OXFORD INDUSTRIES INC Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Macro Environment: Faced pressured macro environment with higher tariffs, elevated promotions, and cautious consumer behavior. Team navigated challenges, delivering net sales and adjusted EPS within/above guidance.
• Lilly Pulitzer: Had strong Q2 with positive DTC comps. Launched innovative products like the Linen Seaspray jacket and Lilly's Vintage Vault, which exceeded expectations.
• Tommy Bahama: Work underway to improve performance. Insights from field work led to adjustments in late summer deliveries. Boracay Island chino launch was successful with high sell-throughs.
• Tariff Mitigation: Teams made progress in mitigating tariff exposure via supply chain shifts and early product delivery. Gross margins reflected discipline despite tariff pressure.
• Capital Projects: Lyons, Georgia distribution center on schedule. Aim to open 3 new Marlin Bar locations and ~15 net new full-price stores by year-end.

Segment Performance

• Lilly Pulitzer: Posted positive direct-to-consumer total comparable sales in Q2. While total sales were slightly down y-o-y, the decline was driven by lower wholesale sales, partially offset by a low single-digit positive comp. Positive comps in Lilly Pulitzer, along with growth in emerging brands, helped offset declines in other segments.
• Tommy Bahama: Second quarter results didn't meet goals. Insights from field work led to improvements in late summer deliveries. The Boracay Island chino launch had high sell-throughs across direct-to-consumer and wholesale channels.
• Johnny Was: Faced headwinds in Q2. A comprehensive plan is underway to improve merchandising strategy, brand storytelling, marketing, and pricing to reestablish momentum.
• Emerging Brands Group: Delivered solid revenue growth from new stores and positive comp store sales. Brands like Southern Tide, Beaufort Bonnet Company, Duck Head, and Jack Rogers showed strong customer appeal and brand momentum.

Guidance

• Net Sales: Expected to be between $1.475 billion and $1.515 billion for FY2025, a decline of 3% to slightly negative compared to FY2024.
• Comp Sales: Flat to modestly positive trends expected for Q3 and Q4.
• Gross Margin: Expected to contract ~200 basis points primarily due to tariffs, partially offset by mitigation efforts.
• Adjusted EPS: Anticipated to be between $2.80 and $3.20 for FY2025, down from $6.68 in FY2024.

Risks

• Tariffs: Incremental tariff exposure of ~$80 million initially, with mitigation efforts reducing impact, but still a key margin driver.
• Promotional Activity: Consumer responsiveness to value-driven shopping weighs on margins due to increased promotional periods.
• Consumer Behavior: Cautious consumer behavior affects sales across segments.

Question and Answer

Q: Ashley Owens asked about the strength of comp sales and promotional activity.

A: Thomas Chubb stated comps were positive, mostly traffic-driven; promotions mostly followed historical patterns, with some adjustments like Tommy Bahama Friends & Family shifting from early September to August.

Q: Janine Stichter inquired about pricing and gross margin.

A: Thomas Chubb explained selective price increases on an item-by-item basis, with examples like the Boracay Island chino launching at a higher price point with strong sell-through. K. Grassmyer added Tommy Bahama Friends & Family timing change worked well.

Q: Dana Telsey asked about market share and marketing spend.

A: Thomas Chubb noted retail was stronger than e-commerce; marketing tactics were similar to past but with some twists, particularly around the holiday season.

Q: Mauricio Serna asked about tariff impact and inventory.

A: K. Grassmyer explained tariff mitigations reduced exposure, and inventory was expected to moderate as tariffs settled, with acceleration of inventory purchases no longer needed.

Q: Joseph Civello followed up on price increases and Lilly's direct vs wholesale.

A: Thomas Chubb said price increases were selective, with Lilly's specialty accounts cautious but major accounts performing well; direct business had positive comps offsetting some wholesale declines.

Q: Tracy Kogan asked about CapEx and store growth.

A: K. Grassmyer stated CapEx expected to be ~$75M post-Lyons distribution center completion; store growth slowed, with pipeline for Southern Tide, Tommy, and Lilly, but Johnny Was store openings slowed.