Oxford Industries, Inc. Stock

Greetings, and welcome to the Oxford Industries' Second Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Brian Smith. Please go ahead.

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 conditions 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 our Investor Relations tab at 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 can turn the call over to Tom Chubb.

Thank you, Brian. Good afternoon and thank you for joining us. I'm pleased to be here today to discuss our second quarter results, the performance of our brands, and our outlook for the balance of fiscal 2026. Overall, second quarter results were within our expectations, highlighted by year-over-year adjusted earnings per share growth and a low single-digit comparable sales gain at Tommy Bahama. We also delivered meaningful adjusted gross margin expansion despite a higher level of promotional activity, reflecting the progress our teams have made on assortment, sourcing, and pricing across the portfolio.

The strong cash flow we generated enabled us to make meaningful progress reducing debt in the second quarter. Refunds of previously paid tariffs contributed to that reduction. Maintaining a strong balance sheet and generating cash that can be deployed thoughtfully remained important priorities for us. Scott will provide more detail on our cash flow and balance sheet performance.

Tommy Bahama's second quarter results were consistent with our expectations. As our largest brand, its positive comparable sales growth provided important support to the overall portfolio and helped offset pressure elsewhere in the business. We were also encouraged by a return to positive comparable sales in Florida, a key market for the brand that had experienced softer results in recent periods. We are pleased with the consistency of the brand's performance and remain focused on sustaining that momentum through disciplined merchandising, marketing, and operating execution.

While we continue to deliver positive results at Tommy Bahama, performance at Lilly Pulitzer remained weak in the second quarter, and our outlook for the brand for the balance of the year is now below what we anticipated at the end of the first quarter. As we discussed on our first quarter call, Lilly Pulitzer entered the quarter with several product and marketing challenges. The core problem is the assortment, with the key issue being that we shifted far too much of our inventory investment out of our entry price points to higher price points. Second quarter results and the trends we are currently seeing indicate that those challenges have been more significant than we originally anticipated. We are responding with actions aimed at both near-term performance and the longer-term health of the brand.

Because of our product development lead times, spring 2027 is the first season in which we can substantially reshape the full assortment. In the meantime, we are refining our marketing and messaging, adjusting the promotional cadence, and managing inventory and expenses more tightly. Given current trends, we expect Lilly Pulitzer to be more promotional during the balance of the year. We will remain strategic and disciplined, using targeted promotional activity to support customer engagement and inventory sell-through while protecting the long-term integrity of the brand.

Promotions are 1 lever, but lasting improvement will also require stronger product relevance, marketing effectiveness, and execution. We are laser-focused on delivering these requirements. For spring 2027, our work is centered on 4 areas: our pricing architecture strategy, balance of print, pattern, and color, mix of intended use occasions between social and casual, and the proportion of new versus continuing styles. These assortment changes will not drive a positive trend change in fiscal 2026, but we believe they will create a more balanced and compelling assortment and better position Lilly Pulitzer for improved performance beginning with the spring 2027 season.

We remain confident in Lilly Pulitzer's long-term potential. The brand has a clear point of view, a strong emotional connection with its customer, and meaningful opportunities for improvement. That confidence does not lessen the urgency of the current situation. We are focused on addressing the issues directly and returning Lilly Pulitzer to the level of performance we expect from the brand.

At Johnny Was, we continue to make progress on the turnaround plan. The brand significantly increased EBITDA during the second quarter, driven by higher gross margin resulting from tighter inventory management and fewer promotions, together with disciplined SG&A cost management. There is still work to do, but we are encouraged by the improvement in profitability. Stepping back, weaker consumer sentiment has added pressure to discretionary demand. Our customers, particularly at Tommy Bahama and Lilly Pulitzer, tend to be active travelers, and although they continue to travel, higher airfare, lodging, and other travel costs may be leaving less room in their discretionary budgets for apparel. Even so, the steady performance at Tommy Bahama reinforces that compelling product and consistent execution can still produce solid results in this environment.

Our responsibility is to deliver that level of product relevance and execution more consistently across the portfolio. The continued softness at Lilly Pulitzer, including the impact of a more promotional posture for the balance of the year, together with softer demand in certain other parts of the portfolio, led us to lower our top and bottom line guidance for the remainder of the year. At Lilly Pulitzer, the issues are primarily assortment and marketing related, while the pressure elsewhere in the business is more closely tied to a more cautious, discerning consumer. We believe the updated guidance represents a prudent assessment of current business trends, the macro environment, and the actions we expect to take. Scott will provide more detail on our revised outlook and the assumptions underlying it.

Against this backdrop, our priorities are clear: sustain the positive momentum at Tommy Bahama, address the assortment and marketing issues at Lilly Pulitzer, and build on the profitability improvement at Johnny Was. We are managing inventory expenses and capital carefully while maintaining our focus on cash generation, debt reduction, and a strong balance sheet. After Scott's comments, I will turn briefly to discuss several broader actions underway across Oxford. As always, I want to thank our teams across Oxford. Their resilience, creativity, and commitment to our customers are the foundation of everything we do.

With that, I'll turn the call over to Scott for more detailed commentary on our financial performance and outlook.

Thank you, Tom. Consolidated net sales were $394 million in the second quarter of fiscal '26 compared to $403 million in the second quarter of fiscal '25, and near the high end of our guidance range of $380 million to $400 million. The company comparable sales were down slightly at 1%, including a 3% decrease in retail sales and flat e-commerce sales. The decline in retail comp sales was partially offset by sales from non-comp stores open primarily in the prior year. Notably, food and beverage sales increased 11%, driven primarily by non-comp locations. Wholesale sales decreased 14% compared to the prior year, but was primarily driven by lower sales of residual inventory through off-price channels. By brand, sales growth at Tommy Bahama helped to partially offset decreases in our other businesses. Sales decreases at Lilly Pulitzer and Johnny Was were driven by a mid-single-digit negative comp and lower off-price wholesale sales, while the sales decline at Emerging Brands was driven primarily by lower wholesale sales. The positive sales growth at Tommy Bahama was driven by a low single-digit positive comp in our DTC channels, partially offset by a decline in wholesale sales driven primarily by lower off-price clearance sales.

Adjusted gross margin expanded 140 basis points to 63.1%, driven primarily by updated assortment, sourcing, and pricing strategies across our portfolio that resulted in higher IMUs, along with a change in sales mix with off-price wholesale sales representing a lower proportion of net sales. These factors were partially offset by a higher proportion of net sales in our DTC channels occurring during promotional events at Tommy Bahama, Lilly Pulitzer, and Emerging Brands.

Tariff cost included in inventory sold during the year were materially consistent with the prior year. As Tom mentioned, we recorded and received significant tariff refunds during the quarter. We recorded a reduction to cost of goods sold of $42 million of tariffs previously paid and received substantially the entire balance during the second quarter or shortly thereafter. The impact of these refunds was excluded from our adjusted results.

Adjusted SG&A expenses increased slightly to $210 million compared to $209 million last year, impacted primarily by new brick-and-mortar retail and food and beverage locations, as well as increases in software and consulting costs, and costs associated with the transition of our Lyons, Georgia, distribution center operations. These increases were partially offset by lower incentive compensation and cuts in more discretionary categories like travel. The result of this yielded adjusted EBITDA of $45 million, or an 11.4% adjusted EBITDA margin, compared to adjusted EBITDA of $43 million, or 10.7%, in the prior year.

Moving beyond EBITDA, adjusted depreciation and amortization increased by approximately $1 million compared to the prior year, primarily due to increases in depreciation related to our new Lyons facility. Interest expense was relatively flat compared to the prior year, as our average debt levels declined during the year. The effective tax rate of 27.5% was lower than the prior year of 29.6% due to certain discrete items that were more significant in the prior year. With all this, we ended up with $1.34 of adjusted EPS.

Moving to the balance sheet, inventory decreased $20 million to 12% on a LIFO basis that included a $10 million increase in to the LIFO reserve. On a FIFO basis, inventory decreased $9 million, or 4%, compared to the second quarter of 2025, with decreases in Emerging Brands, Lilly Pulitzer, and Johnny Was. We ended the quarter with long-term debt of $73 million, which is down $70 million compared to $143 million at the end of the first quarter, and compared to long-term debt of $81 million at the end of the second quarter of fiscal '25, and $116 million at the end of fiscal 2025.

Cash flow from operations provided $97 million in the first half of 2026, which includes $29 million received related to tariff refunds, compared to $80 million in the first half of 2025. We also had lower capital expenditures of $32 million in the first half of '26, compared to the first half of fiscal '25 of $55 million. The decrease, which primarily related to the addition of fewer new bricks-and-mortar locations and lower expenditures on the Lyons, Georgia, distribution center project, as that project comes to a close, also allowed for further reduction of our long-term debt. We're also paying dividends of $22 million.

And now I'll spend some time on our updated outlook for 2026. As Tom mentioned, the ongoing challenges in the Lilly Pulitzer business, along with our generally conservative view of consumer sentiment, led us to reduce our top and bottom line outlook for the remainder of the year. For the full year, we now expect a low single-digit negative comp for the total company, which is lower than our previous range of slightly negative to slightly positive. As a result of the change in our comp assumptions, we are revising our guidance range for the full year and now expect sales to be between $1.43 billion and $1.47 billion, or a decline of 3% to relatively flat, compared to sales of $1.478 billion in fiscal 2025. Our revised sales plan for the full year of '26 includes a sales decrease in Lilly Pulitzer and Johnny Was, partially offset by a sales increase in Tommy Bahama, and growth in the Emerging Brands. By distribution channel, the full-year sales plan consists of low single-digit decreases in our direct-to-consumer channels and a high single-digit decrease in wholesale, partially offset by a low double-digit increase in our food and beverage channel that is benefiting from the additional -- addition of new locations.

Moving on to gross margin, our outlook assumes that the tariff rates reflecting the recent Section 301 changes will remain in effect for the balance of fiscal 2026. Because those rates are only modestly higher than the rates applicable to most of our first half inventory receipts, we do not expect the changes to materially affect fiscal 2026 results. Any additional tariff increase implemented during the balance of the year would be expected to affect primarily future periods due to the timing of the inventory receipts and sales. When removing any tariff refund-related impact, we now expect an approximate 50 basis points increase in gross margin for the year with improved IMUs and a continuation of the shift to a higher proportion of direct-to-consumer sales to be partially offset by higher promotional activity, particularly at Lilly Pulitzer. As a result of these factors, we expect gross margins to improve approximately 100 basis points in both Q3 and Q4 fiscal '26 compared to the prior year.

In addition to lower sales and higher gross margins, we expect SG&A to grow in the low single-digit range, primarily due to the annualization of incremental SG&A from new stores added primarily in fiscal 2025, additional costs related to transition to the Lyons, Georgia, distribution center, and increased software-related costs. Also within EBITDA, we expect higher royalties and other income of approximately $2 million in fiscal '26, largely due to the normalization of sales from our licensing partners that were heavily impacted by the implementation of tariffs in fiscal '25.

Outside of EBITDA, we expect an increase in depreciation due to significantly all of the incremental costs to operate the new Lyons DC in fiscal '26 being depreciation related. We also expect interest expense of $6 million, which is lower than our previous estimate due to our recent significant reduction in debt. Considering all these items and a tax rate between 27% and 28%, we're revising our 2026 adjusted EPS guidance to $1.60 to $2 versus adjusted EPS of $2.11 last year. In the third quarter of '26, we expect sales of $280 million to $300 million compared to sales of $307 million in the third quarter of '25. This primarily reflects a mid-single-digit negative to low single-digit negative comp assumption and relatively flat wholesale sales.

By brand, we expect lower sales at Lilly Pulitzer and Johnny Was to be partially offset by a sales increase at Tommy Bahama and growth at Emerging Brands. We also expect gross margin to expand approximately 100 basis points, SG&A to grow in the low single-digit range, royalty income of approximately $3 million, an interest expense of $1 million, and an effective tax rate of approximately 24%. We expect this to result in third quarter adjusted loss per share between $1.40 and $1.20, compared to a loss per share of $0.92 last year. Our fourth quarter sales plan includes the benefits of some additional promotional activity, primarily at Lilly Pulitzer, along with most of our groups benefiting from the correction of tariff-related merchandising issues that significantly impacted our holiday season and fourth quarter results last year. As a result, our fourth quarter plan includes a comp assumption of relatively flat to slightly positive.

Moving to our CapEx outlook for the remainder of the year, we expect capital expenditures for the year to be approximately $60 million, including the $32 million spent in the first half of fiscal '26, compared to a total of $108 million in fiscal '25. The remaining capital expenditures relate primarily to new brick-and-mortar locations and the remaining capital expenditures for the new distribution center in Lyons, Georgia.

I will now turn it back to Tom for some closing comments.

Thank you, Scott. Before we open the call for questions, I want to briefly discuss a broader review we recently initiated across the enterprise aimed at meaningfully enhancing operating margins in the next few years. The review is focused on opportunities to simplify the business, improve efficiency, and sharpen how we allocate resources across Oxford in order to become less dependent on historical rates of growth to fuel higher profitability. We are still developing our plans and expect to share more as they are finalized, but we believe it is important to highlight several actions already underway.

First, we have made significant progress ramping up the Lyons, Georgia, distribution center. As the facility matures, we'll look to take full advantage of our investment and move more product into the building, including from a legacy 3PL, to operate more efficiently across our increasingly automated footprint. With the major investment phase nearing completion, we also expect capital expenditures to normalize after several years of elevated spending on Lyons, which will increase the cash available for further debt reduction. With impending retirements within our technology leadership, we have transitions underway that will support a reassessment of our IT infrastructure with an eye towards simplifying our tech stack and advancing our data analytics and AI capabilities across the enterprise. We are also optimizing our store fleet, including converting selected Southern Tide and Johnny Was locations to Lilly Pulitzer, where we believe the market and location are better suited to that brand. We will continue to evaluate the fleet market by market and location by location and make changes where we believe they will create the greatest long-term value.

We have a new brand leader at Southern Tide, and also within our Emerging Brands group, we consolidated oversight of the group's finance, planning, and operations functions to improve consistency and efficiency. These are a few examples of the actions underway alongside the work at Tommy Bahama, Lilly Pulitzer, and Johnny Was. We believe these actions will simplify the business, strengthen execution, and position Oxford for more consistent performance and stronger returns over time. We'll have more to say about all of this in December.

With that, we're happy to take your questions. Paul?

Thank you. [Operator Instructions] Our first question is from Ashley Owens with KeyBanc Capital Markets.

Maybe just to start, I wanted to focus in on Tommy Bahama because I thought the point about you calling out the return to positive comps in Florida was very important, just given the size of that market. Could you unpack what helped drive that improvement in the quarter? Whether you're seeing similar strength across both the men's and women's categories?

Yeah, thank you, Ashley. Great questions. And we were -- and I'm glad you called it out because we really were thrilled to see Florida turn positive. As you know, for a number of quarters now, it's been negative for the most part in Tommy Bahama, and that is such a big and important part of our business that when it's negative, it's tough. When it's positive, it makes the whole world seem better. So very glad to see that. Men's versus women's overall in Tommy this year, men's has been up. Women's has actually been up more than men's, which we're happy to see. As you know, we've believed for a long, long time that women's has a huge opportunity in Tommy Bahama. We've made steady progress in growing that business and what we've seen this year has been really encouraging.

Great. And then maybe just quickly on Lilly as well. So I think you were very explicit that spring '27 is that first season where you can and are working to reshape the assortment. And that the changes -- we're not going to see that positive trend change until fiscal -- within this year. I guess, should we now think about Lilly as being a spring '27 recovery story? Could there be improvements in the comp with some of that planned promotionality through the back half of the year?

And then just any proof points to, kind of, watch out for that would tell you that the reset is working ahead of the launch. Then maybe just 1 on the modeling side of things with the gross margin guidance. I think it was 100 bps improvement in both Q3 and Q4, despite those elevated promotions at Lilly. Just anything you can say as to what's giving you the confidence in that outlook, particularly if that consumer demand does remain a little bit pressured.

Yes, so I think you understand this, Ashley, but the length of the product pipeline is really the issue. So you get into spring '26, you realize that you've got a really pretty significant assortment issue, but you've got the rest of the year's product already in the pipeline and you can do limited things to adjust for it. So spring '27 is the first season where we were able to really incorporate what we realized was wrong about the assortment in spring '26. The rest of the seasons for '26 were already fundamentally in the pipeline.

There are some other reasons to think that there might be some fourth quarter upside in Lilly and that's just because last year they were struggling through the tariff-related gaps in the product assortment and they overall had a weak fourth quarter last year. So you might see some upside because of those things in the fourth quarter. And then the other thing is the resort product line, I think, which will look more like the spring '27 line, I think, could give us some early reads, but you're not really going to know till very late in the quarter when you've got some spring stuff. And then on the gross margin question, certainly a good question.

And I'll let Scott walk you through that, why we feel good about what we're projecting.

Yes, we are starting with higher IMUs. Also, wholesale will be a little bit lower percent of the total mix, so that will help neutralize or more than offset the higher promotional cadence that we do expect out of Lilly this year.

Our next question is from Janine Stichter with BTIG.

You got Ethan on for Janine. First, I was just wondering what's driving the divergence between Tommy and the rest of the portfolio? Is it product, demographic, geography, or something else? Just any color you could give on that.

Well, what I would say is I don't think there's really a big divergence between Tommy and most of the rest of the portfolio. It's a little complicated, but Tommy and Lilly, clearly a big divergence, and I think that's almost all about the assortment challenges that Lilly has. Johnny Was, even though their comp numbers are not where Tommy's are, we, kind of, knew that going into the year just because of the trajectory that we came out of '25 on. As we've talked about extensively, the goal in Johnny Was this year is to improve profitability, even if the sales number comes in a bit lower. And that's exactly what happened in the second quarter. So we really look at Johnny Was as a positive story year to date. We think they're ticking the boxes on their turnaround plan.

And then within the Emerging Brands, it's really a Southern Tide issue. We don't -- they're too small for it to make sense for us to get into breaking out a lot of granularity, but Southern Tide's the laggard there. Everything else looks quite good. And as we talked about, we've -- we brought in a new leader at Southern Tide, very excited about him. I think this is his 6th week, maybe, on the job and we're, kind of, rebooting Southern Tide. He's already seen some good opportunities of things that we can improve closer in and then obviously beyond. So I don't think there's as much of a divergence as it might seem like on the surface.

That's a really helpful color and kind of answered my next question, which is going to be on Emerging Brands. So I'll pass it on.

Okay. Thank you, Ethan.

Our next question is from Mauricio Serna with UBS.

Maybe could you talk about quarter to date, what, kind of, comps you're seeing overall? And how should we think about the comps specifically for Tommy Bahama? How are you thinking about the level, like, the sustainability of the, kind of, comps that you delivered in Q2? And then after that, I have a follow-up on Lilly Pulitzer.

Yes, the comps quarter-to-date, a little cloudy because you have some promotion timing. You also have Labor Day being late. So it's a little cloudy. They're down slightly, but it's -- there's a lot of noise in them this early in the quarter that will normalize more as the quarter goes on.

And then on specifically on Tommy.

We're not going to get into comps by group this early. It's just 1 month is -- not with some of the timing.

No, I wasn't asking about the comps for Tommy. More like, how are you thinking about the comps for, like, that brand in the year?

Yeah, yeah, for the year, Tommy, I mean, we expect them to be slightly positive for the year. And so yes, slightly positive comps for the year.

Got it. And then just on, on Lilly Pulitzer, I guess, just was wondering how are you thinking about the, the assortment strategy? I guess like on a go forward basis. I guess I recall like last year in '25 one of the things that had been successful was to move that -- bring more assortment that was higher AUR. And now it sounds like it seems maybe it went too far. So is the right strategy being more towards the historical type of AURs? Or just trying to figure out from that perspective, how should we think about the assortment strategy?

And then I think you also mentioned on the prepared remarks that you were converting some, I think it was Johnny Was and Southern Tide stores into Lilly Pulitzer. Like, what's the rationality behind that considering that the brand -- the brand seems to be still, obviously struggling and you expect that to continue throughout the rest of the year?

Yes, good questions, Mauricio. And we have, over the last several years, been able to grow the higher-priced business at Lilly Pulitzer. And even this year we continue to have success in those higher-priced points. But think of your pricing strategy as like a pyramid where that top tier, which for us in dresses is $400 and up, it's the little tiny triangle at the top of the pyramid and then you go down the pyramid, the pieces get bigger and bigger. That's, I think, the way almost any brand in the world is set up from a price architecture standpoint. And so what we did this year, you captured it, is I think we just went too far too fast in shifting up the pricing tiers and so last year in our entry price point bucket -- and for us, that's dresses, which are a big category under $200.

Last year that would have been about half of the styles that we offered, would have been in that price bucket. This year it was down to almost down to a 3rd. I think it was like 35%. That was just too much too quickly. And as a result of that, some of those customers were willing to move up a price point, but a lot of them I think were not. And that's been -- I think the the bigger part of our problem has been the price architecture. So going forward, what we've done is we've gone back to what we had in '25. And '26 will move a little more in the upward direction than '25 -- excuse me, '27 will move a little more upward than '25, but that'll be a lot back from '26, if that makes sense.

Yes.

And then on the why switch the stores, these are all locations. And Lilly Pulitzer, even this year as bad as it is, it's still a profitable brand. We very much believe in the brand and the team there. This is completely a fixable issue. And the locations that we're converting are some that, where we believe Johnny Was and Southern Tide just because of the level of brand awareness in those markets is going to have a long, hard road to profitability, but that Lilly Pulitzer can -- easily be profitable in -- a great example is on King Street, in Charleston, where Lilly Pulitzer had operated a store. The landlord was expanding a jewelry and watch business and needed to take the space back.

So we were about to be off King Street in Charleston in Lilly. At the same time, we had a Johnny Was store that was losing a couple of $100,000. And Charleston's not the most natural market for Johnny Was. I do believe over the long term, that'll be a place where Johnny Was will win. But in the short term, and with all the other challenges we had, we knew if we flipped it to Lilly Pulitzer, we'd immediately start making a lot of money, which is exactly what happened. So it's those types of scenarios, Mauricio.

Our next question is from Paul Lejuez.

Hi, it's Tracy Kogan filling in for Paul. I was hoping you could talk to us about the traffic, AUR, and average basket in Q2 for Tommy and Lilly. And then secondly, I was just wondering on freight if you're seeing any delays and then also related to freight, what level of pressure you've built into your gross margin, and if that has changed materially from what you expected as of 1Q?

Yes, so in 2Q -- and this has really held pretty constantly throughout the year. Traffic has been pretty good. Conversion rates have been off a little bit. Average order values, average basket sizes have been 1 of the bright spots in the story for us. And then the AURs, I think mostly due to the level of that -- the IMUs are higher and the the MSRPs are higher, but the AURs have actually gone down a bit due to the amount of stuff that we promoted this year.

Is that true? I would guess some of that's a little different though between Tommy and Lilly. Were you speaking about 1 of them in your answer there or was that, kind of, an overall?

It was more of an overall comment. There are differences in the brands, but the trend's been pretty similar.

And then on the freight?

Yeah, on the freight we've built in some slight increases, but we have the a little bit of an offset from some some of our outbound parcels. We have -- we renegotiated contracts. So we're -- in the first half of the year especially, we've got a favorable there that's helping neutralize. Now in the second half, I'm sure we'll get some fuel, additional fuel surcharges that will have a slight increase. But overall, our base rates were starting a little bit lower on our outbound parcels, but our containers coming in from Asia are slightly higher and that's -- it's not a real material.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Tom Chubb for any closing comments.

Thank you, Paul, and thanks to all of you for your interest. We look forward to talking to you again in December, and hope all is well until then.

This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.

Greetings and welcome to the Oxford Industry's first quarter fiscal year 2026 earnings report. call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Brian Smith of Oxford Industries. Please go ahead.

Thank you and good afternoon. Before we begin, I would like to remind participants that certain statements made on today's call 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 a 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 at our website at OxfordInc.com. I'd now like to introduce today's call participants.

With me today are Tom Chubb, Chairman and CEO, and Scott Grassmeyer, CFO and COO.

Thank you for your attention and I would like to turn the call over to Tom Chubb. Thank you, Brian. Good afternoon and thank you for joining us. I'm pleased to be here today to discuss our first quarter results, the progress we are making across the portfolio, and our outlook for the balance of the year. Overall, sales in the first quarter were in line with our expectations and earnings were better than we anticipated, primarily due to stronger than expected gross margin. That gross margin performance reflects meaningful work done by our teams over the past year to respond to tariff pressure, including updates to our sourcing strategies, refinements to our pricing architecture, improved freight rates through vendor negotiations, and the benefit from a higher mix of direct-to-consumer sales. Importantly, we achieved this margin performance while absorbing an $11 million, or 55 cent a share, year-over-year increase in tariff costs during the quarter. that increase, both gross margin and earnings would have improved over the prior year. Looking across the portfolio, the first quarter included several important positive takeaways.

Tommy Bahama, our largest brand, performed well, led by healthy direct-to-consumer results, and our emerging brands continued to generate strong growth. particularly in the Beaufort Bonnet Company and .CAD. However, these positive results were not consistent across the portfolio. Johnny was progressing through its turnaround plan and we are encouraged by the progress on gross margin and direct to consumer performance, even as wholesale remains pressure. Billy Pelletier was below our expectations while lapping a strong prior year first year quarter, and its softness weighed on our overall results. The consumer backdrop remains unsettled. Consumers continue to navigate macroeconomic and geopolitical pressures, including conflicts around the world, higher energy prices, uncertainty around trade policy and tariffs, and pressured sentiment around discretionary discretionary spending. As we have discussed in recent quarters, while some hard data may suggest consumers have the ability to spend, the soft data and what we are seeing continue to point to consumers that is more cautious, selective, and highly discerning. In this type of environment, product relevance and brand connection are especially important.

Consumer response is strongest to differentiated products and brands that create an emotional connection. And that is where our portfolio is advantaged. Our brands are built around lifestyle, optimism, and experiences. And our job is to stay focused on the product, storytelling, and service that bring those brands to life for our consumers. The county of Bahama delivered the strongest performance in the quarter. Our direct-to-consumer business count positive in the mid-single-digit range, with encouraging results in retail and e-commerce, and continued contribution from food and beverage. More broadly, the brand benefited from a better assortment balance, improved key item execution, and the enduring appeal of its relaxed warm weather lifestyle positioning.

We are pleased with the execution at Tommy Bahama. The brand continues to occupy a unique position in the market with a lifestyle proposition that extends beyond any one product category or channel. Its advantage comes from the combination of compelling product, clear storytelling, strong customer engagement, and distinctive experiences across retail, digital, and hospitality. That combination continues to support our confidence in Tommy Bahama's long-term opportunity even in an uncertain near-term environment. At Lilly-Pulitzer, first quarter results were below our expectations and we have work to do. Lilly-Pulitzer remains a distinctive and beloved brand with a highly engaged customer and a very clear point of view. that the business did not execute to its potential in the first quarter. Sales were pressured, particularly in e-commerce, and we believe that pressure reflected, in part, some merchandising and execution issues, including gaps in certain entry price points and allocation opportunities.

We want to be clear that Lilly-Pellitzer's performance was below our expectations and below where we are confident it can be. The brand has tremendous equity with its customer, but in the first quarter, we did not bring together product, pricing, allocation, and messaging. That is on us, and the team is focused on correcting these issues. Keep in mind, this is the same highly talented Lilly team that has consistently delivered strong results, and we are very confident in their ability to address these issues. The good news is that we have identified what we believe are the core issues, and we believe they are addressable. Some can be corrected relatively quickly, like messaging and marketing, while others related to merchandising can only move as fast as the product development lifestyle. and will accordingly take more time. We are focused on addressing these issues and reestablishing Lilly-Pulitzer's positive trajectory and unlocking its long-term growth potential.

The brand is strong, and we believe the team has the talent, experience, and urgency to restore the level of performance we expect. Turning to Johnny was, we believe the brand is on track with its turnaround plan. As we have discussed previously, our focus has been primarily on improving profitability and reinforcing the fundamentals. During the first quarter, gross margin increased as the team made significant progress buying inventory tighter, reducing promotional activity, and improving gross margin return on investment. In terms of top line results, since the first Sales were most under pressure in the wholesale, where Johnny was has had the greater exposure than our other brands to specialty stores, a market that has declined meaningfully in recent years. Sales were also lower to off-priced retailers due to healthier inventory. levels, and to SACS Global, which has been impacted by its bankruptcy process. Historically, Neiman Marcus and SACS have been very important venues for Johnny Wise.

Importantly, performance in the direct-to-consumer business was much more in line with our expectations, and we believe that side of the business is becoming healthier. We are focused on bringing greater cohesion to the design process. refining the assortment, improving marketing effectiveness, and driving better execution across retail, e-commerce, and wholesale. With the new management team in place, we have also become more aggressive in reassessing and rationalizing our store base, closing five underperforming locations in the first quarter. We will continue to assess retail performance and opportunity on a market-by-market basis and location by location and close underperforming stores where appropriate to ensure that our footprint is aligned with the brand's long-term potential. Turnarounds do not happen overnight, and there's still a lot of work to do, but we believe Johnny Was has meaningful long-term potential. Our objective is to build a stronger, more disciplined, and more profitable business that better reflects the strength and resonance of the brand. Our emerging brands also contribute positively with notable strength, particularly in the Beaufort Bonnet Company and Duck Head businesses.

These brands continue to bring energy and growth potential to the portfolio, and we remain focused on building them in a disciplined way through stronger storytelling and growing distribution. Across the enterprise, we are also continuing to strengthen the operational foundation of the company. The new Lyons-Georgia Distribution Center is an important part of that work. As we have said before, we do not expect the ramp up to be without initial costs or complexity, particularly while we are transitioning between facilities. But over time, we believe Lyons will be a meaningful competitive advantage, particularly as direct-to-consumer demand continues to gain share across our portfolio. Second, stepping back from the individual brands, we were pleased with the way we started the fiscal year. At the same time, sales trends softened as we moved through April, and that deceleration continued into May and early June.

Some of that reflects the broader consumer environment and the increased caution we are seeing in discretionary spending, along with the shift in timing of the important Father's Day holiday. Continued softness at Lilly Pulitzer is also an important factor, particularly given that some of the product and merchandising improvements we are making will take some time to fully flow through the assortment. Given these trends, we believe it's appropriate to take a more measured view of the upside sales opportunity for the balance of the year. As a result, we are narrowing our full-year sales outlook by lowering the top end of the range. We believe this is a prudent approach based on what we are seeing in the business and the broader environment today. At the same time, we are tightening our EPS guidance range for the remainder of the year by raising the low end of our previous range due to the impact of the current lower tariff rates flowing through for the balance of the year, combined with focused expense and inventory management. Tariffs remain a major topic and source of uncertainty.

Scott will provide more detail on the updated assumptions embedded in our outlook. From an operating standpoint, our priorities remain unchanged. optimize sourcing, manage pricing thoughtfully, protect gross margin where we can, and avoid actions that would undermine the long-term health of our brands. Periods like this can push companies to become defensive and overly short term. We are not going to do that. Our brands exist to bring happiness, optimism, and a sense of possibility to our customers. That is a real source of differentiation, and we believe the near-term adjustments we are making in the current environment will capitalize on each brand's unique attributes and position us deliver long-term value to our shareholders. As always, I want to thank our teams across Oxford.

Their resilience, creativity, and commitment to our customers are the foundation of everything we do. With that, I'll turn the call over to Scott for more detailed commentary on our.

financial performance and outlook. Thank you, Tom. As Tom mentioned, our teams have shown great discipline and resilience in executing our plan against the backdrop of a challenging consumer and macro environment. Consolidated net sales were 391 million in the first quarter of fiscal 26, compared to 393 million in the first quarter of fiscal 25, and above the midpoint of our guidance range of 385 million to 395 million. Total company comparable sales decreased 2%, including 2% decreases in both retail and e-commerce. The decline in retail comp sales was all set by sales from non-comp stores open primarily in the prior year. Notably, food and beverage sales increased 14%, driven primarily by non-conf locations. Wholesale sales decreased 5% compared to the prior year period, which is better than our original forecast.

By brand, Tommy Bahama delivered solid results with their total sales increasing year-over-year, driven by mid-single-digit comps in our DTC channels, partially offset by a decline in wholesale sales. Emerging brands continued their momentum with sales growth in the low double digits. The positive comps at Tommy Bahama and growth in emerging brands were all set by sales declines at Lilly Pulitzer and Johnny Wise. At Lilly Pulitzer, significant declines in the e-commerce channel. in a difficult comparison to the prior year, led to overall low teen negative comps. And the Johnny was, as Tom mentioned, the sales decline was driven by a significant decrease in the wholesale channel. and mid-single-digit negative comps and or DTC channels. Adjusted gross margin contracted 90 basis points to 63.4%, driven by approximately $11 million or 280 basis points of increased cost of goods sold from the additional tariffs implemented starting in fiscal 25. Despite this US Supreme Court's ruling in late the previously paid tariffs were capitalized in the inventory that we sold during the first quarter.

The increased tariffs were partially offset by updated sourcing and pricing architecture strategies across the portfolio. Lower freight cost to customers due to improved carrier rates from contract renegotiations. and a change in sales mix with wholesale sales representing a low proportion of net sales. Adjusted SG&A expenses increased 1% to $209 million compared to $206 million last year, impacted primarily by new brick and mortar retail and food and beverage locations as well as increases in sales software and consulting costs, and costs associated with the transition of our Lyons, Georgia distribution center operations. These increases were partially offset by lower advertising costs and cuts in more discretionary categories like travel. The result of this yielded adjusted EBITDA of $45 million, or an 11.6% adjusted EBITDA margin, compared to adjusted EBITDA of $54 million, or 13.7% in the prior year. Moving beyond EBITDA, adjusted depreciation amortization was flat compared to the prior year, with increases in depreciation related to our new Lyons facility and new brick-and-mortar locations, all set by lower software-related depreciation. Interest expense of $2 million was higher than the prior year due to higher average depreciation. debt levels and our effective tax rate of 25.4% was higher than the prior year due to certain discrete items.

With all this, we ended with $1.39 of adjusted EPS. Moving to the balance sheet, inventory decreased $15 million or 9% on a LIFO basis and $3 million or 1% on a FIFO basis as compared to the first quarter of 2025, despite $9 million of additional tariff costs capitalized into inventory compared to $3 million at the end of the year. in the first quarter of 2025. Inventory decrease across our three larger brands, partially offset by higher inventory in the emerging brands group to support their higher levels of growth. We ended the quarter with long-term debt of $143 million as compared to $118 million at the end of the first quarter of 2025 and $116 million at the end of fiscal 2025. Cash flows from operations provided $8 million in the first quarter of fiscal 26, compared to cash flows used in operations of $4 million in the first quarter of fiscal 25, with lower earnings offset by positive changes in working capital. We also had capital expenditures of $23 million primarily related to the Lyons-Georgia Distribution Center project and the addition of new brick and mortar locations. And $11 million of dividends that led to an increase in our long-term debt balance since the beginning of the fiscal year.

I'll now spend some time on our updated outlook for 2026. As Tom mentioned, the positive momentum we saw at the start of the year decelerated a bit at the end of the first quarter and continued into the second quarter. For the second quarter, we now expect our total company comp to be in the low single digit negative to flat range. And for the full year or updated comp assumption assumes a range of slightly negative to slightly positive. The updated second quarter and full year comp assumptions are lower than our previous expectations of flat to low single digit positive comps. As a result of the change in our comp assumptions, we're revising the top end of our revenue guidance range for the full year. For the full year, net sales are expected to be between $1.475 billion and $1.505 billion, a relatively flat to up 2% compared to sales of $1.478 billion in fiscal 2025.

A revised sales plan for the full year of 2026 includes a sales increase in Time Bahama and continued growth in emerging brands. by a sales decrease in Lilly Pulitzer and Johnny Wuz. Our updated sales plan does include improvement in the second half as we correct the issues discussed at Lilly Pulitzer and Johnny Wuz continues its turnaround plan. We will also benefit from correcting the tariff-related merchandising issues that impacted the results of most of our brands in the second half of the prior year. year, specifically in the fourth quarter and during the holiday season. By distribution center, the full year sales plan consists of high single digit increase in our food and beverage channel that is benefiting from the addition of new locations added during fiscal 2025, partially offset by low single digit decrease in increases to flat sales in our direct-to-consumer channels, and a mid-single-digit decrease in wholesale. Moving on to gross margin. Our current assumption is that the current tariff, the current lower tariff rate of 10 percent will remain in place for the remainder of the year. These rates are generally consistent with the rates in effect for most of our inventory receipts during the first quarter of 2026. While we are not including the impact of tariff refunds in our guidance, we paid approximately $40 million of tariffs in fiscal 2025, an additional 5 million of tariffs in the first quarter of 2026 that were ultimately invalidated by the Supreme Court ruling in February. approximately $25 million in Phase 1 claims and have begun to receive refunds.

A refund process for Phase 2 and the remainder of our unfiled claims has not yet been established, but we are ready to file claims for refunds as soon as a process is established. It is important to note that given the timing of our planned inventory receipts for the balance of the year, changes in tariff rates during fiscal 2026 would be expected to have a more limited impact on fiscal 2026 results than they would on future periods. In addition to lower tariff assumptions, we expect that gross margins will benefit significantly from the shifts in sourcing and updates to our pricing architecture that our teams have worked on for the last year, and a shift to a higher proportion of direct-to-consumer sales. As a result, we expect gross margins to improve 100 to 200 basis points. in Q2, Q3, and Q4 of fiscal 26 compared to the prior year periods, and an overall approximate 100 basis point increase for the year, when including the headwind from the first quarter. In addition to lower sales and higher gross margins, we expect SG&A to grow in the low single-digit range, primarily due to increased software-related cost and the annualization of incremental SG&A from new stores added since the end of the second quarter of fiscal 25. Also with an EBITDA, we expect higher royalties and other income of approximately $2 million in fiscal 26. Outside of EBITDA, we expect an increase in depreciation due to significantly all the incremental costs to operate the new lines DC and fiscal 2016 depreciation related.

Considering all these items, interest expense of $7 million, a higher tax rate of 28%, we are tightening our 2026 adjusted EPS guidance to $2.30 to $2.70 versus adjusted EPS of $2.11 last year. Again, our guidance does not include the impact of any tariff refunds. The second quarter of 2026, we expect sales of 380 million to 400 million compared to sales of 403 million in the second quarter of 2025. This primary reflects our low single digit negative to flat comp assumption and decreased wholesale sales in the high single digit range. By brand, we expect low lower sales at Lilly Pulitzer and Johnny was to be partially offset by a sales increase at Tommy Bahama and continued growth at emerging brands. We also expect gross margins to expand approximately 100 basis points, SG&A to grow in the low single digit range, royalty income of approximately $5 million, interest expense of $2 million, and a higher effective tax rate of approximately 29%, primarily related to the impact of our annual stock vesting. We expect this to result in second quarter adjusted EPS between $1.20 and $1.40 compared to $1.26 last year.

Moving to our CapEx outlook for the remainder of the year, we spent capital expenditures for the year to be approximately $60 million, including the 23 million spent in the first quarter of fiscal 26, compared to a total of $108 million in fiscal 2025. Remaining capital expenditures relate to the new distribution center line Georgia and new brick-and-mortar locations. Thank you for your time today.

Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. Participants using speaker equipment, it may be necessary to pick up your handset before crossing the star keys. One moment please while we poll for questions. Our first question is from Ashley Owens with KeyBank Capital Markets.

Thanks. Good afternoon. Maybe just to start, I want to click down on the comments about the trend softening through April into May and then early June and then you flagged that Father's Day shift. Is there any way to help us isolate how much of that deceleration is calendar versus the genuine demand softness? Once you normalize for that Father's Day timing.

What does the underlying trend look like there? And then I'll follow up. So I would say, you know, we built into our guidance flat to low single digit negative for Q2. And I think we're, you know, we're more on at the moment in the low single digit negative. I think when we get past Father's Day, we'll be more be in that zone of flat to low single digit negative, I believe is where we'll land. I think we're going to pick up a bit, you know, through Father's Day. And right now we're tracking fine.

Maybe even just secondly, more broadly on wholesale, just be curious, since we last spoke, obviously been elevated gas prices have continued, consumer discretionary sentiment is weak. I would just be curious if you're seeing any shifts in some of the wholesale order behavior across your portfolio for the balance of the year, any retailers trimming buys here pushing out deliveries.

Anything to call out? Thanks. You know, they're still being cautious and we still think we'll be down, but we're not seeing a drastic change. But I think everybody is, you know, given the environment is being a bit cautious. So I think the opportunity for some increases might not be there quite the way we had hoped. But I think they're seeing a lot of what we're seeing right now. And yes, you do have the shifts. I think a lot of people are trying to sort through the current business and how much this father-stay shift is impacting it versus how much is the consumer. And that's a hard thing to really tell.

There's, I think, some of both in what's going on.

And, you know, Ashley, it always comes down to how you're performing on their floor and our wholesale performance overall. that has hung in pretty well so far year to date. Some places are stronger than others, but I would say overall it's been pretty strong.

Okay, understood. Thank you. I'll pass it along. Our next question is from Dana Telsey with Telsey Advisor.

Good afternoon. I want to unpack the performances of Tommy Bahama and Lilly. Certainly the improvement in the performance of Tommy Bahama, even from the fourth quarter to the first quarter, is impressive and wanted to get, whether it's men's, women's, prices category, what's driving that? And the Lilly downtick, I think last quarter when we all spoke, you talked about the headwinds, whether it was a Florida of weather, but felt like the structural components of Lilly was very much intact. What's changed? Where's the softness coming from? Is it by region, by channel, by customer? Is it print? patterns, solid promotions, and what's the timeline of the Lilly fix? Thank you.

Okay, so let me start with Tommy Bahama and I would say the, you know, it was a very nice quarter for Tommy Bahama. We're very proud of it. Ben's had an increase in our direct consumer business year over year. We talked about this in March, but that was really driven by core product that we were sort of weak on last year, and that's things like the Enfield or the Boracay and some of our big linen programs. that really drive it. The real strength in the quarter, you know, men's was good, but women's was even better. And the numbers were really driven by the women's side of the business, which we love seeing because, as you know, law enforcement, long term, we continue to believe we have a very large opportunity in Tommy Bahamas Women's, so the women's DTC business was up, I think about 7 1/2% for the quarter, which is quite strong, and it was driven by what we would consider the fashion business, part of the business or a couple of categories within fashion. I think pants and wovens were both strong during the quarter but you know we were glad glad to see that and you know we're still very much a men's driven business but seeing that strength in women's where it really helped drive our quarterly results to a large degree was great and then one other little stat that I'll throw that I love is that during the first quarter of 2026, 30% of our e-comm orders included both a men's and a women's item. That's up from last year when it was 25%.

And we don't have any great benchmarking on that, But we believe that benchmarks really well in terms of our ability to sell both genders effectively when you've got, you know, almost a third of your orders are dual gender orders. We think that's really great. So really like what we saw in Tommy Bahama during the quarter. Some of that softness that we saw in April and May had to do with some timing shifts and maybe you know a little planning hiccup. I really believe you know, we're going to get through Father's Day and still be on a very good track. It's a little hard to see it today just because of the shift. It's still good. It's just not quite as strong as it was. But I think that's, you know, the Father's Day shift that we're that we're seeing.

And then on Lilly-Pulitzer, I do believe that the February weather in Florida was a contributing factor. And at the time we were talking in March, I think that was very valid because it was especially during February and the first part of March where the average daily temperatures were much, much lower than the normal average daily temperatures. And that's a time of year when it mattered. a lot in Florida as to whether people are motivated or not. But then as we got deeper into the quarter, we realized that there were other issues with both the assortment and with the messaging and marketing around them. So as we identified, during the prepared remarks Dana some of the issues that we were we were We were way under-inventoried in our opening price point bucket. and I think that cost us some business. Some of those customers were willing to move up the price point scale, but I think some of them just ended up, not buying and I think that's where we saw a lot of the sales erosion. Then from a print and color perspective, if you've been watching it, we leaned heavily into the vintage prints and While we love those prints and they're beautiful, I think we probably overdid that. and those tend to appeal a little bit more to the, you know, the most dedicated Lilly fans and maybe a little less so to the newer Lilly fans.

So I think that was an issue. And then the last big one I would identify is what we're we're calling novelty. So as you know, David, there's been a lot of emphasis, not only from us, but across the market, place on newness and novelty and that kind of thing. And I believe we just swung the pendulum a little bit too far on that. this spring and that had, it's good to have a good bit of that, but we just had too much of it and not enough of our assortment was more versatile. And I think especially, uh, when you get into a time period where people are being a little bit more discerning about their purchases. I think she's looking at the versatility of that dress maybe a little more than she would when she's in more of a free spending mode. So, uh, We were talking about this yesterday, but we have had this spring, an absolutely gorgeous dress that was the type of dress that you would wear to some kind of charity ball or gala or something like that.

Absolutely gorgeous, but it's really one of those dresses that you're probably only going to wear once. And because it's so unique and so special and so dramatic and stunning And you know, it was over $700 which for us is a high and price point, and we just have a little too much of that. So in terms of the timeline to fixing, I would also say that that leaning into vintage and nostalgia I think also showed up in our messaging and marketing. You know the way this works, Dana. Messaging and marketing can be addressed more quickly generally. and how we're targeting and some of that stuff, we can, you know, we're already adapting and things like promotions, you may have watched, we did a big Lilly Pulitzer promotion. this past weekend, that was something that we did in what I would call an agile response to the the situation. So those things can be done more quickly. The product development timeline is what it is.

So it's more of a resort before you can really, you know, Up until resort, you're kind of dealing with the product that you, you designed and bought way back when you did that. You know, I do think, I believe we feel that some of our later summer deliveries are a bit stronger and maybe don't have quite the degree of issues. And then what we're doing just in sort of our agile response and rethinking process promotions and all. I think we're going to make the best of it. I'm super proud of the Lilly team and the way that they've responded to it. Dana, you know this well, but this is a fashion business and you're going to have a hiccup like this every now and again. And the issue, you know, that's just, that's part of the business.

Hopefully it's not very often, but it's going to happen every once in a while. And then the key is how do you respond to that in the short term and then in the long term? And I think as they do, the... The Lilly team is doing a terrific job on both fronts. So that was a lot, but hopefully you answered your question. Very helpful. Thank you.

Our next question is from with .

Hi, thanks for taking my question. I wanted to delve into the growth margin side a bit. You talked about having some big wins on the sourcing side, so maybe you could just talk about what's working there, how much you view as kind of structural and able to continue. And then as you think about the guidance for growth margin to increase throughout the balance of the year. What does that assume in terms of promotions by brand, how you're planning them, and also how consumers are shopping around those promotions? Thank you.

Yes, on the gross margin, yes, we have done a lot of sourcing shifts. We also, you know, a lot of the price increases, a lot of them were on newness. And so we do have some products with some good margins. And, you know, But Tommy especially, we sold through at full price nicely. And so we had a pretty nice return higher than expected gross margin there. And then, as we mentioned, the tariffs are 10% now, that's our assumption going forward. So we, and we did have overall some lower promotions both in the first quarter internally and on sales of all price to wholesale accounts. that helped, we also had direct was a higher percentage of our total sales versus wholesale, so that always helps also.

As far as promotions, Lilly will probably be a little more promotional than we planned at the beginning of the year, just kind of given the start. Tommy, pretty much the normal cadence at Tommy. So I think overall we won't be, I don't think our overall total company promotional cadence will be drastically different, probably a little bit more, Lily. quite a bit less at Johnny Wise. Johnny Wise is really, you know, in the inventory downer being much more disciplined on promotional events, and their gross margins were very good, and I think they'll continue to be for the rest of the year. So I think some structural things at Johnny Wise that are really strong. to show through on the gross margin line and some of the SG&A controls there.

I think they'll begin to show on the top line later in the year. Got it. And with the price increases, have you seen any pushback at either of the brands, the price increases, and then just any more plans for ticket increases the rest of the year?.

I would say, Janine, that's a, there's a nuanced answer to that. There hasn't really been any direct pushback to it, but if you look at our numbers, we're, you know, we're selling less units. You know, the AOV's going up, the AUR's going up, so people are selling are paying the price, but the total number of units that we sold during the quarter were, was down a bit. Not, it's not drastic, but So it's hard to know exactly how to interpret that. I think some of that's about the softness and just general caution among the consumer but we're looking at it hard to make sure we're not you know out of whack with what the consumer is willing to pay we do not believe we're out of whack with the market you know at all. We think we're in sync with our peers or competitors, whatever you want to call them, but it bears further scrutiny for sure.

Great, thanks for the color. Thank you, Janine. Our next question is for Mauricio Serna with UBS.

Great. Thanks for taking my questions. I guess just first on Tommy Bahama, could you talk about your expectations in terms of the comp for Q2 and the rest of the year? Just thinking about the very good traction you got in Q1, is it fair to assume that the brand case and sustain amid single digit comp. And then similar question on, I guess similar question on Johnny was, it seemed like, you know, the, you really been able to bring that business into a healthier place, at least in terms of margins, gross margin. How should we think about, you know, the timing for an inflection to positive sales growth of the brand? Could it be, could it happen, you know, by second half of the year? Thank you.

Yes, Tommy, we think we can have positive comps the rest of the year. Our model has a little bit lower than the mid-2040s. single just slightly lower than the first quarter but A lot of it's just some of what we're seeing now, and we've got the whole Father's Day shift. So I think it's really once we get through Father's Day and kind of get that dust settled, I think we'll be in a good place there. But Johnny was, we think we can start having positive comps in the second half. I think just some of the discipline that we've got and then the product, we really couldn't impact product in the first half of the year. In second half of the year, we really think a lot of the, work we've been doing in identifying uh how we ought to be assorting the line that was known going into the design process so we i think we'll have better commercial lines and we also will have a line of more essentials that kind of go with the print. We have very little of that right now.

We'll have quite a bit more of that in the second half. So we think first half, the comp will be a little tough, Johnny was, but a lot more disciplined. on healthier gross margins a lot more. It's spent discipline. Then second half, we really think the comp can start turning around.

And then just a couple of follow-ups on the gross margin side. It seems like the assumption is, even though if tariffs go back to AIPA after July, the way that you flow your inventory, it shouldn't have a meaningful impact. for at least fiscal 26. I just want to make sure that I understood that. I guess that means that we could face a headwind in the 27th. We'll have fall pretty much be in-house.

And then you've got some core that also goes even further during the year. So if tariff rates did go back to IEFA, and right now I think what they're talking is more of a 10 to 12. at least what's being discussed and how quickly that happens you know you could have a gap where you don't have any you know these are going to aspire the the Section 122 will expire in July, and I don't know if these others can be in place right away. So the tariffs are still fairly uncertain, but even if they went all the way back to IEPA, it would not have a huge impact, because I think falls pretty much in at 10, and resort could have a little bit of impact.

Got it. And then just the last point on that, like with tariff refunds, what would be, you know, the primary use of the proceeds?.

That debt repayment. Pay down debt. Yes, yes. And our debt, you know, some of that is seasonal, and we expect second quarter, you know, debt to come down. And then if we get the tariff refunds, then we'll come down even more significantly.

Awesome. Well, thanks for answering the questions and best of luck.

Thank you, Mauricio. Our next question is from Joseph Savillo with True Security.

Hey guys, thanks so much for taking my questions. Just trying to zero in a little bit more on the consumer versus Father's Day. Is there any way you could break down the tax refund impact on 1Q?.

I'm not sure we can do that. I don't know. You know, I believe it was probably a positive, you know, for us for sure, but I don't know that we have a good way to break that down. As you know, Joe, there are a lot of things people including some of your peers out there in the analyst world that you know are trying to do all kinds of things about tax returns and I've read a lot of that but I'm not sure we can translate it exactly.

Yes, I figured it would be pretty tough, but figured I'd ask. And then secondly, can you talk a little bit more about –.

One analysis that I've read is that when you get to $4.50 a gallon, you've eaten up all the benefit of the tax return. Some people are thinking about it. Now, we're not at 450 a gallon most places. And, you know, with where oil's settled down, It's been in the high 80s, low 90s, and seems pretty immune to what the news headlines are in terms of any big swings. At that level, you're looking at $3.75 a gallon on average, I think, which is – I don't think it's going to cripple the economy. I mean, people don't like it. It impacts sentiment, but I don't think it's going to cripple the economy.

Okay.

Got it. That's helpful. Then I guess, can you give any more color on the regional performance of Tommie and maybe how the new DC has impacted operations?.

I wanted to talk about D3. Yes, yes. New D.C., we moved our first brand over at the very end of February. We now have four brands over there. So we've got three more brands, two more, to move, remember Lions was doing a tiny bit for Tommy, they were doing all the emerging brands, they were doing a tiny bit for Lilly and all that Johnny was. So then we'll end up moving, once we get all the brands in and get it all settled down, we will actually start shifting more Tommy We currently have Jack Rogers in a 3PL and that will move. And so the move, it'll probably end of July, early August, we'll have all the brands moved over. And then as our efficiencies get better, we'll move more and more Tommy there.

So we're kind of in the startup phase. and with a project like this, you work out the different kinks and you move the brands over slowly and then you really absorb them and get more efficient and then you move the next brand. So we're kind of in that phase now. but this summer we'll get all the brands over and then and then continue to move more Tommy over and continue to get more efficient. But it is a good, to be a great operation and it's going to be a great long-term asset for the company.

And then Joe, from a geographic standpoint for Tommy, it's really a west coast or western part of the country versus Eastern issue. And the West has been strong this year, which is really good to see. We had a couple of years where it was lagging, and that's really been... the strongest part of the country for us, which we're really glad to see.

Got it. Thanks so much, guys. Thanks, Joe. Thank you. There are no further questions at this time. I'd like to turn the floor back over to Tom Chubb for any closing remarks.

Okay, thank you very much for your time and attention today. We appreciate your interest in our company and we look forward to talking to you again at the end of the summer.

This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.

[Call has ended.]

Greetings, and welcome to the Oxford Industries, Inc. Fourth Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Brian Smith of Oxford Industries. 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 our 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'll be discussing certain non-GAAP financial measures. In the fourth quarter of fiscal 2025, we changed our measure of profitability from segment operating income to segment EBITDA. You can find a reconciliation of non-GAAP to GAAP financial measures, including segment EBITDA 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 now I'd like to turn the call over to Tom Chubb.

Good afternoon, and thank you for joining us. I'm glad to be here today to discuss our fourth quarter results, the progress we made in fiscal 2025 and our outlook for fiscal 2026. We were pleased that fourth quarter net sales and adjusted earnings per share, helped by late January momentum of our largest brand, Tommy Bahama, landed at the midpoint of our guidance ranges, excluding charges associated with the bankruptcy of Saks Global that were not known when we last updated our outlook. While we operated against an uneven consumer backdrop during the holiday season with pressured traffic and conversion trends across much of our portfolio and a highly promotional marketplace, the actions we took throughout the year to strengthen our business helped deliver improving trends late in the fourth quarter. The holiday quarter unfolded broadly in line with the pressures we described last quarter, particularly in categories and assortments most affected by tariff-related sourcing decisions and a highly promotional market.

Despite the challenges of higher tariff costs and a competitive environment, our efforts to strengthen the supply chain and diversify sourcing helped us protect strong gross margins and maintain healthy inventory levels. Importantly, absent the impact of higher tariff costs, gross margin would have increased versus the prior year. As fiscal 2025 concluded, we were encouraged by the improvement we saw as we exited the holiday season and entered our important resort and early spring period. Comparable sales led by mid-single-digit positive comps at Tommy Bahama improved and turned positive for the total company in late January. In the first quarter of fiscal 2026 to date, comps at Tommy Bahama have remained mid-single-digit positive, while comps for the total company have remained modestly positive. At Lilly Pulitzer, first quarter comps have run below our plan, which we believe is largely attributable to colder weather along the Eastern Seaboard, including Florida and the Southeast, the brand's most important markets.

At Johnny Was, while comps remain negative, the business is performing in line with our expectations and improving through the quarter as our marketing and merchandising effectiveness actions begin to take hold. Quarter-to-date, business in the Emerging Brands Group is quite strong with comps well into double digits. We are especially encouraged that performance improved as we moved into resort and early spring when our product offerings were better aligned with customer demand compared with our holiday assortments. We view that improvement as particularly meaningful because these are seasons when our brands are especially well positioned given their connection to warm weather lifestyles and the occasions that matter most to our customers. While the environment remains uncertain, these trends reinforce our confidence that the actions we have taken are gaining traction. We also made meaningful progress in fiscal 2025 to strengthen our operational foundation.

Shortly after year-end, we completed construction of our new state-of-the-art distribution center in Lyons, Georgia and began receiving initial inventory shipments. Lyons represents the most significant infrastructure investment Oxford has made in many years, and we are proud of the teams who brought it to this point. As we indicated previously, we do not expect meaningful near-term financial benefit during the early stages of the ramp, but reaching this milestone is an important step in strengthening our long-term operating platform. In addition to completing Lyons, we continue to invest in technology data and analytics and artificial intelligence while also advancing our strategic sourcing initiatives to further diversify our sourcing profile. Early in fiscal 2025, approximately 40% of our apparel and related products were expected to be sourced from producers located in China.

Through the actions we took during the year, that figure declined to slightly less than 30% of our product purchases in fiscal 2025 and our annualized run rate entering fiscal 2026 has been reduced to approximately 15%. Together, these actions have increased our flexibility and better positioned us to navigate continued uncertainty in the marketplace. Turning to fiscal 2026. Our outlook assumes that we build on the encouraging momentum we have seen early in the first quarter, particularly at Tommy Bahama. While the tariff situation remains fluid and we faced meaningful tariff pressure in Q1 that we did not incur last year, we believe the actions we have taken to diversify sourcing and improve execution across the business will help limit the impact on earnings as we move through fiscal 2026 and allow us to leverage low single-digit sales growth into meaningful earnings improvement.

Scott will provide more detail on the factors shaping our outlook, but our priorities are clear: sustain momentum, improve profitability and continue strengthening our brands for the long term. Stepping back, our operational priorities remain consistent and straightforward regardless of the macro environment: serving our customer, protecting the integrity of our lifestyle brands and generating cash so we can reinvest thoughtfully in the business, maintain a strong balance sheet and create long-term shareholder value. In an uncertain consumer environment, success comes from controlling what we can control and staying focused on execution. Each of our brands have specific priorities for fiscal 2026 tailored to its opportunities, but they share a common thread, a focus on what makes each brand special, the product, the storytelling and the experiences that keep customers engaged. At Tommy Bahama, our top priority in fiscal 2026 is to build on the momentum the brand has generated with comps in the mid-single-digit range in the first quarter to date.

We believe that momentum reflects the work the team has done to improve assortment balance, strengthen key in-stock programs and better align product offerings with customer demand. In fiscal 2026, we are focused on sharpening merchandising, elevating brand storytelling, improving hospitality performance and evolving our marketing approach to build demand, deepen retention and reach new audiences. We believe that combination positions Tommy Bahama to deliver improved profitable growth while reinforcing its position as a leading premium lifestyle brand. At Lilly Pulitzer, we are focused on a set of strategic levers designed to unlock more sustainable profitability while positioning the brand for long-term growth. We see meaningful opportunities to sharpen our assortment strategy, improve pricing architecture and allocation effectiveness, strengthen our connection with the core customer through more personalized storytelling and optimize Lilly's distribution and channel mix in ways that support both growth and brand awareness.

At Johnny Was, our priority remains executing the brand revitalization plan we have been building. That begins with product, as we work to bring greater cohesion to the design process, refine assortments and create a more seamless commercial model across retail, e-commerce and wholesale. At the same time, we remain focused on the merchandising discipline, go-to-market consistency and marketing effectiveness needed to improve execution and stabilize performance over time. We believe these actions, along with the leadership changes we announced in the third quarter, will strengthen the foundation of the business and better position the brand for the future and result in a meaningfully improved EBITDA for the year. Within our Emerging Brands Group, our focus in fiscal 2026 is on accelerating brand heat, expanding distribution in a disciplined way and continuing to leverage our shared operating platform to drive profitable growth.

This group continued to provide encouraging growth in energy in fiscal 2025, and we believe there is meaningful opportunity to build on that momentum through stronger storytelling, better merchandising tools and more effective allocation across channels. Across our portfolio, we are taking a disciplined phased approach to developing our data and AI capabilities, initially focused on areas where we see the clearest near-term return on investment, including marketing and e-commerce use cases, enterprise productivity tools and selected IT applications such as developer productivity. We are starting with practical use cases while continuing to strengthen the data foundation needed to support more advanced capabilities over time. As always, I want to express my deep appreciation for our teams across the enterprise. Their resilience, creativity and focus on our customer are the foundation of everything we do.

With that, I'll turn the call over to Scott for more detailed commentary on our financial performance and outlook.

Thank you, Tom. As Tom mentioned, we finished the fourth quarter and full fiscal year '25 with top line results within our guidance range and bottom line results within our guidance range, excluding $0.19 per share of charges related to the Saks Global bankruptcy. Consolidated net sales in fiscal 2025 decreased 3% to $1.48 billion. Sales in our full-price brick-and-mortar locations and e-commerce were down 3%, driven by a total DTC comp of negative 4%, partially offset in our retail channel by the addition of new store locations. Outlet sales were also down 2%. Our food and beverage locations grew by 4%, driven primarily by the addition of 4 new food and beverage locations added during the year, partially offset by a slightly negative comp. Our wholesale channel, which has continued to be pressured primarily from the decline in the specialty store market, decreased $13 million or 5%.

Despite the decline of the specialty market, we have been pleased with our sell-throughs at our most important department store customers and our ability to grow or at least maintain market share. By brand, sales declines at Tommy Bahama and Johnny Was were driven by negative comps in the high single and low double-digit range, respectively. While sales at Lilly Pulitzer were driven by positive comp in the low single-digit range. Our Emerging Brands continue to be a bright spot with sales growth in the low double-digit range as the brand continues to grow and mature. Adjusted gross margin contracted 190 basis points to 61.3%, driven primarily by higher tariffs of $30 million or 200 basis points.

Absent tariffs, a higher proportion of net sales occurred during promotional and clearance events at Tommy Bahama and Lilly Pulitzer were partially offset by lower freight cost to customers from successful contract renegotiations during the year, along with a change in sales mix with a higher proportion of DTC sales. Across our 3 major brands, consumer responses continued to be strongest during our promotional and end-of-season clearance events and to our new and innovative fashion products, continuing the trend from the last couple of years. Adjusted SG&A expenses, which have been adjusted in the current year to remove depreciation and amortization, increased 4% to $815 million compared to $784 million in fiscal '24. During fiscal '25, we incurred higher expenses related to the 10 net new retail stores opened in fiscal 2025, including 4 new food and beverage locations, along with the 30 net new stores added during fiscal '24. Combined, these locations accounted for almost half of the SG&A increase during the year.

We also incurred higher costs related to software and professional service fees, credit losses primarily related to the Saks bankruptcy, partially offset by lower advertising costs. The result of this yielded adjusted EBITDA of $107 million or 7.2% EBITDA margin compared to adjusted EBITDA of $193 million or 12.7% of net sales in the prior year. Moving beyond EBITDA, adjusted depreciation and amortization was flat compared to fiscal '24. We incurred $4 million of higher interest expense resulting from higher average debt levels, and we had a higher adjusted effective tax rate. With all this, we ended with $2.11 of adjusted EPS, which includes $0.19 of charges related to the Saks bankruptcy. I'll now move on to our balance sheet, beginning with inventory. At the end of fiscal '25, inventory decreased 1% on a LIFO basis, which was impacted by a large increase in our LIFO reserve. Inventory increased 2% on a FIFO basis.

The increase was driven by $11 million of incremental tariff costs capitalized into inventory relating to tariffs implemented during fiscal '25. Inventory was up just slightly in all brands, except for Johnny Was, primarily due to the additional tariff cost. On tariffs, I also want to address some important points. During fiscal '25, we paid approximately $40 million of tariffs imposed under IEEPA that was struck down by the Supreme Court. While those payments could potentially translate into a receivable, the timing collectibility remain uncertain and no potential recovery was included in our fiscal '25 results or is included in our fiscal '26 guidance. We ended the year with outstanding long-term debt of $116 million, up from $31 million at the end of the prior year. Our $120 million of cash flows from operations in fiscal '25 were outpaced by our capital expenditures of $108 million, primarily related to the Lyons, Georgia distribution center project and the addition of new brick-and-mortar locations, $55 million of share repurchases and $42 million of dividends.

I'll now spend some time on our outlook for 2026. For the full year, we expect net sales to be between $1.475 billion and $1.53 billion, approximately flat to up 4% compared to sales of $1.478 billion in 2025. The sales plan in 2026 includes growth in the Tommy Bahama, Lilly Pulitzer and Emerging Brands segments, partially offset by a decrease at Johnny Was. A total comp of approximately flat to positive 3% with some additional lift from noncomp locations opened in 2025. By distribution channel, the sales plan consists of mid-single-digit increases in brick-and-mortar and retail channels, along with a low double-digit increase in food and beverage locations that includes the annualization of 4 new locations from 2025. The wholesale channel is expected to contract in the mid-single-digit range due primarily to continued declines in the specialty store market.

More broadly, our guidance balances the modestly positive first quarter-to-date comps with the uncertainty we continue to see in the consumer environment. This includes the potential for additional pressure from the conflict involving Iran and the possibility that higher oil prices could weigh on consumer spending, freight and raw material cost. Moving on to gross margin. Let me first lay out the tariff assumptions embedded in our outlook. We are assuming tariff rates for the full year fiscal '26 will remain generally consistent with the incremental tariff rates put in place during fiscal '25. These rates are consistent with the rates reflected in our inventory balances at the beginning of fiscal '26 and what we expect for future receipts during the year. We are not incorporating any benefit from the recent Supreme Court decision or any related subsequent actions on other tariff matters. We are also not assuming any refunds of tariffs previously paid.

Using these assumptions, we expect total IEEPA-related tariff headwinds of $50 million during fiscal '26 or an incremental $20 million or 150 basis points of gross margin impact and $1 per share impact on top of the $30 million of tariff headwinds we absorbed in fiscal '25. Additional tariff costs are not expected to be evenly distributed throughout the year. As we have discussed previously, we recognized very little incremental tariff costs in the first quarter of fiscal '25 due to the timing of when tariffs were enacted and our efforts to accelerate large portions of our inventory purchases. As a result, we expect an approximate $12 million or 300 basis points headwind to gross margin in the first quarter of 2026. Beginning the second quarter, we expect incremental tariff impact to moderate significantly as we anniversary periods of fiscal '25 that did include more substantial tariff impacts. After Q1, we expect year-over-year tariff headwinds of approximately $2 million to $4 million or 50 to 100 basis points per quarter.

Outside of tariffs, we expect a full year benefit from price increases, a change in sales mix with a greater proportion of direct-to-consumer sales and a slightly lower promotional cadence to result in a modest adjusted gross margin expansion to approximately 62%. The price increases implied in our guidance range from 4% to 8% and vary by brand. These increases reflect a more elevated assortment as well as higher pricing on new product with relatively limited like-for-like increases on existing product. Moving beyond tariffs and gross margin, we expect SG&A, which now excludes depreciation and amortization, to grow in the low single-digit range, primarily due to increased software-related costs, the annualization of incremental SG&A from the 10 new stores added during fiscal '25 in a handful of locations, including a new Tommy Bahama Marlin Bar in fiscal '26 and increased incentive compensation primarily due to lower payouts in recent years.

Also within EBITDA, we expect royalties and other income to increase by approximately $2 million in fiscal 2026. Additionally, our fiscal '26 guidance includes the unfavorable impact of increased losses of $5 million or $0.25 per share related to the opening of our new Lyons DC. These losses reflect the ramp-up cost of opening and operating the facility before we have achieved targeted inventory levels and the cost of operating 2 facilities while we transition out of the old facility and into the new facility. We expect significantly all the incremental cost to operate the new Lyons DC in fiscal '26 will be depreciation related with some offsetting reductions in cash operating costs. We also expect an increase in nonoperating items, including anticipated higher interest expense of $1 million for the year or an approximate $0.05 EPS impact from anticipated higher average debt levels. We also expect a higher adjusted effective tax rate of approximately 28% compared to 24% in 2025, will result in approximately $2 million of additional tax expense or $0.15 per share impact.

The increase in the effective tax rate is primarily due to expected shortfalls in stock-based compensation vesting during fiscal 2026. Considering all of these items, we expect 2026 adjusted EPS to be between $2.10 and $2.70 versus adjusted EPS of $2.11 last year that included the $0.19 of charges related to the Saks Global bankruptcy. Before moving on to the first quarter, I want to briefly discuss the completion of the new distribution center in Lyons. As Tom mentioned, we are still in the early ramp-up phase to bring the facility online and want to be careful about attributing specific financial benefits before it is fully operational and handling the level of volume we expect over time. Over the long term, we believe Lyons will be an important asset for Oxford. The facility is designed to improve the efficiency and flexibility of our distribution network, supported by a more modern layout and state-of-the-art automation.

In the near term, fiscal 2026 will include the additional depreciation costs mentioned earlier as we move through the early stages of ramp-up following the start-up activity incurred in 2025. Even at this early stage, Lyons is already providing several strategic benefits to the business. These include being able to eliminate 2 higher-cost Los Angeles-based distribution facilities acquired with Johnny Was in fiscal 2024, reducing lease space across other parts of our distribution network, increasing flexibility as we continue to evolve our sourcing network, improving our ability over time to operate the business with lower inventory levels and enhancing service to important Southeast and East Coast markets for Tommy Bahama, which have historically been serviced from our Auburn, Washington facility on the West Coast.

Moving on to the first quarter of fiscal '26. We expect sales of $385 million to $395 million compared to sales of $393 million in the first quarter of 2025. The sales plan in the first quarter includes a flat to modestly positive comp in the low single-digit range. By channel, we expect low to mid-single-digit increases in our retail and e-com direct-to-consumer channels and mid- to high-teen growth in our food and beverage channel to be partially offset by a low double-digit decrease in our wholesale channel. We also expect the $12 million of higher cost of goods sold or approximately 300 basis points of gross margin impact or $0.60 per share from higher tariff costs, as I mentioned previously, along with a higher mix of promotional and clearance sales to be partially offset by a higher mix of direct-to-consumer sales.

SG&A deleveraging largely from the anniversarying of new stores opened in '25, some additional costs related to the new Lyons, Georgia facility and increased incentive compensation, as previously mentioned, higher interest expense of approximately $1 million and a higher effective tax rate of approximately 25% compared to 24% in the first quarter of '25. We expect this to result in first quarter adjusted EPS between $1.20 and $1.30 compared to $1.82 in the first quarter of 2025. Excluding the additional $12 million or $0.60 per share in tariffs, adjusted EPS at the low end of our range is nearly flat with a year ago. Related primarily to the completion of the new Lyons DC and significant reduction in new store openings, we expect total capital expenditures of approximately $65 million in fiscal 2026 compared to $108 million in fiscal '25.

The $65 million includes approximately $20 million of final cost to complete the new Lyons facility early in fiscal '26, which was previously planned to be incurred in late '25. The remaining capital expenditures in '26 will relate to ongoing investments in the execution of our pipeline of new stores in Marlin bars, including 1 Marlin Bar expected to open in '26 and capital expenditures related to relocations and renovations of current brick-and-mortar locations. Across the company, we expect to open a handful of new locations at Tommy Bahama and Lilly Pulitzer, but expect to close some stores in other brands, which should result in a relatively flat store count for the year. Wrapping up our guidance, we expect cash flow from operations of approximately $130 million to allow us to pay down a significant portion of our debt while completing the previously mentioned investments and the payment of our quarterly dividend that was increased by 1% to $0.70 per share by the Board in our latest March meeting.

Thank you for your time today. We now turn the call over for questions. Shamaly?

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

Maybe just to start on Tommy Bahama. You've been very transparent around the assortment changes that you've been working to implement there. As you started to see that improvement with the mid-single-digit comps so far this quarter, could you just help us further unpack what's driving that momentum? Are you seeing any encouraging signals across traffic, basket size or conversion that give you confidence that the trends you're seeing now could be sustainable?

Yes. Thank you, Ashley. No, we're very excited about what we're seeing in Tommy Bahama because not only are we seeing the mid-single digit -- and it really goes back to the back half of January, so very end of last year and then through quarter-to-date of this year. And it's been pretty consistent. It's not -- even this week, it's been a good week. Yesterday was a great day for us on a Wednesday. So we're seeing the kind of consistent results that give us a lot of confidence. And then the next thing I would say, Ashley, is that it's very much about having the right product in the right depth in the stores is really -- and of course, online as well, but that's really what's driving it. So a couple of the best sellers on the men's side, which is the biggest part of our business, have been the Emfielder Polo, which is our bread and butter Polo. It's made a couple of tweaks to it.

It's a new and improved Emfielder Polo, but it's the Emfielder Polo. And then you're familiar with our Boracay pant franchise that has been with us for quite a while now. It started with a Chino way back when, then we added a short, then a 5 pocket, then a new Chino this past fall, which has performed very, very well for us. And then for the spring, the new Boracay short, we had a Boracay short before, but like the pant, this is a new and improved version of it, and that's really helping drive business a lot. On the women's side, dresses are performing well. Wovens, shorts and pants, I believe, are all performing well. We're also seeing, Ashley, that what we're talking about in our marketing materials like a mailer we did last month, that's what's selling too, and it's good to see that connection. So we look at all these things, and we get pretty excited.

And then the last thing I'll tell you is that the results that we posted so far, this time of year, Florida is the most important part of our business, but Florida is still not as strong as we want it to be. And it's really the West that's driving the results. The great thing about that, Ashley, is that as we get into second quarter, the West becomes proportionately more important to our business. So the fact that we have a lot of momentum overall, but particularly out there, I think, bodes well for our ability to sustain this momentum. And then again, it's all about product and having the products that the customer wants to see us -- see from us and for a variety of reasons last year, a lot of them having to do with the tariffs, but other reasons as well. We just -- we were not on that as much as we needed to be, and we are this year, and it's working.

Great. That's super helpful. And then maybe just one follow-up. On the gross margin, I appreciate all the color you gave us there, but I think there was a call about some of the channel mix shift. So as that takes place and it moves more towards the DTC and food and beverage, just how should we think about the margin implications and contribution to overall profitability in '26?

Yes, definitely on gross margins, with DTC growing and wholesale, we talked about pulling back a little bit. It certainly helps the gross margin. We are performing well at the wholesale doors, especially the majors. So we think we can get some momentum back at wholesale. But they both -- definitely on the gross margin line, they help. And then when the DTC is coming into a comp, it really falls to the bottom line. So if we can get comps meaningfully positive, it really does flow through.

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

As you think about the Saks and the loss of Saks, and you just mentioned about wholesale distribution, other places that you would go or you would look to? Is it any of the existing like the Dillard's, Macy's or Nordstrom? How do you see the wholesale channel going forward? And you just mentioned Florida performance, I believe, was weaker than the West Coast. How much weaker is it than the West Coast and any takes there? And just lastly, as you think about the framework for margins and the income statement and balance sheet this year, the lower CapEx this year, what does that mean? How do you think of the opportunity for that cash? And how do you think about margins and SG&A spend as we go through the year?

Okay. I will start with Florida. And just to be very clear, Florida is actually getting stronger. It's improving. It's just that the West has really been kind of on fire. So I don't want to leave anybody with the impression that Florida is where it's been for a while. It is actually picking up. We've been glad to see it. February was extremely cold in Florida. You may have been down there or have friends or family that was down there. February was a really cold month in Florida, and that didn't help. I think we're seeing really good signs out of Florida. The point though is just that the West is on fire, and that bodes well for us, especially as we get into second quarter. And as you know, Dana, for us, you have a good first quarter and second quarter. I mean it's -- that's the makings of a really good year there. So we're excited about that. Then in terms of Saks, look, we're rooting for them.

We want them to be successful. Obviously, it's going to be a smaller footprint. We like doing business with them. We think it's a great venue, especially for our Johnny Was brand, which has historically had a nice business with both the Saks side and the Neiman side of the business. So we're rooting for that. But I think there is some business to be had out there as they move away from certain locations in certain markets. And I believe it's the winners will be the people that you said, Macy's, but more specifically, I think Bloomingdale's as well as some of the top-tier doors at Macy's. And then Dillard's and Nordstrom, I think, are also in a position to win. I think if you look out across that perspective, we have good relationships with all of those, and we like doing business with all of them. And we'll play to win as the market evolves. And then on the CapEx and margin questions, I'll kick that over to Scott.

Yes, yes. So lower CapEx. So a little -- yes, obviously, the Lyons DC, we still have some that carry for from last year, but quite a bit lower and lower in stores. So we plan to -- we raised our dividend modestly, and then we plan to pay debt down. So we think we can take a meaningful buy down of our debt level. So that's the current plans with the cash. And then your margin question was -- can you repeat that one, Dana? I'm sorry.

Sure. As you think about the margins going through this year, any puts and takes on the levers on gross or SG&A, the quarterly cadence of what you'd be looking for, what could be a headwind or a tailwind?

Yes. I'd say for the year, depending on where in the sales guidance range we come, and if we can be closer to the upper end of it, we should be able to leverage SG&A a little bit, which would be nice in having a little bit of growth in our gross margin percentage also. As far as -- there won't be too wild swings year-over-year on the percentage, maybe a little bit more in Q2 than Q1, but relatively flattish on gross margin percentage by quarter, so no wild swings there. And then just with some of the price increases, I think even though we have the tariff headwinds, we think we can overcome that in our gross margin, which I think is important. And then obviously, there's a lot of upside if we did bake in the IEEPA rates. And today, the rates are lower, no telling what's going to happen. So if they held where they are today, there's certainly some upside. And again, we did not build in any refund for what we paid last year. So there's certainly some upsides out there depending on where the tariffs go.

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

You got Ethan on for Janine. First, just I think you said you're looking to pay down a meaningful amount of debt this year. I was just wondering if you have a level you're looking to end the year at? And then where does it rank in your overall capital allocation plans for the year?

We hope to take it down absent any refunds of tariffs, $30 million to $40 million reduction is what our current plan shows. And...

Yes. And on the capital allocation, nothing's really changed there, Ethan. As you know, we believe paying a dividend is important and have paid one every single quarter since we went public in 1960. -- our dividend CAGR over the last 10 years is actually somewhere around 10%. And we increased it by $0.01 a quarter. The Board did earlier this week. So dividends part of it, debt repayment. The CapEx will come way down this year, as Scott outlined in his comments. And I think the big sort of blob of CapEx that we had over the last 2 years is largely behind us, a little bit carried over into this year. That was really just a timing thing. But what we think going -- this year and going forward is that we'll be at much more normalized levels of CapEx. And so there should be plenty of cash flow and free cash flow.

Got it. That's super helpful. And then just one more for me. Could you just give us a little more detail on exactly what the marketing and merchandising actions at Johnny Was will look like this year as you look to reinvigorate the brand?

Yes. So the marketing is really about more elevated, better storytelling, storytelling that emphasizes what's special and unique about the brand and presents it in an elevated way and also one that hopefully reaches a bit of a broader audience than we had in the past. We have a very dedicated fan base at Johnny Was, but we think there are more people out there that we can appeal to, and that is -- some of that's already showing up. And then from a product and merchandising standpoint, it's really about making sure that we have the right silhouettes, the right fabrications, very importantly, the right price points that we're offering innovation and newness, all consistent with the Johnny Was DNA and then investing appropriate levels of inventory. And this is a big project that we've had going, and it started really last summer. And we are starting to see the results of some of it already.

We have a weekly report that we look at every week that's got, of course, sales and margin and a couple of other KPIs. And one of the great things about it is that we look at it this year, pretty much every week, we're seeing almost all green on that report, whereas for a couple of years, it was largely red and now it's almost all green, but we're also seeing the benefits of some of that merchandising work that we did show up. So for example, that work indicated that dresses in the $200 to $300 price bucket were very important. We invested more inventory dollars in that for spring, and it's paying off. It's really -- it's working well. So those are the kinds of things that we're doing. What I'll tell you, Ethan, though, is the full impact of the work really doesn't show up until the fall product hits the floor, which is 7/30, July 30 is when we ship fall.

And then you'll see, I think, a more complete extent of the work that we've done there. Another thing that I would be remiss if I didn't mention is the inclusion of some items that I think we're calling essentials or core essentials. But these are solid pieces. There's like a top, a pant, a skirt, maybe 1 or 2 other things, and they come in, I believe, 3 solid colors that merchandise beautifully with all our embroidered and printed product, but they give a woman a way to come in and if she wants to buy a printed top but would prefer to have a solid pant or a skirt to go with that, we've got it for -- so it's a way to let her complete the outfit in our store, which will be a plus. And then it also -- from a visual merchandising standpoint, it just helps break up the -- all the embroidery and print that we've got in the store.

And sort of in concert with that, we're also, I would say, calming down the interiors of a store, our store a little bit to make them a little less overwhelming and easier to shop. And a lot of this is well in flight. A lot of it will take a little bit longer to fully come to fruition, but we're super excited about it. One of the things that we love Ethan is that one of our very important wholesale customers when they came in to see fall, they absolutely loved it. They bought into it. They loved what we were doing, and they actually upped their budget for their buy for us, which is a very, very strong indicator of what they think about the line. And I think that's an early indicator. Obviously, ultimately, the consumer is the one that votes, but retailers that are great merchants, their opinions tend to be pretty good indicators of where you're headed.

[Operator Instructions] Our next question comes from the line of Mauricio Serna with UBS.

I guess I'm just trying to understand from the guidance that you laid out for the year. I think it implies some acceleration, at least if you look at the ranges, I think like in Q1 versus what you're projecting for the year. Maybe could you just help us reconcile that? Also, could you give us more details on what you're seeing on Lilly Pulitzer. I think you alluded to like the soft start of the year, maybe because of weather. How are you thinking about that business improving as the year progresses?

Mauricio, on the -- I think you're referring to comps, it accelerated a little bit in the guidance from -- and part of it is February was extremely cold. We had -- February was not a great comp month, and it's really -- well, Tommy Bahama has really overcome that. As Tom mentioned, with the West Coast business, Lilly has started a bit behind on comp and behind our initial plan on comp, but they are such East Coast-centric and East Coast is where weather patterns had. They don't have the West Coast offset. So with the weather normalizing, we really believe we'll have a little bit better comp because of that. And we're seeing it more in March, especially at Tommy.

And then on -- yes, on the Lilly thing, I mean, it's the -- in February, as Scott mentioned, it was not a great comp month. And Florida is an enormous part of Lilly's business all year, but especially in the spring, we did a really interesting look back where we looked at the weather patterns in Florida over the last, I don't know, 7 or 8 years, something like that. And when it's cold in February, comps are weak. And by cold, I mean, when the average temperature is colder than normal on a daily basis, the comps tend to be weak. When the weather is warmer than the normal on an average daily basis, the comps are good. And this year, we just didn't have it. Lilly so dependent on Florida, especially at that time of year. and the whole East Coast, they do a lot in the Northeast.

As you know, from where you live, there was just so much snow up there that I think that had an impact on us. And of all of our brands, Lilly is the warmest of a bunch of warm weather brands. And I think we saw it not only in the financial results, but in terms of what was selling, the dress business, which in colder weather, dresses are going to be less popular was the weakest category and the strongest categories were things like pants and jackets that go better with cooler weather. So we look at the product, we don't think we have any issue there. We think the weather will turn and is turning, and we expect things to pick up, but we've obviously factored what we've seen to date into our forecast.

Got it. Very helpful. A couple of follow-ups maybe on the margins. First on gross margin, I think you alluded to first quarter still being impacted with some promotions, I think, or some like higher proportion of sales happening during promotional events. But then like for the full year, I think it's like the opposite or less promotions. So trying to reconcile that. And then specifically on Johnny Was, anything that you can tell us in terms of like how you're thinking about the margin outlook of this business for the year? Or maybe, I guess, like I said, more of a top line first recovery? How should we think about the inflection of that business or how much inflection we should see in '26?

Yes. Yes, I think Johnny Was, it's going to be a little bit more of a gross margin story, which will get better after the first quarter. We still have some goods to clear and still had to have some -- a little more promotions. The number of promotional days are expected to come way down. Our inventory levels are in really good shape. And so we think -- so part of the gross the promotional cadence is Johnny Was will get less promotional as the year goes on. And as we buy better, buy more in the right categories, buy appropriate levels. We think the amount of promotions we'll have to do is less. So for the year, we have Johnny Was gross margins maybe moving backwards slightly in Q1, but for the year, they move forward. So that's kind of explained part of the promotional comments that we had.

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

First one, just on the inventory planning stuff that you've done with Johnny Was. I think you were talking about kind of porting that over to the other brands. Can you just talk about what we should be expecting there, I guess, near and long term and what the impacts might be?

Yes. So we are porting it over really across the entire company. I think after Johnny Was, the next one up was Lilly, but they're several months behind Johnny Was. So the time period before they'll start to really see impact will be pushed out a bit, too. And then of the big brands, Tommy was the last, and they're really getting going on it now. So there's -- it's probably really for Tommy more spring '27 before you see anything. But -- and Lilly, you'll get some probably in the later part of this year. And the key things that I think it helps ultimately is the most important things, sales, margin, customer satisfaction, it's pretty good. And Joe, it's -- I think the potential to really transform the profitability of our business pretty materially is very real. I don't want to put too much on '26 just because of the timing of when this happened. But I think as we get into '27 -- we'll get some in '26. But as we get into '27, you'll see a lot more.

Got it. Sounds good. And then just on the Lyons facility, I know that the financial benefits are further down the road, but can you talk about like the logistical lift you might get from having it closer to the core of the Tommy market?

Yes. Right now, a lot of the East Coast store replenishment, a lot of the East Coast e-commerce is being fulfilled from Auburn, Washington. So just having fulfilled closer to source. We'll take a lot of the guesswork out of the retail replenishment and we'll be really replenishing what the stores really need. It will lead to once we have the rhythm to us being able to carry less inventory because we'll have -- and the individual stores can carry less knowing they can get replenished very quickly. So that's going to be a huge benefit and one that we obviously got to get up and running and getting the right volumes in there and then getting the confidence level of the stores that they can cut back on their buffer stock and get replenished very quickly with the right thing. So -- and we'll continue to add the amount of Tommy Bahama that goes in this facility as the facility ramps up.

Our next question comes from the line of Paul Lejuez with Citigroup.

It's Tracy Kogan filling in for Paul. I had 2 questions. The first, I think you guys mentioned it was traffic and conversion that were the issues in 4Q. And I'm wondering which of the metrics has really changed and improved as you're talking about the improvement quarter-to-date? And then I think in your prepared remarks, you mentioned optimizing Lowe's distribution and channel mix and changing their pricing architecture. And I was just hoping you could go into a little more detail on that.

So on the pricing architecture, it's really that same thing I was talking about in Johnny Was where we've implemented a tool that helps us to do much more detailed analytics on what price points really work well from I'm sure you're familiar with GMROI or gross margin return on investment. So looking at the business on a very granular basis and understanding the best places to invest our inventory dollars. And the example I gave in Johnny Was was dresses in the $200 to $300 price point bucket where historically, according to the data, we were a bit underinvested. We were overinvested in some other places, and it's really trying to adjust those, I guess, imbalances, if you will, in the line.

Then when you know where you need to be, you can design into it. So it's not like you have to raise prices or cut prices to get there. You just design your future line into the price architecture that the analytics indicate will work best. And again, on the Johnny Was example, that finding came out, I guess, back in the summer, and we were able to action it at least to some degree, and it's working. And there are a lot of others, too, but that's the idea. And it's basically, Tracy, about having better tools and processes. We've got great merchants across the country -- company and across the country. We've got just superb merchants, but it's about putting better processes and tools in their hands and letting them to do their job better.

And then on the quarter-to-date traffic conversion...

Yes. What I would tell you is that the big star of the show has really been the average order value, which is a combination of both the average unit price and the unit per transaction, which the trend lines on those are really good. Traffic has been okay. Conversion has still been a little bit of a challenge, but the very strong positives, I would say, are the -- is the average order value growth. That's kind of the story.

And we have reached the end of the question-and-answer session. I would like to turn the floor back over to CEO, Tom Chubb, for closing remarks.

Okay. Thank you, Shamaly, and thank you for your interest, everybody. We look forward to talking to you again in June, and I hope all is well until then. Thank you.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Greetings, and welcome to Oxford Industries Third 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 from Oxford. Thank you, and 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 our 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'll 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 now I'd like to turn the call over to Tom Chubb.

Good afternoon, and thank you for joining us today. As is typical for our third quarter, I'll keep my comments on Q3 relatively brief before turning to what we're seeing in the early weeks of the fourth quarter and how we are approaching the holiday season and the rest of the year.

We are pleased with what we were able to accomplish during the third quarter with our financial results broadly in line with the expectations we set earlier in the year. The environment remained highly competitive and promotional and the consumer continue to be selective with their discretionary spending, often requiring new and innovative product to capture attention. Against that backdrop, our team stayed focused on our long-term priorities and executed well on the fundamentals of our strategy.

Strong sales growth in both the emerging brands group and Lilly Pulitzer offset declines at Tommy Bahama and Johnny Was. Total company comp sales were slightly positive and while gross margins continue to reflect the pressures we've discussed in prior quarters related to tariffs, our underlying adjusted gross margin, absent that pressure improved over last year's even in a highly promotional environment. In addition to the financial results, we made important progress on a number of key initiatives across the enterprise.

Starting with people, we were pleased to have realigned and strengthened our teams in Johnny Was and the emerging brands group through a combination of internal promotions and hiring key executive talent from outside the company. Also at Johnny Was, we made significant progress with the business improvement plan we discussed last quarter. In Tommy Bahama, our bars and restaurants are a distinct competitive advantage, and we were pleased to have added 2 important restaurant openings during the quarter. In Lilly Pulitzer, we anniversaried last year's very successful Palm Beach Fashion Show with a fashion show in Key West. Last year's event has helped fuel creative content and commercial success throughout 2025, and we expect this year's event to do the same for 2026. We also completed the renovation of our [ Worth Avenue ] Lilly Pulitzer flagship location in Palm Beach.

Finally, we are in the final stages of construction of the new state-of-the-art fulfillment center that will be such an important asset to our direct-to-consumer businesses. None of these items will have immediate impact on our financial results, but are critical parts of the foundation of future success.

As I previously mentioned, across the portfolio, performance varied by brand as it has for much of this year. The bright spot continues to be Lilly Pulitzer, where the brand again demonstrated a deep connection with its core consumer and delivered healthy growth in the quarter. Our Emerging Brands business also posted strong year-over-year sales gains, reflecting growing recognition relevance, customer engagement and growth potential.

Moving to Tommy Bahama, while our third quarter results did not meet our goals for the brand, we did see encouraging progress. Comps improved sequentially to down low single digits from down high single digits earlier in the year. We believe we've made meaningful headway in addressing key areas that contributed to softness early in the year, particularly around color assortment and completeness of the line, which led to disparate regional performance and softness in Florida, our most important market. There is still work to do, but we feel good about the adjustments made so far. At the same time, we continue to invest in the long-term health of the brand through thoughtful expansion of our retail and hospitality footprint.

During the quarter, we reentered the important [ Saint Arm ] on circle outside of [ Sarasota ], with a beautiful new full-service restaurant and retail store, which replaced our previous restaurant that was damaged and closed in 2024 due to a hurricane. This new location reinforces the strength of our hospitality model in one of our most important markets. We also opened a new Marlin Bar in the Big Island of Hawaii, further deepening our connection to a region that has been central to the Tommy Bahama brand for decades. Both locations are off to encouraging starts, and we believe they will be long-term assets for the brand.

Turning to Johnny Was. We made several important changes during the quarter to strengthen the foundation of the brand and position it for long-term success. As we discussed last quarter, Johnny Was is an incredible brand with beautiful product, a loyal and engaged customer base and a hard-working, deeply dedicated team. To ensure the brand can fully capitalize on that potential, we have a refreshed key leadership roles, including the promotion of Lisa Kaiser, our former Chief Commercial Officer at Johnny Was to lead the brand as President of Johnny Was. Lisa has an experienced business leader with over 25 years of leadership roles at Neiman Marcus, including 10 years as SVP, General Merchandising Manager of women's ready-to-wear.

We also made changes to the lead designer and Head of Retail positions to bring sharper creative focus, strong merchandising discipline and more consistent execution across the business.

Earlier in the year, we also engaged an outside specialist to help us assess the Johnny Was business and identified the actions needed to meaningfully improve profitability. That comprehensive project has now been largely completed and we have begun executing against its recommendations with clear priorities around creative direction, merchandising and planning, marketing efficiency and retail performance. While we are still early in the process, we're encouraged by the focus, energy and alignment we are seeing across the team. We believe that a combination of refreshed leaders have with a very capable incumbent team and a clear actionable plan will allow us to reinforce the fundamentals of the brand and unlock the substantial long-term opportunity we continue to see in Johnny Was.

With that backdrop, let me turn to the fourth quarter and our early read on the holiday. As a reminder, our comps in the fourth quarter last year were flat and benefited from a post-election balance. When evaluating the yearly results of the fourth quarter this year, it is clear that the softer start to the holiday season reflects a combination of tariff-related product limitations and a holiday period that has been more proportional across the industry compared with last year that made for a difficult environment along with the more challenging comps than earlier in the year.

Most significantly, our brands have experienced challenges in our product assortments that trace back to the tariff-related sourcing decisions made earlier in the year. When our brands were building their holiday and resort lines last spring, the tariff landscape was highly uncertain with the potential for substantial increases on certain China origin categories. As a result, we made difficult but prudent choices to reduce our exposure in categories heavily reliant on China. For example, sweaters and other cold weather product that are important at this time of the year. Those decisions were appropriate given the information available at the time. However, they left us with assortments that were not as complete or as comprehensive as we would like for the holiday season.

Sweaters in particularly have historically been strong drivers of fourth quarter demand across our portfolio and our reduced presence in this category has been a meaningful headwind. At the same time, the holiday selling period has been more promotional than last year with consumers showing heightened sensitivity to value and a willingness to wait for deeper discounts. While our promotional cadence and depth we were consistent with our brand appropriate approach, many competitors entered the season earlier and more aggressively. That dynamic contributed to a slower start for us in the opening weeks of the quarter.

At Lilly Pulitzer, our holiday promotions included curated gift with purchase events and a broader seasonal sale both of which resonated well with our core consumer, and we saw a strong engagement with many of our most giftable styles and capsules. Unfortunately, our successful gift with purchase events were somewhat limited due to high Chinese tariffs and the difficulty of shifting the production of these items elsewhere. Similarly, we identified that there were gaps in our assortments related to the tariff environment, particularly in novelty items and certain other seasonal products that could not be quickly moved out of China which limited our ability to fully serve demand. We also leaned into our core programs to mitigate tariff exposure, which reduced the level of newness we might have otherwise offered.

At Tommy Bahama, we built on themes introduced earlier in the year, offering a compelling mix of gift ready items and cold weather seasonal product. But as with Lilly, many of the categories that historically carry momentum for us during holiday, especially sweaters and other cold weather essentials that are heavily China reliant were reduced as a result of the tariff uncertainty earlier in the year. Those gaps, coupled with a promotional marketplace that moved earlier and deeper than usual, created incremental pressure. Despite these challenges, we have seen continued encouraging response in our Tommy Bahama Boracay [ pants ] that we discussed last quarter. While the price point increased from $138 to $158, new product innovation has led to significant sell-throughs and the Boracay [ pant ] has played meaningfully into the holiday gifting mindset.

This success also highlights some of the trends we have seen in the market where consumers are gravitating to versatile products that can be worn to work and casual events and are less discretionary than some other categories.

At Johnny Was, the customer continues to connect most strongly with the unique artful product that defines the brand, elevated embellish pieces, rich textures and vibrant color stories, again resonated with [ loyals ]. But similar to our other brands, limitations in certain seasonal categories due to tariff-driven sourcing adjustments, along with heightened promotional intensity across the marketplace created a more challenging backdrop for converting that interest at the levels we had anticipated early in the season. While still small in absolute terms, our emerging brands group continues to be a meaningful source of energy and growth within the portfolio.

Southern Tide, The Beaufort Bonnet Company and Duck Head have each built strong momentum this year and we are seeing that momentum carry into the holiday season with a stronger start than what we have seen in our 3 larger brands. These brands benefit from exceptionally loyal customer bases focused product stories and highly engaged teams and their performance is a testament to the opportunity we believe exists in each of them. As we continue to invest in their capabilities particularly in product, marketing and retail expansion, we remain very encouraged by the role of the emerging brands group can play in our long-term growth algorithm.

Taken together, these early holiday trends reinforce what we observed throughout the year. When we deliver fresh, differentiated product that aligns with our brand heritage the customer responds. However, given today's promotional climate, achieving that response requires more competitive value proposition. As a result, and as Scott will detail in a few minutes, we now expect our fourth quarter performance to land below our previous guidance, and we are revising our outlook for the remainder of the year. And that is our focus across the portfolio, concentrating on what makes each brand special and ensuring that what we put in front of the consumer inspires confidence, joy and a sense of possibility. That same focus has guided our product development and marketing plans throughout the year. It's why we have leaned into newness and innovation across our brands, and it's why we continue refining our offerings to match the customer's mindset heading into resort in the early spring period.

While the environment remains dynamic, we are approaching the remainder of the year with clear-eyed realism. We recognize that the consumer continues to navigate uncertainty and that promotional intensity remains high but our teams are executing with discipline, and we believe we are well positioned to meet the consumer where she is today while investing in the long-term strength and potential of our business through initiatives such as those I outlined at the beginning of the call.

As we look ahead to fiscal 2026, we are approaching the year with a clear focus on improving profitability and with confidence in the levers we have already begun to put in place. We expect to begin realizing the benefit of cost reduction initiatives that we started during fiscal 2025, including efforts around indirect spend and other SG&A-related efficiencies across the enterprise. At Johnny Was the significant merchandising and marketing work we undertook this year should begin to bear fruit and we also expect to extend the merchandising efficiency project, we piloted at Johnny Was to the other brands in our portfolio.

In addition, we will continue to focus on input cost reductions and tariff mitigation as we refine our sourcing strategies. Capital expenditures will decline significantly as we complete our new fulfillment center in Lyons, Georgia, which will allow us to meaningfully reduce our debt levels. All of these actions position us well to make tangible progress on profitability while continuing to invest with discipline in the long-term strength of our brands.

As always, I want to express my deep appreciation for our people across the enterprise. Their resilience, creativity and focus on our customers continue to be the foundation of everything we do. With that, I'll turn the call over to Scott for a more detailed commentary on our updated financial outlook.

Thank you, Tom. As Tom mentioned, our teams have shown great discipline and resilience in executing our plan against the backdrop of a challenging consumer and macro environment. In the third quarter, our teams were able to deliver top and bottom line results within our previously issued guidance range.

In the third quarter of fiscal 2025 consolidated net sales were $307 million compared to sales of $308 million in the third quarter of fiscal 2024, and within our guidance range of $295 million to $310 million. Our direct-to-consumer channels were up in total with a total company comp increase of 2%, which was in line with our guidance for the quarter. The direct consumer increase was led by increased e-commerce sales of 5% and increased sales in our food and beverage and full price brick-and-mortar locations of 3% and 1%, respectively. The increases in full price brick-and-mortar were driven primarily by the addition of noncomp locations. With comps in our restaurant and full price brick-and-mortar locations down slightly at 2% and 1%, respectively.

Sales in our outlet locations were comparable to the prior year. Our increased direct-to-consumer sales were offset by decreased sales in the wholesale channel of 11%, driven primarily by decreases in off-price business.

By brand, Lilly Pulitzer delivered another strong quarter with total sales increasing year-over-year driven by double-digit growth in retail and high single-digit growth in e-commerce, partially offset by a decline in the wholesale channel. The positive comp sales at Lilly Pulitzer, along with positive comp sales and overall sales growth in our emerging brands businesses helped to offset the low single-digit negative comp at Tommy Bahama and high single-digit negative comp at Johnny Was that led to sales decreases in both businesses.

Adjusted gross margin contracted 200 basis points to 61% driven by approximately $8 million or 260 basis points of increased cost of goods sold from additional tariffs implemented in fiscal 2025, net of mitigation efforts and a change in sales mix with a higher proportion of net sales occurring during promotional and clearance events at Tommy Bahama and Lilly Pulitzer. These decreases were partially offset by lower freight cost consumers due to improved carrier rates from contract renegotiations, a change in sales mix with wholesale sales representing a lower proportion of net sales and decreased freight rates associated with shipping our products from our vendors.

Adjusted SG&A expenses increased 4% to $209 million compared to $201 million last year, with approximately 5% or approximately 70% of the increase due to increases in employment costs, occupancy costs and depreciation expenses. Due to the opening of 16 net new brick-and-mortar locations since the third quarter of fiscal 2024. This includes the 13 net new stores, including 3 Tommy Bahama Marlin Bars and 1 full-service restaurant opened in the first 9 months of 2025. We also incurred preopening expenses related to some planned new stores scheduled to open in the fourth quarter.

The result of this yielded an $18 million adjusted operating loss or a negative 5.8% operating margin compared to a 3% operating loss or a negative 1.1% in the prior year. The decrease in adjusted operating income reflects the impact of our investments in a challenging consumer and macro environment.

Moving beyond operating income. Our adjusted effective tax rate was 30.3%, was higher than we anticipated due to certain discrete items that were amplified by our operating laws. Interest expense was $1 million higher than compared to the third quarter of fiscal 2024, resulting from higher average debt levels. With all this, we ended with $0.92 of adjusted net loss per share.

As a result of interim impairment assessments performed in the third quarter of fiscal 2025, the company recognized noncash impairment [ larges ] totaling $61 million, primarily related to the Johnny Was trademark. The impairment charges for Johnny Was was reflect the impact of organizational realignment activities in the third quarter of 2025, including changes to the Johnny Was executive team that Tom discussed. Revised future projections based on Johnny Was' recent negative trends in net sales and operating results and challenges in mitigating elevated tariffs.

I'll now move on to our balance sheet, beginning with inventory. During the third quarter of fiscal 2025, inventory increased $1 million or 1% on a LIFO basis and $6 million or 3% on a FIFO basis as compared to the third quarter of 2024, with inventory increasing primarily as a result of $4 million of additional costs capitalized into inventory related to the U.S. tariff implemented in 2025.

We ended the quarter with long-term debt of $140 million compared to $81 million at the end of the second quarter and $31 million at the end of fiscal 2024. Our debt historically increases during the third quarter, primarily due to seasonal fluctuations in cash flow with lower earnings during the third quarter, resulting in increased cash needs. Cash flow from operations provided $70 million in the first 9 months of fiscal 2025 compared to $104 million in the first 9 months of fiscal 2024, driven primarily by lower net earnings and changes in working capital needs.

We also had $55 million of share repurchases, capital expenditures of $93 million, primarily related to Lyons, Georgia distribution center project, which remains on track for completion and go live in early 2026, and the addition of new brick-and-mortar locations and $32 million of dividends that led to an increase in our long-term debt balance since the beginning of the year.

I'll now spend some time on our updated outlook for 2025. Comp sales figures in the fourth quarter to date are negative in the mid-single-digit range, which is lower than our previous expectations of flat to low single-digit positive comps. While our average order value has increased nicely. Traffic has been mixed, but mostly down and conversion has been very challenging across our portfolio. Due to the slow start to the holiday season, we are revising our guidance for the remainder of the year with the expectation that the mid-single-digit comp will continue for the remainder of the year. For the full year, net sales are expected to be between $1.47 billion and $1.49 billion reflecting a decline of 2% to 3% compared to sales of $1.52 billion in fiscal 2024.

Our revised sales plan for the full year of '25 includes decreases in our Tommy Bahama and Johnny Was segments, driven primarily by negative comps, partially offset by growth in our Lilly Pulitzer and Emerging Brands segments driven by positive comps and new store locations. By distribution channel, the sales plan consists of a low single-digit decrease in most channels, including wholesale, full-price retail, e-commerce and outlets partially offset by a low to mid-single-digit increase in our food and beverage channel that is benefiting from the addition of 3 new Marlin Bar locations and 1 new full-service restaurant opened during the year.

For fiscal 2025, our current annual guidance reflects a net tariff impact of approximately $25 million to $30 million or approximately $1.25 to $1.50 per share. While tariffs represent the primary driver of margin contraction this year, we also expect continued promotional activity across our brands to weigh on margins. As consumers remain highly responsive to value and deal-oriented shopping in the current macroeconomic environment. We expect our gross margins for the year to contract by approximately 200 basis points.

In addition to lower sales and gross margins, we expect SG&A to grow in the mid-single-digit range, primarily due to the impact of our recent continued investments in our businesses, including the annualization of incremental SG&A from the 30 net new locations added during fiscal 2024, incremental SG&A related to the addition of approximately 15 net new locations this year, including 3 new Tommy Bahama Marlin bars and a new full-service restaurant. Also within operating income, we expect lower royalties and other income of approximately $3 million in fiscal 2025.

Additionally, our fiscal 2025 guidance includes the unfavorable impact of nonoperating items, including $7 million of interest expense compared to $2 million in 2024 or an approximate $0.20 to $0.25 incremental EPS impact. Increased debt levels in fiscal 2025 are due to our continued capital expenditures on the Lyons, Georgia distribution center, technology investments and return of capital to shareholders exceeding cash flow from operations. We also expect a higher adjusted effective tax rate of approximately 25% compared to 20.9% in 2024. The higher tax rate is primarily a result of a significant change in the impact that our annual stock vesting cat on income tax expense in 2025 compared to 2024. We anticipate the higher tax rate will result in an approximately $0.15 to $0.20 per share impact.

Considering all these items, including the $1.25 to $1.50 per share impact from tariffs, higher interest expense and a higher tax rate. We have revised our guidance and expect 2025 adjusted EPS to be between $2.20 and $2.40 versus adjusted EPS of $6.68 last year. The biggest drivers of the decrease in EPS guidance includes a reduction of our fourth quarter comp assumption from low single-digit positive comps to a mid-single-digit negative comp, a decrease in royalty and other income from lower order expectations from key licensing partners who customers have elevated inventory levels that will lead to a shift in orders from Q4 to Q1 of next year. An increase in SG&A, primarily resulting from increased consulting costs related to our ongoing projects to improve operating results and some additional costs related to our new Lyons, Georgia distribution center.

In the fourth quarter of 2025, we expect sales of $365 million to $385 million compared to sales of $391 million in the fourth quarter of 2024. This primarily reflects our mid-single-digit negative comp assumption and decreased wholesale sales in the low single-digit range, partially offset by the impact from noncomp stores. We also expect gross margin to contract approximately 300 basis points, primarily driven by increased tariffs and a higher proportion of net sales occurring during promotional and clearance events.

SG&A did grow in the low to mid-single-digit range primarily related to the new store locations. Increased interest expense of $1 million, decreased royalty and other income of $1 million and an effective tax rate of approximately 26%. We expect this to result in fourth quarter adjusted EPS between $0.20 compared to $1.37 last year.

I will now discuss our CapEx outlook for the remainder of the year. Consistent with our prior guidance, we expect capital expenditures for the year to be approximately $120 million compared to a total of $134 million in fiscal 2024. Remaining capital expenditures relate to completing the new distribution center and the execution of our current pipeline of new stores at Tommy Bahama and Lilly Pulitzer. We expect this elevated capital expenditure level to moderate significantly in 2026 and beyond after completion of the Lyons, Georgia project. Consistent with the seasonal nature of our business, we expect a modest decrease in outstanding borrowings in the fourth quarter.

Thank you for your time today, and we will now turn the call over for questions. John? John, we're ready for questions.

[Operator Instructions] Our first question comes from Ashley Owens with KeyBanc Capital Markets.

So just first and foremost, I appreciate all the color on what was exactly a gap within each of the banners in terms of assortment for the holiday, but just moving forward, as we navigate the quarter, how meaningful would you expect this to be for the upcoming season? Is it something that's been corrected? Or are you observing some disruption still? Just want to understand how much of holiday is now fully aligned versus where you originally planned?

And then maybe on that, I know China is complex right now and it might be ironing out a little bit. But would ask if this gap is this shifting your viewpoint or sourcing strategy moving forward? Would you try to diversify further, place orders further in advance? Just any color there.

Yes. I think the big thing and while we did give a lot of detail, one thing that we didn't really call out specifically was that it's really what's on the floor right now that most impacted some of our sourcing decisions. And the reason is at the time that we were placing the buys for what's on the floor right now, corresponded with that brief period of time where the duty or the tariff on China was going to be 145%. When it's been 20% or 27% or whatever, that's something that we could make a conscious decision to just stay in China with a particular product if we needed to and just try to take various routes to mitigate that tariff.

When we were looking at 145%, which that's off the table at this point, but that was right when we were placing the buys for what's on the floor now. Lots of stuff we were able to move out of China. Tommy and Lilly are mostly out of China, if not completely but sweaters are the one category, and there are a couple of other ones. Sweater is the big one, that there are just not a lot of -- haven't historically been great resources that we could go to outside of China. So what we decided to do as is at the time, I think it was the right call we knew we couldn't bear that much tariff. So we really cut back the sweater assortment and try to fill it in with other products.

You look at our assortment right now and you wish you had the sweaters. And that's really what we were talking about. So by the time you get to spring, that had settled down a lot. The tariff stuff is still a little bit up in the air, but it settled down a lot, and we were able to either move the stuff or know that it was going to come in at a tariff rate that we could deal with otherwise.

So for spring, I don't think we have the same kind of impact. We still have tariff issues that we have to deal with, but they're not going to impact the assortment the way that they have for this season. Does that help?

Yes. That's super helpful. Just couple other questions really quickly. So I think you mentioned earlier that competitors were more aggressive with promotions for holiday and also earlier, which created that tougher backdrop. Any insight as to what you're seeing in the marketplace now in terms of that and if the intensity has moderated? But also how that's helping to inform your promo strategy for the balance of the year?

And then additionally, just following your leadership refresh and then the external assessment on Johnny Was would be curious as to what emerged as the key priorities you're now focused on? And then also as you look out to 2026, key objectives for the brand and should we be thinking of this as another period of stabilization? Or any color you could provide us on some -- the road map or some of the key building blocks for stabilizing, Johnny?

Okay. So with respect to the promotional sort of intensity out there, I would say right now, it still feels quite high, but we're a little bit in that in between time between Black Friday, Cyber Monday, weekend and the final stretch, and those are usually the most promotional times. I don't think it's really retracted, but I'm not sure it's taken another step up yet. But wouldn't be surprised to see that happen. And we're going to try to be responsive to that in brand appropriate ways. I think the catch word and all the brands to stay nimble. We do want to make sure that we're not totally selling out our brands, but we're also thinking about things that we can do to respond to the marketplace.

The one other thing I'll point out and -- this is -- this calendar that we have this year where there are 27 days between Thanksgiving and Christmas, and Christmas falls on a Thursday, the last time we had that calendar was in 2014. And that year, the business sort of came very late if you looked at the sales build through the Thanksgiving to Christmas selling period that really came on late. Last year, if you remember, you had Christmas on Wednesday. So this year, they've got an additional weekday to shop, which could be meaningful. And also, it allows us to cut off e-com shipments probably on Saturday or in some cases, even Sunday and still have people feel good that they're going to get them by Christmas, while last year, that was mostly on Friday that we were cutting off.

So there are some things there that we kind of built the current trajectory into our forecast, but I think there's some reason to hope that it could -- the season could rally a bit. Don't think it's going to be a great one, but there are some differences that are worth noting.

And then on the Johnny Was plan. The -- I will say a couple of things that the game plan was developed by the team at Johnny Was with some outside assistance, but it's very much the team's plan. Lisa Kaiser, who is now the President of Johnny Was, was part of that team. She's relatively new to Johnny Was, but she's been with us for several months. She was the Chief Commercial Officer before and she was very, very much central to the development of that plan.

So the refreshment of the leadership does not entail I would say, any change in the direction of the plan that we've been working on. And as we talked about last quarter, the keys to that are merchandising effectiveness, which is about having better assortments that hit have the right level of investment in the right price points, the right product categories, getting that to the stores at the right time and in the right store level assortments. And all of that will drive, we believe, some incremental sales versus what we would have otherwise had and also improve the margins, improve full price sell-through and ultimately gross margin.

And then other -- 2 other big areas of focus by the team, and again, it's the team's plan, really the same team. We've just added a few more people in elevated a few people, including Lisa, who we're very excited about. But the second element is about marketing efficiency. And that's really just more effectively spending the dollars that we spend to drive better results. And some of that, we've already started to kick in. And I will say what we're seeing today is encouraging in that we're actually getting I would call it better efficiency out of the spend that we've done in the last month or so, maybe a little longer than that.

And then the last thing is about improving the go-to-market process and calendar and that's something a whole team led by Lisa's, they're very bought into that. Lisa a big believer in that kind of discipline. So I think this -- the refreshment of the leadership team and the elevation doesn't change the plan because they all developed the plan but it enhances our ability to execute as well.

Great. Appreciate all the information, and I'll pass it along, but best of luck.

Our next question comes from Janine Stichter with BTIG.

Wanted to dig into wholesale a little bit. I know it's a relatively smaller piece of the business, but just curious if you can share what's going on there. It sounds like your wholesale partners are being a bit more cautious with orders that there's maybe a little bit more inventory in the channel. And then I think you mentioned that off-price was going to be down. Is that a strategic plan? Or maybe just elaborate on what's going on there.

I think on the overall on the wholesale, I think it is a level of concern and caution by the retailers and I would say most especially the specialty retailers that are a big part of our wholesale base. And during uncertain times, they tend to pull back a bit. And I think we're seeing that now. And Scott, I don't know if you want to elaborate on off price situation bill.

Yes. Yes, we did have less inventory that needed to be liquidated through those channels. So we are trying to keep our owner inventory and hopefully, we'll continue to have less that we have to put through those channels.

Got it. And then just thinking through the tariffs, as you're just now seeing the impact of the products that you were planning, I guess, in April or May when the China tariffs were 145%, is with Q4 what we should think of as a peak headwind from tariffs? Or how much should we think about continuing into the first quarter of next year?

Well, I think in terms of it the impact it had on our product assortment, I think it is peak. I think as we get into spring, we were able to make the product that we wanted to make it somewhere that was a manageable level of tariff. In terms of the impact, the financial impact of tariffs. Remember, we didn't have them during the first quarter of last year, really, they didn't really kick in until later in the year. So first quarter, you're not going apples-to-apples and then as you get later in the year, you start to lap the tariffs. And I don't know if you want to add that.

Yes. Yes. We had accelerated a lot of products. So early in the year, knowing that tariffs were going to be coming or fearful they're going to be coming. So we were able to most of the first quarter had very, very minimal.

Now we go into first quarter of next year, everything will have some tariff on it, but we will have some price increases to at least help mitigate that impact. As we get later in the year, we'll be going apples-apples with tariffs and hopefully have a little bit more mitigation price-wise as the year moves on.

Our next question comes from Joseph Civello with Truist Securities.

Following up on wholesale a bit understand the general cautious tone from retail partners. But can you give any incremental color on your sort of competitive positioning within the channel? And maybe as we get past the tariff pressures on inventory and stuff like that, that you're facing right now?

Well, I think the third quarter, our relative performance to the extent we know, and we don't always have perfect information. But I think we performed well, and I don't think we -- for the overall, I would say, well, there were small pockets where maybe that was not the case. But I would say, overall, our performance was quite good on the retail floor.

For the fourth quarter and the holiday, I think it's too early to know for sure, we don't have enough data. But my hunch is that we're going to continue to perform well relative to the rest of the floor. And it's more about the general cost.

Got it. Makes sense. And then if we could also just get a little bit more color on thoughts around price increases as we go through the spring, which I believe is like the original trajectory you're looking at?

Yes. We do have some price increases in for the fall holiday period, but there'll be more in the spring. But again, we'll have the full tariff load coming in that inventory.

And then we're looking at next fall pricing on -- are there any adjustments -- additional adjustments we need to make. So I think there will be -- once we have the early part of next year, the pricing should the goal is to have it mitigate the tariff dollars. I don't think we'll get the percentage quite mitigated, but the dollars once we get out of the early part of the year, the goal is to have the pricing mitigate the tariff dollars.

Our next question comes from Paul Lejuez with Citigroup.

It's Tracy Kogan filling in for Paul. I had a question about what you're seeing quarter-to-date. And outside of the key sweater category, can you talk about the trends there in some of those other categories and also talk about trends by brand quarter-to-date. Is it pretty broad-based weakness you're seeing across the brands? Or is there a big deviation of one brand or the other?

Sure. Thank you, Tracy. Well, I would say that -- and we talked about this in the prepared remarks, that the big 3 brands are all relatively weak at the moment in the smaller brands are still sort of humming along. They were plus 17% in the third quarter, and they're continuing to have a strong fourth quarter, while the big brands are where we're really seeing the softness.

And then in terms of product, we also talked about that a little bit. And I think in Lilly, we're -- because of the China tariff situation, a threat of 145%. China is where we make a lot of our more embellashed kind of novelty type stuff, things would sparkles and rhinestones and [ Bose ] and that kind of stuff. And so we've just got less of that stuff instead the consumers have to being forced in to some things that I mean, Lilly is never a basic product, but that within the Lilly spectrum are a little more team. And then in Tommy Bahama, we've actually seen very good performance and things like the Boracay pant, which is basically at Chino. It's a really great one, really nice one, but it's a chino pant. And that, as we talked about third quarter and again this quarter, we introduced a new one -- or I'd say third quarter, second quarter. We introduced that earlier in the year, it's at $1.58 versus $1.38. It does have some new features and benefits, but it's sold just incredibly well.

And actually, we're selling a lot more of them than we sold the old one last year.

And then also things like lung, sweet, sleep, wovens are performing well, some of the second layer kits. And I think the kind of theme to a lot of those things is versatility things that can be worn on a lot of different use occasions. But we'll see more as the season develops, Tracy.

Our next question comes from Mauricio Serna with UBS.

Great. I guess I understand now in this fourth quarter, you're experiencing some assortment issues that's related to the sweaters and the move out of China for that -- for this particular season. But as you think about the spring 2026 season, how are you thinking about your assortment, how ready you are in terms of different -- the 3 big brands, I guess, and the potential for maybe after getting through this bit of a hiccup in Q4 maybe having stronger results in the first half of next year?

I think the challenges to the assortment were really mostly for what's on the floor right now. I think as we get into spring, by the time we were placing those buys the 145% tariff was off the table and/or we had found other places to make things. So I don't think we'll have that challenge so much in the spring.

As Scott mentioned a minute ago, the tariff issue for the spring will just be that this year we will have tariffs, whereas in spring of last year, we didn't really have them yet because that been implemented and/or we were pulled in inventory ahead of them.

Got it. And just a reminder, what kind of price increase are you planning for Spring '26 to offset the tariffs?

Yes. It's kind of varying, but it's ranging from 4 to say 8%, but some of it, the ones that are more in the 8% or more of the -- it's more a little more elevated in mix. So I think for the tariff piece of it around 4 which kind of offsets the dollar impact. Yes. Yes, not quite the margin impact, but the dollar impact.

This now concludes our question-and-answer session. I would like to turn the call back over to Tom Chubb for closing comments.

Thanks to all of you very much for your interest. We look forward to talking to you again in March. And until then, I hope you have a happy holiday season.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines, and have a wonderful day.