Perry Ellis International Inc.
) posted adjusted earnings per share of a penny in the second
quarter of fiscal 2013, missing the Zacks Consensus Estimate of 3
cents as well as deteriorating from the year-ago earnings of 11
cents per share. On a reported basis, losses per share were 17
cents versus a gain of 11 cents earned in the year-ago quarter.
Perry Ellis' total revenue decreased 2.3% year over year in the
quarter to $209.4 million which also fell short of the Zacks
Consensus Estimate of $211.0 million.
During the quarter, Perry Ellis' gross profit declined 4.0% year
over year to $69.3 million. Moreover, gross margin fell 60 basis
points (bps) to 33.1%. Selling, general and administrative expense
increased 4.3% year over year to $66.1 million owing to the expense
associated with the company's voluntary retirement program and the
elimination and relocation of a third party logistics provider as
well as some business.
At quarter end, Perry Ellis had cash and cash equivalents of
$82.4 million. Total long-term liability was $226.1 million.
For fiscal 2013, Perry Ellis expects revenue from its existing
business in the range of $990 million-$1.0 billion. Adjusted
earnings per share guidance have been lowered to the range of
$1.75-$1.80 from the previously guided range of $1.95-$2.00. On a
GAAP basis, management expects earnings per share between
$1.65-$1.70 (previously guided $1.85-$1.90).
Expansion of the Callaway license agreement into new channels of
distribution as well as increased promotional activities in the
collection business forced the company to slash its guidance.
For the full year, management anticipates gross margin
improvement in the range of 20 to 30 bps.
Perry Ellis, the designer, distributor and licensor of a broad
line of men's and women's apparel, accessories, and fragrances,
remains optimistic about the new product assortment for the fall
and holiday seasons especially in the Rafaella sportswear
Golf and direct-to-consumer businesses, in particular, are
expected to be promising in the upcoming quarter. In a
faltering economy, the company is streamlining operations and
discarding less productive overhead in order to realize cost
Concerns for the near term include persistent underperformance
in margins and promotional markdowns. Management also expects
revenues to decrease in the mid-single digits in the upcoming
quarter before improving in the fourth quarter.
While margins are again expected to be down in the upcoming
quarter, management considers the dip as temporary and anticipates
margins to recover with the new direct sales model during the
Perry Ellis currently carries a Zacks #3 Rank, which translates
into a short-term Hold rating. We are also maintaining our
long-term Neutral recommendation on the stock. Perry Ellis' peers
Polo Ralph Lauren Corp.
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