Perry Ellis International Inc. reported second-quarter earnings that easily topped guidance as margins expanded and sales rose 2.5 percent. Driving the top-line growth was Perry Ellis, Original Penguin, its overall Golf Sportswear segment and Nike Swim.
Key Fiscal Second Quarter 2018 Financial Accomplishments And Operational Highlights
• Total revenues of $207 million, exceeding guidance of $202 to $205 million and rising 2.5 percent (3 percent in constant currency) from $202 million reported in the second quarter of fiscal 2017
• GAAP gross margin expanded 40 basis points to 37 percent as compared to 36.6 percent in the prior year period reflecting increases in margin across core brands
• Adjusted pre-tax income of $3.2 million, rose 116 percent from adjusted pre-tax income of $1.5 million in the second quarter of fiscal 2017;
• GAAP pre-tax income was $2.7 million compared to a pre-tax loss of $4.4 million in the comparable period of the prior year
• Adjusted diluted EPS of 16 cents, exceeded guidance of 7 cents to 10 cents per diluted share, compared to adjusted diluted EPS of 15 cents in the second quarter of fiscal 2017;
• GAAP diluted EPS was 6 cents compared to a diluted EPS loss of 24 cents in the comparable period of the prior year
• First six months, cash flow from operations tops $40 million with net debt to total capitalization of 8.6 percent;
Company reiterates guidance for fiscal year 2018 for revenues in a range of $870 million to $880 million and diluted earnings per share in a range of $2.07 to $2.17.
Oscar Feldenkreis, chief executive officer and president, commented, “We delivered strong second quarter results, exceeding both our top and bottom line guidance, continuing our positive momentum from first quarter. Our ongoing positive performance demonstrates the power of our core brands, the strong response to our product innovations and the intense focus with which we direct our resources to deliver. As a result of our strategies, the quarter saw growth across all key operating metrics with increased net revenue, expansion in gross margin, a significant increase in operating profit and a more than doubling of adjusted pre-tax earnings. Of particular strength were our Perry Ellis, Original Penguin, Golf Sportswear and Nike brands. Our brands and business are positioned for success as we enter the fall season and as such have reiterated our guidance.”
Fiscal 2018 Second Quarter Results
Total revenue was $207 million, a 2.5 percent increase (3 percent in constant currency) compared to $202 million reported in the second quarter of fiscal 2017. This reflected growth in core brand sales and strong sell through rates throughout the spring season. The disciplined management of inventory along with increased sales of higher margin core brands led to a 40 basis point expansion in GAAP gross margin to 37 percent in the second quarter from 36.6 percent in the second quarter of fiscal 2017. Adjusted gross margin was also 37 percent compared with adjusted gross margin of 36.6 percent in the comparable period of the prior year.
Adjusted EBITDA totaled $8.5 million as compared to $7.1 million in the comparable period of the prior year. Adjusted pre-tax income was $3.2 million, increasing 116 percent from $1.5 million in the second quarter of fiscal 2017. GAAP pre-tax income was $2.7 million compared to a pre-tax loss of $4.4 million in the comparable period of prior year.
As reported under GAAP, the second quarter of fiscal 2018 net income was $1 million, or 6 cents per diluted share, compared to a GAAP net loss of $3.6 million, or 24 cents per diluted share, in the prior year period. On an adjusted basis, the fiscal 2018 second quarter net income was $2.5 million, or 16 cents per diluted share, as compared to adjusted net income of $2.3 million, or 15 cents per diluted share in the second quarter of fiscal 2017.
Balance Sheet And Cash Flows
The company’s financial position continues to get stronger. Cash and investments at the end of the second quarter of fiscal 2018 totaled $53 million and the company’s net debt to total capitalization stood at 8.6 percent at the end of the second quarter of fiscal 2018 as compared to 17.3 percent at the end of the second quarter of fiscal 2017. Working capital management continues to be a critical focus across the organization as inventory turned at approximately 4 times as of the end of the second quarter of fiscal 2018. Cash flow from operations increased to $40 million for the first six months of fiscal 2018 compared to $36 million in the first six months of fiscal 2017.
George Feldenkreis, executive chairman, Perry Ellis International, commented, “We continue to successfully navigate the changing US retail environment, as demonstrated by our strong second quarter performance, and remain committed to accelerate our revenues by creating opportunities that strengthen the performance of our brands. Our investment in talent, marketing and our digital platform is elevating our brands around the world.”
Perry Ellis makes dress and casual shirts, golf sportswear, sweaters, dress pants, casual pants and shorts, jeans wear, active wear, dresses and men’s and women’s swimwear is available through all major levels of retail distribution. The company, through its wholly owned subsidiaries, owns a portfolio of nationally and internationally recognized brands, including: Perry Ellis, Original Penguin by Munsingwear, Laundry by Shelli Segal, Rafaella, Cubavera, Ben Hogan, Savane, Grand Slam, John Henry, Manhattan, Axist, Jantzen and Farah. The company enhances its roster of brands by licensing trademarks from third parties, including: Nike and Jag for swimwear, and Callaway, PGA Tour and Jack Nicklaus for golf apparel.
Photo courtesy Callaway
