Oxford Industries, Inc. ((OXM)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Oxford Industries, Inc. painted a picture of a company navigating through a mixed landscape. While the company faces significant challenges such as declining sales in key segments and gross margin contraction due to tariff costs, there are also positive developments. Notable among these are the performance of the Lilly Pulitzer brand, successful tariff mitigation efforts, and growth in emerging brands. The sentiment expressed during the call was balanced, with a focus on both the hurdles and the proactive measures being taken to address them.
Lilly Pulitzer Positive Comparable Sales
Lilly Pulitzer continues to be a bright spot for Oxford Industries, posting positive direct-to-consumer total comparable sales. This success builds on strong engagement from the first quarter, with innovative product developments and the launch of the Vintage Vault exceeding expectations.
Emerging Brands Group Revenue Growth
Despite a challenging environment, the Emerging Brands Group showed solid revenue growth. This was driven by new store openings and positive comparable store sales, highlighting the potential of these brands to contribute significantly to the company’s overall performance.
Effective Tariff Mitigation
Oxford Industries has made significant progress in mitigating tariff exposure. By shifting their supply chain and ensuring early product delivery, they have managed to maintain gross margins despite the increased tariffs.
Boracay Island Chino Success
The launch of the Boracay Island chino at a higher price point has been successful, with high sell-through rates across both direct-to-consumer and wholesale channels. This indicates strong consumer demand and effective pricing strategies.
Overall Sales Decline
The company reported consolidated net sales of $403 million, a decline from $420 million in the second quarter of fiscal 2024. Sales in full-price brick-and-mortar locations and the wholesale channel decreased by 6%, reflecting broader challenges in these areas.
Tommy Bahama and Johnny Was Sales Decline
Both Tommy Bahama and Johnny Was experienced sales declines, with Tommy Bahama seeing a high single-digit negative comp and Johnny Was a low double-digit negative comp. These declines highlight the difficulties faced by these segments.
Gross Margin Contraction
The adjusted gross margin contracted by 160 basis points to 61.7%, primarily due to $9 million in increased costs from tariffs. This contraction underscores the impact of external economic factors on the company’s profitability.
Increased SG&A Expenses
Adjusted SG&A expenses rose by 5% to $224 million, driven by rising employment costs, occupancy costs, and depreciation expenses from new store openings. This increase reflects the company’s investment in growth and expansion.
Higher Inventory Levels
Inventory levels increased by $27 million or 19%, a result of accelerated inventory purchases and increased costs from tariffs. This rise in inventory is indicative of the company’s strategy to manage supply chain challenges proactively.
Higher Effective Tax Rate
The adjusted effective tax rate increased to 29.6% due to discrete items and stock-based awards vesting. This higher tax rate affects the company’s net profitability.
Forward-Looking Guidance
Looking ahead, Oxford Industries provided a full-year net sales guidance between $1.475 billion and $1.515 billion, reflecting a slight decline compared to fiscal 2024. The company anticipates a gross margin contraction of about 200 basis points for the full year, primarily due to tariffs, and expects fiscal 2025 adjusted EPS to be between $2.80 and $3.20. These projections underscore the company’s cautious optimism in navigating the current economic landscape.
In conclusion, Oxford Industries, Inc.’s earnings call highlighted a balanced sentiment, with significant challenges offset by strategic initiatives and brand successes. While the company faces hurdles such as declining sales and increased costs, its proactive measures and growth in key areas provide a foundation for future resilience.