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Perry Ellis maintains strong balance sheet
Nov '08
Perry Ellis International Inc reported results for the third quarter and nine months ended October 31, 2008. For the three months ended October 31, 2008 ("third quarter of fiscal 2009"), total revenues were $222.8 million, a $4.7 million reduction compared to $227.5 million reported in the third quarter of the fiscal year ended October 31, 2007 ("third quarter of fiscal 2008").

Strong results for the Perry Ellis brand, denim, golf and Hispanic categories coupled with better than expected results in international and licensing businesses were offset by (i) a $4.0 million increase in markdowns and sales allowances to retail partners; (ii) a revenue decline during the quarter of $4.5 million related to Chapter 11 filings or liquidation from multiple retailers; and (iii) overall weakness in the specialty store distribution channel.

Oscar Feldenkreis, President and COO commented, "Several of our growth platforms continue to perform according to plan, despite the overall weakness at retail, demonstrating the strength of our brands and the resiliency of our diversified business model. We continue to innovate and deliver newness at retail, which is driving consumer purchases and assisting us to mitigate the downturn in consumer spending. The positive performances posted by our denim, golf and Hispanic products are a testament to this."

Gross margins improved by 25 basis points to 34.1% of net revenues compared to the third quarter of fiscal 2008, primarily driven by continued success in shifting from private label to branded business. Gross profit decreased by $1.0 million to $75.9 million compared to $76.9 million during the third quarter of fiscal 2008, due to increases in markdowns and sales allowances.

"Especially in these highly promotional times, it is essential to have the power of nationally recognized brands and the sophistication of technologically advanced planning systems that allow us to rapidly react to changes in the environment. The continuous improvement of our gross margins is a direct consequence of Perry Ellis International's strategic shift towards branded product and the successful implementation of our planning platform," Mr. Feldenkreis continued.

Compared to the third quarter of fiscal 2008, operating expenditures grew by $3.9 million. This increase includes the continuous investment in the Company's women's contemporary business acquired in February of this year; $0.6 million in one-time expenses related to the strategic review previously announced and a pre-tax impairment of $0.6 million in marketable securities, which were previously classified as available for sale, and deemed to be other than temporarily impaired. As a result EBITDA, as adjusted, was $16.0 million for the third quarter of fiscal 2009, compared to $20.8 million, representing a reduction of $4.8 million over the same period last year.

"We continue to believe that investing in our key growth opportunities -- particularly women's contemporary -- will allow these businesses to contribute strongly in the future. However, in light of the macroeconomic changes we are all experiencing, we need to make adjustments to enhance our profitability. The primary objective of the strategic review launched late third quarter is to determine the correct allocation of resources across our business portfolio, to ensure that we fund those businesses with the most potential," Mr. Feldenkreis concluded.

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