Consumer Goods Stock under Review: Oxford Industries, Inc. (NYSE: OXM)

On Wednesday, Shares of Oxford Industries, Inc. (NYSE: OXM) rose 0.41% to $91.95. The stock recorded $90.96 as its minimum price and hit the max level of $93.52, during its most recent trading session. It traded total volume of 170,751 shares higher than the average volume of 117.13K shares.

Oxford Industries, Inc. (OXM) recently declared financial results for its fiscal 2018 second quarter ended August 4, 2018.  Consolidated net sales increased to $302.60M contrast to $284.70M in the second quarter of fiscal 2017, which ended July 29, 2017. Earnings on a GAAP basis were $1.61 per share in the second quarter of fiscal 2018 contrast to $1.36 in the same period of the prior year.  On an adjusted basis, earnings were $1.83 per share in the second quarter of fiscal 2018 contrast to $1.44 in the second quarter of fiscal 2017.

In the second quarter of fiscal 2018, the Company incurred $3.70M, or $0.19 per share, of charges related to the restructuring and downsizing of Tommy Bahama’s operations in Japan, which included the forthcoming closure of the Tommy Bahama Ginza flagship retail-restaurant location. These charges were included in the GAAP results and excluded from the adjusted results. After fiscal 2018, the Company anticipates only a negligible impact to its profitability from the Tommy Bahama Asia-Pacific operations.

Consolidated Operating Results:

Gross profit in the second quarter increased to $179.30M contrast to $166.00M in the same period of the prior year, reflecting higher sales and higher gross margin. Gross margin in the second quarter of fiscal 2018 grew to 59.2% contrast to 58.3% in the second quarter of fiscal 2017.  Adjusted gross margin in the second quarter of fiscal 2018 expanded 60 basis points to 59.4% from 58.8% in the same period of the prior year. Consolidated net sales in the second quarter of fiscal 2018 increased 6% to $302.60M, with increases in each operating group.  Increased sales in the Company’s direct to consumer business included a strong comparable store sales increase of 7% and the incremental sales associated with additional stores at Lilly Pulitzer.

In the second quarter of fiscal 2018, SG&A as a percentage of net sales was 48.4% or $146.30M contrast to 46.7% or $132.90M in the prior year’s second quarter.  On an adjusted basis, SG&A as a percentage of net sales was 47.1% or $142.60M contrast to 46.5% or $132.50M in the prior year’s second quarter.  The increase in GAAP SG&A was mainly because of an incremental $5.00M investment in advertising, $3.20M of SG&A charges associated with the downsizing and restructuring of Tommy Bahama’s operations in Japan and the cost of operating additional Lilly Pulitzer stores.

For the second quarter of fiscal 2018, royalties and other operating income were $3.60M contrast to $3.30M in the second quarter of fiscal 2017.

Operating income in the second quarter of fiscal 2018 was $36.50M contrast to $36.40M in the same period of the prior year. On an adjusted basis, operating income was $40.60M contrast to $38.40M in the second quarter of fiscal 2017.

Interest expense for the second quarter of fiscal 2018 was $0.60M contrast to $0.70M in the second quarter of fiscal 2017. The effective tax rate in the second quarter of fiscal 2018 was 24.3% contrast to 36.4% in the same period of the prior year, mainly reflecting the impact of U.S. tax reform.

Balance Sheet and Liquidity:

Inventory increased to $124.0M at August 4, 2018 from $120.0M at the end of the second quarter of fiscal 2017.  The increase was mainly because of planned increases in direct to consumer sales in the second half of fiscal 2018.

As of August 4, 2018, the Company had $25.0M of borrowings outstanding under its $325.0M revolving credit agreement contrast to $38.0M at the end of the second quarter of fiscal 2017, with the decrease attributable to strong cash flow from operations.  The Company ended the quarter with $228.0M of unused availability under its credit agreement.

Outlook for Third Quarter and Fiscal Year 2018:

For the third quarter of fiscal 2018, ending on November 3, 2018, the Company anticipates year over year increases in direct to consumer sales and reductions in wholesale sales. Net sales are expected to be in a range from $235.0M to $245.0M contrast to net sales of $236.00M in the third quarter of fiscal 2017. Earnings per share on a GAAP basis are expected to be in a range of $0.07 to $0.17 in the third quarter.  On an adjusted basis, earnings per share for the third quarter of fiscal 2018 are expected to be in a range of $0.10 to $0.20. This compares with third quarter fiscal 2017 earnings per share of $0.06 and adjusted earnings per share of $0.17.

The Company’s interest expense is expected to be less than $3.0M and its effective tax rate for fiscal 2018 is expected to be about 26%.

Capital expenditures in fiscal 2018, counting $22.0M in the first half of fiscal 2018, are expected to be about $50.0M, mainly reflecting investments in information technology programs, new retail stores and restaurants, and investments to remodel and relocate existing retail stores.

OXM has the market capitalization of $1.55B and its EPS growth ratio for the past five years was 11.00%. The return on assets ratio of the Company was 10.40% while its return on investment ratio stands at 11.80%. Price to sales ratio was 1.41 while 91.20% of the stock was owned by institutional investors.

Marion Frost

Marion Frost

I am Marion Frost and I have over 16 years experience in the financial services industry giving me a vast understanding of how news affects the financial markets. I am an active day trader spending the majority of my time analyzing earnings reports and watching commodities and derivatives. I have a Masters Degree in Economics from Westminster University with previous roles counting Investment Banking.

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