Perry Ellis’s Q1 Earnings Increase Two-Fold

“We are extremely pleased to report very strong results for the first quarter of fiscal 2011. Our multibrand, multichannel diversification strategy which is the foundation for our business platforms continues to prove successful in today's retail environment,” commented Oscar Feldenkreis, President and COO of Perry Ellis International. “As the economy continues to show signs of a recovery, consumers are responding positively across our brand portfolio, reflecting our increased product focus. Our strong performance at retail has driven solid increases in our gross margins and positions us for continued revenue growth in the future.”

Throughout the quarter the company increased revenues by $17 million as a result of organic growth in several key core businesses as well as deliveries of the new brands that were launched during the quarter. However, this growth was offset by the previously announced exit of certain unprofitable businesses which represented $17 million of revenue for the first quarter ended May 2, 2010 (“first quarter of fiscal 2010”). With the increased mix of branded revenue, gross margins expanded by 420 basis points to 35.7% compared to 31.5% for the comparable period in fiscal 2010.

Feldenkreis added, “We continue to see the consumer returning to more normal shopping patterns, which is contributing to increased shipments of our brands at most retailers. In addition, conservative inventory planning at retail combined with a favorable response to our offerings has translated into increased sell through rates at retail and less markdown assistance for our company. This has been a healthy development for all of us in the industry and in our case resulted in a substantial increase in our gross margin rate for the quarter.”

Earnings before interest, tax, depreciation, and amortization (“EBITDA”) for the first quarter of fiscal 2011 grew 56% to $23.1 million compared to $14.9 million during the first quarter of fiscal 2010. A table showing the reconciliation of EBITDA to net income is attached. In addition, net income for the first quarter ended May 1, 2010 increased 92% to $11.2 million compared to $5.8 million for the period ending May 2, 2009.

For the three months ended May 1, 2010, earnings per fully diluted share at $.81 represented an increase of $.35 or 76% compared to $.46 for the first quarter ended May 2, 2009. This compares positively to Thomson's First Call consensus earnings of $.60 for the quarter.

Balance Sheet Update

The company ended the first quarter of fiscal 2011 with $31.8 million in cash compared to $7.1 million at the end of the first quarter of fiscal 2010. In addition, the company continues to strengthen its balance sheet and remains in an outstanding financial position. The continued focus and discipline in working capital management along with strong retail planning allowed the company to reduce its inventory position by $10.2 million or 9% to $104.3 million compared to $114.5 million at the end of the first quarter of fiscal 2010. Inventory turnover improved to 4.8 times versus 4.4 times in the prior year period. Accounts receivables were reduced to $134.0 million compared to $154.7 million. This represents a $20.7 million or 13% reduction.

At quarter end, the company generated $9.8 million in cash from operations and ended the quarter with no borrowings against its $125 million senior credit facility. The company continued to reduce its overall debt position bringing its total net debt to capitalization ratio to 30% as of May 1, 2010 compared to 34% as of January 30, 2010 and 44% as of May 2, 2009.

Fiscal 2011 Guidance

“As we look ahead we expect our trends to continue favorably,” commented George Feldenkreis, Chairman and CEO. “The men's business continues to be strong and for most retailers, performed substantially better than other parts of their businesses. “We have successfully managed the turnaround of several of our underperforming businesses and this has resulted in an improvement in our gross margin. We believe this will be a good year for the company and consequently have increased our guidance for revenues and earnings for the full year.”

The company expects fiscal 2011 net revenues and earnings per share will be in a range of $775 – $795 million and $1.45 – $1.60, respectively, compared to its previous guidance of $770 – $790 million and $1.25 – $1.40 in EPS.