Tom Chubb III - President and CEO Terry Pillow - CEO of the Tommy Bahama Group Scott Grassmyer - SVP, Finance and CFO Douglas Wood - President and COO of the Tommy Bahama Group Anne Shoemaker - VP, Capital Markets and Treasurer.

Ed Yruma – KeyBanc Capital markets Rick Patel - Stephens Inc. Eric Beder - Wunderlich Securities Mike Richardson – Sidoti & Company.

Good day and welcome to the Oxford Industries, Inc. Third Quarter 2014 Earnings Conference Call. Today's conference is being recorded. At this time, I’d like to turn the conference over to Miss. Anne Shoemaker. Please go ahead, ma'am..

Thank you, Renee, 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 the forward-looking statements.

Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today, and in documents filed by us with the SEC, including the risk factors contained in our fiscal 2013 Form 10-K. 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 GAAP financial measures to non-GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our web site at oxfordinc.com. 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..

Thank you for joining us. As you know, the second half of 2014 has proven to be turbulent and unpredictable for much of the retail industry. Despite the market challenges, we were able to fundamentally achieve our plans in the third quarter, posting an 11% topline increase and earnings in line with our previously issued guidance.

Throughout the quarter, traffic patterns in malls and other brick-and-mortar venues were down noticeably. Many retailers responded to the weak traffic with very aggressive discounting and the marketplace has been much more promotional than our earlier expectations.

Our physical store locations were not immune to the effects of the weak traffic in the highly promotional environment and as a result, sales in our stores were softer than we planned .at the same time however, our ecommerce business remained relatively strong.

November remained challenging and we continued to see weak traffic in a highly promotional environment. While the macro environment hasn’t changed much, December has been better thus far, with particular strength in ecommerce. We are successfully navigating this holiday season, but there is still a long way to go.

The most important selling weeks are still ahead of us. As we look towards January, we are anticipating a forward shift of some early spring wholesale shipments into February. We also have some concerns about the impact the west coast port issues they have on our supply chain.

These factors, along with general softness in the environment, are driving us to moderate our sales forecast for the year. At the same time, our commitment to maintaining the integrity of our brands during this difficult trading period remains unwavering.

We have no plans to adopt a more promotional stance in either Tommy Bahama or Lilly Pulitzer and do not anticipate any erosion in our gross margin. Given this backdrop, we expect fourth quarter adjusted EPS in a range of $0.96 to $1.06 compared to $0.89 last year and for the full year, adjusted EPS of $2.85 to $2.95.

Now I’d like to comment a bit about each of our operating groups. For Tommy Bahama, the third quarter is by far the smallest on both the top and bottom lines. Sales for the third quarter were $125 million, a 10% increase and adjusted operating income was $800,000.

This reflects both the seasonality of the business and the significant impact of the fixed expense structure associated with operating retail stores. At the end of the third quarter, Tommy Bahama operated 150 stores compared to 137 last year.

During the fourth quarter’s holiday and resort selling season, Tommy Bahama is creating excitement for the consumer through a series of well-designed marketing initiatives.

Terry Pillow will comment on those, as well as some exciting new store openings, including our new Jupiter Florida restaurant and retail store location as well as several stores that we have opened in our new resort door format.

As I mentioned on our call in September, Lilly Pulitzer completed the resort spring ecommerce clearance sale in early third quarter. This blockbuster three day event generated almost $12 million in sales for the quarter and was the primary driver behind the 19% year over year increase in sales.

The sales increase also reflects the impact of additional retail stores. We now have 28 and a comparable store sales increase of 7%. Lilly is driving business in the fourth quarter with a greater assortment of resort appropriate sportswear and dresses, as well as a variety of smaller, giftable items at a range of price points.

While traffic remains soft in stores, the consumer is responding favorably to this assortment and conversion rates are up nicely. In addition, we are experiencing good strength in momentum in our ecommerce business. Our Lanier Clothes Group reported a notable 19% sales increase in the third quarter.

Increase was driven by the contribution from a large private label program that was partially offset by sales decreases in other higher margin businesses. As a result, operating income in the quarter was comparable with last year. We continue to expect Lanier to end the year with a high single digit operating margin.

Moving to Ben Sherman, the third quarter was affected by timing of some wholesale [shipments]. Beyond that, they were essentially on plan.

We believe we are positioned to deliver a near breakeven fourth quarter which would represent a significant year over year improvement, driven particularly by Ben’s direct to consumer business which is performing well on both sides of the pond. I'd like to now turn the call over to Terry Pillow to give more insights on Tommy Bahama.

Terry?.

Thanks Tom. We’re in full swing for the holiday season. Holiday marketing campaign is very exciting and we believe we are being heard through the noise of this promotional environment. It began with the fashion mailer in early November and we followed that marketing piece with a gift guide just before Thanksgiving.

Our men’s business has been a highlight and as the weather turned, our sweaters and outer wear have been strong. This is our fifth year with our ever popular reversible half-zip knit, and it continues to be a key item in all channels of distribution. This year we offered it in several different fabrications and price points.

We have once again seen solid year over year growth. Our customer is unique and moves very quickly from holiday into resort cruise season. This Thursday our website will turn over to resort and will be supported by our Bahama Bliss mailer, a back to our roots piece which will hit home next week.

This mailer speaks clearly to our customer who is now ready to make some purchases for themselves and get away to somewhere warm. We mentioned in September that our store opening cadence in 2014 would be very back half loaded and in the weeks following the end of Q3, our store opening teams have been incredibly busy.

Since November the first, we have opened seven additional locations, including five U.S stores and our newest retail restaurant location in Jupiter, Florida. We also opened a store in Manly Beach, our eighth store in Australia.

Among the locations recently opened, we featured three distinctly different formats, each reflecting how a true lifestyle brand like Tommy Bahama can interact with a guest and create a unique, memorable experience. Jupiter Florida location for example is our 15th retail restaurant combination.

Situated adjacent to a resort hotel with a great outdoor space on the inter-coastal waterway, this location has gotten off to a fantastic start on both the retail and the restaurant side of the business. We also opened three more of our smaller resort format locations, two in the Naples area and one in St. Petersburg.

Like Ocean Reef, which opened late last year, these shops are a good bit smaller than our mall-based stores and feature a curated assortment of product. While these smaller resort stores are likely to generate lower sales volume, they have the advantage of requiring meaningfully less investment and have lower rent structures.

These economics offer us the ability to generate excellent returns and are another exciting opportunity for growth in our brick-and-mortar strategy, particularly in the types of markets where we are particularly strong.

We also continued to find good opportunities for Tommy Bahama in certain regional malls that we have opened -- where we have opened second stores in key markets, one in Sarasota and the other one in La Jolla. It’s been an exciting year so far for our brand and we are looking forward to a strong finish through our holiday and resort season.

Now I’ll turn the call over to Scott Grassmyer to discuss our consolidated highlights.

Scott?.

Thanks Terry. I'd like to walk you through a selection of highlights from our consolidated results for the third quarter of fiscal 2014. Our consolidated sales increased 11% over the prior year period, with double digit sales growth in Lilly, Lanier and Tommy, partially offset by decreased sales in Ben Sherman and all.

On a consolidated basis, our gross profit increased to $112 million from $105 million last year. Consolidated gross margin decreased to 51.5% to 53.1%. In the quarter, Lanier Clothes, ecommerce flash sales, and outlets represented a greater portion of total sales, putting some downward pressure on gross margin.

SG&A increased from $104 million last year to $115 million as we continue to grow the Tommy and Lilly business. Increase was primarily due to investments in infrastructure costs associated with operating additional retail stores and increased compensation expense.

As we mentioned on our call in September, our third quarter is the smallest [indiscernible] quarter of the fiscal year, primarily reflecting the seasonality of the Tommy Bahama and Lilly Pulitzer businesses. This, along with the meaningful fixed expense structure of the business, results in lower operating income compared to other quarters.

We reported consolidated operating income of $2.6 million, compared to $4.6 million in the prior year. Our interest expense in the quarter was $400,000 lower than last year due to both lower rates and lower average borrowings. We continue to have strong liquidity with $86 million of availability under our revolving credit agreements.

Our effective tax rate at 104% was heavily impacted by our foreign losses in the seasonally low earnings quarter. We expect the rate for the fiscal year to be approximately 43%. We believe our inventory levels at 1$46 million is appropriate to support our anticipated sales growth.

During the first nine months, capital expenditures were $37 million and we expect to spend approximately $55 million for the year. This expenditure is primarily a cost associated with both new and remodeled retail stores and restaurants.

We will also continue to invest in information technology and ecommerce capabilities and make certain enhancements in our facilities. I'd now like to comment on our outlook for the fourth quarter and full year. We’re projecting year over year improvement for the quarter. Last year’s fourth quarter adjusted EPS was $0.89.

For the fourth quarter of fiscal 2014, we expect adjusted earnings in a range of $0.96 to $1.06 and sales in a range of $267 million to $277 million. On a GAAP basis, EPS is planned at $0.93 to $1.03. For fiscal 2014, we now expected adjusted EPS in the range of $2.85 to $2.95 and net sales in a range of $990 million to $1 billion.

On a GAAP, we expect EPS in the range of $2.75 to $2.85 for the year. Adjusted EPS in fiscal 2014 was $2.81 and $2.75 on a GAAP basis. Now I’ll turn the call back over to Tom..

Thanks Scott. There can be no question that for many retailers, this has been a challenging holiday season thus far.

We are in a far better position than many, given our strong lifestyle brands, excellent operating teams across the business and in general, strategies that are designed to avoid participating in the kind of market wide promotional environment we are seeing.

We have remained focused and will continue to leverage our strong position in the marketplace to create long term value for our shareholders. Thank you and Renee, we’re now ready to take questions. .

[Operator Instructions]. And our first question comes from Ed Yruma with KeyBanc Capital markets..

Thanks so much for taking my question.

I guess just on the overall retail environment, particularly as it relates to your stores business, are you planning any kind of -- I know you endeavor to be non-promotional, but in the event that the quarter continues to be promotional, are you planning any contingencies? Would we then expect to see increased e-outlet or flash sale? I guess how would you manage a continued difficult trend through the balance of holiday?.

Look Ed, as you know we’ve got great, strong emotional lifestyle brands that have a genuine connection with the customer. And we believe through our combination of great product, great communication and great in store experience, we can meet the expectations that we’ve laid out for you.

We are doing a lot on the marketing front and Terry alluded to that in his prepared comments. We’ve got all kinds of things we’re doing in Lilly Pulitzer, but that does not include adopting a discount strategy. We’ve incorporated all that into our guidance. I would point out that at this point, there is still a long way to go in the holiday season.

The most important selling weeks are in front of us and we feel good about the approach that we’re taking and expect to be able to deliver what we’ve told you today..

Got it. And has there been a change in your use of the bounce back? It seemed like the offer changed a little bit. We’ve noticed it seems like a somewhat wider distribution of the $50 off.

Has there been any fundamental shift there? And I guess if there’s higher redemptions in January, is that also contemplating within guidance?.

I will let Doug and Terry comment on that in a minute, Ed, but there have been some minor tweaks in both the loyalty gift card program as well as the specifics of how the bounce back or as we call it, flipside promotion works. I wouldn’t call them fundamental changes. I think they’re adjustments that we made based on the learnings of past years.

I’ll let Doug and Terry comment on that a little bit further..

Ed, from an overall standpoint, we’ve had both programs now for at least five years. And we have -- as our database grew, we added loyalty cards we send out. And so as the database got bigger we sent out more cards. With regards to the flipside, for the last year we’ve played with both dollar amount. So spent so much to get so much in January.

And also the timing in which we turn that program on and off and if anything, we turn it on over Black Friday, Cyber Monday and dropped a little bit and picked back up again. But those are all the things that we’ve done through the life of the program..

And Ed just following up on your comment, yes, to the best of our ability we baked all that into our guidance..

Got it. And one final question. As it relates to Ben Sherman, I know you guys have done a good job over the past couple of quarters in showing some year over year improvement. I know it wasn’t a huge swing, but that changed a little bit this quarter. I guess how would you characterize the improvement trajectory at Ben Sherman going forward? Thank you..

Thank you, Ed and yes, we expected to be a little closer to last year for the quarter. What happened we had some wholesale that shifted out from Q3 to Q4. Otherwise they were fundamentally on plan for the quarter. As you know in Q1 and Q2 they posted modest but meaningful improvements.

The plan since the beginning of the year has always been that we were going to see the biggest improvement in the fourth quarter and that’s primarily because it’s by far the biggest quarter and it’s the one that gives them the best opportunity if they can generate topline to get operating leverage on their expense structure and deliver more to the bottom line.

We still believe that they’re going to have a very meaningful year over year improvement in the fourth quarter and that’s based on what we’ve seen in the business so far this quarter which has actually been quite strong, particularly in our direct to consumer business. It’s really been quite good so far. .

Our next question comes from Rick Patel with Stephens..

Just hoping to get a better understanding of the wholesale shift.

First, any way to quantify the impact it’s going to have in the fourth quarter? And then what exactly is driving it? Was it one customer pushing the order back? Is it more than one customer? Does it have to do with the port? And then secondly, I know that the department store channel has been tight with inventory management all year.

I’m curious if you anticipate this challenging environment to continue into 2015..

Okay, let me take the first part of that first. In terms of quarter four wholesale, let me approach the whole guidance moderation issue. And we are moderating our sales forecast and our EPS forecast for the quarter and for the year. And what that is, we’ve taken our sales guidance down.

We think that there’s a chance of a sales decline versus our previous guidance of between $5 million and $10 million. That’s based in part on a lower comp assumption for the retail stores where previously we were expecting sort of a low double digit comp for retail. Now we’d be more in the mid to upper single digits range.

And then part of it is based on some expectation that wholesales may slide out. The wholesale issue is a combination of our thinking that some retailers in part due to the weaker selling that they’re seeing may want to slow down their receipt of early spring merchandize. So we would end up sipping that in February rather than late January.

And there is an element of some risk associated with the port slowdown as well..

And can you just delve into that port slowdown a little further.

Perhaps how much of your product is being affected by it and how should we think about any incremental expenses as you try to navigate that?.

Fundamentally it’s a Tommy Bahama issue for us. They’re the only one that does a meaningful amount of inbound receipt through the west coast. So it’s a Tommy issue. Of course they’re our biggest division. We have seen some slowdown so far.

Containers are moving through, but they’re not moving as quickly as we ordinarily see them and we’re continuing to monitor the situation very closely. I’ll let Doug elaborate on this in a minute, but we’re watching it closely. We may end up incurring some air freight expense to avoid having shipments hang out there.

But again as I mentioned to Ed, to the best of our ability we have baked that into our expectation for the quarter.

Doug, do you want to elaborate a little more on that?.

No. I think you covered it. I could just encourage everyone to [indiscernible]. That was great. But the big [indiscernible] December and January, we have [piles] that have been on the water that haven’t cleared the port that we would have liked to have had for holiday. That’s one impact.

The other impact is what Tom just talked about and that is to those things that we have to spring one January are most probably going to flip into February. The good news is the last time this happened was 12 years ago and the team that I’ve got in house were all here 12 years ago.

So we’re all used to working and understanding how to try to improve our schedule. But we’re monitoring it every single day and we’re trying to make sure it doesn’t impact our business..

[Operator Instructions]. Our next question comes from Eric Beder - Wunderlich Securities..

Could you talk a little bit about Asia, what you’re seeing in terms of returns there in the Japanese stores and Australia?.

We continue to be very excited Australia, and I’ll let Terry and Doug add a little to this in a minute. But as Terry mentioned, we opened our eighth store in Australia I think about a week ago now. It’s right in the Manly Beach area of Sydney. This is actually a location that Terry and Doug and I we were there about, a little more than a year ago.

A terrific, very on brand Tommy Bahama location that’s gotten off to a great start. We like everything about Australia. We’ve been happy with that business. We’re going to continue to try to grow there. In Japan and again I’ll let Terry and Doug add to this, we’ve been working hard at it.

Our retail stores there are not quite performing at the level that we want them to long term. But I think we’ve been very pleased with the year over year progress we’ve seen there, particularly in the third and fourth quarters.

As you may recall, we made a number of adjustments last year but we told you that those wouldn’t really take root until the second half of the year. And as those came into play, they did have the desired effect that we feel like we’re moving in the right direction there.

Terry or Doug, do you want to add something on Australia and Japan in particular?.

I think you pretty much hit it, but Eric I can tell you, we selected that location in Manly Beach when we were over there. And I just got the pictures this week as we’ve been opening it. It’s opened with a big success. It’s a very appropriate beach location for us in Manly.

I’d just like to say on the Japanese, we mentioned last year when we were talking about Tokyo that we needed to adjust our strategy and turn harder into fall and the 12 month assortment and it is working. It has worked and we’re seeing nice increases in our Tokyo location and we think it will provide traction..

Okay. In terms of Lilly Pulitzer, so last year this was a negative comp in Q3 or more correctly, you didn’t really have the pattern product.

Were you happy with the results at Lilly and what should we be expecting from them going forward?.

I think that there’s no denying that the environment had some impact on us. As you know Eric, we’ve worked hard on building a second half business in Lilly Pulitzer and have had some success with it. I think given the market conditions, we were pleased with the comp that we were able to generate in the third quarter.

But there are some headwinds out there in the second half of the year which is not Lilly’s natural strength. It’s harder for us to overcome market headwinds than it would be in the first half where Lilly is top of mind for the consumer. So we’re not unhappy at all with what’s happening in Lilly Pulitzer.

We’ve definitely seen a little bit softer business than we had thought we might experience earlier in the year for the second half. There’s nothing wrong with this brand or the business. It’s still on a terrific track and we expect to have a terrific 2015..

And finally, you talked about some softness here.

Do you think that your longer term goals for stores Tommy and Lilly are still intact or is that something you’re going to revisit if these trends continue in terms of overall softness?.

I think it’s a great question, Eric and I think you’re referring to the potential shift of the industry balance between bricks and mortar and e-com. And I don’t think there’s any question that there is some of that going on.

It’s impacting both the mix of business between bricks and mortar and e-com as well to some degree, the flow and cadence of the business and when it occurs. We’re paying a lot of attention to that, but I think the good thing is that our two key brands, Lilly Pulitzer and Tommy Bahama, could not be positioned better to respond to that.

We’ve got great, strong, powerful, emotional brands that have real relationships with our consumers. We’ve not over stored. We’re not over distributed. We have a compelling product. We’ve got great digital presence and we’ve got terrific e-com businesses and know how to play in that space.

So yes, it might adjust our thinking of return, but I don’t think it means bricks and mortar goes away or that new store openings aren’t part of the equation. We think we’re in an excellent position to respond to some of the shifts in the marketplace..

Our next question comes from Mike Richardson with Sidoti..

I apologize if you’ve answered this before. I had a phone issue.

But can you give us some color on how the Tommy Bahama stores are performing in Asia? Any change, improvement in the seasonal transition there?.

We did just answer that a minute ago and I’m sorry you missed the answer. But we continue to be very pleased with what’s happened in Australia and we just opened another store there last year in Manly Beach. And I won’t repeat all the comments on that, but we’re very happy with that and it’s gotten off to a terrific start.

So Australia is good and our goal there is just to keep growing as much as we can there. In Japan, and we touched on this, which is our other key market, we’re not quite where we want to be yet with performance. But based on adjustments that Terry and Doug and their team made last year, we’ve seen some really great progress in Q3 and Q4 in Japan.

We’re getting good year over year improvements and we feel like we’re on the right track..

You made a new hire in the Gulf business recently. I know it’s a pretty small piece of the overall business. I’m just wondering if you can maybe give some color on your thoughts on the Gulf business going forward. Thanks..

Gulf is very, very small for us. It would be less than 2% of our total sales, but it’s a nice market. We’ve got a nice position carved out for ourselves there. We think that it’s a long way from really being a material part of our business, but we do think we can grow it. And part of our effort to do that was bringing in a national sales manager.

Formerly, prior to our bringing her in, the president of that division both served as the president and general manager of the business, as well as wearing the hat of the national sales manager.

And we just believe the business is at a point where a national sales manager can more than pay for herself in the incremental business that she can help us generate by being able to focus fulltime on that function..

Okay, thanks.

Last one for me, just given the performance of Ben Sherman over the last two or three quarters, any change in plans for that brand going forward?.

Again, we expect very strong fourth quarter for Ben Sherman. Our focus with all of our brands is making sure that we’ve got good strategies in place to ensure that they can help contribute to enhancing long term shareholder value. And that’s no different with Ben Sherman.

We’ll see what their fourth quarter does like all the other business [indiscernible] with them in January and go through the future plans with them. And we’ll report back to you on that in March. But again we do -- at this point, the quarter is not over.

Lots of things could happen, but we do feel very good at this point about their ability to deliver a very strong year over year improvement in Q4..

The expected improvement in Ben Sherman in the fourth quarter, is that more wholesale or retail? Where is that coming from?.

I would say more retail than wholesale. That is it’s both. Definitely retail is improving more quickly than wholesale is..

It appears there are no further questions at this time. I will turn the conference back over to Tom Chubb, CEO and President, for additional or closing remarks..

Thank you very much, Renee. I just want to thank everyone for your time this afternoon and I hope you all have a very happy holiday and best wishes for the New Year..

This does conclude today’s presentation. We thank you for your participation..