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Oxford Industries Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: December 7, 2011 11:46PM
Oxford Industries Inc. (OXM) filed Quarterly Report for the period ended 2011-10-29. Oxford Industries Inc. has a market cap of $666.5 million; its shares were traded at around $40.42 with a P/E ratio of 19.8 and P/S ratio of 1.1. The dividend yield of Oxford Industries Inc. stocks is 1.3%. Oxford Industries Inc. had an annual average earning growth of 4.1% over the past 10 years.
Highlight of Business Operations:We acquired the Lilly Pulitzer brand and operations on December 21, 2010. Therefore, our consolidated operating results for the first nine months of fiscal 2010 did not include any operating activities for Lilly Pulitzer. Net sales for Lilly Pulitzer for the first nine months of fiscal 2011 were $71.4 million. By way of comparison, the Lilly Pulitzer brand and operations generated $56.5 million of net sales during the first nine months of fiscal 2010. The $71.4 million of net sales in the first nine months of fiscal 2011 reflects increases in each of the wholesale, retail and e-commerce channels of distribution.
Net sales for Ben Sherman for the first nine months of fiscal 2011 were comparable to the net sales for the first nine months of fiscal 2010, despite the first nine months of fiscal 2010 including $2.0 million of net sales associated with the previously exited womens and footwear businesses with no such sales in the first nine months of fiscal 2011. The net sales for the first nine months of fiscal 2011 reflect a decrease in unit volume of 18.1%, which was partially offset by an increase in the average selling price per unit of 21.1%. The reduced unit volume was primarily the result of our continuing strategy to improve the wholesale distribution of the brand, as reduced sales to certain moderate department stores have not yet been replaced with sales to targeted upper tier retailers, as well as the lack of sales associated with our previously exited womens and footwear businesses in the first nine months of fiscal 2011. The increase in average selling price per unit was due to (1) our strategy to improve the wholesale distribution of the brand, (2) the favorable foreign currency translation impact of a 5.2% change in average exchange rates between the two periods and (3) the lack of any net sales associated with the previously exited womens and footwear businesses, much of which was sold at close out prices, in the first nine months of fiscal 2011.
The increase in gross profit was primarily due to higher net sales, as discussed above, and increased gross margins. The increase in gross margins was primarily due to changes in the sales mix for the first nine months of fiscal 2011 compared to the first nine months of fiscal 2010. The changes in sales mix included (1) the inclusion of Lilly Pulitzer operating results, (2) direct to consumer sales, which generally have higher gross margins than wholesale sales, making up a larger proportion of Tommy Bahama sales, and (3) the impact of LIFO accounting, which included $0.0 million of charges in the first nine months of fiscal 2011 compared to $1.4 million of charges in the first nine months of fiscal 2010. These positive items were partially offset by the negative impact on our gross profit of the gross margin declines in Ben Sherman and Lanier Clothes in the first nine months of fiscal 2011 and approximately $1.0 million of first quarter fiscal 2011 charges to cost of goods sold in Lilly Pulitzer resulting from the write-up of acquired inventory to fair value pursuant to the purchase method of accounting in connection with the sale of acquired inventory. We do not anticipate that there will be any such charges to cost of goods sold in Lilly Pulitzer in future periods. Our gross profit may not be directly comparable to those of our competitors, as statement of operations classification of certain expenses may vary by company.
Operating income, on a consolidated basis, increased to $55.2 million in the first nine months of fiscal 2011 from $32.6 million in the first nine months of fiscal 2010. The $22.7 million increase in operating income was primarily due to (1) the inclusion of the operating income for Lilly Pulitzer, (2) higher net sales and improved operating results in Tommy Bahama, (3) a more favorable LIFO accounting impact and (4) lower operating expenses in Corporate and Other. These positive items were partially offset by (1) lower operating results in the Ben Sherman and Lanier Clothes operating groups, (2) the negative impact of a $1.0 million charge to cost of goods sold associated with purchase accounting in Lilly Pulitzer and (3) the $1.8 million charge related to the change in fair value of contingent consideration. Changes in operating income by operating group are discussed below.
The percentage of Lilly Pulitzers net sales, substantially all of which were not included in our fiscal 2010 consolidated net sales as the net sales occurred prior to acquisition, was 33%, 25%, 20% and 22% in the first, second, third and fourth quarters of fiscal 2010, respectively. On an annual basis, substantially all of Lilly Pulitzers operating income is typically earned in the first half of the fiscal year as the spring and summer seasons are typically the strongest seasons for Lilly Pulitzer products.
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