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Reduction of private label replenishment bottoms biz at Perry Ellis

Jan '09
Perry Ellis International Inc announced that, based on preliminary results from its holiday season and estimates for initial deliveries of Spring 2009 merchandise, the Company anticipates revenues for the fourth quarter ending January 31, 2009 (“fourth quarter fiscal 2009”) at the $200 to $210 million range. This represents a decrease from total revenues of $212.3 million for the same period last year.

These declines are primarily related to (1) retail partners requesting later deliveries of goods, delaying spring deliveries by 30 to 60 days; and (2) a significant increase in markdowns and sales allowances for the holiday season, which was more promotional than originally anticipated.

Compared to the Company's latest guidance, results for fourth quarter fiscal 2009 were negatively affected by a:

• Deceleration in sales at the department and specialty store channels, primarily for luxury brands;
• Reduction of private label replenishment bottoms business; and
• Weakness in the international markets – Europe and Canada

“The entire apparel industry was faced with a highly promotional environment to drive customer purchases in December, and we were not immune to this phenomenon. Apparel retail sales in dollar terms were down in December, but prices to the consumer were reduced by a higher percentage, thus we believe that the actual number of units sold was higher than last year. As a result, most retailers were able to substantially reduce inventories, which means that for nationally recognized brands, such as ours, open to buy in the next few months might be better than expected and we will have more visibility in the next 30 days,” said Oscar Feldenkreis, President and COO.

Based on current projected results, the Company indicated that it expects diluted earnings per share for the fourth quarter fiscal 2009 to be approximately break-even, as compared to diluted earnings per share of $0.65 during the same period last year. This expectation includes all the currently identified one-time costs associated with the implementation of the strategic review actions such as severance payments.

George Feldenkreis, Chairman and CEO, commented, “As a consequence of the current promotional and highly volatile environment, we have decided to take a conservative approach in our financial planning. At this time, we are projecting a quarter where we will show little if any earnings and consequently we are reducing our guidance for fiscal 2009 to the $0.55 to $0.65 range.”

The Company also announced that it has eliminated all management bonuses for fiscal 2009 and identified an extra $5 million in annual savings, primarily driven by reductions in headcount and corporate overhead expenses. These savings are on top of the previously announced $15 million in annual savings from the strategic review process.

“We have identified over $20 million in savings for fiscal 2010 by reducingour U.S. workforce, by cancelling bonuses for management and by rationalizing our office space. We are also exiting businesses that have not been profitable for us such as with certain specialty stores, while focusing our immediate attention on maximizing profitability in businesses with strong future potential such as outlet stores and ladies which have underperformed this year. Our cost rationalization plan has been in the implementation stage since October '08 and will continue during January, when we will finalize our assessment of the competitive and economic environment. We expect all actions to be finalized by the beginning of February, when we will have better visibility for the first half of next fiscal year,” Mr. Feldenkreis continued.

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