Oxford Industries, Inc.

Greetings and welcome to Oxford's industry second quarter 2020 fiscal earnings conference 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 during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Ann Shoemaker, Treasurer 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 and First Quarter 10-Q. 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 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 Grassmeyer, CFO. 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. Before I start, I would like to wish you and your families my personal best for your health and safety during these difficult times. I'd also like to pause just for a moment to thank our incredible people for all they are doing to delight our customers under such difficult circumstances. Our strategy at Oxford is a simple one, to own brands that make people happy, to delight our customers with memorable experiences and products they love. During 2020, we have faced a myriad of new challenges. Nonetheless, every day we are finding ways to successfully execute this strategy. In order to do this in the current environment, we've leaned heavily into our advanced digital capabilities. The investments we've made in our e-commerce channel over the past several years allowed us to capitalize on the accelerated shift to online spending. Each of our brands, Tommy Bahama, Lilly Pulitzer, and Southern Tide, positively contributed to the 52% year-over-year increase in e-commerce sales in the second quarter. Lilly Pulitzer was the standout, up an extraordinary 142%. The Lilly product collection this summer was very strong and in many ways offered exactly what the customer was looking for, fun, happy, easy to wear apparel. The collection was highlighted by very effective digital marketing to which we shifted more resources in the quarter. A non-comp flash sale in June also added to the success of Lilly's second quarter results. Historically, the Lilly website offers sale items only five days a year. To ensure excellent inventory control, an additional two-day flash sale was held in the second quarter, which generated $15 million of sales at a solid 40 percent margin. Even absent from the last sale, Lilly Pellitzer's e-commerce business grew 74% over last year. We continue to invest in our digital platforms and evolve our digital capabilities, including upgrades and redesigns of websites, enhanced search engine optimization, and enterprise order management systems. We believe the accelerated shift to online shopping brought on by the coronavirus health crisis is likely to continue. While bricks and mortar will continue to be a key part of our distribution strategy, we believe our e-commerce channel will be stronger, bigger, and a more critical component to our overall strategy coming out of this crisis. In contrast to our e-commerce business, Consumer traffic at bricks and mortar locations was understandably very challenged in the quarter, driving meaningful revenue decreases in our stores and restaurants. In addition to operating under restricted hours and limited capacity, important markets which rely heavily on fly-in tourists, such as Hawaii, Las Vegas, and New York City, were pressured even further. Despite the temporary headwinds we are currently experiencing, we believe our modest physical footprint holds true competitive advantages for us. Across all of our brands, we have only 187 full-price stores and restaurants, with most located in premium off-mall locations such as lifestyle centers, iconic resorts and resort towns, and prestigious street fronts. Our beautiful stores and restaurants engage our customers and immerse them in our brands and function as an important guest acquisition tool for us. While we look forward to the time when store traffic improves, we are taking advantage of this opportunity to judiciously prune underperforming and non-brand enhancing locations. By the end of 2020, we will have closed approximately ten locations, including five which closed in the first half. At the same time, we are also making some exciting additions to the lineup this year. We have already opened a Marlin Bar at Dania Point near Fort Lauderdale and converted two existing Tamima, Bahama locations on Los Olos Boulevard in Fort Lauderdale and St. John's Town Center in Jacksonville into Marlin Bars. In the back half of the year, we plan to open Marlin Bars at Fashion Valley in San Diego and Lahaina on Maui. During the pandemic, our Marlin Bars, with their casual bar and dining concept and outdoor seating, have been a bright spot. Every day we are serving existing customers and attracting new customers to the brand. We strongly believe in the Marlin Bar strategy, and are optimistic about the role the concept will play in our future growth strategies. Southern Tide, which has just begun its foray into owned retail, now has two stores, both in Florida, with another opening in the Destin area this fall. While it is difficult to fully assess performance under current conditions, the results that we have seen so far are encouraging. Lilly Pelletier has done an outstanding job leveraging their bricks and mortar locations by adding a concierge level of service for their customers with private appointments and curbside pickup. Their talented store associates are also assisting with customer service calls, further blurring the line between our online and store channels. Our wholesale channel, which we had been strategically pruning prior to the pandemic and represented approximately 30% of our revenue in 2019, has been significantly impacted by current conditions in the consumer marketplace and the weakness of many retailers going into the COVID crisis. Our wholesale sales in the second quarter were less than half of what they were a year ago. As part of our plan to focus on only the strongest partners in this channel of distribution, we meaningfully reduced our exposure to department stores, which made up only 11 percent of our total revenue last year. We are expecting sales reductions in this channel to continue through the back half of the year and are addressing this trend by very carefully managing our inventory levels. Across all channels, our sourcing, planning, and merchandising teams have done an extraordinary job, and our inventory levels are in very good shape, as is the rest of our balance sheet. Cash flow was quite strong in the second quarter as we made significant expense reductions related to employment across the enterprise and reductions in occupancy costs. We ended the quarter with a strong liquidity position with over $30 million in net cash and over $250 million of availability under our credit facility. In March, I outlined our priorities for this year as, one, the safety of our people and our customers, two, protecting the integrity of our brands, and three, preserving liquidity. These have been the right things to focus on during this crisis, but it is also important to remember that while dealing with the issues at hand, we haven't lost sight of our future. And what a future we have at Oxford. With the strength of our brands, the resilience of our people, an enviable balance sheet, and the competitive advantage as mentioned earlier, We look forward to returning the company to growth and resuming our long-term track record of generating increased value for our shareholders in 2021 and beyond. I'll now turn the call over to Scott with more details on the second quarter and our plans for the back half of 2020. Scott? Thank you, Tom.