Pery Ellis 4Q14 Earnings Call Notes

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TPPA will provide duty free imports to major countries except China

“We continue to reduce cost across the portfolio. We have decided to consolidate our Beijing offices into our two other offices in China; in Guangzhou and Shanghai. As we continue to prepare for an eventual approval by the U.S. Senate of the Trans-Pacific partnership agreement or TPPA. When approved this agreement will provide for duty free imports and exports to major countries, except China and this will have a major implication for the apparel industry in the next three to five year period.”

Moving more and more production away from China

“Today our company imports as mainly units from Vietnam as we do from China. Going forward there will be an increase in imports of certain apparel products from countries other than China.”

Tough environment for retail companies

“s you are all aware apparel companies are operating in a very challenging environment with a consumer that has so many choices and so many avenues and channels to choose from.”

Receiving half as many goods through the west coast as they did before the port closure

“As you all know we faced external headwinds that were unique for the quarter, namely port closures in the United States and historic currency fluctuations. While we are pleased that an agreement has been reached in the port dispute we believe that it will take another month or so until the port is back to full normal operations.

In order to mitigate delays caused by the port closures we have redirected a significant portion of our inbound shipments to the East Coast and anticipate that our deliveries will be back on schedule by the second quarter of our fiscal ‘16. We are now receiving approximately 15% of our goods through the West Coast port as compared to 35% to 40% before the slowdown began.”

The port situation has definitely improved

“First of all the port situation has definitely improved. We are, I would say that by the end of May on time for Father’s Day, we will be caught up. As Anita mentioned, we have diverted and started diverting a lot of our concentration from the West Coast to the East Coast, back last year when we saw what was transpiring.”

Got e-commerce to standalone profitability

“this is the first year we were able to get e-com basically to a small profit on a standalone basis, unlike I would say most other platforms that are out there in the industry. We were able to do that by really focusing on specific merchandising assortment within each of the brands, within our e-commerce platform today and we focus on also reducing where there were some duplicative analytics, where we felt that we weren’t getting a payback and where we were able to invest in marketing and analytics that we sell to give us a higher e-commerce lift and better profitability.”

Price of oil lower has been helpful

“Product cost, has been favorably affected by the lower prices of synthetic, the lowering of oil prices, have lowered prices of polyester nylon et cetera. And cotton has been on a kind of decline for a couple of years. So basically that is an effective, in fact it will result in improved earnings. We haven’t been able to quantify that. It’s a small number but it’s a helpful number whatever it is.”

We’re moving to Africa

“Generally speaking, men’s companies are always in the forefront of the changes because we are more conservative “than ladies business” and the men business can take a longer delivery than ladies. So all the big companies today are moving to Africa, for example PVH has established office in Africa, so is Avis [ph] and we are in that process too. We have been buying in Africa for a number of years. So all this is going to be good for the apparel business and we also doing office consolidation whenever necessary like in China. We’re reducing our exposure in China, which will result in improved cost of goods to a degree.”