Greetings, and welcome to Oxford Industries, Inc. Second Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Brian Smith. 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 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 I'd like to turn the call over to Tom Chubb.

Good afternoon and thank you for joining us today. As we continue through fiscal 2025, the second quarter brought complex but clarifying developments in the story we began sharing with you last quarter. While the macro environment remains pressured, marked by higher tariffs, elevated promotional activity across the industry and cautious consumer behavior, our team has navigated these challenges with discipline and focus, delivering net sales and adjusted EPS within and above our guidance ranges, respectively. Though down from the prior year, these results reflect our ability to while staying true to who we are as a company and maintaining the strength of our brands and margin profile. Looking at our recent performance by brand, Lilly Pulitzer continued its deep connection with its core consumer in the second quarter and posted positive direct-to-consumer total comparable sales, building on the strong engagement we saw in the first quarter. A key contributor to this momentum in the second quarter was delivering exciting innovation in our casual product, including the Linen Seaspray jacket that sold out in all colors and extending our offering of elevated everyday product, including polished shorts, silk tops and new stretch twill pants that all performed extremely well. Continuing the theme of engaging the brand's most loyal customers early in the third quarter, Lilly Pulitzer launched the highly anticipated Lilly's Vintage Vault, which debuted Lilly's Zoo, a reproduction of a beloved archival print from 1974 in its original colorway. This limited-edition capsule is the first in a series exploring Lilly's hand-painted print legacy as the brand embarks on a new celebration of its treasured heritage, drawing in Lilly loyalists and new customers alike. While still early, the initial response to the Vintage Vault has exceeded expectations and affirms the power of heritage storytelling and brand authenticity, cornerstones of Lilly…

Thank you, Tom. As Tom mentioned, our teams have shown great discipline and resilience in responding to unprecedented uncertainty and challenges related to trade and tariff developments in the first half of the year. Despite these challenges, our teams were able to deliver top-line results within our previously issued guidance range and bottom-line results slightly above our previous issued guidance range for the second quarter. In the second quarter of fiscal 2025, consolidated net sales were $403 million compared to sales of $420 million in the second quarter of fiscal 2024 and near the midpoint of our guidance range of $395 million to $415 million. Sales in our full-price brick-and-mortar locations were down 6%, driven by a negative comp of 7%, partially offset by the addition of new store locations. Sales in our wholesale channel were down 6%, while e-commerce sales declined 2% and sales in our outlet locations decreased 4%. Sales in our food and beverage locations performed better than our other channels with modest sales growth year-over-year. Overall, we finished the second quarter of fiscal 2025 with a total company comp of negative 5%, which was in line with our guidance for the quarter. Notably, Lilly Pulitzer had another strong quarter. While total sales at Lilly Pulitzer were down modestly compared to the prior year, the decline was driven by lower sales in our wholesale channel, partially offset by a low single-digit positive comp. The positive comp sales at Lilly Pulitzer, along with positive comp sales and overall sales growth in our emerging brands businesses, helped offset the high single-digit negative comp at Tommy Bahama and low double-digit negative comp at Johnny Was that led to sales declines in both businesses. Adjusted gross margin contracted 160 basis points to 61.7%, driven by approximately $9 million of increased cost…

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

So just to start, you mentioned that comparable store sales performance has been positive quarter-to-date. Could you just elaborate on what you believe is driving that strength or what you're seeing from a traffic or transaction perspective? Additionally, anything on a brand level?

Yes. Thank you, Ashley. So comps are positive quarter-to-date. That really -- all the brands have been part of that. Lilly continues to be positive. Tommy Bahama is around flattish at this point, but that's a significant step-up from where they were in the first and second quarters. So we've been really happy to see that. I would say it's mostly traffic-driven. During the first 2 months of the second quarter, our issue was really traffic. Conversions for the most part, hung in there pretty well. Average order values were actually strong and actually ticked up a little bit during the second quarter. And then as we got into July, we saw the traffic start to recover a bit, and that really continued into August. So I think that's the story sort of across the board. And then as I said, we're seeing nice comps in Lilly Pulitzer. Tommy Was is -- Tommy Bahama is in a much better position than they were first and second quarters, and that really -- their business started to pick up in July as well and then continued into August, especially. And so we're encouraged by what we're seeing there, Ashley.

Okay. Great. And then just a follow-up maybe on promotions. I know the environment still remains volatile, and you mentioned that margins are expected to face pressure from both tariffs and then also the consumer shopping around promotional periods. Is there anything you're doing differently in terms of how you're planning your promotional cadence for the back half of the year? And then any nuances between the brands?

I think they're mostly going to follow historical patterns. We, of course, try to always remain nimble and adjust to the situation as it unfolds. But I think we're not planning any major departures from the way we've run promotions in the past. It's just, as you alluded to, Ashley, we expect to do proportionately more of the business during those periods just because we feel like a lot of consumers are really sort of waiting for those opportunities. But second quarter, you look at it, highly promotional environment, definitely had the tariff pressure, but I think you probably heard Scott say this, absent the tariff pressure, our gross margins would have increased year-over-year in the second quarter. So I think we're exercising a lot of discipline and being judicious and trying to maintain price and brand integrity to the maximum extent possible while balancing that with the need to move inventory and generate revenue. And Scott, I don't know if you'd add anything to that.

Yes. I think the only change in promotions is Tommy Bahama Friends & Family. We shifted from September -- early September last year to August this year, and that worked well for us. So we think it was the right move. But other than that, pretty much similar type of events.

And that's all within the same quarter. But I think we -- as Scott pointed out, I think we feel like that probably worked more effectively.

And our next question comes from the line of Janine Stichter with BTIG.

It was impressive you were able to reiterate the gross margin guidance even with the incremental $80 million in tariff headwinds. It sounds like part of that is more price increases. I'm just curious how you're planning pricing, how that's evolved in response to tariffs and what you've seen from the initial price increases that you've taken?

So what I would say is we've been, as Scott used the word in his comments, selective price increases. So we've not done sort of an across-the-board approach to pricing. We've really looked at it on an item-by-item basis and balanced the need to protect our margins and try to recover some of the tariff impact with not wanting to get too far ahead of ourselves because that tariff number, as you know, Janine, is still very much a moving target. We're pretty sure we're going to end up with some incremental tariffs versus what they were in '24, but we still really don't know what they are. So we're trying to be careful about getting too far ahead of ourselves. And the general strategy has been to try to cover the gross margin dollars for the balance of this year. And really, as we get into spring '26, that's where it really kicks in where we're trying to recoup the gross margin dollars, but not necessarily the percent. And on average, that's led to sort of low to mid-single digit or low mid-single-digit price increases, a little bit higher than that for spring and Lilly Pulitzer, but that's -- I think across the board, there's a mix of both tariff-based price increases and then, in some cases, some changes in the mix that are driving that. And one example, though, that I'll give you of a way that we can increase prices without it, I think, being too detrimental for us are that new Boracay Island chino that I mentioned in my comments, and that's up to $158. The old version of the Boracay was $138. This is $158, which is about a 14.5% increase. It's a significantly improved product. We're getting full margin for it. while covering the incremental tariffs on it. And the consumer is -- seems to be fine with it. And I think it's because it's a new, innovative, different and better product. So they're willing to pay the up charge. And that's -- in that case, we're getting not only the margin dollars, but we're actually hanging on to the percentage as well. Then we've got other ongoing products where we're just being very cautious about increasing the price too much before we really know where things are settled out.

That's helpful. And then maybe just one more gross margin question. You talked about improved gross margin from promotional events at Tommy Bahama. Maybe just elaborate on what that was, if it's something that's repeatable, as we think about squaring that with your expectation for just more promotions or consumer shopping more around those key events.

Well, I think part of it was we ended up selling more full-price product during the promotional period.

Yes. And we just had less and like an end-of-season sale, we just had less inventory to sell. So the degree of markdowns was not as severe also.

And our next question comes from the line of Dana Telsey with Telsey Advisory Group.

Tom, I think a couple of calls ago, you had mentioned about the competitive environment with tariffs and how some of the competitors wouldn't even be making some of their collections given the changes with tariff pricing. What are you seeing? Is it helping you gain market share? And then as you think about this upcoming holiday season, maybe, Scott, how are you thinking of marketing spend and new products to drive activation? And then lastly, components of the comp, what did you see in the comp on your DTC side, both from online and from your own stores?

Okay. So starting in reverse order, I would say that during the quarter, traffic was retail stores were relatively stronger than e-commerce, if that makes sense. So we saw a bit of softness in both sides during the quarter. But I think, relatively speaking, retail was stronger than e-com. And that, frankly, is consistent, I think, from what -- with what we're hearing from a lot of other reporting companies that retail seems to be having a bit more strength than e-commerce. Then in terms of the competitors that may not be offering a line for the resort season and maybe doing some more extreme things around pricing, for spring. Those are privately held competitors for the most part that we're talking about, if not exclusively. So we're not seeing a lot of reporting out of them yet. What I would say is I do think that we're holding and even gaining share in our wholesale channels, which is where we can see it with the caveat that overall, that market is -- they're being very cautious with their forward buys. So the overall market is not really growing, but I think we're performing well and are getting and will get rewarded for that a bit. And I think that I'll add one other comment on that, even though you didn't exactly ask it, and that's that one of the earlier reads that we get on how our pricing is going to be received by the consumer is how the wholesale accounts react to it, and they've been very, very positive about the way that we're handling pricing. And that -- to me, that it's still the consumer ultimately that will vote on that. But those merchants at those wholesale accounts are very skilled, capable, experienced people. And if they're reacting well to the way that we're handling pricing, I think we'll the consumer will probably also react pretty well. And Scott, I don't know if you'd add anything to any of that or if I missed something.

Yes, I think you got it, I think you covered.

I think you covered it. Great. And anything just to follow up on the fourth quarter marketing outlook there in terms of how you're planning for Q4?

Well, I think we'll be doing a lot of similar things to what we've done in the past. I don't want to let the cat out of the bag on a couple of the things we'll be doing around the holiday in particular, because there are going to be a few little twists on it, but I really don't want to spill the beans on that if you'll allow me.

And then just lastly, just how does the consumer...

Dana, these are just sort of the tactics. I don't think from a big picture standpoint, it's a whole lot different. But some of the specific tactics we'll be doing, I think, will be slightly different than what we've done in the past.

Got it. And then just on the wholesale partnerships, anything you're seeing different in terms of the wholesale partnerships and how you're planning them?

Well, I think the value of having really good partnerships, which we do with our very best customers. We have extremely close relationships with them. We work very hard to build mutually successful and mutually profitable businesses with them. We really like that part of the business. And I think that's more important than ever that you have those kinds of partnerships. And I think ours -- while it's a challenging time for everybody, I think our partnerships are, by and large, stronger than they've ever been. I'm not sure if I answered the question, but...

And our next question comes from the line of Mauricio Serna with UBS.

I guess just on the commentary about the positive quarter-to-date trend in the comps, could you maybe talk about like how much of a tailwind was that timing of the sale on Tommy Bahama? And just like from excluding that, if you're seeing actually like the business being positive? And then I guess just was wondering maybe if you could clarify, given that the net tariff impact is actually going to be lower than what you initially expected and the sales outlook has been kept unchanged. What is driving you to like maintain -- what is causing you to maintain your full-year EPS outlook for this year?

A couple of things. Why don't tackle the tariffs first and then we'll -- yes. On the tariffs, last quarter, we said around 40 before -- that was before price increases and vendor concessions. Now tariffs with some of the changes in tariffs, the overall exposure went up, but we accelerated. We did more acceleration of receipts and we had some more late in the year shifting out of China to lower tariff countries. So we were able to mitigate it. So I think the before price increases and vendor concessions were pretty much around the same number, as we said before. We tried to lay it out a little different kind of starting with the total exposure of $80 million and about half of that through shifting and early receipts. And then we've got some additional through the price increases and the vendor concessions. So I think overall, even though the landscape turned against us a bit, we were able to have further mitigations to kind of stay in a neutral position to where we were last quarter. And your first question on the Tommy, it was all within the quarter, Mauricio. So it shifted from August to September, and it was early September last year. So that's flushed out now. So in our quarter-to-date, we think we're back to an apples-to-apples view where August itself was apples to oranges and early September was apples to oranges. But now once you got through the Labor Day weekend, where the event was last year, we're back now to an apples-to-apples basis on Tommy.

Okay. That makes a lot of sense. And then just like the one commentary also about inventory, the expectation that it's going to actually like decrease or moderate -- sorry, I forgot the term. But what is driving that? I would assume that the inventories would be higher, just given that you're bringing in inventory without tariff costs.

Well, we said before the impact of any capitalized tariff cost into inventory. But from the acceleration, we don't think we'll -- we think there's tariffs have settled down, but we won't need -- before we were trying to be -- we knew the August 27 change was coming. So we got as much in -- we didn't know what exactly was going to be, but we got as much in as we could before then. Now we don't think we'll have to have that acceleration that we had. So I think part of our -- pretty much our increase in the second quarter was capitalized tariffs and acceleration. That we believe that accounts for virtually the whole increase. And when you get to third quarter, we're only going to be dealing with the tariff impact and not the acceleration. And acceleration was the bigger piece of it.

And our next question comes from the line of Joseph Civello with Truist Securities.

Just following up a little bit on the price increases. I think you said select ones so far have been averaging in the low to mid-single-digit range, that picking up through the spring. Can you just talk about what the magnitude could be by then? And how you'd implement those? It would be on a broader range of products, either brand-specific, region-specific, anything like that would help.

Yes. So I would say, Joe, that the -- I think we're going to be a little bit on the conservative side with the price increases as long as tariffs remain up in the air. The so far, as far as we've really gone out is spring. And for spring, I think they're a little bit higher than they are for fall and resort. But that's kind of where we are right now.

In fall, we really -- on wholesale, we had already had prices out. So there's not the wholesale increases for fall where there will be for spring. We'll have some both direct-to-consumer and wholesale. So we'll come close -- in spring, we think should we make up the gross margin dollars. Fall, we will not quite make up the gross margin dollars.

And the other thing that I would point out, I think you're clear on this. But when we talk about, say, a 5% increase in fall prices, that's fall of this year versus fall of last year. Then when we talk about, say, another 5% increase for spring, that's spring versus spring. It's not on top of a fall increase, if that makes sense. So it's not a cumulative thing. You're not compounding those price increases. So there -- where we are so far, they're really not -- they're not that much.

Just one more follow-up then on Lilly. Just talk a little bit about the direct business versus what you're seeing in wholesale.

Well, I think our specialty accounts, in particular, they tend to -- during tough times, they tend to be very cautious, and we've got a good amount of that. within Lilly Pulitzer. It's not that -- I don't think it's that we're not performing well. They just tend to get more conservative and cautious in their purchasing. And then in our major accounts, our performance has been quite good. Again, as I mentioned earlier, the majors are also in a pretty conservative stance right now when it comes to forward purchases, but I have no concerns about our position with any of the key accounts in either Tommy or Lilly.

And our final question comes from the line of Paul Lejuez with Citigroup.

It's Tracy Kogan filling in for Paul. I know you guys have outlined CapEx this year at $120 million. I think a lot of that is from the DC. So I'm just wondering, as you look out to F '26 and beyond, what is a good CapEx number to use? And if there'll be any more major investments in DCs or things like that in the near future?

Yes. We expect the Lyons project to be substantially complete. There could be a tiny bit that trails over to next year. But once that's behind us, I think an ongoing, it's going to kind of be in that $75 million pace. It really depends on number of stores and the number of store pace has slowed down a little bit than what it was. But I would say somewhere in that $75 million neighborhood.

Got you. And what's your early expectation for store growth next year? Do you have any openings identified?

We've got some pipeline. Johnny Was, we are not opening stores right now. I'm not saying we won't open any, but we've really slowed that down. And then Southern Tide opened a whole lot very quickly. And we've slowed it down, not -- but there will be some Southern Tide stores. I think Tommy and Lilly will kind of be on a normal type.

Yes, subject to real estate availability…

Yes, yes. So there'll probably be a few Marlin Bars and then a few stand-alone stores at Tommy and Lilly will probably have 5 or 6 stand-alone stores. And then Beaufort Bonnet will probably have a couple also. And then Southern Tide will have a few not at the 10 or so pace they had last couple of years. Yes. So overall, probably more like this year, closer to this year, where we're going to be at 15 where we were 30 last year. So probably the 15 is probably a...

Pretty good number.

Pretty good number. And again, with a few of them being Marlin Bars, which are more expensive.

And with that, there are no further questions at this time. I would like to turn the call back to Tom Chubb for closing remarks.

Okay. Thanks, Julian, and thanks to all of you for your interest. We look forward to talking to you again in December, and I hope all is well until then.

Thank you. Ladies and gentlemen, with that, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time. Have a wonderful day.