Gross margins up 220 bps at Perry Ellis in Q2FY15

25 Aug '14

3 min read

Driven by a favorable mix from a shift away from lower margin private and exclusive brands, Perry Ellis International, US-based garment marketer said its expanded gross margin of net revenues, rose by 220 basis points in the second fiscal quarter ending August 2, 2014.

Perry Ellis reported, expanded gross margin growth of 220 basis points year-on-year to 34.6% of net revenues, driven by improvements in product mix, due to a shift away from its decision to reduce lower margin private and exclusive brands and drive growth in higher margin lifestyle brands and channels.

Total revenue for the second quarter of 2014 totalled $204 million, down 4% from $212 million in second quarter of 2014. Perry Ellis said revenues were impacted by planned exits of certain private and retailer exclusive brands and increases in golf lifestyle apparel.

In the second quarter of 2014, Perry Ellis was able to reduce net loss to $1.6 million, or a massive 42.85 percent from $2.8 million, the retailer reported in the second quarter of 2013. Correspondingly, net loss per share fell to $0.11 from $0.19 net loss per share from a year earlier.

Selling, general and administrative expenses amounted to $66.9 million in the period under review, marginally down from $66.5 million in the prior year. Expenses included $1.4 million related to costs associated with infrastructure rationalization as well as investment in Europe from introduction of Callaway in Europe and the expansion of Original Penguin across the continent.

Inventories too fell to $175 million in the second quarter of 2014 from $207 million in the comparable quarter of 2013, which Perry Ellis said was possible due to continuous focus on disciplined inventory management. It ended the second quarter with $73 million in cash and investments and no borrowings under its credit facility.

At the end of the second quarter of 2014, global sales made up for 12.4% of total revenues, against 9.3% at the end of the second quarter of 2013. Perry Ellis expects to further expand international sales, as it executes its global expansion plans.

During the second quarter of 2014, the retailer entered into eight new licensing agreements, and has exited twenty-three private and exclusive brands, since implementing this initiative in the previous fiscal year. It also completed the sale of its Jantzen brand for certain territories in Australasia to its Australian licensee.

To enhance profitability for the rest of the fiscal year, Perry Ellis said it will continue to exit non-core, low growth brand, drive efficiencies and generate cost savings through process enhancements, focus on global growth in North America and Europe through strategic partnerships and expand the direct-to-consumer global footprint.

Oscar Feldenkreis, COO at Perry Ellis International said, "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 expanding globally in Canada, Mexico and Europe.

“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”, he added.

Fibre2fashion News Desk - India

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