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Perry Ellis International Inc. (NASDAQ:PERY)

Q1 2015 Earnings Conference Call

May 22, 2014 09:00 AM ET

Executives

George Feldenkreis - Chairman and CEO

Oscar Feldenkreis - Vice Chairman, President and COO

Anita Britt - CFO

Analysts

Edward Yruma - KeyBanc

Eric Beder - Brean Capital

Ron Bookbinder - Benchmark Company

Robby Ohmes - Bank of America Merrill Lynch

Operator

Good morning ladies and gentlemen and welcome to the Perry Ellis International Fiscal Year 2015 First Quarter Results Conference Call. Before we begin, I would like to remind you that some of the comments made on the call either as part of a prepared remarks are in response to your questions may contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such information is subject to risks and uncertainties as described in the press release and in documents that we have filed with the SEC. Today’s call is being recorded.

Joining us today for the call from Perry Ellis are George Feldenkreis, Chairman and Chief Executive Officer; Oscar Feldenkreis, Vice Chairman, President and Chief Operating Officer; and Anita Britt, Chief Financial Officer.

I would now like to turn the call over to George Feldenkreis. Please go ahead, sir.

George Feldenkreis

Good morning and thank for joining us. We’re glad to report a very good first quarter for Perry. Our revenues were down 2% compared to last year, small number considering the fact that our customer had a very challenging February after difficult January because of the weather and lethargic retail environment. Last year, our adjusted EBITDA for the quarter was $20 million. After excluding one-time gain of $6.3 million from the sale of the John Henry brand rights for Asia. These compared to adjusted EBITDA this year of $18.7 million.

Q1 was the best of the last four quarters. We are on track to a much better year than we had last year. Because of a lot of the hard measure we had to implement last year we have reduced many of our expenses substantially. We will have more visibility to the savings during the course of the year. During the last 12 months, we reduced the number of our associates by approximately 6% compared to previous year. Last year, we made management changes in our direct-to-consumer and retail business.

As a consequence we are now starting to show the improved results. For example, during the last quarter sales of Perry Ellis stores increased by approximately 13% with comp doors increasing by 7.7% for the quarter and gross margin by 9%. Regional in the West Coast, we registered at 12% increase in comp sales and a 5% increase in traffic. In the North East, we registered a 3% growth in comp sales with a drop of 6% in traffic. The increase of the west and south allowed us to show an increase of 7.7% overall income sales.

With Penguin stores increase in all doors of 17.6%, on a comp basis sales were flat versus last year. We have not consolidated all Penguin retail management on operation with the Perry team. This has resulted in substantial saving in expenses and we are going to leverage the best practices of our Perry Ellis stores and implement strong strategies in original Penguin. This will drive better performance and increased profitability for this year and going forward. Our total revenue in our six web sites increased by 52% for the quarter and on a comp basis by 43% compared to a year ago.

In our third-party e-commerce, our business grew by 10%. E-commerce business with our brick-and-mortar consumer as well as pure Internet players continue to be our best way to reach the omni-channel customer. On the international side, we should represent 10% of our built up revenue, our business grew by 28%. We continue to expand in Europe, Mexico, Canada, as well as through our licensing division. In Europe, we achieved 33% growth in Q1.

In the UK, Penguin apparel doing exceptionally well. In Canada, we achieved 38% growth; we are currently in our 1250 doors in the territory. We recently hired a general manager for Canada who will be working out of our Toronto office and will drive our market share growth in many of our branch which are not yet represented in the region.

In the UK, Callaway business is starting off very strong with shipping to Callaway distributors across Europe, Morocco and the Middle East. Callaway has performed above plan for the spring summer 2014. At this stage, we are still investing in the platform and organizing distribution, but we’re sure this would be a profitable business this year. Our Callaway bookings and sell through are excellent and we have had an excellent reception to our fall 2014 collection. We have expanded our sales team in the United Kingdom and the continent. We are determined to capture additional market share in the under penetrated regions and leverage our sales relationship to deferred goals (ph) for our other brands.

Licensing income continued to increase. Our business grew by 8% during the quarter, which is a testament to the strength of our brands. We have signed four more agreements and we are currently negotiating a few more, which will be announced in the next few months. Most of our key licenses in Perry Ellis, Penguin and Laundry achieved double-digit growth in sales during the quarter. We’re also glad to report that inventory is down 14% from the previous quarter and up 5% from last year which include expansion in our inventory in new businesses like Callaway Europe, Jack Nicklaus, Ben Hogan signature and Rafaella store. However, we are focusing our efforts on continuing to reduce inventories of all of our replenishment program and we are very focused on improving the flow of incoming products to effectively match the orders of our customers on a weekly basis. We have consolidated our men’s wholesales sportswear business excluding the Perry brand with our bottom business. This has resulted in improving service to the customer’s better designs direction and an important reduction in expense.

We have also made major changes in management and restructure our fashion swimwear business. We feel that these changes will have a major impact on the performance of this division in the coming swimwear season with delivering starting in Q4 of this year. We are working on several other initiatives to reduce our cost of doing business. The retail environment continues to change in an incredible speed. The growth of vertical retailers mostly foreign and the growth of income have had an effect on the growth of national brand and traditional brick and mortar retailers. Consequently, it’s more important than ever that we focus our sales in growing our products and offering of our key brand.

We believe that in a market where no brands continue to proliferate, we well established brand have had connection with [indiscernible] many years are going to continue to strive as long as they continue to offer greater products of great quality at good prices and continue to properly market the brand. We must attract customers with new products product that create the need to buy innovation is key. We have reorganized several of our division we continue to do so to make sure that we’ll remain from a cost standpoint a very competitive company. We continue to look for ways to grow our business. We are now making investments build an accessory business for all our brands. We have also started to use some of our brand to develop an active wear business and we’ll continue to invest in improving our Internet sites and our service to the brick and mortar and pure income companies that carry our products.

We continue to look forward to strong organic growth with many opportunities we see in the markets. The hard decision and improvement that we have made in the last 12 months we continue to be very optimistic about the present and the future of Perry Ellis International. I feel that the Perry Ellis business model combining great brands with some private brand offering to some of our customers of direct-to-consumer and international licensing business offer the best opportunities for a diversified growth and profitable company in the years ahead.

Thank you for your patience and now I will pass the call along to Oscar.

Oscar Feldenkreis

Thank you, George. We’re very pleased with the results that we’re seeing here today. Before I detail the business specifics performance I would like to first highlight our key achievements for the quarter. Revenues in our international and golf lifestyle business increased by double-digit natural margins in our men’s and women’s sportswear collections continue to improve. As we realized stronger retail sell-throughs and our direct to consumer business posted stronger comp sales as well as solid margin increases.

The strong performance is very encouraging. We continue to concentrate on driving growth across our enterprise and remain laser focused on delivering improved sales by sharpening our merchandising and geographic localization efforts, price value leadership and customer service at the same time we have been diligent in managing our expenses and inventories both at wholesale and our direct-to-consumer business. Second quarter is off to a strong start as weather improvements bodes well for our spring and summer offerings.

With respect to the business specific performances at retail for Perry Ellis, we continue to remain laser focused on the performance and profitability at the door level. We saw improved natural margins at retail and we are turning our product much quicker resulting in better return on the inventory investment for our retail partners. We are rolling out 34 in-store shops at e-retail locations in the next six weeks, all in place for Father’s Day which will bolster our present and our performance in our top stores at retail. Fall and holiday market was well received by our retail partners who are very pleased with the brand’s great product and the impactful marketing which will support it.

Original Penguin continues to show double-digit growth domestically and internationally and Nordstrom were in all doors online and launching at the retailers first Canadian store. Our design and merchandising team has executed with precision and spring performance at retail has been very strong with all original Penguin product categories trending above plan. Swim in particular has been a standup and we will continue to offer swim as in all year round product offering.

Finally, we are very excited that yesterday we launched collaboration between Pepsi and Original Penguin in connection with the upcoming World Cup events. Original Penguin will be featured in window displays across top retail accounts including Bloomingdales, Liberty in London, Paulette in France and at El Palacio De Oro in Mexico, as well as our own stores across the U.S., Canada and Latin America and the Philippines. The rare performance our retails continue to gain market share achieving +8% growth for the quarter, on top of an over 20% increase last year. We are experiencing significant interest from several new major accounts to add Savane to their assortment and we will begin to test new programs in Q2 and in Q3 which we expect would lead to permanent placement as we move into 2015.

We remain on track to achieve double digit growth for the year as the brands product assortments evolves to encompass a full lifestyle assortment of products. Our dominant position in golf apparel continues, and our core portfolio of national and international brands led by Callaway, PGA TOUR, Ben Hogan, Grand Slam and Jack Nicklaus grew 24% and achieved at 12% organic growth. We continue to capture market share annual accounts and increased our door accounts and penetrations for each brands. The success of the Master Callaway global brand image core golf equipment business has had a very positive impact on our apparel business. Building off with their momentum we achieved over 30% organic growth this quarter.

Our Callaway apparel ambassadors have reported six global wins year-to-date, more than any other of our competitors. Our Callaway direct-to-consumer launch was exceptional, the most successful online commerce launched by any brand in our company, and we plan to double our business next year.

Looking forward to Father’s Day and anticipate a strong performance at retail; we would roll out new innovative performance product offering. We are especially excited about our PGA TOUR expansion four and product which will be showcased on our brand ambassador Jason Dufner via a national television campaign and sweepstakes.

Finally, Jack Nicholas has been a great addition to our portfolio, both domestically and international markets and we are now delivering product to 13 countries outside the United States, a testament to the global appeal of the greatest golfer of all time.

Turning to Woman; despite a soft landscape for the women's sportswear Rafaella performed on plan. Replenishment is a key driver behind the success of the brand and we have doubled our bottoms replenishment programs this season, which will complement our other product offerings. We introduced Rafaella Sport to topline to several hundreds of the Rafaella’s top doors and initial reaction has been quite positive. With the support of our retail partners, we recently rolled out these four items to just over 900 doors. As the line performance we expect to expand the penetration and merchandise assortment within these doors with the Rafaela’s current distribution in over 1100 doors. We believe there is a great opportunity for the sport line as we are experiencing a more active lifestyle trend.

Nike Swim delivered another outstanding quarter, volume over 10% relative to last year. Our first quarter is our most significant period and we continue to be planned across all distribution channels and product categories. We had a very strong adoption of our new Elite competitions suit. The Nike NG 1 with many competitive athletes choosing Nike for the first time and breaking records. This year we will be keenly focused on women’s swim, performance swim and growth in the sporting goods channel. While we continue to gain market share as well as rollout enhanced in-store visuals and fixture.

In conclusion, our objective will continue to focus on our core strength and our global lifestyle brands. We cannot control the weather, the consumer sentiment or the macroeconomic environment but we can ensure that we deliver outstanding products, exceptional assortments, and a consumer centric approach through the omni-channel. We have a strong platform in attractive segments that we can grow organically and leverage across additional brands and geographies. And whether growth this organic or through acquisitions, we believe that we know how to add value. Together, with great partners, we create product that resonate with the consumer and have a portfolio of great brands. We appreciate your support and we look forward to continuing our progress, a momentum in the quarters ahead.

Thank you now and I would like to turn the call over to Anita.

Anita Britt

Thank you Oscar, and good morning all. We concluded our first fiscal quarter ahead of our expectations. We were pleased with the result given the challenging start for the season. We have made good progress across many of our initiatives which you heard from both George and Oscar. I will update you on our infrastructure rationalization shortly.

I would like to begin with the review of the quarterly results. First, revenue in our men’s wholesale segment totaled $195 million as compared to $198.7 million in prior year. The segment realized increases in golf lifestyle apparel, Original Penguin and Nike swim which were offset by planned decreases in private and exclusive branded products.

Women’s sportswear segments totaled $34.5 million as compared to $39.8 million primarily associated with the shift in shipments for Rafaella into the next quarter based on plans production receipts. In our direct-to-consumer segment revenues totaled $20.4 million as compared to $17 million and this reflects the 5.6% comparable same store increase coupled with 43% comp increase in e-com. Strong comparable sales were recorded in Perry Ellis as George talked about while as original Penguin comp sales were even for the quarter. Both businesses converted customers well against soft traffic in both outlets and full price venues.

Licensing totaled $7.4 million an increase of 8% for the quarter, progress we have made in licensing both our own national brands in non-direct categories and on pure licensing properties. We were pleased to see the strongest increases in Perry Ellis as well as growth in a number of our licensed only brands. Our licensing organization has been working aggressively and we have a solid pipeline of deals for the future that continued to expand our product and geographical reach.

Moving on to gross margins, we saw margins expand to 34.1% for the first quarter from 33.8% for the year ago period. The major drivers of the expansion were stronger margins in our Perry Ellis and Rafaella collection businesses, as well as favorable mix from higher margin international businesses and licensing.

We also realized lower freight cost resulting from our infrastructure review which impacted favorably for the quarter. On the SG&A side we realized favorability from reduced headcount in our infrastructure as well as reduced design and sample expenses. We did make further investment in marketing and advertising for our national brands as well as investment in Europe for the Callaway golf platform as well as Original Penguin.

Turning to our balance sheet, our net debt position at the end of the quarter totaled $190 million reflecting a net debt to total capitalization of approximately 34.7%, a level that we’re very comfortable with. Receivables totaled $183 million, a 5% increase over prior year reflecting increased sales on a year-over-year basis during the second half of the quarter. Our aging is extremely strong and the overall health of our retailers is solid.

Inventory totaled $177 million at quarter end compared to $207 million at year-end and $168 million in the prior year. During the quarter, we focused on reducing our replenishment stock and are very pleased with the composition and the currency of the inventory. We see a reduced level of clearance goods from prior year and believe that we have managed our levels very well both on our own balance sheet as well as at our retail partners.

Looking forward we believe that there are still considerable headwinds in terms of economic uncertainty with discretionary consumer spending. For this reason, despite the stringer than expected first quarter in terms of revenues, we’re prudently maintaining our revenue guidance in a range of $910 million to $920 million. By business segment, we continue to see men’s sportswear even to prior year. This reflects an increase in golf with growth in Callaway, PGA Tour, Ben Hogan as well as the addition of Jack Nicklaus. We’re planning growth in Nike swim across all channels as well as wholesale Original Penguin business. Offsetting these increases we have tightened our plans on the replenishment portion of our business and also reflecting the impact of plans private and exclusive label brand exits from prior year.

In women’s sportswear, we continue to see a forecast even to prior year, this guidance reflects growth in Rafaella based on solid performance in fiscal 2014 as well as the addition of the sport and denim offering Oscar spoke to. But we’re planning replenishment tight again with the conservative stamps as well as the exit of a private label program under the Rafaella platform.

Direct-to-consumer is planned up 2% to 3% in comp store sales and of course we’re trending north of that in Q1 but we’re maintaining a conservative outlook. And adding in ecommerce comps we’re planning that up 5% for the year. We will continue to focus on the profitability profile at all stores which are now operated by one common group. We do anticipate that it will take a bit of time to see recovery in the Original Penguin stores in any implementation of strategies, but are optimistic that the new team can begin to see positive comp store sales in the second half of the year.

We continue to see licensing increasing by 3% to 4% reflecting continuing growth in our existing portfolio led by the Perry Ellis brand. And the team is also focused on the license only brands which contributed approximately 10% of our licensing revenues for the quarter. Guidance for gross margins continue to be in a range of 33.7% to 33.8% for the year. We achieved our goals for the first quarter and we remain comfortable with the overall year target.

Turning to expenses, we realized considerable expense leverage in the first quarter compared to our plan driven by the stronger revenue contribution. We expect to continue this positive trend by focusing on the disciplined reductions and spends implemented under our infrastructure rationalization initiative. To support this internal process as previously discussed, we engaged industry consultants to review our processes and systems from product development through planning, purchasing, cost and sourcing. We do believe that there will be additional savings opportunities flowing from this project that will be implemented later in the year and are not incorporated into our guidance.

Finally, partially offsetting these items, we do continue to invest in our international platforms both through our direct operations as well as through partnerships. Based on t strength of the first quarter but still being mindful of the headwinds in the retail environment, we have increased our guidance and now expect adjusted earnings per share excluding cost associated with the realignment will be in a range of $0.80 to $0.95 for the full year. As we look at the next quarter, we see revenues in a range of $200 million to $210 million. We anticipate expansion in gross margins between a range of 32.8% to 32.9% as compared to 32.4% in the prior year. We see expenses declining by couple of million from the first quarter and we forecast the loss per share in the quarter in a range of $0.15 to $0.10. And as you know Q2 is historically a loss quarter for us.

We expect to see revenues begin to increase in the second half of the year and we anticipate continued gross margins and operating margin expansion in the second half of fiscal ‘15. As we look at the balance sheet, we have already achieved our inventory target for the year-end and anticipate that there is additional reduction opportunity as we look to drive fast return and reduced weeks of supply. In wrapping up, we believe that we have and are taking the correct strategic new within our organization to drive improved profitability for this year and in future years. With that overview, I am now going to open up the call to questions. I will turn the call back to the operator.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). And we will take our first question from Edward Yruma with KeyBanc.

Edward Yruma - KeyBanc

Hi, good morning and thanks for taking my questions. Anita first on the business process improvement and potential SG&A cuts, I know that it’s not incorporated into guidance but if there are additional savings, is it just a fourth quarter event and any kind of color will be appreciated?

Anita Britt

Ed, it is a little premature. We have the consultants on site; they have been working with us over the last four weeks. They have met with probably about a 150 individuals across the organization. We feel that despite the fact that we run a pretty tight ship and we have the processes, there is always room for improvement when looking at that processes. So, from a conservatism standpoint I think that there could be opportunity that we will be able to implement both in cost of goods sold and SG&A in the fourth quarter. We may be able to see that a little bit earlier but too early to tell at this point. I think I would be able to give you a little bit more color on that as we go to the second quarter and on the next call.

Edward Yruma - KeyBanc

Got it. And a follow-up, you guys had somewhat cautious commentary on the men's replenishment business, is that specific retailers or is that just the overall retail environment? Thanks.

George Feldenkreis

Good morning, Ed. We are just basically managing to what we saw; we saw weak replenishment business in going into January and February because of the many store closures due to the weather. So, we are just adjusting our forecast on replenishment but we will start new programs and those should be on plan and we are just keeping a tight inventory control and managing it better, reducing basically what we are doing is reducing a week of supply where we carried xyz percentage today, we are reducing that percentage to ensure that we have more liquidity and less carrying and being able to improve our supply chain delivery.

Operator

And we will take our next question from Eric Beder with Brean Capital.

Eric Beder - Brean Capital

Could you talk a little bit about what you are seeing in terms of your department store partners in terms of how they are going to plan inventory for the back half of the year? And secondly on the golf business when you look at this business you had a great run with it, are you looking for additional brands? Are there additional places to expand that could you kind of give us little more color on that?

George Feldenkreis

On golf we’re not looking for any more brands right now. We have enough in our portfolio, we believe that the opportunities that we have with our brands are still many more and we’re seeing as this really the whole active lifestyle which plays very well with golf as becoming more of an important role in how the consumer is purchasing and his lifestyle. So we feel that there is still a lot of opportunity product expansion, last year with the coldness that we had we’re expanding our assortments this year and we’re adding additional product category such as outerwear and also heavier garments that will bode well with the assortments and the lifestyle. We’re also doing a much better job geographically which last year we felt that there was, we did not do a good job but we’re able to now offer a transitional assortment that goes well with the cold weather stores and those stores in the south that do sell short sleeve all year around.

So we feel if there is a lot of opportunity as well as remember this is on the Callaway side we feel that there is the new team that we have in place in the big box channels which is a sporting good channels off course and green grass, there are still a lot of opportunities there to be made and as well as the entree of the Jack Nicklaus brand which we just recently started, we have a whole full year in front of us that we feel that there is a lot of opportunities, there is a lot of excitement behind the brand and as well as product extensions.

In terms of how the retailers are planning for the second half for the year, we’re planned accordingly to our growth and we’re managing inventories on the replenishment side very conservatively. We’re able to chase and turn inventories quicker which is something that we have instituted since last year. We’ve taken a very strong approach, we’ve moved a lot of our distribution to the West Coast which allows us to turn much more quicker than in the past where we were using more of a distribution centers on the East Coast side which the length of time was a little bit longer. So we’re able to chase and able to deliver with a shorter weeks of supply.

Operator

(Operator Instructions). We’ll go next to Ron Bookbinder with the Benchmark Company.

Ron Bookbinder - Benchmark Company

Could you talk about Kohl has some new initiatives and a focus on wellness and active lifestyle that they are going to pursue going forward? Could you talk about how you guys are going to fit in with that and grow with them?

George Feldenkreis

The initiative that Kohl’s is number one is -- has been a big focus on national brands our national brands that we’re very focused on concentrating with them is the golf business which is under Grand Slam which we’re seeing good momentum and we feel that the initial results have been good not only on regular sizes but also on big and small, has been a stellar performance in golf for us. And as well as we are expanding our product offering into the fall season. As I just mentioned into Kohl category and as well as being able to deliver short sleeve product in the south that bodes well with that consumer. We feel very comfortable with their new direction as well as on the swimwear side our Nike business both in men’s and ladies is exceptional and on the ladies side we’ve doubled our business and see continues growth with Kohl’s and our Nike business.

Ron Bookbinder - Benchmark Company

And could you talk about accessories, whether its men’s accessories belts and wallets or golf accessories with Ben Hogan or an opportunity for swim accessories given this stellar performance you’re seeing with Nike.

Oscar Feldenkreis

Well in accessories we have basically three pieces, number one as we do currently service the Nike accessory business with goggles and all training products that are needed for swimwear under the Nike brand and that has been a great growth vehicle for us. Our accessory business with the new innovation that we have out in place has been growing exceptionally not only with our swim team dealers but also with our sporting goods channel our market share has grown. Our accessory business when it comes to the men’s side we’re as my father had mentioned we have hired an accessory group to grow our accessory business within our own retail stores which we feel should be about 20% to 25% of our business, where currently today it’s probably penetrated that’s the accessory growth that we see today as you know we have over 50 stores and we feel that accessories could be a bigger part and hopefully would lead to a wholesale opportunity. We do currently today a very strong belt and wallet business which is a very, very profitable business led by a team that we have in New York and that business continues to show strength and growth, not only when we started with the Perry Ellis brand but that group today manages most of our brands today that are able to develop within the men’s channel of the accessory side. We have also recently hired a lady that is developing for us a gift business as we saw last year in December, we are in the holiday season, the growth momentum in gifts and we feel that gifts within golf has a tremendous opportunity and also do accessories in our golf business today such as belts and Callaway and Ben Hogan.

George Feldenkreis

Ron, I would like to add to what Oscar said that when it comes to awareness and sustainability, we started lab, textile lab in Shanghai two years ago which is now fully developed and they are working on a lot of fabrics that have been now developed using CO2 dyeing instead of suing water. So, there is no process of that, do not use any water on dyeing and washing which are going to be revolutionary in the future and providing practically the same price, product that are much more sustainable et cetera. And we are very active on that and we are coming up with new products, they are really, really revolutionary product next year.

Ron Bookbinder - Benchmark Company

And lastly on Jack Nicklaus, Golden Bear, do you expect a large roll-out in the fourth quarter or should we expect a ramp up in that business at some point?

George Feldenkreis

Yes, we are in the process now of finalizing that for the, you will see a roll-out in the fourth quarter and we will have more color on that as we evolve into Q2. We are in the process now of finalizing our orders and our commitments with our retail partners but that is definitely an initiative and a growth area for us.

Operator

And we will go next to Robby Ohmes with Bank of America Merrill Lynch.

Robby Ohmes - Bank of America Merrill Lynch

Good morning guys. I have a couple of questions. The first is just a follow-up on the golf business, Oscar, are you guys seeing in the context of what reported this week, where there they see no bottom to the golf business on the hard line side and they are copying negative in the gold apparel business associated with it. I know you are growing and taking share with all your brands but is there any way where you are seeing some of the pressures that the largest player is seeing in that category? That’s my first question.

George Feldenkreis

Robby, good morning. No, we have not seen any of that at this present stage we are getting replenishment orders on a daily basis from our customer such as DICK’S (ph) and our business there happens to be good. We just had a meeting with them last week and we feel that we are online with them, that’s omni-channel and we are excited about the opportunity. And as I mentioned, it’s really the momentum of the Callaway hard goods with the new equipment that they launched this year and they have been taking from what I understand market share from other hard good competitors and that whole momentum is what’s really accelerating the growth of Callaway, not only in the big box but also on the green grass channel.

Robby Ohmes - Bank of America Merrill Lynch

Terrific and then two other questions. Just could you remind us where Perry Ellis overall is with, sorry where your company is overall with the off-price channel in Cosco and sort of I forget whether you guys are down year-over-year with those channels or growing with those channels? And then I have one more question?

George Feldenkreis

We don’t sale Perry Ellis to Cosco at this present stage and that channel in the club channel our business is stable. We do a big business in private label but it’s not a channel that we bond Perry Ellis to Cosco.

Robby Ohmes - Bank of America Merrill Lynch

Got it and then my last question. Can you sort of update us on, as you look after 2015 and may be some of things that Stanley Silverstein is working on and what we could be looking ahead to on the international side when we get out to next year?

George Feldenkreis

Stanley is working on a number of initiative plus managing our licensing business that was there when Stanley arrived and Stanley is a very intelligent individual and he has done a good job managing the licensing and we’re working on some new initiative in countries who are familiar, Brazil and in Asia. So we’re trying to see how we can build and we’re in the process of -- we probably will be signing Jenson swimwear license. In China our licensee on Manhattan open up more store, very strong licensee of Manhattan, in Vietnam there were a lot of initiatives that we’re working with. But international business takes time to develop and people making decisions but we have already made few announcements and we will make announcement in the next six months.

This is definitely an area where we have been growing and we’ll continue to grow in the next couple of years.

Operator

And we’ll take a follow up from Ronald Bookbinder with the Benchmark Company.

Ron Bookbinder - Benchmark Company

I was wondering if you could tell us as to what the reduction that you’re planning in private label. What percentage of your business is now private label? And what is your goal to get it to?

George Feldenkreis

Well the business that we have, Anita do you have the total percentage?

Anita Britt

Yeah Ron for the first quarter private label came in at about 7% of our business that was versus 9% last year. And as Oscar talked about I think on the last call I made some commentary on this call. We did a deep dive in all the programs that we were focused on in private label and we took a step away and exited the programs that carried lower margins and that we felt, weren’t going to drive us to our overall corporate goals of higher gross margins and higher operating margins.

So I would say from the standpoint of where we’re sitting today we’ve exited those lower margin businesses and the private label 7% give or take 1% should hang in there in the short-term. Longer-term as we’re growing our national brand it will become a smaller percentage of the business go forward.

Operator

And we’ve no further questions in the queue. I’d like to turn the conference back to George Feldenkreis for any additional or closing remarks.

George Feldenkreis

We thank you very much for your patience, we’re very comfortable and very confident that this is going to be a very good year for our company and we continue to work very hard to get higher stockholder value for our shares. Thank you very much.

Operator

Again that does conclude today’s presentation we thank you for your participation.

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