Oxford Industries, Inc.

Greetings and welcome to Oxford Industries Inc. second quarter fiscal 2023 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 a conference, 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, Director of Financial Reports and Investor Relations. 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 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 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 Grassmeyer, 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. Before I jump into reporting on results for the second quarter and our outlook for the balance of the year, I want to start by acknowledging the state of Hawaii in the island of Maui in particular, which have been a very important and special part of our business for many years. We have over 200 members who live on Maui and over 450 in the state of Hawaii. These are wonderful people who we value greatly and our hearts are with all of them as they work to recover from the devastation of the recent wildfires. I am also proud of and grateful for the generosity of our associates across the enterprise who have pitched in in so many ways to help the people of Maui recover from this disaster. This generosity and the resilience of our people in Maui and Hawaii are among the characteristics that make Oxford such a great company. Moving to our results, we're pleased to be reporting sales and adjusted earnings per share within our forecasted range, given the top E operating environment. During the quarter, we achieved 16% total year-over-year revenue growth, driven by our acquisition of Johnny Wust in the third quarter of last year, and a 1% increase on an organic basis which is on top of 11% organic growth in the year-ago period. In addition to the tough comparison, the more modest organic growth rate this year reflects, as widely reported across the marketplace, a customer that has become somewhat more cautious with regard to discretionary purchases. As you know, Our purpose as a company is to evoke happiness in our customers with our brands. Our customer metrics indicate that we are doing exactly that. Excitement for and interest in our brands remains very high. Our active customer count and new customer ad rate are both growing, and our average order value has held steady. and we have seen higher traffic across our portfolio of brands this year. At the same time, conversion rates are lower on a year-over-year basis. In addition, consumers are making more of their purchases during our promotional events. Both of these factors reinforce the notion that the consumer has become more cautious in their discretionary spending than they were a year ago. with the increased purchasing activity during promotional periods also putting some modest gross pressure on gross margins. As we move down the income statement, we saw some operating deleverage during the quarter as a result of our increased investment in a couple of key expense categories. The first is employment expense. Our team is our most valuable asset and is the key to all our success. To be certain that we can continue to be successful going forward, we need to ensure that we have a sufficient number of staff and that they are fairly compensated. Last year, the growth in our business had outrun the size of our staff, and we had a bit of catching up to do to be fully staffed. In addition, we are continuing to invest in our team in an inflationary environment by increasing wage rates and salaries to ensure that we stay competitive and can continue to attract and retain the best people. The second major area of increased expense is in advertising and promotion. As the post-pandemic rebound moves further into the rearview mirror, and the market and consumer continue to normalize, we want to make sure we are doing what we need to in order to maintain high levels of excitement about and awareness of our brands. Accordingly, we have increased our advertising spend levels this year, both in absolute dollars and as a percentage of sales, especially in awareness advertising and experimenting with new media channels. Finally, we are feeling the impact of depreciation, software subscription, and other expenses related to technology and other investments we have made to ensure that we have a modern omnichannel selling platform. While these expenses are causing some short-term operating deleverage in a weaker demand environment, We believe that all three of these areas represent prudent investments in our future. In keeping with our purpose and objective to evoke happiness in our customers and deliver long-term value to our shareholders, we have a number of strategic initiatives underway which are all designed to drive excellence across our portfolio of lifestyle brands to help spur sustained profitable growth. The biggest of these initiatives is a multi-year Southeastern United States Fulfillment Center enhancement project to ensure best-in-class direct-to-consumer throughput capabilities for our brands. When complete, the Fulfillment Center will help support our very large, highly profitable e-commerce business across all our brands and will help support our retail business in the eastern half of the country, particularly Florida, which is our largest revenue state by a wide margin. Another very exciting initiative is the upcoming relaunch of the Johnny Was website. The new Johnny Was website will have the same beautiful, aspirational look and feel of the current site, but will utilize the excellent, best-in-class technology platform that powers our Lilly Pulitzer website. The result will be a website that is 100% Johnny Woz and is much more searchable, more shoppable, easier to check out, and overall provides a better customer experience. When launched later this year, we expect a new site to drive incremental growth in our Johnny Woz e-commerce business. In addition to the website and the fulfillment center projects, we are driving excellence across the portfolio by leveraging our talented people across the brands. Specifically, we have been shifting functional expertise across brands to enhance areas that will further support operational excellence across the enterprise. Aligning talent with opportunities to have the maximum impact on the business benefits both the company and the employee. Our healthy business continues to generate strong cash flow, and we remain focused on using that cash wisely by investing in organic growth and acquisition opportunities and the return of capital to our shareholders. all while maintaining a very healthy balance sheet. This quarter provides an excellent example of that focus in action. During the quarter, we opened five net new locations, bringing our total for the year to eight net new locations. By the end of the year, we expect to have opened 25 net new locations, bringing our total count close to 320 stores and retail bar restaurant locations. In addition, the beautiful Tommy Bahama Miramonte Resort in Indian Wells, California, is on track to open in the third quarter. Included in the openings during the quarter was a beautiful new Marlin Bar and Tommy Bahama store in Palm Beach Gardens. The Marlin Bar is off to a terrific start and as always, has dramatically enhanced our retail business in that location, particularly our women's business. This Marlin Bar is unique among the eight that we have opened so far in that it is in an indoor-outdoor location situated at the entrance to an enclosed mall. Our hospitality business is a linchpin of our Tommy Bahama strategies. And with two more Marlin Bars scheduled to open this year and three planned for fiscal 24, we are extremely excited about the growth that it will help us fuel for many years to come. Our cash generation during the quarter also benefited from our acquisition of Johnny Was last year, with Johnny Was contributing $7.3 million of adjusted operating profit, or approximately $0.34 a share to our quarterly results. We are delighted to have Johnny Wise as part of the portfolio and believe it has lots of runway to grow top line and expand operating margin going forward. This strong cash flow allowed us to pay down $46 million of debt, leaving $48 million outstanding while repurchasing $19 million of stock or approximately 196,000 shares representing 1% of our outstanding stock, paying $10 million in dividends and investing $15 million in capital expenditures during the quarter. Our inventories are very healthy and we're in outstanding position to continue to deliver robust cash flow for the balance of the year and for many years to come. Scott will provide more details on the quarter and the balance of the year in a moment, but as we look forward, given the impact of the Maui wildfires and the slightly more hesitant consumer purchasing behavior to start the third quarter, we believe building in a bit of caution to our guidance for the balance of the year is prudent. At the same time, we know that our efforts to evoke happiness, drive excellence across the portfolio, and invest in our business will drive profitable growth and long-term shareholder value for many years to come, as evidenced by our expected 10-year adjusted EPS CAGR of 14% based on our updated guidance range. Now I will turn the call over to Scott for more details on the quarter and the balance of the year. Scott?