Oxford Industries (OXM -2%) saw a decline following its disappointing Q2 earnings results and guidance. The apparel company, which owns brands like Tommy Bahama, Lilly Pulitzer, Johnny Was, Southern Tide, Beaufort Bonnet, and Duck Head, has now missed EPS estimates for three consecutive quarters, with this miss being the largest. Q2 comps were -1%, falling short of the anticipated mid-single-digit positive comps.
- OXM guided Q3 EPS and revenue well below analyst expectations and significantly lowered its full-year guidance. The company now expects negative comps in the low to mid-single-digits for the rest of the year, a downgrade from the previous mid-single-digit positive comps expected in June.
- Despite its higher-income customer base, OXM cited a continued consumer pullback, which worsened sequentially through the quarter and into August. The cumulative effect of several years of inflation may be impacting consumer behavior.
- OXM's more affluent consumers tend to be sensitive to headlines and market conditions, affecting their purchasing decisions. The company's significant exposure to Florida, which makes up over a third of its brick-and-mortar business, has also slowed down post-pandemic. OXM admitted to some merchandising missteps, including assortment misses and poor timing of promotional events.
- On a positive note, traffic has remained strong, indicating consumer interest in OXM's brands. However, reduced conversion rates show that consumers are cautious about their purchases. While there was a strong response to fashion items at full price, interest in core styles was muted. Promotional events and outlet store sales saw higher activity, impacting margins.
- OXM is optimistic about new collections like the Tommy Bahama Indigo Palms denim line, which launched early in Q3 with strong initial reception. This collection enhances OXM's relevance during cooler months, particularly in the western U.S., Midwest, Mid-Atlantic, and Northeast regions.
Given the significant Q2 miss and weak Q3 guidance, a larger stock decline was expected. However, the share price had already dropped 20% since early August, indicating that investors had anticipated poor results. It appears that even higher-income brands are not immune to macroeconomic issues, and decreased travel may also be affecting OXM's vacation-centric brands.
