Perry Ellis International, Inc. reported a net loss in the second quarter was $5.4 million, or 36 cents per fully diluted share compared to net income of $267,000, or 2 cents per share, last year. The latest quarter was impacted by a combined 27 cents per share in charges.

The charges included: 11 cents per share in net effect associated with management changes and repositioning in its European division; 4 cents per share in incremental net effect related to the acquisition of C&C California and Laundry by Shelli Segal which the company did not operated last year; 4 cents per share in incremental expenses related to the opening of three new Perry Ellis stores and one Original Penguin store during this year; and 8 cents per share in a non-cash impairment of marketable securities.

The company also reported a shift in revenue from the second quarter to the third quarter, which negatively impacted results by $0.07 per share. This shift related to delayed shipments as a result of integration issues with a third-party logistics distributor on the West Coast.

In addition, the company indicated that bankruptcies of certain retail customers in the quarter affected revenues by approximately $6.0 million and earnings per share by approximately 8 cents. The company has been proactive in its risk management with accounts receivable and has mitigated exposure on these customers.

“While revenue and gross profit were in line with our expectations, our results were affected by increased costs and reduced shipments related to the move to third-party distribution from our facility in Winnsboro; a repositioning of our European operations and incremental costs associated with newly acquired businesses. Combined this led to results that were well below a year ago and overshadowed strong performances for many of our growth platforms, including Perry Ellis Collection, swim, golf lifestyle and Laundry and C&C of California. Importantly, we believe the investments we are making in our brands, businesses and infrastructure position us for increased profitability and growth potential in the near future,” Oscar Feldenkreis, President and COO, commented.

Second Quarter Operations Review

For the second quarter of fiscal 2009, total revenues were $193.7 million, a $1.6 million reduction compared to $195.3 million reported in the second quarter of the fiscal year ended July 31, 2007 (“second quarter of fiscal 2008”). This decline was primarily driven by underperformance of the outlet division, disruptions due to management changes in European operations and the impact of multiple retailers declaring bankruptcy this quarter. In addition, shipping issues with a third party logistics provider in the West Coast affected deliveries for the Perry Ellis brand, further impacting revenues in excess of $3 million this quarter. The majority of these orders however, were shipped in August.

Gross profit increased by $0.5 million to $62.2 million compared to $61.7 million during the second quarter of fiscal 2008 with gross margin improving 52 basis points to 32.1% of net revenues. This improvement is a direct consequence of the Company’s strategic shift from private label into branded business. During the second quarter of fiscal 2009, the Company’s private label bottoms business decreased $9.3 million in revenue, partially offset by strong performance in the swim platform; revenue increases both in Perry Ellis Collection and golf lifestyle brands; plus the addition of Laundry by Shelli Segal and C&C California.

Compared to the second quarter of fiscal 2008, operating expenditures grew by $6.9 million during the second quarter of fiscal 2009. This increase was driven by continuous investment in Perry Ellis International’s growth initiatives: (1) women’s contemporary, through the addition of a design team for sportswear and increased investments in marketing, advertising and samples; (2) Europe, through the hiring of a new management team upon retirement of the previous Managing Director; (3) retail, with the opening of two new stores and (4) e-commerce, with the addition of a new vice president and increased investment in viral marketing and other Web 2.0 initiatives.

“The opportunities we have identified in our major growth initiatives such as women’s contemporary, international and e-commerce compels a corresponding commitment of resources and management attention. At the current stage, we must continue to invest in the development plans on our key growth opportunities if we are to maximize their potential,” Mr. Feldenkreis concluded.

Also during the second quarter, the Company determined that certain marketable securities which were classified as available for sale were deemed to be other than temporarily impaired. The Company has recognized a pre-tax impairment of $2.0 million or a net loss of ($.08) per fully diluted share for these marketable securities.

As a result, EBITDA as adjusted was $1.9 million for the second quarter of fiscal 2009, compared to $8.3 million, representing a reduction of $6.4 million over the same period last year. A table showing the reconciliation of EBITDA and EBITDA as adjusted to net income is attached.

The Company continued strengthening its financial position. Proactive retail planning led to a decrease in inventories of $3.3 million compared to the same period last year, reaching $133.1 million at quarter end. The Company’s total debt was $197.0 million at the end of the second quarter of fiscal 2009, representing a debt to capital ratio of 41% compared to 40% for the same period last year. Excluding the contemporary women’s acquisitions funded by its senior credit facility in the amount of $33.1 million, the Company’s total debt and debt to capital ratio would be reduced significantly. Borrowings under the Company’s line of credit at the end of the quarter were $22.3 million, out of $175 million available