锘?9 Earnings Call Transcript
Good day, everyone. Welcome to Perry Ellis Fourth Quarter and Fiscal 2009 Earnings Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to Francisco Hoffmann, Investor Relations and Strategy. Please go ahead, sir.Thank you, operator. Good morning, ladies and gentlemen, and welcome to the Perry Ellis fourth quarter and full fiscal 2009 conference call. You should have received a copy of the press release that went out this morning, including the income statement and balance sheet. Such information is subject to risks and uncertainties as described in the press release and in documents that we have filed with the SEC.Joining us today for this call from Perry Ellis are George Feldenkreis, Chairman and CEO; Oscar Feldenkreis, Vice Chairman, President and COO; and Anita Britt, our new Chief Financial Officer.I would like now to turn the call to Mr. George Feldenkreis, CEO. George.Thank you, Francisco. Good morning. A worse year in business finally came to an end on January 31st. At this stage, it is redundant to speak about the tremendous upheaval in the financial markets and the worldwide recession that is affecting almost every business sector around the globe.I would like to talk today about the reasons why our performance was below our expectation, while at the same time dissecting our results to explain how in the midst of a very bad year we still generated an EBITDA profit of $45 million. I will also focus on what we are doing to improve our performance this year and Oscar will provide details on the various business opportunities that we are growing and the many opportunities that lie ahead.Last fiscal year, we began with the acquisition of two contemporary ladies companies. At that time and to this day contemporary products are the best performing in the women's sector. While C California and Laundry by Shelli Segal are extraordinary brands, we found the companies in much worse shape that we could have ever expected or could have analyzed through the due diligence process. After the acquisition, we had to terminate the New York design team and move the Laundry creative process back to California, where it began, to regain the brand's flair and innovative design.We revamped the product line as well as the design and management looks. We expected this business to be accretive last year, but is actually (inaudible) unforeseen losses in the midst of a deteriorating economy.Another factor that affected our performance is the market disappearance of many men's specialty stores, which have been buffeted [ph] by higher rents, slower sales, and an inability to obtain credit insurance from the factory factoring organizations. This affected businesses like Axis and Tricots St. Raphael. We have substantially discontinued this business and avoided the losses this year that we had last year.Our retail businesses, which currently produce about 5% of total revenue, was affected by the general slowdown in consumer traffic and by the end of the year it became a loser rather than a winner. It ended the year with losses rather than being the profit maker it was the previous year. business, which represents another 5% of our business, has been a steady contributor in the past, was not profitable last year. We revamped the whole organization, hired new associates for the five top management positions and we have set a course that should make this operation profitable again.In licensing, we maintain our same level of revenues as last year. During the last 12 months we have strengthened considerably our licensing division with the hiring of a new President, an additional sales associate, and we look forward to growing our royalties and adding licensing partners in the year ahead.In the face of all these factors, we find it remarkable that we were able to finish the year with revenues of $851 million, only 1.5% below the previous year, when you compare it with drop in sales for most retailers, and with a gross margin that deteriorated by only 1% to 32.7% versus 33.8% last year as we consider that our markdowns went up by almost $10 million versus a year ago.As we analyze the performance of our business units, our core wholesale business platform performed well and not only generated the $45 million in EBITDA, but also covered for the losses in the business I enumerated before as well as the non recurring expenses associated with our restructuring initiative to reduce our expense (inaudible).On the SG side, our expenses increased by $21 million and this positive considering that $80 million of that amount were the SG expenses for the ladies contemporary business and a $4 million amount was for the additional eight retail stores opened. This means that our SG basically remained flat last year and will be lower this current year.For the current year, we are projecting a drop in revenues in the high single to low double digit range with a corresponding drop in gross profit in the low single digits. However, we are equipped to handle this drop with the measures we have taken to reduce our expense structure and focus in turning around the businesses that underperformed last year.I would like to share with you some of the thoughts on the impairment of brand issue, which is the mark to market of the apparel industry. During this quarter, we have taken impairments for $22 million, mostly related to the appraisal of some of our brands. Perry Ellis has invested $207 million acquiring brands. This portfolio of brands is independently appraised by a professional organization at over $375 million. However, accounting rules do not look at our portfolio of brands as a whole, as a basket.Each brand is appraised individually based on its current book of business. For example, a few years ago, Chanel or (inaudible) would have been appraised at a small fraction of their current value. While in the aggregates our brands generate an income that justify the same higher price that we pay for them individually, some of them do not. Consequently, to comply with the GAAP regulations, we took the required impairments. However, within the context of our total brand portfolio, the reality is that our brands continue to worse substantially more than when is reflected in our books.While we have decided not to give guidance for the year because of the uncertainties created by current economic situation, we project that the quarter ending this April 30th will be a profitable quarter.At this stage, we continue to be focused on positioning ourselves to take maximum advantage of the eventual reversal of the economic pendulum as well as to disappearance of some of our competitor. While our profits have been heavily impacted by the financial crisis this past year, we have taken the necessary steps to make sure that this Company continues its growth and increases its profitability going forward. We feel that our core businesses performed exceptionally well even in a dramatically hostile environment.Actually, what we call in our Company the periphery or the outside of our core business like outlets, men's specialty, contemporary women, and European operation, are what dragged our earnings down. We are committed to turning those businesses around and we know that all of them will do better this year. We have new management running this division and we are confident that as we focus on our efforts in these areas, they will become the contributing division within the next 24 month period.We have done it in the past. We have been able to turn around many of our businesses that today are very profitable and we confident that this time again we will succeed. These are difficult times, but we must remember that there are 140 million Americans receiving a check every week.We are confident that our business model, which contains diversified distribution channels, great sourcing and design capabilities, strong management and financial discipline, backed by superior information systems, and coupled with the commitment of our 2200 associates, will move our Company forward and will bring us to new heights in the years to come. Thank you. Oscar?Businesses such as swim, Hispanic brands, golf, denim, and Perry Ellis delivered outstanding results. However, this last holiday season was the most challenging I have experienced in my 20 plus year career in the apparel and retail industry. By now everybody is aware of the difficulties in the overall economy and particularly of retail during the fourth quarter. Rather than dwelling on the consumer environment, which other companies have discussed at length, I would like to talk about the trends we see in the market that favor Perry Ellis International in the year we are starting and the actions we are taking to benefit from these trends. These combinations of opportunities and actions will help Perry Ellis International to come out stronger and better positioned within global economy rebounds.First, the consumer is still buying, not at the same level as last year's, but wherever there is newness and performance advantages, the consumer is still inclined to purchase. Excluding our replenishment programs and the exiting of our men's specialty store business, we shipped almost 16 million units during the fourth quarter, approximately the same number of units as the fourth quarter last year, despite a 10% reduction in net sales. Also, as last week's governmental retail reported detail during January and February of this year, overall retail sales were up, particularly at apparel stores, which reported a 2.8% increase in February.Second, diversification is a key advantage of our Company and a successful strategy in today's environment. While luxury specialty and department stores had a particularly challenging fourth quarter, some of them experienced double digit revenue decreases. Our brands grew in the distribution channels that have better weathered the environment. Penney, we grew over 20% during the quarter and by 6% for the year, primarily driven by our golf, Hispanic, and niche businesses.mulberry bag fashion christian louboutin shoes http://www.aboutpizza.com/files/oakley.asp mulberry outlet york scarpe gucci uomo http://www.cantinevilladora.it/css/dior.asp prada borse outlet isabel marant h&m scarpe zanotti outlet giuseppe zanotti sposa free run nike
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