Perry Ellis International reported revenue decreased 2.3 percent to $209.4 million in the second quarter ended July 28, compared to $214.4 million in the quarter ended July 30, 2011 and in-line with company guidance of a low-single digit decrease. The company noted that continued momentum within golf, direct-to-consumer, and women’s contemporary was slightly offset by decreases in its Perry Ellis and Rafaella collection businesses.
Perry Ellis’ portfolio of brands includes Jantzen, Ben Hogan, Munsingwear and ProPlayer, as well as licensed brands such as Jag and Nike for swimwear and Callaway, PGA Tour and Champions Tour for golf apparel.
“We met our expectations for the second quarter and continue to make significant progress in our Perry Ellis and Rafaella collection businesses,” said Oscar Feldenkreis, president and chief operating officer. “We expect to see improved performance beginning with the holiday season and the new team’s full impact beginning in spring 2013.”
Gross margin for the second quarter decreased by 60 basis points to 33.1 percent compared to 33.7 percent last year due to costs associated with the exit of underperforming brands and businesses, the closing of a sourcing office, as well as increased promotional activity within the company’s collection businesses.
Selling, general and administrative (“SG&A”) expenses for the second quarter of fiscal 2013 increased $2.7 million to $66.1 million compared to $63.4 million in the second quarter of fiscal 2012. This increase was attributed primarily to costs associated with the company’s voluntary early retirement program, exited brands and businesses, and the exit and relocation of a third party logistics provider.
As reported under generally accepted accounting principles (“GAAP”), net loss for the second quarter of fiscal 2013 was $2.4 million, or negative 17 cents per share, compared to net income of $1.8 million, or 11 cents per fully diluted share in the second quarter of fiscal 2012.
After considering the costs of the exit of underperforming brands, the voluntary retirement program, the closing of the sourcing office and the relocation of the third party logistics provider, earnings per fully diluted share, as adjusted, for the second quarter of fiscal 2013 was a penny compared to earnings per fully diluted share, as adjusted, of 11 in the second quarter of fiscal 2012.
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 $82 million in cash and cash equivalents and full availability under its senior credit facility. Inventories at quarter end totaled $164.7 million, a reduction of $44.4 million or 21 percent compared to $209.1 million as of July 30, 2011. As a result of the disciplined management of inventory, the company ended the period with a net debt to total capitalization of approximately 20 percent as compared to 27 percent for the comparable prior year period.
Fiscal 2013 Guidance
The company remains comfortable with revenue guidance ranging from $990 million to $1 billion for full fiscal year 2013.
The company has updated its outlook for the full fiscal year expecting diluted EPS as adjusted in a range of $1.75 to $1.80. This updated guidance principally reflects the impact for the transition to service the new distribution channels in the expanded Callaway agreement, and to a lesser extent continued promotional activity in its collection businesses into the fall season.
The company has a positive outlook as it transitions from a service fee model with Callaway to a direct sales model. Assuming the new channels of distribution positions the company for continued growth in the future and it expects for the transition to be a positive earnings contributor beginning in spring 2013.
| 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 28, 2012 | July 30, 2011 | July 28, 2012 | July 30, 2011 | |||||||||||
| Revenues | ||||||||||||||
| Net sales | $ | 203,090 | $ | 208,596 | $ | 462,106 | $ | 491,371 | ||||||
| Royalty income | 6,347 | 5,839 | 12,854 | 11,353 | ||||||||||
| Total revenues | 209,437 | 214,435 | 474,960 | 502,724 | ||||||||||
| Cost of sales | 140,112 | 142,167 | 317,895 | 333,486 | ||||||||||
| Gross profit | 69,325 | 72,268 | 157,065 | 169,238 | ||||||||||
| Operating expenses | ||||||||||||||
| Selling, general and administrative expenses | 66,103 | 63,370 | 132,450 | 126,745 | ||||||||||
| Depreciation and amortization | 3,472 | 3,424 | 6,890 | 6,613 | ||||||||||
| Total operating expenses | 69,575 | 66,794 | 139,340 | 133,358 | ||||||||||
| Operating (loss) income | (250 | ) | 5,474 | 17,725 | 35,880 | |||||||||
| Costs on early extinguishment of debt | – | – | – | 1,306 | ||||||||||
| Interest expense | 3,513 | 3,769 | 7,322 | 8,435 | ||||||||||
| Net (loss) income before income taxes | (3,763 | ) | 1,705 | 10,403 | 26,139 | |||||||||
| Income tax (benefit) provision | (1,321 | ) | (142 | ) | 3,169 | 8,914 | ||||||||
| Net (loss) income | $ | (2,442 | ) | $ | 1,847 | $ | 7,234 | $ | 17,225 | |||||
| Net (loss) income, per share | ||||||||||||||
| Basic | $ | (0.17 | ) | $ | 0.12 | $ | 0.49 | $ | 1.16 | |||||
| Diluted | $ | (0.17 | ) | $ | 0.11 | $ | 0.47 | $ | 1.08 | |||||
