Oxford Net Off One-Third in Q3

NEW YORK – Facing “a very challenging environment for our historical menswear business,” Oxford Industries’ saw its third-quarter profits fall more than expected and reduced its guidance for the final quarter of the year.

Net income for the three months ended March 2 dropped 33.3% to $9.7 million, or $0.54 a diluted share, from $14.6 million, or $0.82, in the third quarter of last year. Excluding the company’s womenswear unit, sold during the final quarter of last year, net income was down 12.4%, to $9.7 million, or $0.54, from $11.1 million, or $0.63.

The EPS result for the third quarter was $0.03 below consensus estimates.

Sales fell 3.1% to $266.6 million from $275.2 million.

“Our third quarter performance was as anticipated, with a continued strong performance from Tommy Bahama,” said J. Hicks Lanier, chairman and chief executive officer of the Atlanta-based apparel firm. “We have continued to work towards a recovery in Ben Sherman’s US business and to work through a very challenging environment for our historical menswear business.

“We remain very enthusiastic about the growth opportunities for our lifestyle brands, which include wider wholesale distribution, additional retail locations, expansion into new product categories and new licenses, and international expansion,” Lanier continued. “At the same time, we are committed to focus and to transition our historical business, through both additions and deletions, to improve its strategic positioning and profitability.”

But during the third quarter, the Menswear Group’s operating income fell 58.5%, to $2.7 million from $6.4 million, as sales declined 11.5% to $147 million. The Tommy Bahama Group’s results improved, but not enough to compensate for weakness in Menswear – operating income grew 12.6%, to $22.2 million from $19.7 million, while sales advanced 9.8%, to $119.2 million from $108.6 million.

On a percentage basis, the quarterly improvement in sales and income at Tommy Bahama trailed those of the year-to-date results.

The shift in sales towards Tommy Bahama helped overall gross margin improve to 40.6% of sales from 39.9% a year ago.

In Menswear, Ben Sherman’s sales were down but average unit price rose due to tighter distribution. Oxford cited “lower sales volume and margin compression in the Group’s tailored clothing business” for the decline in the group’s operating income.

Oxford continues to expect ongoing strength at Tommy Bahama and improvement in the Menswear Group’s operating income during the fourth quarter, but backed away from previous estimates.

“The improvement in the Menswear Group is not expected to be as significant as previously indicated,” the firm said.

Accordingly, Oxford reduced its estimates for fourth-quarter earnings per diluted share to a range of $1.00 to $1.07, excluding special items, and revised downward its volume estimate for the quarter by $10 million, to a range of $285 million to $295 million.

In the year-to-date period, net income fell 16.8% to $32.8 million, or $1.84 a diluted share, from $39.5 million, or $2.22. Excluding discontinued operations, net income declined 0.2% to $33 million, or $1.85 a diluted share, from $33.1 million, or $1.86.

Sales in the nine months rose 2.4% to $841.7 million from $821.5 million.

Oxford reported results after the close of the equity markets on Tuesday, but its shares were off more than 4% in after-hours trading.

Atlanta-based Oxford manufactures and markets a wide range of men’s apparel under its own brands, including Tommy Bahama, Ben Sherman and Arnold Brant, and under a number of licensed labels.