Perry Ellis Q1 Revenues Fall 9.7%

Perry Ellis International, Inc. said for the first quarter of fiscal 2010, ended May 2, 2009 total revenues decreased by 9.7%, or $23.5 million, to $220.0 million compared to $243.5 million reported in the first quarter of the fiscal year ended April 30, 2008. Compared to last year, the company increased revenues in several of the company’s core businesses including:

– Strong performance of its golf brands at department and mid-tier stores, increasing revenues by $9.6 million

These increases were offset by:

– Further reduction of private label bottoms, accounting for revenues of $7.0 million

– Planned licensing-out of Perry Ellis dress shirts business, accounting for $3.4 million in revenues

– Deceleration of PING golf business at the corporate channel.

The company also reported performance improvement in its underperforming businesses as compared to the prior year, particularly for the Laundry by Shelli Segal brand, Perry Ellis retail outlets as well as its international business in the U.K.

“We remain focused on improving the performance of those businesses challenged during fiscal 2009. The cost reduction efforts we implemented last year are proving successful in bringing these platforms back to profitability. We are particularly encouraged by our Perry Ellis retail performance this past quarter,” Oscar Feldenkreis, president and COO commented.

Pressured both by the planned exit of the licensed PING golf business and by the unusually promotional retail environment, particularly for private label programs within bottoms and swim, gross margins decreased to 31.5% compared to 34.7% during the first quarter of fiscal 2009.

“Considering the overall weakness of the consumer environment, our diversification strategy has proven key to a solid first quarter performance, ahead of expectations. Overall, we continue to gain market share in those areas where we hold strong competitive advantages. These are encouraging developments and signal that the consumer is beginning to feel less anxious; however we believe that the recovery will follow a slow upward slope and will take several quarters to be completed,” Feldenkreis continued.

Driven by the cost cutting initiatives reported during the fourth quarter of last year, the company’s first quarter operating expenditures decreased by $7.9 million to $54.4 million, compared to $62.3 million for the first quarter of the prior year. EBITDA was $14.9 million compared to $22.3 million for the first quarter of fiscal 2009. A table showing the reconciliation of EBITDA to net income is attached. Net income for the period was $5.8 million compared to $9.1 million during the first quarter of fiscal 2009. Net income was positively impacted by a lower effective tax rate. Earnings at 46 cents per fully diluted share were down 14 cents compared to 60 cents for the same period last year. This compares positively to Thomson One Call estimates of 24 cents for the company during the first quarter of fiscal 2010.

“We have acted decisively to adjust our cost structure to the new business reality of this year and expect to deliver solid results during fiscal 2010. We also continue to review all of our businesses for profitability and will take the necessary steps on those businesses that we believe cannot be accretive to our business model,” Feldenkreis concluded.

Balance Sheet Update

Disciplined working capital management allowed the company to strengthen its liquidity and financial position. Proactive retail planning and strong sell-throughs led to a decrease in inventories of $26.3 million or 18.7% compared to April 30, 2008, and at quarter end inventories were $114.5 million. Accounts receivables were reduced to $154.7 million, compared to $172.4 million compared to April 30, 2008. This represents a $17.7 million or 10.2% reduction, in line with the decrease in total revenues of 9.7%.

Cash flow from operations was a source of $17.4 million in working capital as compared to a use of $31.1 million during the prior year period. Disciplined cash management reduced borrowings under the senior credit facility to $38.3 million, compared to $65.3 million at April 30, 2008.

“In a challenging consumer environment, we are managing Perry Ellis International to maintain strong liquidity with a solid balance sheet, thereby operating from a position of strength,” George Feldenkreis, chairman and CEO, commented. “As the economy recovers, companies such as ours – that are managed conservatively and focused on efficiency – will emerge stronger positioned to take advantage of multiple opportunities that lay ahead of us.”

Fiscal 2010 Guidance

The company confirmed its guidance of a total revenue decrease in the high single to low double digits, gross margin improvements towards the second half of the year and expense reductions of approximately $15 million for the entire year.

“We reported a first quarter above analysts’ expectations and we are beginning to see positive signs in the consumer environment. Accordingly, we are confirming our perspective for a profitable year, with improvements during the second half of the year,” Feldenkreis commented. “However, until the uncertainty in the macroeconomic environment subsides and the full performance of our Spring/Summer collection is assessed, we will continue our policy of not providing specific guidance ranges for the remaining of the year,” Feldenkreis concluded.