Oxford Industries, Inc. — Form 10-Q Summary
Period: First quarter of Fiscal 2017, the 13 weeks ended April 29, 2017, compared with the 13 weeks ended April 30, 2016. Although the request metadata says “2016 Q1,” the filing is for 2017 Q1.
Financial performance
| Metric | Q1 FY2017 | Q1 FY2016 | Change |
|---|---|---|---|
| Net sales | $272.4 million | $256.2 million | Up 6.3% |
| Gross profit / margin | $159.4 million / 58.5% | $151.5 million / 59.1% | Profit up 5.2%; margin down 0.6 points |
| Operating income / margin | $30.0 million / 11.0% | $32.0 million / 12.5% | Down 6.4% |
| Net earnings from continuing operations | $17.2 million | $20.2 million | Down 14.8% |
| Diluted earnings per share | $1.03 | $1.21 | Down 14.9% |
| Cash provided by operations | $13.6 million | $1.7 million | Up $11.9 million |
Higher sales reflected Southern Tide’s first full quarter after its April 2016 acquisition, additional stores, higher Tommy Bahama restaurant sales, and a 2% increase in comparable store sales. Consolidated operating results were pressured by higher SG&A, a $1.7 million LIFO charge versus a $0.3 million credit a year earlier, and weaker Lilly Pulitzer and Lanier Apparel results.
Segment sales and operating income were: Tommy Bahama, $172.5 million and $16.0 million; Lilly Pulitzer, $63.3 million and $17.7 million; Lanier Apparel, $23.4 million and $0.9 million; Southern Tide, $12.6 million and $2.1 million. Tommy Bahama operating income rose 20.4%; Lilly Pulitzer fell 14.9%; Lanier Apparel fell 70.1%. Southern Tide’s comparison is not meaningful because the prior-year quarter included only post-acquisition days.
Balance sheet, debt and liquidity
- At April 29, 2017, cash was $6.6 million, working capital was $117.7 million, and the current ratio was 1.99.
- Long-term debt was $93.3 million, down from $152.9 million at April 30, 2016. Debt to total capital was 19%, compared with 30% a year earlier.
- The company reported $194.4 million of unused availability under its revolving credit agreement, subject to borrowing-base limitations, and stated it was compliant with its covenants. The facility matures in May 2021; its weighted-average borrowing rate was 2.5%.
- Cash used in investing was $8.8 million, including $8.5 million of capital expenditures. Financing used $4.6 million; dividends paid were $4.6 million.
Outlook, commentary and risks
- Management expects Fiscal 2017 interest expense of approximately $3.5 million, an effective tax rate of approximately 39%, and capital expenditures of approximately $50–$55 million. No full-year revenue or earnings guidance is provided in the supplied filing text.
- Management estimated Southern Tide Fiscal 2017 sales would exceed $40 million, with approximately 80% from wholesale.
- Tommy Bahama priorities include improving margins through product-cost reductions, selective price increases, lower inventory purchases, revised clearance practices, expense control, a more conservative store approach, and reducing Asia-Pacific operating losses.
- Management cited subdued store traffic, changing digital shopping behavior, promotional pressure, department-store weakness, consumer and economic uncertainty, fashion demand, weather, product and labor costs, and execution risks. Results are seasonal and interim results may not indicate full-year performance.
- Retained lease obligations related to discontinued Ben Sherman operations remain uncertain; the estimated ultimate loss depends partly on future sublease income and market rents. The company reported no legal proceedings it believed would have a material effect.
- Management anticipated the new lease accounting standard would significantly increase recognized lease-related assets and liabilities. The revenue-standard adoption impact and method had not yet been determined.
Important facts for investors to verify
- Whether sales and margins improve in subsequent quarters, particularly at Lilly Pulitzer and Lanier Apparel, and whether Tommy Bahama’s stated margin initiatives produce results.
- How much reported growth reflects Southern Tide and added stores versus comparable demand; comparable store sales increased 2% overall but declined 7% at Lilly Pulitzer.
- Working-capital and seasonal cash-flow trends, revolving-credit availability, debt levels, and covenant headroom.
- Actual Fiscal 2017 tax rate, interest expense, capital expenditures, and Southern Tide sales versus management’s estimates.
- The eventual cost of discontinued-operation lease obligations and the financial-statement effects of pending accounting standards.