The rising threat of Amazon coupled with the shrinking traditional retail channel and the growth of off-price selling is prompting Oxford Industries to heighten the focus on its most-distinctive brands: Tommy Bahama, Lilly Pulitzer and Southern Tide.
In a conference call following the company’s fourth-quarter results, Thomas Chubb, chairman and chief executive officer, said: “It is more important than ever that brands be very specific and definite in what they stand for and that they remain true to that brand message. We believe that going forward there will be fewer multibillion dollar megabrands. It will be more important than ever to be the first choice of a few rather than the second choice of many.”
Chubb said the Atlanta-based company has identified some key objectives for 2017, notably to take a “conservative stance on new store openings and renewals of existing stores,” improving e-commerce and mobile operations, revising its approach to outlet stores and “managing our department store exposure very carefully.”
“Department stores still provide meaningful gross margin contributions in each of our businesses and can still be a good vehicle for customer acquisition,” he said. “At the same time, we need to be careful to not let their struggles end up tarnishing the integrity of our brands.”
Improving the operating performance at Tommy Bahama is also a top priority, Chubb said. In-store traffic at the brand’s 168 stores was down 10 percent in 2016 and as a result, there will be no net increase in the number of units this year.
There was a bright spot: the stores’ food and beverage operation. A Marlin Bar concept that recently opened in Florida has “outpaced our expectation,” he said, and is also driving business to the retail side of the store. As a result, this concept will be evaluated for how it can help drive profitable growth for the brand. The Marlin Bar is more casual and offers walk-up service and cocktails with outdoor seating.
The Tommy Bahama outlets are not performing up to expectations and the brand will begin offering clearance merchandise within its regular-price stores going forward, “which is a new practice for Tommy Bahama,” Chubb said.
Additionally, the brand’s women’s division is still struggling as the mix “did not have the right balance of styles to drive the sales that we had hoped to achieve,” he said. This year, he hopes signature Tommy Bahama product such as swimwear, coverups, knit dresses and a new handbag collection “will help us gain much-needed traction.”
Turning to Lilly Pulitzer, that brand managed to post a 14 percent increase in sales in fiscal 2016 and operating margins rose to 22 percent, Chubb said. So this year, the company will grow the brand’s 40-store retail footprint and will work to enhance its e-commerce business as well.
Southern Tide, Oxford’s newest and smallest brand, “delivered a nice performance in 2016 despite the environment,” he said, and its fledgling women’s business is showing “early success.” Other growth initiatives include expanding the three-unit store concept and enhancing e-commerce.
Lanier Apparel, while still generating strong free cash flow with very little capital investment, is starting to experience challenges, the ceo said, due to its dependence on the department store channel and the corporation is looking closely at how to mitigate those challenges.
Oxford said on Thursday that fourth-quarter earnings per share from continuing operations fell to 72 cents a share from $1.06 a year earlier. Sales increased to $261 million from $259.6 million.
The quarter was impacted by a $7.1 million, or 27 cent per share, writedown for inventory markdowns, severance and the closure of three outlets in the Tommy Bahama division. Tommy Bahama’s gross profits fell 8 percent to $105.7 million from $115 million on a 5 percent sales decline to $186.1 million from $195.9 million in the prior year’s quarter.
Without those charges, Oxford’s overall performance was in line with the company’s most-recent guidance.
For the year, EPS from continuing operations were $3.27 compared to $3.54 in the prior year. Net sales increased 6 percent to $1.02 billion.