On its first quarterly call since acquiring Johnny Was in September, Oxford Industries Inc. said the California-based lifestyle apparel brand complements the company’s other brands and is well-positioned for continued double-digit growth.
Oxford Industries’ two biggest brands are Tommy Bahama and Lilly Pulitzer. Its Emerging Brands portfolio includes the Southern Tide casual activewear line, The Beaufort Bonnet Company children’s wear range and Duck Head fishing-themed collection.
“The brand has a clearly defined positioning, which drives emotional connection and strong engagement with its very loyal customer base,” said Tom Chubb, chairman and CEO, of Johnny Was on Oxford’s third-quarter conference call. “Johnny Was is priced a bit higher than our other brands and sits in the very attractive affordable luxury portion of the market.”
Chubb added, “The brand has an excellent balanced distribution model with 40 percent of sales coming through e-commerce bolstered by a fleet of 60-plus carefully located stores with attractive unit economics and a brand-enhancing and mutually profitable wholesale business. Currently generating annualized sales of over $200 million with operating margins in the mid to high-teen range, Johnny Was has a profitable growth trajectory ahead of it.”
Founded in 1987, sales in the trailing twelve-month period ending July 31, 2022 were $202 million, according to Oxford documents. Over that time period, e-commerce accounted for 41 percent of sales; retail, 34 percent; and wholesale, 25 percent. Johnny Was had 240,000 unique DTC customers over that timeframe with an average DTC order value of $290, 2.3 times the average order from Oxford’s existing premium portfolio of under $125.
Johnny Was operates 61 doors at an average size of 1,600 square feet netting average $700 per square feet. Wholesale outlets included Neiman Marcus, Saks Fifth Avenue. Bloomingdales, Dillard’s and Sundance.
Chubb said the brand also has “an excellent management team,” led by CEO Rob Trauber, “that has been in place for many years and is well aligned culturally and strategically with OXM. The Johnny Was an OXM corporate teams have been working hard on the integration and laying the foundation for future growth in the brand.”
Oxford paid $270 million for Johnny Was with the acquisition expected to be accretive to earnings this year. From a profit perspective, gross margins for Johnny Was were 70 percent in the twelve months ending July 31 with an operating margin of 17 percent, including $5 million in depreciation expense.
Scott Grassmyer, CFO and COO, said, “We’re excited to have added a business with annual net sales in excess of $200 million, the opportunity for double-digit top line growth in the future, the expectation of approximately 65 percent gross margins and mid to high-teen operating margins, excluding any inventory step-up charges and amortization of intangible assets.”
In the third quarter ended October 29, Oxford’s overall sales rose 26.4 percent to $313.0 million. Johnny Was contributed $22.7 million since the acquisition closed on September 19. Sales in the aggregated group of Tommy Bahama, Lilly Pulitzer and Emerging Brands grew 19 percent. Tommy Bahama’s sales grew 20 percent to $178.6 million, Lilly Pulitzer’s revenue gained 16 percent to $84.1 million; and the Emerging Brands portfolio’s sales gained 22 percent to $26.9 million.
Operating income was $27 million, compared to $31 million a year ago. This decrease reflects the gain on a sale of an unconsolidated entity in fiscal 2021, which was partially offset by improved operating income in Tommy Bahama. On an adjusted basis, operating income increased to $33 million compared to $27 million a year ago.
EPS on a GAAP basis was $1.22 compared to $1.54 in the third quarter of fiscal 2021. On an adjusted basis, EPS increased to $1.46 compared to $1.19 in the third quarter of fiscal 2021.
For it fiscal year ending January 28, 2023, the company raised its previously issued guidance due to a better-than-expected third quarter and the addition of Johnny Was. Sales for the year are now projected in the range of $1.395 billion to $1.410 billion as compared to net sales of $1.142 billion in fiscal 2021. Adjusted EPS is expected to be between $10.60 and $10.75 against $7.99 in fiscal 2021.
For the fourth quarter, sales are projected to be between $366 million and $381 million compared to $300 million in the fourth quarter of fiscal 2021. More than 60 percent of the sales increase is expected to be from Johnny Was sales. Grassmyer said, “These updated guidance figures also reflect strong holiday sales to date while contemplating the uncertainty as we believe shoppers are returning to pre-COVID holiday shopping patterns after shopping earlier in 2021.
Adjusted EPS in the fourth quarter is expected to be between $2.01 and $2.16 against $1.68 on an adjusted basis in the prior year.
Photo courtesy Johnny Was
