10 / 42
DEAR FELLOW
SHAREHOLDERS
A year ago we outlined our Growth and Profitability Plan to
better position Perry Ellis International (PEI) for long-term value
creation.The Plan is centered on five key initiatives; international
and licensing expansion; portfolio optimization; investment in
our-high margin, direct-to-consumer channel; enhancement of
our competitive positioning; and cost-savings efficiencies.
We have made considerable progress in implementing this
Plan and are pleased to provide you with an update following
the close of Fiscal 2015. Bottom line, our Growth and
Profitability Plan has made PEI a more focused, financially
efficient corporation.
Along with other apparel-industry players, during the past
year we faced a number of significant external headwinds,
including extensive port closures in the United States and
historic currency fluctuations. While these events impacted
our Fiscal 2015 financial results, we successfully managed
through them and started Fiscal 2016 as strong as ever,
making it our second-most successful quarter in the
Company’s history.
Our Plan helped further solidify our standing as one of the
world’s premier branded-lifestyle apparel corporations.
Among the Plan’s components are:
Expanding International and Licensing Distribution
During Fiscal 2015, international revenues grew 15 percent,
increasing from $90 million to $104 million and accounting
for 12 percent of PEI’s total revenue mix. Much of the
international growth can be attributed to expansion of
the Company’s direct operations in Europe, Canada and
Mexico. In addition, licensing income grew 7 percent, which
underscores the strong brand equity of our flagship brands
domestically and internationally. We remain on track to
bolster international sales, to a point where in a few years
they could represent over 15 percent of total revenues. We
also executed an aggressive licensing strategy that yielded
27 new licensing agreements, growing this revenue stream to
$32 million in royalties for the year.
Portfolio Optimization and Licensing Growth
Throughout FY14 and into FY15, PEI exited 30 underperforming
brands and businesses, which generated $80 million in
revenues. This afforded us a heightened focus on our high-
performing core brands -- Perry Ellis, Original Penguin, Golf
Apparel, Rafaella and Laundry by Shelli Segal.
Enhancing Direct-to-Consumer (DTC) Operations
During Fiscal 2015 the Company focused on enhancing
profitability in its Direct-to-Consumer platform. We
streamlined our internal teams and processes to improve
operating performance. We believe that enhancing DTC sales
opportunities will yield significant earnings potential for PEI.
Toward that end we built a superlative e-commerce channel,
in terms of its ability to facilitate both customer conversion
and loyalty, which increased our e-commerce comparable
revenue by 34 percent. Additionally, at our retail stores
nationwide we’re building localized assortments and tailoring
our product flows on a door-by-door basis, adapting to each
individual market. We’re also devoting time and resources to
the development of our retail associates, while simultaneously
developing new product opportunities and driving margin-rate
improvements through our DTC channel.
Strategic Cost Savings
Over the course of FY15, we took actions that improved
our efficiency and provided us with greater access to
working capital. We effectively managed working capital
by reducing inventory to $184 million, compared with
$207 million at the end of FY14. During the year, we
executed $12 million in cost reductions, cutting both
the costs of goods and SG&A during the year. A portion
of these savings were reinvested into the Company’s
international platform to help drive growth. We will continue
executing this focus to enhance efficiencies and generate
cost savings through thoughtful process enhancements,
inventory management and sourcing optimization.
Fiscal Year 2015 Financial Results
During Fiscal 2015, our portfolio generated $890 million in
total revenue, which is a 2 percent decrease compared with
the previous fiscal year. Today our total revenues represent
approximately $3 billion in global retail sales, of which our
core brands generated 85 percent. The combined sales of
menswear labels Perry Ellis and Original Penguin accounted
for 35 percent of PEI’s revenues, while PEI Golf apparel
was responsible for 21 percent. Womenswear brands
Rafaella and Laundry by Shelli Segal, and lifestyle labels
Farah and Savane, were collectively responsible for 29
percent of PEI’s retail sales.
Notwithstanding the success of our operating plan, there is
much more work to do, we will continue to work diligently on
enhancing the profitability of our retail stores and increasing
net sales at wholesale. Moving into Fiscal 2016, many of