Oxford Industries(US:OXM)2023-09-01 17:40PART I. FINANCIAL INFORMATION Item 1. Financial Statements Oxford Industries' unaudited condensed consolidated financial statements for Q2 and H1 Fiscal 2023 are presented, with comparative data and key notes Condensed Consolidated Balance Sheets The balance sheet shows total assets of $1.15 billion, a decrease from $1.19 billion at year-end Fiscal 2022, but an increase from $957 million in the prior year's quarter Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | July 29, 2023 | January 28, 2023 | July 30, 2022 | | :--- | :--- | :--- | :--- | | Total Current Assets | $282,380 | $330,463 | $421,248 | | Inventories, net | $161,866 | $220,138 | $135,483 | | Total Assets | $1,149,858 | $1,188,665 | $957,202 | | Total Current Liabilities | $232,561 | $269,639 | $222,640 | | Long-term debt | $48,472 | $119,011 | $0 | | Total Liabilities | $525,229 | $632,395 | $423,186 | | Total Shareholders' Equity | $624,629 | $556,270 | $534,016 | Condensed Consolidated Statements of Operations Net sales increased to $420.3 million in Q2 Fiscal 2023, but operating income and net earnings decreased, with diluted EPS falling to $3.22 Q2 Fiscal 2023 vs Q2 Fiscal 2022 (in thousands, except per share) | Metric | Q2 Fiscal 2023 | Q2 Fiscal 2022 | | :--- | :--- | :--- | | Net sales | $420,319 | $363,430 | | Gross profit | $268,729 | $232,149 | | Operating income | $67,674 | $75,371 | | Net earnings | $51,453 | $56,612 | | Diluted EPS | $3.22 | $3.49 | First Half Fiscal 2023 vs First Half Fiscal 2022 (in thousands, except per share) | Metric | First Half Fiscal 2023 | First Half Fiscal 2022 | | :--- | :--- | :--- | | Net sales | $840,416 | $716,011 | | Gross profit | $543,858 | $458,526 | | Operating income | $147,975 | $151,349 | | Net earnings | $109,991 | $114,020 | | Diluted EPS | $6.86 | $6.94 | Condensed Consolidated Statements of Cash Flows Cash provided by operating activities significantly increased to $152.5 million in H1 Fiscal 2023, while investing and financing activities used cash Cash Flow Summary - First Half (in thousands) | Activity | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | | Cash provided by operating activities | $152,500 | $90,629 | | Cash used in investing activities | $(32,638) | $(9,796) | | Cash used in financing activities | $(120,881) | $(94,803) | | Net change in cash | $(1,019) | $(13,970) | Notes to Condensed Consolidated Financial Statements Notes detail operating segments, revenue recognition, leases, income taxes, share repurchases, the Johnny Was acquisition, and a subsequent event regarding wildfires - The company's business is organized into four operating groups: Tommy Bahama, Lilly Pulitzer, Johnny Was (acquired September 19, 2022), and Emerging Brands20 Net Sales by Operating Group - Q2 (in thousands) | Operating Group | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | | Tommy Bahama | $245,443 | $243,965 | | Lilly Pulitzer | $91,349 | $88,665 | | Johnny Was | $52,023 | — | | Emerging Brands | $31,580 | $29,913 | | Consolidated Net Sales | $420,319 | $363,430 | - In August 2023, the Tommy Bahama Marlin Bar in Lahaina, Maui was destroyed by wildfires, with expected substantial insurance recovery56 - During Q2 2023, the company repurchased 186,000 shares of common stock for $19 million under an open market program36 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 Fiscal 2023 performance, highlighting sales growth driven by acquisition but declining operating income due to increased expenses and brand-specific challenges Overview Oxford Industries operates a portfolio of lifestyle brands, with 80% of Fiscal 2022 sales from direct-to-consumer channels, facing a challenging macroeconomic environment - The company's business strategy is to drive excellence across a portfolio of lifestyle brands, including Tommy Bahama, Lilly Pulitzer, Johnny Was, Southern Tide, TBBC, and Duck Head6061 - Direct-to-consumer channels (retail stores, e-commerce, outlets, food & beverage) accounted for 80% of consolidated net sales in Fiscal 202263 - Management notes that the current macroenvironment, including inflation, rising interest rates, and geopolitical issues, is creating a complex and challenging retail environment that may impact the business70 Results of Operations Q2 Fiscal 2023 net sales rose 15.7% to $420.3 million, primarily due to the Johnny Was acquisition, but operating income fell 10.2% due to higher SG&A expenses Q2 Fiscal 2023 vs Q2 Fiscal 2022 Consolidated Results | Metric | Q2 Fiscal 2023 | Q2 Fiscal 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $420,319 | $363,430 | 15.7% | | Gross Profit | $268,729 | $232,149 | 15.8% | | SG&A | $205,231 | $163,135 | 25.8% | | Operating Income | $67,674 | $75,371 | (10.2)% | | Net Earnings | $51,453 | $56,612 | (9.1)% | First Half Fiscal 2023 vs First Half Fiscal 2022 Consolidated Results | Metric | First Half 2023 | First Half 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $840,416 | $716,011 | 17.4% | | Gross Profit | $543,858 | $458,526 | 18.6% | | SG&A | $408,380 | $320,547 | 27.4% | | Operating Income | $147,975 | $151,349 | (2.2)% | | Net Earnings | $109,991 | $114,020 | (3.5)% | Financial Condition, Liquidity and Capital Resources The company maintains a strong financial position with $153 million cash from operations in H1 Fiscal 2023, reduced debt, and planned $90 million in capital expenditures - Cash and short-term investments decreased from $186 million on July 30, 2022, to $8 million on July 29, 2023, primarily due to using cash to fund a portion of the Johnny Was acquisition160 - As of July 29, 2023, the company had $48 million of borrowings outstanding and $266 million in unused availability under its Revolving Credit Agreement51182 - Cash provided by operating activities increased to $153 million in the first half of Fiscal 2023, compared to $91 million in the same period of 2022171 - Anticipated capital expenditures for Fiscal 2023 are approximately $90 million, a significant increase from $47 million in Fiscal 2022, to fund new stores, relocations, and technology initiatives192 Critical Accounting Policies and Estimates No significant changes occurred in the company's critical accounting policies and estimates during the first half of Fiscal 2023, consistent with Fiscal 2022 disclosures - There have not been any significant changes to the company's critical accounting policies and estimates during the First Half of Fiscal 2023196 Seasonal Aspects of Our Business The company's business is seasonal, with higher demand in spring, summer, and holiday seasons, making the third quarter historically the weakest in sales and earnings - The business is seasonal, with higher demand in the spring, summer, and holiday seasons. The third quarter is historically the weakest in terms of net sales and earnings199200 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposure occurred in H1 Fiscal 2023, except for decreased interest rate exposure due to reduced borrowings - There have been no material changes in exposure to market risks during the First Half of Fiscal 2023, other than decreased interest rate exposure resulting from reduced borrowings201 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of quarter-end, with no material changes to internal control over financial reporting - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of the end of the period202 - No material changes to internal control over financial reporting were identified during the second quarter of Fiscal 2023203 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal or regulatory proceedings expected to materially impact its financial position or results - The company is not currently a party to any litigation or regulatory action that is expected to have a material impact on its financial condition or results of operations204 Item 1A. Risk Factors Investors are directed to the Fiscal 2022 Form 10-K for a comprehensive discussion of risk factors that could materially affect the company's business - Investors are directed to the Risk Factors section of the Fiscal 2022 Form 10-K for a comprehensive discussion of risks facing the company205 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 Fiscal 2023, the company repurchased 278,981 shares of common stock at an average price of $103.55, with $31.1 million remaining for future repurchases Share Repurchases in Q2 Fiscal 2023 | Fiscal Month | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May (4/30/23 - 5/27/23) | 47,034 | $105.12 | | June (5/28/23 - 7/1/23) | 84,228 | $99.36 | | July (7/2/23 - 7/29/23) | 147,719 | $105.44 | | Total | 278,981 | $103.55 | - The Board of Directors authorized a $150 million share repurchase program on December 7, 2021. As of July 29, 2023, approximately $31 million remained available under this authorization211212 Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the second quarter of Fiscal 2023 - No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 Fiscal 2023215 Item 6. Exhibits This section lists filed exhibits, including Section 302 and 906 certifications by the CEO and CFO, and XBRL data files - Exhibits filed include Section 302 and 906 certifications by the CEO and CFO, along with XBRL interactive data files217