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Perry Ellis Beats by a Penny

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Perry Ellis International Inc. (PERY - Free Report) posted adjusted earnings per share of 38 cents in the fourth quarter of fiscal 2012, beating the Zacks Consensus Estimate by a penny but deteriorating from the year-ago earnings of 69 cents.

The late request of retail partners for the delivery of goods, promotional activity and sales allowances in the holiday season hurt the company’s fourth quarter results. Additionally, a higher effective tax rate for the year due to an increased mix of domestic versus international income was also a downside.

On an adjusted basis, earnings per share were $1.94 in fiscal 2012 versus $1.88 in the prior year.

Perry Ellis' total revenue increased 11% year over year in the quarter to $229.4 million. Rafaella business infused $23.2 million to the total revenue. In fiscal 2012, total revenue was up 24.1% year over year.  

During the quarter, Perry Ellis' gross profit declined 2.4% year over year to $72.1 million. However, gross margin fell 432 basis points (bps) to 31.4% in the quarter under review. The decline was due to higher levels of markdowns and discounts in collection businesses for Perry Ellis and Rafaella.

At quarter end, Perry Ellis had cash and cash equivalents of $24.1 million. Total long-term liability was $245.9 million.


For 2013, Perry Ellis expects revenue from its existing business in a range of $990 million to $1.0 billion. Adjusted earnings per share are expected in a range of $1.95 to $2.00. On a GAAP basis, management expects earnings per share in a range of $1.85 to $1.90.

Our Take

Perry Ellis, the designer, distributor and licensor of a broad line of men's and women's apparel, accessories, and fragrances, remains optimistic about the new product assortment for the spring season, initial response to which is positive. Management remains committed to growing direct-to-consumer and e-commerce business. We believe this is a positive step toward the strength of Perry Ellis’ market share gain.  The Rafaella sportswear business which has been challenging will now be focused on for improvement.

Concerns for the near term include the inflationary commodity environment, promotional markdowns and high amount of debt in the company’s balance sheet. It has reduced its total net debt to capitalization in fiscal 2012. In a faltering economy, the company is streamlining operations and cutting down less productive overhead in order to maximize profitability. However, all these initiatives will not be implemented before the second half of fiscal 2013.

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 - Free Report) and CROCS Inc. (CROX - Free Report) .

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