Perry Ellis International said second quarter revenues ending July 31, 2010 increased 2% to $161.8 million compared to $159.2 million reported in the comparable period ended August 1, 2009.
Second Quarter Results from Operations
“We are very proud to report solid results for the second quarter of this year. Our ability to continue delivering strong results in this volatile economic environment remains a testament to the strength of our business model, our portfolio of brands, and our dedication to product innovation and delivery. As our wholesale and direct-to-consumer businesses continue to see positive results we look forward to a strong second half of fiscal 2011,” commented Oscar Feldenkreis, President and Chief Operating Officer of Perry Ellis International.
For the second quarter of fiscal 2011, total revenues increased 2% to $161.8 million compared to $159.2 million reported in the comparable period ended August 1, 2009 (second quarter fiscal 2010). As previously announced, excluding the planned exit of $11 million in unprofitable businesses from last year the company increased revenues by 9% throughout the second quarter of this year.
Gross margins for the second quarter of fiscal 2011 expanded by 510 basis points to 36.0% compared to 30.9% in the comparable prior year period. This expansion was driven by continued operational improvements in several of our more challenged businesses and strong inventory discipline resulting in higher levels of full-price selling across many of the company's businesses in the wholesale channels of distribution. The company's owned retail stores also continue to experience higher gross margins, contributing to the overall enhanced performance of the business.
Earnings before interest, tax, depreciation and amortization (EBITDA) for the second quarter of fiscal 2011 reached $4.2 million compared to $1.5 million in the prior year comparable period. A table showing the reconciliation of net income to EBITDA is attached. Also for the second quarter of fiscal 2011 the company reported a net loss of ($2.0) million, representing a loss per fully diluted share of 15 cents compared to a net loss of ($5.3) million or 42 cents per fully diluted share, in the comparable period.
First Half Operations Review
For the six months ended July 31, 2010 total revenues increased 1% to $382.1 million from $379.2 million during the six months ended August 1, 2009 (first half of fiscal 2010). However, excluding the planned exit of a total of $28 million in unprofitable businesses throughout the first half of fiscal year 2011, total revenues increased approximately 9%.
Throughout the first half of fiscal 2011 the company's excellent financial performance and growth story has been fueled by the execution of its strategy to increase sales of higher-margin branded product categories and brands in an effort to drive gross margin and position the company for sustained long term growth and enhanced profitability. For the first half of the year gross margins have expanded 460 basis points to 35.8% compared to 31.2% during the comparable period last year.
The company also improved EBITDA margin by 280 basis points to 7.1% for the first half of the year compared to the same period last year. Net income significantly increased to $9.2 million compared to net income of $500,000 during the same period last year.
Balance Sheet Update
Throughout the second quarter of fiscal 2011 the company continued improving its balance sheet and remains in a solid financial position. The continued discipline in working capital management allowed the company to keep its senior credit facility undrawn at the end of second quarter fiscal 2011. Additionally, the company reported $43.4 million in cash and cash equivalents at quarter end.
Strong cash flow continued to allow the company to significantly reduce its debt level. At the end of the first half of fiscal 2011, senior subordinated notes decreased to $105.5 million, a reduction of $24.4 million compared to the beginning of fiscal 2011. As a result, net debt to total capital declined to 24% as compared to 34% for the prior fiscal year ended January 30, 2010.
Fiscal 2011 Guidance
“Despite the continued uncertainty in the consumer environment today, we remain vigilant yet confident that our business platforms will continue to perform to our expectations and allow us to continue on our path of revenue growth and gross margin expansion throughout the remainder of the year,” commented George Feldenkreis, Chairman and Chief Executive Officer.
“The men's market continues to outpace all other areas in the retail arena today, as evidenced by most retailers' announcements. We are well positioned to continue our positive performance in the second half of the year, and are pleased to raise our full earnings guidance. We remain confident that we will continue to deliver outstanding results for all of our stakeholders,” continued Feldenkreis.
Based on better-than-expected results throughout the first half of fiscal 2011, the company has updated its fiscal 2011 full year earnings per share guidance to a range of $1.53 – $1.68, compared to it previous range of $1.45 – $1.60. The company has maintained and reconfirmed its full year revenue guidance in the range of $775 – $795 million for fiscal 2011.
| PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||
| SELECTED FINANCIAL DATA (UNAUDITED) | |||||||||||||||
| (amounts in 000's, except per share information) | |||||||||||||||
| INCOME STATEMENT DATA: | |||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||
| July 31, 2010 | August 1, 2009 | July 31, 2010 | August 1, 2009 | ||||||||||||
| Revenues | |||||||||||||||
| Net sales | $ | 155,622 | $ | 152,980 | $ | 369,864 | $ | 367,018 | |||||||
| Royalty income | 6,132 | 6,189 | 12,239 | 12,195 | |||||||||||
| Total revenues | 161,754 | 159,169 | 382,103 | 379,213 | |||||||||||
| Cost of sales | 103,601 | 109,961 | 245,206 | 260,771 | |||||||||||
| Gross profit | 58,153 | 49,208 | 136,897 | 118,442 | |||||||||||
| Operating expenses | |||||||||||||||
| Selling, general and administrative expenses | 53,249 | 47,700 | 108,875 | 102,074 | |||||||||||
| Depreciation and amortization | 3,018 | 3,390 | 6,137 | 7,013 | |||||||||||
| Total operating expenses | 56,267 | 51,090 | 115,012 | 109,087 | |||||||||||
| Operating income (loss) | 1,886 | (1,882 | ) | 21,885 | 9,355 | ||||||||||
| Cost on early extinguishment of debt | 730 | – | 730 | – | |||||||||||
| Interest expense | 3,361 | 3,966 | 7,108 | 8,584 | |||||||||||
| Income (loss) before income taxes | (2,205 | ) | (5,848 | ) | 14,047 | 771 | |||||||||
| Income tax (benefit) provision | (317 | ) | (694 | ) | 4,559 | 133 | |||||||||
| Net (loss) income | (1,888 | ) | (5,154 | ) | 9,488 | 638 | |||||||||
| Less: net income attributed to noncontrolling interest | 85 | 154 | 262 | 97 | |||||||||||
