Oxford Industries Building a New DC for DTC Support

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For Oxford Industries Inc., 2024 will be an investment year as it plans for the build out of a new distribution center (DC).

The apparel manufacturer said capital expenditures for 2024 will be in the range of $200 million, up from $74 million last year as it builds a new state-of-the-art facility in Lyons, Ga., to provide direct-to-consumer (DTC) support for all its brands. That support will include the East Coast operations of its Tommy Bahama brand, Oxford said. The new facility is expected to be completed in fiscal 2025. Other brands Oxford owns include Lilly Pulitzer, Johnny Was, Southern Tide, The Beaufort Bonnet Co., Duck Head and footwear brand Jack Rogers, which Oxford acquired in the fourth quarter of fiscal 2023.

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The Tommy Bahama owner disclosed the new facility last week when the company posted earnings results for the fourth quarter ended Feb. 3. Tom Chubb, chairman, president and CEO, said during a conference call that the new DC “will allow us to house and ship more of our product much closer to the markets where we do a very large portion of our business.” Added pluses include getting product to consumers more quickly, replenishing its stores faster, and allowing Oxford to do more business on less inventory.

“The initiative also allows us to leverage our long history in the Lyons community and the excellent workforce that we have there,” Chubb said. He also said the company “will be able to do all of this while maintaining highly competitive shipping costs.”

Also in the company’s future is the exploration of opportunities to expand its use of artificial intelligence (AI). “We already employ AI in a side variety of specific situations and believe that we will continue to find incremental use cases where we can employ AI to improve our efficiency and effectiveness,” Chubb said.

He said the company wrapped up fiscal 2023 with soft sales in January. That continued into February, the start of the first quarter of fiscal 2024, as the company cycled strong double-digit comps from a year ago. In March, as comparisons eased and business picked up, Chubb said the company is comping modestly positive.

“We believe the choppiness we have experienced is reflective of a somewhat unusual situation where most economic indicators are actually fairly positive, and yet consumer sentiment remains materially below where it was for the four or five years prior to the pandemic,” he said, adding that consumer sentiment is manifesting itself in consumers who have the ability to spend, but are becoming more cautious on discretionary spending.

Chubb said the company will stay focused on long-term opportunity, and double-down on efforts to have “fresh, new, differentiated products that gives the consumer a good reason to open her wallet.”

Oxford’s biggest brand is Tommy Bahama. Chubb said the brand is focused on developing and growing its hospitality business. Last year, the brand opened its new Tommy Bahama Miramonte Resort. He said that the brand’s stores that are connected to one of its restaurants and bars “almost uniformly do a higher percentage of business in women’s than the fleet average, and have a higher sales per square foot by a significant margin than the fleet average.” And women’s has now grown to 36 percent of the brand’s DTC business.

At Lilly Pulitzer, which is celebrating 65 years operation, the brand is rolling out collaborations to celebrate its milestone. The brand also has changed up several promotional events in the first two quarters to “surprise” the customer. Chubb said Oxford completed its integration of the Johnny Was brand and in 2024 will focus on increasing store productivity and the effectiveness of its marketing activities. The brand last month introduced its first women’s denim collection.

Chubb said Southern Tide opened a number of stores last year and ended the year with 19 company-owned stores in operation. Oxford plans to open more Southern Tide stores in 2024 and at least one door for the Beaufort Bonnet Co. And for its newest acquisition, Chubb said 2024 will be a year of resetting the Jack Rogers brand, including cleaning up inventory.

Oxford posted a quarterly net loss of $60.1 million, or $3.85 a diluted share, on a 5.7 percent rise in net sales to $404.4 million. That compares with net income of $32 million, or $2 a diluted share, on net sales of $382.5 million in the same year-ago period. On an adjusted basis, earnings per share (EPS) was $1.90, versus $2.28 a year ago. For the year, the company posted a 63.4 percent drop in net income to $60.7 million, or $3.82 a diluted share, on an 11.3 percent gain in net sales to $1.57 billion. On an adjusted basis, EPS was $10.15.

For fiscal 2024, Oxford guided net sales in the range of $1.63 billion to $1.67 billion, with GAAP ES between $8.80 and $9.20. For the first quarter, net sales were projected at between $395 million to $415 million, with GAAP EPS estimated in the range of $2.47 to $2.67.

B. Riley Securities analyst Jeff Lick said 2024 guidance “implies back-half acceleration.” However, he did describe hitting company targets for fiscal 2024 as “daunting,” given the excellent weather, the extra 53rd week to the retail calendar and end-of-year stock market rally in fiscal 2023.

“The current operating environment has led to caution among many retailers, and as a result, we expect our wholesale business to be down meaningfully in the first quarter compared to a very strong first quarter for wholesale last year,” Chubb said. “We expect wholesale to be positive on a year-over-year basis for the balance of the year, which will partially—but not fully—offset the first quarter decline, meaning that we will be down slightly in wholesale for the full year.”

Chubb also said for the full year, the company expects a mid-single-digit top-line growth with new stores and modestly positive comps to help offset economic headwinds and consumer cautiousness.

CFO Scott Grassmyer said the company ended the year with $244 million of cash flow from operations, versus $126 million in 2022. That allowed the company to reduce outstanding debt, while also funding $74 million of capital expenditures, $42 million of dividends, $20 million of share repurchases, and $12 million of acquisition-related expenses for the purchase of Jack Rogers and six former Southern Tide signature stores.