Greetings and welcome to the Oxford Industries Fourth Quarter Fiscal 2022 Earnings Conference Call. This conference is being recorded. It is now my pleasure to introduce your host, Jevon Strasser. 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 include 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 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 and COO. Thank you for your attention. And now, I'd like to turn the call over to Tom Chubb.

Thank you, Jevon. Good afternoon and thank you for joining us to hear about Oxford's record performance in both the fourth quarter and the full fiscal 2022 year. We appreciate your time and interest in our company. As always, our enterprise purpose is about happiness; our enterprise strategy is to own a portfolio of lifestyle brands that create sustained profitable growth; and our enterprise objective is to maximize long-term shareholder value. Each of these important elements was critical to our tremendous success in fiscal 2022. We stayed anchored to these fundamental principles during the year, and we are extremely proud of the incredible results achieved for our shareholders by our amazing team of people. During fiscal 2022, we delivered growth in all brands and all channels of distribution. Total sales grew 24% year-over-year, driven overwhelmingly by organic growth, led by our largest brand, Tommy Bahama, which was up 22% for the year, followed by Lilly Pulitzer and our Emerging Brands Group which increased 13% and 29%, respectively. The balance of the growth came from the addition of Johnny Was, which we are proud to have added to our portfolio during the third quarter of 2022. We generated this top-line growth while simultaneously expanding both gross margin and operating margin. This combination produced record adjusted EPS of $10.88 for fiscal 2022 compared to our previous record of $7.99 in fiscal 2021, a 36% increase on a year-over-year basis. The results we achieved in 2022 are directly attributable to our focus on evoking happiness in our customers through our portfolio of lifestyle brands. When we succeed in our purpose, it creates the sustained profitable growth that ultimately drives long-term shareholder value. So as always, our financial results are linked to our efforts to evoke happiness in our customers. We did an outstanding job on that front during fiscal 2022 as reflected by our customer KPIs. Not including the newly added Johnny Was brand, we finished the year with 2.3 million active customers compared to 2.1 million active customers at the end of 2021. We were able to grow our active customer numbers by focusing on and reinforcing the power of our lifestyle brands. A lifestyle brand is different from an ordinary brand. In an ordinary brand, you are creating a product; in a lifestyle brand, you are creating a world or even a universe. And when that world resonates with people, they want to fully engage with it and ultimately live it. When that happens, people can be very loyal to you for a very long time. Across our portfolio, we did an excellent job of being crystal clear about what each of our brand stands for and then delivering that brand message to target audiences through inspiring marketing campaigns, differentiated and innovative products, and uplifting hospitality and shopping experiences. During 2022, we did a good job of managing both the composition of our portfolio and driving performance across the businesses within our portfolio. From a composition perspective, 2022 was the first year that our portfolio consisted exclusively of lifestyle brands after divesting Lanier Apparel during 2021. As previously noted, we were also pleased to have added Johnny Was, a California-based affordable luxury modern bohemian lifestyle apparel brand. From a portfolio performance perspective, as always, our priority in 2022 was on championing excellence in each key functional area necessary for a lifestyle brand to succeed. A terrific example of this was our creation of a marketing center of excellence to service the in-house agency for our Emerging Brands and to leverage resources and knowledge across the enterprise. Other examples include the establishment of an enterprise-wide corporate responsibility department, the enhancement of our long-term information technology strategy aimed at maximizing our return on IT investments, the initiation of a project to optimize fulfillment across the enterprise, and enhanced leveraging of human capital across the enterprise. An essential part of driving shareholder value is sound capital allocation. Starting the year with $210 million in cash and short-term investments and generating substantial cash flow, we were able to invest $47 million in the future growth of our business, acquire the Johnny Was brand and all its potential for $270 million, buy back $92 million of our stock, complete a $100 million repurchase program, and return an additional $35 million to shareholders in the form of dividends. We are proud to have been able to both return significant capital to our shareholders and make significant investments in the future growth of our business, all while maintaining a very strong balance sheet. We are equally excited about our plans for 2023. Once again, we plan to have good growth in all six of our brands. Gross margin should also expand modestly during the year. Our plan for 2023 includes a top line that is almost 50% larger than it was in 2019, an operating margin that is almost double what it was in 2019, and operating income that is more than 2.5 times 2019's level. These are impressive growth numbers. And to put it plainly, the size of our platform has not kept pace with the size of our portfolio of businesses or with the opportunity for future growth. Accordingly, and within the operating margin target I just outlined, we are excited to aggressively invest during 2023 in people, systems, stores, Marlin Bars, and fulfillment infrastructure to support our growing business. Our willingness to invest is confirmation of our belief in our strategy and our future growth prospects. Our confidence in our ability to blend art and science to deliver wonderful brand experiences to our customers through A+ products, A+ distribution, and A+ communication has never been higher. The source of that confidence now and as always is our people. We are incredibly grateful to each and every one of them for all that they do. Thank you. And I will now turn the call over to Scott for additional insights on 2022 and our plans for 2023.

Thank you, Tom. We had a record-setting fourth quarter that capped a terrific 2022, driven by continued strength in all selling channels across the portfolio. Operating groups executed very well during 2022 and delivered double-digit top-line growth within each brand. Our largest brand, Tommy Bahama, had another exceptional year, with 22% top-line growth and 350 basis points of adjusted operating margin expansion to 19.6%. Lilly Pulitzer also achieved a 13% revenue growth and a 19.8% adjusted operating margin. In 2022, consolidated net sales were $1.41 billion, which included $73 million of sales for Johnny Was, growing 24% above last year's net sales of $1.14 billion, which included $25 million of sales from Lanier Apparel. The growth in our existing brands was strong across all of our full-price distribution channels with increases of 20% in full-price bricks-and-mortar, 13% full price e-commerce, 29% in wholesale, and 14% in restaurants. Additionally, we also had increased sales of $22 million in Lilly Pulitzer's e-commerce flash sales and 14% in our outlets. Meanwhile, in addition to increasing sales, adjusted gross margin expanded 50 basis points over 2021 to 63.5%. We benefited from lower freight costs after experiencing very elevated freight rates in the second half of 2021. We saw additional gross margin benefits from a better mix of sales, which was influenced by the addition of the higher gross margin Johnny Was and the 2021 exit of lower gross margin Lanier Apparel. Initial markup increases as well as raising prices more than our cost increases contributed to this success. These items were partially offset by the impact of Lilly Pulitzer's larger flash sales and lower gross margin on flash sales in 2022 due to extremely lean inventory in 2021. We also had higher inventory markdowns in our Emerging Brands Group during 2022 as we wound up with some excess inventory as inventory purchases outpaced demand. Adjusted SG&A expenses were $684 million compared to $564 million last year. This increase was driven by increases in our existing businesses for employment costs, advertising costs, variable expenses, and other expenses to fuel and support sales growth. Additionally, 2022 included $41 million of SG&A associated with the Johnny Was business for the 19-week period that we owned Johnny Was. While SG&A dollars increased, they did so at a slower pace relative to our sales growth, leading to an 80 basis points leveraging of SG&A. The result of all this yielded $234 million of adjusted operating income or a 16.6% operating margin compared to $174 million or 15.3% in 2021, with the improved adjusted operating income driven by the strong results in Tommy Bahama and the operating income of Johnny Was for the 19 weeks since acquisition in September. This increased operating income was partially offset by a higher effective tax rate of 23% in 2022 and increased interest expense due to the borrowings associated with the acquisition of Johnny Was. Despite these offsets, we inhibited EPS expansion from an already excellent 2021. This led to adjusted EPS growth of 36% to $10.88. I'll now move on to the balance sheet, beginning with inventory. With inventories up 58% or $106 million year-over-year on a FIFO basis, we are in a good position to capture the sales momentum we built. Inventory levels at the beginning of the year were lower than optimal as demand outpaced inventory purchases throughout 2021. Additionally, two other factors contributed to the inventory growth: $20 million of additional inventory from our acquisition of Johnny Was and the early receipt of about $25 million of incremental inventory to mitigate the risk of potential supply chain disruptions, raising inventory balances as well. Our planned revenue growth, which is 45% over where we were in 2019, outpaces our FIFO inventory growth of 37% over the same time period, even with the early receipt of product. Further, with our strategic focus on core and key products in recent years, our inventory has a much greater mix of core and key product items rather than fashion items, which reduces inventory risk. From a liquidity standpoint, we had $9 million of cash and cash equivalents versus $210 million of cash and cash equivalents and short-term investments at the end of 2021. We used our cash and cash equivalents and short-term investments to help fund our acquisition of Johnny Was. After considering our robust cash flow from operations, the acquisition of Johnny Was, capital expenditures and other items, as well as our $127 million of capital returned to shareholders through share repurchases and dividends, we had $119 million of borrowings outstanding under our $325 million revolving credit agreement at the end of 2022. I will also note that earlier this month, we amended our $325 million revolving credit agreement to extend the maturity from July of 2024 to March of 2028. For all practical purposes, the asset-based loan agreement is consistent with the prior agreement other than extending the term, converting LIBOR to SOFR plus 10 basis points, increasing the spreads on variable interest rate borrowings by 25 basis points and an increase in certain amounts allowable for inclusion as eligible assets for the borrowing base calculation. Over the last year, we have returned $127 million of capital directly to shareholders via dividends and open market share repurchases. $92 million of this came from repurchasing 1 million shares during 2022, representing the December 2022 completion of our $100 million share repurchase program initiated in the fourth quarter of 2021. In total, we purchased more than 6% of the outstanding shares from the commencement date of that program. Looking forward, I am pleased to announce that our Board of Directors declared a dividend of $0.65 per share for the first quarter of 2023 payable in April, which is an increase of 18% from the prior quarter's dividend of $0.55. I'll now spend some time on our outlook for 2023. For the full year, we expect net sales to be between $1.62 billion and $1.66 billion, growth of 15% to 18% compared to sales of $1.41 billion in 2022. The increased sales plan in the 53-week 2023 includes the benefit of the full year of Johnny Was as well as growth in our existing brands in the mid-single-digit range, which consists of full price brick-and-mortar and e-commerce channel growth, generally flat wholesale and outlet store sales and lower e-commerce flash sales at Lilly Pulitzer, as Lilly Pulitzer is not having an e-commerce flash sale in the first quarter of 2023. We anticipate modest gross margin expansion in 2023, including the expectation of a higher proportion of full-price direct-to-consumer sales and a lower proportion of e-commerce flash and wholesale sales, as well as the inclusion of the higher gross margin Johnny Was business for the full year 2023. These higher sales and improved gross margins are expected to be partially offset by increased SG&A, which is expected to grow at a rate higher than sales in 2023 as we invest in our business, including information technology spending and SG&A, higher employment costs, additional brick-and-mortar locations opening in 2023, and increased depreciation expense resulting from both IT spending and brick-and-mortar locations. Considering all these items, we expect that operating margin will decrease modestly from 2022 levels. Additionally, we anticipate higher interest expense at $5 million to $6 million, with about half that interest expense in the first quarter, smaller increases in the second and third quarters and a decrease in the fourth quarter. This compares to $3 million of interest expense in the full year of 2022. We also expect a significantly higher effective tax rate of between 25% and 26% compared to 23% in 2022, which benefited from certain favorable items such as prior year operating loss utilizations and the reversal of some valuation allowances. After considering these items, 2023 adjusted EPS is expected to be between $11.50 and $11.90 versus adjusted EPS of $10.88 last year, with the inclusion of a full year of operating income from Johnny Was and increased operating income in our existing businesses being partially offset by increased income tax expense and interest expense. In the first quarter of 2023, we expect sales of $405 million to $425 million compared to sales of $353 million in the first quarter of 2022. In the first quarter of 2023, we expect many of the same factors driving our results that impact the year with higher sales, modest gross margin improvement, some SG&A deleveraging, higher interest expense, and a higher effective tax rate. We expect this to result in first quarter adjusted EPS of between $3.60 and $3.80 compared to $3.50 in the first quarter of 2022. Expanding on the theme of 2023 being an investment year, I'd like to briefly discuss our CapEx outlook for 2023. Capital expenditures in fiscal 2023 are expected to be approximately $90 million compared to $47 million in fiscal 2022. The planned increase is primarily due to increased investment in our various direct-to-consumer technology systems initiatives, the commencement of a significant multiyear project at the Alliance torch distribution center to enhance its direct-to-consumer throughput capabilities, executing on our pipeline of Marlin Bars, including three expected to open in 2023, the addition of Johnny Was, which is increasing its store count by 10 or more stores this year, and increases in store openings in our other brands. We expect this elevated capital expenditure level to continue into 2024 before it begins to moderate in 2025. Moving beyond the income statement, we have a positive outlook on our cash and liquidity position as well. Cash flow from operations is expected to be very strong, giving us ample room to make the previously mentioned investments fund an 18% increase to a quarterly dividend while also deleveraging throughout the year. Thank you for your time today. And now we'll turn the call over for questions.

Your first question comes from Ed Yruma with Piper Sandler.

I guess, first, Tom, on the shared services, I know you guys historically run a very decentralized organization. So I just wanted to unpack maybe some of the investments you're making. Does it change kind of the orientation of the business? And then I guess as we think in the medium term, when should we expect a resumption of SG&A leverage?

Thank you, Ed. Our goal at headquarters is to focus on all the essential functions required for successfully managing a lifestyle brand. We aim to enhance excellence in each of these areas, ensuring that every brand operates at a high standard. When appropriate, we will bundle efforts using shared services, but only when it makes sense. For instance, regarding the Emerging Brands group, we recognized the need for improved digital marketing to ensure their success. To achieve this, we established a digital marketing center of excellence in 2022. We started this initiative about a third of the way through the year, and by the last third, we were fully operational in this function. We are pleased with the positive results this has yielded for the Emerging Brands Group, contributing to their 29% year-over-year growth. Additionally, we've developed an enterprise-wide corporate responsibility department that primarily focuses on ESG initiatives. Our company has always prioritized doing the right thing, and there is now a market and regulatory push to enhance our efforts in this area. Tommy Bahama, our largest brand, has been a leader in this respect and previously had a strong corporate responsibility team. We determined that all brands would benefit from centralizing this function for greater excellence, so we transitioned the Tommy Bahama team to serve as a corporate-wide resource. This reflects our overall strategy. While we will centralize certain functions for economic advantages, areas like product design are unlikely to be centralized. Does that clarify things?

Yes, it does. And on the SG&A, when can we kind of pencil in the resumption of leverage on that line?

Yes, as mentioned in the prepared remarks, we anticipate some reduction in our debt levels this year. We hope to see that trend improve in 2024. However, we are making significant investments in various system projects and adding personnel in key areas. Additionally, we have several retail initiatives underway, including the opening of three Marlin Bars. The process from planning to opening for these Marlin Bars typically takes about six months, leading to pre-opening expenses reflected in our financials. While there are many ongoing initiatives, we believe these will contribute to the future growth of the business. To be candid, we are somewhat behind in managing selling, general, and administrative expenses. Our business has expanded significantly, and keeping up with this growth in terms of infrastructure has been challenging.

Next question; Dana Telsey with Telsey Group.

It's great to see the fourth quarter results. As we look ahead to next year and consider the increases in expenses you mentioned, what new products or categories should we be looking out for this year? Also, regarding the wholesale business, which you described as flat, what is your overall perspective on that segment? Lastly, how do you assess the health of the consumer based on the exit rate at the end of the quarter?

Okay. Dana, I'll start with the wholesale question and I think that we're planning on it being flat. Most of the major retailers are being very, very careful and cautious about their forward inventory buys. Most of them are actually buying down on a year-over-year basis. So in our view, and we see this in the results that we're achieving on the selling floor, flat is actually an outperform in wholesale this year. So we're really pretty happy with that. While we'd love to see growth, we also like to see the big retailers being prudent about their inventory buys. Regarding the health of the consumer, what I would tell you, and this shows up very much in our fourth quarter results, is that the health of the consumer has been good for the consumers that we service. We think the health of the consumer will continue to be good. We're not looking for a major macro rebound in the economy, but we feel our consumer will hold up pretty well throughout the year. I think the primary risk at this point to be very direct about it is probably what's been happening in the banking world and the Fed and sort of regulatory response to that. Our belief is that we'll get through that and the Fed and the regulators will navigate us through that without it becoming a much larger problem. But that would be the one sort of uncontrollable factor that I think is out there at the moment. Again, we think they're going to get through it and our consumer will hold up. But this week, in particular, it's hard not to have that sort of top of mind. And what was the third thing?

Opportunities?

Yes, from a product or category standpoint, Dana, I think that there are some big opportunities that are really more about growing existing categories. In Tommy Bahama, in the women's dress category, we've got a lot of room to grow; our dress business has been very strong there. I think we continue to build that. And as you know, that is a very large category within the total apparel market. I would tell you the same thing within Johnny Was. They have a very large opportunity in dresses, in particular. Again, they’re having very good success, and they’re building it very nicely. Historically, they have been a little light on dresses as a percentage of their total. And I think they’ve got lots of room to grow there. Additionally, we recently started in Lilly Pulitzer some enhanced home products. The concept there is to be the destination of choice for an elevated elegant hostess gift. We started out with a small assortment of items, some picture frames and things like that. But we're pleased with the early performance, and we think we can do some business in that space. I think we've got similar opportunities like that across the company.

Next question; Paul Lejuez with Citigroup.

It's Tracy Kogan filling in for Paul. I had two questions. The first one was on your SG&A. In the fourth quarter, I was wondering if you could talk about how much markdowns were either up or down versus last year? And what was freight relative to last year? And then for both of those pieces, what's embedded in your gross margin guidance for 2023? I think you said moderately up; I was just wondering, assuming markdowns and promotions versus freight?

Freight returned to pre-pandemic levels in the fourth quarter. Our use of air freight decreased significantly compared to earlier, although it may be slightly above pre-pandemic levels. There wasn't much freight disruption in our fourth quarter. As we move into 2023, we're seeing improved freight rates and believe our supply chain has also improved. We have accelerated our merchandising calendar, so we expect very little air freight this year. I don't anticipate freight will negatively impact gross margins in 2023.

As far as inventory markdowns, we had some markdowns in our Emerging Brands group. We do not anticipate anniversary-ing those. Lilly's flash sales will be a little smaller in '23 than in '22. Overall, I think our inventory markdown rates will be a tiny bit less year-over-year. We think we'll start with a little bit higher initial markup, modestly higher initial markup. Additionally, the inclusion of the Johnny Was business for the full year will help, and then wholesale will be a lower piece of the mix. I think we have some mix advantages that will benefit gross margin in 2023.

Got it. And then I just had a follow-up. I think you said you expect to open 10 or more Johnny Was stores. I was wondering if you could talk about what the new store model looks like in terms of the new store investments and payback period compared to Tommy or Lilly stores. Also, how many of those leases you've actually signed already for 2023?

Yes. Johnny Was has a slightly different approach to stores than our other brands. They're a little bit smaller; their average square footage is around 1,600 or so square feet, which is a little smaller than most of the Tommy stores fundamentally and a little bit smaller than Lilly's stores as well. They tend to go into somewhat niche locations. For example, they opened in Santa Fe, which we think is a great spot for them. They opened a small store in Vero Beach, Florida, about 600 square feet, almost like a little beach bungalow. They work with what's there to make it their own, so the build-out cost tends to be lower than in our other brands. I think Scott can offer more details on the investment level and the payback.

Yes. Johnny Was is investing less. The paybacks are usually under two years on a retail store, some even quicker than that, so they're very productive. They also have various kick-out rights in their leases. We've signed six or seven already, and we have multiple others in various stages of negotiation. Some could open this year, some might be next year. We’re excited about the growth; we think there’s still a lot of runway for new stores. We're also opening new stores in the other brands, including several for Southern Tide.

Our last question comes from Noah Zatzkin with KeyBanc.

First, I was wondering if you could provide any color on the exit rate leaving 2022? And then relatedly, on top line growth by brand contemplated in the $405 million to $425 million first quarter revenue guidance range. Secondly, just on inventory, how are you feeling about the position and overall composition? I think you noted that the increase versus '19 was driven by $20 million of incremental Johnny Was inventory and $25 million of earlier receipts, just if you could help unpack that a bit.

Regarding the exit rate for the fourth quarter of 2022, if you remember, back in our December call, we mentioned that November had actually been a little bit softer than the prior year. We weren’t entirely surprised by that because in 2021, people had shopped earlier. In the fourth quarter, November was not as good as November '21 but more consistent with prior Novembers. The rest of the quarter ended up being strong. February was also good for us despite many others in our space reporting difficulties. March has been slightly choppy, but we believe we've accounted for that in our forecast. As the weather turns with upcoming holidays and summer events, we’re excited about what’s ahead.

Regarding inventory, with $20 million more from Johnny Was and $25 million from accelerating the supply chain, we wanted to mitigate supply chain risks by bringing goods in earlier. Additionally, our focus on core and key products means we're carrying slightly more inventory. We believe that our anticipated sales will far surpass the inventory growth. Overall, we feel confident about our inventory composition and levels, and we think we’re well-positioned to capture demand in '23.

I would like to turn the floor over to Tom Chubb for closing remarks.

Thank you all very much for your time and your interest in our company. We look forward to talking to you again in June, and I hope all is well with you until then.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.