Greetings. And welcome to Oxford Industries, Inc. Second Quarter Fiscal 2023 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] As a reminder, this conference is being recorded. It is now my pleasure to introduce, Brian Smith, Director of Financial Reports and Investor Relations. Thank you. 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. Before I turn things over putting on results for the second quarter and our outlook for the balance of the year, I want to start by acknowledging the state of Hawaii and the island of Maui in particular which have been a very important and special part of our business for many years. We have over 200 members who live on Maui and over 450 in the state of Hawaii. These are wonderful people who we value greatly and our hearts are with all of them as they work to recover from the devastation of the recent wildfires. I am also proud of being grateful for the generosity of our associates across the enterprise who have pitched in in so many ways to help the people of Maui recover from this disaster. This generosity and the resilience of our people in Maui and Hawaii are among the characteristics that make Oxford such a great company. Moving to our results, we're pleased to be reporting sales and adjusted earnings per share within our forecasted range given the top the operating environment. During the quarter we achieved 16% total year-over-year revenue growth driven by our acquisition of Johnny Was in the third quarter of last year and a 1% increase on an organic basis which is on top of 11% of organic growth in the year ago period. In addition to the tough comparison, the more modest organic growth rate this year reflects as widely reported across the market place, a customer that has become somewhat more cautious with regard to discretionary purchases. As you know, our purpose as a company is to vote happiness in our customers with our brands. Our customer metrics indicate that we are doing exactly that. Excitement for an…

Thank you, Tom. As Tom mentioned, we are pleased to report another strong quarter that is within our guidance range. In an uncertain microeconomic environment where the consumer has become more cautious, our operating groups executed very well going against direct consumer costs of 14% in the second quarter of 2022. Consolidated net sales for the second quarter of fiscal 2023 were $420 million, which included $52 million of sales for Johnny Was and increases in each operating group, growing 16% above last year's second quarter net sales of $363 million. In the aggregate, Tommy Bahama, Lilly Pulitzer, and Emerging Brands had decreases of 3% in full-price brick and mortar, 4% in full-price e-commerce, and 7% in wholesale sales. These declines were offset by 8% growth in our food and beverage business and 16 million of sales from the Lilly Pulitzer e-commerce flash sale that we did not hold in the second quarter last year. Adjusted gross margin was 64.3% compared to 64.6% last year. This slight decline was driven by increased e-commerce flash sales at Lilly Pulitzer and a greater proportion of sales during Tommy Bahama's loyalty award card flip side and in the season clearance events, partially offset by the higher gross margin of Johnny Was and reduced freight expense. Adjusted SG&A expenses were $202 million compared to $163 million last year. This quarter included $29 million of SG&A associated with the Johnny Was business, which we did not own in the prior year period. There were also additional SG&A increases in our other businesses for employment costs, advertising costs, variable expenses, and other expenses that we continue to invest in our businesses to fuel and support anticipated future growth. The result of all this yielded $73 million of adjusted operating income or a 17% operating margin compared…

Thank you. [Operator Instructions] Our first question comes from the line of Edward Yruma with Piper Sandler. Please proceed with your question.

Hey, good afternoon, guys. Thanks for taking the question and our thoughts are for all of your colleagues in Maui. I guess a couple quick ones from me. First, you guys have added quite a few new customers to the Tommy Bahama customer file over the past couple of years. As you think about kind of retaining some of those customers. I guess kind of new talk about trends that you've seen and maybe tied that back to some of the comments around the promotional environment. And then as a follow up just maybe any insight on the organic growth of Johnny Was and how the business was performing will be appreciated. Thank you.

Okay. Thank you guys and thanks for your comments regarding Maui. We know that you know what a special place that is. And it is a tough situation for sure. So we appreciate the thoughts on the customers at Tommy Bahama. I would say what we're seeing there is really what we're seeing fundamentally across the brands and I think this is consistent with what's going on in the market is that traffic remains good. Interest in the brand is good, our customer account is growing, our new customer adds rate is growing. The issue is really on conversion. And we would attribute that as we said during the comments, to a lower or to more cautious consumer that I believe part of it is being worried about the, about where the economy is going and the actions of the Fed and interest rates and all that. And then I do think the other factor that making customers being more selective and the buying is the amount of promotional activity in the market place. That does seem to be abating a bit through the spring and early part of the summer that was at very elevated levels and that part does seem to be correcting a bit, but I think as some overhang from the economy that’s weighing on the consumer a bit. And then in terms of Johnny Was, I would say that those were the same thing. You’re never experiencing some organic growth challenges themselves, they are not any different than what we are seeing in the other brands and it’s really the same set of drivers at work there. Yes, and they are you – remember that they have a very heavy California business and California was really difficult both in the first quarter and part of…

Thank you very much.

Thank you Ed.

Our next question comes from the line of Noah Zatzkin with KeyBanc. Please proceed with your question.

Hi, thanks for taking my questions. I guess first just hoping you could provide any color on kind of the monthly cadence itself moving through the quarter and then the exit rate leading the second quarter. And then secondly, just wondering how you're feeling about the inventory position. And then any color on planned adjustments to their promotional calendar through the balance of the year would be helpful. Thanks.

Okay, t you, Noah. Thanks for being on the call today. So through the second quarter, June was a what I would call a wobbly months. It got a little better later in the months and sort of a wobbly month. But July actually ended up being a good month. It was pretty strong. And then as we commented in the prepared remarks, early August has been a bit soft. It’s not like the bottoms dropping out or anything like that. But it has been soft as we saw during some of the first quarter months as well and the sum of all these things Noah has convinced us as we said on the call that the consumer is in a more cautious shopping mind set at this point and accordingly we have moderated our guidance a little bit for the rest of the year. In terms of inventory, I'm going to let Scott comment on that in more detail, but we feel great about where inventory is. We think we're in a good spot.

We do. We’re up 14% on a FIFO basis on inventory year-over-year but we – with addition Johnny Was with the sales growth we have and also last year we were building inventory still trying to kind of get him into -- fact appropriate levels. It was really Q3 and Q4 before we really felt we got inventory back to where it needed to be. So I think by the end of the year we should be much closer to flat and maybe even a little down year-over-year. So we feel so good about where we are there.

And then in terms of planned changes to the promotional environment I would say that in Lilly Pulitzer in particular we've done all year. It's not really that we're doing more promotions. We're just mixing them up a bit. As you saw with the -- we had a couple of events this year that we didn't have last year, but we've also eliminated some in Tommy Bahama. I think it will be really very very similar to what we did last year.

Thank you.

Our next question comes from the line of Mauricio Serna with UBS. Please proceed with your question.

Great. Good afternoon and thanks for taking my question. Just wanted maybe to get a little bit more detail about what caused the company to lower the sales outlook. I know like you previously talked about this in the earnings call and the previous earnings call that we have sensed more caution from consumers. Just trying to understand like considering that the sales and EPS came within your expectations, if this was something that really happened post quarter or this is just like baking more conservatism because there's still a lot of uncertainty. And then maybe if you could elaborate more about like your so far like a big picture lessons learned from Johnny Was and how you see that the growth from the brand going forward. Thank you.

Okay. So thank you for the question Mauricio and thank you for being on, but on the guidance I think we covered that reasonably thoroughly. But again, I think the issue is just a realisation and a belief on our part that the consumer is in fact a bit more cautious and early in the year I'm not sure we really saw that at all in the years progress and especially as we got in August I think we just have pretty strong evidence it's hard to know exactly what's going on in the consumers mind, but that there's just being a little bit more careful about when they spend again interest in the brand remains very high. Our traffic looks really good, when they do spend as reflected in our average order values and our average annual spend, there actually you're spending the same or even a little bit more than they did last year but the conversion rate is lower and more of it's happening during promotional time periods. And when you look at all that together that tells us that you have a consumer that's just being a little more careful about how they're spending their discretionary dollars, but we feel very good about the health of our brands and our position in the market, our cash flow as we outline Mauricio is just outstanding. It's going to be fantastic for the year over $200 million and we're investing that money when we kind of done it all in the last 12 months acquisition, stock repurchases, dividends, CapEx I mean we're kind of hidden checking all the boxes if you will. And then lessons learned from Johnny Was, I think every acquisition we do as you know Mauricio I believe all six of the brands that we have in our company every bit of our company is something that we acquired in the last 20 years and I think we get better and better with each acquisition and how we do it and an example of that I would point to in Johnny Was is moving I know it's made from the outside not feel super quick but it was actually pretty quickly to go ahead and get them on a much better website, which will have done hopefully quite soon but certainly this year so we always learned little things and one of the things is to move as quickly as you can and I think we're doing that in Johnny Was and as I mentioned earlier believe very strongly that this is a brand that can continue to grow and expand operating margin as we move forward and it's already contributing. It added $0.34 to EPS in this quarter which we're quite happy to have.

One of the same resale on the top line but top and bottom line is the Maui situation that we talked about. So its $3 million to $4 million of both in the third quarter and top line and in the fourth quarter and top line in our projections that we've reduced and we got 36 stores, a $30 million business on Maui and the two that are open are operating at less than half of the sales volume right now. The [Indiscernible] gone it's -- it's gone and the three very loose village stores are not open right now. We are optimistic that we will be able to get them open, but I don't think there's going to be a lot of torses very very close to [Indiscernible] so we really think it’s going to take quite a while for the tourism to get back in that areas, so that has also contributed to both our top and bottom line guidance changes.

Got it. Very helpful and congratulations on those all. Thank you.

Thank you Mauricio.

Our next question comes from the line of Paul Lejuez with Citigroup. Please proceed with your question.

Thanks. It’s Tracy Kogan for Paul. And I'm wondering if you guys could just elaborate on the current trends a little bit more. I was wondering if -- is it one brand more than the other where you're seeing a caution or maybe one channel versus another, just any differences you are seeing now. And then I have a follow up thanks.

So that trend Tracy is really it's the you know the three bigger brands are all having a roughly similar experience and it's a bit of a mix of channels. And again it's really the conversion issue that were that's holding us back up it and then the three smaller brands actually continue to grow nicely but when you're small as they are still at this point there's -- there's a bit of room to run always. So that's -- that's kind of what we're seeing.

Got it. And then I was wondering if you could quantify some of the moving pieces within gross margin this quarter and kind of where those are headed in the back half. I think you mentioned freight helping I was wondering if you could maybe quantify that and maybe talk about when that benefit runs out, if it's still going to next year that freight benefit, any any color you have on that would be helpful. Thanks.

Yes the freight for the most part is -- it's close to flushing itself through the system. The higher freight from last year was mainly a first half item and mainly a first quarter less on the second quarter fairly minimal in Q3 and Q4, so that's much less of an impact than it had been in previous quarters. We got -- then -- having Johnny Was helps us there and then we had some inventory write downs in Q4 last year that we in our emerging brands group that we don't anticipate anniversaring, so our fourth quarter that will help our fourth quarter gross margin. So I think those are the big runs.

Got it. Thanks very much thank.

Thank you Tracy.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.

Hi good afternoon everyone. As you think about what's happening with the current consumer with the consumer right now and obviously your inventory levels also how are you planning full price versus mark down business going forward. And is there anything on the category side by brand that has done better or not doing better to give you any indication of consumer pulse and what they have focused on?

Yes, great questions as always Dana and thanks for being on the call. So in terms of full price for versus markdown, our plan obviously is to do as much full price business as we possibly can and as we outlined in our response to Noah earlier in Lilly Pulitzer we're not really going to do more promotional events but we're going to mix them up, so the cadence of those and the look of those will be a bit different than what I were last year. And then in Tommy Bahama, it's really going to be very similar to what you saw last year and really in the past and the issue will be whether the consumer shops at their normal levels during full price or whether they hold back a little bit more and save their dollars for the events and that's certainly we saw a bit of that in the second quarter where people were holding off and spending during the events which in more when the consumer is feeling a little more robust they tend to not weigh, they just want it as soon as it hits the floor. And that's kind of what we've factored in to our guidance as best as we can estimate all that, that's what we've factored in our guidance for the balance of the year. And then the category question is good one because we've definitely seen a return this year to I wouldn't call them dressy styles but dressy or wear, during the pandemic it went super casual and cozy and then that actually continued for a while and we're more back to sort of what I would call normal so ladies wearing prettier, more structured dresses and gentlemen wearing more long sleeve bottoms and that kind of thing.…

Thank you.

Thank you Dana.

There are no further questions. I'd like to hand it back to Mr. Chubb for closing remarks.

Okay. Thank you Doug and thanks all of you for your interest in our company. We look forward to talking to you again in December and help hope that all of you are well until then.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.