Tommy Bahama parent Oxford Industries Inc. said it’s winding down the legacy Lanier Apparel group.
In a Nutshell: Reporting third-quarter earnings Wednesday for fiscal 2020, Oxford said its exit from the Lanier Apparel business should be completed in the second half of fiscal 2021, or sometime between August 2021 and January 2022. The wind down is expected to be cash-flow positive.
“As we were carefully navigating this unprecedented environment, we also took steps to reinforce and build upon the strengths of Tommy Bahama, Lilly Pulitzer and Southern Tide, as well as our smaller brands like The Beaufort Bonnet Company and Duck Head. As our brands become more digitally-focused, mobile-centric, and omni-channel, they continue to add capabilities that create personalized and seamlessly integrated digital and bricks and mortar shopping experiences that serve our customers well,” Thomas C. Chubb III, chairman and CEO, said. “Through a series of acquisitions and divestitures over many years, Oxford has migrated from being a private label and licensed manufacturer servicing department stores and big box retailers, to owning a portfolio of compelling, direct to consumer lifestyle brands…. That said, Lanier’s business model does not fit our long-term vision for the enterprise and the challenges presented by the pandemic have amplified the misalignment. Exiting this business will result in a portfolio that is completely in synch with our strategy.”
The Lanier division produces for its own Billy London, Oxford and Oxford America brands, and includes other licensed brands. It was named after the Lanier family—Sartain, Hicks and Thomas Lanier—who founded Oxford Industries after the 1942 acquisition of Oxford Manufacturing Co., which at the time was a manufacturer of military uniforms.
“We are working closely with out licensors, customers and suppliers to ensure a smooth process,” Chubb said on a call with Wall Street analysts.
Chubb believes post-Covid consumers will flock to “easy to wear and easy care” clothing, while “traffic in malls will remain significantly below 2019 levels, department stores will be less relevant than they were before” and “e-commerce will be bigger and more important than ever…”
Company-owned stores and restaurants, he added, “will be a physical representation of the brand, seamlessly integrated into a total direct to consumer ecosystem including e-commerce and heavily digital diversified marketing channels will be essential. All of these trends should benefit our business as we emerge from this crisis.”
Like many in fashion retail, Oxford has been offering virtual shopping appointments, curbside pickup, and digital clienteling, and has tasked store associates with fielding customer service calls.
Net Sales: Net sales for the third quarter ended Oct. 31 fell 27.4 percent to $175.1 million from $241.2 million. Oxford said full price e-commerce sales in the quarter grew 51 percent, with growth from its branded businesses.
Given restrictions and social distancing measures, Oxford saw full-price retail sales and restaurant sales drop 45 percent and 30 percent, respectively; some Tommy Bahama locations have restaurants and it is rolling out its new Marlin Bar concept featuring outdoor dining patios. The wholesale channel fell 37 percent year-over-year.
Gross margin was comparable to last year at 55 percent. Increased gross margin at Lilly Pulitzer was offset by markdowns in other businesses.
The company said inventory decreased 4 percent to $149 million at the end of the quarter from $154 million a year ago.
Chubb told investors on the call that “lounge-type wear” has been doing well across all its brands, while second-layer knits for men have been doing well at Tommy Bahama. “They’re giftable items. They’re comfortable items. They actually lend themselves really well to the work-from-home Zoom environment and then that sort of adds leisure-type performance inspired products that we have in all the brands, [which] have done really well and that’s where we’ve tried to tilt the product assortment, and of course we were reacting on very short notice,” he said. In addition, cozy loungewear and the Island Zone line are resonating in Tommy Bahama women’s, as well as some items at Lilly Pulitzer that feature a “built-in face mask that you kind of pull up when you need it and when you don’t need it, you could drop it back down.”
Chubb also said that while Oxford has shifted its promotion cadence this year, like offering Lilly Pulitzer flash sales, it’s too early too early to say what it will do next year.
“But I do think the idea of mixing things up a bit is a good idea and it’s something that sort of was inspired, if you will, by the coronavirus situation this year, but I do think it’s one of those valuable lessons that we’ll take away from this year, because we’re really pleased with the way that our promotional activities played out this year and we think it’s been good for the guest, pre-added some excitement and variety for her and that’s good for our business,” Chubb said.
For the nine months, net sales fell 36.1 percent to $527.5 million from $825.2 million.
Earnings: The net loss for the quarter was $10.6 million, or 64 cents a diluted share, against net income of $1.7 million, or 10 cents, in the year-ago quarter. On an adjusted basis, excluding a $10 million pre-tax charge related to its Lanier exit, among other items, the loss per share was 44 cents.
Because of the pandemic, the company is not providing financial outlook for fiscal 2020.
For the nine months, the loss was $83.5 million, or $5.04 a diluted share, against net income of $53.2 million, or $3.15, in the year-ago period.
CEO’s Take: “During our historically smallest quarter of the year, our full price e-commerce business grew 51 percent, helping partially offset the headwinds in other channels due to Covid-19. Our sustained digital success this year underscores the power of our brands and their strong consumer connections and is a great indication that our business is positioned for success in the post-pandemic environment,” Chubb said, noting that each of the branded businesses exceeded internal plans.