Release Date: September 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Oxford Industries Inc (OXM, Financial) reported strong cash flows, allowing for continued investment in the business, debt repayment, and shareholder dividends.
- The company saw a positive response to new and differentiated products, particularly in fashion, during the quarter.
- Inventories were down year-over-year, indicating effective inventory management.
- The launch of the Tommy Bahama Indigo Palms collection has shown early success, boosting optimism for future growth.
- Oxford Industries Inc (OXM) is making strategic investments, such as relocating Johnny Was' distribution center to reduce operating costs.
Negative Points
- Sales of $420 million and adjusted EPS of $2.70 fell below guidance due to a continued consumer pullback.
- The company experienced a slowdown in its Florida market, which accounts for over one-third of its brick-and-mortar business.
- Gross margin was pressured by a higher proportion of sales occurring during promotional events.
- Adjusted SG&A expenses increased by 5.7%, driven by investments in new stores and the acquisition of Jack Rogers.
- The company revised its full-year forecast downward, expecting net sales to decline by 2% to 4% compared to the previous year.
Q & A Highlights
Oxford Industries Inc (OXM) Q2 2024 Earnings Call Highlights
Q: Can you provide more details on your promotional strategy for the back half of the year?
A: We recognize the importance of promotions, especially during the holiday period. We will start earlier this year due to a shorter shopping season. We plan to use mailers, gift with purchase offers, gift cards, and bounce-back deals. Our focus on promotions will be more intense than in the past. Regarding wholesale performance, the year has been tough, but we expect the second half to be flat compared to last year. Our performance with major partners has been good, and we are encouraged by spring bookings. - Thomas Chubb, CEO
Q: How did the cadence of the quarter go, and are there categories that performed better or worse than others?
A: The quarter worsened sequentially. May was okay, June softened, and July was significantly worse, especially in the back half. August was also weak. Consumers are value-driven, and we are maintaining our strategy of being a full-price premium brand. Dresses have been strong, while more casual categories like athleisure and swim have been slower. - Thomas Chubb, CEO
Q: How are you thinking about the impact of freight costs on margins?
A: We have built in about a 15 to 20 basis point margin hit due to elevated freight costs, mainly from issues in the Red Sea. We are also monitoring the East Coast port situation and diverting some products to the West Coast. If East Coast ports go on strike, it will be a significant disruptor. - K. Scott Grassmyer, CFO
Q: Are there any adjustments in marketing, store openings, or other initiatives due to the change in business patterns?
A: We are moving full steam ahead with our growth initiatives, including store openings, Marlin Bars, and the distribution center in Lyons. We believe this is a manageable economic cycle and want to be ready when business picks up. - Thomas Chubb, CEO and K. Scott Grassmyer, CFO
Q: Can you elaborate on the promotional activity across your three big brands?
A: We sold through less at full price than expected, resulting in more inventory during promotional events. The consumer was more willing to buy during these events. There was no major change in the events or discounts, just more inventory available that sold. - K. Scott Grassmyer, CFO
Q: What factors contributed most to the slowdown in the top line trend?
A: It's hard to rank order, but headline distraction, Florida's performance, and merchandising missteps all had a material impact. Data supports the theory that headline distraction was significant. Florida, which accounts for one-third of our retail business, went from outperforming to running with the pack. - Thomas Chubb, CEO
Q: When should we expect to see improvement from the merchandising missteps?
A: By the second quarter of next year, we expect to have addressed these issues. We have strong initiatives for the second half, including the Indigo Palms launch in Tommy Bahama and an early spring delivery in January. - Thomas Chubb, CEO
Q: Which regions performed better or worse this quarter?
A: Cooler weather regions like the Midwest, Mid-Atlantic, and New England performed relatively better. Florida and Texas were weaker. Marlin Bars locations held up better than the averages. - Thomas Chubb, CEO and K. Scott Grassmyer, CFO
Q: How are you thinking about ticket prices and avoiding discounts?
A: We don't plan to reprice existing products but may adjust the average unit retail (AUR) by investing more in lower price point offerings in future seasons. This approach will help us avoid heavy discounts while maintaining value for consumers. - Thomas Chubb, CEO
Q: What are your thoughts on the state of the consumer and the impact on your business?
A: The consumer is cautious, and we are seeing a value-driven market. We are maintaining our premium brand strategy while focusing on promotional activities. We expect similar patterns in the third and fourth quarters and have adjusted our guidance accordingly. - Thomas Chubb, CEO and K. Scott Grassmyer, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
