Perry Ellis International reported total revenue increased 1.1 percent in the second quarter to $211.7 million compared to $209.4 in prior year.

Revenues were in line with company guidance for a low single digit increase. The company experienced revenue increases in its Rafaella women's sportswear and Perry Ellis menswear collections driven by its product and assortment initiatives. In addition, revenues rose in Nike swim as well as in licensing. These increases were partially offset by a decrease in direct to consumer revenue and the anticipated reduction in men's classification private label bottoms revenue.

Oscar Feldenkreis, President and Chief Operating Officer, commented, “We are seeing solid progress in our Perry Ellis and Rafaella collection businesses, which is encouraging as we move into the second half of the year. We are pleased with the strength of our brands and their growing lifestyle appeal, which is best evidenced by our licensing revenue increase of 14 percent for the period. While performance in direct to consumer was disappointing, our inventory and assortments are well positioned moving into the fall and have seen a positive improvement for the month to date.”

Gross margin decreased by 70 basis points to 32.4 percent compared to 33.1 percent last year primarily due to a mix shift away from higher margin direct to consumer and mid-tier channel revenues. This impact was partially offset by margin improvement in the company's collection businesses driven by improved product performance at retail.

Selling, general and administrative (“SG&A”) expenses totaled $66.5 million compared to $66.1 million in the second quarter of fiscal 2013. Second quarter fiscal 2014 included $836,000 of costs associated with the company's New York City office consolidation efforts. In the second quarter of fiscal 2013, SG&A included $3.5 million in costs associated with the company's strategic initiatives.

As reported under generally accepted accounting principles (“GAAP”), the net loss for the second quarter of fiscal 2014 was $2.8 million, or 19 cents per share. This compares to a net loss of $2.4 million, or 17 cents per share, in the second quarter of fiscal 2013.

Adjusting for the costs associated with strategic initiatives, the adjusted loss per share was $0.15 for the second quarter of fiscal 2014 and compared to an adjusted profit per share of $0.01 in the second quarter of fiscal 2013.

Adjusted EBITDA for the second quarter totaled $2.9 million or 1.4 percent of revenue. (See attached reconciliation “Table 2”)

First Half Operations Review

For the six months ended August 3, 2013 (“first half of fiscal 2014”) total revenues were essentially flat at $474.0 million compared to $475.0 million for the six months ended July 28, 2012 (“first half of fiscal 2012”) and in line with company guidance. Revenue rose in golf lifestyle apparel, Nike swim and men's accessories. These increases were offset by declines in the company's direct to consumer segment, as well as from the anticipated reductions in men's classification private label bottoms revenue.

Adjusted EBITDA totaled $22.9 million or 4.8 percent of revenue.

Net income was $8.5 million, or $0.55 per fully diluted share, compared to $7.2 million, or $0.47 per fully diluted share, in the first half of fiscal 2013.

Adjusting for the costs associated with strategic initiatives, adjusted earnings per fully diluted share for the first half of fiscal 2014 was $0.44 compared to adjusted earnings per fully diluted share of $0.70 in the first half of fiscal 2013.

Balance Sheet Update

George Feldenkreis, Chairman and CEO of Perry Ellis International commented, “We believe that our excellent financial position and the strength of our operating platform provide us with the foundation to capitalize on our improved sportswear offering and maximize sales opportunities across multiple distribution channels around the globe. We are confident that the focus and disciplined management of our balance sheet will provide support for continued growth in our core competencies.”

The company ended the quarter with $59 million in cash and cash equivalents and full availability under its senior credit facility. Inventories at quarter end totaled $178.9 million, as compared to $183.1 million at February 2, 2013 and $164.7 as of July 28, 2012. As a result of the disciplined management of inventory, the company ended the period with a net debt to total capitalization of approximately 23 percent, which continues to keep it in excellent shape.

Fiscal 2014 Guidance

The company continues to maintain its outlook for the full fiscal year expecting diluted EPS as adjusted in a range of $1.50 to $1.60. Guidance for GAAP earnings per share should be in the range of $1.57 to $1.67. The company is updating its revenue outlook to reflect an increase of 2 percent to 3 percent as compared to its previous outlook for 3 percent to 5 percent growth over fiscal 2013. The reduction in expected revenue growth reflects softer sales in the company's direct to consumer channel and slower sales growth in the mid-tier distribution channel. Disciplined expense management is expected to offset slightly lower revenue growth.

Perry Ellis International, through its wholly owned subsidiaries, owns: Perry Ellis(R), Jantzen(R), Laundry by Shelli Segal(R), C&C California(R), Rafaella(R), Cubavera(R), Ben Hogan(R), Centro(R), Munsingwear(R), Savane(R), Original Penguin(R) by Munsingwear(R), Grand Slam(R), Natural Issue(R), Pro Player(R), the Havanera Co.(R), Gotcha(R), MCD(R), John Henry(R), Mondo di Marco(R), Redsand(R), Manhattan(R), Axist(R), Farah(R), Anchor Blue(R), Miller's Outpost(R), Tahoe River Outfitters(R), Original Khaki company(R) and Techworks(R). The company enhances its roster of brands by licensing trademarks from third parties, including: Nike(R) and Jag(R) for swimwear, and Callaway(R), PGA TOUR(R) and Champions Tour(R) for golf apparel.