Perry Ellis International Inc. saw strong growth in Callaway and Jack Nicklaus golf apparel in the second quarter. Nike Swim is seeing momentum in Europe. A calendar shift and the liquidation of Bon Ton Stores, however, caused a modest sales decline overall in the period. Profits were flat but topped Wall Street’s targets.
“While second quarter sales were down in total due primarily to a shift to the first quarter and business exits as expected, of particular strength were our Original Penguin, Golf Sportswear and Nike brands,” said Oscar Feldenkreis, CEO and president. “Clearly, our powerful portfolio of brands, the innovation in fashion and fabrication that resonates with consumers globally supported by a talented team and vast infrastructure, continues to serve us well.”
Among sports-related brands, golf was down 5 percent in total in the quarter due to the lack of inventory, given the unseasonably cold weather in the first-half. Inventory receipts were adjusted in the second quarter.
Among golf brands, Callaway jumped 24 percent led by growth across all the channels.
“Jack Nicklaus was a star performer showing growth of over 40 percent compared to last year,” added Feldenkreis on a conference call with analysts. “The PGA Tour brand decreased during the quarter, but we believe that this reflected the high revenue growth realized in the first quarter, as well as the Bon-Ton exit. In the second quarter, we also launched the Original Penguin Golf collection which has shown very favorable responses with our first round of shipments.”
Feldenkreis didn’t specify how Nike Swim did overall, but noted that the brand is doing particularly well in Europe. Perry Ellis recently secured licensing rights for Nike Swim overseas.
“Our plans to expand Nike swim globally are progressing well,” said Feldenkreis. “During the quarter, revenues generated outside of the United States represented 22 percent of total revenues, nearly doubling in value from the same quarter last year. Europe is the main driver of this growth coming from successful new wholesale partners.”
Overall, revenues in the company’s men’s sportswear and swim segments in the second quarter totaled $151 million, as compared to $156 million in the prior year. The decline was driven by traditional second-quarter deliveries shifting to the first quarter. First-half shipments in the men’s segment rose 3 percent, in line with expectations, driven by higher sales in Original Penguin, golf apparel and Nike Swim.
Companywide, sales declined 3.5 percent to $199 million, or down 3.8 percent, on a currency-neutral basis. The decrease was primarily the result of the decline in the women’s business attributed to the loss of sales associated with the liquidation of Bon-Ton in the amount of $5 million and the transfer of Laundry dresses to a licensing partner. The Rafaella business was flat despite the exit of Bon Ton. These decreases were only partially offset by increases in Original Penguin and a 10 percent increase in international.
On an adjusted basis, earnings in the period was flat at $2.5 million, or 16 cents per share, compared to the same $2.5 million, or 16 cents, in the second quarter a year ago. Wall Street’s consensus estimate had been 13 cents.
On a reported basis after non-recurring items, Perry Ellis showed a net loss came to $3.3 million, or 21 cents per share, compared to net income of $1.0 million, or 6 cents, in the prior year period.
Gross margins improved 110 basis points due to disciplined inventory management, along with increased sales of higher-margin brands.
SG&A expenses increased 9.8 percent to $75.1 million and included $6.8 million of costs in connection with the evaluation of potential strategic alternatives related to the pending sale of the company to founder George Feldenkreis. Feldenkreis first made the proposal in February 6.
In June, the company’s board accepted the buyer offer of $437 million, or $27.50 per share in cash. Oscar Feldenkreis, George’s son, will continue to lead the company as chief executive officer. George Feldenkreis will return to an active role in the management of the company.
On August 14, Perry Ellis said a special committee of independent board directors had terminated discussions with Randa Accessories Leather Goods on a slightly-higher buyout proposal.
The George Feldenkreis deal is expected to close in the second half. Said Oscar Feldenkreis on the call, “We’re making important progress to close this transaction, including the recently being granted early termination of the waiting period under HSR. The company remains committed to this transaction and is on track to close in the second-half of this year.”
Perry Ellis didn’t update guidance for the year due to the transaction.
Photo courtesy Callaway Golf Apparel
