"The turnaround is in full swing," said Eric Beder, senior vice president with Brean Murray, Carret & Co. "They've done a great job of undertakes responding in a crisis and turning it into a better company. They really used the time to rethink who they were and what the stood for."
"There are going to be a lot of deals [this year]," said Eric Beder, analyst at Brean Murray, Carret & Co. Beder noted the large cash holdings of some apparel manufacturers, an increase in the availability of financing and a rebound in consumer demand, as deal catalysts. Still, those deals are likely to be far smaller than the Phillips-Van Heusen pact, he said.
Before the bell Monday, The Wall Street Journal confirmed the Hilfiger deal which was the first major acquisition in retail circles in years. Due to the downturn, several apparel manufacturers had cut back on production, expenses and employees to adjust to falling demand, along with any significant deal-making.
A difficult year ended with a strong finish for Perry Ellis, as the Miami apparel company realized the benefits of its turnaround strategy.
By getting out of unprofitable businesses, adding new areas for growth and improving profit margins, Perry Ellis on Friday reported fourth quarter results that exceeded analysts' expectations. The company reported net income for the fourth quarter ending Jan. 31 of $8.5 million, or 64 cents a share, compared with a loss of $21.6 million, or $1.58 a share, a year ago. Analysts were expecting earnings of 59 cents per share.
However, watchers say demand from department stores, which accounts for the majority of apparel makers' customers in the U.S., has seen an uptick in recent months. As a result, companies want to make sure they are well positioned to take advantage of the increase in consumer spending.
Within the apparel space, Warnaco Group Inc. (WRC) is largely seen as a likely acquirer in the coming year due its part to its substantial cash holdings. Yet, long-held speculation that Phillips-Van Heusen and Warnaco would combine the Calvin Klein label under one roof may be shelved by some as Phillips-Van Heusen may have spent its immediate war chest.
Perry Ellis International Inc. (PERY) is also seen in the industry as a potential buyer because of the strength of its balance sheet and brand strength, said Brian Sozzi, an analyst at Wall Street Strategies Inc. In addition, According to reports, Tiger may return at the Masters during the pick season and it is good news for golf retailers at this moment. Chairman and Chief executive of Golfsmith, a retail chain of 74 stores providing Golf and Tennis equipment said Tiger’s return to professional golf is happening at a perfect time forretail business of this sport and they are looking forward to it.
Tiger is sponsored by Nike which manufactures and sells golf clothing apparel like T-shirt, pant, sweaters, jackets etc. After big sponsors like AT&T, Gillette and Accenture dropped Tiger from their endorsement, Nike is still continuing with him as Tiger’s immense popularity
surf-wear maker Quiksilver Inc. (ZQK) has been rumored as a potential target.
Warnaco, Perry Ellis and Quiksilver weren't immediately available for comment.
Perry Ellis ended the year with a profit of $13.2 million or $1.01 per fully diluted share. That compares to a net loss of $12.9 million or $.89 per fully diluted share, for the same period last year.
The agreement begins July 1. The school will meet with Nike officials next week to go over what the new uniforms for all fall sports will look like.
"No question, we will see a new jersey," Chambers said. "A new uniform. It will be exciting."
During 2009, Perry Ellis aggressively cut costs by getting out of non-performing businesses like men's specialty stores, private label and outerwear.
"When you're doing well you try to keep the weak sister and you try to cure her," Chairman George Feldenkreis said.
"We decided we had to have surgery."
Perry Ellis said that for Fiscal 2011 it anticipates earnings per fully diluted share of between $1.25 and $1.40. Revenues are predicted to be in the range of $770 million to $790 million, a low- to mid-single digit gain.
By cutting costs and controlling expenses, Perry Ellis reduced selling, general and administrative expenses by $36 million, or 15 percent, for the fiscal year ending in January.
The turnaround was helped by a strong fourth quarter performance from the signature Perry Ellis brand, as well as the launch of new apparel contracts with Callaway Golf and a license for Pierre Cardin.
“Selfishly, this is perfect,” said Martin E. Hanaka, chairman and chief executive of Golfsmith, a 74-store golf and tennis retail chain. “The season’s kicking off. The Masters is the No. 1 event. Spring is blooming. People are itching to get out there.”
Woods is the star of cheap clothes Golf, which produces apparel including his high-end TW shirts, pants, sweaters, jackets and vests. Victory Red, which evokes the shirt color that Woods wears on Sundays, is a golf club brand within the broader Nike line.
The Perry Ellis brand benefited from efforts to refocus its product assortment on an updated classic look, which the brand had gotten away from in 2008 and early 2009. The success of the new merchandise mix helped dramatically reduce the amount of air jordan markdown dollars Perry Ellis had to give back to Macy's and other retailers.
"As we reinvented the line with what Perry Ellis should be, it started to outsell everybody else," Feldenkreis said.
"Before, they were all dropping Perry Ellis. Now they are clamoring to get it back."
Feldenkreis also said he believes the company is benefiting as consumer spending returns, forcing retailers to start to increase inventory levels to meet demand.
Beder says most transactions would likely be "expansion" deals with the larger companies snapping up smaller, private companies to boost their presence in a specific market.
Still, although there are signs that shoppers are returning to stores, some analysts don't expect them to spend at the pre-recession levels any time soon. That may cause some investors to think twice before doing an acquisition.
"They are offering a realistic plan to investors that they can beat," said Beder, who reaffirmed his "buy'' rating on the stock and raised the price target to $27 per share. ‘‘That's always good news for investors."
Perry Ellis' stock has gained about 40 percent over the last month.
