Oxford Industries, Inc. Aktie

Greetings and welcome to the Oxford Industry's first quarter fiscal year 2026 earnings report. 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, 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. I'd now 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 would 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 cent a share, year-over-year increase in tariff costs during the quarter. 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 .CAD. However, these positive results were not consistent across the portfolio. Johnny was 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. Billy 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 continue 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 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. And 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. The county of 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 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-Pulitzer, first quarter results were below our expectations and we have work to do. Lilly-Pulitzer remains a distinctive and beloved brand with a highly engaged customer and a very clear point of view. that 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 lifestyle. and will accordingly take more time. We are focused on addressing these issues and reestablishing Lilly-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, since the first 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 SACS Global, which has been impacted by its bankruptcy process. Historically, Neiman Marcus and SACS have been very important venues for Johnny Wise.

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 Bonnet 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. The new Lyons-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 Lyons will be a meaningful competitive advantage, particularly as direct-to-consumer demand continues to gain share across our portfolio. Second, 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 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 all set by sales from non-comp stores open primarily in the prior year. Notably, food and beverage sales increased 14%, driven primarily by non-conf 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 their 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 at Tommy Bahama and growth in emerging brands were all set by sales declines at Lilly Pulitzer and Johnny Wise. At Lilly Pulitzer, significant declines in the e-commerce channel. in a difficult comparison to the prior year, led to overall low teen negative comps. And the Johnny was, as Tom mentioned, the sales decline was driven by a significant decrease in the wholesale channel. and mid-single-digit negative comps and or 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 US Supreme Court's ruling in late 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 low proportion of net 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 and beverage locations as well as increases in sales software and consulting costs, and costs associated with the transition of our Lyons, 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 depreciation. 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 year. in the first quarter of 2025. Inventory decrease across our three larger brands, partially offset by higher inventory in the emerging brands group to support their higher levels of growth. We ended 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 at the start of 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 or 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. by a sales decrease in Lilly Pulitzer and Johnny Wuz. Our updated sales plan does include improvement in the second half as we correct the issues discussed at Lilly Pulitzer and Johnny Wuz 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. 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 decrease in increases 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 tariff, the current lower tariff rate of 10 percent 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, an additional 5 million of tariffs in the first quarter of 2026 that were ultimately invalidated by the Supreme Court ruling in February. approximately $25 million in Phase 1 claims and have begun to receive refunds.

A refund process for Phase 2 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 2026 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 with an 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 the incremental costs to operate the new lines DC and fiscal 2016 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 low lower sales at Lilly Pulitzer and Johnny was 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 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. Remaining capital expenditures relate to the new distribution center line Georgia and new brick-and-mortar locations. Thank you for your time today.

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. Participants using speaker equipment, it may be necessary to pick up your handset before crossing 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? Once you normalize for that Father's Day timing.

What does the underlying trend look like there? And then I'll 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 Father's Day, we'll be more 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, you know, through Father's Day. And right now we're tracking fine.

Maybe even just secondly, more broadly on wholesale, just be curious, since we last spoke, obviously been 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 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. So I think the opportunity for some 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 yes, you do have the shifts. I think a lot of people are trying to sort through the current business and how much this father-stay 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. that 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 the Lilly downtick, I think last quarter when we all spoke, you talked about the headwinds, whether it was a Florida of 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? patterns, 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 the, you know, it was a very nice quarter for Tommy Bahama. We're very proud of it. Ben'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 drive 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, law enforcement, long term, we continue to believe we have a very large opportunity in Tommy Bahamas Women's, so the women's DTC business was up, I think about 7 1/2% for the quarter, which is quite strong, and it was driven by what we would consider the fashion business, part of the business or a couple of categories within fashion. I think pants and wovens were both strong during the quarter but you know we were glad glad to see that and you know 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 was great and then one other little stat that I'll throw 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, you know, 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 you know a little planning hiccup. I really believe you know, 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 was. But I think that's, you know, the Father's Day shift that we're 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 mattered. 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 we were 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 print and color perspective, if you've been watching it, we leaned heavily into the vintage prints and 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, you know, the most dedicated Lilly fans and maybe a little less so to the newer Lilly fans.

So I think that was an issue. And then the last big one I would identify is what we're we're calling novelty. So as you know, David, there's been a lot of emphasis, not only from us, but across the market, place 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, uh, 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 maybe a little more than she would when she's in more of a free spending mode. So, uh, 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. And 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 and price point, and we just have 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, 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 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 designed and bought way back when you did that. You know, I do think, I believe we feel that some of our later summer deliveries are a bit stronger and maybe don't have quite the degree of issues. And then what we're doing just in sort of our agile response and rethinking process promotions and all. I think we're going to 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 going to have a hiccup like this every now and again. And the issue, you know, that's just, 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... The Lilly team is doing a terrific job on both fronts. So that was a lot, but hopefully you answered your question. Very helpful. Thank you.

Our next question is from with .

Hi, thanks 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 growth 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.

Yes, on the gross margin, yes, we have done a lot of sourcing shifts. We also, you know, a lot of the price increases, a lot of them were on newness. And so we do have some products with some good margins. And, you know, But Tommy especially, we sold through at full price nicely. And so we had a pretty nice return higher than expected gross margin there. And then, as we mentioned, the tariffs are 10% now, that's our assumption going forward. So we, and 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, Lilly will probably be a little more promotional than we planned at the beginning of the year, just kind of given the start. Tommy, 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, in the inventory downer 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 at Johnny Wise that are really strong. to show through on the gross margin line and some of the SG&A controls there.

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, that's a, 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, you know, we're selling less units. You know, the AOV's going up, the AUR's going up, so people are selling are paying the price, but the total number of units that we sold during the quarter were, was down a bit. Not, it's not drastic, but 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 you know out of whack with what the consumer is willing to pay we do not believe we're out of whack with the market you know at all. We think we're in sync with our peers or competitors, whatever you want to call them, but 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. I guess just first on Tommy Bahama, could you talk about your expectations in terms of the comp for Q2 and the rest of the year? Just thinking about the very good traction you got in Q1, is it fair to assume that the brand case and sustain amid single digit comp. And then similar question on, I guess similar question on Johnny was, it seemed like, you know, the, you really been able to bring that business into a healthier place, at least in terms of margins, gross margin. How should we think about, you know, the timing for an inflection to positive sales growth of the brand? Could it be, could it happen, you know, by second half of the year? Thank you.

Yes, Tommy, we think we can have positive comps the rest of the year. Our model has a little bit lower than the mid-2040s. single just slightly lower than the first quarter but A lot of it's just some of what we're seeing now, and we've got the whole Father's Day shift. So I think it's really once we get through Father's Day and kind of get that dust settled, I think we'll be in a good place there. But Johnny was, we think 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, we really couldn't impact product in the first half of the year. In second half of the year, we really think a lot of the, work we've been doing in identifying uh how we ought to be assorting the line that was known going into the design process so we i think we'll have better commercial lines and we also will have a line of more essentials that kind of go with the print. We have very little of that right now.

We'll have quite a bit more of that in the second half. So we think first half, the comp will be a little tough, Johnny was, but a lot more disciplined. on healthier gross margins a lot more. It's spent 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 the assumption is, even though if tariffs go back to AIPA after July, the way that you flow your inventory, it shouldn't have a meaningful impact. for at least fiscal 26. I just want to make sure that I understood that. I guess that means that we could face a headwind in the 27th. We'll have fall 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 IEFA, and right now I think what they're talking is more of a 10 to 12. 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 aspire the 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 a huge impact, because I think falls pretty much in at 10, and 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?.

That debt repayment. Pay down debt. Yes, yes. And our debt, you know, some of that is seasonal, and we expect second quarter, you know, 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.

Thank you, Mauricio. Our next question is from Joseph Savillo with True Security.

Hey guys, thanks so much for taking my questions. 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. You know, I believe it was probably a positive, you know, for us for sure, but I don't know that we have a good way to break that down. As you know, Joe, there are a lot of things 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.

Yes, I figured it would be pretty tough, but figured I'd ask. And then secondly, can you 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 450 a gallon most places. And, you know, with where oil's settled down, 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. At that level, you're looking at $3.75 a gallon on average, I think, which is – I don't think it's 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.

Okay.

Got it. That's helpful. Then I guess, can you give any more color on the regional performance of Tommie and maybe how the new DC has impacted operations?.

I wanted to talk about D3. Yes, yes. New D.C., 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, two more, 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 Lilly and all that Johnny was. So 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 We currently have Jack Rogers in a 3PL and that will move. And so the move, 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 we're kind of in the startup phase. and with a project like this, you work out the different kinks and you move the brands over slowly and then you really absorb them and get more efficient and then you move the next brand. So we're kind of in that phase now. but this summer we'll get all the brands over and then and then continue to move more Tommy over and continue to get more efficient. But it is a good, 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 coast 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, Joe. 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.

[Call has ended.]

Greetings, and welcome to the Oxford Industries, Inc. Fourth Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Brian Smith of Oxford Industries. Thank you. You may begin.

Thank you, and good afternoon. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC including the risk factors contained in our Form 10-K. We undertake no duty to update any forward-looking statements.

During this call, we'll be discussing certain non-GAAP financial measures. In the fourth quarter of fiscal 2025, we changed our measure of profitability from segment operating income to segment EBITDA. You can find a reconciliation of non-GAAP to GAAP financial measures, including segment EBITDA 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 Grassmyer, 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'm glad to be here today to discuss our fourth quarter results, the progress we made in fiscal 2025 and our outlook for fiscal 2026. We were pleased that fourth quarter net sales and adjusted earnings per share, helped by late January momentum of our largest brand, Tommy Bahama, landed at the midpoint of our guidance ranges, excluding charges associated with the bankruptcy of Saks Global that were not known when we last updated our outlook. While we operated against an uneven consumer backdrop during the holiday season with pressured traffic and conversion trends across much of our portfolio and a highly promotional marketplace, the actions we took throughout the year to strengthen our business helped deliver improving trends late in the fourth quarter. The holiday quarter unfolded broadly in line with the pressures we described last quarter, particularly in categories and assortments most affected by tariff-related sourcing decisions and a highly promotional market.

Despite the challenges of higher tariff costs and a competitive environment, our efforts to strengthen the supply chain and diversify sourcing helped us protect strong gross margins and maintain healthy inventory levels. Importantly, absent the impact of higher tariff costs, gross margin would have increased versus the prior year. As fiscal 2025 concluded, we were encouraged by the improvement we saw as we exited the holiday season and entered our important resort and early spring period. Comparable sales led by mid-single-digit positive comps at Tommy Bahama improved and turned positive for the total company in late January. In the first quarter of fiscal 2026 to date, comps at Tommy Bahama have remained mid-single-digit positive, while comps for the total company have remained modestly positive. At Lilly Pulitzer, first quarter comps have run below our plan, which we believe is largely attributable to colder weather along the Eastern Seaboard, including Florida and the Southeast, the brand's most important markets.

At Johnny Was, while comps remain negative, the business is performing in line with our expectations and improving through the quarter as our marketing and merchandising effectiveness actions begin to take hold. Quarter-to-date, business in the Emerging Brands Group is quite strong with comps well into double digits. We are especially encouraged that performance improved as we moved into resort and early spring when our product offerings were better aligned with customer demand compared with our holiday assortments. We view that improvement as particularly meaningful because these are seasons when our brands are especially well positioned given their connection to warm weather lifestyles and the occasions that matter most to our customers. While the environment remains uncertain, these trends reinforce our confidence that the actions we have taken are gaining traction. We also made meaningful progress in fiscal 2025 to strengthen our operational foundation.

Shortly after year-end, we completed construction of our new state-of-the-art distribution center in Lyons, Georgia and began receiving initial inventory shipments. Lyons represents the most significant infrastructure investment Oxford has made in many years, and we are proud of the teams who brought it to this point. As we indicated previously, we do not expect meaningful near-term financial benefit during the early stages of the ramp, but reaching this milestone is an important step in strengthening our long-term operating platform. In addition to completing Lyons, we continue to invest in technology data and analytics and artificial intelligence while also advancing our strategic sourcing initiatives to further diversify our sourcing profile. Early in fiscal 2025, approximately 40% of our apparel and related products were expected to be sourced from producers located in China.

Through the actions we took during the year, that figure declined to slightly less than 30% of our product purchases in fiscal 2025 and our annualized run rate entering fiscal 2026 has been reduced to approximately 15%. Together, these actions have increased our flexibility and better positioned us to navigate continued uncertainty in the marketplace. Turning to fiscal 2026. Our outlook assumes that we build on the encouraging momentum we have seen early in the first quarter, particularly at Tommy Bahama. While the tariff situation remains fluid and we faced meaningful tariff pressure in Q1 that we did not incur last year, we believe the actions we have taken to diversify sourcing and improve execution across the business will help limit the impact on earnings as we move through fiscal 2026 and allow us to leverage low single-digit sales growth into meaningful earnings improvement.

Scott will provide more detail on the factors shaping our outlook, but our priorities are clear: sustain momentum, improve profitability and continue strengthening our brands for the long term. Stepping back, our operational priorities remain consistent and straightforward regardless of the macro environment: serving our customer, protecting the integrity of our lifestyle brands and generating cash so we can reinvest thoughtfully in the business, maintain a strong balance sheet and create long-term shareholder value. In an uncertain consumer environment, success comes from controlling what we can control and staying focused on execution. Each of our brands have specific priorities for fiscal 2026 tailored to its opportunities, but they share a common thread, a focus on what makes each brand special, the product, the storytelling and the experiences that keep customers engaged. At Tommy Bahama, our top priority in fiscal 2026 is to build on the momentum the brand has generated with comps in the mid-single-digit range in the first quarter to date.

We believe that momentum reflects the work the team has done to improve assortment balance, strengthen key in-stock programs and better align product offerings with customer demand. In fiscal 2026, we are focused on sharpening merchandising, elevating brand storytelling, improving hospitality performance and evolving our marketing approach to build demand, deepen retention and reach new audiences. We believe that combination positions Tommy Bahama to deliver improved profitable growth while reinforcing its position as a leading premium lifestyle brand. At Lilly Pulitzer, we are focused on a set of strategic levers designed to unlock more sustainable profitability while positioning the brand for long-term growth. We see meaningful opportunities to sharpen our assortment strategy, improve pricing architecture and allocation effectiveness, strengthen our connection with the core customer through more personalized storytelling and optimize Lilly's distribution and channel mix in ways that support both growth and brand awareness.

At Johnny Was, our priority remains executing the brand revitalization plan we have been building. That begins with product, as we work to bring greater cohesion to the design process, refine assortments and create a more seamless commercial model across retail, e-commerce and wholesale. At the same time, we remain focused on the merchandising discipline, go-to-market consistency and marketing effectiveness needed to improve execution and stabilize performance over time. We believe these actions, along with the leadership changes we announced in the third quarter, will strengthen the foundation of the business and better position the brand for the future and result in a meaningfully improved EBITDA for the year. Within our Emerging Brands Group, our focus in fiscal 2026 is on accelerating brand heat, expanding distribution in a disciplined way and continuing to leverage our shared operating platform to drive profitable growth.

This group continued to provide encouraging growth in energy in fiscal 2025, and we believe there is meaningful opportunity to build on that momentum through stronger storytelling, better merchandising tools and more effective allocation across channels. Across our portfolio, we are taking a disciplined phased approach to developing our data and AI capabilities, initially focused on areas where we see the clearest near-term return on investment, including marketing and e-commerce use cases, enterprise productivity tools and selected IT applications such as developer productivity. We are starting with practical use cases while continuing to strengthen the data foundation needed to support more advanced capabilities over time. As always, I want to express my deep appreciation for our teams across the enterprise. Their resilience, creativity and focus on our customer 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, we finished the fourth quarter and full fiscal year '25 with top line results within our guidance range and bottom line results within our guidance range, excluding $0.19 per share of charges related to the Saks Global bankruptcy. Consolidated net sales in fiscal 2025 decreased 3% to $1.48 billion. Sales in our full-price brick-and-mortar locations and e-commerce were down 3%, driven by a total DTC comp of negative 4%, partially offset in our retail channel by the addition of new store locations. Outlet sales were also down 2%. Our food and beverage locations grew by 4%, driven primarily by the addition of 4 new food and beverage locations added during the year, partially offset by a slightly negative comp. Our wholesale channel, which has continued to be pressured primarily from the decline in the specialty store market, decreased $13 million or 5%.

Despite the decline of the specialty market, we have been pleased with our sell-throughs at our most important department store customers and our ability to grow or at least maintain market share. By brand, sales declines at Tommy Bahama and Johnny Was were driven by negative comps in the high single and low double-digit range, respectively. While sales at Lilly Pulitzer were driven by positive comp in the low single-digit range. Our Emerging Brands continue to be a bright spot with sales growth in the low double-digit range as the brand continues to grow and mature. Adjusted gross margin contracted 190 basis points to 61.3%, driven primarily by higher tariffs of $30 million or 200 basis points.

Absent tariffs, a higher proportion of net sales occurred during promotional and clearance events at Tommy Bahama and Lilly Pulitzer were partially offset by lower freight cost to customers from successful contract renegotiations during the year, along with a change in sales mix with a higher proportion of DTC sales. Across our 3 major brands, consumer responses continued to be strongest during our promotional and end-of-season clearance events and to our new and innovative fashion products, continuing the trend from the last couple of years. Adjusted SG&A expenses, which have been adjusted in the current year to remove depreciation and amortization, increased 4% to $815 million compared to $784 million in fiscal '24. During fiscal '25, we incurred higher expenses related to the 10 net new retail stores opened in fiscal 2025, including 4 new food and beverage locations, along with the 30 net new stores added during fiscal '24. Combined, these locations accounted for almost half of the SG&A increase during the year.

We also incurred higher costs related to software and professional service fees, credit losses primarily related to the Saks bankruptcy, partially offset by lower advertising costs. The result of this yielded adjusted EBITDA of $107 million or 7.2% EBITDA margin compared to adjusted EBITDA of $193 million or 12.7% of net sales in the prior year. Moving beyond EBITDA, adjusted depreciation and amortization was flat compared to fiscal '24. We incurred $4 million of higher interest expense resulting from higher average debt levels, and we had a higher adjusted effective tax rate. With all this, we ended with $2.11 of adjusted EPS, which includes $0.19 of charges related to the Saks bankruptcy. I'll now move on to our balance sheet, beginning with inventory. At the end of fiscal '25, inventory decreased 1% on a LIFO basis, which was impacted by a large increase in our LIFO reserve. Inventory increased 2% on a FIFO basis.

The increase was driven by $11 million of incremental tariff costs capitalized into inventory relating to tariffs implemented during fiscal '25. Inventory was up just slightly in all brands, except for Johnny Was, primarily due to the additional tariff cost. On tariffs, I also want to address some important points. During fiscal '25, we paid approximately $40 million of tariffs imposed under IEEPA that was struck down by the Supreme Court. While those payments could potentially translate into a receivable, the timing collectibility remain uncertain and no potential recovery was included in our fiscal '25 results or is included in our fiscal '26 guidance. We ended the year with outstanding long-term debt of $116 million, up from $31 million at the end of the prior year. Our $120 million of cash flows from operations in fiscal '25 were outpaced by our capital expenditures of $108 million, primarily related to the Lyons, Georgia distribution center project and the addition of new brick-and-mortar locations, $55 million of share repurchases and $42 million of dividends.

I'll now spend some time on our outlook for 2026. For the full year, we expect net sales to be between $1.475 billion and $1.53 billion, approximately flat to up 4% compared to sales of $1.478 billion in 2025. The sales plan in 2026 includes growth in the Tommy Bahama, Lilly Pulitzer and Emerging Brands segments, partially offset by a decrease at Johnny Was. A total comp of approximately flat to positive 3% with some additional lift from noncomp locations opened in 2025. By distribution channel, the sales plan consists of mid-single-digit increases in brick-and-mortar and retail channels, along with a low double-digit increase in food and beverage locations that includes the annualization of 4 new locations from 2025. The wholesale channel is expected to contract in the mid-single-digit range due primarily to continued declines in the specialty store market.

More broadly, our guidance balances the modestly positive first quarter-to-date comps with the uncertainty we continue to see in the consumer environment. This includes the potential for additional pressure from the conflict involving Iran and the possibility that higher oil prices could weigh on consumer spending, freight and raw material cost. Moving on to gross margin. Let me first lay out the tariff assumptions embedded in our outlook. We are assuming tariff rates for the full year fiscal '26 will remain generally consistent with the incremental tariff rates put in place during fiscal '25. These rates are consistent with the rates reflected in our inventory balances at the beginning of fiscal '26 and what we expect for future receipts during the year. We are not incorporating any benefit from the recent Supreme Court decision or any related subsequent actions on other tariff matters. We are also not assuming any refunds of tariffs previously paid.

Using these assumptions, we expect total IEEPA-related tariff headwinds of $50 million during fiscal '26 or an incremental $20 million or 150 basis points of gross margin impact and $1 per share impact on top of the $30 million of tariff headwinds we absorbed in fiscal '25. Additional tariff costs are not expected to be evenly distributed throughout the year. As we have discussed previously, we recognized very little incremental tariff costs in the first quarter of fiscal '25 due to the timing of when tariffs were enacted and our efforts to accelerate large portions of our inventory purchases. As a result, we expect an approximate $12 million or 300 basis points headwind to gross margin in the first quarter of 2026. Beginning the second quarter, we expect incremental tariff impact to moderate significantly as we anniversary periods of fiscal '25 that did include more substantial tariff impacts. After Q1, we expect year-over-year tariff headwinds of approximately $2 million to $4 million or 50 to 100 basis points per quarter.

Outside of tariffs, we expect a full year benefit from price increases, a change in sales mix with a greater proportion of direct-to-consumer sales and a slightly lower promotional cadence to result in a modest adjusted gross margin expansion to approximately 62%. The price increases implied in our guidance range from 4% to 8% and vary by brand. These increases reflect a more elevated assortment as well as higher pricing on new product with relatively limited like-for-like increases on existing product. Moving beyond tariffs and gross margin, we expect SG&A, which now excludes depreciation and amortization, to grow in the low single-digit range, primarily due to increased software-related costs, the annualization of incremental SG&A from the 10 new stores added during fiscal '25 in a handful of locations, including a new Tommy Bahama Marlin Bar in fiscal '26 and increased incentive compensation primarily due to lower payouts in recent years.

Also within EBITDA, we expect royalties and other income to increase by approximately $2 million in fiscal 2026. Additionally, our fiscal '26 guidance includes the unfavorable impact of increased losses of $5 million or $0.25 per share related to the opening of our new Lyons DC. These losses reflect the ramp-up cost of opening and operating the facility before we have achieved targeted inventory levels and the cost of operating 2 facilities while we transition out of the old facility and into the new facility. We expect significantly all the incremental cost to operate the new Lyons DC in fiscal '26 will be depreciation related with some offsetting reductions in cash operating costs. We also expect an increase in nonoperating items, including anticipated higher interest expense of $1 million for the year or an approximate $0.05 EPS impact from anticipated higher average debt levels. We also expect a higher adjusted effective tax rate of approximately 28% compared to 24% in 2025, will result in approximately $2 million of additional tax expense or $0.15 per share impact.

The increase in the effective tax rate is primarily due to expected shortfalls in stock-based compensation vesting during fiscal 2026. Considering all of these items, we expect 2026 adjusted EPS to be between $2.10 and $2.70 versus adjusted EPS of $2.11 last year that included the $0.19 of charges related to the Saks Global bankruptcy. Before moving on to the first quarter, I want to briefly discuss the completion of the new distribution center in Lyons. As Tom mentioned, we are still in the early ramp-up phase to bring the facility online and want to be careful about attributing specific financial benefits before it is fully operational and handling the level of volume we expect over time. Over the long term, we believe Lyons will be an important asset for Oxford. The facility is designed to improve the efficiency and flexibility of our distribution network, supported by a more modern layout and state-of-the-art automation.

In the near term, fiscal 2026 will include the additional depreciation costs mentioned earlier as we move through the early stages of ramp-up following the start-up activity incurred in 2025. Even at this early stage, Lyons is already providing several strategic benefits to the business. These include being able to eliminate 2 higher-cost Los Angeles-based distribution facilities acquired with Johnny Was in fiscal 2024, reducing lease space across other parts of our distribution network, increasing flexibility as we continue to evolve our sourcing network, improving our ability over time to operate the business with lower inventory levels and enhancing service to important Southeast and East Coast markets for Tommy Bahama, which have historically been serviced from our Auburn, Washington facility on the West Coast.

Moving on to the first quarter of fiscal '26. We expect sales of $385 million to $395 million compared to sales of $393 million in the first quarter of 2025. The sales plan in the first quarter includes a flat to modestly positive comp in the low single-digit range. By channel, we expect low to mid-single-digit increases in our retail and e-com direct-to-consumer channels and mid- to high-teen growth in our food and beverage channel to be partially offset by a low double-digit decrease in our wholesale channel. We also expect the $12 million of higher cost of goods sold or approximately 300 basis points of gross margin impact or $0.60 per share from higher tariff costs, as I mentioned previously, along with a higher mix of promotional and clearance sales to be partially offset by a higher mix of direct-to-consumer sales.

SG&A deleveraging largely from the anniversarying of new stores opened in '25, some additional costs related to the new Lyons, Georgia facility and increased incentive compensation, as previously mentioned, higher interest expense of approximately $1 million and a higher effective tax rate of approximately 25% compared to 24% in the first quarter of '25. We expect this to result in first quarter adjusted EPS between $1.20 and $1.30 compared to $1.82 in the first quarter of 2025. Excluding the additional $12 million or $0.60 per share in tariffs, adjusted EPS at the low end of our range is nearly flat with a year ago. Related primarily to the completion of the new Lyons DC and significant reduction in new store openings, we expect total capital expenditures of approximately $65 million in fiscal 2026 compared to $108 million in fiscal '25.

The $65 million includes approximately $20 million of final cost to complete the new Lyons facility early in fiscal '26, which was previously planned to be incurred in late '25. The remaining capital expenditures in '26 will relate to ongoing investments in the execution of our pipeline of new stores in Marlin bars, including 1 Marlin Bar expected to open in '26 and capital expenditures related to relocations and renovations of current brick-and-mortar locations. Across the company, we expect to open a handful of new locations at Tommy Bahama and Lilly Pulitzer, but expect to close some stores in other brands, which should result in a relatively flat store count for the year. Wrapping up our guidance, we expect cash flow from operations of approximately $130 million to allow us to pay down a significant portion of our debt while completing the previously mentioned investments and the payment of our quarterly dividend that was increased by 1% to $0.70 per share by the Board in our latest March meeting.

Thank you for your time today. We now turn the call over for questions. Shamaly?

[Operator Instructions] Our first question comes from the line of Ashley Owens with KeyBanc Capital Markets.

Maybe just to start on Tommy Bahama. You've been very transparent around the assortment changes that you've been working to implement there. As you started to see that improvement with the mid-single-digit comps so far this quarter, could you just help us further unpack what's driving that momentum? Are you seeing any encouraging signals across traffic, basket size or conversion that give you confidence that the trends you're seeing now could be sustainable?

Yes. Thank you, Ashley. No, we're very excited about what we're seeing in Tommy Bahama because not only are we seeing the mid-single digit -- and it really goes back to the back half of January, so very end of last year and then through quarter-to-date of this year. And it's been pretty consistent. It's not -- even this week, it's been a good week. Yesterday was a great day for us on a Wednesday. So we're seeing the kind of consistent results that give us a lot of confidence. And then the next thing I would say, Ashley, is that it's very much about having the right product in the right depth in the stores is really -- and of course, online as well, but that's really what's driving it. So a couple of the best sellers on the men's side, which is the biggest part of our business, have been the Emfielder Polo, which is our bread and butter Polo. It's made a couple of tweaks to it.

It's a new and improved Emfielder Polo, but it's the Emfielder Polo. And then you're familiar with our Boracay pant franchise that has been with us for quite a while now. It started with a Chino way back when, then we added a short, then a 5 pocket, then a new Chino this past fall, which has performed very, very well for us. And then for the spring, the new Boracay short, we had a Boracay short before, but like the pant, this is a new and improved version of it, and that's really helping drive business a lot. On the women's side, dresses are performing well. Wovens, shorts and pants, I believe, are all performing well. We're also seeing, Ashley, that what we're talking about in our marketing materials like a mailer we did last month, that's what's selling too, and it's good to see that connection. So we look at all these things, and we get pretty excited.

And then the last thing I'll tell you is that the results that we posted so far, this time of year, Florida is the most important part of our business, but Florida is still not as strong as we want it to be. And it's really the West that's driving the results. The great thing about that, Ashley, is that as we get into second quarter, the West becomes proportionately more important to our business. So the fact that we have a lot of momentum overall, but particularly out there, I think, bodes well for our ability to sustain this momentum. And then again, it's all about product and having the products that the customer wants to see us -- see from us and for a variety of reasons last year, a lot of them having to do with the tariffs, but other reasons as well. We just -- we were not on that as much as we needed to be, and we are this year, and it's working.

Great. That's super helpful. And then maybe just one follow-up. On the gross margin, I appreciate all the color you gave us there, but I think there was a call about some of the channel mix shift. So as that takes place and it moves more towards the DTC and food and beverage, just how should we think about the margin implications and contribution to overall profitability in '26?

Yes, definitely on gross margins, with DTC growing and wholesale, we talked about pulling back a little bit. It certainly helps the gross margin. We are performing well at the wholesale doors, especially the majors. So we think we can get some momentum back at wholesale. But they both -- definitely on the gross margin line, they help. And then when the DTC is coming into a comp, it really falls to the bottom line. So if we can get comps meaningfully positive, it really does flow through.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group.

As you think about the Saks and the loss of Saks, and you just mentioned about wholesale distribution, other places that you would go or you would look to? Is it any of the existing like the Dillard's, Macy's or Nordstrom? How do you see the wholesale channel going forward? And you just mentioned Florida performance, I believe, was weaker than the West Coast. How much weaker is it than the West Coast and any takes there? And just lastly, as you think about the framework for margins and the income statement and balance sheet this year, the lower CapEx this year, what does that mean? How do you think of the opportunity for that cash? And how do you think about margins and SG&A spend as we go through the year?

Okay. I will start with Florida. And just to be very clear, Florida is actually getting stronger. It's improving. It's just that the West has really been kind of on fire. So I don't want to leave anybody with the impression that Florida is where it's been for a while. It is actually picking up. We've been glad to see it. February was extremely cold in Florida. You may have been down there or have friends or family that was down there. February was a really cold month in Florida, and that didn't help. I think we're seeing really good signs out of Florida. The point though is just that the West is on fire, and that bodes well for us, especially as we get into second quarter. And as you know, Dana, for us, you have a good first quarter and second quarter. I mean it's -- that's the makings of a really good year there. So we're excited about that. Then in terms of Saks, look, we're rooting for them.

We want them to be successful. Obviously, it's going to be a smaller footprint. We like doing business with them. We think it's a great venue, especially for our Johnny Was brand, which has historically had a nice business with both the Saks side and the Neiman side of the business. So we're rooting for that. But I think there is some business to be had out there as they move away from certain locations in certain markets. And I believe it's the winners will be the people that you said, Macy's, but more specifically, I think Bloomingdale's as well as some of the top-tier doors at Macy's. And then Dillard's and Nordstrom, I think, are also in a position to win. I think if you look out across that perspective, we have good relationships with all of those, and we like doing business with all of them. And we'll play to win as the market evolves. And then on the CapEx and margin questions, I'll kick that over to Scott.

Yes, yes. So lower CapEx. So a little -- yes, obviously, the Lyons DC, we still have some that carry for from last year, but quite a bit lower and lower in stores. So we plan to -- we raised our dividend modestly, and then we plan to pay debt down. So we think we can take a meaningful buy down of our debt level. So that's the current plans with the cash. And then your margin question was -- can you repeat that one, Dana? I'm sorry.

Sure. As you think about the margins going through this year, any puts and takes on the levers on gross or SG&A, the quarterly cadence of what you'd be looking for, what could be a headwind or a tailwind?

Yes. I'd say for the year, depending on where in the sales guidance range we come, and if we can be closer to the upper end of it, we should be able to leverage SG&A a little bit, which would be nice in having a little bit of growth in our gross margin percentage also. As far as -- there won't be too wild swings year-over-year on the percentage, maybe a little bit more in Q2 than Q1, but relatively flattish on gross margin percentage by quarter, so no wild swings there. And then just with some of the price increases, I think even though we have the tariff headwinds, we think we can overcome that in our gross margin, which I think is important. And then obviously, there's a lot of upside if we did bake in the IEEPA rates. And today, the rates are lower, no telling what's going to happen. So if they held where they are today, there's certainly some upside. And again, we did not build in any refund for what we paid last year. So there's certainly some upsides out there depending on where the tariffs go.

Our next question comes from the line of Janine Stichter with BTIG.

You got Ethan on for Janine. First, just I think you said you're looking to pay down a meaningful amount of debt this year. I was just wondering if you have a level you're looking to end the year at? And then where does it rank in your overall capital allocation plans for the year?

We hope to take it down absent any refunds of tariffs, $30 million to $40 million reduction is what our current plan shows. And...

Yes. And on the capital allocation, nothing's really changed there, Ethan. As you know, we believe paying a dividend is important and have paid one every single quarter since we went public in 1960. -- our dividend CAGR over the last 10 years is actually somewhere around 10%. And we increased it by $0.01 a quarter. The Board did earlier this week. So dividends part of it, debt repayment. The CapEx will come way down this year, as Scott outlined in his comments. And I think the big sort of blob of CapEx that we had over the last 2 years is largely behind us, a little bit carried over into this year. That was really just a timing thing. But what we think going -- this year and going forward is that we'll be at much more normalized levels of CapEx. And so there should be plenty of cash flow and free cash flow.

Got it. That's super helpful. And then just one more for me. Could you just give us a little more detail on exactly what the marketing and merchandising actions at Johnny Was will look like this year as you look to reinvigorate the brand?

Yes. So the marketing is really about more elevated, better storytelling, storytelling that emphasizes what's special and unique about the brand and presents it in an elevated way and also one that hopefully reaches a bit of a broader audience than we had in the past. We have a very dedicated fan base at Johnny Was, but we think there are more people out there that we can appeal to, and that is -- some of that's already showing up. And then from a product and merchandising standpoint, it's really about making sure that we have the right silhouettes, the right fabrications, very importantly, the right price points that we're offering innovation and newness, all consistent with the Johnny Was DNA and then investing appropriate levels of inventory. And this is a big project that we've had going, and it started really last summer. And we are starting to see the results of some of it already.

We have a weekly report that we look at every week that's got, of course, sales and margin and a couple of other KPIs. And one of the great things about it is that we look at it this year, pretty much every week, we're seeing almost all green on that report, whereas for a couple of years, it was largely red and now it's almost all green, but we're also seeing the benefits of some of that merchandising work that we did show up. So for example, that work indicated that dresses in the $200 to $300 price bucket were very important. We invested more inventory dollars in that for spring, and it's paying off. It's really -- it's working well. So those are the kinds of things that we're doing. What I'll tell you, Ethan, though, is the full impact of the work really doesn't show up until the fall product hits the floor, which is 7/30, July 30 is when we ship fall.

And then you'll see, I think, a more complete extent of the work that we've done there. Another thing that I would be remiss if I didn't mention is the inclusion of some items that I think we're calling essentials or core essentials. But these are solid pieces. There's like a top, a pant, a skirt, maybe 1 or 2 other things, and they come in, I believe, 3 solid colors that merchandise beautifully with all our embroidered and printed product, but they give a woman a way to come in and if she wants to buy a printed top but would prefer to have a solid pant or a skirt to go with that, we've got it for -- so it's a way to let her complete the outfit in our store, which will be a plus. And then it also -- from a visual merchandising standpoint, it just helps break up the -- all the embroidery and print that we've got in the store.

And sort of in concert with that, we're also, I would say, calming down the interiors of a store, our store a little bit to make them a little less overwhelming and easier to shop. And a lot of this is well in flight. A lot of it will take a little bit longer to fully come to fruition, but we're super excited about it. One of the things that we love Ethan is that one of our very important wholesale customers when they came in to see fall, they absolutely loved it. They bought into it. They loved what we were doing, and they actually upped their budget for their buy for us, which is a very, very strong indicator of what they think about the line. And I think that's an early indicator. Obviously, ultimately, the consumer is the one that votes, but retailers that are great merchants, their opinions tend to be pretty good indicators of where you're headed.

[Operator Instructions] Our next question comes from the line of Mauricio Serna with UBS.

I guess I'm just trying to understand from the guidance that you laid out for the year. I think it implies some acceleration, at least if you look at the ranges, I think like in Q1 versus what you're projecting for the year. Maybe could you just help us reconcile that? Also, could you give us more details on what you're seeing on Lilly Pulitzer. I think you alluded to like the soft start of the year, maybe because of weather. How are you thinking about that business improving as the year progresses?

Mauricio, on the -- I think you're referring to comps, it accelerated a little bit in the guidance from -- and part of it is February was extremely cold. We had -- February was not a great comp month, and it's really -- well, Tommy Bahama has really overcome that. As Tom mentioned, with the West Coast business, Lilly has started a bit behind on comp and behind our initial plan on comp, but they are such East Coast-centric and East Coast is where weather patterns had. They don't have the West Coast offset. So with the weather normalizing, we really believe we'll have a little bit better comp because of that. And we're seeing it more in March, especially at Tommy.

And then on -- yes, on the Lilly thing, I mean, it's the -- in February, as Scott mentioned, it was not a great comp month. And Florida is an enormous part of Lilly's business all year, but especially in the spring, we did a really interesting look back where we looked at the weather patterns in Florida over the last, I don't know, 7 or 8 years, something like that. And when it's cold in February, comps are weak. And by cold, I mean, when the average temperature is colder than normal on a daily basis, the comps tend to be weak. When the weather is warmer than the normal on an average daily basis, the comps are good. And this year, we just didn't have it. Lilly so dependent on Florida, especially at that time of year. and the whole East Coast, they do a lot in the Northeast.

As you know, from where you live, there was just so much snow up there that I think that had an impact on us. And of all of our brands, Lilly is the warmest of a bunch of warm weather brands. And I think we saw it not only in the financial results, but in terms of what was selling, the dress business, which in colder weather, dresses are going to be less popular was the weakest category and the strongest categories were things like pants and jackets that go better with cooler weather. So we look at the product, we don't think we have any issue there. We think the weather will turn and is turning, and we expect things to pick up, but we've obviously factored what we've seen to date into our forecast.

Got it. Very helpful. A couple of follow-ups maybe on the margins. First on gross margin, I think you alluded to first quarter still being impacted with some promotions, I think, or some like higher proportion of sales happening during promotional events. But then like for the full year, I think it's like the opposite or less promotions. So trying to reconcile that. And then specifically on Johnny Was, anything that you can tell us in terms of like how you're thinking about the margin outlook of this business for the year? Or maybe, I guess, like I said, more of a top line first recovery? How should we think about the inflection of that business or how much inflection we should see in '26?

Yes. Yes, I think Johnny Was, it's going to be a little bit more of a gross margin story, which will get better after the first quarter. We still have some goods to clear and still had to have some -- a little more promotions. The number of promotional days are expected to come way down. Our inventory levels are in really good shape. And so we think -- so part of the gross the promotional cadence is Johnny Was will get less promotional as the year goes on. And as we buy better, buy more in the right categories, buy appropriate levels. We think the amount of promotions we'll have to do is less. So for the year, we have Johnny Was gross margins maybe moving backwards slightly in Q1, but for the year, they move forward. So that's kind of explained part of the promotional comments that we had.

Our next question comes from the line of Joseph Civello with Truist Securities.

First one, just on the inventory planning stuff that you've done with Johnny Was. I think you were talking about kind of porting that over to the other brands. Can you just talk about what we should be expecting there, I guess, near and long term and what the impacts might be?

Yes. So we are porting it over really across the entire company. I think after Johnny Was, the next one up was Lilly, but they're several months behind Johnny Was. So the time period before they'll start to really see impact will be pushed out a bit, too. And then of the big brands, Tommy was the last, and they're really getting going on it now. So there's -- it's probably really for Tommy more spring '27 before you see anything. But -- and Lilly, you'll get some probably in the later part of this year. And the key things that I think it helps ultimately is the most important things, sales, margin, customer satisfaction, it's pretty good. And Joe, it's -- I think the potential to really transform the profitability of our business pretty materially is very real. I don't want to put too much on '26 just because of the timing of when this happened. But I think as we get into '27 -- we'll get some in '26. But as we get into '27, you'll see a lot more.

Got it. Sounds good. And then just on the Lyons facility, I know that the financial benefits are further down the road, but can you talk about like the logistical lift you might get from having it closer to the core of the Tommy market?

Yes. Right now, a lot of the East Coast store replenishment, a lot of the East Coast e-commerce is being fulfilled from Auburn, Washington. So just having fulfilled closer to source. We'll take a lot of the guesswork out of the retail replenishment and we'll be really replenishing what the stores really need. It will lead to once we have the rhythm to us being able to carry less inventory because we'll have -- and the individual stores can carry less knowing they can get replenished very quickly. So that's going to be a huge benefit and one that we obviously got to get up and running and getting the right volumes in there and then getting the confidence level of the stores that they can cut back on their buffer stock and get replenished very quickly with the right thing. So -- and we'll continue to add the amount of Tommy Bahama that goes in this facility as the facility ramps up.

Our next question comes from the line of Paul Lejuez with Citigroup.

It's Tracy Kogan filling in for Paul. I had 2 questions. The first, I think you guys mentioned it was traffic and conversion that were the issues in 4Q. And I'm wondering which of the metrics has really changed and improved as you're talking about the improvement quarter-to-date? And then I think in your prepared remarks, you mentioned optimizing Lowe's distribution and channel mix and changing their pricing architecture. And I was just hoping you could go into a little more detail on that.

So on the pricing architecture, it's really that same thing I was talking about in Johnny Was where we've implemented a tool that helps us to do much more detailed analytics on what price points really work well from I'm sure you're familiar with GMROI or gross margin return on investment. So looking at the business on a very granular basis and understanding the best places to invest our inventory dollars. And the example I gave in Johnny Was was dresses in the $200 to $300 price point bucket where historically, according to the data, we were a bit underinvested. We were overinvested in some other places, and it's really trying to adjust those, I guess, imbalances, if you will, in the line.

Then when you know where you need to be, you can design into it. So it's not like you have to raise prices or cut prices to get there. You just design your future line into the price architecture that the analytics indicate will work best. And again, on the Johnny Was example, that finding came out, I guess, back in the summer, and we were able to action it at least to some degree, and it's working. And there are a lot of others, too, but that's the idea. And it's basically, Tracy, about having better tools and processes. We've got great merchants across the country -- company and across the country. We've got just superb merchants, but it's about putting better processes and tools in their hands and letting them to do their job better.

And then on the quarter-to-date traffic conversion...

Yes. What I would tell you is that the big star of the show has really been the average order value, which is a combination of both the average unit price and the unit per transaction, which the trend lines on those are really good. Traffic has been okay. Conversion has still been a little bit of a challenge, but the very strong positives, I would say, are the -- is the average order value growth. That's kind of the story.

And we have reached the end of the question-and-answer session. I would like to turn the floor back over to CEO, Tom Chubb, for closing remarks.

Okay. Thank you, Shamaly, and thank you for your interest, everybody. We look forward to talking to you again in June, and I hope all is well until then. Thank you.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Greetings, and welcome to Oxford Industries Third Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Brian Smith from Oxford. Thank you, and you may begin.

Thank you, and good afternoon. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC including the risk factors contained in our Form 10-K. 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 Grassmyer, 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 today. As is typical for our third quarter, I'll keep my comments on Q3 relatively brief before turning to what we're seeing in the early weeks of the fourth quarter and how we are approaching the holiday season and the rest of the year.

We are pleased with what we were able to accomplish during the third quarter with our financial results broadly in line with the expectations we set earlier in the year. The environment remained highly competitive and promotional and the consumer continue to be selective with their discretionary spending, often requiring new and innovative product to capture attention. Against that backdrop, our team stayed focused on our long-term priorities and executed well on the fundamentals of our strategy.

Strong sales growth in both the emerging brands group and Lilly Pulitzer offset declines at Tommy Bahama and Johnny Was. Total company comp sales were slightly positive and while gross margins continue to reflect the pressures we've discussed in prior quarters related to tariffs, our underlying adjusted gross margin, absent that pressure improved over last year's even in a highly promotional environment. In addition to the financial results, we made important progress on a number of key initiatives across the enterprise.

Starting with people, we were pleased to have realigned and strengthened our teams in Johnny Was and the emerging brands group through a combination of internal promotions and hiring key executive talent from outside the company. Also at Johnny Was, we made significant progress with the business improvement plan we discussed last quarter. In Tommy Bahama, our bars and restaurants are a distinct competitive advantage, and we were pleased to have added 2 important restaurant openings during the quarter. In Lilly Pulitzer, we anniversaried last year's very successful Palm Beach Fashion Show with a fashion show in Key West. Last year's event has helped fuel creative content and commercial success throughout 2025, and we expect this year's event to do the same for 2026. We also completed the renovation of our [ Worth Avenue ] Lilly Pulitzer flagship location in Palm Beach.

Finally, we are in the final stages of construction of the new state-of-the-art fulfillment center that will be such an important asset to our direct-to-consumer businesses. None of these items will have immediate impact on our financial results, but are critical parts of the foundation of future success.

As I previously mentioned, across the portfolio, performance varied by brand as it has for much of this year. The bright spot continues to be Lilly Pulitzer, where the brand again demonstrated a deep connection with its core consumer and delivered healthy growth in the quarter. Our Emerging Brands business also posted strong year-over-year sales gains, reflecting growing recognition relevance, customer engagement and growth potential.

Moving to Tommy Bahama, while our third quarter results did not meet our goals for the brand, we did see encouraging progress. Comps improved sequentially to down low single digits from down high single digits earlier in the year. We believe we've made meaningful headway in addressing key areas that contributed to softness early in the year, particularly around color assortment and completeness of the line, which led to disparate regional performance and softness in Florida, our most important market. There is still work to do, but we feel good about the adjustments made so far. At the same time, we continue to invest in the long-term health of the brand through thoughtful expansion of our retail and hospitality footprint.

During the quarter, we reentered the important [ Saint Arm ] on circle outside of [ Sarasota ], with a beautiful new full-service restaurant and retail store, which replaced our previous restaurant that was damaged and closed in 2024 due to a hurricane. This new location reinforces the strength of our hospitality model in one of our most important markets. We also opened a new Marlin Bar in the Big Island of Hawaii, further deepening our connection to a region that has been central to the Tommy Bahama brand for decades. Both locations are off to encouraging starts, and we believe they will be long-term assets for the brand.

Turning to Johnny Was. We made several important changes during the quarter to strengthen the foundation of the brand and position it for long-term success. As we discussed last quarter, Johnny Was is an incredible brand with beautiful product, a loyal and engaged customer base and a hard-working, deeply dedicated team. To ensure the brand can fully capitalize on that potential, we have a refreshed key leadership roles, including the promotion of Lisa Kaiser, our former Chief Commercial Officer at Johnny Was to lead the brand as President of Johnny Was. Lisa has an experienced business leader with over 25 years of leadership roles at Neiman Marcus, including 10 years as SVP, General Merchandising Manager of women's ready-to-wear.

We also made changes to the lead designer and Head of Retail positions to bring sharper creative focus, strong merchandising discipline and more consistent execution across the business.

Earlier in the year, we also engaged an outside specialist to help us assess the Johnny Was business and identified the actions needed to meaningfully improve profitability. That comprehensive project has now been largely completed and we have begun executing against its recommendations with clear priorities around creative direction, merchandising and planning, marketing efficiency and retail performance. While we are still early in the process, we're encouraged by the focus, energy and alignment we are seeing across the team. We believe that a combination of refreshed leaders have with a very capable incumbent team and a clear actionable plan will allow us to reinforce the fundamentals of the brand and unlock the substantial long-term opportunity we continue to see in Johnny Was.

With that backdrop, let me turn to the fourth quarter and our early read on the holiday. As a reminder, our comps in the fourth quarter last year were flat and benefited from a post-election balance. When evaluating the yearly results of the fourth quarter this year, it is clear that the softer start to the holiday season reflects a combination of tariff-related product limitations and a holiday period that has been more proportional across the industry compared with last year that made for a difficult environment along with the more challenging comps than earlier in the year.

Most significantly, our brands have experienced challenges in our product assortments that trace back to the tariff-related sourcing decisions made earlier in the year. When our brands were building their holiday and resort lines last spring, the tariff landscape was highly uncertain with the potential for substantial increases on certain China origin categories. As a result, we made difficult but prudent choices to reduce our exposure in categories heavily reliant on China. For example, sweaters and other cold weather product that are important at this time of the year. Those decisions were appropriate given the information available at the time. However, they left us with assortments that were not as complete or as comprehensive as we would like for the holiday season.

Sweaters in particularly have historically been strong drivers of fourth quarter demand across our portfolio and our reduced presence in this category has been a meaningful headwind. At the same time, the holiday selling period has been more promotional than last year with consumers showing heightened sensitivity to value and a willingness to wait for deeper discounts. While our promotional cadence and depth we were consistent with our brand appropriate approach, many competitors entered the season earlier and more aggressively. That dynamic contributed to a slower start for us in the opening weeks of the quarter.

At Lilly Pulitzer, our holiday promotions included curated gift with purchase events and a broader seasonal sale both of which resonated well with our core consumer, and we saw a strong engagement with many of our most giftable styles and capsules. Unfortunately, our successful gift with purchase events were somewhat limited due to high Chinese tariffs and the difficulty of shifting the production of these items elsewhere. Similarly, we identified that there were gaps in our assortments related to the tariff environment, particularly in novelty items and certain other seasonal products that could not be quickly moved out of China which limited our ability to fully serve demand. We also leaned into our core programs to mitigate tariff exposure, which reduced the level of newness we might have otherwise offered.

At Tommy Bahama, we built on themes introduced earlier in the year, offering a compelling mix of gift ready items and cold weather seasonal product. But as with Lilly, many of the categories that historically carry momentum for us during holiday, especially sweaters and other cold weather essentials that are heavily China reliant were reduced as a result of the tariff uncertainty earlier in the year. Those gaps, coupled with a promotional marketplace that moved earlier and deeper than usual, created incremental pressure. Despite these challenges, we have seen continued encouraging response in our Tommy Bahama Boracay [ pants ] that we discussed last quarter. While the price point increased from $138 to $158, new product innovation has led to significant sell-throughs and the Boracay [ pant ] has played meaningfully into the holiday gifting mindset.

This success also highlights some of the trends we have seen in the market where consumers are gravitating to versatile products that can be worn to work and casual events and are less discretionary than some other categories.

At Johnny Was, the customer continues to connect most strongly with the unique artful product that defines the brand, elevated embellish pieces, rich textures and vibrant color stories, again resonated with [ loyals ]. But similar to our other brands, limitations in certain seasonal categories due to tariff-driven sourcing adjustments, along with heightened promotional intensity across the marketplace created a more challenging backdrop for converting that interest at the levels we had anticipated early in the season. While still small in absolute terms, our emerging brands group continues to be a meaningful source of energy and growth within the portfolio.

Southern Tide, The Beaufort Bonnet Company and Duck Head have each built strong momentum this year and we are seeing that momentum carry into the holiday season with a stronger start than what we have seen in our 3 larger brands. These brands benefit from exceptionally loyal customer bases focused product stories and highly engaged teams and their performance is a testament to the opportunity we believe exists in each of them. As we continue to invest in their capabilities particularly in product, marketing and retail expansion, we remain very encouraged by the role of the emerging brands group can play in our long-term growth algorithm.

Taken together, these early holiday trends reinforce what we observed throughout the year. When we deliver fresh, differentiated product that aligns with our brand heritage the customer responds. However, given today's promotional climate, achieving that response requires more competitive value proposition. As a result, and as Scott will detail in a few minutes, we now expect our fourth quarter performance to land below our previous guidance, and we are revising our outlook for the remainder of the year. And that is our focus across the portfolio, concentrating on what makes each brand special and ensuring that what we put in front of the consumer inspires confidence, joy and a sense of possibility. That same focus has guided our product development and marketing plans throughout the year. It's why we have leaned into newness and innovation across our brands, and it's why we continue refining our offerings to match the customer's mindset heading into resort in the early spring period.

While the environment remains dynamic, we are approaching the remainder of the year with clear-eyed realism. We recognize that the consumer continues to navigate uncertainty and that promotional intensity remains high but our teams are executing with discipline, and we believe we are well positioned to meet the consumer where she is today while investing in the long-term strength and potential of our business through initiatives such as those I outlined at the beginning of the call.

As we look ahead to fiscal 2026, we are approaching the year with a clear focus on improving profitability and with confidence in the levers we have already begun to put in place. We expect to begin realizing the benefit of cost reduction initiatives that we started during fiscal 2025, including efforts around indirect spend and other SG&A-related efficiencies across the enterprise. At Johnny Was the significant merchandising and marketing work we undertook this year should begin to bear fruit and we also expect to extend the merchandising efficiency project, we piloted at Johnny Was to the other brands in our portfolio.

In addition, we will continue to focus on input cost reductions and tariff mitigation as we refine our sourcing strategies. Capital expenditures will decline significantly as we complete our new fulfillment center in Lyons, Georgia, which will allow us to meaningfully reduce our debt levels. All of these actions position us well to make tangible progress on profitability while continuing to invest with discipline in the long-term strength of our brands.

As always, I want to express my deep appreciation for our people across the enterprise. Their resilience, creativity and focus on our customers continue to be the foundation of everything we do. With that, I'll turn the call over to Scott for a more detailed commentary on our updated financial 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. In the third quarter, our teams were able to deliver top and bottom line results within our previously issued guidance range.

In the third quarter of fiscal 2025 consolidated net sales were $307 million compared to sales of $308 million in the third quarter of fiscal 2024, and within our guidance range of $295 million to $310 million. Our direct-to-consumer channels were up in total with a total company comp increase of 2%, which was in line with our guidance for the quarter. The direct consumer increase was led by increased e-commerce sales of 5% and increased sales in our food and beverage and full price brick-and-mortar locations of 3% and 1%, respectively. The increases in full price brick-and-mortar were driven primarily by the addition of noncomp locations. With comps in our restaurant and full price brick-and-mortar locations down slightly at 2% and 1%, respectively.

Sales in our outlet locations were comparable to the prior year. Our increased direct-to-consumer sales were offset by decreased sales in the wholesale channel of 11%, driven primarily by decreases in off-price business.

By brand, Lilly Pulitzer delivered another strong quarter with total sales increasing year-over-year driven by double-digit growth in retail and high single-digit growth in e-commerce, partially offset by a decline in the wholesale channel. The positive comp sales at Lilly Pulitzer, along with positive comp sales and overall sales growth in our emerging brands businesses helped to offset the low single-digit negative comp at Tommy Bahama and high single-digit negative comp at Johnny Was that led to sales decreases in both businesses.

Adjusted gross margin contracted 200 basis points to 61% driven by approximately $8 million or 260 basis points of increased cost of goods sold from additional tariffs implemented in fiscal 2025, net of mitigation efforts and a change in sales mix with a higher proportion of net sales occurring during promotional and clearance events at Tommy Bahama and Lilly Pulitzer. These decreases were partially offset by lower freight cost consumers due to improved carrier rates from contract renegotiations, a change in sales mix with wholesale sales representing a lower proportion of net sales and decreased freight rates associated with shipping our products from our vendors.

Adjusted SG&A expenses increased 4% to $209 million compared to $201 million last year, with approximately 5% or approximately 70% of the increase due to increases in employment costs, occupancy costs and depreciation expenses. Due to the opening of 16 net new brick-and-mortar locations since the third quarter of fiscal 2024. This includes the 13 net new stores, including 3 Tommy Bahama Marlin Bars and 1 full-service restaurant opened in the first 9 months of 2025. We also incurred preopening expenses related to some planned new stores scheduled to open in the fourth quarter.

The result of this yielded an $18 million adjusted operating loss or a negative 5.8% operating margin compared to a 3% operating loss or a negative 1.1% in the prior year. The decrease in adjusted operating income reflects the impact of our investments in a challenging consumer and macro environment.

Moving beyond operating income. Our adjusted effective tax rate was 30.3%, was higher than we anticipated due to certain discrete items that were amplified by our operating laws. Interest expense was $1 million higher than compared to the third quarter of fiscal 2024, resulting from higher average debt levels. With all this, we ended with $0.92 of adjusted net loss per share.

As a result of interim impairment assessments performed in the third quarter of fiscal 2025, the company recognized noncash impairment [ larges ] totaling $61 million, primarily related to the Johnny Was trademark. The impairment charges for Johnny Was was reflect the impact of organizational realignment activities in the third quarter of 2025, including changes to the Johnny Was executive team that Tom discussed. Revised future projections based on Johnny Was' recent negative trends in net sales and operating results and challenges in mitigating elevated tariffs.

I'll now move on to our balance sheet, beginning with inventory. During the third quarter of fiscal 2025, inventory increased $1 million or 1% on a LIFO basis and $6 million or 3% on a FIFO basis as compared to the third quarter of 2024, with inventory increasing primarily as a result of $4 million of additional costs capitalized into inventory related to the U.S. tariff implemented in 2025.

We ended the quarter with long-term debt of $140 million compared to $81 million at the end of the second quarter and $31 million at the end of fiscal 2024. Our debt historically increases during the third quarter, primarily due to seasonal fluctuations in cash flow with lower earnings during the third quarter, resulting in increased cash needs. Cash flow from operations provided $70 million in the first 9 months of fiscal 2025 compared to $104 million in the first 9 months of fiscal 2024, driven primarily by lower net earnings and changes in working capital needs.

We also had $55 million of share repurchases, capital expenditures of $93 million, primarily related to Lyons, Georgia distribution center project, which remains on track for completion and go live in early 2026, and the addition of new brick-and-mortar locations and $32 million of dividends that led to an increase in our long-term debt balance since the beginning of the year.

I'll now spend some time on our updated outlook for 2025. Comp sales figures in the fourth quarter to date are negative in the mid-single-digit range, which is lower than our previous expectations of flat to low single-digit positive comps. While our average order value has increased nicely. Traffic has been mixed, but mostly down and conversion has been very challenging across our portfolio. Due to the slow start to the holiday season, we are revising our guidance for the remainder of the year with the expectation that the mid-single-digit comp will continue for the remainder of the year. For the full year, net sales are expected to be between $1.47 billion and $1.49 billion reflecting a decline of 2% to 3% compared to sales of $1.52 billion in fiscal 2024.

Our revised sales plan for the full year of '25 includes decreases in our Tommy Bahama and Johnny Was segments, driven primarily by negative comps, partially offset by growth in our Lilly Pulitzer and Emerging Brands segments driven by positive comps and new store locations. By distribution channel, the sales plan consists of a low single-digit decrease in most channels, including wholesale, full-price retail, e-commerce and outlets partially offset by a low to mid-single-digit increase in our food and beverage channel that is benefiting from the addition of 3 new Marlin Bar locations and 1 new full-service restaurant opened during the year.

For fiscal 2025, our current annual guidance reflects a net tariff impact of approximately $25 million to $30 million or approximately $1.25 to $1.50 per share. While tariffs represent the primary driver of margin contraction this year, we also expect continued promotional activity across our brands to weigh on margins. As consumers remain highly responsive to value and deal-oriented shopping in the current macroeconomic environment. We expect our gross margins for the year to contract by approximately 200 basis points.

In addition to lower sales and gross margins, we expect SG&A to grow in the mid-single-digit range, primarily due to the impact of our recent continued investments in our businesses, including the annualization of incremental SG&A from the 30 net new locations added during fiscal 2024, incremental SG&A related to the addition of approximately 15 net new locations this year, including 3 new Tommy Bahama Marlin bars and a new full-service restaurant. Also within operating income, we expect lower royalties and other income of approximately $3 million in fiscal 2025.

Additionally, our fiscal 2025 guidance includes the unfavorable impact of nonoperating items, including $7 million of interest expense compared to $2 million in 2024 or an approximate $0.20 to $0.25 incremental EPS impact. Increased debt levels in fiscal 2025 are due to our continued capital expenditures on the Lyons, Georgia distribution center, technology investments and return of capital to shareholders exceeding cash flow from operations. We also expect a higher adjusted effective tax rate of approximately 25% compared to 20.9% in 2024. The higher tax rate is primarily a result of a significant change in the impact that our annual stock vesting cat on income tax expense in 2025 compared to 2024. We anticipate the higher tax rate will result in an approximately $0.15 to $0.20 per share impact.

Considering all these items, including the $1.25 to $1.50 per share impact from tariffs, higher interest expense and a higher tax rate. We have revised our guidance and expect 2025 adjusted EPS to be between $2.20 and $2.40 versus adjusted EPS of $6.68 last year. The biggest drivers of the decrease in EPS guidance includes a reduction of our fourth quarter comp assumption from low single-digit positive comps to a mid-single-digit negative comp, a decrease in royalty and other income from lower order expectations from key licensing partners who customers have elevated inventory levels that will lead to a shift in orders from Q4 to Q1 of next year. An increase in SG&A, primarily resulting from increased consulting costs related to our ongoing projects to improve operating results and some additional costs related to our new Lyons, Georgia distribution center.

In the fourth quarter of 2025, we expect sales of $365 million to $385 million compared to sales of $391 million in the fourth quarter of 2024. This primarily reflects our mid-single-digit negative comp assumption and decreased wholesale sales in the low single-digit range, partially offset by the impact from noncomp stores. We also expect gross margin to contract approximately 300 basis points, primarily driven by increased tariffs and a higher proportion of net sales occurring during promotional and clearance events.

SG&A did grow in the low to mid-single-digit range primarily related to the new store locations. Increased interest expense of $1 million, decreased royalty and other income of $1 million and an effective tax rate of approximately 26%. We expect this to result in fourth quarter adjusted EPS between $0.20 compared to $1.37 last year.

I will now discuss our CapEx outlook for the remainder of the year. Consistent with our prior guidance, we expect capital expenditures for the year to be approximately $120 million compared to a total of $134 million in fiscal 2024. Remaining capital expenditures relate to completing the new distribution center and the execution of our current pipeline of new stores at Tommy Bahama and Lilly Pulitzer. We expect this elevated capital expenditure level to moderate significantly in 2026 and beyond after completion of the Lyons, Georgia project. Consistent with the seasonal nature of our business, we expect a modest decrease in outstanding borrowings in the fourth quarter.

Thank you for your time today, and we will now turn the call over for questions. John? John, we're ready for questions.

[Operator Instructions] Our first question comes from Ashley Owens with KeyBanc Capital Markets.

So just first and foremost, I appreciate all the color on what was exactly a gap within each of the banners in terms of assortment for the holiday, but just moving forward, as we navigate the quarter, how meaningful would you expect this to be for the upcoming season? Is it something that's been corrected? Or are you observing some disruption still? Just want to understand how much of holiday is now fully aligned versus where you originally planned?

And then maybe on that, I know China is complex right now and it might be ironing out a little bit. But would ask if this gap is this shifting your viewpoint or sourcing strategy moving forward? Would you try to diversify further, place orders further in advance? Just any color there.

Yes. I think the big thing and while we did give a lot of detail, one thing that we didn't really call out specifically was that it's really what's on the floor right now that most impacted some of our sourcing decisions. And the reason is at the time that we were placing the buys for what's on the floor right now, corresponded with that brief period of time where the duty or the tariff on China was going to be 145%. When it's been 20% or 27% or whatever, that's something that we could make a conscious decision to just stay in China with a particular product if we needed to and just try to take various routes to mitigate that tariff.

When we were looking at 145%, which that's off the table at this point, but that was right when we were placing the buys for what's on the floor now. Lots of stuff we were able to move out of China. Tommy and Lilly are mostly out of China, if not completely but sweaters are the one category, and there are a couple of other ones. Sweater is the big one, that there are just not a lot of -- haven't historically been great resources that we could go to outside of China. So what we decided to do as is at the time, I think it was the right call we knew we couldn't bear that much tariff. So we really cut back the sweater assortment and try to fill it in with other products.

You look at our assortment right now and you wish you had the sweaters. And that's really what we were talking about. So by the time you get to spring, that had settled down a lot. The tariff stuff is still a little bit up in the air, but it settled down a lot, and we were able to either move the stuff or know that it was going to come in at a tariff rate that we could deal with otherwise.

So for spring, I don't think we have the same kind of impact. We still have tariff issues that we have to deal with, but they're not going to impact the assortment the way that they have for this season. Does that help?

Yes. That's super helpful. Just couple other questions really quickly. So I think you mentioned earlier that competitors were more aggressive with promotions for holiday and also earlier, which created that tougher backdrop. Any insight as to what you're seeing in the marketplace now in terms of that and if the intensity has moderated? But also how that's helping to inform your promo strategy for the balance of the year?

And then additionally, just following your leadership refresh and then the external assessment on Johnny Was would be curious as to what emerged as the key priorities you're now focused on? And then also as you look out to 2026, key objectives for the brand and should we be thinking of this as another period of stabilization? Or any color you could provide us on some -- the road map or some of the key building blocks for stabilizing, Johnny?

Okay. So with respect to the promotional sort of intensity out there, I would say right now, it still feels quite high, but we're a little bit in that in between time between Black Friday, Cyber Monday, weekend and the final stretch, and those are usually the most promotional times. I don't think it's really retracted, but I'm not sure it's taken another step up yet. But wouldn't be surprised to see that happen. And we're going to try to be responsive to that in brand appropriate ways. I think the catch word and all the brands to stay nimble. We do want to make sure that we're not totally selling out our brands, but we're also thinking about things that we can do to respond to the marketplace.

The one other thing I'll point out and -- this is -- this calendar that we have this year where there are 27 days between Thanksgiving and Christmas, and Christmas falls on a Thursday, the last time we had that calendar was in 2014. And that year, the business sort of came very late if you looked at the sales build through the Thanksgiving to Christmas selling period that really came on late. Last year, if you remember, you had Christmas on Wednesday. So this year, they've got an additional weekday to shop, which could be meaningful. And also, it allows us to cut off e-com shipments probably on Saturday or in some cases, even Sunday and still have people feel good that they're going to get them by Christmas, while last year, that was mostly on Friday that we were cutting off.

So there are some things there that we kind of built the current trajectory into our forecast, but I think there's some reason to hope that it could -- the season could rally a bit. Don't think it's going to be a great one, but there are some differences that are worth noting.

And then on the Johnny Was plan. The -- I will say a couple of things that the game plan was developed by the team at Johnny Was with some outside assistance, but it's very much the team's plan. Lisa Kaiser, who is now the President of Johnny Was, was part of that team. She's relatively new to Johnny Was, but she's been with us for several months. She was the Chief Commercial Officer before and she was very, very much central to the development of that plan.

So the refreshment of the leadership does not entail I would say, any change in the direction of the plan that we've been working on. And as we talked about last quarter, the keys to that are merchandising effectiveness, which is about having better assortments that hit have the right level of investment in the right price points, the right product categories, getting that to the stores at the right time and in the right store level assortments. And all of that will drive, we believe, some incremental sales versus what we would have otherwise had and also improve the margins, improve full price sell-through and ultimately gross margin.

And then other -- 2 other big areas of focus by the team, and again, it's the team's plan, really the same team. We've just added a few more people in elevated a few people, including Lisa, who we're very excited about. But the second element is about marketing efficiency. And that's really just more effectively spending the dollars that we spend to drive better results. And some of that, we've already started to kick in. And I will say what we're seeing today is encouraging in that we're actually getting I would call it better efficiency out of the spend that we've done in the last month or so, maybe a little longer than that.

And then the last thing is about improving the go-to-market process and calendar and that's something a whole team led by Lisa's, they're very bought into that. Lisa a big believer in that kind of discipline. So I think this -- the refreshment of the leadership team and the elevation doesn't change the plan because they all developed the plan but it enhances our ability to execute as well.

Great. Appreciate all the information, and I'll pass it along, but best of luck.

Our next question comes from Janine Stichter with BTIG.

Wanted to dig into wholesale a little bit. I know it's a relatively smaller piece of the business, but just curious if you can share what's going on there. It sounds like your wholesale partners are being a bit more cautious with orders that there's maybe a little bit more inventory in the channel. And then I think you mentioned that off-price was going to be down. Is that a strategic plan? Or maybe just elaborate on what's going on there.

I think on the overall on the wholesale, I think it is a level of concern and caution by the retailers and I would say most especially the specialty retailers that are a big part of our wholesale base. And during uncertain times, they tend to pull back a bit. And I think we're seeing that now. And Scott, I don't know if you want to elaborate on off price situation bill.

Yes. Yes, we did have less inventory that needed to be liquidated through those channels. So we are trying to keep our owner inventory and hopefully, we'll continue to have less that we have to put through those channels.

Got it. And then just thinking through the tariffs, as you're just now seeing the impact of the products that you were planning, I guess, in April or May when the China tariffs were 145%, is with Q4 what we should think of as a peak headwind from tariffs? Or how much should we think about continuing into the first quarter of next year?

Well, I think in terms of it the impact it had on our product assortment, I think it is peak. I think as we get into spring, we were able to make the product that we wanted to make it somewhere that was a manageable level of tariff. In terms of the impact, the financial impact of tariffs. Remember, we didn't have them during the first quarter of last year, really, they didn't really kick in until later in the year. So first quarter, you're not going apples-to-apples and then as you get later in the year, you start to lap the tariffs. And I don't know if you want to add that.

Yes. Yes. We had accelerated a lot of products. So early in the year, knowing that tariffs were going to be coming or fearful they're going to be coming. So we were able to most of the first quarter had very, very minimal.

Now we go into first quarter of next year, everything will have some tariff on it, but we will have some price increases to at least help mitigate that impact. As we get later in the year, we'll be going apples-apples with tariffs and hopefully have a little bit more mitigation price-wise as the year moves on.

Our next question comes from Joseph Civello with Truist Securities.

Following up on wholesale a bit understand the general cautious tone from retail partners. But can you give any incremental color on your sort of competitive positioning within the channel? And maybe as we get past the tariff pressures on inventory and stuff like that, that you're facing right now?

Well, I think the third quarter, our relative performance to the extent we know, and we don't always have perfect information. But I think we performed well, and I don't think we -- for the overall, I would say, well, there were small pockets where maybe that was not the case. But I would say, overall, our performance was quite good on the retail floor.

For the fourth quarter and the holiday, I think it's too early to know for sure, we don't have enough data. But my hunch is that we're going to continue to perform well relative to the rest of the floor. And it's more about the general cost.

Got it. Makes sense. And then if we could also just get a little bit more color on thoughts around price increases as we go through the spring, which I believe is like the original trajectory you're looking at?

Yes. We do have some price increases in for the fall holiday period, but there'll be more in the spring. But again, we'll have the full tariff load coming in that inventory.

And then we're looking at next fall pricing on -- are there any adjustments -- additional adjustments we need to make. So I think there will be -- once we have the early part of next year, the pricing should the goal is to have it mitigate the tariff dollars. I don't think we'll get the percentage quite mitigated, but the dollars once we get out of the early part of the year, the goal is to have the pricing mitigate the tariff dollars.

Our next question comes from Paul Lejuez with Citigroup.

It's Tracy Kogan filling in for Paul. I had a question about what you're seeing quarter-to-date. And outside of the key sweater category, can you talk about the trends there in some of those other categories and also talk about trends by brand quarter-to-date. Is it pretty broad-based weakness you're seeing across the brands? Or is there a big deviation of one brand or the other?

Sure. Thank you, Tracy. Well, I would say that -- and we talked about this in the prepared remarks, that the big 3 brands are all relatively weak at the moment in the smaller brands are still sort of humming along. They were plus 17% in the third quarter, and they're continuing to have a strong fourth quarter, while the big brands are where we're really seeing the softness.

And then in terms of product, we also talked about that a little bit. And I think in Lilly, we're -- because of the China tariff situation, a threat of 145%. China is where we make a lot of our more embellashed kind of novelty type stuff, things would sparkles and rhinestones and [ Bose ] and that kind of stuff. And so we've just got less of that stuff instead the consumers have to being forced in to some things that I mean, Lilly is never a basic product, but that within the Lilly spectrum are a little more team. And then in Tommy Bahama, we've actually seen very good performance and things like the Boracay pant, which is basically at Chino. It's a really great one, really nice one, but it's a chino pant. And that, as we talked about third quarter and again this quarter, we introduced a new one -- or I'd say third quarter, second quarter. We introduced that earlier in the year, it's at $1.58 versus $1.38. It does have some new features and benefits, but it's sold just incredibly well.

And actually, we're selling a lot more of them than we sold the old one last year.

And then also things like lung, sweet, sleep, wovens are performing well, some of the second layer kits. And I think the kind of theme to a lot of those things is versatility things that can be worn on a lot of different use occasions. But we'll see more as the season develops, Tracy.

Our next question comes from Mauricio Serna with UBS.

Great. I guess I understand now in this fourth quarter, you're experiencing some assortment issues that's related to the sweaters and the move out of China for that -- for this particular season. But as you think about the spring 2026 season, how are you thinking about your assortment, how ready you are in terms of different -- the 3 big brands, I guess, and the potential for maybe after getting through this bit of a hiccup in Q4 maybe having stronger results in the first half of next year?

I think the challenges to the assortment were really mostly for what's on the floor right now. I think as we get into spring, by the time we were placing those buys the 145% tariff was off the table and/or we had found other places to make things. So I don't think we'll have that challenge so much in the spring.

As Scott mentioned a minute ago, the tariff issue for the spring will just be that this year we will have tariffs, whereas in spring of last year, we didn't really have them yet because that been implemented and/or we were pulled in inventory ahead of them.

Got it. And just a reminder, what kind of price increase are you planning for Spring '26 to offset the tariffs?

Yes. It's kind of varying, but it's ranging from 4 to say 8%, but some of it, the ones that are more in the 8% or more of the -- it's more a little more elevated in mix. So I think for the tariff piece of it around 4 which kind of offsets the dollar impact. Yes. Yes, not quite the margin impact, but the dollar impact.

This now concludes our question-and-answer session. I would like to turn the call back over to Tom Chubb for closing comments.

Thanks to all of you very much for your interest. We look forward to talking to you again in March. And until then, I hope you have a happy holiday season.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines, and have a wonderful day.

Greetings, and welcome to Oxford Industries, Inc. Second Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Brian Smith. Thank you. You may begin.

Thank you, and good afternoon. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements.

Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC, including the risk factors contained in our Form 10-K. We undertake no duty to update any forward-looking statements.

During this call, we will be discussing certain non-GAAP financial measures. You can find a reconciliation of non-GAAP to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website at oxfordinc.com.

And now I'd like to introduce today's call participants. With me today are Tom Chubb, Chairman and CEO; and Scott Grassmyer, 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 today. As we continue through fiscal 2025, the second quarter brought complex, the clarifying developments in the story we began sharing with you last quarter. While the macro environment remains pressured, marked by higher tariffs, elevated promotional activity across the industry and cautious consumer behavior, our team has navigated these challenges with discipline and focus, delivering net sales and adjusted EPS within and above our guidance ranges, respectively.

Though down from the prior year, these results reflect our ability to adapt to dynamic margin conditions while staying true to who we are as a company and maintaining the strength of our brands and margin profile.

Looking at our recent performance by brand. Lilly Pulitzer continued its deep connection with its core consumer in the second quarter and posted positive direct-to-consumer total comparable sales, building on the strong engagement we saw in the first quarter. A key contributor to this momentum in the second quarter was delivering exciting innovation in our casual product, including the Linen Seaspray jacket that sold out in all colors and extending our offering of elevated everyday product, including polish shorts, silk tops and new stretch pants that all performed extremely well.

Continuing the theme of engaging the brand's most loyal customers, early in the third quarter, Lilly Pulitzer launched a highly anticipated Lilly's vintage fault which debuted Lilly a reproduction of a beloved archival print from 1974 in its original colorway. This limited edition capsule is the first in a series exploring Lilly's hand-painted print legacy as the brand embarks on a new celebration of its treasured heritage, drawing in Lilly loyalists and new customers alike. While still early, the initial response to the vintage fault has exceeded expectations and affirms the power of heritage storytelling and brand authenticity cornerstones of Lilly Pulitzer's enduring success.

Turning to Tommy Bahama. While our second quarter results did not meet our for the brand, we are energized by the work underway to improve performance. As always, our teams have leaned in spending time in the field, listening to our customers and digging into the data to understand what's driving the softness. What we've learned is encouraging because it's actionable. We've identified that some spring and early summary deliveries missed the mark in several areas, most notably in color assortment and complete liveness of the line, which led to gaps in their offering that are especially relevant to our customer in Florida, where performance continues to be below our expectations.

By contrast, we saw better results in the West where the assortment resonated more effectively with the regional aesthetic. These insights galvanized our team and we quickly implemented improvements for late summer deliveries to ensure the products available to our customers are more thoughtfully curated and locally relevant.

Tommy Bahama is a brand with exceptional consumer loyalty and a deeply resonant lifestyle message. With the right adjustments, we are confident we can reaccelerate performance and reengage our customer in a more meaningful way in the second half and beyond.

A great example of what's working is the recent launch of the Boracay Island Zeno. This updated pant, which builds on the incredible equity we've established in the original Boracay collection comes with a higher price point of $158, but that hasn't flowed down demand in the We have experienced very high sell-throughs across our own direct-to-consumer channels and also with our wholesale partners who have increased recent orders based on early success. We knew going in that the Boracay guest is incredibly loyal once they find a fit, they love, and this product has tapped directly into that loyalty. It delivers the comfort, versatility and polish that defines the Tommy Bahama lifestyle and it does so in a way that's clearly resonated with existing and new customers. We will launch new versions of this pant, including a 5-pocket version and shorts in our upcoming seasons to capitalize on this momentum.

Turning to Johnny Was, we continue to face headwinds, and the business remained challenged in the second quarter. While the numbers are not where we want them to be, we remain confident in the potential of Johnny Was and are taking further action. Working closely with both internal teams and external partners, we have developed and are in the early stages of implementing a comprehensive plan to improve Johnny Was' performance. We see meaningful opportunity to enhance the merchandising strategy, elevate brand storytelling and marketing and refine our approach to customer segmentation and pricing. Our goal is to reestablish momentum in this beautiful, differentiated brand, ensure it contributes meaningfully to Oxford's portfolio. To that end, we believe that the best days for Johnny Was still lie ahead.

I also want to take a moment to acknowledge the performance of our Emerging Brands Group, which delivered solid revenue growth both from new stores and positive comp store sales in what remains a highly challenging environment. These brands, Southern Tide, the Buford Bonnet Company had and Jack Rogers are still in the early stages of their development within our portfolio and yet continue to demonstrate strong customer appeal and brand momentum. The growth we're seeing reinforces our belief that there are significant growth opportunities ahead, and we are excited about the opportunity to build these brands into even more meaningful contributors in the years to come.

Switching gears to our tariff mitigation plans and capital projects, we said last quarter that we would continue to control what we can and we have. Our teams have made significant progress mitigating tariff exposure through continued supply chain shifts and facilitating the early delivery of products to avoid tariff increases and our gross margins, though under some pressure versus last year reflect that discipline. We've also taken steps to safeguard profitability by enhancing inventory management and maintaining pricing integrity even in a more promotional retail environment.

At the same time, we remain committed to completing the long-term investments we have underway that will serve us well beyond this fiscal year. Our lines Georgia distribution center is on schedule and continues to receive the necessary capital to bring it fully online sometime late in fiscal 2025 or early fiscal 2026.

We also remain on track to deliver 3 new Marlin Bar openings and a net increase of approximately 15 full-price stores across our portfolio by year-end. While the environment remains dynamic, I'm encouraged by what we're seeing early in the third quarter. Scott will provide more details on our financial results and outlook for the remainder of the year. Total company comp sales quarter-to-date are modestly positive in the low single-digit range, a clear signal that the work our teams are doing to refine the assortments improved storytelling and reconnect with our consumers is beginning to pay off. These are the kind of results that come from listening closely, adjusting thoughtfully and executing with discipline.

There is no doubt that this is a challenging period for our industry, but we believe that our portfolio of differentiated lifestyle-driven brands led by our exceptional teams is uniquely positioned to weather the volatility.

As we move into the second half, we are doubling down on the brand equity we built keeping our eyes on the long-term horizon while managing short-term headwinds with resolve. We remain confident that our continued focus on execution, brand authenticity and customer happiness will allow us to emerge from this cycle stronger with even deeper connections to our customers.

And now I will hand it over to Scott for more details on our second quarter results as well as our expectations for the balance of the year. Scott?

Thank you, Tom. As Tom mentioned, our teams have shown great discipline and resilience in responding to unprecedented uncertainty and challenges related to trade and tariff developments in the first half of the year. Despite these challenges, our teams were able to deliver top line results within our previously issued guidance range and bottom line results slightly above our previous issued guidance range for the second quarter. .

In the second quarter of fiscal 2025, consolidated net sales were $403 million compared to sales of $420 million in the second quarter of fiscal 2024 and near the midpoint of our guidance range of $395 million to $415 million. Sales in our full-price brick-and-mortar locations were down 6% and driven by a negative comp of 7%, partially offset by the addition of new store location.

Sales in our wholesale channel were down 6%, while e-commerce sales declined 2% and sales in our outlet locations decreased 4%. Sales in our food and beverage locations performed better than our other channels with modest sales growth year-over-year.

Overall, we finished the second quarter of fiscal 2025 with a total company comp of negative 5%, which was in line with our guidance for the quarter. Notably, Lilly Pulitzer had another strong quarter. While total sales at Lilly Pulitzer were down modestly compared to the prior year, the decline was driven by lower sales in our wholesale channel, partially offset by a low single-digit positive comp.

The positive comp sales at Lilly Pulitzer, along with positive comp sales and overall sales growth in our emerging brands businesses helped offset the high single-digit negative comp at Tommy Bahama and low double-digit negative comp at Johnny Was that led to sales declines in both businesses.

Adjusted gross margin tracked 160 basis points to 61.7% driven by approximately $9 million of increased cost of goods sold from additional tariffs implemented in fiscal 2025, net of mitigation efforts, which was partially offset by improved gross margins during promotional events at Tommy Bahama, a change in sales mix with full price retail and e-commerce sales, representing a higher proportion of net sales at Lilly Pulitzer and Johnny Was, and a change in sales mix with wholesale sales representing a lower portion of net sales. Without the impact of the incremental tariffs, our gross margins would have increased.

Adjusted SG&A expenses increased 5% to $224 million compared to $213 million last year, with approximately $4 million or 40% of the increase due to increases in employment costs, occupancy costs and depreciation expense due to the opening of 26 net new brick-and-mortar retail locations, including 3 new Tommy Bahama Marlin bars since the second quarter of fiscal 2024. This includes the 11 net new stores, including 2 Tommy Bahama Marlin bars opened in the first half of fiscal 2025.

We also incurred preopening expenses related to some planned new stores including an additional Tommy Bahama Marlin bar scheduled to open in the fourth quarter. The result of this yielded a $28 million adjusted operating profit or 7% operating margin compared to $57 million operating profit or 13.5% operating margin in the prior year. The decrease in adjusted operating income reflects the impact of our investments in a challenging consumer and macro environment.

Moving beyond operating income, our adjusted effective tax rate of 29.6% was higher than we anticipated due to certain discrete items, most notably from the unfavorable impact on tax expense related to the annual vesting of stock-based awards during the quarter, which occurs when they stop vest at a price lower than the price it spends for book purposes.

Interest expense was $1 million higher compared to the second quarter of fiscal 2024, resulting from higher average debt levels. With all this, we ended with $1.26 of adjusted net earnings per share.

I'll now move on to our balance sheet, beginning with inventory. During the second quarter of fiscal '25, inventory increased $27 million or 19% on a LIFO basis and $29 million or 13% on a FIFO basis as compared to the second quarter of 2024, with inventory increasing in all of our operating groups at Johnny Was, primarily due to the impacts associated with the U.S. tariffs that were implemented in the first half of 2025, including accelerated purchases of inventory that were implemented to minimize the impact of potential pending tariff increases and $5 million of increased cost cap loss into inventory after the implementation of the tariffs.

Notably as the tariff situation has stabilized to a degree, at least compared to the beginning of the fiscal year, we expect our inventory levels to decrease during the remainder of the year excluding any additional capitalized tariff cost as the need to accelerate inventory purchases to sides.

We ended the quarter with long-term debt of $81 million compared to $118 million last quarter, and $31 million at the end of fiscal 2024. Cash flow from operations provided $80 million in the first half of fiscal 2025 compared to $122 million in the first half of 2024, driven primarily by lower net earnings, changes in working capital needs, including accelerated inventory purchases and $15 million of expenditures related to implementation costs associated with cloud computing arrangements that are classified as operating cash outflows.

We also had $55 million of share repurchases, capital expenditures of $55 million, primarily related to the Lions Georgia distribution center project and the addition of new brick-and-mortar locations and $21 million of dividends that led to an increase in our long-term debt balance since the beginning of the year.

I'll now spend some time on our updated outlook for 2025. Comp sales figures in the third quarter date positive in the low single-digit range, also consistent with our expectations. With comp sales figures in the second quarter and third quarter to date, consistent with our previously provided guidance and several of the third quarter's most important events, including the Tommy Bahama Friends and Family sale behind us. We feel confident in affirming our previously issued guidance for the remainder of the year.

Consistent with our previously issued guidance, we expect the trend of flat to modestly positive comp sales to continue for the remainder of the third quarter and for the fourth quarter. For the full year, net sales are expected to be between $1.475 billion and $1.515 billion, reflecting a decline of 3% to just slightly negative compared to sales of $1.52 billion in fiscal 2024.

Our sales plan for the full year of 2025, consistent with our previously issued guidance includes: decreases in our Tommy Bahama and Johnny Was segments, driven primarily by negative comps. That decline is expected to be tempered by growth in our Lilly Pulitzer and Emerging Brands segments driven by positive comps and new store locations.

By distribution channel, the sales plan consists of low single-digit decrease in e-commerce and wholesale sales, partially offset by a low to mid-single-digit increase in our food and beverage channel that will benefit from the addition of 3 new Marlin Bar locations during the year.

We expect flat sales in both full-price retail and outlet channels with modest negative comps, offset by the addition of approximately 15 new locations during the year. For fiscal 2025, we continue to expect gross margin to contract by approximately 200 basis points largely due to the impact of tariffs. With the recent tariff increases announced during the second quarter, including increased tariffs in countries like Vietnam and India that were included as part of our shift away from China. Largely offset by the mitigation efforts we have undertaken, including accelerated inventory receipts and quickly shifting our sourcing network. Despite recent legal challenges, our current forecast is based on the assumption that these tariffs will remain in place for the remainder of the year.

Based on the current tariff policies and our historical 2024 sourcing patterns, we estimated a potential incremental tariff exposure of approximately $80 million in fiscal 2025, prior to any mitigation actions such as accelerated receipts, sourcing shifts, vendor concessions or price increases. Accelerating receipts and sourcing shifts, we were able to mitigate roughly half of this exposure.

Through additional vendor concessions and select second half price increases, our current annual guidance reflects a net tariff impact of approximately $25 million to $35 million or approximately $1.25 to $1.75 per share after tax.

While tariffs represent the primary driver of margin contraction this year, we also expect continued promotional activity across our brands to weigh on margins as consumers remain highly responsive the value and deal-oriented shopping in the current environment.

In addition to lower sales and gross margins, we expect SG&A to grow in the mid-single-digit range, primarily due to the impact of our recent and continued investments in our business, including the annualized -- annualization of incremental SG&A from the 30 net new locations added during fiscal 2024 and incremental SG&A related to the addition of approximately 15 net new locations in fiscal 2025, including 3 new Tommy Bahama Marlin Bars, including the 2 opened in the first quarter and a third plan to open on the Big Island of Hawaii late this year.

Also within operating income, we expect lower royalties and other income of approximately $1 million in fiscal 2025. Additionally, our fiscal 2025 guidance includes the unfavorable impact of nonoperating items, including $7 million of interest expense compared to $2 million in 2024 or an approximate $0.20 to $0.25 incremental EPS impact. Increased debt levels in fiscal 2025 are due to our continued capital expenditures on the line Georgia distribution center, technology investments and return of capital to shareholders exceeding cash flow from operations.

We also expect a higher adjusted effective tax rate of approximately 25% -- excuse me, approximately 26% to 27% compared to 20.9% in 2024. The higher tax rate is primarily a result of a significant change in the impact that our annual stock vesting cat on stock compensation expense in 2025 compared to 2024. We anticipate the higher tax rate will result in approximately $0.20 to $0.25 per share impact. Considering all these items, including the $1.25 to $1.75 impact from tariffs, higher interest expense and a higher tax rate. We still expect 2025 adjusted EPS to be between $2.80 and $3.20 versus adjusted EPS of $6.68 last year.

In the third quarter, we expect sales of $295 million to $310 million compared to sales of $308 million in the third quarter of 2024. This primarily reflects a high single-digit decline in wholesale sales offset by our flat to low single-digit positive comp assumption and the impact from noncomp stores.

We also expect gross margin to contract approximately 300 basis points, primarily driven by increased tariffs and a higher proportion of net sales occurring during promotional and clearance events. SG&A to grow in the low to mid-single-digit range, primarily related to the new store locations, increased interest expense of $1 million flat royalty and other income and an effective tax rate of approximately 25%. We expect this to result in third quarter adjusted loss per share of between $1.05 and $0.85, compared to a loss of $0.11 in the third quarter of 2024.

I will now discuss our CapEx outlook, capital expenditure outlook for the remainder of the year. largely consistent with our prior guidance. We have spent capital expenditures for the year to be approximately $121 million compared to a total of $134 million in fiscal 2024. The remaining capital expenditures related to completing the new distribution center in lines, Georgia and the execution of our pipeline of new stores and Tommy Bahama Marlin Bar, including increases in store count across Tommy Bahama, Lilly Pulitzer, Southern Tide and the Beaufort Bonnet Company. We expect this elevated capital expenditure level to moderate significantly in 2026 and beyond after the completion of the Lyons, Georgia project.

Consistent with the seasonal nature of our business, we expect an increase in outstanding borrowings as we head into the third quarter, which is typically our smallest quarter of the year. Due to our lower net earnings during fiscal 2025, elevated levels of capital expenditures share repurchases completed in the first half of 2025. Payment of our dividend and working capital needs, we expect to remain in a debt position for the remainder of the year.

Thank you for your time today. And we will now turn the call over for questions.

[Operator Instructions] And our first question comes from the line of Ashley Owens with KeyBanc Capital Markets.

So just to start, you mentioned that comparable store sales performance has been positive quarter to date. Could you just elaborate on what you believe is driving that strength or what you're seeing from a traffic or transaction perspective? Additionally, anything on a brand level.

Yes. Thank you, Ashley. So comps are positive quarter-to-date, that really all the brands have been part of that. Lilly continues to be positive. Tommy Bahama is around flattish at this point, but that's a significant step-up from where they were in the first and second quarter. So we've been really happy to see that. I would say it's mostly traffic driven. During the first 2 months of the second quarter, our issue was really traffic. Conversions for the most part, hung in there pretty well. Average order values were actually strong and actually ticked up a little bit during the second quarter. .

And then as we got into July, we saw the traffic start to recover a bit, and that really continued into August. So I think that's the story sort of across the board. And then as I said, we're seeing nice comps in Lilly Pulitzer, Tommy Was is -- Tommy Bahama is in a much better position than they were first and second quarter, that really -- their business started to pick up in July as well and then continued into August, especially in -- so we're encouraged by what we're seeing there, Ashley.

Okay. Great. And then just a follow-up, move on promotions. I know the environment still remains volatile, and you mentioned that margins are expected to face pressure from both tariffs and then also the consumer shopping around promotional periods. There anything you're doing differently in terms of how you're planning your promotional cadence for the back half of the year? And then any nuances between the brands?

I think they're mostly going to follow historical patterns. We, of course, try to always remain nimble and adjust to the situation as it unfolds. But I think we're not planning any major departures from the way we run promotions in the past. It's just, as you alluded to, Ashley, we expect to do proportionately more of the business during those periods just because we feel like a lot of consumers are really sort of waiting for those opportunities.

But second quarter, you look at it, highly promotional environment, definitely had the tariff pressure, but I think you probably heard Scott say this, absent the tariff pressure, our gross margins would have increased year-over-year in the second quarter. So I think we're exercising a lot of discipline and being judicious and trying to maintain price and brand integrity to the maximum of stent possible while balancing that with the need to move inventory and generate revenue.

And Scott, I don't know if you'd add anything to that.

Yes. I think the only change in promotions, Tommy Bahama's Friends and Family. We shifted from September -- early September last year to August this year, and that worked well for us. So we think it was the right move. But other than that, pretty much similar type events.

And that fall within the same quarter. But I think we -- as Scott pointed out, I think we feel like that probably worked more effectively.

Okay. That's super helpful color. I will pass it along.

Our next question comes from the line of Janine Stichter with BTIG.

I was impressed you were able to reiterate the gross margin guidance even with incremental $80 million in tariff headwinds. It sounds like part of that is more price increases. I'm just curious how you're planning pricing, how that's evolved in response to tariffs and what you've seen from the initial price increases that you've taken?

So what I would say is we've been -- as Scott used the word in his comments, select price increases. So we've not done sort of across the Board, approach to pricing. We've really looked at it on an item-by-item basis and balance the need to protect our margins and try to recover some of the tariff impact with not wanting to get too far ahead of ourselves because that tariff number, as you know, Janine, is still very much a moving target. We're pretty sure we're going to end up with some incremental tariffs versus what they were in '24, but we still really don't know what they are. So we're trying to be careful about getting too far ahead of ourselves.

And the general strategy has been to try to cover the gross margin dollars for the balance of this year. And really, as we get into spring '26, that's where it really kicks in where we're trying to recoup the gross margin dollars but not necessarily the percent. And on average, that led to sort of low to mid-single-digit or low mid-single-digit price increases, a little bit higher than that for spring and Lilly Pulitzer, but that's -- and then I think across the board, there's a mix of both tariff-based price increases. And then in some cases, some changes in the mix that are driving that.

And one example that I'll give you of a way that we can increase prices without it, I think being too detrimental for us or that new Boracay China Island, now that I mentioned in my comments, and that's up to 158. The old version of the Boracay was 138. This is 158, which is about a 14.5% increase. It's a significantly improved product. We're getting full margin for it, while covering the incremental tariffs on it and the consumer seems to be fine with it. And I think it's because it's a new innovative different and better products, so they're willing to pay the upcharge. And that's -- in that case, we're getting not only the margin dollars, but we're actually hanging on to the percentage as well. Then we've got other ongoing products where we're just being very cautious about increasing the price too much before we really know where things are settled out.

That's helpful. And then maybe just one more gross margin question. You talked about improved gross margin from promotional at Tommy Bahama. Maybe just elaborate on what that was if it's something that's repeatable as you think about squaring that with your expectation for just more promotions or consumer shopping more around those key events?

Well, I think part of it was we ended up selling more full-priced product during the promotional period.

Yes. And we just had less like indices and sale. We just had less inventory to sell. So the market -- the degree of markdowns was not as severe also.

And our next question comes from the line of Dana Telsey with Telsey Advisory Group.

I think a couple of calls ago, you had mentioned about the competitive environment with tariffs and how some of the competitors wouldn't even be making their -- some of their collections given the changes with tariff pricing. What are you seeing? Is it helping you gain market share? And then as you think about this upcoming holiday season, maybe, Scott, how are you thinking of marketing spend and new products to drive activation? And then lastly, components of the comp, what did you see in the comp on your DTC side, both from online and from your own stores?

Okay. So starting in reverse order, I would say that during the quarter, traffic was -- retail stores were relatively stronger than e-commerce, if that makes sense. So we saw a bit of softness in both sides during the quarter. But I think relatively speaking, retail was stronger than e-comm. And that, frankly, is consistent. I think from what -- with what we're hearing from a lot of other reporting companies that retail seem to be having a bit more strength than e-commerce. Then in terms of the competitors, that may not be offering a line for the resort season and maybe doing some more extreme things around pricing for spring, those are privately held competitors for the most part that we're talking about, if not exclusively. So we're not seeing a lot of reporting out of them yet. What I would say is I do think that we're holding and even gaining share in our wholesale channels, which is where we can see it. With the caveat that overall, that market is -- they're being very cautious with their forward

So the overall market is not really growing, but I think we're performing well and are getting and will get rewarded for that a bit. And I think I'll add one other comment on that, even though you didn't exactly ask it. And that's that one of the earlier reads that we get on how our pricing is going to be received by the consumer is how the wholesale accounts react to it, and they've been very, very positive about the way that we're handling pricing.

And that -- to me, that it's still the consumer ultimately that will vote on that. But those merchants at those wholesale accounts are very skilled, capable experienced people. And if they're reacting well to the way that we're handling pricing, I think we'll -- the consumer will probably also react pretty well.

And Scott, I don't know if you'd add anything to any of that or if I missed something?

Yes, I think you got it I think you covered.

Great. And anything just to follow up on fourth quarter marketing outlook there in terms of how you're planning for Q4?

Well, I think we'll be doing a lot of similar things to what we've done in the past. I don't want to let the cat out of the bag on a couple of the things. We'll be doing around holiday in particular because there are going to be a few little twists on it, but I really don't want to spill them being if you will allow me.

And then just lastly, just...

Dana, these are just sort of the tactics. I don't think from a big picture standpoint, it's a whole lot different. But some of the specific tactics we'll be doing, I think, will be slightly different than what we've done in the past.

Got it. And then just on the wholesale partnerships, anything you're seeing different in terms of the wholesale partnerships and how you're planning them?

Well, I think the value of having really good partnerships, which we do with our very best customers. We have extremely close relationships with them. We work very hard to build mutually successful and mutually profitable businesses with them. We really like that part of the business. And I think that's more important than ever that you have those kind of partnerships. And I think ours -- while it's a challenging time for everybody, I think our partnerships are, by and large, stronger than they've ever been. If I answered the question, but...

And our next question comes from the line of Mauricio Serna with UBS.

Great. I guess just on the commentary about the positive quarter-to-date trend in the comps. Could you maybe talk about like how much of a tailwind was that timing of the sale on Tommy Bahama. And just like from -- excluding that, if you're seeing actually like the business being positive. And then I guess just I was wondering maybe if you could clarify, given that the net tariff impact is actually going to be lower than what you initially expected? And the sales outlook has been kept unchanged. What is driving you to like maintain -- what is continue to maintain your full year EPS outlook for this year?

A couple of things. I want to tackle the tariffs first and then we'll -- Yes. On the tariffs, last quarter, we said around $40 million before. That was before price increases and vendor concessions. Now tariffs with some of the changes in tariffs, the overall exposure went up, but we accelerated. We did more acceleration of receipts and we had some more late in the year shifting out of China to lower tariff countries. So we are able to mitigate it. So I think the -- before price increases and vendor concessions were pretty much around the same number as we said before. We tried to lay it out a little different kind of starting with the total exposure of $80 million and about half of that through shifting and early receipts. And then we've got some additional through the price increases and the vendor concessions. So I think overall, even though the landscape turned against us a bit, we were able to have further mitigations to kind of stay in a neutral position to where we were last quarter.

And your first question on the Tommy, it was all within the quarter, Mauricio. So it shift from August to September, and it was early September last year. So that's flushed out now. So in our quarter to date, we think we're back to an apples-to-apples view where August itself was apples to oranges -- early September was apples to oranges, but now once you got through the Labor Day weekend where the event was last year, we're back now to an apples-to-apples basis on timing.

Okay. That makes a lot of sense. And then just like to the one commentary also about inventory, the expectation that's going to actually like decrease or moderate -- sorry, I forgot the term. But what is driving that? I would assume that the inventories would be higher just given that our bringing in inventory with a tariff costs?

Well, that we said before the impact of any capitalized tariff cost into inventory. But from the acceleration, we don't think we'll -- we think the tariffs have settled down what we won't need. Before we were trying to beat -- we knew the August 27 change was coming. So we got as much in -- we didn't know what exactly was going to be, but we got as much in as we could before then. Now we don't think we'll have to have that acceleration that we had. So I think part of our pretty much our increase in the second quarter was capitalized tariffs and acceleration. That we believe that accounts for virtually the whole increase. And when you get to third quarter, we're only going to be dealing with the tariff impact and not the acceleration and deceleration was the bigger piece of it.

And our next question comes from the line of Joseph Civello with Truist Securities.

Just following up a little bit on the price increases. I think you said Select 1 so far been averaging in the low to mid-single-digit range that picking up through the spring. Can you just talk about what the magnitude could be by then? And how you implement those would be on a broader range of products, either brand-specific region specific, anything like that would help.

Yes. So I would say, Joe, that the -- I think we're going to be a little bit on the conservative side with the price increases as long as tariffs remain up in the air. The -- so far as far as we've really gone out is spring and for spring, I think they're a little bit higher than they are for fall and resort. But that's kind of where we are right now.

And fall, we really on wholesale, we had already had prices out. So there's not the wholesale increases for fall where there will be for spring will have some both direct-to-consumer and wholesale. So we'll come close. In spring, we think should we make the gross margin dollars fall, we will not quite make up the gross margin dollars.

And the other thing that I would point out, I think you're clear on this. But when we talk about, say, a 5% increase in fall prices, that's fall of this year versus fall of last year. Then when we talk about, say, another 5% increase for spring, that spring versus spring, it's not on top of a fall increase if that makes sense. So it's not a cumulative thing. You're not compounding those price increases. So there -- where we are so far, they're really not -- they're not that much.

Just one more follow-up then on Lilly. Just talk a little bit about the direct business versus what you're seeing in wholesale mix so much.

Well, I think our specialty accounts, in particular, they tend to -- during tough times, they tend to be very cautious, and we've got a good amount of that within Lilly Pulitzer or it's not that I don't think it's that we're not performing well. I just tend to get more conservative and cautious in their purchasing. And then in our major accounts, our performance has been quite good. Again, as I mentioned earlier, the majors are also in a pretty conservative stance right now when it comes to forward purchases, but I have no concerns about our position with any of the key accounts in either Tommy or Lilly.

And our final question comes from the line of Paul Lejuez with Citigroup.

It's Tracy Kogan filling in for Paul. I know you guys have outlined CapEx this year at $120 million. I think a lot of that is from the DC. So I'm just wondering as you look out to F '26 and beyond, what is a good CapEx number to use? And if there'll be any more major investments in DCs or things like that in the near future?

Yes. We expect Alliance project to be substantially complete, there could be a tiny bit that trails over to next year. But once that's behind us, I think an ongoing rate it's going to kind of be in $75 million pace. It really depends on number of stores and the number of store paces slowed down a little bit than what it was. But I would say somewhere in that $75 million neighborhood.

Got you. And what's your early expectation for store growth next year? Do you have any openings identified?

We've got some pipeline. Johnny Was, we are not opening stores right now. I'm not saying we won't up in any, but we've really slowed that down. And then Southern Tide opened a whole lot very quickly. And we've slowed it down, but there will be some Southern Tide stores. Tommy and Lilly will kind of be on a normal type.

Yes, subject to real estate available.

Yes, yes. So there's probably a few Marlin bars and then a few stand-alone stores at Tommy and Lilly are probably have 5 or 6 stand-alone stores. And then we'll probably have a couple also in Southern Tide Tito. I have a few not at the 10 or so pace they had last the last couple of years. Yes. So overall, probably more like this year, closer to this year where we're going to be at 15 where we were 30 last year. So probably the 15 is probably a...

Pretty good numbers.

Pretty good number. And again, with a few of them being more bars, which are more expensive.

And with that, there are no further questions at this time. I would like to turn the call back to Tom Chubb for closing remarks.

Okay. Thanks, Julian, and thanks to all of you for your interest. We look forward to talking to you again in December and hope all as well until then.

Thank you. Ladies and gentlemen. And with that, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time, and have a wonderful day.

Greetings, and welcome to the Oxford Industries, Inc. First Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Brian Smith. 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 and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements.

Important factors that could cause actual results of operations or 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 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 Grassmyer, 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. We are pleased to be reporting results for the first quarter of fiscal 2025 that were solidly within our forecast range in the midst of very challenging and unpredictable market conditions. The so-called hard data indicates that the consumer still has the ability to spend money. However, the soft data, particularly consumer sentiment surveys as well as reports on discretionary spending indicate a consumer that is much more cautious when it comes to spending on discretionary items, which includes fundamentally everything we sell.

Our own experience during the quarter was similar to what we've seen over the last several quarters, and that is that the consumer responds most strongly to new innovative and differentiated product and to promotions where the perceived value is high. Complicating the situation is the rapidly evolving U.S. international trade policy, particularly with regard to tariffs.

Tariff policy is challenging us in several ways. First, consumer concern about the impact of tariffs on prices and the economy is exacerbating weak consumer sentiment. Second, the rapid evolution of the tariff policy is making it exceptionally difficult to plan and forecast the business. And finally, the tariff policy is requiring us to significantly realign our supply chain, which could prove to be the catalyst for implementing some changes in our sourcing strategies that ultimately benefit our company and shareholders, but certainly present short-term challenges and financial ramifications.

During challenging market conditions like those that we are currently encountering, it is imperative that we not lose sight of the fact that our reason for being is to evoke happiness in our customers. All 7 of the brands in our portfolio are what we call happy brands, and our customers look to them for the spirit of optimism and possibility that they exude. We deliver this happiness through our brand positioning, our products, our marketing messages and imagery and the experiences we provide in our stores, restaurants and bars and our resort hotel as well as on our e-commerce websites.

Staying focused on bringing happiness to our customers helps mitigate the impact of challenging marketing conditions and ensures that as those conditions abate, we will emerge even stronger than when we went into the challenging time. The pandemic provided great reinforcement of that idea. It would have been very easy to slip into a darker, more pessimistic mode with our brand messaging during the lockdowns, but we refused to do that, and we emerged on the other side even stronger than ever. Likewise, we are staying focused on happiness now.

During the first quarter of fiscal 2025, the continued focus on happiness paid off with fantastic results in our Lilly Pulitzer brand given the environment. As the result of Lilly's focus on delighting our most dedicated and highest spending consumers, we were able to post double-digit growth with positive comps in both e-com and retail as well as meaningful growth in our average order size and improved profitability. Some of the highlights of the quarter in Lilly included our beautiful prints, which had an excellent balance this season between tonal and multicolor as well as between bright colors and soft colors. We also had big success with sportswear items like the Ronson Top, a simple T made special with gold buttons and puffy sleeves.

The reintroduction of Lilly men's after more than a decade as well as our collaboration with the Normandy-based French brand, St. James were, by design, not huge volume drivers, but sold through at very high rates and created lots of buzz and excitement. Our newness quotient was excellent at more than 50% this spring as compared to approximately 40% last year.

On the marketing front, we continue to ride the wave of excitement created by our Palm Beach Fashion Show last fall, which featured Spring 2025 product.

In our Tommy Bahama business, we continued our efforts to deliver happiness to a growing audience with the opening of 2 new Marlin Bars. The 2 new locations at the King of Prussia Mall on the mainline in Pennsylvania and at SouthPark Mall in Charlotte, North Carolina are both in more temperate climates than our typical warm weather locations and both are located at large regional malls, which is also different than where we have typically located Marlin Bars.

Prior to building Marlin Bars in these locations, we had Tommy Bahama stores in both Charlotte and King of Prussia. As we have seen with past Marlin Bar conversions, we expect to see a meaningful uplift in our retail business in those locations as well as the opportunity to provide an immersive Tommy Bahama brand experience on the bar and restaurant side.

Nothing creates passion for the Tommy Bahama brand like a nice dinner and a beverage or 2 with family and friends at one of our Marlin bars. SouthPark Mall and King of Prussia Mall are 2 of the best in the country, and we are excited to see what we can deliver there.

While we are remaining focused on our long-term evergreen objective of delighting the consumer with our happy brands, we are also working hard to respond to more immediate challenges. At the top of the list is the rapidly evolving change in U.S. trade policy, particularly tariffs. Beginning more than 50 years ago, when as an enterprise, we first branched into international product sourcing, our objective has always been to have a resilient supply chain that can respond to the changing needs both the marketplace as well as to significant changes in U.S. trade policy. And through the years, there have been many significant changes to trade policy, including NAFTA, various other free trade agreements, China's accession to the WTO in 2005 and others. And each time, our supply chain has quickly and successfully adapted to the new policy.

The only difference this time is that the policy change has come with less notice and more fluidity than with past changes. Nevertheless, our ability to adapt is unchanged, and we are doing exactly that. We are making excellent progress on our goal of diversifying our supply chain, particularly away from China and currently expect to exceed the milestones that we laid out in April. By the second half of 2026, we currently plan to be substantially out of China.

Tariffs are one of many input costs that we take into account as we work through the complicated process of establishing prices and initial gross margins for a particular season. As we go through this process for future seasons, we are, of course, taking into account what we currently know about tariffs. There is still much work to be done, but we are pleased with the progress. As an example, in our largest business, Tommy Bahama, for Spring 2026, taking into account the currently effective elevated tariff rates, we are projecting that our AUR will increase by less than 3%, fully recovering gross margin dollars, while our initial gross margin percent would decrease by less than 50 basis points.

In subsequent seasons, we expect to be able to work initial gross margin percentages back up without any dramatic changes in pricing. While the tariffs are and will certainly create some turbulence in our results this year, we do not see them as a long-term threat to our competitiveness or our ability to deliver long-term value to our shareholders. Another more immediate challenge we are hard at work on is improving the profitability of our Johnny Was business. Johnny Was is an incredible brand with absolutely beautiful product, loyal and engaged customers and an incredibly dedicated, hard-working and professional team. We believe Johnny Was also has an opportunity to improve its profitability to a level similar to what we are accustomed to in Lilly Pulitzer and Tommy Bahama.

After a period of very rapid growth, including rapid expansion of its retail store footprint over the last 6 or 7 years, some of which was before we bought the brand, we are shifting our focus to increasing profitability and reinforcing the fundamentals. This includes brand creative, merchandising assortment and planning, marketing efficiency and retail execution. We have been working diligently on this project over the last several months and have brought in additional talent and external resources to help. We look forward to reporting to you on the plan and the progress in the coming quarters.

Progress on our new state-of-the-art fulfillment center in South Georgia is on track and we expect to be complete at the end of the fiscal year. Once complete, we believe the new SC will be a competitive advantage for our most commercially important region, the Southeastern United States, especially Florida.

Without a doubt, we are operating in very difficult circumstances, but are responding to the current challenges well while never losing sight of the long-term goals and objectives. We are grateful to all of our team members for all that they do on behalf of our customers and our shareholders.

I'll now turn the call over to Scott for more details on our first quarter results as well as our expectations for the balance of the year. Scott?

Thank you, Tom. As Tom mentioned, our teams faced unprecedented uncertainty and challenges related to the rapidly developing tariff and trade environment during the first quarter. Despite these substantial challenges, our team focused on what they could control and delivered top and bottom line results within our previously issued guidance ranges.

In the first quarter of fiscal 2025, consolidated net sales were $393 million compared to sales of $398 million in the first quarter of '24 and towards the high end of our guidance range of $375 million to $395 million. Sales in our brick-and-mortar locations were down 1%, driven by a negative comp of 5%, partially offset by the addition of new store locations. E-commerce sales decreased 5%. Sales in our food and beverage locations were down 3%, while sales in our outlet locations were comparable year-over-year. Sales in our wholesale channel increased 4% compared to the first quarter of 2024 with increased sales to major department stores and off-price retailers.

By segment, lower sales at Tommy Bahama and Johnny Was were partially offset by a low double-digit sales increase at Lilly Pulitzer that saw success with its strategy to focus on product that resonates strongly with its core customer and an increase in emerging brands, driven by a promising rollout of new retail locations. Adjusted gross margin contracted 110 basis points to 64.3%, driven primarily by increased freight expenses to e-commerce customers at Tommy Bahama, increased markdowns during clearance events at Lilly Pulitzer and Johnny Was and a change in sales mix with wholesale sales, including off-price wholesale sales, representing a higher proportion of net sales.

We also incurred $1 million of additional charges or an approximate 20 basis point negative impact to consolidated gross margin or $0.04 per share in cost of goods sold resulting from the U.S. tariffs on imported goods implemented in the first quarter of fiscal 2025. Adjusted SG&A expenses increased 5% to $221 million compared to $210 million last year, with approximately $6 million or 59% of the increase due to increases in employment costs, occupancy costs and depreciation expense due to the opening of 31 new brick-and-mortar retail locations, including 4 new Tommy Bahama Marlin Bars since the first quarter of fiscal 2024. This includes the 8 net new stores, including 2 Tommy Bahama Marlin Bars opened in the first quarter of fiscal '25. We also incurred preopening expenses related to some of the approximate 7 net new stores planned to open during the remainder of fiscal '25, including an additional Tommy Bahama Marlin Bar.

The result of this yielded a $39 million adjusted operating profit or a 9.8% operating margin compared to $57 million operating profit or a 14.4% margin in the prior year. The decrease in adjusted operating income reflects the impact of our investments in a challenging consumer and macro environment.

Moving beyond operating income. Our adjusted effective tax rate of 24.2% was impacted by certain discrete items, most notably from the receipt of interest related to a U.S. Federal income tax receivable. Interest expense was $1 million higher compared to the first quarter of fiscal 2024, resulting from higher average debt levels. With all this, we ended with $1.82 of adjusted net earnings per share.

I'll now move on to our balance sheet, beginning with inventory. During the first quarter of fiscal '25, inventory increased $18 million or 12% on a LIFO basis and $20 million or 9% on a FIFO basis with inventory increasing in all of our operating groups except Johnny Was, primarily due to the impacts associated with the U.S. tariffs that were implemented in the first quarter of fiscal 2025, including accelerated purchases of inventory before the anticipated implementation of the increased tariffs and increased costs capitalized into inventory after the implementation of the tariffs.

At the end of the first quarter of '25, our inventory balances included an additional $3 million of cost associated with the increased tariff implemented in the first quarter of fiscal '25. We ended the quarter with long-term debt of $118 million. We used $4 million in cash flows from operations in the first quarter of fiscal '25, driven primarily by lower net earnings, changes in working capital needs, including accelerating inventory purchases and $12 million of expenditures related to implementation costs associated with cloud computing arrangements that are classified as operating cash outflows.

We also had $51 million of share repurchases, capital expenditures of $23 million, primarily related to the Lyons, Georgia distribution center project and the addition of new brick-and-mortar locations and $10 million of dividends that led to an increase in our long-term debt balance.

I'll now spend some time on our updated outlook for 2025. We finished the first quarter of fiscal 2025 with a negative comp of 5%, which was slightly lower than our previous forecast of negative 2% to 4% comps. Comp sales figures in the second quarter to date are negative similar to the first quarter, which is a trend we expect to continue for the remainder of the quarter. While we believe the negative comp trend will moderate slightly as we enter the second half of fiscal 2025 and lap easier comparisons due in part to the negative effects of 2 hurricanes that impacted the Southeastern United States in the third quarter of fiscal 2024, our forecast includes negative comps in the low single-digit range for the remainder of the year. For the full year, we now expect net sales to be between $1.475 billion to $1.515 billion, reflecting a decline of 3% to just slightly negative compared to sales of $1.52 billion in fiscal 2024.

Our updated sales plan for the full year of 2025 now includes a total company comp sales decline in the low to mid-single-digit range. Decreases in our Tommy Bahama and Johnny Was segments was driven by negative comps, partially offset by new store locations. That decline is expected to be tempered by growth in our Lilly Pulitzer and Emerging Brands segments, driven by positive comps in new store locations.

By distribution channel, the sales plan consists of a low single-digit decrease in e-commerce and wholesale sales, partially offset by a flat to low single-digit increase in both full-price retail and outlet sales. We expect the full-price retail and outlet channels will benefit from the addition of approximately 15 net new locations during the year, partially offset by negative comp sales. We also expect low to mid-single-digit increase in our food and beverage channel that will benefit from the addition of 3 new Marlin Bar locations during the year.

Our updated guidance also reflects the most recent tariff developments. When we last issued guidance in March, additional tariffs placed on Chinese imports were 20% and reciprocal tariffs on countries other than China had not yet been announced.

Tariffs placed on imports from countries around the world have also fluctuated significantly since March, including pauses and delays in tariffs and additional tariffs placed on Chinese imports that reached as high as 145%. Our current forecast includes the assumption that the currently implemented additional 30% tariff placed on Chinese imports and 10% on all other countries will remain in place for the remainder of fiscal 2025. Based on these updated assumptions, we now expect that gross margin will contract approximately 200 basis points for the year. This contraction includes $40 million in additional tariff cost or $2 per share after tax, which is an increase from the $9 million to $10 million included in our March forecast.

We're working hard at mitigating the gross margin dollar impact of tariffs and expect to be fully mitigated by spring of '26. Planned mitigation efforts to move sourcing from China to countries with lower tariff rates, including our effort to reduce sourcing from China from approximately 40% in 2024 to approximately 30% for 2025 and our expectation of increased activity during promotional events across our brands as the challenging macroeconomic environment will lead to consumers looking for deals and promotions.

In addition to lower sales and gross margin, we expect SG&A to grow in the mid-single-digit range at a rate higher than sales in 2025, primarily due to continued investments in our business, including the annualization of incremental SG&A from the 30 net new locations added during fiscal 2024. Incremental SG&A related to the addition of approximately 15 net new locations, including 3 new Tommy Bahama Marlin Bars, including the 2 that opened in the first quarter and a third planned to open on the big island of Hawaii late this year and an increase in adjusted depreciation and amortization from $57 million in fiscal 2024 to $59 million in fiscal 2025, which excludes $11 million in amortization of acquired intangibles in fiscal '24 and $8 million in fiscal '25. Also within operating income, we expect lower royalties and other income of approximately $1 million in fiscal 2025.

Additionally, our fiscal '25 guidance includes the unfavorable impact of nonoperating items, including $5 million of higher interest expense compared to $2 million in 2024 or an approximately $0.20 to $0.25 EPS impact. The increased debt levels in fiscal '25 are due to our continued capital expenditures on the Lyons, Georgia distribution center, technology investments and return of capital to shareholders exceeding cash flow from operations.

We also expect a higher adjusted effective tax rate of approximately 26% compared to 20.9% in 2024, which benefited from certain favorable items primarily related to interest income and tax receivables that are not expected to reoccur in 2025. The higher tax rate will result in an approximate $0.20 to $0.25 per share impact. Considering all these items, including the $2 impact from tariffs, higher interest expense and a higher tax rate, we expect 2025 adjusted EPS to be between $2.80 and $3.20 versus adjusted EPS of $6.68 last year.

In the second quarter of 2025, we expect sales of $395 million to $415 million compared to sales of $420 million in the second quarter of 2024. This reflects our low to mid-single-digit negative comp assumption, partially offset by the addition of noncomp stores and relatively flat wholesale sales. We also expect gross margin to contract by approximately 250 basis points, which includes our updated tariff assumption of $15 million in additional tariff costs or $0.75 per share after tax.

SG&A to grow in the mid-single-digit range, primarily related to the new store locations, increased interest expense of $2 million, flat royalty and other income and a higher effective tax rate of approximately 31% from net discrete tax expense for stock-based compensation. We expect this to result in second quarter adjusted EPS of between $1.05 and $1.25 compared to $2.77 in the second quarter of 2024.

I'd now like to discuss our CapEx outlook for the remainder of the year. Materially consistent with our prior guidance, we expect capital expenditures to be approximately $120 million, including the $23 million incurred during the first quarter compared to $134 million in fiscal 2024, with approximately $70 million related to finishing the project to build a new distribution center in Lyons, Georgia. Remaining capital expenditures relate to the execution on our pipeline of new stores in Tommy Bahama Marlin Bars, including increases in store count across Tommy Bahama, Lilly Pulitzer, Southern Tide and The Beaufort Bonnet Company. We expect this elevated capital expenditure level to moderate in 2026 and beyond after the completion of the Lyons, Georgia project.

We expect cash flows from operations to be strong as we head into our busiest time of the year, allowing us to fund the previously mentioned investments, our quarterly dividend and reduce our outstanding borrowings, although we do expect to be in a debt position for the remainder of the year due to our first quarter share repurchase, dividend payments and anticipated capital expenditures.

Thank you for your time today. We will now turn the call over for questions. Joe?

[Operator Instructions] And our first question comes from the line of Ashley Owens with KeyBanc Capital Markets.

So nice to see the strong response in Lilly in the quarter. I know you elaborated on some of the strengths you saw there. Just what learnings have emerged from the strength? Is the key there to continue to drive a broad range of colorways and the newness that you're offering? And just any levers you could talk to that are in place to sustain that momentum through the balance of the year?

I think the key, Ashley, really, and thank you for the question, is focusing on those most committed customers, which is sort of the top 20% of the customer base. They account for more than 60% of the sales and even more of that when you look at profitability and really focusing in on what they love about Lilly and delivering it to them in a way that's both consistent with the DNA of the brand, which we're, in my opinion, very much doing right now, while at the same time being relevant to the current customer and marketplace. And I just think the Lilly team has done an extraordinary job of it. Ashley, you know this because you pay a lot of attention, and that really started at the beginning of last year as we celebrated the 65th anniversary, and we did some special capsules and a lot of marketing things and it kind of built up through the year, and it's really paying off for us now. So I would say going forward, that really is the key is focusing on that core customer, staying true to our DNA, but at the same time, staying relevant to what's going on today.

Okay. Great. And then just a follow-up. I know you discussed some of the puts and takes around margin and pricing increases at Tommy Bahama kind of going into spring 2026. Just could you elaborate on some of your pricing plans for the other brands that you have identified, if any, just curious as you navigate some of these margin headwinds with promotional spending and then additionally now with the tariffs, how you're balancing the potential need to stay promotional with some potential price increases to offset some of these higher costs?

Yes. Well, a great question. And I think we threw the Tommy Bahama example out there where our plan for spring 2026 has our AUR going up by less than 3%. And then at that level, we get back all the gross profit dollars. The initial margin will go down by less than 50 basis points. Now -- the other part of your question is, are we going to experience margin dilution because of promotional activity. For 2026, it's just way too early for us to really predict that, I think. As Scott pointed out, for the balance of this year, we have baked in some additional promotions -- not really more promotions, just the expectation that more business will be done during those promotional times. But for '26, all we're really -- as far as we've gotten really is the initial margins. Scott, I don't know if you want to add anything?

Yes. And for '25, spring/summer are our biggest seasons, and there's not much adjustment we could do there. So we are starting to see some modest price increases for fall and then spring where we really fully mitigate.

The next question comes from the line of Joseph Civello with Truist Securities.

I wanted to check in and see about the wholesale. I think you said 4% growth. Just talk about how that compared to your expectations and conversations with retailers as we get to the back half of the year.

Well, I'll let Scott comment a little bit further on our expectations, but we were pleased to see that growth in the wholesale, and I would say that our performance at wholesale has been quite good, which we always like to see that, Joe. I think we've talked about that in the past. But on the floor of one of our big department store customers, we're going head-to-head with some other great brands in a tough environment like we've got right now to see that we're actually performing quite well in that head-to-head competition is pretty reassuring to see that. It shows the strength of our brands and our products. And then in terms of how you would evaluate that relative to our expectation...

Yes. I think wholesale is pretty much tracking to our expectations. We knew we had a little bit up spring order book, and we're expecting the second half of the year to be down a little bit as a lot of accounts have gotten more conservative. So now for the full year, slightly down, but slightly up in Q1. And the specialty stores have certainly been weaker than the department stores. So that specialty store channel is still pretty challenged.

The next question comes from the line of Janine Stichter with BTIG.

You've got Ethan on for Janine. So to start, great to hear that the newness is really resonating at Lilly. I was just wondering if you could give some color on the newness in the assortment at Tommy and how that's resonating? And then my second question, just digging in on Johnny Was, kind of what drove that mid-teens decline in Q1? And just what gives you confidence in the guide for the brand for the rest of the year?

Okay. So with regard to Lilly, the newness, as I've commented on and certainly been a big part of the success in our sort of newness quotient was higher this year. We were a little over 50% this year versus, I think, about 40% last year. So we were pleased to see that. A lot of it was in sportswear items like the top that I highlighted. And that's great to see. We've traditionally been very, very strong in dresses, but good to see the strength in sportswear as well. And then as I mentioned, we think a lot of it -- we thought our print assortment this spring was really quite strong and very well balanced and gave a lot of customers great options in terms of whether they wanted to go multicolor, more tone on tone or bright or soft. They just had good options.

And then in Tommy, I would say newness is working also. I mean we're seeing that everywhere. It's sort of -- as I said, it's things that are new and exciting and different or -- other than that, they're sort of looking for what they perceive as being high-value situations. And as Scott talked about, that means we end up doing a little bit more business proportionately during our promotional periods.

And then in terms of the Johnny Was guide going forward, I think that we're not projecting a big rebound there from what their current performance is while we would love to see that and we're doing a lot of things to try to make that happen. As I talk about the plan that we're working on at Johnny Was, for the most part, that would probably impact '26 and beyond more than it would '25. So what we've got in the guidance model does not really assume a big rebound in Johnny Was in the next quarter or 2. Scott, I don't know if you...

Yes, that's accurate. Yes. yes.

The next question comes from the line of Mauricio Serna with UBS.

Just wanted to dig into the tariff impact that you provided in your outlook. It seems though it's much higher than what you talked about before. But even I guess, as I look at the current tariffs, it still seems high. Maybe could you talk about what is the gross impact that you're considering, like, because I suppose the $40 million is like the net impact. And if you have been facing any -- like how are you thinking about the mitigation strategies beginning to materialize in your operations over the next couple of quarters?

Yes. Mauricio, the $40 million is the gross. Before, we were at $9 million to $10 million gross. So the increase. And before -- just as a reminder, the only enacted tariff at the time was the China 20%. There were no additional tariffs on the other countries at the time of that guidance. So now we've gone from 10% everywhere and China going from 20% to 30% is the change. So that's what caused the $9 million to $10 million to go up to $40 million. We are working on mitigation actions. But again, as I mentioned earlier, spring/summer are our biggest seasons. There's really nothing we could do about that. Some of the later fall deliveries, there is some select increases. And then when we get into spring, again, we expect to be fully mitigated. So it will hit us hard in '25. But as a reminder, we left last year at 40% China. This year, we will average 30%, but we'll leave the year lower. And then next year, we expect to be below 10% China. So our China percentage is continuing to come down, but we obviously couldn't affect spring/summer and really couldn't affect early fall or really fall much on shifts. But for resort and spring of next year, we have some major moves coming.

[Operator Instructions] The next question comes from the line of Paul Lejuez with Citi.

It's Tracy Kogan filling in for Paul. I had a couple of questions. I was wondering, I know you said comps were down about 5% for the quarter as a whole. I was wondering how that trended in February versus March and April combined. And then I was curious what you're seeing in the restaurant business in terms of traffic and ticket. I saw that business was down, but just wondering what the drivers were there.

So the -- in response to the first part of your question, Tracy, April was definitely the strongest month for us, and that was true, I believe, in both retail and e-com. And part of that undoubtedly was the Easter shift. So we would have expected and did expect to have a pretty good performance in April, and that turned out to be accurate. And then in terms of restaurants, the overall was down 3%, but the comp was actually only down 1%. So pretty close to flat last year. I don't know if we've got the traffic numbers for restaurants or [indiscernible].

Right now, yes.

I think in general, Tracy, the ticket sizes have been ticking up a little bit. And that's due to some of the item prices going up.

And Tracy, this year, you remember, our Sarasota restaurant is still not open. We're moving locations. So that's where we had it last year during busy season. We did not have it this year, but it should open, I believe, late this summer.

And that's why the comp come at...

Yes. Exactly.

So the comp was really -- we were close to flat, which was certainly better than what we saw in our retail stores.

Got it. And just back to the first question, do you look at March and April combined, I'm just wondering how that period compared to February? Like did your business pick up?

Yes. It did. It definitely did. I mean, basically, the improvement was sequential through the quarter and April was the best, March was better. February was the worst.

There are no further questions at this time. I'd like to turn the call back to Tom Chubb for closing remarks.

Okay. Thank you, Joe, and thanks to all of you for your interest. We look forward to talking to you again in September and hope all of you have a great summer.

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