Oxford Industries (OXM, Financial) saw a significant drop of 7% following disappointing Q3 earnings and guidance. The apparel company, known for brands like Tommy Bahama, Lilly Pulitzer, and Johnny Was, cited macroeconomic challenges, including a tough consumer environment, election distractions, and hurricane impacts in the Southeastern US.
Key Points:
- OXM missed EPS estimates for the fourth consecutive quarter, with substantial misses in the last two. Analysts expected a profit, but OXM reported a loss. Sales fell 5.2% year-over-year to $308 million, with declines across all core brands. Q4 guidance showed downside EPS, and revenue guidance was slightly below expectations.
- OXM had warned of a soft Q3, initially expecting to meet forecasts, but hurricanes pushed results below expectations. The election distracted its older, headline-sensitive customer base, particularly impacting the Southeastern US, where Florida accounts for a third of its DTC business.
- The consumer's sensitivity to years of high inflation compounded issues. OXM’s strategy of selling premium brands at full price, with minimal off-price exposure, is seen as a long-term strength but currently poses a challenge.
- Customer traffic remains healthy, but reduced purchase conversion affects results. Despite short-term challenges, OXM continues to invest in new stores, Marlin Bars, a distribution center, and technology, increasing expenses amid weak sales, impacting EPS.
- Looking to Q4, November started poorly but improved post-election, with a strong Thanksgiving weekend. Although the holiday season is shorter due to a late Thanksgiving, OXM is confident in its holiday offerings and marketing. Indigo Palms was a standout performer in Q3 and excelled in November.
Despite a higher-income customer base, OXM is still affected by macroeconomic issues as consumers focus on value. Next year, OXM aims to stabilize and expand operating margins, encouraged by recent sales trends and forward wholesale bookings. The stock has faced pressure recently, and the strong market reaction suggests uncertainty about reaching a bottom.
