Perry Ellis International Inc. issued an open letter to shareholders Tuesday outlining changes it’s made to improve both its corporate governance practices and ways in which its strategic plan has already helped its performance.
The letter, signed by chairman and chief executive officer George Feldenkreis and lead independent director Joseph Lacher, noted that shareholder returns have improved 62 percent in the past year, well above the 12 percent returns on the S&P 500, and gross margin has picked up 120 basis points to 34 percent of revenue.
Direct-to-consumer now represents 10 percent of revenues, up from 8 percent a year ago, with e-commerce sales ahead 38 percent, while international is now 11.3 percent of revenues, up from 10 percent a year ago, with the goal of pushing the figure to 20 percent in the next three years. Additionally, between cost of goods sold and selling, general and administrative expenses, $8.2 million in costs savings have been realized, inventory cut to $156 million at the end of the third quarter from the year-end level of $207 million, and a total of 29 “low-margin brands” have been abandoned.
“While there is still more work to do, Perry Ellis has continued to attract and retain key strategic partnerships, exemplified by the 20 new licenses through fiscal third quarter and our reaffirmed projection that licensing revenue is expected to increase by over 5 percent for the year,” Feldenkreis and Lacher said. “We expect additional licensed deals completed during the fourth quarter will be announced in the forthcoming weeks.”
But the two dedicated much of the note to areas in which corporate governance had been brought more into line with industry best practices, including the appointments during the past year of three independent directors, retail veteran J. David Scheiner, Gilt cofounder Alexandra Wilson and investment banker Jane DeFlorio.
“More than two-thirds of your board is now composed of independent directors,” the ceo and director wrote, adding that they continue to seek directorial candidates who “can expand the depth and breadth of your board’s talent and provide us with additional competencies and resources for growing shareholder value.”
Addressing governance issues, the company requires that directors who fail to receive a majority of votes cast are required to resign, with the nominating and governance committee ultimately deciding whether those resignations should be accepted.
The ceo and chief operating officer are now required to hold stock with a value of three times their base salary and outside directors holdings at least equal to their annual retainers.
The firm also said that related party transactions must be reviewed and approved by the board’s governance committee and disclosed in the company’s filings with the Securities and Exchange Commission.
“A number of these related party transactions predate the company’s initial public offering [in May 1993],” the letter said. “We believe that, given the terms of these historical arrangements, they have benefited the company.”
The two acknowledged “that a number of our shareholders believe that best practices in corporate governance require that we minimize” such transactions.