Oxford Industries, Inc. — Form 10-Q Summary
Period: Third quarter and first nine months of fiscal 2022. The quarter was the 13 weeks ended October 29, 2022; the nine-month period was the 39 weeks ended that date. The request metadata says “2021 Q3,” but the supplied filing is for fiscal 2022 Q3.
Business context and results
Oxford operates Tommy Bahama, Lilly Pulitzer, Johnny Was, Southern Tide, The Beaufort Bonnet Company and Duck Head. It acquired Johnny Was on September 19, 2022, so reported results include only six weeks of that brand. Fiscal 2021 comparisons also reflect the prior-year Lanier Apparel business, which Oxford exited.
| Metric | Q3 FY2022 | Q3 FY2021 | First nine months FY2022 | First nine months FY2021 |
|---|---|---|---|---|
| Net sales | $313.0m | $247.7m | $1,029.0m | $842.2m |
| Gross profit / margin | $197.7m / 63.2% | $152.5m / 61.6% | $656.2m / 63.8% | $528.7m / 62.8% |
| Operating income / margin | $27.3m / 8.7% | $30.6m / 12.4% | $178.7m / 17.4% | $133.5m / 15.9% |
| Net earnings | $19.7m | $26.0m | $133.7m | $105.9m |
| Diluted EPS | $1.22 | $1.54 | $8.19 | $6.29 |
| Operating cash flow | Not stated separately | Not stated separately | $86.3m | $157.1m |
Q3 sales increased 26.4%, while net earnings fell 24.3%; nine-month sales rose 22.2%, operating income 33.8% and net earnings 26.2%. Q3 operating income and EPS were lower mainly because Q3 FY2021 included an $11.6m gain on sale of an investment, while Lilly Pulitzer operating income declined and the tax rate was higher. Nine-month diluted EPS also benefited from a 3% reduction in weighted-average diluted shares.
Q3 sales growth included Tommy Bahama up 20%, Lilly Pulitzer up 16%, Emerging Brands up 22% and $22.7m of post-acquisition Johnny Was sales. On a nine-month basis, Tommy Bahama sales rose 27%, Lilly Pulitzer 14% and Emerging Brands 32%. Retail, e-commerce, restaurant and wholesale represented approximately 36%, 34%, 7% and 22% of Q3 sales, respectively.
Cash flow, liquidity and capital
- Nine-month operating cash flow was $86.3m, down from $157.1m, mainly reflecting inventory and receivables growth and lower current liabilities. Investing activities used $129.7m, including $263.7m for acquisitions and $32.3m of capital expenditures; financing activities provided $13.2m.
- At October 29, cash and cash equivalents were $15.0m, with no short-term investments; working capital was $69.1m and the current ratio was 1.30. Inventory was $171.6m, compared with $91.0m a year earlier.
- Long-term debt was $130.4m, primarily drawn to finance Johnny Was. The company reported $160m of unused revolving-credit availability, subject to limitations, and a 4.4% weighted-average borrowing rate. The credit facility matures in July 2024; Oxford reported covenant compliance.
- Oxford repurchased 976,000 shares for $87m during the first nine months and declared dividends of $1.65 per share. It expected fiscal 2022 capital expenditures of approximately $50m.
Outlook, risks and unusual items
- Management said recent demand and earnings were strong, but cautioned that their continuation is uncertain. Risks include inflation, higher interest rates, changing discretionary spending, supply-chain disruption, labor and freight costs, COVID-19 effects, geopolitical events and weather.
- For Johnny Was, management cited approximately $209m in sales in the 12 months ended October 29, 2022, expected annual gross margin of about 65% excluding inventory step-up charges, and expected EBIT margin in the mid-to-high teens excluding inventory step-up charges and intangible amortization. These are management expectations, not consolidated guidance.
- Management expected a fiscal 2022 effective tax rate of 24%–25%. The filing does not provide a consolidated full-year revenue or earnings forecast.
- Johnny Was was acquired for approximately $271m, funded with cash, short-term investments and revolving-credit borrowings. The purchase-price allocation is preliminary; $92.5m of goodwill and $134.6m of intangible assets were recorded. Oxford incurred approximately $2.8m of transaction and integration costs through Q3 and recognized a $1.4m inventory step-up charge; further integration costs may occur.
- Hurricane Ian reduced estimated Q3 sales by approximately $3m; two Naples locations reopened in November. Oxford noted uncertainty about ongoing regional effects. It also cited Johnny Was integration, China sourcing concentration, regional store concentration, lease commitments and possible goodwill or intangible impairment as risks.
- The business is seasonal, and Q3 is typically its lowest-sales and lowest-earnings quarter. Management said quarterly results in FY2021 and FY2022 may not indicate future quarterly patterns.
Key facts for investors to verify
- Confirm the intended filing period: the supplied 10-Q covers fiscal 2022 Q3, not 2021 Q3.
- Track whether Johnny Was meets the stated growth and margin expectations after integration and completion of purchase accounting.
- Monitor inventory levels, working-capital cash use, freight and product costs, and the impact of markdowns on margins.
- Assess debt reduction, variable-rate interest exposure, revolving-credit availability and the July 2024 facility maturity.
- Review subsequent results for Hurricane Ian effects, acquisition integration charges and any impairment indicators.