Perry Ellis founder dis­cusses next chap­ter

South Florida Sun-Sentinel Palm Beach (Sunday) - - Money - By Rob Wile The Mi­ami Herald

There are few Mi­ami com­pa­nies left from the era when Ge­orge Feldenkreis, who fled Com­mu­nist Cuba in the 1960s, founded the firm that to­day is known as Perry Ellis In­ter­na­tional.

What be­gan as an au­to­mo­tive parts im­port-ex­port busi­ness in down­town Mi­ami in 1967 ul­ti­mately be­came a com­pany with nearly $1 bil­lion in rev­enue and a brand name known the world over. In 1994, the com­pany, then known as Supreme In­ter­na­tional, went pub­lic. In 2000, Supreme In-

ter­na­tional bought Perry Ellis, the name­sake brand of the Man­hat­tan women’s wear star de­signer who died in 1986. Supreme was re­named Perry Ellis In­ter­na­tional and traded on the NAS­DAQ Ex­change as PERY.

Over the next decade, the Perry Ellis brand be­came a sta­ple in men’s cloth­ing and sports­wear. Perry Ellis In­ter­na­tional con­tin­ued to sign li­cens­ing deals with and some­times pur­chase mar­quee brands in­clud­ing Levi’ s, Dock­ers, Nike Swimwear, Jantzen and PGA Tour.

Fol­low­ing the Great Re­ces­sion, the com­pany strug­gled to main­tain fi­nan­cial per­for­mance. In 2014, ac­tivist in­vestors launched a bid to shake up the com­pany’s man­age­ment. In 2015, Feldenkreis stepped down as CEO; the next year, his son Os­car was named CEO. Two years later, in 2017, the com­pany’s board forced Ge­orge Feldenkreis from his position as ex­ec­u­tive chair­man, as some un­happy share­hold­ers pushed to re­duce the Feldenkreis fam­ily’s in­flu­ence.

Al­most im­me­di­ately, the elder Feldenkreis be­gan mount­ing a come back. In Fe­bru­ary of this year, he sub­mit­ted a bid to buy out all out­stand­ing shares of the com­pany at $27.50 per share. That of­fer val­ued the com­pany at just un­der $430 mil­lion. Some ac­tivist share­hold­ers con­tin­ued to re­sist Feldenkreis con­trol, and at least one other buyer was con­sid­ered. In Oc­to­ber, the com­pany’s board voted unan­i­mously to ac­cept the Feldenkreis bid and take the com­pany pri­vate. The com­pany, based in Do­ral, has about 550 em­ploy­ees in Mi­ami and about 2,400 world­wide.

An­a­lyst An­drew Burns, with in­vest­ment bank­ing firm David­son, is­sued a note to clients in Fe­bru­ary say­ing pri­va­ti­za­tion would likely ben­e­fit the com­pany. Burns cited an im­prov­ing over­all retail climate, the com­pany’s plans to in­vest in in­ter­na­tional ex­pan­sion, and its con­tin­ued push to ac­quire brands in his note.

Share­holder ad­vi­sory firms ISS and Glass Lewis also en­dorsed the bid. Wrote Glass Lewis, “The ex­e­cuted agree­ment ap­pears to be rea­son­ably con­sis­tent with in­dus­try trends and the pre­mi­ums gen­er­ally re­al­ized by in­vestors across re­cent all-cash buy­outs.”

Ge­orge and his son Os­car, Perry Ellis’ pres­i­dent and CEO, talked with the Mi­ami Herald to dis­cuss the com­pany’s next chap­ter. Their an­swers have been edited for length.

Q: Why was it so im­por­tant to keep Perry Ellis in the fam­ily?

Ge­orge: “Busi­nesses that have more of a fam­ily feel­ing are more suc­cess­ful in the long run. We are able to teach em­ploy­ees and give them an op­por­tu­nity to grow on the job. That’s why there was such an over­whelm­ing ex­plo­sion of sup­port.

“We won the share­holder vote by 90 per­cent. When I saw the faces, saw the body lan­guage of share­hold­ers at Oc­to­ber’s live vote in Do­ral, I felt proud in ac­com­plish­ing that. The dan­ger we had was, in al­most ev­ery com­pany, when a Mi­ami com­pany gets ac­quired, the Mi­ami lo­ca­tion is the one that dis­ap­pears. That af­fects the em­ploy­ees, the build­ing, the ven­dors, the sup­port of lo­cal or­ga­ni­za­tions.

“For the Feldenkreis fam­ily, it was im­por­tant to keep the busi­ness in Mi­ami. Naysay­ers said it was im­pos­si­ble, but we made the dream pos­si­ble, and we ac­quired the com­pany.

Q: Ge­orge, what has the past year felt like? How did your ouster af­fect you?

Ge­orge: “It was a great shock to me when the spe­cial com­mit­tee had me leave. They de­cided for rea­sons un­known to me-I never in­ter­viewed any­one to ask what I did that prompted their ac­tion. They said I have a few days to sign doc­u­ment, that I have to leave in four days, sign a re­lease let­ter. At my age, and what I’ve done in life, it was some­thing hu­mil­i­at­ing and very frus­trat­ing — to lose ev­ery­thing I worked for in my life

“So I thought the only way out for me was to buy the com­pany.

“I was mo­ti­vated by the way they be­haved to methat there was no rea­son to do that. And No. 2, fi­nan­cial in­ter­est: We have 25 per­cent of the com­pany-that’s Os­car, all my grand­chil­dren, 27 grand­chil­dren; it was re­ally a big fi­nan­cial dan­ger I was fac­ing.”

When he of­fered to buy the com­pany on Feb. 6, Feldenkreis was sur­prised that a group of share­hold­ers con­tin­ued to op­pose him, he said.

”But when I went to the em­ploy­ees, the ware­houses, our em­ploy­ees in Mi­ami, it was re­ally over­whelm­ing, great emo­tion, very re­ward­ing, very emo­tional for me and fam­ily.“

Os­car: “I was ready to leave as well. My fa­ther asked me to stay, and as he pro­ceeded in de­vel­opinga strat­egy, we con­tin­ued to work un­der very chal­leng­ing cir­cum­stances.

“At the end of the day, my fa­ther gave me, ev­ery day, the mo­ti­va­tion. He told me that this dif­fi­culty even­tu­ally would be over­come, that he’s lived through many chal­leng­ing times, and the Man Above has al­ways been good to us. I had a great con­fi­dence in our peo­ple and when the deal was ap­proved, on Oct. 18, it was a great feel­ing-there’s no greater feel­ing than that. I’m ex­cited about the fu­ture and what we can bring to Mi­ami. We em­ploy 500 peo­ple in the state of Florida, be­tween Tampa and Mi­ami. We’re proud to be in Mi­ami, proud that we will con­tinue to be here in South Florida. We came here in 1961-my fa­ther from noth­ing. We’ve al­ways con­trib­uted back to the com­mu­nity.”

Q: What will tak­ing the com­pany pri­vate ac­com­plish?

Os­car: It’s bet­ter for the com­pany in the long termfor the growth in the dig­i­tal space, as well as open­ing up more stores, be­tween retail and dig­i­tal. The com­pany should have 25 stores; to­day it’s only 15.”

The move will also ben­e­fit the com­pany’s var­i­ous brands, he said.

“We’re launch­ing Guy Har­vey — named for the ma­rine artist and ecol­o­gist — next year, which has a lot of her­itage in South Florida. We’re launch­ing Perry Ellis Amer­ica with a more streetwear logo.

“We have lot of op­por­tu­ni­ties in the com­pany, and we feel it’s in the best in­ter­est to in­vest in the fu­ture.” The pres­sures of quar­terly re­turns can stand in the way of good long-term in­vest­ments, he said.

“Our fu­ture is to con­tinue growing dig­i­tal, growing in­ter­na­tional, which is a small piece of the busi­ness; right now it’s 18 per­cent, and it should be close to 35 per­cent. I think we have a tremen­dous port­fo­lio with Nike swimwear which has seen an ex­plo­sion in the U.S. and Eu­rope. And with our golf brands, our li­cens­ing will con­tinue to grow as our brands be­come stronger and more pow­er­ful. We’re also launch­ing Jack Nick­laus brand, PGA Tour brand, Ben Ho­gan brand golf ac­ces­sories. We’ve made some strong ac­qui­si­tions and are bring­ing more li­cens­ing op­por­tu­ni­ties to the com­pany.

Q: Busi­ness-watch­ers keep talk­ing about the death of brick-and-mor­tar stores. Do you see con­tin­ued signs of doom for phys­i­cal retail stores?

Os­car: “Our cus­tomers con­tinue to shop brick-and­mor­tar stores. Only 25 per­cent of sales are gen­er­ated from the dig­i­tal side, and that is more ba­sic items like un­der­wear or socks. I think fash­ion cus­tomers will still be 75-80 per­cent brick-and­mor­tar.

“Re­tail­ers need to cre­ate an ex­pe­ri­ence. In to­day’s day and age, it’s not just about what prod­ucts you have, it’s the ex­pe­ri­ence you can bring to ta­ble. Are you giv­ing the cus­tomer some­thing unique to them. Per­son­al­iza­tion is be­com­ing more im­por­tant to­day-to­day you’re able to per­son­al­ize the Orig­i­nal Pen­guin logo with your fa­vorite color, or get em­broi­deries done on Cubav­era shirt.

Q: What do you see as the fu­ture growth pro- spects for Mi­ami as a city?

Os­car: “I think what’s hap­pened in Mi­ami is fan­tas­tic. The Mi­ami De­sign Dis­trict, Wyn­wood Aven­tura is be­ing re­fur­bished. Mi­ami is a great city. Peo­ple love to come here. We’re very for­tu­nate to live here in South Florida, and we have an un­der­stand­ing that it’s more than about the warmth.”

Ge­orge: “We’ve seen the growth of in­cred­i­ble mu­se­ums, the Ar­sht Cen­ter for the Per­form­ing Arts. Our univer­si­ties are get­ting bet­ter. And now so many peo­ple in the north are com­ing here be­cause of the lower taxes.”

Q: Ge­orge, do you be­lieve it is pos­si­ble for some­one to build a bil­lion-dol­lar, pub­licly traded com­pany to­day from Mi­ami in the way you did?

Ge­orge: “It would be dif­fi­cult to repli­cate it to­day, in this busi­ness. I was for­tu­nate that my fa­ther was rep­re­sent­ing for­eign fac­to­ries in Cuba. And the 1960s were trans­for­ma­tional years, when mar­kets went from the U.S. to over­seas for ap­parel and footwear. If you look back at the tra­jec­tory, our com­pany was al­ready in Ja­pan in 1963, Korea and Taiwan in ’68. I was in China in the ’70s-be­fore Kissinger. Right place at the right time.

“Also to­day, the cost of start­ing new busi­nesses is dif­fer­ent. But hav­ing said that, you have Uber, Lyft; they did not ex­ist just a few years ago so there are other ways you can come in and make a big busi­ness. But it shows you have to be in the right place at right time, and iden­tify the right place at right time. But there are al­ways op­por­tu­ni­ties.“

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