Perry Ellis to Close 15 Stores, as Retailer Posts Wider Loss
Quarterly loss balloons from a year earlier amid a 5.5% sales slide
The decision is part of a broader plan to support the business as the Miami-based retailer reported a second-quarter loss that ballooned from a year earlier and said sales slid 5.5% on falling foot traffic.
Shares tumbled 10% Thursday afternoon, dragging the stock down 18% over the past 12 months.
Known for men’s apparel, Perry Ellis also operates Original Penguin and Callaway Golf stores in addition to namesake shops. The company has come under pressure from activist investors to shake up its management structure, which has been dominated by the Feldenkreis family, and consider selling itself. Last May, the company agreed to shuffle its board though some investors have continued to suggest the company looks beyond the family ranks for a new leader and weigh strategic alternatives.
On Thursday, Chief Executive Oscar Feldenkreis said the company’s current strategy is “the right formula to drive our business forward in a challenging retail environment.” He said sales across Perry Ellis’s core brands rose, but gains were offset by planned business exits and adverse exchange rates. Earnings, meanwhile, were offset by charges stemming from restructuring its operations.
Mr. Feldenkreis cautioned that changing consumer spending patterns for international tourists in the U.S., a strong dollar and “volatility in the global environment” remain headwinds, but he backed the company’s full-year earnings view of $1.95 to $2 an adjusted share.
As part of its strategic update Thursday, Perry Ellis said it would close 15 underperforming stores over the next 18 months, split between namesake shops and Penguin stores. Anita Britt, the company’s chief financial officer, said the problem is twofold: Rents are rising and traffic is falling.
She said the company is still determining which stores it would close but noted it could close fewer than 15 if it were to win rent concessions. “It’s kind of a Catch-22,” she said. “Traffic has been dropping and dropping” while landlords are raising the cost to maintain stores. Ms. Britt said traffic fell in the mid-single digits during the quarter.
The company also said it would accelerate its international expansion, expanding sales from stores abroad from the current 13% slice of revenue.
For the quarter, the company reported a loss of $4.4 million, or 24 cents a share, wider than its year-earlier loss of $2.8 million, or 9 cents a share. Excluding restructuring-related costs, the company reported a profit of 15 cents a share, down from 31 cents in the year-ago quarter.
Analysts predicted a penny in adjusted per-share profit on $197.7 million in revenue, according to Thomson Reuters.
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