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.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast