Monday, April 4, 2016

Perry Ellis: Room For Upside On Valuation And Earnings

Huge international expansion opportunity.
Driving costs and inventory down.
Showed accelerating margins through last year.
Perry Ellis (NASDAQ:PERY) has multiple drivers medium and long term. They are scheduled to report earnings on April 12th.
Near Term Margin Drivers
Perry Ellis has been bringing down inventories which is giving them a strong position versus competitors and their retail customers. Gross margins accelerated to +240bp in the recently reported quarter up from a string quarters in the +80-100bp improvement range.
Overall inventory levels were reported down year over year. After having been flat year over year trends in the last two quarters were down 14% in Q2 and 13% in Q3.
Lower inventories are giving Perry Ellis a much stronger competitive position:
1) They are able to take markdowns faster to clear underperforming goods and focus on goods that are performing better.
2) They are shipping less goods to off-price (goods sold to off-price were down 38% on last quarter). Off price sales are extremely low margin. Avoiding that channel helps their average unit price lift.
3) Inventory at their retail customers were at or below planned levels as of last quarter giving customers less leverage over Perry Ellis to cut price or take back goods.
4) With unseasonable weather patterns Perry Ellis has been better able to adapt and clear goods to be clean for the next season. Companies that have lagging merchandise that leaks into the next season distract customers from buying new flows. Perry Ellis, through leaner inventories, is on the offense despite weather volatility.

To see rest of report...


#in, $pery
Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. Disclosure: These trades can lose you money and principle especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS

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