Greetings. Welcome to Oxford Industries, Inc. First Quarter Fiscal 2024 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] I will now turn the conference over to your host, Brian Smith of Oxford Industries, Inc. 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. 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, Brian. Good afternoon, and thank you for joining us. I'm going to start with an update on the execution of our plan for the first quarter of fiscal 2024 and our current expectations for the balance of the year. Our strong brands and our excellent team focused on executing our strategy allowed us to deliver sales and adjusted EPS within our guidance ranges for the first quarter despite continued macroeconomic headwinds and lower levels of consumer sentiment. While most economic indicators remain fairly positive, consumer sentiment has dropped meaningfully from levels at the start of this year and has driven the consumer to become more cautious than originally anticipated in our spending on discretionary items such as the fashion resort apparel, which is the core of our business. Net sales were down $22 million or 5% as compared to the first quarter of fiscal 2023. The majority of the decline in net sales is attributable to a $17 million year-over-year decline in wholesale sales for the first quarter which we anticipated as we lapped a very robust first quarter of fiscal 2023. Our position with our key retail partners remains very strong and our sell-through performance remains excellent. However, most of them in response to muted consumer sentiment and the attendant lackluster demand were very cautious in their inventory purchases for spring and summer of this year, and that shows up in our first quarter sales numbers. Looking forward, thanks to our continued strong performance with our key partners, our forward order book is solid, and we expect to make up about half of the first quarter shortfall in the wholesale over the remaining three quarters of the year. The second factor in our sales decline was the change in promotional cadence and events in our Lilly Pulitzer…

Thank you, Tom. We closed the first quarter of fiscal 2024 with top and bottom line results within our guidance range. Despite the uncertain macro environment affecting all channels of distribution as referenced by Tom, and going against wholesale growth and also direct-to-consumer comps of 10% in the first quarter of 2023, our team is focused on executing against our strategies and delivering for our shareholders. In the first quarter of fiscal 2024, consolidated net sales decreased 5% to $398 million. The first quarter 2024 net sales includes decreases in most of our full-price channels, with decreases of $17 million or 16% as we expected in an especially difficult wholesale channel, $6 million or 5% in e-commerce sales, $3 million or 2% in full-price bricks and mortar retail. A bright spot continues to be our food and beverage business that delivered strong growth of 8%. Additionally, we had increased sales in our outlets of 6% that benefited from consumers looking for deals and promotions. In connection with consumers looking for deals and promotions, adjusted gross margin contracted 40 basis points to 65.4%, driven by a higher proportion of net sales occurring during promotional events across Tommy Bahama, Lilly Pulitzer and Johnny Was. The decrease in adjusted gross margin caused by the promotional environment were partially offset by lower inventory markdowns in our emerging brands group and a change in sales mix with wholesale sales representing a lower proportion of total sales during the first quarter of '24. Adjusted SG&A expenses increased 5% to $210 million compared to $200 million last year. During the first quarter of '24, we incurred higher expenses related to recent and ongoing investments in our business, primarily from the addition of 27 new brick-and-mortar locations opened since the first quarter of last year and the addition…

[Operator Instructions] And our first question comes from the line of Ashley Owens with KeyBanc Capital Markets. Please proceed with your question.

Hi, good afternoon. Just wondering if you could provide a little bit of color on kind of the trends by brand embedded in the second quarter guidance as well as any color by brand on the exit rate leaving the first quarter? And then I have a follow-up.

We're expecting -- for the second quarter, all of our brands will certainly improve, and we're expecting positive comps and are having positive comps. so far in the second quarter. So we expect kind of mid-single positives. It certainly has accelerated as the quarter has gone on, June being stronger than May.

And as Scott pointed out in his comments during the call, first quarter, we were up against a 10% positive comp last year, in the second quarter, you had, I think, a negative 5% last year. So an easier comp or comparison, but we're delivering against that so far and we're optimistic about what we can do.

Okay. Great. And then just quickly on the gross margins. You called out some contraction expected for 2Q, there is some in 1Q, but you're guiding to flat for the year. I think if we back into it, you're expecting to see some expansion in the back half. Maybe just help us a bit with the shaping there? And also any color on what's driving that? Thanks.

Yeah. I think some of it is -- a lot of these new stores will be -- especially in the fourth quarter, will be operating. So I think our direct business and then the promotion -- level promotions should be more like-for-like versus being a little bit higher in the first half.

Okay, great. Thank you.

Thank you, Ashley.

Thank you. Our next question comes from the line of Janine Stichter with BTIG. Please proceed with your question.

Hi, good afternoon. I was hoping you could elaborate a little bit on the wholesale side of business. It sounds like it's relatively on plan with what happened in Q1, now expecting a return to growth for the remainder of the year. But I would just love to hear a bit more about what you're hearing from your wholesale partners? And then maybe with that, if you could elaborate a bit on where you see additional door opportunities, potential for new door growth for both Tommy and for Lilly? Thank you.

Okay. Thank you, Janine. And I think that as we outlined in March and it came through and of course, we have pretty good visibility because you book most of your wholesale business in advance. But last year's first quarter, we were -- had a very robust quarter in the wholesale, most of the market did not, but we did. So we had a tough compare that we were going against. And then it was really just a matter, we believe, of retailers being very cautious and as they saw softer consumer demand, just not wanting to be over inventory. So they held their forward orders and check and resulted in the $17 million year-over-year decline that we had. All that said, and all along, our performance at retail has been quite good. And as a result of that, and as their inventory positions are showing up in pretty good shape, the forward order book looks really solid, and we do expect to make up -- I think about half of that first quarter shortfall over the balance of the year. In terms of door growth, I think we do have an opportunity in Lilly Pulitzer, I think we've got the opportunity to expand doors. And I think that's happening and will happen over the next couple of years. I think we can grow that wholesale business that way. In Tommy Bahama, it's probably a little bit more about doing more dollars in the doors that we're already in with some door growth opportunity as well. And I think the continued growth of our women's wholesale business in Tommy Bahama, which has really been a bright spot over the last couple of years, but I still think we've got room to run there. So we're pretty bullish about wholesale. It's still -- we're going to be a direct-to-consumer led business, and each of our brands will be, but we believe very much that wholesale is an important part of a healthy brand. And we think that with where we're positioned now in the way that we're partnering with our wholesale partners, we think we can grow there.

Great. And maybe then just one more. You talked about a bit about consumer cautiousness and it sounds like that's only kind of gotten worse as we go through the year. I know your consumer is really gravitating towards newness, especially Tommy Bahama. Do you feel like you have the right assortment to deliver that newness or is there anything we should expect in terms of how you might pivot the merchandise just to kind of cater to what they're looking for in this environment? Thank you.

Yeah. Great question, Janine, and I do think newness is still really resonating with the consumer. And frankly, you hear that from a lot of our peers out there in the marketplace, too, but that's what the consumer is looking for. I think the other big opportunity that we have is in sort of speaking on an enterprise-wide basis and generalizing a bit. But we've covered the super casual part of our assortments really well. So sort of athleisure-type product and the lounge type product, covered that really well, and we're covering occasion really well. What I think we -- where we have an opportunity is a little bit of that segment in the middle, which would be the everyday stuff that you could maybe wear to the office, maybe wear out to dinner with friends. And I think we're a little under assortment in that right now. I do think we get better with that as the year goes on and also had good newness coming in. So looking at it again on sort of an enterprise basis, I think we like our assortments as we get later in the year. I think they were fine in the spring but I think they get better as the year progresses.

Great. Thanks so much for the color and best of luck.

Okay. Thanks a lot, Janine.

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

Great. Good afternoon and thanks for taking my questions. First one on the updated sales guidance. I just want to understand, I think you mentioned that you expect comp sales up mid-single-digits second quarter. And I think that's also the case for the rest of the year or second half. I just want to understand like what was the -- like the prior outlook that you had contemplated given that you lowered the sales guidance? And maybe any distinctions that you would make on where you're seeing under or over-performance across the brand's portfolio? Thank you.

Yeah. It was [few points higher] (ph) in our original guidance. And for the year, we're expecting to come out with a slightly positive comp. So we kind of overcome that negative in Q1, where before we were closer to mid-single for the year. We're now in of the low single for the year.

Yeah, sorry. And about the brands?

Yeah. I think, Mauricio, what I would say is they all really from a demographic standpoint or kind of chasing a similar customers. So they're sort of seeing the same thing and there are some differences between the brands and geographies. But the overall theme is really the same. It's that more cautious consumer that's still showing up and looking -- and as I mentioned in my prepared remarks, traffic year-over-year was actually up pretty nicely during the first quarter, but the conversion is down. The one callout that I would really make is I think Johnny Was had a nice performance in e-commerce during the first quarter, which really was a bit of a stand out both in our company and frankly, from what we've seen across a lot of the peer set as well. So that would be the bottom line, a pretty similar experience with some differences. But broadly, it's the same thing.

Got it. And then just very lastly, on the guidance, I think you mentioned you expect SG&A -- sorry, operating margin to decrease modestly. I think if you back into the guidance, I think it's pretty much in line with -- what you guided for last quarter, so I just want to understand from an SG&A dollar standpoint, are you also reducing that expectation just because of the lower sales? Or how should we think about SG&A dollars? Thank you.

Yeah, SG&A -- it's been moderated some, yeah, but they'll still be higher year-over-year. And probably in the Q2 and Q3, probably somewhere around $20 million higher. Get to Q4, you have one less week. So it's probably about half that roughly. So definitely moderated from -- in dollars from our earlier forecast, but still a higher percent of -- slightly higher percent of sales than earlier forecast.

Got it. That $20 million, $30 million, is that for a specific quarter like one?

That is for Q2 and Q3, the 20-ish is in Qs 2 and 3 and about $20 million higher. And in Q4, about half of that, about $10 million higher, but Q4 has one less week because last year, I had that 53rd year, it was a 14-week quarter versus a 13-week quarter.

Yeah. Got it. Okay. Very helpful. Thank you.

Thank you. Our next question comes from the line of Paul Lejuez with Citi. Please proceed with your question.

Hey, it's Tracy Kogan filling in for Paul. I was hoping you guys could say what you thought was the reason for the comp inflection in 2Q. Is it -- I know you referenced the easier comparison. So wondering if you think it's just that. And if you think that easier comparisons is the reason that it's gotten better, say, in June versus May? Or is there some new product introduction that -- or maybe promotions that's driving this inflection? And then I have a follow-up. Thanks.

Well, part of it is the more favorable comparison, the easier comparison to last year, but also, as we pointed out in March and again today, we have this shift in the way that we're running some of the events at Lilly that will result in them probably having a really strong comp in the second quarter. And that will help pull the whole enterprise loan a bit. And as we also -- Tracy, we have seen quarter-to-date, second quarters looked pretty good. It's positive. It's improved sequentially. It looked reasonably good so far.

And did you see the same -- I know there was more of a shift at Lilly, but have you seen a similar inflection to positive comps at Tommy? And then my second question was just on, in general, do you think you're seeing any price resistance from the consumer? I don't know if your consumer research is telling you anything there? Or is it just the consumer being generally more cautious?

Well, I think what we would say is, very clearly, when they like it, they're more than happy to pay whatever we've got it marked at. And the best example of that probably is the Lilly Pulitzer Capsule collection that they did, The 65th Anniversary Capsule, which was the average price on that was probably 2 times or 3 times what their normal price points are and it sold out very, very quickly. So I don't think there's really price resistance, but as much as just the consumer is looking for deals. And when there's not a deal, you just being more selective about what she's really willing to buy.

Thank you. And then just back to the Tommy Bahama question about this quarter and whether you had seen that similar kind of inflection to at least a positive comps, maybe not to 2% to 3%?

Yeah, I think it's fair to say that all the brands have seen a good start to the second quarter.

Got it. Thank you very much. Good luck guys.

Thank you, Tracy.

Thank you. And we have reached the end of the question-and-answer session. And I'll now turn the call back over to CEO, Tom Chubb for closing remarks.

Okay. Thank you very much for your interest today. We look forward to talking to you again in September and hope you have a great summer until then.

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