Perry Ellis International, Inc. second quarter total revenues were $171.0 million, compared to $190.0 million, a 10.0% decrease versus the comparable period last year. The decline in total revenues during the quarter was anticipated in management’s fiscal 2007 plan, and was primarily a result of previously announced reductions of private label and branded programs at a national mid tier chain, the impact of Federated Department Store door closures due to the May Company merger integration and a reduction in off price sales. These factors also impacted total revenues for the six month period ended July 31, 2006, which were $385.0 million, compared to $415.6 million, a 7.4% decrease versus the comparable period last year.
Due to the seasonality of the Company’s business, second quarter results historically result in losses. For the second quarter of fiscal 2007, the net loss was 25 cents per fully diluted share. This result was the same as the loss per fully diluted share reported during the same period last year, because improved gross margin performance offset the impact of lower total revenues. Additionally, the second quarter of fiscal 2007 results include a reduction of $0.02 per share for the adoption of Statement of Financial Accounting Standards (“SFAS”) 123R requiring the expensing of stock options. These costs are not reflected in prior year results.
For the first half ended July 31, 2006, earnings were $0.34 per fully diluted share compared to earnings of $0.65 per fully diluted share for the comparable period last year. Proforma earnings for the first half of fiscal 2007 were $0.53 per fully diluted share. Proforma results exclude the impact of $3.0 million in debt extinguishment costs ($0.19 per fully diluted share) incurred as a result of the March 2006 repayment of the Company’s $57 million senior secured notes. The Company believes that proforma results provide a more meaningful comparison of financial performance. A table showing the reconciliation of actual to proforma results is attached. Additionally, first half fiscal 2007 proforma and reported first half of fiscal 2007 earnings per share include expenses of $0.04 per share related to the adoption of SFAS 123R, requiring the expensing of stock options. These costs are not reflected in prior year results.
George Feldenkreis, chairman and chief executive officer commented: “We continue to perform on plan despite the impact of retailer consolidation. We are pleased with the significant improvement of our gross profit margins, which is a result of great products performing exceptionally well at retail, as well as improved production planning and sourcing. We also continue to effectively manage our working capital, by significantly reducing inventory levels and improving inventory turns. Lastly, we continue to improve processes to lower our expense levels, which resulted in lower first half operating expenses versus last year, despite start-up investments in the outerwear and swim divisions as a result of our recently added Dockers® and JAG® license agreements, as well as the expensing of stock options.”
Oscar Feldenkreis, vice-chairman, president and chief operating officer stated: “We are excited about our growth opportunities and expect to resume strong growth in our fourth quarter across multiple product categories and channels. We are particularly enthused by the expected growth in swim, outerwear, Perry Ellis® sportswear, international and direct retail. Our Perry Ellis Collection sportswear is the leading indicator of consumer interest in the brand, and this business continues to trend up. The Collection’s strong current retail performance, coupled with retailers response to the spring 2007 deliveries we unveiled during August’s Men’s Market Week, fuel the excitement in Perry Ellis. Consequently, most department stores are planning for double digit Perry Ellis growth this spring.”
He concluded: “Although a variety of issues are weighing on consumer spending, we are confident that our standout brands will continue to claim a substantial share of the market. Our focused investments in our brands marketing will attract consumers to our various lifestyle concepts and continuously improved product offerings.”
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED)
(amounts in 000's, except per share information)
INCOME STATEMENT DATA:
Three Months Ended Six Months Ended
July 31, July 31,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
Revenues
Net sales $165,699 $184,298 $373,953 $404,692
Royalty income 5,323 5,686 11,067 10,892
-------- -------- -------- --------
Total revenues 171,022 189,984 385,020 415,584
Cost of sales 117,176 136,146 260,725 288,819
-------- -------- -------- --------
Gross profit 53,846 53,838 124,295 126,765
Operating expenses
Selling, general and
administrative expenses 49,947 50,017 99,768 101,106
Depreciation and
amortization 2,765 2,223 5,450 4,463
-------- -------- -------- --------
Total operating expenses 52,712 52,240 105,218 105,569
-------- -------- -------- --------
Operating income 1,134 1,598 19,077 21,196
Costs on early extinguishment
of debt - - 2,963 -
Interest expense 4,755 5,411 10,650 10,781
-------- -------- -------- --------
(Loss) income before minority
interest and income taxes (3,621) (3,813) 5,464 10,415
Minority interest 145 125 144 368
Income tax (benefit) provision (1,309) (1,534) 1,863 3,560
-------- -------- -------- --------
Net (loss) income $ (2,457) $ (2,404) $ 3,457 $ 6,487
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Net (loss) income per share
Basic $ (0.25) $ (0.25) $ 0.36 $ 0.68
======== ======== ======== ========
Diluted $ (0.25) $ (0.25) $ 0.34 $ 0.65
======== ======== ======== ========
Weighted average number of
shares outstanding
Basic 9,636 9,512 9,622 9,489
Diluted 9,636 9,512 10,146 10,013
