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Perry Ellis International Inc. Reports Operating Results (10-K)

April 12, 2012 | About:
10qk

10qk

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Perry Ellis International Inc. (PERY) filed Annual Report for the period ended 2012-01-28.

Perry Ellis Int has a market cap of $289 million; its shares were traded at around $18.22 with a P/E ratio of 9.6 and P/S ratio of 0.3. Perry Ellis Int had an annual average earning growth of 0.4% over the past 5 years.

Highlight of Business Operations:

Net sales to our five largest customers accounted for approximately 49%, 50% and 53% of net sales in fiscal 2012, 2011, and 2010, respectively. For fiscal 2012, three customers accounted for over 10% of net sales; Kohls, Marmaxx and Macys accounted for approximately 16%, 10% and 10% of net sales, respectively. For fiscal 2011, two customers accounted for over 10% of net sales; Kohls and Macys accounted for approximately 19% and 11% of net sales, respectively. For fiscal 2010, two customers accounted for over 10% of net sales; Kohls and Macys accounted for approximately 20%, and 11% of net sales, respectively.

We derive a significant amount of our revenues from a few major customers. For example, net sales to our five largest customers accounted for approximately 49%, 50% and 53% of net sales for fiscal 2012, 2011 and 2010, respectively. For fiscal 2012, three customers accounted for over 10% of net sales; Kohls, Marmaxx and Macys accounted for approximately 16%, 10% and 10% of net sales, respectively. For fiscal 2011, two customers accounted for over 10% of net sales; Kohls and Macys accounted for approximately 19% and 11% of net sales, respectively. For fiscal 2010, two customers accounted for over 10% of net sales; Kohls and Macys accounted for approximately 20%, and 11% of net sales, respectively. A significant decrease in business from or loss of any of our major customers could harm our financial condition by causing a significant decline in revenues.

Selling, general and administrative expenses. Selling, general and administrative expenses in fiscal 2011 were $220.0 million, an increase of $19.6 million, or 9.8%, from $200.4 million in fiscal 2010. As a percentage of total revenues, selling, general and administrative expenses increased to 27.8% in fiscal 2011 as compared to 26.6% in fiscal 2010, which was in line with our expectations. The increase, primarily in our wholesale business, reflects additional promotions and advertising investment in our core brands along with new brands this includes celebrity endorsements, social media, print advertising as well as promotional events. We believe these investments are integral to building and supporting the brand images in order to complement the superior quality and value of product they bring to the end consumer. Increases were also reflected in investment in our employees through salary increases as well as bonus plans that rewarded improving profitability performance across most of our businesses. Additionally, expenses increased because of our expansion into our new wholesale brands, such as Callaway. We also incurred approximately $2.2 million of expense related to the acquisition of Rafaella.

The decrease of $20.3 million in the level of cash from operating activities in fiscal 2012 as compared to fiscal 2011 is primarily attributable to an increase in account receivable of $16.3 million as compared to a decrease of accounts receivable of $14.4 million during the same period in fiscal 2011. The increase was the result of increased shipments and revenues during the fourth quarter. Additionally, there were decreases in operating cash flows attributed to an increase in inventory of $22.8 million, an increase in other assets and prepaid taxes of $3.5 million, and a decrease in accounts payable and accrued expenses of $1.9 million. As a result of the increase in inventory, for fiscal 2012, our inventory turnover ratio decreased to 3.3 as compared to 3.8 for fiscal 2011.

The decrease of $67.8 million in the level of cash from operating activities in fiscal 2011 as compared to fiscal 2010 is primarily attributable to an increase of inventory of $43.1 million as compared to a decrease of inventory of $28.1 million during the same period in fiscal 2011. In line with our expectations, we strategically purchased inventory to secure pricing and capacity which resulted in a 38% increase of inventory as compared to fiscal 2010. The increase was the result of our actions to accelerate the receipt of goods in anticipation of possible priced increases. As a result of this increase in inventory, for fiscal 2011, the inventory turnover ratio decreased to 3.8 as compared to 4.7 for fiscal 2010. Additionally, there were increases in operating cash flows attributed to the decrease in accounts receivable of $14.4 million due to an increase in collection efforts despite the increase in sales toward the end of the fourth quarter, an increase in accounts payable and accrued expenses of $6.7 million, offset by an decrease of $5.2 million in unearned revenues and other liabilities.

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