Oxford Industries, Inc.

Greetings and welcome to the Oxford industry's second quarter fiscal 2024 earnings conference call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. A brief question and answer session will follow the formal presentation. As a reminder, this call is being recorded. I would now like to turn the call over to Brian Smith. Thank you, Brian. 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 our actual results of operations or our financial condition to differ are discussed in our press release issued earlier today. and the 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 will 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 of our website at oxfordinc.com. And I'd like to introduce today's call participants. With me today are Tom Chubb, Chairman and CEO, and Scott Grassmeyer, CFO and CLO. Thank you for your attention, and I'd like to turn the call over to Tom Chubb.

Good afternoon, and thank you for joining us. I'm going to start with an update on the execution of our plan for the second quarter of fiscal 2024 and our current expectations for the balance of the year. During the second quarter, we continue to make excellent progress on long-term strategic goals, but fell short of delivering on our near-term financial targets. Sales of $420 million and adjusted EPS of $2.70 for the quarter were below our guidance range, primarily due to a continued pullback from the consumer. The pullback worsened sequentially during the quarter, coinciding with consumer sentiment hitting an eight-month low in July, with the trend continuing into August and the start of our third quarter. While most underlying economic indicators remain reasonably strong, the cumulative effect of several years of inflation may be catching up with the consumer. Simultaneously, the second quarter was also marked by several national and global noteworthy events, that led to a more distracted consumer at several points over the summer. Certain factors that we may believe may have amplified these headwinds with respect to our particular business include, first, our focus on affluent 45 and up customers who tend to be more headline and market sensitive. Second, our significant exposure to Florida which accounts for over a third of our bricks and mortar business and grew at an exceptional pace coming out of the pandemic, but has slowed down as the new post-pandemic world settles in. And finally, some commercial and merchandising missteps on our part, including assortment misses and timing of promotional events. The slowdown we experienced in our business has been driven by reduced conversion, while traffic has remained strong, which indicates that consumers are very interested in our leading brands but have become cautious when making purchase decisions. Looking across the marketplace, the two areas where the consumer continues to respond positively are newness and value. During the quarter, we saw a strong full-price response to fashion and new and differentiated products. while interest in core styles was more muted. The consumer also responded to value in the quarter with a higher proportion of sales during the quarter occurring during promotional events and at our outlet stores than in last year's second quarter. The greater proportion of off-price selling put pressure on gross margin versus our expectation, which along with lower than anticipated sales, resulted in operating margin, operating profit, and ultimately EPS that were below our plan. Importantly, our balance sheet remained strong. Inventories were down on a year-over-year basis to end the quarter, while strong cash flows allowed us to continue investing in the future of our business, including investing in our store pipeline and Lions Georgia Distribution Center project, which Scott will detail shortly, pay off our debt, and return cash directly to shareholders through our quarterly dividend. For the balance of the year, we expect to continue to see a more cautious consumer, and accordingly, we have reduced our forecast for the year. Our playback for achieving forecasted results will be, as always, to protect the strength and integrity of our brands for the long term by avoiding brand-damaging, short-sighted reactions to current market conditions. At the same time, we will create excitement and enthusiasm for our brands via some specific initiatives in the second half. These include new collections, such as our Tommy Bahama Indigo Palms collection of denim and denim-friendly products which launched early in the third quarter. Initial reception to the collection's launch has been strong. The Indigo Palms collection encompasses a range of styles for both men and women, and the early success is fueling our optimism for how it can help us continue to build and grow our business going forward in both our direct channels as well as wholesale. By offering our guests a completely on-brand assortment of Tommy Bahama product that is appropriate for cooler weather, it enhances our ability to be relevant in the cooler months, particularly in the western part of the country, the Midwest, the Mid-Atlantic, and the Northeast. Also in the denim universe, Johnny Woz is collaborating with Sasan Denim, playing to nostalgia for the original premium denim brand and featuring a beautiful marketing campaign with Lily Aldridge as the face of the brand. A campaign like this is new territory for us, and we are excited to see what we learn from it. From a value perspective, we will again protect the integrity of our brands, but within that constraint, offer plenty of opportunities for our customers to get lots of value for their money in brand friendly ways. Some examples of this include the seasonal Lily Pelletzer flash sale, which is happening right now, and our holiday marketing plans, which feature special value products, gift with purchase, gift cards, bounce back deals, and many others. In addition to our focus on top line initiatives, Our second half will include focus on our operating margin with a keen interest in opportunities for SG&A reductions. As an example, we invested in the relocation of Johnny Woz Distribution Center operations from high-cost distribution centers in Los Angeles to Lyons, Georgia that will result in significant operating cost reductions that Scott will discuss more in a minute. We will also continue to look across all areas of business for opportunities to reduce SG&A spend without impairing our future growth prospects. While we are disappointed in our recent performance and revised outlook for this year, our teams have successfully navigated challenging economic cycles before, and I am confident that we have the right people and strategies in place to emerge on the other side of this difficult market with the health of our brands and our consumer connections stronger than ever. Thanks for your attention, and I will now turn the call over to Scott for additional detail. Scott?

Thank you, Tom. As Tom mentioned, there were several macroeconomic headwinds across the marketplace that negatively affected our financial results during the quarter, most notably lower consumer sentiment and an increase in the promotional environment. Despite these headwinds, our teams are focused on executing against our strategies of delivering newness and compelling products that resonate with consumers to combat these challenges and encourage full-price selling. In the second quarter of fiscal 2024, consolidated net sales of $420 million were comparable to the second quarter of fiscal 2023 and below our initial guidance range of $430 to $450 million. Notably, sales in our outlets increased 4%, as this channel benefited from consumers looking for deals and promotions, while sales in full price brick and mortar locations were up 1%, driven by new stores and increased promotional activity, partially offset by low single-digit negative comps. Our wholesale channel, which was particularly challenging in the first quarter of this year, had a difficult second quarter with sales down 5% compared to the second quarter of 2023. As the specialty store business across our brands continues to struggle, partially offset by increased sales to major department stores. E-commerce and food and beverage sales were relatively flat compared to the second quarter of 2023. Adjusted gross margin contracted 100 basis points to 63.3%, driven primarily by a higher proportion of net sales occurring during promotional events in Tommy Bahama, Lilly Pulitzer, and Johnny Wise. Across our three brands, we saw a strong response from consumers to our promotions promotional and indices and clearance events. We were able to partially offset this decrease in our emerging brands group through our continued efforts to improve our inventory position and reduce the need for off-price wholesale and promotional direct-to-consumer sales. Adjusted SG&A expenses increased 5.7% to $213 million compared to $202 million last year. During the second quarter of fiscal 2024, we incurred higher expenses related to recent and ongoing investments in our business, primarily from the addition of 30 new brick-and-mortar locations opened since the second quarter of last year and the addition of Jack Rogers brand acquired in the fourth quarter of 2023. We also have incurred costs on some of the approximately 15 net new brick-and-mortar locations, including four Marlin Bar locations that we expect to open in the second half of the fiscal year. Additionally, we incurred approximately $1 million of expenses, which were omitted from adjusted SG&A, associated with the relocation of Johnny Woz's distribution center operations from Los Angeles to Georgia. We expect to occur an additional million dollars of charges related to the relocation the second half of the year, but are projecting this move to save Johnny Woz approximately $4 million in operating costs per year with the potential for additional savings. The results of this yielded 57 million of adjusted operating income or 13.5% operating margin. compared to 73 million or 17.3% in the prior year. The decrease in adjusted operating income reflects the SG&A investments amidst a challenging consumer environment for sales and gross margin. Moving beyond operating income, our effective tax rate was flat. All interest expense was a million dollars lower compared to the second quarter of 2023, resulting from lower average debt levels. With all this, we achieved $2.77 of adjusted EPS. I'll now move on to our balance sheet, beginning with inventory. During the second quarter of fiscal 2024, we were able to decrease inventory by 6% or $13 million year over year on a FIFO basis. The decrease in inventories resulted from our continued inventory discipline across our portfolio. We were also able to repay our remaining outstanding debt and ended the quarter in an $18 million cash position. From a liquidity standpoint, our $122 million of cash flows from operations in the first half of fiscal 2024 allowed us to fund our elevated level of capital expenditures of $54 million and pay $22 million of dividends, all while being able to repay the $29 million of borrowings that was outstanding at the end of fiscal 2023. I'll now spend some time on our outlook for 2024. We finished the second quarter fiscal 24 with negative comps of 1%, which was lower than our previous forecast of mid-single digit positive comps for the quarter. Similar to the results we saw in the second quarter, comp sales figures in the third quarter to date are negative. We believe the negative comp trend will continue and result in negative comps in the low to mid-single digit range for the remainder of the year. on top of similar comps in the prior year. These assumptions compare to our previous expectations from June that assumed mid-single-digit positive comps for the remainder of the year, and we revised our sales forecast accordingly. For the full year, we now expect net sales to be between 1.51 billion and 1.54 billion, or a decline of two to four percent compared to sales of 1.57 billion in 2023. Our updated sales plan for 2024 now includes low to mid-single-digit sales declines in Tommy Bahama and Lilly Pulitzer, partially offset by sales growth in the low single-digit range for Johnny Wise and Emerging Brands Group. By channel, wholesale comprises the majority of the sales decrease, with a partial offset from a slight increase in our direct-to-consumer channels. We expect wholesale sales, which were down approximately $20 million in the first half of the year, to be relatively flat in the second half of the year compared to fiscal 2023 as we go against easier counts relative to what we saw in the first half. In our direct-to-consumer channels, we expect growth in our outlets as those locations continue to perform well in the current environment and in our full-price retail food and beverage locations that will benefit from the addition of the approximately 30 new locations during the year. We expect sales in our e-commerce channel will be flat to slightly negative for the year. Looking across the marketplace, there are many macroeconomic risks and uncertainties that could affect our outlook, including consumer headwinds and industry trends that we have already discussed. There are also the upcoming elections in November and the related consequences that could have the potential to disrupt demand. Other challenges, including the shipping disruptions to global trade, caused in part by the attacks in the Red Sea, also have the potential to disrupt the supply of goods across the economy and increase freight costs. We now anticipate gross margin for the year will decline by approximately 50 to 100 basis points compared to the prior year. As expected, increased activity during promotional events across our brands will more than offset the gross margin benefit from proportionally lower wholesale sales. We also anticipate a slightly negative impact in the second half from an increase in freight rates. Our guidance contains our best estimate of the impact that increased freight will have on our earnings. In addition to slightly lower sales and negative gross margin, we expect SG&A to grow at a rate higher than sales in 2024, primarily due to the investments in our business, including expanding our store count by a net of approximately 30 locations with five new Tommy Bahama Marlin bars, continued IT investments, and the addition of Jack Rogers. Additionally, as discussed during our last call, we expect the Jack Rogers brand acquired in the fourth quarter of fiscal 2023 to generate an operating loss of approximately $2.5 million in 2024 as we reset and refocus the business. We also anticipate lower interest expense of two million for the year compared to six million in 2023, and higher royalty and other income, primarily from a full year of the Italian Bahama Miramonte Resort. Additionally, we expect a higher adjusted effective tax rate of approximately 24% compared to 23% in 2023, which benefited from certain favorable items that are not expected to reoccur in 2024. Considering all these items, we expect operating margin to decrease from 2023 levels and now expect 2024 adjusted EPS to be between $7 and $7.30 versus adjusted EPS of $10.15 last year with decreases in all of our businesses and a higher tax rate being partially offset by the lower interest expense and higher adjusted royalties and other income. In the third quarter of 2024, We expect sales of $310 million to $325 million compared to sales of $327 million in the second quarter of 2023. We also expect gross margin to contract by approximately 50 to 100 basis points with the trend of increased sales during promotional events expected to continue. SG&AD leveraging $1 million of lower interest expense and a flat royalty in other income. We expect this to result in third quarter adjusted EPS between zero and 20 cents, compared to a dollar and one cent in the third quarter of 2023. Given our fixed cost structure and the seasonality of our business, third quarter's typically the smallest of the year from a sales and EPS perspective, and will be further impacted in 2024 by heavy pre-opening costs for new stores and Marlin bars. Expanding on the investments we're making in 2024, I'd like to briefly discuss our updated CapEx outlook for the remainder of the year. Due to refined cash flow timing projections for our Alliance Georgia Distribution Center project and adjustments to other capital projects, capital expenditures in fiscal 2024 have been moderated and are now expected to be approximately $150 million, including $54 million incurred during the first half of the year, compared to $74 million in fiscal 2023. with approximately $75 million related to this significant multi-year project to build a new distribution center in Lyons, Georgia that will enhance the direct-to-consumer throughput capabilities of our brands. The remaining capital expenditures relate to the execution of our pipeline of Marlin Bars, increases in store count across Tommy Bahama, Lilliput, Sir Johnny Was, Southern Tide, and the Beaufort Bonnet Company, and increased investment in our various direct-to-consumer technology systems initiatives. We expect this elevated capitalist venture level to moderate in 2025 and further moderate in 2026 and beyond after the completion of the Lions Georgia project. We also have a positive outlook on our cash and liquidity position as well. Cash flow from operations are expected to be very strong, giving us ample room to fund the previously mentioned investments. Our quarterly dividend and limit the need to borrow under a revolver, although we do expect a modest debt position for much of the second half due to the elevated capital expenditures. Thank you for your time today. We'll now turn the call over for questions. Paul?

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. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. In the interest of time, we ask that participants limit themselves to one question and one follow-up. One moment, please, while we poll for questions. Thank you. Our first question is from Ashley Owens with KeyBank Capital Markets. Please proceed with your question.

Hi, thanks for taking my question today. This is Chantana Madhaka on for Ashley. So I just wanted to dig into maybe a little bit more about how you're thinking about promotional events going into the back half, maybe any color you could provide there by brand, just, you know, now that the thinking around promotions is a little bit differently. Also wanted to see if you could dig in further for us on what you're hearing from wholesale partners, maybe an update on the order books. Thank you.

Okay, so on the promotions, I wouldn't say that we're really thinking about it differently. I think what we're thinking is just we recognize that they're going to be very important this year, especially as they always are during the holiday period. So we're going to start a bit earlier. As you know, the shopping season is about five days, not about, it's exactly five days shorter this year than it was last year. So it's going to be important that we jump on it at the beginning of the November. We're going to have an assortment of mailers. We're doing a mailer in Tommy Bahama that we haven't done in a couple of years. So that would be a little bit of a change. We've got a great gift with purchase offering that we're going to do over the cyber weekend, starting with Black Friday and going through the weekend, actually starting on Thursday, I believe. We've got our normal gift cards. We've got bounce back sales. We'll have the Lily Pulitzer flash sale in January. So it's really the same thing. Types of things, I think it's just that our focus on those maybe will be a little bit more intent than it has been in the past. In terms of the wholesale performance, as Scott mentioned in his prepared remarks, the year overall has been tougher in the wholesale. We do expect the second half to be about flat with last year, which is the first half was down, I think, about 5%. or so, but our performance with our majors, which is where we have the most visibility to how we're doing, has actually been quite good. And I think as we're starting to see spring bookings, we're actually encouraged with what we're seeing there.

Awesome. Thanks. Nice to hear.

Thank you.

Thank you. Our next question is from Dana Telsey with Telsey Advisor Group. Please proceed with your question.

Hi, good afternoon, everyone. As you think about the state of the consumer and what you saw in outlets versus the other channels of distribution, with the brands, with Tommy, with Lilly, what are you seeing that's different? How did the cadence of the quarter go? And are there categories that perform better or worse than others? And with the promotional environment, How deep are the markdowns and how are you thinking about promotions for Q3 and Q4? Thank you.

Okay, thank you Dana. So the cadence of the quarter as we mentioned was that it got worse sequentially through the quarter. May was actually an okay month. June softened a bit, but not terribly. And then July got a lot worse, especially in the back half of July. And then, as we mentioned, August was weak as well. In terms of what the consumer's looking for, as you know, I think, very well, it is a value-driven market right now. We are intent on maintaining our strategy of being a portfolio of full-priced premium brands and we're not really veering away from that but we are going to be paying a lot of attention and be very focused on sort of the types of promotional activities that you've seen from us in the past Dana and then as we mentioned in our prepared remarks you know we during the second quarter did a greater proportion of our sales during those events. We may have had a little bit more in terms of the number of promotional days, but the biggest factor was just that that was the time when the consumer was most interested in shopping and the time where they were most interested in converting, if you will. I would say that the discounts were also a little bit steeper during the second quarter and And I think it's reasonable to expect that we're going to see a similar pattern in the third and fourth quarter. And that is what we built into our guidance. And Scott, you may want to reiterate and elaborate on our guidance a bit.

Yeah, as we mentioned the call, we have moderated the comps where we were expecting positive comps in our earlier guidance and we moderate them down to kind of the low to mid single digit range and just basically what we've been seeing recently in the state of the consumer. We just thought it was prudent to do that and we do have the shorter period between Thanksgiving and Christmas and we do think it's going to be a promotional period and we're going to try to you know, do similar type events. But as we found in the second quarter, we tended to have a little bit more inventory to fuel those events than we might have last year, which, you know, did erode gross margin a little bit.

And then, Dana, in terms of products, I would say, you know, anything that's truly new, truly innovative, truly differentiated are the products that are most likely to get consumer's intention. And then just broadly, I would say that the more casual categories, the athleisure type product, swim has been slower. Those types of things have been slower. Dresses have really been strong across the portfolio and more the dressier end of the spectrum, I would say, the You know, the more presentable end of the spectrum, I think, is where we've seen the relative strength in general.

And then just picking apart freight costs, how are you thinking about the puts and takes on margins?

Yeah. We filled in about 15 to 20 basis points in margin hit due to elevated freight. So it's not a huge, huge amount. We are watching, and that's mainly in some of the Red Sea issues that have inflated rates. We are seeing, or we are watching closely the East Coast situation with the union negotiations and are diverting some product to the West Coast. and then we'll have to bring it across the country in some cases. So that's something we continue to watch. But we have built in some disruption from that. Obviously, if the East Coast ports do go on strike, that's going to be a disruptor to, I think, everyone.

Just one last thing. With the change in business patterns, any – whether it's marketing or store openings or marlin bars, any adjustments that you're thinking about, whether in terms of timing or shifts in how you're thinking about any of the initiatives? Thank you.

Not really. We're pretty much full steam ahead.

Yeah, and the growth initiatives. SG&A is something we always look at, but it's obviously, we're looking at opportunities there when they present themselves. We mentioned the Johnny Woods Distribution Center move, which was gonna save us a bit of money, and we're looking at other opportunities to reduce SG&A, but as far as growth initiatives. moving forward.

Which would include the stores that were opening, the Marlin bars and the distribution center in Lyons. And you know, look Dana, we don't, we believe that this is a, you know, at worst an old school recession. Maybe not even that. It's not the type of event that we saw in the pandemic or the financial crisis And, you know, we want to be ready when business starts to pick up. We believe in our direct-to-consumer channels as we do our wholesale channel. And building stores and Marlin bars and having a D.C. that can serve us both retail, wholesale, and our e-com business is, you know, going to be very important as we get a year or two, three years out. So we want to make sure that we're there. These are long-term projects that we need to manage for the long term.

Thank you.

Thank you, Dana.

Thank you. Our next question is from Marisa Osorna with UBS. Please proceed with your question.

Hi, good afternoon. Thanks for taking our questions. I guess maybe if you could elaborate a little bit more on the promotional activity across each of the, you know, three big brands. You know, I know I recall like there was some shift in promotional events and Lily Pulitzer, but, you know, outside of that, like anywhere where you saw like promotions really surprised you on the negative side. And yeah, like just a bit more detail from that would be very helpful. Thank you.

I would say is this more we just had we sold through a bit less at full price than we expected so we had more inventory when we did like Tommy's end of the season sale had you know more inventory than did the prior year you know Lily Johnny was that would that was more the case so it just resulted in and you had a consumer much more willing to buy during those events so it wasn't that we had major change in the events or were majorly different on the degree of discounts. There was just more inventory available that sold, so we kind of traded some full price sales for off price sales during typical clearance periods.

Understood. And then just a quick follow-up. I'm surprised to see also kind of like the slowdown on the restaurant business. Could you elaborate a little bit more about what happened there? And lastly, could you remind us the comp sales, you know, the compares you're up against in the second half of the year? I think, yeah, just to be mindful of that. Thank you.

Yes, I think the restaurants slowed down. As you know, Mauricio, the restaurants just have not slowed down really up until the second quarter. They have been extremely strong as they reopened. Even during the pandemic, when service was much more limited, they were quite strong and then just had been super strong. And I think a little bit of that has slowed down. Florida, for example, is a big restaurant market. And as we talked about in the retail business in Florida as well, which had been just sort of nonstop go, go, go since the pandemic. And it sort of settled down to where it was performing more like the rest of the country during the quarter. Thanks.

As far as comps, last year, Q3 and Q4, we were kind of in that 3% to 5% range negative. And so we're projecting similar type comps in our second half this year. And where before we were projecting positive comps. So that's the big change in guidance is really that comp movement is the biggest change.

Thank you.

And we're going to be working very hard, of course, Mauricio, to try to turn that negative comp assumption into a positive result. But given what we've seen over the last six or eight weeks, we just thought it was prudent to lower that expectation.

Thank you. Our next question is from Janine Stichter with BTIG. Please proceed with your question.

Hi. Thanks for taking my question. So, you know, to start out, on the consumer, you went through a whole host of factors that might have contributed to the slowdown. I think you talked about distraction and inflation and merchandising missteps. You know, maybe just help us rank order in your opinion, which are the most meaningful in terms of the change you've seen in the top-line trends. And then within that, we'd love some more context around Florida. It grew a lot in the years after COVID. You're talking about some normalization. Just maybe your thoughts on what ending we're in with the normalization there and maybe some context on how much it grew with COVID. Thank you.

So with respect to Florida, what I want to be very clear about is that it's not underperforming so much the rest of the country, is that it's just no longer outperforming the rest of the country, which was really what happened continuously for the three previous years, was that it outperformed everybody else. Now it's sort of more running with the pack. What I believe we're going to see going forward, at least for the next several quarters, is that it's probably just going to run with the pack a bit more. So if things pick up nationally, I would expect Florida to pick up with that, I believe. And if they don't pick up as quickly, I think Florida will sort of stay more or less where most of the other regions are. And then in terms of trying to rank order, the three factors that we talked about that headline distraction, Florida, and the merchandising missteps. Kind of hard to do that. I would say that they're all meaningful factors. Janine, I think they all had a material impact on results. There's some data from a big advertising agency that sort of supports our theory on the headline. distraction where they looked at, I think, over 100 brands that mostly cater to a 45 and up type consumer and saw that during July they were down 14% year over year. And that would tend to support the theory that that was a material factor for us. Our merchandising misstep, some of them we can measure a little bit more than others, but we again think that they were material. And then the Florida thing, I mean, it's a third of our business, and it went from a third of our retail business, and it went from a significant outperform to running with the plaque, which cost us a lot of incremental contribution dollars.

Okay, great. And then on the merchandising missteps, it sounds like you have a lot of things already in the works, but I would love to hear your sense of when we should expect to see some improvement there.

Well, certainly on a year-over-year basis, as we get to the second quarter of next year, they're all completely fixable. Undoubtedly, we will make some other missteps next year. It's a part of the business. hopefully they'll just be a little less pronounced than this year and we believe they will. And then in terms of what we've got coming for the third and fourth quarter from a merchandise and commercial standpoint, we really like it a lot. One of the things that we've got that we think will be a meaningful plus for us this year is We've got the indigo palms launch in Tamibahama, which is already driving some positive results in the getting cooler month that we're in now and should help as we get further into the cooler months. And then in January, they're actually going to have an early spring delivery that's going to hit the floor in January. Typically, January is just about everything that's left over from sort of the pre-holiday and resort time. And this year, we're actually going to give our guests a taste of spring in January that we think they'll be receptive to and they'll like. So we like our lineup. For the second half, we wish that consumer were a little bit stronger than they are, but we do think we've got good tools to work with to try to capitalize on the demand that is there.

All right, great. Perfect. Thanks for all the color.

Thank you.

Thank you. Our next question is from Paul Wedgway with Citigroup. Please proceed with your question.

Hey guys, thanks. Can you talk about which regions were forming this quarter? It sounds like Florida was in line with the chain, but where did you see better results by region and where did you see weaker results? And then can you talk about where each of the brands are in terms of full price selling relative to all-time peaks and also maybe relative to pre-pandemic levels, just trying to understand the level of markdowns that you're seeing, what percentage of the assortment for each of the brands are selling at full price today versus what you saw last year or the year before, maybe pre-pandemic, just to kind of frame where you are in that continuum. Thanks.

Okay. Thank you, Paul. And first, with respect to the regional question, This is on a relative basis. Nowhere was really great. Almost everywhere was soft during the quarter. But the places that were relatively strong were some of the cooler weather places like the Midwest, the Mid-Atlantic, New England, and then some of the spots out west, I think, especially the northwest. Some of the desert areas were relatively strong as compared to Florida, Texas, some of the places that were a little bit weaker. But again, nowhere was really what I would call strong. Everywhere was soft. And again, on Florida, it's not that it was you know, way worse than other places. It's just that it looked more like other places where for the last couple of years it had been an outlier on the positive side. And now on the relative level of this kind of thing.

Yeah, one more to add to that. The Marlin Bar locations held, the retail side of the Marlin Bars held much better than the averages out there so that that that part was encouraging yeah very important yeah as far as uh the level of discount we we we were pretty low levels you know since print the pandemic i would say this year's kind of reverting back to closer to a pre-pandemic level i don't have the exact percentages um but it's not a big outlier from where we operated uh Pre-pandemic, it's just been more promotional than we've been since the pandemic. And again, it's the lower full price sales that's just yielding. It's not because we're doing lots more events. It's just the lower full price sales is just providing more inventory that we need to clear. And so some of our clearance and promotional events are just a bit bigger.

Got it. How are you thinking about ticket prices? Do they need to be adjusted lower to avoid having to use more discounts to drive sales, or do you prefer to leave them where they are and show the customer that discount as a call to action?

I think that we want to, you know, we don't want to, you know, reprice existing product or, you know, the same style if it goes forward, there's a little bit of an opportunity to adjust the AUR by buying more heavily into some of our lower price point offerings in future seasons. And I think we will do a little bit of that. I don't think it'll be dramatic, but I think we'll probably invest a little bit more in some of the lower price points that we already have where we were lighter in inventory this year and in upcoming seasons, I think we'll probably invest a little bit more. That was an example of one of the issues, Paul, that we had in the second quarter was our opening price point dresses in Tommie, Bahama, which for Tommie, Bahama is sort of 90 to $120. We were significantly under-invested in inventory in that price point for dresses during the second quarter, and we failed it. I think lost some revenue as a result of that. when we get to next spring, I think you'll see us more heavily invested. So again, not so much changing the prices on existing product, but we do have some ability to tweak the AUR just by the mix of price points that we're offering.

Thank you, good luck. Thank you, Paul.

Thank you. There are no further questions at this time. I would like to hand the floor back over to management for any closing comments.

Okay. Paul, thank you very much for hosting our call, and thanks to all of you for your interest in our company, and we look forward to talking to you again in December, and I hope all is well until then.

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