Oxford Industries, Inc. (OXM) Earnings Call Transcript & Summary

Thanks, and good afternoon, everyone. I want to start by reminding those on the line that some of what we say during this call, including in the Q&A portion, could be considered forward-looking statements under the federal securities laws. Such statements aren't promises, and what actually happens could end up looking quite different from what those statements suggest or imply. The key factors that might cause our operating results or financial condition to come out differently are laid out in the press release we put out earlier today, as well as in the documents we file with the SEC, among them the risk factors in our Form 10-K. We're not obligated to revise any forward-looking statements. Also, on this call we'll touch on some non-GAAP financial measures. A reconciliation between non-GAAP and GAAP financial measures appears in the press release we issued earlier today, and you'll find it posted under the Investor Relations tab at oxfordinc.com. Let me now introduce who's joining us on today's call. Here with me are Tom Chubb, our Chairman and CEO, and Scott Grassmyer, our CFO and COO. Thanks for listening, and I'll hand things over now to Tom Chubb.

Good afternoon, and thanks for being with us today. Just like we normally do in our third quarter, I'll keep my remarks about Q3 fairly short, then I'll move on to what we're observing in the first few weeks of Q4, along with how we're thinking about the holiday period and the balance of the year; we feel good about what we achieved in the third quarter, with our financial results largely matching the expectations we laid out earlier in the year. The climate stayed extremely competitive and promotional, and shoppers remained choosy about their discretionary purchases, frequently needing something new and innovative to draw their interest. Given those conditions, our team remained concentrated on our long-term priorities and performed well on the core elements of our strategy. Robust sales gains at both the Emerging Brands Group and Lilly Pulitzer countered decreases at Tommy Bahama and Johnny Was. Comp sales for the total company came in slightly positive. And although gross margins keep showing the tariff-related pressures we've talked about in earlier quarters, our underlying adjusted gross margin, excluding that pressure, came in better than last year's figure even amid heavy promotions; beyond the financial results, we achieved meaningful progress on several key initiatives throughout the enterprise, beginning with people, we were happy to have reorganized and reinforced our teams at Johnny Was and the Emerging Brands Group by combining internal promotions with bringing in key executive talent from outside the company. Also at Johnny Was, we moved substantially forward on the business improvement plan we talked about last quarter; at Tommy Bahama, our bars and restaurants represent a clear competitive edge, and we were glad to have opened 2 important new restaurants during the quarter. At Lilly Pulitzer, we lapped last year's highly successful Palm Beach Fashion show by holding a fashion show in Key West. That event from last year has helped drive creative content and commercial success all through 2025, and we anticipate this year's event doing the same for 2026. We also finished renovating our Worth Avenue Lilly Pulitzer flagship location in Palm Beach. Lastly, we're in the last phases of building the new cutting-edge fulfillment center that will serve as such a vital asset for our direct-to-consumer businesses. None of these things will affect our financial results right away, but they're essential pieces of the groundwork for future success. As I said earlier, performance differed by brand across the portfolio, just as it has for most of this year. Lilly Pulitzer remained the standout, with the brand once again showing a deep bond with its core consumer and delivering healthy growth for the quarter. Our Emerging Brands business likewise recorded strong year-over-year sales increases, reflecting rising recognition, relevance, customer engagement and growth potential. Turning to Tommy Bahama. While our third quarter results fell short of our goals for the brand, we did see encouraging progress. On a sequential basis, comps got better, moving from a decline in the high single digits earlier in the year to a decline in the low single digits. We think we've achieved significant progress on the major issues that drove weakness early in the year, especially in the areas of color assortment and line completeness, which caused uneven regional results and softness in Florida, our single most important market. More work remains, yet we're pleased with the changes implemented thus far. Meanwhile, we keep putting money into the brand's long-term health by carefully growing our retail and hospitality presence. In the quarter, we returned to the key St. Armands Circle area outside Sarasota with a lovely new full-service restaurant and retail store, replacing the restaurant we had there before, which a hurricane damaged and forced to close in 2024. This new site underscores how strong our hospitality model is in one of our most critical markets. We also launched a new Marlin Bar on the Big Island of Hawaii, strengthening our ties to a region that has been at the heart of the Tommy Bahama brand for decades. Both places are showing promising early results, and we think they'll be lasting assets for the brand. Now to Johnny Was. During the quarter we implemented a number of significant changes aimed at bolstering the brand's foundation and setting it up for success over the long term. As we mentioned last quarter, Johnny Was is a remarkable brand with gorgeous product, a devoted and involved customer base, and a diligent, highly committed team. To make sure the brand can take full advantage of that potential, we've brought fresh faces into key leadership roles, among them the promotion of Lisa Caser, who had been our formal Chief Commercial Officer at Johnny Was, to head the brand as President of Johnny Was. Lisa brings extensive business leadership experience, with more than 25 years in leadership positions at Neiman Marcus, among them 10 years as SVP, General Merchandising Manager of Women's ready-to-wear; we likewise changed who leads design and who heads retail, in order to sharpen creative focus, instill strong merchandising discipline, and drive more consistent execution throughout the business. Earlier in the year, we brought in an outside expert to assist us in evaluating the Johnny Was business and pinpointing what actions were required to improve profitability in a meaningful way; that thorough project is now mostly finished, and we've started carrying out its recommendations, with clear priorities around creative direction, merchandising and planning, marketing efficiency, and retail performance. Though we're at an early stage, the focus, energy, and alignment we're witnessing across the team give us encouragement. We're confident that combining refreshed leadership with a very talented existing team and a clear, actionable plan will let us shore up the brand's fundamentals and capture the considerable long-term opportunity we still see in Johnny Was. Given all that, let me move to the fourth quarter and what we're seeing early in the holiday. Just to remind everyone, our comparisons for Q4 of last year were flat, and we got a lift from the bounce after the election. Looking at the early numbers for the fourth quarter this year, it's obvious that the weaker beginning to the holiday season comes from a mix of product constraints tied to tariffs and a holiday stretch that's been more promotional industry-wide than it was a year ago, which created a tough backdrop, plus tougher comparisons than we faced earlier in the year. The biggest issue is that our brands have run into problems with product assortments that go back to sourcing decisions related to tariffs that were made earlier in the year. Back when our brands were putting together their holiday and resort lines last spring, the tariff situation was very uncertain, with the possibility of large increases on some categories sourced from China. So we made hard but sensible decisions to lower our exposure in categories that depend heavily on China — sweaters, for instance, and other cold weather items that matter a lot at this point in the year. Given what we knew at the time, those choices were the right ones. But they left us with assortments that weren't as complete or as broad as we'd want for the holiday season. Sweaters especially have historically been big drivers of fourth quarter demand across our portfolio, and our smaller presence in that category has been a significant headwind.

Meanwhile, this holiday sales season proved more discount-driven compared with a year ago, as shoppers displayed greater concern for getting good value and proved willing to hold out until markdowns got steeper. Our own promotional rhythm and depth stayed aligned with the brand-appropriate strategy we favor, yet a large number of rivals kicked off the season sooner and with more force. That situation led to a softer beginning for us across the first weeks of the quarter. Over at Lilly Pulitzer, our holiday promotional activity featured curated gift with purchase events alongside a wider seasonal sale, and both connected strongly with our core customer, with robust engagement seen across numerous of our most giftable styles and capsules. Regrettably, those successful gift with purchase events ended up somewhat constrained because of steep Chinese tariffs and the trouble involved in relocating production of such items to other places. In the same way, we found gaps in our assortments tied to the tariff situation, notably in novelty items and certain other seasonal products that could not be swiftly shifted out of China, which held back our capacity to fully meet demand. We additionally pushed harder on our core programs to lessen tariff exposure, and that cut down on the degree of newness we could otherwise have delivered. Turning to Tommy Bahama, we expanded on themes launched earlier in the year, providing an appealing blend of gift-ready items and cold weather seasonal product. Yet just as with Lilly, numerous categories that traditionally generate momentum for us during holiday, particularly sweaters and other cold weather essentials that depend heavily on China, were trimmed because of tariff uncertainty earlier in the year. Those gaps, combined with a promotional marketplace that shifted earlier and deeper than normal, generated added pressure. Even with such obstacles, we have witnessed ongoing encouraging response for our Tommy Bahama Boracay pants that we talked about last quarter. Though the price point rose from $138 to $158, fresh product innovation has driven substantial sell-throughs, and the Boracay pant has factored meaningfully into the holiday gifting mindset. This win also underscores some of the trends observed in the market, where consumers are drawn to versatile products suitable for work and casual events and less discretionary than certain other categories. At Johnny Was, the customer keeps connecting most strongly with the distinctive artful product that defines the brand. Elevated embellished pieces, rich textures and vibrant color stories, once again struck a chord with loyalists; but like our other brands, constraints in certain seasonal categories stemming from tariff-driven sourcing adjustments, together with heightened promotional intensity throughout the marketplace, produced a tougher backdrop for converting that interest at the levels we had expected early in the season. Although still small in absolute terms, our emerging brand group remains a meaningful source of energy and growth within the portfolio. Southern Tide, The Beaufort Bonnet Company, and Duck Head have all generated considerable momentum during this year, and that momentum is carrying over into the holiday period, where we've gotten off to a better start than we have with our 3 bigger brands. What benefits these brands is remarkably devoted customer followings, sharply defined product narratives, and deeply committed teams, and how they've performed demonstrates the potential we think each one holds. As we keep putting resources into their capabilities—especially in product, marketing, and retail expansion—we stay quite optimistic about what the Emerging Brands Group can contribute to our long-term growth algorithm. When considered as a whole, these initial holiday patterns confirm what we saw all year long: when we bring forward fresh, distinctive product that connects with our brand heritage, the customer responds; yet in the promotional environment of today, getting that response demands a value proposition that is more competitive. Consequently—and as Scott will explain shortly—we now anticipate our fourth quarter results will come in under our earlier guidance, and we are adjusting our outlook for the rest of the year; that is where our attention sits across the portfolio, zeroing in on what sets each brand apart and making sure that whatever we present to the consumer sparks confidence, joy, and a feeling of possibility. That same attention has shaped our product development and marketing plans all year. It's the reason we've embraced newness and innovation throughout our brands, and the reason we keep honing what we offer so it matches the customer's mindset as we head toward resort in the early spring period. Although the environment stays dynamic, we are moving into the rest of the year with clear-eyed realism. We understand that the consumer is still working through uncertainty and that promotional intensity is still elevated, yet our teams are carrying out their work with discipline, and we think we are well positioned to serve the consumer where she is today while putting money into the long-term strength and potential of our business through initiatives like the ones I described at the start of the call. Turning to fiscal 2026, we are entering that year squarely focused on boosting profitability and confident about the levers we have already started establishing. We anticipate beginning to capture the payoff from cost reduction initiatives launched during fiscal 2025, among them work on indirect spend and other SG&A-related efficiencies throughout the enterprise. At Johnny Was, the substantial merchandising and marketing efforts we made this year ought to start paying off, and we also expect to bring the merchandising efficiency project we tested at Johnny Was to the remaining brands in our portfolio. Beyond that, we will keep concentrating on lowering input costs and mitigating tariffs as we further develop our sourcing strategies. Capital expenditures will fall considerably once we finish our new fulfillment center in Lyon, Georgia, which will let us bring our debt levels down in a meaningful way. Every one of these steps puts us in a strong spot to deliver real gains in profitability, even as we keep putting money to work carefully in strengthening our brands over the long haul. As ever, I want to say how deeply grateful I am to our team members throughout the company. Their ability to bounce back, their ingenuity, and their dedication to serving our customer remain the bedrock of all that we do; having said that, I'll hand things over to Scott, who will walk through our revised financial outlook in greater detail.

Thanks, Tom. Like Tom said, our teams have demonstrated a lot of discipline and resilience when it comes to carrying out our plan while the consumer and macro environments remain difficult. During Q3, our teams managed to produce results on both the top and bottom lines that fell inside the guidance range we had previously issued. Consolidated net sales for the third quarter of fiscal 2025 came in at $307 million, versus $308 million during the same quarter of fiscal 2024, and that landed inside our guidance range of $295 million to $310 million. Our direct-to-consumer channels grew overall, with a total company comp gain of 2%, matching what we had guided for the quarter. Leading the direct-to-consumer increase were a 5% rise in e-commerce sales and a 31% sales increase in our food and beverage and full-price brick-and-mortar locationsk-and-mortar locations, which rose 3% and 1%, respectively. Growth in full-price brick-and-mortar came mainly from adding noncomp locations, while comps at our restaurant and full-price brick-and-mortar locations slipped slightly, by 2% and 1%, respectively. Sales at our outlet locations were about the same as a year earlier. Offsetting our higher direct-to-consumer sales was an 11% drop in wholesale channel sales, mostly from declines in off-price business. Looking at brands, Lilly Pulitzer turned in another solid quarter, with total sales rising year-over-year thanks to double-digit growth in retail and high single-digit growth in e-commerce, partly offset by a wholesale channel decline. Positive comp sales at Lilly Pulitzer, together with positive comp sales and overall sales growth across our emerging brands businesses, helped offset the low single-digit negative comp at Tommy Bahama and the high single-digit negative comp at Johnny Was, which produced sales decreases at both businesses. Adjusted gross margin narrowed 200 basis points to 61%, driven by roughly $8 million, or 260 basis points, of higher cost of goods sold stemming from additional tariffs put in place in fiscal 2025, net of mitigation efforts, plus a shift in sales mix toward a greater share of net sales happening during promotional and clearance events at Tommy Bahama and Lilly Pulitzer. Partly offsetting those decreases were lower freight cost to consumers thanks to better carrier rates from contract renegotiations, a sales mix shift in which wholesale sales made up a smaller share of net sales, and reduced freight rates for shipping our products from our vendors. Adjusted SG&A expenses rose 4% to $209 million, up from $201 million a year ago, with roughly 5%, or approximately 70%, of that increase coming from higher employment costs, occupancy costs and depreciation expenses tied to opening 16 net new brick-and-mortar locations since the third quarter of fiscal 2024. That figure includes the 13 net new stores, among them 3 Tommy Bahama Marlin Bars and 1 full-service restaurant, opened during the first 9 months of 2025. We also took on preopening expenses for some planned new stores set to open in the fourth quarter. This produced an adjusted operating loss of $18 million, equal to a negative 5.8% operating margin, versus a 3% operating loss, or negative 1.1%, in the prior year. That decline in adjusted operating income comes from the effect of our investments amid a difficult consumer and macro backdrop. Turning past operating income: our adjusted effective tax rate came in at 30.3%, above what we had expected, because of certain discrete items whose impact was magnified by our operating loss. Interest expense ran $1 million above the third quarter of fiscal 2024, driven by higher average debt levels; taking all of that together, we finished with $0.92 of adjusted net loss per share. Following interim impairment assessments carried out in the third quarter of fiscal 2025, the company recorded noncash impairment charges of $61 million in total, mostly tied to the Johnny Was trademark. Those Johnny Was impairment charges mirror the effect of organizational realignment activities in the third quarter of 2025, among them changes to the Johnny Was executive team that Tom discussed. Revised future projections were based on Johnny Was recent negative trends in net sales and operating results, plus difficulties in offsetting elevated tariffs. Let me turn now to our balance sheet, starting with inventory. In the third quarter of fiscal 2025, inventory rose $1 million, or 1%, on a LIFO basis, and $6 million, or 3%, on a FIFO basis, against the third quarter of 2024, with the increase mainly stemming from $4 million of additional costs capitalized into inventory tied to the U.S. tariff implemented in 2025. We closed the quarter with long-term debt of $140 million, versus $81 million at the end of the second quarter and $31 million at the end of fiscal 2024. Our debt historically rises during the third quarter, largely because of seasonal swings in cash flow, with lower earnings in the third quarter leading to greater cash needs. Cash flow from operations provided $70 million across the first 9 months of fiscal 2025, compared with $104 million across the first 9 months of fiscal 2024, mainly on lower net earnings and shifts in working capital needs; we also had $55 million of share repurchases, capital expenditures of $93 million, chiefly for the Lyons, Georgia distribution center project, which remains on track to be completed and go live in early 2026, along with the addition of new brick-and-mortar locations, and $32 million of dividends, which pushed our long-term debt balance higher since the start of the year. I'll now take some time on our updated outlook for 2025. Comp sales figures in the fourth quarter to date are negative in the mid-single-digit range, below our prior expectations of flat to low single-digit positive comps. Although our average order value has risen nicely, traffic has been mixed, but mostly down, and conversion has proven very challenging across our portfolio. Because the holiday period got off to a sluggish beginning, we're updating our outlook for the rest of the year, and we anticipate that the mid-single-digit comp will carry on through the balance of the year. Looking at the whole year, we expect net sales to land somewhere between $1.47 billion and $1.49 billion, which works out to a decline of 2% to 3% against the $1.52 billion we posted in fiscal 2024. Within our updated sales plan for the full year of '25, there are decreases in our Tommy Bahama and Johnny West segments, mostly the result of negative comps, partly offset by growth in our Lilly Pulitzer and Emerging Brands segments, which comes from positive comps and new store locations. If you look by distribution channel, the plan calls for a low single-digit decrease across most channels, among them wholesale, full-price retail, e-commerce and outlets, partly offset by a low to mid-single-digit increase in our food and beverage channel, which is gaining from the addition of 3 new Marlin Bar locations and 1 new full-service restaurant that opened during the year. For fiscal 2025, the annual guidance we currently have reflects a net tariff impact of roughly $25 million to $30 million, or approximately $1.25 to $1.50 per share. Tariffs are the main reason margins are contracting this year, but we also anticipate that continued promotional activity across our brands will weigh on margins, since consumers remain highly responsive to value and deal-oriented shopping in today's macroeconomic environment.

Looking at the whole year, our projection is that gross margins will contract roughly 200 basis points. In addition to softer sales and gross margins, SG&A should increase somewhere in the mid-single-digit range. The main reason is the impact of investments we've recently been making and continuing to make in our businesses — for instance, the annualization of incremental SG&A stemming from the 30 net new locations we added in fiscal 2024, plus additional SG&A connected to the roughly 15 net new locations being added this year, among them 3 new Tommy Bahama Marlin bars and one new full-service restaurant. Also, when it comes to operating income, our expectation is that royalties and other income will be about $3 million lower in fiscal 2025. Additionally, when we look at our outlook for fiscal 2025, it includes some negative effects from nonoperating items. Interest expense, for example, is expected to be $7 million, compared with $2 million in 2024, which translates to roughly $0.20 to $0.25 of additional impact on EPS. The reason our debt levels are higher in fiscal 2025 is that we've kept up our capital spending on the Lyons, Georgia distribution center, continued investing in technology, and returned capital to shareholders—all of which went beyond what we generated in cash flow from operations. On top of that, we're expecting an adjusted effective tax rate of about 25%, up from 20.9% in 2024. The higher tax rate stems largely from a major shift in how our yearly stock vesting affected income tax expense during 2025 relative to 2024, and we anticipate that this elevated rate will produce a per-share impact of roughly $0.15 to $0.20. When we factor in everything — the $1.25 to $1.50 per share hit from tariffs, along with greater interest expense and the increased tax rate — our guidance has been updated, and we now project adjusted EPS for 2025 in the range of $2.20 to $2.40, compared with adjusted EPS of $6.68 a year earlier. Several factors are responsible for most of the reduction in our EPS guidance. First, we now expect fourth quarter comps to be negative in the mid-single-digit range, rather than positive in the low single digits. Second, royalty and other income will be lower because key licensing partners are anticipating fewer orders — their customers are carrying excess inventory, which will push some orders out of Q4 and into the first quarter of next year. Third, SG&A will be higher, largely because of greater consulting expenses tied to our ongoing efforts to improve operating results, along with certain added costs associated with our new distribution center in Lyons, Georgia. Looking ahead to Q4 2025, our guidance is for revenue between $365 million and $385 million, down from the $391 million we posted in Q4 2024. The main drivers here are our assumption of a negative mid-single-digit comp and a low single-digit decline in wholesale, with noncomp stores providing a partial offset. On gross margin, we're anticipating roughly 300 basis points of contraction, largely because of higher tariffs and a bigger share of net sales coming from promotional and clearance activity. For SG&A, expect growth in the low to mid-single-digit range, mostly tied to new store openings, along with $1 million more in interest expense, $1 million less in royalty and other income, and an effective tax rate near 26%. For the fourth quarter, we anticipate adjusted EPS landing somewhere from $0 to $0.20, versus $1.37 during the same period a year ago. Now I'll go over what we're expecting for CapEx across the rest of the year. As we've said before, capital expenditures should come in at roughly $120 million for the year, against $134 million total in fiscal 2024. What's left to spend relates to finishing that new distribution center, plus carrying out the pipeline of new stores we currently have underway at Tommy Bahama and Lilly Pulitzer. Once the Lions Georgia project wraps up, we look for this higher level of capital expenditures to come down substantially in 2026 and afterward. Given how seasonal our business is, we anticipate a slight reduction in outstanding borrowings during the fourth quarter. I appreciate everyone's time today, and now we'll open the call up for questions. Bond?

First off, I really appreciate the detail you provided about precisely what kind of assortment shortfall existed across each of the banners for the holiday period. That said, looking ahead as we work through the quarter, how significant do you anticipate this being for the season coming up? Has it already been fixed? Or are you still seeing some level of disruption? I'd just like to get a sense of how much of holiday is now completely in line with what you had initially intended. And then, on top of that, I realize China is complicated at the moment and that things may be smoothing out somewhat, but I'd like to ask whether this gap is altering your outlook or your sourcing approach going forward. Would you look to diversify even more, or commit to orders earlier? Any insight you can offer there would help.

Yes. I believe the key point — and even though we provided quite a bit of detail — is that one item we never explicitly highlighted was that what sits on the floor at this moment is what had the greatest effect on certain sourcing choices we made. The explanation for that is when we were committing to the purchases for the merchandise currently on the floor, that timing lined up with that short window during which the duty, or tariff, imposed on China was set to reach 145%. In periods when it sat at 20% or 27%, or anything along those lines, we had the ability to deliberately choose to remain in China for a given product when necessary and simply pursue different avenues to reduce the impact of that tariff. But when we faced 145% — which is no longer a possibility now — that coincided exactly with the moment we were committing to the buys for the goods on the floor today. A great deal of product we managed to shift out of China. Tommy and Lilly are largely, perhaps entirely, outside of China; however, sweaters represent the single category — along with a few others — where that wasn't possible. Sweaters are the major one, yet there simply aren't many — and historically there haven't been strong alternatives available to us beyond China. So here's what we chose to do, Ashley, and back then, I believe it was the correct decision. We understood we couldn't absorb a tariff of that magnitude. As a result, we significantly reduced the sweater assortment and attempted to substitute it with other goods. When you look at what we're carrying today, you wish those sweaters were there. That's essentially the situation we were describing; so once you reach spring, things had calmed down considerably. The tariff situation remains somewhat uncertain, yet it cooled off substantially, and we either succeeded in relocating the goods or knew they would arrive at a tariff level we could manage. Consequently, for spring, I don't believe we'll face the same sorts of effects. There are still tariff problems we need to handle, though they won't affect the assortment the way they did for this season. Does that answer your question?

Yes, that's really useful. A few more items, and I'll be quick. So earlier, I believe you said rivals pushed harder on discounts during the holidays and before that, which made the environment more difficult. What are you observing in the market right now regarding that — has the pressure eased — and how is that shaping your promotional approach for the rest of the year? Also, after the changes in your leadership team and the outside review of Johnny Was, what came out as the main priorities you're concentrating on at the moment? And what are the important goals for the brand as you plan for 2026? Should we view this as yet another stretch of stabilization? Or could you give us any detail on the road map or the main components for getting Johnny on steadier footing?

Okay; so when it comes to how intense the promotions are out there, I'd say at this moment it still seems pretty elevated, though we're somewhat in that gap separating the Black Friday, Cyber Monday weekend from the closing stretch, and those tend to be the heaviest discounting windows. I don't believe it has truly pulled back, yet I'm not certain it has climbed another notch either, but it wouldn't shock me if that occurred. And we're going to attempt to react to that in ways that suit each brand. I think the watchword across all the brands is remaining agile. We do want to ensure we aren't completely cheapening our brands, but we're also considering actions we can take to answer the marketplace. One more thing I'll mention, and this concerns the calendar we have this year, where 27 days separate Thanksgiving and Christmas, and Christmas lands on a Thursday. The most recent time we saw that calendar was 2014; and during that year, business arrived quite late. If you examined how sales built through the Thanksgiving to Christmas selling period, it genuinely showed up late. Last year, in case you recall, Christmas fell on Wednesday. So this year, shoppers gain one extra weekday to buy, which might matter. And beyond that, it lets us stop e-com shipments likely on Saturday or sometimes even Sunday and still leave customers confident they'll receive them before Christmas, whereas last year, we were mostly cutting off on Friday; so those are a few elements where we sort of incorporated the present trajectory into our forecast, but I think there's some cause to hope the season might — could rally somewhat. I don't think it will be a great one, but there are a few differences there that deserve mention. Now, regarding the Johnny Was initiative, I want to mention a few points: the strategy was put together by the Johnny Was team, with some external help, but it's really their own plan. Lisa Kaiser, who currently serves as President of Johnny Was, was a member of that group. She hasn't been at Johnny Was very long, though she's been with our company for a number of months now. Previously she held the role of Chief Commercial Officer, and she played a very central part in shaping that plan. So refreshing the leadership does not, in my view, mean any shift in the course we've been pursuing. As we mentioned during the prior quarter, the essential elements involve merchandising effectiveness — meaning stronger assortments that achieve the proper investment level at the correct price points and product categories, delivered to stores at the proper moment and with the proper store-level assortment. All of this should generate, in our view, additional sales compared to what we'd have had otherwise, while also lifting margins, improving full-price sell-through, and eventually gross margin. Then there are 2 other major priorities for the team — and again, this is the team's plan, essentially the same group; we've simply brought in a few additional individuals and promoted several, Lisa among them, and we're quite enthusiastic about her. The second piece concerns marketing efficiency; basically, it's about getting more out of the money we already spend to produce stronger outcomes, and we've already begun implementing some of that. What we've observed so far is encouraging, since we're achieving what I'd describe as improved efficiency from the spending we've undertaken over the past month or so, perhaps a bit longer. Finally, there's the matter of refining the go-to-market process and calendar, and that's something the entire team, under Lisa's leadership, is strongly committed to. Lisa firmly believes in that type of discipline. So I believe this — refreshing the leadership team and the promotions don't alter the plan, since they all helped create it, but it strengthens our capacity to carry it out effectively.

Excellent. Thanks for the details — I'll share them with the team. Wishing you the best of luck.

I'd like to explore wholesale a bit more. I realize it accounts for a fairly modest portion of the overall business, yet I'm simply wondering whether you could tell us what's happening in that area. From what I gather, your wholesale partners have grown somewhat more hesitant about placing orders, while perhaps somewhat more product is sitting in the channel. Also, I believe you said off-price would decline. Does that reflect a deliberate strategy? Perhaps you could say a bit more about what's taking place there.

Regarding wholesale broadly, I'd characterize it as a degree of worry and hesitancy among the retailers. I'd add that the majority — particularly the specialty retailers, who make up a significant share of our wholesale customer base — when times feel unpredictable, have a tendency to ease off somewhat, and my sense is that's what we're witnessing at present. Scott, I'm not sure whether you'd like to add some detail about what's happening with off-price.

Yeah. Yeah, there was a smaller amount of stock on our side that had to be cleared out via those outlets. So our goal is to hold onto what we own, and with any luck, we'll keep having a reduced quantity that requires moving through those outlets.

Understood. So next, when I consider the tariffs—since you're only now witnessing how those products you'd been arranging, I believe, back in April or May, when Chinese tariffs stood at 145%, have been affected—should Q4 be viewed as the worst tariff-related drag? Or to what extent ought we to expect that continuing into Q1 of the coming year?