Perry Ellis Beats, Cuts Outlook

Including one-time costs associated with the Rafaella acquisition and impairment charges, GAAP net earnings came in at 54 cents per share, down from 64 cents in the year-earlier period.

For full fiscal 2011, Perry Ellis earned $1.85 per share versus $1.02 in the prior year. On a GAAP basis, earnings were $1.70 per share versus $1.01 in fiscal 2010.

Perry Ellis' total revenue grew 5.3% year over year in the quarter to $206.9 million. Sales growth was aided by improved performance from the Perry Ellis Collection at department stores, as well as the direct-to-consumer and women's and contemporary businesses. Revenue increased 4.9% year over year to $790.3 million during fiscal 2011.

During the quarter, Perry Ellis' gross profit increased 6.2% year over year to $74.0 million. During fiscal 2011, gross margin expanded 270 basis points to 35.7%, driven by improved profitability in the company's direct-to-consumer businesses, increased full price sell-throughs at retail, and a continued mix of higher margin branded product.

Financials

At quarter-end, Perry Ellis had cash and cash equivalents of $18.5 million, compared to $18.3 million in the year-ago period. Long-term debt was $270.1 million versus $183.9 million in fiscal 2010.

Outlook

Perry Ellis expects earnings per share in the range of $2.30–$2.40 for fiscal 2012, compared to $2.50–$2.65 guided earlier. The new guidance represents a 27% year-over-year growth. Revenues are expected to reach $1 billion for 2012.

Our Take

Perry Ellis, the designer, distributor and licensor of a broad line of men's and women's apparel, accessories, and fragrances, announced a stock offering and senior notes issuance in early-March. While this is a positive step toward the strength of its capital structure, these transactions will have a dilutive impact on its 2012 earnings per share.

Moreover, other concerns for the near term include the inflationary commodity environment, the cut in the 2012 outlook and integration risks associated with the recent acquisition of Rafaella.

Perry Ellis is currently a Zacks #4 Rank (short-term 'Sell' rating). For the long term, we reiterate our 'Neutral' recommendation on shares. However, one of Perry Ellis' peers, Polo Ralph Lauren Corp. ( RL - Analyst Report ) retains a Zacks #1 Rank (short-term 'Strong Buy' rating).