Amped up by the acquisition of Ben Hogan and the expansion of its rights to Callaway Golf during the first quarter, Perry Ellis International Inc. is banking on an explosion in its golf business even as the company looks to trim the overall brand portfolio.
Oscar Feldenkreis, president and chief operating officer of the Miami-based apparel firm, told analysts on the company’s first-quarter conference call Thursday that men’s and women’s golf apparel, which generated about $150 million in sales last year, could develop into “a probably close to $400 million, $500 million business within the next five years” as Perry Ellis looks to capitalize on opportunities with a broader expanse of retailers, larger product assortment and wider geographical reach.
Feldenkreis singled out golf, along with the firm’s direct-to-consumer, swimwear and Laundry by Shelli Segal businesses, as providing “strong retail sales” in the first quarter, helping the company to surpass earnings and revenue estimates for the period despite declines in both areas.
“The entire golf category remains a huge growth driver for us,” he said. “The expertise we have developed within the lifestyle business solidifies our positioning as a key vendor for golf apparel and continues to provide us with new product and retail expansion opportunities within the men’s and women’s categories.”
PEI acquired worldwide rights to the Ben Hogan brand from Callaway Golf Co. in February and reached an agreement with Callaway to expand its purview as apparel licensee for the Callaway brand last month. That arrangement now includes the entire Western Hemisphere and all retail channels.
An evaluation of its brand portfolio is expected to be completed by the end of the current second quarter. Anita Britt, chief financial officer, hinted that some names on its roster might be sold. “Due to the interest emanating from our brands and business review, we are actively working with a number of interested parties on the potential purchase of certain brands,” she said.
Britt also noted that the company projected a 20 percent reduction in its business with J.C. Penney Co. Inc. for the year based on the retailer’s transition in its pricing and merchandising plans.
In the three months ended April 28, net income slipped 37.1 percent to $9.7 million, or 64 cents a diluted share, from $15.4 million, or 99 cents, in the year-ago quarter. Adjusted EPS was 71 cents a share, 6 cents better than the 65-cent consensus estimate.
Revenues declined 7.9 percent to $265.5 million from $288.3 million while gross margin receded to 33 percent of sales from 33.6 percent in the year-ago quarter. The consensus revenue figure was $261.2 million.
Analyst Eric Beder of Brean Murray, Carret & Co., reiterated his “buy” rating on the stock and raised his target price to $25 a share from $23. In addition to confidence in the “rejuvenation of the key namesake brand and Rafaella” during the second half of the year, he cited PEI’s balance sheet and “one of the cleanest inventory levels in our universe.”
Inventories were down 15.7 percent, to $167.2 million from $198.3 million at the close of the 2012 fiscal year.
Shares of Perry Ellis closed Thursday at $17.69, up 21 cents or 1.2 percent.