UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| |
| For the quarterly period ended October |
| |
| or |
| |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| |
| 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, Georgia 30309
(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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
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.
| | | | |
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 ☐ No ☒
As of December 2, 2022,1, 2023, there were 15,768,53015,625,096 shares of the registrant’s common stock outstanding.
OXFORD INDUSTRIES, INC.
INDEX TO FORM 10-Q
For the Third Quarter of Fiscal 20222023
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, demand for our products, which may be impacted by competitive conditions and/or evolving consumer shopping patterns; macroeconomic factors that may impact consumer discretionary spending and pricing levels for apparel and related products, many of which may be impacted by current inflationary pressures, rising interest rates, concerns about the stability of the banking industry or general economic uncertainty;uncertainty, and the effectiveness of measures to mitigate the impact of these factors; competitive conditions and/or evolving consumer shopping patterns; acquisition activities (such as our recentthe acquisition of Johnny Was), including our ability to integrate key functions, recognize anticipated synergies and minimize related disruptions or distractions to our business as a result of these activities; the impact of the coronavirus (COVID-19) pandemic on our business, operations and financial results; supply chain disruptions; costs and availability of labor and freight deliveries;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;products, as well as our ability to pass along price increases to consumers; energy costs; our ability to be more hyper-digital and 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, licensees, logistics providers and landlords, to meet their obligations to us and/or continue our business relationship to the same degree in light of current or future staffing shortages, liquidity challenges and/or bankruptcy filings;as they have historically; retention of and disciplined execution by key 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;data and maintain continuity of our information technology systems; the effectiveness of our advertising initiatives in defining, launching and communicating brand-relevant customer experiences; the level of our indebtedness, including the risks associated with heightened interest rates on the debt and 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 potential imposition of additional duties; the timing of shipments requested by our wholesale customers; weather; fluctuations and volatility in global financial and/or real estate markets; the timing and cost of retail store and food and beverage location openings and remodels, technology implementations and other capital expenditures; store closuresexpenditures, including the timing, cost and successful implementation of changes to our distribution network; pandemics or other operating restrictions due to COVID-19, natural disaster or otherwise;public health crises; expected outcomes of pending or potential litigation and regulatory actions; the increased consumer, employee and regulatory focus on climate change and 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; factors that could affect our consolidated effective tax rate; the risk of impairment to goodwill and other intangible assets; and geopolitical risks, including those related to the ongoing war between Russiain Ukraine and Ukraine.the Israel-Hamas war. Forward-looking statements reflect our expectations at the time such forward-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. Item 1A. Risk Factors contained in our Fiscal 20212022 Form 10-K, as updated in Part II, Item 1A. Risk Factors contained in this report, and those described from time to time in our future reports filed with the SEC. We caution that one should not place undue reliance on forward-looking statements, which speak only as of the date on which they are made. We disclaim any intention, obligation or duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
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 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 “Fiscal 20212022 Form 10-K” means our Annual Report on Form 10-K for Fiscal 2021.2022. Additionally, the terms listed below reflect the respective period noted:
| | |
Fiscal 2024 | | 52 weeks ending February 1, 2025 |
Fiscal 2023 | | 53 weeks ending February 3, 2024 |
Fiscal 2022 | | 52 weeks |
Fiscal 2021 | | 52 weeks ended January 29, 2022 |
Fourth Quarter Fiscal | |
|
Third Quarter Fiscal 2023 | | 13 weeks ended |
Second Quarter Fiscal 2023 | | 13 weeks ended July 29, 2023 |
First Quarter Fiscal 2023 | | 13 weeks ended April 29, 2023 |
Fourth Quarter Fiscal 2022 | | 13 weeks |
Third Quarter Fiscal 2022 | | 13 weeks ended October 29, 2022 |
Second Quarter Fiscal 2022 | | 13 weeks ended July 30, 2022 |
First Quarter Fiscal 2022 | | 13 weeks ended April 30, 2022 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Nine Months Fiscal 2022 | | 39 weeks ended October 29, 2022 |
|
|
|
4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | |
|
| October 29, |
| January 29, |
| October 30, |
| October 28, |
| January 28, |
| October 29, | ||||||
| | 2022 | | 2022 | | 2021 | | 2023 | | 2023 | | 2022 | ||||||
ASSETS | | | | | | | | | | | | | | | | | | |
Current Assets | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 14,976 | | $ | 44,859 | | $ | 37,976 | | $ | 7,879 | | $ | 8,826 | | $ | 14,976 |
Short-term investments | | | — | | | 164,890 | | | 150,036 | | | — | | | — | | | — |
Receivables, net | |
| 64,497 | |
| 34,550 | |
| 46,266 | |
| 60,101 | |
| 43,986 | |
| 62,230 |
Inventories, net | |
| 171,639 | |
| 117,709 | |
| 90,981 | |
| 157,524 | |
| 220,138 | |
| 171,639 |
Income tax receivable | | | 19,740 | | | 19,728 | | | 18,085 | | | 19,454 | | | 19,440 | | | 19,740 |
Prepaid expenses and other current assets | |
| 28,643 | |
| 18,599 | |
| 23,609 | |
| 46,421 | |
| 38,073 | |
| 30,910 |
Total Current Assets | | $ | 299,495 | | $ | 400,335 | | $ | 366,953 | | $ | 291,379 | | $ | 330,463 | | $ | 299,495 |
Property and equipment, net | |
| 173,391 | |
| 152,447 | |
| 156,672 | |
| 188,686 | |
| 177,584 | |
| 173,391 |
Intangible assets, net | |
| 287,626 | |
| 155,307 | |
| 155,527 | |
| 273,444 | |
| 283,845 | |
| 287,626 |
Goodwill | |
| 116,268 | |
| 23,869 | |
| 23,909 | |
| 124,230 | |
| 120,498 | |
| 116,268 |
Operating lease assets | | | 237,078 | | | 195,100 | | | 200,508 | | | 246,399 | | | 240,690 | | | 237,078 |
Other assets, net | |
| 26,459 | |
| 30,584 | |
| 29,234 | |
| 38,018 | |
| 35,585 | |
| 26,459 |
Total Assets | | $ | 1,140,317 | | $ | 957,642 | | $ | 932,803 | | $ | 1,162,156 | | $ | 1,188,665 | | $ | 1,140,317 |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Current Liabilities | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Accounts payable | | $ | 72,932 | | $ | 80,753 | | $ | 64,709 | | $ | 68,565 | | $ | 94,611 | | $ | 72,932 |
Accrued compensation | |
| 36,150 | |
| 30,345 | |
| 32,744 | |
| 20,219 | |
| 35,022 | |
| 36,150 |
Current portion of operating lease liabilities | |
| 62,349 | |
| 61,272 | |
| 58,287 | |
| 65,224 | |
| 73,865 | |
| 62,349 |
Accrued expenses and other liabilities | |
| 58,964 | |
| 53,796 | |
| 51,432 | |
| 58,504 | |
| 66,141 | |
| 58,964 |
Total Current Liabilities | | $ | 230,395 | | $ | 226,166 | | $ | 207,172 | | $ | 212,512 | | $ | 269,639 | | $ | 230,395 |
Long-term debt | |
| 130,449 | |
| — | |
| — | |
| 66,219 | |
| 119,011 | |
| 130,449 |
Non-current portion of operating lease liabilities | |
| 225,921 | |
| 199,488 | |
| 206,484 | |
| 226,238 | |
| 220,709 | |
| 225,921 |
Other non-current liabilities | |
| 18,058 | |
| 21,413 | |
| 21,779 | |
| 20,675 | |
| 20,055 | |
| 18,058 |
Deferred income taxes | |
| 2,455 | |
| 2,911 | |
| 1,899 | |
| 9,399 | |
| 2,981 | |
| 2,455 |
Shareholders’ Equity | |
| | |
| | |
| | |
| | |
| | |
| |
Common stock, $1.00 par value per share | |
| 15,815 | |
| 16,805 | |
| 16,891 | |
| 15,625 | |
| 15,774 | |
| 15,815 |
Additional paid-in capital | |
| 169,063 | |
| 163,156 | |
| 160,421 | |
| 174,730 | |
| 172,175 | |
| 169,063 |
Retained earnings | |
| 351,731 | |
| 331,175 | |
| 321,238 | |
| 439,755 | |
| 370,145 | |
| 351,731 |
Accumulated other comprehensive loss | |
| (3,570) | |
| (3,472) | |
| (3,081) | |
| (2,997) | |
| (1,824) | |
| (3,570) |
Total Shareholders’ Equity | | $ | 533,039 | | $ | 507,664 | | $ | 495,469 | | $ | 627,113 | | $ | 556,270 | | $ | 533,039 |
Total Liabilities and Shareholders’ Equity | | $ | 1,140,317 | | $ | 957,642 | | $ | 932,803 | | $ | 1,162,156 | | $ | 1,188,665 | | $ | 1,140,317 |
See accompanying notes.
5
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| Third Quarter |
| First Nine Months | |
| Third Quarter |
| First Nine Months | | ||||||||||||||||
| | Fiscal 2022 | | Fiscal 2021 | | Fiscal 2022 | | Fiscal 2021 | | | Fiscal 2023 | | Fiscal 2022 | | Fiscal 2023 | | Fiscal 2022 | | ||||||||
Net sales | | $ | 313,033 | | $ | 247,729 | | $ | 1,029,044 | | $ | 842,163 | | | $ | 326,630 | | $ | 313,033 | | $ | 1,167,046 | | $ | 1,029,044 | |
Cost of goods sold | |
| 115,339 | |
| 95,191 | |
| 372,824 | |
| 313,414 | | |
| 121,211 | |
| 115,339 | |
| 417,769 | |
| 372,824 | |
Gross profit | | $ | 197,694 | | $ | 152,538 | | $ | 656,220 | | $ | 528,749 | | | $ | 205,419 | | $ | 197,694 | | $ | 749,277 | | $ | 656,220 | |
SG&A | |
| 175,027 | |
| 137,505 | |
| 495,574 | |
| 420,997 | | |
| 194,822 | |
| 175,027 | |
| 603,202 | |
| 495,574 | |
Royalties and other operating income | |
| 4,648 | |
| 15,574 | |
| 18,018 | |
| 25,744 | | |
| 3,863 | |
| 4,648 | |
| 16,360 | |
| 18,018 | |
Operating income | | $ | 27,315 | | $ | 30,607 | | $ | 178,664 | | $ | 133,496 | | | $ | 14,460 | | $ | 27,315 | | $ | 162,435 | | $ | 178,664 | |
Interest expense, net | |
| 698 | |
| 222 | |
| 1,214 | |
| 685 | | |
| 1,217 | |
| 698 | |
| 4,856 | |
| 1,214 | |
Earnings before income taxes | | $ | 26,617 | | $ | 30,385 | | $ | 177,450 | | $ | 132,811 | | | $ | 13,243 | | $ | 26,617 | | $ | 157,579 | | $ | 177,450 | |
Income tax expense | |
| 6,951 | |
| 4,400 | |
| 43,764 | |
| 26,898 | | |
| 2,461 | |
| 6,951 | |
| 36,806 | |
| 43,764 | |
Net earnings | | $ | 19,666 | | $ | 25,985 | | $ | 133,686 | | $ | 105,913 | | | $ | 10,782 | | $ | 19,666 | | $ | 120,773 | | $ | 133,686 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Net earnings per share: | |
|
| |
|
| |
|
| |
|
| | |
|
| |
|
| |
|
| |
|
| |
Basic | | $ | 1.25 | | $ | 1.56 | | $ | 8.36 | | $ | 6.37 | | | $ | 0.69 | | $ | 1.25 | | $ | 7.75 | | $ | 8.36 | |
Diluted | | $ | 1.22 | | $ | 1.54 | | $ | 8.19 | | $ | 6.29 | | | $ | 0.68 | | $ | 1.22 | | $ | 7.57 | | $ | 8.19 | |
Weighted average shares outstanding: | |
|
| |
|
| |
|
| |
| | | |
|
| |
|
| |
|
| |
| | |
Basic | |
| 15,740 | |
| 16,649 | |
| 15,992 | |
| 16,627 | | |
| 15,587 | |
| 15,740 | |
| 15,589 | |
| 15,992 | |
Diluted | |
| 16,139 | |
| 16,872 | |
| 16,333 | |
| 16,841 | | |
| 15,787 | |
| 16,139 | |
| 15,947 | |
| 16,333 | |
Dividends declared per share | | $ | 0.55 | | $ | 0.42 | | $ | 1.65 | | $ | 1.21 | | | $ | 0.65 | | $ | 0.55 | | $ | 1.95 | | $ | 1.65 | |
See accompanying notes.
6
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| Third Quarter |
| First Nine Months | |
| Third Quarter |
| First Nine Months | | ||||||||||||||||
| | Fiscal 2022 | | Fiscal 2021 | | Fiscal 2022 | | Fiscal 2021 | | | Fiscal 2023 | | Fiscal 2022 | | Fiscal 2023 | | Fiscal 2022 | | ||||||||
Net earnings | | $ | 19,666 | | $ | 25,985 | | $ | 133,686 | | $ | 105,913 | | | $ | 10,782 | | $ | 19,666 | | $ | 120,773 | | $ | 133,686 | |
Other comprehensive income (loss), net of taxes: | |
|
| |
|
| |
|
| |
|
| | |
|
| |
|
| |
|
| |
|
| |
Net foreign currency translation adjustment | |
| (450) | |
| 654 | |
| (98) | |
| 583 | | |
| (888) | |
| (450) | |
| (1,173) | |
| (98) | |
Comprehensive income | | $ | 19,216 | | $ | 26,639 | | $ | 133,588 | | $ | 106,496 | | | $ | 9,894 | | $ | 19,216 | | $ | 119,600 | | $ | 133,588 | |
See accompanying notes.
7
OXFORD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | | | | | | | | | | | | |
| | First Nine Months | | | First Nine Months | | ||||||||
|
| Fiscal 2022 |
| Fiscal 2021 | |
| Fiscal 2023 |
| Fiscal 2022 | | ||||
Cash Flows From Operating Activities: |
| |
|
| |
|
|
| |
|
| |
|
|
Net earnings | | $ | 133,686 | | $ | 105,913 | | | $ | 120,773 | | $ | 133,686 | |
Adjustments to reconcile net earnings to cash flows from operating activities: | |
|
| |
|
| | |
|
| |
|
| |
Depreciation | |
| 31,126 | |
| 28,592 | | |
| 35,476 | |
| 31,126 | |
Amortization of intangible assets | |
| 2,322 | |
| 660 | | |
| 11,003 | |
| 2,322 | |
Equity compensation expense | |
| 7,796 | |
| 5,854 | | |
| 11,034 | |
| 7,796 | |
Gain on sale of investment in unconsolidated entity | | | — | | | (11,586) | | |||||||
Amortization of deferred financing costs | |
| 258 | |
| 258 | | |||||||
Change in fair value of contingent consideration | |
| — | |
| 786 | | |||||||
Gain on sale of assets | | | (1,756) | | | — | | |||||||
Amortization and write-off of deferred financing costs | |
| 465 | |
| 258 | | |||||||
Deferred income taxes | |
| (456) | |
| 3,115 | | |
| 6,448 | |
| (456) | |
Changes in operating assets and liabilities, net of acquisitions and dispositions: | |
|
| |
| | | |
|
| |
| | |
Receivables, net | |
| (21,230) | |
| (14,341) | | |
| (11,651) | |
| (21,230) | |
Inventories, net | |
| (31,332) | |
| 32,544 | | |
| 61,598 | |
| (31,332) | |
Income tax receivable | | | (12) | | | (109) | | | | (14) | | | (12) | |
Prepaid expenses and other current assets | |
| (5,644) | |
| (3,238) | | |
| (8,337) | |
| (5,644) | |
Current liabilities | |
| (23,271) | |
| 10,361 | | |
| (54,468) | |
| (23,271) | |
Other balance sheet changes | |
| (6,988) | |
| (1,724) | | |
| (1,173) | |
| (6,988) | |
Cash provided by operating activities | | $ | 86,255 | | $ | 157,085 | | | $ | 169,398 | | $ | 86,255 | |
Cash Flows From Investing Activities: | |
|
| |
|
| | |
|
| |
|
| |
Acquisitions, net of cash acquired | |
| (263,656) | |
| — | | |
| (3,320) | |
| (263,656) | |
Purchases of property and equipment | |
| (32,331) | |
| (25,132) | | |
| (54,496) | |
| (32,331) | |
Purchases of short-term investments | | | (70,000) | | | (150,000) | | | | — | | | (70,000) | |
Proceeds from short-term investments | | | 234,837 | | | — | | | | — | | | 234,837 | |
Proceeds from sale of investment in unconsolidated entity | | | — | | | 14,586 | | |||||||
Proceeds from the sale of property, plant and equipment | | | 2,125 | | | — | | |||||||
Other investing activities | |
| 1,450 | |
| (2,000) | | |
| (33) | |
| 1,450 | |
Cash used in investing activities | | $ | (129,700) | | $ | (162,546) | | | $ | (55,724) | | $ | (129,700) | |
Cash Flows From Financing Activities: | |
|
| |
|
| | |
|
| |
|
| |
Repayment of revolving credit arrangements | |
| (45,262) | |
| — | | |
| (369,159) | |
| (45,262) | |
Proceeds from revolving credit arrangements | |
| 175,711 | |
| — | | |
| 316,368 | |
| 175,711 | |
Deferred financing costs paid | | | (1,661) | | | — | | |||||||
Repurchase of common stock | | | (86,804) | | | — | | | | (20,045) | | | (86,804) | |
Proceeds from issuance of common stock | |
| 1,263 | |
| 1,044 | | |
| 1,509 | |
| 1,263 | |
Repurchase of equity awards for employee tax withholding liabilities | |
| (3,166) | |
| (2,983) | | |
| (9,941) | |
| (3,166) | |
Cash dividends paid | |
| (26,572) | |
| (20,447) | | |
| (31,487) | |
| (26,572) | |
Other financing activities | |
| (2,010) | |
| (749) | | |
| — | |
| (2,010) | |
Cash provided by (used in) financing activities | | $ | 13,160 | | $ | (23,135) | | |||||||
Cash used in (provided by) financing activities | | $ | (114,416) | | $ | 13,160 | | |||||||
Net change in cash and cash equivalents | | $ | (30,285) | | $ | (28,596) | | | $ | (742) | | $ | (30,285) | |
Effect of foreign currency translation on cash and cash equivalents | |
| 402 | |
| 559 | | |
| (205) | |
| 402 | |
Cash and cash equivalents at the beginning of year | |
| 44,859 | |
| 66,013 | | |
| 8,826 | |
| 44,859 | |
Cash and cash equivalents at the end of period | | $ | 14,976 | | $ | 37,976 | | | $ | 7,879 | | $ | 14,976 | |
See accompanying notes.
8
OXFORD INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
THIRD QUARTER OF FISCAL 20222023
1. 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 interim periods are not necessarily indicative of results to be expected for a full fiscal year due to the seasonality of our business, as well as the acquisition of Johnny Was during the Third Quarter of Fiscal 2022.business.
The preparation of our unaudited condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the amounts reported as assets, liabilities, revenues and expenses in the consolidated 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 20212022 Form 10-K. No recently issued guidance adopted in Fiscal 20222023 had a material impact on our consolidated financial statements upon adoption or is expected to have a material impact in future periods.
On September 19, 2022, we acquired These financial statements should be read in conjunction with the Johnny Was® lifestyle apparel brand and its related assets and operations, which is discussed in further detail in Note 7 of these unaudited condensed consolidated financial statements. Also, in Fiscal 2021, we exited our Lanier Apparel business, as discussed in Note 11 of our consolidated financial statements ofand notes thereto included in our Fiscal 20212022 Form 10-K. Johnny Was in Fiscal 2022 and Lanier Apparel in Fiscal 2021 are each disclosed as separate operating groups in Note 2 of these unaudited condensed consolidated financial statements.
Recently Issued Accounting Standards Applicable to Future Periods
Recent accounting pronouncements pending adoption are either not applicable or not expected to have a material impact on our consolidated financial statements.
Recent Macroeconomic Conditions
The COVID-19 pandemic has had a significant effect on overall economic conditions and our operations in recent years. In Fiscal 2021, the economic environment improved significantly with a rebound in retail traffic starting in March 2021 and other improvements as the year progressed, although certain stores were closed for portions of Fiscal 2021, particularly in the First Quarter of Fiscal 2021. This exceptionally strong consumer demand, along with the strength of our brands, resulted in record earnings for us during Fiscal 2021 and the First Nine Months of Fiscal 2022. The strong earnings in recent periods are despite certain challenges in the retail apparel market, including labor shortages, supply chain disruptions and product and operating cost increases in Fiscal 2021 and Fiscal 2022. We, as well as others in our industry, have increased prices to attempt to offset inflationary pressures.
There can be no assurance that the strong consumer demand of Fiscal 2021 and Fiscal 2022 will continue for our business or the broader retail apparel market. There remains significant uncertainty in the macroeconomic environment as to the impact of changing consumer discretionary spending habits, recent supply chain and other business disruptions, ongoing operating cost increases and other inflationary pressures, rising interest rates, the duration and severity of the pandemic and general economic conditions. Thus, the ultimate impact of these items on our business remains uncertain at this time.
9
2. Operating Group Information: We identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance. Our operating group structure reflects a brand-focused management approach, emphasizing operational coordination and resource allocation across each brand’s direct to consumer, wholesale and licensing operations, as applicable. With our acquisition of Johnny Was on September 19, 2022, our business is organized as our Tommy Bahama, Lilly Pulitzer, Johnny Was and Emerging Brands operating groups. Results for periods prior to Fiscal 2022 also include the Lanier Apparel operating group, which we exited in Fiscal 2021.
Tommy Bahama, Lilly Pulitzer and Johnny Was each design, source, market and distribute apparel and related products bearing their respective trademarks and may license their trademarks for other product categories. The Emerging Brands operating group, which was organized in Fiscal 2022, consists of the operations of our smaller, earlier stage Southern Tide, TBBC and Duck Head brands. In prior years, Southern Tide was reported as a separate operating group, while both TBBC and Duck Head were included in Corporate and Other. All prior year amounts have been restated to conform to the current year presentation.
Each of the smaller brands included in Emerging Brands designs, sources, markets and distributes apparel and related products bearing its respective trademarks and is supported by Oxford’s emerging brands team that provides certain support functions to the smaller brands, including marketing and advertising execution, customer relationship management and analysis and other functions. The shared resources provide for operating efficiencies and enhanced knowledge sharing across our smaller brands.
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 between operating groups, any other items that are not allocated to the operating groups, including LIFO inventory accounting adjustments, and the operations of our Lyons, Georgia distribution center and our Oxford America business, which we exited in Fiscal 2022.
109
The table below presents certain financial information (in thousands) about our operating groups, as well as Corporate and Other.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| Third Quarter | | First Nine Months | |
| Third Quarter | | First Nine Months | | ||||||||||||||||
|
| Fiscal 2022 |
| Fiscal 2021 |
| Fiscal 2022 |
| Fiscal 2021 | |
| Fiscal 2023 |
| Fiscal 2022 |
| Fiscal 2023 |
| Fiscal 2022 | | ||||||||
Net sales |
| | |
| |
|
| |
|
| |
|
|
| | |
| |
|
| |
|
| |
|
|
Tommy Bahama | | $ | 178,645 | | $ | 148,454 | | $ | 650,677 | | $ | 513,985 | | | $ | 170,144 | | $ | 178,645 | | $ | 655,022 | | $ | 650,677 | |
Lilly Pulitzer | |
| 84,053 | |
| 72,157 | |
| 264,763 | |
| 233,066 | | |
| 76,290 | |
| 84,053 | |
| 265,089 | |
| 264,763 | |
Johnny Was (1) | | | 22,661 | | | — | | | 22,661 | | | — | | | | 49,105 | | | 22,661 | | | 150,619 | | | 22,661 | |
Emerging Brands | |
| 26,912 | |
| 22,082 | |
| 88,588 | |
| 67,336 | | |
| 31,155 | |
| 26,912 | |
| 96,726 | |
| 88,588 | |
Lanier Apparel | |
| — | |
| 4,232 | |
| — | |
| 24,743 | | |||||||||||||
Corporate and Other | |
| 762 | |
| 804 | |
| 2,355 | |
| 3,033 | | |
| (64) | |
| 762 | |
| (410) | |
| 2,355 | |
Consolidated net sales | | $ | 313,033 | | $ | 247,729 | | $ | 1,029,044 | | $ | 842,163 | | | $ | 326,630 | | $ | 313,033 | | $ | 1,167,046 | | $ | 1,029,044 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | |
|
| |
|
| |
|
| |
|
| | |
|
| |
|
| |
|
| |
|
| |
Tommy Bahama | | $ | 6,576 | | $ | 6,895 | | $ | 20,110 | | $ | 20,801 | | | $ | 6,299 | | $ | 6,576 | | $ | 18,356 | | $ | 20,110 | |
Lilly Pulitzer | |
| 3,288 | |
| 2,445 | |
| 9,384 | |
| 6,833 | | |
| 4,372 | |
| 3,288 | |
| 11,743 | |
| 9,384 | |
Johnny Was (1) | | | 2,184 | | | — | | | 2,184 | | | — | | | | 4,684 | | | 2,184 | | | 14,593 | | | 2,184 | |
Emerging Brands | |
| 391 | |
| 324 | |
| 1,143 | |
| 955 | | |
| 504 | |
| 391 | |
| 1,389 | |
| 1,143 | |
Lanier Apparel | |
| — | |
| 27 | |
| — | |
| 88 | | |||||||||||||
Corporate and Other | |
| 197 | |
| 186 | |
| 627 | |
| 575 | | |
| 161 | |
| 197 | |
| 398 | |
| 627 | |
Consolidated depreciation and amortization | | $ | 12,636 | | $ | 9,877 | | $ | 33,448 | | $ | 29,252 | | | $ | 16,020 | | $ | 12,636 | | $ | 46,479 | | $ | 33,448 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating income (loss) | |
|
| |
|
| |
|
| |
|
| | |
|
| |
|
| |
|
| |
|
| |
Tommy Bahama | | $ | 18,984 | | $ | 5,531 | | $ | 130,508 | | $ | 73,515 | | | $ | 12,097 | | $ | 18,984 | | $ | 118,655 | | $ | 130,508 | |
Lilly Pulitzer | | | 12,688 | |
| 15,985 | |
| 60,358 | |
| 61,713 | | | | 6,769 | |
| 12,688 | |
| 49,851 | |
| 60,358 | |
Johnny Was (1) | | | 117 | | | — | | | 117 | | | — | | | | 935 | | | 117 | | | 7,266 | | | 117 | |
Emerging Brands | |
| 3,729 | |
| 4,103 | |
| 15,456 | |
| 13,565 | | |
| 3,709 | |
| 3,729 | |
| 10,650 | |
| 15,456 | |
Lanier Apparel | |
| — | |
| 348 | |
| — | |
| 2,053 | | |||||||||||||
Corporate and Other | |
| (8,203) | |
| 4,640 | |
| (27,775) | |
| (17,350) | | |
| (9,050) | |
| (8,203) | |
| (23,987) | |
| (27,775) | |
Consolidated operating income | |
| 27,315 | |
| 30,607 | | $ | 178,664 | | $ | 133,496 | | |
| 14,460 | |
| 27,315 | | $ | 162,435 | | $ | 178,664 | |
Interest expense, net | |
| 698 | |
| 222 | |
| 1,214 | |
| 685 | | |
| 1,217 | |
| 698 | |
| 4,856 | |
| 1,214 | |
Earnings before income taxes | | $ | 26,617 | | $ | 30,385 | | $ | 177,450 | | $ | 132,811 | | | $ | 13,243 | | $ | 26,617 | | $ | 157,579 | | $ | 177,450 | |
| | | | | | | | | | | | | | | | | | |
|
| October 29, 2022 |
| January 29, 2022 |
| October 30, 2021 |
| October 28, 2023 |
| January 28, 2023 |
| October 29, 2022 | ||||||
Assets |
| |
| | |
|
| |
|
| |
| | |
|
| |
|
Tommy Bahama (2) | | $ | 544,947 | | $ | 531,678 | | $ | 531,534 | | $ | 563,564 | | $ | 569,833 | | $ | 544,947 |
Lilly Pulitzer (3) | |
| 192,609 | |
| 176,757 | |
| 173,104 | |
| 192,566 | |
| 211,119 | |
| 192,609 |
Johnny Was (4) | | | 350,212 | | | — | | | — | | | 331,131 | | | 334,603 | | | 350,212 |
Emerging Brands (5) | |
| 83,280 | |
| 66,825 | |
| 54,532 | |
| 86,790 | |
| 91,306 | |
| 83,280 |
Lanier Apparel (6) | |
| — | |
| 207 | |
| 3,261 | |||||||||
Corporate and Other (7) | |
| (30,731) | |
| 182,175 | |
| 170,372 | |||||||||
Corporate and Other (6) | |
| (11,895) | |
| (18,196) | |
| (30,731) | |||||||||
Consolidated Total Assets | | $ | 1,140,317 | | $ | 957,642 | | $ | 932,803 | | $ | 1,162,156 | | $ | 1,188,665 | | $ | 1,140,317 |
(1) |
(2) | Increase in Tommy Bahama total assets from October |
(3) |
(4) |
(5) | Increase in Emerging Brands total assets from October |
(6) |
1110
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 quarter or nine month period presented, except that the amounts included for Johnny Was represent the post-acquisition period only.presented. We have calculated all percentages below based on actual data, and percentages may not add to 100 due to rounding.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Third Quarter Fiscal 2022 |
| | Third Quarter Fiscal 2023 |
| ||||||||||||||||||||||
|
| Net Sales |
| Retail |
| E-commerce |
| Restaurant |
| Wholesale |
| Other |
|
| Net Sales |
| Retail |
| E-commerce |
| Food & Beverage |
| Wholesale |
| Other |
| ||
Tommy Bahama | | $ | 178,645 |
| 44 | % | 20 | % | 13 | % | 23 | % | — | % | | $ | 170,144 |
| 45 | % | 21 | % | 13 | % | 21 | % | — | % |
Lilly Pulitzer | |
| 84,053 |
| 27 | % | 62 | % | — | % | 11 | % | — | % | |
| 76,290 |
| 31 | % | 58 | % | — | % | 11 | % | — | % |
Johnny Was | | | 22,661 | | 38 | % | 41 | % | — | % | 21 | % | — | % | | | 49,105 | | 39 | % | 41 | % | — | % | 20 | % | — | % |
Emerging Brands | |
| 26,912 |
| 5 | % | 40 | % | — | % | 55 | % | — | % | |
| 31,155 |
| 12 | % | 41 | % | — | % | 47 | % | — | % |
Lanier Apparel | |
| — |
| — | % | — | % | — | % | — | % | — | % | ||||||||||||||
Corporate and Other | |
| 762 |
| — | % | — | % | — | % | 47 | % | 53 | % | |
| (64) |
| — | % | — | % | — | % | — | % | NM | % |
Total | | $ | 313,033 |
| 36 | % | 34 | % | 7 | % | 22 | % | — | % | | $ | 326,630 |
| 37 | % | 35 | % | 7 | % | 21 | % | — | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Third Quarter Fiscal 2021 |
| | Third Quarter Fiscal 2022 |
| ||||||||||||||||||||||
|
| Net Sales |
| Retail |
| E-commerce |
| Restaurant |
| Wholesale |
| Other |
|
| Net Sales |
| Retail |
| E-commerce |
| Food & Beverage |
| Wholesale |
| Other |
| ||
Tommy Bahama | | $ | 148,454 |
| 47 | % | 22 | % | 13 | % | 18 | % | — | % | | $ | 178,645 |
| 44 | % | 20 | % | 13 | % | 23 | % | — | % |
Lilly Pulitzer | |
| 72,157 |
| 31 | % | 58 | % | — | % | 11 | % | — | % | |
| 84,053 |
| 27 | % | 62 | % | — | % | 11 | % | — | % |
Johnny Was | | | — | | — | % | — | % | — | | — | % | — | % | | | 22,661 | | 38 | % | 41 | % | — | | 21 | % | — | % |
Emerging Brands | |
| 22,082 |
| 4 | % | 34 | % | — | % | 62 | % | — | % | |
| 26,912 |
| 5 | % | 40 | % | — | % | 55 | % | — | % |
Lanier Apparel | |
| 4,232 |
| — | % | — | % | — | % | 100 | % | — | % | ||||||||||||||
Corporate and Other | |
| 804 |
| — | % | — | % | — | % | 67 | % | 33 | % | |
| 762 |
| — | % | — | % | — | % | — | % | NM | % |
Total | | $ | 247,729 |
| 37 | % | 33 | % | 8 | % | 21 | % | — | % | | $ | 313,033 |
| 36 | % | 34 | % | 7 | % | 22 | % | — | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | First Nine Months 2022 |
| | First Nine Months 2023 |
| ||||||||||||||||||||||
|
| Net Sales |
| Retail |
| E‑commerce |
| Restaurant |
| Wholesale |
| Other |
|
| Net Sales |
| Retail |
| E‑commerce |
| Food & Beverage |
| Wholesale |
| Other |
| ||
Tommy Bahama | | $ | 650,677 |
| 46 | % | 23 | % | 12 | % | 19 | % | — | % | | $ | 655,022 |
| 45 | % | 23 | % | 13 | % | 19 | % | — | % |
Lilly Pulitzer | |
| 264,763 |
| 34 | % | 49 | % | — | % | 17 | % | — | % | |
| 265,089 |
| 34 | % | 51 | % | — | % | 15 | % | — | % |
Johnny Was | | | 22,661 | | 38 | % | 41 | % | — | % | 21 | % | — | % | | | 150,619 | | 38 | % | 40 | % | — | % | 22 | % | — | % |
Emerging Brands | |
| 88,588 |
| 5 | % | 39 | % | — | % | 56 | % | — | % | |
| 96,726 |
| 10 | % | 42 | % | — | % | 48 | % | — | % |
Lanier Apparel | |
| — |
| — | % | — | % | — | % | — | % | — | % | ||||||||||||||
Corporate and Other | |
| 2,355 |
| — | % | — | % | — | % | 50 | % | 50 | % | |
| (410) |
| — | % | — | % | — | % | — | % | NM | % |
Consolidated net sales | | $ | 1,029,044 |
| 39 | % | 31 | % | 8 | % | 21 | % | — | % | | $ | 1,167,046 |
| 38 | % | 34 | % | 7 | % | 21 | % | — | % |
| | | | | | | | | | | | | | |
|
| First Nine Months 2021 |
| |||||||||||
|
| Net Sales |
| Retail |
| E‑commerce |
| Restaurant |
| Wholesale |
| Other |
| |
Tommy Bahama | | $ | 513,985 |
| 46 | % | 24 | % | 14 | % | 16 | % | — | % |
Lilly Pulitzer | |
| 233,066 |
| 35 | % | 48 | % | — | % | 17 | % | — | % |
Johnny Was | | | — | | — | % | — | % | — | % | — | % | — | % |
Emerging Brands | |
| 67,336 |
| 4 | % | 37 | % | — | % | 59 | % | — | % |
Lanier Apparel | |
| 24,743 |
| — | % | — | % | — | % | 100 | % | — | % |
Corporate and Other | |
| 3,033 |
| — | % | — | % | — | % | 65 | % | 35 | % |
Consolidated net sales | | $ | 842,163 |
| 38 | % | 31 | % | 8 | % | 22 | % | — | % |
| | | | | | | | | | | | | | |
|
| 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) |
12
3. Revenue Recognition and Receivables: Our revenue consists of direct to consumer sales, including our retail store, e-commerce and restaurantfood 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 20212022 Form 10-K.
11
The table below quantifies net sales by distribution channel (in thousands) for each period presented.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| Third Quarter |
| First Nine Months |
|
| Third Quarter |
| First Nine Months |
| ||||||||||||||||
| | Fiscal 2022 |
| Fiscal 2021 |
| Fiscal 2022 |
| Fiscal 2021 | | | Fiscal 2023 |
| Fiscal 2022 |
| Fiscal 2023 |
| Fiscal 2022 | | ||||||||
Retail | | $ | 112,344 | | $ | 92,579 | | $ | 402,400 | | $ | 319,493 | | | $ | 121,804 | | $ | 112,344 | | $ | 449,546 | | $ | 402,400 | |
E-commerce | |
| 107,756 | |
| 82,402 | |
| 323,045 | |
| 261,393 | | |
| 113,531 | |
| 107,756 | |
| 391,559 | |
| 323,045 | |
Restaurant | |
| 23,157 | |
| 19,748 | |
| 81,333 | |
| 70,784 | | |||||||||||||
Food & Beverage | |
| 22,562 | |
| 23,157 | |
| 84,097 | |
| 81,333 | | |||||||||||||
Wholesale | |
| 69,292 | |
| 52,658 | |
| 220,707 | |
| 189,133 | | |
| 68,716 | |
| 69,292 | |
| 241,857 | |
| 220,707 | |
Other | |
| 484 | |
| 342 | |
| 1,559 | |
| 1,360 | | |
| 17 | |
| 484 | |
| (13) | |
| 1,559 | |
Net sales | | $ | 313,033 | | $ | 247,729 | | $ | 1,029,044 | | $ | 842,163 | | | $ | 326,630 | | $ | 313,033 | | $ | 1,167,046 | | $ | 1,029,044 | |
An estimated sales return liability of $9$8 million, $11$12 million and $7$9 million for expected direct to consumer returns is classified in accrued expenses and other liabilities in our consolidated balance sheet as of October 29, 2022,28, 2023, January 29, 202228, 2023, and October 30, 2021,29, 2022, respectively. As of October 29, 2022,28, 2023, January 29, 202228, 2023, and October 30, 2021,29, 2022, prepaid expenses and other current assets included $4$3 million, $4 million and $3$4 million, respectively, representingrelating 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 29, 2022,28, 2023, January 29, 202228, 2023, and October 30, 2021,29, 2022, reserve balances recorded as a reduction to receivables related to these items were $5$3 million, $3$4 million and $5 million, respectively. As of October 29, 2022,28, 2023, January 29, 202228, 2023, and October 30, 2021,29, 2022, our provision for credit losses related to receivables included in our consolidated balance sheets was $1 million, $1 million and $2$1 million, respectively. In both the First Nine Months of Fiscal 2022 and the First Nine Months of Fiscal 2021, provisions for credit losses expense included in our consolidated statement of operations and the write-offs of credit losses were less than $1 million.
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 $17$18 million, $16$19 million and $14$17 million as of October 28, 2023, January 28, 2023, and October 29, 2022, January 29, 2022, and October 30, 2021, respectively.
4. Leases: InFor the ordinary courseThird Quarter of business, we enter into real estateFiscal 2023, operating lease agreements for our directexpense was $18 million and variable lease expense was $10 million, resulting in total lease expense of $28 million compared to consumer locations, which include retail and food and beverage locations, and office and warehouse/distribution space, as well as leases for certain equipment. Our real estate leases have varying terms and expirations and may have provisions to extend, renew or terminate$25 million of total lease expense in the lease agreement at our discretion, among other provisions. Our real estate lease terms are typically for a periodThird Quarter of ten years or less and typically require monthly rent payments with specified rent escalations during the lease term. Our real estate leases usually provide for payments of our pro rata share of real estate taxes, insurance and other operating expenses applicable to the property, and certain of our leases require payment of sales taxes on rental payments. Also, our direct to consumer location leases often provide for contingent rent payments based on sales if certain sales thresholds are achieved.
Fiscal 2022. For the First Nine Months of Fiscal 20222023, operating lease expense which includes amounts used in determining the operating lease liability and operating lease asset, was $43$53 million and variable lease expense was $31$32 million, resulting in total lease expense of $75$85 million compared to $70$75 million of total lease expense in the First Nine Months of Fiscal 2021. 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.
1312
First Nine Months of Fiscal 2022 was $53 million, while cash paid for lease amounts included in the measurement of operating lease liabilities in the First Nine Months of Fiscal 2021 was $53 million.
As of October 29, 2022,28, 2023, the stated lease liability payments for the fiscal years specified below were as follows (in thousands):
| | | | | | |
|
| Operating lease |
| Operating lease | ||
Remainder of 2022 | | $ | 15,300 | |||
2023 | | | 79,865 | |||
Remainder of 2023 | | $ | 19,761 | |||
2024 | | | 63,653 | | | 73,791 |
2025 | |
| 47,707 | | | 58,704 |
2026 | |
| 40,493 | |
| 52,989 |
2027 | | | 27,146 | |
| 39,332 |
After 2027 | |
| 52,525 | |||
2028 | | | 33,277 | |||
After 2028 | |
| 63,417 | |||
Total lease payments | | $ | 326,689 | | $ | 341,271 |
Less: Difference between discounted and undiscounted lease payments | |
| 38,419 | |
| 49,809 |
Present value of lease liabilities | | $ | 288,270 | | $ | 291,462 |
5. Income Taxes: Our effective income tax rate forFor the Third Quarter of Fiscal 2022 was 26.1% while2023, our effective income tax rate for the Third Quarter of Fiscal 2021 was 14.5%. Our effective income tax rate for the First Nine Months of Fiscal 2022 was 24.7% while our effective income tax rate for the First Nine Months of Fiscal 2021 was 20.3%. The effective tax rate for both the First Nine Months of Fiscal 2022 and the First Nine Months of Fiscal 2021 benefitted from certain favorable items that resulted in a18.6%, which is lower tax rate than a more typical annual effective tax rate of approximately 25% primarily due to 26%.
Thethe 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 expenserate 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 boththe 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, and theour effective income tax rate was 24.7%. The First Nine Months of Fiscal 20212022 included the benefit of 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 recognitionU.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 certain tax credit amounts and the vesting of restricted stock awards atIRA will have a price higher than the grant date fair value. These favorable items were partially offset by certain unfavorable permanent items which are not deductible for income tax purposes. Additionally, and more significantly, the income tax expense inmaterial effect on our reported results, cash flows or financial position. For the First Nine Months of Fiscal 20212023, excise taxes included as part of the benefitprice of common stock repurchased during the period did not have a $2 million net reduction in uncertain tax positions resulting from the settlement of those uncertain tax position amounts in the First Quarter of Fiscal 2021 and the utilization of benefits associated with certain capital lossesmaterial effect on our reported results.
6. Shareholders’ Equity: From time to substantially offset the gain recognized on the sale of an unconsolidated entity intime, we repurchase our common stock mainly through open market repurchase plans. During the Third Quarter of Fiscal 2021.2023 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.
6. Shareholders’ Equity: InWe 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 976,000 shares of our common stock for $87$10 million under our $100 million open market stock repurchase program after repurchasing 91,000 shares for $8 million in the Fourth Quarter of Fiscal 2021. These repurchases resulted in $5 million remaining under the existing open market repurchase program and $55 million remaining under our existing Board of Directors’ authorization as of October 29, 2022. Additionally, subsequent to October 29, 2022, we repurchased an additional 47,000 shares of our common stock for $5 million under the open market repurchase program resulting in no amounts remaining under the open market repurchase program as of December 8, 2022.
During both the First Quarter of Fiscal 2022 and the First Quarter of Fiscal 2021, we repurchased $3 million of shares, respectively, from our employees to cover employee tax liabilities related to the vesting of shares of our common stock.
1413
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 2021 | | Fiscal 2022 | ||||||||||||||||||||||||||
|
| Common Stock |
| APIC |
| Retained Earnings |
| AOCI |
| Total |
| Common Stock |
| APIC |
| Retained Earnings |
| AOCI |
| Total | ||||||||||
January 30, 2021 |
| $ | 16,889 |
| $ | 156,508 |
| $ | 235,995 |
| $ | (3,664) |
| $ | 405,728 | |||||||||||||||
January 29, 2022 |
| $ | 16,805 | | $ | 163,156 | | $ | 331,175 | | $ | (3,472) | | $ | 507,664 | |||||||||||||||
Comprehensive income | |
| — | |
| — | |
| 28,468 | |
| 391 | |
| 28,859 | |
| — | |
| — | |
| 57,408 | |
| 477 | |
| 57,885 |
Shares issued under equity plans | |
| 39 | |
| 283 | |
| — | |
| — | |
| 322 | |
| 5 | |
| 387 | |
| — | |
| — | |
| 392 |
Compensation expense for equity awards | |
| — | |
| 2,227 | |
| — | |
| — | |
| 2,227 | |
| — | |
| 2,725 | |
| — | |
| — | |
| 2,725 |
Repurchase of shares | |
| (34) | |
| (2,949) | |
| — | |
| — | |
| (2,983) | |
| (526) | |
| (3,131) | |
| (42,375) | |
| — | |
| (46,032) |
Dividends declared | |
| — | |
| — | |
| (6,252) | |
| — | |
| (6,252) | |
| — | |
| — | |
| (9,214) | |
| — | |
| (9,214) |
May 1, 2021 | | $ | 16,894 | | $ | 156,069 | | $ | 258,211 | | $ | (3,273) | | $ | 427,901 | |||||||||||||||
April 30, 2022 | | $ | 16,284 | | $ | 163,137 | | $ | 336,994 | | $ | (2,995) | | $ | 513,420 | |||||||||||||||
Comprehensive income | |
| — | |
| — | |
| 51,460 | | | (462) | |
| 50,998 | |
| — | |
| — | |
| 56,612 | | | (125) | |
| 56,487 |
Shares issued under equity plans | |
| 1 | |
| 341 | |
| — | |
| — | |
| 342 | |
| 15 | |
| 475 | |
| — | |
| — | |
| 490 |
Compensation expense for equity awards | |
| — | |
| 1,673 | |
| — | |
| — | |
| 1,673 | |
| — | |
| 2,527 | |
| — | |
| — | |
| 2,527 |
Repurchase of shares | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (339) | |
| — | |
| (29,475) | |
| — | |
| (29,814) |
Dividends declared | |
| — | |
| — | |
| (7,215) | |
| — | |
| (7,215) | |
| — | |
| — | |
| (9,094) | |
| — | |
| (9,094) |
July 31, 2021 | | $ | 16,895 | | $ | 158,083 | | $ | 302,456 | | $ | (3,735) | | $ | 473,699 | |||||||||||||||
July 30, 2022 | | $ | 15,960 | | $ | 166,139 | | $ | 355,037 | | $ | (3,120) | | $ | 534,016 | |||||||||||||||
Comprehensive income | |
| — | |
| — | |
| 25,985 | |
| 654 | |
| 26,639 | |
| — | |
| — | |
| 19,666 | | | (450) | |
| 19,216 |
Shares issued under equity plans | |
| (4) | |
| 386 | |
| — | |
| — | |
| 382 | |
| 1 | |
| 379 | |
| — | |
| — | |
| 380 |
Compensation expense for equity awards | |
| — | |
| 1,952 | |
| — | |
| — | |
| 1,952 | |
| — | |
| 2,545 | |
| — | |
| — | |
| 2,545 |
Repurchase of shares | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (146) | |
| — | |
| (13,977) | |
| — | |
| (14,123) |
Dividends declared | |
| — | |
| — | |
| (7,203) | |
| — | |
| (7,203) | |
| — | |
| — | |
| (8,995) | |
| — | |
| (8,995) |
October 30, 2021 | | $ | 16,891 | | $ | 160,421 | | $ | 321,238 | | $ | (3,081) | | $ | 495,469 | |||||||||||||||
October 29, 2022 | | $ | 15,815 | | $ | 169,063 | | $ | 351,731 | | $ | (3,570) | | $ | 533,039 | |||||||||||||||
Comprehensive income | |
| — | |
| — | |
| 25,408 | |
| (391) | |
| 25,017 | |
| — | |
| — | |
| 32,049 | |
| 1,746 | |
| 33,795 |
Shares issued under equity plans | |
| 5 | |
| 401 | |
| — | |
| — | |
| 406 | |
| 5 | |
| 332 | |
| — | |
| — | |
| 337 |
Compensation expense for equity awards | |
| — | |
| 2,334 | |
| — | |
| — | |
| 2,334 | |
| — | |
| 2,780 | |
| — | |
| — | |
| 2,780 |
Repurchase of shares | |
| (91) | |
| — | |
| (8,268) | |
| — | |
| (8,359) | |
| (46) | |
| — | |
| (4,824) | |
| — | |
| (4,870) |
Dividends declared | |
| — | |
| — | |
| (7,203) | |
| — | |
| (7,203) | |
| — | |
| — | |
| (8,811) | |
| — | |
| (8,811) |
January 29, 2022 | | $ | 16,805 | | $ | 163,156 | | $ | 331,175 | | $ | (3,472) | | $ | 507,664 | |||||||||||||||
January 28, 2023 | | $ | 15,774 | | $ | 172,175 | | $ | 370,145 | | $ | (1,824) | | $ | 556,270 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | First Nine Months Fiscal 2022 | | First Nine Months Fiscal 2023 | ||||||||||||||||||||||||||
|
| Common Stock |
| APIC |
| Retained Earnings |
| AOCI |
| Total |
| Common Stock |
| APIC |
| Retained Earnings |
| AOCI |
| Total | ||||||||||
January 29, 2022 |
| $ | 16,805 | | $ | 163,156 | | $ | 331,175 | | $ | (3,472) | | $ | 507,664 | |||||||||||||||
January 28, 2023 |
| $ | 15,774 | | $ | 172,175 | | $ | 370,145 | | $ | (1,824) | | $ | 556,270 | |||||||||||||||
Comprehensive income | |
| — | |
| — | |
| 57,408 | |
| 477 | |
| 57,885 | |
| — | |
| — | |
| 58,538 | |
| (604) | |
| 57,934 |
Shares issued under equity plans | |
| 5 | |
| 387 | |
| — | |
| — | |
| 392 | |
| 6 | |
| 596 | |
| — | |
| — | |
| 602 |
Compensation expense for equity awards | |
| — | |
| 2,725 | |
| — | |
| — | |
| 2,725 | |
| — | |
| 3,259 | |
| — | |
| — | |
| 3,259 |
Repurchase of shares | |
| (526) | |
| (3,131) | |
| (42,375) | |
| — | |
| (46,032) | |
| — | |
| — | |
| — | |
| — | |
| — |
Dividends declared | |
| — | |
| — | |
| (9,214) | |
| — | |
| (9,214) | |
| — | |
| — | |
| (10,640) | |
| — | |
| (10,640) |
April 30, 2022 | | $ | 16,284 | | $ | 163,137 | | $ | 336,994 | | $ | (2,995) | | $ | 513,420 | |||||||||||||||
April 29, 2023 | | $ | 15,780 | | $ | 176,030 | | $ | 418,043 | | $ | (2,428) | | $ | 607,425 | |||||||||||||||
Comprehensive income | |
| — | |
| — | |
| 56,612 | | | (125) | |
| 56,487 | |
| — | |
| — | |
| 51,453 | | | 319 | |
| 51,772 |
Shares issued under equity plans | |
| 15 | |
| 475 | |
| — | |
| — | |
| 490 | |
| 130 | |
| 358 | |
| — | |
| — | |
| 488 |
Compensation expense for equity awards | |
| — | |
| 2,527 | |
| — | |
| — | |
| 2,527 | |
| — | |
| 4,249 | |
| — | |
| — | |
| 4,249 |
Repurchase of shares | |
| (339) | |
| — | |
| (29,475) | |
| — | |
| (29,814) | |
| (280) | |
| (9,848) | |
| (18,800) | |
| — | |
| (28,928) |
Dividends declared | |
| — | |
| — | |
| (9,094) | |
| — | |
| (9,094) | |
| — | |
| — | |
| (10,377) | |
| — | |
| (10,377) |
July 30, 2022 | | $ | 15,960 | | $ | 166,139 | | $ | 355,037 | | $ | (3,120) | | $ | 534,016 | |||||||||||||||
July 29, 2023 | | $ | 15,630 | | $ | 170,789 | | $ | 440,319 | | $ | (2,109) | | $ | 624,629 | |||||||||||||||
Comprehensive income | |
| — | |
| — | |
| 19,666 | | | (450) | |
| 19,216 | |
| — | |
| — | |
| 10,782 | | | (888) | |
| 9,894 |
Shares issued under equity plans | |
| 1 | |
| 379 | |
| — | |
| — | |
| 380 | |
| 5 | |
| 415 | |
| — | |
| — | |
| 420 |
Compensation expense for equity awards | |
| | |
| 2,545 | |
| — | |
| — | |
| 2,545 | |
| — | |
| 3,526 | |
| — | |
| — | |
| 3,526 |
Repurchase of shares | |
| (146) | |
| — | |
| (13,977) | |
| — | |
| (14,123) | |
| (10) | |
| — | |
| (1,056) | |
| — | |
| (1,066) |
Dividends declared | |
| — | |
| — | |
| (8,995) | |
| — | |
| (8,995) | |
| — | |
| — | |
| (10,290) | |
| — | |
| (10,290) |
October 29, 2022 | | $ | 15,815 | | $ | 169,063 | | $ | 351,731 | | $ | (3,570) | | $ | 533,039 | |||||||||||||||
October 28, 2023 | | $ | 15,625 | | $ | 174,730 | | $ | 439,755 | | $ | (2,997) | | $ | 627,113 |
1514
During the First Quarter of Fiscal 2022,Long-Term Stock Incentive Plan and Equity Compensation Expense
In recent years, we have granted 0.1 milliona combination of service-based restricted share units, subject to the recipient remaining an employee through the May 2025 vesting date. Additionally, during the First Quarter of Fiscal 2022, we granted 0.1 millionawards and awards based on relative total shareholder return-based (“TSR-based”return ("TSR") restricted share units at target subject to (1) our achievement of a specified TSR-based ranking by Oxford relative to a comparator group during a period of approximately three years from the date of grant and (2) the recipient remaining an employee through the May 2025 vesting date. certain select employees.
Service-Based Restricted Share Awards
The number of shares ultimately earned for the TSR-based restricted share units will be between 0% and 200% of the restricted share units at target. Neither the service-based or TSR-based restricted share units are included in the table above as the awards are not outstanding shares.
Both the service-based and TSR-based restricted share units are entitled to dividend equivalents for dividends declared on our common stock during the vesting period, with the dividend equivalents forbelow summarizes the service-based restricted share units payable at the time of the payment of the respective dividendawards, including both restricted shares and the dividend equivalents for the TSR-based restricted share units, payable after vesting of the restricted shares solely attributable to the number of shares actually earned. Neither the service-based or TSR-based restricted share units have any voting rights during the vesting period. Both the service-based and TSR-based restricted share units granted during the First Quarter of Fiscal 2022 include certain clauses related to accelerated vesting upon the occurrence of qualifying retirement, death or disability of the employee prior to the vesting date. Our stock incentive plans are described in Note 8 to our consolidated financial statements included in our Fiscal 2021 Form 10-K.
7. Business Combinations: On September 19, 2022, we acquired 100% of the ownership interests in JW Holdings, LLC and its subsidiaries (collectively “Johnny Was”). Johnny Was owns the Johnny Was California lifestyle brand and its related operations including the design, sourcing, marketing and distribution of collections of affordable luxury, artisan-inspired bohemian apparel, accessories and home goods. Johnny Was products are sold through the Johnny Was website and retail stores as well as select department stores and specialty stores. Information about the operating results of Johnny Was from the acquisition date through the end of the fiscal quarter are included in the operating group information included in Note 2.
The purchase priceactivity for the acquisition of Johnny Was totaled $270 million in cash, subject to adjustment based on net working capital as of the closing date of the acquisition. After giving effect to the preliminary estimated working capital adjustment, which we expect to finalize near the end of the fiscal year, the purchase price paid at closing was $271 million, including acquired cash of $7 million. We used cash and short-term investments on hand and borrowings under our Fourth Amended and Restated Credit Agreement (as amended, the “U.S. Revolving Credit Agreement”) to fund the transaction. There are no contingent consideration arrangements associated with this transaction. Transaction and integration costs related to this acquisition, which primarily consist of representation and warranty insurance, integration costs, due diligence costs, legal fees and other costs, total approximately $3 million as of October 29, 2022 and are included in SG&A in our consolidated statements of operations in the First Nine Months of Fiscal 2022. These costs are included in Corporate and Other in Note 2. We may incur additional integration costs in future periods.2023:
Our allocation of
| | | | | | |
|
| 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 purchase price to the estimated fair values of the acquired assets and liabilities, including intangible assets, customer relationships, operating lease amounts, property and equipment, working capital amounts and other amounts, is preliminary. The allocation of purchase price will be revised during the one year allocation period, as appropriate, as we obtain new information about the fair values of these assets and liabilities as of the acquisition date and finalize our valuation estimates. Changes in future periods to the amounts allocated to the various assets and liabilities could be material. The following table summarizes our preliminary allocation of the purchase priceTSR-based restricted share unit activity at target for the Johnny Was acquisition (in thousands):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 | |
1615
| | | |
|
| Johnny Was acquisition | |
Cash and cash equivalents | | $ | 7,288 |
Receivables | |
| 10,258 |
Inventories (1) | |
| 23,283 |
Prepaid expenses | |
| 4,417 |
Property and equipment | |
| 21,212 |
Intangible assets | |
| 134,640 |
Goodwill | |
| 92,457 |
Operating lease assets | | | 54,485 |
Other non-current assets | |
| 656 |
Accounts payable, accrued expenses and other liabilities | |
| (30,743) |
Non-current portion of operating lease liabilities | | | (47,009) |
Purchase price | | $ | 270,944 |
Goodwill, which is expected be deductible for federal income tax purposes, represents the amount by which the cost to acquire Johnny Was exceeds the fair value of individual acquired assets less liabilities of the business at acquisition. purposes.
Intangible assets allocated in connection with our preliminary 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 consolidatedfollowing unaudited pro forma information presented below (in thousands, except per share data) gives effect toshows the September 19,results of our operations for the Third Quarter of Fiscal 2022 and First Nine Months of 2022 as if the acquisition of Johnny Was as if the acquisition had occurred as ofat 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 the beginning of Fiscal 2021that date and is not intended to be a projection of future results of operations. The consolidatedfollowing unaudited pro forma information has been prepared from thehistorical financial statements for Johnny Was and our historical statements of operationsus 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 |
| First Nine Months |
| Third Quarter Fiscal 2022 |
| First Nine Months of Fiscal 2022 | ||||||||||||||||
| | Fiscal 2022 | | Fiscal 2021 | | Fiscal 2022 | | Fiscal 2021 | | Actual | | Pro Forma | | Actual | | Pro Forma | ||||||||
Net sales |
| $ | 344,058 |
| $ | 294,416 |
| $ | 1,163,889 |
| $ | 976,718 |
| $ | 313,033 |
| $ | 344,058 |
| $ | 1,029,044 |
| $ | 1,163,889 |
Earnings before income taxes | | $ | 36,085 | | $ | 33,424 | | $ | 198,341 | | $ | 135,889 | | $ | 26,617 | | $ | 34,444 | | $ | 177,450 | | $ | 196,700 |
Net earnings | | $ | 26,767 | | $ | 28,264 | | $ | 149,354 | | $ | 108,221 | | $ | 19,666 | | $ | 25,536 | | $ | 133,686 | | $ | 148,124 |
Earnings per share: | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 1.70 | | $ | 1.70 | | $ | 9.34 | | $ | 6.51 | | $ | 1.25 | | $ | 1.62 | | $ | 8.36 | | $ | 9.26 |
Diluted | | $ | 1.66 | | $ | 1.68 | | $ | 9.14 | | $ | 6.43 | | $ | 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 Third QuarterRevolving 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 20222023 and as of October 28, 2023, no financial covenant testing was required pursuant to our Revolving Credit Agreement, or the First Nine Months of Fiscal 2022,Prior Credit Agreement, as wellapplicable, as the Third Quarterminimum availability threshold was met at all times. As of Fiscal 2021, pro forma information above includes amortization of acquired intangible assets, but excludesOctober 28, 2023, we were compliant with all applicable covenants related to the transaction expenses associated with the transaction and the incremental cost of goods sold associated with the step-up of inventory at acquisition that will be recognized by us in our Fiscal 2022 consolidated statement of operations. TheRevolving Credit Agreement.
17
First Nine Months of Fiscal 2021 pro forma information above includes amortization of acquired intangible assets, transaction expenses and integration costs associated with the transaction and incremental cost of goods sold associated with the step-up of inventory at acquisition. Additionally, the pro forma adjustments for each period prior to the date of acquisition reflect an estimate of incremental interest expense associated with additional borrowings and income tax expense that would have been incurred subsequent to the acquisition.
We believe that the acquisition of Johnny Was further advances our strategic goal of owning a diversified portfolio of lifestyle brands. The acquisition provides strategic benefits through growth opportunities and further diversification of our business.
8. Debt: As of October 29, 2022, January 29, 2022 and October 30, 2021, we had $130 million, $0 million and $0 million outstanding under our U.S. Revolving Credit Agreement, with the increase in borrowings primarily due to the acquisition of Johnny Was as discussed above. As of October 29, 2022, January 29, 2022 and October 30, 2021, we had $160 million, $322 million and $322 million in unused availability under the U.S. Revolving Credit Agreement, subject to certain limitations on borrowings. The details of our U.S. Revolving Credit Agreement, which matures in July 2024, are described in Note 5 to our consolidated financial statements included in our Fiscal 2021 Form 10-K.
9. Subsequent Event: On November 14, 2022, we invested $8 million for a minority ownership interest in the Miramonte Resort & Spa in Indian Wells, California. The property will be converted into the Tommy Bahama Miramonte Resort & Spa, with an anticipated completion date in late 2023. A national commercial and hospitality real estate company and its subsidiaries are the property manager and development project manager. Additionally, we entered into a licensing agreement pursuant to which we will earn certain royalty payments based on the revenues of the Tommy Bahama Miramonte Resort & Spa.
18
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 thereto 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 Fiscal 20212022 Form 10-K.
OVERVIEW
Business Overview
We are a leading branded apparel company that designs, sources, markets and distributes products bearing the trademarks of our Tommy Bahama, Lilly Pulitzer, Johnny Was, Southern Tide, TBBC and Duck Head lifestyle brands.
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 that create an emotional connection can command greater loyalty and higher price points and create licensing 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 them. We believe the principal competitive factors in the apparel industry are the reputation, value, and image of brand names; the design of differentiated, innovative or otherwise compelling product; consumer preference; price; quality; marketing (including through rapidly shifting digital and social media vehicles); product fulfillment capabilities; and customer service. Our ability to compete successfully in the apparel industry is directly related todependent on our proficiency in foreseeing changes and trends in fashion and consumer preference and presenting appealing products for consumers. Our design-led, commercially informed lifestyle brand operations strive to provide exciting, differentiated fashion products each season.season as well as certain core products that consumers expect from us.
Tommy BahamaOn September 19, 2022, we acquired Johnny Was. Johnny Was products are sold through the Johnny Was website and Lilly Pulitzer,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 aggregate, represented 90%results of our consolidated net salesoperations 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 2021. 2022 and the First Nine Months of Fiscal 2022 are not indicative of results for a full quarter or a nine month period.
During Fiscal 2021,2022, 80% of our consolidated net sales were through our direct to consumer channels of distribution, which consist of our brand specific full-price retail stores, and e-commerce websites and outlets, as well as our Tommy Bahama food and beverage operations and Tommy Bahama outlets.operations. The remaining 20% of our net sales was generated through our wholesale distribution channels. Our wholesale operations consist of net sales of products bearing our lifestyle brands,channels, which complement our direct to consumer operations and provide access to a larger base of consumers. Our wholesale operations consist of sales of products bearing the trademarks of our lifestyle brands to various specialty stores, better department stores, Signature Stores, multi-branded e-commerce retailers and other retailers.
For additional information about our business and our operating groups, in Fiscal 2021, see Part I, Item 1. Business of our Fiscal 20212022 Form 10-K. Important factors relating to certain risks which could impact our business are described in Part II, Item 1A. Risk Factors of this report and Part I. Item 1A. Risk Factors of our Fiscal 20212022 Form 10-K.
Industry and Recent Macroeconomic Conditions Overview
We operate in a highly competitive apparel 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 competitors vary by operating group and distribution channel. The apparel industry is cyclical and very dependent on the overall level and focus of discretionary consumer spending, which changes as consumer preferences and regional,
18
domestic and international economic conditions change and has shifted towardschange. 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 away from other product categories in recent years.categories. Further, negative economic conditions often have a longer and more severe impact on the apparel industry than on other industries.industries 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 historical practicesthey have historically and may result in increased operating costs and investments to generate growth or even maintain existing sales levels. While the competition and evolution present significant
19
risks, especially for traditional retailers who fail or are unable to adapt, we believe it also presents a tremendous opportunity for brands and retailers to capitalize on the changing consumer environment.
WeThe 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, and we continue to invest in our brands’ direct to consumer initiatives and leveragedistribution 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 term while managing the various challenges facing our industry.
The COVID-19 pandemic has had a significant effect on overall economic conditions and our operations in recent years and accelerated or exacerbated many of the changesindustry in the industry. In Fiscal 2021, the economic environment improved significantly with a rebound in retail traffic starting in March 2021 and other improvements as the year progressed, although certain stores were closed for portions of Fiscal 2021, particularly in the First Quarter of Fiscal 2021. This exceptionally strong consumer demand, along with the strength of our brands, resulted in record earnings for us during Fiscal 2021 and the First Nine Months of Fiscal 2022. The strong earnings in recent periods are despite certain challenges in the retail apparel market, including labor shortages, supply chain disruptions and product and operating cost increases in Fiscal 2021 and Fiscal 2022. We, as well as others in our industry, have increased prices to attempt to offset inflationary pressures.
There can be no assurance that the strong consumer demand of Fiscal 2021 and Fiscal 2022 will continue for our business or the broader retail apparel market. There remains significant uncertainty in the macroeconomic environment as to the impact of changing consumer discretionary spending habits, recent supply chain and other business disruptions, ongoing operating cost increase and other inflationary pressures, rising interest rates, the duration and severity of the pandemic and general economic conditions. Thus, the ultimate impact of these items on our business remains uncertain at this time.
Johnny Was Acquisition
On September 19, 2022, we acquired the Johnny Was California lifestyle brand and related operations, which includes the design, sourcing, marketing and distribution of collections of affordable luxury, artisan-inspired bohemian apparel, accessories and home goods. Johnny Was products are sold through the Johnny Was website and retail stores as well as select department stores and specialty stores.
The purchase price for the acquisition of Johnny Was totaled $270 million in cash, subject to adjustment based on net working capital as of the closing date of the acquisition. After giving effect to the preliminary estimated working capital adjustment, the purchase price paid at closing was $271 million. We used cash and short-term investments on hand and borrowings under our U.S. Revolving Credit Agreement to finance the transaction. Refer to Note 7 included in the unaudited condensed consolidated financial statements included in this report for additional information about the acquisition of Johnny Was.
In the 12 months ended October 29, 2022, the Johnny Was business generated approximately $209 million of net sales. On an annual basis, we anticipate that gross margins, excluding the impact of any inventory step-up charges related to purchase accounting, will be approximately 65% and earnings before interest and taxes, excluding the impact of any inventory step-up charges and amortization of intangible assets, which have not been finalized at this time as we have not completed our assessment and allocation of fair value of the acquired assets and liabilities, will be in the mid to high teen percentage of net sales. We expect that the business will continue to grow as each channel of distribution grows. During the 12 months ended October 2022, e-commerce, retail and wholesale represented 41%, 34% and 25%, respectively, of the net sales of Johnny Was.
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 the six weeks from the September 19, 2022 acquisition through the October 29, 2022 quarter end only. Therefore, the amounts included in the results of operations below are not indicative of results for a full quarter or a nine month period.
20
Lanier Apparel Exit
In Fiscal 2021, we exited our Lanier Apparel business, a business which had been focused on moderately priced tailored clothing and related products. This decision aligns with our stated business strategy of developing and marketing compelling lifestyle brands. It also took into consideration the increased macroeconomic challenges faced by the Lanier Apparel business, many of which were magnified by the COVID-19 pandemic. The operating results of the Lanier Apparel business in Fiscal 2021 largely reflect activities associated with the ongoing wind down of operations following the 2020 announcement that we would be exiting the business. In Fiscal 2021, Lanier Apparel’s net sales were $25 million and represented 2% of our consolidated net sales. We do not expect any future net sales, operations or charges for Lanier Apparel. Refer to Note 11 in our consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Fiscal 2021 Form 10-K for additional information about the Lanier Apparel exit.current environment.
Key Operating Results:
The following table sets forth our consolidated operating results (in thousands, except per share amounts) for the First Nine Months of Fiscal 20222023 compared to the First Nine Months of Fiscal 2021:2022:
| | | | | | | | | | | | |
|
| First Nine Months |
| First Nine Months | ||||||||
|
| Fiscal 2022 | | Fiscal 2021 |
| Fiscal 2023 | | Fiscal 2022 | ||||
Net sales | | $ | 1,029,044 | | $ | 842,163 | | $ | 1,167,046 | | $ | 1,029,044 |
Operating income | | $ | 178,664 | | $ | 133,496 | | $ | 162,435 | | $ | 178,664 |
Net earnings | | $ | 133,686 | | $ | 105,913 | | $ | 120,773 | | $ | 133,686 |
Net earnings per diluted share | | $ | 8.19 | | $ | 6.29 | | $ | 7.57 | | $ | 8.19 |
Weighted average shares outstanding - diluted | |
| 16,333 | |
| 16,841 | |
| 15,947 | |
| 16,333 |
Net earnings per diluted share were $7.57 in the First Nine Months of Fiscal 2023 compared to $8.19 in the First Nine Months of Fiscal 2022 compared to $6.29 in the First Nine Months of Fiscal 2021.2022. The 30% increase8% decrease in net earnings per diluted share was primarily due toincluded a 26% increase10% decrease in net earnings as well as a 3%2% reduction in weighted average shares outstanding due to ouropen market share repurchase program which commencedrepurchases in the Fourth Quarter of Fiscal 2021.2022 and Fiscal 2023. The higherdecreased net earnings were primarily due to higher(1) lower operating income inat Tommy Bahama, Lilly Pulitzer, and Emerging Brands and (2) increased interest expense. These decreases were partially offset by (1) the First Nine Monthsinclusion of Fiscal 2021 including a $12 million gain on salethe operating income of investment in an unconsolidated entity and (2) a higher effective tax rateJohnny Was in the First Nine Months of Fiscal 2022.2023, (2) a lower operating loss at Corporate and Other and (3) a lower effective tax rate.
COMPARABLE SALES
We often disclose comparable sales to provide additional information regarding changes in our results of operations between periods. Our disclosures of comparable 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 full-price retail stores and e-commerce sites in the comparable sales disclosures is a more meaningful way of reporting our comparable 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 channels. For our comparable sales disclosures, we exclude (1) outlet store 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) food and beverage sales, as we do not currently believe that the inclusion of food and beverage sales in our comparable sales disclosures is meaningful in assessing our branded apparel businesses. Comparable sales information reflects net sales, including shipping and handling revenues, if any, associated with product sales.
For purposes of our disclosures, comparable sales consists of sales through e-commerce sites and any physical full-price retail stores that were 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 which would result in a 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 is significantly different from the prior retail space. For those stores which are excluded based on the preceding sentence, the stores continue to be excluded from comparable sales until the criteria for a new store is met subsequent to the remodel, relocation, or other event. A full-price retail store that is remodeled will generally continue to be included in our comparable sales metrics as a store is not typically closed for longer than a two-week period during a remodel; however, a full-price retail store that is relocated generally will not be included in our comparable 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. Any 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 our comparable sales metrics.
Definitions and calculations of comparable sales differ among companies, and therefore comparable sales metrics disclosed by us may not be comparable to the metrics disclosed by other companies.
STORE COUNTDIRECT 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 acquired brands,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 29, | | January 29, | | October 30, | | January 30, |
|
| 2022 |
| 2022 |
| 2021 |
| 2021 |
Tommy Bahama retail stores |
| 102 |
| 102 |
| 103 |
| 105 |
Tommy Bahama retail-restaurant locations |
| 21 |
| 21 |
| 21 |
| 20 |
Tommy Bahama outlets |
| 35 |
| 35 |
| 35 |
| 35 |
Total Tommy Bahama locations |
| 158 |
| 158 |
| 159 |
| 160 |
Lilly Pulitzer retail stores |
| 59 |
| 58 |
| 59 |
| 59 |
Johnny Was retail stores | | 64 | | — | | — | | — |
Johnny Was outlets | | 2 | | — | | — | | — |
Total Johnny Was locations | | 66 | | — | | — | | — |
Southern Tide retail stores | | 5 | | 4 | | 4 | | 3 |
TBBC retail stores | | 2 | | 1 | | — | | — |
Total Oxford locations |
| 290 |
| 221 |
| 222 |
| 222 |
21
On September 28, 2022, Hurricane Ian made landfall in Southwest Florida. The hurricane resulted in store closures at many of our Florida direct to consumer locations for a few days that week and caused significant property damage across the region. Substantially all of our direct to consumer locations returned to normal operating hours shortly after the hurricane. However, two of our locations in Naples, Florida, including a retail-restaurant location, suffered significantly greater damage as a result of the hurricane, resulting in those locations being closed for a longer period. Both of these locations reopened in November 2022. We estimate that the impact of the hurricane on our net sales during the Third Quarter of Fiscal 2022 was approximately $3 million. While all of our direct to consumer locations have reopened, due to the significant damage to the region and the potential impact on tourism, consumer demand and retail traffic, there remains uncertainty about the ultimate impact of Hurricane Ian on our business during the next few months.
| | | | | | | | |
| | 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 20222023 COMPARED TO THIRD QUARTER OF FISCAL 20212022
The discussion and tables below compare our statements of operations for the Third Quarter of Fiscal 20222023 to the Third Quarter of Fiscal 2021.2022. 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 as well as the dollar change and the percentage change as compared to the same period of the prior year. The table also includes net earnings per diluted share and diluted weighted average shares outstanding (in thousands), as well as the change and the percentage change for each of these items as compared to the same period of the prior year.
| | | | | | | | | | | | | | | | | | |
|
| 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 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 were $327 million in the Third Quarter of Fiscal 2023 compared to net sales of $313 million in the Third Quarter of Fiscal 2022. The 4% increase in net sales included (1) a $26 million increase in sales 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 Emerging Brands. These increases were partially offset by decreased sales in Tommy Bahama and Lilly Pulitzer.
The increase in net sales by distribution channel consisted of the following:
● | 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. We have calculated all percentages below on actual data, and percentages may not add to 100 due to rounding.
| | | | | |
|
| 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 decreased $9 million, or 5%, in the Third Quarter of Fiscal 2023, with a decrease in (1) full-price retail sales of $5 million, or 8%, (2) wholesale sales of $4 million, or 11% and (3) food and beverage sales of $1 million, or 3%, primarily due to remodels of certain locations and the impact of the Maui wildfires. These decreases were partially offset by an increase in (1) outlet sales of $1 million, or 6%, and (2) e-commerce sales of $1 million, or 1%. The following table presents the proportion of net sales by distribution channel for Tommy Bahama for each period presented:
| | | | | |
| | 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 decreased $8 million, or 9%, in the Third Quarter of Fiscal 2023, 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 2022. The following table presents the proportion of net sales by distribution channel for Lilly Pulitzer for each period presented:
| | | | | |
| | Third Quarter | | ||
|
| Fiscal 2023 |
| Fiscal 2022 |
|
Retail |
| 31 | % | 27 | % |
E-commerce |
| 58 | % | 62 | % |
Wholesale |
| 11 | % | 11 | % |
Total |
| 100 | % | 100 | % |
22
Johnny Was:
Johnny Was net sales were $49 million in the Third Quarter of Fiscal 2023. We owned Johnny Was for six out of the thirteen weeks of the Third Quarter of Fiscal 2022. The following table presents the proportion of net sales by distribution channel for Johnny Was for each period presented:
| | | | | |
| | 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 $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 we 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 Emerging Brands for each period presented:
| | | | | |
| | 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 net sales of our Lyons, Georgia distribution center business, our Oxford America business, which we exited in Fiscal 2022, and the elimination of any sales between operating groups.
23
Gross Profit
The tables below present gross profit by operating group and in total for the Third Quarter of Fiscal 2023 and the Third Quarter of Fiscal 2022, as well as the dollar change and percentage change between those two 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 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 increased gross profit of 4% was primarily due to the 4% increase in net sales. The decreased gross margin included (1) a $4 million higher LIFO accounting charge in the Third Quarter of Fiscal 2023 compared to the Third Quarter of Fiscal 2022 and (2) full-price e-commerce sales representing a lower proportion of net sales in Lilly Pulitzer. These decreases were partially offset by (1) increased sales and higher gross margins in Johnny Was, (2) higher gross margin in Emerging Brands resulting from lower inventory markdowns, (3) lower freight costs and (4) the lack of the $1 million inventory step up charge in cost of goods sold related to the Johnny Was acquisition in the Third Quarter of Fiscal 2022.
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 2023 compared to $175 million in the Third Quarter of Fiscal 2022, with approximately $18 million, or 93%, of the increase due to the SG&A of Johnny Was that we owned for six out of the thirteen weeks of the Third Quarter of Fiscal 2022. The 11% increase in total SG&A in the Third Quarter of Fiscal 2023 included the following, each of which includes the SG&A of Johnny Was: (1) increased employment costs of $10 million, primarily due to increased head count, pay rate increases and other employment cost increases, including in our direct to consumer and distribution center operations partially offset by lower incentive compensation amounts, (2) a $3 million increase in advertising expense, (3) a $3 million increase in occupancy expenses, (4) a $2 million increase in variable expenses related to higher sales, including credit card transaction fees, supplies, commissions, royalties and other expenses, (5) a $2 million increase in amortization of intangible assets and (6) a $2 million increase in depreciation expense. These increases were partially offset by a $4 million decrease in administrative expenses including professional fees, travel and other items.
Royalties and other operating income
| | | | | | | | | | | | |
|
| 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 2023 was primarily due to decreased royalty income in Tommy Bahama reflecting the lower sales of our licensing partners.
25
Operating income (loss)
| | | | | | | | | | | | |
|
| 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 2023 compared to $27 million in the Third Quarter of Fiscal 2022. The decreased operating income included (1) lower operating income in Tommy Bahama, Lilly Pulitzer, and Emerging Brands and (2) a higher operating loss in Corporate and Other. These decreases were partially offset by the increased operating income of Johnny Was. Changes in operating income (loss) by operating group are discussed below.
Tommy Bahama:
| | | | | | | | | | | | |
|
| 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 decreased operating income 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 $3 million in increased 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 gross 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 2023 includes $3 million of amortization of intangible assets associated with the acquired operations of Johnny Was. In the Third Quarter of Fiscal 2022, the acquired operations of Johnny Was were negatively impacted by (1) $2 million of amortization of intangible assets and (2) $1 million of inventory step-up charges resulting from the acquisition.
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 partially offset by higher 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 2023. The higher LIFO accounting charge was partially offset by lower SG&A, including decreased incentive compensation amounts. The Third Quarter of Fiscal 2022 also included $3 million of transaction expenses and integration costs associated with the Johnny Was acquisition.
Interest expense, net
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2023 |
| Fiscal 2022 | | $ Change |
| % Change | | |||
Interest expense, net | | $ | 1,217 | | $ | 698 | | $ | 519 |
| 74.4 | % |
The higher interest expense in the Third Quarter of Fiscal 2023 was primarily due to a higher average outstanding debt balance during the Third Quarter of Fiscal 2023 than the Third Quarter of Fiscal 2022. We utilized debt to fund a
27
portion of the Johnny Was acquisition on September 19, 2022. There was no debt outstanding in the Third Quarter of Fiscal 2022 prior to the acquisition of Johnny Was.
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 2023 compared to $1.22 in the Third Quarter of Fiscal 2022 reflecting (1) increased SG&A, (2) decreased gross margin, (3) increased interest expense and (4) decreased royalties and other operating income. These decreases were partially offset by (1) higher sales, (2) a decreased effective income tax rate and (3) share repurchases as noted above.
FIRST NINE MONTHS OF FISCAL 2023 COMPARED TO FIRST NINE MONTHS OF FISCAL 2022
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 as well as the dollar change and the percentage change as compared to the same period of the prior year. The table also includes net earnings per diluted share and diluted
28
weighted average shares outstanding (in thousands), as well as the change and the percentage change for each of these items as compared to the same period of the prior year.
| | | | | | | | | | | | | | | | | | |
|
| Third Quarter |
|
| | | | |
| |||||||||
| | Fiscal 2022 | | | Fiscal 2021 | | | $ Change |
| % Change | | |||||||
| | | | | | | | | | | | | | | | | | |
Net sales |
| $ | 313,033 |
| 100.0 | % | | $ | 247,729 | | 100.0 | % | | $ | 65,304 |
| 26.4 | % |
Cost of goods sold | |
| 115,339 |
| 36.8 | % | |
| 95,191 |
| 38.4 | % | |
| 20,148 |
| 21.2 | % |
Gross profit | | $ | 197,694 |
| 63.2 | % | | $ | 152,538 |
| 61.6 | % | | $ | 45,156 |
| 29.6 | % |
SG&A | |
| 175,027 |
| 55.9 | % | |
| 137,505 |
| 55.5 | % | |
| 37,522 |
| 27.3 | % |
Royalties and other operating income | |
| 4,648 |
| 1.5 | % | |
| 15,574 |
| 6.3 | % | |
| (10,926) |
| (70.2) | % |
Operating income | | $ | 27,315 |
| 8.7 | % | | $ | 30,607 |
| 12.4 | % | | $ | (3,292) |
| (10.8) | % |
Interest expense, net | |
| 698 |
| 0.2 | % | |
| 222 |
| 0.1 | % | |
| 476 |
| 214.4 | % |
Earnings before income taxes | | $ | 26,617 |
| 8.5 | % | | $ | 30,385 |
| 12.3 | % | | $ | (3,768) |
| (12.4) | % |
Income tax expense | |
| 6,951 |
| 2.2 | % | |
| 4,400 |
| 1.8 | % | |
| 2,551 |
| 58.0 | % |
Net earnings | | $ | 19,666 |
| 6.3 | % | | $ | 25,985 |
| 10.5 | % | | $ | (6,319) |
| (24.3) | % |
Net earnings per diluted share | | $ | 1.22 | | | | | $ | 1.54 | | | | | $ | (0.32) | | (20.8) | % |
Weighted average shares outstanding - diluted | | | 16,139 |
| | | | | 16,872 |
| | | | | (733) |
| (4.3) | % |
| | | | | | | | | | | | | | | | | | |
|
| 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) | % |
22
Net Sales
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| First Nine Months |
| | | |
| ||||||||||
| | Fiscal 2022 | | Fiscal 2021 |
| $ Change |
| % Change | | | Fiscal 2023 | | Fiscal 2022 | | $ Change | | % Change | | ||||||
Tommy Bahama | | $ | 178,645 | | $ | 148,454 | | $ | 30,191 |
| 20.3 | % | | $ | 655,022 | | $ | 650,677 | | $ | 4,345 |
| 0.7 | % |
Lilly Pulitzer | |
| 84,053 | |
| 72,157 | |
| 11,896 |
| 16.5 | % | |
| 265,089 | |
| 264,763 | |
| 326 |
| 0.1 | % |
Johnny Was | | | 22,661 | |
| — | |
| 22,661 |
| 100.0 | % | | | 150,619 | |
| 22,661 | |
| 127,958 |
| NM | % |
Emerging Brands | |
| 26,912 | |
| 22,082 | |
| 4,830 |
| 21.9 | % | |
| 96,726 | |
| 88,588 | |
| 8,138 |
| 9.2 | % |
Lanier Apparel | |
| — | |
| 4,232 | |
| (4,232) |
| (100.0) | % | ||||||||||||
Corporate and Other | |
| 762 | |
| 804 | |
| (42) |
| (5.2) | % | |
| (410) | |
| 2,355 | |
| (2,765) |
| (117.4) | % |
Consolidated net sales | | $ | 313,033 | | $ | 247,729 | | $ | 65,304 |
| 26.4 | % | | $ | 1,167,046 | | $ | 1,029,044 | | $ | 138,002 |
| 13.4 | % |
Consolidated net sales were $313$1,167 million in the Third QuarterFirst Nine Months of Fiscal 20222023 compared to net sales of $248$1,029 million in the Third QuarterFirst Nine Months of Fiscal 2021, with an increase in each brand and channel of distribution.2022. The 26%13% increase in net sales included double-digit percentage increases(1) a $128 million increase in each of our Tommy Bahama, Lilly Pulitzer and Emerging Brands operating groups as well as $23 million of sales for Johnny Was, which was acquired during the Third Quarter of Fiscal 2022. These2022, and (2) increases were partially offset by a $4 million decrease in sales for Lanier Apparel, which we exited in Fiscal 2021. The higher net sales were due to a combination of increased volume as well as price increases, which were implemented in order to mitigate increased product and other costs. The Third Quarter of Fiscal 2022 included the unfavorable impact of Hurricane Ian in Southwest Florida, which we estimate reduced our net sales by approximately $3 million.each operating group.
The increase in net sales by distribution channel consisted of the following:
● | an increase in full-price |
● | an increase in full-price |
● | an increase in wholesale sales of |
● | an increase in Lilly Pulitzer e-commerce flash clearance sales of |
● | 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 |
2329
● | 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. We have calculated all percentages below on actual data, and percentages may not add to 100 due to rounding.
| | | | | | | | | | |
|
| Third Quarter |
|
| First Nine Months |
| ||||
| | Fiscal 2022 |
| Fiscal 2021 | |
| Fiscal 2023 |
| Fiscal 2022 |
|
Retail |
| 36 | % | 37 | % |
| 38 | % | 39 | % |
E-commerce |
| 34 | % | 33 | % |
| 34 | % | 31 | % |
Restaurant |
| 7 | % | 8 | % | |||||
Food & beverage |
| 7 | % | 8 | % | |||||
Wholesale |
| 22 | % | 21 | % |
| 21 | % | 21 | % |
Total |
| 100 | % | 100 | % |
| 100 | % | 100 | % |
Tommy Bahama:
Tommy Bahama net sales increased $30$4 million, or 20%1%, in the Third QuarterFirst Nine Months of Fiscal 2022,2023, with an increase in each channel of distribution. The increase in net sales in Tommy Bahama included increases in (1) wholesalee-commerce sales of $14$5 million, or 53%3%, with this increase primarily due to higher order books as wholesale accounts increased their buys for Fiscal 2022 compared to Fiscal 2021, (2) full-price retail sales of $8 million, or 14%, (3) restaurantfood and beverage sales of $3 million, or 17%3%, with high single-digit percentage increases in locations open the full quarter of both periods as well as increased sales at the New York and Palm Desert locations, which were not open the full quarter in the Third Quarter of Fiscal 2021, (4) e-commerce(3) wholesale sales of $3$2 million, or 9%2%, and (5)(4) outlet sales of $2 million, or 14%4%. These increases were partially offset by a decrease in full-price retail sales of $7 million, or 3%. The following table presents the proportion of net sales by distribution channel for Tommy Bahama for each period presented:
| | | | | | | | | | |
| | Third Quarter | |
| First Nine Months |
| ||||
|
| Fiscal 2022 |
| Fiscal 2021 |
|
| Fiscal 2023 |
| Fiscal 2022 |
|
Retail |
| 44 | % | 47 | % |
| 45 | % | 46 | % |
E-commerce |
| 20 | % | 22 | % |
| 23 | % | 23 | % |
Restaurant |
| 13 | % | 13 | % | |||||
Food & beverage |
| 13 | % | 12 | % | |||||
Wholesale |
| 23 | % | 18 | % |
| 19 | % | 19 | % |
Total |
| 100 | % | 100 | % |
| 100 | % | 100 | % |
Lilly Pulitzer:
Lilly Pulitzer net sales increased $12 million, or 16%, in the Third QuarterFirst Nine Months of Fiscal 2022, with an increase in each channel2023 were comparable to the First Nine Months of distribution. The increase in net sales in Lilly PulitzerFiscal 2022. Increases included increases in (1) e-commerce flash clearance sales of $9$6 million, or 45%17%, as Lilly Pulitzer hadand (2) increased levels of inventory available for thefull-price e-commerce flash clearance sales in Fiscal 2022 after having more limited end of season inventory in Fiscal 2021, (2)sales. These increases were partially offset by decreased (1) wholesale sales of $1$5 million, or 16%, (3) full-price e-commerce sales of $1 million, or 5%,11% and (4)(2) retail sales of $1 million, or 4%1%. The following table presents the proportion of net sales by distribution channel for Lilly Pulitzer for each period presented:
| | | | | |
| | Third Quarter | | ||
|
| Fiscal 2022 |
| Fiscal 2021 |
|
Retail |
| 27 | % | 31 | % |
E-commerce |
| 62 | % | 58 | % |
Wholesale |
| 11 | % | 11 | % |
Total |
| 100 | % | 100 | % |
Johnny Was:
Johnny Was net sales were $23 million in the six weeks following the September 19, 2022 acquisition through the end of the quarter. During the six-week period, e-commerce, retail and wholesale sales were 41%, 38% and 21% of the net sales of Johnny Was. As the net sales are for less than half the fiscal quarter, the percentage of net sales by
| | | | | |
|
| First Nine Months |
| ||
|
| Fiscal 2023 |
| Fiscal 2022 |
|
Retail |
| 34 | % | 34 | % |
E-commerce |
| 51 | % | 49 | % |
Wholesale |
| 15 | % | 17 | % |
Total |
| 100 | % | 100 | % |
2430
distribution channel are not indicative
Johnny Was:
Johnny Was net sales were $151 million during the First Nine Months of Fiscal 2023. We owned Johnny Was for six out of the thirty-nine weeks of the First Nine Months of Fiscal 2022. The following table presents the proportion of net sales by distribution channel for the full Third Quarter of Fiscal 2022 or any other fiscal quarter.Johnny Was for each period presented:
| | | | | |
|
| 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 $5$8 million, or 22%9%, in the Third QuarterFirst Nine Months of Fiscal 2022,2023 with an increaseincreased sales in each of the TBBC, Duck Head and Southern Tide businesses comprising Emerging Brands. By brand, the increase in net sales included increases in (1) TBBC of $4 million, or 50%, (2) Duck Head of $1 million, or 57%, and (3) Southern Tide of $0 million, or 2%.all brands. By distribution channel, the $5$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 44%6%, in e-commerce, (2) $1 million, or 8%,decrease in wholesale sales that includes the impact of the acquisition and (3) $0 million, or 46%, in theconversion of three former Southern Tide and TBBCSignature Store operations to company owned retail businesses, as those brands continue to open new retail locations.stores. The following table presents the proportion of net sales by distribution channel for Emerging Brands for each period presented:
| | | | | | | | | | |
| | Third Quarter | |
| First Nine Months |
| ||||
|
| Fiscal 2022 |
| Fiscal 2021 | |
| Fiscal 2023 |
| Fiscal 2022 |
|
Retail | | 5 | % | 4 | % | | 10 | % | 5 | % |
E-commerce |
| 40 | % | 34 | % |
| 42 | % | 39 | % |
Wholesale |
| 55 | % | 62 | % |
| 48 | % | 56 | % |
Total |
| 100 | % | 100 | % |
| 100 | % | 100 | % |
Lanier Apparel:
There were no Lanier Apparel net sales in the Third Quarter of Fiscal 2022, compared to $4 million of net sales in the Third Quarter of Fiscal 2021.
Corporate and Other:
Corporate and Other net sales primarily consist of net sales of our Lyons, Georgia distribution center business, as well as our Oxford America business, which we exited in Fiscal 2022.2022, and the elimination of any sales between operating groups.
31
Gross Profit
The tables below present gross profit by operating group and in total for the Third QuarterFirst Nine Months of Fiscal 20222023 and the Third QuarterFirst Nine Months of Fiscal 2021,2022, as well as the dollar change and percentage change between those two 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 |
| | | | | |
| First Nine Months |
| | | | |
| ||||||||
| | Fiscal 2022 |
| Fiscal 2021 | | $ Change |
| % Change | |
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| ||||||
Tommy Bahama | | $ | 115,641 | | $ | 91,773 | | $ | 23,868 |
| 26.0 | % | | $ | 424,730 | | $ | 419,781 | | $ | 4,949 |
| 1.2 | % |
Lilly Pulitzer | |
| 52,993 | |
| 48,668 | |
| 4,325 |
| 8.9 | % | |
| 178,489 | |
| 179,841 | |
| (1,352) |
| (0.8) | % |
Johnny Was | |
| 14,597 | |
| — | |
| 14,597 |
| 100.0 | % | |
| 103,285 | |
| 14,597 | |
| 88,688 |
| NM | % |
Emerging Brands | |
| 13,426 | |
| 11,770 | |
| 1,656 |
| 14.1 | % | |
| 48,224 | |
| 43,901 | |
| 4,323 |
| 9.8 | % |
Lanier Apparel | |
| — | |
| 2,195 | |
| (2,195) |
| (100.0) | % | ||||||||||||
Corporate and Other | |
| 1,037 | |
| (1,868) | |
| 2,905 |
| NM | % | |
| (5,451) | |
| (1,900) | |
| (3,551) |
| NM | % |
Consolidated gross profit | | $ | 197,694 | | $ | 152,538 | | $ | 45,156 |
| 29.6 | % | | $ | 749,277 | | $ | 656,220 | | $ | 93,057 |
| 14.2 | % |
Notable items included in amounts above: | | | | | | | | | | | | | | | | | | | | | | | | |
LIFO adjustments in Corporate and Other | | $ | (650) | | $ | 2,197 | |
|
|
|
| | | $ | 6,287 | | $ | 3,087 | |
|
|
|
| |
Inventory step-up charge included in Johnny Was | | $ | 1,376 | | $ | — | | | | | | | | $ | — | | $ | 1,376 | | | | | | |
Lanier Apparel exit charges in cost of goods sold | | $ | — | | $ | (684) | | | | | | |
25
| | | | | | | | | | |
|
| Third Quarter | |
| First Nine Months |
| ||||
| | Fiscal 2022 | | Fiscal 2021 | |
| Fiscal 2023 |
| Fiscal 2022 |
|
Tommy Bahama |
| 64.7 | % | 61.8 | % |
| 64.8 | % | 64.5 | % |
Lilly Pulitzer |
| 63.0 | % | 67.4 | % |
| 67.3 | % | 67.9 | % |
Johnny Was | | 64.4 | % | — | % | | 68.6 | % | 64.4 | % |
Emerging Brands |
| 49.9 | % | 53.3 | % |
| 49.9 | % | 49.6 | % |
Lanier Apparel |
| — | % | 51.9 | % | |||||
Corporate and Other |
| NM | % | NM | % |
| NM | % | NM | % |
Consolidated gross margin |
| 63.2 | % | 61.6 | % |
| 64.2 | % | 63.8 | % |
The increased gross profit of 30%14% was primarily due to the 26%13% increase in net sales as well as increased consolidated gross margin. The higher gross margin included (1) lowerthe 68.6% gross margin of Johnny Was, (2) reduced freight costs, of $5 million, or 175 basis points, after incurring $6 million, or 270 basis points of incremental freight costs in the Third Quarter of Fiscal 2021, (2) a $3 million lower LIFO accounting charge in the Third Quarter of Fiscal 2022 compared to the Third Quarter of Fiscal 2021, (3) improved initial product margins, as certain sales prices were increased more than the increased product costs during the last year and (4) the lack of any Lanier Apparel sales, which had lower gross margins than our branded businesses. These items were partially offset by (1) the impact of the Lilly Pulitzer e-commerce flash sale, which represented a larger proportion of net sales and had lower gross margins in the Third Quarter of Fiscal 2022, (2) the $1 million inventory step up charge in cost of goods sold related to the Johnny Was acquisition in the Third QuarterFirst Nine Months of Fiscal 2022. These increases were partially offset by (1) increased e-commerce flash clearance sales in Lilly Pulitzer, (2) increased sales during the loyalty award, Flip Side marketing, and end of season clearance events in Tommy Bahama and (3) the lack of a favorable adjustment of Lanier Apparel exit$3 million in higher LIFO accounting charges in cost of goods sold after a $1 million favorable adjustment of Lanier Apparel exit charges in cost of goods sold in the Third QuarterFirst Nine Months of Fiscal 2021.
In2023 compared to the Third QuarterFirst Nine Months of Fiscal 2021, freight costs increased significantly from prior periods, including rate increases for both ocean and air shipments as well as the increased utilization of air freight on inbound products as we navigated our need for inventory and the supply chain challenges. The increased inbound freight rates, which have moderated somewhat from the peak, have continued into Fiscal 2022. However, our use of air freight has decreased as we have placed seasonal inventory purchases on an earlier timeline to reduce the risk of late delivery of our products. These factors resulted in a significant negative impact on our gross margin during the Second Half of Fiscal 2021, but not as significant of a negative impact on our gross margin in the Second Half of Fiscal 2022. In Fiscal 2022 freight costs are still elevated by approximately 50 to 100 basis points as compared to pre-pandemic levels.
Tommy Bahama:
The higher gross margin for Tommy Bahama was primarily due to (1) reduced freight costs in the Third Quarter of Fiscal 2022, after significantly higher freight costs were incurred in the Third Quarter of Fiscal 2021, as well asand (2) improved initial product margins. These itemsincreases were partially offset by a changeincreased sales during the loyalty award, Flip Side marketing, and end of season clearance events in sales mix with wholesale sales representing a higher proportion of net sales in the Third Quarter of Fiscal 2022.Tommy Bahama.
Lilly Pulitzer:
The lower gross margin for Lilly Pulitzer was primarily due to (1) a change in sales mix with e-commerce flash clearance sales which typically have gross margins in the low 40% range, representing a larger proportion of net sales and (2) lower gross margins on the e-commerce flash clearance sales, as the gross margin achieved in the Third Quarter of Fiscal 2021 was higher than typical due to less end of season inventory available in Fiscal 2021.sales. This decrease was partially offset by (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 (3) lower freight costs and improved initial product margins.costs.
Johnny Was:
The Johnny Was gross profit and gross
Gross margin for the six weeks following the September 19, 2022 acquisition through the end of the quarter was unfavorably impacted by the $1 million of incremental cost of goods sold resulting from the charge related to the step up of inventory to fair value at acquisition. Thus, we do not believe the gross profit or gross margin is indicative of the gross profit or gross margin for the Third QuarterFirst Nine Months of Fiscal 2022 or any other fiscal quarter for Johnny Was. On an annual basis, with no impact of inventory step-up charges, Johnny Was gross margins have historically been and are expected to be approximately 65%, after conforming to our accounting policy of classifying outbound freight charges in cost of goods sold rather than SG&A.2023 was 68.6%.
2632
Emerging Brands:
The lowerhigher gross margin for Emerging Brands was primarily due to more inventory markdowns and increased freight costs partially offset by a change in sales mix with direct to consumer sales representing a greater proportion of net sales.
Lanier Apparel:
There This increase was nopartially offset by lower gross profit for Lanier Apparel in the Third Quartermargin on wholesale sales due to off-price wholesale sales of Fiscal 2022. The Third Quarterpreviously marked down inventory representing a greater proportion of Fiscal 2021 for Lanier Apparel included the gross profit impact of net sales as we were exiting the business, as well as a reduction in inventory markdowns associated with the exit of Lanier Apparel.wholesale sales.
Corporate and Other:
The gross profit in Corporate and Other primarily reflects the impact of LIFO accounting adjustments, which was a charge of $6 million and $3 million in the First Nine Months of Fiscal 2023 and the First Nine Months of Fiscal 2022, respectively, and the gross profit of the Lyons, Georgia distribution center and Oxford America businesses. The primary driver for the improved gross profit was the $3 million lower 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 |
| | | | |
|
| First Nine Months |
| | | |
| |||||||||
| | Fiscal 2022 |
| Fiscal 2021 | | $ Change |
| % Change | |
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| ||||||
SG&A | | $ | 175,027 | | $ | 137,505 | | $ | 37,522 |
| 27.3 | % | | $ | 603,202 | | $ | 495,574 | | $ | 107,628 |
| 21.7 | % |
SG&A (as a % of net sales) | |
| 55.9 | % |
| 55.5 | % |
|
|
|
| | |
| 51.7 | % |
| 48.2 | % |
|
|
|
| |
Notable items included in amounts above: | | | | | | | | | | | | | | | | | | | | | | | | |
Tommy Bahama lease termination charge | | $ | — | | $ | 4,850 | | | | | | | ||||||||||||
Amortization of Johnny Was intangible assets | | $ | 1,641 | | $ | — | | | | | | | | $ | 10,389 | | $ | 1,641 | | | | | | |
TBBC change in fair value of contingent consideration | | $ | — | | $ | 786 | | | | | | | ||||||||||||
Lanier Apparel exit charges in SG&A | | $ | — | | $ | 559 | | | | | | | ||||||||||||
Transaction expenses and integration costs associated with the Johnny Was acquisition included in Corporate and Other | | $ | 2,783 | | $ | — | | | | | | | | $ | — | | $ | 2,783 | | | | | | |
SG&A was $175$603 million in the Third QuarterFirst Nine Months of Fiscal 2023 compared to $496 million in the First Nine Months of Fiscal 2022, compared to SG&A of $138 million in the Third Quarter of Fiscal 2021, with approximately $14$82 million, or 76%, of the increase due to the SG&A of Johnny Was. The 27%22% increase in total SG&A in the Third QuarterFirst Nine Months of Fiscal 20222023 included the following, each of which reflects increases due toincludes the acquisitionSG&A of Johnny Was: (1) increased employment costs of $17$35 million, primarily due to increased head count, pay rate increases and other employment cost increases, particularlyincluding in our direct to consumer and distribution center operations partially offset by lower incentive compensation amounts, (2) a $7$22 million increase in advertising expense, (3) a $5$15 million increase in occupancy expenses, (4) a $14 million increase in variable expenses related to higher sales, including credit card transaction fees, supplies, commissions, royalties and other expenses, (4)(5) a $5$9 million increase in occupancy expenses, including increases in base rent amounts, percentage rent, occupancy related operating costs and other items, (5) $3 millionamortization of charges relatedintangible assets primarily due to transaction expenses and integration costs associated with the acquisition of Johnny Was acquisition,in the Third Quarter of Fiscal 2022, (6) a $3$7 million increase in administrative expenses including professional fees, travel and other items and (7) a $2 million increase in amortization of intangible assets and (8) a $1$4 million increase in depreciation expense. These items were partially offset by the absence of $5 million of Tommy Bahama lease termination charges, $1 million of TBBC change in fair value of contingent consideration and $1 million of Lanier Apparel exit charges in the Third Quarter of Fiscal 2022.
27
Royalties and other operating income
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
|
| First Nine Months |
| | | |
| |||||||||
| | Fiscal 2022 |
| Fiscal 2021 | | $ Change |
| % Change | |
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| ||||||
Royalties and other operating income | | $ | 4,648 | | $ | 15,574 | | $ | (10,926) |
| (70.2) | % | | $ | 16,360 | | $ | 18,018 | | $ | (1,658) |
| (9.2) | % |
Notable items included in amounts above: | | | | | | | | | | | | | | | | | | | | | | | | |
Gain on sale of investment in unconsolidated entity | | $ | — | | $ | (11,586) | | | | | | | ||||||||||||
Gain on sale of Merida manufacturing facility | | $ | (1,756) | | $ | — | | | | | | |
Royalties and other operating income typically consists primarily of income received from third parties from the licensing of our brands, but the Third Quarter of Fiscal 2021 also included a $12 million gain on sale of investment in unconsolidated entity. Royaltybrands. The decreased royalties and other operating income in the Third QuarterFirst Nine Months of Fiscal 2022 increased primarily due to increased royalty income in both Tommy Bahama and Lilly Pulitzer.
Operating income (loss)
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2022 |
| Fiscal 2021 | | $ Change |
| % Change | | |||
Tommy Bahama | | $ | 18,984 | | $ | 5,531 | | $ | 13,453 |
| 243.2 | % |
Lilly Pulitzer | |
| 12,688 | |
| 15,985 | |
| (3,297) |
| (20.6) | % |
Johnny Was | | | 117 | | | — | | | 117 |
| 100.0 | % |
Emerging Brands | |
| 3,729 | |
| 4,103 | |
| (374) |
| (9.1) | % |
Lanier Apparel | |
| — | |
| 348 | |
| (348) |
| (100.0) | % |
Corporate and Other | |
| (8,203) | |
| 4,640 | |
| (12,843) |
| NM | % |
Consolidated operating income | | $ | 27,315 | | $ | 30,607 | | $ | (3,292) |
| (10.8) | % |
Notable items included in amounts above: | | | | | | | | | | | | |
LIFO adjustments in Corporate and Other | | $ | (650) | | $ | 2,197 | |
|
|
|
| |
Inventory step-up charge included in Johnny Was | | $ | 1,376 | | $ | — | | | | | | |
Lanier Apparel exit charges in cost of goods sold | | $ | — | | $ | (684) | | | | | | |
Tommy Bahama lease termination charge | | $ | — | | $ | 4,850 | | | | | | |
Amortization of Johnny Was intangible assets | | $ | 1,641 | | $ | — | | | | | | |
TBBC change in fair value of contingent consideration | | $ | — | | $ | 786 | | | | | | |
Lanier Apparel exit charges in SG&A | | $ | — | | $ | 559 | | | | | | |
Transaction expenses and integration costs associated with the Johnny Was acquisition included in Corporate and Other | | $ | 2,783 | | $ | — | | | | | | |
Gain on sale of investment in unconsolidated entity | | $ | — | | $ | (11,586) | | | | | | |
Operating income was $27 million in the Third Quarter of Fiscal 2022 compared to $31 million in the Third Quarter of Fiscal 2021. The decreased operating income2023 was primarily due to the Third Quarter of Fiscal 2021 including a gain on sale of an investment in an unconsolidated entity, with no such gain in the Third Quarter of Fiscal 2022, and lower operatingdecreased royalty income in Lilly Pulitzer. These items wereTommy Bahama reflecting the lower sales of our licensing partners. This decrease was partially offset by higher operating incomea $2 million gain recorded in Tommy Bahama. Changes in operating income (loss) by operating group are discussed below.the First Nine Months of Fiscal 2023 on the sale of the
2833
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 $162 million in the First Nine Months of Fiscal 2023 compared to $179 million in the First Nine Months of Fiscal 2022. The decreased operating income included lower operating income in Tommy Bahama, Lilly Pulitzer and Emerging Brands. These decreases were partially offset by (1) the operating income of Johnny Was and (2) a lower operating loss in Corporate and Other.
Tommy Bahama:
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
|
| First Nine Months |
| | | |
| |||||||||
| | Fiscal 2022 |
| Fiscal 2021 | | $ Change |
| % Change | |
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| ||||||
Net sales | | $ | 178,645 | | $ | 148,454 | | $ | 30,191 |
| 20.3 | % | | $ | 655,022 | | $ | 650,677 | | $ | 4,345 |
| 0.7 | % |
Gross profit | | $ | 115,641 | | $ | 91,773 | | $ | 23,868 | | 26.0 | % | | $ | 424,730 | | $ | 419,781 | | $ | 4,949 | | 1.2 | % |
Gross margin | |
| 64.7 | % |
| 61.8 | % |
|
|
|
| | |
| 64.8 | % |
| 64.5 | % |
|
|
|
| |
Operating income | | $ | 18,984 | | $ | 5,531 | | $ | 13,453 |
| 243.2 | % | | $ | 118,655 | | $ | 130,508 | | $ | (11,853) |
| (9.1) | % |
Operating income as % of net sales | |
| 10.6 | % |
| 3.7 | % |
|
|
|
| | |
| 18.1 | % |
| 20.1 | % |
|
|
|
| |
Notable items included in amounts above: | | | | | | | | | | | | | ||||||||||||
Tommy Bahama lease termination charge | | $ | — | | $ | 4,850 | | | | | | |
The increaseddecreased operating income for Tommy Bahama was primarily due to higher sales, gross margin(1) increased SG&A and (2) lower royalty incomeincome. These decreases were partially offset by increased SG&A.higher sales and gross margin. The increased SG&A was primarily due to (1) $9 million of increased employment costs, with the majority of the increase in retail and restaurant operations, (2) a $2$3 million increase in occupancy expenses including increases in base rent amounts, percentage rent, occupancy related operating costs and other items,advertising expense, (3) $2 million of increased variable expenses related to higher sales, including credit card transaction fees, supplies, commissions, royalties and other expenses and (4) a $2 million increase in advertising expense.occupancy expenses. These SG&A increases were partially offset by the absence of $5a $1 million of Tommy Bahama lease termination chargesdecrease in the Third Quarter of Fiscal 2022.administrative expenses including professional fees, travel and other items.
34
Lilly Pulitzer:
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
|
| First Nine Months |
| | | |
| |||||||||
| | Fiscal 2022 |
| Fiscal 2021 | | $ Change |
| % Change | |
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| ||||||
Net sales | | $ | 84,053 | | $ | 72,157 | | $ | 11,896 |
| 16.5 | % | | $ | 265,089 | | $ | 264,763 | | $ | 326 |
| 0.1 | % |
Gross profit | | $ | 52,993 | | $ | 48,668 | | $ | 4,325 | | 8.9 | % | | $ | 178,489 | | $ | 179,841 | | $ | (1,352) | | (0.8) | % |
Gross margin | |
| 63.0 | % |
| 67.4 | % |
|
|
|
| | |
| 67.3 | % |
| 67.9 | % |
|
|
| | |
Operating income | | $ | 12,688 | | $ | 15,985 | | $ | (3,297) |
| (20.6) | % | | $ | 49,851 | | $ | 60,358 | | $ | (10,507) |
| (17.4) | % |
Operating income as % of net sales | |
| 15.1 | % |
| 22.2 | % |
|
|
|
| | |
| 18.8 | % |
| 22.8 | % |
|
|
|
| |
The decreased operating income for Lilly Pulitzer was due to (1) increased SG&A and (2) lower gross margin partially offset by higher sales and royalty income.margin. The increased SG&A was primarily due to (1) $2 million ofin increased advertising expense, (2) $2 million of increased employment costs, (3) $1$2 million of increased variable expenses resulting fromand (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 higher net sales,First Nine Months of Fiscal 2023 represents the acquired operations of Johnny Was that were negatively impacted by (1) $10 million of amortization of intangible assets and (4)(2) $1 million of higher depreciation expense.
Johnny Was:
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2022 |
| Fiscal 2021 | | $ Change |
| % Change | | |||
Net sales | | $ | 22,661 | | $ | — | | $ | 22,661 |
| 100.0 | % |
Gross profit | | $ | 14,597 | | $ | — | | $ | 14,597 | | 100.0 | % |
Gross margin | |
| 64.4 | % |
| — | % |
|
|
|
| |
Operating income | | $ | 117 | | $ | — | | $ | 117 |
| 100.0 | % |
Operating income as % of net sales | |
| 0.5 | % |
| — | % |
|
|
|
| |
Notable items included in amounts above: | | | | | | | | | | | | |
Inventory step-up charge included in Johnny Was | | $ | 1,376 | | $ | — | | | | | | |
Amortization of Johnny Was intangible assets | | $ | 1,641 | | $ | — | | | | | | |
Johnny Was operating income incosts associated with the six weeks following the September 19, 2022 acquisition through the endimplementation of the quarter was negatively impacted by $1 million of charges related to inventory step-up charges and $2 million of
29
amortization of intangible assets. As the operating results are for less than half the fiscal quarter, the operating results are not necessarily indicative of the Johnny Was operating results of the Third Quarter of Fiscal 2022.a new e-commerce platform.
Emerging Brands:
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
|
| First Nine Months |
| | | |
| |||||||||
| | Fiscal 2022 |
| Fiscal 2021 | | $ Change |
| % Change | |
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| ||||||
Net sales | | $ | 26,912 | | $ | 22,082 | | $ | 4,830 |
| 21.9 | % | | $ | 96,726 | | $ | 88,588 | | $ | 8,138 |
| 9.2 | % |
Gross profit | | $ | 13,426 | | $ | 11,770 | | $ | 1,656 | | 14.1 | % | | $ | 48,224 | | $ | 43,901 | | $ | 4,323 | | 9.8 | % |
Gross margin | |
| 49.9 | % |
| 53.3 | % |
|
|
|
| | |
| 49.9 | % |
| 49.6 | % |
|
|
| | |
Operating income | | $ | 3,729 | | $ | 4,103 | | $ | (374) |
| (9.1) | % | | $ | 10,650 | | $ | 15,456 | | $ | (4,806) |
| (31.1) | % |
Operating income as % of net sales | |
| 13.9 | % |
| 18.6 | % |
|
|
|
| | |
| 11.0 | % |
| 17.4 | % |
|
|
|
| |
| | | | | | | | | | | | | ||||||||||||
Notable items included in amounts above: | | | | | | | | | | | | | ||||||||||||
TBBC change in fair value of contingent consideration | | $ | — | | $ | 786 | | | | | | | ||||||||||||
| | | | | | | | | | | | |
The decreased operating income for Emerging Brands was due to increased SG&A and lower gross margin&A. This decrease was partially offset by (1) higher net sales.sales and (2) higher gross margin. The increased SG&A included (1) higher SG&A associated with the Southern Tide and TBBCnew retail store operations, including related employment costs, and occupancy costs and administrative expenses, (2) higher advertising expense and (3) increased variable expenses resulting from increased sales, (3) higher advertising expense and (4) increased administrative expenses associated with the Emerging Brands businesses. These increases in SG&A were partially offset by the lack of a TBBC change in fair value of contingent consideration in the Third Quarter of Fiscal 2022 after incurring a $1 million charge for TBBC change in fair value of contingent consideration in the Third Quarter of Fiscal 2021.
Lanier Apparel:
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2022 |
| Fiscal 2021 | | $ Change |
| % Change | | |||
Net sales | | $ | — | | $ | 4,232 | | $ | (4,232) |
| (100.0) | % |
Gross profit | | $ | — | | $ | 2,195 | | $ | (2,195) | | (100.0) | % |
Gross margin | |
| — | % |
| 51.9 | % |
|
|
| | |
Operating income | | $ | — | | $ | 348 | | $ | (348) |
| (100.0) | % |
Operating income as % of net sales | |
| — | % |
| 8.2 | % |
|
|
|
| |
Notable items included in amounts above: | | | | | | | | | | | | |
Lanier Apparel exit charges in cost of goods sold | | $ | - | | $ | (684) | | | | | | |
Lanier Apparel exit charges in SG&A | | $ | - | | $ | 559 | | | | | | |
| | | | | | | | | | | | |
There was no operating income for Lanier Apparel in the Third Quarter of Fiscal 2022. The Third Quarter of Fiscal 2021 for Lanier Apparel included the operating income resulting from the net sales, cost of goods sold and SG&A as we were exiting the Lanier Apparel business, including the net impact related to Lanier Apparel exit charges.sales.
3035
Corporate and Other:
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
|
| First Nine Months |
| | | |
| |||||||||
| | Fiscal 2022 |
| Fiscal 2021 | | $ Change |
| % Change | |
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| ||||||
Net sales | | $ | 762 | | $ | 804 | | $ | (42) |
| (5.2) | % | | $ | (410) | | $ | 2,355 | | $ | (2,765) |
| (117.4) | % |
Gross profit | | $ | 1,037 | | $ | (1,868) | | $ | 2,905 | | NM | % | | $ | (5,451) | | $ | (1,900) | | $ | (3,551) | | NM | % |
Operating loss | | $ | (8,203) | | $ | 4,640 | | $ | (12,843) |
| NM | % | | $ | (23,987) | | $ | (27,775) | | $ | 3,788 |
| NM | % |
Notable items included in amounts above: | | | | | | | | | | | | | | | | | | | | | | | | |
LIFO adjustments in Corporate and Other | | $ | (650) | | $ | 2,197 | | | | | | | | $ | 6,287 | | $ | 3,087 | |
|
|
| | |
Transaction expenses and integration costs associated with the Johnny Was acquisition | | $ | 2,783 | | $ | — | | | | | | | | $ | — | | $ | 2,783 | | | | | | |
Gain on sale of investment in unconsolidated entity | | $ | — | | $ | (11,586) | | | | | | | ||||||||||||
Gain on sale of Merida manufacturing facility | | $ | (1,756) | | $ | — | | | | | | |
The lowerimproved operating results in Corporate and Other were primarily a result of (1) the Third Quarter of Fiscal 2021decreased SG&A, including decreased incentive compensation amounts and (2) a $12$2 million gain on the sale of an investmentthe Merida manufacturing facility in an unconsolidated entity, (2)Mexico. The First Nine Months of Fiscal 2022 also included $3 million of transaction expenses and integration costs associated with the Johnny Was acquisition and (3) increased SG&A, including increased employment costs. The impact of these items were partially offset by a $3 million favorable impact from LIFO accounting.
Interest expense, net
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2022 |
| Fiscal 2021 | | $ Change |
| % Change | | |||
Interest expense, net | | $ | 698 | | $ | 222 | | $ | 476 |
| 214.4 | % |
The higher interest expense in the Third Quarter of Fiscal 2022 was primarily due to borrowings pursuant to our U.S. Revolving Credit Agreement to fund a portion of the acquisition of Johnny Was, while there was no debt outstanding in the Third Quarter of Fiscal 2021. The interest expense for the Third Quarter of Fiscal 2021 primarily consisted of unused line fees and amortization of deferred financing fees associated with the U.S. Revolving Credit Agreement.
Income tax provision
| | | | | | | | | | | | |
|
| Third Quarter |
| | | | |
| ||||
| | Fiscal 2022 |
| Fiscal 2021 | | $ Change |
| % Change | | |||
Income tax expense | | $ | 6,951 | | $ | 4,400 | | $ | 2,551 |
| 58.0 | % |
Effective tax rate | |
| 26.1 | % |
| 14.5 | % |
|
|
|
| |
The Third Quarter of Fiscal 2021 benefitted from the utilization of benefits associated with certain capital losses to substantially offset the gain recognized on the sale of an unconsolidated entity in the Third Quarter of Fiscal 2021, resulting in the effective tax rate during the Third Quarter of Fiscal 2021 being unusually low. Further, due to the lower earnings during the third quarter as compared to our other fiscal quarters, certain discrete or other items recognized 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. We expect our annual effective tax rate for Fiscal 2022 to be between 24% and 25%.
31
Net earnings
| | | | | | |
|
| Third Quarter | ||||
| | Fiscal 2022 |
| Fiscal 2021 | ||
Net sales | | $ | 313,033 | | $ | 247,729 |
Operating income | | $ | 27,315 | | $ | 30,607 |
Net earnings | | $ | 19,666 | | $ | 25,985 |
Net earnings per diluted share | | $ | 1.22 | | $ | 1.54 |
Weighted average shares outstanding - diluted | |
| 16,139 | |
| 16,872 |
Net earnings per diluted share were $1.22 in the Third Quarter of Fiscal 2022 compared to $1.54 in the Third Quarter of Fiscal 2021. The decreased net earnings per diluted share was primarily due to (1) the Third Quarter of Fiscal 2021 including a gain on sale of an investment in an unconsolidated entity in Corporate and Other, (2) lower operating income in Lilly Pulitzer and (3) a higher effective tax rate. These items were partially offset by higher operating income in Tommy Bahama.
FIRST NINE MONTHS OF FISCAL 2022 COMPARED TO FIRST NINE MONTHS OF FISCAL 2021
The discussion and tables below compare our statements of operations for the First Nine Months of Fiscal 2022 to the First Nine Months of Fiscal 2021. 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 as well as the dollar change and the percentage change as compared to the same period of the prior year. The table also includes net earnings per diluted share and diluted weighted average shares outstanding (in thousands), as well as the change and the percentage change for each of these items as compared to the same period of the prior year.
| | | | | | | | | | | | | | | | | | |
|
| First Nine Months |
|
| | | | |
| |||||||||
| | Fiscal 2022 | | | Fiscal 2021 | | | $ Change |
| % Change | | |||||||
Net sales | | $ | 1,029,044 | | 100.0 | % | | $ | 842,163 |
| 100.0 | % | | $ | 186,881 | | 22.2 | % |
Cost of goods sold | |
| 372,824 |
| 36.2 | % | |
| 313,414 |
| 37.2 | % | |
| 59,410 |
| 19.0 | % |
Gross profit | | $ | 656,220 |
| 63.8 | % | | $ | 528,749 |
| 62.8 | % | | $ | 127,471 |
| 24.1 | % |
SG&A | |
| 495,574 |
| 48.2 | % | |
| 420,997 |
| 50.0 | % | |
| 74,577 |
| 17.7 | % |
Royalties and other operating income | |
| 18,018 |
| 1.8 | % | |
| 25,744 |
| 3.1 | % | |
| (7,726) |
| (30.0) | % |
Operating income | | $ | 178,664 |
| 17.4 | % | | $ | 133,496 |
| 15.9 | % | | $ | 45,168 |
| 33.8 | % |
Interest expense, net | |
| 1,214 |
| 0.1 | % | |
| 685 |
| 0.1 | % | |
| 529 |
| 77.2 | % |
Earnings before income taxes | | $ | 177,450 |
| 17.2 | % | | $ | 132,811 |
| 15.8 | % | | $ | 44,639 |
| 33.6 | % |
Income tax expense | |
| 43,764 |
| 4.3 | % | |
| 26,898 |
| 3.2 | % | |
| 16,866 |
| 62.7 | % |
Net earnings | | $ | 133,686 |
| 13.0 | % | | $ | 105,913 |
| 12.6 | % | | $ | 27,773 |
| 26.2 | % |
Net earnings per diluted share | | $ | 8.19 | | | | | $ | 6.29 | | | | | $ | 1.90 | | 30.2 | % |
Weighted average shares outstanding - diluted | | | 16,333 |
| | | | | 16,841 |
| | | | | (508) |
| (3.0) | % |
32
Net Sales
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
| | Fiscal 2022 | | Fiscal 2021 | | $ Change | | % Change | | |||
Tommy Bahama | | $ | 650,677 | | $ | 513,985 | | $ | 136,692 |
| 26.6 | % |
Lilly Pulitzer | |
| 264,763 | |
| 233,066 | |
| 31,697 |
| 13.6 | % |
Johnny Was | | | 22,661 | |
| — | |
| 22,661 |
| 100.0 | % |
Emerging Brands | |
| 88,588 | |
| 67,336 | |
| 21,252 |
| 31.6 | % |
Lanier Apparel | |
| — | |
| 24,743 | |
| (24,743) |
| (100.0) | % |
Corporate and Other | |
| 2,355 | |
| 3,033 | |
| (678) |
| (22.4) | % |
Consolidated net sales | | $ | 1,029,044 | | $ | 842,163 | | $ | 186,881 |
| 22.2 | % |
Consolidated net sales were $1,029 million in the First Nine Months of Fiscal 2022 compared to net sales of $842 million in the First Nine Months of Fiscal 2021. The 22% increase in net sales included double-digit percentage increases in each of our Tommy Bahama, Lilly Pulitzer, and Emerging Brands operating groups as well as $23 million of sales for Johnny Was, which was acquired during the Third Quarter of Fiscal 2022.acquisition. These increases were partially offset by a $25 million decrease in sales for Lanier Apparel, which we exited in Fiscal 2021. In the First Nine Months of Fiscal 2021, and particularly in the First Quarter of Fiscal 2021, consumer traffic and our operations had only partially rebounded from the impacts of the COVID-19 pandemic as we still had certain store closures and operating restrictions in certain regions, wholesale customer demand was still soft and most of the consumer traffic improvement occurred after the First Quarter of Fiscal 2021. The higher net sales were due to a combination of increased volume as well as price increases, which were implemented in order to mitigate increased product and other costs.
The increase in net sales by distribution channel consisted of the following:
The following table presents the proportion of our consolidated net sales, including the net sales of Johnny Was and Lanier Apparel, by distribution channel for each period presented. We have calculated all percentages below on actual data, and percentages may not add to 100 due to rounding.
33
| | | | | |
|
| First Nine Months |
| ||
|
| Fiscal 2022 |
| Fiscal 2021 |
|
Retail |
| 39 | % | 38 | % |
E-commerce |
| 31 | % | 31 | % |
Restaurant |
| 8 | % | 8 | % |
Wholesale |
| 21 | % | 22 | % |
Total |
| 100 | % | 100 | % |
Tommy Bahama:
Tommy Bahama net sales increased $137 million, or 27%, in the First Nine Months of Fiscal 2022, with an increase in each channel of distribution. The increase in net sales in Tommy Bahama included increases in (1) full-price retail sales of $56 million, or 29%, (2) wholesale sales of $37 million, or 44%, (3) e-commerce sales of $26 million, or 21%, (4) restaurant sales of $11 million, or 15%, with low double-digit percentage increases in locations open the full quarter of both periods as well as increased sales at the New York and Palm Desert locations, which were not open the full quarter in the Third Quarter of Fiscal 2021, and (5) outlet sales of $7 million, or 17%. The following table presents the proportion of net sales by distribution channel for Tommy Bahama for each period presented:
| | | | | |
|
| First Nine Months |
| ||
|
| Fiscal 2022 |
| Fiscal 2021 |
|
Retail |
| 46 | % | 46 | % |
E-commerce |
| 23 | % | 24 | % |
Restaurant |
| 12 | % | 14 | % |
Wholesale |
| 19 | % | 16 | % |
Total |
| 100 | % | 100 | % |
Lilly Pulitzer:
Lilly Pulitzer net sales increased $32 million, or 14%, in the First Nine Months of Fiscal 2022, with an increase in each channel of distribution. The increase in net sales in Lilly Pulitzer included increases in (1) e-commerce flash clearance sales of $16 million, or 86%, as Lilly Pulitzer had increased levels of inventory available for the e-commerce flash clearance sales in Fiscal 2022 after having more limited end of season inventory in Fiscal 2021, (2) retail sales of $9 million, or 11%, (3) wholesale sales of $6 million, or 15%, with higher full-price sales and lower off-price sales and (4) full-price e-commerce sales of $1 million, or 1%. The following table presents the proportion of net sales by distribution channel for Lilly Pulitzer for each period presented:
| | | | | |
|
| First Nine Months |
| ||
|
| Fiscal 2022 |
| Fiscal 2021 |
|
Retail |
| 34 | % | 35 | % |
E-commerce |
| 49 | % | 48 | % |
Wholesale |
| 17 | % | 17 | % |
Total |
| 100 | % | 100 | % |
Johnny Was:
Johnny Was net sales were $23 million in the six weeks following the September 19, 2022 acquisition through the end of the quarter. During the six-week period ecommerce, retail and wholesale sales were 41%, 38% and 21% of the net sales. As the net sales are for less than half of one fiscal quarter, the percentage of net sales by distribution channel are not indicative of the proportion of net sales that are typical for the nine month period ended October 29, 2022.
Emerging Brands:
Emerging Brands net sales increased $21 million, or 32%, in the First Nine Months of Fiscal 2022, with an increase in each of the TBBC, Southern Tide and Duck Head businesses comprising Emerging Brands. By brand, the increase in net sales included increases in (1) TBBC of $12 million, or 59%, to $31 million, (2) Southern Tide of $7 million, or 17%, to $51 million, and (3) Duck Head of $2 million, or 51%, to $7 million. By distribution channel, the $21 million
34
increase included increases of (1) $10 million, or 40%, in e-commerce, (2) $9 million, or 24%, in wholesale, and (3) $2 million, or 69%, in the Southern Tide and TBBC retail businesses, as those brands continue to open new retail locations. The following table presents the proportion of net sales by distribution channel for Emerging Brands for each period presented:
| | | | | |
|
| First Nine Months |
| ||
|
| Fiscal 2022 |
| Fiscal 2021 |
|
Retail | | 5 | % | 4 | % |
E-commerce |
| 39 | % | 37 | % |
Wholesale |
| 56 | % | 59 | % |
Total |
| 100 | % | 100 | % |
Lanier Apparel:
There were no Lanier Apparel net sales in the First Nine Months of Fiscal 2022, compared to $25 million of net sales in the First Nine Months of Fiscal 2021.
Corporate and Other:
Corporate and Other net sales primarily consist of net sales of our Lyons, Georgia distribution center business as well as our Oxford America business, which we exited in Fiscal 2022. The decrease in net sales was primarily due to lower sales in Oxford America.
Gross Profit
The tables below present gross profit by operating group and in total for the First Nine Months of Fiscal 2022 and the First Nine Months of Fiscal 2021, as well as the dollar change and percentage change between those two 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 2022 |
| Fiscal 2021 |
| $ Change |
| % Change |
| |||
Tommy Bahama | | $ | 419,781 | | $ | 326,681 | | $ | 93,100 |
| 28.5 | % |
Lilly Pulitzer | |
| 179,841 | |
| 161,718 | |
| 18,123 |
| 11.2 | % |
Johnny Was | |
| 14,597 | |
| — | |
| 14,597 |
| 100.0 | % |
Emerging Brands | |
| 43,901 | |
| 36,278 | |
| 7,623 |
| 21.0 | % |
Lanier Apparel | |
| — | |
| 12,255 | |
| (12,255) |
| (100.0) | % |
Corporate and Other | |
| (1,900) | |
| (8,183) | |
| 6,283 |
| NM | % |
Consolidated gross profit | | $ | 656,220 | | $ | 528,749 | | $ | 127,471 |
| 24.1 | % |
Notable items included in amounts above: | | | | | | | | | | | | |
LIFO adjustments in Corporate and Other | | $ | 3,087 | | $ | 9,616 | |
|
|
|
| |
Inventory step-up charge included in Johnny Was | | $ | 1,376 | | $ | — | | | | | | |
Lanier Apparel exit charges in cost of goods sold | | $ | — | | $ | (2,826) | | | | | | |
| | | | | |
|
| First Nine Months |
| ||
|
| Fiscal 2022 |
| Fiscal 2021 |
|
Tommy Bahama |
| 64.5 | % | 63.6 | % |
Lilly Pulitzer |
| 67.9 | % | 69.4 | % |
Johnny Was | | 64.4 | % | — | % |
Emerging Brands |
| 49.6 | % | 53.9 | % |
Lanier Apparel |
| — | % | 49.5 | % |
Corporate and Other |
| NM | % | NM | % |
Consolidated gross margin |
| 63.8 | % | 62.8 | % |
35
The increased gross profit of 24% was primarily due to the 22% increase in net sales as well as increased consolidated gross margin. The higher gross margin included (1) a $7 million lower LIFO accounting charge in the First Nine Months of Fiscal 2022 compared2023 relative to the First Nine Months of Fiscal 2021, (2) the lack of any Lanier Apparel sales, which had lower gross margins than our branded businesses, (3) improved initial product margins, as certain sales prices were increased more than the increased product costs, and (4) lower freight costs of $1 million, after incurring approximately 100 basis points of incremental freight costs in the First Nine Months of Fiscal 2021. These items were partially offset by (1) the impact of the Lilly Pulitzer e-commerce flash sale, which represented a larger proportion of net sales and had lower gross margins in the First Nine Months of Fiscal 2022, (2) the lack of a favorable adjustment of Lanier Apparel exit charges in cost of goods sold after a $3 million favorable adjustment of Lanier Apparel exit charges in cost of goods sold in the First Nine Months of Fiscal 2021 and (3) the $1 million inventory step up charge related to the Johnny Was acquisition in the Third Quarter of Fiscal 2022.
In the Third Quarter of Fiscal 2021, freight costs increased significantly from prior periods, including rate increases for both ocean and air shipments as well as the increased utilization of air freight on inbound products as we navigated our need for inventory and the supply chain challenges. The increased inbound freight rates, which have moderated somewhat from the peak, have continued into Fiscal 2022. However, our use of air freight has decreased as we have placed seasonal inventory purchases on an earlier timeline to reduce the risk of late delivery of our products. These factors resulted in a significant negative impact on our gross margin during the Second Half of Fiscal 2021, but not as significant of a negative impact on our gross margin in the Second Half of Fiscal 2022. In Fiscal 2022 freight costs are still elevated by approximately 50 to 100 basis points as compared to pre-pandemic levels.
Tommy Bahama:
The higher gross margin for Tommy Bahama was primarily due to reduced freight costs in the First Nine Months of Fiscal 2022, after significantly higher freight costs were incurred in the Third Quarter of Fiscal 2021, as well as improved initial product margins. These items were partially offset by (1) a change in sales mix with wholesale sales representing a higher proportion of net sales, (2) the impact of a higher proportion of Tommy Bahama direct to consumer sales occurring during periodic Friends and Family, loyalty award card, Flip Side marketing or end of season clearance events, and (3) increased food costs in our food and beverage business.
Lilly Pulitzer:
The lower gross margin for Lilly Pulitzer was primarily due to (1) a change in sales mix with e-commerce flash clearance sales, which typically have gross margins in the low 40% range, representing a larger proportion of net sales and (2) lower gross margins on the e-commerce flash clearance sales, as the gross margin achieved in the Third Quarter of Fiscal 2021 was higher than typical e-commerce flash clearance sales gross margins due to less end of season inventory available in Fiscal 2021. This was partially offset by lower freight costs and improved initial product margins.
Johnny Was:
The Johnny Was gross profit and gross margin for the six weeks following the September 19, 2022 acquisition through the end of the quarter was unfavorably impacted by $1 million of incremental cost of goods sold resulting from the charge related to the step up of inventory to fair value at acquisition. Thus, we do not believe the gross profit or gross margin in the six week period is indicative of the gross profit or gross margin for the First Nine Months of Fiscal 2022 or any other fiscal period for Johnny Was. On an annual basis, with no impact of inventory step-up charges, Johnny Was gross margins have historically been and are expected to be approximately 65%, after conforming to our accounting policy of classifying outbound freight charges in cost of goods sold rather than SG&A.
Emerging Brands:
The lower gross margin for Emerging Brands was primarily due to more inventory markdowns and increased freight costs partially offset by a change in sales mix with direct to consumer sales representing a greater proportion of net sales.
Lanier Apparel:
There was no gross profit for Lanier Apparel in the First Nine Months of Fiscal 2022. The First Nine Months of Fiscal 2021 for Lanier Apparel included the gross profit impact of net sales as we were exiting the business, as well as a reduction in inventory markdowns associated with the exit of Lanier Apparel.
36
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 improved gross profit was the $7 million lower 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
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2022 |
| Fiscal 2021 |
| $ Change |
| % Change |
| |||
SG&A | | $ | 495,574 | | $ | 420,997 | | $ | 74,577 |
| 17.7 | % |
SG&A (as a % of net sales) | |
| 48.2 | % |
| 50.0 | % |
|
|
|
| |
Notable items included in amounts above: | | | | | | | | | | | | |
Tommy Bahama lease termination charge | | $ | — | | $ | 4,850 | | | | | | |
Amortization of Johnny Was intangible assets | | $ | 1,641 | | $ | — | | | | | | |
TBBC change in fair value of contingent consideration | | $ | — | | $ | 786 | | | | | | |
Lanier Apparel exit charges in SG&A | | $ | — | | $ | 3,788 | | | | | | |
Transaction expenses and integration costs associated with the Johnny Was acquisition included in Corporate and Other | | $ | 2,783 | | $ | — | | | | | | |
SG&A was $496 million in the First Nine Months of Fiscal 2022 compared to SG&A of $421 million in the First Nine Months of Fiscal 2021. The increase includes the net impact of approximately $14 million of SG&A associated with Johnny Was in the First Nine Months of Fiscal 2022 and $10 million of SG&A and exit charges of Lanier Apparel in the First Nine Months of Fiscal 2021, which are reflected in the changes in each category noted in the following paragraph, as applicable.
The 18% increase in SG&A in the First Nine Months of Fiscal 2022 included (1) increased employment costs of $35 million, primarily due to increased head count, pay rate increases and other employment cost increases, particularly in our direct to consumer and distribution center operations, (2) a $14 million increase in advertising expense, (3) an $11 million increase in variable expenses related to higher sales, including credit card transaction fees, supplies, commissions, royalties and other expenses, (4) a $7 million increase in occupancy expenses, including increases in base rent amounts, percentage rent, occupancy related operating costs and other items, (5) a $5 million increase in administrative expenses including professional fees, travel and other items, (6) $3 million of charges related to transaction expenses and integration costs associated with the Johnny Was acquisition, (7) a $2 million increase in depreciation expense, and (8) a $2 million increase in amortization of intangible assets expense. These items were partially offset by the absence of $5 million of Tommy Bahama lease termination charges, $4 million of Lanier Apparel exit charges and $1 million of TBBC change in fair value of contingent consideration in the First Nine Months of Fiscal 2022.
Royalties and other operating income
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2022 |
| Fiscal 2021 |
| $ Change |
| % Change |
| |||
Royalties and other operating income | | $ | 18,018 | | $ | 25,744 | | $ | (7,726) |
| (30.0) | % |
Notable items included in amounts above: | | | | | | | | | | | | |
Gain on sale of investment in unconsolidated entity | | $ | — | | $ | (11,586) | | | | | | |
37
Royalties and other operating income typically consists primarily of income received from third parties from the licensing of our brands, but the First Nine Months of Fiscal 2021 also included a $12 million gain on sale of investment in unconsolidated entity. Royalty income in the First Nine Months of Fiscal 2022 increased primarily due to increased royalty income in both Tommy Bahama and Lilly Pulitzer.
Operating income (loss)
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2022 |
| Fiscal 2021 |
| $ Change |
| % Change |
| |||
Tommy Bahama | | $ | 130,508 | | $ | 73,515 | | $ | 56,993 |
| 77.5 | % |
Lilly Pulitzer | |
| 60,358 | |
| 61,713 | |
| (1,355) |
| (2.2) | % |
Johnny Was | | | 117 | | | — | | | 117 |
| 100.0 | % |
Emerging Brands | |
| 15,456 | |
| 13,565 | |
| 1,891 |
| 13.9 | % |
Lanier Apparel | |
| — | |
| 2,053 | |
| (2,053) |
| (100.0) | % |
Corporate and Other | |
| (27,775) | |
| (17,350) | |
| (10,425) |
| NM | % |
Consolidated operating income | | $ | 178,664 | | $ | 133,496 | | $ | 45,168 |
| 33.8 | % |
Notable items included in amounts above: | | | | | | | | | | | | |
LIFO adjustments in Corporate and Other | | $ | 3,087 | | $ | 9,616 | |
|
|
|
| |
Inventory step-up charge included in Johnny Was | | $ | 1,376 | | $ | — | | | | | | |
Lanier Apparel exit charges in cost of goods sold | | $ | — | | $ | (2,826) | | | | | | |
Tommy Bahama lease termination charge | | $ | — | | $ | 4,850 | | | | | | |
Amortization of Johnny Was intangible assets | | $ | 1,641 | | $ | — | | | | | | |
TBBC change in fair value of contingent consideration | | $ | — | | $ | 786 | | | | | | |
Lanier Apparel exit charges in SG&A | | $ | — | | $ | 3,788 | | | | | | |
Transaction expenses and integration costs associated with the Johnny Was acquisition included in Corporate and Other | | $ | 2,783 | | $ | — | | | | | | |
Gain on sale of investment in unconsolidated entity | | $ | — | | $ | (11,586) | |
|
|
|
| |
Operating income was $179 million in the First Nine Months of Fiscal 2022 compared to $133 million in the First Nine Months of Fiscal 2021. The increased operating income was primarily due to higher net sales, gross margin and royalty income partially offset by increased SG&A. By operating group, the increased operating income was due to higher operating income in Tommy Bahama partially offset by the lower operating results in Corporate and Other, which included a $12 million gain on sale of investment in unconsolidated entity in the First Nine Months of Fiscal 2021, as well as other smaller changes in our other operating groups. Changes in operating income (loss) by operating group are discussed below.
Tommy Bahama:
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2022 |
| Fiscal 2021 |
| $ Change |
| % Change |
| |||
Net sales | | $ | 650,677 | | $ | 513,985 | | $ | 136,692 |
| 26.6 | % |
Gross profit | | $ | 419,781 | | $ | 326,681 | | $ | 93,100 | | 28.5 | % |
Gross margin | |
| 64.5 | % |
| 63.6 | % |
|
|
|
| |
Operating income | | $ | 130,508 | | $ | 73,515 | | $ | 56,993 |
| 77.5 | % |
Operating income as % of net sales | |
| 20.1 | % |
| 14.3 | % |
|
|
|
| |
Notable items included in amounts above: | | | | | | | | | | | | |
Tommy Bahama lease termination charge | | $ | — | | $ | 4,850 | | | | | | |
The increased operating income for Tommy Bahama was primarily due to higher sales, gross margin and royalty income partially offset by increased SG&A. The increased SG&A was primarily due to (1) $25 million of increased employment costs, with the majority of the increase in retail and restaurant operations, (2) $8 million of increased
38
variable expenses related to higher sales, including credit card transaction fees, supplies, commissions, royalties and other expenses, (3) a $4 million increase in advertising expense, (4) a $4 million increase in occupancy expenses including increases in base rent amounts, percentage rent, occupancy related operating costs and other items and (5) a $1 million increase in administrative expenses including professional fees, travel and other items. These SG&A increases were partially offset by (1) the absence of $5 million of Tommy Bahama lease termination charges in the Third Quarter of Fiscal 2022 and (2) a $1 million reduction in depreciation expense.
Lilly Pulitzer:
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2022 |
| Fiscal 2021 |
| $ Change |
| % Change |
| |||
Net sales | | $ | 264,763 | | $ | 233,066 | | $ | 31,697 |
| 13.6 | % |
Gross profit | | $ | 179,841 | | $ | 161,718 | | $ | 18,123 | | 11.2 | % |
Gross margin | |
| 67.9 | % |
| 69.4 | % |
|
|
| | |
Operating income | | $ | 60,358 | | $ | 61,713 | | $ | (1,355) |
| (2.2) | % |
Operating income as % of net sales | |
| 22.8 | % |
| 26.5 | % |
|
|
|
| |
The lower operating income for Lilly Pulitzer was primarily due to increased SG&A and lower gross margin partially offset by higher sales and royalty income. The increased SG&A was primarily due to (1) $7 million of increased advertising expense, (2) $4 million of increased employment costs, (3) $3 million of higher depreciation expense, (4) $2 million of variable expenses related to higher net sales including credit card transaction fees, supplies and other expenses, and (5) $2 million of professional and other fees, primarily related to various ongoing direct to consumer and brand initiatives.
Johnny Was:
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2022 |
| Fiscal 2021 |
| $ Change |
| % Change |
| |||
Net sales | | $ | 22,661 | | $ | — | | $ | 22,661 |
| 100.0 | % |
Gross profit | | $ | 14,597 | | $ | — | | $ | 14,597 | | 100.0 | % |
Gross margin | |
| 64.4 | % |
| — | % |
|
|
| | |
Operating income | | $ | 117 | | $ | — | | $ | 117 |
| 100.0 | % |
Operating income as % of net sales | |
| 0.5 | % |
| — | % |
|
|
|
| |
Notable items included in amounts above: | | | | | | | | | | | | |
Inventory step-up charge included in Johnny Was | | $ | 1,376 | | $ | — | | | | | | |
Amortization of Johnny Was intangible assets | | $ | 1,641 | | $ | — | | | | | | |
Johnny Was operating income in the six weeks from September 19, 2022 through the end of the fiscal quarter on October 29, 2022 included $1 million of inventory step-up charges and $2 million of amortization of intangible assets, which negatively impacted the operating income of Johnny Was. As the operating results for Johnny Was are for only six weeks, the operating results for this period are not indicative of the Johnny Was operating results for the First Nine Months of Fiscal 2022.
39
Emerging Brands:
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2022 |
| Fiscal 2021 |
| $ Change |
| % Change |
| |||
Net sales | | $ | 88,588 | | $ | 67,336 | | $ | 21,252 |
| 31.6 | % |
Gross profit | | $ | 43,901 | | $ | 36,278 | | $ | 7,623 | | 21.0 | % |
Gross margin | |
| 49.6 | % |
| 53.9 | % |
|
|
| | |
Operating income | | $ | 15,456 | | $ | 13,565 | | $ | 1,891 |
| 13.9 | % |
Operating income as % of net sales | |
| 17.4 | % |
| 20.1 | % |
|
|
|
| |
Notable items included in amounts above: | | | | | | | | | | | | |
TBBC change in fair value of contingent consideration | | $ | — | | $ | 786 | | | | | | |
The increased operating income for Emerging Brands was primarily due to higher net sales partially offset by increased SG&A and lower gross margin. The increased SG&A included (1) higher SG&A associated with the Southern Tide and TBBC retail store operations, including related employment costs and occupancy costs, (2) increased variable expenses resulting from increased sales, (3) higher advertising expense and (4) increased administrative expenses associated with the Emerging Brands businesses. These increases in SG&A were partially offset by the lack of a TBBC change in fair value of contingent consideration in the First Nine Months of Fiscal 2022 after incurring a $1 million charge for TBBC change in fair value of contingent consideration in the First Nine Months of Fiscal 2021.
Lanier Apparel:
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2022 |
| Fiscal 2021 |
| $ Change |
| % Change |
| |||
Net sales | | $ | — | | $ | 24,743 | | $ | (24,743) |
| (100.0) | % |
Gross profit | | $ | — | | $ | 12,255 | | $ | (12,255) | | (100.0) | % |
Gross margin | |
| — | % |
| 49.5 | % |
|
|
|
| |
Operating income | | $ | — | | $ | 2,053 | | $ | (2,053) |
| (100.0) | % |
Operating income as % of net sales | |
| — | % |
| 8.3 | % |
|
|
|
| |
Notable items included in amounts above: | | | | | | | | | | | | |
Lanier Apparel exit charges in cost of goods sold | | $ | — | | $ | (2,826) | | | | | | |
Lanier Apparel exit charges in SG&A | | $ | — | | $ | 3,788 | | | | | | |
There was no operating income for Lanier Apparel in the First Nine Months of Fiscal 2022. The First Nine Months of Fiscal 2021 for Lanier Apparel included the operating income resulting from the net sales, cost of goods sold and SG&A as we were exiting the Lanier Apparel business, including the net impact related to Lanier Apparel exit charges.
Corporate and Other:
| | | | | | | | | | | | |
|
| First Nine Months |
| | | |
| |||||
|
| Fiscal 2022 |
| Fiscal 2021 |
| $ Change |
| % Change |
| |||
Net sales | | $ | 2,355 | | $ | 3,033 | | $ | (678) |
| (22.4) | % |
Gross profit | | $ | (1,900) | | $ | (8,183) | | $ | 6,283 | | NM | % |
Operating loss | | $ | (27,775) | | $ | (17,350) | | $ | (10,425) |
| NM | % |
Notable items included in amounts above: | | | | | | | | | | | | |
LIFO adjustments in Corporate and Other | | $ | 3,087 | | $ | 9,616 | |
|
|
| | |
Transaction expenses and integration costs associated with the Johnny Was acquisition | | $ | 2,783 | | $ | — | | | | | | |
Gain on sale of investment in unconsolidated entity | | $ | — | | $ | (11,586) | | | | | | |
The lower operating results in Corporate and Other were primarily a result of (1) the First Nine Months of Fiscal 2021 including a $12 million gain on sale of an investment in an unconsolidated entity, with no such gain in the First
40
Nine Months of Fiscal 2022, (2) $3 million of transaction expenses and integration costs associated with the Johnny Was acquisition and (3) increased SG&A, including increased employment costs and other operating expenses. The impact of these items was partially offset by a $7 million favorable impact from LIFO accounting.
Interest expense, net
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| First Nine Months |
| | | |
|
| First Nine Months |
| | | |
| ||||||||||
|
| Fiscal 2022 |
| Fiscal 2021 |
| $ Change |
| % Change |
|
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| ||||||
Interest expense, net | | $ | 1,214 | | $ | 685 | | $ | 529 |
| 77.2 | % | | $ | 4,856 | | $ | 1,214 | | $ | 3,642 |
| 300.0 | % |
The higher interest expense in the First Nine Months of Fiscal 20222023 was primarily due to borrowings pursuant to our U.S. Revolving Credit Agreementa higher average outstanding debt balance during the First Nine Months of Fiscal 2023 than the First Nine Months of Fiscal 2022. We utilized debt to fund a portion of the acquisition of Johnny Was while thereacquisition on September 19, 2022. There was no debt outstanding in Fiscal 2022 prior to the First Nine Monthsacquisition of Fiscal 2021. The interest expense for the First Nine Months of Fiscal 2021 primarily consisted of unused line fees and amortization of deferred financing fees associated with the U.S. Revolving Credit Agreement.Johnny Was.
Income tax provision
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| First Nine Months |
| | | |
|
| First Nine Months |
| | | |
| ||||||||||
|
| Fiscal 2022 |
| Fiscal 2021 |
| $ Change |
| % Change |
|
| Fiscal 2023 |
| Fiscal 2022 |
| $ Change |
| % Change |
| ||||||
Income tax expense | | $ | 43,764 | | $ | 26,898 | | $ | 16,866 |
| 62.7 | % | | $ | 36,806 | | $ | 43,764 | | $ | (6,958) |
| (15.9) | % |
Effective tax rate | |
| 24.7 | % |
| 20.3 | % |
|
|
|
| | |
| 23.4 | % |
| 24.7 | % |
|
|
|
| |
Both the First Nine Months of Fiscal 20222023 and the First Nine Months of Fiscal 2021 benefitted2022 benefited from the net favorable impact of certain items that resulted in a lower effective tax rate than the more typical annual effective tax rate. rate of approximately 25%.
The income tax expense in both the First Nine Months of Fiscal 20222023 included the benefit of 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. The First Nine Months of Fiscal 2021 included the benefit of2022 benefited from the utilization of certain net operating loss carryforward amounts in certain state and foreign jurisdictions the recognition ofand certain tax credit amounts and the vesting of restricted stock awards at a price higher than the grant date fair value. These favorable items were partially offset by certain unfavorable permanent items which are not deductible for income tax purposes. Additionally, and more significantly, the income tax expense in the First Nine Months of Fiscal 2021 included the benefit of a $2 million net reduction in uncertain tax positions resulting from the settlement of those uncertain tax position amounts in the First Quarter of Fiscal 2021 and the utilization of benefits associated with certain capital losses to substantially offset the gain recognized on the sale of an unconsolidated entity in the Third Quarter of Fiscal 2021.
We expect our annual effective tax rate for Fiscal 2022 to be between 24% and 25%.
Net earnings
| | | | | | |
|
| First Nine Months | ||||
|
| Fiscal 2022 |
| Fiscal 2021 | ||
Net sales | | $ | 1,029,044 | | $ | 842,163 |
Operating income | | $ | 178,664 | | $ | 133,496 |
Net earnings | | $ | 133,686 | | $ | 105,913 |
Net earnings per diluted share | | $ | 8.19 | | $ | 6.29 |
Weighted average shares outstanding - diluted | |
| 16,333 | |
| 16,841 |
Net earnings per diluted share were $8.19 in the First Nine Months of Fiscal 2022 compared to $6.29 in the First Nine Months of Fiscal 2021. The 30% increase in net earnings per diluted share was primarily due to a 26% increase in net earnings as well as a 3% reduction in weighted average shares outstanding due to our share repurchase program which commenced in the Fourth Quarter of Fiscal 2021. The higher net earnings were primarily due to higher operatingother items.
4136
income in Tommy Bahama partially offset by (1) the First Nine Months of Fiscal 2021 including a $12 million gain on sale of investment in an unconsolidated entity and (2) a higher effective tax rateNet earnings
| | | | | | |
|
| 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 per diluted share were $7.57 in the First Nine Months of Fiscal 2022.2023 compared to $8.19 in the First Nine Months of Fiscal 2022 reflecting the (1) increased SG&A, (2) increased interest expense and (3) decreased royalties and other operating income. These decreases were partially offset by (1) higher sales and gross margin, (2) a decreased effective income tax rate and (3) share repurchases as noted above.
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, Johnny Was, Southern Tide, TBBC and Duck Head lifestyle 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 our branded 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 interest, if any.interest. Additionally, we use our cash to fund capital expenditures and other investing activities, dividends, share repurchases and repayment of indebtedness, if any. In the ordinary course of business, we maintain certain levels of inventory, extend credit to our wholesale customers and pay our operating expenses. Thus, we require a certain amount of ongoing working capital to operate our business. Our need for working capital is typically seasonal with the greatest working capital requirements to support our larger spring, summer and holiday direct to consumer seasons. Our capital needs depend on many factors including the results of our operations and cash flows, futureanticipated growth rates, the need to finance inventory levels and the success of our various products.
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 opportunityfunds to continue to invest in our lifestyle brands, direct to consumer initiatives and information technology projects,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.$325 million Revolving Credit Agreement, subject to its terms, which is described below.
Key Liquidity MeasuresWorking Capital
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| October 29, |
| January 29, |
| October 30, |
| January 30, |
|
| October 28, |
| January 28, |
| October 29, |
| January 29, |
| ||||||||
($ in thousands) | | 2022 | | 2022 | | 2021 | | 2021 | | | 2023 | | 2023 | | 2022 | | 2022 | | ||||||||
Total current assets | | $ | 299,495 | | $ | 400,335 | | $ | 366,953 | | $ | 258,316 | | | $ | 291,379 | | $ | 330,463 | | $ | 299,495 | | $ | 400,335 | |
Total current liabilities | | $ | 230,395 | | $ | 226,166 | | $ | 207,172 | | $ | 196,252 | | | $ | 212,512 | | $ | 269,639 | | $ | 230,395 | | $ | 226,166 | |
Working capital | | $ | 69,100 | | $ | 174,169 | | $ | 159,781 | | $ | 62,064 | | | $ | 78,867 | | $ | 60,824 | | $ | 69,100 | | $ | 174,169 | |
Working capital ratio | |
| 1.30 | |
| 1.77 | |
| 1.77 | |
| 1.32 | | |
| 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 29, 2022,28, 2023, decreased from October 30, 202129, 2022 primarily due to the decrease in (1) decreased inventories of $14 million, (2) decreased
37
cash and cash equivalents of $7 million and short-term investments, which was used to fund a portion(3) decreased receivables of the Johnny Was acquisition purchase price,$2 million. These decreases were partially offset by increased inventories, receivables andan increase in prepaid expenses and other current assets including the assets related to Johnny Was.of $16 million. Current liabilities as of October 29, 2022 increased28, 2023 decreased from October 30, 202129, 2022 primarily due to the current liabilities associated with Johnny Was. Changes in current assets(1) decreased accrued incentive compensation of $14 million and current liabilities are discussed below.(2) decreased accounts payable of $4 million.
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 as of October 29, 202228, 2023 as compared to October 30, 2021.29, 2022.
42
Current Assets:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| October 29, |
| January 29, |
| October 30, |
| January 30, |
|
| October 28, |
| January 28, |
| October 29, |
| January 29, |
| ||||||||
| | 2022 | | 2022 | | 2021 | | 2021 | | | 2023 | | 2023 | | 2022 | | 2022 | | ||||||||
Cash and cash equivalents | | $ | 14,976 | | $ | 44,859 | | $ | 37,976 | | $ | 66,013 | | | $ | 7,879 | | $ | 8,826 | | $ | 14,976 | | $ | 44,859 | |
Short-term investments | | | — | | | 164,890 | | | 150,036 | | | — | | | | — | | | — | | | — | | | 164,890 | |
Receivables, net | |
| 64,497 | |
| 34,550 | |
| 46,266 | |
| 30,418 | | |
| 60,101 | |
| 43,986 | |
| 62,230 | |
| 31,588 | |
Inventories, net | |
| 171,639 | |
| 117,709 | |
| 90,981 | |
| 123,543 | | |
| 157,524 | |
| 220,138 | |
| 171,639 | |
| 117,709 | |
Income tax receivable | | | 19,740 | | | 19,728 | | | 18,085 | | | 17,975 | | | | 19,454 | | | 19,440 | | | 19,740 | | | 19,728 | |
Prepaid expenses and other current assets | |
| 28,643 | |
| 18,599 | |
| 23,609 | |
| 20,367 | | |
| 46,421 | |
| 38,073 | |
| 30,910 | |
| 21,561 | |
Total current assets | | $ | 299,495 | | $ | 400,335 | | $ | 366,953 | | $ | 258,316 | | | $ | 291,379 | | $ | 330,463 | | $ | 299,495 | | $ | 400,335 | |
Cash and cash equivalents and short-term investments were $8 million as of October 28, 2023, compared to $15 million as of October 29, 2022, compared to $188 million as of October 30, 2021.2022. The decrease in cash and cash equivalents and short-term investmentsbalance as of October 28, 2023 represents typical cash amounts maintained on an ongoing basis in our operations, which generally ranges from October 30, 2021 was due$5 million to the use of$10 million at any given time. Any excess cash and short-term investmentsis generally used to fund a portion of the Johnny Was acquisition purchase price, with the remainder funded via borrowings pursuant torepay amounts outstanding under our U.S. Revolving Credit Agreement.
The increased receivables, netcash and cash equivalents balance as of October 29, 2022 included $11 millioncash balances acquired during the acquisition of Johnny Was on September 19, 2022.
The decreased receivables, associated with Johnny Was. Additionally, receivables in our other business increasednet as of October 28, 2023, was primarily due to (1) higherlower wholesale trade receivables primarily resulting from lower wholesale sales (2) a reduction in estimated customer allowancesTommy Bahama and credit losses related to wholesale receivables, (3) increased credit receivables and (4) additional amounts due from landlords for tenant improvement allowances. Lilly Pulitzer in the Third Quarter of Fiscal 2023.
Inventories, net, which is net ofincluded a $75$79 million and $62$75 million LIFO reserve as of October 29, 202228, 2023, and October 30, 2021, respectively, increased to a more normalized level as of October 29, 2022, and also included inventories of $25 million associated with Johnny Was. The planned increaserespectively. Inventories decreased in inventories of our existing brands wasall operating groups primarily due to (1) inventory throughout Fiscal 2021 at lower than optimal levels, when a stronger than anticipated rebound in consumer demand outpacedcontinuing initiatives to focus on closely managing inventory purchases (2) increases resulting from the earlier receipt ofand reducing on-hand inventory levels. We believe that inventory levels in Fiscal 2022all operating groups are appropriate to mitigate supply chain risks, (3)support anticipated sales growth in each of our brands for the remainder of Fiscal 2022 and early Fiscal 2023 and (4) increased product costs. The inventory increases in our brands were partially offset by the impact of LIFO accounting, including the $13 million increase in the LIFO reserve, which was primarily due to the impact of the inflationary environment on the LIFO reserve.plans.
Income tax receivable primarily relates to the income tax receivable associated with tax returns for Fiscal 2020, which included the carry back of operating losses to offset taxable income from previous years. The increase in prepaid expenses and other current assets as of October 29, 202228, 2023 was primarily due to an increase in prepaid expenses and other current assets associated with Johnny Was.taxes resulting from the timing of tax payments.
Non-current Assets:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| October 29, |
| January 29, |
| October 30, |
| January 30, |
|
| October 28, |
| January 28, |
| October 29, |
| January 29, |
| ||||||||
| | 2022 | | 2022 | | 2021 | | 2021 | | | 2023 | | 2023 | | 2022 | | 2022 | | ||||||||
Property and equipment, net | | $ | 173,391 | | $ | 152,447 | | $ | 156,672 | | $ | 159,732 | | | $ | 188,686 | | $ | 177,584 | | $ | 173,391 | | $ | 152,447 | |
Intangible assets, net | |
| 287,626 | |
| 155,307 | |
| 155,527 | |
| 156,187 | | |
| 273,444 | |
| 283,845 | |
| 287,626 | |
| 155,307 | |
Goodwill | |
| 116,268 | |
| 23,869 | |
| 23,909 | |
| 23,910 | | |
| 124,230 | |
| 120,498 | |
| 116,268 | |
| 23,869 | |
Operating lease assets | | | 237,078 | | | 195,100 | | | 200,508 | | | 233,775 | | | | 246,399 | | | 240,690 | | | 237,078 | | | 195,100 | |
Other assets, net | |
| 26,459 | |
| 30,584 | |
| 29,234 | |
| 33,714 | | |
| 38,018 | |
| 35,585 | |
| 26,459 | |
| 30,584 | |
Total non-current assets | | $ | 840,822 | | $ | 557,307 | | $ | 565,850 | | $ | 607,318 | | | $ | 870,777 | | $ | 858,202 | | $ | 840,822 | | $ | 557,307 | |
Property and equipment, net as of October 29, 202228, 2023, increased primarily due to the capital expenditures exceeding depreciation during the 12 months ended October 28, 2023.
38
Intangible assets, net as of October 28, 2023, decreased primarily due to the amortization of intangible assets acquired in the acquisition of Johnny Was. Goodwill increased due to measurement period adjustments related to the acquisition of Johnny Was and the acquisition of three former Southern Tide signature stores.
Operating lease assets as of October 28, 2023, increased primarily due to the addition of $22 millionnew leased locations, or the extension of property and equipment associated with Johnny Was. This increase was partially offset by the net impact of depreciation expenseexisting leased locations, exceeding capital expenditures during the 12 months ended October 29, 2022. Intangible assets, net and goodwill as of October 29, 2022, increased primarily due to the $133 million of intangible assets and $92 million of goodwill associated with Johnny Was. Operating lease assets as of October 29, 2022 increased primarily due to the operating lease assets associated with Johnny Was of $54 million. This increase was partially offset by the net impact of the recognition of amortization related to existing operating leases and the termination or reduced term of certain operating leases which exceeded the operating lease assets associated with new or extended operating leases in our existing businesses.leases. The decreaseincrease in other assets, net as of October 29, 2022,28, 2023, was primarily due to a decreasean increase in assets set
43
aside for potential deferred compensation obligations, which was partially offset by other assets associated with Johnny Was.equity investments in unconsolidated entities including the $8 million investment in Fiscal 2022 in the entity that owns the Tommy Bahama resort.
Liabilities:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| October 29, |
| January 29, |
| October 30, |
| January 30, |
|
| October 28, |
| January 28, |
| October 29, |
| January 29, |
| ||||||||
| | 2022 | | 2022 | | 2021 | | 2021 | | | 2023 | | 2023 | | 2022 | | 2022 | | ||||||||
Total current liabilities | | $ | 230,395 | | $ | 226,166 | | $ | 207,172 | | $ | 196,252 | | | $ | 212,512 | | $ | 269,639 | | $ | 230,395 | | $ | 226,166 | |
Long-term debt | |
| 130,449 | |
| — | |
| — | |
| — | | |
| 66,219 | |
| 119,011 | |
| 130,449 | |
| — | |
Non-current portion of operating lease liabilities | |
| 225,921 | |
| 199,488 | |
| 206,484 | |
| 239,963 | | |
| 226,238 | |
| 220,709 | |
| 225,921 | |
| 199,488 | |
Other non-current liabilities | |
| 18,058 | |
| 21,413 | |
| 21,779 | |
| 23,691 | | |
| 20,675 | |
| 20,055 | |
| 18,058 | |
| 21,413 | |
Deferred income taxes | | | 2,455 | | | 2,911 | | | 1,899 | | | — | | | | 9,399 | | | 2,981 | | | 2,455 | | | 2,911 | |
Total liabilities | | $ | 607,278 | | $ | 449,978 | | $ | 437,334 | | $ | 459,906 | | | $ | 535,043 | | $ | 632,395 | | $ | 607,278 | | $ | 449,978 | |
Current liabilities increaseddecreased as of October 29, 2022 primarily due to current liabilities of $30 million associated with Johnny Was, with increases in accounts payable, accrued compensation and current portion of operating lease liabilities and accrued expenses and other liabilities each generally due to the liabilities of Johnny Was. This increase was partially offset by lower income tax payable, accounts payable and accrued expenses and other liabilities related to our other businesses.
The long-term debt of $130 million as of October 29, 2022, was primarily due to borrowing certain amounts to fund a portion of the acquisition of Johnny Was. Non-current portion of operating lease liabilities as of October 29, 2022, increased primarily due to $46 million of operating lease liability amounts associated with Johnny Was. This was partially offset by the net impact of the payment of operating lease liabilities and reductions in liabilities related to the termination or reduced term of certain operating leases which exceeded the operating lease liabilities associated with new or extended operating leases. Other non-current liabilities as of October 29, 2022 decreased28, 2023 primarily due to decreases in deferredaccrued incentive compensation and decreases in accounts payable, which was primarily due to decreased payables associated with lower inventory in transit. The reduction in long-term debt was the result of continuing initiatives to pay down our long-term debt balance. Deferred income taxes increased as of October 28, 2023 due to timing differences related to property and equipment and lease related liabilities.
Statement of Cash Flows
The following table sets forth the net cash flows for the First Nine Months of Fiscal 20222023 and the First Nine Months of Fiscal 20212022 (in thousands):
| | | | | | | | | | | | | | |
| | First Nine Months | | | First Nine Months | | ||||||||
|
| Fiscal 2022 |
| Fiscal 2021 | |
| Fiscal 2023 |
| Fiscal 2022 | | ||||
Cash provided by operating activities | | $ | 86,255 | | $ | 157,085 | | | $ | 169,398 | | $ | 86,255 | |
Cash used in investing activities | |
| (129,700) | |
| (162,546) | | |
| (55,724) | |
| (129,700) | |
Cash provided by (used in) financing activities | |
| 13,160 | |
| (23,135) | | |||||||
Cash used in (provided by) financing activities | |
| (114,416) | |
| 13,160 | | |||||||
Net change in cash and cash equivalents | | $ | (30,285) | | $ | (28,596) | | | $ | (742) | | $ | (30,285) | |
Cash and cash equivalents and short-term investments, in the aggregate, were $15 million and $188 million as of October 29, 2022 and October 30, 2021, respectively. The decrease in cash and cash equivalents and short-term investments from October 30, 2021 was due to the use of cash and short-term investments to fund the acquisition of Johnny Was, with the remainder of the purchase price funded via borrowings pursuant to our U.S. Revolving Credit Agreement. Changes in cash flows in the First Nine Months of Fiscal 20222023 and the First Nine Months of Fiscal 20212022 related to operating activities, investing activities and financing activities are discussed below.
Operating Activities:
In the First Nine Months of Fiscal 20222023 and the First Nine Months of Fiscal 2021,2022, operating activities provided $86$169 million and $157$86 million of cash, respectively. The cash flow from operating activities for each period primarily consisted of net earnings for the relevant period adjusted, as applicable, for non-cash activities including depreciation, amortization of intangible assets, equity-based compensation, gain on sale of our interest in an unconsolidated entity,assets, and other non-cash items as well as the net impact of changes in deferred income taxes and operating assets and liabilities.
In the First Nine Months of Fiscal 2022, changes2023, the net change in operating assets and liabilities hadwas primarily due to a net unfavorable impact ondecrease in inventories that increased cash flow from operations, whilepartially offset by a decrease in the
44
First Nine Months of Fiscal 2021 the changescurrent liabilities and an increase in operating assets and liabilities had a net favorable impact onreceivables that decreased cash flow from operations.
In the First Nine Months of Fiscal 2022, the net change in operating assets and liabilities was primarily due to an increase in inventories and receivables and a decrease in current liabilities all of whichthat decreased cash flow from operations. In the First Nine Months
39
Investing Activities:
In the First Nine Months of Fiscal 20222023 and the First Nine Months of Fiscal 2021,2022, investing activities used $130$56 million and $163$130 million of cash, respectively. On an ongoing basis, our cash flow used in investing activities primarily consists of our capital expenditures, which totaled $54 million and $32 million in the First Nine Months of Fiscal 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 2022, we paid $264 million for the September 19, 2022 acquisition of Johnny Was and also converted $165 million of short-term investments into cash to fund a portion of the acquisition. During the First Nine Months of Fiscal 2021, we invested $150 million of excess cash into short-term investments and received $15 million of proceeds from the sale of our investment in an unconsolidated entity.
On an ongoing basis, our cash flow used in investing activities primarily consists of our capital expenditures, which totaled $32 million and $25 million in the First Nine Months of Fiscal 2022 and the First Nine Months of Fiscal 2021, respectively. In addition to our capital expenditures in the First Nine Months of Fiscal 2022 and the First Nine Months of Fiscal 2021, we also used or generated certain amounts of cash, which are included in other investing activities, related to investments in unconsolidated entities, including minority ownership interests or loans.
On an ongoing basis, our cash flow used in investing activities is expected to primarily consist of our capital expenditure investments in information technology initiatives, including e-commerce capabilities;(1) direct to consumer operations, including opening, relocating and remodeling locations; andlocations, (2) facilities enhancements for distribution centers and offices.offices and (3) information technology initiatives, including e-commerce capabilities.
Financing Activities:
In the First Nine Months of Fiscal 20222023 and the First Nine Months of Fiscal 2021,2022, financing activities provided $13used $114 million and used $23provided $13 million of cash, respectively. DuringIn the First Nine Months of Fiscal 2022,2023, we used cash to repurchase $90repurchased $30 million of shares, including repurchased shares of our stock pursuant to an open market stock repurchase program and equity awards in respect of employee tax withholding liabilities,liabilities; paid $31 million of dividends; and paid $2 million in deferred financing costs associated with the amendment of the Revolving Credit Agreement. In the First Nine Months of Fiscal 2022, we repurchased $90 million of shares, including repurchased shares of our stock pursuant to payan open market stock repurchase program and of equity awards in respect of employee tax withholding liabilities; paid $27 million of dividendsdividends; and to paypaid $2 million of contingent consideration for the final contingent consideration payment related to the TBBC acquisition, which is includedacquisition.
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 other financing activities. In the First Nine Months of Fiscal 2021, we used cash flow from operations2023. Alternatively, to pay $20 million of dividends, repurchase $3 million of shares, consisting of repurchased shares of equity awards in respect of employee tax withholding liabilities, and pay $1 million of contingent consideration, which is included in other financing activities.
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 U.S. Revolving Credit Agreement, like we did in the First Nine Months of Fiscal 2022. Alternatively, if net cash requirements are less than our net cash flows, we may repay amounts outstanding our U.S. Revolving Credit Agreement, if any.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 flows over both the short and long
45
term to satisfy our ongoing operating cash requirements, and(2) ample opportunityfunds 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 levels and the success of our various products.
To the extent cash flow needs in the future exceed cash flow provided by our operations, as well as our cash and cash equivalents, we will have access, subject to its terms, to our U.S. Revolving Credit Agreement to provide funding for operating activities, capital expenditures and acquisitions, if any, and any other investing or financing activities. Our U.S. Revolving Credit Agreement is also used to establish collateral for certain insurance programs and leases and to finance trade letters of credit for certain product purchases, which reduce the amounts available under our line of credit when issued and totaled $5 million as of October 29, 2022.
As of October 29, 2022, we had $130 million of borrowings outstanding compared to no borrowings outstanding as of October 30, 2021, with the increase primarily due to borrowings to fund the Johnny Was acquisition. As of October 29, 2022, the weighted average interest rate of our borrowings was 4.4%, with interest rates on the individual short-term borrowing tranches ranging from 4.1% to 5.5%. The increase in borrowings, all of which are at variable interest rates, increases our exposure to rising interest rates. As of October 29, 2022, after considering our borrowings, letters of credit and available assets, we had $160 million of unused availability under our U.S. Revolving Credit Agreement.
Our cash short-term investments 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 in the First Nine Months of Fiscal 2023. Further, we continue to assess, and may possibly make changes to, our capital structure, including borrowingswhich we may achieve by borrowing from additional credit facilities, sales ofselling debt or equity securities or the repurchaserepurchasing
40
additional shares of our stock in the future. Changes in our capital structure, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
$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, 2023, we had borrowings of $66 million, issued standby letters of credit of $6 million, and availability of $253 million under 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.
The Revolving Credit Agreement is subject to several 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 a 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 U.S. Revolving Credit Agreement are customary for those included in similar facilities entered into at the time we amended the U.S. Revolving Credit Agreement. During the Third Quarter of Fiscal 20222023 and as of October 29, 2022,28, 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 29, 2022,28, 2023, we were compliant with all applicable covenants related to the U.S. Revolving Credit Agreement. Refer to Note 5 of our consolidated financial statements included in our Fiscal 2021 Form 10-K for additional information regarding our U.S. Revolving Credit Agreement, including details about affirmative and negative covenants.
We anticipate that at the maturity of the U.S. Revolving Credit Agreement or as otherwise deemed appropriate, 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.
Operating Lease Commitments:
Refer to Note 4 in our unaudited condensed consolidated financial statements included in this report for additional information about our operating lease commitments as of October 29, 2022.28, 2023.
Dividends:
On December 5, 2022,4, 2023, our Board of Directors approved a cash dividend of $0.55$0.65 per share payable on January 27, 2023February 2, 2024 to shareholders of record as of the close of business on January 13, 2023.19, 2024. Although we have paid dividends each
41
quarter since we became a public company in July 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 credit facility, other debt instruments or applicable law limit our ability to pay dividends. We may borrow to fund dividends or repurchase shares
46
in the short term subject to the terms and conditions of our credit facility, other debt instruments and applicable law. All cash flow from operations will not be paid out as dividends. For details about limitations on our ability to pay dividends, see the discussion of our U.S. Revolving Credit Agreement above and in Note 5 of our consolidated financial statements contained in our Fiscal 2021 Form 10-K.
Share Repurchases:
Refer to Note 6 in our unaudited condensed consolidated financial statements and Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds included in this report for additional information about our share repurchases in Fiscal 2022. As of the date of filing this Form 10-Q, there were no amounts remaining under the open market repurchase program with $50 million remaining under the Board of Directors’ authorization.
Capital Expenditures:
Our anticipated capital expenditures for Fiscal 2022,2023, including the $32$54 million incurred in the First Nine Months of Fiscal 2022,2023, are expected to be approximately $50 million. Our ongoing$80 million, as compared to $47 million for Fiscal 2022. The planned increase in capital expenditures primarily consist of costsincludes 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 one-half of the planned capital expenditure amount for 2023. Additionally, we will continue with our investments in informationour various technology systems initiatives, including e-commerce capabilities; directand omnichannel capabilities, data management and analytics, customer data and insights, cybersecurity, automation including artificial intelligence and infrastructure. Finally, we anticipate spend associated with a multi-year Southeastern United States distribution center enhancement project to consumer operations, including opening, relocating and remodeling locations; and facilities enhancementsensure best-in-class direct-to-consumer throughput capabilities for distribution centers and offices. Our capital expenditure amounts in future years will fluctuate from the amounts incurred in Fiscal 2022 and prior years depending on the investments we believe appropriate for that year to support future expansion of our businesses.brands.
Other Liquidity Items:
Our contractual obligations as of October 29, 202228, 2023 except for the increased operating lease commitments and increaseddecreased debt outstanding, both as discussed above, have not changed materially from the contractual obligations outstanding at January 29, 2022,28, 2023, as disclosed in our Fiscal 20212022 Form 10-K. We have not entered into agreements which meet the SEC’s definition of an off balance sheet financing arrangement, other than operating leases, and have made no financial commitments or guarantees with respect to any unconsolidated subsidiaries or special purpose entities.
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. 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 Fiscal 20212022 Form 10-K. There have not been any significant changes to our critical accounting policies and estimates during the First Nine Months of Fiscal 2022.2023. A detailed summary of significant accounting policies is included in Note 1 to our consolidated financial statements contained in our Fiscal 20212022 Form 10-K.
4742
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. As a result, our quarterly operating results and working capital requirements fluctuate significantly from quarter to quarter. Typically, the demand 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 fiscal year). Thus, our third quarter historically has had the lowest net sales and net earnings compared to other quarters. Further, the impact of certain unusual or non-recurring items, economic conditions, our e-commerce flash clearance sales, wholesale product shipments, weather, acquisitions or other factors affecting our operations may vary from one year to the next. Therefore, due to the potential impact of these items, listed in the previous sentence, the COVID-19 pandemic’s more significant negative impact on the First Quarter of Fiscal 2021 than later quarters of Fiscal 2021 and the September 2022 acquisition of Johnny Was, we do not believe that net sales or operating income by quarter in eitherthe First Nine Months of Fiscal 2021 or Fiscal 2022 are necessarily2023 is indicative of the expected proportion of amounts by quarter for future periods.
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 Fiscal 20212022 Form 10-K. There have not been any material changes in our exposure to these risks during the First Nine Months of Fiscal 20222023 other than our increaseddecreased exposure to interest rates resulting from our increased borrowings.decreased borrowings relative to January 28, 2023.
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.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls 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 20222023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
On September 19, 2022, we completed the acquisition of Johnny Was. We are in the process of integrating the Johnny Was business processes, information technology systems and other components into our operations and internal controls over financial reporting, and pursuant to the SEC’s guidance that an assessment of a recently acquired business may be omitted from the scope of the assessment in the year of acquisition, the scope of our assessment of the effectiveness of our internal controls over financial reporting as of the end of Fiscal 2022 will exclude Johnny Was.
PART II. OTHER INFORMATION
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, importing or exporting regulations, product safety requirements, taxation 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
48
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. We operate in a competitive and rapidly changing business environment. Investors should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Fiscal 20212022 Form 10-K, which could materially affect our business, financial condition or operating results.
Johnny Was, which we acquired during the Third Quarter of Fiscal 2022, is an affordable luxury, artisan-inspired bohemian apparel, accessories We operate in a competitive and home goods brand that is exposed to similar industry, macroeconomic, operational, cybersecurityrapidly changing business environment and information technology, sourcing, regulatory and other general risks as our other businesses. However, as a result of our acquisition of Johnny Was, there may be heightened or additional risks to our business, financial condition and results of operations relative to those risk factors identified in our Fiscal 2021 Form 10-Kuncertainties that investors should consider in particular, as further described below:
Integration is a complex process that may be disruptive to our operations and/or impair our ability to recognize the anticipated benefits of the Johnny Was acquisition. Integrating Johnny Was into our existing operations will be a complex, time-consuming and expensive process and may create challenges and adverse consequences for us. For example, efforts to integrate support functions, staffing and vendors may be ineffective; we may experience employee turnover, including key management and creative personnel within both Johnny Was and our existing businesses as a result of the transaction and integration process; we may be unable to establish and maintain acceptable standards, controls, procedures and policies consistent with our existing operations, including in key areas such as cybersecurity, digital marketing, compliance and accounting; relationships with customers of Johnny Was and/or our existing businesses may be impaired; and the integration process may divert the attention of our management team from other areas of our business. If we are not able to successfully integrate the Johnny Was business into our operations in a timely and effective manner, the anticipated benefits of the acquisition may not be realized fully or at all, or may take longer to realize than expected.
The significant indebtedness we incurred in connection with the Johnny Was acquisition could adversely affect us. The purchase price for the acquisition of Johnny Was totaled $270 million in cash, subject to adjustment based on net working capital as of the closing date of the acquisition, and we utilized our U.S. Revolving Credit Agreement to finance a significant portion of the purchase price. As of October 29, 2022, we had $130 million of outstanding debt under the U.S. Revolving Credit Agreement. The indebtedness will increase our interest expense and exposure to rising interest rates and could, among other things, reduce our flexibility to respond to changing business and economic conditions, to fund working capital, capital expenditures or other acquisitions or to service general corporate purposes. Furthermore, the indebtedness under the U.S. Revolving Credit Agreement bears interest at variable interest rates, and if interest rates increase, together with the current indebtedness, we will be subject to higher debt service requirements, which could adversely affect our cash flows, business and operations.
Johnny Was’ sourcing concentration in China exposes us to heightened risks associated with trade regulation. In Fiscal 2021, 38% of our products were sourced from China. During the 12 months ended October 29, 2022, Johnny Was sourced more than 90% of its products from a limited number of suppliers in China. As a result of our Johnny Was acquisition, we have heightened concentration risks relating to any potential U.S. trade policies or tariffs regarding China, U.S. Customs and Border Protection actions relating to goods imported from China or other factors such as consumer perception of environmental or social compliance within China.
Johnny Was’ geographic concentration heightens our exposure to certain regional risks. As of October 29, 2022, of Johnny Was’ 66 retail stores, 18 were located in California. In addition, Johnny Was wholesale sales have geographic concentration in the Sun Belt, including in resort destinations, where our Tommy Bahama, Lilly Pulitzer and Southern Tide businesses already have heightened concentrations. As a result of our Johnny Was acquisition, we have heightened exposure to factors that impact these regions, including general economic conditions, weather patterns, natural disasters, public health crises, changing demographics and other factors.
4943
We recorded a significant amount of goodwill and intangible assets in connection with the Johnny Was acquisition, which could result in impairment charges that adversely impact our financial results. Our preliminary allocation of the purchase price for the Johnny Was acquisition, which will be revised during the one year allocation period, as appropriate, resulted in us recording $227 million in goodwill and intangible assets as of October 29, 2022. Goodwill and intangible assets are subject to periodic impairment testing, which requires us to make estimates about future performance and cash flows that are inherently uncertain and can be affected by numerous factors, including changes in economic conditions, income tax rates, interest rates, our results of operations and competitive conditions in the industry. It is possible that we could have an impairment charge for intangible assets or goodwill associated with Johnny Was in future periods if, among other things, economic conditions decline, our strategies for Johnny Was change, the results of operations of Johnny Was are less than anticipated at the time of acquisition, enterprise values and market multiples of comparable businesses decline or interest rates increase. A future impairment charge for intangible assets or goodwill could be material and adversely impact our consolidated financial statements or results of operations.
Johnny Was’ portfolio of retail stores increases our long-term lease commitments. As of October 29, 2022, Johnny Was operated 66 of the total 290 brick-and-mortar locations within our enterprise. Many of the Johnny Was retail stores are located in centers in which one of our other brands also operates a retail store and/or restaurant. In connection with the Johnny Was acquisition, we assumed more than $50 million in lease liabilities under Johnny Was’ leases. Any deterioration in consumer sentiment relating to shopping at bricks-and-mortar retail locations, or the financial condition of one or more of the centers in which Johnny Was operates, could negatively impact our financial performance, result in impairment of operating lease assets and/or other long-lived assets or otherwise have a material adverse effect on our results of operations or financial condition.
Additional risks and uncertainties that we currently consider immaterial or not presently known to us may also adversely affect our business. The risks described in our Fiscal 2022 Form 10-K 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 |
(c) | During the Third Quarter of Fiscal |
| | | | | | | | | | | | | | | | | | |
| | | | | | | Total Number of | | Dollar Value | | | | | | | Total Number of | | Dollar Value |
| | | | | | | Shares | | (000s) of Shares | | | | | | | Shares | | (000s) of Shares |
| | | | Average | | Purchased as | | That May Yet be | | | | Average | | Purchased as | | That May Yet be | ||
| | Total Number | | Price | | Part of Publicly | | Purchased Under | | Total Number | | Price | | Part of Publicly | | Purchased Under | ||
| | of Shares | | Paid per | | Announced Plans | | the Plans or | | of Shares | | Paid per | | Announced Plans | | the Plans or | ||
Fiscal Month |
| Purchased |
| Share |
| or Programs |
| Programs |
| Purchased |
| Share |
| or Programs |
| Programs | ||
August (7/31/22 - 8/27/22) | | 41,954 | | $ | 104.69 | | 41,954 | | $ 64,586 | |||||||||
September (8/28/22 - 10/1/22) | | 56,543 | | $ | 94.81 | | 56,543 | | $ 59,225 | |||||||||
October (10/2/22 - 10/29/22) | | 47,727 | | $ | 91.57 | | 47,727 | | $ 54,855 | |||||||||
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 | | 146,224 | | $ | 96.59 | | 146,224 | | $ 54,855 | | 9,905 | | $ | 106.84 | | 9,905 | | $ 30,000 |
As disclosed in our Quarterly Report on Form 10-Q for the Third Quarter of Fiscal 2021, and in subsequent filings, onOn 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 $100$20 million open market stock repurchase program (Rule 10b5-1 plan) to acquire shares of our stock, under which we repurchased:
50
After considering the repurchases through the end of the Third Quarter of Fiscal 2022,2023, we repurchased 186,000 and 10,000 shares, respectively, of our common stock for $19 million and $1 million, respectively. After considering the repurchases during the Third Quarter of Fiscal 2023, there was $5 millionno amount remaining under the open market repurchase program and $55$30 million remaining under the Board of Directors’ authorization as of October 29, 2022. As of the date of filing this Form 10-Q, there were no amounts remaining under the open market repurchase program and $50 million remaining under the Board of Directors’ authorization.28, 2023.
Also, we have certain stock incentive plans as described in Note 8 to our consolidated financial statements included in our Fiscal 20212022 Form 10-K, 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. During the First Quarter of Fiscal 2022, weWe repurchased $3$10 million of shares from employees during the Second Quarter of Fiscal 2023, with no such repurchases of shares from employees in the Second Quarter of Fiscal 2022 or Third Quarter of Fiscal 2022.2023.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
None
ITEM 5. OTHER INFORMATION
NoneDuring 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.
44
ITEM 6. EXHIBITS
| | |
|
| |
3.1 |
| |
3.2 | | |
31.1 | | |
31.2 | | |
32 | | Section 906 Certification by Principal Executive Officer and Principal Financial Officer.* |
101.INS | | XRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document |
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. |
51
SIGNATURES
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 | OXFORD INDUSTRIES, INC. | |
| | |
| (Registrant) | |
| | |
| /s/ K. Scott Grassmyer | |
| K. Scott Grassmyer | |
| Executive Vice President, Chief Financial Officer and Chief Operating Officer | |
| (Authorized Signatory) | |
5245