Ongoing problems at Ben Sherman, complicated by the disruptions of Hurricane Sandy, led Oxford Industries Inc. to report third-quarter earnings that missed estimates, lower full-year guidance and terminate Ben Sherman chief executive officer Pan Philippou.
During the three months ended Oct. 27, net income at the Atlanta-based owner of Tommy Bahama and Lilly Pulitzer expanded 85.3 percent to $3 million, or 18 cents a diluted share, from $1.6 million, or 10 cents, in the year-ago period. Adjusted earnings per share hit 19 cents, 2 cents below Wall Street’s expectations. Despite double-digit contraction at Ben Sherman and the Lanier Clothes unit, sales grew 6.5 percent to $181.4 million from $170.3 million. Gross margin moved to 53.4 percent of sales from 52.1 percent a year ago.
At the London-based Ben Sherman, which broke even on an operating basis during the third quarter of 2011, the operating loss amounted to $2.1 million as sales fell 21.5 percent to $19.8 million.
Philippou, the former Diesel executive who joined Ben Sherman as ceo in 2010, left the company last month. While the company seeks a successor, Thomas Chubb, the company’s president, will manage the business on an interim basis.
“We weren’t looking for a change in direction,” Chubb told WWD, “only for more focus and better execution. We have a great team in place and a lot of confidence in the team in London. Pan undertook a lot of change and brought in a lot of fine people. He did a lot of good things to reset the trajectory of the business. We don’t feel good about where the business is at the moment but we feel very good about its potential.”
On a conference call Tuesday evening following the disclosure of results, Chubb had linked the poor performance at the division to “a misstep in Ben Sherman’s merchandise mix, which resulted in too much of the product offering in styles at the high end of the price range,” complicated by “difficult economic conditions in the U.K. and Europe, as well as Ben Sherman’s exit from certain moderate-tier wholesale accounts in the U.K.”
He noted that Ben Sherman will undertake expense reduction but that it isn’t expected to hit the unit’s personnel hard. “We’ve had a reduction in sales over the last few years and there are some things we can do — primarily in the back office — to reduce the expense structure without hurting our ability to do business effectively.” Without specifying, he said the company would also abandon projects with limited upside potential. Chubb will succeed J. Hicks Lanier as ceo of Oxford at the conclusion of the year.
Oxford acquired Ben Sherman, best known for the “Mod” approach it took to men’s wear in the Sixties, in July 2004 for 80 million pounds, or approximately $145 million. In 2005, its sales were $154.1 million, a figure that was down to $91.4 million last year despite a $4.5 million increase in sales over 2010. Operating losses in 2010 and 2011 were $2.7 million and $2.5 million.
In the third quarter, Tommy Bahama’s sales rose 11.6 percent to $103.2 million while expenses related to its international retail rollout and the opening of a New York flagship depressed operating income, which fell 27.2 percent to $3.4 million. Selling, general and administrative expenses more than quadrupled, to about $5.1 million, as the firm pursued expansion. Retail units grew to 110, including seven outside the U.S., from 94 a year ago.
Hurricane Sandy affected 24 of Oxford’s stores “to varying degrees,” according to Lanier. It pushed the opening of the Tommy Bahama New York store back two weeks, to Nov. 27, with the on-premise restaurant and bar now expected to open on Dec. 14.
Lilly Pulitzer continued to perform well, with sales up 61.6 percent to $26.9 million and operating income of $3.5 million versus a year-ago loss.
With the weak third-quarter performance and expectations of ongoing difficulties at Ben Sherman, the firm reduced its full-year guidance and projected fourth-quarter sales of between $225 million and $235 million and adjusted EPS in a range of 64 to 74 cents. The sales projection incorporated the $234.3 million earlier expected by analysts, but EPS guidance was well below the 93 cents that had served as the consensus estimate of analysts.
On Wednesday, shares fell $4.22, or 8 percent, to $48.56 in Nasdaq trading.
Eric Beder, analyst at Brean Capital, maintained his “buy” rating and $60 target price on the stock despite the “moribund” status of Ben Sherman. “We believe the Oxford Industries upside story remains fully intact and we would use the recent weakness in the stock to become even more aggressive in one of our key small-cap players,” he wrote in a research note, adding that he remains convinced of Oxford’s ability to “stabilize” Ben Sherman in the year ahead.
For the nine months, net income rose 17.3 percent to $26 million, or $1.57, as sales rose 10.7 percent, to $619.3 million.
Supermodel @helenachristensen teamed up with longtime friend and designer @camillastaerk on a joint @paredeyewear collaboration. The lineup features three styles and 11 offerings, all of which embody a vintage feel. Get all the details on how they celebrated the collab on WWD.com. #wwdaccessories #wwdeye (📷: @slovekinpics)
“It’s a hard industry to keep motivated, as well, so finding different subjects and people is what makes it worth it – when you’re like, oh, I’ve met great people, I feel like I’ve done something good, and I feel proud of having done this,” said French actress Stacy Martin on being grateful for the variety of roles she’s take on. Read @ktauer’s full interview with Martin on her her latest film “Godard Mon Amour.” #wwdeye (📷: @danieldorsa)
After showing in front of the Eiffel Tower for his last two women’s ready-to-wear collection, it looks like @anthonyvaccarello may be heading to the Big Apple. Sources say the designer will stage his next @ysl show in NYC on June 6. Get all the details on WWD.com. #wwdnews #wwdfashion (📷: @aitorrosasphoto)
EXCLUSIVE: Two and half months after John Targon, cofounder and codesigner of Baja East, was hired as creative director of the contemporary division at Marc Jacobs, he has left the company, WWD has learned. Marc Jacobs International, which is owned by LVMH Moët Hennessy Louis Vuitton, confirmed Targon’s departure in a statement: “John Targon is a talented designer and we appreciate the work he has done here. Ultimately working together did not make sense for the brand and we wish him the best.” Read the story by @jessiredale, link in bio. #wwdnews
@theluxurycollection is officially launching a collection, tapping Sofia Sanchez de Betak for the capsule. Over 30 styles will be featured in the Chufy x The Luxury Collection, debuting next month at Bergdorf Goodman, The Webster, FiveStory and more. De Betak, known as “@chufy,” drew inspiration for the collection from her trips to Japan in the past year #wwdfashion
@lhd, founder and CEO of @thewebster, has teamed up with @lebonmarcherivegauche for the European launch of her ready-to-wear line, LHD. The launch will come with an exclusive pop-up opening today that’s set to run through May 20. Located on the second floor, it carries her debut Miami-themed resort collection, launched in November as see-now-buy-now. #wwdfashion