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

Thanks, and good afternoon, everyone. I'd like to start by reminding those on the line that some of what we say during this call, including in the Q and A portion, could be considered forward-looking statements under the federal securities laws. Such statements aren't guarantees, and what actually happens may end up differing materially from what those statements express or imply. The key factors that might cause our actual 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 update any forward-looking statements. We'll also be talking about certain non-GAAP financial measures on this call. A reconciliation between non-GAAP and GAAP financial measures appears in the press release we issued earlier today, which you can find under the Investor Relations tab of our website at oxfordinc.com. Now I'd like to introduce the participants on today's call. Joining me are Tom Chubb, our Chairman and CEO, and Scott Grassmyer, our CFO and COO. Thanks for listening, and I'll hand things over to Tom Chubb.

Thanks, Brian. Good afternoon, everyone, and I appreciate you being with us. It's a pleasure to speak with you today about the results we posted for the second quarter, how our brands performed, and what we expect for the rest of fiscal 2026. On the whole, our second quarter came in as we had anticipated, with the highlights being growth in adjusted earnings per share compared with a year ago and a comparable sales increase in the low single digits at Tommy Bahama. On top of that, we achieved substantial expansion in adjusted gross margin even though promotional activity ran at a higher level, which speaks to the strides our teams have taken in assortment, sourcing, and pricing throughout the portfolio. Thanks to the robust cash flow we produced, we were able to make considerable headway in lowering debt during the second quarter. Refunds tied to tariffs we had previously paid played a part in that decrease. Keeping our balance sheet strong and bringing in cash that we can put to work carefully continue to be key priorities for us. Scott will walk you through more specifics regarding our cash flow and balance sheet results. At Tommy Bahama, second quarter performance matched what we had expected. As the biggest brand in our portfolio, its comparable sales growth gave us valuable support at the overall portfolio level and helped counterbalance softness in other parts of the business. Another encouraging sign was comparable sales turning positive again in Florida, an important market for this brand that had seen weaker results of late. We are happy with how consistently the brand has been performing and stay committed to keeping that momentum going through disciplined merchandising, marketing, and operational execution. Even as Tommy Bahama kept posting positive results, Lilly Pulitzer had another weak second quarter, and our forecast for this brand for the remainder of the year now sits below where we thought it would be when the first quarter wrapped up. As we mentioned on the call for the first quarter, Lilly Pulitzer headed into the quarter facing a number of product and marketing difficulties. The heart of the issue lies in the assortment, and the central problem is that we moved far too much of what we invest in inventory away from our entry price points toward higher ones. The second quarter's results, along with the trends we see right now, tell us these difficulties have been bigger than we initially expected; we are taking action on two fronts, targeting both near-term results and the brand's longer-term health. Owing to the lead times in our product development, the first season in which we can meaningfully rework an entire assortment is spring 2027. Until then, we are sharpening our marketing and messaging, tweaking the promotional cadence, and keeping a tighter grip on inventory and expenses. Based on what we are seeing in current trends, we expect Lilly Pulitzer to lean more heavily on promotions for the rest of the year. We will stay strategic and disciplined, relying on focused promotional efforts to encourage customer engagement and move inventory while safeguarding the brand's long-term integrity. Promotions help, but they’re only one tool. To get durable gains, we also need products that feel more relevant, marketing that works harder, and stronger execution; we’re intensely focused on meeting those needs; as we look toward spring 2027, four priorities guide our efforts: our strategy for pricing architecture, the balance among print, pattern, and color, how intended use occasions are mixed between social and casual, and the ratio of new styles to continuing ones. Those assortment adjustments won’t produce a positive trend shift in fiscal 2026, yet we think they’ll yield a more balanced and compelling assortment and put Lilly Pulitzer in a better position for improved performance starting with the spring 2027 season. Our confidence in Lilly Pulitzer’s long-term potential hasn’t changed. The brand has a distinct point of view, a powerful emotional bond with its customer, and substantial room to get better; that confidence doesn’t reduce how urgent the current situation is. We’re intent on tackling the problems head-on and bringing Lilly Pulitzer back to the performance level we expect from it. At Johnny Was, progress on the turnaround plan continues. During the second quarter, the brand raised EBITDA significantly, helped by a higher gross margin that came from tighter inventory management and fewer promotions, along with disciplined management of SG&A costs. More remains to be done, but the profitability improvement gives us encouragement. Zooming out, weaker consumer sentiment has put additional pressure on discretionary demand. Our customers, especially at Tommy Bahama and Lilly Pulitzer, are often active travelers. They’re still traveling, but higher airfare, lodging, and other travel costs may be leaving less room in their discretionary budgets for apparel. Even so, Tommy Bahama’s steady performance shows that compelling product and consistent execution can still deliver solid results in this environment. Our job is to provide that degree of product relevance and execution more consistently throughout the portfolio. Continued softness at Lilly Pulitzer, including the effect of a more promotional posture for the balance of the year, plus softer demand in certain other parts of the portfolio, caused us to reduce our top and bottom-line guidance for the remainder of the year. At Lilly Pulitzer, the problems are mainly tied to assortment and marketing, while pressure elsewhere in the business is more closely linked to a more cautious, discerning consumer. We view the updated guidance as a prudent assessment of current business trends, the macro environment, and the actions we expect to take. Scott will give more detail on our revised outlook and the assumptions behind it. Given this backdrop, our priorities are clear. Keep the positive momentum going at Tommy Bahama, fix the assortment and marketing issues at Lilly Pulitzer, and extend the profitability improvement at Johnny Was. We’re handling inventory expenses and capital carefully while staying focused on cash generation, debt reduction, and a strong balance sheet. After Scott’s comments, I’ll briefly discuss several broader actions underway across Oxford. As always, I want to thank our teams across Oxford. The way they bounce back, innovate, and stay devoted to the people we serve — that's what everything we do is built on. So with that, I'll hand things over to Scott, who will walk through our financial results and outlook in more detail.

Thanks, Tom. For the second quarter of fiscal 2026, our consolidated net sales were $394 million. That compares with $403 million in the same quarter of fiscal 2025, and it put us close to the upper end of the guidance range we'd given of $380 million to $400 million. On a comparable basis, company sales dipped slightly, down 1%, and within that, retail fell 3% while e-commerce was flat. Sales from non-comp stores, most of which opened in the prior year, helped offset some of that decline in retail comp sales. Worth noting: food and beverage sales were up 11%, largely driven by the non-comp locations. On a year-over-year basis, wholesale sales dropped 14%, but this was mostly because we sold less leftover inventory through off-price channels. When you break it down by brand, Tommy Bahama's growth offset some of the declines we saw in other parts of the business. The sales drops at Lilly Pulitzer and Johnny Was came from a negative mid-single-digit comp as well as reduced off-price wholesale sales. As for Emerging Brands, the decrease in sales was largely due to lower wholesale sales. At Tommy Bahama, DTC sales grew thanks to a positive low single-digit comp in our DTC channels, which was partly canceled out by a wholesale sales decline caused mainly by fewer off-price clearance sales. On an adjusted basis, gross margin came in at 63.1%, up 140 basis points. The main drivers were better initial markups stemming from updates we made to assortment, sourcing, and pricing across the portfolio, along with a change in the sales mix, since off-price wholesale accounted for a reduced portion of net sales. Working against those gains was a bigger portion of net sales generated by our DTC channels during promotional events at Tommy Bahama, Lilly Pulitzer, and Emerging Brands. As for tariff costs tied to inventory sold this year, they were materially consistent with last year. Tom mentioned this earlier, and it's true that during the quarter we both booked and collected sizable tariff refunds. We reduced cost of goods sold by $42 million to account for tariffs paid earlier, and essentially that entire amount came in during Q2 or shortly thereafter. Our adjusted results don't include these refunds. On the adjusted side, SG&A came to $210 million, a small uptick from $209 million in the same period last year. The main drivers were newly opened brick-and-mortar retail stores and food and beverage outlets, along with greater spending on software and consulting and expenses related to shifting operations at the distribution center in Lyons, Georgia. Those higher costs were partly balanced out by lower incentive compensation and cutbacks in more discretionary areas like travel. This produced adjusted EBITDA of $45 million, an 11.4% adjusted EBITDA margin, against adjusted EBITDA of $43 million, or 10.7%, a year earlier. Beyond EBITDA, adjusted depreciation amortization grew by roughly $1 million from the prior year, chiefly from higher depreciation tied to our new Lyons facility. Interest expense was fairly flat versus the prior year, as our average debt levels came down during the year. Our effective tax rate came in at 27.5%, which was below last year's 29.6%, because some discrete items carried more weight in the prior year. Taking all of that together, adjusted EPS landed at $1.34. Turning to the balance sheet, inventory on a LIFO basis was down $20 million, or 12%; that figure included a $10 million bump to the LIFO reserve; on a FIFO basis, inventory fell $9 million, or 4%, versus the second quarter of 2025, with declines in Emerging Brands, Lilly Pulitzer, and Johnny Was. We closed the quarter with long-term debt of $73 million, a drop of $70 million from $143 million at the end of the first quarter, and also below the $81 million of long-term debt at the close of the second quarter of fiscal 2025, as well as the $116 million at the end of fiscal 2025. During the opening six months of 2026, our operations brought in $97 million of cash flow. That total includes $29 million we received in connection with tariff refunds. By comparison, the same period in 2025 came in at $80 million. Spending on capital expenditures also came down, landing at $32 million across the first half of 2026, whereas the first half of fiscal 2025 saw $55 million. The main reasons for that reduction were that we opened fewer new bricks-and-mortar sites and devoted less money to the Lyons, Georgia, distribution center project now that it is nearing completion, which in turn freed up capacity to further reduce our long-term debt. On top of that, we are distributing $22 million in dividends. I'd like to spend a few moments now walking through our revised 2026 outlook. Like Tom said, the ongoing struggles at Lilly Pulitzer, plus the cautious way we're reading consumer sentiment overall, led us to lower our revenue and profit forecasts for the remainder of the year. For the full year, we're now looking at a low single-digit negative comp for the whole company, which is under our prior guidance of slightly negative to slightly positive. Since our comp assumptions have changed, we're updating our full-year guidance range and now expect sales of $1.43 billion to $1.47 billion, representing a decline of 3% to roughly flat, compared with $1.478 billion in fiscal 2025. For the entire 2026 fiscal year, our updated sales strategy anticipates a decline at Lilly Pulitzer and Johnny Was. That drop should be partly balanced out by gains at Tommy Bahama and expansion within Emerging Brands. Looking at how we sell, the annual plan calls for a low single-digit dip in direct-to-consumer, along with a high single-digit drop in wholesale. Those declines should be partly offset by a low double-digit rise in food and beverage, which is getting a boost from newly opened locations. Now turning to gross margin: our guidance bakes in the assumption that tariff levels tied to the latest Section 301 modifications will stay in place through the rest of fiscal 2026. Since those rates are just slightly above what applies to the bulk of the inventory we received in the first half, we don't anticipate these changes having a material impact on fiscal 2026 results. Should any further tariff hikes take effect over the rest of the year, the timing of when inventory comes in and when sales occur means the effect would mainly land in later periods. Setting aside any impact tied to tariff refunds, our current expectation is roughly a 50 basis point lift in gross margin for the year, as better IMUs and the ongoing move toward a larger share of direct consumer sales get partly offset by heavier promotional activity, especially at Lilly Pulitzer. With all that in mind, for both the third and fourth quarters of fiscal 2026, we expect gross margins to improve by around 100 basis points compared to the same periods a year earlier. Apart from weaker sales and better gross margins, SG&A is projected to climb in the low single-digit range, largely due to the full-year effect of added SG&A from new locations that mostly opened during fiscal 2025, additional expenses related to shifting to the distribution center in Lyons, Georgia, and increased software costs. On the EBITDA side, we also expect about $2 million more from royalties and other income in fiscal 2026, primarily since sales through our licensing partners ought to return to normal levels following the severe impact of tariff implementation in fiscal 2025.

Beyond EBITDA, we anticipate higher depreciation, since essentially all the added costs of running the new Lyons DC during fiscal 2026 will fall under depreciation. Interest expense should come in at $6 million, below what we previously projected, thanks to the sizable debt reduction we completed recently. Taking these pieces together, along with a tax rate of 27% to 28%, our updated 2026 adjusted EPS guidance is $1.60 to $2, against adjusted EPS of $2.11 a year ago. For the third quarter of 2026, our sales expectation is $280 million to $300 million, versus $307 million in the third quarter of 2025. That mainly captures an assumption of a mid-single-digit negative to low single-digit negative comp, plus wholesale sales that are fairly flat. Looking at individual brands, we anticipate that declines at Lilly Pulitzer and Johnny Was will be partly offset by higher sales at Tommy Bahama and expansion at Emerging Brands. We further expect gross margin to widen by roughly 100 basis points, SG&A to rise in the low single-digit range, royalty income near $3 million, interest expense of $1 million, and an effective tax rate around 24%; the outcome we expect is third-quarter adjusted loss per share of $1.40 to $1.20, versus a loss per share of $0.92 a year earlier. Our fourth quarter sales plans incorporate gains from a bit more promotional activity, mostly at Lilly Pulitzer, together with the majority of our groups seeing relief from the fix of tariff-related merchandising problems that weighed heavily on our holiday season and fourth quarter results a year ago. Consequently, our fourth quarter plan assumes a comp of roughly flat to slightly positive. Turning to our CapEx outlook for the rest of the year, we project capital expenditures of about $60 million for the year, which includes the $32 million used in the first half of fiscal 2026, against a total of $108 million in fiscal 2025. What remains of those capital expenditures is mostly tied to new brick-and-mortar locations and the leftover capital expenditures for the new distribution center in Lyons, Georgia. I'll hand it back to Tom now for some closing comments.

Thanks, Scott. Prior to taking questions on this call, I'd like to spend a moment covering a wider review that we kicked off not long ago throughout the whole company, with the goal of substantially lifting operating margins over the coming years. That review centers on ways to streamline operations, boost efficiency, and refine how resources get distributed across Oxford, so that we rely less on past growth rates to drive improved profitability; our plans remain under development, and we intend to provide further details once they're set, though we think it's worth calling out a handful of steps already in motion. To start, we've achieved considerable headway in bringing the distribution center in Lyons, Georgia, up to speed. As that site reaches maturity, we'll aim to get the most out of what we've invested and route additional product through it, some of it from a legacy 3PL, so we can run more efficiently within our footprint that keeps growing more automated; since the heaviest investment period is almost behind us, we also anticipate CapEx returning to normal levels following multiple years of elevated outlays on Lyons, which should free up more cash to pay down additional debt. Given upcoming retirements among our technology leaders, we have transitions in progress that will back a fresh look at our IT infrastructure, intended to streamline our tech stack and push forward our data analytics and AI capabilities companywide. We're additionally refining our store base, which includes shifting certain Southern Tide and Johnny Was spots over to Lilly Pulitzer, in cases where we think the market and the location fit that brand better. We'll keep assessing the fleet one market and one location at a time, making adjustments wherever we expect the biggest long-term value to be created. Southern Tide has a new brand leader, and in our Emerging Brands group as well, we brought the finance, planning, and operations functions under unified oversight to gain greater consistency and efficiency. Those represent just some of the steps now underway. Together with the efforts at Tommy Bahama, Lilly Pulitzer, and Johnny Was, we're confident these moves will streamline the business, improve execution, and set Oxford up for steadier results and better returns down the road. There's more to share on all of this come December; with that said, we're ready for your questions. Paul?

Hi there, thanks, and good afternoon. Perhaps to kick things off, I'd like to zero in on Tommy Bahama, since I felt your mention of Florida returning to positive comps was quite significant, especially considering how large that market is. Could you break down what fueled that gain during the quarter, and are you noticing comparable momentum in both the men's and women's lines?

Yes. Thanks, Ashley. Excellent questions. I'm happy you brought it up, because seeing Florida go positive truly delighted us. As you're aware, across quite a few quarters now, it's mostly been negative for Tommy Bahama, and given that it's such a substantial and vital piece of our business, when it's negative, it's hard. When it's positive, everything feels brighter. Really pleased about that. Regarding men's against women's in Tommy overall, this year, men's has risen. Women's has in fact risen more than men's, which makes us glad. As you're aware, we've long held the view that women's represents an enormous opportunity at Tommy Bahama. We've achieved consistent gains in expanding that business, and what we've witnessed this year has been genuinely heartening.

Great. So perhaps a quick point on Lilly too. You made it quite clear, I believe, that spring 2027 is the first season in which you're able to and are actively working to rework the assortment, and that we won't see that positive trend shift during this year. So should we be viewing Lilly now as a spring 2027 turnaround story? Might there be comp improvements from some of that promotional activity you have planned in the back half? And then any evidence to look for that would signal the reset is functioning before the launch. Then perhaps one more, on the modeling front, regarding the gross margin guidance — I believe it was a 100 basis points gain in Q3 and Q4 both, even with those higher promotions at Lilly. Anything you can share about what gives you confidence in that projection, especially if consumer demand stays somewhat under pressure. Thank you.

Yeah. So I believe you grasp this, Ashley, but the real problem is how long the product pipeline is; so when you reach spring 2026, you find that you have a fairly major assortment problem, yet the remainder of that year's product is already in the pipeline, and only limited adjustments are possible. So spring 2027 is the first season in which we could genuinely fold in what we had figured out was incorrect regarding the spring 2026 assortment. The other seasons in 2026 were essentially already locked into the pipeline. There are additional reasons to believe there could be some fourth quarter upside in Lilly. That's simply because a year ago they were dealing with tariff-related holes in the product assortment. They had a poor fourth quarter overall a year ago. You might see some upside from those factors in the fourth quarter. Another item is the resort product line, which I think will resemble the spring 2027 line more closely, and I think that could provide some early signals, though you truly won't know until very late in the quarter, once you have some spring merchandise. On the gross margin question, definitely a good one. I'll let Scott take you through that —

Yes.

And that's why we're optimistic about our forecast.

Right, so we're beginning with a greater IMU. On top of that, wholesale is going to represent a somewhat smaller share of the overall mix, and that should assist in counteracting — or actually more than counteract — the increased promotional activity we anticipate from Lilly during this year.

Super helpful color. Thank you.

Thank you, Ashley.

Hi there. You've got Ethan here, sitting in for Janine. Appreciate you letting us ask a few things. To kick off, I'm curious about what's behind the gap between Tommy and the remainder of the portfolio? Could it be the product, the demographic, the geography, or perhaps something different? Any detail you could offer on that would help.

Sure, here's my take: I wouldn't characterize it as a major gap separating Tommy from most of the other brands we hold. It's somewhat nuanced, but Tommy and Lilly — that's obviously a sizable gap, and my sense is that it comes down almost entirely to the assortment problems Lilly is dealing with. With Johnny Was, despite the fact that their comp figures aren't at Tommy's level, we more or less anticipated that as we entered the year, simply given the path we were on coming out of 2025. Like we've discussed at length, what Johnny Was is aiming for this year is better profitability, even if the sales figure lands somewhat lower. And in the second quarter, that's precisely what we saw. So we genuinely view Johnny Was as a good-news story so far this year; we believe they're checking off the items in their turnaround plan. When it comes to the Emerging Brands, the problem really sits with Southern Tide; they're simply too small for it to be worthwhile for us to start disclosing a great deal of detail. Southern Tide is the one trailing there. All the others are doing pretty well. As we've mentioned, we've installed a new leader at Southern Tide. Really enthusiastic about him. I believe he's in week six, possibly, in the role, and we're essentially restarting Southern Tide. He's already spotting some solid chances for things we can fix in the near term and then, clearly, further out. My view is that the gap isn't as large as it may appear at first glance.

Understood; that's genuinely useful context and it sort of covered what I was going to ask about next, which concerns Emerging Brands, so I'll hand it over. Appreciate it.

All right. Thanks, Ethan.

Yes. Morning. I appreciate you taking my question. Could you discuss what we've seen so far this quarter in terms of overall comps, and then how should we frame comps for Tommy Bahama in particular? What's your view on whether the comps you posted in Q2 can hold up? Then I have a follow-up regarding Lilly Pulitzer.

Yeah, comps for the quarter to date are somewhat murky, since promotion timing plays a role. On top of that, Labor Day falls later, so it's murky as well. They're slightly negative. There's plenty of noise in them at this early stage of the quarter, which will settle down more as the quarter progresses.

Are you asking about Tommy in particular?