Perry Ellis International, Inc. (PERY) is a very well run company, with unique advantages. The company's biggest competitive advantage is its management. The company is still run by the family that founded it 50 years ago. In addition, the company maintains its focus on trendy apparel that maintains its popularity. In view of these reasons, and many more, long-term investors are advised to seriously consider purchasing this stock.
Important Factors for Analysis:
Perry Ellis benefits from a diversified line of apparel brands. It offers fashionable clothes, which have remained popular over long periods of time. The company's business strategy is to keep increasing each brands' offerings by leveraging the strengths of other brands in the company portfolio.
Perry Ellis is a leading apparel company in the US. It manages over 30 brands, some of which have been in existence for over 100 years. It earns most of its revenues from licensing its products to large retailers such as Kohl's Corporation (NYSE:KSS), Macy's, Inc. (M) and Sam's Wholesale Club (WMT). Its most successful brand is Perry Ellis (brand).
The key competitive advantage of the company is its superior clothes. Perry Ellis lays a lot of emphasis on meeting current fashion trends, and has done a remarkable job so far. The Perry Ellis (brand) products have been described as relaxed, stylish and witty by its fans and others.
The company uses several software programs for identification of future fashion trends. It uses Data Warehouse, Geographical Information Systems and IBM SPSS software, which produce predictive analysis on such trends. A keen focus on fashion provides a huge edge for the company over its competitors.
The company has demonstrated the ability to acquire and integrate several fashion brands. Different acquisitions have helped open new product lines to the company. For instance, the "Ben Hogan acquisition helped us develop compression and woven tops, hats, belts, gloves and other apparel products which can be replicated within our other golf brands." Also, the Rafaella acquisition provided the entire business critical mass in the women's apparel market in the United States. The business strategy of Perry Ellis is to help the brands borrow hints and designing capabilities to create a broader collection within each brand.
Perry Ellis is attempting to grow internationally through the licensing of its products. It currently licenses its brands in the United States, Canada, Mexico, the United Kingdom and Europe. In addition, the company has opened outlet stores in the United Kingdom and Puerto Rico. As the company expands its international reach, it should find huge sources of revenue, especially in emerging markets.
The company is lucky to still have its founder at the helm. George Feldenkreis, Chairman and CEO, founded Supreme International in 1961. Supreme acquired Perry Ellis International in 1999. George has been involved in all aspects of the business since its inception, and has provided outstanding leadership over the years. George has had plenty of experience over the years and has learned from many mistakes he made 35 years ago. The company benefits immensely from his presence. His love of the apparel business helps Perry Ellis produce superior products. He is also a recipient of the Ernst & Young Entrepreneur of the Year Award.
George's son, Oscar Feldenkreis, COO of Perry Ellis, has been involved in the business ever since he was a teenager. He shares his father's interest in fashion, and is the perfect leader for a fashion-based company. The family is doing a good job of running the public company and their love of fashion along with their work ethic provide Perry Ellis with a huge competitive advantage.
Perry Ellis has a handsome current ratio, at 2.6. However, the ratio is down from 4 in 2008. Regardless, the ratio is satisfactory and displays good cash management.
The long-term debt to equity ratio of the company is at .46. The ratio has slid from .91 in 2008. While the equity has been constantly increasing due to consistent profits, the long-term debt has fallen 24% over 5 years. The company has a well maintained balance sheet and should not cause liquidity problems in the short term.
The P/E ratio (ttm) is at 20.47. Even though this number seems high, the markets have adjusted the P/E ratio in view of a slight reduction in revenue last year. The revenue at Perry Ellis, post recession, has been unpredictable, but due to the strong fundamentals of the company, it should make a strong recovery.
Perry Ellis International is a "buy" for long-term investors. The company has great potential for growth in and outside the country. It owns a very worthy portfolio of brands that are supported by the company's love of fashion. Most importantly, the company has very able and serious management that is likely to stick around for a while and help increase earnings.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.