Greetings, and welcome to Oxford Industries Inc Third Quarter Fiscal 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Anne Shoemaker, Treasurer. Please go ahead.

Thank you, and good afternoon. 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 our operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC, including the risk factors contained in our Form 10-K and first quarter 10-Q. We undertake no duty to update any forward-looking statements. During this call, we will be discussing certain non-GAAP financial measures. You can find a reconciliation of non-GAAP 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: Tom Chubb, Chairman and CEO; and Scott Grassmyer, CFO. Thank you for your attention. And now I'd like to turn the call over to Tom Chubb.

Good afternoon and thank you for joining us. I am encouraged by our third quarter results of each of our branded businesses Tommy Bahama, Lilly Pulitzer, and Southern Tide exceeded our internal plans. During our historically smallest quarter of the year, our full priced e-commerce business grew 51%, helping partially offset the headwinds in other channels due to COVID-19. Our sustained digital success this year underscores the power of our brands and their strong consumer connections, and is a great indication that our business is well positioned for success in a post pandemic environment. With the onset of COVID-19 in March, we focused on three priorities, the safety of our people and our customers, protecting the integrity of our brands, and preserving liquidity. We have done a good job executing on all three of these fronts. At the same time, our business and industry are facing significant changes that have only accelerated during the last nine months. As we progress through the year, while not taking our eye off the three priorities I outlined, we have resumed our focus on initiatives that will help us to better capitalize on important market trends in both the near term and the long term. In the post pandemic world, we believe products will continue to trend towards easy to wear and easy care, traffic in malls will remain significantly below 2019 levels. Department stores will be less relevant than they were before, e-commerce will be bigger and more important than ever. Company owned stores and restaurants will be a physical representation of the brand, seamlessly integrated into our total direct-to-consumer ecosystem, including e-commerce and heavily digital diversified marketing channels will be essential. All of these trends should benefit our business as we emerge from this crisis. We are building upon our already strong…

Thank you, Tom. We were quite pleased with our performance in the third quarter given the circumstances. As a reminder, our third quarters historically our smallest quarter of the year with Lilly Pulitzer Spring Summer clearance event making a meaningful contribution. This year we made some changes to the event. We did not hold sales in our stores. Lilly's customers show up in force and for the safety of our employees and our customers, we decided to limit the sale to online. The other big change was to hold the event in two parts. The first in June in our second quarter, and the second in September in our third quarter. The third quarter event was $12 million or 41% lower than last year due to the shift. The combined online events, however, were very successful in $2 million or 7% higher year-over-year. For our full price e-commerce business, we saw solid growth in each of our brands. On a consolidated basis, our full price e-commerce comp increased 51%. Each of our brands exceeded our internal plans for the third quarter with full price ecom at Tommy Bahama increasing 38%, Lilly Pulitzer, up 93% and a 36% increase at Southern Tide. Our full price retail sales decreased 45% as traffic was down significantly and most of our stores continue to operate under various restrictions. Our important Hawaiian locations were severely impacted by travel and other restrictions. Tommy Bahama operates 19 locations with a food and beverage component, excluding Hawaii and New York, where we had extended closures and restrictions. We were very pleased with our restaurant comp of negative 6%. Our newest Marlin Bar in Jacksonville, Florida, which opened in the second quarter, exceeded even our pre- pandemic plans. Overall restaurants were down 30% year-over-year. Our gross margin was 55%…

[Operator Instructions] Our first question comes from line of Paul Lejuez with Citigroup.

Hey guys, thanks. Curious if you can maybe talk a little bit more about what you're seeing quarter-to-date both in terms of sales trends and how that ties into what you expect for the rest of the quarter? Also curious about the promotional environment, what you're seeing currently and how you're thinking about the gross margin line for 4Q? And I think part of the gross margin improvement that you saw this quarter was probably from change in Lilly promos, but maybe can you also talk about the other moving pieces within the gross margin line in 3Q? Thanks.

Okay, I'll talk about the sales trends a little bit. Paul, this is Tom Chubb. And then I'll let Scott comment on anything else he would mention on the sales trends as well as walk you through the gross margin issues. So sales quarter-to-date, we've been really pleased with our business has been strong with the election in November, as expected, started out a little bit slow. But we had really planned that. And then since then it's picked up momentum. And I think absent the California situation, we'd probably be thinking that the sales decline in fourth quarter would be a bit less than the third quarter. But because of what's happening there with the new restrictions and having 27 stores and three restaurants there, backed off our expectation a little bit for the fourth quarter. But what we've seen, it's been good, it's been steward quarter-to-date, they've actually been better, they've continued to pick up a little bit of steam and e-commerce has continued to be strong. I will point out the obvious that e-commerce with FedEx and UPS having the issues they're having that will probably start to wind down earlier this year than it has in years past. But of course we build all that into the plan as well. So really happy with what we're seeing so far. But obviously still a challenging environment out there.

As far as the gross margins in Q3, on a consolidated basis, we're a little bit or slightly up year-over-year. And that did benefit from the shift in the Lilly clearance event where some of it was moved back to the second quarter, but Tommy was just a little bit lower year-over-year and Lilly was meaningfully higher, but again that mix influenced that. And Southern Tide and Lanier were both meaningfully lower due to mainly some inventory markdowns. So, but it all blended together to be up slightly.

Got it. And then how should we be thinking about gross margin for 4Q, Scott?

For the fourth quarter, we'll probably be down slightly year-over-year, but it will be pretty comparable Q4, down just a little bit as the way it's looking right now.

Our next question comes from the line of Edward Yruma with KeyBanc Capital Markets.

Hey guys, thanks for taking the questions today. I guess first is just a follow-up to Paul's question. I know that you're promo at Tommy was restructured this year. It wasn't the classic kind of bounce back. I guess kind of -- how do we think about if any modeling implications to the lack of a bounce back? And then two, I know Lanier has historically been really managed for cash flow. Obviously the world has changed. But how should we think about kind of what the normalized cash flow was from Lanier as we think about kind of modeling you're business post Lanier? Thank you.

Okay. Actually glad to hear Ed. Okay. On the bounce back at Tommy, we did the same event, the timing was just a little bit later, where last year, the cards went down in late October and this year they didn't go out until I guess the second week of November. So it's just really a little bit of a timing shift at Tommy, but they still both the cards and then the flip side of that where you spend a certain amount and we will expect a little bit less transactions, because of the traffic in the stores, but we are still doing it online also. And -- next question, yes, Lanier's cash flow was -- I mean it was very volatile over the last couple of years. I mean, it would have some ebbs and flows, but normally on a normal year when they weren't having a significant inventory build or contraction, Lanier would -- had been very little capital expenditures, very little D&A, so it is really the tax affected operating profit was really usually translated to their cash flow, but they did over the last couple of years have a lot more volatility with inventory levels at times running off and then at times running back down. And then this year, obviously, they had a very challenging year. So they've been using cash in the normal operations this year. And so it was becoming -- we didn't have confidence that we could maintain that -- cash flow. I think Ed, if you look back at that and sort of normalize the inventory peaks and valleys through the years, the sales were really sort of flat line and so it really didn't -- if you average to that over time you're talking to a pretty small amount of cash flow that was actually coming out of Lanier.

Our next question comes from the line of Susan Anderson with B. Riley, FBR.

Hi, good evening, and thanks for taking my question. I guess I'm curious, just looking at fourth quarter, are you doing anything different with the product or the business? I think typically you would be rolling out your resort line but with limited people I guess traveling to resorts, I guess how are you marketing the product to consumers? And then also, I'm just curious if you could talk a little bit about the home product at Tommy and how that's doing?

Yes, so, the theme is of course, as we talked about in product, it's really easy to wear and easy care. You see that throughout the industry and that's true for us as well. So what that means is a lot of lounge type wear across all our brands, all that type of product is doing quite well as they always do this time a year in Tommy Bahama, second layer nits for men are doing really, really well. They're giftable items. They're comfortable items. They actually lend themselves really well to the work from home zoom environment and then that sort of adds leisure type performance inspired products that we have in all the brands, have done really well and that's where we've tried to tilt the product assortment, and of course we were reacting on very short notice. But that's what we've tried to set up for holiday and that's really -- so that's what's selling well. One of the highlights Susan of the selling so far in Tommy Bahama has been on the women's side. Where typically for Tommy, women sort of takes a step back this year -- at this time of year and it becomes really all about the men's business. Well this year, it's different and that men's is doing well, but women's is really stepping up and we've got quite a few items, women's items in our top 10 right now for Tommy Bahama, and those are really things that are coming out of our island soft line which I would describe is being cozy loungewear and then our island zone line which is performance product that we describe is sort of effortless function in field. So those are real bright spots that we're very excited about. We've got really cool thing in Lilly Pulitzer right now, which is a couple of items that have a built-in face mask that you kind of pull up when you need it and when you don't need it, you could drop it back down, which is a fun to the current environment and that's creating some excitement in some of those as well.

Now that's great. And then what about the home product at Tommy?

Yes, well home kind of stuff, giftable type items, of course, very, very popular. It's not a massive part of the line at Tommy Bahama. But it is popular as always this time of the year. Cookies also sell well which is interesting extension of our food business, but we do offer packaged cookies in our stores, those are doing really well right now.

Wow, that's interesting. I guess very quick two just on the regional performance. Did you see any change from second quarter into third quarter? And then also, I guess it sounds like Hawaii still is a pressure point, has that improved at all?

Yes, I think the big theme has been that sort of throughout the year. And I'm trying to draw some general suggestions, but sort of Florida in the Southeast have tended to be the strongest, pretty much throughout this whole situation. And then the rest of the country has been weaker with movements and traffic really sort of corresponding to the level of COVID infections and hospitalizations and things like that. So the Midwest has been weaker lately than some of the other regions. Obviously, California has its challenges and Hawaii with -- for a long time you fundamentally couldn't travel at all there. They have created a path for you to be able to travel now at least so that's improved a bit in Hawaii. And Scott anything else I am missing there on the regional flavor.

I think that covers it.

Okay. And then just lastly really quick on Southern Tide. Was it the new stores, I guess that helped to drive the growth there or did you guys see also I guess maybe growth driven by online pickup?

Yes, it was both, and then a little bit off-price wholesale too I believe that helped. But we were pleased with what we saw in direct-to-consumer, e-com as we mentioned was plus 36 for the quarter, which was great to see. And then also we were happy to have the stores open. And Southern Tide continues to do some great marketing. I think they punch above their weight in that regard and that's been true this year too, I think they've tailored their marketing very well and continued to deliver a light-hearted up beat happy message but one that was not toned off to what's going on in the world either.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group.

Hi, good afternoon, everyone. As you think about the shift with Lilly Pulitzer in the flash sales. How are you thinking about promotional cadence going forward for all of the brands? And then also as you think about the fourth quarter into next year, the expense structure giving shipping and shipping surcharges with online, how are you planning? Thank you.

Okay. I'll talk about the promotional thing. I think we've -- what we learned this year is that shifting the promotional cadence around is not a bad thing at all. I think the customer actually enjoys the variety a little bit; it takes some of the predictability out a bit, which is good for us from the business basis. So I don't know exactly what we'll do next year, it's way too early to say that. But I do think the idea of mixing things up a bit is a good idea and it's something that sort of was inspired if you will by the coronavirus situation this year, but I do think it's one of those valuable lessons that we'll take away from this year, because we're really pleased with the way that our promotional activities played out this year and we think it's been good for the guest, pre-added some excitement and variety for her and that's good for our business. And then on the shipping charges and the surcharges and how that will impact the quarter, I'll let Scott comment on that.

Yes. We already obviously are getting some surcharges. But we've also implemented the enterprise order management abilities to ship e-com from store at Tommy and that's going to help mitigate that some. We're not shipping all orders in store obviously, but we are able to take advantage of that. So we do have a bit of mitigation because we're shipping a lot of orders a lot closer to the person's home. Because then only well it would be better customer service and also reduce some freight costs. So net-net, it will probably be a little bit higher, but we do have a little bit of mitigation with the enterprise order management system.

And one last thing of the stores that haven't reopened; are you looking to close them? Do you keep them? How do you think about the store base and in like Manhattan, how do you think about it?

Well, we've got, I think a handful of stores that have already closed this year. Few more that will close during the year and then a group next year and altogether I think that's about 22.

Yes it is. The two together, yes.

The two years together.

Of particular closers.

Those are -- and that could change depending on landlord negotiations or whatever. But what we're really doing Dana is looking very hard at any opportunity where we have a kick out cause and the lease that allows us to get out of a certain point or we've got a renewal, we're just looking at them and evaluating them very carefully to see whether it makes sense to continue to operate that store or can we satisfy that demand some other way either through targeting e-commerce more heavily to that area or through an enhanced wholesale relationship or whatever it may be. So we're being smart about it. I think being very analytical about it taking a 360 degree view of those stores, and if we were to close on how we continue to serve that guest and capture those dollars. And I think what will happen is that will lead to some closures, but we're also opening a few stores too, as you know. So net-net I think those store count will probably drift down maybe just a little bit over the next few years, but will end up with a portfolio of stores that are better positioned and more profitable for us.

Our next question comes from the line of Steve Marotta with C.L. King.

Good afternoon, Tom, Scott, and Anne. Forgive me if my phone disconnected briefly if this question was asked. My apologies, but can you talk a little bit about inventory being down 4% versus sales down being 27% and what gives you confidence that the inventory composition is good?

Yes, our inventory on August for Tommy is down and Tommy is pretty flat and they -- remember that we shifted their summer line to serve as kind of the resort spring, much of the resort spring line. So we do have that spring inventory in-house where last year some of that would have not left factory yet. So at the end of the quarter, I think we have that difference. But I think our inventories are in good shape or our old inventories or aged inventories are actually lower year-over-year and our core inventory, some of the basics is a little bit higher year-over-year. But we feel good where we -- that will work out in ordinary course. So we think we feel good about our inventory and the items that we felt we do need to liquidate, we've taken proper reserves on those. So I think overall, we are in good shape.

That's very helpful. And I'd also like to review what you said of our Marlin Bar that they are tracking at pre -- at your pre-COVID planned levels. That's pretty amazing considering what COVID has done to restaurant traffic in general. Can you unpeel that a little bit more?

Yes. Not only are they tracking at pre-COVID planned levels, the new one that we have been in Jacksonville is actually exceeding the plan that we had for it before we have even heard of the coronavirus. So it's been really awesome to see, and it's also driven a big increase in our retail business there. It's not technically a comp because we moved the location of that store within the center, but whereas our Tommy stores in general are comp to down about 40%. That location this year is comping up since opening in the Marlin Bar I think about 30% or so. So you have a massive difference which is attributable I think primarily to the existence of the Marlin Bar there. And one of the greatest things about that is a huge amount of that comp increase is actually being driven by women's. So that's turning into one of our strongest women stores and as you know Steve we've always thought we had a bigger opportunity in women's than we've been sort of bringing into the cash register and what we're seeing is that in these Marlin Bars, not only do they help drive the overall business, but they really help drive the women's business, which is a big opportunity for us. And then you've Steve heard from Scott before about all the advantages of the Marlin Bar with the lower capital commitment, the lower rent number that's typically involved in the lower labor level, but that you can operate on there. So they're winning formula. I would also say that from a consumer standpoint they are more about how people want to eat out these days with the more of a grazing approach, than a full sit down multi-course meal that we have in our full service restaurants. So they offer a great quality of food, but it's in a sort of a small play type in sand woods and bowls and salads format with great cocktails and wine and beer and such and that's something that's very appealing to people in the contemporary margin.

Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Mr. Tom Chubb for closing remarks.

Okay. Thank you, Laura, and thanks to all of you for your interest in our company. Stay safe and I wish you and your families a very happy holiday season. And we'll look forward to talking to you again in March.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. And enjoy the rest of your evening.