Earnings Call Transcript - OXM Q2 2025

Operator, Operator

Greetings, and welcome to Oxford Industries, Inc. Second Quarter Fiscal 2025 Earnings Conference Call. Please note, this conference is being recorded. I will now turn the conference over to Brian Smith. Thank you. You may begin.

Brian Smith, President

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 operations or 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 I'd like to turn the call over to Tom Chubb.

Thomas Chubb, Chairman and CEO

Good afternoon and thank you for joining us today. As we continue through fiscal 2025, the second quarter brought complex but clarifying developments in the story we began sharing with you last quarter. While the macro environment remains pressured, marked by higher tariffs, elevated promotional activity across the industry, and cautious consumer behavior, our team has navigated these challenges with discipline and focus, delivering net sales and adjusted EPS within and above our guidance ranges, respectively. Though down from the prior year, these results reflect our ability to stay true to who we are as a company and maintain the strength of our brands and margin profile. Looking at our recent performance by brand, Lilly Pulitzer continued its deep connection with its core consumer in the second quarter and posted positive direct-to-consumer total comparable sales, building on the strong engagement we saw in the first quarter. A key contributor to this momentum in the second quarter was delivering exciting innovation in our casual product, including the Linen Seaspray jacket that sold out in all colors and extending our offering of elevated everyday products, including polished shorts, silk tops, and new stretch twill pants that all performed extremely well. Continuing the theme of engaging the brand's most loyal customers early in the third quarter, Lilly Pulitzer launched the highly anticipated Lilly's Vintage Vault, which debuted Lilly's Zoo, a reproduction of a beloved archival print from 1974 in its original colorway. This limited-edition capsule is the first in a series exploring Lilly's hand-painted print legacy as the brand embarks on a new celebration of its treasured heritage, drawing in Lilly loyalists and new customers alike. While still early, the initial response to the Vintage Vault has exceeded expectations and affirms the power of heritage storytelling and brand authenticity, cornerstones of Lilly Pulitzer's enduring success. Turning to Tommy Bahama. While our second quarter results did not meet our goals for the brand, we are energized by the work underway to improve performance. As always, our teams have learned by spending time in the field, listening to our customers, and digging into the data to understand what's driving the softness. What we've learned is encouraging because it's actionable. We've identified that some spring and early summer deliveries missed the mark in several areas, most notably in color assortment and completeness of the line, which led to gaps in the offering that are especially relevant to our customers in Florida, where performance continues to be below our expectations. By contrast, we saw better results in the West, where the assortment resonated more effectively with the regional aesthetic. These insights galvanized our team, and we quickly implemented improvements for late summer deliveries to ensure the products available to our customers are more thoughtfully curated and locally relevant. Tommy Bahama is a brand with exceptional consumer loyalty and a deeply resonant lifestyle message. With the right adjustments, we are confident we can reaccelerate performance and reengage our customers in a more meaningful way in the second half and beyond. A great example of what's working is the recent launch of the Boracay Island chino. This updated pant, which builds on the incredible equity we've established in the original Boracay collection, comes with a higher price point of $158, but that hasn't slowed down demand. We have experienced very high sell-throughs across our own direct-to-consumer channels and also with our wholesale partners who have increased recent orders based on early success. We knew going in that the Boracay customer is incredibly loyal. Once they find a fit, they love it, and this product has tapped directly into that loyalty. It delivers the comfort, versatility, and polish that defines the Tommy Bahama lifestyle and does so in a way that's clearly resonating with existing and new customers. We will launch new versions of this pant, including a 5-pocket version and shorts in our upcoming seasons to capitalize on this momentum. Turning to Johnny Was. We continue to face headwinds, and the business remained challenged in the second quarter. While the numbers are not where we want them to be, we remain confident in the potential of Johnny Was and are taking further action. Working closely with both internal teams and external partners, we have developed and are in the early stages of implementing a comprehensive plan to improve Johnny Was' performance. We see a meaningful opportunity to enhance the merchandising strategy, elevate brand storytelling and marketing, and refine our approach to customer segmentation and pricing. Our goal is to reestablish momentum in this beautiful, differentiated brand and ensure it contributes meaningfully to Oxford's portfolio. To that end, we believe that the best days for Johnny Was still lie ahead. I also want to acknowledge the performance of our Emerging Brands Group, which delivered solid revenue growth, both from new stores and positive comparable store sales in what remains a highly challenging environment. These brands, Southern Tide, the Beaufort Bonnet Company, Duck Head, and Jack Rogers, are still in the early stages of their development within our portfolio and yet continue to demonstrate strong customer appeal and brand momentum. The growth we're seeing reinforces our belief that there are significant growth opportunities ahead, and we are excited about the opportunity to build these brands into even more meaningful contributors in the years to come. Switching gears to our tariff mitigation plans and capital projects. We said last quarter that we would continue to control what we can, and we have. Our teams have made significant progress in mitigating tariff exposure through continued supply chain shifts and facilitating the early delivery of products to avoid tariff increases. Our gross margins, though under some pressure compared to last year, reflect that discipline. We've also taken steps to safeguard profitability by enhancing inventory management and maintaining pricing integrity even in a more promotional retail environment. At the same time, we remain committed to completing the long-term investments we have underway that will serve us well beyond this fiscal year. Our Lyons, Georgia, distribution center is on schedule and continues to receive the necessary capital to bring it fully online sometime late in fiscal 2025 or early fiscal 2026. We also remain on track to deliver three new Marlin Bar openings and a net increase of approximately 15 full-price stores across our portfolio by year-end. While the environment remains dynamic, I'm encouraged by what we're seeing early in the third quarter. Total company comparable sales quarter-to-date are modestly positive in the low single-digit range, a clear signal that the work our teams are doing to refine the assortments, improve storytelling, and reconnect with our consumers is beginning to pay off. These are the kind of results that come from listening closely, adjusting thoughtfully, and executing with discipline. There is no doubt that this is a challenging period for our industry, but we believe that our portfolio of differentiated lifestyle-driven brands led by our exceptional teams is uniquely positioned to weather the volatility. As we move into the second half, we are doubling down on the brand equity we've built, keeping our eyes on the long-term horizon while managing short-term headwinds with resolve. We remain confident that our continued focus on execution, brand authenticity, and customer happiness will allow us to emerge from this cycle stronger with even deeper connections to our customers. And now I'll hand it over to Scott for more details on our second-quarter results as well as our expectations for the balance of the year.

Scott Grassmyer, CFO and COO

Thank you, Tom. As Tom mentioned, our teams have shown great discipline and resilience in responding to unprecedented uncertainty and challenges related to trade and tariff developments in the first half of the year. Despite these challenges, our teams were able to deliver top-line results within our previously issued guidance range and bottom-line results slightly above our previously issued guidance range for the second quarter. In the second quarter of fiscal 2025, consolidated net sales were $403 million compared to sales of $420 million in the second quarter of fiscal 2024 and near the midpoint of our guidance range of $395 million to $415 million. Sales in our full-price brick-and-mortar locations were down 6%, driven by a negative comparable sales of 7%, partially offset by the addition of new store locations. Sales in our wholesale channel were down 6%, while e-commerce sales declined 2% and sales in our outlet locations decreased 4%. Sales in our food and beverage locations performed better than our other channels with modest sales growth year-over-year. Overall, we finished the second quarter of fiscal 2025 with a total company comparable sales of negative 5%, which was in line with our guidance for the quarter. Notably, Lilly Pulitzer had another strong quarter. While total sales at Lilly Pulitzer were down modestly compared to the prior year, the decline was driven by lower sales in our wholesale channel, partially offset by a low single-digit positive comparable sales. The positive comparable sales at Lilly Pulitzer, along with positive comparable sales and overall sales growth in our emerging brands businesses, helped offset the high single-digit negative comparable sales at Tommy Bahama and low double-digit negative comparable sales at Johnny Was that led to sales declines in both businesses. Adjusted gross margin contracted 160 basis points to 61.7%, driven by approximately $9 million of increased cost of goods sold from additional tariffs implemented in fiscal 2025, net of mitigation efforts, which was partially offset by improved gross margins during promotional events at Tommy Bahama, a change in sales mix with full-price retail and e-commerce sales representing a higher proportion of net sales at Lilly Pulitzer and Johnny Was, and a change in sales mix with wholesale sales representing a lower portion of net sales. Without the impact of the incremental tariffs, our gross margins would have increased. Adjusted SG&A expenses increased 5% to $224 million compared to $213 million last year, with approximately $4 million or 40% of the increase due to increases in employment costs, occupancy costs, and depreciation expense due to the opening of 26 net new brick-and-mortar retail locations, including three new Tommy Bahama Marlin Bars since the second quarter of fiscal 2024. This includes the 11 net new stores, including two Tommy Bahama Marlin Bars opened in the first half of fiscal 2025. We also incurred preopening expenses related to some planned new stores, including additional Tommy Bahama Marlin Bars scheduled to open in the fourth quarter. The result of this yielded a $28 million adjusted operating profit or a 7% operating margin compared to a $57 million operating profit or a 13.5% operating margin in the prior year. The decrease in adjusted operating income reflects the impact of our investments in a challenging consumer and macro environment. Moving beyond operating income. Our adjusted effective tax rate of 29.6% was higher than we anticipated due to certain discrete items, most notably from the unfavorable impact on tax expense related to the annual vesting of stock-based awards during the quarter, which occurs when the stock vests at a price lower than the price expensed for book purposes. Interest expense was $1 million higher compared to the second quarter of fiscal 2024, resulting from higher average debt levels. With all this, we ended with $1.26 of adjusted net earnings per share. I'll now move on to our balance sheet, beginning with inventory. During the second quarter of fiscal '25, inventory increased $27 million or 19% on a LIFO basis and $29 million or 13% on a FIFO basis as compared to the second quarter of 2024, with inventory increasing in all of our operating groups, except Johnny Was, primarily due to the impacts associated with the U.S. tariffs that were implemented in the first half of 2025, including accelerated purchases of inventory implemented to try to minimize the impact of potential pending tariff increases and $5 million of increased costs capitalized into inventory after the implementation of the tariffs. Notably, as the tariff situation has stabilized to a degree, at least compared to the beginning of the fiscal year, we expect our inventory levels to decrease during the remainder of the year, excluding any additional capitalized tariff costs as the need to accelerate inventory purchases subsides. We ended the quarter with long-term debt of $81 million compared to $118 million last quarter and $31 million at the end of fiscal 2024. Cash flow from operations provided $80 million in the first half of fiscal 2025 compared to $122 million in the first half of 2024, driven primarily by lower net earnings, changes in working capital needs, including accelerated inventory purchases and $15 million of expenditures related to implementation costs associated with cloud computing arrangements that are classified as operating cash outflows. We also had $55 million of share repurchases, capital expenditures of $55 million, primarily related to the Lyons, Georgia, distribution center project and the addition of new brick-and-mortar locations, and $21 million of dividends that led to an increase in our long-term debt balance since the beginning of the year. I'll now spend some time on our updated outlook for 2025. Comparable sales figures in the third quarter to date are positive in the low single-digit range, also consistent with our expectations. With comparable sales figures in the second quarter and third quarter to date consistent with our previously provided guidance, and several of the third quarter's most important events, including the Tommy Bahama Friends and Family sale behind us, we feel confident in affirming our previously issued guidance for the remainder of the year. Consistent with our previously issued guidance, we expect the trends of flat to modestly positive comparable sales to continue for the remainder of the third quarter and for the fourth quarter. For the full year, net sales are expected to be between $1.475 billion and $1.515 billion, reflecting a decline of 3% to just slightly negative compared to sales of $1.52 billion in fiscal 2024. Our sales plan for the full year of 2025, consistent with our previously issued guidance, includes decreases in our Tommy Bahama and Johnny Was segments, driven primarily by negative comps. That decline is expected to be tempered by growth in our Lilly Pulitzer and Emerging Brands segments, driven by positive comps in new store locations. By distribution channel, the sales plan consists of low single-digit decrease in e-commerce and wholesale sales, partially offset by a low to mid-single-digit increase in our food and beverage channel that will benefit from the addition of three new Marlin Bar locations during the year. We expect flat sales in both full-price retail and outlet channels with modest negative comps offset by the addition of approximately 15 net new locations during the year. For fiscal 2025, we continue to expect gross margin to contract by approximately 200 basis points, largely due to the impact of tariffs. With the recent tariff increases announced during the second quarter, including increased tariffs in countries like Vietnam and India that were included as part of our shift away from China, largely offset by the mitigation efforts we have undertaken, including accelerated inventory receipts and quickly shifting our sourcing network. Despite recent legal challenges, our current forecast is based on the assumption that these tariffs will remain in place for the remainder of the year. Based on current tariff policies and our historical 2024 sourcing patterns, we estimated a potential incremental tariff exposure of approximately $80 million in fiscal 2025 prior to any mitigation actions such as accelerated receipts, sourcing shifts, vendor concessions, or price increases. By accelerating receipts and sourcing shifts, we were able to mitigate roughly half of this exposure. Through additional vendor concessions and select second-half price increases, our current annual guidance reflects a net tariff impact of approximately $25 million to $35 million or approximately $1.25 to $1.75 per share after tax. While tariffs represent the primary driver of margin contraction this year, we also expect continued promotional activity across our brands to weigh on margins as consumers remain highly responsive to value and deal-oriented shopping in the current environment. In addition to lower sales and gross margins, we expect SG&A to grow in the mid-single-digit range, primarily due to the impact of our recent and continued investments in our business, including the annualization of incremental SG&A from the 30 net new locations added during fiscal 2024, and incremental SG&A related to the addition of approximately 15 net new locations in fiscal 2025, including three new Tommy Bahama Marlin Bars, including the two opened in the first quarter and a third planned to open on the Big Island of Hawaii late this year. Also within operating income, we expect lower royalties and other income of approximately $1 million in fiscal 2025. Additionally, our fiscal 2025 guidance includes the unfavorable impact of non-operating items, including $7 million of interest expense compared to $2 million in 2024 or an approximate $0.20 to $0.25 incremental EPS impact. Increased debt levels in fiscal 2025 are due to our continued capital expenditures on the Lyons, Georgia distribution center, technology investments, and the return of capital to shareholders exceeding cash flow from operations. We also expect a higher adjusted effective tax rate of approximately 26% to 27% compared to 20.9% in 2024. The higher tax rate is primarily a result of a significant change in the impact that our annual stock vesting had on stock compensation expense in 2025 compared to 2024. We anticipate the higher tax rate will result in approximately $0.20 to $0.25 per share impact. Considering all these items, including the $1.25 to $1.75 impact from tariffs, higher interest expense, and a higher tax rate, we still expect 2025 adjusted EPS to be between $2.80 and $3.20 versus adjusted EPS of $6.68 last year. In the third quarter, we expect sales of $295 million to $310 million compared to sales of $308 million in the third quarter of 2024. This primarily reflects a high single-digit decline in wholesale sales, offset by our flat to low single-digit positive comparable sales assumption and the impact from non-comparable stores. We also expect gross margin to contract approximately 300 basis points, primarily driven by increased tariffs and a higher proportion of net sales occurring during promotional and clearance events. SG&A is expected to grow in the low to mid-single-digit range, primarily related to the new store locations, increased interest expense of $1 million, flat royalty, and other income, and an effective tax rate of approximately 25%. We expect this to result in third-quarter adjusted loss per share of between $1.05 and $0.85 compared to a loss of $0.11 in the third quarter of 2024. I will now discuss our capital expenditure outlook for the remainder of the year, largely consistent with our prior guidance. We expect capital expenditures for the year to be approximately $121 million compared to a total of $134 million in fiscal 2024. The remaining capital expenditures relate to completing the new distribution center in Lyons, Georgia, and the execution of our pipeline of new stores in Tommy Bahama Marlin Bars, including increases in store count across Tommy Bahama, Lilly Pulitzer, Southern Tide, and the Beaufort Bonnet Company. We expect this elevated capital expenditure level to moderate significantly in 2026 and beyond after the completion of the Lyons, Georgia project. Consistent with the seasonal nature of our business, we expect an increase in outstanding borrowings as we head into the third quarter, which is typically our smallest quarter of the year due to our lower net earnings during fiscal 2025, elevated levels of capital expenditures, share repurchases completed in the first half of 2025, payment of our dividend, and working capital needs, we expect to remain in a debt position for the remainder of the year. Thank you for your time today, and we will now turn the call over for questions.

Ashley Owens, Analyst

So just to start, you mentioned that comparable store sales performance has been positive quarter-to-date. Could you just elaborate on what you believe is driving that strength or what you're seeing from a traffic or transaction perspective? Additionally, anything on a brand level?

Thomas Chubb, Chairman and CEO

Yes. Thank you, Ashley. So comps are positive quarter-to-date. All the brands have been part of that. Lilly continues to be positive. Tommy Bahama is around flattish at this point, but that's a significant step-up from where they were in the first and second quarters. So we've been really happy to see that. I would say it's mostly traffic-driven. During the first two months of the second quarter, our issue was really traffic. Conversions, for the most part, hung in there pretty well. Average order values were actually strong and ticked up a little bit during the second quarter. And then as we got into July, we saw the traffic start to recover a bit, and that really continued into August. So I think that's the story sort of across the board. And then as I said, we're seeing nice comps in Lilly Pulitzer. Tommy Bahama is in a much better position than they were in the first and second quarters, and that really - their business started to pick up in July as well and then continued into August, especially. And so we're encouraged by what we're seeing there, Ashley.

Ashley Owens, Analyst

Okay. Great. And then just a follow-up maybe on promotions. I know the environment still remains volatile, and you mentioned that margins are expected to face pressure from both tariffs and then also the consumer shopping around promotional periods. Is there anything you're doing differently in terms of how you're planning your promotional cadence for the back half of the year? And then any nuances between the brands?

Thomas Chubb, Chairman and CEO

I think they're mostly going to follow historical patterns. We, of course, try to always remain nimble and adjust to the situation as it unfolds. But I think we're not planning any major departures from the way we've run promotions in the past. It's just, as you alluded to, Ashley, we expect to do proportionately more of the business during those periods just because we feel like a lot of consumers are really sort of waiting for those opportunities. But in the second quarter, as you look at it, it was a highly promotional environment, and we definitely had the tariff pressure, but I think you probably heard Scott say this, absent the tariff pressure, our gross margins would have increased year-over-year in the second quarter. So I think we're exercising a lot of discipline and being judicious and trying to maintain price and brand integrity to the maximum extent possible while balancing that with the need to move inventory and generate revenue. And Scott, I don't know if you'd add anything to that.

Scott Grassmyer, CFO and COO

Yes. I think the only change in promotions is Tommy Bahama Friends & Family. We shifted from early September last year to August this year, and that worked well for us. So we think it was the right move. But other than that, it's pretty much similar type of events.

Janine Hoffman Stichter, Analyst

It was impressive you were able to reiterate the gross margin guidance even with the incremental $80 million in tariff headwinds. It sounds like part of that is more price increases. I'm just curious how you're planning pricing, how that's evolved in response to tariffs and what you've seen from the initial price increases that you've taken?

Thomas Chubb, Chairman and CEO

So what I would say is we've been, as Scott used the word in his comments, selective price increases. So we've not done an across-the-board approach to pricing. We've really looked at it on an item-by-item basis and balanced the need to protect our margins and try to recover some of the tariff impact without wanting to get too far ahead of ourselves because that tariff number, as you know, Janine, is still very much a moving target. We're pretty sure we're going to end up with some incremental tariffs compared to what they were in '24, but we still really don't know what they are. So we're trying to be careful about getting too far ahead of ourselves. The general strategy has been to try to cover the gross margin dollars for the balance of this year, and really as we get into spring '26, that's where it really kicks in where we're trying to recoup the gross margin dollars, but not necessarily the percentage. This has led to low to mid-single-digit price increases on average, a little higher for the spring on Lilly Pulitzer, but that's how we stand.

Janine Hoffman Stichter, Analyst

That's helpful. And then maybe just one more gross margin question. You talked about improved gross margin from promotional events at Tommy Bahama. Maybe just elaborate on what that was, if it's something that's repeatable, as we think about squaring that with your expectation for just more promotions or consumer shopping more around those key events.

Thomas Chubb, Chairman and CEO

Well, I think part of it was we ended up selling more full-price product during the promotional period.

Scott Grassmyer, CFO and COO

Yes. And we just had less and like an end-of-season sale, we just had less inventory to sell. So the degree of markdowns was not as severe also.

Dana Telsey, Analyst

Tom, I think a couple of calls ago, you had mentioned about the competitive environment with tariffs and how some of the competitors wouldn't even be making some of their collections given the changes with tariff pricing. What are you seeing? Is it helping you gain market share? And then as you think about this upcoming holiday season, maybe, Scott, how are you thinking of marketing spend and new products to drive activation? And then lastly, components of the comp, what did you see in the comp on your DTC side, both from online and from your own stores?

Thomas Chubb, Chairman and CEO

Okay. So starting in reverse order, I would say that during the quarter, traffic in retail stores was relatively stronger than e-commerce, if that makes sense. So we saw a bit of softness in both sides during the quarter. But I think, relatively speaking, retail was stronger than e-com. And that, frankly, is consistent with a lot of other reporting companies that retail seems to be having a bit more strength than e-commerce. As for the competitors that may not be offering a line for the resort season and doing some more extreme pricing for spring, those are mostly privately held competitors, so we're not seeing a lot of reporting out of them yet. However, I do think that we're holding and even gaining share in our wholesale channels, where we can see it, with the caveat that the overall market is being very cautious with their forward buys. The overall market is not really growing, but I think we're performing well and will get rewarded for that a bit. In addition, one of the earlier reads that we get on how our pricing will be received by the consumer is how the wholesale accounts react to it, and they've been very positive about the way that we're handling pricing. While it's the consumer that ultimately decides, those merchants at those wholesale accounts are skilled, capable, and experienced people. If they're reacting well to the way we're handling pricing, the consumer will likely respond positively as well. Scott, I don't know if you'd add anything.

Scott Grassmyer, CFO and COO

Yes, I think you covered it.

Dana Telsey, Analyst

Great.

Thomas Chubb, Chairman and CEO

Well, I think we'll be doing a lot of similar things to what we've done in the past. I don't want to let the cat out of the bag on a couple of the things we'll be doing around the holiday in particular because there are going to be a few little twists on it, but I really don't want to spill the beans on that if you'll allow me.

Dana Telsey, Analyst

Got it.

Thomas Chubb, Chairman and CEO

Dana, these are just sort of the tactics. I don't think from a big picture standpoint, it's a whole lot different. But some of the specific tactics we'll be doing, I think, will be slightly different than what we've done in the past.

Dana Telsey, Analyst

Got it. And then just on the wholesale partnerships, anything you're seeing different in terms of the wholesale partnerships and how you're planning them?

Thomas Chubb, Chairman and CEO

Well, I think the value of having really good partnerships, which we do with our very best customers, is extremely high. We have close relationships with them and work hard to build mutually successful and profitable businesses with them. We really like that part of the business. While it's a challenging time for everybody, I think our partnerships are stronger than ever.

Mauricio Serna Vega, Analyst

I guess just on the commentary about the positive quarter-to-date trend in the comps, could you maybe talk about how much of a tailwind was that timing of the sale on Tommy Bahama? And just excluding that, if you're seeing actually the business being positive? And then I guess just was wondering maybe if you could clarify, given that the net tariff impact is actually going to be lower than what you initially expected and the sales outlook has been kept unchanged. What is driving you to maintain your full-year EPS outlook for this year?

Scott Grassmyer, CFO and COO

A couple of things. Why don't I tackle the tariffs first? Last quarter, we said around 40, which was before price increases and vendor concessions. Now tariffs, with some of the changes, the overall exposure went up, but we accelerated, did more acceleration of receipts and had some more late in the year shifting from China to lower tariff countries. So we were able to mitigate it. Even though the landscape turned against us a bit, we were able to have further mitigations to stay in a neutral position compared to last quarter. Regarding Tommy, it was located all within the quarter. So it shifted from August to September, and it was early September last year. So that's flushed out now. We think we're back to an apples-to-apples view now.

Joseph Civello, Analyst

Just following up a little bit on the price increases. I think you said select ones so far have been averaging in the low to mid-single-digit range, that picking up through the spring. Can you just talk about what the magnitude could be by then? And how you'd implement those? It would be on a broader range of products, either brand-specific, region-specific, anything like that would help.

Thomas Chubb, Chairman and CEO

Yes. I would say that we're going to be a little bit on the conservative side with the price increases as long as tariffs remain up in the air. So far, as far as we've really gone out is spring, and for spring, I think they're a little bit higher than they are for fall and resort. But that's kind of where we are right now.

Scott Grassmyer, CFO and COO

In the fall, we really had already had prices out for wholesale, so there are not the wholesale increases for fall where there will be for spring. We'll have some both direct-to-consumer and wholesale. So we'll come close. In spring, we think we should make up the gross margin dollars. Fall, we will not quite make up the gross margin dollars.

Thomas Chubb, Chairman and CEO

And the other thing that I would point out is when we talk about, say, a 5% increase in fall prices, that's fall of this year versus fall of last year. When we talk about a 5% increase for spring, that's spring versus spring. It's not on top of a fall increase, if that makes sense. So there, where we are so far, they're really not that much.

Joseph Civello, Analyst

Just one more follow-up then on Lilly. Just talk a little bit about the direct business versus what you're seeing in wholesale.

Thomas Chubb, Chairman and CEO

Well, I think our specialty accounts, in particular, tend to be very cautious during tough times. We've got a good amount of that within Lilly Pulitzer. It's not that we're not performing well, they just tend to be more conservative in their purchasing. In our major accounts, our performance has been quite good. Again, as I mentioned earlier, the majors are also in a cautious stance right now regarding forward purchases, but I have no concerns about our position with any of the key accounts in either Tommy or Lilly.

Tracy Kogan, Analyst

I know you guys have outlined CapEx this year at $120 million. I think a lot of that is from the DC. So I'm just wondering, as you look out to 2026 and beyond, what is a good CapEx number to use? And if there will be any more major investments in DCs or things like that in the near future?

Scott Grassmyer, CFO and COO

Yes. We expect the Lyons project to be substantially complete. There could be a tiny bit that trails over to next year. But once that's behind us, I think ongoing capital expenditures will be in that $75 million range. It really depends on the number of stores, and the pace has slowed down a bit from what it was. But I'd say somewhere in that $75 million neighborhood.

Tracy Kogan, Analyst

Got you. And what's your early expectation for store growth next year? Do you have any openings identified?

Scott Grassmyer, CFO and COO

We've got some pipeline. Johnny Was, we are not opening stores right now. I'm not saying we won't open any, but we've really slowed that down. Southern Tide opened a lot quickly, but we've also slowed it down. There will be some Southern Tide stores. I think Tommy and Lilly will be on a normal type growth pace.

Thomas Chubb, Chairman and CEO

Yes, subject to real estate availability. Overall, I expect more like this year where we're at about 15 openings, compared to 30 last year. So that 15 is probably a good number, and some of those will be Marlin Bars, which are more expensive.

Operator, Operator

And with that, there are no further questions at this time. I would like to turn the call back to Tom Chubb for closing remarks.

Thomas Chubb, Chairman and CEO

Okay. Thanks, Julian, and thanks to all of you for your interest. We look forward to talking to you again in December, and I hope all is well until then.

Operator, Operator

Thank you. Ladies and gentlemen, with that, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time. Have a wonderful day.