Perry Ellis Q2 Loss Narrows, Boosts 2015 EPS Outlook; Shares Up 6%

(RTTNews) - Apparel company Perry Ellis International, Inc. (PERY) reported Thursday a net loss for the second quarter that narrowed from last year, despite a sales decline, reflecting improved revenues amid focus on higher margin brands and higher margin channels of distribution.

Adjusted loss per share also came in narrower than analysts' expectations, while quarterly revenues missed their estimates. The company also raised earnings guidance for the full-year 2015, while maintaining annual revenue outlook.

"There is positive momentum in our businesses as the team is focused on driving higher margin sales, adding licensing agreements and expanding our geographic reach and categories served. During the quarter we continued to make solid progress in our international expansion across our direct operations in Canada, Mexico and Europe," President and COO Oscar Feldenkreis said in a statement.

The Miami, Florida-based company reported a net loss of $1.62 million or $0.11 per share for the second quarter, narrower than $2.83 million or $0.19 per share in the prior-year quarter.

Excluding items, adjusted net loss for the quarter was $1.14 million or $0.08 per share, compared to net loss of $2.31 million or $0.15 per share in the year-ago quarter.

On average, five analysts polled by Thomson Reuters expected the company to report a loss of $0.12 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter decreased 4 percent to $203.53 million from $211.71 million in the same quarter last year, and missed four Wall Street analysts' consensus estimate of $209.04 million.

The company noted that the decline in revenues was primarily driven by planned exits of certain private and retailer exclusive branded programs. Increases in golf lifestyle apparel and Original Penguin offset reductions in women's sportswear.

Net sales for the quarter were $196.01 million, down from $204.49 million in the prior-year quarter, while royalty income increased to $7.52 million from $7.21 million in the comparable quarter a year ago.

The company noted that direct-to-consumer business reported a 2.7 percent comparable same store sales increase, driven by solid performance in Perry Ellis Men's Collection as well as golf platform and Original Penguin brands. Direct e-commerce also registered a 20 percent comparable sales growth.

Gross margin for the quarter improved 220 basis points to 34.6 percent, reflecting the company's focus on higher margin brands and higher margin channels of distribution as well as better infrastructure rationalization program, which led to reduced logistics and other costs.

The company noted that it generated $4.2 million in cost savings by implementing actions resulting from the infrastructure review. It also remains on track to deliver $9 million in cost reductions this year partially reinvested in the European expansion of Callaway and Original Penguin.

"We see international growth and direct-to-consumer expansion as important drivers of the business going forward. As we look ahead, we are announcing strategic priorities that will enable us to maximize shareholder value by remaining focused on the strategic review of our portfolio and optimizing the positioning of our brands while continuing to reduce costs," Feldenkreis added.

While outlining its strategic priorities for the remainder of fiscal 2015, the company said it will focus on exiting non-core, low growth brands and businesses as well as drive efficiencies and generate cost savings through process enhancements.

During the second quarter, the company has exited 23 private and exclusive brands and entered into eight new licensing agreements.

The company is also looking to boost international growth through both direct investment in North America and Europe as well as through strategic partnerships with licensees and other partners.

It will also expand the direct-to-consumer global footprint and continue to optimize its positioning and competency in the menswear arena through wholesale, retail and licensing of its core brands.

Looking ahead to fiscal 2015, the company raised ts adjusted earnings guidance to a range of $0.85 to $0.95 per share from the previously announced range of $0.80 to $0.95 per share, while continuing to project revenues between $910 million and $920 million.

Street is currently looking for full-year 2015 earnings of $0.91 per share on annual revenues of $924.90 million.

In Thursday's regular trading session, PERY is currently trading at $20.50, up $1.21 or 6.27% on a volume of 0.21 million shares.