Greetings. Welcome to the Oxford Industries, Inc. First Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Jevon Strasser. You may begin.

Thank you and good afternoon. Before we begin, I would like to remind participants that certain statements made on today’s call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC, including the risk factors contained in our Form 10-K. We undertake no duty to update any forward-looking statements. During this call, we will be discussing certain non-GAAP financial measures. You can find a reconciliation of non-GAAP to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website at oxfordinc.com. And now, I’d like to introduce today’s call participants. With me today are Tom Chubb, Chairman and CEO and Scott Grassmyer, CFO and COO. Thank you for your attention. And now, I’d like to turn the call over to Tom Chubb.

Good afternoon and thank you for joining us. We are pleased to be reporting an incredibly strong start to fiscal 2022. Scott will provide additional detail in a moment, but here are some of the highlights. Before I jump in, I want to pause to thank our incredible team for all that they do. Five consecutive quarters of record earnings do not happen on their own. Each of our happy upbeat lifestyle brands, Tommy Bahama and Lilly Pulitzer as well as Southern Tide, The Beaufort Bonnet Company and Duck Head, which comprise our newly designated emerging brands group, achieved exceptional results in the first quarter of 2022. All three operating groups posted strong sales and operating profit growth over 2021. On an adjusted basis, our consolidated first quarter sales of $353 million, operating margin of 22% and EPS of $3.50 which was an 85% increase over last year’s record first quarter EPS of $1.89, all outperformed expectations. While a terrific quarter for all the biggest contributor to our record earnings was the performance of our largest brand, Tommy Bahama, where sales grew 46% versus 2021 to $228 million and adjusted operating margin increased by nearly 1000 basis points to 23%. We continue to focus on the execution of our strategic priorities that I laid out at the beginning of the year, which drive both our performance to-date and optimism for the future. Our brands are at the core of our business and we remain acutely focused on brand positioning and voice to remain true to who we are. While each brand has a unique DNA, inspiring optimism and aspirations for happiness is paramount across the portfolio. This can be seen particularly through enhanced creative and digital marketing efforts, which are driving tremendous success. The effectiveness of our marketing efforts can…

Thank you, Tom. Our operating groups executed exceptionally well during the first quarter of 2022 and delivered record performance, as Tom mentioned earlier. Our strong start to the year was driven by growth across all brands and channels, supported by outstanding trends in customer count, retail traffic, and average transaction value. In the first quarter of fiscal 2022, consolidated net sales were $353 million, a 33% increase over last year’s first quarter net sales of $266 million, which included $12 million of sales from Lanier Apparel. Our full-price e-commerce business grew significantly, up 20%. On the bricks-and-mortar front, we saw a full-price retail growth of 51%, driven by comp store increases. Performance of our food and beverage locations was strong as well with 23% growth over last year. Our first quarter adjusted gross margin was 64.5% compared to 64% in fiscal 2021. This 50 basis point improvement was fueled by a shift in sales mix towards full-price direct-to-consumer channels and higher IMUs, particularly in innovative new performance offerings, almost 100 basis points of higher freight cost, including the use of air freight, partially offset some of the margin improvement. Our operating margins increased 700 basis points on an adjusted basis to 22% of net sales driven by improvements in gross margin and leverage within SG&A, which decreased to 45% of sales versus 51% last year. All three of our operating groups achieved year-over-year operating margin expansion. Tommy Bahama had especially impressive profitability trends with a 990 basis point operating margin expansion compared to last year. Our business is supported by a very strong balance sheet. Here are some highlights. We ended the quarter with inventory in excellent shape to support planned growth. On an as-reported LIFO basis, inventory increased 13% to $123 million at the end of the first quarter…

Thank you. [Operator Instructions] Our first question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.

Thank you. Congratulations, everyone. What a terrific quarter and a great outlook.

Thank you, Dana.

As you think about the current environment and what you’re seeing with prices and what we’re hearing about wholesale order directional changes and then becoming more conservative, how are you planning AUR price increases? The freight costs look like it went to 100 basis points this quarter from 160 last quarter. Under the hood, how are you thinking about the puts and takes of gross margin and SG&A? Then I just have a question about the brands. Thank you.

Well, I’ll let Scott elaborate on this in a little bit, but I think that generally we feel pretty good about where that’s going to come out. As we mentioned I think in the March call, we did some pricing that took effect in first quarter. We will have more that kicks in over the next couple of quarters. And in terms of maintaining or improving our initial markups, I think we’ve done a pretty good job of staying ahead of some of the cost pressure. We will probably see some level of promotional activity creeping back into the marketplace. As you know, last year the marketplace, in general, was much cleaner than it usually is, and we were just as non-promotional as we’ve ever been. So we will probably get a little pressure from that. And then the freight, as you highlighted, has – some of that headwind has started to decrease in intensity a bit, and I think that’s a potential pickup that we have going forward as well. Scott, you want to fill in some of the blanks?

Yes. On the freight, second quarter might be a little bit of a headwind because we didn’t have a lot in the second quarter last year, but in the third and fourth quarter, it is easing compared to the prior year. Also the way we’ve moved some merchandising calendars, we think we can avoid the degree of air freight that we had to do in the second half of last year. And then as far as SG&A, as a percent of sales, it’ll probably level off or maybe be a little higher in the last three quarters than the prior year as a percent of sales, but we do expect robust growth, and we do have some inflationary pressures, particularly with things like labor, that we’re combating that will – but and then, as Tom mentioned, gross margin wise, we think we’ve gotten ahead of the input cost increases and should still have higher IMUs throughout the year.

Got it. And then the flash sale movement to this quarter, what’s the impact on that on – I think it’s either the second quarter or the third quarter? How are you thinking about that going forward? And then the Marlin Bars looked like they did very well. I think one opening this year. What are you expecting for that?

Yes. So on the flash sale, philosophically – I’ll let Scott talk about what the dollars will look like possibly for the rest of the year. But philosophically, the idea behind the movement in the flash sale was really to mix it up a little bit. As you know, Dana, during the really 2020, during the height of the pandemic and then last year, we mixed up our game a little bit, tried some different things. We like it. I think our consumer really likes to be surprised a little bit, and we like to be a little less predictable with some of that stuff. So that $7 million was really a movement in the timing as much as anything. We will still have an August flash sale and then a January flash sale. And, Scott, do you want to fill in some of the numbers?

Yes. Last year we did not do any in the first half of the year, but had about $19 million in the third quarter. But we had a lot less inventory. We evolved [ph] to a higher inventory level. So, we still expect the third quarter flash sale to probably be a little bit above last year’s flash sale, even though we did an additional sale. And then the fourth quarter sale, we will have one in January and right now we think it will be pretty flattish with last year. We did $13 million last year and we will be somewhere in that range this year in our January sale.

Got it. Two quick last things. One is on the categories that you are selling, are you flexing – it sounds like the dresses and you are flexing into along with men’s and swim, anything to note on categories and how maybe the athleisure trend is trending for you? And then on – for you, Tom and then for Scott, typically, the second quarter operating margin, even if you look in the past, before 2019, is higher than the first quarter, any thoughts behind that or how you are thinking about it? Thank you.

Okay. Thank you very much, Dana. And I will tackle the category shift for you. And as you would expect, really across the whole enterprise, we are shifting into more dressier, more structured categories. So, in Lilly Pulitzer, we are probably selling less leggings than we were last year, but more occasion dresses than we were last year, and that’s actually good because it’s moving the average unit retail up without really a price increase, but just the shift in the mix is helping drive a higher AUR, which is great to see. We are seeing a similar thing in Tommy Bahama, and the best example maybe is in men’s where we have seen huge growth in wovens, which are a fairly pricey category for us, a very key category for us. And while everything – I think every significant category in Tommy Bahama grew during the quarter, we really saw a lot of that dollar increase was coming through wovens, which is a positive. Then in terms of the athleisure, where some of those trends you would think would be slowing down, the more performance-driven product, but that’s not really true. Performance product has continued to grow in both Tommy and Lilly. The mix of that product has changed a bit. So, for example, in Lilly, as I mentioned, the leggings maybe have slowed down a bit, but we are doing really well with some of the tennis and golf type items. And I think what you are seeing is that as people, as we said, return to travel, social events, and even going back to the workplace, which is more casual than it’s ever before and our brands are more appropriate than they have ever been before for the workplace, we are getting a lot of pickup from all of those things.

As far as the operating margins, first quarter we had great expansion and our wholesale business is healthier. And Q1 is a big wholesale quarter as you ship in initial spring. Also our women’s business, Tommy has gotten very, very strong and that tends to be a strong first quarter business. Second quarter we think will still be a strong quarter, but I think first and second on operating margin are coming a lot closer together than they have been in the past. Second quarter has always been a big Father’s Day quarter for Tommy, and it will continue to be. But I think we will see pretty similar operating margins in Q1 and Q2.

Got it. Thank you.

Thank you, Dana.

Our next question comes from the line of Susan Anderson with B. Riley. Please proceed with your question.

Hi. Nice job on the quarter and thanks for taking my question.

Of course.

I was wondering if you can maybe just talk about Southern Tide, the stores there, how those are performing versus your expectations. And then I am curious if you are seeing any difference in that consumer given I think it’s a little – they are a little younger than the other two brands and maybe a little bit more impacted by inflation, just curious if you are seeing any difference? And then I have another question. Thanks

So, with respect to the performance of the stores, I would say that we are very happy with what we are seeing there. We are up to five as we called out in the call script where we have got a couple more that are in the works to open hopefully before too long. So, we like what we are seeing there. It’s still a new operation. We are learning a lot. I mentioned in the prepared remarks that we just recently launched ship-from-store capabilities which just enhances the overall value of those stores to our operation. And bottom line, we like them a lot. And then in terms of the consumer and any differences there, I think it’s a similar economic demographic that we are tracking there. Actually a lot of our younger Southern Tide consumers, it’s probably their parents that are paying for it, not them. So, the response of the consumer to the current conditions has really been pretty similar. And you saw that the emerging brands group posted a – they had a great quarter, too. They are the smallest of our three reporting segments now, but they had a terrific quarter as well, and the biggest piece of that is Southern Tide, but I will tell you that all three brands had a great quarter. As we mentioned in the prepared remarks, when you look at the quarter, all brands and all channels of distribution were up year-over-year, which is pretty impressive to be in that position.

Great. That sounds good. Thanks for all the details there. And then lastly, it sounds like you expect all of the regions to be up this year which is good here. So, I am just curious if you could talk about maybe the performance in the north now or the regions that underperformed last year, what you are seeing there. And then also it sounds like Florida and stuff has continued to be strong, if you could talk about that? Thanks.

Yes. That’s a great question, Susan. And we are seeing really I think all the regions pretty much on a year-to-date basis are up, which is good to see. So, those regions that lagged a little bit and coming back to life the Mid-Atlantic, the Mid-West and the Northeast are all positive and coming back to life and growing pretty nicely, which is great to see. At the same time, the regions that have really been the strongest through the – since the beginning of the pandemic, particularly Florida and Texas, have just been – it’s unbelievable. They just have remained very, very strong. And I think a lot of what’s happening, particularly in our two big brands, Tommy and Lilly that have a lot of presence in Florida is that a lot of their customers are really – they are relocating to those places. And so for them, what previously maybe was a warm weather or vacation brand is really becoming a year-round brand for them when they relocate from the Northeast to somewhere in Florida. And that’s just – that’s more good news for us, to be honest.

Great. That sounds good. Good luck the rest of the year.

Thank you, Susan.

And our last question comes from the line of Paul Lejuez with Citigroup. Please proceed with your question.

Thanks. It’s Tracy filling in for Paul. I had a couple questions. I guess the first is on inventory. Maybe if you could give us a sense of where it is by brand and if there are any areas like either if you are more constrained – you were more constrained at one brand versus the other this quarter and if you thought you missed sales because of supply chain constraints? And then the second question is just on the drivers of the comp increase at retail in the first quarter. I was wondering if it was primarily ticket and AUR driven or just what your traffic looked like in the first quarter? Thank you.

Do you want to tackle the first part?

Yes. Our inventory on each brand was up some, but as you mentioned, last year was a little bit lower than ideal. And this year with supply chain things, I am sure there is some sales miss, but us being 80% direct, we had very compelling well merchandised packages on the floor and on the side. So, I don’t think we missed a lot of sales. But there are some pockets where maybe some late inventory if we hadn’t had on the floor we might have had some opportunities. But we feel good about our inventory. As we have talked about with some of the systems we have now, we believe we can do more sales with less inventory and I think that’s showing through that our inventory levels now on a FIFO basis are no higher than ‘19 levels, and we are doing a lot more business on that inventory. So, we feel good about our inventory. We are bringing some goods in earlier. We still are looking at [ph] some maybe gets on our books a little bit earlier as we reacted to some supply chain things by placing orders earlier. But anytime you don’t get everything you want and it is exactly when you want it, you might be missing some sales. But being 80% direct, you can mitigate a lot of that.

And then – and Tracy, in terms of what’s driving the increase in the direct-to-consumer, it’s primarily traffic, a bit of AUR increase as well with a lot of that AUR increase actually coming from, as we talked about, the mix of product and the skewing maybe to some more expensive items, plus a little bit of price increase getting in there from like-for-like. And that that’s really been true across the big brands, but the smaller brands as well, Duck Head and Beaufort Bonnet and Southern Tide.

Got it. Thanks very much.

Thank you.

We have reached the end of the question-and-answer session. I will now turn the call back over to Tom Chubb for closing remarks.

Okay, Shamali. Thank you very much and thanks to all of you for your interest. Enjoy your summer. And we look forward to talking to you again in early September.

And this concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.