Good day, and welcome to the Oxford Industries, Incorporated Third Quarter Fiscal 2012 Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Anne Shoemaker, Treasurer. Please go ahead, ma'am.

Thank you, Melissa, and good afternoon, everyone. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in the documents filed by us with the SEC. We undertake no duty to update any forward-looking statements. Also, during this call, we will be discussing certain non-GAAP financial measures. You can find a reconciliation of these non-GAAP financial measures to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website at oxfordinc.com. And now I'd like to introduce today's call participants. With me today are Hicks Lanier, Chairman and CEO; Tom Chubb, President; Scott Grassmyer, CFO; Terry Pillow, CEO of Tommy Bahama; and Doug Wood, President of Tommy Bahama. Thank you for your attention. And now I'd like to turn the call over to Hicks Lanier.

Good afternoon, and thank you for joining us to discuss our results. Well, Tommy Bahama and Lilly Pulitzer posted strong sales in the third quarter. We continue to invest in the growth of these fantastic brands, and we're very pleased with their contribution to our solid operating results. Our third quarter adjusted earnings increased 19% over last year, within our previously issued guidance range. In this quarter, which is by far our smallest for the year, Ben Sherman's disappointing performance muted our overall financial results. We have moderated our guidance for the year as the Ben Sherman struggles continue into the fourth quarter and we experienced delays in opening 3 key Tommy Bahama stores. Terry Pillow and Tom Chubb will provide more details on both of these items. That said, our expectation for the full year adjusted earnings reflects an earnings increase of 8% to 12% for the year even after our significant investments in Tommy Bahama this year. I'll return with some closing comments before Q&A, but I'd like to now turn this call over to Terry Pillow to discuss Tommy Bahama's results for the quarter. Terry?

Thank you, Hicks. Tommy Bahama's sales grew by 12% in the third quarter. We're particularly pleased with our direct to consumer performance. Through the first 9 months, our full-price comp store sales have increased in the high single digits with low single digits reported in the third quarter, our smallest quarter of the year. Our e-commerce business has posted significant gains both in Q3 and for the first 9 months of the year. We are now up to 110 Tommy Bahama stores with 5 new stores opened in the third quarter and 3 more expected to open in the fourth. A very important store, the New York flagship store, opened 2 weeks later than we planned on November 17. However, due to Hurricane Sandy, we experienced some delays in obtaining required permitting, which caused delays in opening the restaurant and bar. We plan to open the restaurant and bars on December 14, approximately 6 weeks later than planned. Even without the critical restaurant and bar components, we are pleased with the early results at the retail store. We have a long-term lease in this Fifth Avenue location with a great rent deal and are very excited with what we have done there. I'd note in addition to our New York location, 15 other Tommy Bahama stores were impacted to varying degrees by Sandy, with our 2 New Jersey stores still feeling some impact. Also affecting our forecast for the fourth quarter is the delay for our Chicago store on Michigan Avenue. We have been required to stop work on that location due to an unresolved dispute between our landlord and the developer. This opening, previously planned for November, has been pushed into fiscal 2013. Finally, our Hong Kong store, which also was planned for November, is now expected to open towards the end of December. We have seen a positive reaction in both our retail stores and e-commerce with our holiday loyalty cards that we sent out in mid-November. Our holiday gift guide started hitting homes last week, and the early read is very positive. We believe our product assortment in both men's and women's has never looked better, and our inventory position is in great shape. As you know, as part of our international expansion strategy, we acquired our Australian business from our licensee in the second quarter. We have made some enhancements there and are encouraged by the initial results we are seeing. We are well positioned on the Gold Coast market and are finalizing plans to expand into the Sydney market with a full-price retail store. With all of these elements in place, we are looking forward to a good holiday season to finish what has been another great year of development for the Tommy Bahama brand. Now I'll turn the call over to Tom Chubb to discuss results for the rest of our operating groups.

Thanks, Terry. Good afternoon, everyone, and thank you for joining us. While the third quarter remains a small one for Lilly Pulitzer, by continuing to develop innovative products that the customer loves and deliver a brand message that truly resonates with her, Lilly was able to deliver $26.9 million of sales, which represents an impressive 62% increase over last year with increases in all channels of distribution. The sales increase drove the swing from a small loss in the third quarter last year to a 13% positive operating margin this quarter. In August, the customer once again showed her enthusiasm for the brand with Lilly's flash sale on its e-commerce site exceeding our expectations. For the quarter, full-price sales on our site also continued to have excellent year-over-year increases, and we achieved comp growth in brick-and-mortar stores in the low double digits for the quarter and the year so far. We continue to be very pleased with the performances of our new stores in Charlotte, Atlanta and Baltimore, and our 19th store at Tysons Galleria outside of Washington, D.C. opens this week. We have also signed leases for 3 new Lilly's stores. The Shops at Riverside in New Jersey and Kenwood Towne Centre in Cincinnati are expected to open in the first quarter of 2013, and Streets at Southpoint in Durham, North Carolina in the second quarter. We are continuing to evaluate other sites as new stores are demonstrating that they are an excellent growth vehicle for Lilly. Lilly is off to a very good start in the fourth quarter with success in some new sportswear items and a holiday gift item. Needless to say, we are very enthusiastic about Lilly's performance this year. Ben Sherman's results for the third quarter were disappointing both in the absolute terms and relative…

Thanks, Tom. I'll now walk through the consolidated results. Consolidated net sales increased 7% to $181.4 million in the third quarter of fiscal 2012. On an adjusted basis, earnings per share increased 19% to $0.19 compared to $0.16 in the third quarter of fiscal 2011. On a U.S. GAAP basis, earnings per share increased to $0.18 in the third quarter of fiscal 2012 compared to $0.10 in the same period of the prior year. Consolidated gross margins for the third quarter increased to 53.4% compared to 52.1% in the third quarter of fiscal 2011. The increase in gross margins was primarily due to the sales mix, continuing to shift towards our higher-gross margin Tommy Bahama and Lilly Pulitzer businesses, the increased percentage of direct to consumer sales and the net favorable impact of LIFO accounting adjustments. SG&A for the third quarter of fiscal 2012 was $94.1 million, or 51.9% of net sales, compared to $85.2 million or 50% of net sales in the third quarter of fiscal 2011. In the quarter, the company incurred approximately $5.1 million of SG&A as we continued to make investments in Tommy Bahama's International expansion and incurred preopening expenses for the New York store. Last year, SG&A related to these investments was $1.2 million in the third quarter. SG&A also increased in the quarter due to the cost of operating additional retail stores and other expenses to support the growing Tommy Bahama and Lilly Pulitzer businesses, partially offset by decreases in SG&A in Ben Sherman and Lanier Clothes. Royalties and other operating income for the third quarter of fiscal 2012 were $3.8 million, approximately flat with last year. As a result of the improvements we made in our capital structure in the second quarter, interest expense for the third quarter of fiscal 2012 was 74%…

Thank you, Scott. Let me just pick up off Scott's last comments. If you'll recall, starting with the beginning of this year, we made a communication that this was going to be an investment year for Tommy Bahama. And that $15 million figure that Scott just mentioned of the impact on operating earnings, net of the gross margin that we achieved from those 2 ventures, is the magnitude of the annual investment we made there. And at this juncture, we feel very good about it. You can see that in the fourth quarter, that figure is going to be $5.2 million. But now, the $9.8 million from $15 million so it's a significant investment for us. But I think every one of us feels very strongly that we've done the right thing and that we will get a meaningful reward for years to come from this investment. Secondly, on the Ben Sherman front, there's no question that we have run into some issues in the third quarter. And from my vantage point, this is sort of good news because we were under the assumption going back 3 or 4 months ago that most of our problems were macroeconomic issues in Europe and the U.K., and we pinpointed that we had some very specific missteps and issues. But fortunately, they are very correctable, and the Ben Sherman team is highly focused on setting about correcting those. There'll be an impact in the fourth quarter but, hopefully, when we talk to you next, we'll have a much better story to tell by. Melissa, We are ready to take any questions now.

[Operator Instructions] And our first question will come from Edward Yruma from KeyBanc Capital Markets.

I wanted to drill on -- a little bit more on Ben Sherman. I know that there's been a deliberate attempt with Plectrum to elevate the business, and I was trying to understand the sequencing of some of these operational issues that you've uncovered. Cutting [ph] were they more pronounced than you would have expected? And I guess, Tom, now that you've kind of gotten your hands more involved there, how quickly can you influence the trajectory of the business?

Ed, as to the question about how quickly we can influence, there are some issues here that really will carry from the third quarter to the fourth quarter. If you'll remember, we talked about it being attributable to the merchandise mix being skewed too far towards the upper end of the price range. Because Ben Sherman basically works on 2 big seasons a year, Autumn/Winter and Spring/Summer, that merchandise mix is basically the mix that we're stuck with through the fourth quarter. So I think it's going to be -- continue to present some challenges to us through the fourth quarter. For spring and beyond, which basically corresponds to our first quarter, I think we were better assorted from the beginning, and we've also had some ability to influence that assortment here in the last month or so. So I do think while we will have some real challenges through the fourth quarter, and those were obviously built into the guidance now, we can begin to influence some meaningful things for the Spring/Summer season. And then for subsequent seasons, even more.

Sure. One follow-up to that point. I think you said before that you weren't unwilling to consider a more strategic thought process around Ben Sherman should either macro not improve or the business not improve. I guess where are you on evaluating the business from that perspective?

Well, I think that we have immediate problems in Ben Sherman that require immediate attention, and that's really been our focus, is dealing with the very near-term issues. We had the exit of the CEO about a month ago. That has enabled us to get much closer to the business and really get a much more detailed understanding of the business. As I mentioned, while we do have some of these issues in the merchandise mix that are going to carry through the fourth quarter, that's not to say there's nothing that we can do even in the very near term. In anything that we can do or identify that we think might improve trading results, we're acting on it immediately. We're also, as I mentioned in the prepared part of our remarks, exiting certain unprofitable or low-potential activities. There were some things that were going on in Ben Sherman that I think were distracting from the core mission, and we've moved already to shut some of those down. And then we've also initiated a very aggressive expense reduction program to bring the overhead structure in line with the size of the business. And these are all things that some of them have already happened, some of them can happen in the coming weeks and months and some of them will take a little longer to happen.

Got you. And my final question. I know you don't provide specific comp data points for your direct owned businesses, but you have from time to time provided some directional colors to the trajectory of comps. What are comps looking like at the Tommy Bahama stores? And how much was the moderation from Sandy?

Ed, this is Terry. We -- as we've said, our comps in Q3 were in the low single digits for Q3, but it's -- our e-comm business was terrific and experienced great growth. So we saw a little bit of the spreading around of the sales. But Q3, obviously, we were pleased with the way the business formed. That's our smallest quarter. As we look into -- as we moved into November, we saw mid-single-digit comps in November. So we're still getting very healthy comps, and the e-comm business is still a very explosive business for us. So we got a lot of business to do the rest of December and through the holiday seasons, but we've been experiencing good comp store growth.

We'll now go to our next question from Danielle McCoy from Brean Capital.

Firstly, I just wanted to say that Fifth Avenue store looks amazing. I was just there the other day and everything just really looks great.

Thanks, Danielle. This is Terry Pillow, I appreciate that. It's -- I appreciate somebody taking notice of it, because we've spent a lot of time on it, and it's doing quite well, as we've said in the remarks. The early results have been very, very promising. Can't wait to show you the bar and restaurant.

Yes, I'm definitely looking forward to that. So I guess just one more follow-up on Ben Sherman. Was there any cotton impact with that?

Not really. Cotton prices have sort of become a non-issue in Ben Sherman. I'd love to be able to blame the problem there on cotton prices, but I don't think that would be fair. It was really -- it was an issue for us a year or so ago, and it's really not now.

Okay. And then I guess just a little bit more color on the non-dress Lilly Pulitzer looks, how they're doing. A little bit of color on the new Lilly stores. And any more details, expansion plans or around about how many stores for next year?

Well, on the sportswear looks and what's worked during the third quarter, which basically neatly corresponds to Lilly's fall season, sportswear actually exceeded dresses in terms of dollar sales volume, which for Lilly is a relatively unusual occurrence. Normally, dresses are the leading category; for the third quarter, sportswear actually exceeded dresses. And then in the fourth quarter so far, sportswear is again performing very nicely. None of that says that dresses still aren't and always will be a very important category for Lilly and at the end of the day probably always be the most important category. But it's nice to see that Lilly is having some good success in sportswear as well. Then for store openings, we laid out in the prepared remarks there's a store that's opening this week in Tysons Galleria outside of Washington, D.C. Then we've got 3 stores that we've signed leases on that are opening, 2 in the first quarter and 1 in the second quarter of next year. At present, those are the only leases that we've got signed, but we're looking at lots of opportunities. We're very interested in opening more. For modeling purposes, I think somewhere around 3 to 5 stores is still the right number, but we'll keep you posted as our plans there evolve. As you know, we're very, very happy with the way the retail stores are performing and are anxious to identify good opportunities for expansion there.

Okay. And then just lastly, uses of free cash flow going forward?

Well, we have a high capital expenditure rate this year that we've indicated that we'll probably moderate next year. So we think next year is setting up to be a very strong free cash flow year. In the short term, we'll pay revolver debt down with it. But we've continue to have great investment opportunities in Tommy Bahama and Lilly Pulitzer. So that's our #1 goal, is to continue to invest in those brands, and then another acquisition, that if the right thing came along, we'd certainly look. But in the near term, it'll be investment in Tommy and Lilly and reducing debt levels.

[Operator Instructions] And now we'll go to Susan Sansbury from Miller Tabak.

I got lost a little bit in the prepared remarks. Scott, can you explain to me why the tax rate went up?

A couple of reasons. First, we're getting closer to a normalized rate, but we've had a couple of things that have swung us higher. Part is some of our foreign losses, both at Ben Sherman and Asian expansion. You're in jurisdictions where you don't have income to offset it. So you're not getting a benefit for those losses. Until, now, there's been -- those losses can carry forward. So if we have income in the future, we're going to get a recognized benefit. But the way the accounting rules work, we're building up those losses. We're not able to recognize those benefits from a GAAP accounting basis right now. So as -- so hopefully, we get those interests profitable, and then we have a carryforward opportunity. So that's really the main thing. The other thing is as Lilly Pulitzer and Tommy Bahama grow, there are -- some of the tax jurisdictions are higher. So they're getting closer to more normal statutory rates that you would expect for U.S. earnings. 39% is when you build in a 35% federal and you build in some state tax on top, you're getting pretty close to statutory rates. So I think really, our rate is normalizing where maybe it was weighed down for some foreign benefits we had, and we had lower domestic earnings at the same time.

Okay. Second question for Tom Chubb, I guess. With respect to Ben Sherman, I know you don't want to be specific in the short term or whatnot. But should we expect losses, operating losses, of this -- losses to continue in the fourth quarter?

Yes. Yes. That's implied in our guidance, is a third quarter operating loss or, excuse me, fourth quarter operating loss for Ben Sherman.

Okay. And so order of magnitude? It's going to be bigger than it was in the third quarter?

Probably roughly comparable to maybe a bit smaller. It'll be in the same neighborhood, generally.

Okay. And extending through the first quarter of next year? In other words, we've got 3 consecutive quarters of losses for Ben Sherman. Is that the way to think about it?

Too early to know how the quarters for next year lay out, Susan. To be honest, I think there's a very good chance that Ben Sherman can improve significantly for the total year next year. But how that may lay out by quarter, it's just too early for us to know.

Okay. Terry, I was also in the -- I've been in the flag -- New York City flagship store -- it's only a block and a half away from me -- twice now. And actually, I was amazed to see the number of people in the store given the fact that you haven't advertised it. So I concur with you that it's doing quite well. And yes, please get that bar and restaurant open. I need a drink.

Did you buy anything, Susan? I hope you bought something.

No, I channeled tech [ph] like mad and talked to customers as well as associates.

So we -- as you know, Susan, when we have the bar and restaurant component working with the store, it definitely increases it. And we've been happy with the traffic that we've had in there even without it. So we think with the restaurant, it will clearly make a better -- big response.

The -- I -- with the amount of -- my only comment is the amount of merchandise that you're trying to put into that small space makes it a little cramped every now and then. But I think you're off to a marvelous start.

Well, thanks.

Hurry up and get it -- let's have the grand opening. And hurry up and...

Thank you. Thanks, Sue.

So we can make it a hotspot in Midtown.

Okay.

And our next question will come from Mike Richardson from Sidoti.

Just a couple of quick questions for you. Is there any timetable on when that Chicago store might be opening?

Mike, as we said, we were hoping to get it opened this year, but it -- everything -- it's really depending on how these landlords can solve their issue. We don't know. As soon -- we got halfway finished with it before we were required to stop work on it. But everything is ready to go. If we get back in there and start working, we can open it pretty quick. It's just a matter of when the dispute is going to be settled and we can get back in there. But it's clearly on Michigan Avenue, the premier location on Michigan Avenue, and one that we want to open because we think it's clearly -- it's not with a restaurant or the bar, but it's clearly a flagship for us as well. So we're hoping to get it as soon as possible. It's kind of out of our hands, in the hands of the courts at this point.

Okay. I guess you got in the release you mentioned that like 24 stores were impacted by Sandy. And I guess you called out a couple in New -- or 1, at least 1 in New Jersey that was still -- hadn't quite got back to where it was before. But I'm just wondering, the other stores are also sort of back to where they were? And so I'm wondering if the sales trends sort of improved in the back half of November just generally?

Yes, Mike, in Atlantic City, we've had a store there for a number of years. It got slammed pretty hard, and that's the one that we're referring to that -- still that's recovering. But all of those stores up and down that coast, that hurt. We're pretty much back to normal now. But we did see -- I was in New York during that whole time, and it was -- even though some parts of New York we didn't feel -- up and down that coast was pretty severe. So we're happy that things are pretty much back to normal at every store, but Garden Plaza -- Garden State and Atlantic City.

Okay. Just last one. Just any general comments on the sourcing environment and what you guys are seeing just directionally in prices and pricing?

Nothing. As Tom mentioned in regard to Ben Sherman on cotton, we haven't seen -- we've got a mechanism that our office and sourcing group around the world is doing a great job, as always. We're not seeing any real change or anything dramatically happening in that regard. Our supply chain is very solid at this point.

And our next question will come from Jim Ragan from Crowell, Weedon.

I wonder if you can just talk a little bit about the merchandise mix in Q3 and maybe early Q4 with -- in Tommy Bahama. Specifically, I know there's been a push to increase the Tommy Bahama women's line. Can you just talk about how that's going?

Yes, we're very happy with the progress we're making in women's right now, as we said here. I was just reviewing it the other day. Our women's is just past 30%, around 30% of the business' total. However, we always talk about it's hard to grow that one. Men's keeps growing as well. Right now, with the -- we mentioned the merchandise mix we have. We're seeing some key items that we didn't think could get any bigger for us. It just keeps getting bigger this year, both e-comm and the retail stores. And fortunately, I mentioned in my prepared remarks where -- our inventory levels going into the last, these next 3 weeks before Christmas, which is traditionally our biggest 3 weeks of the year. We've never -- the reason I call that out on the -- we were looking at last week just to make sure that where we were on inventory, and I couldn't be happier where we are positioned on inventory going into the -- this critical time period. So women's is working well. However, it's hard to grow that percentage when men's is continuing to grow. And it's coming from fashion and key items. But I can tell you right now the key item piece of the business is really on par in both e-comm and full-price retail.

Okay, great. And then I had -- I also had a question regarding the -- just the retail store expansion. This has been a year of, I'd say, a few flagship stores between New York City, Chicago. And then some of your international stores, I think, would be considered flagships. I mean, what's the outlook for that going forward? Are you going to do some more ambitious store projects as you open new stores next year? Or will you pull that back a little bit?

We're looking at in the next year domestically open 26 and 8 [ph] stores, the majority of those being full-price stores, probably an outlet. And there, we have 4 international stores next year, too, in Japan, one of those being an aggressive project. Also, an island in Tokyo with a restaurant and bar. And we're opening a second store in a mall about 1.5 hours outside of Tokyo just to get an idea of both of those kind of what's an island look like and then what's a freestanding store without a restaurant would look like. So we think we'll get a pretty good read on the Japanese market. We're opening -- and as I mentioned in the prepared remarks, we've got a lease on a store in Sydney that we're very happy with. It's on the high street with high visibility. I'd say as high as New York or Michigan Avenue in comparison to Australia. However, we're not -- because of the size of the space, we're not going to open an island there. We're just going to open about a 3,000-square-foot retail store. And then the store we're opening in Hong Kong, I would say even though that location is a freestanding building, even though we're not having a full restaurant, we are having a hospitality component where we will offer guests drinks. And that's the -- that's a high-profile location for us. And we'll probably open another store in Singapore. So we're not backing off. We're learning with each of these stores internationally. We're seeing great increases in Macau and Singapore where we've got stores open right now. So we're encouraged and we're learning every day about this market. So that's sort of our cadence going into next year.

And that does conclude our question-and-answer session. At this time, I'd like to turn the call back over to Hicks Lanier for our closing remarks.

Thanks, Melissa. As I think you can gather we believe both Tommy Bahama and Lilly Pulitzer represent excellent vehicles for driving sustainable, profitable, long-term growth. We are addressing the issues with Ben Sherman, and we'll continue to take corrective action. Our management teams are dedicated and motivated to executing optimum strategy, and that's always focusing on delivering outstanding shareholder value. Thank you for your attention today, and we look forward to the next call.

That does conclude our conference at this time. We thank you for your participation. You may now disconnect.