Release Date: June 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Oxford Industries Inc (OXM, Financial) delivered sales and adjusted EPS within guidance ranges despite macroeconomic headwinds.
- The company expects to make up about half of the first quarter shortfall in wholesale over the remaining three quarters of the year.
- Positive comps are expected for the full year, with growth in all brands and direct-to-consumer channels.
- Strong cash flow is anticipated for 2024, enabling continued investments in the business.
- New store openings and distribution capacity rebalancing are expected to support future growth.
Negative Points
- Net sales were down $22 million or 5% compared to the first quarter of fiscal 2023.
- Wholesale sales declined by $17 million year-over-year in the first quarter.
- Direct-to-consumer businesses experienced a 7% negative comp due to cautious consumer spending.
- Adjusted gross margin contracted by 40 basis points to 65.4%, driven by higher promotional events.
- SG&A expenses increased by 5% due to investments in new stores and the addition of the Jack Rogers brand.
Q & A Highlights
Q: Could you provide some color on the trends by brand embedded in the second quarter guidance and any color by brand on the exit rate leaving the first quarter?
A: We're expecting positive comps for all our brands in the second quarter, with mid-single-digit growth. The performance has accelerated as the quarter has progressed, with June being stronger than May. Last year's second quarter had a negative 5% comp, making this year's comparison easier.
Q: On gross margins, you called out some contraction expected for 2Q and 1Q, but you're guiding to flat for the year. Can you help us understand the shaping there?
A: We expect new stores to be operating, especially in the fourth quarter, which will boost our direct business. The level of promotions should be more like-for-like in the second half, leading to gross margin expansion.
Q: Could you elaborate on the wholesale side of the business and potential for new door growth for Tommy Bahama and Lilly Pulitzer?
A: Last year's first quarter was robust, leading to a tough comparison. Retailers were cautious due to softer consumer demand, resulting in a $17 million year-over-year decline. However, our forward order book looks solid, and we expect to make up about half of the first quarter shortfall over the balance of the year. Lilly Pulitzer has opportunities for door expansion, while Tommy Bahama can grow dollars in existing doors and expand its women's wholesale business.
Q: How are you addressing consumer cautiousness, and do you feel you have the right assortment to deliver newness?
A: Newness is resonating with consumers. We have covered super casual and athleisure products well but see an opportunity in everyday items that can be worn to the office or out to dinner. We expect our assortments to improve as the year progresses.
Q: On the updated sales guidance, what was the prior outlook, and where are you seeing under or over-performance across the brand's portfolio?
A: Originally, we expected mid-single-digit comps for the year, but now we expect slightly positive comps. All brands are seeing similar cautious consumer behavior, with traffic up but conversion down. Johnny Was had a standout performance in e-commerce during the first quarter.
Q: Regarding SG&A expenses, are you reducing expectations due to lower sales?
A: SG&A has been moderated but will still be higher year-over-year. For Q2 and Q3, SG&A will be about $20 million higher, and for Q4, about $10 million higher due to one less week in the quarter.
Q: What is driving the comp inflection in 2Q, and is it due to easier comparisons or new product introductions?
A: The easier comparison to last year is a factor, but the shift in promotional events at Lilly Pulitzer will result in strong comps for the second quarter. We have seen positive comps quarter-to-date, with sequential improvement.
Q: Are you seeing any price resistance from consumers, or is it just general cautiousness?
A: When consumers like a product, they are willing to pay the marked price. The Lilly Pulitzer Capsule collection, priced 2-3 times higher than normal, sold out quickly. Consumers are looking for deals and being selective about purchases.
Q: Have you seen a similar inflection to positive comps at Tommy Bahama in 2Q?
A: All brands have seen a good start to the second quarter, with positive comps.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
