Oxford Industries, Inc. — Form 10-Q Summary
Period clarification: Although the request identifies 2020 Q1, this filing reports Oxford Industries’ first quarter of fiscal 2021, the 13 weeks ended May 1, 2021. The prior comparable quarter ended May 2, 2020. The company designs and sells branded apparel, led by Tommy Bahama and Lilly Pulitzer, with Southern Tide and other businesses also reported.
Financial results and liquidity
- Sales: $265.8 million, up 65.7% from $160.3 million. The comparison is affected by COVID-related store, restaurant and wholesale closures during about half of the prior-year quarter. Sales remained 6% below first-quarter fiscal 2019.
- Profit and margins: Gross profit was $166.6 million; gross margin was 62.7%, versus 58.7%. Operating income was $34.9 million (13.1% of sales), compared with an $85.5 million operating loss. Net earnings were $28.5 million, or $1.70 diluted per share, versus a $66.8 million net loss, or $4.02 per share.
- Drivers and comparability: The prior-year quarter included $60.5 million of goodwill and intangible-asset impairment charges; none were recorded this quarter. Higher sales and improved gross margins also supported the recovery, partly offset by higher SG&A. SG&A rose 11.5% to $137.1 million but declined as a share of sales to 51.6% from 76.7%.
- Cash flow: Operating activities provided $41.0 million, versus $45.8 million used in the prior-year quarter. Investing activities used $5.4 million, including $4.9 million in property and equipment purchases. Financing activities used $9.7 million, including $6.3 million of dividends.
- Balance sheet and liquidity: Cash was $92.1 million at May 1, 2021, up from $66.0 million at fiscal year-end but down from $181.8 million a year earlier. The company had no borrowings under its revolving credit agreement and reported $322 million of unused availability, including most cash as eligible assets. Working capital was $83.6 million and the current ratio was 1.37. Operating lease liabilities totaled $286.6 million; these are separate from reported debt.
- Capital returns: The company declared dividends of $0.37 per share, versus $0.25 in the prior-year quarter. It did not repurchase shares under its public repurchase authorization; $32 million remained available.
Material changes and business developments
- Sales increased in every reported operating group and distribution channel. Retail sales rose to $91.3 million, e-commerce to $74.2 million, restaurant sales to $25.2 million, and wholesale sales to $74.5 million. Direct-to-consumer channels represented a larger share of sales than in the prior-year quarter.
- Tommy Bahama sales increased 80% to $156.7 million; Lilly Pulitzer increased 50% to $73.6 million; Southern Tide increased 86% to $15.5 million. These comparisons reflect the disrupted prior-year quarter.
- Corporate and Other reported a $9.8 million operating loss, versus a $0.3 million loss. A $3.1 million LIFO accounting charge this quarter compared with a $3.3 million LIFO credit a year earlier was a significant factor.
- The company is exiting Lanier Apparel, with completion expected in the second half of fiscal 2021. It recorded $1 million of additional exit charges this quarter and expects approximately $3 million of further charges. Lanier Apparel sales were $12.0 million.
Outlook, risks and unusual items
- Management expected fiscal 2021 capital expenditures of approximately $35 million, including $5 million incurred in the first quarter; actual spending may be affected by the pandemic.
- Management said cash on hand, operating cash flow and revolving-credit availability should fund ongoing requirements and strategic investment. The filing provides no specific revenue or earnings guidance.
- COVID-19 remained a material uncertainty: locations generally had reopened, but many still faced reduced traffic, hours or capacity, and renewed closures were possible. Management could not reasonably estimate the pandemic’s ultimate impact or the extent of recovery.
- The effective tax rate was 17.8%. Favorable items included a $2 million net reduction in uncertain tax positions and certain tax credits and other tax benefits; management cited 25%–26% as a more typical annual rate in fiscal 2019 and 2018.
- Other disclosed risks include discretionary-spending and fashion-demand changes, competition, supply-chain and labor constraints, product costs, wholesale shipment timing, and the execution and costs of the Lanier Apparel exit. The company reported no legal proceedings it believed would materially affect its financial position, results or cash flows.
Key facts for investors to verify
- Assess recovery against fiscal 2019 as well as the COVID-disrupted prior-year quarter; first-quarter sales were still 6% below fiscal 2019.
- Track whether gross-margin improvement and higher direct-to-consumer sales persist, and whether SG&A growth remains controlled.
- Monitor cash conversion, receivables, inventory, and the distinction between zero funded debt and substantial lease liabilities.
- Confirm the timing and ultimate costs of the Lanier Apparel exit and the effect of LIFO adjustments.
- Review subsequent disclosures for pandemic-related operating changes, tax benefits, capital spending and any updated outlook.