The maker of Tommy Bahama says shoppers are still hesitant. It's investing in new stores anyway.

By Bill Peters

'Experience has shown us that during times like this, when near-term demand is choppy, it is best to stay focused on the long-term opportunity,' CEO says

Demand for clothing still isn't where clothing makers or clothing retailers want it to be. But Oxford Industries Inc., the company behind the Tommy Bahama and Lilly Pulitzer fashion brands, said Thursday that it plans to invest in new stores this year - as well as its restaurants and resort.

That didn't do much for the stock price of the company, which sells beach- and resort-wear and runs dozens of stores, a handful of restaurants and a Tommy Bahama-themed resort in California. Shares slid after hours, after the company warned that those investments, along with consumer hesitation, would weigh on the bottom line in the months ahead.

Oxford (OXM), in its fourth-quarter earnings release, said it plans to spend more on opening physical stores this year - including new Marlin Bars, a Tommy Bahama-branded restaurant - and invest in improving distribution on the East Coast.

"While these investments, combined with the persistence of a cautious consumer environment, will put pressure on near-term EPS, we are excited to continue executing the initiatives that we have in place to bring more consumers into the beautiful universes our brands represent," Chief Executive Tom Chubb said in a statement.

Chubb said on the company's earnings call that while many economic indicators were positive, consumer sentiment was still sour when compared to where it was before the pandemic.

But he said that it was better to play offense, and said that hospitality was crucial to consumer perception.

"The muted consumer sentiment is manifesting itself in consumers who have the ability to spend, but are being much more cautious in their spending on discretionary items such as the fashion apparel, which is the core of our business," Chubb said.

"Experience has shown us that during times like this, when near-term demand is choppy, it is best to stay focused on the long-term opportunity and strengthening the fundamentals of the business that have created our strong foundation," he said.

Like its industry peers, he said Oxford this year would focus on new clothing that stood out. And he said that hospitality helped "complete the dream that is Tommy Bahama" for customers. Those customers, the company has said, tend to be older than 45, with a household income above $100,000 a year.

Still, shares were down 6.9% after hours on Thursday, after the company forecast full-year profit that was below Wall Street's expectations.

Oxford said it expected to report adjusted earnings per share of $9.30 to $9.70 this year. That was below FactSet forecasts for $10.26.

However, the company's sales forecast over that period - $1.63 billion to $1.67 billion - was above estimates for $1.62 billion.

Higher prices and higher interest rates over the past two years have left consumers with less cash to spend on clothing. Retailers, in turn, have been more prudent about what clothing they bring into their stores to sell.

During the fourth quarter, sales for Tommy Bahama and Lilly Pulitzer were both up. Fourth-quarter sales overall rose 6% from a year ago to $404 million, but they were below FactSet forecasts for $408.3 million.

Oxford reported a fourth-quarter net loss of $60.1 million, or $3.85 a share, contrasting with a profit of around $32 million, or a $2 a share, in the same quarter last year. That loss reflected an impairment charge related to its Johnny Was clothing brand, amid "the current challenging macroeconomic environment that has resulted in a more cautious consumer and elevated interest rates for prolonged periods."

Adjusted earnings per share came in at $1.90, below expectations for $1.95.

-Bill Peters

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03-28-24 1855ET

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