The parent company of Jantzen and licensee of Nike swimwear saw total swimwear revenues reduced by $17 million in the fiscal first quarter ended April 30 as they exit several unprofitable brands and product categories. By year-end, PERY expects to decrease swimwear revenues by a total of $20 million dollars to roughly a $60 million business, meaning it will become even less important than it is today. Management stressed that swimwear is now only about 7% of total company sales and the declines here should not be seen as having a long-term negative impact on the total PERY business.
The cuts in the swim division are still expected to yield improved fiscal 2006 operating profits due to actions to improve gross margins and lower operating expenses. Inventories are 30% below last year levels, leading to less exposure to end of season liquidation at cost in the second and third quarter of this year. Management said that they ended the selling season last year with a higher level of inventory to liquidate.
PERY plans to exit two license agreements this year, with Tommy Swim departing in June and the Ocean Pacific mens sportswear business exited by December.
However the company still appears to be a bit bullish about the Jantzen, Nike, and Perry Ellis lines for the next swim season, which starts this July.
Management sees the swim business as an improved profitability picture or about a break-even operation, a reality that they say would be an “improvement from what it was a year ago.”
Total company sales for Perry Ellis International increased 14.3% for the quarter to $225.6 million, compared to $197.4 million in the first quarter last year. Net income grew 8.4% to $8.9 million, or 89 cents per diluted share.
The company confirmed previously announced fiscal 2006 guidance with total revenues expected to be in the range of approximately $890 million to $910 million and diluted earnings per share in the $2.25 to $2.35 per share range.
