Oxford Industries, Inc.

Greetings. Welcome to the Oxford Industries Inc. Third 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 the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Brian Smith of Oxford Industries. You may begin.

Thank you and good afternoon. 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 meeting 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 on 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. I want to spend just a few minutes talking about the third quarter, then move to our expectations and plans for the fourth quarter, and finally give you a bit of a sneak preview on our plans for 2024. We are pleased to be reporting solid results for the third quarter of fiscal 2023. Our results reflect low single digit sales growth, inclusive of comps that were down low single digits, which come on top of a 12% positive comp in the third quarter of last year. While the consumer has clearly become more judicious in their discretionary spending, we believe our performance especially on a two-year stack basis, compares favorably to our peer group. Despite a more difficult backdrop, we delivered these results as our people have remained focused on leveraging our strong brands to deliver clear and consistent messages that inspire and resonate with customers, creating strong desire for our products and services. A great example of this during the third quarter includes the opening of the Tommy Bahama Miramonte Resort in Indian Wells, California. This dual box resort in the Coachella Valley leverages the credibility that Tommy Bahama has built over nearly 30 years in the hospitality space through our very popular restaurants and bars, as well as the overall strength of Tommy Bahama as one of America's premier lifestyle brands. The resort will have a meaningful impact on reinforcing and even strengthening the lifestyle positioning of the Tommy Bahama brand, ultimately helping us reach new customers, retain existing ones, and increase the engagement of all customers. while at the same time generating meaningful but modest royalty income over time. Another great example of leveraging the strength of our brands to drive business results in the third quarter was the launch of the gorgeous new Johnny Was website. You will recall that the new website layers the exquisite Johnny Was imagery, brand messaging, and product on the best in class Lilly Pellitzer e-commerce technology that we have implemented over the last several years. The new website, combined with a change in digital marketing agencies, has us very excited about our ability to grow our Johnny Woz web business going forward. As a result of these and many other activities by our brands, our traffic and full price selling remained healthy during the quarter. and we were actually able to expand adjusted gross margin. In addition, our active customer count and our new customer ad rate both increased mid single digits versus last year, while average annual spend has remained roughly flat. All of these metrics are extraordinarily positive indicators of the strength of our brands. Finally, Scott will provide more details in a minute, but I would be remiss if I did not call out the strength of our cash flow from operations, which was $169 million on a year-to-date basis, our balance sheet, and the fact that we were able to actually reduce inventory on a year-over-year basis during the quarter. Moving on to the fourth quarter, We are excited about our plans and our opportunities in a market that remains somewhat uneven. Our DTC business got off to a bit of a sluggish start in early November and then posted strong results during the very important Thanksgiving weekend. As you are aware, this year's calendar provides the longest possible selling period between Thanksgiving and Christmas at 32 days. Not surprisingly, business since the middle of the week following Thanksgiving has been choppy. History indicates that when we have a calendar like this year's, we can expect a dramatic ramp up in sales during the 10 to 12 days before Christmas. We expect to see that ramp up this year, and we are excited about the plans we have in each of our brands to capitalize on that opportunity. With respect to our wholesale business, we do expect to experience some headwinds during the fourth quarter. Our brands and products continue to perform very well at our key wholesale partners. However, due to the uncertain consumer environment, wholesale accounts have become more cautious in their purchasing for spring of 2024, and therefore spring bookings are down as the result of this caution. not because of performance. Given that many of our early spring orders typically shift during the last month of each fiscal year, we expect some softness in our fourth quarter wholesale business. Scott will provide more detail in a minute, but as a result of the wholesale situation and the uneven direct-to-consumer market, in the interest of caution, we are moderating our guidance for the fourth quarter. Moving beyond this year, we are extremely excited about our developing plans for 2024 and beyond. While it is too early for us to give our initial forecast for 2024, we would like to give you a sneak peek at some of our key plans. We believe that the most likely scenario for the economy is a soft landing. And in the absence of a broad macroeconomic setback, We believe that we can continue to leverage our incredible brands to inspire customers and generate the demand for our brands and services that will drive growth in our business. Year to date, we have increased our store count by net 17 stores through the first three quarters and expect another five openings during the fourth quarter. Most of the openings happen in the back half of the year And given the timing and typical post-opening ramp-up period, we will not see the full benefit of these stores until fiscal 2024. On top of this, we will also realize the full benefit from the upgrades that we have made to the Johnny Woz e-commerce business, which were completed in the third quarter of this year in 2024. In addition to annualizing the impact of many of our 2023 activities, we also plan to continue to fuel future growth with projects that we have planned for 2024. First, we plan to increase our store count by more than 25 net new stores with Tommy Bahama and Lily Pelletzer returning to more of a pre-pandemic store opening cadence. We are particularly excited about the six Marlin bars slated for the next 12 months, which includes our Winter Park, Florida location scheduled to open in January. We also anticipate meaningful openings for both Johnny Was and our emerging brands, where we have opportunities for continued retail growth. The pre-opening activities associated with these stores particularly the five Marlin bars, will put some pressure on 2024 operating margins, but having these stores in place will fuel our growth trajectory in 2025 and beyond. We are also excited about the potential to utilize our emerging brands group platform as a vehicle for growth. The platform has evolved nicely, and we have proven its ability to support smaller brands in their growth and development. The Beaufort Bonnet Company is a great example. Since we acquired TBBC in 2017, it has grown at a compound annual growth rate of 23%. Another great example is Duckhead, an iconic brand with an iconic product in over 150 years of history. This brand was all but out of business when we bought it, and since adding it to our platform, We relaunched and rebuilt the brand into a rapidly growing, profitable business with sales in excess of $10 million and meaningful potential. We are constantly on the lookout for more opportunities like these. Finally, we are enhancing our long-term distribution capabilities by building an expanded, modern, automated distribution center near our existing facility in Lyons, Georgia. The target is to complete this project during 2025. Once complete, it will increase our annual shipping capacity from 7 million units to over 20 million units with potential to grow to 30 million units with some additional equipment investment. The project will have numerous significant benefits to the enterprise and will help continue to drive future growth. The cost per unit of handling and shipping a unit in this facility will continue to be highly competitive with greater automation. Secondly, it will give us the additional capacity that we need to service the concentration of stores that we have in Florida and elsewhere in the eastern part of the country, giving us the ability to optimize inventory better by replenishing stores more quickly and more frequently. It will allow us to serve more of our web customers in the eastern part of the country better by getting products into their hands more quickly. All of these activities, in addition to the others that we will talk about in March when we provide our initial forecast for the year, promise to help fuel growth in 2024 and beyond. None of what we have accomplished during 2023 are planned for 2024 would be possible without our wonderful and dedicated team of people. And during this holiday season, we would like to express our sincere gratitude for all that they do. And now I'll turn the call over to Scott for additional comments on our results for the third quarter and forecast for the balance of the year. Scott?