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Q1 Profit Slides at Oxford Industries

Bottom line flat at Lilly Pulitzer, down at Tommy Bahama and Ben Sherman.

Investments in its growing Tommy Bahama and Lilly Pulitzer brands pushed Oxford Industries Inc.’s profits down in the first quarter.

Profits were flat at Lilly Pulitzer and down at Tommy Bahama while the loss at Ben Sherman grew, with improvement not expected until the year’s second half.

Net earnings fell 24.3 percent to $13.6 million, or 82 cents a share, from $18 million, or $1.09, a year ago as selling, general and administrative expenses expanded. Even so, earnings per share came in 4 cents ahead of the 78 cents analysts projected.

Sales for the quarter ended May 4 inched up 1.4 percent to $234.2 million from $231 million. Sales at the Tommy Bahama business rose 6.6 percent to $150.4 million, while sales at the Lilly Pulitzer unit gained 10.7 percent to $39.4 million and Ben Sherman’s sales fell 29.5 percent to $12.2 million.

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Terry Pillow, chief executive officer of Tommy Bahama, noted that the brand’s comparable sales rose 10 percent, as a rebound in April offset weather-related weakness earlier in the quarter.

Thomas C. Chubb 3rd, president and chief executive officer of Oxford, commented, “During the quarter we made steady progress with respect to Tommy Bahama’s Asia-Pacific store rollout with the opening of our first two stores in Japan. In addition, early in the second quarter we expanded our presence in North America with the acquisition of nine stores in Canada previously operated by a licensee. Combined with a good pace of new Lilly Pulitzer store openings, we are looking forward to leveraging a significant increase in our overall retail presence.”

Chubb also said that the troubled Ben Sherman brand is making progress on “cost control as well as on the quality of our assortments and distribution. We remain optimistic that the actions taken will result in tangible improvements in the second half of fiscal 2013.”

Ben Sherman’s operating loss in the quarter rose to $4.8 million from a loss of $2.7 million a year ago, while Tommy Bahama’s profits fell 16.4 percent, to $21.4 million, and Lanier Clothes’ were off 39.2 percent to $2.5 million. Lilly Pulitzer’s profit was flat at $11 million.

For the full year, Oxford continues to project earnings of $3 to $3.15, which compares with adjusted earnings of $2.61 last year.

Eric Beder, analyst at Brean Capital LLC, elevated his price target for the stock to $71 from $70.

“We remain buyers of [Oxford] and view the company as one of the few key top- and bottom-line expansion stories in the retailing universe,” he wrote in a research note. “Further, with two value-added, underpenetrated and premium lifestyle brands in Tommy Bahama and Lilly Pulitzer, we believe Oxford Industries is also one of the few players in the mature apparel sector with the ability to surpass peak operating margins and register material bottom-line upside.”