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Perry Ellis Pumps Up Share Buyback - Analyst Blog
Perry Ellis International Inc. ( PERY ) recently approved a $20 million extension of its stock repurchase program, thereby maintaining the trend of returning wealth to its shareholders from time to time, depending on market conditions. This program now authorizes the company to repurchase up to $40 million of its common stock over a twelve-month period.
Perry Ellis will fund this repurchase program through the cash balances and its available credit facility. At the end of third-quarter 2011, Perry Ellis had cash and cash equivalents of $21.4 million. Long-term debt was $220.0 million.
Although the board allocated a maximum of $40 million to carry out the program, Perry Ellis is not obligated to buyback any specific number of outstanding shares, and can revaluate the program on an ongoing basis.
Earlier in November 2007, the company's board of directors authorized repurchase up to $20 million of its common stock over a 12-month period. Then, in September 2008, 2009 and 2010, the board extended the stock repurchase program for the next twelve months.
Since inception, total repurchases under this plan, remain $17.4 million through the third quarter of fiscal 2012. Perry Ellis has about 22.6 million common shares remaining under its current repurchase authorization.
Perry repurchased 418,000 and 1,769,296 shares of its common stock during fiscal 2010 and 2009, respectively, at a cost of approximately of $1.8 million and $11.6 million. No purchases were made during 2011 as well as in the first nine months of fiscal 2012.
We believe this is a positive step toward the return of shareholder wealth. The increase in share buyback authorization also affirms the company's confidence in its fundamentals. At the same time, buying back shares will help the company in reducing the share count, thereby increasing earnings per share and return on equity. As of November 30, 2011, the shares of the company were trading at $14.30. The stock had historically traded between $12.22 and $32.84 in the last 12 months. Apart from bolstering shareholder value, this strategic move will also lift the relatively undervalued share price.
Perry Ellis currently retains a Zacks #4 Rank, which translates into a short-term Sell rating. We are also maintaining our long-term Neutral recommendation on the stock. Perry Ellis' peers include Polo Ralph Lauren Corp. ( RL ) and CROCS Inc. ( CROX ).
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