Perry Ellis International Inc. (NASDAQ:PERY) Q1 2019 Earnings Conference Call - Preliminary Transcript

May 31, 2018 • 09:00 am ET

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Perry Ellis International Inc. (NASDAQ:PERY) Q1 2019 Earnings Conference Call - Preliminary Transcript

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Presentation
Executive
Jorge Narino

$9.8 million as compared to $8.3 million in the prior year. Increases in revenue included a $1.5 million increase due to the adoption of the new revenue recognition standard which required advertising reimbursements to be classified as revenue instead of as a reduction of the related advertising cost, as was the case in fiscal 2018.

Moving on to total company results, beginning with gross margin, adjusted margins contracted by 60 basis points versus prior year as a result of the mix of the incremental sales as well as the residual close-out of the Bon-Ton inventory. SG&A totaled $75.5 million for the quarter or 29.6% of total sales as compared to $71.2 million or 29.4% of total sales in the prior first quarter. This increase includes a $1.5 million increase due to the adoption of the new revenue standard which requires advertising reimbursements to be classified into revenue instead of as a related advertising cost, as was mentioned previously. On an adjusted basis, SG&A would have been $73.2 million or 28.7% of sales. We continue to maintain cost discipline, effectively managing increases in wages and other inflationary costs that have risen approximately 3% to 4% per year.

Adjusted pre-tax income was $15.6 million, up 7.6% from $14.5 million in the first quarter of 2018. Adjusted net income was $12.1 million, decreasing 5% from $12.8 million in the 2018 first quarter, and adjusted net income per diluted share was $0.78, declining 6% from $0.83 last year.

Turning to the balance sheet and cash flows, our balance sheet continues to be strong.

Inventories grew 8% versus the first quarter of fiscal 2018, supporting the growth of Nike Swim and including the expansion of our international business. Our net debt to capitalization of 18.9% compared with 24.3% in the first quarter of 2018. In addition, we reduced our borrowings under the credit facility by $2 million to $62.4 million at the end of the quarter. This places us in a very comfortable position to support the expansion of our global business.

Moving onto our outlook, for the full year we continue to expect challenges; however, we are positioned very well in terms of our product focus and our execution and performance. Accordingly, we are maintaining our guidance for revenues at $855 million to $865 million, and adjusted earnings per share for the year of $1.80 to $1.90. The adjusted earnings exclude any potential expenses, which will be significant, to be incurred by the company in connection with the board of directors special committee's exploration and evaluation of potential strategic alternatives and the related February 6, 2018 proposal to acquire the company. This continues to reflect a gross margin rate of 38.2%.

SG&A is expected to be relatively consistent with adjusted prior year levels, reflecting a disciplined approach to expense management in offsetting inflationary cost pressures. In addition, for the full year we expect a tax rate of 23%. We are expecting operating cash flows to approximate $15 million for fiscal 2018 and our