Q1 2021 Oxford Industries Inc Earnings Call
[music].
Greetings and welcome to the Oxford Industries, Inc. First quarter of fiscal 'twenty 'twenty 1 earnings conference call. At this time all participants are in a listen only mode of question and answer session will follow the formal presentation if anyone should require.
Operator assistance during the conference. Please press Star Zero on your telephone keypad. Please note. This conference is being recorded I will now 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.
On today's call and in the Q&A session may constitute forward looking statements within the meaning of federal Securities law.
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.
We undertake no duty to update any forward looking statements during.
Paul 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 Oxford, Inc. Dot com.
Due to the material impact of COVID-19.
On our business in fiscal 2020, we will also include comparisons to our fiscal 2019 results and now I'd like to introduce today's call participants with me today are Tom Chubb, Chairman and CEO and Scott <unk> CFO. Thank you for your attention and now I'd like to turn.
This call over to Tom Chubb.
Thank you Anne and thanks to all of you for joining US. This afternoon. We are extremely pleased to be reporting an incredibly strong start to fiscal 2021, we took decisive actions at the start of the pandemic to per <unk>.
Our people our.
Turn the claims and our liquidity does.
Of those combined with our focus over the past year on delivering happy new store customers and investing in enhanced digital marketing and in store capabilities as well as on our bars and restaurants of store.
Going to ignore foundation for profitable growth.
As consumers become increasingly more comfortable returning to physical shopping our overall engagement levels have greatly accelerated leading to a strong momentum across our entire portfolio of brands.
Given conditions last year at <unk>.
Our brand price swing that we were able to post strong sales gains across all brands in all channels of distribution during the first quarter of fiscal 2021 as compared to the first quarter of fiscal 2020.
What is much more impressive about our first quarter 2.
2021 performance.
How it compares to the first quarter of 2019, we believe that the comparison to 2019 is much more informative for most purposes when comparing to 2020.
Accordingly during our discussion today, we will focus.
On the positive traction we have made towards returning to and even exceeding our 2019 levels of performance.
First quarter sales came in at $266 million compared to $282 million in fiscal 2019.
And versus our guidance range of $220 million to $240 million at its worth noting that 14 of the $16 million of sales decrease from the first quarter of fiscal 2019 is due to lower sales of linear apparel, which as.
You know we are in the process of exiting on.
On an adjusted basis earnings per share increased to $1.89 compared to earnings of $1.30 in the first quarter of fiscal 2019.
Scott will provide more detail on a few minutes, but these results were driven.
And by very strong performance in our e-commerce businesses and outstanding gross margins, our bar and restaurant business also performed very nicely during the quarter.
In our bricks and mortar stores, we generally saw a sequential improvement in traffic and sales in the quarter.
Regions in Florida.
Southeast and Texas, showing the most strength while at the mid Atlantic the northeast and the Midwest are recovering at a somewhat slower pace. There is no question that we are benefiting from some pent up demand so far this spring and summer and the alignment of our.
Our brands focus on products related to travel vacation and social occasions, with the consumers' desire to travel and Reengage socially we.
We expect this to continue as more regions of the country begin to normalize.
That said, we believe that the results we have seen.
Thus far this year and that we are projecting for the balance of the year also demonstrate the value of staying true to our brands during the challenges that we faced last year.
Our commitment to that happy upbeat and optimistic messages of our brands and delivering.
Messages chart consumers through our products and services is paying off handsomely as the world re engages. In addition, we are seeing positive returns on the investments we have made and continue to make in enhancing our brand's creative content and improving.
Those of Omni channel customer service and continuing to hone our digital marketing capabilities, and then our stores bars and restaurants.
And our biggest brands Tommy Bahama, we are anchored in the relaxed island lifestyle, we deliver this lifestyle to our guests through our amazing.
Moving on products are wonderful stores and E Commerce website, and very importantly through our powers and restaurants by staying true to our live the island life brand message and making the types of at investments outlined above we were able to deliver outstanding first.
I'm proud of the results sales overall king close to 2019 levels driven by healthy gains in e-commerce and restaurants, while stores in the wholesale continued to improve sequentially.
Very importantly increased full price selling and stronger initial volume use.
First coupled with excellent expense control helped contribute to a marked improvement in gross margin operating margin end up 36% increase in operating income over first quarter 2019, we are delighted with the margins we achieved.
For the quarter.
Finally, we were pleased to see that while performance in our men's business was strong our womens business at Tommy Bahama was even stronger we are on or Dab. The dedicated cadre of true Tommy Bahama fans that comprise our very loyal customer base.
That said, we believe there is room on the island to delight, even more customers through the investments we are making and the priorities. We have established we are intent on expanding our customer reach while continuing to serve our loyal counts.
Staying.
Anchored <unk> resort chic lifestyle, and as we say being the Sunshine served Lilly pellets are very well during the first quarter Lilly product priority for spring 'twenty..1 was feel good fashion with a focus on the happy color and print easy sheet comfortable.
A couple pieces and of resort state of mind. This focus together with the investments that we've made in enhancing our brand creative and enhancing our store and digital capabilities paid off in strong first quarter results. We continue to see strong growth from E Commerce.
While our stores and our wholesale business continued to improve as consumers feel increasingly comfortable engaging in the physical world.
In total first quarter 'twenty, 1 sales exceeded first quarter 2019 sales and operating margin came in at an impressive.
27% as compared to 21% in 2019.
Our luck sladek and lounge product continued to drive growth and we saw a healthy rebound in our dress business at.
Her social calendar begins to fill up at.
At the same time.
Our golf and tennis collections have also been bright spots and the consumers showing strong renewed interest in swim at.
She thinks about travel and vacation. This summer our recent results demonstrate that we have the product she wants and our brand messages resonating with her.
We look forward to continue to drive a strong business through the balance of the year.
Our smaller brands southern tide on.
On a company in Buckhead also had a great first quarter, all posting meaningful sales gains above first quarter 2019 levels of.
All 3 year poised to contribute to our profitability this year.
We are very pleased with our first quarter results and are excited about the balance of the year.
Scott will provide more details in our guidance momentarily, but I will say that we do expect tab of strong year, particularly in.
In terms of profitability our enthusiasm is based on both external factors as well as the internal priorities that we have been focusing on for the last year.
Start with the external factors as the summer progresses, we expect some of the reach of instead of been Florida.
To recover for us, namely the mid Atlantic the northeast and the Midwest to pick up momentum. We also believe that consumers will continue to have a high degree of interest in travel vacation and social events through the year time going after a long pandemic consumers appreciate.
At the highly differentiated happy colorful upbeat nature of our brands and products more than ever all of these external factors portend a strong 2021.
We are also excited about the benefits. We are seeing is the result of our internal priorities.
There are many but I will highlight tide here.
First in our brand message, we are taking care to ensure that our messengers.
True to our core brand values at.
And relevant for today's consumer end marketplace.
We have realigned our creative teams.
And are enhancing our creative content to make sure. It is delivering the full impact of our powerful brand messages.
Third as part of our effort to enhance our digital capabilities, we are improving our ability to capture and analyze customer data in a way debt perspective.
<unk> her privacy, but also puts us in positions of server at a better and more personalized way. It also helps us identify and reach new audiences of potential customers.
Fourth we are holding of our skills of measuring the effectiveness of and optimizing the various.
Channels many of them digital media that we use to reach both existing and potential new customers.
Fifth we continue to enhance our store order fulfillment capabilities. This allows us to use inventory located anywhere in our footprint to satisfy.
Demand from anywhere the implications for inventory efficiency sell through rates and ultimately gross margin are huge we believe the combination of the positive external factors as well as the benefits from our work on our internal priorities gives.
Give us ample reason to be bullish on 2021.
In closing please allow me to express my sincere appreciation for our wonderful of loyal customers and for our World class employees and incredible group of women and men.
Side of worked harder than ever over the last year and a half to deliver of happiness to those customers. Thank you for all you do and now I will turn the call over to Scott for additional detail on our results and our outlook from the balance of the year Scott.
Thank you Tom.
Tom just mentioned fiscal 2021 is off to a great store with record earnings in the first quarter of walk you through how we got there.
Sales were stronger than expected and excluding the impact of the exit of the Lanier apparel business were comparable to 2019 levels.
Full price E Commerce channel was 55% higher than in 2019 with significant growth over 2019, and all of our brand of businesses.
Our retail store performance reflects the significant regional differences in the pace of recovery, we saw real strength in the southeast and southwest, particularly.
Our Florida.
Retail sales achieved 2019 levels. However.
We are experiencing at much slower recovery in other parts of the country, where sales levels in the northeast mid Atlantic and Midwest, while improving versus Q4, we're still over 30% lower than in 2019.
<unk> over all of retail sales were 16% lower than in 2019, we continue to see improvement so far on the second quarter and expect that improvement to continue as restrictions lift and of summer of rise in these areas.
Our restaurants benefited from the addition of 5 Marlin bars and the strong recovery.
Certain regions with a sales increase of 7% compared to 2019.
All restaurants are now open at set from New York, which we plan to reopen this fall.
We are particularly.
<unk> proud of the work we have done to improve our gross margin, which on an adjusted basis expanded 520 basis points over.
Over 2019% to 64%.
As demand remained high more of our sales in the first quarter were at full price and in the first quarter of 2019.
Gross margin also benefited from our focus and investments in our direct to consumer businesses and lower sales on linear.
On your apparel, which has resulted in a meaningful shift in our sales mix to these higher margin channels of distribution.
In the first quarter of 2021 of our direct business was 72% of revenue compared to 64% in the first quarter of 2019.
We have also increased our iam used by reducing.
<unk> product cost and selectively increasing prices.
SG&A modest of decreased modestly from 2019 levels with lower employment cost occupancy cost variable expenses and travel costs, partially offset by increased performance based incentive compensation.
Putting it.
At altogether in the first quarter, our consolidated adjusted operating margin expanded 410 basis points over 2019% to 15% with operating margin expansion in all operating groups.
Our business is supported by our strong balance sheet and cash flow from operations here of some highlights.
<unk>.
On a FIFO basis inventory decreased 29% compared to the end of the first quarter of 2020.
Excluding lanier apparel, which we are exiting FIFO inventory decreased 22% compared to the into the first quarter of 2020.
Tommy Bahama Lilly Pulitzer.
And southern tide, each decreased inventory levels significantly year over year with conservative purchases of seasonal inventory and higher than expected first quarter sales.
Ongoing enhancements to enterprise order management systems are also contributing to a more efficient use of inventory.
On a LIFO.
<unk> basis inventory decreased 36% to period to the end of the first quarter of 2020.
Supply chain challenges, including higher transit cost and production and transit delays are ongoing.
Our emphasis on direct to consumer channels gives us more flexibility on product release dates.
Yeah.
Our liquidity position is strong with $92 million of cash and no debt at the end of the first quarter and the first quarter of 2021 cash provided by operating activities was $41 million compared to cash used in operating activities of $46 million in the first quarter of 2020.
Right.
Turning to our outlook.
The positive momentum we experienced in the first quarter has continued and we expect to deliver strong revenue and earnings in the second quarter.
Sales in the second quarter of expected to be in a range of $300 million to $310 million compared to $302 million in the second quarter of 2.
The 19th.
Impacting sales in the second quarter as the wind down of our linear our apparel business, we estimate lanier apparel revenue to decline to approximately $5 million in the second quarter of fiscal 2021 compared to $20 million in the second quarter of fiscal 2019.
Strong full price.
Sales of shift of our sales mix towards of our brands and our direct to consumer channels and higher <unk> in the second quarter are expected to contribute contribute to a meaningful increase in consolidated gross margin over 2019.
On an adjusted basis earnings per share for the second quarter of 2020.
1 on <unk>.
Expected to be in a range of $2.15.
The $2.35.
Compared to a $1.84 per share in the second quarter of 2019.
Our third quarter is historically, our smallest sales and earnings quarter of due to the seasonality of our brands. We also.
No clear end of season inventory in both the third and fourth quarters with the highly profitable at Lilly Pulitzer After-party sales at the most notable of our events.
High sell throughs in the first quarter and elevated sales planned levels planned in the second quarter are expected to reduce the availability of excess inventory.
With each of clearance events.
As a result of lower planned revenue from clearance events in the third quarter and the impact of the linear apparel exit we're projecting an adjusted loss in the quarter and a range of 20 to 35 per share compared to adjusted earnings of <unk> <unk> per share.
Towards the third quarter of 2019.
With our better than expected first quarter results combined with our injection for a strong finish to the year driven by continued strength strength planned in our full price ecommerce channel retail and restaurant channels of distribution, we are raising our previously issued guidance.
Share in for 2021.
We now expect sales in a range of $1 <unk> 5 billion to $1 <unk> 5 billion.
Compared to net sales of $1.1.2 billion in 2019.
For the full year Lanier apparel sales are expected to be approximately 20 million.
Guidance of $75 million lower than 2019 with node Lanier apparel sales planned in the fourth quarter.
Adjusted earnings per share for 2021 are expected to exceed 2019 levels benefiting from meaningful gross margin expansion.
SG&A for the full years of.
It would be comparable with 2019 with lower employment costs occupancy costs and travel costs, partially offset by increased performance space incentive compensation and investments in marketing, including top of the funnel expenditures.
We now expect adjusted earnings in a range of 4.
Spectrum at 85 cents.
The $5.15 per share compared to $4.32 per share in 2019.
We plan to continue investing in our growth opportunities primarily in information technology initiatives, such as the redesign and relaunch of the Lilly Pulitzer Mobile mobile App.
$4, just on development of digital marketing and customer service enhancements.
We also plan to open new retail stores and a new Marlin bar at town square on Las Vegas, which will replace our full service restaurant at the center.
In 2021 capital expenditures for the full year of expected to be approximately.
And a drop of $1 million comparable to 2019 levels.
We appreciate your time today, and we'll now turn.
Over the call for questions Hillary.
Thank you.
At this time, we'll be conducting a question and answer session I would like to ask a question. Please press star 1 on your telephone.
Keybanc.
All information tone will indicate your line of my question queue. You May press star 2 if you'd like to remove your question from Mchugh from participants using speaker equipment at may be necessary to pick up your handset before pressing of Jackie.
1 moment, please while we poll for question.
Our first question is from Edward <unk> of Keybanc capital markets. Please state your question.
Hey, good afternoon, guys. Thanks for taking the question congrats on a great quarter.
First I wanted to take that on gross margin a little debt, obviously at an incredibly poor performance there.
In terms of last year I know you had inventory that you.
Packed away.
The benefit from our cost basis, when you kind of brought that inventory back into flow. This year and then as a follow up as you think longer term about the DTC penetration, particularly in the Tommy brand do you think you've kind of hit a peak or do you think that the direct business from continuing to grow as a percentage.
Overall sales thanks.
I'll, maybe take the first 1 and then flip it on.
I'll take the second 1 excuse me and then flip it over to Scott to talk about any benefit that we might have had the gross margin, but I do.
Believe that DTC as a percentage of the total.
Sure.
We can continue to grow.
Certainly it will be a larger part this year than it was in 2019.
As wholesale is recovering.
I do think our wholesale business is very healthy.
We're performing well at all of our key customers.
Which is great to see but over the long term, we do expect.
D C DTC to be the primary driver of growth.
Do you want to talk about merge yes.
There.
It's really not any kind of significant cost difference from what we carried over what at that allowed us to do was really not have a lot of excess inventory last year that were flooding the market with and I think it really help with our brand health net.
Our merchandising teams at a great job of really.
Taking what we can merchandise well into that spring line and it just.
All of us not to have to buy a bunch of inventory for early spring. We already had at home at also help with some of the transit delays because of that.
Inventory was already here, so we really had no delays there.
Got it and 1 other follow up I know you guys mentioned you were taking some tactical price increases.
I know historically, you've done that as you've introduced new product rollouts of new functionality.
Are the price increases on kind of at similar basis as you bring on your product or are you taking more of kind of wholesale approach to some of the price increases. Thanks.
It's more of a selected that Ben it is across the board type of price.
<unk> increases.
Also as we get at more performance type products.
New products that we introduced in the performance area tend to have a higher gross margin also.
Great. Thank you.
Thank you.
Our next question is from Paul <unk> on.
Please state your question.
Thanks, It's Tracy Kogan filling in for Paul.
2 questions I guess, the first is on the supply chain I'm wondering if the delays youre seeing narrow contributing to what you expect could be on having a lack of clearance inventory in third quarter or is that really just more related to your sell throughs.
Of Citi and my second question was I was just wondering in the Tommy business.
How much of your outlet business was hurt by lack of international tourism. If you could maybe give us some color on the difference in performance in your outlook versus your full price stores are those in tourist regions versus those that are not thanks a lot.
Okay.
And supply chain question, and any impact that that might be having on the Lilly Pulitzer.
After party sale later in the year of the way that I would answer that Tracy is the.
Primary driver of the route calls if you will of not.
Not having as much inventory of the higher sell.
Some of them.
That we've had year to date.
However, the supply chain issues make it harder for us to.
<unk> inventory really for full price business as well as.
As for the third debt.
Wood.
Through mentally end up leaving us, possibly with more inventory for that after party sales so the.
We are having some challenges with delays in shipping as well as some delays in production.
At the factory and due to the Covid.
Mike.
As much as possible, we've obviously tried to factor all of that into our <unk>.
<unk> forecast.
And I think we've.
Sort of captured that but the real cause is the higher then.
Anticipated full price selling.
The early part of the year.
And then on the outlet stores or outlets are down similar to a total retail we don't really benefit that much from international travel is not the way to some.
Brands mine in our outlet stores there while the sales were down on the gross margins are very healthy and of our outlet. So.
We just have a much leaner on inventory and the inventory is very good inventory.
And we're able to get a little bit better pricing, having to discount a little less than we had in previous years. So over all of our outlet businesses.
Sales are down but margins are up so it's pretty healthy.
Got it thanks very.
Very much.
Thank you Tracy.
Our next question is from Susan Anderson of B Riley. Please state your question.
Hi, good evening nice to see that improvement in the quarter.
And I'm curious I think you mentioned that you expect the northern states.
Scott.
They've started to open and I'm curious, if you've seen that penetrated or seen them start to pick up just yet and then also at the South has continued to perform well and then also curious what you're seeing in Hawaii is that's opened up now.
Yeah.
At midnight.
And at northeast and Midwest, which where the 3 sort of lagging regions that we called out they are improving if you look at the more recent performance versus the performance.
Earlier in the year.
The general trend there is good and I think at size you.
Would expect of people.
Start to get out more feeling more comfortable on some of the restrictions start to get lifted and more people are backs unaided.
People want to be out shopping and buying stuff and.
We think that actually plays out.
<unk> for us really well.
John.
In those states summer time, and it's a really good time to have people out shopping.
For our brands, which are all about warm weather and Sunshine and all of those types of things that are in the south.
Say that relative.
<unk> of any other year. The performance continues to be very good. We're pleased with what we're seeing there I will point out that Florida always slows down for us during the summer time.
Debt versus other times of the year end I think you have that.
It won't.
2 relative slow down as compared to other years, but it will be.
At the less of our overall sales picture during the summer months.
As to Hawaii at a bit of a mixed bag there the play.
Places that rely heavily on.
On international.
Don't be able tourists.
Especially people coming in from Japan, or Australia, and that would be the island of Oahu.
Because there are still issues wood travel from those places.
They have not recovered as fast as some of the locations like.
Like mowing and the Big Island that are more driven by U S tourists and there are still restrictions in place, but we are seeing.
On a nice recovery and I think that will continue.
As the year of progress as I think all of Hawaii.
Continue to get better.
Which is at.
As a positive for us.
Thrilled with the results that we saw on the first quarter, but again that was with certain reach.
Regions still.
Okay.
Depressed from where they were in 2019 and as they come back online we think that.
Net.
Bodes well for us.
Great that's very helpful.
And then I'm just curious are you seeing new customers come into all of the brands.
Or is it existing customers that are coming back now.
On that maybe where shopping the brand's pre COVID-19, but haven't shopped them, because maybe they havent gone on vacation.
Or something and now they're coming back or if youre also capturing new customers at if thats in store online or both.
The answer of yes, yes, and yes were.
Customer accounts are building were seeing customers that.
Debt or customers that we've had in the past and we're adding new customers.
Bruce.
Both online and in stores and that's really across all brands from some of that got a little choppy.
During the pandemic, obviously it was hard to add new customers in stores when the stores were closed.
There was.
A lot going on there, but all of the customer metrics of really.
Looking pretty good through the first quarter of the year end, we think we'll be able to continue.
At trend and it's on.
Obviously, an area of a lot of focus for us as well.
Great that sounds positive flow. Thanks, so much good.
The rest of the year.
Okay.
Our next question is from Dana Telsey Telsey Advisory group. Please state your question.
Hi, good afternoon, and congratulations on the terrific results.
As you think about e-commerce, and I believe last year E Commerce reached nearly 43% of sales.
And you had 55% increase in full price now how are you thinking about percentage of total sales at comes from E Commerce, and the margin accretion relative towards that for each of the brands.
Yes, sorry about highest penetration.
Yeah as you know Lilly has a higher penetration.
Tradition of ecommerce and Tommy does day, both took a big step up last year last year was a very unusual year as a percentage of the total at will.
We'll be a bit smaller of this year than it was last year, but it will still in both brands be significantly higher.
Then it was in 2019 and overall total enterprise I think we're estimating at to be at about 33%.
For 2021, which will be up pretty significantly.
It was.
And in 'twenty.
19.
'twenty 2 is probably the first year, where you'll really be able to see.
Where that.
Sort of what the new baseline of E. Commerce is because you do still have.
Stores in the wholesales still on a bit of a recovery mode.
This year of Dana.
And so 2020 to probably get at baseline, but then from there.
I think E comm probably continues.
The fastest growing.
Part of the business and we like cash.
It's very profitable business for us.
I'll, let Scott maybe.
Elaborate a little more on the margin impact.
E Comm is a very profitable business, even though you have some extra cost around that you do have a high ticket, which is growing our average ticket has been growing and our initial gross margins are higher so.
We are able to.
Easily fund the extra cost with that margin. So we really do like the e-commerce business and we.
<unk> been investing in it and those investments have been paying off at will continue to invest in that business.
And then just 2 more follow up at 1 of things it sounded like you had learned coming.
So <unk> had to run the stores more efficiently regarding store labor at store.
So if we open at this part of the flow through beyond the gross margin of what's leading to the operating margin increases and how do you think about labor go forward.
Dana I would say, yes. It is part of the flow through we did learn.
Coming out of operating more efficiently and I think we're benefiting.
From that right now there is a part of that debt debt.
As sort of intentional if you will of deliberate and I think there is actually a little bit of at that has to do with.
Trouble of many employers are.
Ahead on right now and filling open positions.
Positions and we're actually running a little thinner than we want.
At the at the margins at probably costing us a few.
Sales dollars.
Im not sure at wood.
Hurt us is.
On labor cost of per.
Percentage of sales, but in absolute dollars.
It's probably worth spending less just because we can't get people in.
Good work.
And then as you think about inventory going through the balance of the year how.
Do you think about.
Inventory at the approaching the fourth quarter and how long this congestion last everything we hear it seems like it continues to be extended.
Yeah, Doug So in 1 thing we have adjusted our merchandising calendars to order earlier.
Yes.
<unk> built in a little.
More.
Time for any kind of transit delays, especially for that.
Fourth quart, especially when we get into resort in <unk>.
In the early deliveries of spring, which some of those happened in the first quarter, we plan on attempting to at least sort of an inventory earlier and hopefully.
It will be.
That cushion that.
Celebrated the orders, we'll absorb that so.
And inventory levels.
We are operating more.
Efficiently with inventory.
As far as we expect to be below 20 of the whole.
Diller and whether it'll be quite as big of a percentage or not not quite sure of what should be.
Lower all year I think we can just run the business with less inventory due to some of the investments.
Thank you.
Our final question is from.
Steve Marotta of CL King Please state your question.
Good afternoon, Tom Scott and John maybe you could address given how this year is shaping up and theres the reopening.
Performance is actually very good very very good.
To the extent I know you can't talk about next year from a guidance standpoint, but maybe you can.
Talk at a very high level about what you think optimal operating margin is for the business end for the long term.
I'd like to ask you how do you expect to lap this next year, but that.
Would be maybe giving too much specific guidance on next year you just if you could.
Just frame it a little bit on on where you are and where you think you can how this can you could build off of this or if maybe the margins are playing a little bit about themselves at the moment given all of the dynamics in the industry.
Yes, Thank you Steve Thanks.
For the question and I'll, let my partner Scott chime in here in a minute with some further detail on thinking on the operating margin long term, but what I would tell you at the very highest levels that you have and this is a message that we've been trying to deliver since this time last year.
As the first couple of months of the pandemic, we were very focused on making sure.
Debt, we would get through at and financially survive and as you know we did that with.
With flying colors, but really about this time last year, we also pivoted to make.
Make sure that we were doing everything we could across all of our brands to emerge from the pandemic, even stronger than we went into it and this was part of our prepared remarks today is that we believe that we are seeing not.
Not only the benefits from debris.
But also the benefits of the priorities that we have.
Internally and that those are paying off and we do believe that we have come out of this as brands.
Which ultimately drive our business.
On a stronger position.
Open web thats, helping us do.
As drive sales.
GAAP the reopening is part of it.
We think the strength of our brands and the activities and priorities that we've done to.
Bolster those are also paying off debt, resulting in higher gross margin.
<unk>.
We've developed skills that of help helping us operate more efficiently from a operating expense leverage standpoint, as well as an inventory of efficiency.
Standpoint.
And we're also.
<unk> focused on and while we we love of wholesale and we want to continue our wholesale business.
We're very focused on driving our direct to consumer businesses.
And when you look at all of those what I would tell you is.
It's really hard.
For me to predict what next year looks like but over the long term I do believe we will be expanding our enterprise wide operating modes.
Scott if you want to.
Total company I mean, we really expect to be low double digit operating margin company and I think we can enter that.
That double digit territory this year end.
At Tommy Bahama.
We've always felt there was a lot of room for operating margin improvement and we really believe this year, we're going to have a lot of progress and they can get into double digits. This year also we wanted to get them 12 of North I don't think that will happen this year, but I think that certainly.
Certainly.
And then not too long term future to get them. There. So and then Lilly has great operating margins. They always have and we think they can maybe expand slightly over 19 margin levels. So.
So if we think our margin profile of certainly improving and I think at continues.
Continued to improve.
Yes.
That's very helpful. Thank you I'll take the rest of my questions offline. Thanks again.
Thank you Steve.
We have reached the end of the question and answer session I will now turn the call over to Tom Chubb for closing remarks.
Thank you Hillary.
Hillary and thanks to all of you for your interest in our company and your support and we look forward to talking to you again in September when we report second quarter results. Thank you.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Okay.