UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Mark One)

For the fiscal year ended January 31, 20032004

OR

For the transition period from            to            .

Commission File number 0-21764

Perry Ellis International, Inc.

(Exact Name of Registrant as Specified in Its Charter)

(305) 592-2830

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.01 per share

(Title of each class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is an accelerated filer (as defined in the Exchange Act Rule 12b-2).    Yesx    No  ¨    No  x

The number of shares outstanding of the Registrant’s Common Stock is 6,425,641 (as of March 11, 2003).

The aggregate market value of the voting stock held by non-affiliates of the Registrantregistrant is approximately $38,923,108$124,696,201 (as of July 31, 2002)2003).

The number of shares outstanding of the registrant’s Common Stock is 8,469,998 (as of April 6, 2004).

DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference:

Portions of the Company’s Proxy Statement for the 20032004 Annual Meeting—Part III

Unless the context otherwise requires, all references to “Perry Ellis,” the “Company,” “we,” “us” or “our” include Perry Ellis International, Inc. and its subsidiaries. References in this report to the Jantzen acquisition refer to our acquisition of the Jantzen swimwear business from subsidiaries of VF Corporation in March 2002. References in this report to the Salant acquisition refer to our pending acquisition by merger of Salant Corporation pursuant to a definitive merger agreement entered into in FebruaryJune 2003. References in this report to annual financial data for Perry Ellis refer to fiscal years ending January 31. This Form 10-K contains trademarks held by us and those of third parties.

General information about Perry Ellis can be found atwww.perryellis.comwww.pery.com. Perry Ellis makes itsWe make our annual report on Form 10-K, quarterly reports on Form 10-Q, current report on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 available free of charge on its web site,our website, as soon as reasonably practicable after they are electronically filed with the SEC.

FORWARD-LOOKING STATEMENTS

We caution readers that this report and the portions of the proxy statement incorporated by reference into this report include “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations rather than historical facts and they are indicated by words or phrases such as “anticipate,” “could,” “may,” “might,” “potential,” “predict,” “should,” “estimate,” “expect,” “project,” “believe,” “intend,” “plan,” “envision,” and similar words or phrases. TheseWe have based such forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. statements, many of which are beyond our control.

Some of the factors that would affect our financial performance, cause actual results to differ from our estimates, or underlie such forward-looking statements, are set forth in various places in this report and in the portions of the proxy statement incorporated by reference, including under the headingheadings Item 1 “Business – Certain Risks,” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. These factors include:

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You are cautioned not to place undue reliance on these forward-looking statements, which are valid only as of the date they were made. We undertake no obligation to update or revise any forward-looking statements to reflect new information or the occurrence of unanticipated events or otherwise.

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PART I

Item 1. Business

Overview

Perry Ellis isWe are one of the leading apparel companies in the United States. We control a leading designer, marketerportfolio of major men’s and licensorwomen’s brands, some of a broad line of high quality men’s sportswear, including casualwhich were established over 100 years ago. We design, source, market and dress casual shirts, golf sportswear, sweaters, dress casual pantslicense our products nationally and shorts, jeans wear, active wearinternationally at multiple price points and swimwear toacross all major levels of retail distribution. During fiscal 2003, with the Jantzen acquisition, Perry Ellis began designing and marketing women’s swimwear under the Jantzen^® and Southpoint^®distribution at more than 20,000 doors. Our portfolio of highly recognized brands women’s and junior’s swimwear under the Tommy Hilfiger^® brand, and women’s and junior’s swimwear, men’s and junior’s competitive swimwear, swimwear accessories and apparel under the Nike^® brand.

Perry Ellis owns or licenses the brand names under which most of its products are sold. These brand names includeincludes Perry Ellis^® and Perry Ellis America^®, which we believe together generate over $1 billion in annual retail sales, Axis^®, Tricots St. Raphael^®, Jantzen^®, John Henry^®, Manhattan^®, PING^® and Mondo di Marco^® for dress casual wear, Cubavera^®, the Havanera^®, Havana Shirt Co.^®™, Natural Issue^®, Munsingwear^® and, Grand Slam^® for casual sportswear, Perry Ellis America, Original Penguin^®, and Natural Issue for jeans wear, PING, Perry Ellis and Munsingwear for golf sportswear, Pro PlayerManhattan^® and Perry Ellis America for active wear, NAUTICA. We also (i) license the Nike^® for selected product lines for sale to corporate purchasers and Jantzen, Southpoint, Nike and Tommy Hilfiger^® brands for swimwear and swimwear accessories.accessories, (ii) are the worldwide master licensee for PING^® golf apparel, (iii) license the Ocean Pacific^® brand for certain men’s sportswear categories and (iv) license the NAUTICA^® brand for our corporate wear business.

Perry Ellis’We distribute our products primarily to wholesale customers that represent all major levels of retail distribution channels include regional, national and internationalincluding department stores, national and regional chain stores, mass merchants, specialty stores, sporting goods stores, green grass (i.e., golf related), specialty storesshops, the corporate incentive market, as well as clubs and corporate wear distributors throughoutindependent retailers in the United States Puerto Rico and Canada. Perry Ellis’Our largest customers include Federated Department Stores, Inc., Dillard’s Inc., The May Department Stores Company, Wal-Mart Stores, J.C.Inc., J. C. Penney Company, Inc., Kohl’s Corporation, and Sears, Roebuck & Co. We also operate 38 retail stores located primarily in upscale retail outlet malls across the United States. In addition, we leverage our design, sourcing and Co., Mervyn’s,logistics expertise by offering a limited number of private label programs to retailers. In order to maximize the worldwide exposure of our brands and K-Mart Corporation.generate high margin royalty income, we license our brands through approximately 56 domestic and approximately 79 international license agreements.

Perry Ellis also licenses its trademark portfolio domesticallyOur wholesale business, which is comprised of men’s sportswear and internationallywomen’s and men’s swimwear and swimwear accessories, accounted for 96% of our total revenues in fiscal 2004, and our licensing business accounted for 4% of our total revenues in fiscal 2004. We have traditionally focused on the men’s sportswear market, which represented approximately 86.7% of our total wholesale revenues in fiscal 2004, while our women’s and men’s swimwear market represented approximately 13.3% of our total wholesale revenues in fiscal 2004.

Our licensing business is a significant contributor to our operating income. We license the brands we own to third parties for apparelthe manufacturing and marketing of various other products that Perry Ellis doesin distribution channels in which we do not selldistribute those brands, including men’s and women’s footwear, and men’s suits, underwear, loungewear, active wear, outerwear, fragrances, eyewear and accessories. In addition, to generating additional sourceswe license our brands internationally for the manufacturing and marketing of revenue for Perry Ellis, theseproducts that we offer domestically such as Jantzen sportswear. These licensing arrangements raise the overall awareness of our brands without requiring us to make capital investments or incur additional operating expenses.

In June 2003, we acquired Salant, a leading designer, marketer and distributor of brand name and private label menswear products and the largest licensee of the Perry Ellis’Ellis brand. With the Salant acquisition we have consolidated control of the Perry Ellis brand, added significant revenues and earnings, solidified our balance sheet, further diversified our product offerings and customer base, and added to our portfolio of brands. As a result of this acquisition, we also assumed operation of 39 retail outlet stores, of which four have since been closed closed.

We employ a three-dimensional strategy in the design, sourcing, marketing and licensing of our products that focuses on diversity of brands, products and distribution channels. Through this strategy, we provide our products to a broad range of customers, which reduces our reliance on any single distribution channel, customer, or demographic group and minimizes competition among our brands.

Perry Ellis has built its broadDiversity of Brands.We maintain a portfolio of 18 highly recognized brands through selective acquisitionsthat we either own or license. We are focused on brands that appeal to fashion conscious consumers across all income levels. We design, source, market and license most of our products on a brand-by-brand basis targeting distinct consumer demographic and lifestyle profiles. We also market the Natural Issue, John Henry and the establishmentHavanera Co. brands, which appeal to the middle-income consumer. In addition, we market brands that appeal to women through our Jantzen family of its own brands over its 36-year operating history. In recent years, through acquisition of brands and internal growth, Perry Ellis has experienced significant overall growth. From Perry Ellis’ initial public offering in 1993 to fiscal 2003, Perry Ellis has experienced a compound annual revenue growth rate of 22.3%. In order to continue to grow, Perry Ellis selectively evaluates a number of acquisition candidates each year.swimwear products.

Through its “familyDiversity of brands” marketing strategy,Product Categories.We design and market apparel in a broad range of men’s product categories and a few women’s product categories, which increases the stability of our business. Our menswear offerings include casual sportswear, dress shirts and pants, jeans wear, golf apparel, sweaters, sports apparel, swimwear and swim accessories, activewear, and leather accessories. Our womenswear offerings include swimwear, sportswear and accessories. We believe that our product diversity decreases our dependence on any one product or fashion trend and has contributed substantially to our growth.

Diversity of Distribution Channels.We market our products through all major levels of retail distribution, which allows us to reach a broad range of consumers in the United States and Canada. We distribute through department stores, national and regional chain stores, mass merchants, specialty stores, sporting goods stores, green grass golf shops, the corporate incentive market, as well as clubs and other independent retailers in the United States and Canada. We entered the corporate wear market in 2001, where we provide corporate clients with high quality customized products. Our products are distributed through more than 20,000 doors at some of the nation’s leading retailers, including Federated, Dillard’s, May Department Stores, Wal-Mart, J. C. Penney, Kohl’s, Sears, and Nordstrom.

The following table illustrates the diversity of the brands and products we produce and market and their respective distribution channels:

We were incorporated in Florida in April 1967 and changed our name from Supreme International Corporation to Perry Ellis seeks to developInternational, Inc. on June 18, 1999. Our principal executive offices are located at 3000 N.W. 107th Avenue, Miami, Florida 33172, and enhance a distinct brand name, styling and pricing strategy for each product category within each distribution channel and target consumer. Perry Ellis markets its brands to a wide range of segments, targeting consumers in specific age, income and lifestyle categories. Perry Ellis also produces goods sold under private label programs for various retail customers. Branded product and private label sales accounted for 75.0% and 25.0% of Perry Ellis’ fiscal 2003 net sales, respectively, compared to 63.0% and 37.0% of fiscal 2002 net sales, respectively.our telephone number is (305) 592-2830.

Perry Ellis believesOur Competitive Strengths

We believe that itsour competitive strengths position it wellus to capitalize on several trends that have affected the apparel sectorindustry in recent years. These trends include include:

Perry Ellis primarily contracts for the manufacture of its products through a worldwide network of quality manufacturers. Perry Ellis currently uses approximately 130 independent suppliers, located in the Far East, other parts of Asia, Africa and South and Central America. Perry Ellis believesWe believe that its extensive sourcing experience enables it to obtain quality products on a cost-effective basis.

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Recent Developments

Jantzen Acquisition

In March 2002, Perry Ellis completed the Jantzen acquisition, which was the acquisition of certain assets of Jantzen, Inc., a recognized innovator in swimwear since 1910, from subsidiaries of VF Corporation. The purchase price of the Jantzen acquisition was approximately $24.0 million, excluding transaction fees. The Jantzen brand has a history of over 90 years and its products are sold in upscale department stores, national and regional chain stores, mass merchants and specialty shops. The acquisition was financed with a portion of the proceeds from a $57.0 million offering of 9½% senior secured notes due 2009 described below.

The Jantzen assets Perry Ellis acquired consisted primarily of trademarks and trade names, license agreements, certain equipment, other items of personal property, showroom leases and a limited amount of inventory relating to the 2003 season. Perry Ellis also acquired the license for the Tommy Hilfiger brand for women’s and junior’s swimwear and the Nike brand for women’s and junior’s swimwear, men’s and junior’s competitive swimwear, swimwear accessories and apparel. Perry Ellis plans on building on Jantzen’s reputation for high-quality swimwear. The Jantzen acquisition has added to Perry Ellis’ strong portfolio of brands, allowed Perry Ellis to broaden its product line into new product categories, such as women’s swimwear and sportswear and increased Perry Ellis’ licensing revenues.

Secured Notes Offering

On March 22, 2002, Perry Ellis completed a private offering of $57.0 million 9½% senior secured notes due 2009. Approximately $24.0 million of the net proceeds of this offering was used to finance the Jantzen acquisition, with the remainder of the net proceeds being used to reduce the amount of outstanding debt under Perry Ellis’ senior credit facility and as additional working capital. The senior secured notes are secured by a first priority security interest granted in Perry Ellis’ portfolio of trademarks and licenses as of the closing date of the Jantzen acquisition, including the trademarks, licenses and all income, royalties and other payments acquired in the Jantzen acquisition. The senior secured notes are senior secured obligations of Perry Ellis and rankpari passuin right of payment with all of its existing and future senior indebtedness.

The Salant Acquisition

On February 3, 2003, Perry Ellis entered into a merger agreement with Salant Corporation, Perry Ellis’s largest licensee, which provides for the merger of a wholly owned Perry Ellis subsidiary with Salant. If the merger is completed, Salant will become a wholly owned subsidiary of Perry Ellis. Salant paid $5.7 million in royalties and $2.7 million in advertising contribution to Perry Ellis in fiscal 2003. The merger is subject to customary closing conditions. Perry Ellis expects to close the merger before the end of its second fiscal quarter if all of the conditions to the merger are satisfied.

The aggregate merger consideration to be paid by Perry Ellis is $91.0 million, and it is expected to be comprised of approximately $52.0 million in cash and approximately $39.0 million worth of newly issued Perry Ellis common stock. Salant shareholders will receive approximately $9.37 per share in value comprised of at least $5.35 per share in cash and not more than $4.02 per share of Perry Ellis common stock. The precise fraction of a share of Perry Ellis common stock that Perry Ellis will issue in the merger for each Salant share will be determined based on the average closing price of the Perry Ellis common stock for the 20-day period ending three trading days before the anticipated merger closing date. The maximum number of shares of Perry Ellis common stock, however, that may be issued in the Salant acquisition is limited to 3,250,000.

The cash portion of the merger consideration will be funded from Perry Ellis’ existing cash reserves and through borrowings under its senior credit facility. Perry Ellis obtained a commitment from the lead senior lender in its existing senior credit facility to increase the facility from $60.0 million to $110.0 million, with a  $30.0 million sub-limit for letters of credit.

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Salant licenses the Perry Ellis brand from Perry Ellis for men’s sportswear, dress shirts, dress pants and leather accessories and derived approximately $164.3 million or 65.2% of its revenues for the fiscal year ended December 28, 2002 from the sale of Perry Ellis products. The remaining approximately $87.7 million of Salant’s fiscal 2002 revenue is made up of Salant’s owned brands such as Axis^® for active wear and Tricots St. Raphael^® for sweaters, sales under license agreements for use of the JNCO^® and Ocean Pacific^® brands, as well as several private label programs. The Axis and Tricots St. Raphael brands are both sold at upscale retailers. Salant also operates 40 leased retail outlet stores around the country.

If the Salant acquisition is completed, Perry Ellis will be positioned to enter the men’s collection market for sportswear, dress shirts and dress pants and the leather accessories market. With the acquisition, Perry Ellis will also begin to design, market and license products under the Axis and Tricots St. Raphael brands, and under the JNCO trademark for menswear. Furthermore, Perry Ellis will begin marketing menswear under the Ocean Pacific brands as a licensee, if the written consent of Ocean Pacific Apparel Corp. is obtained.

Perry Ellis believes the Salant acquisition will allow the company to exercise greater control of the Perry Ellis brands’ major product categories, add significant revenue and earnings growth, strengthen Perry Ellis’ management team and enhance the company’s efforts to build a stronger domestic and international licensing business. In addition, Perry Ellis believes that the Salant acquisition will also provide the company with two well-recognized brands, Axis and Tricots St. Raphael, to further strengthen its brand portfolio.

Competitive Strengths

Perry Ellis believes that it haswe have the following competitive advantagesstrengths in itsour industry:

Portfolio of Familynationally and internationally recognized brands. We currently own or license a portfolio of Brands.    Perry Ellis owns18 brands, which enjoy high recognition within their respective consumer segments. We believe that these brands have built a loyal following of fashion-conscious consumers and markets eight majorretailers who desire high quality, well-designed products. We license the Nike, Tommy Hilfiger, PING, NAUTICA and Ocean Pacific brands, Perry Ellis, Jantzen, Natural Issue, Munsingwear, Grand Slam, John Henry, Manhattan, and Cubavera with a totalwhich we believe are highly recognizable brands within their various product categories. We also license 14 of over 41 sub-brands (such as Perry Ellis Portfolio, Perry Ellis America, Southpoint, Original Penguin^® and Havanera). If the Salant acquisition is completed, Perry Ellis will have greater control of the Perry Ellis brand and also own and market the Axis and Tricots St. Raphael brands. Perry Ellis also designs, sources and markets four other majorour brands (PING, NAUTICA, Nike and Tommy Hilfiger), which it licenses under existing agreements with various expiration dates and renewal options. Perry Ellis also licenses its brands and sub-licenses the PING brand to licenseesthird parties for products in distribution channels in which we do not market those brands. We believe that it does not sell directly to retailers. These brands enjoy national and international recognition in their respective sectors of the market and have a loyal consumer and retailer following. Brandbrand recognition is critical in the apparel industry, where strong brand names help define consumer preferences and drive upscaleselling space at retailers.

Diversified product offering and distribution model. We market a diverse array of products under our numerous brands at multiple price points and across multiple levels of retail distribution. Our menswear offerings include casual sportswear, dress shirts and pants, jeans wear, golf apparel, sweaters, sports apparel, swimwear and swim accessories, activewear and leather accessories. Our womenswear offerings include swimwear, sportswear and swim accessories. Our products are distributed through more than 20,000 doors at department stores, national and regional chain store floor space allocation.stores, mass merchants, specialty stores, sporting goods stores, green grass golf shops, the corporate incentive market and independent retailers in the United States and Canada. Our diversified product offerings and distribution model reduce our reliance on any one product, demographic group, merchandise preference or distribution channel and minimizes competition among our brands.

Strong Retailer Relationships.relationships with our retailers    Perry Ellis believes its. We believe that our established relationships with retailers at all distribution levels give it the opportunityallow us to maximize the selling space dedicated to itsour products, monitor itsour brand presentation and merchandising selection, and introduce new brands and products. Perry Ellis hasBecause of our quality brands and products, dedication to customer service, design expertise and sourcing capabilities, we have developed and maintained long-standing relationships with itsour largest customers, which includeincluding Dillard’s (more than 25 years), May Department Stores (more than 25 years), J.C. Penney (more than 2325 years), Sears (25 years), Federated Department Stores (16 years), Wal-Mart (14 years), and Kohl’s (10 years),.

Strong licensing capabilities and Sears (20 years)relationships. Perry Ellis believes that it has maintained these relationshipsWe license many of the brands we own, and, as a result, of the quality brand names it offers its customers, innovative organic brand development, private label products and its dedication to customer service. Management, in conjunction with Perry Ellis’ staff of sales people and commissioned agents, meets with its major customers frequently to review product offerings, establish and monitor sales plans, and design joint advertising and promotional campaigns. Perry Ellis believes its reliable delivery times, consistent product quality and quick response to fashion trends and inventory demands allow it to meet its retailers’ current requirements. In addition, Perry Ellis’ global sourcing network, design expertise, advanced systems and technology, and warehousing facilities enhance its ability to meet the changing and increasing needs of its retailers and mitigates channel volatility. If the Salant acquisition is completed, Perry Ellis intends to capitalize on Salant’s strong relationship with upscale retail customers, with whom Perry Ellis does not currently do significant business. In addition, Perry Ellis believes that the Salant acquisition will also allow Perry Ellis to further diversify its customer base so that no customer will account for more than 10% of Perry Ellis’ annual net sales.

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Strong Licensing Capabilities and Relationships.    Perry Ellis hashave gained significant experience in identifying potential licensing opportunities and hasopportunities. We have established relationships with many active licensees by actively licensing theand believe these relationships provide opportunities to grow our revenues and earnings. Our brands it owns. Perry Ellis’ brands haveare solidly positioned it in more retailersretail outlets at all major levels of retail distribution giving them strongand have increased our exposure nationally and internationally thereby making Perry Ellis’ brands more attractive to licensees. Perry Ellis believesinternationally. We believe that itsour broad portfolio of brands also appeals to licensees because it gives themlicensees the opportunity to sell itstheir products into many different retail distribution channels. For example, a manufacturer of men’s accessories might license the Natural IssueCubavera brand to sell to nationalenter the department storesstore channel or license the Munsingwear brand to target mass merchants. Further,the national and regional chain stores. By licensing our owned brands, we offer consumers a complete product assortment by aligning its strengthsbrand. We also coordinate our marketing efforts with those of its licensees, Perry Ellis has been able to raise brand awareness, enhance its sourcing capabilities,thereby maximizing exposure for our brands and plan its marketing campaigns to maximizeour return on investment. Perry Ellis believes that its licensing expertise, which is supported by an experienced and dedicated staff, will allow it to continue marketing its brands to apparel and accessory producers effectively. Perry Ellis has already begun to bring its licensing experience and expertise to its Jantzen brand and expects to position it among the key players in the swimwear and sportswear market.

World-Wide Low-Cost Sourcing CapabilitiesSophisticated global low-cost sourcing capabilities. Perry Ellis’ global network of suppliers enables it to purchase apparelWe have sourced our products at competitive cost without sacrificing quality, while at the same time reacting quickly to its retailers’ needs and maximizing production flexibility. Perry Ellis developed this expertise through more than 35 years of experience in purchasing its products from suppliers around the world. No individual supplier in fiscal 2003 accountedglobally for more than 10.0%36 years and employ sophisticated logistics and supply chain management systems to maintain maximum flexibility. Our network of itsworldwide sourcing partners enables us to meet our customers’ needs in an efficient and high quality manner without relying on any one vendor, factory, or country. In fiscal 2004, based on the total sourcing needs. Perry Ellis does not have long-term contractual arrangements with anydollar value, we sourced our products from Asia (72%), Central and South America (14%), the Middle East (6%) and other areas of its suppliers, thereby affording it greater flexibility in making purchasing decisions with its vendor base. Perry Ellis currently maintainsthe world (8%). We maintain a staff of experienced sourcing professionals principally locatedin five offices in China (including Hong Kong), as well as in the United States, South Korea China, and Taiwan. With the global network of nineOur sourcing offices closely monitor our suppliers and provide strict quality assurance offices, Perry Ellis is ableanalyses that allow us to closely monitor its suppliers andconsistently maintain strictour high quality standards for the foreseeable future. Byour customers. We have a compliance department that works closely with our quality assurance staff to ensure that our sourcing itspartners comply with Company-mandated and country-specific labor and employment regulations. We believe that sourcing our products Perry Ellis manages itsoverseas allows us to manage our inventories more effectively and does not incuravoid incurring the costs of maintaining and operating production facilities. Because of our sourcing experience, capabilities and relationships, we believe that we are well positioned to take advantage of the 2005 elimination of all textile and apparel quotas for member countries of the World Trade Organization.

Design Expertiseexpertise and Advanced Technology.advanced technology    Perry Ellis’ in-house. We maintain a staff consists of 45 senior93 designers, merchandisers and merchandisers,artists who are supported by a staff of 42 other41 design professionals. Together, theyprofessionals, including assistant designers, technical designers, graphic artists and production assistants. Our in-house design staff designs substantially all of Perry Ellis’our products utilizing state-of-the-artusing advanced computer-aided design technology. The use of this technology that minimizes the time-consumingtime-intensive and costly production of actual sewn samplesprototypes prior to customer approval. It also allows Perry Ellis to create custom-designedIn addition, this technology provides our customers with products meeting thethat have been custom designed for their specific needs of its customers and facilitates a quick response to changingmeet current fashion trends. Perry Ellis’ computer-aidedWe employ advanced fabric and design system is upgraded on an ongoing basistechnologies to allow itensure a proper fit and outstanding performance when we create our women’s and men’s swimwear. We regularly upgrade our computer technology to enhance itsour design technology, instantaneously share its designscapabilities, facilitate communication with itsour global suppliers globally,and customers on a real-time basis, react quickerfaster to new product developments by competitors and meet changes in consumer trends.customer needs.

Capacity for Growth.    Perry Ellis is leveraging its recent investments in infrastructure and its skilled personnel to accommodate future internal growth and selected acquisitions. Perry Ellis owns its corporate office facility in Miami, Florida, which includes 70,000 square feet of office space, and 160,000 square feet of warehouse space, and owns three acres of vacant land adjacent to it. Perry Ellis also leases three warehouse facilities in Miami, Florida totaling approximately 103,000 square feet to handle the overflow of bulk shipments and its specialty and PING operations. In addition, in connection with the Jantzen acquisition Perry Ellis acquired 350,000 square feet of warehouse space in Seneca, South Carolina, which sits on 35 acres of land. Perry Ellis believesWe recently launched PerrySolutions, a software system that these facilities, along with two third-party warehouse facilities in California, its four showrooms in New York with 25,400 square feet, and the 45,200 square feet of leased space housing Jantzenenables our sales and design offices in Portland, Oregon are sufficient to accommodate current operations and additional personnel. If the Salant acquisition is completed, Perry Ellis will acquire an additional 360,000 square foot distribution warehouse in Winnsboro, South Carolina and 136,000 square feet of leased office, design and showroom space primarily in New York, New York.

In June 2002, Perry Ellis installed the Essentus Vision Suite ERP system in its Jantzen division. In December 2002, this system was rolled out to the remaining Perry Ellis businesses. Perry Ellis will use this

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systemplanners to manage customer orders, inventoriesour retail customers’ inventory at the SKU level. This system helps maximize sales of our products thereby increasing inventory turns for retailers, which in turn reduces our product returns and controlmarkdowns, and increases our profitability. We also use PerrySolutions during the supply chain process. Based onassortment planning process to allocate the latest technology,correct quantities for the Essentus Vision Suiteinitial rollout of products replaced legacy systems that were in some cases more than 20 years old. Implementation of this new system is part of Perry Ellis’ commitment to upgrading its corporate infrastructure to position Perry Ellis for future growth.product at retail.

Proven Abilityability to Integrate Acquisitionsintegrate acquisitions. Since 1993, we have been successful in selectively acquiring, managing, developing and positioning 18 highly recognized brands within our business, including Munsingwear (1996), Perry Ellis (1999), John Henry (1999), Manhattan (1999) and Jantzen (2002). We believe our experience has selectively acquired and integrated eight major brands, which currently have over 41 sub-brands. In assessing acquisition candidates, Perry Ellis selectively targets brands that it believes are under-performing and can be revitalized using Perry Ellis’ competitive strengths. To date Perry Ellis’ most significant brand purchases have been its acquisitionsprepared us for the integration of the Munsingwear family of brands in 1996, the Perry Ellis, John Henry and Manhattan brands in 1999, and the Jantzen brand in 2002.Salant business.

As part of an extensive integration process for each brand, Perry Ellis has:we have:

Perry Ellis believes that because of its existing infrastructure and experience with integrating brands it can successfully integrate additional brands into its family of brands, revitalizing them consistent with its competitive strengths.different distribution channels to address the needs in those channels,

Experienced Management Teammanagement team. Perry Ellis’Our senior management team each averages nearly 25more than 26 years of experience in the apparel industry. Among other attributes, Perry Ellis’ management teamindustry and has significantextensive experience in developinggrowing and revitalizingrejuvenating brands, structuring licensing agreements, and dealing effectivelybuilding strong relationships with retailers, the tradeglobal suppliers and the financial community.retailers. In addition, George Feldenkreis, our chairman and chief executive officer, and Oscar Feldenkreis, our president and chief operating officer, have expressed their commitment to us by maintaining a significant ownership stake in our company.

Our Business Strategy

Perry Ellis’ “familyOur strategy is to continue to pursue our three-dimensional approach by developing and enhancing our portfolio of brands”brands, increasing the scope of our product offerings and expanding distribution for our brands, while continuing our focus on growth and profitability through the execution of the following strategies:

Continue to strengthen the competitive position and recognition of our brands. We intend to continue enhancing the recognition of our brands by aggressively marketing approach is designedour brands to developboth consumers and retailers. We have made a strategic decision to focus on branded apparel and to reduce our private label business. As a result of this shift in our business strategy and our acquisition and development of certain brands, our branded apparel business has increased as a percentage of net sales from 75% for fiscal 2003 to 91% for fiscal 2004. We manage each brand individually, developing a distinct brand and marketing strategy for eachevery product category within eachand distribution channel. For example, Perry Ellis’ golf sportswear designs for the mass market distribution channel are sold under the Munsingwear Penguin Sport brand, for department stores under the Grand Slam brand, and for higher end retailers, golf shops and resorts under the PING brand. By differentiating Perry Ellis’ brandsWe will continue to participate in this manner, Perry Ellis can better satisfy the needs of each type of retailer by offering brands tailored to their specific distribution channel while not saturating its retail market. In addition, Perry Ellis believes that this strategy helps insulate it from changing retail patterns, allows it to maintain the integrity of each distribution channel, and helps prevent brand erosion.

Perry Ellis’ objective is to develop and enhance its brands by:

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Controlling strong brands allows Perry Ellis to increase its retail base, license these brands to third parties, develop sub-brands and grow internationally.

To achieve this objective, Perry Ellis has adopted a strategy based on the following elements:

Increase Brand Name Recognition.    Perry Ellis intends to enhance recognition of its brand names by promoting its brands at the retailer and consumer levels. As part of this effort, Perry Ellis conducts cooperative advertising in print and broadcast media, as well as market directly to consumers through billboards, event sponsorships, celebrity sponsorships, special event advertisements and advertisements in which various retailers feature its products in their advertisements. Perry Ellis also engages in direct consumer advertising in select markets by securing highly visible billboards and events, sponsorships, and advertising in periodicals such as Men’s Health, Maxim and Gentleman’s Quarterly in association with specific regional or national events. Perry Ellis is continuing Jantzen’s emphasis in print advertisements for its swimwear products in influential fashion magazines such asselected periodicals. In Style, Glamour and Vogue and intendsaddition, we will continue to sponsor selected athletes and celebrities in the future. Perry Ellis believes these campaigns will serve to further enhance and broaden its customer base. Licensing Perry Ellis’ brands to third parties also serves to improve brand recognition by providing increased consumer exposure. Perry Ellis also hashave a strong presence at trade-shows,trade shows, such as “M.A.G.I.C.” in Las Vegas, market-weekMarket Week in New York, and golf and swim-focusedswim shows and events throughout the country. Perry Ellis also continues to maintain Web sites for each of its majorLicensing our brands to take advantage ofthird parties also enhances brand recognition by providing increased customer exposure domestically and internationally, as well as opportunities created by the Internet.for future product extensions.

Continue to diversify our product line. We intend to continue to expand the range of our product lines, thereby capitalizing on the name recognition, popularity, and discrete target customer segmentation of our major brands. For example, we are introducing a line of women’s beachwear and sportswear under the Jantzen brand. We intend to pursue expansion opportunities in young men’s sportswear, whether through licensing or direct marketing opportunities. The Salant acquisition takes us into the men’s better market and collection market for sportswear, dress shirts, bottoms and leather accessories and, through the Axis and Tricots St. Raphael brands, the better sportswear market. We intend to use Axis and Tricots St. Raphael, as well as the expertise of Salant’s sales and marketing personnel, to expand our sweater business. In addition, we will continue to seek licensing opportunities that will expand our collection of products.

Increase Distribution.    Perry Ellis has increased the distribution of its existing products by expanding the number of regional and national retailers that carry its brands and gained greater penetration in the numbereach channel. We will continue to selectively pursue new ways to increase our penetration of stores in which each of these retailers sells its products. This increased exposure has broadened Perry Ellis’ established reputation at the retail and consumer levels. Perry Ellis selectively pursues newexisting channels of distribution for itsour products, focusing on maintaining the integrity of itsour products and reinforcing itsour image at existing retail stores, as well as introducing itsour products to geographic areas and consumer sectors that are presently less familiar with itsour products. Perry Ellis believes itWe will further increasealso seek to expand our business with our existing customers by offering them products that are compelling and different from those in the marketplace and by capitalizing on our relationships with them by offering them more of our products. As a result of the Salant acquisition, we have increased the number of regional and national retailers that carry itsour brands ifand entered certain upscale department stores, such as Nordstrom, which carry the Salant acquisition is completed.Axis and Tricots St. Raphael brands.

Adapt to our continually changing marketplace. We will continue to make the necessary investments and implement strategies to meet the growing needs of our customers on a timely basis in the ever-changing apparel industry. We have a history of successfully adapting our business to meet the challenges of our industry. Some examples include:

Continue To Diversify Product Line.    Perry Ellis continues to broaden

Adapt To Changing Marketplace.    The apparel business continues to present new challenges in changing styles, customer demands and consumer tastes, getting goods to market, and reacting to the technologies employed by the retailers and imposed on suppliers. By continuing to strive for improvements in its design department Perry Ellis continues to develop new designs suited to the various lifestyles it caters to. Perry Ellis’ continuing commitment to sourcing and logistics enables it to meet the time pressures of gearing up for the new sales seasons, and reacting quickly to customer demands. Some examples of Perry Ellis’ ability to meet the challenges in its business follow:

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Expand Licensing Activitiesour licensing opportunities. Since acquiringour acquisition of Munsingwear in 1996, Perry Ellis haswe have significantly expanded the licensing of itsour brands to third parties for various product categories. The acquisitions of the Perry Ellis, John Henry, Manhattan, and Jantzen brands have provided Perry Ellis, and willWe intend to continue to provide it, with significant licensing opportunities. If the Salant acquisition is completed, the addition of the Axislicense our brands to existing and Tricot St. Raphael brand names is expected to enhance these activities. Perry Ellis is using itsnew licensees as profitable opportunities arise. We will also use our brand portfolio to expand itsour licensing activities particularly with respectin womenswear and sportswear. At the international level, we will continue to product categories such as women’s wear and active wear, and to enter into historically underserved geographic areasexplore licensing opportunities where we see opportunities for the company,growth, such as Latin America, Europe and Asia. Perry Ellis is continually working with its licenseesWe will continue to strengthen their design, finished products and marketing campaigns, thereby increasing its revenues. Perry Ellis also continually reviews its possible entry into new markets and provides potential licenseesprovide our licensing partners with strong brands, design expertise and innovative marketing strategies. In addition to the revenues and brand awareness that licensing provides us, we also believe that licensing our brands benefits us by reducing the volatility of our operating income.

Pursue Strategic Acquisitions.    The apparel industry has followed the consolidation trend of the retail industry as large retailers have continued to give preferences to more dependablestrategic acquisitions and flexible vendors. Perry Ellis is frequently presented with and evaluates new acquisition opportunities and intends. We intend to continue itsour strategy of making selective acquisitions to expand our portfolio of brands and add new product lines as our industry continues to follow the consolidation trend of our retailers. We will continue to internally develop new brands and expand its portfoliological extensions of brands.existing brands as opportunities in the marketplace arise. We intend to pursue acquisition opportunities in a disciplined manner as they become available and focus on products or categories that have high consumer awareness and are difficult to duplicate from a technical or logistical standpoint. Since our initial public offering in 1993, Perry Ellis haswe have acquired, or obtained licenses for, several brands, including Munsingwear, Perry Ellis, John Henry, Manhattan, Jantzen, PING, Tommy Hilfiger, Nike, NAUTICA, Mondo di Marco, Ocean Pacific, Axis, Tricots St. Raphael and NAUTICA. The Jantzen acquisition provided Perry Ellis withRedsand. We believe that our history of selectively acquiring under-marketed or under-performing brands and incorporating them into our efficient infrastructure generates a unique opportunity to apply its design, sourcing, marketing and distribution expertise to a new market with a potentially significant upside. The Salant acquisition, if completed, will give Perry Ellis greater control over the Perry Ellis brand, as well as additional brands owned and licensed by Salant.superior return on investment for our investors.

Brands

The key componentsIn fiscal 2004, approximately 91% of Perry Ellis’ brand strategy are to: (a) provide consistent high qualityour net sales were from branded products (b) distribute its brands in distinct channels of distribution, and (c) reinforce and capitalize on each brand’s image through new product development and image advertising. This strategy has enabled Perry Ellisas compared to increase its customer base, license its brands to third parties and develop sub-brands.

During fiscal 2003 approximately 75.0%when 75% of Perry Ellis’ products (byour net sales value) were sold under brands it owns or licenses from third parties. Perry Ellisbranded products. We currently owns eightown 13 and license five nationally recognized brands whose products it sourceswe source and sells to retailers and other channels. Thesesell through all major levels of retail distribution. Our owned brands include Perry Ellis, Perry Ellis America, Axis, Tricots St. Raphael, Jantzen, John Henry, Cubavera, the Havanera Co., Natural Issue, Munsingwear, Grand Slam, John Henry, Manhattan,Original Penguin and Cubavera. ThereManhattan. We have beendeveloped over 4142 sub-brands developed from these eight major brands, including the Perry Ellis Portfolio, Perry Ellis America, Southpoint, Penguin Sport and Original Penguin sub-brands. Perry EllisAxist. We also distributesdistribute the PING, Nike, Tommy Hilfiger, NAUTICA and NAUTICAOcean Pacific brands under license arrangements.

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Perry Ellis licensesWe license the Perry Ellis brand, itsour premier brand, as well as the Jantzen, John Henry, Manhattan, Natural Issue, Munsingwear and MunsingwearManhattan brands, for products that it doesin distribution channels in which we do not sellmarket directly to the retailers. Perry Ellis’In addition, we license our brands internationally for products we distribute domestically. Our depth of brand selection enables itus to target consumers across a wide range of ages, incomes and lifestyles.lifestyles, reduces our reliance on any single distribution channel, customer or demographic group, and minimizes competition among brands.

Perry Ellis.Ellis    Perry Ellis. In fiscal 2000, we acquired the Perry Ellis brandand Perry Ellis America brands, which we believe together generate over $1 billion in 1999, which isannual retail sales and are associated with elegance, quality, value, comfort and innovative designs. Currently, theThe Perry Ellis brand appeals primarily to higher-income, status conscious, professional 25-40 year oldyear-old men. In fiscal 2003,As a result of the Salant acquisition, we are now designing and marketing Perry Ellis branded sportswear, dress shirts, dress pants and leather accessories for the men’s better market and collection market. We also initiated the design of Perry Ellis women’s and men’s swimwear. Perry Ellis primarily licenseslicense the Perry Ellis brand to third parties for a wide variety of apparel and non-apparel products, with Salant being its largest licensee. Therefore, Perry Ellis will be able to exercise greater control overproducts.

Axis. We acquired the Perry EllisAxis brand if the Salant acquisition is completed. Thewhen we acquired Salant. This brand is currently one ofassociated with a casual lifestyle that affords quality, value, comfort and innovative designs. The Axis brand appeals primarily to higher-income, status conscious, professional 30-50 year-old men. We sell sportswear and activewear under the better performing brands inAxis brand, which are sold primarily at upscale department stores and specialty stores. Perry Ellis products

Tricots St. Raphael. We acquired the Tricots St. Raphael brand when we acquired Salant. This brand is associated with a sophisticated dress casual lifestyle featuring quality, unique designs and fabrics. The Tricots St. Raphael brand appeals primarily to higher-income, status conscious, professional 40-60 year-old men. We sell sportswear and sweaters under the Tricots St. Raphael brand, which are sold under the “Perry Ellis” brand in collection departmentsprimarily at upscale department and under the “Perry Ellis Portfolio” brand in classification departments.specialty stores.

Jantzen and Southpoint.Southpoint    Perry Ellis. We acquired the Jantzen and Southpoint brands as part of the Jantzen acquisition in fiscal 2003. The Jantzen brand has a history of over 90 years, and its products are sold in upscale department stores, national and regional chain stores, mass merchants and specialty shops. With this acquisition, Perry Ellis entered thestores. We sell men’s and women’s swimwear under the Jantzen brand, as well as women’s swimwear under the Southpoint brand. We also recently introduced men’s and accessories marketswomen’s sportswear under the Jantzen brand to capitalize on its rich history and the men’s swimwear and accessories markets.reputation for quality.

John Henry. The John Henry brand, which we originally licensed from Salant, and subsequently acquired in fiscal 2000, appeals to middle-income 25-45 year-old men. The brand is well known, is associated with quality and value, and is primarily sold in national and regional chain stores. Our John Henry product offerings form a “dress casual collection” as John Henry is considered a designer brand at national and regional chain stores.

Cubavera and the Havanera Co. We introduced the Cubavera brand in fiscal 2000 and followed with the introduction of the Havanera Co. brand in fiscal 2002. These brands appeal to Hispanic males between the ages of 25-45 and consumers who embrace Hispanic lifestyle brands. Cubavera is currently sold in major department stores as well as specialty stores around the country, while the Havanera Co. brand is sold in national chain stores.

Natural Issue. Perry EllisWe developed the Natural Issue brand in fiscal 1988 to appeal to middle-income men who are 25-55 years old.year-old men. Natural Issue’s products include dress casual shirts, sweaters and pants. Perry Ellis is expanding itsWe have expanded our pants products to include the Natural Issue Executive Khaki pants line with cotton fabric.fabric, as well as twill and corduroy fabrics. Natural Issue is primarily sold in national and regional chain stores.

Munsingwear. Perry EllisWe purchased the Munsingwear family of brands along with its associated sub-brands in fiscal 1997 to appeal to the middle-income 30-50 year-old manmen who prefersprefer classic American casual sportswear. Munsingwear and its sub-brands have over 100 years of history. Munsingwear apparel categories include golf shirts, vests, jackets,sportswear, sweaters, activewear and casual pants, thatand are primarily sold in national and regional chain stores. TheseThe sub-brands are also sold primarily to national and regional mass merchants.chain stores.

Grand Slam and Penguin Sport. Perry EllisWe purchased the Grand Slam and Penguin Sport brands as part of the Munsingwear acquisition in 1996.fiscal 1997. Grand Slam is an American heritage brand with its signature penguin icon logo and appeals to the middle-income 30-60 year-old manmen who prefers aprefer classic casual active wear.gold apparel. The Grand Slam brand is primarily sold in department stores.

The Penguin Sport brand offers a functional sportswear with a golf edge. It is associated with easy care fabrication, and its lightweight fabric makes for a comfortable fit. It offers fashionable styling at a moderate price and is sold in the national and regional chain, stores and specialty and sporting goods stores.

Original Penguin.Penguin    Perry Ellis. We re-introduced the Original Penguin brand in fiscal 2003, which is a lifestyle product for the Generation X and Y consumermales who isare suburban upper middleupper-middle class, ages 18 to 35. The line offers vintage inspired golf wearsportswear that its targeted consumer’s fatherconsumers’ fathers used to wear. The product line is primarily sold at upscale department stores and upper tier specialty retail stores and includes apparel, shoes and accessory items.

John Henry.PING    This. We have a worldwide apparel master license for the prestigious PING golf brand, which Perry Ellis originally licensed from the Salant, and subsequently acquired in fiscal 2000, appeals to middle income 25-45 year oldgolfers and high-income, status conscious 25-50 year-old men. The license expires in December 2004, but renews automatically based on performance levels. The brand is well known and isa well-known golf brand, which we positioned to be associated with the highest standard of quality in the golf business. Products under this brand include golf shirts, sweaters, shorts and value. Perry Ellis’ John Henry product offerings form a “dress casual collection” as John Henry is considered a designer brand at its distribution level.outerwear. The John Henry brand is sold primarily sold in national chaingolf shops and top-tier specialty and department stores.

Manhattan.    Perry Ellis also acquired the Manhattan brand in fiscal 2000 from Salant. For over 100 years, Manhattan has been associated with men’s dress shirts. Perry Ellis has diversified the Manhattan brand in the

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United States to include a wider range of sportswear and classic dress-casual apparel. Perry Ellis currently offers a collection at K-Mart consisting of pants, shirts and sweaters, in a variety of styles and patterns geared towards a casual lifestyle. The brand is designed to appeal to 25-65 year old men and include shirts, pants and sweaters.

Cubavera, Havanera and Havana Shirt CoNike. In fiscal 2000, Perry Ellis introduced the Cubavera brand and introduced Havanera and the Havana Shirt Co. brands in fiscal 2002. These brands appeal to the growing Hispanic market. Cubavera is currently sold in major department stores, as well as, specialty shops around the country, while the Havanera and the Havana Shirt Co. brands are sold in national and regional chain stores.

Nike.    Perry EllisWe signed a license agreement with Nike to design and market men’s, women’s, junior’s, boy’s and junior’sgirl’s swimwear, men’s and junior’s competitive swimwear, and swimwear apparel and accessories as part of the Jantzen acquisition. Swim products are sold through sporting good stores, specialty stores, team dealers and department store distribution. The license agreement expires on May 31, 2006.

PING.    Perry Ellis has an apparel master license for the prestigious PING golf brand, which appeals to golfers and high-income 25-50 year-old men who are status conscious. The license had an initial term expiring in December 2003 and has been renewed until December 2004. The brand is a well-known and prestigious golf brand, which Perry Ellis positioned to be associated with the highest standard of quality in the golf business. Perry Ellis products under this brand include golf shirts, sweaters, shorts and outerwear. The brand is sold primarily in the golf shops and top-tier specialty and department stores.

Tommy Hilfiger.Hilfiger    Perry Ellis. We acquired the license for the Tommy Hilfiger brand of women’s and junior’s fashion swimwear as part of the Jantzen acquisition. TheThese products are sold in upscale department stores and specialty shops.stores. The license agreement expires on December 31, 2005.

Ocean Pacific.We acquired the license for the Ocean Pacific brand men’s casual sportswear as part of the Salant acquisition. These products are sold in national and regional chain stores. The license agreement expires on December 31, 2005.

Other Brands.We also own the Manhattan, Mondo di Marco, Pro Player and Redsand brands and license the NAUTICA brand. The Manhattan and Mondo di Marco brands are associated with dress casual apparel sold primarily at mass merchants and upscale department stores, respectively. The Redsand brand is associated with a youth lifestyle and is sold primarily at specialty stores. The NAUTICA brand is licensed for our corporate wear business.

Other Markets

Private Label. In addition to itsour sales of branded products, Perry Ellis sellswe sell products to retailers for marketing as private label orfor their own store lines. In fiscal 2003, Perry Ellis2004, we sold private label products to Wal-Mart,Saks, Inc., Dillard’s, J.C. Penney, Goody’s, K-Mart, Target, Mervyn’s, MeijerCasual Male, Kmart, Wal-Mart and Sears.Meijer. Private label sales generally yield lower profitgross margins than sales of comparable branded products. Private label sales accounted for approximately 25.0%9%, 36.6%25%, and 34.0%37% of net sales during fiscal years2004, 2003, 2002 and 2001,2002, respectively. The decrease in the private label business as a percentage of Perry Ellisour net sales is a result of the additional net sales of apparel under the brands acquired in the Jantzen acquisition, and the subsequent license agreements with Nike and Tommy Hilfiger and Perry Ellis’our decision to focus itsour efforts on selling branded products which typically generate higher gross margins.products.

Corporate wear or ASI.    Perry Ellis. We entered into the corporate wear business at the end of fiscal 2001. Perry EllisWe recognized thea change in the current business environment and hashave successfully provided a variety of corporations with high quality designer products. Perry EllisIn fiscal 2004, our corporate wear business accounted for 3.3% of net sales. We currently offersoffer the PING, NAUTICA, Cubavera and Perry Ellis brands in this market and sellssell primarily to corporate wear distributors.

Products and Product Design

Perry Ellis offersWe offer a broad line of high quality men’s casual sportswear, including casualdress shirts and dress casual shirts,pants, jeans wear, golf sportswear, active wear,apparel, sweaters, jackets, vests, casual and dress pants and shorts, and men’s and women’ssports apparel, swimwear and swim accessories, activewear and leather accessories. Our womenswear offerings include swimwear, sportswear and swim accessories. Substantially all itsof our products are designed by Perry Ellis’our in-house staff utilizing itsour advanced computer-aided design technology. This technology enables Perry Ellisus to produce computer-generated simulated samples that display how a particular style will look in a given color and fabric before it is actually produced. These samples can be printed on paper or directly onto fabric to accurately present the colors and patterns to a potential customer. In addition, Perry Elliswe can quickly alter the simulated sample in response to the customer’sour customers’ comments, such as change of color, print layout, collar style and trimming, pocket details and/or

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placket treatments. The use of computer-aided design technology minimizes the time-consuming and costly need to produce actual sewn samples prior to retailer approval, allows Perry Ellisus to create custom-designed products meeting the specific needs of customers and reduces a product’s time to market, from conception to the delivery of the product to customers.

In designing itsour apparel products, Perry Ellis seekswe seek to promote consumer appeal by combining functional, colorful and high quality fabrics with creative designs and graphics. Styles, color schemes and fabrics are also selected to encourage consumers to coordinate outfits and form collections, thereby encouraging multiple purchases. Perry EllisOur designers stay continuously abreast of the latest design trends, fabrics, colors, styles and consumer preferences by attending trade shows, periodically conducting market research in Europe and the United States and using outside consultants. Perry Ellis sourcersOur purchasing department also continuously seekseeks to improve the quality of theour fabrics by staying abreast ofinformed about the latest trends in fabric all over the world. In addition, Perry Elliswe actively monitorsmonitor the retail sales of itsour products to determine changes in consumer trends.

In accordance with standard industry practices for licensed products, Perry Ellis haswe have the right to approve the concepts and designs of all products produced and distributed by itsour licensees.

Perry Ellis’Our products include:

SShirtshirts. Perry Ellis offersWe offer a broad line of sport shirts, which includeincludes cotton and cotton-blend printed, yarn-dyed and solid knit shirts, cotton woven shirts, silk, cotton and rayon printed button front sport shirts, linen sport shirts, golf shirts, and embroidered knits and woven shirts. Perry Ellis’Our shirt line also includes dress shirts, dress casual shirts, brushed twill shirts, jacquard knits and yarn-dyed flannels. In addition, Perry Ellis is alsoAdditionally, we are one of the leading distributors of guayabera-style shirts in the United States. Perry Ellis marketsWe market shirts under a number of itsour own brands as well as the private labels of its retailers. Perry Ellisour retail customers. Our shirts are produced in a wide range of men’s sizes, including sizes for the big and tall men’s market. Sales of shirts accounted for approximately 57%, 65%, 74% and 74% of Perry Ellis’our net sales during fiscal years2004, 2003, 2002, and 2001,2002, respectively. The decrease of shirts as a percentage of net sales reflects the addition of swimwear, as a result of the Jantzen acquisition, and Perry Ellis’our increased focus on itsour other products.

Bottoms. Our bottoms business.

Pants.    Perry Ellis’ pants linesline include a variety of styles of wool, wool-blend, linen and poly/polyester/rayon dress pants, casual pants in cotton and poly/polyester/cotton and linen/cotton walking shorts. Perry Ellis offers its pants in a wide range of men’s sizes. Perry Ellis markets its pantsWe market our bottoms as single items or as a collection to complement itsour shirt lines. Sales of pants and shortsbottoms accounted for approximately 21%, 20%21%, and 20% of Perry Ellis’our net sales during fiscal 2004, 2003, 2002 and 2001,2002, respectively.

Swimwear.Swimwear. With the Jantzen acquisition, and upon the successful addition of both the Nike and the Tommy Hilfiger licenses, Perry Elliswe entered the women’s, men’s and junior’s swimwear and accessories market. Sales of swimwear and accessories accounted for approximately 13% and 8% of net sales induring fiscal 2003.2004 and 2003, respectively.

Other Products. Perry Ellis offersWe also offer sweaters, vests, jackets, pullovers and pulloversleather accessories under itsour existing brands, as well as private label. The majority of the other products Perry Ellis sellswe sell are sweaters.sweaters and leather accessories. Other products accounted for approximately 6%9%, 6%, and 6% of net sales during each of fiscal years2004, 2003 2002 and 2001, respectively.2002.

Marketing and Distribution

Perry Ellis markets its apparel products to customers principally through the direct efforts of an in-house sales staff, independent commissioned sales representatives who work exclusively for it, and other non-exclusive independent commissioned sales representatives, who generally market other product lines as well as those of Perry Ellis. Perry Ellis also attends major industry trade shows in the fashion, golf, and corporate sales areas.

Perry Ellis also advertises to customers through print advertisements in a variety of consumer and trade magazines and newspapers and through outdoor advertising such as billboards strategically placed to be viewed

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by consumers. For example, Perry Ellis is continuing Jantzen’s emphasis in print advertisements for its swimwear products in influential fashion magazines such as In Style, Glamour and Vogue and intends to sponsor selected athletes and celebrities in the future. In order to promote its men’s sportswear at the retail level, Perry Ellis conducts cooperative advertising in print and broadcast media, which features Perry Ellis’ products in its customers’ advertisements. The cost of this cooperative advertising is shared with Perry Ellis’ customers. Perry Ellis also conducts various in-store marketing activities with its customers, such as retail events and promotions and shares in the cost of these events. These events and promotions are in great part orchestrated to coincide with high volume shopping times such as holidays (Christmas and Thanksgiving) and Father’s Day. In addition to event promotion, Perry Ellis places perennial displays and signs of its products in retail establishments.

Perry Ellis makes use of direct consumer advertising in selected markets featuring the Perry Ellis, Natural Issue, John Henry, Grand Slam and Munsingwear brand names through the placement of highly visible billboards, sponsorships, and special event advertising. Perry Ellis also maintains informational Web sites featuring its brands. Perry Ellis creates and implements editorial and public relations strategies designed to heighten the visibility of its brands. All these activities are coordinated around each brand in an integrated marketing approach.

The following table sets forth the principal brand names for Perry Ellis’ product categories at the different levels of retail distribution:

Perry Ellis believes that customer service is a key factor in successfully marketing its apparel products and providing its customers with a high level of customer service. Perry Ellis coordinates efforts with customers to develop products meeting their specific needs using its design expertise and computer-aided design technology. Utilizing its well-developed sourcing capabilities, Perry Ellis strives to produce and deliver products to its customers on a timely basis.

Perry Ellis’ in-house sales staff is responsible for customer follow-up and support, including monitoring prompt order fulfillment and timely delivery. Perry Ellis utilizes an Electronic Data Interchange, or EDI, system for

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certain customers in order to provide advance-shipping notices, process orders and conduct billing operations. In addition, certain customers use the EDI system to communicate their weekly inventory requirements per store to Perry Ellis electronically. Perry Ellis then fills these orders either by shipping directly to the individual stores or by sending shipments, individually packaged and bar coded by store, to a centralized customer distribution center.

Perry Ellis makes use of a number of software packages that enable it to track retail sales by store by stock keeping units or SKUs. Combined with software that provides demographic mapping data, Perry Ellis can develop specific micro-market plans for its customers that provide the customer with enhanced returns on Perry Ellis’ various product lines.

Licensing Operations

For the past eight years, Perry Ellis haswe have been actively licensing the brands it owns. The licensing of Perry Ellis’we own, and sublicensing the brands we license, to third parties for various product categories is onecategories. Licensing enhances the images of its strategies. The licensing of Perry Ellis’our brands enhances their image by widening the range, product offerings and distribution of these products sold under our brands without requiring Perry Ellisus to make significant capital investments or incur significantadditional operating expenses. As a result of this strategy, Perry Ellis haswe have gained significant experience in identifying potential licensing opportunities and hashave established strong relationships with many active licensees. Perry Ellis’Our licensing operation is also a significant contributor to Perry Ellis’ profitability.our operating income.

Perry Ellis is currentlyAs of April 6, 2004, we were the licensor ofin approximately 111135 license agreements, 56 domestic and 79 international, with 100 licensees, 40 domestic and 60 international, for various products including footwear, sportswear, dress shirts and bottoms, underwear, loungewear, outerwear, underwear, active wear, women’s sportswear,activewear, neckwear, fragrances, eyewear and loungewear. Salesaccessories. Wholesale sales of licensed products by Perry Ellis’our licensees (including Salant) were approximately $576$434.0 million, $534$576.0 million, and $516$534.0 million in fiscal years2004, 2003, and 2002, and 2001, respectively. Perry EllisWe received royalties from these sales of approximately $21.7 million, $28.8 million, $26.7 million and $25.8$26.7 million in fiscal years2004, 2003, and 2002, and 2001, respectively. With the Salant acquisition, Perry Ellis believes that while itsWhile our royalties will initially declinedeclined as a result of owningthe Salant its largest licensee, in the long term,acquisition, we believe that our long-term licensing opportunities will continue to grow domestically and internationally. See our audited Consolidated Financial Statements and the related notes in this report.

Although the Perry Ellis brand has international recognition, Perry Elliswe still perceivesperceive the brand to be under-penetrated in international markets such as Europe and Asia. Perry Ellis isWe are actively pursuing obtainingattempting to obtain licenses for various products bearing the Perry Ellis brand intoin these under-performing international markets. Perry Ellis believesWe believe that itsour brand and licensing experience will enable itus to capitalize on these international opportunities and that the Salant acquisition will assist itus in this endeavor. In addition, the Jantzen brand has a history in excess of 90 years and Perry Ellis believeswe believe that the Jantzen brandbrand’s history of over 90 years will enable itallow us to take advantage of many domestic and international licensing opportunities.

To maintain a brand’s image, Perry Elliswe closely monitors itsmonitor our licensees and approvesapprove all licensed products. In evaluating a prospective licensee, Perry Ellis considerswe consider the candidate’s experience, financial stability, manufacturing performance and marketing ability. Perry EllisWe also evaluatesevaluate the marketability and compatibility of the proposed products with itsour other products. Perry EllisWe regularly monitorsmonitor product design, development, merchandising and marketing of licensees, and schedulesschedule meetings throughout the year with licensees to ensure quality, uniformity and consistency with Perry Ellis’our products. Perry EllisWe also gives itsgive our licensees a view of itsour products and fashion collections and itsour expectations of where its products should be positioned in the marketplace. In addition to approving, in advance, all of Perry Ellis’our licensees’ products, Perry Elliswe also approvesapprove their advertising, promotional and packaging materials.

As part of Perry Ellis’our licensing strategy, Perry Ellis workswe work with itsour licensees to further enhance the development, image, and sales of their products. Perry Ellis offersWe offer licensees marketing support, and itsour relationships with retailers help the licensees generate higher revenues and become more profitable.revenues.

Perry Ellis’Our license agreements generally extend for a period of three to five years with options to renew prior to expiration for an additional multi-year period based onupon a licensee meeting certain performance criteria.

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The typical agreement requires that the licensee pay Perry Ellisus the greater of a royalty based on a percentage of the licenseeslicensee’s net sales of the licensed products or a guaranteed minimum royalty that typically increases over the term of the agreement. Generally, licensees are required to contribute to Perry Ellisus additional monies for advertising and promotion of the licensed products in their covered territory.

Marketing, Distribution and Customers

We market our apparel products to customers principally through the direct efforts of our in-house sales staff, independent commissioned sales representatives who work exclusively for us, and other non-exclusive independent commissioned sales representatives who generally market other product lines as well as ours. We also attend major industry trade shows in the fashion, golf, and corporate sales areas.

We own a chain of 38 retail outlet stores, 35 of which were acquired as part of the Salant acquisition, through which we sell Perry Ellis sellsproducts directly to the public. These retail stores are generally located in upscale retail outlet malls.

We believe that customer service is a key factor in successfully marketing our apparel products. We coordinate efforts with customers to develop products meeting their specific needs using our design expertise and computer-aided design technology. Utilizing our sourcing capabilities, we strive to produce and deliver products to our customers on a timely basis.

Our in-house sales staff is responsible for customer follow-up and support, including monitoring prompt order fulfillment and timely delivery. We utilize an Electronic Data Interchange, or EDI, system for certain customers in order to provide advance-shipping notices, process orders and conduct billing operations. In addition, certain customers use the EDI system to communicate their weekly inventory requirements per store to us. We then fill these orders either by shipping directly to the individual stores or by sending shipments, individually packaged and bar coded by store, to a centralized customer distribution center.

We recently launched PerrySolutions, a software system that enables our sales planners to manage our retail customers’ inventory at the SKU level. This system helps maximize the sales of our products thereby increasing inventory turns for the retailer, which in turn reduces our product returns and markdowns and increases our profitability. By using software that provides demographic mapping data, we can develop specific micro-market plans for our customers that provide them with enhanced returns on our various product lines.

We sell merchandise to a broad spectrum of retailers, including national and regional chain, stores, upscale department, stores, mass marketmerchants and specialty stores. Perry Ellis’Our largest customers include Federated, May Department Stores, Dillard’s, Wal-Mart, J.C. Penney, Kohl’s, and Sears. We have developed and maintained long-standing relationships with these customers, including Dillard’s (more than 25 years), May Department Stores (more than 25 years), J.C. Penney (more than 25 years), Sears (25 years), Federated (16 years), Wal-Mart (14 years) and Mervyn’s. Kohl’s (10 years).

Net sales to Perry Ellis’our five largest customers accounted for approximately 40%39%, 47%40%, and 42%47% of net sales in fiscal years2004, 2003, 2002 and 2001,2002, respectively. For fiscal 2004, net sales to Kohl’s accounted for approximately 10% of our net sales. For fiscal 2003, net sales to Wal-Mart accounted for approximately 11% of total net sales. For fiscal 2002, net sales to Target Corp. accounted for approximately 12%, of net sales, while net sales to J.C.J. C. Penney and Wal-Mart accounted for approximately 11%. For fiscal 2001, sales to Wal-Mart accounted for approximately 14% of total net sales and sales to J.C. Penneyeach accounted for approximately 11% of net sales. No other single customer accounted for more than 10% of net sales during such fiscal years.

Advertising and Promotions

We advertise to customers through print advertisements in a variety of consumer and trade magazines and newspapers and through outdoor advertising such as billboards strategically placed to be viewed by consumers. For example, we are continuing Jantzen’s emphasis on print advertisements for our swimwear products in influential magazines such as Sports Illustrated, In Style, Glamour and Vogue and intend to sponsor selected athletes and celebrities in the future. In order to promote our men’s sportswear at the retail level, we participate in cooperative advertising in print and broadcast media, which features our products in our customers’ advertisements. The cost of this cooperative advertising is shared with our customers. We also conduct various in-store marketing activities with our customers, such as retail events and promotions, the costs of which are shared by our customers. These events and promotions are in great part orchestrated to coincide with high volume shopping times such as holidays (Christmas and Thanksgiving) and Father’s Day. In addition to event promotion, we place perennial displays and signs of our products in retail establishments.

We use direct consumer advertising in selected markets featuring the Perry Ellis, Cubavera, the Havanera Co., John Henry, Natural Issue, Munsingwear and Grand Slam brand names through the placement of highly visible billboards, sponsorships and special event advertising. We also maintain informational websites featuring our brands. We create and implement editorial and public relations strategies designed to heighten the visibility of our brands. All of these activities are coordinated around each brand in an integrated marketing approach.

Seasonality and Backlog

Perry Ellis’Our products have historically been geared towards lighter weight apparel generally worn during the spring and summer months. Perry Ellis believesWe believe that this seasonality has been reduced with theour introduction of fall, winter and holiday merchandise. The Jantzen swimwear business, however, is highly seasonal in nature, with the vast majority of itsour sales occurring in Perry Ellis’our first and fourth quarter. Perry Ellis’ higher priced products generally tend to be less sensitive to economic conditions and weather conditions. While the variation in Perry Ellis’ sales on a quarterly basis has narrowed somewhat, seasonality can be affected by a variety of factors, including the mix of advance and fill-in orders, the amount of sales to different distribution levels, and overall product mix between traditional and fashion merchandise.

Perry EllisWe generally receivesreceive orders from itsour retailers approximately five to seven months prior to shipment. For approximately 80.0%80% of our sales, Perry Ellis haswe have orders from itsour retailers before it placeswe place orders with itsour suppliers. A summary of the order and delivery cycle for Perry Ellis’our four primary selling seasons, excluding swimwear, is illustrated below:

Sales and receivables are recorded when inventory is shipped, with payment terms generally 30 to 75 days from the date of shipment. Perry Ellis’shipped. Our backlog of orders includes confirmed and unconfirmed orders, which Perry Ellis believes,we believe, based on industry practice and past experience, will be confirmed. As of March 2, 2003, Perry Ellis’April 1, 2004, the backlog for orders of orders for itsour products, all of which are expected to be shipped during fiscal 2004,2005, was approximately $129.7$221.7 million, as compared to approximately $112.6$129.7 million as of March 2, 2002.2003, which was prior to the Salant acquisition.

The amount of unfilled orders at a point in time is affected by a number of factors, including the mix of product, the timing of the receipt and processing of customer orders and the scheduling of the sourcing and shipping of the product, which in most cases depends on the desires of the customer. Backlog is also affected by on-going trends among customers to reduce the lead-time on their orders. Since the fall of 2001, Perry Ellis’our customers have been more cautious of their inventory levels and have delayed placing orders and re-orders compared to Perry Ellis’our previous experience. Due to these factors a comparison of unfilled orders from period to period is not necessarily meaningful and may not be indicative of eventual actual shipments.

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Supply of Products and Quality Control

Perry EllisWe currently usesuse independent contract manufacturers to supply the substantial majority of the products it sells. Nearly 70%we sell. Of the total dollar value of Perry Ellis’sourced products in fiscal 2004, 72%, 14%, 6% and 8% were sourced from suppliers are located in the Far East, 23% inAsia, South and Central America, and 6% in the Middle East. Perry Ellis’ largest independent contract manufacturer supplied less than 4%East and other areas of Perry Ellis’ purchased product during fiscal 2003. Perry Ellis believesthe world, respectively. We believe that the use of numerous independent contract manufacturers allows itus to maximize production flexibility, while avoiding significant capital expenditures, work-in-process inventory build-ups and the costs of maintaining and operating production facilities. Perry Ellis hasWe have had relationships with some suppliers for as long as 30 years, however, none of these relationships are formal or require either party to either purchase or supply any fixed quantity of product. While Perry Ellis believes it is unlikely, and has never been a factor in the past, it is possible that in times of tight market supply, the absence of formal supply agreements may impair Perry Ellis’ ability to secure a reliable source of product supply.

The vast majority of Perry Ellis’ non-Jantzenour non-swimwear products are purchased as “full packages”,packages,” where Perry Ellis placeswe place an order with the supplier and the supplier purchases all the raw materials, assembles the garments and ships them to Perry Ellis’our distribution facilities or third party facilities. For the Jantzensome of our swimwear business, which includes the Jantzen, Southpoint, Nike and Tommy Hilfiger Nike and Southpoint brands, Perry Ellis purchaseswe purchase fabric from domestic and international suppliers. Purchased fabrics areThe purchased fabric is primarily cut in the United States. The cut fabric is matched with various trim components and shipped to off-shore sewing contractors located primarily in Mexico and the Caribbean Basin enabling Perry Ellisus to utilize exemptions under “807” customs regulations, which provide that certain articles assembled abroad from United States components are exempt from United States duties on the value of those components. This process is generally referred to as CMT (cut, make and trim) and differs from “full package” sourcing in that Perry Ellis,we, not the supplier, purchasespurchase and ownsown the fabric and trim components. Perry Ellis plans to ultimately shiftWe are, however, shifting the production of the Jantzenour swimwear business to the “full package” sourcing model.model and anticipate that in the future the vast majority of our purchases will be “full packages.” Finished goods are generally shipped to either Perry Ellis’ Miami, Florida or Seneca, South Carolinaour distribution facilities or to third-party warehouses in California for repackaging and distribution to customers.

Perry Ellis maintainsWe maintain a staff of experienced sourcing professionals in five offices in Beijing, Shanghai and Guangzhou China Seoul,(including Hong Kong), as well as the United States, South Korea and Taipei, Taiwan to source itsTaiwan. This staff sources our products in over 30 countries worldwide, to monitor itsmonitors our suppliers’ purchases of raw material, and to monitormonitors production at contract manufacturing facilities in order to ensure quality control and timely delivery. Perry EllisWe also operatesoperate through independent agents based in Thailand, Vietnam, Indonesia, Philippines,Asia and United Arab Emirates. Perry Ellisthe Middle East. Our personnel based in itsour Miami, Florida office perform similar functions with respect to itsour suppliers in Central America. Perry Ellis conductsWe conduct inspections of samples of each product prior to cutting by contractors during the manufacturing process and prior to shipment. Perry EllisWe also hashave full-time quality assurance inspectors in Latin America and the Dominican Republic, Honduras, El Salvador, Guatemala,Caribbean and in each of itsour overseas offices.

In order to assist with timely delivery of finished goods, Perry Ellis functions as its own customs broker. Perry Ellis prepares its own customs documentation and arranges for any inspections or other clearance procedures with the United States Customs Service. Perry Ellis is a member of the United States Customs Automated Interface program. This membership permits Perry Ellis to clear its goods through United States Customs electronically and generally reduces the necessary clearance time to a matter of hours rather than days.

Perry EllisWe also generally facilitatesfacilitate and aids itsaid our foreign contractors in obtaining raw materials. Otherwise, the foreign contractors

purchase the raw material in accordance with Perry Ellis’our specifications. Raw materials, which are in most instances made and/or colored especially for Perry Ellis,us, consist principally of piece goods and yarn and are purchasedspecified by Perry Ellisus from a number of foreign and domestic textile mills and converters.

Perry Ellis isWe are committed to ethical sourcing standards and requires itsrequire our independent contractors to comply with itsour code of conduct. Perry Ellis monitorsWe monitor compliance by itsour foreign contract manufacturers with applicable laws and regulations relating to, for example, the payment of wages, working conditions and the environment. As part of Perry Ellis’our compliance program, Perry Elliswe routinely performsperform audits of itsour contract manufacturers and requiresrequire corrective action when appropriate.

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Import and Import Restrictions

Perry Ellis’ transactionsOur relationship with itsour foreign suppliers abroad are subjectsubjects us to the risks of doing business abroad. Imports into the United StatesAs a result of our suppliers, in some instances, being at great geographic distances from us, our transportation costs are affected by, among other things, the cost of transportation of the productsincreased and the imposition oflonger lead times are required, which reduces our flexibility. Our finished goods are also subject to import duties, quotas and other restrictions. The countries that Perry Ellis sources itswe source our products from may, from time to time, impose new quotas, duties, tariffs, or other restrictions or adjust prevailing quotas,quota, duty or tariff levels, which could affect Perry Ellis’our ability to import products at the current or increased levels. Perry EllisOther risks in doing business with foreign suppliers include political or economic instability, any significant fluctuations in the value of the dollar against foreign currencies, terrorist activities, and restrictions on the transfer of funds. Although we have not been affected in a material way by any of the foregoing factors, we cannot predict the likelihood or frequency of any such events occurring.occurring and any material disruption may have an adverse affect on our business.

Perry Ellis’In order to assist with the timely delivery of finished goods, we function as our own customs broker for a majority of our deliveries. We prepare our own customs documentation and arrange for any inspections or other clearance procedures with the United States Customs Service. We are a member of the United States Customs Automated Interface program. This membership permits us to clear our goods through United States Customs electronically and generally reduces the necessary clearance time to a matter of hours rather than days.

Import and Import Restrictions

Our import operations are subject to constraints imposed by bilateral textile agreements between the United States and a number of foreign countries including China, Indonesia and Korea. These agreements impose quotas on the amount and type of goods that can be imported into the United States from these countries. Such agreements also allow the United States to impose, at any time, restraints on the importation of categories of products that, under the terms of the agreements, are not subject to specified limits. Perry Ellis’Most of our imported products are also subject to United States customs duties and other charges.

Perry Ellis monitorsWe monitor duty, tariff, and quota-related developments and continually seeksseek to minimize itsour potential exposure to quota-related risks through, among other measures, geographical diversification of itsour contract manufacturers, the maintenance of overseas offices, allocation of overseas production to product categories where more quota is available and shifts of production among countries and manufacturers.

In addition toUnder the factors outlined above, Perry Ellis’ import operations may be adversely affected by political or economic instability resulting in the disruption of trade from exporting countries, any significant fluctuations in the valueterms of the dollar against foreign currenciesWorld Trade Organization Agreement on Textiles and restrictions onClothing, WTO members have agreed to remove all quotas by January 1, 2005. Because of our sourcing experience, capabilities and relationships, we believe we are well-positioned to take advantage of the transferelimination of funds.quotas by 2005.

Competition

The retail apparel industry is highly competitive and fragmented. Perry Ellis’Our competitors include numerous apparel designers, manufacturers, importers, and licensors, and itsour own customers’ private label programs, many of which are larger and have greater financial and marketing resources than it. Perry Ellis believeswe have available to us. We believe that the principal competitive factors in the industry are: (1) brands,brand name and brand identity, (2) timeliness, reliability and quality of services provided, (3) market share and visibility, (4) price, and fashion, and (5) the ability to anticipate customer and consumer demands and maintain appeal of products to customers.

Perry Ellis strivesWe strive to focus on these points and hashave proven to have theour ability to anticipate and respond quickly to customer demands with its brand names andour brands, range of products and itsour ability to operate within the industry’s production and delivery constrains. Perry Ellis believesconstraints. We believe that itsour continued dedication to customer service, product assortment and quality control, as well as itsour aggressive pursuit of licensing and acquisition opportunities, directly addresses the competitive factors in all market segments. Perry EllisOur established brand namesbrands and relationships with retailers hashave resulted in a loyal following of customers.

Perry Ellis considers

We understand that the level of competition and the nature of itsour competitors variesvary by product segment. In particular, in the mass market channel, manufacturers constitute Perry Ellis’our main competitors in this less expensive segment of the market, while high profile domestic and foreign designers and licensors account for itsour main competitors in the more upscale segment of the market. Although Perry Ellis haswe have been able to compete successfully to date, there can be no assurance that significant new competitors will not develop in the future.

Trademarks

Most of Perry Ellis’Our material trademarks are registered with the United States Patent and Trademark Office and in other countries. Perry Ellis regards itsWe regard our trademarks and other proprietary rights as valuable assets whichthat are critical in the marketing of its products. Perry Ellisour products, and, therefore, we vigorously protects itsprotect our trademarks against infringements.

Perry Ellis may be subject to claims and suits against it, and may be initiator of claims and suits against others, in the ordinary course of its business, including claims arising from the use of its trademarks.

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Employees

At January 31, 2003, Perry EllisAs of April 6, 2004, we had approximately 6691,398 employees compared to approximately 471576 employees as of April 6, 2003. Other than some of our employees at January 31, 2002. Noneour Winnsboro, South Carolina distribution facility, none of Perry Ellis’our employees are subject to collective bargaining agreements, however, inagreements. In fiscal 2003, however, a labor organization attempted to organize certain employees of one of Perry Ellis’our subsidiaries in itsat our Miami, Florida facility. A National Labor Relations Board-supervised election was held on September 9, 2002, as a result of which a2002. A majority of the employees votingat our Miami distribution center who voted cast their ballotballots against unionization. The labor organization filed objections to the election, and, after a lengthy review process, the National Labor Relations Board ordered another election be held on May 30, 2003. At the May 30, 2003 election, a majority of the employees who voted cast their ballots against unionization. The labor organization filed objections to this second election, which objections are pending before the National Labor Relations Board. Perry Ellis considers itsWe consider our employee relations to be satisfactory.

Certain Risks

Our business faces certain risks. The risks described below may not be the only risks we face. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our business. If any of the events or circumstances described as risks below actually occurs, our business, results of operations or financial condition could be materially and adversely affected.

We rely on a few key customers, and the loss of any one key customer would substantially reduce our revenues.

We derive a significant amount of our revenues from a few major customers. A significant decrease in business from or loss of any of our major customers could harm our financial condition by causing a significant decline in revenues attributable to such customers.

Net sales to our five largest customers totaled approximately 39%, 40%, and 47% of net sales during fiscal 2004, fiscal 2003, and fiscal 2002, respectively. Our five largest customers are J. C. Penney, Kohl’s, Federated, May, and Sears. For fiscal 2004, Kohl’s represented 10% of our net sales. Net sales to Wal-Mart accounted for approximately 11% of net sales during fiscal 2003. Net sales to Target Corporation, Wal-Mart, and J. C. Penney accounted for approximately 12%, 11% and 11% of net sales during fiscal 2002, respectively. No other single customer accounted for more than 10% of our net sales during these fiscal years.

Although we have long-standing relationships with many of our customers, we do not have long-term contracts with any of them and purchases generally occur on an order-by-order basis. We believe that purchasing decisions are generally made independently by individual department stores within a company controlled group. There has been a trend, however, toward more centralized purchasing decisions. As such decisions become more centralized, the risk to us of such concentration increases. If our customers were to curtail or cease their purchase orders with us, our revenues could significantly decrease and our financial condition could be significantly harmed.

We may not be able to anticipate consumer preferences and fashion trends, which could negatively affect acceptance of our products by retailers and consumers and result in a significant decrease in net sales.

Our failure to anticipate, identify and respond effectively to changing consumer demands and fashion trends could adversely affect acceptance of our products by retailers and consumers and may result in a significant decrease in net sales or leave us with a substantial amount of unsold inventory. We believe that our success depends on our ability to anticipate, identify and respond to changing fashion trends in a timely manner. Our products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to rapid change. We may not be able to continue to develop appealing styles or successfully meet constantly changing consumer demands in the future. In addition, any new products or brands that we introduce may not be

successfully received by retailers and consumers. Due to the fact that we began marketing women’s apparel with the acquisition of the Jantzen swimwear business in fiscal 2003, we may be more subject to additional changes in fashion trends as women’s fashion trends have historically changed more rapidly than men’s. If our products are not successfully received by retailers and consumers and we are left with a substantial amount of unsold inventory, we may be forced to rely on markdowns or promotional sales to dispose of excess, slow-moving inventory. If this occurs, our business, financial condition, results of operations and prospects may be harmed.

Our business could be negatively impacted by the financial instability of our customers.

During the past several years, various retailers, including some of our customers, have experienced significant difficulties, including bankruptcies, liquidations, consolidation of ownership, and increased centralization of buying decisions. For example, Kmart Corporation and Casual Male Corp. filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. These and other financial problems of some of our customers increase the risk of extending credit to these retailers. Consistent with industry practices, we sell products primarily on open account after completing an appropriate credit review. A significant adverse change in a customer or its financial position could cause us to limit or discontinue business with that customer, require us to assume more credit risk relating to that customer’s receivables or limit our ability to collect amounts related to previous purchases by that customer, all of which could harm our business, financial condition and results of operation by causing a significant decline in revenues attributable to such customers.

We are dependent upon the revenues generated by our licensing alliances and the loss or inability to renew certain licenses could reduce our royalty income or net sales and consequently reduce our net income.

A portion of our net income is derived from licensing income received from our licensing partners. The interruption of the business of several of our licensing partners at any one time could adversely affect our royalty income and net income. Licensing income accounted for $21.7 million or 4.3% of total revenues for fiscal 2004.

We currently license the PING, Nike, Tommy Hilfiger, NAUTICA and Ocean Pacific brands from third parties. These licenses vary in length of term, renewal conditions and royalty obligations. The average term of these licenses is three to five years with automatic renewals depending upon whether we achieve certain targeted sales goals. We may not be able to renew or extend any of these licenses, on favorable terms, if at all. If we are unable to renew or extend any of these licenses, we could experience a decrease in net sales.

We may face challenges integrating Salant, which may negatively impact our business.

We will need to integrate Salant’s business into our operations in order to achieve the anticipated benefits of the Salant acquisition. We may face challenges in consolidating functions and integrating management procedures, personnel and operations in an efficient and effective manner which may negatively impact our business. Some of these challenges include increased demands on management related to the significant increase in the size and diversity of our business after the Salant acquisition, is completed, Perry Ellis will have approximately 1,400 employees.the diversion of management’s attention to implement our strategies for the Salant business, the retention and integration of key Salant employees, analyzing aspects of Salant’s business that are to be kept separate and distinct from our other businesses, and difficulties in assimilating Salant’s corporate culture and practices into ours.

We may not have uncovered all the risks associated with the Salant acquisition or any future acquisitions and a significant liability may arise after closing.

There may be additional risks that we failed to discover in the course of performing our due diligence investigations related to the Salant acquisition and any future acquisitions which could result in significant liabilities arising after the consummation of such transactions. In connection with the Salant acquisition, we assumed all of Salant’s liabilities, whether pre-existing or contingent, as a matter of law. Moreover, as in the Salant acquisition, to the extent we acquire all of the capital stock of potential future sellers, we will assume all of the seller’s liabilities as a matter of law. As is customary in transactions similar to the Salant acquisition, the merger agreement did not provide for our indemnification against any of Salant’s liabilities should they arise or become known to us after the closing. Such liabilities could include those arising from the trademarks, employee benefits and pension contribution obligations of a prior owner, accounting and financial reporting matters, tax matters and noncompliance with applicable federal, state or local environmental requirements by prior owners for which we, as a successor owner, may potentially be responsible. While we tried to minimize these risks by conducting such due diligence, including trademark, employee benefits and environmental reviews, that we deemed appropriate under the circumstances, we may not have identified all existing or potential risks. Any significant liability that may arise may harm our business, financial condition, results of operations and prospects by requiring us to expend significant funds to satisfy such liability.

We need significant working capital to fund our operations, a substantial portion of which is financed, and our inability to continue to finance such working capital could affect our marketing and sales efforts because our ability to purchase inventory would be curtailed.

We need significant working capital to purchase inventory and are often required to post letters of credit when placing an order with one of our foreign manufacturers. We meet our working capital needs through our operating cash flow, our senior credit facility and letter of credit facilities. If we are unable to extend or renew either our senior credit facility or letter of credit facilities on satisfactory terms or in the event borrowings thereunder were unavailable to us as a result of any noncompliance with any covenants contained therein, our ability to purchase inventory would be curtailed or eliminated, which would significantly affect our marketing and sales efforts, thus harming our business.

We have a significant amount of debt, which could have important negative consequences to us, including making it difficult for us to satisfy all of our obligations in the event we experience financial difficulties.

We have a significant amount of debt. As of March 31, 2004, we had $265.7 million of debt outstanding (excluding amounts outstanding under our letter of credit facilities).

Our substantial indebtedness could have important consequences to you, including:

Our ability to pay interest on our indebtedness and to satisfy our other debt obligations will depend upon, among other things, our future operating performance and our ability to refinance indebtedness when necessary. Each of these factors is, to a large extent, dependent on economic, financial, competitive and other factors beyond our control. If, in the future, we cannot generate sufficient cash from operations to make scheduled payments on our indebtedness or to meet our other obligations, we will need to refinance our existing debt, obtain additional financing or sell assets. We cannot assure you that our business will generate cash flow, or that we will be able to obtain funding, sufficient to satisfy our debt service requirements.

To service our existing and future debt, we will require a significant amount of cash, which may not be available to us.

Our ability to make payments on or refinance our debt will depend largely upon our future operating performance and cash flow. Our future operating performance and cash flow are subject to many factors, including general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We cannot assure you that our business will generate cash flow from operations in an amount sufficient to enable us to pay the interest and principal on our debt or to fund our other liquidity needs. If we are unable to generate cash to meet our debt service requirements, we may have to renegotiate or refinance the terms of our debt. We cannot assure you that we will be able to renegotiate or refinance any of our debt on commercially reasonable terms or at all. In addition, prior to the repayment of our senior subordinated notes, we will be required to repay or refinance our senior credit facility and, perhaps, any other debt we incur. Any new debt we incur may have a shorter maturity than our existing debt. Payment of such debt will reduce the amount of funds available to us to make payments on our existing debt.

If we are unable to refinance our debt or obtain new financing under these circumstances, we would have to consider other options, such as selling certain assets to meet our debt service obligations or using cash, if available, that would have been used for other business purposes.

These options may not be feasible or may be inadequate, and may also adversely affect our operations or the implementation of our business plan. Our senior credit facility and the indentures governing our senior secured notes and the senior subordinated notes may restrict, or market or business conditions may limit, our ability to do some of these things. Non-payment or other non-compliance with our senior credit facility, the indentures governing our senior secured notes and senior subordinated notes or the instruments governing our other debt could result in an event of default under our other instruments governing our debt.

Our swimwear business has not been profitable.

We acquired the Jantzen swimwear business in March 2002, which business has not yet been profitable. Our future results may be adversely impacted if this business remains unprofitable.

Our swimwear business is highly seasonal in nature and revenue and profitability can be adversely affected by climate and other factors.

The vast majority of swimwear shipments to our customers occur in our first and fourth quarters. Adverse weather, temporary disruptions in the supply chain and other factors that result in reduced or delayed shipments to customers could impact the profitability of the swimwear business, which in turn may negatively impact our consolidated net income.

We operate in a highly competitive and fragmented industry and our failure to successfully compete could result in a loss of one or more significant customers.

The retail apparel industry is highly competitive and fragmented. Our competitors include numerous apparel designers, manufacturers, importers and licensors, many of which have greater financial and marketing resources than us. We believe that the principal competitive factors in the apparel industry are:

The level of competition and the nature of our competitors varies by product segment with low-margin, mass-market manufacturers being our main competitors in the less expensive segment of the market and U.S. and foreign designers and licensors competing with us in the more upscale segment of the market. If we do not maintain our brand names and identities and continue to provide high quality and reliable services on a timely basis at competitive prices, we may not be able to continue to compete in our industry. If we are unable to compete successfully, we could lose one or more of our significant customers which, if not replaced, could negatively impact our sales and financial performance.

We depend on certain key personnel the loss of which could negatively impact our ability to manage our business.

Our future success depends to a significant extent on retaining the services of certain executive officers and directors, in particular George Feldenkreis, our chairman of the board and chief executive officer, and Oscar Feldenkreis, our president and chief operating officer. They are each party to an employment agreement, which was renewed in December 2002 for an additional two-year period expiring in May 2005. The loss of the services of either George Feldenkreis or Oscar Feldenkreis, or any other key member of management, could have a material adverse effect on our ability to manage our business. Our continued success is dependent upon our ability to attract and retain qualified management, administrative and sales personnel to support our future growth. Our inability to do so may have a significant negative impact on our ability to manage our business.

Item 2. Properties

Perry Ellis’ mainWe own our principal executive and administrative offices,office, warehouse and distribution facility, arewhich is located in a 230,000 square foot facility in Miami, Florida which Perry Ellis owns.Florida. This facility is encumbered by aan $11.6 million mortgage. For purposes of potential future expansion, Perry Ellis ownswe own approximately three acres of land adjacent to itsthis facility.

On September 13, 2002, Perry Ellis purchased a 350,000 square foot distribution center in Seneca, South Carolina for $2.5 million cash. Perry Ellis had secured the option to purchase the facility as part of the Jantzen acquisition.

Perry Ellis leasesWe lease three warehouse facilities in Miami, totaling approximately 103,000 square feet, to handle the overflow of bulk shipmentswhich house distribution and its specialty and PING operations.administrative functions. These facilities are leased on a month-to-month basis from Perry Ellis’our chairman and chief executive officer.

Perry Ellis leases fourWe own a 345,000 square foot distribution center in Seneca, South Carolina, and in Winnsboro, South Carolina, we own a 380,000 square foot distribution facility.

We lease several locations in New York City, totaling approximately 25,40097,000 square feet, with leases expiring from August 2005 to December 2012. These locations are used for office, design, and showroom space.

Perry Ellis leasesWe lease 45,200 square feet for office space used by Perry Ellis’ Jantzenour swimwear business in Portland, Oregon, pursuant to a lease expiring in December 2004.

In order to monitor production of Perry Ellisour products in the Far East, Perry Ellis maintainswe maintain offices in South Korea and China (including Hong Kong) and also leaseslease offices jointly with GFX, Corporation,Inc., a company controlled by Perry Ellis’George Feldenkreis, our chairman and chief executive officer, in Beijing, China and Taipei, Taiwan.

Salant currently owns a 360,000 square foot distribution facility and leases an additional 26,000 square feet of distribution space in Winnsboro, South Carolina. SalantWe also leases approximately 136,000 square feet of combined office, design and showroom space primarily in New York, New York. Salant also operates 40operate 38 retail outlet stores, comprising approximately 104,00094,500 square feet of selling space, all of which are leased. If the Salant acquisition is completed, Perry Ellis will also own or assume the leases for all of Salant’s facilities.

Item 3. Legal Proceedings

Perry Ellis is subject to claims and suits against it, and is the initiator of claims and suits against others in the ordinary course of business, including claims arising from the use of its trademarks. Perry Ellis does not believe that the resolution of any pending claims will have a material adverse affect on its business, financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

Not Applicable.

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PART II

Item 5. Market for Registrant’s Common Equity and Related StockholderShareholder Matters

Perry Ellis’Our common stock has been listed for trading on the Nasdaq National Market under the symbol “PERY” since June 1999. Prior to that date, theour trading symbol was “SUPI” under itsbased upon our former name, Supreme International Corporation. The following table sets forth, for the periods indicated, the range of high and low per share bids of Perry Ellisour common stock as reported by the Nasdaq National Market. Such quotation representsquotations represent inter-dealer prices, without retail mark-up, markdownmark-down or commission and may not necessarily represent actual transactions.

As of March 7, 2003,April 6, 2004, there were approximately 52276 shareholders of record of Perry Ellisour common stock. Perry Ellis believesWe believe the number of beneficial owners of itsour common stock is in excess of 1,100.

Perry Ellis hasWe have not paid any cash dividends since itsour inception and doesdo not contemplate doing so in the near future. Payment of cash dividends is prohibited under Perry Ellis’our senior credit facility and indentures governing itsour senior secured notes and senior subordinated notes. See Notes 15 and 1614 through 17 to the consolidated financial statements of Perry Ellis included in Item 8 of this Report. Any future decision regarding payment of cash dividends will depend on Perry Ellis’our earnings and financial position and such other factors, as Perry Ellis’our board of directors deems relevant.

The section under the heading “Executive Compensation” entitled “Equity Compensation Plan Information for Fiscal 2003”2004” in the Company’s proxy statement for the 20032004 annual meeting of shareholders is incorporated herein by reference.

For additional information concerning the Company’s capitalization please see Note 21,23, “Stock Options and Warrants” of the Notes to the Consolidated Financial Statements included in Item 8.

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Item 6. Selected Financial Data

Summary Historical Financial Information

(Dollars in thousands, except for per share data)

The following selected financial data is qualified by reference to, and should be read in conjunction with, the Consolidated Financial Statements of Perry Ellis and related Notes thereto included in Item 8 of this Report and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Certain amounts in prior fiscal years have been reclassified to conform to the 20032004 presentation.

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