Oxford Q4, Guidance Fall Short

Ben Sherman’s losses, accounting adjustments keep earnings below year-ago levels, analysts’ expectations.

Tommy Bahama’s indoor furniture.

Oxford Industries Inc. disappointed Wall Street with lower-than-expected fourth-quarter earnings and 2013 guidance late Tuesday.

The letdown was tempered by “beats” on revenue, both for the quarterly results and in projections for the new year, limiting damage to the stock in after-hours trading. Shares closed down 28 cents, or 0.5 percent, at $52.05 during the regular trading session and shed an additional 2.5 percent, to $50.73, in the first hour of after-hours trading.

In the three months ended Feb. 2, net income fell 25.2 percent to $5.3 million, or 32 cents a diluted share, from $7.1 million, or 43 cents, in the prior-year quarter. Stripping out an accounting adjustment and a change in the fair value of contingent consideration involving the purchase of Lilly Pulitzer, adjusted EPS was 65 cents, 5 cents below the 70 cents expected, on average, by analysts.

Revenues advanced 18.3 percent to $236.2 million from $199.7 million in the year-ago period, better than the $228.6 million estimated by analysts. Gross margin leaped 490 basis points to 53 percent of sales from 48.1 percent a year ago.

RELATED CONTENT: WWD Earnings Tracker >>

The Tommy Bahama, Lilly Pulitzer and Lanier Clothes units all registered double-digit increases in sales, led by Lilly Pulitzer’s 25.9 percent growth to $29.1 million.

Ben Sherman’s sales dropped 4.8 percent, to $24.7 million, and its operating loss grew to $4.5 million from a loss of $254,000 in the 2011 quarter.

“We are taking specific actions to stabilize and improve this business,” said Thomas Chubb 3rd, president and chief executive officer of Oxford, “but the impact of these challenges is expected to continue into 2013, particularly in the first half.”

Against that backdrop, Oxford projected first-quarter EPS of between 72 and 82 cents, below the $1.20 earlier estimated by analysts, with revenues of between $230 million and $240 million versus estimates of $255 million. Full-year guidance was for sales of $930 million to $945 million, better than the $928.2 million expected, and EPS of between $3 and $3.15, below the earlier estimate of $3.24.

In a call with analysts, Chubb said that after adding 12 domestic stores in 2012, Tommy Bahama is on track to open another 12 this year. In addition to the U.S., the brand branched out internationally for the first time in fiscal 2012 and there are now nine stores operating in the Asia-Pacific region. The newest store, in Yokohama, Japan, opened last week and a unit in Tokyo’s Ginza district is on tap for later this week.  

“We believe Japan is a huge opportunity for us with its large, well-developed consumer market and the enthusiasm for American brands there,” Chubb said. “We believe that building Tommy Bahama’s international platform is an excellent long-term investment for Oxford and the runway it creates is substantial.”

Terry Pillow, ceo of Tommy Bahama Group, said the brand achieved several milestones in fiscal 2012 including achieving $500 million in net sales, operating over 100 domestic stores and generating over $100 million in women’s sales. Women’s wear now accounts for 28 percent of sales. 

Turning to Lilly Pulitzer, Chubb said the company opened four stores for the brand in 2012, the first new store openings since 2009. “These new stores are performing very well and we would like to see four to six new carefully placed stores each year for the foreseeable future,” he said. Milestones for this brand include sales of over $100 million, he said, as revenues hit $122.6 million.

For both brands, Chubb said e-commerce continues to be a growth engine, now representing over 10 percent of Tommy Bahama’s sales and over 20 percent of Lilly Pulitzer’s.

At Lanier Clothes, operating margins rose to just over 10 percent on sales of $107 million. “While tailored clothing has been a softer category, we believe we are well positioned and continue to see and pursue opportunities to grow this business profitably,” Chubb said. “We believe opportunities exist to grow our trouser business, expand in the new channels of distribution and offer more tailored clothing at higher price points.”

At the beleaguered Ben Sherman division, where sales in fiscal 2012 dropped 10 percent to $82 million and operating losses increased to $10.9 million, Chubb blamed the results primarily on “poor execution of our strategy. With that said, with 69 percent of our business outside the U.S. predominantly in the U.K. and Europe, we also can’t overlook the significant negative impact of the economy on the Ben Sherman business,” he added.

Chubb said the company is “very focused on getting this business on a firmer footing in fiscal 2013” through expense reductions in distribution costs and marketing expenses that will be “most significant in the second half of the year,” and “exiting from customer relationships that are not profitable. While this will put an additional strain on the top line, we need to direct our resources on the areas where Ben Sherman has the most potential to be profitable, such as e-commerce,” he said.

Chubb said the company is expecting a 50 percent reduction in the brand’s operating loss in fiscal 2013 compared to fiscal 2012 and to break even from a cash flow perspective. 

For the company as a whole for the full year, net income grew 6.6 percent to $31.3 million, or $1.89 a diluted share, while revenues increased 12.7 percent to $855.5 million.