Oxford Industries, Inc. — Form 10-K Summary
Reporting period: Fiscal 2021, the 52 weeks ended January 29, 2022; filed March 28, 2022. Although the request metadata says “2020 Q4,” this filing covers the full fiscal year ended in 2022, not the quarter ended in 2020. Fiscal 2020 ended January 30, 2021.
Business context
Oxford is a branded apparel and lifestyle company whose principal brands are Tommy Bahama, Lilly Pulitzer and Southern Tide, with TBBC and Duck Head also included in its portfolio. Tommy Bahama and Lilly Pulitzer together generated 90% of Fiscal 2021 consolidated sales. Sales were 80% direct-to-consumer and 20% wholesale. The company completed its exit from Lanier Apparel during the year.
Financial results and liquidity
| Metric | Fiscal 2021 | Fiscal 2020 | Fiscal 2019 |
|---|---|---|---|
| Net sales | $1.142 billion | $748.8 million | $1.123 billion |
| Gross profit / margin | $706.2 million / 61.8% | $415.2 million / 55.4% | $645.0 million / 57.4% |
| Operating income (loss) | $165.5 million / 14.5% of sales | $(123.8) million | $93.7 million |
| Net earnings (loss) | $131.3 million | $(95.7) million | $68.5 million |
| Diluted EPS | $7.78 | $(5.77) | $4.05 |
| Cash from operating activities | $198.0 million | $83.9 million | $121.9 million |
- Sales rose 52.5% from Fiscal 2020, recovering from pandemic-related closures and reduced traffic; they were 1.7% above Fiscal 2019. Net earnings were described as a record.
- Fiscal 2021 gross margin improved from both comparison years, supported by more full-price sales, fewer markdowns, better initial product margins and a more favorable direct-to-consumer sales mix. Higher freight costs and a $16 million LIFO charge were offsets.
- SG&A was $573.6 million, or 50.2% of sales, versus $492.6 million, or 65.8%, in Fiscal 2020. The increase in dollars primarily reflected reopened operations, higher employment and variable costs, incentive compensation and advertising.
- Cash and short-term investments totaled $209.7 million at year-end ($44.9 million cash and $164.9 million short-term investments). The company had no borrowings outstanding and reported $322 million of unused availability under its $325 million revolving facility; stated total liquidity was $382 million.
- Working capital was $174.2 million and the current ratio was 1.77, compared with $62.1 million and 1.32 a year earlier. Inventory was $117.7 million.
- Operating lease liabilities had a present value of $260.8 million. These lease obligations are separate from reported debt, which was zero at year-end.
- Capital expenditures were $31.9 million. Management expected Fiscal 2022 capital expenditures of approximately $50 million.
Material changes and unusual items
- Tommy Bahama sales increased 72.5% to $724.3 million and operating income was $111.7 million, compared with an operating loss in Fiscal 2020. Management reported a 15% operating margin and sales 7% above Fiscal 2019.
- Lilly Pulitzer sales increased 29.4% to $299.0 million; operating income rose to $63.6 million. Southern Tide sales increased 55.9% to $54.1 million and operating income was $10.0 million.
- Fiscal 2020 included $60.5 million of goodwill and intangible-asset impairment charges, mainly for Southern Tide, and a $15.5 million write-off of an abandoned Tommy Bahama technology project. Neither charge recurred in Fiscal 2021.
- Fiscal 2021 included a $16 million LIFO charge, a $4.9 million Tommy Bahama lease-termination charge, a $11.6 million gain on sale of an investment, and a $2.7 million gain on sale of the Lanier distribution center. Lanier exit activity generated a $2 million net benefit for the year; the company expected no further Lanier revenue or exit charges.
- E-commerce accounted for 32% of consolidated sales, down from 43% in Fiscal 2020, while retail rose to 39% from 27%; the prior-year mix reflected pandemic-related store closures. E-commerce sales were $369.3 million, and management expected them to exceed full-price retail sales in Fiscal 2022.
Outlook, commentary and risks
Management cited strong consumer demand and a rebound in physical-store traffic, while emphasizing uncertainty about whether these trends would continue. Its priorities include growing direct-to-consumer and digital capabilities, investing in its brands, and protecting brand positioning through selective distribution and controlled promotional activity. Planned Fiscal 2022 activity included three Lilly Pulitzer store openings and additional Southern Tide stores; Tommy Bahama anticipated a Marlin Bar conversion and a limited number of possible store closures.
Management aimed to sustain Tommy Bahama’s Fiscal 2021 margins through product-cost reductions, selective price increases, tighter inventory buying and clearance management, expense control, and a conservative approach to store openings and lease renewals. Key risks include COVID-19 effects, inflation and freight costs, supply-chain delays, labor availability and expense, sourcing concentration in Asia and China, fashion and discretionary-spending shifts, inventory forecasting, wholesale-customer credit exposure, cybersecurity, and geopolitical or trade developments. The company reported more than $35 million of U.S. import duties in Fiscal 2021 and an average duty rate of approximately 17% on directly imported products.
The Board approved a $0.55-per-share dividend payable in April 2022, a 31% increase over the Fiscal 2021 fourth-quarter dividend. A $150 million share-repurchase authorization was in place; the company repurchased about $8 million in the fourth quarter and reported $112 million remaining under the authorization as of March 28, 2022. Dividend and repurchase levels remain subject to cash needs, credit-agreement terms and other constraints.
The independent auditor issued an unqualified opinion on the financial statements and internal controls. The audit identified annual impairment testing of goodwill and indefinite-lived intangible assets as a critical audit matter; no such impairment was recorded in Fiscal 2021.
Important facts for investors to verify
- Confirm the period distinction: this is Fiscal 2021, ended January 29, 2022, rather than a 2020 fourth-quarter filing.
- Assess whether Fiscal 2021 demand, sales mix and 61.8% gross margin are sustainable after the pandemic recovery, including the effects of freight, labor, inflation and LIFO accounting.
- Review the reported $382 million liquidity figure alongside the $209.7 million of cash and investments, revolving-credit borrowing-base limitations, and $260.8 million of lease liabilities.
- Evaluate the degree to which earnings include nonrecurring gains and exit-related items, and compare ongoing operating performance after those items.
- Monitor inventory availability and aging, supplier and shipping concentration, and the company’s ability to deliver planned store, digital and technology investments within budget.