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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to         

Commission File Number: 1-4365

OXFORD INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Georgia

   

58-0831862

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

999 Peachtree Street, N.E., Suite 688, Atlanta, Georgia 30309

(Address of principal executive offices)                               (Zip Code)

(404) 659-2424

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $1 par value

OXM

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of June 3, 2022, there were 15,929,490 shares of the registrant’s common stock outstanding.

Table of Contents

OXFORD INDUSTRIES, INC.

INDEX TO FORM 10-Q

For the First Quarter of Fiscal 2022

Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets (Unaudited)

5

Condensed Consolidated Statements of Operations (Unaudited)

6

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

7

Condensed Consolidated Statements of Cash Flows (Unaudited)

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3. Quantitative and Qualitative Disclosures About Market Risk

32

Item 4. Controls and Procedures

32

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

32

Item 1A. Risk Factors

32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 3. Defaults Upon Senior Securities

33

Item 4. Mine Safety Disclosures

33

Item 5. Other Information

33

Item 6. Exhibits

34

SIGNATURES

34

2

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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

Our SEC filings and public announcements may include forward-looking statements about future events. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which typically are not historical in nature. We intend for all forward-looking statements contained herein, in our press releases or on our website, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). Such statements are subject to a number of risks, uncertainties and assumptions including, without limitation, the impact of the coronavirus (COVID-19) pandemic on our business, operations and financial results, including due to uncertainties about scope and duration, supply chain disruptions, future store closures or other operating restrictions or the impact on consumer traffic, any or all of which may also affect many of the following risks; demand for our products, which may be impacted by competitive conditions and/or evolving consumer shopping patterns; macroeconomic factors that may impact consumer discretionary spending and pricing levels for apparel and related products, many of which may be impacted by current inflationary pressures; supply chain disruptions, including the potential lack of inventory to support demand for our products, which may be impacted by capacity constraints, closed factories, and cost and availability of freight deliveries; costs and availability of labor; costs of products as well as the raw materials used in those products; energy costs; our ability to be more hyper-digital and respond to rapidly changing consumer expectations; the ability of business partners, including suppliers, vendors, licensees and landlords, to meet their obligations to us and/or continue our business relationship to the same degree in light of current or future staffing shortages, liquidity challenges and/or bankruptcy filings; retention of and disciplined execution by key management and other critical personnel; cybersecurity breaches and ransomware attacks, as well as our and our third party vendors’ ability to properly collect, use, manage and secure business, consumer and employee data; changes in international, federal or state tax, trade and other laws and regulations, including the potential imposition of additional duties; the timing of shipments requested by our wholesale customers; weather; fluctuations and volatility in global financial markets; the timing and cost of store and restaurant openings and remodels, technology implementations and other capital expenditures; acquisition activities, including our ability to timely recognize expected synergies from acquisitions; expected outcomes of pending or potential litigation and regulatory actions; the increased consumer, employee and regulatory focus on climate change and environmental, social and governance issues; access to capital and/or credit markets; factors that could affect our consolidated effective tax rate; and geopolitical risks, including those related to the ongoing conflict in Ukraine. Forward-looking statements reflect our expectations at the time such forward-looking statements are made, based on information available at such time, and are not guarantees of performance. Although we believe that the expectations reflected in such forward-looking statements are reasonable, these expectations could prove inaccurate as such statements involve risks and uncertainties, many of which are beyond our ability to control or predict. Should one or more of these risks or uncertainties, or other risks or uncertainties not currently known to us or that we currently deem to be immaterial, materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Important factors relating to these risks and uncertainties include, but are not limited to, those described in Part I. Item 1A. Risk Factors contained in our Fiscal 2021 Form 10-K, and those described from time to time in our future reports filed with the SEC. We caution that one should not place undue reliance on forward-looking statements, which speak only as of the date on which they are made. We disclaim any intention, obligation or duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

3

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DEFINITIONS

As used in this report, unless the context requires otherwise, "our," "us" or "we" means Oxford Industries, Inc. and its consolidated subsidiaries; "SG&A" means selling, general and administrative expenses; "SEC" means the United States Securities and Exchange Commission; "FASB" means the Financial Accounting Standards Board; "ASC" means the FASB Accounting Standards Codification; "GAAP" means generally accepted accounting principles in the United States; "TBBC" means The Beaufort Bonnet Company; and “Fiscal 2021 Form 10-K” means our Annual Report on Form 10-K for Fiscal 2021. Additionally, the terms listed below reflect the respective period noted:

Fiscal 2023

53 weeks ending February 3, 2024

Fiscal 2022

52 weeks ending January 28, 2023

Fiscal 2021

52 weeks ended January 29, 2022

Fiscal 2020

52 weeks ended January 30, 2021

Fourth Quarter Fiscal 2022

13 weeks ending January 28, 2023

Third Quarter Fiscal 2022

13 weeks ending October 29, 2022

Second Quarter Fiscal 2022

13 weeks ending July 30, 2022

First Quarter Fiscal 2022

13 weeks ended April 30, 2022

Fourth Quarter Fiscal 2021

13 weeks ended January 29, 2022

Third Quarter Fiscal 2021

13 weeks ended October 30, 2021

Second Quarter Fiscal 2021

13 weeks ended July 31, 2021

First Quarter Fiscal 2021

13 weeks ended May 1, 2021

4

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par amounts)

(unaudited)

    

April 30,

    

January 29,

    

May 1,

2022

2022

2021

ASSETS

Current Assets

Cash and cash equivalents

$

31,799

$

44,859

$

92,086

Short-term investments

134,327

164,890

Receivables, net

 

74,374

 

34,550

 

67,658

Inventories, net

 

122,760

 

117,709

 

108,810

Income tax receivable

19,741

19,728

17,830

Prepaid expenses and other current assets

 

24,911

 

18,599

 

22,355

Total Current Assets

$

407,912

$

400,335

$

308,739

Property and equipment, net

 

150,393

 

152,447

 

157,553

Intangible assets, net

 

155,080

 

155,307

 

155,967

Goodwill

 

23,870

 

23,869

 

23,930

Operating lease assets

182,345

195,100

221,647

Other assets, net

 

27,417

 

30,584

 

33,146

Total Assets

$

947,017

$

957,642

$

900,982

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

  

 

  

 

  

Current Liabilities

 

  

 

  

 

  

Accounts payable

$

68,641

$

80,753

$

72,323

Accrued compensation

 

26,477

 

30,345

 

31,578

Current portion of operating lease liabilities

 

54,642

 

61,272

 

60,226

Accrued expenses and other liabilities

 

76,657

 

53,796

 

60,963

Total Current Liabilities

$

226,417

$

226,166

$

225,090

Long-term debt

 

 

 

Non-current portion of operating lease liabilities

 

185,365

 

199,488

 

226,358

Other non-current liabilities

 

19,600

 

21,413

 

21,270

Deferred income taxes

 

2,215

 

2,911

 

363

Shareholders’ Equity

 

 

 

Common stock, $1.00 par value per share

 

16,284

 

16,805

 

16,894

Additional paid-in capital

 

163,137

 

163,156

 

156,069

Retained earnings

 

336,994

 

331,175

 

258,211

Accumulated other comprehensive loss

 

(2,995)

 

(3,472)

 

(3,273)

Total Shareholders’ Equity

$

513,420

$

507,664

$

427,901

Total Liabilities and Shareholders’ Equity

$

947,017

$

957,642

$

900,982

See accompanying notes.

5

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OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

    

First Quarter

Fiscal 2022

Fiscal 2021

Net sales

$

352,581

$

265,762

Cost of goods sold

 

126,204

 

99,177

Gross profit

$

226,377

$

166,585

SG&A

 

157,412

 

137,125

Royalties and other operating income

 

7,013

 

5,433

Operating income

$

75,978

$

34,893

Interest expense, net

 

242

 

252

Earnings before income taxes

$

75,736

$

34,641

Income tax expense

 

18,328

 

6,173

Net earnings

$

57,408

$

28,468

Net earnings per share:

 

  

 

  

Basic

$

3.52

$

1.72

Diluted

$

3.45

$

1.70

Weighted average shares outstanding:

 

  

 

Basic

 

16,316

 

16,594

Diluted

 

16,622

 

16,792

Dividends declared per share

$

0.55

$

0.37

See accompanying notes.

6

Table of Contents

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

First Quarter

Fiscal 2022

Fiscal 2021

Net earnings

$

57,408

$

28,468

Other comprehensive income (loss), net of taxes:

 

  

 

  

Net foreign currency translation adjustment

 

477

 

391

Comprehensive income

$

57,885

$

28,859

See accompanying notes.

7

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OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

First Quarter

    

Fiscal 2022

    

Fiscal 2021

Cash Flows From Operating Activities:

 

  

 

  

 

Net earnings

$

57,408

$

28,468

Adjustments to reconcile net earnings to cash flows from operating activities:

 

  

 

  

Depreciation

 

9,963

 

9,463

Amortization of intangible assets

 

227

 

220

Equity compensation expense

 

2,725

 

2,227

Amortization of deferred financing costs

 

86

 

86

Deferred income taxes

 

(727)

 

1,584

Changes in operating assets and liabilities, net of acquisitions and dispositions:

 

  

 

  

Receivables, net

 

(39,834)

 

(37,219)

Inventories, net

 

(5,054)

 

14,902

Income tax receivable

(13)

145

Prepaid expenses and other current assets

 

(6,314)

 

(1,980)

Current liabilities

 

3,498

 

27,211

Other balance sheet changes

 

515

 

(4,102)

Cash provided by operating activities

$

22,480

$

41,005

Cash Flows From Investing Activities:

 

  

 

  

Purchases of property and equipment

 

(9,280)

 

(4,925)

Purchases of short-term investments

(15,000)

Proceeds from short-term investments

45,000

Other investing activities

 

 

(500)

Cash provided by (used in) investing activities

$

20,720

$

(5,425)

Cash Flows From Financing Activities:

 

  

 

  

Repurchase of common stock

(42,867)

Proceeds from issuance of common stock

 

392

 

322

Repurchase of equity awards for employee tax withholding liabilities

 

(3,166)

 

(2,983)

Cash dividends paid

 

(9,020)

 

(6,252)

Other financing activities

 

(2,010)

 

(749)

Cash used in financing activities

$

(56,671)

$

(9,662)

Net change in cash and cash equivalents

$

(13,471)

$

25,918

Effect of foreign currency translation on cash and cash equivalents

 

411

 

155

Cash and cash equivalents at the beginning of year

 

44,859

 

66,013

Cash and cash equivalents at the end of period

$

31,799

$

92,086

See accompanying notes.

8

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OXFORD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

FIRST QUARTER OF FISCAL 2022

1.    Basis of Presentation:  The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial reporting and the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. We believe the accompanying unaudited condensed consolidated financial statements reflect all normal, recurring adjustments that are necessary for a fair presentation of our financial position and results of operations as of the dates and for the periods presented. Results of operations for interim periods are not necessarily indicative of results to be expected for a full fiscal year due to the seasonality of our business.

The preparation of our unaudited condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the amounts reported as assets, liabilities, revenues and expenses in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

The significant accounting policies applied during the interim periods presented are consistent with the significant accounting policies described in our Fiscal 2021 Form 10-K. No recently issued guidance adopted in Fiscal 2022 had a material impact on our consolidated financial statements upon adoption or is expected to have a material impact in future periods.

In Fiscal 2021, we exited our Lanier Apparel business, a business which had been focused on moderately priced tailored clothing and related products. This decision aligns with our stated business strategy of developing and marketing compelling lifestyle brands. The operating results of the Lanier Apparel business in Fiscal 2021 largely reflect activities associated with the ongoing wind down of operations following the 2020 announcement that we would be exiting the business.

Recently Issued Accounting Standards Applicable to Future Periods

Recent accounting pronouncements pending adoption are either not applicable or not expected to have a material impact on our consolidated financial statements.

COVID-19 Pandemic

The COVID-19 pandemic has had a significant effect on overall economic conditions and our operations in recent years. In Fiscal 2021, the economic environment improved significantly with a significant rebound in retail traffic starting in March 2021 and other improvements as the year progressed, although certain stores were closed for portions of the First Quarter of Fiscal 2021. This improved environment and exceptionally strong consumer demand drove record earnings during Fiscal 2021 and have continued in the First Quarter of Fiscal 2022. There can be no assurance that these trends will continue for our business or the broader retail apparel market. There remains significant uncertainty as to the duration and severity of the pandemic as well as the associated impact of changes in consumer discretionary spending habits, supply chain and other business disruptions, operating cost increases and inflationary pressures, general economic conditions and restrictions on our ongoing operations that result from the COVID-19 pandemic. Thus, the ultimate impact of the pandemic on our business remains uncertain at this time.

2.    Operating Group Information:   We identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance. Our operating group structure reflects a brand-focused management approach, emphasizing operational coordination and resource allocation across each brand’s direct to consumer, wholesale and licensing operations, as applicable. Our business is organized as our Tommy Bahama, Lilly Pulitzer, Emerging Brands and Lanier Apparel operating groups.

Tommy Bahama and Lilly Pulitzer each design, source, market and distribute apparel and related products bearing their respective trademarks and license their trademarks for other product categories. The Emerging Brands

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operating group consists of the operations of our smaller, earlier stage Southern Tide, TBBC and Duck Head brands. In prior years, Southern Tide was reported as a separate operating group, while both TBBC and Duck Head were included in Corporate and Other. All prior year amounts have been restated to conform to the current year presentation.

In the First Quarter of Fiscal 2022, we organized our smaller brands into the Emerging Brands operating group. Each of these smaller brands are supported by Oxford’s emerging brands team that provides certain support functions to our three smaller brands, including marketing and advertising execution, customer relationship management and analysis and other functions. The shared resources provide for operating efficiencies and enhanced knowledge sharing across the three brands.

Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, substantially all financing activities, the elimination of inter-segment sales, any other items that are not allocated to the operating groups, including LIFO inventory accounting adjustments, and the operations of our Lyons, Georgia distribution center and our Oxford America business, which we are in process of exiting in Fiscal 2022. For a more extensive description of our Tommy Bahama and Lilly Pulitzer operating groups, see Part I, Item 1. Business included in our Fiscal 2021 Form 10-K.

The table below presents certain financial information (in thousands) about our operating groups, as well as Corporate and Other.

First Quarter

    

Fiscal 2022

    

Fiscal 2021

Net sales

 

  

 

  

 

Tommy Bahama

$

228,067

$

156,698

Lilly Pulitzer

 

92,045

 

73,576

Emerging Brands

 

31,763

 

22,432

Lanier Apparel

 

 

12,019

Corporate and Other

 

706

 

1,037

Consolidated net sales

$

352,581

$

265,762

Depreciation and amortization

 

  

 

  

Tommy Bahama

$

6,618

$

7,040

Lilly Pulitzer

 

2,975

 

2,099

Emerging Brands

 

359

 

310

Lanier Apparel

 

 

36

Corporate and Other

 

238

 

198

Consolidated depreciation and amortization

$

10,190

$

9,683

Operating income (loss)

 

  

 

  

Tommy Bahama

$

52,606

$

20,660

Lilly Pulitzer

 

26,178

 

19,945

Emerging Brands

 

7,736

 

4,961

Lanier Apparel

 

 

855

Corporate and Other

 

(10,542)

 

(11,528)

Consolidated operating income

$

75,978

$

34,893

Interest expense, net

 

242

 

252

Earnings before income taxes

$

75,736

$

34,641

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April 30, 2022

 

January 29, 2022

    

May 1, 2021

Assets

 

  

  

 

  

Tommy Bahama (1)

$

542,734

$

531,678

$

569,391

Lilly Pulitzer (2)

 

194,091

 

176,757

 

188,886

Emerging Brands (3)

 

72,728

 

66,825

 

49,802

Lanier Apparel (4)

 

 

207

 

9,620

Corporate and Other (5)

 

137,464

 

182,175

 

83,283

Consolidated Total Assets

$

947,017

$

957,642

$

900,982

(1)Decrease in Tommy Bahama total assets from May 1, 2021 includes reductions in operating lease assets and property and equipment partially offset by higher inventories and receivables.
(2)Increase in Lilly Pulitzer total assets from May 1, 2021 includes increased property and equipment and inventories partially offset by reductions in operating lease assets and receivables.
(3)Increase in Emerging Brands total assets from May 1, 2021 includes increased inventories, receivables and property and equipment.
(4)Decrease in Lanier Apparel total assets from May 1, 2021 is due to the exit of the Lanier Apparel business during Fiscal 2021.
(5)Increase in Corporate and Other total assets from May 1, 2021 includes increased short-term investments partially offset by decreases in cash and cash equivalents, inventories and other non-current assets.

The tables below quantify net sales, for each operating group and in total (in thousands), and the percentage of net sales by distribution channel for each operating group and in total, for each period presented. We have calculated all percentages below based on actual data, and percentages may not add to 100 due to rounding.

First Quarter Fiscal 2022

 

    

Net Sales

    

Retail

    

E-commerce

    

Restaurant

    

Wholesale

    

Other

 

Tommy Bahama

$

228,067

 

45

%  

20

%  

14

%  

21

%  

%

Lilly Pulitzer

 

92,045

 

34

%  

44

%  

%  

22

%  

%

Emerging Brands

 

31,763

 

5

%  

30

%  

%  

65

%  

%

Lanier Apparel

 

 

%  

%  

%  

%  

%

Corporate and Other

 

706

 

%  

%  

%  

43

%  

57

%

Total

$

352,581

 

39

%  

27

%  

9

%  

25

%  

%

First Quarter Fiscal 2021

 

    

Net Sales

    

Retail

    

E-commerce

    

Restaurant

    

Wholesale

    

Other

 

Tommy Bahama

$

156,698

 

42

%  

23

%  

16

%  

19

%  

%

Lilly Pulitzer

 

73,576

 

35

%  

42

%  

%  

23

%  

%

Emerging Brands

 

22,432

 

3

%  

34

%  

%  

63

%  

%

Lanier Apparel

 

12,019

 

%  

%  

%  

100

%  

%

Corporate and Other

 

1,037

 

%  

%  

%  

53

%  

47

%

Total

$

265,762

 

34

%  

28

%  

9

%  

28

%  

%

3.    Revenue Recognition and Receivables: Our revenue consists of direct to consumer sales, including our retail store, e-commerce and restaurant operations, and wholesale sales, as well as royalty income, which is included in royalties and other operating income in our consolidated statements of operations. We recognize revenue when performance obligations under the terms of the contracts with our customers are satisfied. Our accounting policies related to revenue recognition for each type of contract with customers is described in the significant accounting policies described in our Fiscal 2021 Form 10-K.

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The table below quantifies net sales by distribution channel (in thousands) for each period presented.

First Quarter

    

Fiscal 2022

    

Fiscal 2021

Retail

$

136,080

$

91,280

E-commerce

 

96,473

 

74,238

Restaurant

 

30,885

 

25,208

Wholesale

 

88,616

 

74,453

Other

 

527

 

583

Net sales

$

352,581

$

265,762

As of April 30, 2022, January 29, 2022 and May 1, 2021, prepaid expenses and other current assets included $5 million, $4 million and $4 million, respectively, representing the estimated value of inventory for expected direct to consumer and wholesale sales returns. An estimated sales return liability of $14 million, $11 million and $12 million for expected direct to consumer returns is classified in accrued expenses and other liabilities in our consolidated balance sheet as of April 30, 2022, January 29, 2022 and May 1, 2021, respectively.

Substantially all amounts recognized in receivables, net represent trade receivables related to contracts with customers. In the ordinary course of our wholesale operations, we offer discounts, allowances and cooperative advertising support to and accept returns from certain of our wholesale customers for certain products. As of April 30, 2022, January 29, 2022 and May 1, 2021, reserve balances recorded as a reduction to receivables related to these items were $5 million, $3 million and $6 million, respectively. As of April 30, 2022, January 29, 2022 and May 1, 2021, our provision for credit losses related to receivables included in our consolidated balance sheets was $1 million, $1 million and $2 million, respectively. In both the First Quarter of Fiscal 2022 and the First Quarter of Fiscal 2021, provisions for credit losses expense included in our consolidated statement of operations and the write-offs of credit losses was less than $1 million.

Contract liabilities for gift cards purchased by consumers and merchandise credits received by customers but not yet redeemed, less any breakage income recognized to date, is included in accrued expenses and other liabilities in our consolidated balance sheet and totaled $15 million, $16 million and $13 million as of April 30, 2022, January 29, 2022, and May 1, 2021, respectively.

4.    Leases: In the ordinary course of business, we enter into real estate lease agreements for our direct to consumer locations, which include retail and food and beverage locations, and office and warehouse/distribution space, as well as leases for certain equipment. Our real estate leases have varying terms and expirations and may have provisions to extend, renew or terminate the lease agreement at our discretion, among other provisions. Our real estate lease terms are typically for a period of ten years or less and typically require monthly rent payments with specified rent escalations during the lease term. Our real estate leases usually provide for payments of our pro rata share of real estate taxes, insurance and other operating expenses applicable to the property, and certain of our leases require payment of sales taxes on rental payments. Also, our direct to consumer location leases often provide for contingent rent payments based on sales if certain sales thresholds are achieved.

For the First Quarter of Fiscal 2022 operating lease expense, which includes amounts used in determining the operating lease liability and operating lease asset, was $14 million and variable lease expense was $10 million, resulting in total lease expense of $24 million compared to $26 million of total lease expense in the First Quarter of Fiscal 2021. Cash paid for lease amounts included in the measurement of operating lease liabilities in the First Quarter of Fiscal 2022 was $18 million, while cash paid for lease amounts included in the measurement of operating lease liabilities in the First Quarter of Fiscal 2021 was $18 million.

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As of April 30, 2022, the stated lease liability payments for the fiscal years specified below were as follows (in thousands):

    

Operating lease

Remainder of 2022

$

46,126

2023

61,905

2024

49,287

2025

 

35,891

2026

 

27,944

2027

16,072

After 2027

 

29,212

Total lease payments

$

266,437

Less: Difference between discounted and undiscounted lease payments

 

26,430

Present value of lease liabilities

$

240,007

5.    Income Taxes: Our effective income tax rate for the First Quarter of Fiscal 2022 was an expense of 24.2% while our effective income tax rate for the First Quarter of Fiscal 2021 was an expense of 17.8%. Both periods benefitted from certain favorable items that resulted in a lower tax rate than a more typical annual effective tax rate of approximately 25%.

The income tax expense in both the First Quarter of Fiscal 2022 and the First Quarter of Fiscal 2021 included the benefit of the utilization of certain net operating loss carryforward amounts in certain state and foreign jurisdictions, the recognition of certain tax credit amounts and the vesting of restricted stock awards at a price higher than the grant date fair value. These favorable items were partially offset by certain unfavorable permanent items which are not deductible for income tax purposes. Additionally, and more significantly, the income tax expense in the First Quarter of Fiscal 2021 included the benefit of a $2 million net reduction in uncertain tax positions resulting from the settlement of those uncertain tax position amounts in the First Quarter of Fiscal 2021.

6.    Shareholders’ Equity: In the First Quarter of Fiscal 2022, we repurchased 491,000 shares of our common stock for $43 million under our $100 million open market stock repurchase program after repurchasing 91,000 shares for $8 million in the Fourth Quarter of Fiscal 2021. These repurchases resulted in $49 million remaining under the existing open market repurchase program and $99 million remaining under our existing Board of Directors’ authorization as of April 30, 2022. During both the First Quarter of Fiscal 2022 and the First Quarter of Fiscal 2021, we repurchased $3 million of shares from our employees to cover employee tax liabilities related to the vesting of shares of our common stock.

Additionally, subsequent to April 30, 2022 through June 8, 2022, we repurchased an additional 220,000 shares of our common stock for $19 million under the open market repurchase program resulting in $30 million remaining under the open market repurchase program as of June 8, 2022.

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The following tables detail the changes (in thousands) in our common stock, additional paid-in capital ("APIC"), retained earnings and accumulated other comprehensive (loss) income ("AOCI"), for each period presented.

Fiscal 2021

    

Common Stock

    

APIC

    

Retained Earnings

    

AOCI

    

Total

January 30, 2021

    

$

16,889

    

$

156,508

    

$

235,995

    

$

(3,664)

    

$

405,728

Comprehensive income

 

 

 

28,468

 

391

 

28,859

Shares issued under equity plans

 

39

 

283

 

 

 

322

Compensation expense for equity awards

 

 

2,227

 

 

 

2,227

Repurchase of shares

 

(34)

 

(2,949)

 

 

 

(2,983)

Dividends declared

 

 

 

(6,252)

 

 

(6,252)

May 1, 2021

$

16,894

$

156,069

$

258,211

$

(3,273)

$

427,901

Comprehensive income

 

 

 

51,460

(462)

 

50,998

Shares issued under equity plans

 

1

 

341

 

 

 

342

Compensation expense for equity awards

 

 

1,673

 

 

 

1,673

Repurchase of shares

 

 

 

 

 

Dividends declared

 

 

 

(7,215)

 

 

(7,215)

July 31, 2021

$

16,895

$

158,083

$

302,456

$

(3,735)

$

473,699

Comprehensive income

 

 

 

25,985

 

654

 

26,639

Shares issued under equity plans

 

(4)

 

386

 

 

 

382

Compensation expense for equity awards

 

 

1,952

 

 

 

1,952

Repurchase of shares

 

 

 

 

 

Dividends declared

 

 

 

(7,203)

 

 

(7,203)

October 30, 2021

$

16,891

$

160,421

$

321,238

$

(3,081)

$

495,469

Comprehensive income

 

 

 

25,408

 

(391)

 

25,017

Shares issued under equity plans

 

5

 

401

 

 

 

406

Compensation expense for equity awards

 

 

2,334

 

 

 

2,334

Repurchase of shares

 

(91)

 

 

(8,268)

 

 

(8,359)

Dividends declared

 

 

 

(7,203)

 

 

(7,203)

January 29, 2022

$

16,805

$

163,156

$

331,175

$

(3,472)

$

507,664

First Quarter Fiscal 2022

    

Common Stock

    

APIC

    

Retained Earnings

    

AOCI

    

Total

January 29, 2022

    

$

16,805

$

163,156

$

331,175

$

(3,472)

$

507,664

Comprehensive income

 

 

 

57,408

 

477

 

57,885

Shares issued under equity plans

 

5

 

387

 

 

 

392

Compensation expense for equity awards

 

 

2,725

 

 

 

2,725

Repurchase of shares

 

(526)

 

(3,131)

 

(42,375)

 

 

(46,032)

Dividends declared

 

 

 

(9,214)

 

 

(9,214)

April 30, 2022

$

16,284

$

163,137

$

336,994

$

(2,995)

$

513,420

During the First Quarter of Fiscal 2022, we granted 0.1 million service-based restricted share units, subject to the recipient remaining an employee through the May 2025 vesting date. Additionally, during the First Quarter of Fiscal 2022, we granted 0.1 million total shareholder return-based (“TSR-based”) restricted share units at target subject to (1) our achievement of a specified TSR-based ranking by Oxford relative to a comparator group during a period of approximately three years from the date of grant and (2) the recipient remaining an employee through the May 2025 vesting date. The number of shares ultimately earned for the TSR-based restricted share units will be between 0% and 200% of the restricted share units at target. Neither the service-based or TSR-based restricted share units are included in the table above as the awards are not outstanding shares.

Both the service-based and TSR-based restricted share units are entitled to dividend equivalents for dividends declared on our common stock during the vesting period, with the dividend equivalents for the service-based

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restricted share units payable at the time of the payment of the respective dividend and the dividend equivalents for the TSR-based restricted share units payable after vesting of the restricted shares, for the number of shares ultimately earned. Neither the service-based or TSR-based restricted share units have any voting rights during the vesting period. Both the service-based and TSR-based restricted share units granted during the First Quarter of Fiscal 2022 include certain clauses related to accelerated vesting upon the occurrence of qualifying retirement, death or disability of the employee prior to the vesting date. Our stock incentive plans are described in Note 8 to our consolidated financial statements included in our Fiscal 2021 Form 10-K.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto contained in this report and the consolidated financial statements, notes to consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Fiscal 2021 Form 10-K.

OVERVIEW

Business Overview

We are a leading branded apparel company that designs, sources, markets and distributes products bearing the trademarks of our Tommy Bahama, Lilly Pulitzer, Southern Tide, TBBC and Duck Head lifestyle brands.

Our business strategy is to develop and market compelling lifestyle brands and products that evoke a strong emotional response from our target consumers. We consider lifestyle brands to be those brands that have a clearly defined and targeted point of view inspired by an appealing lifestyle or attitude. Furthermore, we believe lifestyle brands that create an emotional connection can command greater loyalty and higher price points and create licensing opportunities. We believe the attraction of a lifestyle brand depends on creating compelling product, effectively communicating the respective lifestyle brand message and distributing products to consumers where and when they want them. We believe the principal competitive factors in the apparel industry are the reputation, value, and image of brand names; design of differentiated, innovative or otherwise compelling product; consumer preference; price; quality; marketing (including through rapidly shifting digital and social media vehicles); product fulfillment capabilities; and customer service. Our ability to compete successfully in the apparel industry is directly related to our proficiency in foreseeing changes and trends in fashion and consumer preference and presenting appealing products for consumers. Our design-led, commercially informed lifestyle brand operations strive to provide exciting, differentiated products each season.

Tommy Bahama and Lilly Pulitzer, in the aggregate, represented 90% of our consolidated net sales in Fiscal 2021. During Fiscal 2021, 80% of our consolidated net sales were through our direct to consumer channels of distribution, which consist of our brand specific full-price retail stores and e-commerce websites, Tommy Bahama food and beverage operations and Tommy Bahama outlets. The remaining 20% of our net sales was generated through our wholesale distribution channels. Our wholesale operations consist of net sales of products bearing our lifestyle brands, which complement our direct to consumer operations and provide access to a larger base of consumers.

For additional information about our business and our operating groups, see Part I, Item 1. Business of our Fiscal 2021 Form 10-K. Important factors relating to certain risks which could impact our business are described in Part II, Item 1A. Risk Factors of this report and Part I. Item 1A. Risk Factors of our Fiscal 2021 Form 10-K.

Industry Overview

We operate in a highly competitive apparel market that continues to evolve rapidly with the expanding application of technology to fashion retail. No single apparel firm or small group of apparel firms dominates the apparel industry, and our direct competitors vary by operating group and distribution channel. The apparel industry is cyclical and very dependent upon the overall level and focus of discretionary consumer spending, which changes as consumer preferences and regional, domestic and international economic conditions change. Further, negative economic conditions often have a longer and more severe impact on the apparel industry than on other industries. Also, in recent years prior to the COVID-19 pandemic, consumers have chosen to spend less of their discretionary spending on certain product categories, including apparel, while spending more on services and other product categories.

This competitive and evolving environment requires that brands and retailers approach their operations, including marketing and advertising, very differently than historical practices and may result in increased operating costs and investments to generate growth or even maintain sales levels. While the competition and evolution presents significant

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risks, especially for traditional retailers who fail or are unable to adapt, we believe it also presents a tremendous opportunity for brands and retailers to capitalize on the changing consumer environment. 

Many of the changes in the industry noted above were accelerated or exacerbated by the COVID-19 pandemic. Additionally, in Fiscal 2021 the United States economy, as well as the apparel retail industry and our own business operations, began experiencing very strong growth in consumer demand and also began encountering various challenges including labor shortages, supply chain disruptions and product and operating cost increases. These items, combined with more recent macroeconomic factors, have continued to impact the apparel retail industry and our business in Fiscal 2022. We, as well as others in our industry, have increased prices to attempt to offset these inflationary pressures.

We believe our lifestyle brands have true competitive advantages, and we continue to invest in and leverage technology to serve our consumers when and where they want to be served. We continue to believe that our lifestyle brands, with their strong emotional connections with consumers, are well suited to succeed and thrive in the long term while managing the various challenges facing our industry.

COVID-19 Pandemic

The COVID-19 pandemic has had a significant effect on overall economic conditions and our operations in recent years. In Fiscal 2021, the economic environment improved significantly with a significant rebound in retail traffic starting in March 2021 and other improvements as the year progressed, although certain stores were closed for portions of the First Quarter of Fiscal 2021. This improved environment and exceptionally strong consumer demand drove record earnings for us through Fiscal 2021 and have continued in the First Quarter of Fiscal 2022. There can be no assurance that these trends will continue for our business or the broader retail apparel market or that store closures will not occur in the future as a result of any resurgence of COVID-19 cases and/or additional government mandates or recommendations. There remains significant uncertainty as to the duration and severity of the pandemic as well as the associated impact of changes in consumer discretionary spending habits, supply chain and other business disruptions, operating cost increases and inflationary pressures, general economic conditions and restrictions on our ongoing operations that result from the COVID-19 pandemic. Thus, the ultimate impact of the pandemic on our business remains uncertain at this time.

Lanier Apparel Exit

In Fiscal 2021, we exited our Lanier Apparel business, a business which had been focused on moderately priced tailored clothing and related products. This decision aligns with our stated business strategy of developing and marketing compelling lifestyle brands. It also took into consideration the increased macroeconomic challenges faced by the Lanier Apparel business, many of which were magnified by the COVID-19 pandemic. The operating results of the Lanier Apparel business in Fiscal 2021 largely reflect activities associated with the ongoing wind down of operations following the 2020 announcement that we would be exiting the business. In Fiscal 2021, Lanier Apparel’s net sales were $25 million and represented 2% of our consolidated net sales. We do not expect any future net sales, operations or charges for Lanier Apparel. Refer to our consolidated financial statements and Management Discussion and Analysis in our Fiscal 2021 Form 10-K for additional information about the Lanier Apparel exit.

Key Operating Results:

The following table sets forth our consolidated operating results (in thousands, except per share amounts) for the First Quarter of Fiscal 2022 compared to the First Quarter of Fiscal 2021:

    

First Quarter

    

Fiscal 2022

Fiscal 2021

Net sales

$

352,581

$

265,762

Operating income

$

75,978

$

34,893

Net earnings

$

57,408

$

28,468

Net earnings per diluted share

$

3.45

$

1.70

Weighted average shares outstanding - diluted

 

16,622

 

16,792

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Earnings per share were $3.45 in the First Quarter of Fiscal 2022 compared to $1.70 in the First Quarter of Fiscal 2021. The higher earnings per share were primarily a result of (1) increased net sales in our Tommy Bahama, Lilly Pulitzer and Emerging Brands operating groups, (2) improved consolidated gross margin, and (3) higher royalty income. These favorable items were partially offset by (1) increased SG&A, (2) a higher effective tax rate and (3) the absence of operating income in Lanier Apparel in the First Quarter of Fiscal 2022 due to the exit of the business in Fiscal 2021.

STORE COUNT

The table below provides store count information for our brands as of the dates specified. The store count includes our permanent locations and excludes any pop-up or temporary store locations which have an initial lease term of 12 months or less.

April 30,

January 29,

May 1,

January 30,

    

2022

    

2022

    

2021

    

2021

Tommy Bahama retail stores

 

102

 

102

 

104

 

105

Tommy Bahama retail-restaurant locations

 

21

 

21

 

21

 

20

Tommy Bahama outlets

 

35

 

35

 

35

 

35

Total Tommy Bahama locations

 

158

 

158

 

160

 

160

Lilly Pulitzer retail stores

 

59

 

58

 

59

 

59

Southern Tide retail stores

4

4

4

3

TBBC retail stores

1

1

Total Oxford locations

 

222

 

221

 

223

 

222

RESULTS OF OPERATIONS

FIRST QUARTER OF FISCAL 2022 COMPARED TO FIRST QUARTER OF FISCAL 2021

The discussion and tables below compare our statements of operations for the First Quarter of Fiscal 2022 to the First Quarter of Fiscal 2021. Each dollar and percentage change provided reflects the change between these fiscal periods unless indicated otherwise. Each dollar and share amount included in the tables is in thousands except for per share amounts. We have calculated all percentages based on actual data, and percentage columns in tables may not add due to rounding. Individual line items of our consolidated statements of operations, including gross profit, may not be directly comparable to those of our competitors, as classification of certain expenses may vary by company.

The following table sets forth the specified line items in our unaudited condensed consolidated statements of operations both in dollars (in thousands) and as a percentage of net sales as well as the dollar change and the percentage change as compared to the same period of the prior year:

    

First Quarter

    

    

 

Fiscal 2022

Fiscal 2021

$ Change

    

% Change

Net sales

    

$

352,581

    

100.0

%  

$

265,762

100.0

%  

$

86,819

    

32.7

%

Cost of goods sold

 

126,204

 

35.8

%  

 

99,177

 

37.3

%  

 

27,027

 

27.3

%

Gross profit

$

226,377

 

64.2

%  

$

166,585

 

62.7

%  

$

59,792

 

35.9

%

SG&A

 

157,412

 

44.6

%  

 

137,125

 

51.6

%  

 

20,287

 

14.8

%

Royalties and other operating income

 

7,013

 

2.0

%  

 

5,433

 

2.0

%  

 

1,580

 

29.1

%

Operating income

$

75,978

 

21.5

%  

$

34,893

 

13.1

%  

$

41,085

 

117.7

%

Interest expense, net

 

242

 

0.1

%  

 

252

 

0.1

%  

 

(10)

 

(4.0)

%

Earnings before income taxes

$

75,736

 

21.5

%  

$

34,641

 

13.0

%  

$

41,095

 

118.6

%

Income tax expense

 

18,328

 

5.2

%  

 

6,173

 

2.3

%  

 

12,155

 

196.9

%

Net earnings

$

57,408

 

16.3

%  

$

28,468

 

10.7

%  

$

28,940

 

101.7

%

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Net Sales

    

First Quarter

    

Fiscal 2022

Fiscal 2021

    

$ Change

    

% Change

Tommy Bahama

$

228,067

$

156,698

$

71,369

 

45.5

%

Lilly Pulitzer

 

92,045

 

73,576

 

18,469

 

25.1

%

Emerging Brands

 

31,763

 

22,432

 

9,331

 

41.6

%

Lanier Apparel

 

 

12,019

 

(12,019)

 

(100.0)

%

Corporate and Other

 

706

 

1,037

 

(331)

 

(31.9)

%

Consolidated net sales

$

352,581

$

265,762

$

86,819

 

32.7

%

Consolidated net sales were $353 million in the First Quarter of Fiscal 2022 compared to net sales of $266 million in the First Quarter of Fiscal 2021. The 33% increase in net sales included increases in Tommy Bahama, Lilly Pulitzer, and Emerging Brands as well as each distribution channel, which were partially offset by a $12 million decrease in Lanier Apparel, which we exited in Fiscal 2021. In the First Quarter of Fiscal 2021, consumer traffic and our operations had only partially rebounded from the impacts of the COVID-19 pandemic as we still had certain store closures and operating restrictions in certain regions, wholesale customer demand was still soft and most of the consumer traffic improvement occurred later in Fiscal 2021. Although we did have some price increases in the First Quarter of Fiscal 2022 in order to mitigate increased product and other costs, net sales was primarily impacted by increased volume.

The increase in net sales by distribution channel included increases in (1) full-price retail sales of $41 million, or 51%, driven primarily by increased consumer traffic, (2) wholesale sales of our non-Lanier Apparel businesses of $26 million, or 42%, with this increase due to higher order books as wholesale accounts increased their buys for Spring 2022 compared to Spring 2021 as well as the timing of some initial spring deliveries, which shipped in February in 2022 rather than January, (3) full-price e-commerce sales of $15 million, or 20%, as each of our e-commerce businesses continued to grow, (4) e-commerce flash clearance sales in Lilly Pulitzer of $7 million, with no e-commerce flash clearance sales in the prior year period, (5) restaurant sales of $6 million, or 23%, and (6) outlet sales of $4 million, or 35%. The following table presents the proportion of our consolidated net sales by distribution channel for each period presented. We have calculated all percentages below on actual data, and percentages may not add to 100 due to rounding.

    

First Quarter

    

Fiscal 2022

    

Fiscal 2021

Retail

 

39

%  

34

%

E-commerce

 

27

%  

28

%

Restaurant

 

9

%  

9

%

Wholesale

 

25

%  

28

%

Total

 

100

%  

100

%

Tommy Bahama:

Tommy Bahama net sales increased $71 million, or 46%, in the First Quarter of Fiscal 2022, with an increase in each channel of distribution. The increase in net sales in Tommy Bahama included increases in (1) full-price retail sales of $34 million, or 63%, (2) wholesale sales of $17 million, or 56%, (3) e-commerce sales of $11 million, or 30%, (4) restaurant sales of $6 million, or 23%, with strong sales and fewer operating restrictions in our 21 food and beverage

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locations, and (5) outlet sales of $4 million, or 35%. The following table presents the proportion of net sales by distribution channel for Tommy Bahama for each period presented:

First Quarter

    

Fiscal 2022

    

Fiscal 2021

 

Retail

 

45

%  

42

%

E-commerce

 

20

%  

23

%

Restaurant

 

14

%  

16

%

Wholesale

 

21

%  

19

%

Total

 

100