By Thomas J. Ryan

Perry Ellis International Inc.’s (Nasdaq:PERY) golf apparel business delivered healthy gains in the third quarter, in part due to the unseasonable weather seen in many parts of the U.S. so far this fall.

“The warm weather in the third quarter was very beneficial to our success, and innovation continues to drive retail sales,” said Oscar Feldenkreis, Perry Ellis International’s CEO and president of the golf apparel segment, on a conference call with analysts.

Among its golf brands, PGA Tour saw sales up mid- to low-double-digits year over year. Ben Hogan, which has a licensing agreement with Walmart, also experienced a double-digit increase in retail sales for the quarter. “At Callaway we are quite pleased with the results of our efforts in building the country-club green-grass channel as well as the corporate channel,” said Feldenkreis. “We attributed this strength to our compelling product coupled with the great performance of Callaway hard goods and equipment.” He added that Callaway golf apparel has also done well on the international front from the opening of new markets.

Perry Ellis’ Nike Swim brand faced its smallest quarter in the period, but Feldenkreis said he was “thrilled to see sales at retail gain at a double-digit pace.” Nike Swim’s initial fall test in Europe was “well received” by both its retail partners and consumers, as were initial sales in Latin America. Perry Ellis’ arrangement with Nike in the swim category was expanded last year. Feldenkreis added, “With Q4 representing the initial kickoff of the spring 2017 season, we are very optimistic and excited that Nike Swim will perform great at retail based on our tests and experience to date.”

Companywide, Perry Ellis International’s earnings came in ahead of guidance, with a strong performance from its flagship Perry Ellis label. Other core brands include Rafaella, Laundry by Shelli Segal and Original Penguin.

The company reported a net loss of $5.2 million, or 34 cents a share, after a charge of $8.3 million associated with the termination of a pension plan against net income of $2.3 million, or 15 cents, a year ago. Excluding non-recurring charges, earnings would have been 23 cents a share against 16 cents a year ago. Officials had expected adjusted EPS for the quarter to be approximately even with the prior year.

Sales slid 5.7 percent to $185.3 million, reflecting the exit of non-core brands and negative currency exchange rates. Since 2013, the company has exited more than 30 brands, which accounted for approximately $100 million in lower margin revenues, and refocused its portfolio toward core, high-margin brands. Smaller owned brands such as Pro Player were licensed to other firms. Sales were below guidance, calling for revenues in the range of $192 million to $195 million. A 3.5-percent revenue gain was seen in its core global brands.

The bottom line was helped by tight expense controls and an improvement in gross margins by 100 basis points to 36.7 percent due to the solid retail performance across its core brands in both the company’s wholesale and direct-to-consumer channels.

Despite the better-than-expected EPS performance, the company kept its guidance of revenues for the full year in a range of $885 million to $890 million, with adjusted earnings in a range of $1.95 to $2. Said Feldenkreis, “We feel that with the elections over, consumer confidence continues to increase and we expect to see increased consumer spending during the holiday season.”

Photo courtesy Callaway Apparel/Perry Ellis