Oxford Industries, Inc. today announced financial results for its fiscal 2012 second quarter, which ended July 28, 2012. Consolidated net sales increased 14.5% to $206.9 million in the second quarter of fiscal 2012 compared to $180.6 millionin the second quarter of fiscal 2011. On an adjusted basis, earnings from continuing operations per diluted share rose 14.0% to $0.65 compared to$0.57 in the second quarter of fiscal 2011.

On a U.S. GAAP basis, earnings from continuing operations per diluted share were $0.30 in the second quarter of fiscal 2012 compared to $0.21 in the same period of the prior year.  Adjusted earnings per share for both periods exclude charges related to repurchases of senior secured notes, a change in the fair value of contingent consideration and LIFO accounting adjustments. For reference, tables reconciling U.S. GAAP to adjusted measures are included at the end of this release.

J. Hicks Lanier, Chairman and Chief Executive Officer, commented, "We are pleased to continue to report excellent results, including strong performances in our Tommy Bahama and Lilly Pulitzer direct to consumer businesses.  We achieved these results while continuing to make major investments in platforms for the future growth of our Company.  The most significant of these include Tommy Bahama's New York flagship and their international expansion."

Mr. Lanier concluded, "To support our long-term growth plans, we have significantly improved our already strong balance sheet by completing the redemption of our senior secured notes and increasing our revolving credit facility to $235 million. As we begin the second half of fiscal 2012, the health of our key growth brands is outstanding and our people are well-prepared to complete a great year."

Operating Results

Tommy Bahama's results for the second quarter continued to demonstrate the strength of the brand. Net sales for the second quarter of fiscal 2012 increased 16.8% to $127.5 million. Comparable store sales increases in full price stores were in the low double digits and substantial positive momentum continued in e-commerce. At the end of the second quarter, Tommy Bahama operated 105 retail stores compared to 90 on July 30, 2011.  In addition to opening four new stores in the United States and one in Singapore in the second quarter, Tommy Bahama acquired its Australian licensed business, which included five retail stores.    

Tommy Bahama's operating income for the second quarter of fiscal 2012 was $16.6 million compared to $17.0 million in the second quarter of fiscal 2011. SG&A increased as Tommy Bahama invested in growth initiatives for the brand.  In addition to costs associated with operating additional retail stores, the second quarter of fiscal 2012 included a negative impact to operating income of approximately $3.5 million related to certain infrastructure, pre-opening rent and other costs associated with Tommy Bahama's international expansion and the upcoming New York store.  This consisted of $4.0 million of expenses partially offset by $0.5 million of gross margin from sales in the international stores.

Lilly Pulitzer's net sales increased by 24.5% to $30.9 million for the second quarter.  All channels of distribution reported increases, with high single digit comparable store sales increases and significant increases in e-commerce and wholesale sales. As a result of the increased sales and gross margins,Lilly Pulitzer reported a 28.9% increase in adjusted operating income to $8.0 million for the second quarter of fiscal 2012. On a U.S. GAAP basis, operating income for the quarter increased 32.0% to $7.4 million.

Ben Sherman reported net sales of $20.1 million for the second quarter compared to $20.9 million in the second quarter of fiscal 2011 and an operating loss of $1.5 million compared to an operating loss of $1.8 million in the same period last year. The improvement in operating results was primarily due to higher gross margins partially offset by the lower sales and decreased royalty income.

Net sales for Lanier Clothes increased 8.1% to $24.8 million in the second quarter of fiscal 2012. Operating income in the second quarter was $2.4 million, slightly ahead of last year's operating income of $2.3 million.

Corporate and Other reported an operating loss of $4.6 million for the second quarter of fiscal 2012 compared to an operating loss of $5.4 million in the second quarter of fiscal 2011.  The improved results reflect the favorable impact of LIFO accounting.

Consolidated gross margins for the second quarter of fiscal 2012 increased slightly to 57.2% compared to 57.0% in the second quarter of fiscal 2011, reflecting the favorable impact of LIFO accounting.

SG&A for the second quarter of fiscal 2012 was $100.7 million, or 48.7% of net sales, compared to $88.6 million, or 49.1% of net sales, in the second quarter of fiscal 2011.  The Company achieved this modest leveraging of SG&A while making investments of approximately $4.0 million for the Tommy Bahama international expansion and New York store. The increase in SG&A was primarily due to the above-mentioned investments, the costs of operating additional retail stores and other SG&A expenses to support the growing Tommy Bahama and Lilly Pulitzer businesses.

Royalties and other operating income for the second quarter of fiscal 2012 were $3.3 million compared to $4.0 million in the second quarter of fiscal 2011. The decrease in royalties and other operating income was primarily due to lower royalty income in Ben Sherman.

Interest expense for the second quarter of fiscal 2012 was $3.3 million compared to $4.3 million in the second quarter of fiscal 2011. The decrease in interest expense was primarily due to the repurchase of $45.0 million in aggregate principal amount of the Company's 11.375% Senior Secured Notes during fiscal 2011.  In July 2012, the Company redeemed the remaining outstanding $105 million in aggregate principal amount of notes, which will result in further decreases in interest expense going forward.  The Company anticipates that interest expense for each of the third and fourth quarters of fiscal 2012 will be approximately $1.1 million.

For the first half of fiscal 2012, consolidated net sales grew 12.6% to $437.9 million compared to $389.0 million in the first half of fiscal 2011. Adjusted earnings per diluted share from continuing operations increased to $1.77 compared to $1.64 in the first half of fiscal 2011. On a U.S. GAAP basis, earnings per diluted share from continuing operations were $1.39 compared to $1.25 in the first half of fiscal 2011.  

Balance Sheet and Liquidity

Total inventories at the close of the second quarter of fiscal 2012 were $88.4 million, compared to $77.7 million at the close of the second quarter of fiscal 2011. The increase was primarily due to anticipated sales growth and the operation of additional retail stores by Tommy Bahama and Lilly Pulitzer.  

In June 2012, the Company amended and restated its U.S. revolving credit agreement.  The facility increased from $175 million to $235 million, subject to a borrowing base, with additional borrowing capacity provided by the inclusion of certain trademarks as collateral.

In July 2012, the Company redeemed all of its outstanding $105 million in aggregate principal amount of its 11.375% Senior Secured Notes, which were scheduled to mature in July 2015.  The redemption of the notes resulted in a $9.1 million charge comprised of a $6.0 million premium payment and the write off of approximately $3.1 million of unamortized deferred financing costs and unamortized bond discount.  The redemption of the notes was funded through borrowings under the Company's U.S. revolving credit agreement and cash on hand. As of July 28, 2012, the Company had $95.2 million of borrowings outstanding and $95.1 million of unused availability under its U.S. revolving credit agreement.

The Company's capital expenditures for fiscal 2012, including $27.3 million incurred during the first half of fiscal 2012, are expected to be approximately$60 million. These expenditures consist primarily of costs associated with opening new retail stores, information technology investments, retail store remodeling and distribution center enhancements.

Fiscal 2012 Outlook

For fiscal 2012, the Company affirmed its previously issued guidance of adjusted earnings from continuing operations per diluted share in a range of$2.85 to $2.95 and net sales of $850 to $865 million. The earnings guidance for the year includes a negative impact to operating income of approximately $14 million associated with the Tommy Bahama international rollout and the New York store compared to the Company's earlier estimate of $12 million.  The increase is primarily due to pre-opening expenses associated with a high profile store in Hong Kong, the addition of a Senior Managing Director of International and costs associated with the acquisition of Tommy Bahama's Australian licensed business. In the first half of fiscal 2012, $5.9 million of the estimated $14 million was incurred. On a U.S. GAAP basis, earnings per diluted share are expected to be between $2.42 and $2.52.

For the third quarter, ending on October 27, 2012, the Company anticipates net sales in a range from $175 to $185 million and adjusted earnings from continuing operations per diluted share of $0.18 to $0.23. On a U.S. GAAP basis, earnings per diluted share are expected to be between $0.16 and $0.21. Because of the impact of seasonality on the Company's business, sales and earnings in the third quarter are typically lower than other quarters. 

Dividend

The Company also announced that its Board of Directors has approved a cash dividend of $0.15 per share payable on October 26, 2012 to shareholders of record as of the close of business on October 12, 2012. The Company has paid dividends every quarter since it became publicly owned in 1960.