CROX Crocs Inc

Perry Ellis International Inc. (PERY) posted adjusted earnings per share of $1.08 in the first quarter of fiscal 2012, treading ahead of the Zacks Consensus Estimate of 98 cents and the year-ago performance of 81 cents. GAAP net earnings came in at 99 cents per share, up from 81 cents in the year-earlier period.

Perry Ellis' total revenue surged 31% year over year in the quarter to $288.3 million, which also surpassed the Zacks Consensus Estimate of $272.0 million. Sales growth was aided by improved performances at the Golf and Hispanic lifestyle brands, as well as Perry Ellis Collection. Organic revenue grew 13% to $249 million, excluding the recently acquired Rafaella business. In the first quarter, Rafaella injected $38.9 million to the total revenue.

During the quarter, Perry Ellis' gross profit leaped 23% year over year to $97.0 million. However, gross margin was 33.6% of total revenue compared to 35.7% in the comparable prior-year quarter.  The decline was due to the Rafaella business (acquired in late January), which had a lower gross margin and dampened first quarter gross margin of Perry Ellis by 110 basis points. Incremental program business and the effect of converting licenses for small leather goods and dress shirts into wholesale businesses also hurt first quarter gross margin by approximately 100 basis points.

Financials

At quarter end, Perry Ellis had cash and cash equivalents of $21.7 million. Long-term debt was $219.5 million.

Outlook

Perry Ellis expects earnings per share in the range of $2.40–$2.50 for fiscal 2012, compared to $2.30–$2.40 guided earlier. The expectation for revenue was reiterated at $1 billion.

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 performance of Rafaella as well as current business trends. Management remains committed to integrate its niche businesses such as Golf and Hispanic as well as the Perry Ellis Collection with Rafaella’s women’s sportswear. We believe this is a positive step toward the strength of Perry Ellis’ market share gain.

Perry Ellis is currently a Zacks #2 Rank (short-term 'Buy' rating). For the long term, we reiterate our “Neutral” recommendation on the stock. Perry Ellis' peers include Polo Ralph Lauren Corp. (RL) and CROCS Inc. (CROX)

 
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