Perry Ellis Loss Narrows, Lifts Outlook

Aug.26.10 | About: Perry Ellis (PERY)
Perry Ellis International Inc. (NASDAQ:PERY) posted a narrower GAAP net loss of $2.0 million in the second quarter of fiscal 2011, compared to a net loss of $5.3 million in the year-ago period. Excluding special items, adjusted net loss per share came in at 11 cents better than the Zacks Consensus Estimate for a loss of 16 cents per share.

Perry Ellis is a designer, distributor and licensor of a broad line of men's and women's apparel, accessories, and fragrances. The company's merchandise include dress and casual shirts, golf sportswear, sweaters, dress and casual pants and shorts, jeans wear and active wear is available through all major retail channels. The company’s portfolio of brands includes Perry Ellis, Jantzen, Laundry by Shelli Segal, C&C California, Cubavera and Munsingwear.

Perry Ellis’ total revenue posted a modest 1.6% growth in the quarter to $161.8 million from $159.2 million in the year-ago quarter. Sales growth was aided by improved performance in both wholesale and direct-to-consumer businesses. However, overall revenue growth was partially offset by the company’s planned exit from certain unprofitable operations.

During the quarter, Perry Ellis’ gross profit increased by 18.2% year-over-year to $58.2 million, while gross margin expanded 500 basis points (bps) to 36.0%. The expansion was mainly driven by management initiatives to improve operational efficiencies and prudent inventory management. The company also witnessed better merchandise margins at company-owned stores in the quarter.

Selling, general and administrative expenses increased 11.6% to $53.2 million from $47.7 million in the year-ago period. However, increased revenues and gross margin expansion more than offset the increase in operating expenses. Consequently, Perry Ellis swung to an operating income of $1.9 million, from an operating loss of $1.9 million in the prior year quarter.

At quarter-end, Perry Ellis had cash and cash equivalents of $43.4 million, compared to $29.5 million in the year-ago period. Long-term debt at the end of the quarter was $105.5 million, reflecting a long-term debt-to-capitalization ratio of 27.2%.

Bolstered by the better-than-expected quarterly performance, Perry Ellis lifted its fiscal 2011 EPS guidance to a range of $1.53 to $1.68 from the earlier forecast of $1.45 to $1.60. The revised guidance is in line with the Zacks Consensus Estimate of $1.63 per share, which moved up 3 cents in just the past week as 2 of 4 covering analysts raised expectations.

Perry Ellis has a Zacks #2 Rank (short-term Buy rating), while in the long-term we have a Neutral recommendation on the company.