Good day, and welcome to the Oxford Industries Incorporated First Quarter 2013 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Ms. Anne Shoemaker, Treasurer. Please go ahead. .

Thank you, Brandon, and good afternoon, everyone. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws.

Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in our forward-looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in the documents filed by us with the SEC.

We undertake no duty to update any forward-looking statements. During this call, we will be discussing certain non-GAAP financial measures.

You can find a reconciliation of these non-GAAP financial measures to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website at oxfordinc.com.

Also for comparative purposes, keep in mind that fiscal 2013 is a 52-week year, while fiscal 2012 was a 53-week year, with the extra week in the fourth quarter of fiscal 2012. .

And now, I'd like to introduce today's call participants. With me today are Tom Chubb, CEO and President; Scott Grassmyer, CFO; Terry Pillow, CEO of Tommy Bahama; and Doug Wood, President of Tommy Bahama. Thank you for your attention. And now, I'd like to turn the call over to Tom Chubb. .

Good afternoon, and thank you for joining us to discuss our first quarter results. We are very happy with what we were able to accomplish during the first quarter. .

Earnings came in at $0.82, which was at the top end of our guidance. I should note that we were able to deliver these solid results while making significant increases in SG&A, designed to support future growth at Tommy Bahama and Lilly Pulitzer. I'd like to take a minute to walk you through our thoughts on our investments in these brands.

While much of the increase to SG&A is related to operating new stores, a portion of the increase is also related to expanding and developing our teams. With the rate of growth at Tommy and Lilly, we have needed that personnel in almost every area of these businesses, including retail, e-commerce, design, marketing and IT.

And we have built a strong team into Hong Kong to support Tommy's Asia-Pacific expansion. We have also expanded our marketing spend and efforts to further support these brands. .

In addition to SG&A, we are also making significant capital investments. In 2012, at $61 million, our capital expenditures were the highest in our company's history as we rolled out our international presence, build a New York flagship, expanded our domestic presence and supported our e-commerce growth.

While this level of capital expense will moderate to approximately $45 million in 2013, the investments will continue and remain aligned with supporting the growth of Tommy and Lilly with new stores, remodeling of existing stores and IT spend, particularly associated with e-commerce.

We believe that this level of investment in both operating expenses and capital expenditures is essential to support our long-term strategy for the growth of the Tommy and Lilly brands. I'd like to now turn the call over to Terry Pillow to discuss Tommy Bahama's results for the quarter.

Terry?.

Thank you, Tom. I'm pleased to report another quarter of solid results for Tommy Bahama. .

As we mentioned in our last call, our East Coast business was affected by unusually cold spring weather. We rebounded in April and for the quarter, posted a 10% comp store increase and a net sales of $150 million.

Our operating income was $21 million with an operating margin of 14%, a very respectable outcome given the level of investments we're making. It was a very busy spring for store openings.

We added 6 stores in the United States, including the long-anticipated Michigan Avenue store in Chicago, 2 in Japan, and early in the second quarter, opened a store in Sydney, Australia. In May, we brought in the Canadian business, adding 9 more stores.

Similar to our experience in Australia, we think there are real opportunities to improve this business with a change in the Canadian pricing strategy to be more aligned with the U.S. and an improved merchandising mix. .

We also have the opportunity to enhance our marketing to our Canadian customers through our website. Our New York flagship is making a marked impact on Fifth Avenue. We're experiencing a robust lunch-hour and our bars are becoming a destination in New York City. We are seeing our dinner seatings improve every week.

If you will recall, we opened New York City in the dead of winter, followed by one of the coldest spring seasons in recent history. As the weather turned, our positive momentum has increased and business is quite good in both the restaurant and retail store.

We experienced a longer ramp-up with Street locations, and while we probably won't make money during our first year of operations in Manhattan, we are confident that we have a home run here. .

Our Asian Pacific rollout continues. The strategic cornerstone of Tommy Bahama's entry into Japan was the opening of a Tommy Bahama Island, which is a combined retail store and restaurant in the heart of the trend-setting Ginza shopping district in Tokyo. This marks the first Tommy Bahama Island opened outside the United States.

We also opened a 2,200-square foot retail store at the suburban LaLaport mall in Yokohama. These stores have already generated a lot of interest in our brand. And ISETAN, one of Japan's premier department stores, has invited us to introduce Tommy Bahama via pop-up shops in key doors.

Our 2 different store types and the pop-up shops will give us multiple perspective and exposures in this high-potential market. Australia is also enjoying success with the resort location stores in Queensland. One of our strategic goals in acquiring this business was to begin to open retail stores in Australia's more populous cities.

In keeping with that strategy, at the beginning of the second quarter, we opened a 2,400-square foot store in Sydney's central business district on busy George Street. We also opened our first permanent outlet store in Australia. We had success in the first quarter in continuing our initiative to grow our women's business.

We saw 28% growth in our full-priced direct to consumer women's business. As a percentage of Tommy's, full-priced direct to consumer sales women's increased from 32% to 35%, with strong growth in all areas including sportswear, swim and accessories. This momentum carried into the second quarter with our growing Mother's Day business. .

And as you know, this weekend is Father's Day. Father's Day week is historically the third biggest week of the year for us and will be important to our second quarter result. As a footnote, during the quarter, we had a very successful launch of a new fragrance with a new fragrance licensee.

It has performed well in our direct to consumer channels and with our wholesale customers. As we continue to develop our international business, we should have the ability to build an even larger fragrance business. Now, I'll turn the call over to Tom Chubb to discuss the results for the rest of our operating groups.

Tom?.

Thanks, Terry. I'll pick back up with Lilly Pulitzer. We were pleased to report for the first quarter an 11% increase in sales at Lilly Pulitzer. While a double-digit sales increase is good, we believe the increase would've been even larger if we had not had such a cold wet spring on the East Coast, where Lilly's business is concentrated.

Lilly's operating margin was a strong 28%, and operating income was flat with last year at $11 million as we continued to invest in Lilly's infrastructure, mostly in terms of people, building the teams in the retail, marketing and IT areas.

We opened 2 new stores during the quarter at the Kenwood mall in Cincinnati, Ohio and The Shops at Riverside in Hackensack, New Jersey. We expect to have 2 more opened by the end of the year, including a store in Raleigh-Durham and another at Waterside in Naples, Florida. Our stores continue to perform very well and are a compelling investment for us.

As I mentioned earlier, we are experiencing good momentum so far in the second quarter, which is historically one of Lilly's strongest quarters. As with Tommy, we are planning for solid increases to the top and bottom lines in the second quarter and the year. .

As most of you know, our Lanier Clothes business is a wholesale business comprised of a variety of branded and private label programs across a broad range of customers.

While we expect fiscal 2013 to deliver comparable sales to fiscal 2012, as is typical with Lanier, there will be sifts in sales and operating income from quarter-to-quarter as Lanier moves in and out of programs and transitions from old to new programs with its customers. .

Lanier's results for the first quarter were lower than last year, but in line with their plan. Sales declined to $27 million and they delivered a 9% operating margin. Their investment in working capital remained very low as inventory levels also decreased.

The second quarter of fiscal 2013 is expected to be very similar to the second quarter of fiscal 2012. As we expected, Ben Sherman saw a significant reduction in the top line and a larger operating loss than the first quarter of last year. Sales were $12 million and the operating loss was $4.8 million.

While on the surface, this doesn't sound like good news, we believe we are seeing important evidence of stabilization at Ben Sherman as these results were well aligned with their plan for the quarter. The management team led by recently promoted CEO, Mark Bateman [ph], is focused and determined to deliver improved results.

Inventories have been reduced to much healthier levels. We have also implemented a number of cost-cutting measures, including to a more efficient U.K. third-party distribution center. .

These cost-cutting measures should begin to bear fruit in the form of lower second half SG&A expenses compared to last year. The autumn winter season has been purchased in a more commercially appropriate manner for our retail stores and has been well received by our wholesale customers.

We expect to see a relatively difficult year-over-year comparison in the second quarter, but believe the actions we've taken will drive meaningful improvement in the second half of the year.

Moving to corporate and other, for the first quarter, higher sales and gross profit at Oxford Golf and the operations at our Lyons distribution center reduced the operating loss to $4 million from $5 million last year. We also benefited from reduced SG&A in our corporate operations and lower LIFO accounting charges.

I'll now turn the call over to Scott Grassmyer to discuss our consolidated highlights for the quarter.

Scott?.

Thanks, Tom. For the first quarter of fiscal 2013, we saw a 7% sales increase at Tommy Bahama and an 11% sales increase at Lilly Pulitzer. These increases were partially offset by decreases, as expected, as we're near closing Ben Sherman.

As a result, our consolidated net sales rose slightly to $234 million compared to $231 million in the first quarter of fiscal 2012. .

Consolidated gross margins continue to expand as the direct to consumer component of our sales mix grows. Gross margins increased 130 basis points to 57.2%, and gross profit for the first quarter of fiscal 2013 increased to $134 million. SG&A continued to increase above Tommy Bahama and Lilly Pulitzer.

Both of these operating groups, there's the additional SG&A associated with operating more retail stores, and we have higher employment and marketing expenses to support their growth and brand development. .

Additionally, there was $4 million of incremental SG&A for Tommy's Asia-Pacific expansion. .

We saw reductions in SG&A at Lanier Clothes, Ben Sherman and in corporate and other. The net result was SG&A of $113 million or 48% of net sales compared to $101 million or 44% of net sales in the first quarter of fiscal 2012. Both interest and taxes were generally in line with our expectation.

All borrowings for the quarter were under our revolving credit facilities with interest expense for the quarter at $900,000 compared to interest expense of $3.6 million in the first quarter of fiscal 2012. At quarter-end, we had $165 million of borrowings outstanding and approximately $72 million of unused availability under our U.S. and U.K.

revolving credit facilities. Our effective tax rate for the first quarter was 45.8% compared to 38.3% in the first quarter of fiscal 2012, impacted by our inability to recognize a tax benefit for losses in foreign jurisdictions.

In the second quarter, the effective tax rate is expected to moderate to approximately 39.5% and blend out to approximately 41% for the year. .

Now, to the balance sheet. There is one unusual item I'd like to point out. Typically, we report a modest cash balance.

At the end of the first quarter, our cash and cash equivalents balance was significantly higher because it also included $19 million related to the acquisition of the Tommy Bahama business of our Canadian licensee, including the purchase price, transaction expenses and associated working capital.

We concluded that transaction a few days after quarter-end on May 6, 2013, and cash balances have returned to more normal levels. Our inventory increased to $96 million at the end of the first quarter from $86 million at the end of the first quarter of fiscal 2012.

The increase was primarily to support anticipated sales growth and additional retail stores at Tommy Bahama and Lilly Pulitzer. .

We're pleased that inventory levels decreased to both Lanier Clothes and Ben Sherman. We had a lot of store openings in the first quarter. .

As a result, our capital expenditures were $14 million in the first quarter. We expect capital expenditures for fiscal 2013 to be approximately $45 million.

In addition to the cost of opening new retail stores, we will be doing some remodeling of selected retail stores and restaurants, and we'll be making information technology investments, including e-commerce enhancements. .

Moving to our outlook for the second quarter and year. Our outlook for the second quarter of fiscal 2013 includes meaningful increases in both sales and earnings in what has historically been a strong quarter for both Tommy and Lilly, particularly in the direct to consumer channels.

We anticipate net sales in a range from $240 million to $250 million compared to net sales of $207 million in the second quarter of fiscal 2012. Earnings on an adjusted basis are expected to benefit from Tommy and Lilly operating additional retail stores, as well as growth in e-commerce.

Earnings per share is expected to be in the range of $0.92 to $1.02 compared to earnings per share of $0.30 on a GAAP basis and $0.65 on an adjusted basis in the second quarter of fiscal 2012. .

We continue to expect earnings per share for fiscal 2013 in the range of $3 to $3.15, and net sales in the $930 million to $940 million range. This compares to fiscal 2012 earnings per share of $1.89 on a GAAP basis and $2.61 on an adjusted basis. Thanks for your attention. And now, I'll turn this call back over to Tom Chubb. .

Thank you, Scott. I'll return with some closing comments, but would now like to take any questions you may have. Brandon, we're now ready for questions. .

[Operator Instructions] And we'll go first to Jessica Schmidt with KeyBanc. .

My first question, just in terms of Ben Sherman. The new leadership team has had some time to sort of review the business, and I was wondering if you could talk a little bit about the cost-cutting opportunities they have identified so far and kind of how you feel about the expenses at this point. .

That's a good question, Jessica, and I think the 3 key cost-cutting areas are in distribution cost, marketing and a little bit in people with some redundancies there.

As to distribution cost, I mentioned that we actually, just in the last week or so, have completed the move out of one third-party distribution center into a new third-party distribution center in the United Kingdom. In that move alone, we'll yield some very material cost savings to us.

Obviously, there were some transition costs, but even net of those, there are significant cost savings that we'll get the second half of this year, and then next year, we'll get a full annualized benefit of those.

In the marketing arena, it's not that we're going to cut out marketing expenditures altogether, but we do think that in the past, we spent some money not very effectively.

And so what we're looking to do, and we've already done to some extent in terms of forward commitments that we have, is reduced marketing expenditures but have done it in a way that we don't think it impairs the business in any way.

And just as an example, part of our marketing spend is on trade shows, and it's important for a brand like Ben Sherman to show up at trade shows. But we believe we can do it effectively while still spending a lot less money than we were in the past.

And then the third area that I mentioned is that there have been a few redundancies from a people perspective that have been actioned recently in the business.

And then beyond that, it's really just going through the income statement line by line and looking for a lot of small opportunities to save money that together, add up to pretty meaningful expense savings through the second half of the year. And then, again, a lot of those will get a full annualized benefit of next year. .

And just as a quick follow-up.

Can you talk about the competitive environment across Tommy and Lilly, and if you've seen any need to promote more?.

I'll let Terry and Doug maybe handle the Tommy part, and then come back on the Lilly part. .

Yes, Jessica, this is Terry. There's always competition, I mean we face it every day. But we've been able to, over the first quarter and what we saw coming out of the momentum out of first quarter extend into May, we've been able to keep our strategy. We basically keep our stores at a -- our full-priced stores at full price.

We haven't seen any reason that we need to promote, which we're very encouraged about. We -- as I said in the prepared remarks, we're very happy with our Q1 and we're looking forward to Father's Day. And what we've seen so far, we're quite optimistic about. .

And Jessica, on Lilly, the strategy is very similar to Tommy Bahama's. When it comes to pricing, Lilly's very much a full-priced brand. As you know, with the exception of 2 brief sales at the end of the season, the e-com side is full-priced all the time and the retail stores are largely full-priced, too.

We do, do some markdowns in stores and have end of season sales, but they're very limited and we're going to stick with that strategy. We like it a lot, it's worked well with Tommy Bahama and worked well for the Lilly guys even before we bought them, and we've encouraged them to continue that approach to the business. .

We'll move next to Pamela Quintiliano with SunTrust. .

So I have actually a few for you. If you could just provide an update on the Tommy women's business and just any learnings from the flagship in Asia. For example, I noticed in New York, the women's have been moved up front.

And just the rationale behind that? And as far as Lilly, just the weather sensitivity, were you able to adjust the timing of the flows there? And how should we think about that?.

Okay.

Well, Terry, do you want to tackle the Tommy question?.

I'd be happy to. Thanks for noticing, Pamela, that we moved women's up front in New York. When we opened New York, we merchandised it with men's up front, women's in the back. During the Mother's Day period, we decided to move it -- a few weeks before Mother's Day, move it up front.

We've seen interestingly enough, not only an increase in women's, but even with men's in the back, we've seen men's increase. So our strategy when we went to the Far East in building these stores, since we're a brand new brand in these markets, we merchandised the stores approximately 50-50, and they're performing to that level or better.

So we couldn't be -- we've been talking about women's for the last 3 or 4 years. And as I said in the prepared remarks, we couldn't be more pleased. We think we've got the apparel on track.

The addition of accessories to that mix is providing another lift in business, and it also just gives us the ability to look fresh in the stores and project a very current image.

So the good news about it is by moving it around and increasing our women's business, the reason we're having a hard time giving it the 50% of the business is men's continues to grow fast as well. So it's a high quality problem to have, but we -- we're very pleased with it. .

Pam, and on the question about Lilly and the sensitivity to weather, as we mentioned in the prepared comments, Lilly, as you know, is very concentrated on the East Coast, and it was quite a cold and wet spring and Lilly is a very warm weather brand, so that wasn't a great combination.

And there's no question that while Lilly delivered an excellent quarter, it could've been even better had the weather been more cooperative. As to what we did to react to that, as you know, like most fashion brands, Lilly's deliveries are planned way in advance and carefully orchestrated.

We did make some tweaks, but of course, you don't want to change the entire game plan. We made a few tweaks to -- when we were actually putting stuff on the floor and then also to the way they were merchandising at both in-store and on the website to try to be responsive to the situation.

But for the balance of the year, we'll pretty much stick to our planned delivery schedule. .

If I could just squeeze in one more on Ben Sherman. It seems like you guys are pleased with how things are going thus far to set your expectations and the orders for the fall are coming in okay.

What do you see as potential tick ups? What are you looking out for now?.

I think the word pleased is maybe an overstatement when you have a business that's achieving or failing to achieve financial results the way Ben Sherman is. It's hard to say that we're really pleased... .

Well, relative to just where you saw it. .

Yes. We do believe we've got a good plan though, and that the team is very focused on it and they're executing on it. And as we've mentioned several times in the past, the key parts of that are the team, which we believe we've got a great team in place now and focused on the right things.

The cost cutting, which is entirely internal, that's not dependent on any external factors. We just need to execute that. And based on what they've done with the distribution center, we feel good about our ability to deliver that part of it. Then wholesale business, we've tried to clean up the bad accounts and focus on growing the good accounts.

And at this point, we've got most of the bookings that are required to support our plan for the year. We are just starting to sell spring now, some of which we'll deliver in January. And then for the balance of the year, we've really just got a modest improvement in retail planned.

Those things all added together would result in a very meaningful reduction in the loss that we had last year. .

We'll go next to Eric Beder with Brean Capital. .

You really ramped up the rollouts of Tommy Bahamas in Q1.

How many are left for the rest of the year?.

[indiscernible] Yes, Eric, we've got -- in Q1, we mentioned we had 6, which those were primarily full-priced stores and 2 outlets. We've got another 7 stores for the balance of the year to open. And we've got as busy of a back half as we had first half. But we're excited about those stores.

We've got our fourth store in Chicago, a shopping center called Oakbrook, which is very center. We're trying a new format store for us in Annapolis, which we're excited about, and the balance of them are outlet stores which we, what, we're going to open up 4 of those in the back half of the year. .

And I would just add to that, some of that just has to do with the inability of a retailer like us to completely control when retail real estate is available. And sometimes, you -- they come in clumps a little more than maybe is ideal. .

So this is really going to be more than the normal 8 to 10 you have this year?.

Yes, my little additional comment there was a long way of saying, don't necessarily plan on 13 a year for the next several years. .

Who would do that? Never. The new Chicago store, how has the response been to that? And you mentioned that the New York store has not been profitable. I assume that's your expectation.

And when do you think that store will be profitable?.

Let me comment on Chicago, Eric. We're very pleased with Chicago. It's a smaller store. It's the same footprint as the store that you just saw in New York that we've opened. It's called urban resort model. We're very pleased. It's a smaller store than New York, but we're very pleased.

And the other store we have nearby, that store's also performing quite well, too. So Chicago is a great market, a great market for us. New York, as I said in the prepared remarks, we have a home run in New York. We couldn't be happier about New York. And you're right, that is within the expectations of how we planned that.

On the profitability of it, depends on how we can ramp up as a business there, but I got to tell you, it's -- from a lot of perspective, not only the sales, but the visibility that -- we had a party there last night, we had 200 people upstairs.

It was quite an event, and it's just turning into a very visible property for us, one that we couldn't be more excited about. .

All right. And in terms of Lilly Pulitzer, you have 2 more openings.

Cincinnati was a -- how was the Cincinnati store? And when you look at it, are there opportunity to open more than the 2 you listed for Lilly? And I guess we should assume the 4 to 6, going forward, is pretty much a good number for Lilly Pulitzer for openings?.

I think for now, the 4 to 6 a year is a good number. We've got the 2 planed for the balance of the year. The Raleigh-Durham stores should open this summer and then the Naples store later in the year. We've got a decent pipeline of stores in the works that should support a 4 to 6 number for next year.

And Cincinnati has been really good for us, but we didn't go into that blind. We knew that we had customers in Cincinnati based on our wholesale business there, as well as e-com. So we knew it was a good market for us, and we've got a good location there and it's working well for us. .

Okay. And finally, just to close off on Lilly Pulitzer. That's a big dress business. The comps are about 3%. What was a driver in Q1? Was it still dresses or other categories? I know you're trying to diversify the mix.

Were other categories stronger?.

No, dresses were very strong in the first quarter. I don't think we lost any momentum at all in dresses. And the other parts of the business grew, but I don't -- because we had overall growth, but dresses remained a strength at Lilly. .

[Operator Instructions] And we'll move next to Mike Richardson with Sidoti. .

I just have -- I have a couple of quick ones here.

How much of the sales increase in the second quarter do you think was due to pent-up demand just from the first quarter? Was that $240 million to $250 million kind of what you're expecting with your original plan?.

Yes, that was pretty much in line with what we were expecting in our original plan. .

Okay. And then obviously, Ben's had some brand-specific issues and whatnot. I was reading something the other day that was saying that they thought the U.K. economy was beginning to strengthen. I'm wondering if you're sort of getting that sense as well just from people talking over there and whatnot. .

Well, I think that -- I don't know that I would quite say that. I think it's been a very, very tough market over there for several years, and maybe it started to stabilize a bit. But within that environment, I think we performed very poorly over the last couple of years.

And while some of that's been the macro environmental, awful lot of it's been self-inflected. And obviously, our focus now is on fixing what we can control, which is our own performance. We're doing that -- the U.K. was really the first market that we tackled in terms of focusing on improving our own retail.

And in the last couple of months, we've actually seen a nice pickup in our own retail in the U.K., which I think has a whole lot to do with the new team and the focus that they're bringing to the matter. .

Okay. And then just a last one.

What are the comps at Tommy and Lilly? I think you said Tommy comps 10%?.

Tommy was 10% for the quarter and Lilly was 3% for the quarter. .

And we have no additional questions in our queue at this time. I would like to turn the call back over to Mr. Tom Chubb for any additional or closing remarks. .

Okay. Thank you, Brandon. Just in closing, we really believe in our ability to deliver long-term value to our shareholders. To sustain the growth necessary to deliver on this objective, we're going to need to continue to support Tommy and Lilly with the capital and resources they need.

We will look to Lanier to continue to provide us with a solid cash return on the cash invested, and to Ben Sherman, to execute their planned improvements. Thank you, again, for your time this afternoon and we look forward to talking with you again in September. .

And that does conclude today's call. Thank you, all, for your participation..