Oxford Industries, Inc. today announced financial results for its fiscal 2013 second quarter, which ended August 3, 2013. For the quarter, consolidated net sales increased 14% to $235.0 million compared to $206.9 million in the second quarter of fiscal 2012, which ended July 28, 2012. On an adjusted basis, earnings per share rose 55% to $1.01 compared to $0.65 in the second quarter of fiscal 2012.

On a GAAP basis, earnings per share were $0.96 in the second quarter of fiscal 2013 compared to$0.30 in the same period of the prior year.  Adjusted earnings per share for the second quarter of fiscal 2012 exclude $9.1 million of charges related to the redemption of the Company's senior notes.  Adjusted earnings per share for the second quarter of fiscal 2013 exclude $0.6 million of charges resulting from the acquisition of the Tommy Bahama licensed business in Canada. Adjusted earnings per share for both periods exclude charges related to a change in the fair value of contingent consideration and the impact of LIFO accounting. For reference, tables reconciling GAAP to adjusted measures are included at the end of this release.

Thomas C. Chubb III, CEO and President, commented, "We are quite pleased with our first half performance, which included strong top and bottom line growth at both Tommy Bahama and Lilly Pulitzer.  We were particularly pleased with how our direct to consumer channels performed with comparable store sales increases of 13% at Tommy Bahama and 19% at Lilly Pulitzer in the second quarter.  Our results demonstrate the strength of these brands and the power of our direct to consumer strategy.  We believe there are many more opportunities ahead for us to drive sustained, profitable growth in these businesses."

Mr. Chubb concluded, "Following a strong first half, we believe we have an excellent game plan for the all-important holiday and resort selling seasons and are expecting a good second half as well.  Our direct to consumer business continues to perform well, but we have seen some erosion in our wholesale business. Our second half order books came in slightly below our expectation and we've seen some choppiness in our in-season re-order business. We have factored this into our forecast for the balance of the year and have made a modest downward revision to our guidance. Even with this revision, we believe fiscal 2013 will deliver strong top and bottom line results for our shareholders."

Operating Results

Tommy Bahama Tommy Bahama's results for the second quarter continued to demonstrate the strength of the brand.  Net sales increased 20% to $153.2 million in the second quarter of fiscal 2013. Tommy Bahama delivered a comparable store sales increase of 13%, driven by particularly strong e-commerce sales. In addition to opening two new stores in the United States and a store in Sydney, Australia, Tommy Bahama acquired its previously licensed Canadian business, which included nine retail stores. At the end of the second quarter of fiscal 2013, Tommy Bahama operated 133 stores compared to 121 stores at the end of the first quarter of fiscal 2013 and 105 stores on July 28, 2012. 

Tommy Bahama's adjusted operating income for the second quarter of fiscal 2013 rose 47% to $24.5 million compared to $16.6 million in the second quarter of fiscal 2012. The increase in operating income was primarily due to higher sales and gross margin, partially offset by higher SG&A as Tommy Bahama continued to invest in growth initiatives for the brand.  On a GAAP basis, Tommy Bahama'soperating income for the second quarter of fiscal 2013 was $23.8 million compared to $16.6 million in the second quarter of fiscal 2012.

Lilly Pulitzer  Lilly Pulitzer's net sales increased by 24% to $38.2 million for the second quarter of fiscal 2013 with increased sales in all channels of distribution. Lilly Pulitzer delivered a comparable store sales increase of 19%, driven by particularly strong full-price e-commerce sales.  With a new store in the Raleigh-Durham area, Lilly Pulitzer now operates 22 stores compared to 21 stores at the end of the first quarter of fiscal 2013 and 17 stores at July 28, 2012.  As a result of the strong sales increase, Lilly Pulitzer reported a 20% increase in adjusted operating income to $9.6 million for the second quarter of fiscal 2013.  On a GAAP basis, operating income for the second quarter of fiscal 2013 was $9.6 millioncompared to $7.4 million in the second quarter of fiscal 2012.

Lanier Clothes Net sales for Lanier Clothes were $22.3 million in the second quarter of fiscal 2013 compared to $24.8 million in the second quarter of fiscal 2012.  The decrease in sales was primarily due to certain wholesale sales shifting from the second quarter to the third quarter of fiscal 2013. Operating income in the second quarter of fiscal 2013 was $2.0 million compared to $2.4 million in the second quarter of fiscal 2012, affected by the lower sales.

Ben Sherman Ben Sherman reported net sales of $16.3 million for the second quarter of fiscal 2013 compared to $20.1 million in the second quarter of fiscal 2012.  Wholesale sales decreased $3.9 million primarily due to the exit from certain accounts in the UK and US, as well as certain wholesale sales shifting from the second quarter to the third quarter of fiscal 2013.  Ben Sherman's operating loss was $3.8 million in the second quarter of fiscal 2013 compared to an operating loss of $1.5 millionin the same period last year.  The decline in operating results was primarily due to the decrease in sales, lower gross margin and lower royalty income, partially offset by reductions in SG&A.

Corporate and Other Corporate and Other reported an adjusted operating loss of $3.5 million for the second quarter of fiscal 2013 compared to an adjusted operating loss of $4.9 million in the second quarter of fiscal 2012.  The improved results reflect the favorable impact of higher sales at Oxford Golfand decreased corporate SG&A. On a GAAP basis, Corporate and Other reported an operating loss of$3.9 million in the second quarter of fiscal 2013 compared to a loss of $4.6 million in the second quarter of fiscal 2012.

Consolidated Operating Results

Net Sales For the second quarter of fiscal 2013, consolidated net sales were $235.0 million compared to $206.9 million in the second quarter of fiscal 2012. Sales increases at Tommy Bahama and Lilly Pulitzer were partially offset by sales decreases at Lanier Clothes and Ben Sherman.

Gross Profit and Gross Margin For the second quarter of fiscal 2013, consolidated gross margin increased 100 basis points to 58.2%, primarily due to the increased proportion of the higher gross margin Tommy Bahama and Lilly Pulitzer businesses and the continued shift in sales mix towards direct to consumer sales.  Gross profit for the second quarter of fiscal 2013 increased to $136.8 millionfrom $118.3 million in the second quarter of fiscal 2012.

SG&A The Company achieved a modest leveraging of SG&A in the second quarter of fiscal 2013.  SG&A was $112.4 million, or 47.8% of net sales, compared to $100.7 million, or 48.7% of net sales, in the second quarter of fiscal 2012.  The increase in SG&A was primarily due to $9.1 million of incremental costs associated with operating additional retail stores and restaurants, as well as incremental expenses to support the growing Tommy Bahama and Lilly Pulitzer businesses, partially offset by SG&A reductions at Ben Sherman, Lanier Clothes and Corporate and Other.

Change in Fair Value of Contingent Consideration The second quarter of fiscal 2013 included $0.1 million of change in fair value of contingent consideration compared to $0.6 million in the second quarter of fiscal 2012.

Royalties and Other Income   Royalties and other income were $3.4 million in the second quarter of fiscal 2013, comparable to the second quarter of fiscal 2012. 

Operating Income   For the second quarter of fiscal 2013, consolidated operating income was $27.7 million compared to $20.3 million in the second quarter of fiscal 2012.

Interest Expense   For the second quarter of fiscal 2013, interest expense declined 69% to $1.0 millionfrom $3.3 million in the second quarter of fiscal 2012. The decrease was primarily due to the Company's utilization of its U.S. Revolving Credit Agreement, which bears substantially lower interest rates than its previously outstanding senior notes which were fully redeemed in July 2012.

Income Taxes The effective tax rate for the second quarter of fiscal 2013 was 40.7% compared to 36.0% in the second quarter of fiscal 2012.  The rate in the second quarter of fiscal 2013 was unfavorably impacted by the Company's inability to recognize a tax benefit for losses in certain foreign jurisdictions.

Balance Sheet and Liquidity

Total inventories at the close of the second quarter of fiscal 2013 were $101.9 million, compared to$88.4 million at the close of the second quarter of fiscal 2012. The increase was primarily due to anticipated sales growth and the operation of additional retail stores by Tommy Bahama and Lilly Pulitzer.  

As of August 3, 2013, the Company had $125.4 million of aggregate borrowings outstanding and $86.4 million of aggregate unused availability under its US and UK revolving credit agreements.

The Company's capital expenditures for fiscal 2013, including $26.0 million incurred during the first half of fiscal 2013, are expected to be approximately $45 million. These expenditures consist primarily of costs associated with opening new retail stores, retail store and restaurant remodeling and information technology initiatives including e-commerce enhancements.

Fiscal 2013 Outlook

For fiscal 2013, the Company has lowered its full year guidance and now expects adjusted earnings per share in a range of $2.90 to $3.05 and net sales in a range of $920 to $930 million. On a GAAP basis, the Company expects earnings per share in a range of $2.80 to $2.95 for the year. This compares with fiscal 2012 earnings per share of $2.61 on an adjusted basis and $1.89 on a GAAP basis.

For the third quarter, ending on November 2, 2013, the Company anticipates net sales in a range of$195 to $205 million and adjusted earnings per share of $0.08 to $0.13. On a GAAP basis, earnings per share are expected to be between $0.04 and $0.09. This compares with earnings per share of$0.19 on an adjusted basis and $0.18 on a GAAP basis in the third quarter of fiscal 2012 on sales of$181.4 million. Because of the impact of seasonality on the Company's business, sales and earnings in the third quarter are typically significantly lower than other quarters. 

For the fourth quarter, ending on February 1, 2014, the Company expects net sales in a range of $250 to $260 million and earnings per share in a range of $0.99 to $1.09 on an adjusted basis and $0.98 to $1.08 on a GAAP basis.  In the fourth quarter of fiscal 2012, which included 14 weeks, earnings were$0.65 on an adjusted basis and $0.32 on a GAAP basis on sales of $236 million.

The effective tax rate is expected to be approximately 42% for the fiscal year, with the rate in the third quarter expected to be higher than the fourth quarter.

Dividend

The Company also announced that its Board of Directors has approved a cash dividend of $0.18 per share payable on November 1, 2013 to shareholders of record as of the close of business on October 18, 2013. The Company has paid dividends every quarter since it became publicly owned in 1960.