Oxford Industries’s Q4 Sales Jump 28 Percent

Oxford Industries, Inc., the owner of Tommy Bahama, Lilly Pulitzer and Johnny Was, reported earnings rose 35.7 percent in the fourth quarter ended January 28 as sales expanded 28 percent. Results exceeded company guidance.

Adjusted EPS of $2.28 topped company guidance between $2.01 and $2.16. Sales of $382 million were just ahead of guidance in the range of $366 million and $381 million 

Consolidated net sales for the full fiscal 2022 year increased 24 percent to $1.41 billion compared to $1.14 billion in fiscal 2021. Earnings per share (EPS) on a GAAP basis increased 31 percent to $10.19 compared to $7.78 in fiscal 2021. On an adjusted basis, EPS increased 36 percent to $10.88 compared to $7.99 in fiscal 2021.

Consolidated net sales in the fourth quarter of fiscal 2022 increased 28 percent to $382 million compared to $300 million in the fourth quarter of fiscal 2021. EPS on a GAAP basis increased to $2.00 compared to $1.50 in the fourth quarter of fiscal 2021. On an adjusted basis, EPS increased to $2.28 compared to $1.68 in the fourth quarter of fiscal 2021.

Tom Chubb, chairman and CEO, commented, “I am extremely proud of our team for delivering record results for both the fourth quarter and full year. Our strategy of creating aspirational lifestyles through compelling product collections, inspiring advertising campaigns and uplifting shopping experiences is resonating with customers across our powerful portfolio of leading brands. Fiscal 2022 was highlighted by robust organic growth in all brands and all channels of distribution with sales in Tommy Bahama, our largest brand, up 22 percent, Lilly Pulitzer up 13 percent and the Emerging Brands Group up 29 percent. Our performance also benefitted from Johnny Was, a fantastic brand and business we added to our portfolio in the third quarter. The combination of our top-line performance, meaningful gross margin expansion and expense leverage fueled a 36 percent year-over-year increase in adjusted earnings per share to a record $10.88.

“Our plan for fiscal 2023 is to capitalize on the momentum we’ve built across our portfolio of brands to drive double-digit top- and bottom-line growth. We are excited about our plans for 2023 and believe continued consumer interest in elegant casualwear, moving to warmer climates and travel is all macro trends that play to our strengths. We believe these factors position us well to deliver another year of excellent results.”

Chubb concluded, “At the foundation of our company and the source of all our success is our incredible team of people. We are enormously grateful for each and every one of them and all that they do.”

Fiscal 2022 versus Fiscal 2021

• For the full 2022 fiscal year, consolidated net sales increased 24 percent to $1.41 billion, including net sales of $73 million for Johnny Was for the 19-week period under Oxford ownership, from $1.14 billion in the prior year, which included $25 million of net sales for Lanier Apparel. Fourth-quarter consolidated net sales increased 28 percent over the prior year to $382 million, including net sales for Johnny Was of $50 million in its first full quarter in the Oxford portfolio. These net sales increases include the following growth in each of our distribution channels.
  
• For the full fiscal year 2022, full-price DTC sales increased $175 million, or 24 percent, to $898 million versus fiscal 2021, including $56 million of DTC sales in Johnny Was and a 16 percent aggregate increase in DTC sales in Tommy Bahama, Lilly Pulitzer and Emerging Brands. For the fourth quarter, full-price DTC sales were $258 million in fiscal 2022, including Johnny Was net sales of $38 million and an 8 percent aggregate increase in full-price DTC sales in Tommy Bahama, Lilly Pulitzer and Emerging Brands, compared to $203 million in the prior year.
  
• Full-price retail sales of $487 million for the year and $134 million for the fourth quarter were 26 percent and 23 percent higher than respective prior-year periods. This includes full-price retail sales in Johnny Was of $26 million for the 19-week period in fiscal 2022 and $17 million for the fourth quarter. Full-price retail sales in Tommy Bahama, Lilly Pulitzer and Emerging Brands, in the aggregate, grew 19 percent for the year and 7 percent for the quarter.
  
• Full-price e-commerce sales grew 22 percent to $412 million for the full year and 31 percent for the fourth quarter. This includes full-price e-commerce sales in Johnny Was of $31 million for the year and $21 million for the fourth quarter. Full-price e-commerce sales in Tommy Bahama, Lilly Pulitzer and Emerging Brands, in the aggregate, grew 13 percent for the year and 8 percent for the quarter.
  
• Sales from Lilly Pulitzer flash sales were $54 million for the year and $18 million for the quarter versus $32 million and $13 million in the same periods of fiscal 2021.
  
• Outlet sales were $66 million for the year and $17 million for the quarter, 16 percent and 10 percent increases, respectively, versus prior-year results. Both the full year and the fourth quarter of fiscal 2022 included $1 million of Johnny Was outlet sales.
  
• Restaurant sales grew 13 percent to $109 million for the full year and 10 percent to $28 million for the fourth quarter versus fiscal 2021.  
  
• Wholesale sales of $282 million for the year and $61 million for the quarter were 22 percent and 44 percent higher, respectively, than fiscal 2021. Johnny Was contributed wholesale sales of $16 million for the full year and $11 million for the fourth quarter of fiscal 2022, while Lanier Apparel wholesale sales in fiscal 2021 were $25 million for the full year.   
  
• Gross margin increased to 63.0 percent on a GAAP basis and 63.5 percent on an adjusted basis for full-year fiscal 2022 compared to 61.8 percent GAAP and 63.0 percent adjusted in the prior year. For the fourth quarter, fiscal 2022 gross margin increased to 60.8 percent GAAP and 61.5 percent adjusted compared to 59.2 percent GAAP and 61.3 percent adjusted in the fourth quarter of fiscal 2021.
  
• SG&A was $692 million for full-year fiscal 2022 compared to $574 million in fiscal 2021, increasing primarily due to increases in employment costs, advertising costs, variable expenses, occupancy, and other expenses to support sales growth. Fiscal 2022 included SG&A associated with Johnny Was for the 19-week period, including operational SG&A of $41 million, amortization of intangible assets of $5 million and transaction and integration costs of $3 million. On an adjusted basis, SG&A was $684 million for full-year fiscal 2022 compared to $564 million in fiscal 2021. For the fourth quarter of Fiscal 2022, SG&A was $196 million on a GAAP basis and $193 million on an adjusted basis compared to SG&A of $153 million on a GAAP basis and $152 million on an adjusted basis in the fourth quarter of fiscal 2021.
  
• Royalties and other operating income decreased by $11 million to $22 million for the full year. This decrease was primarily driven by a $12 million gain on the sale of an unconsolidated entity in the third quarter of fiscal 2021 and a $3 million gain on the sale of the Lanier Apparel distribution center in Toccoa, Georgia in the fourth quarter of fiscal 2021. Royalties for fiscal 2022 increased in both Tommy Bahama and Lilly Pulitzer for the year.
  
• Full-year operating income was $219 million in fiscal 2022, compared to $166 million in fiscal 2021. This represents an operating margin increase of 100 bps to 15.5 percent on a GAAP basis. On an adjusted basis, full-year operating income increased to $234 million, or 16.6 percent of net sales, compared to $174 million in fiscal 2021. This represents an operating margin increase of 130 bps on an adjusted basis. For the fourth quarter of fiscal 2022, operating income on a GAAP basis was $40 million compared to $32 million in the prior year, while adjusted operating income was $46 million in fiscal 2022 and $36 million in fiscal 2021.
  
• Interest expense was $3 million for the year and $2 million for the fourth quarter of 2022. Interest expense for both the full year and fourth quarter of fiscal 2021 was less than $1 million. The increased interest expense was due to the increased debt levels as a result of the acquisition of Johnny Was.
  
• The effective tax rate for fiscal 2022 was 23 percent compared to 20 percent for fiscal 2021, both of which are lower than a typical effective tax rate. The effective tax rate for the fourth quarter of fiscal 2022 was 16 percent compared to 20 percent for the fourth quarter of fiscal 2021. The effective tax rates for each period included certain favorable discrete items that are not expected to occur in future periods.
  

Balance Sheet and Liquidity
Inventory increased $102 million on a LIFO basis and $106 million, or 58 percent, on a FIFO basis compared to the end of the fourth quarter of fiscal 2021. Inventory balances at January 28, 2023, represent a more normalized level after inventory levels were lower than optimal throughout fiscal 2021 when a stronger-than-expected rebound in consumer demand outpaced inventory purchases. Also, the inventory increase reflects: (i) $20 million of Johnny Was inventory, (ii) the early receipt of incremental inventory of approximately $25 million to mitigate risks of supply chain delays or disruptions, (iii) anticipated sales increases in fiscal 2023 and (iv) higher product costs. Compared to the end of the fourth quarter of fiscal 2019, on a FIFO basis, inventory increased by 37 percent while sales for fiscal 2023 are expected to be 44 percent to 48 percent higher than fiscal 2019.

As of January 28, 2023, the company had $119 million of borrowings outstanding under its revolving credit agreement, compared to no borrowings at the end of the prior year. Also, the company had $9 million of cash and cash equivalents versus $210 million of cash, cash equivalents and short-term investments at the end of the fourth quarter of fiscal 2021. Both the increase in debt outstanding and reduction in cash, cash equivalents and short-term investments were due to the acquisition of Johnny Was in fiscal 2022.

On March 6, 2023, the company amended its revolving credit facility, which extended the maturity date from July 2024 to March 2028 and increased the spreads on the variable interest rate borrowings by approximately 25 basis points.

Dividend and Share Repurchase
The Board of Directors declared a quarterly cash dividend of $0.65 per share, which represents an 18 percent increase over its previous quarterly dividend rate of $0.55. The dividend is payable on April 28, 2023 to shareholders of record as of the close of business on April 14, 2023. The company has paid dividends every quarter since it became publicly owned in 1960.

During the fourth quarter of fiscal 2022, the company completed the $100 million 10b5-1 share repurchase plan entered into in December 2021. Under this plan, the company repurchased approximately 1.1 million shares (representing over 6 percent of total shares outstanding) at an average price of $90 per share. This consists of $8 million in the fourth quarter of fiscal 2021 and $92 million in fiscal 2022. As of January 28, 2023, the company has $50 million remaining under its Board of Directors prior share repurchase authorization.

Outlook
For fiscal 2023, a 53-week year ending on February 3, 2024, the company initiated sales and EPS guidance. The company expects net sales in a range of $1.62 billion to $1.66 billion as compared to net sales of $1.41 billion in fiscal 2022. In fiscal 2023, GAAP EPS is expected to be between $10.86 and $11.26 compared to fiscal 2022 GAAP EPS of $10.19. Adjusted EPS is expected to be between $11.50 and $11.90, compared to fiscal 2022 adjusted EPS of $10.88.

For the first quarter of fiscal 2023, the company expects net sales to be between $405 million and $425 million compared to net sales of $353 million in the first quarter of fiscal 2022. GAAP EPS is expected to be in a range of $3.44 to $3.64 in the first quarter compared to GAAP EPS of $3.45 in the first quarter of fiscal 2022. Adjusted EPS is expected to be between $3.60 and $3.80 compared to adjusted EPS of $3.50 in the first quarter of fiscal 2022.

The company anticipates higher interest expense at $5 million to $6 million, with about half that interest expense in the first quarter, as the company expects to significantly reduce debt during the year. This compares to $3 million in the full year of 2022. The company’s effective tax rate is expected to be between 25 percent and 26 percent.

Capital expenditures in fiscal 2023 are expected to be approximately $90 million compared to $47 million in fiscal 2022. The planned increase is primarily due to increased investment in various technology systems initiatives, the commencement of a significant multi-year project at the company’s Lyons, Georgia distribution center to enhance its direct-to-consumer throughput capabilities, increased Marlin Bar openings in Fiscal 2023, the addition of Johnny Was, which is increasing its store count by 10 or more stores this year, and increases in store openings in other brands.