Oxford Industries, Inc. today announced financial results for its fourth quarter and 2012 fiscal year ended February 2, 2013. For fiscal 2012, a 53-week fiscal year, consolidated net sales rose 13% to $855.5 million from $758.9 million in fiscal 2011, which was a 52-week fiscal year. On an adjusted basis, earnings per share rose to $2.61 for the 2012 fiscal year compared to $2.41 in the prior year.

In the fourteen-week fourth quarter of fiscal 2012, consolidated net sales rose 18% to $236.2 million compared to $199.7 million in the thirteen-week fourth quarter of fiscal 2011.  Adjusted earnings per share for the quarter were $0.65 compared to $0.61 in the same period last year. 

For the full year,  GAAP  earnings per share increased to $1.89 from $1.77 in the prior year.  In the fourth quarter of fiscal 2012,  GAAP earnings per share were $0.32 compared to $0.43 in the same period of the prior year. For reference, tables reconciling GAAP to adjusted measures are included at the end of this release.

"We are very pleased with the 2012 performance of our two largest brands, Tommy Bahama and Lilly Pulitzer," commented Thomas C. Chubb III, CEO and President. "We launched Tommy Bahama's international expansion in 2012 and we now operate nine stores in the Asia-Pacific region, including our newest in Yokohama, Japan.  We believe this is an excellent long-term investment and the runway it creates for us is substantial.  Tommy Bahamacontinues a store opening pace that will add approximately 12 stores on the domestic front and approximately four international stores in fiscal 2013.   Our e-commerce business also continues to grow rapidly and, in conjunction with our retail stores, we are well on our way to creating a seamless omni-channel experience for our consumers."

Mr. Chubb continued, "Lilly Pulitzer also had a year of extraordinary growth as our brand continues to reach more and more customers.  A measured pace of four to six new stores each year, a growing e-commerce business that now exceeds 20% of Lilly's sales and the potential for carefully executed product extensions demonstrate the significant growth potential for Lilly Pulitzer.

"Needless to say, Ben Sherman's operating results in fiscal 2012 were extremely disappointing.  Missteps in the execution of our strategy coupled with a difficult consumer market in the UK and Europe have put pressures on both our top line and gross margins.  We are taking specific actions to stabilize and improve this business, but the impact of these challenges is expected to continue into 2013, particularly in the first half.

Mr. Chubb concluded, "Notwithstanding the challenges with Ben Sherman, the overall picture for fiscal 2013 is bright.  Tommy Bahama and Lilly Pulitzereach clearly demonstrate a powerful ability to drive our consolidated revenues and profitability. We expect our continued investment in their direct to consumer initiatives, including people, systems and infrastructure, to deliver long-term, sustainable growth for our shareholders in the years to come." 

Operating Group Results

Tommy Bahama  In fiscal 2012, net sales at Tommy Bahama increased 17% to $528.6 million from $452.2 million in fiscal 2011. Operating income for the year increased 8% compared to the prior year, to $69.5 million.  Growth in operating income in fiscal 2012 was suppressed by a $15.9 millionnegative impact related to investments in Tommy Bahama's international expansion and its New York flagship store on Fifth Avenue compared to $3.5 million in fiscal 2011.

Tommy Bahama's fourth quarter results were very strong with a 23% increase in net sales to $156.8 million compared to $127.6 million in the fourth quarter of fiscal 2011.  Operating income for the quarter increased 27% from the same period in the prior year to $23.9 million. The increase in net sales and operating income was driven by a low-teens percentage comparable store sales increase (which includes full price stores and e-commerce) on a comparable 13-week basis.  Sales also increased due to the operation of additional retail stores, a mid-teens percentage increase in wholesale sales and the benefit of the extra week included in the fourth quarter and fiscal year 2012. As of February 2, 2013, Tommy Bahama operated 113 retail stores globally, including 75 full-price stores, 14 restaurant-retail locations and 24 outlet stores, compared to 96 retail stores as of January 28, 2012.

Lilly Pulitzer  In fiscal 2012, net sales at Lilly Pulitzer increased 30% from the prior year to $122.6 million. Adjusted operating income rose 50% to $26.6 million compared to $17.7 million in fiscal 2011.  The fiscal 2012 adjusted operating income excludes a $6.3 million charge for the change in the fair value of contingent consideration for the earn-out obligation related to the Lilly Pulitzer acquisition. Fiscal 2011 adjusted operating income excluded a$2.4 million charge for the change in the fair value of contingent consideration as well as a $1.0 million purchase accounting charge.  

The strong financial performance of Lilly Pulitzer has increased the certainty that the contingent consideration will be earned in full.  As a result, a charge was taken in the fourth quarter of fiscal 2012 to bring the fair value of the obligation to $14.5 million, which represents all but $0.5 million of the maximum remaining potential payment of $15 million. The remaining $0.5 million charge is expected to be recognized in fiscal 2013 and 2014.

GAAP  operating income for fiscal 2012 at Lilly Pulitzer increased to $20.3 million from $14.3 million in fiscal 2011.

At Lilly Pulitzer, net sales in the fourth quarter of fiscal 2012 increased 26% to $29.1 million compared to $23.1 million during the same period of the prior year.  Net sales increased primarily due to a more than 20%  increase in comparable store sales (which includes full price retail and e-commerce excluding flash clearance sales).  Sales also increased due to higher e-commerce flash clearance sales, the impact of operating additional retail stores on a comparable 13-week basis and the benefit of the extra week.  As of February 2, 2013, Lilly Pulitzer operated 19 retail stores compared to 16 retail stores as of January 28, 2012.

Lilly Pulitzer's adjusted operating income in the fourth quarter of fiscal 2012 was $2.8 million compared to $2.6 million in the fourth quarter of fiscal 2011.  SG&A increased in the quarter due to the operation of new stores and additional infrastructure to support the growth of the brand.  Lilly Pulitzerreported a GAAP operating loss in the fourth quarter of fiscal 2012 of $1.7 million compared to operating income of $2.0 million in the fourth quarter of fiscal 2011.  The only adjustment to GAAP earnings in the fourth quarter of each year was a charge to increase the fair value of contingent consideration.   In the fourth quarter of fiscal 2012, the charge was $4.5 million compared to $0.6 million in the same period of the prior year. 

Lanier Clothes  Fiscal 2012 net sales for Lanier Clothes decreased slightly to $107.3 million from $108.8 million in fiscal 2011.  Operating income also decreased to $10.8 million in fiscal 2012 from $12.9 million in fiscal 2011, primarily due to continued pressures on gross margins.

Net sales in the fourth quarter of fiscal 2012 increased 13% to $22.3 million from $19.8 million in fiscal 2011, primarily due to certain spring merchandise shipping in the fourth quarter of fiscal 2012, which would have typically shipped in the first quarter of the following year.  Lanier Clothes'operating income increased 29% to $2.0 million from $1.5 million in the fourth quarter of fiscal 2011.

Ben Sherman  In fiscal 2012, net sales for Ben Sherman fell 10% to $81.9 million from $91.4 million in fiscal 2011.  The loss from operations  increased to $10.9 million in fiscal 2012 from $2.5 million in fiscal 2011.  In the fourth quarter of fiscal 2012, net sales were $24.7 million compared to $25.9 millionin the fourth quarter of fiscal 2011 and the loss from operations was $4.5 million compared to $0.3 million in the fourth quarter of fiscal 2011.

The increase in the operating loss in the fourth quarter of fiscal 2012 was primarily due to lower wholesale sales, lower gross margins and severance costs as well as the impact of the difficult economic conditions in the United Kingdom and Europe.  The lower gross margins reflected heavier direct to consumer promotions, inventory markdowns and an increased mix of off-price sales.  To improve results in Ben Sherman,  the Company plans to reduce expenses, lower inventory risk, exit low potential and unprofitable businesses, and emphasize areas of potential profitability, such as e-commerce and existing retail stores.

Corporate and Other  For fiscal 2012, Corporate and Other operating results, as adjusted, were a loss of $16.6 million compared to a loss of $15.4 million in fiscal 2011. On a GAAP basis, Corporate and Other reported a loss of $20.7 million in fiscal 2012 compared to a loss of $20.0 million in the prior year, primarily due to a decrease in transition service income related to the Oxford Apparel disposition.

For the fourth quarter of fiscal 2012, Corporate and Other operating results, as adjusted, were a loss of $5.3 million compared to a loss of $3.9 million in the fourth quarter of fiscal 2011 due to increased costs associated with certain benefits and the timing of incentive compensation, as well as the decrease in transition service income.  On a GAAP basis, Corporate and Other reported a loss of $9.8 million in the fourth quarter of fiscal 2012 compared to a loss of $8.5 million in the same period of the prior year.

Consolidated Operating Results

Net Sales  For fiscal 2012, consolidated net sales rose 13% to $855.5 million from $758.9 million in fiscal 2011. In the fourth quarter of fiscal 2012, consolidated net sales rose 18% to $236.2 million compared to $199.7 million in the fourth quarter of fiscal 2011.  The sales increases in the quarter and the year were driven by strong performance from both Tommy Bahama and Lilly Pulitzer and the impact of the additional week in fiscal 2012.

Gross Profit and Margins  For fiscal 2012, consolidated gross margins increased 50 basis points to 54.9% primarily due to the impact of LIFO accounting.  Gross profit for the year rose to $469.6 million from $413.0 million in fiscal 2011.  For the fourth quarter of fiscal 2012, consolidated gross margins increased to 53.0% compared to 51.9% for the fourth quarter of fiscal 2011, due to the net impact of LIFO accounting and a change in sales mix towards direct to consumer sales.  Gross profit for the fourth quarter of fiscal 2012 increased to $125.2 million from $103.6 million in the fourth quarter of fiscal 2011.

SG&A   For fiscal 2012, SG&A was $410.7 million or 48.0% of net sales compared to $358.6 million, or 47.2% of net sales in the prior year.  For the fourth quarter of fiscal 2012, SG&A was $115.1 million, or 48.7% of net sales, compared to $93.6 million, or 46.9% of net sales in the fourth quarter of fiscal 2011.  The increase in SG&A reflects expenses relating to the Tommy Bahama international expansion and the New York store of $8.4 million and$20.0 million for the fourth quarter and full fiscal year, respectively. This compares to $1.6 million and $3.6 million of these expenses for the 2011 fourth quarter and full fiscal year, respectively.   SG&A also increased due to the costs of operating additional retail stores, other expenses to support the growing Tommy Bahama and Lilly Pulitzer businesses and the SG&A impact of the additional week in fiscal 2012.

Royalties and Other Income   Royalties and other income was $16.4 million in fiscal 2012 compared to $16.8 million in fiscal 2011.  For the fourth quarter of fiscal 2012, royalties and other income of $4.3 million was comparable to last year.

Operating Income   For fiscal 2012, consolidated operating income, as adjusted, increased to $79.3 million from $76.8 million in fiscal 2011.  In the fourth quarter of fiscal 2012,  consolidated operating income, as adjusted, increased to $18.9 million from $18.8 million in the fourth quarter of fiscal 2011. GAAP  consolidated operating income in fiscal 2012 was $69.0 million compared to $68.8 million in fiscal 2011.  In the fourth quarter of fiscal 2012, GAAP consolidated operating income was $9.9 million compared to $13.6 million in the fourth quarter of fiscal 2011. 

Interest Expense   For fiscal 2012, interest expense declined 45% to $8.9 million from $16.3 million in fiscal 2011. The decrease was primarily due to repurchases in fiscal 2011 and the full redemption in fiscal 2012 of our senior secured notes. Interest expense for the fourth quarter of fiscal 2012 was$1.1 million compared to $3.5 million in the fourth quarter of fiscal 2011.

Income Taxes   For fiscal 2012, the Company's effective tax rate rose to 38.5% compared to 32.8% in fiscal 2011.  For the fourth quarter of fiscal 2012, the effective tax rate increased to 40.6% from 30.0% in the fourth quarter of fiscal 2011. The fourth quarter of fiscal 2012 was negatively impacted by the Company's inability to recognize a tax benefit for losses in foreign jurisdictions while the fourth quarter of fiscal 2011 benefited from certain favorable items. 

Cash Flow From Operations  For fiscal 2012, cash flow from operations increased 51% to $67.5 million from $44.6 million in fiscal 2011 primarily due to more efficient management of working capital and higher earnings.

Balance Sheet and Liquidity

Total inventories at February 2, 2013 were $109.6 million, compared to $103.4 million at January 28, 2012. The increase in inventory levels was primarily to support anticipated sales growth and additional Tommy Bahama and Lilly Pulitzer stores, while inventory levels at both Lanier Clothes andBen Sherman decreased from January 28, 2012. Receivables increased to $62.8 million compared to $59.7 million at such dates primarily due to the timing of wholesale shipments.

As of February 2, 2013, the Company had $116.5 million of borrowings outstanding and approximately $105.7 million of unused availability under its U.S. and U.K revolving credit facilities.

The Company's capital expenditures for fiscal 2012 were $60.7 million. These expenditures consisted primarily of investments associated with new retail stores, information technology investments,  store remodeling and distribution center enhancements.

Dividend

The Company announced that its Board of Directors has declared a cash dividend of $0.18 per share payable on May 3, 2013 to shareholders of record as of the close of business on April 19, 2013. This represents a 20% increase from the dividend paid in the fourth quarter of fiscal 2012.  The Company has paid dividends every quarter since it became publicly owned in 1960.

Outlook for Fiscal 2013 and the First Quarter of Fiscal 2013

For fiscal year 2013, which ends on February 1, 2014, the Company expects continued solid sales growth, a moderate expansion of operating margins and significant growth in earnings per share.  The Company currently expects net sales of $930 to $945 million in fiscal 2013 compared to $855.5 million in fiscal 2012. Earnings per share are expected to be between $3.00 and $3.15.  This compares with fiscal 2012 adjusted earnings per share of$2.61 and GAAP earnings per share of $1.89.

The Company expects net sales in the first quarter of fiscal 2013 to be in the range of $230 to $240 million compared to net sales of $231.0 million in the first quarter of fiscal 2012.  Earnings per share for the first quarter of 2013 are expected to be in a range of $0.72 to $0.82 compared to adjusted earnings per share of $1.12 and GAAP earnings per share of $1.09 in the first quarter of fiscal 2012.  The first quarter is expected to be impacted by the pre-opening costs for the Tommy Bahama Tokyo and Chicago stores, higher international and other infrastructure expenses and first quarter sales declines at Ben Sherman and Lanier Clothes.     

Net Sales  For fiscal 2013, the Company expects Tommy Bahama and Lilly Pulitzer to have percentage net sales increases in the low-teens compared to fiscal 2012.  The Company expects sales to be relatively flat with fiscal 2012 for Lanier Clothes and percentage sales decreases in the mid to high single digits compared to fiscal 2012 for Ben Sherman. 

Gross Margins  The Company expects full year gross margins to increase approximately 150 basis points in fiscal 2013 as Tommy Bahama and Lilly Pulitzer grow at a faster pace and become a larger percentage of the total mix of net sales.  Gross margins are also expected to benefit from the continuing shift within these businesses to direct to consumer channels, which generally carry higher gross margins than wholesale sales.  Gross margin is expected to decline slightly at Lanier Clothes as competitive pricing and cost pressures continue.  Modest gross margin improvements are anticipated at Ben Sherman in fiscal 2013.

SG&A  SG&A is expected to rise at a pace slightly higher than the expected increase in net sales in fiscal 2013. Depreciation and amortization of intangible assets is expected to be approximately $33 million in fiscal 2013 from $26 million in fiscal 2012. 

Royalties and Other Income  For fiscal 2013, royalties and other income is expected to be comparable to fiscal 2012 at approximately $16 million. 

Operating Margin  For fiscal 2013, operating margin for Tommy Bahama is expected to increase modestly.  The operating loss in its international business is expected to continue at a level comparable to fiscal 2012.  For the first quarter, operating profit is expected to decrease primarily due to pre-opening costs for the Tokyo and Chicago stores as well as higher international and other infrastructure expenses.  Operating margin at Lilly Pulitzer is expected to remain comparable to last year at slightly above 20%. Lanier Clothes is expected to have a slight reduction in operating margin due to the gross margin pressures described above. 

While the Company expects lower sales at Ben Sherman, reductions in SG&A and gross margin improvements are expected to reduce operating losses in fiscal 2013.  However, in the first quarter of fiscal 2013, a more pronounced sales decrease of approximately $6 million is expected to drive a larger operating loss than in the first quarter of fiscal 2012.

Interest Expense The full benefit of the Company's debt refinancing in fiscal 2012 will be realized in fiscal 2013.  Full year interest expense is estimated to be approximately $4.5 million in fiscal 2013.

Effective Tax Rate  The effective tax rate for fiscal 2013 is anticipated to rise to approximately 40.5% compared to an effective tax rate of 38.5% in fiscal 2012.  The impact of foreign losses in fiscal 2012 was offset by certain discrete items, which will not be available to the Company in fiscal 2013.  As foreign losses are projected to be highest in the first quarter of fiscal 2013, the increased tax rate will be more pronounced and is currently estimated to be  45.0% in that quarter.