Oxford Industries (OXM) is trading lower today after reporting Q4 (Jan) earnings results last night and providing guidance for Q1 (Apr). Oxford Industries is not well known, but you probably know its brands. It sells apparel bearing the trademarks of its owned and licensed brands. Oxford's largest brand at 61% of FY18 revenue is Tommy Bahama. Its next largest brand is Lilly Pulitzer (25% of revs), followed by Lanier Apparel (9%) 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, lives in or travels to warm weather locations and embraces a relaxed and casual approach to daily living. Lilly Pulitzer focuses on upscale collections of women's and girl's dresses, sportswear and related products.
Turning to the Q4 (Jan) results, adjusted EPS grew 16% YoY to $1.08, which was at the higher end of prior guidance of $0.96-1.11. Revenue was basically flat, up 1.8% yr/yr, at $298.5 mln, which was at the lower end of prior guidance of $297-307 mln. Breaking it down by brand, Tommy Bahama revenue fell 4.8% yr/yr while Lilly Pulitzer rose 12.2%. Adjusted operating margin ticked slightly higher to 8.1% from 8.0% last year.
While the Q1 (Apr) results were decent but not great, the guidance was more disappointing. For Q1 (Apr), OXM sees non-GAAP EPS of just $1.15-1.25, which is a good bit below market expectations. Revenue in Q1 (Apr) is expected to come in around $270-280 mln, which is also below market expectations. Full year guidance was disappointing as well, especially on the EPS line.
A strategy that OXM has been using is to strategically prune its wholesale distribution and it has made progress as it was $25 mln lower than last year. The idea is that OXM wants to drive customers to Tommy Bahama and Lilly Pulitzer stores and to drive online sales. That way, OXM has more control over product layout and pricing etc. It's having an impact as same store comps in FY18 grew by +4% fueled by strong gains in its e-commerce business and positive overall bricks and mortar comps (although comps were just +2% in JanQ). OXM has reduced its department store exposure to 12% of total sales. E-commerce remains OXM's fastest growing channel of distribution increasing to 21% of total revenue in FY18.
In terms of the plans for each brand in 2019, OXM wants to build on the powerful equity of selected items like the Boracay Pant and The Emfielder Polo and supplement its line with new offerings like the dressier Newport Coast shirt collection and the Palm Coast Performance Polo. At the same time, Tommy Bahama is growing its women's business, including the creation of dress-ups in the stores so it's easier for guests to appreciate the assortments.
Lilly's plans for 2019 include building on newer product categories like swim, tennis, and golf. Luxletic activewear will continue to expand and OXM says consumers will see more of what it calls family moments which highlight children's and men's apparel. As always, beautiful printed dresses will remain central to the collection and 2019 assortments will include an expanded size range.
In sum, this was not a great quarter for OXM and the guidance was quite weak. However, the stock is down only modestly. Our sense is that investors understand that OXM is going through a transition and they understand there will be bumps along the way.