Perry Ellis International reported Q2 revenue increased 33 percent to $214.4 million as compared to $161.8 million in the same prior year period. Net income rebounded to show a profit of $1.8 million, or 11 cents a share, compared to a net loss of $2.0 million, or 15 cents, in Q2 of last year.
Strength within men's golf, women's dresses under Laundry by Shelli
Segal, International in the U.K., and Mexico, and solid increases in
direct to consumer drove an 18 percent increase in organic revenue for
the quarter. In addition, the recently acquired Rafaella business
contributed approximately $22.8 million in revenue for the second
quarter of fiscal 2012.
The company also increased its fiscal 2012 EPS guidance to a range of $2.45 to $2.52 from a range of $2.40 to $2.50 and forecasts revenue to exceed $1.0 billion
Total gross profit for the quarter increased to $72.3 million compared to $58.2 million in the comparable prior year period. Gross margin was 33.7 percent for the quarter as compared to 36.0 percent last year. The planned gross margin decrease was due to the opportunistic revenue increases of lower gross margin program businesses, the conversion of the Perry Ellis dress shirts and small leather goods businesses from licensing to wholesale, the decrease of our higher margin licensing business as a percentage of total revenue mix, and the ladies business, including Rafaella. This decrease was partially off-set by higher gross margins in both direct to consumer and International. Furthermore, selling, general, and administrative expenses as a percentage of total revenues were 29.6 percent in the second quarter of fiscal 2012 compared to 32.9 percent in the comparable prior year period, a 330 basis point improvement reflecting leverage of corporate services.
“Expansion of our core businesses and the addition of Rafaella women's sportswear resulted in a strong profit for the second quarter. We believe this exemplifies the success of our diversification strategies and the ongoing strength of our growth initiatives. We are very pleased to achieve this performance in what traditionally has been an unprofitable quarter for our Company and during what continues to be an uncertain domestic and global economy,” commented Oscar Feldenkreis, President and COO.
Feldenkreis continued, “Our efforts in expanding our international footprint are beginning to gain strong traction. Our focus on direct to consumer was also productive as we achieved solid gains in these businesses. We also successfully acquired six top retail leases in an auction, which will be converted into full price doors. These locations are scheduled to open at the start of the holiday season.”
Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) for the second quarter increased 81 percent to $8.9 million, or 4.1 percent of total revenues compared to $4.9 million, or 3.0 percent of total revenue for the comparable prior year period (see attached reconciliation “Table 2”).
First Half Operations Review
For the six months ended July 30, 2011 total revenues increased 31.6 percent to $502.7 million, compared to $382.1 million in the comparable prior year period. For the first half of fiscal 2012, Rafaella contributed $61.8 million in total revenue, while the company's core organic businesses grew 15.4 percent. This increase is attributable to the continued success within the company's golf, Perry Ellis Collection, Hispanic, and direct to consumer businesses.
EBITDA for the first half of fiscal 2012 increased 52 percent to $42.5 million, or 8.5 percent of total revenue, compared to $28.0 million, or 7.3 percent of total revenue, in the prior year. Rafaella delivered $9.4 million of EBITDA for the first half of fiscal 2012 and is contributing significantly to the Company's continued operating margin improvement. Continued growth and expansion of the Company's core businesses added an additional $5.0 million to EBITDA, a 176 percent improvement compared to the first half of fiscal 2011.
As reported under generally accepted accounting principles (“GAAP”) net income attributable to Perry Ellis International, Inc. for the first half of fiscal 2012 increased 87 percent to $17.2 million, or $1.08 per fully diluted share, compared to $9.2 million or $0.66 per fully diluted share in the six months ended July 31, 2010 (“first half of fiscal 2011”).
Net income attributable to Perry Ellis International, Inc, as adjusted, for the first half of fiscal 2012 (see attached reconciliation “Table 1”) grew by 91.3 percent to $18.6 million compared to $9.7 million last year. Net Income, as adjusted, excludes the impact of the cost on early extinguishment of the senior subordinated 2013 notes and duplicated interest from March 8, 2011 to April 6, 2011 associated with the interest during the time that the retired debt and the new senior subordinated 2019 notes were simultaneously outstanding.
Balance Sheet Update
The company ended the second quarter of fiscal 2012 with $34.1 million in cash and cash equivalents and full availability under its senior credit facility. Accounts receivable totaled $110.2 million compared to $85.3 million at July 31, 2010. This increase includes the addition of the Rafaella sportswear business. Excluding Rafaella, receivables increased by 23 percent in line with the organic revenue increase for the quarter. The quality of the receivables continues to be strong and the Company is pleased with the financial strength of its current customer base.
Inventories were $211.5 million at quarter end including $21 million associated with the acquired Rafaella business. Excluding Rafaella, the inventory increase reflects the Company's planned increases of additional weeks of supply in its replenishment and program businesses totaling $22 million to support forward business, $14 million in inventory for new businesses and retail stores, early receipts totaling approximately $26 million for holiday and spring inventory, and for inventory required for fall shipping for third quarter sales. Inventory quality and aging remains current.
Fiscal 2012 Guidance
The company forecasts revenue exceeding $1.0 billion for full fiscal year 2012. Total EBITDA for the year is expected to approach $90 million, thereby approaching a 9.0 percent EBITDA margin for fiscal 2012.
Based on the company's first half of fiscal 2012 performance and current business trends, the Company now expects earnings per diluted share for full year fiscal 2012 in a range of $2.45 – $2.52 compared to previous guidance of $2.40 – $2.50.
Perry Ellis International, through its wholly owned subsidiaries, owns a portfolio of nationally and internationally recognized brands, including: Perry Ellis, Jantzen, Laundry by Shelli Segal, C&C California, Rafaella, Cubavera, Centro, Solero, 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, Farah, Anchor Blue and Miller's Outpost. The Company enhances its roster of brands by licensing trademarks from third parties, including: Pierre Cardin for men's sportswear, Nike and Jag for swimwear, and Callaway, TOP-FLITE, PGA TOUR and Champions Tour for golf apparel.