Perry Ellis International Inc. reported adjusted pre-tax income rose 37 percent in the fourth quarter as sales grew 11.3 percent.

For the Fourth Quarter:

  • Total revenues rose 11.3 percent to $227 million from $204 million in the 2017 fourth quarter
  • Gross margin expanded 50 basis points to 38.9 percent
  • GAAP pre-tax income almost doubled to $12.8 million from $6.7 million in fiscal 2017 and adjusted pre-tax income rose 37 percent to $15.8 million from $11.5 million in the fourth quarter of fiscal 2017

For the Fiscal Year:

  • Total revenues rose 2 percent to $875 million, in line with guidance from $861 million reported in fiscal 2017
  • Fiscal Year GAAP gross margin expanded 70 basis points to 37.7 percent
  • Fiscal Year adjusted pre-tax income of $37.8 million rose 7.3 percent from adjusted pre-tax income of $35.2 million in the fiscal 2017
  • Fiscal Year GAAP diluted EPS of $3.68 included a tax benefit of $22.9 million, or $1.49 per share, and compared to GAAP diluted EPS of $0.95 per share in fiscal 2017
  • Adjusted diluted EPS increased 4.4 percent, in line with guidance to $2.13, from adjusted diluted EPS of $2.04 in fiscal 2017
  • Total debt-to-capitalization improved to 10.7 percent from 17.2 percent at fiscal 2017 year end

The company’s guidance for the year called 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 are pleased to continue the positive momentum for our brands and businesses in the final quarter of the year, delivering a double-digit increase in total revenue, a 50-basis-point expansion in gross margin and continued leverage in expenses, which contributed to an almost doubling of GAAP pre-tax earnings compared to the fourth quarter of last year. Our ongoing strength continues to validate the success of our strategy and the strong execution of our initiatives by our team with continuous innovation across our powerful global brands, leading to strong acceptance of our product offerings around the world. The fourth quarter saw us direct our growth toward our higher margin core brands, channels and businesses, which resulted in core brand sales increasing 19 percent, international growth of 33 percent, e-commerce sales rising and positive comparable sales. We remain excited about our outlook as we begin fiscal 2019 and expect the execution of our strategy, along with the disciplined management of expenses and our balance sheet, to result in another strong year for Perry Ellis International and its shareholders.”

Fiscal 2018 Fourth Quarter Results

Total revenue for the fourth quarter of fiscal 2018 was $227 million, an 11.3 percent increase (10.1 percent increase on constant currency) compared to $204 million reported in the fourth quarter of fiscal 2017. This reflected increases across all segments, with particular strength in Men’s Sportswear and Nike swim.

The disciplined management of inventory, along with increased sales of higher-margin core brands, led to a 50-basis-point expansion in GAAP gross margin to 38.9 percent in the fourth quarter from 38.4 percent. Strength in the company’s Perry Ellis, Golf Lifestyle Apparel and Nike swim business led to the margin increase. Adjusted gross margin was 38.9 percent compared with adjusted gross margin of 38.7 percent in the comparable period of the prior year.

Adjusted pre-tax income was $15.8 million, increasing 36.9 percent from $11.5 million in the fourth quarter of fiscal 2017. GAAP pre-tax income was $12.8 million compared to GAAP pre-tax income of $6.7 million in the comparable period of prior year.

As reported under GAAP, the fourth quarter of fiscal 2018 net income was $39.7 million, or $2.56 per diluted share, compared to net income of $9.0 million, or $0.59 per diluted share, in the fourth quarter of fiscal 2017. Adjusted net income for the fourth quarter of fiscal 2018 totaled $13.6 million, or $0.88 per diluted share, as compared to $10.1 million, or $0.66 per diluted share, in the fourth quarter of fiscal 2017.

Fiscal 2018 Results

Fiscal 2018 total revenue was $875 million, a 2 percent increase (2 percent increase on constant currency) compared to $861 million in fiscal 2017. This reflected growth in core brands, particularly Men’s Sportswear and Nike swim.

Adjusted earnings per diluted share for fiscal 2018 were $2.13 compared to adjusted earnings per diluted share of $2.04 in fiscal 2017. (Adjusted earnings per diluted share exclude the items outlined in the attached Table 1 for both fiscal periods.)

On a GAAP basis, net income for fiscal 2018 was $56.7 million, or $3.68 per diluted share, compared to a GAAP net income of $14.5 million, or $0.95 per diluted share, for fiscal 2017.

Earnings before interest, taxes, depreciation, amortization and impairments, as adjusted (“adjusted EBITDA”) for fiscal 2018 totaled $59.2 million, or 6.8 percent of total revenues, as compared to $57.2 million, or 6.6 percent of total revenues, in fiscal 2017.

Adjusted gross margin for fiscal 2018 was 37.8 percent compared to adjusted gross margin of 37.2 percent in fiscal 2017. Gross margin was positively impacted during fiscal 2018 by favorable product performance, which led to increases in merchandising margin in the company’s domestic businesses.

Selling, general and administrative (“SG&A”) expenses totaled $274.7 million for fiscal 2018 as compared to $280.0 million in fiscal 2017. SG&A in fiscal 2018 included $3.7 million related to consolidation of operations and strategic initiatives. SG&A in fiscal 2017 included $10.1 million in pension plan termination expense, as well as $8.6 million related to exited brands, consolidation of operations and strategic initiatives.

Balance Sheet

The company’s financial position continues to be very strong. Fiscal 2018 year-end cash and investments totaled $49.3 million. The company’s net debt-to-total capitalization stood at 10.7 percent at fiscal 2018 year-end as compared to 17.2 percent at the end of fiscal 2017. Working capital management continues to be a critical focus across the organization as inventory turned at approximately 3.8x for fiscal 2018.

Fiscal 2019 Guidance

The company is providing revenue and earnings guidance for fiscal 2019. For comparability, the company has recast its fiscal 2018 sales and earnings to remove the sales, income/losses related to the transition of the Laundry dress business to a license model and the elimination of Bon-Ton sales due to its bankruptcy and liquidation.

For fiscal 2019, the company currently expects total revenue to be in the range of $855 million to $865 million from core sales of $843.6 million in fiscal 2018. Excluding any potential expenses (which could be significant) to be incurred by the company in connection with the Board of Director’s exploration and evaluation of potential strategic alternatives and the related February 9, 2018 proposal to acquire the company, diluted earnings per share are currently expected in the range of $1.80 to $1.90, assuming a tax rate of 25 percent, which compares to core adjusted diluted earnings per share of $1.70 in fiscal 2018.

Perry Ellis International Inc., through its wholly owned subsidiaries, owns a portfolio of nationally and internationally-recognized brands, including: Perry Ellis, An 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 and Guy Harvey for performance fishing and resort wear.