Oxford Industries, Inc. today announced financial results for its fiscal 2012 third quarter, which ended October 27, 2012. Consolidated net sales increased 7% to $181.4 million in the third quarter of fiscal 2012. On an adjusted basis, earnings per share increased 19% to $0.19 compared to $0.16 in the third quarter of fiscal 2011. Adjusted earnings per share exclude charges related to repurchases of senior secured notes, a change in the fair value of contingent consideration and LIFO accounting adjustments.

On a U.S. GAAP basis, earnings per share were $0.18 in the third quarter of fiscal 2012 compared to$0.10 in the same period of the prior year. 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 of Oxford Industries, Inc., commented,  "Our growth continues to be driven by strong sales increases at Tommy Bahama and Lilly Pulitzer and we are  pleased that early holiday results at both of these brands have been strong."

Mr. Lanier continued, "Despite the good performances of these businesses, our overall results for the third quarter were negatively impacted by Ben Sherman's disappointing performance, which has continued into the fourth quarter. We also are experiencing a fourth-quarter impact from Hurricane Sandy, which delayed the opening of our high-profile Tommy Bahama bar and restaurant in New Yorkand affected 24 of our other stores to varying degrees. Additionally, we have experienced delayed openings for our Hong Kong and Chicago stores."

Mr. Lanier concluded, "While we have moderated our near-term guidance as a result of these factors, we remain confident and well-positioned for growth. We will continue to make significant strategic investments in Tommy Bahama and Lilly Pulitzer, each an outstanding brand, and are moving quickly to address the issues with Ben Sherman's performance. We remain focused, across our organization, on growth, efficiency and creating value for our shareholders." 

Operating Results  

Tommy Bahama reported net sales for the third quarter of fiscal 2012 of $103.2 million compared to$92.5 million in the third quarter of fiscal 2011. The 12% increase in net sales was attributable to increases in all channels of distribution, with e-commerce delivering the highest percentage gains. At the end of the third quarter, Tommy Bahama operated 110 retail stores, which includes seven international stores. This compares to 94 retail stores on October 29, 2011.  

Tommy Bahama's operating income for the third quarter of fiscal 2012 was $3.4 million compared to$4.6 million in the third quarter of fiscal 2011. The benefit of higher sales was offset by the planned$5.1 million of SG&A related to Tommy Bahama's international expansion and pre-opening expenses for the New York store. This compares to $1.2 million of SG&A related to international expansion in the third quarter of fiscal 2011.

Lilly Pulitzer's net sales increased 62% to $26.9 million in the third quarter of fiscal 2012 driven by increases in all channels of distribution. The largest increase was in e-commerce, which was driven by a strong end-of-season flash sale as well as healthy full-price sales increases. Lilly Pulitzer reported operating income of $3.5 million compared to a loss of $0.4 million in the third quarter of fiscal 2011. The improved operating results were primarily due to increased sales. At the end of the third quarter, Lilly Pulitzer operated 18 full-price retail stores compared to 16 stores at October 29, 2011.

Ben Sherman reported net sales of $19.8 million for the third quarter of fiscal 2012 compared to $25.2 million in the third quarter of fiscal 2011. Sales in the third quarter were impacted by missteps in Ben Sherman's merchandise mix, which resulted in too much of the product offering in styles at the high end of the price range. This, coupled with the difficult economic conditions in the U.K. and Europe and Ben Sherman's exit from certain moderate-tier wholesale accounts in the U.K., resulted in the sales decrease. Ben Sherman reported an operating loss of $2.1 million in the third quarter of fiscal 2012 compared to operating income of $0.3 million in the third quarter of fiscal 2011 primarily due to the decreased sales. 

Net sales for Lanier Clothes were $27.2 million in the third quarter of fiscal 2012 compared to $33.1 million in the third quarter of fiscal 2011. In the third quarter of last year, Lanier Clothes benefited from initial shipments related to a new product launch, while the current quarter was impacted by a slow-down in the intake rate on replenishment programs by a key customer. The Company expects Lanier Clothes' fourth quarter sales to be above last year. Operating income in the third quarter of fiscal 2012 was $2.4 million compared to operating income of $4.3 million in the third quarter of fiscal 2011, with the decrease primarily due to lower sales and gross margins partially offset by lower SG&A.

Corporate and Other reported an operating loss of $1.2 million for the third quarter of fiscal 2012 compared to an operating loss of $2.1 million in the third quarter of fiscal 2011. The improved results reflect the net impact of LIFO accounting.

Consolidated gross margins for the third quarter of fiscal 2012 were 53.4% compared to 52.1% in the third quarter of fiscal 2011. The increase in gross margins was primarily due to the sales mix continuing to shift towards the Company's higher gross margin Tommy Bahama and Lilly Pulitzer businesses, the increased percentage of direct to consumer sales and the net favorable impact of LIFO accounting adjustments.

SG&A for the third quarter of fiscal 2012 was $94.1 million, or 51.9% of net sales, compared to $85.2 million, or 50.0% of net sales, in the third quarter of fiscal 2011. In the quarter, the Company incurred approximately $5.1 million of SG&A for the Tommy Bahama international expansion and pre-opening expenses for the New York store compared to $1.2 million in the prior year. SG&A also increased due to the costs of operating additional retail stores and other expenses to support the growing Tommy Bahama and Lilly Pulitzer businesses, partially offset by decreases in SG&A in Ben Sherman and Lanier Clothes.

Royalties and other operating income for the third quarter of fiscal 2012 were $3.8 million, approximately flat with last year.

Interest expense for the third quarter of fiscal 2012 was $1.0 million compared to $3.7 million in the third quarter of fiscal 2011. The 74% decrease in interest expense was primarily due to lower interest rates as the Company changed the source of its borrowings from senior notes, which were redeemed in the second quarter of fiscal 2012, to its U.S. revolving credit facility. 

Income taxes for the third quarter of fiscal 2012 increased to $2.0 million from $0.7 million in 2011. The increase was primarily due to higher pre-tax earnings and an increase in the effective tax rate from 31.2% to 39.3%. The current year tax rates were unfavorably impacted by an inability to fully recognize benefits from losses in foreign jurisdictions, as well as a greater proportion of the Company's earnings occurring in jurisdictions with higher tax rates. Both periods benefited from certain favorable discrete items. 

For the first nine months of fiscal 2012, consolidated net sales grew 11% to $619.3 million compared to $559.2 million in the first nine months of fiscal 2011. Consolidated gross margins on an adjusted basis were flat with last year at 55.5%. Adjusted earnings per share from continuing operations for the first nine months of fiscal 2012 increased to $1.96 compared to $1.80 in the same period of the prior year. On a U.S. GAAP basis, earnings per share from continuing operations were $1.57 compared to$1.34 in the first nine months of fiscal 2011.

Balance Sheet and Liquidity

Total inventories at the close of the third quarter of fiscal 2012 were $102.2 million, compared to $91.0 million at the close of the third quarter of fiscal 2011. The increase in inventory levels was primarily to support anticipated sales growth and additional Tommy Bahama and Lilly Pulitzer stores. Receivables increased to $68.9 million at quarter end compared to $66.4 million at the end of last year's third quarter primarily due to the timing of wholesale shipments.

As of October 27, 2012, the Company had $130.3 million of borrowings outstanding and approximately$91.4 million of unused availability under its U.S. and U.K revolving credit facilities.

The Company's capital expenditures for fiscal 2012, including $47.7 million incurred during the first nine months of fiscal 2012, are expected to approach $60 million for the year. 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

The Company has moderated its earnings guidance predominantly as a result of the ongoing challenges at Ben Sherman as the factors that impacted the third quarter continue, and to a lesser extent due to store opening delays at Tommy Bahama and the impact of Hurricane Sandy. 

For the fiscal year 2012 ending on February 2, 2013, the Company now expects adjusted earnings from continuing operations per share in a range of $2.60 to $2.70 and net sales of $845 million to $855 million. This compares to adjusted earnings from continuing operations per share of $2.41 and net sales of $759 million in fiscal 2011. On a U.S. GAAP basis, earnings per diluted share are expected to be between $2.19 and $2.29 for fiscal 2012 compared to $1.77 in fiscal 2011. The earnings guidance for the year includes a negative impact to operating income of approximately $15 million associated with the Tommy Bahama international rollout and New York store, compared to a $3.5 million negative impact last year.

For the fourth quarter of fiscal 2012, the Company anticipates net sales in a range from $225 million to $235 million and adjusted earnings per share of $0.64 to $0.74. This compares to adjusted earnings per share of $0.61 and net sales of $200 million in the fourth quarter of fiscal 2011. On a U.S. GAAP basis, earnings per share for the fourth quarter of fiscal 2012 are expected to be between $0.62 and $0.72 compared to $0.43 in the fourth quarter of fiscal 2011. The earnings guidance for the fourth quarter includes a negative impact to operating income of approximately $5 million associated with the Tommy Bahama international rollout and New York store, compared to a $1.6 million negative impact last year.

Dividend

The Company also announced that its Board of Directors has approved a cash dividend of $0.15 per share payable on February 1, 2013 to shareholders of record as of the close of business on January 18, 2013. The Company has paid dividends every quarter since it became publicly owned in 1960.