Perry Ellis International reported revenues for the fourth quarter were $196.4 million, a 3% increase compared
to $191.2 million a year ago. The
increase is attributable to a turnaround of Perry Ellis Collection at
department stores, initial shipments of Callaway and TOP-FLITE spring
product, as well as improved performance in direct to consumer
businesses, primarily the Perry Ellis and Original Penguin retail
stores. These increases were slightly offset by the planned exit of
certain mass merchant programs and the exit of licenses in outerwear and
green grass golf.
Reduced levels of markdown support coupled with strong performance of
branded businesses at retail positively impacted gross margins,
improving them to 35.5% during the quarter compared to 29.0% for the
comparable quarter last year, representing a 650 bps improvement. Fourth
quarter adjusted EBITDA was $20.1 million compared to $2.4 million, a
$17.7 million dollar improvement, over the same period last year.
Net income was $8.5 million, or $.64 per fully diluted share,
compared to a loss of $21.6 million or $1.58 per fully diluted share
during the forth quarter of fiscal 2009. Overall, fourth quarter results were ahead of internal plans and above
analyst consensus in adjusted EBITDA and EPS.
“We feel that we are past the worst and most severe global economic
recession the country and the industry have ever seen, and we are very
proud of our fiscal 2010 and fourth quarter earnings. Our performance
was driven by the strength of our brands, the continued implementation
and execution of all of our growth strategies, and because of the
dedication and hard work of all of our associates around the world. All
of these factors have ensured that Perry Ellis International will
continue to emerge as an industry leader and deliver even better results
in the current fiscal year,” commented George Feldenkreis, Chairman and
Chief Executive Officer.
Fiscal 2010 Results
Fiscal 2010 revenues were in line with company guidance at $754.2 million versus $851.3 million reported in the prior year ended January 31, 2009 (“fiscal 2009”). The company reported net income of $13.2 million or $1.01 per fully diluted share, compared to a net loss of $12.9 million or $.89 per fully diluted share, for the comparable period last year.
“Fiscal 2010 was a turnaround year for Perry Ellis International,” commented Oscar Feldenkreis, President and Chief Operating Officer. “We delivered earnings ahead of expectations during a very challenging economic downturn. We also took the initiative to seek out new business opportunities such as the Callaway & Pierre Cardin license agreements. We expect to see 2011 as a breakout year to capitalize on these opportunities as well as our core growth platforms.”
Overall gross margins for fiscal 2010 improved 30 bps to 33.0% compared to 32.7% in fiscal 2009. The margin expansion was mainly driven by a mix of higher margin branded product, the exiting of several low profit private label programs, the exit of some underperforming businesses, the introduction of Callaway Golf direct sales and reduced sales and operational allowances resulting from strong product performance and improved operational efficiencies.
Cost reduction initiatives and strict expense controls throughout fiscal 2010 resulted in selling, general and administrative expense reductions of $36 million. Selling, general and administrative expenses at $200.4 million represented a 15% reduction compared to $236.8 million for fiscal 2009. As a result of these cost reductions, the company achieved fiscal 2010 earnings before interest, tax, impairments, depreciation and amortization (“adjusted EBITDA”) of $48.7 million, a $3.2 million or 7% increase over fiscal 2009.
Balance Sheet and Liquidity Review
The company said disciplined working capital management allowed the company to finish the year with its strongest balance sheet and liquidity position in 10 years. Generating $88.8 million in cash from operations and a free cash flow of $85.1 million during the year allowed the company to fully pay down its senior credit facility and also retire $21 million in senior notes, which the company expects will represent approximately $1.8 million in interest savings annually. Additionally, the company ended the year with $18.3 million in cash, an increase of $9.5 million year over year.
Proactive planning and inventory discipline during fiscal 2010 allowed the company to reduce its inventories by $26.8 million, or 19%, compared to fiscal 2009 with total inventory of $112.3 million. Inventory turns increased to 4.72 times, compared to 4.25 times last year, due to a consistent flow of inventory and the timely clearance of aged goods. Accounts receivable were reduced to $139.9 million compared to $142.9 million as of January 31, 2009. This represents a $3.0 million or 2% reduction, a positive trend in relation to revenue growth in the quarter.
“As the macroeconomic environment and consumer confidence continues to show signs of improvement, Perry Ellis International will continue to be proactive and take decisive actions to continue strengthening our financial position and prepare ourselves for success in the years ahead,” commented Oscar Feldenkreis.
Fiscal 2011 Guidance
The company announced that for the twelve months ending January 31, 2011 (“fiscal 2011”) it anticipates earnings per fully diluted share in the range of $1.25 – $1.40 and revenues to be in the range of $770 – $790 million for the year, representing a low- to mid-single-digit increase. Additionally, with the exit of underperforming businesses in fiscal 2010 along with new higher margin growth initiatives such as Callaway, gross margins are expected to continue to improve throughout fiscal 2011.
“We are very excited about our multiple growth opportunities this year as we see most of our customers experiencing increased sales. Perry Ellis is experiencing the strongest sell thrus in the department store channel we have seen in years and we continue to capitalize on our position as the number one premier golf apparel supplier in the country. We also continue to read and meet the needs of the Hispanic consumer very well. Our retail and e-commerce operations showed 19% growth in gross profit during the fourth quarter compared to last year and we are also starting to see the turnaround in our contemporary businesses. All of this coupled with the new opportunities such as Callaway, Pierre Cardin, & Collegiate should position us extremely well for 2010,” commented George Feldenkreis.
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED)
(amounts in 000's, except per share information)
INCOME STATEMENT DATA:
Three Months Ended Years Ended
January 30, 2010 January 31, 2009 January 30, 2010 January 31, 2009
Net sales $ 190,045 $ 184,470 $ 729,217 $ 825,868
Royalty income 6,393 6,764 24,985 25,429
Total revenues 196,438 191,234 754,202 851,297
Cost of sales 126,769 135,687 505,104 573,046
Gross profit 69,669 55,547 249,098 278,251
Selling, general and administrative expenses 49,578 54,311 200,356 236,840
Depreciation and amortization 3,320 3,886 13,625 14,784
Impairment on long-lived assets 254 22,299 254 22,299
Total operating expenses 53,152 80,496 214,235 273,923
Operating income (loss) 16,517 (24,949 ) 34,863 4,328
Impairment on marketable securities - 234 - 2,797
Cost on early extinguishment of debt 357 - 357 -
Interest expense 4,076 4,357 17,371 17,491
Income (loss) before income taxes 12,084 (29,540 ) 17,135 (15,960 )
Income tax (benefit) provision 3,508 (7,970 ) 3,615 (3,682 )
Net income (loss) 8,576 (21,570 ) 13,520 (12,278 )
Less: net income attributed to noncontrolling interest 88 47 353 612
Net income (loss) attributed to Perry Ellis International, Inc. $ 8,488 $ (21,617 ) $ 13,167 $ (12,890 )
Net income (loss) attributed to Perry Ellis International, Inc. per
Basic $ 0.67 $ (1.58 ) $ 1.04 $ (0.89 )
Diluted $ 0.64 $ (1.58 ) $ 1.01 $ (0.89 )
Weighted average number of shares outstanding
Basic 12,730 13,650 12,699 14,416
Diluted 13,351 13,650 13,005 14,416