Oxford Industries, Inc., the parent of Tommy Bahama, Lilly Pulitzer and Johnny Was brands, consolidated net sales in the first quarter of fiscal 2024 decreased 5 percent as declines of 5.8 percent for the Tommy Bahama brand and 9.3 percent at Lilly Pulitzer offset a gain of 3.5 percent at Johnny Was.

Consolidated net sales in the first quarter of fiscal 2024 decreased to $398 million compared to $420 million in the first quarter of fiscal 2023. EPS on a GAAP basis was $2.42 compared to $3.64 in the first quarter of fiscal 2023. On an adjusted basis, EPS was $2.66 compared to $3.78 in the first quarter of fiscal 2023.

Tom Chubb, chairman and CEO, commented, “Our strong brands and excellent team focused on executing our strategy allowed us to deliver sales and adjusted EPS within our guidance ranges for the first quarter despite continued macroeconomic headwinds and lower levels of consumer sentiment. While most economic indicators remain fairly positive, consumer sentiment has dropped meaningfully from levels at the start of this year and has driven the consumer to become more cautious than originally anticipated in her discretionary spending across our channels of distribution. Encouragingly, our comparable sales trend has improved sequentially and is positive in the second quarter to date. However, given the continued choppiness in the market and lack of sustained positive momentum, coupled with the drop in consumer sentiment, we believe it is prudent to adopt a more conservative outlook for the balance of the year and, therefore, are lowering our fiscal 2024 sales and EPS guidance.

“Despite these near-term challenges, we still expect topline growth in all our brands, growth in all direct-to-consumer distribution channels and positive comps for the full year. We also expect a strong 2024 from a cash flow perspective and will continue investing in the future of our business. These investments will provide the ability to continue to deliver profitable growth and strong cash flow on a sustained basis.”

Chubb concluded, “All of this is achieved through the efforts of our remarkable people to whom we are grateful as always.”

First Quarter Fiscal 2024 versus Fiscal 2023

  • Consolidated net sales decreased 5 percent to $398 million. Full-price direct-to-consumer (DTC) sales decreased 3 percent to $257 million versus the first quarter of fiscal 2023. Full-price retail sales of $137 million were 2 percent lower than the prior-year period. E-commerce sales decreased 5 percent to $120 million compared to last year. Outlet sales were $18 million, a 6 percent increase versus prior-year results, primarily driven by a $1 million increase in Tommy Bahama. Food and beverage sales grew 8 percent to $35 million compared to last year. Wholesale sales of $88 million were 16 percent lower than the first quarter of fiscal 2023.
  • Gross margin was 64.9 percent on a GAAP basis, compared to 65.5 percent in the first quarter of fiscal 2023. The decrease in gross margin was primarily due to sales during promotional events representing a higher proportion of net sales and a $1 million higher LIFO accounting charge versus last year, partially offset by proportionally lower wholesale sales. Adjusted gross margin, which excludes the effect of LIFO accounting, decreased to 65.4 percent compared to 65.8 percent on an adjusted basis in the prior year period.
  • SG&A was $213 million compared to $203 million last year. This increase was primarily driven by expenses related to 27 new store openings since the first quarter of 2023, pre-opening expenses related to approximately 15 to 20 additional stores planned to open during the remainder of fiscal 2024, including 4 new Tommy Bahama Marlin Bars, and the addition of Jack Rogers. On an adjusted basis, SG&A was $210 million compared to $200 million in the prior-year period.
  • Royalties and other operating income decreased by $1 million to $7 million compared to last year. This decrease was primarily due to the absence of a $2 million gain recorded in the first quarter of 2023 on the sale of a discontinued manufacturing facility in Mexico.
  • Operating income was $52 million, or 13.2 percent of net sales, compared to $80 million, or 19.1 percent of net sales, in the first quarter of fiscal 2023. On an adjusted basis, operating income decreased to $57 million, or 14.4 percent of net sales, compared to $83 million, or 19.8 percent of net sales, in last year’s first quarter. The decreased operating income includes the impact of lower sales, lower gross margin, and higher SG&A as the company continues to invest in the business.
  • Interest expense was $1 million compared to $2 million in the prior year period. The decreased interest expense was primarily due to a lower average outstanding debt balance during the first quarter of fiscal 2024 than the first quarter of 2023, driven by strong cash flows allowing for $76 million of debt reduction since the first quarter of fiscal 2023.
  • The effective tax rate increased to 25.6 percent in the first quarter of fiscal 2024 compared to 24.9 percent in the prior year period due to certain unfavorable discrete items.

Balance Sheet and Liquidity
Inventory decreased $35 million on a LIFO basis and $26 million, or 10 percent, on a FIFO basis compared to the end of the first quarter of fiscal 2023. Inventory decreased in all operating groups except Johnny Was primarily due to the continued initiatives to manage inventory purchases and reduce on-hand inventory levels closely.

During the first quarter of fiscal 2024, cash flow from operations was $33 million compared to $53 million in the first quarter of fiscal 2023. The cash flow from operations in the first quarter of fiscal 2024 provided sufficient cash to fund $12 million of capital expenditures, $11 million of dividends and $11 million of debt repayment.

As of May 4, 2024, the company had $19 million of borrowings outstanding, compared to $94 million at the end of the first quarter of last year. Also, the company had $8 million of cash and cash equivalents versus $10 million of cash and cash equivalents at the end of the first quarter of fiscal 2023. The cash and cash equivalents balance as of May 4, 2024, represents typical cash amounts maintained on an ongoing basis in its operations, typically approximately $10 million at any given time.

Dividend
Oxford Industries Board of Directors declared a quarterly cash dividend of $0.67 per share. The dividend is payable on August 2, 2024 to shareholders of record as of the close of business on July 19, 2024. The company has paid quarterly dividends since it became publicly owned in 1960.

Outlook
The company revised its sales and EPS guidance for fiscal 2024, ending on February 1, 2025. The company now expects net sales to range from $1.59 billion to $1.63 billion, compared to net sales of $1.57 billion in fiscal 2023. In fiscal 2024, GAAP EPS is expected to be between $7.99 and $8.39 compared to fiscal 2023 GAAP EPS of $3.82. Adjusted EPS is expected to be between $8.60 and $9.00, compared to fiscal 2023 adjusted EPS of $10.15.

For the second quarter of fiscal 2024, the company expects net sales to be between $430 million and $450 million compared to net sales of $420 million in the second quarter of fiscal 2023. GAAP EPS is expected to range from $2.82 to $3.02 in the second quarter compared to GAAP EPS of $3.22 in the second quarter of fiscal 2023. Adjusted EPS is expected to be between $2.95 and $3.15 compared to adjusted EPS of $3.45 in the second quarter of fiscal 2023.

The company anticipates interest expense of $2 million in fiscal 2024, including $1 million in the first quarter of fiscal 2024, with interest expense expected to be less than $1 million each of the second, third and fourth quarters of fiscal 2024. The company’s effective tax rate is expected to be approximately 24 percent for the second quarter of fiscal 2024 and roughly 25 percent for the full year of fiscal 2024.

Capital expenditures in fiscal 2024, including the $12 million in the first quarter of fiscal 2024, are expected to be approximately $170 million compared to $74 million in fiscal 2023, a reduction from the company’s prior estimate due to the timing of cash flow related to investments for future growth, including the timing of spend associated with a multi-year project to build a new distribution center in Lyons, GA to ensure direct-to- consumer throughput capabilities for its brands.

The planned year-over-year increase in capital expenditures includes approximately $90 million budgeted in fiscal 2024 for the distribution center project. Additionally, Oxford plans to invest in new brick-and-mortar locations, relocations and remodels of existing locations, resulting in a year-over-year net increase of full-price stores of approximately 25 by the end of fiscal 2024. Oxford said it would also continue investing in its various tech systems initiatives, including e-commerce and omnichannel capabilities, data management and analytics, customer data and insights, cybersecurity, and automation, including artificial intelligence and infrastructure.

Image courtesy Tommy Bahama