Oxford Industries (OXM 88.33, -4.18, -4.52%) is trading lower today after
reporting Q1 (Apr) earnings results and providing guidance for Q2 (Jul). While
the AprQ results were quite good, the EPS guidance for JulQ fell light of
You may not be familiar with Oxford Industries, but you probably know its brands. It sells apparel bearing the trademarks of its owned and licensed brands. Oxford's largest brand, contributing nearly two-thirds of FY17 revenue, is Tommy Bahama. Its next largest brand is Lilly Pulitzer (23% of revs), followed by Lanier Apparel (10%) and Southern Tide (4%). Oxford also produces certain licensed and private label apparel products.
Tommy Bahama's typical consumer is older than 45 years old, has a household annual income in excess of $100K, lives or vacations in warm weather and resort locations, and embraces a relaxed approach to daily living. Tommy Bahama products can be found in Tommy Bahama stores and online as well as at some department stores. OXM also operates Tommy Bahama restaurants and licenses the Tommy Bahama name for various product categories.
Lilly Pulitzer focuses on upscale collections of women's and girl's dresses, sportswear and related products. The Lilly Pulitzer brand was originally created in the late 1950s by Lilly Pulitzer and is an affluent brand inspired by the lifestyle of Palm Beach resorts. The brand is somewhat unique among women's brands in that it has demonstrated multi-generational appeal. Lilly Pulitzer products can be found in Lilly Pulitzer stores, online, and at department stores. The brand has been expanding into new product categories including Luxletic athletic wear and the Spring 2018 launch of Lilly Pulitzer swim. OXM sees significant opportunity to expand the reach of the Lilly Pulitzer brand. Of note, Lilly Pulitzer has the highest operating margin of any of OXM's brands.
Turning to the Q1 (Apr) results, adjusted EPS grew 14% year/year to $1.28, which was above prior guidance of $1.15-1.25. Revenue was basically flat year/year at $272.6 mln, which was in-line with expectations. Tommy Bahama revenue fell 3.1% year/year while Lilly Pulitzer rose 8.3%. Adjusted operating margin dipped a bit to 10.8% from 11.8% in the prior year period.
While the Q1 (Apr) results were largely satisfying, the forward-looking guidance disappointed. For Q2 (Jul), OXM anticipates non-GAAP EPS of just $1.75-1.85, which is below market expectations. Revenue in Q2 (Jul) is expected to come in around $300-310 mln, which is roughly in-line with market expectations. OXM slightly increased full year non-GAAP EPS guidance to $4.45-4.65 from $4.40-4.60. Full year revs are expected at $1.125-1.145 bln vs prior guidance of $1.12-1.14 bln.
OXM says that it was pleased with its Q1 (Apr) results and that the company was happy with the performance of its direct to consumer business, which included positive comps led by strong gains in e-commerce sales. At the same time, as planned, OXM selectively reduced its wholesale door count to ensure a consistent customer experience across all distribution channels. OXM feels this is an important step towards maintaining the strength and integrity of its brands.
This year OXM is building more robust omnichannel capabilities, and the company has achieved several major milestones. Among these is the all-new Lilly Pulitzer website, which provides a great digital presentation of the brand for both mobile and desktop devices. For Tommy Bahama, its multi-year omnichannel IT infrastructure project is progressing well. Customers should expect to see an enhanced brand experience later in fiscal 2018.
OXM has also been focusing on acquiring new customers as the company believes that its brands are capable of resonating with a larger consumer audience. To this end, during AprQ, Lilly Pulitzer collaborated with Pottery Barn on an exclusive collection of home decor and furniture while Tommy Bahama ran targeted advertising campaigns in key markets such as San Diego, Scottsdale, and Naples.
In sum, while the AprQ results were quite good, the JulQ EPS guidance seems to be weighing on the stock this morning. Also, the company saw some operating margin compression in AprQ. Another factor worth considering is that the stock ran from around $80 in late May to close at $92.51 yesterday for a 16% move in just a few weeks. implying that investor sentiment was bullish heading into this earnings report. That JulQ EPS guidance seems to be spooking investors a bit.
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