Greetings and welcome to the Oxford Industries Fourth Quarter Fiscal 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jevon Strasser. Please go ahead.

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 take 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.

Thank you, Jevon. Good afternoon and thank you for joining us to hear about Oxford's record performance in both the fourth quarter and the full fiscal 2022 year. We appreciate your time and interest in our company. As always, our enterprise purpose is to about happiness, our enterprise strategy is to own a portfolio of lifestyle brands that create sustained profitable growth and our enterprise objective is to maximize long-term shareholder value. Each of these important elements were critical to our tremendous success in fiscal 2022. We stayed anchored to these fundamental presets during the year and we are extremely proud of the incredible results achieved for our shareholders by our amazing team of people. During fiscal 2022, we delivered growth in all brands and all channels of distribution. Total sales grew 24% year-over-year, driven overwhelmingly by organic growth led by our largest brand, Tommy Bahama which was up 22% for the year, followed by Lilly Pulitzer and our Emerging Brands Group which increased 13% and 29%, respectively. The balance of the growth came from the addition of Johnny Was which we are proud to have added to our portfolio during the third quarter of 2022. We generated this top line growth while simultaneously expanding both gross margin and operating margin. This combination produced record adjusted EPS of $10.88 for fiscal 2022 compared to our previous record of $7.99 in fiscal 2021, a 36% increase on a year-over-year basis. The results we achieved in 2022 are directly attributable to our focus on evoking happiness in our customers through our portfolio of lifestyle brands. When we succeed in our purpose, it creates the sustained profitable growth that ultimately drives long-term shareholder value. So as always, our financial results are linked to our efforts to evoke happiness in our customers. We did…

Thank you, Tom. We had a record-setting fourth quarter that capped a terrific 2022, driven by continued strength in all selling channels across the portfolio. Operating groups executed very well during 2022 and delivered double-digit top line growth within each brand. Our largest brand, Tommy Bahama, had another exceptional year, with 22% top line growth and 350 basis points of adjusted operating margin expansion to 19.6%. Lilly Pulitzer also achieved a 13% revenue growth and a 19.8% adjusted operating margin. In 2022, consolidated net sales were $1.41 billion which included $73 million of sales for Johnny Was, growing 24% above last year's net sales of $1.14 billion which included $25 million of sales from Lanier Apparel. The growth in our existing brands was strong across all of our full-price distribution channels with increases of 20% in full-price bricks and mortar, 13% full price e-comm, 29% in wholesale and 14% in restaurants. Additionally, we also had increased sales of $22 million in the Lilly Pulitzer's e-commerce flash sales and 14% in our outlets. Meanwhile, in addition to increasing sales, adjusted gross margin expanded 50 basis points over 2021 to 63.5%. We benefited from lower freight costs after experiencing very elevated freight rates in the second half of 2021. We saw additional gross margin benefits from a better mix of sales which was influenced by the addition of the higher gross margin, Johnny Was and the 2021 exit of lower gross margin Lanier Apparel. IMUs increase as well as we raised prices more than our cost increased. These items were partially offset by the impact of Lilly Pulitzers, larger flash sales and lower gross margin on the flash sales in 2022 due to extremely lean inventory in 2021. We also had higher inventory markdowns in our Emerging Brands Group during 2022 as…

[Operator Instructions] Your first question comes from Ed Yruma with Piper Sandler.

I guess, first, Tom, on the shared services, I know you guys historically run a very decentralized organization. So I just wanted to unpack maybe some of the investments you're making. Does it change kind of the orientation of the business? And then I guess as we think in the medium term, when should we expect a resumption of SG&A leverage?

Okay. Thank you, Ed. So the -- our objective really with the utilized part of the company here at headquarters is what we want to do is look at all the key functions that you need to be good at to be successful at to successfully run a lifestyle brand. And then our approach to that is to drive excellence in each of those key functions, make sure that each of the brands is functioning at a very high level in each of those key functions. And then as we say, bundling where appropriate. And what that means is we will do things on a shared services basis where it makes sense to do so. We're not going to just default to that but we'll do it where it makes sense to do so. And the example I gave in the prepared remarks which I think we may have discussed with you previously, was that with respect to the Emerging Brands group, the 3 smaller brands, we thought that in order to be able to achieve the excellence that they need to have in digital marketing to be successful as lifestyle brands that we needed to bundle that digital marketing effort. So we did exactly that. We established and built a digital marketing center of excellence during 2022. We started about 1/3 of the way through the year. And by the last 1/3 of the year, we were going wide open in that function and we're very pleased that it's achieved very good results within the Emerging Brands Group and that was part of the reason that they were able to deliver that 29% year-over-year growth. Then we talked about also during the prepared remarks, establishing an enterprise-wide corporate responsibility department, that's focused mainly on what I would call ESG-type…

Yes, it does. And on the SG&A, when can we kind of pencil in resumption of leverage on that line?

Yes. As we said in the prepared remarks, we expect some deleveraging this year. And hopefully, when we get into '24, that will start turning. But we've got a lot of investments in system projects and we also are adding some resources in the form of people in some key areas. We also have a lot of retail activity going on and including 3 Marlin Bars. And as you know, these Marlin Bars from the time you take the session until you open, it's about a 6-month period. So you have all the preopening costs, including going through your P&L. So we have a lot of items but there are exciting items that I think are going to help fuel future growth of the business. And to be honest with you, we're playing a little bit of catch-up on SG&A. Our business has grown dramatically. And it's -- when you grow business the way it's grown, you're always -- it's hard to get that infrastructure at as quick as the sales are growing. So we're playing a little bit of catch-up in '23.

Next question; Dana Telsey with Telsey Group.

Nice to see the fourth quarter results. As you're taking a look at next year and you talked a little about some of the increases in expenses, as you think about each brand, where could -- could they -- if it was better than expected, are there new products or categories that we should be looking for as we go through this year? And then just lastly, on the wholesale business. where you talked about flat, I believe. What are you seeing on the wholesale business overall? And how do you think about the health of the consumer with the exit rate as you exited the quarter?

Okay. Dana, I'll start with the wholesale question and I think that we're planning on it being flat, as you know very well because you follow so many of these people. Most of the major retailers are being very, very careful and cautious about their forward inventory buys. Most of them are actually buying down on a year-over-year basis. So in our view and we see this in the results that we're achieving on the selling floor. Flat is actually an outperform in the wholesale this year. So we're really pretty happy with that. And while we'd love to see growth, we also like to see the big retailers being prudent about their inventory buy. Then on the health of the consumer, what I would tell you and this shows up very much in our fourth quarter results, is that the health of the consumer has been good for the consumers that we service, I think the health of the consumer has been good. We expect it to continue to be good We're not looking for a major macro rebound in the economy but we think our consumer will hold up pretty well through the year. And I think the primary risk at this point to be very direct about it, is probably what's been happening in the banking world and the Fed and sort of regulatory response to that. Our belief is that we will get through that the Fed and the regulators. So navigate us through that without it becoming a much larger problem. But that would be the one sort of uncontrollable factor that I think is out there at the moment. And again, we think they're going to get through it. Our consumer will hold up. But this week, in particular, it's hard not to have that sort of top of mind. And what was the third thing?

Opportunities?

Opportunities Yes, from a product or category standpoint, Dana, I think that there are some big opportunities that are really more about growing existing categories. So I think in Tommy Bahama in the women's dress category, we've got a lot of room to run our dress business, has been very strong there. But I think we continue to build that. And as you know, that is a very large category within the total apparel market. I would tell you the same thing within Johnny Was. I think they have a very large opportunity in dresses in particular. And again, they're having very good success with they're building it very nicely. Historically, they've been a little light on dresses as a percentage of their total. And I think they've got lots of room to grow there. Then in addition to those types of opportunities where we can grow a big category at a sort of an enhanced rate of growth. I think throughout the company, there are some fill-in opportunities and one that's not going to be huge overnight and probably even over the long term. I don't think is an enormous category. But we recently started in Lilly Pulitzer, some enhanced home product. And the concept there is to be the destination of choice for sort of an elevated elegant hostess gift. And we've started out with a small assortment of items, some picture frames and things like that. But we're pleased with the early performance and we think we can do some business in that space. I think we've got similar opportunities like that across the company.

Next question; Paul Lejuez with Citigroup.

It's Tracy Kogan filling in for Paul. I had 2 questions. The first 1 was on your SG&A. In fourth quarter, I was wondering if you could talk about how much markdown levels or either up or down versus last year? And then what was freight relative to last year? And then for both of those pieces, what's embedded in your gross margin guidance for 2023? I think you said moderately up, just wondering assuming for markdowns and promotions versus freight? And then I have a follow-up when you're done with that.

Okay. Freight, pretty much return -- the freight rates pretty much returned to pre-pandemic levels in the fourth quarter. And our use of airfreight was down considerably from what it had been earlier maybe a tiny bit elevated from pre-pandemic. So there really wasn't a lot of freight noise in our fourth quarter. And going into '23, we're really not -- where freight rates are much better and we think our supply chain, we have accelerated our merchandising calendar. So we're really expect very little airfreight this year. So I don't think freight will really be much of a negative factor at all in gross margins in '23.

And on the markdowns?

As far as inventory markdowns. Yes, to me, we had -- we had in our Emerging Brands group. We did take some inventory markdowns last year. And we do not anticipate anniversary-ing those. Lilly flash sale, we think we'll be a little bit smaller in '23 than it was in '22. And so overall, I think our inventory markdown rates will be a tiny bit less year-over-year. And we think we'll start with a little bit higher IMU, modestly higher IMU and then we do have the add of the Johnny Was business for the full year which will help. And then wholesale will be a little bit lower piece of mix. So I think we have some mix advantages. They'll be running through '23 that will help gross margin some.

Got it. And then I just had a follow-up. I think you said you expect to open 10 or more Johnny Was stores. And I was wondering if you could talk about what you -- what the new store model there looks like in terms of the new store investments and your payback period compared to Tommy or Lilly store. And I was wondering how many of those leases you've actually signed already for 2023?

Yes. I'll make a quick comment on it and then let Scott follow on. But I think Johnny Was has a slightly different approach to stores than our other brands. They're a little bit smaller. I think their average square footage of 1,600 or so square feet, so a little smaller than most of the -- well really been all of the Tommy stores fundamentally and a little bit smaller than Lilly runs as well. They also go into some, what I would call, somewhat nichier-type location. So in the past, really, even since we bought them, they opened in Santa Fe which is the first store that we have in Santa Fe but we think that's a great spot for them and we're excited about that one. Another example would be a tiny little store that I did in Vero Beach, Florida. I think it's like 600 square feet and it's almost like a little beach bungalow and it's just it's so right for the brand. It looks terrific. And all that. And then what they do is they tend to do these smaller niche year-type locations. And then they really work with what's there and just sort of make it their own. So the build-out cost actually tends to be a little bit lower than in our other brands. And I'll let Scott fill in some of the details on the investment level in the payback.

Yes. Yes. Johnny Was is investing less. So the paybacks are usually less than 2 years on a retail store, some even quicker than that. So they're very productive. They also you see built in different several kick-out rights and leases. So -- but we usually or 10-year leases but several ways to get out if it doesn't were. or so that we're going to open, we probably got 6 or 7 signed and we've got multiple other ones in various stages of negotiations. Some could open this year, some might be next year. So we're excited about the growth. We think there's still a lot of runway for new stores. We're also opening stores in the other brands may be some stores, Southern Tide will open quite a few stores. We'll get a couple open and we've got 3 Tommy Bahama, Marlin Bars that we're very excited about. That pipeline in the Marlin Bars was something that takes a while to get going and we real pipeline in Marlin Bars. So I think we'll be able to open at least 3 next year and for the next several years. So the brick-and-mortar front, I think we've got a lot of exciting growth happening.

Our last question comes from Noah Zatzkin with KeyBanc.

First, wondering if you could provide any color on the exit rate leaving 2022? And then relatedly, on top line growth by brand contemplated in the $405 million to $425 million 1Q revenue guidance range. And then second, just on inventory, how are you feeling about the position and overall composition? I think you noted that the increase versus '19 was driven by $20 million of incremental Johnny Was inventory and I think $25 million of earlier receipts but just if you could help unpack that a bit.

Okay. Regarding the exit rate, for the fourth quarter of 2021. I assume you mean the -- or excuse me, fourth quarter of 2022, you mean the sales trajectory?

Yes.

Yes. So, if you remember, Noah, back in our December call, we said that November had actually been a little bit softer than the prior year that did not seen them out of back to us because in 2021, people had thought so early. So we weren't entirely surprised by that. And what we saw was a very normalizing environment in Q4, where November was not as good as November '21 but much more like what prior Novembers have looked like. And then obviously, as our fourth quarter results reflect the rest of the quarter ended up being strong. And then in February, we also had a good month. I've seen a lot of other people in our space talk about February being tough but we actually had quite a good February. We were pretty happy with what we saw in February. And as we sit here today, March has been slightly choppy but we believe we've factored all that into our forecast. And we think that as the weather turns and the Easter and spring breaks approach which are a pretty meaningful catalyst for us on the sales front. And then we get into all the summer holidays, Memorial Day, Mother's Day and Father's Day, 4th of July, we couldn't be more excited about what we've got ahead of us.

And as far as the inventory, with $20 million more Johnny Was and we have about $25 million from accelerating the supply chain really -- there's been interruptions out there and we wanted to bring goods in earlier to make sure we had them earlier. We also mentioned that our lines are -- we have a much heavier focus on core and key items. In a lot of those programs, you tend to bring in the season's inventory at the beginning of that season versus fashion where you're bringing in monthly, you're bringing in delivery. So that tends to when you have a more core key item business, you tend to carry a little more inventory. So, when you -- we like to compare back to '19 and even despite the Johnny Was and the acceleration, our anticipated sales are expected to much outpaced what the inventory growth has been. So we feel good about our inventory, the composition of it and the levels and we think we're set up well to capture demand in '23.

I would like to turn the floor over to Tom Chubb for closing remarks.

Okay. Thank you all very much for your time and your interest in our company and we look forward to talking to you again in June and hope all is well with you until then.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.