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Oxford Trims Outlook on Weak Wholesale

Second-quarter profits exceed expectations as advance and reorder businesses struggle.

A Tommy Bahama store

Shares of Oxford Industries Inc. retreated in after-hours trading Tuesday as the company brought down estimates for the year based on softness in its wholesale operations.

“Our direct-to-consumer business continues to perform well, but we have seen some erosion in our wholesale business,” said Thomas Chubb 3rd, president and chief executive officer of the Atlanta-based owner of the Tommy Bahama and Lilly Pulitzer brands. “Our second-half order books came in slightly below our expectation and we’ve seen some choppiness in our in-season reorder business.”

In the three months, net income more than tripled to $15.8 million, or 96 cents a diluted share, from $5 million, or 30 cents, in the 2012 quarter. Excluding charges related to the acquisition of the previously licensed Tommy Bahama business in Canada, adjusted earnings per share was $1.01, 3 cents better than the 98 cents expected by analysts.

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Revenues increased 13.6 percent to $235 million from $206.9 million in last year’s quarter. Gross margin rose 100 basis points to 58.2 percent of sales from 57.2 percent in the comparable 2012 quarter.

The “choppiness” at the wholesale level prompted Oxford to lower its earnings guidance for the full year to a range of $2.90 to $3.05 a share on sales of between $920 million and $930 million. Previous guidance, issued when first-quarter results were reported in June, was for EPS of $3 to $3.15 on revenues of between $930 million and $940 million.

Investors reacted to the cautious tone and sent Oxford’s shares down $4.60, or 7.1 percent, to $60.12 in the early stages of after-hours trading. Prior to the market’s close, they’d risen 86 cents, or 1.4 percent, to $64.72.

The second quarter produced strong results at Tommy Bahama and Lilly Pulitzer, sales and profit declines at Lanier Clothes and continued sales and profit erosion from the struggling Ben Sherman brand.

Helped by a 13 percent increase in comparable sales, much of it from e-commerce, Tommy Bahama’s revenues grew 20.2 percent to $153.2 million while operating profit expanded 43.8 percent to $23.8 million. Similarly, Lilly Pulitzer’s sales were up 23.5 percent, to $38.2 million, as comps rose 19 percent and operating income rose 29 percent to $9.6 million. Sales at Lanier were down 10 percent to $22.3 million with profit down 15.5 percent to $2 million.

Ben Sherman’s sales were down 19 percent to $16.3 million while its operating loss more than doubled to $3.8 million.