SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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| For the quarterly period ended October 28, |
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| or |
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from to |
Commission File Number: 1-4365
OXFORD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| | |
Georgia | 58-0831862 | |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
999 Peachtree Street, N.E., Suite 688, Atlanta, Georgia30309
(Address of principal executive offices) (Zip Code)
(404) 659-2424
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, $1 par value | OXM | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of December 1, 2023, there were 15,625,096 shares outstanding of each of the issuer’s classes ofregistrant’s common stock as of the latest practicable date.outstanding.
INDEX TO FORM 10-Q
For the
Third Quarter of Fiscal
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2
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
Our SEC filings and public announcements may include forward-looking statements about future events. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which typicallygenerally are not historical in nature. We intend for all forward-looking statements contained herein, in our press releases or on our website, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). Such statements are subject to a number of risks, uncertainties and assumptions including, without limitation, competitive conditions,demand for our products, which may be impacted by evolvingmacroeconomic factors that may impact consumer shopping patterns; the impact of economic conditions on consumer demanddiscretionary spending and spendingpricing levels for apparel and related products, particularly in lightmany of which may be impacted by current inflationary pressures, rising interest rates, concerns about the stability of the banking industry or general economic uncertainty; demand foruncertainty, and the effectiveness of measures to mitigate the impact of these factors; competitive conditions and/or evolving consumer shopping patterns; acquisition activities (such as the acquisition of Johnny Was), including our products; timingability to integrate key functions, recognize anticipated synergies and minimize related disruptions or distractions to our business as a result of shipments requested bythese activities; supply chain disruptions; costs and availability of labor and freight deliveries, including our ability to appropriately staff our retail stores and food and beverage locations; costs of products as well as the raw materials used in those products, as well as our ability to pass along price increases to consumers; energy costs; our ability to respond to rapidly changing consumer expectations; weather or natural disasters, including the ultimate impact of the recent wildfires on the island of Maui; the ability of business partners, including suppliers, vendors, wholesale customers; expected pricing levels;customers, licensees, logistics providers and landlords, to meet their obligations to us and/or continue our business relationship to the same degree as they have historically; retention of and disciplined execution by key management;management and other critical personnel; cybersecurity breaches and ransomware attacks, as well as our and our third party vendors’ ability to properly collect, use, manage and secure business, consumer and employee data and maintain continuity of our information technology systems; the timingeffectiveness of our advertising initiatives in defining, launching and costcommunicating brand-relevant customer experiences; the level of store openingsour indebtedness, including the risks associated with heightened interest rates on the debt and of planned capital expenditures; weather;the potential impact on our ability to operate and expand our business; changes in international, federal or state tax, trade and other laws and regulations, including the impactpotential imposition of potential federal tax reformadditional duties; the timing of shipments requested by our wholesale customers; fluctuations and volatility in global financial and/or real estate markets; the United States; coststiming and cost of products as well asretail store and food and beverage location openings and remodels, technology implementations and other capital expenditures, including the raw materials used in those products; coststiming, cost and successful implementation of labor; acquisition and disposition activities;changes to our distribution network; pandemics or other public health crises; expected outcomes of pending or potential litigation and regulatory actions; the increased consumer, employee and regulatory focus on environmental, social and governance issues; the regulation or prohibition of goods sourced, or containing raw materials or components, from certain regions and our ability to evidence compliance; access to capital and/or credit markets; our ability to timely recognize our expected synergies from any acquisitions we pursue; and factors that could affect our consolidated effective tax rate such asrate; the resultsrisk of foreign operations or stock based compensation.impairment to goodwill and other intangible assets; and geopolitical risks, including those related to the ongoing war in Ukraine and the Israel-Hamas war. Forward-looking statements reflect our expectations at the time such forward lookingforward-looking statements are made, based on information available at such time, and are not guarantees of performance.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, these expectations could prove inaccurate as such statements involve risks and uncertainties, many of which are beyond our ability to control or predict. Should one or more of these risks or uncertainties, or other risks or uncertainties not currently known to us or that we currently deem to be immaterial, materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Important factors relating to these risks and uncertainties include, but are not limited to, those described in Part I,I. Item 1A. Risk Factors contained in our Annual Report onFiscal 2022 Form 10-K, for Fiscal
3
DEFINITIONS
As used in this report, unless the context requires otherwise, "our," "us" or "we" means Oxford Industries, Inc. and its consolidated subsidiaries; "SG&A" means selling, general and administrative expenses; "SEC" means U.S.the United States Securities and Exchange Commission; "FASB" means the Financial Accounting Standards Board; "ASC" means the FASB Accounting Standards Codification; "GAAP" means generally accepted accounting principles in the United States; "TBBC" means The Beaufort Bonnet Company; and "discontinued operations"“Fiscal 2022 Form 10-K” means the assets and operations of our former Ben Sherman operating group which we sold inAnnual Report on Form 10-K for Fiscal 2015. Unless otherwise indicated, all references to assets, liabilities, revenues, expenses or other information in this report reflect continuing operations.2022. Additionally, the terms listed below reflect the respective period noted:
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Fiscal 2024 | | |
52 weeks ending February | ||
Fiscal | | 53 weeks ending February 3, |
Fiscal | | 52 weeks ended January 28, |
Fiscal | | 52 weeks ended January |
Fourth Quarter Fiscal | | 14 weeks ending February 3, |
Third Quarter Fiscal | | 13 weeks ended October 28, |
Second Quarter Fiscal | | 13 weeks ended July 29, |
First Quarter Fiscal | | 13 weeks ended April 29, |
Fourth Quarter Fiscal | | 13 weeks ended January 28, |
Third Quarter Fiscal | | 13 weeks ended October 29, |
Second Quarter Fiscal | | 13 weeks ended July 30, |
First Quarter Fiscal | | 13 weeks ended April 30, |
First Nine Months Fiscal | | 39 weeks ended October 28, |
First Nine Months Fiscal | | 39 weeks ended October 29, |
4
ITEM 1. FINANCIAL STATEMENTS
OXFORD INDUSTRIES, INC.
(in thousands, except par amounts)
(unaudited)
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||
ASSETS | |||||||||||
Current Assets | |||||||||||
Cash and cash equivalents | $ | 6,077 | $ | 6,332 | $ | 5,351 | |||||
Receivables, net | 73,724 | 58,279 | 68,492 | ||||||||
Inventories, net | 127,301 | 142,175 | 136,383 | ||||||||
Prepaid expenses | 27,619 | 24,842 | 29,558 | ||||||||
Total Current Assets | $ | 234,721 | $ | 231,628 | $ | 239,784 | |||||
Property and equipment, net | 191,038 | 193,931 | 195,799 | ||||||||
Intangible assets, net | 175,057 | 175,245 | 185,957 | ||||||||
Goodwill | 63,443 | 60,015 | 51,053 | ||||||||
Other non-current assets, net | 24,250 | 24,340 | 22,882 | ||||||||
Total Assets | $ | 688,509 | $ | 685,159 | $ | 695,475 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current Liabilities | |||||||||||
Accounts payable | $ | 59,230 | $ | 76,825 | $ | 53,144 | |||||
Accrued compensation | 24,434 | 19,711 | 18,181 | ||||||||
Other accrued expenses and liabilities | 30,542 | 32,000 | 26,358 | ||||||||
Liabilities related to discontinued operations | 3,709 | 2,860 | — | ||||||||
Total Current Liabilities | $ | 117,915 | $ | 131,396 | $ | 97,683 | |||||
Long-term debt | 72,131 | 91,509 | 142,425 | ||||||||
Other non-current liabilities | 73,487 | 70,002 | 69,176 | ||||||||
Deferred taxes | 16,829 | 13,578 | 13,643 | ||||||||
Liabilities related to discontinued operations | 972 | 2,544 | 3,279 | ||||||||
Commitments and contingencies | |||||||||||
Shareholders’ Equity | |||||||||||
Common stock, $1.00 par value per share | 16,833 | 16,769 | 16,773 | ||||||||
Additional paid-in capital | 134,561 | 131,144 | 129,762 | ||||||||
Retained earnings | 260,809 | 233,493 | 228,016 | ||||||||
Accumulated other comprehensive loss | (5,028 | ) | (5,276 | ) | (5,282 | ) | |||||
Total Shareholders’ Equity | $ | 407,175 | $ | 376,130 | $ | 369,269 | |||||
Total Liabilities and Shareholders’ Equity | $ | 688,509 | $ | 685,159 | $ | 695,475 |
| | | | | | | | | |
|
| October 28, |
| January 28, |
| October 29, | |||
| | 2023 | | 2023 | | 2022 | |||
ASSETS | | | | | | | | | |
Current Assets | | | | | | | | | |
Cash and cash equivalents | | $ | 7,879 | | $ | 8,826 | | $ | 14,976 |
Short-term investments | | | — | | | — | | | — |
Receivables, net | |
| 60,101 | |
| 43,986 | |
| 62,230 |
Inventories, net | |
| 157,524 | |
| 220,138 | |
| 171,639 |
Income tax receivable | | | 19,454 | | | 19,440 | | | 19,740 |
Prepaid expenses and other current assets | |
| 46,421 | |
| 38,073 | |
| 30,910 |
Total Current Assets | | $ | 291,379 | | $ | 330,463 | | $ | 299,495 |
Property and equipment, net | |
| 188,686 | |
| 177,584 | |
| 173,391 |
Intangible assets, net | |
| 273,444 | |
| 283,845 | |
| 287,626 |
Goodwill | |
| 124,230 | |
| 120,498 | |
| 116,268 |
Operating lease assets | | | 246,399 | | | 240,690 | | | 237,078 |
Other assets, net | |
| 38,018 | |
| 35,585 | |
| 26,459 |
Total Assets | | $ | 1,162,156 | | $ | 1,188,665 | | $ | 1,140,317 |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
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|
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Current Liabilities | |
|
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|
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|
|
Accounts payable | | $ | 68,565 | | $ | 94,611 | | $ | 72,932 |
Accrued compensation | |
| 20,219 | |
| 35,022 | |
| 36,150 |
Current portion of operating lease liabilities | |
| 65,224 | |
| 73,865 | |
| 62,349 |
Accrued expenses and other liabilities | |
| 58,504 | |
| 66,141 | |
| 58,964 |
Total Current Liabilities | | $ | 212,512 | | $ | 269,639 | | $ | 230,395 |
Long-term debt | |
| 66,219 | |
| 119,011 | |
| 130,449 |
Non-current portion of operating lease liabilities | |
| 226,238 | |
| 220,709 | |
| 225,921 |
Other non-current liabilities | |
| 20,675 | |
| 20,055 | |
| 18,058 |
Deferred income taxes | |
| 9,399 | |
| 2,981 | |
| 2,455 |
Shareholders’ Equity | |
| | |
| | |
| |
Common stock, $1.00 par value per share | |
| 15,625 | |
| 15,774 | |
| 15,815 |
Additional paid-in capital | |
| 174,730 | |
| 172,175 | |
| 169,063 |
Retained earnings | |
| 439,755 | |
| 370,145 | |
| 351,731 |
Accumulated other comprehensive loss | |
| (2,997) | |
| (1,824) | |
| (3,570) |
Total Shareholders’ Equity | | $ | 627,113 | | $ | 556,270 | | $ | 533,039 |
Total Liabilities and Shareholders’ Equity | | $ | 1,162,156 | | $ | 1,188,665 | | $ | 1,140,317 |
See accompanying notes.
5
(in thousands, except per share amounts)
(unaudited)
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | ||||||||||||
Net sales | $ | 235,960 | $ | 222,308 | $ | 793,032 | $ | 761,539 | |||||||
Cost of goods sold | 110,784 | 104,254 | 342,477 | 327,225 | |||||||||||
Gross profit | $ | 125,176 | $ | 118,054 | $ | 450,555 | $ | 434,314 | |||||||
SG&A | 127,091 | 121,442 | 393,193 | 374,379 | |||||||||||
Royalties and other operating income | 3,039 | 3,061 | 10,123 | 10,433 | |||||||||||
Operating income (loss) | $ | 1,124 | $ | (327 | ) | $ | 67,485 | $ | 70,368 | ||||||
Interest expense, net | 683 | 716 | 2,355 | 2,505 | |||||||||||
Earnings (loss) from continuing operations before income taxes | $ | 441 | $ | (1,043 | ) | $ | 65,130 | $ | 67,863 | ||||||
Income taxes | (631 | ) | 555 | 24,172 | 25,408 | ||||||||||
Net earnings (loss) from continuing operations | $ | 1,072 | $ | (1,598 | ) | $ | 40,958 | $ | 42,455 | ||||||
Earnings from discontinued operations, net of taxes | — | — | — | — | |||||||||||
Net earnings (loss) | $ | 1,072 | $ | (1,598 | ) | $ | 40,958 | $ | 42,455 | ||||||
Net earnings (loss) from continuing operations per share: | |||||||||||||||
Basic | $ | 0.06 | $ | (0.10 | ) | $ | 2.47 | $ | 2.57 | ||||||
Diluted | $ | 0.06 | $ | (0.10 | ) | $ | 2.45 | $ | 2.55 | ||||||
Earnings from discontinued operations, net of taxes, per share: | |||||||||||||||
Basic | $ | — | $ | — | $ | — | $ | — | |||||||
Diluted | $ | — | $ | — | $ | — | $ | — | |||||||
Net earnings (loss) per share: | |||||||||||||||
Basic | $ | 0.06 | $ | (0.10 | ) | $ | 2.47 | $ | 2.57 | ||||||
Diluted | $ | 0.06 | $ | (0.10 | ) | $ | 2.45 | $ | 2.55 | ||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 16,618 | 16,531 | 16,591 | 16,516 | |||||||||||
Diluted | 16,735 | 16,531 | 16,710 | 16,635 | |||||||||||
Dividends declared per share | $ | 0.27 | $ | 0.27 | $ | 0.81 | $ | 0.81 |
| | | | | | | | | | | | | |
|
| Third Quarter |
| First Nine Months | | ||||||||
| | Fiscal 2023 | | Fiscal 2022 | | Fiscal 2023 | | Fiscal 2022 | | ||||
Net sales | | $ | 326,630 | | $ | 313,033 | | $ | 1,167,046 | | $ | 1,029,044 | |
Cost of goods sold | |
| 121,211 | |
| 115,339 | |
| 417,769 | |
| 372,824 | |
Gross profit | | $ | 205,419 | | $ | 197,694 | | $ | 749,277 | | $ | 656,220 | |
SG&A | |
| 194,822 | |
| 175,027 | |
| 603,202 | |
| 495,574 | |
Royalties and other operating income | |
| 3,863 | |
| 4,648 | |
| 16,360 | |
| 18,018 | |
Operating income | | $ | 14,460 | | $ | 27,315 | | $ | 162,435 | | $ | 178,664 | |
Interest expense, net | |
| 1,217 | |
| 698 | |
| 4,856 | |
| 1,214 | |
Earnings before income taxes | | $ | 13,243 | | $ | 26,617 | | $ | 157,579 | | $ | 177,450 | |
Income tax expense | |
| 2,461 | |
| 6,951 | |
| 36,806 | |
| 43,764 | |
Net earnings | | $ | 10,782 | | $ | 19,666 | | $ | 120,773 | | $ | 133,686 | |
| | | | | | | | | | | | | |
Net earnings per share: | |
|
| |
|
| |
|
| |
|
| |
Basic | | $ | 0.69 | | $ | 1.25 | | $ | 7.75 | | $ | 8.36 | |
Diluted | | $ | 0.68 | | $ | 1.22 | | $ | 7.57 | | $ | 8.19 | |
Weighted average shares outstanding: | |
|
| |
|
| |
|
| |
| | |
Basic | |
| 15,587 | |
| 15,740 | |
| 15,589 | |
| 15,992 | |
Diluted | |
| 15,787 | |
| 16,139 | |
| 15,947 | |
| 16,333 | |
Dividends declared per share | | $ | 0.65 | | $ | 0.55 | | $ | 1.95 | | $ | 1.65 | |
See accompanying notes.
6
(in thousands)
(unaudited)
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | ||||||||||||
Net earnings (loss) | $ | 1,072 | $ | (1,598 | ) | $ | 40,958 | $ | 42,455 | ||||||
Other comprehensive income (loss), net of taxes: | |||||||||||||||
Net foreign currency translation adjustment | (617 | ) | (172 | ) | 248 | 1,547 | |||||||||
Total other comprehensive (loss) income, net of taxes | $ | (617 | ) | $ | (172 | ) | $ | 248 | $ | 1,547 | |||||
Comprehensive income (loss) | $ | 455 | $ | (1,770 | ) | $ | 41,206 | $ | 44,002 |
| | | | | | | | | | | | | |
|
| Third Quarter |
| First Nine Months | | ||||||||
| | Fiscal 2023 | | Fiscal 2022 | | Fiscal 2023 | | Fiscal 2022 | | ||||
Net earnings | | $ | 10,782 | | $ | 19,666 | | $ | 120,773 | | $ | 133,686 | |
Other comprehensive income (loss), net of taxes: | |
|
| |
|
| |
|
| |
|
| |
Net foreign currency translation adjustment | |
| (888) | |
| (450) | |
| (1,173) | |
| (98) | |
Comprehensive income | | $ | 9,894 | | $ | 19,216 | | $ | 119,600 | | $ | 133,588 | |
See accompanying notes.
7
(in thousands)
(unaudited)
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | ||||||
Cash Flows From Operating Activities: | |||||||
Net earnings | $ | 40,958 | $ | 42,455 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation | 29,779 | 29,070 | |||||
Amortization of intangible assets | 1,733 | 1,744 | |||||
Equity compensation expense | 4,616 | 5,332 | |||||
Amortization of deferred financing costs | 317 | 586 | |||||
Deferred income taxes | 3,376 | 6,008 | |||||
Changes in working capital, net of acquisitions and dispositions: | |||||||
Receivables, net | (17,227 | ) | (2,204 | ) | |||
Inventories, net | 17,017 | 10,118 | |||||
Prepaid expenses | (2,713 | ) | (6,510 | ) | |||
Current liabilities | (14,217 | ) | (33,229 | ) | |||
Other non-current assets, net | (241 | ) | (717 | ) | |||
Other non-current liabilities | 1,880 | 654 | |||||
Cash provided by operating activities | $ | 65,278 | $ | 53,307 | |||
Cash Flows From Investing Activities: | |||||||
Acquisitions, net of cash acquired | (5,055 | ) | (94,960 | ) | |||
Purchases of property and equipment | (26,357 | ) | (40,144 | ) | |||
Other investing activities | — | (2,029 | ) | ||||
Cash used in investing activities | $ | (31,412 | ) | $ | (137,133 | ) | |
Cash Flows From Financing Activities: | |||||||
Repayment of revolving credit arrangements | (199,765 | ) | (339,560 | ) | |||
Proceeds from revolving credit arrangements | 180,387 | 438,010 | |||||
Deferred financing costs paid | — | (1,430 | ) | ||||
Proceeds from issuance of common stock | 1,071 | 993 | |||||
Repurchase of equity awards for employee tax withholding liabilities | (2,206 | ) | (1,868 | ) | |||
Cash dividends declared and paid | (13,641 | ) | (13,590 | ) | |||
Cash (used in) provided by financing activities | $ | (34,154 | ) | $ | 82,555 | ||
Net change in cash and cash equivalents | $ | (288 | ) | $ | (1,271 | ) | |
Effect of foreign currency translation on cash and cash equivalents | 33 | 299 | |||||
Cash and cash equivalents at the beginning of year | 6,332 | 6,323 | |||||
Cash and cash equivalents at the end of the period | $ | 6,077 | $ | 5,351 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest, net | $ | 2,098 | $ | 2,067 | |||
Cash paid for income taxes | $ | 19,536 | $ | 26,103 |
| | | | | | | |
| | First Nine Months | | ||||
|
| Fiscal 2023 |
| Fiscal 2022 | | ||
Cash Flows From Operating Activities: |
| |
|
| |
|
|
Net earnings | | $ | 120,773 | | $ | 133,686 | |
Adjustments to reconcile net earnings to cash flows from operating activities: | |
|
| |
|
| |
Depreciation | |
| 35,476 | |
| 31,126 | |
Amortization of intangible assets | |
| 11,003 | |
| 2,322 | |
Equity compensation expense | |
| 11,034 | |
| 7,796 | |
Gain on sale of assets | | | (1,756) | | | — | |
Amortization and write-off of deferred financing costs | |
| 465 | |
| 258 | |
Deferred income taxes | |
| 6,448 | |
| (456) | |
Changes in operating assets and liabilities, net of acquisitions and dispositions: | |
|
| |
| | |
Receivables, net | |
| (11,651) | |
| (21,230) | |
Inventories, net | |
| 61,598 | |
| (31,332) | |
Income tax receivable | | | (14) | | | (12) | |
Prepaid expenses and other current assets | |
| (8,337) | |
| (5,644) | |
Current liabilities | |
| (54,468) | |
| (23,271) | |
Other balance sheet changes | |
| (1,173) | |
| (6,988) | |
Cash provided by operating activities | | $ | 169,398 | | $ | 86,255 | |
Cash Flows From Investing Activities: | |
|
| |
|
| |
Acquisitions, net of cash acquired | |
| (3,320) | |
| (263,656) | |
Purchases of property and equipment | |
| (54,496) | |
| (32,331) | |
Purchases of short-term investments | | | — | | | (70,000) | |
Proceeds from short-term investments | | | — | | | 234,837 | |
Proceeds from the sale of property, plant and equipment | | | 2,125 | | | — | |
Other investing activities | |
| (33) | |
| 1,450 | |
Cash used in investing activities | | $ | (55,724) | | $ | (129,700) | |
Cash Flows From Financing Activities: | |
|
| |
|
| |
Repayment of revolving credit arrangements | |
| (369,159) | |
| (45,262) | |
Proceeds from revolving credit arrangements | |
| 316,368 | |
| 175,711 | |
Deferred financing costs paid | | | (1,661) | | | — | |
Repurchase of common stock | | | (20,045) | | | (86,804) | |
Proceeds from issuance of common stock | |
| 1,509 | |
| 1,263 | |
Repurchase of equity awards for employee tax withholding liabilities | |
| (9,941) | |
| (3,166) | |
Cash dividends paid | |
| (31,487) | |
| (26,572) | |
Other financing activities | |
| — | |
| (2,010) | |
Cash used in (provided by) financing activities | | $ | (114,416) | | $ | 13,160 | |
Net change in cash and cash equivalents | | $ | (742) | | $ | (30,285) | |
Effect of foreign currency translation on cash and cash equivalents | |
| (205) | |
| 402 | |
Cash and cash equivalents at the beginning of year | |
| 8,826 | |
| 44,859 | |
Cash and cash equivalents at the end of period | | $ | 7,879 | | $ | 14,976 | |
See accompanying notes.
8
THIRD
QUARTER OF FISCAL1. Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial reporting and the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. We believe the accompanying unaudited condensed consolidated financial statements reflect all normal, recurring adjustments that are necessary for a fair presentation of our financial position and results of operations as of the dates and for the periods presented. Results of operations for |
The preparation of our unaudited condensed consolidated financial statements in conformity with GAAP requires us to make certain gift with purchaseestimates and assumptions that affect the amounts totaling $0.2 million and $1.8 million previously reported as SG&A, have been reclassified to cost of goods sold for the Third Quarter of Fiscal 2016assets, liabilities, revenues and the First Nine Months of Fiscal 2016, respectively. This reclassification resulted in a decrease in SG&A and a corresponding increase in cost of goods soldexpenses in the Third Quarter ofconsolidated financial statements and accompanying notes. Actual results could differ from those estimates.
The significant accounting policies applied during the interim periods presented are consistent with the significant accounting policies described in our Fiscal 2016 and the First Nine Months of2022 Form 10-K. No recently issued guidance adopted in Fiscal 2016, with no2023 had a material impact on previously reported net earnings (loss).
2. Operating Group Information: We identify our consolidated results of operations, cash flows or financial position. We currently anticipate utilizing the modified retrospective method of adoption allowed by the guidance and plan to adopt the standard as of the first day of Fiscal 2018.
Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, substantially all financing activities, the elimination of inter-segmentany sales LIFO accounting adjustments for inventory,between operating groups, any other costsitems that are not allocated to the operating groups, including LIFO inventory accounting adjustments, and the operations of our other businesses which are not included in our operating groups, including our Lyons, Georgia distribution center operations. For a more extensive descriptionand our Oxford America business, which we exited in Fiscal 2022.
9
The table below presents certain financial information (in thousands) about our operating groups, as well as Corporate and Other.
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | ||||||||||||
Net sales | |||||||||||||||
Tommy Bahama | $ | 123,895 | $ | 125,966 | $ | 483,971 | $ | 472,796 | |||||||
Lilly Pulitzer | 59,244 | 52,319 | 192,045 | 186,777 | |||||||||||
Lanier Apparel | 43,110 | 35,065 | 84,314 | 81,217 | |||||||||||
Southern Tide | 9,217 | 8,687 | 31,254 | 19,267 | |||||||||||
Corporate and Other | 494 | 271 | 1,448 | 1,482 | |||||||||||
Total net sales | $ | 235,960 | $ | 222,308 | $ | 793,032 | $ | 761,539 | |||||||
Depreciation and amortization | |||||||||||||||
Tommy Bahama | $ | 8,033 | $ | 7,756 | $ | 23,321 | $ | 23,331 | |||||||
Lilly Pulitzer | 2,303 | 1,956 | 6,377 | 5,551 | |||||||||||
Lanier Apparel | 145 | 123 | 443 | 335 | |||||||||||
Southern Tide | 108 | 191 | 317 | 457 | |||||||||||
Corporate and Other | 355 | 389 | 1,054 | 1,140 | |||||||||||
Total depreciation and amortization | $ | 10,944 | $ | 10,415 | $ | 31,512 | $ | 30,814 | |||||||
Operating income (loss) | |||||||||||||||
Tommy Bahama | $ | (5,872 | ) | $ | (7,133 | ) | $ | 32,082 | $ | 26,761 | |||||
Lilly Pulitzer | 4,952 | 6,212 | 43,621 | 49,646 | |||||||||||
Lanier Apparel | 5,615 | 3,666 | 6,668 | 6,609 | |||||||||||
Southern Tide | 1,016 | (472 | ) | 3,765 | (425 | ) | |||||||||
Corporate and Other | (4,587 | ) | (2,600 | ) | (18,651 | ) | (12,223 | ) | |||||||
Total operating income (loss) | $ | 1,124 | $ | (327 | ) | $ | 67,485 | $ | 70,368 | ||||||
Interest expense, net | 683 | 716 | 2,355 | 2,505 | |||||||||||
Earnings (loss) from continuing operations before income taxes | $ | 441 | $ | (1,043 | ) | $ | 65,130 | $ | 67,863 |
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | |||||||||
Beginning balance | $ | (4,411 | ) | $ | (5,110 | ) | $ | (5,276 | ) | $ | (6,829 | ) |
Net foreign currency translation adjustment | (617 | ) | (172 | ) | 248 | 1,547 | ||||||
Ending balance | $ | (5,028 | ) | $ | (5,282 | ) | $ | (5,028 | ) | $ | (5,282 | ) |
| | | | | | | | | | | | | |
|
| Third Quarter | | First Nine Months | | ||||||||
|
| Fiscal 2023 |
| Fiscal 2022 |
| Fiscal 2023 |
| Fiscal 2022 | | ||||
Net sales |
| | |
| |
|
| |
|
| |
|
|
Tommy Bahama | | $ | 170,144 | | $ | 178,645 | | $ | 655,022 | | $ | 650,677 | |
Lilly Pulitzer | |
| 76,290 | |
| 84,053 | |
| 265,089 | |
| 264,763 | |
Johnny Was (1) | | | 49,105 | | | 22,661 | | | 150,619 | | | 22,661 | |
Emerging Brands | |
| 31,155 | |
| 26,912 | |
| 96,726 | |
| 88,588 | |
Corporate and Other | |
| (64) | |
| 762 | |
| (410) | |
| 2,355 | |
Consolidated net sales | | $ | 326,630 | | $ | 313,033 | | $ | 1,167,046 | | $ | 1,029,044 | |
| | | | | | | | | | | | | |
Depreciation and amortization | |
|
| |
|
| |
|
| |
|
| |
Tommy Bahama | | $ | 6,299 | | $ | 6,576 | | $ | 18,356 | | $ | 20,110 | |
Lilly Pulitzer | |
| 4,372 | |
| 3,288 | |
| 11,743 | |
| 9,384 | |
Johnny Was (1) | | | 4,684 | | | 2,184 | | | 14,593 | | | 2,184 | |
Emerging Brands | |
| 504 | |
| 391 | |
| 1,389 | |
| 1,143 | |
Corporate and Other | |
| 161 | |
| 197 | |
| 398 | |
| 627 | |
Consolidated depreciation and amortization | | $ | 16,020 | | $ | 12,636 | | $ | 46,479 | | $ | 33,448 | |
| | | | | | | | | | | | | |
Operating income (loss) | |
|
| |
|
| |
|
| |
|
| |
Tommy Bahama | | $ | 12,097 | | $ | 18,984 | | $ | 118,655 | | $ | 130,508 | |
Lilly Pulitzer | | | 6,769 | |
| 12,688 | |
| 49,851 | |
| 60,358 | |
Johnny Was (1) | | | 935 | | | 117 | | | 7,266 | | | 117 | |
Emerging Brands | |
| 3,709 | |
| 3,729 | |
| 10,650 | |
| 15,456 | |
Corporate and Other | |
| (9,050) | |
| (8,203) | |
| (23,987) | |
| (27,775) | |
Consolidated operating income | |
| 14,460 | |
| 27,315 | | $ | 162,435 | | $ | 178,664 | |
Interest expense, net | |
| 1,217 | |
| 698 | |
| 4,856 | |
| 1,214 | |
Earnings before income taxes | | $ | 13,243 | | $ | 26,617 | | $ | 157,579 | | $ | 177,450 | |
| | | | | | | | | |
|
| October 28, 2023 |
| January 28, 2023 |
| October 29, 2022 | |||
Assets |
| |
| | |
|
| |
|
Tommy Bahama (2) | | $ | 563,564 | | $ | 569,833 | | $ | 544,947 |
Lilly Pulitzer (3) | |
| 192,566 | |
| 211,119 | |
| 192,609 |
Johnny Was (4) | | | 331,131 | | | 334,603 | | | 350,212 |
Emerging Brands (5) | |
| 86,790 | |
| 91,306 | |
| 83,280 |
Corporate and Other (6) | |
| (11,895) | |
| (18,196) | |
| (30,731) |
Consolidated Total Assets | | $ | 1,162,156 | | $ | 1,188,665 | | $ | 1,140,317 |
(1) | |
(2) | Increase in Tommy Bahama total assets from October 29, 2022, includes increases in operating lease assets and property and equipment. |
(3) | Change in Lilly Pulitzer total assets from October 29, 2022, includes decreases in operating lease assets and receivables partially offset by an increase in property and equipment. |
(4) | Decrease in Johnny Was total assets from October 29, 2022, includes decreases in intangible assets and cash and cash equivalents. |
(5) | Increase in Emerging Brands total assets from October 29, 2022, includes increases in operating lease assets. |
(6) | Increase in Corporate and Other total assets from October 29, 2022, includes increases in prepaid taxes. |
10
The tables below quantify net sales, for each operating group and in total (in thousands), and the percentage of net sales by distribution channel for each operating group and in total, for each period presented. We have calculated all percentages below based on actual data, and percentages may not add to 100 due to rounding.
| | | | | | | | | | | | | | |
| | Third Quarter Fiscal 2023 |
| |||||||||||
|
| Net Sales |
| Retail |
| E-commerce |
| Food & Beverage |
| Wholesale |
| Other |
| |
Tommy Bahama | | $ | 170,144 |
| 45 | % | 21 | % | 13 | % | 21 | % | — | % |
Lilly Pulitzer | |
| 76,290 |
| 31 | % | 58 | % | — | % | 11 | % | — | % |
Johnny Was | | | 49,105 | | 39 | % | 41 | % | — | % | 20 | % | — | % |
Emerging Brands | |
| 31,155 |
| 12 | % | 41 | % | — | % | 47 | % | — | % |
Corporate and Other | |
| (64) |
| — | % | — | % | — | % | — | % | NM | % |
Total | | $ | 326,630 |
| 37 | % | 35 | % | 7 | % | 21 | % | — | % |
| | | | | | | | | | | | | | |
| | Third Quarter Fiscal 2022 |
| |||||||||||
|
| Net Sales |
| Retail |
| E-commerce |
| Food & Beverage |
| Wholesale |
| Other |
| |
Tommy Bahama | | $ | 178,645 |
| 44 | % | 20 | % | 13 | % | 23 | % | — | % |
Lilly Pulitzer | |
| 84,053 |
| 27 | % | 62 | % | — | % | 11 | % | — | % |
Johnny Was (1) | | | 22,661 | | 38 | % | 41 | % | — | | 21 | % | — | % |
Emerging Brands | |
| 26,912 |
| 5 | % | 40 | % | — | % | 55 | % | — | % |
Corporate and Other | |
| 762 |
| — | % | — | % | — | % | — | % | NM | % |
Total | | $ | 313,033 |
| 36 | % | 34 | % | 7 | % | 22 | % | — | % |
| | | | | | | | | | | | | | |
| | First Nine Months 2023 |
| |||||||||||
|
| Net Sales |
| Retail |
| E‑commerce |
| Food & Beverage |
| Wholesale |
| Other |
| |
Tommy Bahama | | $ | 655,022 |
| 45 | % | 23 | % | 13 | % | 19 | % | — | % |
Lilly Pulitzer | |
| 265,089 |
| 34 | % | 51 | % | — | % | 15 | % | — | % |
Johnny Was | | | 150,619 | | 38 | % | 40 | % | — | % | 22 | % | — | % |
Emerging Brands | |
| 96,726 |
| 10 | % | 42 | % | — | % | 48 | % | — | % |
Corporate and Other | |
| (410) |
| — | % | — | % | — | % | — | % | NM | % |
Consolidated net sales | | $ | 1,167,046 |
| 38 | % | 34 | % | 7 | % | 21 | % | — | % |
| | | | | | | | | | | | | | |
|
| First Nine Months 2022 |
| |||||||||||
|
| Net Sales |
| Retail |
| E‑commerce |
| Food & Beverage |
| Wholesale |
| Other |
| |
Tommy Bahama | | $ | 650,677 |
| 46 | % | 23 | % | 12 | % | 19 | % | — | % |
Lilly Pulitzer | |
| 264,763 |
| 34 | % | 49 | % | — | % | 17 | % | — | % |
Johnny Was (1) | | | 22,661 | | 38 | % | 41 | % | — | % | 21 | % | — | % |
Emerging Brands | |
| 88,588 |
| 5 | % | 39 | % | — | % | 56 | % | — | % |
Corporate and Other | |
| 2,355 |
| — | % | — | % | — | % | — | % | NM | % |
Consolidated net sales | | $ | 1,029,044 |
| 39 | % | 31 | % | 8 | % | 21 | % | — | % |
(1) | The |
3. Revenue Recognition and Receivables: Our revenue consists of direct to consumer sales, including our retail store, e-commerce and food and beverage operations, and wholesale sales, as well as royalty income, which is included in royalties and other operating income in our consolidated statements of operations. We recognize revenue when performance obligations under the terms of the contracts with our customers are satisfied. Our accounting policies related to revenue recognition for each type of contract with customers is described in the significant accounting policies described in our Fiscal 2022 Form 10-K.
11
The table below quantifies net sales by distribution channel (in thousands) for each period presented.
| | | | | | | | | | | | | |
|
| Third Quarter |
| First Nine Months |
| ||||||||
| | Fiscal 2023 |
| Fiscal 2022 |
| Fiscal 2023 |
| Fiscal 2022 | | ||||
Retail | | $ | 121,804 | | $ | 112,344 | | $ | 449,546 | | $ | 402,400 | |
E-commerce | |
| 113,531 | |
| 107,756 | |
| 391,559 | |
| 323,045 | |
Food & Beverage | |
| 22,562 | |
| 23,157 | |
| 84,097 | |
| 81,333 | |
Wholesale | |
| 68,716 | |
| 69,292 | |
| 241,857 | |
| 220,707 | |
Other | |
| 17 | |
| 484 | |
| (13) | |
| 1,559 | |
Net sales | | $ | 326,630 | | $ | 313,033 | | $ | 1,167,046 | | $ | 1,029,044 | |
An estimated sales return liability of $8 million, $12 million and $9 million for expected direct to consumer returns is classified in accrued expenses and other liabilities in our consolidated balance sheet as of October 28, 2023, January 28, 2023, and October 29, 2022, respectively. As of October 28, 2023, January 28, 2023, and October 29, 2022, prepaid expenses and other current assets included $3 million, $4 million and $4 million, respectively, relating to the estimated value of inventory for expected direct to consumer and wholesale sales returns.
Substantially all amounts recognized in receivables, net represent trade receivables related to contracts with customers. In the ordinary course of our wholesale operations, we offer discounts, allowances and cooperative advertising support to and accept returns from certain of our wholesale customers for certain products. As of October 28, 2023, January 28, 2023, and October 29, 2022, reserve balances recorded as a reduction to receivables related to these items were $3 million, $4 million and $5 million, respectively. As of October 28, 2023, January 28, 2023, and October 29, 2022, our provision for credit losses related to receivables included in our consolidated balance sheets was $1 million, $1 million and $1 million, respectively.
Contract liabilities for gift cards purchased by consumers and merchandise credits received by customers but not yet redeemed, less any breakage income recognized to date, is included in accrued expenses and other liabilities in our consolidated balance sheet and totaled $18 million, $19 million and $17 million as of October 28, 2023, January 28, 2023, and October 29, 2022, respectively.
4. Leases: For the Third Quarter of Fiscal 2023, operating lease expense was $18 million and variable lease expense was $10 million, resulting in total lease expense of $28 million compared to $25 million of total lease expense in the Third Quarter of Fiscal 2022. For the First Nine Months of Fiscal 2023, operating lease expense was $53 million and variable lease expense was $32 million, resulting in total lease expense of $85 million compared to $75 million of total lease expense in the First Nine Months of Fiscal 2022.
Cash paid for lease amounts included in the measurement of operating lease liabilities in the First Nine Months of Fiscal 2023 was $61 million, while cash paid for lease amounts included in the measurement of operating lease liabilities in the First Nine Months of Fiscal 2022 was $53 million.
The increase in lease expense and cash paid was primarily driven by the acquisition of Johnny Was.
12
As of October 28, 2023, the stated lease liability payments for the fiscal years specified below were as follows (in thousands):
| | | |
|
| Operating lease | |
Remainder of 2023 | | $ | 19,761 |
2024 | | | 73,791 |
2025 | | | 58,704 |
2026 | |
| 52,989 |
2027 | |
| 39,332 |
2028 | | | 33,277 |
After 2028 | |
| 63,417 |
Total lease payments | | $ | 341,271 |
Less: Difference between discounted and undiscounted lease payments | |
| 49,809 |
Present value of lease liabilities | | $ | 291,462 |
5. Income Taxes: For the Third Quarter of Fiscal 2023, our effective income tax rate was 18.6%, which is lower than a more typical annual effective tax rate of approximately 25% primarily due to the favorable utilization of research and development tax credits and adjustments to the US taxation on foreign earnings. For the Third Quarter of Fiscal 2022, our effective income tax rate was 26.1%. Due to the lower earnings during our third quarters as compared to our other fiscal quarters, certain discrete or other items we recognize in the third quarter may have a more pronounced impact resulting in the effective tax rate of the third quarter not being indicative of the effective tax rate for the full fiscal year.
For the First Nine Months of Fiscal 2023, our effective income tax rate was 23.4%, which is lower than a more typical annual effective tax rate of approximately 25% primarily due to the significant benefit from the vesting of restricted stock awards at a price higher than the grant date fair value and the favorable utilization of research and development tax credits and adjustments to the US taxation on foreign earnings. For the First Nine Months of Fiscal 2022, our effective income tax rate was 24.7%. The First Nine Months of Fiscal 2022 included the utilization of certain net operating loss carryforward amounts in certain state and foreign jurisdictions and other items.
Inflation Reduction Act of 2022
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (“IRA”) into law. The IRA implemented a corporate alternative minimum tax, subject to certain thresholds being met, and a 1% excise tax on share repurchases effective beginning January 1, 2023. We do not currently expect that the tax-related provisions of the IRA will have a material effect on our reported results, cash flows or financial position. For the First Nine Months of Fiscal 2023, excise taxes included as part of the price of common stock repurchased during the period did not have a material effect on our reported results.
6. Shareholders’ Equity: From time to time, we repurchase our common stock mainly through open market repurchase plans. During the Third Quarter of Fiscal 2023 and First Nine Months of 2023, we repurchased 10,000 and 196,000 shares of our common stock, respectively, as part of an open market repurchase program at a cost of $1 million and $20 million, respectively. The 10,000 shares repurchased during the Third Quarter of Fiscal 2023 completed the open market repurchase program. During the Third Quarter of Fiscal 2022 and First Nine Months of Fiscal 2022, we repurchased 146,000 and 976,000 shares of our common stock, respectively, at a cost of $14 million and $87 million, respectively. The excise taxes included in the cost of shares repurchased during Fiscal 2023 was not material.
We also repurchase shares from our employees to cover employee tax liabilities related to the vesting of shares of our common stock. During the First Nine Months of Fiscal 2023 and the First Nine Months of Fiscal 2022, we repurchased $10 million and $3 million of shares, respectively, from our employees to cover employee tax liabilities related to the vesting of shares of our common stock.
13
The following tables detail the changes (in thousands) in our common stock, additional paid-in capital ("APIC"), retained earnings and accumulated other comprehensive (loss) income ("AOCI"), for each period presented.
| | | | | | | | | | | | | | | |
| | Fiscal 2022 | |||||||||||||
|
| Common Stock |
| APIC |
| Retained Earnings |
| AOCI |
| Total | |||||
January 29, 2022 |
| $ | 16,805 | | $ | 163,156 | | $ | 331,175 | | $ | (3,472) | | $ | 507,664 |
Comprehensive income | |
| — | |
| — | |
| 57,408 | |
| 477 | |
| 57,885 |
Shares issued under equity plans | |
| 5 | |
| 387 | |
| — | |
| — | |
| 392 |
Compensation expense for equity awards | |
| — | |
| 2,725 | |
| — | |
| — | |
| 2,725 |
Repurchase of shares | |
| (526) | |
| (3,131) | |
| (42,375) | |
| — | |
| (46,032) |
Dividends declared | |
| — | |
| — | |
| (9,214) | |
| — | |
| (9,214) |
April 30, 2022 | | $ | 16,284 | | $ | 163,137 | | $ | 336,994 | | $ | (2,995) | | $ | 513,420 |
Comprehensive income | |
| — | |
| — | |
| 56,612 | | | (125) | |
| 56,487 |
Shares issued under equity plans | |
| 15 | |
| 475 | |
| — | |
| — | |
| 490 |
Compensation expense for equity awards | |
| — | |
| 2,527 | |
| — | |
| — | |
| 2,527 |
Repurchase of shares | |
| (339) | |
| — | |
| (29,475) | |
| — | |
| (29,814) |
Dividends declared | |
| — | |
| — | |
| (9,094) | |
| — | |
| (9,094) |
July 30, 2022 | | $ | 15,960 | | $ | 166,139 | | $ | 355,037 | | $ | (3,120) | | $ | 534,016 |
Comprehensive income | |
| — | |
| — | |
| 19,666 | | | (450) | |
| 19,216 |
Shares issued under equity plans | |
| 1 | |
| 379 | |
| — | |
| — | |
| 380 |
Compensation expense for equity awards | |
| — | |
| 2,545 | |
| — | |
| — | |
| 2,545 |
Repurchase of shares | |
| (146) | |
| — | |
| (13,977) | |
| — | |
| (14,123) |
Dividends declared | |
| — | |
| — | |
| (8,995) | |
| — | |
| (8,995) |
October 29, 2022 | | $ | 15,815 | | $ | 169,063 | | $ | 351,731 | | $ | (3,570) | | $ | 533,039 |
Comprehensive income | |
| — | |
| — | |
| 32,049 | |
| 1,746 | |
| 33,795 |
Shares issued under equity plans | |
| 5 | |
| 332 | |
| — | |
| — | |
| 337 |
Compensation expense for equity awards | |
| — | |
| 2,780 | |
| — | |
| — | |
| 2,780 |
Repurchase of shares | |
| (46) | |
| — | |
| (4,824) | |
| — | |
| (4,870) |
Dividends declared | |
| — | |
| — | |
| (8,811) | |
| — | |
| (8,811) |
January 28, 2023 | | $ | 15,774 | | $ | 172,175 | | $ | 370,145 | | $ | (1,824) | | $ | 556,270 |
| | | | | | | | | | | | | | | |
| | First Nine Months Fiscal 2023 | |||||||||||||
|
| Common Stock |
| APIC |
| Retained Earnings |
| AOCI |
| Total | |||||
January 28, 2023 |
| $ | 15,774 | | $ | 172,175 | | $ | 370,145 | | $ | (1,824) | | $ | 556,270 |
Comprehensive income | |
| — | |
| — | |
| 58,538 | |
| (604) | |
| 57,934 |
Shares issued under equity plans | |
| 6 | |
| 596 | |
| — | |
| — | |
| 602 |
Compensation expense for equity awards | |
| — | |
| 3,259 | |
| — | |
| — | |
| 3,259 |
Repurchase of shares | |
| — | |
| — | |
| — | |
| — | |
| — |
Dividends declared | |
| — | |
| — | |
| (10,640) | |
| — | |
| (10,640) |
April 29, 2023 | | $ | 15,780 | | $ | 176,030 | | $ | 418,043 | | $ | (2,428) | | $ | 607,425 |
Comprehensive income | |
| — | |
| — | |
| 51,453 | | | 319 | |
| 51,772 |
Shares issued under equity plans | |
| 130 | |
| 358 | |
| — | |
| — | |
| 488 |
Compensation expense for equity awards | |
| — | |
| 4,249 | |
| — | |
| — | |
| 4,249 |
Repurchase of shares | |
| (280) | |
| (9,848) | |
| (18,800) | |
| — | |
| (28,928) |
Dividends declared | |
| — | |
| — | |
| (10,377) | |
| — | |
| (10,377) |
July 29, 2023 | | $ | 15,630 | | $ | 170,789 | | $ | 440,319 | | $ | (2,109) | | $ | 624,629 |
Comprehensive income | |
| — | |
| — | |
| 10,782 | | | (888) | |
| 9,894 |
Shares issued under equity plans | |
| 5 | |
| 415 | |
| — | |
| — | |
| 420 |
Compensation expense for equity awards | |
| — | |
| 3,526 | |
| — | |
| — | |
| 3,526 |
Repurchase of shares | |
| (10) | |
| — | |
| (1,056) | |
| — | |
| (1,066) |
Dividends declared | |
| — | |
| — | |
| (10,290) | |
| — | |
| (10,290) |
October 28, 2023 | | $ | 15,625 | | $ | 174,730 | | $ | 439,755 | | $ | (2,997) | | $ | 627,113 |
14
Long-Term Stock Incentive Plan and Equity Compensation Expense
In recent years, we have granted a combination of service-based restricted share awards and awards based on relative total shareholder return ("TSR") to certain select employees.
Service-Based Restricted Share Awards
The table below summarizes the service-based restricted share awards, including both restricted shares and restricted share units, activity for the First Nine Months of Fiscal 2023:
| | | | | | |
|
| First Nine Months of Fiscal 2023 |
| |||
|
| |
| Weighted- |
| |
| | Number of | | average | | |
| | Shares or | | grant date | | |
| | Units | | fair value | | |
Awards outstanding at beginning of year | | 212,945 | | $ | 64 | |
Awards granted | | 60,105 | | $ | 115 | |
Awards vested, including awards repurchased from employees for employees’ tax liability | | (111,095) | | $ | 41 | |
Awards forfeited | | (2,670) | | $ | 80 | |
Awards outstanding on October 28, 2023 | | 159,285 | | $ | 99 | |
TSR-based Restricted Share Units
The table below summarizes the TSR-based restricted share unit activity at target for the First Nine Months of Fiscal 2023:
| | | | | | |
|
| First Nine Months of Fiscal 2023 |
| |||
|
| |
| Weighted- |
| |
| | | | average | | |
| | Number of | | grant date | | |
| | Share Units | | fair value | | |
TSR-based awards outstanding at beginning of year | | 196,040 | | $ | 89 | |
TSR-based awards granted | | 74,605 | | $ | 153 | |
TSR-based restricted shares earned and vested, including restricted share units repurchased from employees for employees’ tax liability | | (76,340) | | $ | 50 | |
TSR-based awards forfeited | | (550) | | $ | 113 | |
TSR-based awards outstanding on October 28, 2023 | | 193,755 | | $ | 129 | |
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7. Business Combinations: On September 19, 2022, we acquired JW Holdings, LLC and its subsidiaries (collectively “Johnny Was”) (the “Acquisition”). We accounted for this transaction as a business combination, which generally requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date.
The final estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration, were as follows (in thousands):
| | | | | | | | | |
|
| Provisional Amounts at | | Measurement Period Adjustments | | Final Amounts at | |||
Cash and cash equivalents | | $ | 7,296 | | $ | — | | $ | 7,296 |
Receivables | |
| 8,777 | |
| — | |
| 8,777 |
Inventories | |
| 23,434 | |
| (28) | |
| 23,406 |
Prepaid expenses and other assets | |
| 6,353 | |
| — | |
| 6,353 |
Property and equipment | |
| 21,108 | |
| (947) | |
| 20,161 |
Intangible assets | |
| 134,640 | |
| — | |
| 134,640 |
Goodwill | |
| 96,637 | |
| 2,599 | |
| 99,236 |
Operating lease assets | | | 54,859 | | | — | | | 54,859 |
Accounts payable, accrued expenses and other liabilities | |
| (34,777) | |
| 699 | |
| (34,078) |
Non-current portion of operating lease liabilities | | | (47,009) | | | — | | | (47,009) |
Purchase price | | $ | 271,318 | | $ | 2,323 | | $ | 273,641 |
We made measurement-period adjustments, as shown in the table above, that increased the amount of provisional goodwill by $3 million. Substantially all of the goodwill is deductible for income tax purposes.
Intangible assets allocated in connection with our purchase price allocation consisted of the following (in thousands):
| | | | | |
|
| |
| Johnny Was | |
| | Useful life | | acquisition | |
Finite lived intangible assets acquired, primarily consisting of customer relationships |
| 8 - 13 years | | $ | 56,740 |
Trade names and trademarks |
| Indefinite | |
| 77,900 |
| | | | $ | 134,640 |
The following unaudited pro forma information (in thousands, except per share data) shows the results of our operations for the Third Quarter of Fiscal 2022 and First Nine Months of 2022 as if the acquisition of Johnny Was had occurred at the beginning of Fiscal 2021. The information presented below is for illustrative purposes only, is not indicative of results that would have been achieved if the acquisition had occurred as of that date and is not intended to be a projection of future results of operations. The following unaudited pro forma information has been prepared from historical financial statements for Johnny Was and us for the periods presented, including without limitation, purchase accounting adjustments, but excluding any seller specific management/advisory or similar expenses and any synergies or operating cost reductions that may be achieved from the combined operations in the future.
| | | | | | | | | | | | |
|
| Third Quarter Fiscal 2022 |
| First Nine Months of Fiscal 2022 | ||||||||
| | Actual | | Pro Forma | | Actual | | Pro Forma | ||||
Net sales |
| $ | 313,033 |
| $ | 344,058 |
| $ | 1,029,044 |
| $ | 1,163,889 |
Earnings before income taxes | | $ | 26,617 | | $ | 34,444 | | $ | 177,450 | | $ | 196,700 |
Net earnings | | $ | 19,666 | | $ | 25,536 | | $ | 133,686 | | $ | 148,124 |
Earnings per share: | | | | | | | | | | | | |
Basic | | $ | 1.25 | | $ | 1.62 | | $ | 8.36 | | $ | 9.26 |
Diluted | | $ | 1.22 | | $ | 1.58 | | $ | 8.19 | | $ | 9.07 |
8. Debt: On March 6, 2023, we entered into a Second Amendment to the Fourth Amended and Restated Credit Agreement (the “Revolving Credit Agreement”). The Revolving Credit Agreement provides for a revolving credit facility of up to $325 million, which may be used to fund working capital, to fund future acquisitions and for general
16
corporate purposes. The Revolving Credit Agreement amended and restated our Fourth Amended and Restated Credit Agreement (the “Prior Credit Agreement”). The Revolving Credit Agreement (1) extended the maturity of the facility from July 2024 to March 2028 and (2) modified certain provisions of the agreement. In other non-current assets, we capitalized debt issuance costs of $2 million in connection with commitments upon entering into the Revolving Credit Agreement.
Pursuant to the Revolving Credit Agreement, the interest rate applicable to our borrowings under the Revolving Credit Agreement are based on either the Term Secured Overnight Financing Rate plus an applicable margin of 135 to 185 basis points or prime plus an applicable margin of 25 to 75 basis points.
The Revolving Credit Agreement generally (1) is limited to a borrowing base consisting of specified percentages of eligible categories of assets, (2) accrues variable-rate interest (weighted average interest rate of 7% as of October 28, 2023), unused line fees and letter of credit fees based upon average utilization or unused availability, as applicable, (3) requires periodic interest payments with principal due at maturity and (4) is secured by a first priority security interest in substantially all of the assets of Oxford Industries, Inc. and its domestic subsidiaries, including accounts receivable, books and records, chattel paper, deposit accounts, equipment, certain general intangibles, inventory, investment property (including the equity interests of certain subsidiaries), negotiable collateral, life insurance policies, supporting obligations, commercial tort claims, cash and cash equivalents, eligible trademarks, proceeds and other personal property.
We have issued standby letters of credit of $6 million in the aggregate under the Revolving Credit Agreement as of October 28, 2023. Outstanding letters of credit under the Revolving Credit Agreement reduce the amount of borrowings available to us.
As of October 28, 2023, we had $66 million of borrowings outstanding and $253 million in unused availability under the Revolving Credit Agreement. Under the Prior Credit Agreement as of January 28, 2023, and October 29, 2022, we had $119 million and $130 million of borrowings outstanding, and $199 million and $160 million of unused availability, respectively.
Compliance with Covenants
The Revolving Credit Agreement is subject to a number of affirmative covenants regarding the delivery of financial information, compliance with law, maintenance of property, insurance requirements and conduct of business. Also, the Revolving Credit Agreement is subject to certain negative covenants or other restrictions including, among other things, limitations on our ability to (1) incur debt, (2) guaranty certain obligations, (3) incur liens, (4) pay dividends to shareholders, (5) repurchase shares of our common stock, (6) make investments, (7) sell assets or stock of subsidiaries, (8) acquire assets or businesses, (9) merge or consolidate with other companies or (10) prepay, retire, repurchase or redeem debt.
Additionally, the Revolving Credit Agreement contains a financial covenant that applies only if excess availability under the agreement for three consecutive business days is less than the greater of (1) $23.5 million or (2) 10% of availability. In such case, our fixed charge coverage ratio as defined in the Revolving Credit Agreement must not be less than 1.0 to 1.0 for the immediately preceding 12 fiscal months for which financial statements have been delivered. This financial covenant continues to apply until we have maintained excess availability under the Revolving Credit Agreement of more than the greater of (1) $23.5 million or (2) 10% of availability for 30 consecutive days.
We believe that the affirmative covenants, negative covenants, financial covenants and other restrictions under the Revolving Credit Agreement are customary for those included in similar facilities entered into at the time we amended the Revolving Credit Agreement. During Fiscal 2023 and as of October 28, 2023, no financial covenant testing was required pursuant to our Revolving Credit Agreement, or the Prior Credit Agreement, as applicable, as the minimum availability threshold was met at all times. As of October 28, 2023, we were compliant with all applicable covenants related to the Revolving Credit Agreement.
17
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to the unaudited condensed consolidated financial statementsthereto contained in this report and the consolidated financial statements, notes to consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report onFiscal 2022 Form 10-K for Fiscal
OVERVIEW
Business Overview
We are a globalleading branded apparel company that designs, sources, markets and distributes products bearing the trademarks of our Tommy Bahama®,Bahama, Lilly Pulitzer®Pulitzer, Johnny Was, Southern Tide, TBBC and Southern Tide®Duck Head lifestyle brands, other owned brands and licensed brands as well as private label apparel products. During Fiscal 2016, 92% of our net sales were from products bearing brands that we own and 66% of our net sales were through our direct to consumer channels of distribution. In Fiscal 2016, 96% of our consolidated net sales were to customers located in the United States, with the sales outside the United States consisting primarily of our Tommy Bahama product sales in Canada and the Asia-Pacific region.
Our business strategy is to develop and market compellingdrive excellence across a portfolio of lifestyle brands and products that evoke a strong emotional response from our target consumers.create sustained, profitable growth. We consider lifestyle brands to be those brands that have a clearly defined and targeted point of view inspired by an appealing lifestyle or attitude. Furthermore, we believe lifestyle brands like Tommy Bahama, Lilly Pulitzer and Southern Tide that create an emotional connection with consumers can command greater loyalty and higher price points at retail and create licensing opportunities, which may drive higher earnings.opportunities. We believe the attraction of a lifestyle brand depends on creating compelling product, effectively communicating the respective lifestyle brand message and distributing products to consumers where and when they want it.
On September 19, 2022, we acquired Johnny Was. Johnny Was products are sold through the Johnny Was website and full-price retail stores and outlets as well as select department stores and specialty stores. We continue to execute acquisition and integration activities in connection with the Johnny Was acquisition, such as investing in technology infrastructure. The financial information included in the results of operations discussion below for the Third Quarter of Fiscal 2022 and the First Nine Months of Fiscal 2022, includes only the six weeks from the September 19, 2022 acquisition through October 29, 2022. Therefore, the amounts included in the results of operations below for the Third Quarter of Fiscal 2022 and the First Nine Months of Fiscal 2022 are not indicative of results for a specific product.
During Fiscal 2022, 80% of our owned lifestyle branded products primarilyconsolidated net sales were through our direct to consumer channels consisting of distribution, which consist of our brand specific full-price retail stores, e-commerce websites and outlets, as well as our Tommy Bahama food and Lilly Pulitzer retail stores andbeverage operations. The remaining 20% of our e-commerce sites for Tommy Bahama, Lilly Pulitzer and Southern Tide, andnet sales was generated through our wholesale distribution channels. Our direct to consumer operations provide us with the opportunity to interact directly with our customers, present to them a broad assortment of our current season products and immerse them in the theme of the lifestyle brand. We believe that presenting our products in a setting specifically designed to showcase the lifestyle onchannels, which the brands are based enhances the image of our brands. Our Tommy Bahama and Lilly Pulitzer full-price retail stores provide high visibility for our brands and products and allow us to stay close to the preferences of our consumers, while also providing a platform for long-term growth for the brands. In Tommy Bahama, we also operate a limited number of restaurants, generally adjacent to a Tommy Bahama full-price retail store location, which we believe further enhance the brand's image with consumers.
For additional information about our business and our operating groups, see Part I, Item 1. Business of our Fiscal 2022 Form 10-K. Important factors relating to certain risks which could impact our business are described in Part I. Item 1A. Risk Factors of our Fiscal 2022 Form 10-K.
Industry Overview
We operate in a highly competitive apparel markets in which numerous U.S. and foreign apparel firms compete.market that continues to evolve rapidly with the expanding application of technology to fashion retail. No single apparel firm or small group of apparel firms dominates the apparel industry, and our direct competitors vary by operating group and distribution channel. We believe the principal competitive factors in the apparel industry are reputation, value, and image of brand names; design; consumer preference; price; quality; marketing; product fulfillment capabilities; and customer service.
18
domestic and international economic conditions change. Often,Also, in recent years consumers have chosen to spend less of their discretionary spending on certain product categories, including apparel, while spending more on services and other product categories. Further, negative economic conditions often have a longer and more severe impact on the apparel industry than on other industries. We believe current global economic conditionsindustries due, in part, to apparel purchases often being more of a discretionary purchase.
This competitive and evolving environment requires that brands and retailers approach their operations, including marketing and advertising, very differently than they have historically and may result in increased operating costs and investments to generate growth or even maintain existing sales levels. While the resulting economic uncertainty continue to impact our business,competition and the apparel industry as a whole.
The current macroenvironment, with heightened concerns about continuing inflationary trends, a global economic recession, geopolitical issues, the availability and cost of credit and continued increases in interest rates, combined with heightened promotional activity in our industry, is creating a complex and challenging retail environment, which has impacted our businesses and financial results during Fiscal 2023 and exacerbated some of the inherent challenges to our operations. There remains significant uncertainty in the macroeconomic environment, and the impact of these and other factors could have a major effect on our businesses.
However, we believe our lifestyle brands have true competitive advantages, in this new retailing paradigm, and we arecontinue to invest in our brands’ direct to consumer initiatives and distribution capabilities while further leveraging technology to serve our consumers when and where they want to be served. We continue to believe that our lifestyle brands, with their strong emotional connections with consumers, are well suited to succeed and thrive in the long-termlong term while managing the various challenges facing our industry.
Key Operating Results:
The following table sets forth our consolidated operating results from continuing operations (in thousands, except per share amounts) for the First Nine Months of Fiscal 20172023 compared to the First Nine Months of Fiscal 2016:
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | |||||
Net sales | $ | 793,032 | $ | 761,539 | ||
Operating income | $ | 67,485 | $ | 70,368 | ||
Net earnings from continuing operations | $ | 40,958 | $ | 42,455 | ||
Net earnings from continuing operations per diluted share | $ | 2.45 | $ | 2.55 |
| | | | | | |
|
| First Nine Months | ||||
|
| Fiscal 2023 | | Fiscal 2022 | ||
Net sales | | $ | 1,167,046 | | $ | 1,029,044 |
Operating income | | $ | 162,435 | | $ | 178,664 |
Net earnings | | $ | 120,773 | | $ | 133,686 |
Net earnings per diluted share | | $ | 7.57 | | $ | 8.19 |
Weighted average shares outstanding - diluted | |
| 15,947 | |
| 16,333 |
Net earnings from continuing operations per diluted share were $7.57 in the First Nine Months of Fiscal 2017 was2023 compared to $8.19 in the First Nine Months of Fiscal 2022. The 8% decrease in net earnings per diluted share included a 10% decrease in net earnings as well as a 2% reduction in weighted average shares outstanding due to open market share repurchases in Fiscal 2022 and Fiscal 2023. The decreased net earnings were primarily due to the impact of LIFO accounting on Corporate and Other operating results and(1) lower operating income inat Tommy Bahama, Lilly Pulitzer, primarily related to charges associated with the Fiscal 2017 acquisition of certain Lilly Pulitzer Signature Store operations.and Emerging Brands and (2) increased interest expense. These itemsdecreases were partially offset by higher(1) the inclusion of the operating income of Johnny Was in Tommy Bahama as well as Southern Tide, which was acquired in April 2016.
COMPARABLE STORE SALES
We often disclose comparable store sales in order to provide additional information regarding changes in our results of operations between periods. Our disclosures of comparable store sales include net sales from our full-price retail stores and e-commerce sites, excluding sales associated with e-commerce flash clearance sales. We believe that the inclusion of both our full-price retail stores and e-commerce sites in ourthe comparable store sales disclosures is a more meaningful way of reporting our comparable store sales results, given similar inventory planning, allocation and return policies, as well as our cross-channel marketing and other initiatives for the direct to consumer channel.channels. For our comparable store sales disclosures, we exclude (1) outlet store sales, warehouse sales and e-commerce flash clearance sales, as those clearance sales are used primarily to liquidate end of
19
season inventory, which may vary significantly depending on the level of end of season inventory on hand and generally occur at lower gross margins than our non-clearance direct to consumer sales, and (2) restaurantfood and beverage sales, as we do not currently believe that the inclusion of restaurantfood and beverage sales in our comparable store sales disclosures is meaningful in assessing our consolidated results of operations.branded apparel businesses. Comparable store sales information reflects net sales, including shipping and handling revenues, if any, associated with product sales.
For purposes of our disclosures, we consider a comparable store to be, in addition to oursales consists of sales through e-commerce sites aand any physical full-price retail storestores that waswere owned and open as of the beginning of the prior fiscal year and which did not have during the relevant periods, and is not within the current fiscal year scheduled to have, (1) a remodel or other event resultingwhich would result in the store being closeda closure for an extended period of time (which we define as a period of two weeks or longer), (2) a greater than 15% change in the size of the retail space due to expansion, reduction or relocation to a new retail space or (3) a relocation to a new space that wasis significantly different from the prior retail space, or (4) a closing or opening of a Tommy Bahama restaurant adjacent to the full-price retail store.space. For those stores which are excluded from comparable stores based on the preceding sentence, the stores continue to be excluded from comparable store sales until the criteria for a new store is met subsequent to the remodel, relocation, restaurant closing or opening, or other event. A full-price retail store that is remodeled will generally continue to be included in our comparable store sales metrics as a store is not typically closed for longer than a two weektwo-week period during a remodel; however, in some cases, a store may be closed for more than two weeks during a remodel. Afull-price retail store that is relocated generally will generally not be included in our comparable store sales metrics until that store has been open in the relocated space for the entirety of the prior fiscal year because the size or other characteristics of the store typically change significantly from the prior location. Additionally, anyAny stores that were closed during the prior fiscal year or current fiscal year, or which we expect to close or vacate in the current fiscal year, as well as any pop-up or temporary store locations, are excluded from the definition ofour comparable store sales.
Definitions and calculations of comparable store sales differ among retail companies, and therefore comparable store sales metrics disclosed by us may not be comparable to the metrics disclosed by other companies.
DIRECT TO CONSUMER LOCATIONS
The table below provides information about the number of direct to consumer locations for our brands as of the dates specified. For Johnny Was, locations are only included subsequent to the date of acquisition. The amounts below include our permanent locations and exclude any pop-up or temporary store locations which have an initial lease term of 12 months or less.
| | | | | | | | |
| | October 28, | | January 28, | | October 29, | | January 29, |
|
| 2023 |
| 2023 |
| 2022 |
| 2022 |
Tommy Bahama full-price retail stores |
| 102 |
| 103 |
| 102 |
| 102 |
Tommy Bahama retail-food & beverage locations |
| 21 |
| 21 |
| 21 |
| 21 |
Tommy Bahama outlets |
| 34 |
| 33 |
| 35 |
| 35 |
Total Tommy Bahama locations |
| 157 |
| 157 |
| 158 |
| 158 |
Lilly Pulitzer full-price retail stores |
| 61 |
| 59 |
| 59 |
| 58 |
Johnny Was full-price retail stores | | 71 | | 65 | | 64 | | — |
Johnny Was outlets | | 2 | | 2 | | 2 | | — |
Total Johnny Was locations | | 73 | | 67 | | 66 | | — |
Southern Tide full-price retail stores | | 15 | | 6 | | 5 | | 4 |
TBBC full-price retail stores | | 3 | | 3 | | 2 | | 1 |
Total Oxford direct to consumer locations |
| 309 |
| 292 |
| 290 |
| 221 |
RESULTS OF OPERATIONS
THIRD QUARTER OF FISCAL 20172023 COMPARED TO THIRD QUARTER OF FISCAL 2016
The discussion and tables below compare our statements of operations for the Third Quarter of Fiscal 2023 to the Third Quarter of Fiscal 2022. Each dollar and percentage change provided reflects the change between these fiscal periods unless indicated otherwise. Each dollar and share amount included in the tables is in thousands except for per share amounts. We have calculated all percentages based on actual data, and percentage columns in tables may not add due to rounding. Individual line items of our consolidated statements of operations, including gross profit, may not be directly comparable to those of our competitors, as classification of certain expenses may vary by company.
20
The following table sets forth the specified line items in our unaudited condensed consolidated statements of operations both in dollars (in thousands) and as a percentage of net sales. The table also sets forthsales as well as the dollar change and the percentage change of the data as compared to the same period of the prior year. We have calculated all percentages based on actual data, butThe table also includes net earnings per diluted share and diluted weighted average shares outstanding (in thousands), as well as the change and the percentage columns may not add due to rounding.
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | $ Change | % Change | ||||||||||||
Net sales | $ | 235,960 | 100.0 | % | $ | 222,308 | 100.0 | % | $ | 13,652 | 6.1 | % | |||
Cost of goods sold | 110,784 | 47.0 | % | 104,254 | 46.9 | % | 6,530 | 6.3 | % | ||||||
Gross profit | $ | 125,176 | 53.0 | % | $ | 118,054 | 53.1 | % | $ | 7,122 | 6.0 | % | |||
SG&A | 127,091 | 53.9 | % | 121,442 | 54.6 | % | 5,649 | 4.7 | % | ||||||
Royalties and other operating income | 3,039 | 1.3 | % | 3,061 | 1.4 | % | (22 | ) | (0.7 | )% | |||||
Operating income (loss) | $ | 1,124 | 0.5 | % | $ | (327 | ) | (0.1 | )% | $ | 1,451 | NM | |||
Interest expense, net | 683 | 0.3 | % | 716 | 0.3 | % | (33 | ) | (4.6 | )% | |||||
Earnings (loss) from continuing operations before income taxes | $ | 441 | 0.2 | % | $ | (1,043 | ) | (0.5 | )% | $ | 1,484 | NM | |||
Income taxes | (631 | ) | (0.3 | )% | 555 | 0.2 | % | (1,186 | ) | NM | |||||
Net earnings (loss) from continuing operations | $ | 1,072 | 0.5 | % | $ | (1,598 | ) | (0.7 | )% | $ | 2,670 | NM | |||
Earnings from discontinued operations, net of taxes | — | — | % | — | — | % | — | — | % | ||||||
Net earnings (loss) | $ | 1,072 | 0.5 | % | $ | (1,598 | ) | (0.7 | )% | $ | 2,670 | NM |
| | | | | | | | | | | | | | | | | | |
|
| Third Quarter |
|
| | | | |
| |||||||||
| | Fiscal 2023 | | | Fiscal 2022 | | | $ Change |
| % Change | | |||||||
| | | | | | | | | | | | | | | | | | |
Net sales |
| $ | 326,630 |
| 100.0 | % | | $ | 313,033 | | 100.0 | % | | $ | 13,597 |
| 4.3 | % |
Cost of goods sold | |
| 121,211 |
| 37.1 | % | |
| 115,339 |
| 36.8 | % | |
| 5,872 |
| 5.1 | % |
Gross profit | | $ | 205,419 |
| 62.9 | % | | $ | 197,694 |
| 63.2 | % | | $ | 7,725 |
| 3.9 | % |
SG&A | |
| 194,822 |
| 59.6 | % | |
| 175,027 |
| 55.9 | % | |
| 19,795 |
| 11.3 | % |
Royalties and other operating income | |
| 3,863 |
| 1.2 | % | |
| 4,648 |
| 1.5 | % | |
| (785) |
| (16.9) | % |
Operating income | | $ | 14,460 |
| 4.4 | % | | $ | 27,315 |
| 8.7 | % | | $ | (12,855) |
| (47.1) | % |
Interest expense, net | |
| 1,217 |
| 0.4 | % | |
| 698 |
| 0.2 | % | |
| 519 |
| 74.4 | % |
Earnings before income taxes | | $ | 13,243 |
| 4.1 | % | | $ | 26,617 |
| 8.5 | % | | $ | (13,374) |
| (50.2) | % |
Income tax expense | |
| 2,461 |
| 0.8 | % | |
| 6,951 |
| 2.2 | % | |
| (4,490) |
| (64.6) | % |
Net earnings | | $ | 10,782 |
| 3.3 | % | | $ | 19,666 |
| 6.3 | % | | $ | (8,884) |
| (45.2) | % |
Net earnings per diluted share | | $ | 0.68 | | | | | $ | 1.22 | | | | | $ | (0.54) | | (44.3) | % |
Weighted average shares outstanding - diluted | | | 15,787 |
| | | | | 16,139 |
| | | | | (352) |
| (2.2) | % |
Net Sales
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | $ Change | % Change | ||||||||
Tommy Bahama | $ | 123,895 | $ | 125,966 | $ | (2,071 | ) | (1.6 | )% | ||
Lilly Pulitzer | 59,244 | 52,319 | 6,925 | 13.2 | % | ||||||
Lanier Apparel | 43,110 | 35,065 | 8,045 | 22.9 | % | ||||||
Southern Tide | 9,217 | 8,687 | 530 | 6.1 | % | ||||||
Corporate and Other | 494 | 271 | 223 | NM | |||||||
Total net sales | $ | 235,960 | $ | 222,308 | $ | 13,652 | 6.1 | % |
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | | |||||
| | Fiscal 2023 | | Fiscal 2022 |
| $ Change |
| % Change | | |||
Tommy Bahama | | $ | 170,144 | | $ | 178,645 | | $ | (8,501) |
| (4.8) | % |
Lilly Pulitzer | |
| 76,290 | |
| 84,053 | |
| (7,763) |
| (9.2) | % |
Johnny Was | | | 49,105 | |
| 22,661 | |
| 26,444 |
| NM | % |
Emerging Brands | |
| 31,155 | |
| 26,912 | |
| 4,243 |
| 15.8 | % |
Corporate and Other | |
| (64) | |
| 762 | |
| (826) |
| (108.4) | % |
Consolidated net sales | | $ | 326,630 | | $ | 313,033 | | $ | 13,597 |
| 4.3 | % |
Consolidated net sales increased $13.7 million, or 6.1%, in the Third Quarter of Fiscal 2017 compared to the Third Quarter of Fiscal 2016. The increase in consolidated net sales was primarily driven by (1) a $5.6 million increase in wholesale sales, consisting of increases in Lanier Apparel and Southern Tide and decreases in Tommy Bahama and Lilly Pulitzer, (2) an incremental net sales increase of $5.5 million associated with the operation of non-comp full-price retail stores in Lilly Pulitzer and Tommy Bahama, (3) a $2.4 million, or 4%, increase in comparable store sales to $69.5were $327 million in the Third Quarter of Fiscal 2017 from $67.12023 compared to net sales of $313 million in the Third Quarter of Fiscal 2016 and (4)2022. The 4% increase in net sales included (1) a $1.6$26 million increase in restaurantsales for Johnny Was, which we owned for six out of the thirteen weeks of the Third Quarter of Fiscal 2022, and (2) increased sales in Tommy Bahama.Emerging Brands. These increases were partially offset by a $1.5 million decreasedecreased sales in net sales through our off-price direct to consumer clearance channels, which includes our e-commerce flash clearance salesTommy Bahama and outlets. Lilly Pulitzer.
The changesincrease in net sales by operating group are discussed below.
● | an increase in full-price e-commerce sales of $9 million, or 11%, including (1) an $11 million increase in Johnny Was, (2) a $2 million increase in Emerging Brands and (3) a $1 million increase in Tommy Bahama. These increases were partially offset by a $5 million decrease in Lilly Pulitzer; |
● | an increase in full-price retail sales of $8 million, or 8%, including (1) a $10 million increase in Johnny Was, (2) a $2 million increase in Emerging Brands as we opened new retail locations and (3) a $1 million increase in Lilly Pulitzer. These increases were partially offset by a $5 million decrease in Tommy Bahama; |
● | an increase in outlet sales of $2 million, or 13%, including (1) a $1 million increase in Tommy Bahama and (2) a $1 million increase in Johnny Was; |
21
● | a decrease in Lilly Pulitzer e-commerce flash clearance sales of $3 million, or 10%; |
● | a decrease in wholesale sales of $1 million, or 1%, including (1) a $4 million decrease in Tommy Bahama and (2) a $1 million decrease in Lilly Pulitzer. These decreases were partially offset by a $5 million increase in Johnny Was; and |
● | a decrease in food and beverage sales of $1 million, or 3%. |
The following table presents the proportion of our consolidated net sales by distribution channel for each period presented:
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | |||
Full-price retail stores and outlets | 33 | % | 33 | % |
E-commerce | 20 | % | 20 | % |
Restaurant | 7 | % | 7 | % |
Wholesale | 40 | % | 40 | % |
Total | 100 | % | 100 | % |
| | | | | |
|
| Third Quarter |
| ||
| | Fiscal 2023 |
| Fiscal 2022 | |
Retail |
| 37 | % | 36 | % |
E-commerce |
| 35 | % | 34 | % |
Food & beverage |
| 7 | % | 7 | % |
Wholesale |
| 21 | % | 22 | % |
Total |
| 100 | % | 100 | % |
Tommy Bahama:
Tommy Bahama net sales decrease of $2.1decreased $9 million, or 1.6%5%, was primarily driven by (1) a $6.5 million decrease in our off-price direct to consumer clearance channel, primarily resulting from the absence of any e-commerce flash clearance sales in the Third Quarter of Fiscal 2017 as well as lower sales in existing outlet stores, and (2)2023, with a $0.9 million decrease in (1) full-price retail sales of $5 million, or 8%, (2) wholesale sales reflecting lower full-price wholesaleof $4 million, or 11% and (3) food and beverage sales as Tommy Bahama continuesof $1 million, or 3%, primarily due to manage its exposure to department stores,remodels of certain locations and higher off-price wholesale sales.the impact of the Maui wildfires. These decreases were partially offset by an increase in (1) a $2.5outlet sales of $1 million, or 5%6%, increase in comparable storeand (2) e-commerce sales to $51.1of $1 million, in the Third Quarter of Fiscal 2017 from $48.6 million in the Third Quarter of Fiscal 2016, (2) a $1.6 million increase in restaurant sales resulting from sales at a new restaurant location in Dallas, Texas which opened in the Third Quarter of Fiscal 2017 and a new Marlin Bar location in Coconut Point, Florida, which opened in the Fourth Quarter of Fiscal 2016, and (3) an incremental net sales increase of $1.3 million associated with the operation of non-comp full-price retail stores. Tommy Bahama's direct to consumer sales benefited from a shift in the Friends and Family event which was held entirely in the third quarter in Fiscal 2017, but was split between the second and third quarter in Fiscal 2016.
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | |||
Full-price retail stores and outlets | 47 | % | 46 | % |
E-commerce | 11 | % | 13 | % |
Restaurant | 13 | % | 12 | % |
Wholesale | 29 | % | 29 | % |
Total | 100 | % | 100 | % |
| | | | | |
| | Third Quarter | | ||
|
| Fiscal 2023 |
| Fiscal 2022 |
|
Retail |
| 45 | % | 44 | % |
E-commerce |
| 21 | % | 20 | % |
Food & beverage |
| 13 | % | 13 | % |
Wholesale |
| 21 | % | 23 | % |
Total |
| 100 | % | 100 | % |
Lilly Pulitzer:
Lilly Pulitzer net sales increase of $6.9decreased $8 million, or 13.2%9%, was primarily a result of (1) a $5.0 million increase in e-commerce flash clearance sales and (2) an incremental net sales increase of $4.2 million associated with the operation of additional full-price retail stores, including stores opened by Lilly Pulitzer and the 12 acquired Signature Stores. These increases were partially offset by (1) a $2.2 million decrease in wholesale sales and (2) a $0.1 million, or 1%, decrease in comparable store sales to $18.4 million in the Third Quarter of Fiscal 2017 compared to $18.52023, with a decrease in (1) full-price e-commerce sales of $5 million, or 19%, (2) e-commerce flash sales of $3 million, or 10% and (3) wholesale sales of $1 million, or 10%. These decreases were partially offset by an increase in retail sales of $1 million, or 3%. The increase in retail sales was partially driven by the participation of Lilly Pulitzer’s retail stores in the September 2023 flash clearance sale. Lilly Pulitzer’s retail stores did not participate in the flash sale during the Third Quarter of Fiscal 2016, with negative retail comparable store sales offsetting positive e-commerce comparable store sales. The decrease in wholesale sales reflects Lilly Pulitzer's efforts to continue to manage its exposure to department stores and the Third Quarter of Fiscal 2017 not including any wholesale sales to the acquired Signature Stores. The decrease in comparable store sales primarily reflects reduced retail store traffic.
| | | | | |
| | Third Quarter | | ||
|
| Fiscal 2023 |
| Fiscal 2022 |
|
Retail |
| 31 | % | 27 | % |
E-commerce |
| 58 | % | 62 | % |
Wholesale |
| 11 | % | 11 | % |
Total |
| 100 | % | 100 | % |
22
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | |||
Full-price retail stores | 35 | % | 32 | % |
E-commerce | 53 | % | 50 | % |
Wholesale | 12 | % | 18 | % |
Total | 100 | % | 100 | % |
Johnny Was:
Johnny Was net sales for Lanier Apparel of $8.0were $49 million or 22.9%, was primarily due to increased sales resulting from a branded pants program with a warehouse club and initial shipments in certain private label sportswear and branded tailored clothing programs.
| | | | | |
| | Third Quarter | | ||
|
| Fiscal 2023 |
| Fiscal 2022 |
|
Retail |
| 39 | % | 38 | % |
E-commerce |
| 41 | % | 41 | % |
Wholesale |
| 20 | % | 21 | % |
Total |
| 100 | % | 100 | % |
Emerging Brands:
Emerging Brands net sales increased wholesale$4 million, or 16%, in the Third Quarter of Fiscal 2023 with increased sales in Southern Tide and Duck Head partially offset by decreased sales at TBBC. By distribution channel, the $4 million increase included increases of (1) $2 million, or 196%, in retail sales as well as higherwe opened new retail locations and (2) $2 million, or 18%, in e-commerce sales. The following table presents the proportion of net sales by distribution channel for Southern TideEmerging Brands for each period presented:
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | |||
E-commerce | 16 | % | 16 | % |
Wholesale | 84 | % | 84 | % |
Total | 100 | % | 100 | % |
| | | | | |
| | Third Quarter | | ||
|
| Fiscal 2023 |
| Fiscal 2022 | |
Retail | | 12 | % | 5 | % |
E-commerce |
| 41 | % | 40 | % |
Wholesale |
| 47 | % | 55 | % |
Total |
| 100 | % | 100 | % |
Corporate and Other:
Corporate and Other net sales primarily consist of the net sales of our Lyons, Georgia distribution center to third party warehouse customers as well as the impact ofbusiness, our Oxford America business, which we exited in Fiscal 2022, and the elimination of any intercompany sales between our operating groups.
23
Gross Profit
The tabletables below presentspresent gross profit by operating group and in total for the Third Quarter of Fiscal 20172023 and the Third Quarter of Fiscal 2016,2022, as well as the dollar change and percentage change between those two periods.periods, and gross margin by operating group and in total. Our gross profit and gross margin, which is calculated as gross profit divided by net sales, may not be directly comparable to those of our competitors, as the statement of operations classification of certain expenses may vary by company.
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | $ Change | % Change | ||||||||
Tommy Bahama | $ | 74,279 | $ | 73,923 | $ | 356 | 0.5 | % | |||
Lilly Pulitzer | 32,891 | 30,251 | 2,640 | 8.7 | % | ||||||
Lanier Apparel | 13,191 | 9,440 | 3,751 | 39.7 | % | ||||||
Southern Tide | 4,884 | 3,194 | 1,690 | 52.9 | % | ||||||
Corporate and Other | (69 | ) | 1,246 | (1,315 | ) | NM | |||||
Total gross profit | $ | 125,176 | $ | 118,054 | $ | 7,122 | 6.0 | % | |||
LIFO charge (credit) included in Corporate and Other | $ | 476 | $ | (1,024 | ) | ||||||
Inventory step-up charge included in Southern Tide | $ | — | $ | 994 | |||||||
Inventory step-up charge included in Lilly Pulitzer | $ | 1,086 | $ | — |
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | | | ||||
| | Fiscal 2023 |
| Fiscal 2022 | | $ Change |
| % Change | | |||
Tommy Bahama | | $ | 111,194 | | $ | 115,641 | | $ | (4,447) |
| (3.8) | % |
Lilly Pulitzer | |
| 47,094 | |
| 52,993 | |
| (5,899) |
| (11.1) | % |
Johnny Was | |
| 33,775 | |
| 14,597 | |
| 19,178 |
| NM | % |
Emerging Brands | |
| 16,799 | |
| 13,426 | |
| 3,373 |
| 25.1 | % |
Corporate and Other | |
| (3,443) | |
| 1,037 | |
| (4,480) |
| NM | % |
Consolidated gross profit | | $ | 205,419 | | $ | 197,694 | | $ | 7,725 |
| 3.9 | % |
Notable items included in amounts above: | | | | | | | | | | | | |
LIFO adjustments in Corporate and Other | | $ | 3,529 | | $ | (650) | |
|
|
|
| |
Inventory step-up charge included in Johnny Was | | $ | — | | $ | 1,376 | | | | | | |
| | | | | |
|
| Third Quarter | | ||
| | Fiscal 2023 | | Fiscal 2022 | |
Tommy Bahama |
| 65.4 | % | 64.7 | % |
Lilly Pulitzer |
| 61.7 | % | 63.0 | % |
Johnny Was | | 68.8 | % | 64.4 | % |
Emerging Brands |
| 53.9 | % | 49.9 | % |
Corporate and Other |
| NM | % | NM | % |
Consolidated gross margin |
| 62.9 | % | 63.2 | % |
The increase in consolidatedincreased gross profit was primarily due to higher net sales, as discussed above. Changes in gross margin by operating group are discussed below. The table below presents gross margin by operating group and in total for the Third Quarter of Fiscal 2017 and the Third Quarter of Fiscal 2016.
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | |||
Tommy Bahama | 60.0 | % | 58.7 | % |
Lilly Pulitzer | 55.5 | % | 57.8 | % |
Lanier Apparel | 30.6 | % | 26.9 | % |
Southern Tide | 53.0 | % | 36.8 | % |
Corporate and Other | NM | NM | ||
Consolidated gross margin | 53.0 | % | 53.1 | % |
Tommy Bahama:
The higher gross margin for Tommy Bahama was primarily due to (1) lower freight costs, (2) a change in sales mix with wholesale sales representing a smaller proportion of net sales and (3) increased outlet gross margins.
Lilly Pulitzer:
The lower gross margin for Lilly Pulitzer was primarily due to (1) full-price e-commerce sales representing a lower proportion of net sales, (2) increased e-commerce shipping costs and (3) higher loyalty reward discounts driven by the new loyalty program implemented in 2023. These decreases were partially offset by increased initial product margins.
Johnny Was:
Gross margin for the Third Quarter of Fiscal 2023 was 68.8% compared to 64.4% for the Third Quarter of Fiscal 2022. The Johnny Was gross profit and gross margin for the Third Quarter of 2022 was unfavorably impacted by the $1
24
million of incremental cost of goods sold resulting from the charge related to the step up of inventory to fair value at acquisition.
Emerging Brands:
The higher gross margin for Emerging Brands was primarily due to a change in sales mix with direct to consumer sales representing a larger proportion of net sales. This increase was partially offset by lower gross margin on wholesale sales due to off-price wholesale sales of previously marked down inventory representing a greater proportion of wholesale sales.
Corporate and Other:
The gross profit in Corporate and Other primarily reflects the impact of LIFO accounting adjustments and the gross profit of the Lyons, Georgia distribution center and Oxford America businesses. The primary driver for the decreased gross profit was the $4 million higher LIFO accounting charge. The LIFO accounting impact in Corporate and Other in each period includes the net impact of (1) a charge in Corporate and Other when inventory that had been marked down in an operating group in a prior period was ultimately sold, (2) a credit in Corporate and Other when inventory had been marked down in an operating group in the current period, but had not been sold as of period end and (3) the change in the LIFO reserve, if any.
SG&A
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2023 |
| Fiscal 2022 | | $ Change |
| % Change | | |||
SG&A | | $ | 194,822 | | $ | 175,027 | | $ | 19,795 |
| 11.3 | % |
SG&A (as a % of net sales) | |
| 59.6 | % |
| 55.9 | % |
|
|
|
| |
Notable items included in amounts above: | | | | | | | | | | | | |
Amortization of Johnny Was intangible assets | | $ | 3,463 | | $ | 1,641 | | | | | | |
Transaction expenses and integration costs associated with the Johnny Was acquisition included in Corporate and Other | | $ | — | | $ | 2,783 | | | | | | |
SG&A was $195 million in the Third Quarter of Fiscal 2017 primarily reflects the sale of inventory that had been marked down2023 compared to the estimated net realizable value in prior periods in an operating group, but generally reversed in Corporate and Other as part of LIFO accounting. The LIFO accounting credit in Corporate and Other$175 million in the Third Quarter of Fiscal 2016 primarily reflects2022, with approximately $18 million, or 93%, of the reversalincrease due to the SG&A of inventory markdowns to net realizable value recognized inJohnny Was that we owned for six out of the operating groups during that quarter.
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | $ Change | % Change | ||||||||
SG&A | $ | 127,091 | $ | 121,442 | $ | 5,649 | 4.7 | % | |||
SG&A as % of net sales | 53.9 | % | 54.6 | % | |||||||
Amortization of intangible assets included in Tommy Bahama associated with Tommy Bahama Canada acquisition | $ | 391 | $ | 375 | |||||||
Amortization of intangible assets included in Southern Tide | $ | 72 | $ | 156 | |||||||
Amortization of intangible assets included in Lilly Pulitzer associated with Signature Store acquisitions | $ | 90 | $ | — | |||||||
Transaction/integration costs associated with Signature Store acquisitions | $ | 563 | $ | — |
Royalties and other operating income
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | $ Change | % Change | ||||||||
Royalties and other operating income | $ | 3,039 | $ | 3,061 | $ | (22 | ) | (0.7 | )% |
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2023 |
| Fiscal 2022 | | $ Change |
| % Change | | |||
Royalties and other operating income | | $ | 3,863 | | $ | 4,648 | | $ | (785) |
| (16.9) | % |
Royalties and other operating income typically consists primarily of income received from third parties from the licensing of our brands. The decreased royalties and other operating income in the Third Quarter of Fiscal 20172023 was primarily reflectsdue to decreased royalty income received from third parties from the licensing of our Tommy Bahama, Lilly Pulitzer and Southern Tide brands. The comparable royalty and other operating income includes an increase in Tommy Bahama and decreases in Lilly Pulitzer and Southern Tide.reflecting the lower sales of our licensing partners.
25
Operating income (loss)
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | $ Change | % Change | ||||||||
Tommy Bahama | $ | (5,872 | ) | $ | (7,133 | ) | $ | 1,261 | 17.7 | % | |
Lilly Pulitzer | 4,952 | 6,212 | (1,260 | ) | (20.3 | )% | |||||
Lanier Apparel | 5,615 | 3,666 | 1,949 | 53.2 | % | ||||||
Southern Tide | 1,016 | (472 | ) | 1,488 | NM | ||||||
Corporate and Other | (4,587 | ) | (2,600 | ) | (1,987 | ) | (76.4 | )% | |||
Total operating income (loss) | $ | 1,124 | $ | (327 | ) | $ | 1,451 | NM | |||
LIFO charge (credit) included in Corporate and Other | $ | 476 | $ | (1,024 | ) | ||||||
Inventory step-up charge included in Southern Tide | $ | — | $ | 994 | |||||||
Inventory step-up charge included in Lilly Pulitzer | $ | 1,086 | $ | — | |||||||
Amortization of intangible assets included in Tommy Bahama associated with Tommy Bahama Canada acquisition | $ | 391 | $ | 375 | |||||||
Amortization of intangible assets included in Southern Tide | $ | 72 | $ | 156 | |||||||
Amortization of intangible assets included in Lilly Pulitzer associated with Signature Store acquisitions | $ | 90 | $ | — | |||||||
Transaction/integration costs associated with Signature Store acquisitions | $ | 563 | $ | — |
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2023 |
| Fiscal 2022 | | $ Change |
| % Change | | |||
Tommy Bahama | | $ | 12,097 | | $ | 18,984 | | $ | (6,887) |
| (36.3) | % |
Lilly Pulitzer | |
| 6,769 | |
| 12,688 | |
| (5,919) |
| (46.7) | % |
Johnny Was | | | 935 | | | 117 | | | 818 |
| NM | % |
Emerging Brands | |
| 3,709 | |
| 3,729 | |
| (20) |
| (0.5) | % |
Corporate and Other | |
| (9,050) | |
| (8,203) | |
| (847) |
| NM | % |
Consolidated operating income | | $ | 14,460 | | $ | 27,315 | | $ | (12,855) |
| (47.1) | % |
Notable items included in amounts above: | | | | | | | | | | | | |
LIFO adjustments in Corporate and Other | | $ | 3,529 | | $ | (650) | |
|
|
|
| |
Inventory step-up charge included in Johnny Was | | $ | — | | $ | 1,376 | | | | | | |
Amortization of Johnny Was intangible assets | | $ | 3,463 | | $ | 1,641 | | | | | | |
Transaction expenses and integration costs associated with the Johnny Was acquisition included in Corporate and Other | | $ | — | | $ | 2,783 | | | | | | |
Operating income was $14 million in the Third Quarter of Fiscal 2017 was primarily due2023 compared to improved$27 million in the Third Quarter of Fiscal 2022. The decreased operating resultsincome included (1) lower operating income in Tommy Bahama, Lanier ApparelLilly Pulitzer, and Southern Tide.Emerging Brands and (2) a higher operating loss in Corporate and Other. These itemsdecreases were partially offset by lowerthe increased operating results in Lilly Pulitzer, primarily due to the impactincome of purchase accounting charges related to the acquisition of certain Lilly Pulitzer Signature Stores, and Corporate and Other, primarily due to the impact of LIFO accounting.Johnny Was. Changes in operating income (loss) by operating group are discussed below.
Tommy Bahama:
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | $ Change | % Change | ||||||||
Net sales | $ | 123,895 | $ | 125,966 | $ | (2,071 | ) | (1.6 | )% | ||
Gross margin | 60.0 | % | 58.7 | % | |||||||
Operating loss | $ | (5,872 | ) | $ | (7,133 | ) | $ | 1,261 | 17.7 | % | |
Operating loss as % of net sales | (4.7 | )% | (5.7 | )% | |||||||
Amortization of intangible assets included in Tommy Bahama associated with Tommy Bahama Canada acquisition | $ | 391 | $ | 375 |
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2023 |
| Fiscal 2022 | | $ Change |
| % Change | | |||
Net sales | | $ | 170,144 | | $ | 178,645 | | $ | (8,501) |
| (4.8) | % |
Gross profit | | $ | 111,194 | | $ | 115,641 | | $ | (4,447) | | (3.8) | % |
Gross margin | |
| 65.4 | % |
| 64.7 | % |
|
|
|
| |
Operating income | | $ | 12,097 | | $ | 18,984 | | $ | (6,887) |
| (36.3) | % |
Operating income as % of net sales | |
| 7.1 | % |
| 10.6 | % |
|
|
|
| |
The improveddecreased operating resultsincome for Tommy Bahama was due to (1) decreased net sales, (2) increased SG&A and (3) lower royalty income. These decreases were partially offset by higher gross margin. The increased SG&A was primarily due to lower SG&A, improved gross margins, and$3 million in increased royalty income,employment costs. This increase was partially offset by decreases in advertising expenses, variable expenses and administrative expenses including professional fees, travel and other items.
Lilly Pulitzer:
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2023 |
| Fiscal 2022 | | $ Change |
| % Change | | |||
Net sales | | $ | 76,290 | | $ | 84,053 | | $ | (7,763) |
| (9.2) | % |
Gross profit | | $ | 47,094 | | $ | 52,993 | | $ | (5,899) | | (11.1) | % |
Gross margin | |
| 61.7 | % |
| 63.0 | % |
|
|
|
| |
Operating income | | $ | 6,769 | | $ | 12,688 | | $ | (5,919) |
| (46.7) | % |
Operating income as % of net sales | |
| 8.9 | % |
| 15.1 | % |
|
|
|
| |
The decreased operating income for Lilly Pulitzer was due to (1) decreased net sales, (2) lower net sales. Thegross margin and (3) lower royalty income. SG&A was comparable in the Third Quarter of 2023 and the Third Quarter of 2022 with a $1 million decrease in administrative expenses including professional fees, travel and other items offset by a $1 million increase in depreciation expenses.
26
Johnny Was:
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2023 |
| Fiscal 2022 | | $ Change |
| % Change | | |||
Net sales | | $ | 49,105 | | $ | 22,661 | | $ | 26,444 |
| NM | % |
Gross profit | | $ | 33,775 | | $ | 14,597 | | $ | 19,178 | | NM | % |
Gross margin | |
| 68.8 | % |
| 64.4 | % |
|
|
|
| |
Operating income | | $ | 935 | | $ | 117 | | $ | 818 |
| NM | % |
Operating income as % of net sales | |
| 1.9 | % |
| 0.5 | % |
|
|
|
| |
Notable items included in amounts above: | | | | | | | | | | | | |
Inventory step-up charge included in Johnny Was | | $ | — | | $ | 1,376 | | | | | | |
Amortization of Johnny Was intangible assets | | $ | 3,463 | | $ | 1,641 | | | | | | |
Operating income for the Third Quarter of Fiscal 20172023 includes cost reductions in Tommy Bahama retail store, wholesale and corporate operations as Tommy Bahama has focused on reducing certain employment and other operating costs. These lower expenses were partially offset by (1) $1.4$3 million of higher incentive compensation amounts and (2) $0.9 million of incremental SG&A associated with operating non-comp retail stores, including set-up costs associated with the new retail-restaurant location which opened in the Third Quarter of Fiscal 2017.
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | $ Change | % Change | ||||||||
Net sales | $ | 59,244 | $ | 52,319 | $ | 6,925 | 13.2 | % | |||
Gross margin | 55.5 | % | 57.8 | % | |||||||
Operating income | $ | 4,952 | $ | 6,212 | $ | (1,260 | ) | (20.3 | )% | ||
Operating income as % of net sales | 8.4 | % | 11.9 | % | |||||||
Inventory step-up charge included in Lilly Pulitzer | $ | 1,086 | $ | — | |||||||
Amortization of intangible assets included in Lilly Pulitzer associated with Signature Store acquisitions | $ | 90 | $ | — | |||||||
Transaction/integration costs associated with Signature Store acquisitions | $ | 563 | $ | — |
Emerging Brands:
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2023 |
| Fiscal 2022 | | $ Change |
| % Change | | |||
Net sales | | $ | 31,155 | | $ | 26,912 | | $ | 4,243 |
| 15.8 | % |
Gross profit | | $ | 16,799 | | $ | 13,426 | | $ | 3,373 | | 25.1 | % |
Gross margin | |
| 53.9 | % |
| 49.9 | % |
|
|
|
| |
Operating income | | $ | 3,709 | | $ | 3,729 | | $ | (20) |
| (0.5) | % |
Operating income as % of net sales | |
| 11.9 | % |
| 13.9 | % |
|
|
|
| |
| | | | | | | | | | | | |
The comparable operating income for Emerging Brands was primarily due to increased SG&A increases were partially offset by lower incentive compensation amountshigher sales and gross margin. The increased SG&A included (1) higher SG&A associated with new retail store operations, including related employment costs, occupancy costs and administrative expenses, (2) higher advertising expense and (3) increased variable expenses resulting from increased sales.
Corporate and Other:
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2023 |
| Fiscal 2022 | | $ Change |
| % Change | | |||
Net sales | | $ | (64) | | $ | 762 | | $ | (826) |
| (108.4) | % |
Gross profit | | $ | (3,443) | | $ | 1,037 | | $ | (4,480) | | NM | % |
Operating loss | | $ | (9,050) | | $ | (8,203) | | $ | (847) |
| NM | % |
Notable items included in amounts above: | | | | | | | | | | | | |
LIFO adjustments in Corporate and Other | | $ | 3,529 | | $ | (650) | | | | | | |
Transaction expenses and integration costs associated with the Johnny Was acquisition | | $ | — | | $ | 2,783 | | | | | | |
The increased operating loss in Corporate and Other was primarily a result of a higher net LIFO accounting charge in the Third Quarter of Fiscal 2017.
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | $ Change | % Change | ||||||||
Net sales | $ | 43,110 | $ | 35,065 | $ | 8,045 | 22.9 | % | |||
Gross margin | 30.6 | % | 26.9 | % | |||||||
Operating income | $ | 5,615 | $ | 3,666 | $ | 1,949 | 53.2 | % | |||
Operating income as % of net sales | 13.0 | % | 10.5 | % |
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | $ Change | % Change | ||||||||
Net sales | $ | 9,217 | $ | 8,687 | $ | 530 | 6.1 | % | |||
Gross margin | 53.0 | % | 36.8 | % | |||||||
Operating income (loss) | $ | 1,016 | $ | (472 | ) | $ | 1,488 | NM | |||
Operating income (loss) as % of net sales | 11.0 | % | (5.4 | )% | |||||||
Inventory step-up charge included in Southern Tide | $ | — | $ | 994 | |||||||
Amortization of intangible assets included in Southern Tide | $ | 72 | $ | 156 |
Interest expense, net
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2023 |
| Fiscal 2022 | | $ Change |
| % Change | | |||
Interest expense, net | | $ | 1,217 | | $ | 698 | | $ | 519 |
| 74.4 | % |
The increase in operating income for Southern Tidehigher interest expense in the Third Quarter of Fiscal 20172023 was primarily due to a higher average outstanding debt balance during the Third Quarter of Fiscal 2016 including $1.0 million of incremental cost of goods sold associated with the step-up of inventory with no such charges in2023 than the Third Quarter of Fiscal 2017, as well as the higher sales and gross margin. These items were partially offset by the impact of increased SG&A2022. We utilized debt to support planned growth for the Southern Tide business.fund a
27
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | $ Change | % Change | ||||||||
Net sales | $ | 494 | $ | 271 | $ | 223 | NM | ||||
Operating loss | $ | (4,587 | ) | $ | (2,600 | ) | $ | (1,987 | ) | (76.4 | )% |
LIFO charge (credit) included in Corporate and Other | $ | 476 | $ | (1,024 | ) |
portion of the Third Quarter of Fiscal 2017 were primarily due to the $1.5 million net unfavorable impact of LIFO accounting, higher incentive compensation amounts and increases in other expenses.
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | $ Change | % Change | ||||||||
Interest expense, net | $ | 683 | $ | 716 | $ | (33 | ) | (4.6 | )% |
Income tax
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2023 |
| Fiscal 2022 | | $ Change |
| % Change | | |||
Income tax expense | | $ | 2,461 | | $ | 6,951 | | $ | (4,490) |
| (64.6) | % |
Effective tax rate | |
| 18.6 | % |
| 26.1 | % |
|
|
|
| |
For the Third Quarter of Fiscal 2023, our effective income tax rate was 18.6%, which is lower than a more typical annual effective tax rate of approximately 25% primarily due to the favorable utilization of research and development tax credits and adjustments to the US taxation on foreign earnings. For the Third Quarter of Fiscal 2022, our effective income tax rate was 26.1%. Due to the lower earnings during our third quarters as compared to our other fiscal quarters, certain discrete or other items we recognize in the third quarter may have a more pronounced impact resulting in the effective tax rate of the third quarter not being indicative of the effective tax rate for the full fiscal year.
Net earnings
| | | | | | |
|
| Third Quarter | ||||
| | Fiscal 2023 |
| Fiscal 2022 | ||
Net sales | | $ | 326,630 | | $ | 313,033 |
Operating income | | $ | 14,460 | | $ | 27,315 |
Net earnings | | $ | 10,782 | | $ | 19,666 |
Net earnings per diluted share | | $ | 0.68 | | $ | 1.22 |
Weighted average shares outstanding - diluted | |
| 15,787 | |
| 16,139 |
Net earnings per diluted share were $0.68 in the Third Quarter of Fiscal 2017.
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | $ Change | % Change | |||||||
Income taxes | $ | (631 | ) | $ | 555 | $ | (1,186 | ) | NM |
Third Quarter Fiscal 2017 | Third Quarter Fiscal 2016 | |||||
Net earnings (loss) from continuing operations | $ | 1,072 | $ | (1,598 | ) | |
Net earnings (loss) from continuing operations per diluted share | $ | 0.06 | $ | (0.10 | ) | |
Weighted average shares outstanding - diluted | 16,735 | 16,531 |
The discussion and tables below compare our statements of operations for the First Nine Months of Fiscal 2023 and the First Nine Months of Fiscal 2022. Each dollar and percentage change provided reflects the change between these fiscal periods unless indicated otherwise. Each dollar and share amount included in the tables is in thousands except for per share amounts. We have calculated all percentages based on actual data, and percentage columns in tables may not add due to rounding. Individual line items of our consolidated statements of operations, including gross profit, may not be directly comparable to those of our competitors, as classification of certain expenses may vary by company.
The following table sets forth the specified line items in our unaudited condensed consolidated statements of operations both in dollars (in thousands) and as a percentage of net sales. The table also sets forthsales as well as the dollar change and the percentage change of the data as compared to the same period of the prior year. We have calculated all percentages based on actual data, but percentage columns may not add due to rounding.The table also includes net earnings per diluted share and diluted
28
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | $ Change | % Change | ||||||||||||
Net sales | $ | 793,032 | 100.0 | % | $ | 761,539 | 100.0 | % | $ | 31,493 | 4.1 | % | |||
Cost of goods sold | 342,477 | 43.2 | % | 327,225 | 43.0 | % | 15,252 | 4.7 | % | ||||||
Gross profit | $ | 450,555 | 56.8 | % | $ | 434,314 | 57.0 | % | $ | 16,241 | 3.7 | % | |||
SG&A | 393,193 | 49.6 | % | 374,379 | 49.2 | % | 18,814 | 5.0 | % | ||||||
Royalties and other operating income | 10,123 | 1.3 | % | 10,433 | 1.4 | % | (310 | ) | (3.0 | )% | |||||
Operating income | $ | 67,485 | 8.5 | % | $ | 70,368 | 9.2 | % | $ | (2,883 | ) | (4.1 | )% | ||
Interest expense, net | 2,355 | 0.3 | % | 2,505 | 0.3 | % | (150 | ) | (6.0 | )% | |||||
Earnings from continuing operations before income taxes | $ | 65,130 | 8.2 | % | $ | 67,863 | 8.9 | % | $ | (2,733 | ) | (4.0 | )% | ||
Income taxes | 24,172 | 3.0 | % | 25,408 | 3.3 | % | (1,236 | ) | (4.9 | )% | |||||
Net earnings from continuing operations | $ | 40,958 | 5.2 | % | $ | 42,455 | 5.6 | % | $ | (1,497 | ) | (3.5 | )% | ||
Earnings from discontinued operations, net of taxes | — | — | % | — | — | % | — | — | % | ||||||
Net earnings | $ | 40,958 | 5.2 | % | $ | 42,455 | 5.6 | % | $ | (1,497 | ) | (3.5 | )% |
weighted average shares outstanding (in thousands), as well as the change and tables below compare certain linethe percentage change for each of these items included in our statements of operations for the First Nine Months of Fiscal 2017as compared to the First Nine Monthssame period of Fiscal 2016. Each dollar and percentage change provided reflects the change between these periods unless indicated otherwise. Each dollar and share amount included in the tables is in thousands except for per share amounts. Individual line items of our consolidated statements of operations may not be directly comparable to those of our competitors, as classification of certain expenses may vary by company. Unless otherwise indicated, all references to assets, liabilities, revenues, expenses or other information in this report reflect continuing operations.
| | | | | | | | | | | | | | | | | | |
|
| First Nine Months |
|
| | | | |
| |||||||||
| | Fiscal 2023 | | | Fiscal 2022 | | | $ Change |
| % Change | | |||||||
Net sales | | $ | 1,167,046 | | 100.0 | % | | $ | 1,029,044 |
| 100.0 | % | | $ | 138,002 | | 13.4 | % |
Cost of goods sold | |
| 417,769 |
| 35.8 | % | |
| 372,824 |
| 36.2 | % | |
| 44,945 |
| 12.1 | % |
Gross profit | | $ | 749,277 |
| 64.2 | % | | $ | 656,220 |
| 63.8 | % | | $ | 93,057 |
| 14.2 | % |
SG&A | |
| 603,202 |
| 51.7 | % | |
| 495,574 |
| 48.2 | % | |
| 107,628 |
| 21.7 | % |
Royalties and other operating income | |
| 16,360 |
| 1.4 | % | |
| 18,018 |
| 1.8 | % | |
| (1,658) |
| (9.2) | % |
Operating income | | $ | 162,435 |
| 13.9 | % | | $ | 178,664 |
| 17.4 | % | | $ | (16,229) |
| (9.1) | % |
Interest expense, net | |
| 4,856 |
| 0.4 | % | |
| 1,214 |
| 0.1 | % | |
| 3,642 |
| 300.0 | % |
Earnings before income taxes | | $ | 157,579 |
| 13.5 | % | | $ | 177,450 |
| 17.2 | % | | $ | (19,871) |
| (11.2) | % |
Income tax expense | |
| 36,806 |
| 3.2 | % | |
| 43,764 |
| 4.3 | % | |
| (6,958) |
| (15.9) | % |
Net earnings | | $ | 120,773 |
| 10.3 | % | | $ | 133,686 |
| 13.0 | % | | $ | (12,913) |
| (9.7) | % |
Net earnings per diluted share | | $ | 7.57 | | | | | $ | 8.19 | | | | | $ | (0.62) | | (7.6) | % |
Weighted average shares outstanding - diluted | | | 15,947 |
| | | | | 16,333 |
| | | | | (386) |
| (2.4) | % |
Net Sales
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | $ Change | % Change | ||||||||
Tommy Bahama | $ | 483,971 | $ | 472,796 | $ | 11,175 | 2.4 | % | |||
Lilly Pulitzer | 192,045 | 186,777 | 5,268 | 2.8 | % | ||||||
Lanier Apparel | 84,314 | 81,217 | 3,097 | 3.8 | % | ||||||
Southern Tide | 31,254 | 19,267 | 11,987 | NM | |||||||
Corporate and Other | 1,448 | 1,482 | (34 | ) | NM | ||||||
Total net sales | $ | 793,032 | $ | 761,539 | $ | 31,493 | 4.1 | % |
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
| | Fiscal 2023 | | Fiscal 2022 | | $ Change | | % Change | | |||
Tommy Bahama | | $ | 655,022 | | $ | 650,677 | | $ | 4,345 |
| 0.7 | % |
Lilly Pulitzer | |
| 265,089 | |
| 264,763 | |
| 326 |
| 0.1 | % |
Johnny Was | | | 150,619 | |
| 22,661 | |
| 127,958 |
| NM | % |
Emerging Brands | |
| 96,726 | |
| 88,588 | |
| 8,138 |
| 9.2 | % |
Corporate and Other | |
| (410) | |
| 2,355 | |
| (2,765) |
| (117.4) | % |
Consolidated net sales | | $ | 1,167,046 | | $ | 1,029,044 | | $ | 138,002 |
| 13.4 | % |
Consolidated net sales increased $31.5 million, or 4.1%, in the First Nine Months of Fiscal 2017 compared to the First Nine Months of Fiscal 2016. The increase in consolidated net sales was primarily driven by (1) an incremental net sales increase of $17.4 million associated with the operation of non-comp full-price retail stores and the Southern Tide e-commerce operations, which we acquired in April 2016, (2) a net $8.3 million aggregate increase in wholesale sales, primarily consisting of higher sales in Southern Tide, which we acquired in April 2016, Lanier Apparel and Tommy Bahama partially offset by a decrease in Lilly Pulitzer, (3) a $5.8 million, or 2%, increase in comparable store sales to $313.0were $1,167 million in the First Nine Months of Fiscal 2017 from $307.22023 compared to net sales of $1,029 million in the First Nine Months of Fiscal 2016 and (4)2022. The 13% increase in net sales included (1) a $5.3$128 million increase in restaurant sales in Tommy Bahama. These increases were partially offset by a $5.4 million decrease in net sales through our off-price direct to consumer clearance channels consisting of lower sales in Tommy Bahama and higher sales in Lilly Pulitzer. The changes in net sales by operating group are discussed below.
The increase in net sales by distribution channel consisted of the Third Quarter of Fiscal 2016 were unfavorably impacted by hurricanes to varying degrees, which resulted in certain store closures and also negatively impacted wholesale reorders in our business as certain wholesale accounts had lower sales than plan.following:
● | an increase in full-price e-commerce sales of $63 million, or 22%, including (1) a $52 million increase in e-commerce sales in Johnny Was, (2) a $5 million increase in Tommy Bahama and (3) a $6 million increase in Emerging Brands; |
● | an increase in full-price retail sales of $42 million, or 12%, including (1) a $45 million increase in retail sales in Johnny Was and (2) a $5 million increase in Emerging Brands as we opened new retail locations. These increases were partially offset by (1) a $7 million decrease in Tommy Bahama and (2) a $1 million decrease in Lilly Pulitzer; |
● | an increase in wholesale sales of $21 million, or 10%, including (1) a $28 million increase in wholesale sales in Johnny Was and (2) a $2 million increase in Tommy Bahama. These increases were partially offset by (1) a $5 million decrease in Lilly Pulitzer and (2) a $3 million decrease in Emerging Brands; |
● | an increase in Lilly Pulitzer e-commerce flash clearance sales of $6 million, or 17%; |
● | an increase in outlet sales of $5 million, or 10%, including (1) a $3 million increase in outlet sales in Johnny Was and (2) a $2 million increase in Tommy Bahama; and |
29
● | an increase in food and beverage sales of $3 million, or 3%. |
The following table presents the proportion of our consolidated net sales by distribution channel for each period presented:
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | |||
Full-price retail stores and outlets | 39 | % | 39 | % |
E-commerce | 17 | % | 17 | % |
Restaurant | 8 | % | 7 | % |
Wholesale | 36 | % | 37 | % |
Total | 100 | % | 100 | % |
| | | | | |
|
| First Nine Months |
| ||
|
| Fiscal 2023 |
| Fiscal 2022 |
|
Retail |
| 38 | % | 39 | % |
E-commerce |
| 34 | % | 31 | % |
Food & beverage |
| 7 | % | 8 | % |
Wholesale |
| 21 | % | 21 | % |
Total |
| 100 | % | 100 | % |
Tommy Bahama:
Tommy Bahama net sales increase of $11.2increased $4 million, or 2.4%1%, was primarily driven by (1) a $10.4 million, or 5%, increase in comparable store sales to $229.1 million in the First Nine Months of Fiscal 2017 from $218.6 million in the First Nine Months of Fiscal 2016, (2) a $5.3 million2023, with an increase in restaurant(1) e-commerce sales reflectingof $5 million, or 3%, (2) food and beverage sales from a new restaurant and Marlin Bar location as well as increasedof $3 million, or 3%, (3) wholesale sales at existing restaurants, (3) an incremental net sales increase of $4.8$2 million, associated with the operation of non-comp full-price retail storesor 2%, and (4) a $1.1outlet sales of $2 million, increase in wholesale sales reflecting higher off-price sales, as Tommy Bahama sold some excess prior season inventory, and lower full-price wholesale sales, as Tommy Bahama continues to manage its exposure to department stores.or 4%. These increases were partially offset by $10.4 million of lower salesa decrease in our off-price direct to consumer clearance channel, primarily resulting from the absence of any e-commerce flash clearance sales in the First Nine Months of Fiscal 2017 as well as lower sales in existing outlet stores. Tommy Bahama's direct to consumer sales benefited from (1) a 132 page Spring 2017 catalog, which presented the wide breadth of Tommy Bahama products in one place, (2) increased sales from its semiannual Friends & Family events held each year, (3) increased sales from Tommy Bahama's loyalty award card and Flip Side events held in the second quarter of each year and (4) Tommy Bahama taking initial markdowns on select items at the end of the selling season in our retail stores and on our e-commerce website in the First Nine Months of Fiscal 2017.
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | |||
Full-price retail stores and outlets | 49 | % | 49 | % |
E-commerce | 14 | % | 15 | % |
Restaurant | 13 | % | 11 | % |
Wholesale | 24 | % | 25 | % |
Total | 100 | % | 100 | % |
| | | | | |
|
| First Nine Months |
| ||
|
| Fiscal 2023 |
| Fiscal 2022 |
|
Retail |
| 45 | % | 46 | % |
E-commerce |
| 23 | % | 23 | % |
Food & beverage |
| 13 | % | 12 | % |
Wholesale |
| 19 | % | 19 | % |
Total |
| 100 | % | 100 | % |
Lilly Pulitzer:
Lilly Pulitzer net sales increase of $5.3 million, or 2.8%, was primarily a result of (1) an incremental net sales increase of $11.1 million associated with the operation of additional full-price retail stores and (2) a $5.1 million increase in e-commerce flash clearance sales. These sales increases were partially offset by (1) a $4.6 million, or 5%, decrease in comparable store sales to $83.9 million in the First Nine Months of Fiscal 2017 compared2023 were comparable to $88.5 million in the First Nine Months of Fiscal 2016, with negative retail comparable store2022. Increases included (1) e-commerce flash clearance sales offsetting positive e-commerce comparable store salesof $6 million, or 17%, and (2) a $6.3 million decrease in wholesaleincreased full-price e-commerce sales. The decrease in comparable store sales primarily reflects reduced retail store traffic. The lowerThese increases were partially offset by decreased (1) wholesale sales were primarily a result of lower$5 million, or 11% and (2) retail sales to department stores, as Lilly Pulitzer continues to manage its exposure to department stores, and lower orders from specialty stores.
| | | | | |
|
| First Nine Months |
| ||
|
| Fiscal 2023 |
| Fiscal 2022 |
|
Retail |
| 34 | % | 34 | % |
E-commerce |
| 51 | % | 49 | % |
Wholesale |
| 15 | % | 17 | % |
Total |
| 100 | % | 100 | % |
30
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | |||
Full-price retail stores | 38 | % | 37 | % |
E-commerce | 33 | % | 30 | % |
Wholesale | 29 | % | 33 | % |
Total | 100 | % | 100 | % |
Johnny Was:
Johnny Was net sales for Lanier Apparel of $3.1were $151 million or 3.8%, was primarily due to increased sales resulting from a branded pants program with a warehouse club as well as initial shipments in certain private label sportswear and branded tailored clothing programs. These sales increases were partially offset by lower sales in other programs resulting from reductions in volume and the exit from various programs.
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | |||
E-commerce | 17 | % | 19 | % |
Wholesale | 83 | % | 81 | % |
Total | 100 | % | 100 | % |
| | | | | |
|
| First Nine Months |
| ||
|
| Fiscal 2023 |
| Fiscal 2022 |
|
Retail |
| 38 | % | 38 | % |
E-commerce |
| 40 | % | 41 | % |
Wholesale |
| 22 | % | 21 | % |
Total |
| 100 | % | 100 | % |
Emerging Brands:
Emerging Brands net sales increased $8 million, or 9%, in the First Nine Months of Fiscal 2023 with increased sales in all brands. By distribution channel, the $8 million increase included increases of (1) $6 million, or 17%, in e-commerce and (2) $5 million, or 114%, in retail sales as we opened new retail locations. These increases were partially offset by a $3 million, or 6%, decrease in wholesale sales that includes the impact of the acquisition and conversion of three former Southern Tide Signature Store operations to company owned retail stores. The following table presents the proportion of net sales by distribution channel for Emerging Brands for each period presented:
| | | | | |
|
| First Nine Months |
| ||
|
| Fiscal 2023 |
| Fiscal 2022 |
|
Retail | | 10 | % | 5 | % |
E-commerce |
| 42 | % | 39 | % |
Wholesale |
| 48 | % | 56 | % |
Total |
| 100 | % | 100 | % |
Corporate and Other:
Corporate and Other net sales primarily consist of the net sales of our Lyons, Georgia distribution center to third party warehouse customers as well as the impact ofbusiness, our Oxford America business, which we exited in Fiscal 2022, and the elimination of any intercompany sales between our operating groups.
31
Gross Profit
The tabletables below presentspresent gross profit by operating group and in total for the First Nine Months of Fiscal 20172023 and the First Nine Months of Fiscal 2016,2022, as well as the dollar change and percentage change between those two periods.periods, and gross margin by operating group and in total. Our gross profit and gross margin, which is calculated as gross profit divided by net sales, may not be directly comparable to those of our competitors, as the statement of operations classification of certain expenses may vary by company.
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | $ Change | % Change | ||||||||
Tommy Bahama | $ | 289,428 | $ | 280,906 | $ | 8,522 | 3.0 | % | |||
Lilly Pulitzer | 121,657 | 119,390 | 2,267 | 1.9 | % | ||||||
Lanier Apparel | 26,354 | 23,129 | 3,225 | 13.9 | % | ||||||
Southern Tide | 15,849 | 7,534 | 8,315 | NM | |||||||
Corporate and Other | (2,733 | ) | 3,355 | (6,088 | ) | NM | |||||
Total gross profit | $ | 450,555 | $ | 434,314 | $ | 16,241 | 3.7 | % | |||
LIFO charge (credit) included in Corporate and Other | $ | 3,748 | $ | (2,277 | ) | ||||||
Inventory step-up charge included in Southern Tide | $ | — | $ | 2,123 | |||||||
Inventory step-up charge included in Lilly Pulitzer | $ | 1,086 | $ | — |
Tommy Bahama:
The higher gross margin for Tommy Bahama was primarily due to (1) reduced freight costs and (2) improved initial product margins. These increases were partially offset by operating group are discussed below. increased sales during the loyalty award, Flip Side marketing, and end of season clearance events in Tommy Bahama.
Lilly Pulitzer:
The table below presentslower gross margin for Lilly Pulitzer was primarily due to a change in sales mix with flash clearance sales representing a larger proportion of net sales. This decrease was partially offset by operating group(1) an increase in initial product margins, (2) a change in sales mix with wholesale sales representing a lower proportion of Lilly Pulitzer net sales and in total(3) lower freight costs.
Johnny Was:
Gross margin for the First Nine Months of Fiscal 2017 and the First Nine Months2023 was 68.6%.
32
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | |||
Tommy Bahama | 59.8 | % | 59.4 | % |
Lilly Pulitzer | 63.3 | % | 63.9 | % |
Lanier Apparel | 31.3 | % | 28.5 | % |
Southern Tide | 50.7 | % | 39.1 | % |
Corporate and Other | NM | NM | ||
Consolidated gross margin | 56.8 | % | 57.0 | % |
Emerging Brands:
The increase inhigher gross margin for Tommy Bahama in the First Nine Months of Fiscal 2017Emerging Brands was primarily resulted fromdue to a change in sales mix with full-price direct to consumer sales representing a greater proportion of Tommy Bahama’snet sales. TheThis increase in gross margin was partially offset by lower gross margin on wholesale sales due to off-price wholesale sales of previously marked down inventory representing a greater proportion of wholesale sales.
Corporate and Other:
The gross profit in Corporate and Other primarily reflects the impact of the saleLIFO accounting adjustments, which was a charge of certain aged inventory$6 million and $3 million in the First Nine Months of Fiscal 2017. This inventory had been marked down to its estimated realizable value in the Fourth Quarter of Fiscal 20162023 and the sales associated with this inventory resulted in a nominal impact to gross margin. Additionally, gross margin continued to be impacted by a greater proportion of sales in our stores and on our e-commerce website occurring during our marketing events, which typically have lower gross margins than sales during non-promotional periods.
SG&A
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| |||
SG&A | | $ | 603,202 | | $ | 495,574 | | $ | 107,628 |
| 21.7 | % |
SG&A (as a % of net sales) | |
| 51.7 | % |
| 48.2 | % |
|
|
|
| |
Notable items included in amounts above: | | | | | | | | | | | | |
Amortization of Johnny Was intangible assets | | $ | 10,389 | | $ | 1,641 | | | | | | |
Transaction expenses and integration costs associated with the Johnny Was acquisition included in Corporate and Other | | $ | — | | $ | 2,783 | | | | | | |
SG&A was $603 million in the First Nine Months of Fiscal 2017.
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | $ Change | % Change | ||||||||
SG&A | $ | 393,193 | $ | 374,379 | $ | 18,814 | 5.0 | % | |||
SG&A as % of net sales | 49.6 | % | 49.2 | % | |||||||
Amortization of intangible assets included in Tommy Bahama associated with Tommy Bahama Canada acquisition | $ | 1,134 | $ | 1,124 | |||||||
Amortization of intangible assets included in Southern Tide | $ | 216 | $ | 365 | |||||||
Amortization of intangible assets included in Lilly Pulitzer associated with Signature Store acquisitions | $ | 90 | $ | — | |||||||
Transaction expenses associated with the Southern Tide acquisition included in Corporate and Other | $ | — | $ | 762 | |||||||
Distribution center integration charges | $ | — | $ | 454 | |||||||
Transaction/integration costs associated with Signature Store acquisitions | $ | 563 | $ | — |
Royalties and other operating income
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | $ Change | % Change | ||||||||
Royalties and other operating income | $ | 10,123 | $ | 10,433 | $ | (310 | ) | (3.0 | )% |
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | $ Change | % Change | ||||||||
Tommy Bahama | $ | 32,082 | $ | 26,761 | $ | 5,321 | 19.9 | % | |||
Lilly Pulitzer | 43,621 | 49,646 | (6,025 | ) | (12.1 | )% | |||||
Lanier Apparel | 6,668 | 6,609 | 59 | 0.9 | % | ||||||
Southern Tide | 3,765 | (425 | ) | 4,190 | NM | ||||||
Corporate and Other | (18,651 | ) | (12,223 | ) | (6,428 | ) | (52.6 | )% | |||
Total operating income | $ | 67,485 | $ | 70,368 | $ | (2,883 | ) | (4.1 | )% | ||
LIFO charge (credit) included in Corporate and Other | $ | 3,748 | $ | (2,277 | ) | ||||||
Inventory step-up charge included in Southern Tide | $ | — | $ | 2,123 | |||||||
Inventory step-up charge included in Lilly Pulitzer | $ | 1,086 | $ | — | |||||||
Amortization of intangible assets included in Tommy Bahama associated with Tommy Bahama Canada acquisition | $ | 1,134 | $ | 1,124 | |||||||
Amortization of intangible assets included in Southern Tide | $ | 216 | $ | 365 | |||||||
Amortization of intangible assets included in Lilly Pulitzer associated with Signature Store acquisitions | $ | 90 | $ | — | |||||||
Transaction expenses associated with the Southern Tide acquisition included in Corporate and Other | $ | — | $ | 762 | |||||||
Distribution center integration charges | $ | — | $ | 454 | |||||||
Transaction/integration costs associated with Signature Store acquisitions | $ | 563 | $ | — |
33
Merida manufacturing facility in Mexico previously operated by our Lanier Apparel operating group, which we exited in Fiscal 2021.
Operating income (loss)
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| |||
Tommy Bahama | | $ | 118,655 | | $ | 130,508 | | $ | (11,853) |
| (9.1) | % |
Lilly Pulitzer | |
| 49,851 | |
| 60,358 | |
| (10,507) |
| (17.4) | % |
Johnny Was | | | 7,266 | | | 117 | | | 7,149 |
| NM | % |
Emerging Brands | |
| 10,650 | |
| 15,456 | |
| (4,806) |
| (31.1) | % |
Corporate and Other | |
| (23,987) | |
| (27,775) | |
| 3,788 |
| NM | % |
Consolidated operating income | | $ | 162,435 | | $ | 178,664 | | $ | (16,229) |
| (9.1) | % |
Notable items included in amounts above: | | | | | | | | | | | | |
LIFO adjustments in Corporate and Other | | $ | 6,287 | | $ | 3,087 | |
|
|
|
| |
Inventory step-up charge included in Johnny Was | | $ | — | | $ | 1,376 | | | | | | |
Amortization of Johnny Was intangible assets | | $ | 10,389 | | $ | 1,641 | | | | | | |
Transaction expenses and integration costs associated with the Johnny Was acquisition included in Corporate and Other | | $ | — | | $ | 2,783 | | | | | | |
Gain on sale of Merida manufacturing facility | | $ | (1,756) | | $ | — | | | | | | |
Operating income was due$162 million in the First Nine Months of Fiscal 2023 compared to $179 million in the lower operating results in Corporate and Other, primarily due to the impactFirst Nine Months of LIFO accounting, and lowerFiscal 2022. The decreased operating income in Lilly Pulitzer. These items were partially offset by increasedincluded lower operating income in Tommy Bahama, Lilly Pulitzer and Southern Tide, which was not owned forEmerging Brands. These decreases were partially offset by (1) the full nine months in the prior year. Changes in operating income (loss) byof Johnny Was and (2) a lower operating group are discussed below.
Tommy Bahama:
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | $ Change | % Change | ||||||||
Net sales | $ | 483,971 | $ | 472,796 | $ | 11,175 | 2.4 | % | |||
Gross margin | 59.8 | % | 59.4 | % | |||||||
Operating income | $ | 32,082 | $ | 26,761 | $ | 5,321 | 19.9 | % | |||
Operating income as % of net sales | 6.6 | % | 5.7 | % | |||||||
Amortization of intangible assets included in Tommy Bahama associated with Tommy Bahama Canada acquisition | $ | 1,134 | $ | 1,124 |
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| |||
Net sales | | $ | 655,022 | | $ | 650,677 | | $ | 4,345 |
| 0.7 | % |
Gross profit | | $ | 424,730 | | $ | 419,781 | | $ | 4,949 | | 1.2 | % |
Gross margin | |
| 64.8 | % |
| 64.5 | % |
|
|
|
| |
Operating income | | $ | 118,655 | | $ | 130,508 | | $ | (11,853) |
| (9.1) | % |
Operating income as % of net sales | |
| 18.1 | % |
| 20.1 | % |
|
|
|
| |
The increase indecreased operating income for Tommy Bahama was primarily due to (1) increased salesSG&A and higher gross margin, as discussed above,(2) lower royalty income. These decreases were partially offset by higher SG&A.sales and gross margin. The higherincreased SG&A was primarily due to (1) $9 million of increased employment costs, (2) a $3 million increase in advertising expense, (3) $2 million of increased variable expenses and (4) a $2 million increase in occupancy expenses. These increases were partially offset by a $1 million decrease in administrative expenses including professional fees, travel and other items.
34
Lilly Pulitzer:
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| |||
Net sales | | $ | 265,089 | | $ | 264,763 | | $ | 326 |
| 0.1 | % |
Gross profit | | $ | 178,489 | | $ | 179,841 | | $ | (1,352) | | (0.8) | % |
Gross margin | |
| 67.3 | % |
| 67.9 | % |
|
|
| | |
Operating income | | $ | 49,851 | | $ | 60,358 | | $ | (10,507) |
| (17.4) | % |
Operating income as % of net sales | |
| 18.8 | % |
| 22.8 | % |
|
|
|
| |
The decreased operating income for Lilly Pulitzer was due to (1) increased SG&A and (2) lower gross margin. The increased SG&A was primarily due to (1) $2 million in increased advertising expense, (2) $2 million of increased employment costs, (3) $2 million of increased variable expenses and (4) $2 million of increased depreciation.
Johnny Was:
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| |||
Net sales | | $ | 150,619 | | $ | 22,661 | | $ | 127,958 |
| NM | % |
Gross profit | | $ | 103,285 | | $ | 14,597 | | $ | 88,688 | | NM | % |
Gross margin | |
| 68.6 | % |
| 64.4 | % |
|
|
| | |
Operating income | | $ | 7,266 | | $ | 117 | | $ | 7,149 |
| NM | % |
Operating income as % of net sales | |
| 4.8 | % |
| 0.5 | % |
|
|
|
| |
Notable items included in amounts above: | | | | | | | | | | | | |
Inventory step-up charge included in Johnny Was | | $ | — | | $ | 1,376 | | | | | | |
Amortization of Johnny Was intangible assets | | $ | 10,389 | | $ | 1,641 | | | | | | |
Operating income for the First Nine Months of Fiscal 2017 includes2023 represents the acquired operations of Johnny Was that were negatively impacted by (1) a $5.6 million increase in incentive compensation amounts, (2) $3.5$10 million of incrementalamortization of intangible assets and (2) $1 million of costs associated with the implementation of a new e-commerce platform.
Emerging Brands:
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| |||
Net sales | | $ | 96,726 | | $ | 88,588 | | $ | 8,138 |
| 9.2 | % |
Gross profit | | $ | 48,224 | | $ | 43,901 | | $ | 4,323 | | 9.8 | % |
Gross margin | |
| 49.9 | % |
| 49.6 | % |
|
|
| | |
Operating income | | $ | 10,650 | | $ | 15,456 | | $ | (4,806) |
| (31.1) | % |
Operating income as % of net sales | |
| 11.0 | % |
| 17.4 | % |
|
|
|
| |
The decreased operating income for Emerging Brands was due to increased SG&A. This decrease was partially offset by (1) higher sales and (2) higher gross margin. The increased SG&A included (1) higher SG&A associated with non-compnew retail storesstore operations, including related employment costs, occupancy costs and administrative expenses, (2) higher advertising expense and (3) $1.3 million of incremental brand advertising expense. These cost increases were partially offset by cost reductions in Tommy Bahama's retail store, wholesale and corporate operations as Tommy Bahama has focused on reducing certain employment and other operating costs.increased variable expenses resulting from increased sales.
35
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | $ Change | % Change | ||||||||
Net sales | $ | 192,045 | $ | 186,777 | $ | 5,268 | 2.8 | % | |||
Gross margin | 63.3 | % | 63.9 | % | |||||||
Operating income | $ | 43,621 | $ | 49,646 | $ | (6,025 | ) | (12.1 | )% | ||
Operating income as % of net sales | 22.7 | % | 26.6 | % | |||||||
Inventory step-up charge included in Lilly Pulitzer | $ | 1,086 | $ | — | |||||||
Amortization of intangible assets included in Lilly Pulitzer associated with Signature Store acquisitions | $ | 90 | $ | — | |||||||
Transaction/integration costs associated with Signature Store acquisitions | $ | 563 | $ | — |
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | $ Change | % Change | ||||||||
Net sales | $ | 84,314 | $ | 81,217 | $ | 3,097 | 3.8 | % | |||
Gross margin | 31.3 | % | 28.5 | % | |||||||
Operating income | $ | 6,668 | $ | 6,609 | $ | 59 | 0.9 | % | |||
Operating income as % of net sales | 7.9 | % | 8.1 | % |
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | $ Change | % Change | |||||||
Net sales | $ | 31,254 | $ | 19,267 | $ | 11,987 | NM | |||
Gross margin | 50.7 | % | 39.1 | % | ||||||
Operating income | $ | 3,765 | $ | (425 | ) | $ | 4,190 | NM | ||
Operating income as % of net sales | 12.0 | % | (2.2 | )% | ||||||
Inventory step-up charge included in Southern Tide | $ | — | $ | 2,123 | ||||||
Amortization of intangible assets included in Southern Tide | $ | 216 | $ | 365 | ||||||
Distribution center integration charges | $ | — | $ | 454 |
Corporate and Other:
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | $ Change | % Change | ||||||||
Net sales | $ | 1,448 | $ | 1,482 | $ | (34 | ) | NM | |||
Operating loss | (18,651 | ) | (12,223 | ) | $ | (6,428 | ) | (52.6 | )% | ||
LIFO charge (credit) included in Corporate and Other | $ | 3,748 | $ | (2,277 | ) | ||||||
Transaction expenses associated with the Southern Tide acquisition included in Corporate and Other | $ | — | $ | 762 |
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| |||
Net sales | | $ | (410) | | $ | 2,355 | | $ | (2,765) |
| (117.4) | % |
Gross profit | | $ | (5,451) | | $ | (1,900) | | $ | (3,551) | | NM | % |
Operating loss | | $ | (23,987) | | $ | (27,775) | | $ | 3,788 |
| NM | % |
Notable items included in amounts above: | | | | | | | | | | | | |
LIFO adjustments in Corporate and Other | | $ | 6,287 | | $ | 3,087 | |
|
|
| | |
Transaction expenses and integration costs associated with the Johnny Was acquisition | | $ | — | | $ | 2,783 | | | | | | |
Gain on sale of Merida manufacturing facility | | $ | (1,756) | | $ | — | | | | | | |
The lowerimproved operating results in Corporate and Other were primarily due toa result of (1) the $6.0 million net unfavorable impact of LIFO accountingdecreased SG&A, including decreased incentive compensation amounts and (2) higher incentive compensation expense amounts.a $2 million gain on the sale of the Merida manufacturing facility in Mexico. The First Nine Months of Fiscal 2022 also included $3 million of transaction expenses and integration costs associated with the Johnny Was acquisition. These itemsincreases were partially offset by $0.8 million of transaction expenses associated with the Southern Tide acquisitiona higher net LIFO accounting charge in the First Nine Months of Fiscal 2016, with no such expenses2023 relative to the First Nine Months of Fiscal 2022.
Interest expense, net
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| |||
Interest expense, net | | $ | 4,856 | | $ | 1,214 | | $ | 3,642 |
| 300.0 | % |
The higher interest expense in the First Nine Months of Fiscal 2017.
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | $ Change | % Change | ||||||||
Interest expense, net | $ | 2,355 | $ | 2,505 | $ | (150 | ) | (6.0 | )% |
Income tax
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| |||
Income tax expense | | $ | 36,806 | | $ | 43,764 | | $ | (6,958) |
| (15.9) | % |
Effective tax rate | |
| 23.4 | % |
| 24.7 | % |
|
|
|
| |
Both the First Nine Months of Fiscal 2023 and the First Nine Months of Fiscal 2022 benefited from the net favorable impact of certain items were partially offset by higher interest ratesthat resulted in a lower effective tax rate than the more typical annual effective tax rate of approximately 25%.
The income tax expense in the First Nine Months of Fiscal 2017. Interest expense for2023 included the full yearbenefit of Fiscal 2017 is expectedthe vesting of restricted stock awards at a price higher than the grant date fair value and the favorable utilization of research and development tax credits and adjustments to be approximately $3 million.
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | $ Change | % Change | ||||||||
Income taxes | $ | 24,172 | $ | 25,408 | $ | (1,236 | ) | (4.9 | )% | ||
Effective tax rate | 37.1 | % | 37.4 | % |
36
Net earnings from continuing operations
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | |||||
Net earnings from continuing operations | $ | 40,958 | $ | 42,455 | ||
Net earnings from continuing operations per diluted share | $ | 2.45 | $ | 2.55 | ||
Weighted average shares outstanding - diluted | 16,710 | 16,635 |
| | | | | | |
|
| First Nine Months | ||||
|
| Fiscal 2023 |
| Fiscal 2022 | ||
Net sales | | $ | 1,167,046 | | $ | 1,029,044 |
Operating income | | $ | 162,435 | | $ | 178,664 |
Net earnings | | $ | 120,773 | | $ | 133,686 |
Net earnings per diluted share | | $ | 7.57 | | $ | 8.19 |
Weighted average shares outstanding - diluted | |
| 15,947 | |
| 16,333 |
Net earnings from continuing operations per diluted share were $7.57 in the First Nine Months of Fiscal 2017 was primarily due2023 compared to $8.19 in the impactFirst Nine Months of LIFO accounting on CorporateFiscal 2022 reflecting the (1) increased SG&A, (2) increased interest expense and Other(3) decreased royalties and other operating resuts and lower operating income in Lilly Pulitzer, primarily related to charges associated with the Fiscal 2017 acquisition of certain Lilly Pulitzer Signature Store operations.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Our primary source of revenue and cash flow is through our design, sourcing, marketing and distribution of branded apparel products bearing the trademarks of our Tommy Bahama, Lilly Pulitzer, andJohnny Was, Southern Tide, TBBC and Duck Head lifestyle brands, other owned brands and licensed brands, and private label apparel products. brands. We primarily distribute our products to our customers via direct to consumer channels of distribution, but we also distribute our products via wholesale channels of distribution.
Our primary uses of cash flow include the purchase of products in the operation of our businessbranded apparel products from third party contract manufacturerssuppliers located outside of the United States, as well as operating expenses, including employee compensation and benefits, operating lease commitments and other occupancy-related costs, marketing and advertising costs, information technology costs, variable expenses, distribution costs, other general and administrative expenses and the periodic payment of periodic interest payments related to our financing arrangements.
We have a long history of generating sufficient cash flows from operations to satisfy our cash requirements for our ongoing capital expenditure needs as well as payment of dividends and repayment of our debt. Thus, we believe our anticipated future cash flows from operating activities will provide (1) sufficient cash over both the short and long term to satisfy our ongoing operating cash requirements, (2) ample funds to continue to invest in our businesses, (3) additional cash flow to repay outstanding debt and (4) sufficient cash for other strategic initiatives. Also, if cash inflows are less than cash outflows, we have access to amounts under our U.S.$325 million Revolving Credit Agreement, subject to its terms, which is described below. We may seek to finance our future cash requirements through various methods, including cash flow from operations, borrowings under our current or additional credit facilities, sales of debt or equity securities, and cash on hand.
($ in thousands) | October 28, 2017 | January 28, 2017 | October 29, 2016 | January 30, 2016 | ||||||||
Total current assets | $ | 234,721 | $ | 231,628 | $ | 239,784 | $ | 216,796 | ||||
Total current liabilities, including liabilities related to discontinued operations | $ | 117,915 | $ | 131,396 | $ | 97,683 | $ | 128,899 | ||||
Working capital | $ | 116,806 | $ | 100,232 | $ | 142,101 | $ | 87,897 | ||||
Working capital ratio | 1.99 | 1.76 | 2.45 | 1.68 | ||||||||
Debt to total capital ratio | 15 | % | 20 | % | 28 | % | 12 | % |
Working Capital
| | | | | | | | | | | | | |
|
| October 28, |
| January 28, |
| October 29, |
| January 29, |
| ||||
($ in thousands) | | 2023 | | 2023 | | 2022 | | 2022 | | ||||
Total current assets | | $ | 291,379 | | $ | 330,463 | | $ | 299,495 | | $ | 400,335 | |
Total current liabilities | | $ | 212,512 | | $ | 269,639 | | $ | 230,395 | | $ | 226,166 | |
Working capital | | $ | 78,867 | | $ | 60,824 | | $ | 69,100 | | $ | 174,169 | |
Working capital ratio | |
| 1.37 | |
| 1.23 | |
| 1.30 | |
| 1.77 | |
Our working capital ratio is calculated by dividing total current assets by total current liabilities. Current assets as of October 28, 2023, decreased from October 29, 2016 to October 28, 20172022 primarily due to a $9.1(1) decreased inventories of $14 million, reduction(2) decreased
37
cash and cash equivalents of $7 million and (3) decreased receivables of $2 million. These decreases were partially offset by an increase in inventories.prepaid expenses and other current assets of $16 million. Current liabilities increased by $20.2 millionas of October 28, 2023 decreased from October 29, 2016 to October 28, 20172022 primarily due to increases in(1) decreased accrued incentive compensation of $6.3$14 million and (2) decreased accounts payable of $6.1 million, other accrued expenses of $4.2 million and liabilities related to discontinued operations of $3.7$4 million. Changes in current assets and current liabilities are discussed below.
Balance Sheet
The following tables set forth certain information included in our consolidated balance sheets (in thousands). Below each table are explanations for any significant changes in the balances fromas of October 28, 2023 as compared to October 29, 2016 to October 28, 2017.
Current Assets:
October 28, 2017 | January 28, 2017 | October 29, 2016 | January 30, 2016 | |||||||||
Cash and cash equivalents | $ | 6,077 | $ | 6,332 | $ | 5,351 | $ | 6,323 | ||||
Receivables, net | 73,724 | 58,279 | 68,492 | 59,065 | ||||||||
Inventories, net | 127,301 | 142,175 | 136,383 | 129,136 | ||||||||
Prepaid expenses | 27,619 | 24,842 | 29,558 | 22,272 | ||||||||
Total current assets | $ | 234,721 | $ | 231,628 | $ | 239,784 | $ | 216,796 |
| | | | | | | | | | | | | |
|
| October 28, |
| January 28, |
| October 29, |
| January 29, |
| ||||
| | 2023 | | 2023 | | 2022 | | 2022 | | ||||
Cash and cash equivalents | | $ | 7,879 | | $ | 8,826 | | $ | 14,976 | | $ | 44,859 | |
Short-term investments | | | — | | | — | | | — | | | 164,890 | |
Receivables, net | |
| 60,101 | |
| 43,986 | |
| 62,230 | |
| 31,588 | |
Inventories, net | |
| 157,524 | |
| 220,138 | |
| 171,639 | |
| 117,709 | |
Income tax receivable | | | 19,454 | | | 19,440 | | | 19,740 | | | 19,728 | |
Prepaid expenses and other current assets | |
| 46,421 | |
| 38,073 | |
| 30,910 | |
| 21,561 | |
Total current assets | | $ | 291,379 | | $ | 330,463 | | $ | 299,495 | | $ | 400,335 | |
Cash and cash equivalents were $8 million as of October 28, 2017 and2023, compared to $15 million as of October 29, 2016 represent2022. The cash and cash equivalents balance as of October 28, 2023 represents typical cash amounts maintained on an ongoing basis in our operations, which generally ranges from $5 million to $10 million at any given time. Any excess cash is generally used to repay amounts outstanding under our U.S. Revolving Credit Agreement. The increase incash and cash equivalents balance as of October 29, 2022 included cash balances acquired during the acquisition of Johnny Was on September 19, 2022.
The decreased receivables, net as of October 28, 20172023, was primarily due to higherlower wholesale trade receivables primarily resulting from lower wholesale sales in Lanier ApparelTommy Bahama and Lilly Pulitzer in the Third Quarter of Fiscal 2017.
Inventories, net, included a $79 million and $75 million LIFO reserve as of October 28, 2017 decreased from2023, and October 29, 2016 as a result of lower inventory levels2022, respectively. Inventories decreased in Lanier Apparel, Southern Tide and Tommy Bahama partially offset by higher inventory levels in Lilly Pulitzer. The reduced inventory in Lanier Apparel wasall operating groups primarily due to the exit from and changes in certain replenishment programs resulting in lower inventory levels in the short term. Southern Tide's inventory decreased primarily due tocontinuing initiatives to reduce on-hand inventory levels and clear prior season inventory more quickly, as well as a $1 million step-up from cost to fair value at acquisition, which was included in Southern Tide's October 29, 2016 inventory balance. Tommy Bahama's inventory decreased primarily due to a focus on closely managing inventory purchases as well as the sale of certain prior seasonand reducing on-hand inventory through off-price wholesale channels and outlet stores.levels. We believe that inventory levels in eachall operating groupgroups are appropriate to support anticipated sales for the Fourth Quarter of Fiscal 2017.
The increase in prepaid expenses and other current assets as of October 28, 2017 decreased from October 29, 2016 as a result of (1) lower prepaid rent2023 was primarily due to an increase in prepaid taxes resulting from the timing of payment of monthly rent amounts as certain November 2017 rent payments had not been paid as of October 28, 2017, but substantially all November 2016 rent payments had been made as of October 29, 2016, and (2) lower prepaid taxes based on the timing of estimated tax payments and tax expense. These decreases were partially offset by increases in prepaid advertising, software licenses and other operating expenses.
Non-current Assets:
October 28, 2017 | January 28, 2017 | October 29, 2016 | January 30, 2016 | |||||||||
Property and equipment, net | $ | 191,038 | $ | 193,931 | $ | 195,799 | $ | 184,094 | ||||
Intangible assets, net | 175,057 | 175,245 | 185,957 | 143,738 | ||||||||
Goodwill | 63,443 | 60,015 | 51,053 | 17,223 | ||||||||
Other non-current assets, net | 24,250 | 24,340 | 22,882 | 20,839 | ||||||||
Total non-current assets | $ | 453,788 | $ | 453,531 | $ | 455,691 | $ | 365,894 |
| | | | | | | | | | | | | |
|
| October 28, |
| January 28, |
| October 29, |
| January 29, |
| ||||
| | 2023 | | 2023 | | 2022 | | 2022 | | ||||
Property and equipment, net | | $ | 188,686 | | $ | 177,584 | | $ | 173,391 | | $ | 152,447 | |
Intangible assets, net | |
| 273,444 | |
| 283,845 | |
| 287,626 | |
| 155,307 | |
Goodwill | |
| 124,230 | |
| 120,498 | |
| 116,268 | |
| 23,869 | |
Operating lease assets | | | 246,399 | | | 240,690 | | | 237,078 | | | 195,100 | |
Other assets, net | |
| 38,018 | |
| 35,585 | |
| 26,459 | |
| 30,584 | |
Total non-current assets | | $ | 870,777 | | $ | 858,202 | | $ | 840,822 | | $ | 557,307 | |
Property and equipment, net as of October 28, 2017 decreased from October 29, 20162023, increased primarily as a result ofdue to the capital expenditures exceeding depreciation expense induring the twelve12 months ended October 28, 2017, partially offset by capital expenditures during the same period. The decrease in intangible2023.
38
Intangible assets, net and the increase in goodwill atas of October 28, 2017 were2023, decreased primarily due to the consolidated balance sheet as of October 29, 2016 including provisional amounts related to the First Quarter of Fiscal 2016 acquisition of Southern Tide, which were finalized in the Fourth Quarter of Fiscal 2016, as disclosed in Note 12 to our consolidated financial statements contained in our Annual Report on Form 10-K for Fiscal 2016. Various smaller acquisitions in the twelve months ended October 28, 2017 resulted in additional intangible asset and goodwill amounts as well, with the increases in intangible assets from these acquisitions partially offset by amortization of intangible assets duringacquired in the period.
October 28, 2017 | January 28, 2017 | October 29, 2016 | January 30, 2016 | |||||||||
Total current liabilities | $ | 117,915 | $ | 131,396 | $ | 97,683 | $ | 128,899 | ||||
Long-term debt | 72,131 | 91,509 | 142,425 | 43,975 | ||||||||
Other non-current liabilities | 73,487 | 70,002 | 69,176 | 67,188 | ||||||||
Deferred taxes | 16,829 | 13,578 | 13,643 | 3,657 | ||||||||
Non-current liabilities related to discontinued operations | 972 | 2,544 | 3,279 | 4,571 | ||||||||
Total liabilities | $ | 281,334 | $ | 309,029 | $ | 326,206 | $ | 248,290 |
Operating lease assets as of October 28, 20172023, increased compared to October 29, 2016primarily due to (1) a $6.3 millionthe addition of new leased locations, or the extension of existing leased locations, exceeding the recognition of amortization related to existing operating leases and the termination or reduced term of certain operating leases. The increase in accrued compensation primarily reflecting higher accrued bonus amounts in Tommy Bahama, Lanier Apparel and Corporate and Other partially offset by lower accrued bonus in Lilly Pulitzer, (2) a $6.1 million increase in accounts payable primarily reflecting higher inventory in transit amounts which had not been paidother assets, net as of October 28, 2017, (3) a $4.2 million2023, was primarily due to an increase in other accrued expenses reflecting higher duties payable, gift card payables, accrued royalties, accrued advertising and other amounts and (4) a $3.7equity investments in unconsolidated entities including the $8 million increaseinvestment in liabilities related to discontinued operations as all amounts recognizedFiscal 2022 in the prior year were classified in non-currententity that owns the Tommy Bahama resort.
Liabilities:
| | | | | | | | | | | | | |
|
| October 28, |
| January 28, |
| October 29, |
| January 29, |
| ||||
| | 2023 | | 2023 | | 2022 | | 2022 | | ||||
Total current liabilities | | $ | 212,512 | | $ | 269,639 | | $ | 230,395 | | $ | 226,166 | |
Long-term debt | |
| 66,219 | |
| 119,011 | |
| 130,449 | |
| — | |
Non-current portion of operating lease liabilities | |
| 226,238 | |
| 220,709 | |
| 225,921 | |
| 199,488 | |
Other non-current liabilities | |
| 20,675 | |
| 20,055 | |
| 18,058 | |
| 21,413 | |
Deferred income taxes | | | 9,399 | | | 2,981 | | | 2,455 | | | 2,911 | |
Total liabilities | | $ | 535,043 | | $ | 632,395 | | $ | 607,278 | | $ | 449,978 | |
Current liabilities butdecreased as of October 28, 2017 certain amounts are classified as current liabilities.
Statement of Cash Flows
The following table sets forth the net cash flows including continuing and discontinued operations, for the First Nine Months of Fiscal 20172023 and the First Nine Months of Fiscal 20162022 (in thousands):
First Nine Months Fiscal 2017 | First Nine Months Fiscal 2016 | |||||
Cash provided by operating activities | $ | 65,278 | $ | 53,307 | ||
Cash used in investing activities | (31,412 | ) | (137,133 | ) | ||
Cash (used in) provided by financing activities | (34,154 | ) | 82,555 | |||
Net change in cash and cash equivalents | $ | (288 | ) | $ | (1,271 | ) |
| | | | | | | |
| | First Nine Months | | ||||
|
| Fiscal 2023 |
| Fiscal 2022 | | ||
Cash provided by operating activities | | $ | 169,398 | | $ | 86,255 | |
Cash used in investing activities | |
| (55,724) | |
| (129,700) | |
Cash used in (provided by) financing activities | |
| (114,416) | |
| 13,160 | |
Net change in cash and cash equivalents | | $ | (742) | | $ | (30,285) | |
Changes in cash flows in the First Nine Months of Fiscal 20172023 and the First Nine Months of Fiscal 20162022 related to operating activities, investing activities and financing activities are discussed below.
Operating Activities:
In the First Nine Months of Fiscal 20172023 and the First Nine Months of Fiscal 2016,2022, operating activities provided $65.3$169 million and $53.3$86 million of cash, respectively. The cash flow from operating activities wasfor each period primarily the resultconsisted of net earnings for the relevant period adjusted, as applicable, for non-cash activities including depreciation, amortization andof intangible assets, equity-based compensation, gain on sale of assets, and other non-cash items as well as the net impact of changes in deferred income taxes and our working capital accounts. In both the First Nine Months of Fiscal 2017operating assets and First Nine Months of Fiscal 2016, working capital account changes had an unfavorable impact on cash flow from operations with the First Nine Months of Fiscal 2017 not as unfavorably impacted as the First Nine Months of Fiscal 2016. liabilities.
In the First Nine Months of Fiscal 20172023, the net change in operating assets and First Nine Months of Fiscal 2016, the more significant changesliabilities was primarily due to a decrease in working capital accounts were decreases in current liabilities, increases in receivables and increases in prepaid expenses, each of which decreasedinventories that increased cash flow from operations, partially offset by decreasesa decrease in inventories, which increasedcurrent liabilities and an increase in receivables that decreased cash flow from operations.
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Investing Activities:
In the First Nine Months of Fiscal 2023 and the First Nine Months of Fiscal 2022, investing activities used $56 million forand $130 million of cash, respectively. On an ongoing basis, our cash flow used in investing activities primarily consists of our capital expenditures, compared to $40.1which totaled $54 million and $32 million in the First Nine Months of Fiscal 2016.2023 and the First Nine Months of Fiscal 2022, respectively. In addition to our capital expenditures in the First Nine Months of Fiscal 2023, we paid $3 million in the aggregate for a working capital settlement associated with the acquisition of Johnny Was and the acquisition of three former Southern Tide Signature Stores. We also received $2 million from the sale of the Merida manufacturing facility in Mexico. During the First Nine Months of Fiscal 2017,2022, we paid $5.1$264 million for acquisitions, which were related to the September 19, 2022 acquisition of certain Lilly Pulitzer Signature Stores as well as workingJohnny Was and also converted $165 million of short-term investments into cash to fund a portion of the acquisition.
On an ongoing basis, our cash flow used in investing activities is expected to primarily consist of our capital settlements relatedexpenditure investments in (1) direct to certain Fiscal 2016 acquisitions. Duringconsumer operations, including opening, relocating and remodeling locations, (2) facilities enhancements for distribution centers and offices and (3) information technology initiatives, including e-commerce capabilities.
Financing Activities:
In the First Nine Months of Fiscal 2016, we paid $95.0 million for acquisitions, consisting of the acquisition of the operations2023 and assets of Southern Tide and the Duck Head trademark, and $2.0 million for the final working capital settlement associated with our Ben Sherman discontinued operations.
If net cash requirements are less than our net cash flows, we may repay amounts outstanding on our Revolving Credit Agreement, if any, consistent with our net repayment of $53 million of long-term debt in the First Nine Months of Fiscal 2016,2023. Alternatively, to the extent we are in a net debt position, and our net cash requirements exceed our net cash flows, we may borrow amounts from our Revolving Credit Agreement.
Liquidity and Capital Resources
We have a long history of generating sufficient cash flows from operations to satisfy our cash requirements for our ongoing capital expenditure needs as well as payment of dividends and repayment of our debt. Thus, we believe our anticipated future cash flows from operating activities will provide (1) sufficient cash over both the short and long term to satisfy our ongoing operating cash requirements, (2) ample funds to continue to invest in our lifestyle brands, direct to consumer initiatives and information technology projects, (3) additional cash flow to repay outstanding debt and (4) sufficient cash for other strategic initiatives.
Our capital needs depend on many factors including the results of our operations and cash flows, future growth rates, the need to finance inventory and the success of our various products. To the extent cash flow needs in the future exceed cash flow provided by our operations, we will have access, subject to its terms, to our Revolving Credit Agreement to provide funding for operating activities, capital expenditures and acquisitions, if any, and any other investing or financing activities provided $82.6activities.
Our cash and debt, as well as availability, levels in future periods will not be comparable to historical amounts, particularly after the completion of the acquisition of Johnny Was in September 2022. We anticipate our debt will be further reduced during the Fourth Quarter of Fiscal 2023 following the reduction of long-term debt by $53 million of cash. Inin the First Nine Months of Fiscal 2017,2023. Further, we decreased debt as our cash flow from operations exceededcontinue to assess, and may possibly make changes to, our capital expenditures, paymentstructure, which we may achieve by borrowing from additional credit facilities, selling debt or equity securities or repurchasing
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additional shares of our stock in the First Nine Months of Fiscal 2016, we increased debt primarily for the purpose of funding our Fiscal 2016 acquisitions, fundingfuture. Changes in our capital expenditures and payment of dividends, which in the aggregate exceeded our cash flow from operations. During the First Nine Months of Fiscal 2017 and the First Nine Months of Fiscal 2016, we paid $13.6 million of dividends.
$325 Million Revolving Credit Agreement.
On March 6, 2023, we amended the Revolving Credit Agreement to, among other things, mature in March 2028. As of October 28, 20172023, we had borrowings of $66 million, issued standby letters of credit of $6 million, and availability of $253 million under our $325 million Fourth Amended and Restatedthe Revolving Credit Agreement.
Pursuant to the Revolving Credit Agreement, ("U.S.the interest rate applicable to our borrowings under the Revolving Credit Agreement") comparedAgreement are based on either the Term Secured Overnight Financing Rate plus an applicable margin of 135 to $142.4 million185 basis points or prime plus an applicable margin of borrowings outstanding as of October 29, 2016. 25 to 75 basis points.
The U.S. Revolving Credit Agreement generally (1) is limited to a borrowing base consisting of specified percentages of eligible categories of assets, (2) accrues variable-rate interest (weighted average borrowinginterest rate of 2.7%7% as of October 28, 2017)2023), unused line fees and letter of credit fees based upon average utilization or unused availability, or utilization,as applicable, (3) requires periodic interest payments with principal due at maturity (May 2021) and (4) is secured by a first priority security interest in substantially all of the assets of Oxford Industries, Inc. and substantially all of its domestic subsidiaries, including accounts receivable, books and records, chattel paper, deposit accounts, equipment, certain general intangibles, inventory, investment property (including the equity interests of certain subsidiaries), negotiable collateral, life insurance policies, supporting obligations, commercial tort claims, cash and cash equivalents, eligible trademarks, proceeds and other personal property.
The U.S. Revolving Credit Agreement is subject to a number ofseveral affirmative covenants regarding the delivery of financial information, compliance with law, maintenance of property, insurance requirements and conduct of business. Also, the U.S. Revolving Credit Agreement is subject to certain negative covenants or other restrictions including, among other things, limitations on our ability to (1) incur debt, (2) guaranty certain obligations, (3) incur liens, (4) pay dividends to shareholders, (5) repurchase shares of our common stock, (6) make investments, (7) sell assets or stock of subsidiaries, (8) acquire assets or businesses, (9) merge or consolidate with other companies or (10) prepay, retire, repurchase or redeem debt.
Additionally, the U.S. Revolving Credit Agreement contains a financial covenant that applies only if excess availability under the agreement for three consecutive business days is less than the greater of (i)(1) $23.5 million or (ii)(2) 10% of availability. In such a case, our fixed charge coverage ratio as defined in the U.S. Revolving Credit Agreement must not be less than 1.0 to 1.0 for the immediately preceding 12 fiscal months for which financial statements have been delivered. This financial covenant continues to apply until we have maintained excess availability under the U.S. Revolving Credit Agreement of more than the greater of (i)(1) $23.5 million or (ii)(2) 10% of availability for 30 consecutive days.
We believe that the affirmative covenants, negative covenants, financial covenants and other restrictions under the U.S. Revolving Credit Agreement are customary for those included in similar facilities entered into at the time we entered intoamended the U.S. Revolving Credit Agreement. During the Third Quarter of Fiscal 20172023 and as of October 28, 2017,2023, no financial covenant testing was required pursuant to our U.S. Revolving Credit Agreement or the Prior Credit Agreement, as applicable, as the minimum availability threshold was met at all times. As of October 28, 2017,2023, we were compliant with all applicable covenants related to the U.S. Revolving Credit Agreement.
Operating Lease Commitments:
Refer to satisfyNote 4 in our ongoingunaudited condensed consolidated financial statements included in this report for additional information about our operating lease commitments as of October 28, 2023.
Dividends:
On December 4, 2023, our Board of Directors approved a cash requirements, which generally consistdividend of working capital and other operating activity needs, capital expenditures, interest payments$0.65 per share payable on our debt and dividends, if any, primarily from positive cash flow from operations supplemented by borrowings under our U.S. Revolving Credit Agreement. Our need for working capital is typically seasonal with the greatest requirements generally in the fall and springFebruary 2, 2024 to shareholders of each year. Our capital needs will depend on many factors including our growth rate, the need to finance inventory levels and the success of our various products. We anticipate that at the maturityrecord as of the U.S. Revolving Credit Agreement or as otherwise deemed appropriate,close of business on January 19, 2024. Although we will be able to refinance the facility or obtain other financing on terms available in the market at that time. The terms of any future financing arrangements may not be as favorable as the terms of the current agreement or current market terms.
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quarter since we became a public company in July 1960. However,1960, we may discontinue or modify dividend payments at any time if we determine that other uses of our capital, including payment of outstanding debt, funding of acquisitions, funding of capital expenditures or repurchases of outstanding shares, may be in our best interest; if our expectations of future cash flows and future cash needs outweigh the ability to pay a dividend; or if the terms of our U.S. Revolving Credit Agreement,credit facility, other debt instruments or applicable law limit our ability to pay dividends. We may borrow to fund dividends or repurchase shares in the short term based on our expectation of operating cash flows in future periods subject to the terms and conditions of the U.S. Revolving Credit Agreement,our credit facility, other debt instruments and applicable law. All cash flow from operations will not be paid out as dividendsdividends.
Capital Expenditures:
Our anticipated capital expenditures for Fiscal 2023, including the $54 million incurred in all periods. For detailsthe First Nine Months of Fiscal 2023, are expected to be approximately $80 million, as compared to $47 million for Fiscal 2022. The planned increase in capital expenditures includes spend associated with new brick and mortar locations and relocations and remodels of existing locations resulting in a year-over-year net increase of full price stores of approximately 25 by the end of Fiscal 2023. The spend associated with these brick and mortar locations represents about limitations on our ability to pay dividends, see the discussionone-half of the U.S. Revolving Credit Agreement above.
Other Liquidity Items:
Our contractual obligations as of October 28, 20172023 except for the decreased debt outstanding, as discussed above, have not changed materially from the contractual obligations outstanding at January 28, 2017,2023, as disclosed in our Annual Report onFiscal 2022 Form 10-K for Fiscal 2016 filed with the SEC, other than changes in amounts outstanding under our U.S. Revolving Credit Agreement, as discussed above.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP in a consistent manner. The preparation of these financial statements requires the selection and application of accounting policies. Further, the application of GAAP requires us to make estimates and judgments about future events that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. On an ongoing basis, we evaluate our estimates, including those discussed below. We base our estimates on historical experience, current trends and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions. We believe it is possible that other professionals, applying reasonable judgment to the same set of facts and circumstances, could develop and support a range of alternative estimated amounts. We believe that we have appropriately applied our critical accounting policies. However, in the event that inappropriate assumptions or methods were used relating to the critical accounting policies, our consolidated statements of operations could be materially misstated.
Our critical accounting policies and estimates are discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report onFiscal 2022 Form 10-K for Fiscal 2016.10-K. There have not been any significant changes to the application of our critical accounting policies and estimates during the First Nine Months of Fiscal 2017. Additionally, a2023. A detailed summary of significant accounting policies is included in Note 1 to our consolidated financial statements contained in our Annual Report onFiscal 2022 Form 10-K for Fiscal 2016. 10-K.
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SEASONAL ASPECTS OF OUR BUSINESS
Each of our operating groups is impacted by seasonality as the demand by specific product or style, as well as by distribution channel, may vary significantly depending on the time of year. For details ofAs a result, our quarterly operating results and working capital requirements fluctuate significantly from quarter to quarter. Typically, the impact of seasonality on eachdemand for products for our larger brands is higher in the spring, summer and holiday seasons and lower in the fall season (the third quarter of our operating groups, seefiscal year). Thus, our third quarter historically has had the business discussion for each operating group discussed in Part I, Item 1, Business in our Annual Report on Form 10-K for Fiscal 2016. Aslowest net sales and net earnings compared to other quarters. Further, the timingimpact of certain unusual or non-recurring items, economic conditions, our e-commerce flash clearance sales, wholesale product shipments, weather, acquisitions or other factors affecting the businessour operations may vary from one year to the next,next. Therefore, due to the potential impact of these items, we do not believe that net sales or operating income for any particular quarter orin the distributionFirst Nine Months of net sales and operating income for Fiscal 2016 are necessarily2023 is indicative of anticipated results for the full fiscal year or expected distribution in future years. Our third quarter has historically been our smallest net sales and operating income quarter, and that result is expected to continue in the future as our direct to consumer businesses are more heavily weighted towards Spring, Summer and Holiday and as we continue to manage our wholesale businesses. The following table presents our percentageproportion of net sales and operating income from continuing operationsamounts by quarter for Fiscal 2016:
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||
Net sales | 25 | % | 28 | % | 22 | % | 25 | % |
Operating income (loss) | 36 | % | 43 | % | — | % | 21 | % |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain interest rate, foreign currency, commodity and inflation risks as discussed in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk in our Annual Report onFiscal 2022 Form 10-K for Fiscal 2016.10-K. There have not been any significantmaterial changes in our exposure to these risks during the First Nine Months of Fiscal 2017.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our company, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and
Changes in Internal Control over Financial Reporting
There have not been anywere no changes in our internal controlcontrols over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act during the Third Quarter of Fiscal 20172023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are a party to litigation and regulatory actions arising in the ordinary course of business. These actions may relate to trademark and other intellectual property, employee relations matters, real estate, licensing arrangements, real estate, importing or exporting regulations, product safety requirements, taxation employee relation matters or other topics. We are not currently a party to any litigation or regulatory action or aware of any proceedings contemplated by governmental authorities that we believe could reasonably be expected to have a material impact on our financial position, results of operations or cash flows. However, our assessment of any litigation or other legal claims could potentially change in light of the discovery of additional factors not presently known or determinations by judges, juries, or others which are not consistent with our evaluation of the possible liability or outcome of such litigation or claims.
ITEM 1A. RISK FACTORS
Our business is subject to numerous risks. Investors should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report onFiscal 2022 Form 10-K, for Fiscal 2016, which could materially affect our business, financial condition or operating results. We operate in a competitive and rapidly changing business environment and additional risks and uncertainties that
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we currently consider immaterial or not presently known to us or that we currently consider immaterial may also adversely affect our business. The risks described in our Annual Report onFiscal 2022 Form 10-K for Fiscal 2016 are not the only risks facing our company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) | During the Third Quarter of Fiscal 2023, we did not make any unregistered sales of equity securities. |
(c) | During the Third Quarter of Fiscal 2023, we repurchased the following shares of our common stock: |
| | | | | | | | | |
| | | | | | | Total Number of | | Dollar Value |
| | | | | | | Shares | | (000s) of Shares |
| | | | Average | | Purchased as | | That May Yet be | |
| | Total Number | | Price | | Part of Publicly | | Purchased Under | |
| | of Shares | | Paid per | | Announced Plans | | the Plans or | |
Fiscal Month |
| Purchased |
| Share |
| or Programs |
| Programs | |
August (7/30/23 - 8/26/23) | | 9,905 | | $ | 106.84 | | 9,905 | | $ 30,000 |
September (8/27/23 - 9/30/23) | | - | | $ | - | | - | | $ 30,000 |
October (10/1/23 - 10/28/23) | | - | | $ | - | | - | | $ 30,000 |
Total | | 9,905 | | $ | 106.84 | | 9,905 | | $ 30,000 |
On December 7, 2021, our Board of Directors authorized us to spend up to $150 million to repurchase shares of our stock. This authorization superseded and replaced all previous authorizations to repurchase shares of our stock and has no automatic expiration.
Pursuant to the Board of Directors’ authorization, we entered into a $20 million open market stock repurchase program (Rule 10b5-1 plan) to acquire shares of our stock. During the Second Quarter of Fiscal 2023 and the Third Quarter of Fiscal 2017,2023, we did not make any unregistered salesrepurchased 186,000 and 10,000 shares, respectively, of our equity securities.
Also, we have certain stock incentive plans as described in Note 78 to our consolidated financial statements included in our Annual Report onFiscal 2022 Form 10-K, for Fiscal 2016, all of which are publicly announced plans. Under the plans, we can repurchase shares from employees to cover employee tax liabilities related to the vesting of shares of our stock. DuringWe repurchased $10 million of shares from employees during the Second Quarter of Fiscal 2023, with no such repurchases of shares from employees in the Third Quarter of Fiscal 2017, no shares were repurchased pursuant to these plans.
ITEM 5. OTHER INFORMATION
During the Third Quarter of Fiscal 2023, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
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ITEM 6. EXHIBITS
| | |
3.1 | ||
Restated Articles of Incorporation of Oxford Industries, Inc. (filed as Exhibit 3.1 to the | ||
3.2 | | Bylaws of Oxford Industries, Inc., as |
31.1 | | |
31.2 | | |
32 | | |
101.INS | | XRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL |
101.SCH | | XBRL Taxonomy Extension Schema Document* |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document* |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document* |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document* |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document* |
104 | | Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
| | * Filed herewith. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | |
December 7, 2023 | ||
OXFORD INDUSTRIES, INC. | | |
| | |
| (Registrant) | |
| | |
| /s/ K. Scott Grassmyer | |
| K. Scott Grassmyer | |
| Executive Vice President, Chief Operating Officer | |
| (Authorized Signatory) | |
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