August 22, 2008 / 1:11 PM / 11 years ago

Perry Ellis swings to loss on costs, shares slump

BANGALORE (Reuters) - Perry Ellis International Inc PERY.O swung to a second-quarter loss, hurt by costs related to integration of its newly-acquired brands and a management shake-up in its European unit, and slashed its fiscal 2009 profit outlook sending the apparel maker’s shares down 30 percent.

The retailer changed the top management executives at its UK operations after they failed to “proactively” grow its Farah brand and disagreed with the company on its development plans for its Penguin brand in Europe, CEO George Feldenkreis said in a conference call with analysts.

Perry Ellis took a charge of 11 cents a share in the second quarter related to the executive changes.

The company, which bought women’s contemporary brands Laundry by Shelli Segal and C&C California earlier this year, was also stung by a charge of 4 cents a share related to the acquisitions.

The retailer, whose other brands include Perry Ellis, Jantzen and Cubavera, posted a net loss of $5.4 million, or 36 cents a share, compared with net income of $267,000, or 2 cents a share, a year earlier.

The quarterly results also included a charge of 4 cents a share in connection with the opening of three new Perry Ellis stores and one Original Penguin store in the year.

Sales fell nearly 1 percent to $193.7 million for the quarter ended July 31, said the company, which is generally known for its menswear.

Analysts on average had expected the clothing maker to post a loss of 2 cents a share, before special items, on revenue of $200.4 million, according to Reuters Estimates.

The Miami-based retailer also said its shipments were delayed on integration issues with a third-party logistics distributor on the West Coast and revenue on such shipments were shifted to the third quarter. The revenue shift hurt the latest quarter’s results by 7 cents a share.

The company had closed its Winnsboro warehouse in March to increase logistics efficiencies by transferring more shipments to the West Coast and using a third-party logistics company.

Perry Ellis’ results were also dragged down by bankruptcies of a few retail customers in the quarter.

“The disruption created by retailers such as Mervyn’s, Boscov’s and Goody’s seeking Chapter 11 protection accounted for almost $6 million in revenues in the second quarter,” CEO Feldenkreis said.

For fiscal 2009, the company expects to earn $1.67 a share to $1.72 a share, down from its prior outlook of $1.95 a share to $2.00 a share.

The lowered forecast, which assumes an increase in ongoing expenses, also includes a non-cash impairment charge of 8 cents a share related to impairment of marketable securities, the company said.

However, Perry Ellis maintained its revenue view of $910 million to $925 million for the period.

Analysts on average were expecting earnings of $2 a share, before special items, on revenue of $930.3 million, for the financial year.

Shares of the company fell to a low of $16.05, before recouping some losses to trade down $5.49 at $17.51 Friday on Nasdaq.

About 973,780 Perry Ellis shares changed hands in intraday trading, about 5 times the 50-day moving average volume of the stock.

Reporting by Dhanya Skariachan in Bangalore, Editing by Dinesh Nair

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