Perry
Ellis International, Inc. reported first-quarter revenues fell 9.7% to $220.0
million compared to $243.5 million a year ago, but its core sports brands
delivered gains. Strong performance of its golf brands at department and
mid-tier stores increased revenues by $9.6 million while positive results for
Jantzen and Nike during current swim season, increased revenues by $3.2 million.

 

Positive
revenues also stemmed from door expansion for Hispanic lifestyle brands,
particularly Centro at Kohl’s and Cubavera at the department store channel,
plus new belts and accessories programs.

  

These
increases were offset by:

 

(i)
Further reduction of private label bottoms, accounting for revenues of $7.0
million;

 

(ii)
Departure of multiple retailers which filed for Chapter 11 during fiscal 2009,
accounting for revenues of $6.2 million;

 

(iii)
Planned licensing-out of Perry Ellis dress shirts business, accounting for $3.4
million in revenues; and

 

(iv)
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 $0.46 per fully diluted share were down
$0.14 compared to $0.60 for the same period last year. This compares positively
to Thomson One Call estimates of $0.24 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.”

The company's brands include Perry Ellis, Jantzen, Laundry by Shelli Segal, C&C California, Cubavera, Munsingwear, Savane, Original Penguin by Munsingwear, Grand Slam, Natural Issue, Pro Player, the Havanera Co., Axis, Tricots St. Raphael, Gotcha, Girl Star, MCD John Henry, Mondo di Marco, Redsand, Manhattan, Axist and Farah. Brands operated under license include Dockers for outerwear, Nike and JAG for swimwear, and Callaway, PING and PGA TOUR for golf apparel.


PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED)
(amounts in 000's, except per share information)
INCOME STATEMENT DATA:
 



 




Three Months Ended



May 2, 2009
April 30, 2008






 

Revenues






Net sales



$

214,038



$

237,762

Royalty income



 

6,006

 


 

5,787

Total revenues




220,044




243,549

Cost of sales



 

150,810

 


 

158,982

Gross profit




69,234




84,567

Operating expenses






Selling, general and administrative expenses




54,374




62,268

Depreciation and amortization



 

3,623

 


 

3,666

Total operating expenses



 

57,997

 


 

65,934

Operating income




11,237




18,633

Interest expense



 

4,618

 


 

4,491






 

Income before income taxes




6,619




14,142

Income tax provision



 

827

 


 

4,708

Net income




5,792




9,434






 

Less: net (loss) income attributed to noncontrolling interest


(57

)



327