ATLANTA — As Oxford Industries transitions to lifestyle brands and away from private label, market professionals have indicated the company, which owns Tommy Bahama and Ben Sherman, may soon sell another piece of its business to Li & Fung.
Oxford sold its Womenswear Group, comprised mostly of private label businesses distributed to the mass market, to the Hong Kong–based sourcing company in June 2006. Now, the word is that Oxford is considering selling its Oxford Apparel Group, which represents 30 percent of sales, to Li & Fung. As one Wall Street banker said, “It’s a natural extension.” Oxford had no comment, and DNR was unable to reach Li & Fung by presstime.
J. Hicks Lanier, chairman and CEO of Oxford, said at its annual stockholders meeting last week that the company will stay focused on lifestyle brands and direct-to-consumer business. In fiscal 2003, Oxford had no lifestyle brands and private label represented 80 percent of sales, Thomas Chubb, executive vice-president, said. In fiscal 2007, lifestyle brands represented 55 percent of business and private label was down to 26 percent. Tommy Bahama alone accounts for 41 percent of sales; Lanier Clothes, with 15 percent of sales, and Oxford Apparel are comprised of private label and licensed brands.
Chubb said Oxford Apparel Group last week reported a sales decline of 34 percent in the first quarter. Chubb said sales were down there because Oxford was exiting businesses that weren’t doing well. “We’re not so much focused on top line with this group as we are with getting good returns,” he said. The unit’s consolidated gross margins for the quarter increased 41 percent, driven by an increase in branded and retail sales. Brands in this group include Oxford Golf, Solitude, Hathaway and Ely & Walker.
Oxford Industries reported Oct. 9 that consolidated net sales for the first fiscal quarter fell 16 percent to $237.9 million from $284.1 million. Oxford had originally projected sales of $245 million to $255 million. Net income fell 56 percent to $4.8 million, or 27 cents per diluted common share from continuing operations, from $10.95 million, or 63 cents per share, a year ago. Lanier called the first quarter an “aberration,” and said Oxford believes the second quarter will be flat to slightly up. Investors didn’t like the news. Oxford’s stock fell $7.85, or about 21 percent, to $28.40 on the day the company announced results.
Even Tommy Bahama wasn’t immune to the consumer debt and problems in the mortgage market that hurt first quarter results. The brand’s 4.8 percent decline in sales caught Oxford off guard.
“We hadn’t had a hiccup in that business,” Lanier said. “We assumed our consumers were affluent enough not to have those things hurt them but we were wrong.” Sales, he continued, fell more than Oxford had planned because of the drop in Tommy Bahama business.
Challenging consumer credit-card and residential real-estate markets, particularly in Florida, California, Arizona and Nevada, hurt retail sales in Tommy Bahama’s own stores and its retail customers’ stores in the period. Those four states represented approximately two-thirds of Tommy Bahama’s own retail store sales in fiscal 2007.
“On a brighter note,” Lanier continued, “the past couple of weeks have been pretty encouraging in our [Tommy Bahama] stores. We’re back to hitting our plan.”
Tommy Bahama has been growing on both sides of its business, adding licensed products and a Web site, Tommybahama.com, that debuted in early October with men’s apparel and accessories. Women’s will be added in a couple of weeks. Tommy Bahama also opened eight to nine stores in 2007, most recently one in San Destin, Fla.
The Ben Sherman brand posted a sales decline of 3.9 percent to $37.6 million in the quarter, which was expected as Oxford continues to see the effects of tighter distribution of Ben Sherman products associated with the brand’s repositioning. That’s particularly true in the U.K., Ben Sherman’s roots, where the brand is in a slightly lower tier of distribution than in the U.S., according to Chubb. He added that retail conditions in the U.K. have been “abysmal.”
The brand is expanding globally and has “excellent penetration in Germany and Scandinavia with the best retailers,” Chubb said. Oxford now is pinpointing Asia and the Middle East for expansion. Chubb said Ben Sherman is offering a single collection for spring 2008, rather than a more moderate one for the U.K. and a more upscale one for everywhere else. “It’s important to have a single line with a single message,” he said.
Oxford also is pleased with the performance of Ben Sherman stores, now open 18 to 24 months.
Sales at Lanier Clothes fell 12.5 percent in the quarter. Chubb said about half of the unit’s business is with J.C. Penney and Macy’s, where tailored clothing business “just isn’t happening at all.” Fiscal 2007 was tough for both Oxford’s top and bottom line, he said, and the principal contributor to that was the moderate tailored clothing business. However, he added, “We think that business is well positioned and we’re prepared to take advantage of the market when the sluggishness goes away. But now we’re managing risks [i.e., inventories] and expenses for bottom-line return.”