Greetings, and welcome to Oxford Industries First Quarter Fiscal 2020 Earnings Conference Call. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Anne Shoemaker, Treasurer. Thank you. You may begin.

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. 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. Before providing you with an update on our response to COVID-19 and our first quarter financial and operating results, I'm going to spend a few minutes on recent events. What has happened across the country over the last few weeks has brought into sharp focus that we, as a country, are still falling well short of our national aspiration of racial equality and equal economic opportunity for all. It is time for us all to listen, learn and act. We can feel heartbroken, fearful or uncomfortable, but we must get busy and take action to change things for the future. With this in mind, Oxford is making a $1 million commitment of additional support over the next 4 years to help our local communities address economic and racial inequality through education. Every child, regardless of race or economic circumstance, deserves the chance to learn and be successful. The likelihood of success increases exponentially when a child has access to a quality education. All too frequently, particularly in economically disadvantaged communities and communities of color, that access does not exist. Our commitment builds on Oxford's long history of supporting education programs that improve access to quality education for economically disadvantaged youth in predominantly African-American communities. Now let's talk about what's going on in our business. It goes without saying that this year is a very unusual year. In any other year, our key objective is always delivering the sustained profitable growth that drives long-term shareholder value. With the shutdown of the economy in response to the COVID pandemic, this is a year that, given the nature of our business, makes it almost impossible for us to achieve this objective. That said, we believe this situation is temporary and that by focusing on our people, our brands and our liquidity, we will emerge from this year positioned well to thrive in the new and very different post-COVID marketplace. With respect to these three objectives, people, brands and liquidity, I am very pleased with what we have accomplished since March and the track we are on for the rest of the year. With respect to people, the COVID pandemic and the resulting shutdown have been incredibly disruptive for people at both a personal and professional level. To navigate through this difficult situation, we have had to take a number of painful but necessary actions that have added to the disruption in people's lives. These have included layoffs, furloughs, pay reductions and other actions, including work from home that have added to the challenges that people face. We do not take these actions lightly at all, and I am deeply appreciative of how our teams have rallied. Their commitment, resourcefulness and focus has far exceeded what I could have possibly hoped for. As we are beginning to emerge from the shutdown and are in the early stages of recovery, I believe our team is stronger than ever and better suited to take on the new challenges facing our industry. Secondly, with our bricks-and-mortar operations substantially shut down for several months, and only now slowly beginning to reopen, we have done a terrific job of protecting and preserving the integrity of our brands and our relationship with our customers. To ensure we remain in a strong position for the post-COVID consumer marketplace, we took actions to help us mitigate an over-inventory position, which would undoubtedly require us to engage in heavy discounting and promotional activity that could damage the integrity of our brands. We reduced and canceled existing orders, we reduced the amount of our previously planned forward orders, and we delayed and re-merchandised inventory that was already in the pipeline. Through our digital marketing and e-commerce capabilities, we have also done a great job of keeping our customers engaged with our brands in ways that are relevant during this unusual time. The key takeaway is that some of the most effective messages were those where we really leaned into our brands and their messages of optimism and happiness. Customers really look to our brands as an escape from some of the realities of living in a quarantine or a work-from-home, homeschooled world. Reemergence from the shutdown has also accelerated our efforts to become truly omni-channel. We believe that all of these actions put our brands in great shape for the future that lies ahead. Finally, and very importantly, we have managed our cash outflows very carefully and as a result, have preserved the strong liquidity we had going into the shutdown. We are confident that we will finish the year with more than adequate liquidity to grow and thrive going forward. Some of the key steps that we've taken have included painful but necessary reductions in employment expense, including the elimination of cash bonuses and reductions in executive and other employee salaries, reducing the forward inventory commitments, slowing down capital expenditures, negotiating equitable rent arrangements with our landlords, and a reduction to our dividend and the Board of Directors' cash compensation. Many of these actions are ongoing, including our discussions with landlords, as we work to resolve the current situation. To reiterate, our key focus this year is making sure our people, brands and liquidity are in an excellent position for the post-shutdown consumer marketplace. I'm very proud of what we've accomplished and believe we are on the right track towards achieving these critical objectives over the remainder of the year. I'll now turn the call over to Scott for more details.

Thank you, Tom. Our first quarter of 2020 began strongly. In February, we were very excited to open 2 new Tommy Bahama Marlin bars, both in the Fort Lauderdale area. Our retail and e-commerce businesses were posting positive comps and we were on track to add to a multiyear positive comp trend. As we approached mid-March, the spread of COVID-19 started to accelerate and began impacting the retail marketplace. From March 17th, to protect the health of our employees and customers, we temporarily closed all of our North American stores and restaurants. Our corporate offices successfully adopted work-from-home strategies and, with appropriate safety measures in place, we have been able to keep all of our distribution centers open. The impact to Oxford from the COVID-19 crisis is exacerbated by the seasonality of our business. Our Tommy Bahama, Lilly Pulitzer and Southern Tide brands are oriented primarily to spring/summer, with March through June being 4 of our strongest months of the year. Our stores and restaurants, which made up 47% of our overall sales in 2019, just began to reopen in early May, and we expect to have almost all of our locations opened by the end of June. As our stores open, however, they are operating with many restrictions in place and consumer traffic is rebuilding slowly. The stores that are open are operating at about half prior year levels on average, with significant regional variations. While we don't expect revenue from stores to reach prior year levels at any time during 2020, we do anticipate steady improvement as restrictions ease and consumers' comfort level increases around travel and shopping. Turning to our wholesale channel, it appears that the pandemic is likely to accelerate the closure of a number of department and specialty stores. Over the last several years, we have very carefully managed our exposure to these accounts as it has become increasingly difficult to find partners with whom we can maintain a mutually beneficial business. In 2019, wholesale sales at Tommy Bahama decreased to 20% of revenue, and at Lilly Pulitzer, 21% of revenue. Most of our wholesale partners have excess inventory, and we believe it will take them a while to work through what they have on hand. We believe the demand for new product will be softened in 2020, and therefore, we expect wholesale revenue to be significantly lower than 2019. Throughout this challenging period, we were able to successfully use our digital platforms to stay connected with our customers. E-commerce, which was 23% of our revenue in 2019, grew by 12% in the first quarter, and the positive momentum has continued into the second quarter as we reap the benefits of the long-term investments we have made in digital and e-commerce, such as upgrades and redesigns of websites, enhanced search engine optimization and new enterprise order management systems. In the first quarter, adjusted gross margins declined 220 basis points due to higher inventory markdowns and a modest increase in promotional activities. We expect to continue to experience pressure on gross margin as we expect to be modestly more promotional throughout the rest of the year. We have made significant strides in reducing expenses in the first quarter, with reductions across most spending categories, reducing SG&A by $17 million compared to last year. Employment costs were reduced by $11 million in the first quarter as we made the difficult decisions that affected our employees. We furloughed substantially all of our retail and restaurant employees, eliminated positions throughout the organization, reduced salaries for certain employees, and we suspended our bonus and 401(k) match programs. We expect the SG&A to be lower year-over-year, with the largest percentage decrease in the second quarter. Then, as we expect all locations to be opened for the full third and fourth quarters, the year-over-year percentage decreases in SG&A are expected to narrow. Managing inventory is a critical component of ensuring the health of our brands, and we have taken meaningful actions to reduce and defer inventory orders with approximately a 25% reduction in forward orders. By repurposing some of Tommy Bahama's spring/summer collection, we've taken about $25 million of inventory and moved it out to Tommy Bahama's resort line in December. We have been working with our vendors to extend payment terms. We are pleased with our efforts, and inventory at quarter end increased only 8% despite the significant sales decline. While it's incredibly difficult to project results in this uncertain environment, I want to add some color on how we currently view the remainder of the year. Timing of the COVID-19 pandemic created significant headwinds to our top line, and similar to the first quarter, we expect a significant year-over-year decrease in second quarter sales. However, in the second quarter, we expect larger percentage year-over-year decreases in SG&A, resulting in a smaller loss than in the first quarter. The third quarter is always a difficult quarter due to seasonality, and we expect it to be even more difficult this year. Right now, we are projecting the fourth quarter to be modestly profitable with some recovery in our direct-to-consumer channel, but sales will still be below last year. As Tom mentioned, preserving a high-level liquidity is essential during these uncertain times, as we have ample liquidity to meet our ongoing cash requirements, reflecting the strength of our balance sheet entering the pandemic as well as the recent actions we have taken to mitigate the COVID-19 impact. During March 2020, as a proactive measure to boost cash, we drew down $200 million of our $325 million asset-based revolving credit facility. At the end of the first quarter, we had $208 million of borrowings outstanding, an additional $114 million of unused availability and $182 million of cash and cash equivalents. Our cash flow from operations used $46 million in the first quarter compared to a use of $6 million in the prior year period. As we entered the second quarter, our cash burn rate has decreased, and we expect it to continue at lower levels throughout the remainder of fiscal 2020. The first quarter of fiscal 2020 net sales in each of our operating groups decreased from prior periods, resulting in significantly lower operating results, including operating losses in each group other than Lilly Pulitzer. As a result, this triggered first quarter goodwill and indefinite-lived intangible asset impairment assessments in accordance with our accounting policies. Our assessments included that the fair values of Southern Tide goodwill and indefinite-lived intangible assets as of May 2, 2020, did not exceed their respective carrying values, resulting in a $60 million non-cash impairment charge. Last quarter, the Board of Directors reduced our quarterly dividend from $0.37 per share to $0.25 per share. The Board has determined that it is appropriate to keep the dividend payable on July 31 at $0.25 per share. The Board has also elected to reduce its cash compensation by 50% for the remainder of the fiscal year. Thanks, everyone, for your time today. We appreciate your support. Please stay safe during these challenging times. Devin, we are now ready for questions.

Our first question comes from Rick Patel with Needham & Company.

You touched on stores not reaching the same level of productivity as last year during 2020. Can you provide some additional color by channel? I'm assuming you still expect e-com sales to be higher, but I'd love to get any color you may have on store-level sales versus wholesale as we think about the next few quarters?

Yes. So I think with respect to e-com, it's been strong. It was strong in the first quarter. The second quarter actually is going really, really well so far, and we expect it will frankly remain strong throughout the year. I don't really see that taking a turn for the worse at all. On stores, what we're seeing is that as we reopen, our emotional connection with our brands is stronger than ever. But you're still operating in a very restricted environment. You've got kind of a couple of considerations going on. First and foremost, we want to make sure that we're doing all the things that we should be to protect the health and safety of our employees and our customers. Secondly, you've got governmental restrictions and guidelines that you're trying to comply with. And third, you just have consumer sentiment about getting out and about. What we're seeing is sort of what tracks with what you're seeing on the news. In places that are more receptive to reopening, like Florida and Texas, we're seeing, in many cases, approaches to the level that we did last year. On specific days, we're actually even comping up in some places—not every day, but some days. In other places, it's much slower. Our general experience as we've been bringing stores back is that, as they start back, in the first couple of days, you're doing 10% or 15% of what you did the previous year, and then it tends to build up from there. On the wholesale side, they face a lot of the same challenges on top of that, and many of them are in tough inventory positions where they've got a lot more inventory than they need at the moment, and they need to work through that. So we expect demand to be suppressed for the balance of the year. I just don't think they'll be taking in goods at the same level or close to what they did last year, really. E-com is looking really good. Our retail channels, I think, will build sequentially through the year. The wholesale will likely continue to be challenged through most of the year. Scott, anything you want to add?

Tom, on the last point on wholesale. We've heard from some other brands that they're planning their fall order books down 30% or even more, just given the inventory issue that you're touching on. Are you approaching it the same way from a planning perspective? Or do you not expect it to be that severe?

We certainly are not planning to try to force goods on people where they're not ready for them. In our forward-order planning, we're approaching it with the idea that we'll be buying 25% less on a forward order basis, with the belief that wholesale will be down and our own channels won't be all the way back up. We have seen it has been a very slow start back to wholesale, and I think it will take some time for the inventory to correct itself.

Got it. I was going to ask about the gross margin. So down 220 basis points. It's down, but it's not nearly as severe as what we've seen from a lot of other companies where it's down north of 1,000 basis points. So just curious, your thoughts on the ability to limit gross margin deterioration? And is it safe to assume that 1Q is the most severe in terms of the gross margin decline and we should see it getting less bad going forward?

As we get into seasonal clearance periods, there could be more goods clearing. So those quarters could have a little bit more pressure. Hopefully, when we get into the fourth quarter, it will be a little less pressure. But we did, by deferring some of the inventory and canceling inventory orders, get on it early and were able to go in there with current business, reduce them and re-merchandise and delay some goods that were scheduled for summer, pushing them out to the resort season. That has taken a little bit of pressure off. Right now, being only 8% up, with over 40% sales reduction, we're really pleased with the actions our groups have taken.

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

I guess first on the store footprint, given some of the changes that may occur, any thoughts around the current size of the footprint? And are you taking the opportunity to close stores permanently, and then as a housekeeping question, I know you mentioned you're in negotiations for rent? Have you expensed the full amount of rent in the first quarter? Or do you catch some of that up in later quarters?

Yes. So Ed, thank you very much for being on the call today. I'll answer the last one first because it's got the most straightforward answer, and that's that we are fully expensing the rent during the first quarter. So unless we had a signed deal with the landlord giving us some kind of break, we ran the full rent expense through the income statement. So there are no surprises coming later on rent. Secondly, on the store footprint, I think we're thinking a lot about what the store looks like in the future. I don't know that we've got all the conclusions yet. I think that we probably, over time, are going to see fewer people in stores. But when they get there, they're going to be more committed to buying. They will have done their research in advance and will be looking for the expertise in the service of our great staff in the stores. It may change the way we want to layout those stores and the size of them, but I don't know that we've drawn any hard conclusions about that. In terms of store count, one of the strengths going into this shutdown is that we were not overstored. We didn't have a lot of marginal stores. While this situation has definitely put pressure on things, I don't expect to close down a lot of stores because of this. I can't say there won't be a small handful that won't reopen, but I don't think we'll close down many stores in the short term.

Just one other follow-up, if I may. You guys have historically been a very disciplined buyer; I know it's probably tough to talk about during this time of pressured macro, but you bought Lilly at a fantastic, very opportunistic time. Are you starting to see potential targets get more reasonable valuations? Is there something you would entertain at this point?

I think that's right. We did buy Lilly at the end of 2010, and that was kind of when the recovery was underway after the financial crisis. We think there might be an opportunity like that again. What we're seeing right now is a little bit more of distressed situations where the businesses were probably not in the best shape going into the crisis and have seen further strain on them. But I think hopefully, as our eyes are open to it over the coming months, as things start to rebound, there could be some good opportunities, and we will definitely be looking for them.

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

I guess, maybe to start out, can you talk about the differences that you're seeing? I think you said that some stores were opening or maybe it was an average down 15% and then improving? Is that the average across the base? And maybe just talk about the differences that you're seeing in the regions that are performing better versus the regions that are maybe opening up a little bit slower? And then, if you could comment on just how Hawaii and California is doing?

Yes. Sure. Thanks for the question. The stores that are doing best are really those in locations that people are driving to for a getaway, particularly in sunny areas near the beach. For example, we've got stores in Destin, the Sandestin Resort area in Florida that are doing very well. We also have outlet stores in Myrtle Beach, South Carolina, and Hilton Head that are performing strongly right now, and we believe that's due to people driving in from various locations to enjoy a little break and vacation. Our stores on Kiawah are also doing quite well. Palm Beach and Naples are doing well. Those types of locations are thriving right now, while stores in enclosed malls and more inland areas are taking a bit longer to reopen and recover. With respect to Hawaii, as you know, Hawaii is still completely shut down. If you were to fly there today, you would have to go into a quarantine for 14 days. Therefore, there is fundamentally no tourist business at this point. We are conducting a small amount of business in Hawaii, but it will be hard to return to our normal levels without the tourist business. We’re optimistic it will reopen soon, as COVID case levels are low at this point. Hawaii also affects our California business because a good amount of our California sales come from customers headed to Hawaii on vacation and stocking up before they leave. However, we do have some locations in California that we believe will perform well as things begin to open up, such as Palm Desert in Palm Springs. Even though it's very hot during the summer, many people from Southern California will want to drive there on weekends for a break, which should benefit us.

Great. That's very helpful. And then I'm not sure if I missed it, but can you talk about maybe the online business by brand in the first quarter? And then I think you said, in general, online sales accelerated in the second quarter. Did you see that across all brands also?

In Lilly, across the board, we were up 12% for the quarter, which was positive. We had a good start to the quarter, but the earlier parts of the quarantine were a lot choppier. As we progressed later into it and continuing now, momentum has picked up significantly. Lilly has been the strongest brand, but we've been pleased with performance across all brands. For the second quarter to date, everything looks really good so far. Lilly is leading the pack, but I should point out that for Tommy, there's a significant calendar shift because Father's Day this year is later than it was last year. We anticipate a strong next couple of weeks for Tommy Bahama with Father's Day coming, which should lead to a good quarter for e-commerce.

Great. And I guess one last question. I think you mentioned that your planning orders down 25%. I'm assuming that because you saved some product that you were originally going to launch in the first half or back half that offsets that a little bit? And then I guess if demand is stronger than that, is there any ability at all to chase?

Well, I think what we're doing is a couple of things, Susan, with the inventory. You're planning for a business that, for the year, is going to be significantly smaller. So you just need less inventory. That's one aspect you're trying to adjust for. The second is you have a significant amount of inventory that has been in limbo during the shutdown that you still need to use at some point. So you reduce forward orders, you cancel forward orders, you buy less moving forward, and you take what is already in the pipeline, delay it, and re-merchandise it for later quarters. However, I think if we found ourselves short of inventory in the first quarter, there would certainly be some ability to chase if things start to pick up in the third quarter. Even with everything we've done regarding inventory, I’m not concerned about being short on products.

Our next question comes from the line of Steve Marotta with CLK Associates.

Could you mention if any Marlin bars have reopened? And if there's any material variance in the performance of those locations versus the average store opening?

Yes. We've got a couple of Marlin bars open and they're doing really well. I'm glad you asked that question because we actually think the Marlin Bar is perfect for the situation we’re in. People are a lot more comfortable outside, and health experts will tell you that the risk of spread is a lot lower outdoors, especially in a hot, humid climate. This situation sets up really well for our Marlin bars. Additionally, due to the quarantine, we've built a much more robust takeout business than we ever had before. We didn't fundamentally work in that business previously, but currently, our takeout business is running about 15% to 20% of total business in those Marlin bars. Their menu items are very well suited to takeout. People often say that crises create innovations and new business models that continue long after the crisis ends. I don't see us going backward on takeout; I think we will maintain that capability. Our team has focused on delivering this in a very Tommy Bahama way, and I'm very proud of what they've accomplished. This will be a nice little legacy of this situation.

That's very helpful. And also, Tom, in your opening remarks, you mentioned that there are some accelerated efforts to become truly omni-channel. Can you talk a little bit about any of those mile markers that you may have reached in the first quarter or since the quarter has closed?

Yes. I think a couple of things we've implemented as we've reopened include buy online, pickup in-store as a first step in the reopening process—though not everywhere, in many cases. We've also been doing a lot of shipping from store, even while the stores weren't fully open to the public. In some situations, where we weren’t open yet, we've offered appointments only. In that scenario, people book the appointment and communicate with store associates digitally before arriving for their appointment. That practice is something I believe will continue beyond this period. There are many different initiatives like this that have made our digital and e-commerce presence increasingly significant while the stores support that overall effort.

Our final question comes from the line of Dana Telsey, Telsey Advisory Group.

As you think about inventory levels, did you take any reserves? Where do you see inventory lining up as we move forward? How much did it impact the gross margin? And are you packing and holding any for next year?

We took about $4 million of additional inventory markdown reserves in the first quarter, which weighed on our margin some. Depending on where sales land, we probably end the year with higher year-over-year inventories. Hopefully, we won't have a whole lot higher than Q1. However, if the marketplace improves more than we've accounted for, that could change. We worked with vendors on delaying inventory; most of the goods were held in Asia by the vendors and not billed or shipped to us. Therefore, from both brand protection and cash management perspectives, we deferred many of those inventory payments. Overall, we’re pleased with our current situation, and we're very happy with how quickly our groups acted as soon as this situation arose; it was our priority.

And Scott, you talked about more SG&A reduction coming. Where is that coming from? Where does marketing fit in this? And how do you look at that?

Yes. A lot of the actions happened during Q1, so we'll see the full benefit in Q2 from actions taken earlier. For marketing, we are reshuffling some marketing dollars. We'll probably spend a little less but are increasing digital spending. We may spend less on some catalogs right now. A shift is happening. We've retained a majority of the marketing budget, but we are being very strategic before we allocate any funds. This is an opportunity: if something isn't working, we'll conserve spending versus what we had planned, but if it performs, we'll spend those dollars.

And how do you think about CapEx for the year?

We should be around $30 million, while we were initially planning around $50 million or slightly more. This was going to be a fairly high CapEx year. We've deferred some expenses, but still, our Marlin Bars continue. We have one in Fashion Valley in San Diego that is moving forward, as well as Jacksonville. Lahaina in Hawaii is also under construction. These specific bar openings are things that must continue. In terms of systems projects, we have deferred some to next year, but there are other projects we believe will yield significant near-term revenue, so we’re keeping them on track. We have tightened up on expenses and deferred what we could, but we are being tactical with respect to those that can drive revenue.

When you think of the complexion of the second quarter, could the sales decline in the second quarter be as great as the first? And then the SG&A reduction could help to make up for it? And my last question is, what permanent changes in how you run the business are coming out of this?

I'll take that on the SG&A; that's correct. One thing I remember is that in the first quarter, we shipped a lot of wholesale early. Therefore, wholesale is really not expected to see much life in the second quarter. The sales decline could be similar to the first quarter; it's difficult to project, but we do anticipate a significant sales decrease. However, we believe the SG&A reductions will help offset that.

In terms of the way the business will permanently change, Dana, I think wholesale will likely continue to decline. E-commerce is going to keep rising to the center of our world, while our own stores will remain crucial. We’re making great strides towards truly being omni-channel with a single view of the customer and inventory, along with the ability to fulfill demand from anywhere. We're moving significantly forward in all these areas, and these trends are being accelerated by the recent shutdown.

We have reached the end of our question-and-answer session, and I would like to turn the call back over to Mr. Tom Chubb for any closing remarks.

Okay, Devin. Thank you very much to all of you for being on the call today. We very much appreciate your interest. We wish you a safe and enjoyable summer, and we'll look forward to talking to you again in a couple of months.

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation, and have a wonderful day.