Oxford Industries, Inc. — Form 10-Q Summary
Reporting period: The filing covers the first quarter of fiscal 2013, the 13 weeks ended May 4, 2013. The request metadata says “2012 Q1,” but the filing itself identifies the period as fiscal 2013 Q1; the comparable period was fiscal 2012 Q1, ended April 28, 2012.
Financial results
| Metric | Fiscal 2013 Q1 | Fiscal 2012 Q1 | Change |
|---|---|---|---|
| Net sales | $234.2 million | $231.0 million | +1.4% |
| Gross profit / margin | $134.1 million / 57.2% | $129.2 million / 55.9% | Margin +1.3 percentage points |
| Operating income / margin | $26.1 million / 11.1% | $32.8 million / 14.2% | -20.5% |
| Net earnings | $13.6 million | $18.0 million | -24.3% |
| Diluted earnings per share | $0.82 | $1.09 | Down $0.27 |
| Operating cash flow | -$4.6 million | -$3.1 million | Greater cash use |
| Capital expenditures | $13.9 million | $9.6 million | Higher investment |
Gross margin improved mainly because Tommy Bahama and Lilly Pulitzer, which generally have higher margins, accounted for a larger share of sales, and direct-to-consumer sales increased. Higher SG&A more than offset sales and gross-profit growth: SG&A rose 12.1% to $113.0 million, or 48.3% of sales versus 43.6%.
Business and segment performance
- Tommy Bahama: Sales rose 6.6% to $150.4 million, including 10% comparable-store sales growth. Operating income fell 16.4% to $21.4 million as store growth, Asia-Pacific expansion and business-support costs outweighed revenue growth.
- Lilly Pulitzer: Sales rose 10.7% to $39.4 million; comparable-store sales increased 3%. Operating income was approximately flat at $11.0 million as added SG&A and lower gross margin offset sales growth.
- Lanier Clothes: Sales declined 17.4% to $27.3 million and operating income declined 39.2% to $2.5 million, reflecting order timing, exited programs, pricing pressure and product mix.
- Ben Sherman: Sales declined 29.5% to $12.2 million; operating loss widened to $4.8 million. The filing cites reduced wholesale accounts and volume, weak UK and European conditions, and merchandise-mix issues that drove promotions.
Balance sheet, liquidity and debt
- At May 4, 2013, cash was $28.3 million, current assets $248.5 million, current liabilities $98.3 million and working capital $150.3 million. The current ratio was 2.53.
- Total debt was $165.1 million: $159.3 million long-term and $5.8 million short-term. Debt to total capital was 41%, versus 34% at April 28, 2012.
- Unused availability under revolving facilities was $71.6 million in total: $69.6 million under the U.S. facility and $2.0 million under the U.K. facility. The company reported compliance with its credit covenants and said no financial covenant testing was required during the quarter.
- Cash from financing was $39.3 million, primarily reflecting revolving-credit borrowings. Cash increased by $20.9 million during the quarter. Operating cash use is described as typical for the seasonally weak first quarter.
Outlook, commentary and notable items
- Management forecast fiscal 2013 capital expenditures of approximately $45 million, compared with $60.7 million in fiscal 2012, mainly for stores, remodels and information technology.
- Management anticipated fiscal 2013 interest expense of approximately $4.5 million and a full-year effective tax rate of approximately 41%. The first-quarter rate was 45.8%, affected by foreign losses for which no tax benefit was recognized.
- Management expected fiscal 2013 Asia-Pacific operating losses to be comparable to the $10.4 million incurred in fiscal 2012, with the loss rate moderating toward year-end as more stores contribute.
- On May 6, 2013, after quarter-end, Oxford acquired its former licensee’s Tommy Bahama operations in Canada, including nine retail stores and a wholesale business. Quarter-end cash included $18.7 million borrowed to fund the transaction, costs and initial working capital.
- Management cited promotional retail conditions, economic uncertainty, input-cost pressures, challenging tailored-clothing markets and continued weakness in the UK and Europe. Apparel demand is discretionary and seasonal; quarterly results are not necessarily indicative of full-year results.
- The filing reports no litigation or regulatory action expected to have a material adverse effect, no material change in market-risk exposure, and effective disclosure controls. No material changes to internal control over financial reporting were reported.
Important facts for investors to verify
- Confirm the reporting-period label: the filing is fiscal 2013 Q1, despite the request metadata’s “2012 Q1.”
- Track whether Tommy Bahama and Lilly Pulitzer sales growth can absorb expansion and infrastructure costs without further margin pressure.
- Monitor Ben Sherman’s merchandise and wholesale turnaround, and Lanier Clothes’ order trends, pricing and margins.
- Assess debt and revolving-credit availability after the Canadian acquisition and planned capital expenditures; the $18.7 million acquisition funding was borrowed before quarter-end and spent after it.
- Compare actual full-year results with management’s capital-expenditure, interest-expense, tax-rate and Asia-Pacific loss expectations.