Anne Shoemaker - Vice President, Capital Markets and Treasurer Tom Chubb - Chairman and Chief Executive Officer, President K. Scott Grassmyer - Executive Vice President, Finance, Chief Financial Officer and Controller.

Edward Yruma - KeyBanc Capital Markets, Inc. Pamela Quintiliano - SunTrust Corinna Van Der Ghinst - Citi Research Rick Patel - Needham & Co. Eric Beder - FBR Danielle McCoy - Telsey Advisory Group Andrew Burns - D.A. Davidson.

Good day ladies and gentlemen, and welcome to the Oxford’s Second Quarter 2017 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the floor over to Ms. Anne Shoemaker, Treasurer, for opening remarks and introductions. Please go ahead, ma'am..

Thank you Bethany 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 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 non-GAAP 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.

Please note that all financial results and outlook information discussed on this call, unless otherwise noted, are from continuing operations, and all per share amounts are on a diluted basis. As a reminder, the results from the Ben Sherman business are reflected as discontinued operations for all periods presented.

Also, on April 19, 2016, the Company acquired Southern Tide. Please also note that fiscal 2017 which ends February 3, 2018 is a 53-week year. And now I’d like to introduce today’s call participants. With me today are Tom Chubb, Chairman and CEO; and Scott Grassmyer, CFO. 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. Before we jump into the discussion of our results and outlook, I want to spend just a minute or two on a topic far bigger and much more important. The devastation being delivered by Hurricane Harvey at the Gulf Coast region of our country is simply horrific.

Our thoughts and prayers are with the millions of people whose lives have been disrupted and in many cases upended by the hurricane, including some of our own employees and guests.

If there is anything redeeming about this terrible natural disaster, it is a demonstration of the fact that when the chips are down, it becomes evident that there is an incredible capacity for goodwill and generosity across our nation.

The can-do spirit of the people in the affected regions, coming together and helping each other on a neighbor to neighbor basis as well as the work of the tens of thousands of professional and volunteer relief workers involved in the effort is truly inspiring.

We are proud to have a number of initiatives underway through which our company and our employees across the enterprise are helping in the effort. I'll now move on to some commentary on our business.

With solid results for the first half of the fiscal year under our belt, we are well positioned to deliver a healthy growth on both the top and bottom line in fiscal 2017.

Our dynamic portfolio of compelling lifestyle brands and our well managed channels of distribution differentiate Oxford and we are confident in our ability to deliver shareholder value. A real highlight of our first half is the positive momentum we saw and are continuing to see at Tommy Bahama.

In a very crowded and noisy marketplace, where consumers are bombarded, perhaps even overwhelmed by various forms of nonstop communication, many brands struggle to effectively deliver their message, not so with Tommy Bahama. Our call to live the island life is one that Tommy Bahama alone can proclaim boldly and with authority.

Then we not only talk the talk, but we walk the walk by backing up our brand message with our beautiful, differentiated, and innovative product, our island inspired stores, restaurants, and communications, and most important of all, our wonderful people who embody the aloha spirit in everything they do to serve our guests.

The numbers we have achieved thus far this year in Tommy Bahama are the direct result of proclaiming the message, live the island life starting with the 132-page brand catalog we sent to over 900,000 guests in March and then bringing that message to life in every product we make and everything we do and say.

Our men's business remained unfalteringly strong and we gained traction in our women's business. Traffic inched into positive territory in Q2, and comps were solidly positive at plus 5% for the first half. In addition, our restaurant business comped up 6% in the half with particular strength in our key Hawaiian market.

Leveraging the competitive advantages of the Tommy Bahama brand is how we have succeeded and how we will continue to succeed. During the second half, we will continue to leverage our island lifestyle positioning with a variety of compelling initiatives to excite and attract customers.

Tommy Bahama's newest retail restaurant location, which opened this month in Plano, Texas near Dallas, came out of the gate very strongly. The success we are seeing in Plano proves once again our unique ability to deliver a compelling on brand food and beverage experience.

Delivering this experience to the guest not only drives our restaurant business, but cements our position in the guests' minds as the authoritative island lifestyle brand, which in turn helps sell all our products. We will continue to leverage this competitive advantage to drive sustained profitable growth.

Turning to Lilly Pulitzer, with its true resort product, expertise in print, pattern, and color and multigenerational approach, no other brand delivers a resort message the way Lilly Pulitzer does. The strength of our resort positioning enabled Lilly to deliver a remarkable 29% operating margin for the first half.

We also saw good growth in our e-commerce business, which will be about a third of Lilly's business for the year. Lilly's solidly profitable brick-and-mortar presence is an important point of connection with our consumer that helps reinforce the brand's resort positioning.

This is particularly true when the store is located either in a resort area or within the premises of a resort, and we believe there is a lot of room to grow this brand within this resort space.

We recently took advantage of an opportunity to bring in some licensed signature stores in very strategic key resort markets such as Nantucket, Martha's Vineyard, and four stores on Cape Cod.

These locations tie in nicely with our new Watch Hill, Rhode Island; and Avalon, New Jersey stores, as well as the Ritz-Carlton's Lilly Shop at Amelia Island, Florida, where we can focus on true resort.

Later in the second half, pop up shops on Las Olas Boulevard in Fort Lauderdale and on Marco Island will continue to reinforce Lilly's resort brand position. So we just completed our three-day, end-of-season clearance sale and when the dust settles, it will be the largest in Lilly's history.

We saw incredible excitement and enthusiasm from our Lilly customers who were lined up outside our store and came to our website in droves. Full price sales were also quite robust during the sale period. The amazing passion for Lilly we just witnessed reinforces our confidence to deliver a strong second half.

We believe our continued key to grow and success is having fantastic brands that offer beautiful product to our customer, when, where, and how she wants it. We are distribution agnostic. We want our products distributed in ways where we can best grow revenue, build brand awareness, and acquire new customers.

And we believe the most meaningful opportunities for our brands are in our direct-to-consumer initiatives enhancing our customers’ e-commerce experience, having new stores and new concepts and great locations and exploiting our food and beverage expertise.

Tommy Bahama, Lilly Pulitzer, Southern Tide and Lanier Apparel have distinct competitive advantages as well as talented teams operating within a culture of excellence that brings out their best efforts. This is in any environment a formula for success. With that, I'll now turn the call over to Scott Grassmyer..

Thanks Tom. Just a quick additional comment related to Hurricane Harvey. In the Houston area we have one Lilly Pulitzer and five Tommy Bahama stores, none of which appear to have any physical damage. We reopened our Tommy Bahama retail restaurant location, The Woodlands today and we're working to get the others up as soon as possible.

Now I'd like to walk you through some additional details by operating group and our guidance for the third quarter and full year. Please refer to our press release issued earlier today for additional information. Second quarter 2017 net sales increased to $285 million compared to $283 million last year. Once again, Tommy Bahama had a very good quarter.

Direct-to-consumer costs increased 4% and we also saw a nice sales increase in our restaurants. Importantly, Tommy's adjusted operating margin expanded 50 basis points year-over-year to 11.9%. Tommy is on track for the year to grow the top line in the mid-single digits and expand operating margin by over 100 basis points.

Lilly Pulitzer sales were essentially flat with contributions from new stores and positive e-commerce costs offset by lower wholesale sales and negative brick-and-mortar comps. Lilly Pulitzer's operating margin remained very strong at 30%. Tom mentioned the incredible results we just saw in Lilly's clearance event this week.

Not only is this a great brand appropriate way to clear indices in merchandise, it also delivers a very healthy gross margin. For the year we expect Lilly's sales to increase in the mid-single-digit and operating margins remain very healthy at around 20%.

Sales at Lanier Apparel were lower than last year, but essentially in line with what we had planned for the second quarter. For the year we expect mid-single-digit topline growth and an operating margin in the mid-single-digits.

Southern Tide in its first full year of operations with Oxford is on track to deliver revenue just above $40 million and an operating margin in the low double-digits. On a consolidated basis adjusted operating income in the second quarter was $38 million compared to $40 million in the same period of the prior year.

Adjusted EPS in the quarter was $1.44 compared to $1.48 in the second quarter of 2016. Our balance sheet remained strong.

We did a good job of executing our plans on inventory and refining our clearance strategy at Tommy Bahama and we believe we are well positioned for better operating performance in our outlet stores and other clearance channels going forward.

This improvement at Tommy Bahama as well as reductions at Lanier Apparel and Southern Tide resulted in 11% decrease in inventory to $120 million. Continue to generate strong cash flow from operations and reduce our outstanding debt while continuing to invest in our brands and pay a dividend.

We ended the quarter with $38 million of borrowings and $215 million of unused availability under our revolving credit facility and we are well positioned to support our growth initiatives. I'll now walk you through our outlook for the third quarter and full year.

Earlier today we initiated guidance for the third quarter of fiscal 2017 which ends on October 28. In the third quarter we expect net sales to be in a range from $240 million to $250 million and adjusted earnings per share to be between $0.09 and $0.19.

On a comparable basis, sales were $220 million in the third quarter of fiscal 2016 and we had an adjusted loss per share of $0.07. This improvement is primarily due to an expected year-over-year sales increase at Lanier Apparel and the impact of the larger Lilly flash sale.

We are very pleased to have affirmed our adjusted EPS outlook for the full year. Adjusted earnings per share are expected to be between $3.50 and $3.70 which compares to adjusted earnings of $3.30 per share in fiscal 2016. We now expect net sales to grow between $1.085 billion to $1.105 billion as compared to fiscal 2016 net sales of $1.023 billion.

Our effective tax rate for fiscal 2017 is expected to approach 39% compared to 37% in the full 2016 fiscal year, with the increase reflecting the unfavorable impact of divesting of stock awards in the first quarter of this year and reduction in the utilization of operating loss carryforwards related to fiscal 2016.

Full-year interest expense is now expected to be approximately $3.4 million which is comparable to last year. Capital expenditures in fiscal 2017 are expected to be approximately $50 million.

We are investing in information technology initiatives in new Lilly Pulitzer and Tommy Bahama retail stores as well as investments to remodel and relocate existing stores. CapEx this year also will include Tommy Bahama's newest retail restaurant location in Plano, Texas. And Bethany we are now ready for questions..

Thank you. [Operator Instructions] And we will take our first question from Edward Yruma of KeyBanc Capital Markets..

Hi, good afternoon guys. Congrats on the quarter. First on Tommy, I know you guys have had some success at introducing product at higher price points.

Can you talk about pricing overall at Tommy Bahama and maybe opportunities to raise price selectively on existing products? And then as a follow up, at Lilly Pulitzer, how would you score kind of current product acceptance, are there areas in assortment that are stronger and maybe where are the pockets of weakness? Thank you..

Okay, first with respect to Tommy Bahama, I think as we talked about as earlier as the beginning of the year, we are doing some selective price increases. Some of those have kicked in and have been sort of a non-event. In other words, they haven't slowed down the philosophy of those products at all.

And then, I think the balance for those will kick in mostly in the third quarter of this year, but we're not really anticipating any real resistance to those. So combined with what we've done on the product cost side, we continue to expect higher initial gross margins in Tommy Bahama going forward.

And with respect to Lilly and product acceptance, I think the issues that we've had there have not been so much product acceptance, but probably a little more assortment of product and not having as much as of the entry point kind of product in the mix as well as our marketing which has been a little bit more geared to the existing core customer and not so much as that newer customer that's just nibbling at the edges of the brand, and those are things that we will obviously be addressing going forward.

In the fourth quarter particularly, we've got all kinds of great things happening that we feel very good about from both a product and marketing perspective.

So if you'd like a couple of examples of those, we've had really good success with some of these what we call prints with a purpose which are special prints where part of the proceeds goes to the benefit of a charity, and we did one in August called Tortuga Time for loggerhead turtles which did very, very well.

We'll be doing more of that, I don't want to get into details yet. We'll be doing more work direct mail, including a non-comp mailer in December I believe. We've got more frequent smaller drops of products during November and December, will add newness in the stores basically every single week.

We've expanded our lounge offering which is a great space for us what we sometimes called cosy lounge, that these are pyjama type products, but that are substantial enough and stylish enough to be worn as a loungewear including some printed velvet velour that we're very excited and we think the Lilly customer will be very excited about, and there is a great product collaboration going that I think will provide a very exciting entry point kind of product in the stores, so lots of good things are cooking out there for particularly the fourth quarter..

Great, one final followup if I may, could you talk a little bit about Tommy Bahama performance at stores that have a high bias towards foreign tourists, so if it’s kind of New York, Hawaii, or Las Vegas? Thank you..

Well, as we mentioned in our comments, our prepared remarks, Hawaii has been good. We've seen really good strength there. And as you know, there had - we went through a couple of years where the Hawaiian market was not as strong, but this year, year-to-date we really have seen good results, good strong comps.

Restaurants as we mentioned in the Hawaiian key locations like Waikiki and Mauna Lani where you've been before I think we're, we're really good, so we were pleased to see that..

Great thanks so much..

Thank you, Ed..

We will take our next question from Pam Quintiliano of SunTrust..

Great, hey guys. Congrats on the quarter and thanks so much for taking my questions..

Of course..

The first one, just a follow up on Ed's question, can you dig a little bit more into Lilly's comp, particularly you said in the prepared remarks that brick-and-mortar was negative? So I know you just said it was about product exceptions and entry point, is there anything else there you think that we could attribute that to? And then all that detail on 4Q is great, but when we think about the 3Q comp, which has been more challenging than 2Q was, were you able to adjust anything there just reflecting some learnings you had from 2Q? And even if there was anything with inventories or adjusting timing of flows, just how to think about that? And then I have one follow up on Tommy after that..

Yes, so Pam what I would tell you is that in third quarter if you think about it, it’s a very, very small quarter, and the biggest part of the third quarter is the sale to be honest with you, that's sort of the story of the third quarter and that’s going to be a good story on sale.

Overall for the second half, what we experienced in the first half was negative store comps, positive e-com comps which were netted down to an overall negative. In the second half we see that pattern continuing. We do have comps model getting a little bit better, but we’re not projecting a complete turnaround there..

And what would you attribute that to with the negative – with the negative store comps, is it that you are shifting a lot more online or is there anything else with that pattern?.

There are two things, one that we don’t spend a lot of time talking about because there is not whole lot that’s within our control and that’s just general retail traffic which is you know is a trend nationwide pretty much across all retailers.

The second part and this is actually a good new story, we think more of this story is within things that we control and the simple way of putting it is that as we went into this year, we feel like we shifted more towards our core consumer and had less emphasis on attracting new customers or customers that had only been in a small kind of way and trying to get them to come back and buy more.

That was deliberative on our part. In hindsight we think we swung the pendulum a little bit to follow us.

So the fix is really just to step on the gas a bit in terms of bringing in those newer and lower spend customers and making - bringing more of them in and increasing their spend and i think we are quite certain that the levers that we can pull that will help us do that..

That sounds great and then….

One other thing, Pam. This is Scott. The third quarter, we’re going against some pretty tough double stack comps in the last two years, 27 and 12.

So they are tough numbers and it is a small quarter and as Tom mentioned the sale is really that’s the big thing of the quarter and we executed on it and we’re very pleased with the way the sale is shaking out, the sale is over and dust hasn’t all settled..

Yes Pam, we know you are probably one of our over a million customers that visited the website for three days and maybe got into stores as well, but it was just an absolute frenzy. I mean we literally in many if not most of our stores we had people lined up outside the store.

Anne and Scott and I saw a number of videos of people at [indiscernible] and locations all over the country literally like raft around the mall waiting to get in. And as you know on the website we had enormous traffic. It was a very, very successful sale really on all fronts in terms of the dollars we generated.

As Scott mentioned, for us that’s at a very healthy gross margins. So this is - it contributes to our success. It was great from a customer reactivation as well as acquisition standpoint. We got a lot of new customers in and saw a lot of old customers as well.

So it was really just a terrific sale all around and it proves to us that the enthusiasm for the brand remains incredibly high and we think we understand where we can make some adjustments to really restart the comps in a positive direction. At the same time, this is an incredibly strong business.

I mean a 29% operating margin for the first half is something that we’re quite proud of. And as you know, the sales productivity of these stores is incredibly high.

So when you talk about a comp you’re talking about dropping from well over $800 a square foot to something that’s slightly lower than that, but it’s still a very, very productive retail chain. And then there are the new stores that we’re incredibly excited about.

These Martha's Vineyard, Nantucket, the four add on Cape Cod, the one on Newberry Street in Boston, I mean these are markets that are key strategic markets to have a company owned store and we’ve been well represented there by our signature store partner that we believe that we can be even better represented with a company owned store in those very, very important markets..

Oh, I definitely contributed in Watch Hill and the Flash sale. So I....

You know Watch Hill and Avalon have been terrific both from we’ve done excellent business there, but also hopefully we’re indelibly improving the vision of the brand as a true resort brand and the clientele visits those places and as you know the clientele that’s in those places is exactly the type of guest that we’re trying to target..

Then, can I just quickly ask on Tommy, anything, any commentary on Asia and just any update there and how is the Marlin Bar going and I’m sure it continues to be a smashing success, any thoughts on how you’re rolling that out for locations?.

Yes, so on Asia, we made good progress in the quarter. Sales were up slightly. I think we reduced the operating loss for the half by a $1 million versus last year. So we continue to execute our plan there. And as you know, in Australia, we’re very committed to that market. We like that market.

We have a good business there and we’re going to steam ahead there. In Japan we’re very happy with the improvement we’ve seen and the growth that we’ve seen, but we’re still a good ways from being profitable there.

So we continue to look for a solution that allows us to not walk away from the market or the goodwill that we built there, but at the same time to eliminate those operating losses..

And then just the Marlin Bar, what is going there?.

And on the Marlin Bar, we continue to be extremely pleased with what its doing, both on the food and beverage side, as well as very importantly, what it has done for our retail business there particularly the women’s business.

So it’s been a big success and we’re continuing to look for opportunities for how we can take the learnings from that food and beverage concept and leverage it into new locations. The next place where you really see strong evidence of that is in Palm Springs.

That’s going to be a lot more like a Marlin Bar than it is like one of the traditional restaurants and that is currently scheduled to open in early 2018 I think.

So you’ll see it there and at the same time we just opened this great store and restaurant in I believe it’s called Legacy West in Plano, Texas and that thing has just come out of the gates incredibly strong. It has been very, very pleasing to the see and I think it's also a great model of where retail is actually headed in the future.

So, we don't believe at all that but bricks-and-mortar retail is going away. We just believe that it's changing and very, very happily for us we think it's changing in our directions.

So, if you look at Legacy West it's a lifestyle shopping center, no department store, only food and beverage and then what I would call very special and unique retail there and when you think about our portfolio that's perfect for us. That's what we are across our business.

So it is retail about us, we think that not only can we survive, we actually think it's a better environment for us..

I am very excited to go visit that store and….

Yes, that's right you are going to be out there, we….

Yes..

Look forward to you being there..

Thank you..

And we will take our next question from Corinna Van Der Ghinst of Citi Research..

Hi Corinna..

Hi, thank you. Good afternoon. I wanted to start with a couple questions on the guidance. It looks like you just took the full year topline guidance just on the hearing and it sounds like that's may be on the Lilly Pulitzer brand are being expected at mid single digit.

I am just trying to parse out how much the converted really or the acquired really think signature stores are contributing in revenues?.

Yes, that’s one thing you've got to remember the stores are very seasonal and we're buying them after season, so on a full year basis they are going to be about $6 million on a full year basis, but for the season some of them are not even open after once you get into October and live [ph] is just going to be very, very little in the second half of the year and/or actually will be a little bit dilutive to the bottom line in this year, but they'll be accretive next year.

And so those stores aren’t going to have much topline or bottom line impact of this year, but next year though that will contribute..

Okay, great and then just to clarify you guys are expecting Tommy comps to look slightly better for Q3 than Q2 and Lilly comps also slightly better, but still comping negatively in the third quarter, is that the right way to think about it?.

Yes..

Okay, And then lastly on the guidance sorry, does the updated guidance assume higher marketing expense than you guys had previously kind of modeled in just given some of the new marketing initiatives that you talked about like the direct mailer for Lilly in December?.

But both Lilly and Tommy will be spending more marketing yes in the second half than was in the original guidance and than they did last year..

Okay, perfect.

And then if I could squeeze in a second question, I was just hoping you, I know Tom you gave some detail in the prepared remarks about the rationale behind acquiring the signature stores that maybe you could just walk us through kind of why now, what the cost was and is this something that you guys would like to do more of going forward and does it take the place of kind of traditional M&A that you've talked about on new brands?.

Well, it certainly doesn't take the place of additional M&A and there were really 12 stores all together that we bought; six that we bought from one operator and six that we bought from another operator, okay five and seven excuse me. And one of them was really just an opportunistic situation that came up pretty quickly.

Those stores are all in the Virginia area and that was the five store operator. And that came out pretty quickly. She just got to a point where she was ready to move on in her life and so we had an opportunity to take those stores and we did it.

The second group, the New England group if you will those held on the Cape, the Vineyard, Nantucket, Boston, that was something that we'd actually been interested in for a long time. In fact the discussions predate our acquisition of Lilly Pulitzer in 2010, so that has been going on for a long time.

I think both parties always knew that those stores would probably end up within the company owned portfolio and we worked out the deal this year and the fact that we did all these together is really more of a coincidence than anything.

It wasn't like we decided to go on a full scale assault to buy as many signature stores as we could as quickly as we could. With regard to future plans Cori it will be sort of on a case by case basis. I do think that these are probably not the last signature stores that we will buy.

I suspect we will take on some more from the operators, some of the operators, but I also don't expect us to take them all on. We still think there are an awful lot of markets that are best suited for a partner store rather than a company owned store.

We very much value our signature store operators and what they do for the brand and we believe that they will continue to be an important part of our company for a long time. With regard to the economics, I'll let Scott chime in..

Yes, we're not going to disclose those purchases, the actual purchase price of the stores, but as Tom said, there are opportunities come up in the one case and one was much more strategic. And as he said that will, I'm sure they'll be additional ones, but though kind of will be on a case-by-case basis..

Okay, great.

And I’m sorry, I should have asked this [indiscernible] this doesn’t preclude Lilly's move kind of what started across the US this far?.

No and again it does not alter our overall M&A strategy either..

Okay, perfect. Thanks so much..

Thank you..

And we will take our next question from Rick Patel of Needham & Co..

Hi good afternoon everyone, congrats on the strong execution at Tommy. I had a question on Hurricane Harvey. So, if the stores that you have in the region have to remain closed for an extended period of time, how would that impact sales in the third quarter and is that risk embedded into your guidance already for the quarter..

It is, it's not embedded in our guidance and I think Rick it seems at this point well we're still assessing, it seems highly unlikely that they're going to stay closed for more than a couple more days.

I mean there is from every indication we have which includes photographs and discussions with our landlords as well as physical inspection by our employees in some cases there's no physical damage to the property or our inventory. It's really just a matter of the floodwaters receding and the power coming back on I think for the most part.

The biggest one of them, the Woodlands Retail Restaurant reopened today, so that's really good news. And you know, we don't know and we want to be careful, but I think we really expect that the rest of them will be back pretty quickly. And it's six stores altogether, one again the biggest of which is already reopened.

Rick the other part of it of course is what happens once they reopen just how quickly life returns to normal and shopping patterns resume and all that, that's a little harder to call, but we'll see..

How many stores that you’re acquiring, I'm just curious how sales productivity and margins compare to what you have for your own stories and what levers do you need to pull in order to improve these metrics?.

They’re going to be a little below our own store to some a more seasonal, some are not open year round. We do believe that us controlling the product flow that we can improve those and they are wholesale sell today.

So we'll give up the wholesale so in place of the retail sales, but we will have control of flowing the merchandise the way we think we need to flow it, being able to refill in the appropriate product that's really selling. So, we think once we get them and get it back in season we will be able to improve them.

But currently they're not - they're not quite at the performance level of our own stores, but they are profitable..

Okay.

And then just a question on Tommy, so I guess, how should we be thinking about your promotions going forward? I know there was a promotional shift out of 2Q into 3Q, anyway to quantify the positive impact that could have to your third quarter as we think about comps? And in the past you've had these traffic driving events, these gift card promotions in the past and they’ve been pretty successful.

As you think about the back half, should we expect an increase in the cadence of those types of events especially for the fourth quarter?.

I don’t think there’ll be an increase in the cadence. I think we will continue to do them and in some cases we may reach more guests with them as we have through Tommy that we’ve grown the lists of people that we’re targeting.

The big thing in the fourth quarter that will be different is that the work that we did back in the spring the Live the Island Life book, we’re going to do another one of those in the holiday this year.

So to be the same size and sort of weight and quality and all that and we were really, really pleased with how that worked in the spring and so we’re going to do that again in the holiday. And as far as the event it crossed over last year was part second part, third quarter this year also third quarter event.

So it will have a slight lift to our comp size, not going to, it’s not a huge amount, but it should help our comps slightly in the third quarter..

Got it. And then last question from me is on Lilly, so it sounds like the flash sale went really well, it sounds like it’s up.

Any color on why you would expect a slowdown in comps, is there anything that happened last year in particular that would make you be able to more conservative about the outlook for the rest of this quarter?.

A couple, just traffic patterns, so the brick-and-mortar traffic pattern is one thing and then just the comps were going up again in the third quarter of 27, two years ago and 12 last year. So we’re going to get some tough numbers.

So and Tom mentioned some of the products that we’re going to get into especially some of the lower price products are really going to be more the fourth quarter thing rather than the third quarter..

And Rick, just so you’re clear, flash is not in the comp. The sale is not in the comp number..

All right, great. I appreciate all the color and all the best in the back half..

Okay, thanks Rick..

And we will take our next question from Eric Beder of FBR..

Good afternoon. Congratulations on a solid quarter..

Thanks Eric..

Could you talk a little bit, I know you’ve gone through Tommy Bahama doing more in season, end of season sales.

How has that worked out and how does it enable you to be a little bit better on the outlet sales?.

It’s worked out just fantastically well for us. We couldn’t be happier with the way that the overall clearance within Tommy Bahama has worked.

If you remember going into the year our priority in Tommy Bahama was actually improving the whole clearance operation including what we do in the outlets and how we do it in the outlets and fundamentally how we clear end of season merchandize. So we accomplished a number of things.

We did very, very good business during the sale periods that we did in January and then in July. We also managed to sort of take the first mark in store and get rid of a lot of inventory there at a very good recovery and also without incurring the handling and freight charges that you would have if you moved it out.

And you also will remember Eric, that one of our big objectives was sort of unclogging the outlet stores of inventory, so that they could perform better. I believe during the course of the year we’ve lowered the number of units in the outlets by about 40% which is a big accomplishment and it’s working.

We’re seeing the gross margins in outlet go up in the business and the outlet is performing stronger. So when you look at that total clearance situation, it’s really a very, very healthy and strong one. We’re very, very pleased with that. The team at Tommy has done a terrific job..

I see you've closed an outlet, have you just reviewed or kind of rethink how many outlets you actually need, or the ratio they need to be there for going forward?.

Well, as you know, we haven’t added one in I don’t know four years..

It is about four years in the U.S. since we’ve added one..

Yes, so the ratio is definitely tilted more towards full price stores and I think will continue to do so..

Okay. In terms of Tommy Bahama Women’s, there you guys have worked a lot on it. How is it -you mentioned it was doing extremely well.

What’s the next kind of iteration for Tommy Bahama Women’s going forward?.

I think you saw, if you’ve been watching it this year I think it’s a lot of that that is targeted on a same to a 45-year-old and up women. It’s easy to wear. It is what I think of as being breezy and very much Tommy Bahama product. Those are the products that have worked well this year. As we talked about our women’s business has grown nicely this year.

Swim has been extremely strong, but sportswear has been strong too and we’re happy with what’s happening there and we're going to continue in that same direction..

And last the Southern Tide question, what’s happening with Southern Tide in terms of the franchise stores and expanding that more into women’s?.

So we’ve got three franchise stores or licensed stores, but not franchise, there is a legal difference. So they are licensed stores, but we’ve got three open now. We’ve got a number in works of which I think we’ll have three or four more open by the end of the year and then we've got a nice pipeline of them that extends into next year as well.

So that’s going well. We’re pleased with the way that that’s developing and then in women’s I think overall that’s probably somewhere just north of 10% of the business in total. So still small, but it’s actually growing at a rapid rate.

Our bookings for fall and then for next spring falls in the book and the pre-book number is up quite strong over the last year. Still small numbers keep in mind, but it’s grown very nicely and then for spring of the next year we’re in the booking cycle now but it’s going quite well too.

So we’re pleased with the development in the women’s business albeit still quite small in Southern Tide..

Great, good luck for the rest of the year..

Thanks Eric..

[Operator Instructions] We will take our next question from Danielle McCoy of Telsey Advisory Group..

Hi everyone, thank you for taking my question..

Of course..

I was wondering if you could talk about the Tommy Bahama performance in Canada and anything to know between the Canadian market and what you’re seeing here in the U.S.?.

Yes, Canada has been, it’s been good, we are – we did open two new stores last year which are the first two stores that we opened since we got the license back and then there are a couple of small stores we will probably I think when we closed which we might close, but operating further in the better [indiscernible].

There and we also have a small but nice wholesale business in Canada also..

And those closings are on lease expirations. We’re just not going to renew in a couple of places, but the only downsize came - really Danielle is just that it’s a small market. There’s not a lot of population in it..

All right, thank you.

And then I guess as we start to see the product mix shift a bit at Lilly and some more marketing targeting that younger consumer, how should we think about more of a normalized comp going forward for that brand?.

Well, I think we can certainly get back to where we are in positive comps and again in bricks-and-mortar we're at a very, very high level of productivity. So how much comp is reasonable to expect there I'm not sure, although I think it can be positive.

And then on e-com I think we can continue to comp quite nicely that we're getting way ahead of ourselves here in terms of what budgets we actually have, but I don't see why double-digit comps and e-com or not achievable..

All right, great. Thank you guys. Good luck for the rest of the year..

Thank you..

And we will take our next question from Andrew Burns of D.A. Davidson..

Good afternoon. I'll add my congratulations.

Most of my questions were answered, well just a follow up on Southern Tide you've owned the brand for over a year now and setting aside some industry wide wholesale headwinds, how is the brand developing versus your initial expectations? And secondly, you've made some investments there and then you know growth margins for the brand have bounced around a bit, how do you think about the margin profile developing as we move forward? Thanks.

.

I think in terms of how it’s performing versus our expectations, I would say, the thing that we didn't expect was for the market to be as tough as it has been. So, what's changed is that the market is a good bit tougher than when we bought the brand and that's to be fair has slowed things down just a bit.

All that said, we're going to get good growth this year top and bottom line. We're pleased with the way the brand is developing. There is some noise as you point out and our gross margins and I'll let Scott elaborate on that if he wants a little further.

But the brand has a very, very healthy margin structure and has all the makings of a business that can grow profitably for a long time..

Remember Southern Tide is mostly a wholesale business, so where other businesses have a lot of direct consumer, so their gross margins will be a little bit less than some of the other businesses with - they have a lot of direct, but a wholesale business there, very healthy gross margins and some things that were evolved doing some, we're finding some synergies sourcing wise that hopefully can help enhance those margins in the future..

Thanks and as you look at the environment today, do you think the potential for tucking in additional smaller growth brands like Southern Tide is improving given the market volatility?.

Well, we certainly have the capacity and the wherewithal and the desire to do that. It is very hard to predict when an opportunity will materialize. We are optimistic to your point that some of the volatility in the marketplace will sort of trigger some opportunities if you will and we're aggressively looking for them..

Thanks and good luck..

Thanks, a lot..

This concludes our question and answer session. For additional and closing remarks, I would like to turn the call over to Mr. Tom Chubb..

Thank you, Bethany and thanks again for your time this afternoon. We appreciate your interest and look forward to speaking to you again in December..

And ladies and gentlemen this does conclude today's conference. We thank you for your participation. You may now disconnect..