Good day and welcome to the Oxford Industries, Inc., Fourth Quarter, Fiscal 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Brian Smith. 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 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 with our results for fiscal 2023, which represent the second-strongest annual earnings in our 82-year history. The conclusion of FY'23 also caps the end of a five-year period during which we delivered compound annual adjusted EPS growth exceeding 18%. In addition, we generated strong cash flow from operations of $244 million in fiscal 2023, allowing us to invest in both organic growth and acquisitions, return capital to our shareholders via our quarterly dividend and opportunistic share repurchases, and pay down almost all our outstanding debt. On today's call, we'll walk through our recent performance and provide an update on the initiatives we have planned for fiscal 2024 that we believe will position us to continue to deliver sustained profitable growth and drive long-term shareholder value for many years to come. In terms of how we wrapped up the fiscal year, January was a bit softer than expected, and as a result, both our fourth quarter and full year came in at the low end of our forecast with sales for fiscal 2023 totaling $1.571 billion and adjusted earnings per share coming in at $10.15. The January softness continued into the new fiscal year, and February was also down as we cycled strong double-digit comps in February of last year. In March, as comparisons eased, business has picked up, and month-to-date, we are 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. The muted consumer sentiment is manifesting itself in consumers who have the ability to spend but are being much more cautious in…

Thank you, Tom. As Tom mentioned, we are pleased to report top and adjusted bottom-line results within our guidance range for both the fourth quarter and full fiscal year 2023. Despite facing headwinds from a challenging consumer environment, our operating groups focused on what they could control and delivered solid results going against positive DTC comps of 9% and 17% for the fourth quarter and full year fiscal '22, respectively. In 2023, consolidated net sales grew 11% to $1.57 billion, including an increase of $130 million in sales for Johnny Was, which we owned for 19 of 52 weeks during fiscal 2022. The 2023 net sales also includes an approximate $16 million benefit from the 53rd week, resulting in $10 million of additional gross profit. In the aggregate, Tommy Bahama, Lilly Pulitzer, and emerging brands delivered growth across most of our full-price distribution channels, with increases of 6% in restaurants that have delivered strong results all year, 3% in full-price ecommerce, and 1% growth in an especially difficult wholesale channel. Full-price bricks and mortar were relatively flat compared to 2022. Additionally, we also had increases in sales in our outlets of 5% and 3% in the Lilly Pulitzer ecommerce flash sales, both benefiting from consumers looking for deals and promotions. In addition to increased sales, we were able to expand adjusted gross margin 50 basis points to 64%, while also meaningfully lowering inventory balances. The increase in adjusted gross margin was driven by a full year of higher margin sales from Johnny Was, a decrease in inventory markdowns, and decreased freight costs. These were partially offset by increased promotional sales of both Tommy Bahama and Lilly Pulitzer. Adjusted SG&A expenses were $807 million compared to $684 million last year, with approximately $76 million, or 62% of the increase, due to…

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Janine Stichter with BTIG. Please go ahead.

Thank you for all the color on the health of the consumer and the state of the consumer. I was hoping you could elaborate a little bit more on what you saw in January and February into March. I'm curious if you saw any variance by brand. I'm also curious if you think weather played any role and what's driving the improvement to March. Thank you.

Well, thank you for the question, Janine, and thanks for being on the call today. As we said, it was soft in January and in February. There were some variations among the brands, but really everybody saw the softness. And I think weather probably did have some impact on that, but we believe it was a little bit more just about consumer sentiment and where they are and their willingness to spend, as we outlined in the comments.

We also were going against very difficult comps from the prior year. So January and February both had very strong comps a year ago, and so we think we're going against the toughest comps of the year, and comps started moderating in March forward. So we're optimistic that we can still comp positive for the year, although very modestly.

Great. And then just on the wholesale side of things, you talked about wholesale being down in Q1 and then turning positive in Q2. I just want to understand, is that pretty consistent with how you had been thinking about it? I'm just curious if you're seeing any change in tone from your wholesale partners or if that's similar to how you've been thinking about it before.

I think I've been pretty cautious for a while now. I think maybe they've been a little more cautious than we would have thought back in the latter part of this year. But the good news, Janine, is that our performance at wholesale is actually quite strong from those accounts that we get data. So most of the majors give us pretty good feedback on how we're performing on the floor, and those numbers actually look quite good. So we believe over the longer term that we're not losing any position at all. In fact, we're outperforming our peers on the floor, and that as the retailers get a little more optimistic about where they are in their overall business, that we will get rewarded for our performance currently. We also are optimistic, we don't really have this in the plan, but that we might get a little bit of in-season business. And then the last thing I would tell you is that we talk about the caution a lot, but I think a lot of it, or at least a portion of what's going on, is also that retailers are getting their inventories back in line post-pandemic. There was a period where they were, because of all the supply chain issues, they were overbuying maybe a little bit, sort of just in case inventory, because they didn't know what they were going to get and when they were going to get it. And I think most vendors are shipping pretty much on time and complete these days. So there's less of that sort of safety stock buying going on. So we view this as a short-term blip, Janine. We don't really think we're losing ground in wholesale. In fact, we think we're probably getting stronger in that arena.

And last year, Janine, first quarter was a very strong wholesale quarter for us. I think we were kind of bucking the trend in the industry. We were actually up in Q1 last year. So we are, again, going against a strong wholesale period of the year before for us.

The next question comes from Mauricio Serna with UBS. Please go ahead.

I just wanted to get a little bit more detail on the quarterly trend. You mentioned February started soft, March got better. Maybe if you could tell us like quarter-to-date, like how are the DTC comp sales trending and what is like for your full-year sales guidance expectations, what are the implied DTC comp sales? And then maybe you talked about the gross margin drivers being essentially like a positive sales makeshift. Anything that you can tell us about your expectations on promotions? And then, just lastly, if you could elaborate a little bit more about the Jack Rogers acquisition, what prompted you to buy the brand, like any overview about the brand, like the size of the business. You talked about the impact on the operating profit, but maybe what do you think about the top line? That would be very helpful. Thank you.

Yes. Well, maybe I'll start in reverse order with Jack Rogers. It is a great brand, Mauricio. It's been around for a long time. Like Lilly Pulitzer, it was born in about 1960, I believe. Lilly was 59, as far as we know. Jack Rogers was, I think, 60 or so, 59, 60, right about the same time. Born in Palm Beach, was popular with Jackie Kennedy at the time, later Jackie Onassis. Very classic brand. They have a single sandal that people refer to as Jack Rogers, that they're very, very well known for. And they've been sort of a staple of East Coast classic ladies dressing for a long, long time. At one time, this business was up in the $50 million plus range. During the pandemic and the post-pandemic, and probably even a little leading up to that, it went through sort of a rough period with a number of changes in management, and, of course, all the issues that happened with the pandemic. But they've still held on to their sort of iconic positioning with the customer. And so we bought it at a time where it needs a little bit of a reset, needs to go back to its core DNA, go back to its roots. There's some inventory that we've actually mostly got cleaned up at this point, but we need to do that sort of reset the marketing, and we're going to take this year to do it. I think during this year we'll do not quite $10 million in revenue, but somewhere in that range. And then, as Scott outlined, we will have a little bit of an operating loss. But I think we'll be in good shape from there to build both the business going forward. And then I think you had also asked about comp assumptions for the year.

Yes. First off, February was down low, double digits. But, again, going against a very robust comp. Last year we had really strong February, strong early March, and then we started seeing it weaken a bit. So we're down low double digits in February. March, we're up very modestly. We have a very modest positive comp, but March is a bigger month. So I think quarter-to-date we're, I admit, single digits down, but trending in the right direction. And so for the year, we're not expecting an overly robust comp, but we still think we can, for the year, come out slightly on the positive side.

Great. And in terms of promotions?

Yes. As we noted in our prepared remarks, we expect gross margin for the year to be flat to up slightly. That's mostly driven by mix change, but it also doesn't reflect a whole lot more discounting in the product. And I think that's a sign of a very healthy business.

The next question comes from Ashley Owens with KeyBanc Capital Markets. Please go ahead.

I guess just to start, you talked a little bit about promotions already, but I'm just curious as to how you're thinking about kind of the calendar from promotions relative. We talked a little bit about Lilly and the focus there and some of the shifts that we're seeing in 1Q and 2Q. So I would just be curious kind of to hear how that's shaking out for your other brands and if you're planning for any material shifts.

I think Lilly's the biggest shift. And last year, we did a 30-off event in the first quarter. And while it generated a lot of revenue, we believe maybe it was off everything. And we believe that it would be better not to do that because sometimes you get a little bit of a hangover after it. So we're not going to do that event this year. But we will do Lilly flash sales, and we're going to mix them up a little bit, which, yes, but that will be limited prior season product as it always is. So we just have some timing changes with the biggest being between Q1 and Q2 where there will be less events, less dollar value events in Q1 than last year and then Q2 probably a little bit more. So that's the biggest change. I think everywhere else it's pretty much typical type promo events. Tommy does there. Friends and family twice a year, and they do their promotional cards with a flip side event a couple times a year. And then they do very limited end-of-season sales. And I think their plan is to do basically those exact things again this year.

Okay, great. And then, I guess just kind of to follow up on that, again, a lot of guidance and color kind of on that 1Q, but also some shifts going into 2Q. So just thinking about the overall guide for the top line, as we move through the remainder of the year. Any help you could provide kind of on the shaping there when we're factoring in some of the moving pieces that we're seeing would be helpful.

Yes. We would expect the top line for each quarter going forward to be up anywhere from high single to right at double digits. Or maybe more at least mid-single to low double digits, where first quarter will be a bit weaker. And, again, wholesale, we expect wholesale for the Qs 2 through 4 to actually be up a little, but Q1 being down. So that will help quite a bit. And then, again, not having that big negative comp like we had in February. We don't expect that to repeat as the comps we're going against for the rest of the year we think are not as difficult as the February comp. So we think we expect sales growth in every quarter going forward.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Tom Chubb for any closing remarks.

Thanks to all of you for your interest and your attention today, and we look forward to talking to you again in June. And until then, hope you stay well, and we'll look forward to seeing you then.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.