Oxford Industries (OXM -3%) is experiencing a downturn after releasing underwhelming Q1 earnings and guidance. The apparel company, known for brands like Tommy Bahama, Lilly Pulitzer, and Johnny Was, missed EPS estimates for the second consecutive quarter and provided lower-than-expected guidance for Q2 and the full year.
- Despite benefiting from increased consumer travel, OXM noted a significant drop in consumer sentiment since March, leading to more cautious spending on discretionary items, including its core fashion resort apparel.
- Q1 revenue declined by 5.2% year-over-year to $398.2 million, with sales decreases across most full-price channels. The wholesale channel was particularly hard-hit, with a 16% drop in sales due to cautious inventory purchases by partners.
- On a positive note, OXM's forward order book looks strong, and the company expects to recover about half of Q1's wholesale shortfall over the next three quarters. Fall order books are also trending higher, and inventory levels in major department stores have improved.
- A change in promotional strategy impacted sales for the Lilly Pulitzer brand, which saw a 9.3% year-over-year decline to $88.4 million in Q1. However, OXM anticipates significant year-over-year sales growth for Lilly Pulitzer in Q2. Additionally, a 7% negative comp in direct-to-consumer (DTC) businesses contributed to the overall sales decline.
- Q2 comps have shown a positive trend quarter-to-date. As OXM anniversaries the cautious environment that began in Q1 last year, the company expects positive comps to continue through the year, including mid-single-digit comps for Q2 and improved comps in the second half of the year.
Initially, OXM's struggles were surprising given its older, higher net worth customer base, which is generally less affected by inflation. However, high price points and cautious consumer spending on discretionary items have impacted sales. The stock's limited decline may be due to OXM's prior warning of a weak Q1, which likely priced in some negativity. Despite the challenges, OXM still projects full-year topline growth across all brands and expects to benefit from easier comps in Q2-Q4.
