Oxford Industries, Inc.

Greetings and welcome to the Oxford Industries first quarter fiscal year 2026 earnings call. At this time, all participants are in a listen only mode. A question and answer session will follow a formal presentation. If anyone should require operator assistance, 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 of Oxford Industries. Please go ahead.

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 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 at 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 COO. Thank you for your attention, and I'd like to turn the call over to Tom Chubb.

Thank you, Brian. Good afternoon, and thank you for joining us. I'm pleased to be here today to discuss our first quarter results, the progress we are making across the portfolio, and our outlook for the balance of the year. Overall, sales in the first quarter were in line with our expectations and earnings were better than we anticipated, primarily due to stronger than expected gross margin. That gross margin performance reflects meaningful work done by our teams over the past year to respond to tariff pressure, including updates to our sourcing strategies, refinements to our pricing architecture, improved freight rates through vendor negotiations, and the benefit from a higher mix of direct-to-consumer sales. Importantly, we achieved this margin performance while absorbing an $11 million, or 55 cents a share, year-over-year increase in tariff costs during the quarter. Absent that increase, both gross margin and earnings would have improved over the prior year. Looking across the portfolio, the first quarter included several important positive takeaways. Tommy Bahama, our largest brand, performed well, led by healthy direct-to-consumer results, and our emerging brands continued to generate strong growth, particularly in the Beaufort Bonnet Company and Duckhead. However, these positive results were not consistent across the portfolio. Johnny Wise is progressing through its turnaround plan, and we are encouraged by the progress on gross margin and direct-to-consumer performance, even as wholesale remains pressure. Lilly Pelletier was below our expectations while lapping a strong prior year first-year quarter, and its softness weighed on our overall results. The consumer backdrop remains unsettled. consumers continued to navigate macroeconomic and geopolitical pressures, including conflicts around the world, higher energy prices, uncertainty around trade policy and tariffs, and pressured sentiment around discretionary spending. As we have discussed in recent quarters, while some hard data may suggest consumers have the ability to spend, the soft data and what we are seeing continue to point to consumers that is more cautious, selective, and highly discerning. In this type of environment, product relevance and brand connection are especially important. Consumer response is strongest to differentiated products and brands that create an emotional connection. That is where our portfolio is advantaged. Our brands are built around lifestyle, optimism, and experiences, and our job is to stay focused on the product, storytelling, and service that bring those brands to life for our consumers. Tommy Bahama delivered the strongest performance in the quarter. Our direct-to-consumer business count positive in the mid-single-digit range with encouraging results in retail and e-commerce and and continued contribution from food and beverage. More broadly, the brand benefited from a better assortment balance, improved key item execution, and the enduring appeal of its relaxed warm weather lifestyle positioning. We are pleased with the execution at Tommy Bahama. The brand continues to occupy a unique position in the market with a lifestyle proposition that extends beyond any one product category or channel. Its advantage comes from the combination of compelling product, clear storytelling, strong customer engagement, and distinctive experiences across retail, digital, and hospitality. That combination continues to support our confidence in Tommy Bahama's long-term opportunity even in an uncertain near-term environment. At Lilly-Pellitzer, first quarter results were below our expectations and we have work to do. Lilly-Pellitzer remains a distinctive and beloved brand with a highly engaged customer and a very clear point of view. But the business did not execute to its potential in the first quarter. Sales were pressured, particularly in e-commerce, and we believe that pressure reflected, in part, some merchandising and execution issues, including gaps in certain entry price points and allocation opportunities. We want to be clear that Lilly-Pellitzer's performance was below our expectations and below where we are confident it can be. The brand has tremendous equity with its customer, but in the first quarter, we did not bring together product, pricing, allocation, and messaging. That is on us, and the team is focused on correcting these issues. Keep in mind, this is the same highly talented Lilly team that has consistently delivered strong results, and we are very confident in their ability to address these issues. The good news is that we have identified what we believe are the core issues, and we believe they are addressable. Some can be corrected relatively quickly, like messaging and marketing, while others related to merchandising can only move as fast as the product development lifecycle and will accordingly take more time. We are focused on addressing these issues and reestablishing Willie Pulitzer's positive trajectory and unlocking its long-term growth potential. The brand is strong, and we believe the team has the talent, experience, and urgency to restore the level of performance we expect. Turning to Johnny was, we believe the brand is on track with its turnaround plan As we have discussed previously, our focus has been primarily on improving profitability and reinforcing the fundamentals. During the first quarter, gross margin increased as the team made significant progress buying inventory tighter, reducing promotional activity, and improving gross margin return on investment. In terms of top line results, Sales were most under pressure in the wholesale, where Johnny was has had the greater exposure than our other brands to specialty stores, a market that has declined meaningfully in recent years. Sales were also lower to off-priced retailers due to healthier inventory levels and to Saks Global, which has been impacted by its bankruptcy process. Historically, Neiman Marcus and sites have been very important venues for Johnny Woz. Importantly, performance in the direct-to-consumer business was much more in line with our expectations, and we believe that side of the business is becoming healthier. We are focused on bringing greater cohesion to the design process, refining the assortment, improving marketing effectiveness, and driving better execution across retail, e-commerce, and wholesale. With the new management team in place, we have also become more aggressive in reassessing and rationalizing our store base, closing five underperforming locations in the first quarter. We will continue to assess retail performance and opportunity on a market-by-market basis and location-by-location and close underperforming stores where appropriate to ensure that our footprint is aligned with the brand's long-term potential. Turnarounds do not happen overnight, and there's still a lot of work to do, but we believe Johnny Was has meaningful long-term potential. Our objective is to build a stronger, more disciplined, and more profitable business that better reflects the strength and resonance of the brand. Our emerging brands also contribute positively with notable strength, particularly in the Beaufort Bonick Company and Duck Head businesses. These brands continue to bring energy and growth potential to the portfolio, and we remain focused on building them in a disciplined way through stronger storytelling and growing distribution. Across the enterprise, we are also continuing to strengthen the operational foundation of the company. Our new Lions Georgia Distribution Center is an important part of that work. As we have said before, we do not expect the ramp up to be without initial costs or complexity, particularly while we are transitioning between facilities. But over time, we believe Lions will be a meaningful competitive advantage particularly as direct-to-consumer demand continues to gain share across our portfolio. Stepping back from the individual brands, we were pleased with the way we started the fiscal year. At the same time, sales trends softened as we moved through April, and that deceleration continued into May and early June. Some of that reflects the broader consumer environment and the increased caution we are seeing in discretionary spending, along with the shift in timing of the important Father's Day holiday. Continued softness at Lilly Pulitzer is also an important factor, particularly given that some of the product and merchandising improvements we are making will take some time to fully flow through the assortment. Given these trends, we believe it's appropriate to take a more measured view of the upside sales opportunity for the balance of the year. As a result, we are narrowing our full year sales outlook by lowering the top end of the range. We believe this is a prudent approach based on what we are seeing in the business and the broader environment today. At the same time, we are tightening our EPS guidance range for the remainder of the year by raising the low end of our previous range due to the impact of the current lower tariff rates flowing through for the balance of the year, combined with focused expense and inventory management. Tariffs remain a major topic and source of uncertainty. Scott will provide more detail on the updated assumptions embedded in our outlook. From an operating standpoint, our priorities remain unchanged. Optimize sourcing, manage pricing thoughtfully, protect gross margin where we can, and avoid actions that would undermine the long-term health of our brands. Periods like this can push companies to become defensive and overly short-term. We are not going to do that. Our brands exist to bring happiness, optimism, and a sense of possibility to our customers. That is a real source of differentiation, and we believe the near-term adjustments we are making in the current environment will capitalize on each brand's unique attributes and position us to deliver long-term value to our shareholders. As always, I want to thank our teams across Oxford. Their resilience, creativity, and commitment to our customers are the foundation of everything we do. With that, I'll turn the call over to Scott for more detailed commentary on our financial performance and outlook.

Thank you, Tom. As Tom mentioned, our teams have shown great discipline and resilience in executing our plan against the backdrop of a challenging consumer and macro environment. Consolidated net sales were 391 million in the first quarter of fiscal 26, compared to 393 million in the first quarter of fiscal 25, and above the midpoint of our guidance range of 385 million to 395 million. Total company comparable sales decreased 2%, including 2% decreases in both retail and e-commerce. The decline in retail comp sales was offset by sales from non-comp stores open primarily in the prior year. Notably, food and beverage sales increased 14%, driven primarily by non-comp locations. Wholesale sales decreased 5% compared to the prior year period, which is better than our original forecast. By brand, Tommy Bahama delivered solid results, with the total sales increasing year-over-year, driven by mid-single-digit comps in our DTC channels, partially offset by a decline in wholesale sales. Emerging brands continued their momentum with sales growth in the low double digits. The positive comps that tied Bahama in growth and emerging brands were all set by sales declines at Lilly Pulitzer and Johnny Wise. At Lilly Pulitzer, significant declines in the e-commerce channel and a difficult comparison to the prior year led to overall low teen negative comps. And at Johnny Wise, as Tom mentioned, the sales decline was driven by a significant decrease in the wholesale channel and mid single digit negative comps in our DTC channels. Adjusted gross margin contracted 90 basis points to 63.4%, driven by approximately $11 million or 280 basis points of increased cost of goods sold from the additional tariffs implemented starting in fiscal 25. Despite this U.S. Supreme Court's ruling in late February, the previously paid tariffs were capitalized in the inventory that we sold during the first quarter. The increased tariffs were partially offset by... updated sourcing and pricing architecture strategies across the portfolio, lower freight cost to customers due to improved carrier rates from contract renegotiations, and a change in sales mix with wholesale sales representing a lower proportion of mass sales. Adjusted SG&A expenses increased 1% to $209 million compared to $206 million last year, impacted primarily by new brick-and-mortar retail and food beverage locations, as well as increases in software and consulting costs and costs associated with the transition of our Lions Georgia distribution center operations. These increases were partially offset by lower advertising costs and cuts in more discretionary categories like travel. The result of this yielded adjusted EBITDA of $45 million or an 11.6% adjusted EBITDA margin. compared to adjusted EBITDA of $54 million or 13.7% in the prior year. Moving beyond EBITDA, adjusted depreciation amortization was flat compared to the prior year with increases in depreciation related to our new Lyons facility and new brick and mortar locations all set by lower software related depreciation. Interest expense of $2 million was higher than the prior year due to higher average debt levels and our effective tax rate of 25.4% was higher than the prior year due to certain discrete items. With all this, we ended with $1.39 of adjusted EPS. Moving to the balance sheet, inventory decreased $15 million or 9% on a LIFO basis and $3 million or 1% on a FIFO basis as compared to the first quarter of 2025. Despite $9 million of additional tariff costs capitalized into inventory compared to $3 million at the end of the first quarter of 2025. Inventory decreased across our three larger brands, partially offset by higher inventory in the emerging brands group to support their higher levels of growth. We entered the quarter with long-term debt of $143 million as compared to $118 million at the end of the first quarter of 2025 and $116 million at the end of fiscal 2025. Cash flows from operations provided $8 million in the first quarter of fiscal 26, compared to cash flows used in operations of $4 million in the first quarter of fiscal 25, with lower earnings offset by positive changes in working capital. We also had capital expenditures of $23 million, primarily related to the Lyons-Georgia Distribution Center project and the addition of new brick and mortar locations. and $11 million of dividends that led to an increase in our long-term debt balance since the beginning of the fiscal year. I'll now spend some time on our updated outlook for 2026. As Tom mentioned, the positive momentum we saw to start the year decelerated a bit at the end of the first quarter and continued into the second quarter. For the second quarter, we now expect our total company comp to be in the low single-digit negative to flat range. and for the full year, our updated comp assumption assumes a range of slightly negative to slightly positive. The updated second quarter and full year comp assumptions are lower than our previous expectations of flat to low single digit positive comps. As a result of the change in our comp assumptions, we're revising the top end of our revenue guidance range for the full year. For the full year, net sales are expected to be between 1.475 billion and 1.505 billion, a relatively flat to up 2% compared to sales of $1.478 billion in fiscal 2025. A revised sales plan for the full year of 2026 includes a sales increase in Time Bahama and continued growth in emerging brands, partially offset by a sales decrease in Lily Pulitzer and Johnny Wise. An updated sales plan does include improvement in the second half as we correct the issues discussed at Lilly Pulitzer and Johnny West continues its turnaround plan. We will also benefit from correcting the tariff related merchandising issues that impacted the results of most of our brands in the second half of the prior year, specifically in the fourth quarter and during the holiday season. By distribution center, the full year sales plan consists of high single digit increase in our food and beverage channel that is benefiting from the addition of new locations added during fiscal 2025, partially offset by low single-digit decreases to flat sales in our direct-to-consumer channels, and a mid-single-digit decrease in wholesale. Moving on to gross margin, our current assumption is that the current lower tariff rate of 10% will remain in place for the remainder of the year. These rates are generally consistent with the rates in effect for most of our inventory receipts during the first quarter of 2026. While we are not including the impact of tariff refunds in our guidance, we paid approximately $40 million of tariffs in fiscal 2025 and an additional $5 million of tariffs in the first quarter of 2026 that were ultimately invalidated by the Supreme Court ruling in February. To date, we have filed for approximately $25 million in Phase I claims and have begun to receive refunds. A refund process for phase two and the remainder of our unfiled claims has not yet been established, but we are ready to file claims for refunds as soon as a process is established. It is important to note that given the timing of our planned inventory receipts for the balance of the year, changes in tariff rates during fiscal 2026 would be expected to have a more limited impact on fiscal 26 results than they would on future periods. In addition to lower tariff assumptions, we expect that gross margins will benefit significantly from the shifts in sourcing and updates to our pricing architecture that our teams have worked on for the last year, and a shift to a higher proportion of direct-to-consumer sales. As a result, we expect gross margins to improve 100 to 200 basis points in Q2, Q3, and Q4 of fiscal 26 compared to the prior year periods. and an overall approximate 100 basis point increase for the year, when including the headwind from the first quarter. In addition to lower sales and higher gross margins, we expect SG&A to grow in the low single-digit range, primarily due to increased software-related cost and the annualization of incremental SG&A from new stores added since the end of the second quarter of fiscal 25. Also within EBITDA, we expect higher royalties and other income of approximately $2 million in fiscal 26. Outside of EBITDA, we expect an increase in depreciation due to significantly all of the incremental costs to operate the new lines DC and fiscal 26 being depreciation related. Considering all these items, interest expense of $7 million, a higher tax rate of 28%, we are tightening our 2026 adjusted EPS guidance to $2.30 to $2.70 versus adjusted EPS of $2.11 last year. Again, our guidance does not include the impact of any tariff refunds. The second quarter of 2026, we expect sales of $380 million to $400 million compared to sales of $403 million in the second quarter of 2025. This primary reflects our low single digit negative to flat comp assumption and decreased wholesale sales in the high single digit range. By brand, we expect lower sales at Lilly Pulitzer and Johnny Woods to be partially offset by a sales increase at Tommy Bahama and continued growth at emerging brands. We also expect gross margins to expand approximately 100 basis points, SG&A to grow in the low single digit range, royalty income of approximately $5 million, interest expense of $2 million, and a higher effective tax rate of approximately 29%, primarily related to the impact of our annual stock vesting. We expect this to result in second quarter adjusted EPS between $1.20 and $1.40 compared to $1.26 last year. Moving to our CapEx outlook for the remainder of the year. We have spent capital expenditures for the year to be approximately $60 million, including the $23 million spent in the first quarter of fiscal 26, compared to a total of $108 million in fiscal 2025. The remaining capital expenditures relate to the new distribution center in Lyons, Georgia, and new brick and mortar locations. 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'd 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 handset before pressing the star keys.

One moment, please, while we poll for questions. Our first question is from Ashley Owens with KeyBank Capital Markets.

Thanks. Good afternoon. Maybe just to start, I want to click down on the comments about the trend softening through April into May and then early June and then you flagged that Father's Day shift. Is there any way to help us isolate how much of that deceleration is?

calendar versus the genuine demand softness like once you normalize for that father's day timing what what does the underlying trend look like there and i have a follow-up so i would say you know we built into our guidance flat to low single digit negative for q2 and i think we're you know we're more on at the moment in the low single digit negative i think when we get past fathered day we'll be in that zone of flat to low single digit negative, I believe is where we'll land. I think we're going to pick up a bit through Father's Day. And right now we're tracking fine.

Understood. Maybe then just secondly, more broadly on wholesale, just be curious since we last spoke, there's Obviously, elevated gas prices have continued. Consumer discretionary sentiment is weak. I would just be curious if you're seeing any shifts in some of the wholesale order behavior across your portfolio for the balance of the year. Any retailers trimming buys here or pushing out deliveries? Anything to call out? Thanks.

You know, they're still being cautious, and we still think we'll be down, but we're not seeing a drastic change. But I think everybody is, you know, given the environment, is being a bit cautious. And, you know, so I think the opportunity for some, you know, increases might not be there quite the way we had hoped, but I think they're seeing a lot of what we're seeing right now. And, you know, you do have the shifts, so I think a lot of people are trying to sort through the current business and how much this Father's Day shift is impacting it versus how much is the consumer. And that's a hard thing to really tell. There's, I think, some of both in what's going on.

And, you know, Ashley, it always comes down to how you're performing on their floor and our wholesale performance overall has hung in pretty well so far year to date. Some places are stronger than others, but I would say overall it's been pretty strong.

Okay, understood. Thank you. I'll pass it along. Our next question is from Dana Telsey with Telsey Advisor.

Good afternoon. I want to unpack the performances of Tommy, Bahama, and Lilly. Certainly the improvement in the performance of Tommy Bahama, even from the fourth quarter to the first quarter, is impressive and wanted to get, whether it's men's, women's, prices category, what's driving that? And then the Lilly downtick, I think last quarter when we all spoke, you talked about the headwinds, whether it was the Florida weather, but felt like the structural components of Lilly was very much intact. What's changed? Where's the softness coming from? Is it by region, by channel, by customer? Is it print, pattern, solid, promotions? And what's the timeline of the Lilly fix? Thank you.

Okay, so let me start with Tommy Bahama. And I would say, you know, it was a very nice quarter for Tommy Bahama. We're very proud of it. Men's had an increase in our direct consumer business year over year. We talked about this in March, but that was really driven by core product that we were sort of weak on last year, and that's things like the Enfield or the Boracay and some of our big linen programs that really drove it. The real strength in the quarter, you know, men's was good, but women's was even better. And the numbers were really driven by the women's side of the business, which we love seeing because, as you know, long term, we continue to believe we have a very large opportunity in Tommy Bahama's women. So the women's DTC business was up, I think, about 7.5% for the quarter, which is quite strong. and it was driven by what we would consider the fashion part of the business. There were a couple of categories within fashion. I think pants and wovens were both strong during the quarter, but we were glad to see that. We're still very much a men's-driven business, but seeing that strength in women's where it really helped drive our quarterly results to a large degree. It was great. And then one other little stat that I'll throw out at you that I love is that during the first quarter of 2026, 30% of our e-comm orders included both a men's and a women's item. That's up from last year. when it was 25%, and we don't have any great benchmarking on that, but we believe that benchmarks really well in terms of our ability to sell both genders effectively. When you've got almost a third of your orders are dual gender orders, we think that's really great. So really like what we saw in Tommy Bahama during the quarter, Some of that softness that we saw in April and May had to do with some timing shifts and maybe a little planning hiccup. I really believe that we're going to get through Father's Day and still be on a very good track. It's a little hard to see it today just because of the shift. It's still good. It's just not quite as strong as it but I think that's the Father's Day shift that we're seeing. And then on Lilly Pulitzer, I do believe that the February weather in Florida was a contributing factor. And at the time we were talking in March, I think that was very valid because it was especially during February and the first part of March where the average daily temperatures were much, much lower than the normal average daily temperatures. And that's a time of year when it matters a lot in Florida as to whether people are motivated or not. But then as we got deeper into the quarter, we realized that there were other issues with both the assortment and with the messaging and marketing around them. So as we identified during the prepared remarks, Dana, Some of the issues that we were way under-inventoried in our opening price point bucket, and I think that cost us some business. Some of those customers were willing to move up the price point scale, but I think some of them just ended up not buying, and I think that's where we saw a lot of the sales erosion. Then from a a print and color perspective. If you've been watching it, we leaned heavily into the sort of vintage prints. While we love those prints and they're beautiful, I think we probably overdid that. And those tend to appeal a little bit more to the most dedicated Lilly fans and maybe a little less so to the the newer Lilly fans. I think that was an issue. And then the last big one I would identify is what we're calling novelty. So as you know, David, there's been a lot of emphasis, not only from us, but across the marketplace on newness and novelty and that kind of thing. And I believe we just swung the pendulum a little bit too far on that. this spring and that had it's good to have a good bit of that but we just had too much of it and not enough of our assortment was more versatile and I think especially when you get into a time period where people are being a little bit more discerning about their purchases I think she's looking at the versatility of that dress and maybe a little more than she would when she's in more of a free spending mode. We were talking about this yesterday, but we have had this spring an absolutely gorgeous dress that was the type of dress that you would wear to some kind of charity ball or gala or something like that. Absolutely gorgeous, but it's really one of those dresses that you're probably only going to wear once because it's so unique and so special and so dramatic and stunning. And, you know, it was over $700, which for us is a high price point. And we just have, you know, a little too much of that. So in terms of the timeline to fixing, I would also say that that leaning into vintage and nostalgia, I think, also showed up in our messaging and marketing. You know the way this works, Dana. Messaging and marketing can be addressed more quickly, generally, and how we're targeting and some of that stuff we can do. you know, we're already adapting. And things like promotions, you may have watched, we did a big Lilly Pulitzer promotion this past weekend. That was something that we did in what I would call an agile response to the situation. So those things can be done more quickly. The product development timeline is what it is. So it's more of a resort before you can really, you know, up until resort, you're kind of dealing with the product that you, you know, you designed and bought way back when you did that. And, you know, I do think, I believe we feel that some of our later summer deliveries are a bit stronger and maybe less don't have quite the degree of issues. And then what we're doing just in sort of our agile response and rethinking promotions and all, I think we're gonna make the best of it. I'm super proud of the Lilly team and the way that they've responded to it. Dana, you know this well, but this is a fashion business and you're gonna have a hiccup like this every now and again. And the issue, you know, that's part of the business. Hopefully it's not very often, but it's going to happen every once in a while. And then the key is how do you respond to that in the short term and then in the long term? And I think as they do, the Lilly team is doing a terrific job on both fronts. So that was a lot, but hopefully answered your question.

Very helpful. Thank you.

Our next question is from Janine Stichter with BTI.

Hi, thank you for taking my question. I wanted to delve into the growth margin side a bit. You talked about having some big wins on the sourcing side, so maybe you could just talk about what's working there, how much you view as kind of structural and able to continue, and then As you think about the guidance for gross margin to increase throughout the balance of the year, what does that assume in terms of promotions by brand, how you're planning them, and also how consumers are shopping around those promotions? Thank you.

Yeah, on the gross margin, yeah, we have done a lot of sourcing shifts. We also, you know, a lot of the price increases increased. A lot of them were on newness. And so we do have some products with some good margins. And, you know, at Tommy especially, we sold through at full price nicely. And so we had a pretty nice, you know, higher than expected gross margin there. And then, you know, as we mentioned, you know, the tariffs are, you know, 10% now. That's our assumption going forward. So we, you know, and we... We did have overall some lower promotions both in the first quarter internally and on sales of all price to wholesale accounts. That helped. We also had direct was a higher percentage of our total sales versus wholesale, so that always helps also. As far as promotions, You know, Lily will probably be a little more promotional than we planned at the beginning of the year, just kind of given the start. Tommy, you know, pretty much the normal cadence at Tommy. So I think overall we won't be – I don't think our overall total company promotional cadence will be drastically different, probably a little bit more Lily. Quite a bit less at Johnny Wise. Johnny Wise is really – You know, the inventory down are being much more disciplined on promotional events, and their gross margins were very good, and I think they'll continue to be for the rest of the year. So I think some structural things that Johnny was that are really starting to show through on the gross margin line and some of the SG&A controls there, and I think they'll begin to show on the top line later in the year.

Got it. And with the price increases, have you seen any pushback at either of the brands, the price increases, and then just any more plans for ticket increases the rest of the year?

I would say, Janine, there's a nuanced answer to that. There hasn't really been any direct pushback to it, but if you look at our numbers, we're selling less units. The ARVs going up, the AURs going up, so people are selling or paying the price, but the total number of units that we sold during the quarter was down a bit. It's not drastic, so it's hard to know exactly how to interpret that. I think some of that's about The softness and just general caution among the consumer, but we're looking at it hard to make sure we're not out of whack with what the consumer is willing to pay. We do not believe we're out of whack with the market at all. We think we're in sync with our peers or competitors, whatever you want to call it. But, you know, it bears further scrutiny for sure.

Great. Thanks for the color. Thank you, Janine. Our next question is for Mauricio Serna with UBS.

Great. Thanks for taking my questions. Tommy Bahama, could you talk about your expectations in terms of the comp for Q2 and the rest of the year? Just thinking about, you know, the very good traction you're getting, you got in Q1. Is it fair to assume that, you know, the brand can sustain a mid-single-digit comp? And then a similar question on, I guess, a similar question on Johnny Wass. It seems like, you know, you've really been able to bring that business into a healthier place, at least in terms of margins, gross margins. How should we think about the timing for an inflection to positive sales growth of the brand? Could it happen by second half of the year? Thank you.

Yeah, Tommy, we think we can have positive comps the rest of the year. Our model has a little bit lower than the mid single, just slightly lower than the first quarter. But a lot of it's just you know, some of what we're seeing now and we got the whole Father's Day shift. So I think it's really, you know, once we get through Father's Day and kind of get that dust settled, you know, I think we'll be in a good place there. At Johnny Woz, we think, you know, we can start having positive comps in the second half. I think just some of the discipline that we've got and then the product, you know, we really couldn't impact product in the first half of the year. In second half a year, we really think a lot of the work we've been doing in identifying how we ought to be assorting the line, that was known going into the design process. So we think we'll have better commercial lines, and we also will have a line of more essentials that kind of go with the prints. We have very little of that right now. We'll have quite a bit more of that in the second half. So we think, you know, you know, first half, you know, the comp will be a little tough. It, Johnny, was, but a lot more discipline on, you know, healthier gross margins, a lot more expense discipline. Then second half, we really think the comp can start turning around.

And then just a couple of follow-ups on the gross margin side. It seems like, you know, the assumption is, you know, even though, like, I guess, even though, like, if tariffs go back to AIPA, like, after, you know, July, the way that you flow your inventory, it shouldn't have like a meaningful impact for at least fiscal 26. I just want to make sure that I understood that. I guess that means that you could face a headwind in 26.

We'll have fall pretty much. Fall will pretty much be in-house. And then you've got some core that also goes even further during the year. So if tariff rates did go back to even. And right now, I think what they're talking is more of a 10 to 12 rate. is at least what's being discussed, and how quickly that happens. You know, you could have a gap where you don't have any. You know, these are going to expire. The Section 122 will expire in July, and I don't know if these others can be in place right away. So the tariffs are still fairly uncertain, but even if they went all the way back to IEPA, it would not have, you know, a huge impact because I think falls pretty much in at 10. And, you know, resort could have a little bit of impact.

Got it. And then just the last point on that, like with tariff refunds, what would be, you know, the primary use of the proceeds?

Debt repayment. Pay down debt. Yeah. Yeah. And our debt, you know, some of that's Some of that is seasonal, and we expect second quarter debt to come down, and then if we get the tariff refunds, then we'll come down even more significantly.

Awesome. Well, thanks for answering the questions, and best of luck.

All right.

Thank you, Mauricio.

Our next question is from Joseph Savillo with True Security.

Hey, guys. Thanks so much for taking my questions. I'm just trying to zero in a little bit more on the consumer versus Father's Day. Is there any way you could break down the tax refund impact on 1Q?

I'm not sure we can do that.

I don't know. I believe it was probably a positive for us, for sure, but I don't know that we have a good way to to break that down. As you know, Joe, there are a lot of people, including some of your peers out there in the analyst world that, you know, are trying to do all kinds of things about tax returns. And I've read a lot of that, but I'm not sure we can translate it exactly.

Yeah, I figured it'd be pretty tough, but figured I'd ask. And then secondly, talk a little bit more about...

One analysis that I've read is that when you get to $4.50 a gallon, you've eaten up all the benefit of the tax return. Some people are thinking about it. Now, we're not at $4.50 a gallon most places. And, you know, with where oil's settled down, You know, it's been in the high 80s, low 90s, and seems pretty immune to what the news headlines are in terms of any big swings. And at that level, you're looking at, you know, $3.75 a gallon on average, I think, which is, I don't think is going to cripple the economy. I mean, people don't like it. It impacts sentiment, but I don't think it's going to cripple the economy.

Got it. Uh, that's helpful. And then, um, I guess on the, uh, can you give any more color on the regional performance of Tommy and maybe how the, uh, the new DC has impacted operations?

You want to talk about DC?

Yeah. Yeah. New DC. Um, we moved our first brand over at the very end of February. We now have four brands over there. So we've got three more brands, uh, to move. Remember, Lions was doing a tiny bit for Tommy. They were doing all the emerging brands. They were doing a tiny bit for Lily and all that Johnny was. Then we'll end up moving. Once we get all the brands in and get it all settled down, we will actually start shifting more Tommy over. We currently have Jack Rogers in a 3PL position. and that will move. And so the move, you know, it'll probably end of July, early August, we'll have all the brands moved over, and then as our efficiencies get better, we'll move more and more Tommy there. So, you know, we're kind of in the startup phase, and, you know, with a project like this, you know, you kind of, you work out the different kinks, and you kind of move the brands over slowly, and then you really absorb them, and get more efficient, and then you move to the next brand. So we're kind of in that phase now, but this summer we'll get all the brands over and then continue to move more Tommy over and continue to get more efficient. But it is a good, it's going to be a great operation, and it's going to be a great long-term asset for the company.

And then, Joe, from a geographic standpoint for Tommy, it's really a west or western part of the country versus eastern issue. And the west has been strong this year, which is really good to see. We had a couple of years where it was lagging, and that's really been the strongest part of the country for us, which we're really glad to see.

Got it. Thanks so much, guys. Thanks, Jeff.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Tom Chubb for any closing remarks.

Okay. Thank you very much for your time and attention today. We appreciate your interest in our company, and we look forward to talking to you again at the end of the summer.

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