Q4 2024 Oxford Industries Inc Earnings Call

In This Article:

Participants

Brian Smith; Investor Relations; Oxford Industries Inc

Thomas Chubb; Chairman of the Board, President, Chief Executive Officer; Oxford Industries Inc

K. Scott Grassmyer; Chief Financial Officer, Chief Operating Officer, Executive Vice President; Oxford Industries Inc

Ashley Owens; Analyst; KeyBanc Capital Markets

Ethan Saghi; Analyst; BTIG

Mauricio Serna; Analyst; UBS

Tracy Kogan; Analyst; Citi

Presentation

Operator

Greetings, and welcome to the Oxford Industries fourth-quarter fiscal 2024 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded.
It's now my pleasure to introduce your host, Brian Smith. Please go ahead.

Brian Smith

Thank you, and good afternoon. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC, including the Risk Factors contained in our Form 10-K. We undertake no duty to update any forward-looking statements.
During this call, we will be discussing certain non-GAAP financial measures. You can find a reconciliation of non-GAAP to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website at oxfordinc.com.
I'd now like to introduce today's call participants. With me today are Tom Chubb, Chairman and CEO; and Scott Grassmyer, CFO and COO.
Thank you for your attention. And now, I'd like to turn over the call over to Tom Chubb.

Thomas Chubb

Good afternoon, and thank you for joining us. We are pleased to be reporting fourth quarter net sales and adjusted EPS that are both near the top of our guidance ranges. In December, we said that we were expecting a strong holiday selling season. That expectation turned into reality as the consumer did, in fact, show up to buy their loved ones and friends the gifts that they really wanted from the brands that they love.
We were particularly pleased in the weeks leading up to Christmas by the performance of some of our newer special products such as Tommy Bahama's Indigo Palms denim and denim-friendly product, the Tommy Bahama Marlin Luxe Quarter Zip Pullover, and the Lilly Pulitzer Reserve collection. The performance of these higher price point products is strong evidence that when there is reason to shop, our customers are choosing to spend with our brands. And this helped drive comps for the month of December up 2%.
As we moved into January, we experienced a moderation in demand which we attribute to the recent pattern of consumers retreating when there isn't a reason to spend, combined with the deterioration in consumer sentiment. As a result, January was not as strong as December, with comps down 3%. This negative trend accelerated in the beginning of fiscal 2025 with comps of negative 9% in February.
Given this backdrop, we are pleased with our fourth-quarter performance and commend and thank our people for delivering these results. We believe the choppiness in demand we experienced towards the end of fiscal 2024 is likely to continue in the near term.
Just as the consumers showed up and was willing to spend for Christmas, we expect the same will be true for the first half of fiscal 2025 with strong selling for big events such as Easter, Mother's Day, Father's Day, Memorial Day, and the Fourth of July. In the in between times, we anticipate the consumer will be more hesitant to spend given the uncertainty in the current marketplace. With our power portfolio of happiness evoking brands, our world-class omnichannel platform, our strong cash and balance sheet, and our resilient team, we continue to believe that the long-term opportunity for us is extremely bright. However, we are realistic enough to recognize that we are not immune from the current headwinds.
As with any time of uncertainty, the key for us in the short term is to control the controllables and to stay focused. At the top of our focus list is our customer. Our top priority is staying hyper-focused on the 4-point North Star that serves as the blueprint for how we run the company. As a reminder, our 4-point North Star starts with our overarching strategy to maximize long-term shareholder value. The key here is to remember that we're building a sustainable business and shareholder value for the long term, notwithstanding the short-term turbulence.
The second point of our strategy is to own a portfolio of lifestyle brands. We have 83 years behind us and have remained successful through many challenges. We know how to do this. During this uncertain time, we will make sure that we are protecting the integrity of our brands for the long term. Protecting the integrity of our brands means avoiding short-term fixes to offer slightly improved near-term results that would damage our brands and our prospects for the long term.
Third is our purpose as a company, which is to evoke happiness in our consumers. All of our brands are happy brands that metaphorically take our customers to their happy place. It is important for us to stay focused on delivering that happiness to our customers and not get distracted by external challenges beyond our control.
Our fourth and final area of focus is to generate cash that we can then reinvest to grow our existing businesses, pursue acquisitions when the opportunity exists, and returning capital to our shareholders, all while maintaining a healthy balance sheet. Each of our brands has detailed plans for fiscal 2025 tailored to their unique circumstances, challenges, and opportunities. However, all of them have one thing in common, and that is that they focus on the core of what makes the brand great.
For Tommy Bahama, focusing on the core is about ensuring that we are engaged and fully activated in our top 25 markets. We have a tremendous following in each of these markets that serves as a great foundation for the business. At the same time, there's a significant opportunity to attract a much larger audience to the brand.
As we ignite and activate these core markets in 2025, our plan is to not only delight our current customers, but connect with prospective customers to drive more traffic and higher conversion across all channels.
At Lilly Pulitzer, focusing on the core is all about the top 20% of our customer base. The top 20% of our customer base accounts for 67% or two-thirds of our sales and even more of our profitability as they tend to buy at full price. Making sure that we have the products, experiences, and marketing messages that delight these customers will help ensure they are fully engaged in spending money with us during fiscal 2025. We also believe that doubling down on serving our best customers will help us to attract many, many more who are demographically and psychographically similar to our existing top customer base.
In Johnny Was, focusing on the core is about getting back to the brand's roots through the type of products that made Johnny Was famous and a favorite with hundreds of thousands of customers. As we stretch the boundaries of what the brand can be in the last several years, we probably took a little bit of focus off the embroidered and embellished products that consumers came to love.
During 2025, we will focus on delighting our engaged customers with an enhanced assortment of what we call our collection product, merchandise that better reflects Johnny Was' origins. We believe this focus on what makes Johnny Was unique and differentiated in the marketplace will also help us attract new loyalists to the brand.
Scott will provide more detail on our guidance in a minute, but it is fair to say that the ongoing uncertainty in the marketplace has made us a bit more cautious in our view for the full year. That said, we still expect cash flow to remain strong, with cash flow from operations projected to be approximately $170 million for the year. And we intend to continue to invest that cash flow in the areas that we will believe help drive long-term shareholder value.
At the top of our investment priorities is continuing to grow and strengthen our omnichannel platform. In recent months, we have completed significant upgrades to our Tommy Bahama, Lilly Pulitzer, Southern Tide, and the Beaufort Bonnet Company e-commerce websites. In addition, late this year, we expect to complete the new distribution center that will allow us to increase our inventory velocity and sell-throughs as it services our very large omnichannel business in the eastern and southern parts of the country.
During the year, we also plan to open approximately 20 new stores, including four new Marlin Bars, and we remain focused, as always, on returning capital to shareholders, and we have already purchased $50 million worth of stock during the first part of this fiscal year at prices that we believe over the long term will prove to be very attractive.
In addition, on Monday, our Board of Directors approved a 3% increase in our quarterly dividend from $0.67 to $0.69. As a reminder, we have paid a dividend every quarter since we went public in 1960. As we navigate the uncertainty of our confidence is buoyed by the fact that as a company, as a team, we know who we are, and we know what we are doing.
I'll now turn the call over to Scott for more detail on the fourth quarter, the full year, and our outlook for fiscal 2025. Scott?

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