Perry Ellis International, Inc., which makes Nike branded swimwear and golf apparel under the Callaway, Top-Flite, PGA Tour and Champions Tour brands, reported revenues reached $980.6 million in the fiscal year ended Jan. 28, up 24 percent compared to $790.3 million reported in the prior year ended Jan. 29, 2011.
Rafaella, which the company acquired in late January 2011, contributed total revenue of $123.3 million for the year. The company delivered organic revenue growth of 8.5 percent led by Golf lifestyle, swim, direct-to- consumer, and ladies dresses.
Net income attributed to Perry Ellis International, Inc. for fiscal 2012 was $25.5 million, or $1.60 per fully diluted share GAAP (“EPS”), compared to $24.1 million, or $1.70 per fully diluted share in fiscal 2011.
Net income attributed to Perry Ellis International, Inc. per fully diluted share as adjusted for fiscal 2012 was $1.94 compared to EPS per fully diluted share as adjusted of $1.88 in fiscal 2011. EPS, as adjusted excludes costs related to the early extinguishment of debt, interest, impairment charges of $6.1 million on long-lived assets in fiscal 2012, and impairment charges of $400k for certain retail store leaseholds in fiscal 2011.
Overall gross margin for fiscal 2012 was 33.0 percent compared to 35.7 percent in fiscal 2011. As the company previously noted, retailers requesting later deliveries of goods, as well as a significant increase in promotional markdowns and sales allowances for the holiday season pressured overall revenues and gross margin in fiscal 2012.
“Fiscal 2012 included strong sales and profit growth despite second half challenges driven by the difficult holiday season and product setbacks within our Perry Ellis & Rafaella collection businesses,” said Oscar Feldenkreis, president and chief operating officer of Perry Ellis International. “Importantly, we ended the year in a solid financial position with the processes, initiatives and talent in place to improve our long term operating performance. While we expect some ongoing challenges, we are encouraged by the positive momentum of our core businesses at the start of fiscal 2013 with our priorities intensely focused on our namesake Perry Ellis brand. We remain confident in our strategies and our ability to increase value for Perry Ellis stakeholders.”
Selling, general, and administrative (“SG&A”) expenses were well controlled throughout fiscal 2012 totaling $248.6 million or 25.4 percent to sales compared to $220.0 million or 27.9% to sales in fiscal 2011. The year-over-year increase reflects the Rafaella acquisition as well as 15 new retail doors that were opened throughout fiscal 2012. The increase in SG&A was slightly offset by the reversal of long term incentive compensation. In addition, the company recorded a non-cash impairment expense of $6.1 million associated with an asset held for sale as well as trade names.
Earnings before interest, taxes, depreciation, amortization, and impairments (“adjusted EBITDA”) for fiscal 2012 totaled $75.1 million, or 7.7 percent of total revenue. This represents a 16 percent increase over fiscal 2011 adjusted EBITDA of $64.7 million.
Strategic Review
The company’s key focus is on its core businesses of golf, men’s and women’s sportswear, and swim. Distribution strength in wholesale will continue to be augmented by direct-to-consumer as well as international expansion in Europe and Asia. The company model of utilizing its brand portfolio to create exclusive brands for specific retailers has been very successful and has mitigated potential cannibalization.
In an effort to streamline its business model, the company has identified smaller brands and businesses which combined generate approximately $30-$40 million in revenue that it plans to liquidate and close by the end of fiscal 2013. These brands and businesses have not generated sufficient momentum to contribute to the company’s profitability. The company will provide additional detail surrounding these specific brands and businesses throughout the year as they are fully exited.
In addition to this business review, the company has identified approximately $5.5 million in annual cost savings by streamlining its infrastructure including distribution centers, product processes and development costs, trade shows, and headcount reduction. The company will begin to recognize a portion of these savings by the fall of fiscal 2013 and expects to be fully recognized by spring 2014. The company expects to incur costs of approximately $2.0 million associated with these initiatives.
Fourth Quarter 2012 Results
Total revenue for the fourth quarter of fiscal 2012 was $229.4 million, an 11 percent increase compared to $206.9 million reported in the fourth quarter of fiscal 2011. Rafaella contributed $23.2 million in the fourth quarter.
As reported under GAAP, fourth quarter per fully diluted share EPS was $0.12 compared to $0.54 in the fourth quarter of fiscal 2011. Excluding the above mentioned costs and impairment charges in both fiscal 2012 and 2011 per fully diluted share EPS as adjusted for the fourth quarter was $0.38 compared to $0.69 in the prior year period.
“Our liquidity and leverage profile remains extremely strong,” said Feldenkreis. “With net debt to capitalization of 31.5 percent and combined with availability under our credit facility, we are in a compelling position to take full advantage of any strategic opportunities that may arise in the near future while simultaneously investing in international markets and other core competencies.”
Cash and cash equivalents at year end totaled $24.1 million. Accounts receivable totaled $145.6 million compared to $129.5 million in fiscal 2011 reflecting the increase in shipments for the fourth quarter. The quality of the receivables continues to be strong and the company is focused on maintaining a financially strong customer base.
Inventories increased 13 percent to $198.3 million at year end compared to $175.8 million in the comparable prior year period ended Jan. 29, 2011. The company also noted that it continues to reduce its weeks of supply of on-going replenishment business and that inventory quality and aging remains current.
Throughout the fourth quarter the company repurchased 1.157 million shares for a total of $15.96 million, bringing the total weighted average number of per fully diluted shares outstanding to 15.95 million for the year.
Fiscal 2013 Guidance
“As we look ahead, we believe it is prudent to remain conservative in our business outlook for fiscal 2013,” Feldenkreis said. “Our focus is direct and unyielding and our priority is on our namesake brand Perry Ellis. We have augmented our management, creative and merchandising teams in Perry Ellis as well as in Rafaella. We are optimistic about our core businesses in all areas and in the expansion of our distribution network.”
The company announced that for the twelve months ending Feb. 2, 2013 (“fiscal 2013”) it anticipates revenue to be in a range of $990 million – $1.0 billion after exiting businesses discussed above. It anticipates adjusted fully diluted earnings per share to be in a range of $1.95 – $2.00. On a GAAP basis, the company expects earnings per fully diluted share to be in a range of $1.85 – $1.90.
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 28, 2012 | January 29, 2011 | January 28, 2012 | January 29, 2011 | |||||||||
| Revenues | ||||||||||||
| Net sales | $ | 222,062 | $ | 199,164 | $ | 955,549 | $ | 763,884 | ||||
| Royalty income | 7,386 | 7,744 | 25,043 | 26,404 | ||||||||
| Total revenues | 229,448 | 206,908 | 980,592 | 790,288 | ||||||||
| Cost of sales | 157,394 | 132,933 | 656,850 | 507,829 | ||||||||
| Gross profit | 72,054 | 73,975 | 323,742 | 282,459 | ||||||||
| Operating expenses | ||||||||||||
| Selling, general and administrative expenses | 55,517 | 56,430 | 248,618 | 220,018 | ||||||||
| Depreciation and amortization | 3,691 | 3,101 | 13,673 | 12,211 | ||||||||
| Impairment on long-lived assets | 6,066 | 392 | 6,066 | 392 | ||||||||
| Total operating expenses | 65,274 | 59,923 | 268,357 | 232,621 | ||||||||
| Operating income | 6,780 | 14,052 | 55,385 | 49,838 | ||||||||
| Cost on early extinguishment of debt | – | – | 1,306 | 730 | ||||||||
| Interest expense | 3,800 | 2,914 | 16,103 | 13,203 | ||||||||
| Income before income taxes | 2,980 | 11,138 | 37,976 | 35,905 | ||||||||
| Income tax provision | 1,197 | 3,427 | 12,459 | 11,393 | ||||||||
| Net income | 1,783 | 7,711 | 25,517 | 24,512 | ||||||||
| Less: net income attributable to noncontrolling interest | – | – | – | 400 | ||||||||
| Net income attributable to Perry Ellis International, Inc. | $ | 1,783 | $ | 7,711 | $ | 25,517 | $ | 24,112 | ||||
| Net income attributable to Perry Ellis International, Inc. per share | ||||||||||||
| Basic | $ | 0.12 | $ | 0.58 | $ | 1.71 | $ | 1.84 | ||||
| Diluted | $ | 0.12 | $ | 0.54 | $ | 1.60 | $ | 1.70 | ||||
