Q4 2025 Oxford Industries Inc Earnings Call
Operator: Greetings and welcome to the Oxford Industries fourth quarter fiscal 2024 earnings conference call. At this time, all participants are in a listen-only mode.
Greetings and welcome to the Oxford Industries fourth quarter fiscal 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.
Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
And the answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
Brian Smith: It's now my pleasure to introduce your host, Brian Smith. Please go ahead. Thank you, and good afternoon.
Speaker Change: Now my pleasure to introduce your host Brian Smith. Please go ahead.
Speaker Change: Thank you and good afternoon before we begin I would like to remind participants that certain statements made on today's call and the Q&A session.
Brian Smith: Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session, they constitute four different statements within the meaning of the 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 a 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.
Speaker Change: Institute forward looking statements within the meaning of the federal Securities laws.
Speaker Change: Forward looking statements are not guarantees and actual results may differ materially from those expressed or implied in the forward looking statements.
Speaker Change: Factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today.
Speaker Change: Documents filed by us with the SEC.
Speaker Change: Including the risk factors contained in our Form 10-K.
Speaker Change: We undertake no duty to update any forward looking statements.
Brian Smith: During this call, we will be discussing certain non-GAAP financial measures. You can find the 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.
Speaker Change: During this call we'll 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.
Speaker Change: It is posted under the Investor Relations tab of our website at Oxford in Dot Com.
Brian Smith: And I'd like to introduce today's call participants.
Speaker Change: I'd now like to introduce today's call participants with me today are Tom Chubb, Chairman and CEO, and Scott Glassmeyer CFO and CMO.
Brian Smith: With me today are Tom Chubb, Chairman and CEO, and Scott Grassmeyer, CFO and COO.
Thomas Chubb: Thank you for your attention, and I'd like to turn over the call over to Tom Chubb. Good afternoon and thank you for joining us. We are pleased to be reporting fourth quarter net sales and adjusted EPS that are both near the top of our guidance ranges. In December, we said that we were expecting a strong holiday selling season. That expectation turned into reality, as the consumer did, in fact, show up to buy their loved ones and friends the gifts that they really wanted from the brands that they loved. We were particularly pleased in the weeks leading up to Christmas by the performance of some of our newer special products, such as Tommy Bahamas Indigo Palms Denim and Denim Friendly product, the Tommy Bahama Marlin Luxe Quarter Zip Pullover, and the Lily Pulitzer Reserve collection.
Speaker Change: You for your attention and I'd like to turn it over to <unk>.
Call over to Tom Chubb.
Tom Chubb: Good afternoon, and thank you for joining us we're pleased to be reporting fourth quarter net sales and adjusted EPS that are both near the top of our guidance ranges.
Tom Chubb: In December we said that we were expecting a strong holiday selling season that expectation turned into reality is the consumer did in fact show up to buy their loved ones and friends. The gifts that they really wanted from the brands that they love we were particularly pleased to end the week.
Tom Chubb: Leading up to Christmas, but the performance of some of our newer special product such as Tommy Bahama seem to go palms, denim and denim friendly product the Tommy Bahama Marlin Lux quarters at Pollo.
Tom Chubb: And the Lilly pellets are reserved collection the performance of these higher price point products is strong evidence that when there is reason to shop, our customers are choosing to spend with our brands and this helped drive comps for the month of December up 2%.
Thomas Chubb: The performance of these higher price point products is strong evidence that when there is reason to shop, our customers are choosing to spend with our brands. And this helped drive comps for the month of December up 2%. As we moved into January, we experienced a moderation in demand which we attribute to the recent pattern of consumers retreating when there isn't a reason to spend combined with a deterioration in consumer sentiment. As a result, January was not as strong as December with comps down 3%. This negative trend accelerated in the beginning of fiscal 2025 with comps of negative 9% in February.
Tom Chubb: As we moved into January we experienced a moderation in demand, which we attribute to the recent pattern of consumers were intriguing when there isn't a reason to spend combined with the deterioration in consumer sentiment.
Tom Chubb: As a result January was not as strong as December with comps down 3%.
Tom Chubb: This negative trend accelerated in the beginning of fiscal 2025 with comps of negative 9% in February given this backdrop, we are pleased with our fourth quarter performance and commend and thank our people for delivering these results we believe the choppiness in demand.
Thomas Chubb: Given this backdrop, we are pleased with our fourth quarter performance and commend and thank our people for delivering these results. We believe the choppiness in demand we experienced towards the end of fiscal 2024 is likely to continue in the near term. Just as the consumer showed up and was willing to spend for Christmas, we expect the same will be true for the first half of fiscal 2025 with strong selling for big events such as Easter, Mother's Day, Father's Day, Memorial Day, and the Fourth of July. In the in-between times, we anticipate the consumer will be more hesitant to spend given the uncertainty in the current marketplace.
Tom Chubb: We experienced towards the end of fiscal 'twenty 'twenty four is likely to continue in the near term.
Tom Chubb: Just as the consumers showed up and was willing to spend for Christmas. We expect the same will be true for the first half of fiscal 2025 with strong selling for big events, such as Easter mother's day father's day Memorial day and fourth of July.
Tom Chubb: In the in between times, we anticipate the consumer will be more hesitant to spend given the uncertainty in the current market place.
Thomas Chubb: With our powerful portfolio of happiness-evoking brands, our world-class omnichannel platform, our strong cash and balance sheet, and our resilient team, we continue to believe that the long-term opportunity for us is extremely bright. However, we are realistic enough to recognize that we are not immune from the current headwind. As with any time of uncertainty, the key for us in the short term is to control the controllables and to stay focused. At the top of our focus list is our customers. Our top priority is staying hyper-focused on the four-point North Star that serves as the blueprint for how we run the company.
Tom Chubb: With our powerful portfolio of happiness about King brands are world class Omni channel platform, our strong cash and balance sheet.
Tom Chubb: And our resilient team, we continue to believe that long term opportunity for us is extremely bright.
Tom Chubb: However, we are realistic enough to recognize that we are not immune from the current headwinds as with any time of uncertainty the key for us in the short term is to control the controllable and to stay focused at the top of our focus list is our customer.
Tom Chubb: Our top priority is staying hyper focused on the four point North star that serves as the blueprint for how we run the company as a reminder, our four point North Star starts with our overarching strategy to maximize long term shareholder value. The key here is.
Thomas Chubb: As a reminder, our four-point North Star starts with our overarching strategy to maximize long-term shareholder value. The key here is to remember that we're building a sustainable business and shareholder value for the long term, notwithstanding the short-term turbulence. The second point of our strategy is to own a portfolio of lifestyle brands. We have 83 years behind us and have remained successful through many challenges. We know how to do both. During this uncertain time, we will make sure that we are protecting the integrity of our brands for the long term. Protecting the integrity of our brands means avoiding short-term fixes to offer slightly improved near-term results that would damage our brands and our prospects for the long term.
Tom Chubb: To remember that we're building a sustainable business and shareholder value for the long term notwithstanding the short term turbulence. The second point of our strategy is to own a portfolio of lifestyle brands. We have 83 years behind us and have remained successful.
Tom Chubb: There are many challenges we know how to do this during this uncertain time, we will make sure that we're protecting the integrity of our brands for the long term.
Tom Chubb: Protecting the integrity of our brands means avoiding short term fixes to offer slightly improve near term results that would damage our brands and our prospects for the long term.
Thomas Chubb: Third is our purpose as a company, which is to evoke happiness in our consumers. All of our brands are happy brands that metaphorically take our customers to their happy place. It is important for us to stay focused on delivering that happiness to our customers and not get distracted by external challenges beyond our control. Our fourth and final area of focus is to generate cash that we can then reinvest to grow our existing businesses, pursue acquisitions when the opportunity exists, and returning capital to our shareholders, all while maintaining a healthy balance. Each of our brands has detailed plans for fiscal 2025 tailored to their unique circumstances, challenges, and opportunities.
Tom Chubb: Third is our purpose as a company, which is to have both happiness and our consumers all of our brands are happy brands that metaphorically take our customers to their happy place. It is important for us to stay focused on delivering that happiness to our customers and not yet.
Tom Chubb: Distracted by external challenges beyond our control.
Tom Chubb: Our fourth and final area of focus is to generate cash that we can then reinvest to grow our existing businesses pursue acquisitions when the opportunity exists and returning capital to our shareholders all while maintaining a healthy balance sheet each.
Tom Chubb: Each of our brands as detailed plans for fiscal 2025 tailored to their unique circumstances challenges and opportunities. However, all of them have one thing in common and that is that a focus on the core of what makes the brand great.
Thomas Chubb: However, all of them have one thing in common, and that is that they focus on the core of what makes the brand great. For Tommy Bahama, focusing on the core is about ensuring that we are engaged and fully activated in our top 25 markets. We have a tremendous following in each of these markets that serves as a great foundation for the business. At the same time, there's a significant opportunity to attract a much larger audience to the brand. As we ignite and activate these core markets in 2025, our plan is to not only delight our current customers, but connect with prospective customers to drive more traffic and higher conversion across all channels.
Tom Chubb: For Tommy Bahama, focusing on the core is about ensuring that we are engaged and fully activated in our top 25 markets. We have a tremendous following in each of these markets that serves as a great Foundation for the business at the same time, there's a significant opportunity.
Tom Chubb: To attract a much larger audience to brands as we ignite and activate these core markets in 2025, our plan is to not only delight, our current customers that connect with prospective customers to drive more traffic and higher conversion across.
Tom Chubb: All channels.
Thomas Chubb: At Lilly Pulitzer, focusing on the core is all about the top 20% of our customer base. The top 20% of our customer base accounts for 67% or two thirds of our sales and even more of our profitability as they tend to buy at full price. Making sure that we have the products, experiences, and marketing messages that delight these customers will help ensure they are fully engaged in spending money with us during fiscal 2025. We also believe that doubling down on serving our best customers will help us to attract many, many more who are demographically and psychographically similar to our existing top customer base.
Tom Chubb: At Lilly pellets are focusing on the core is all about the top 20% of our customer base the top 20% of our customer base accounts for 67% or two thirds of our sales and even more of our profitability as they tend to buy at.
Tom Chubb: Full price thank.
Tom Chubb: Making sure that we have the products experiences and marketing messages that the light CS customers will help ensure they are fully engaged and spending money with us during fiscal 2025. We also believe that doubling down on serving our best customers will help us to attract.
Tom Chubb: Many many more who are demographically and psycho graphically similar to our existing customer base and Johnny was focusing on the core is about getting back to the brands roots through the type of products that Nate Johnny was famous and a favorite with hundreds of <unk>.
Thomas Chubb: In Johnny Was, focusing on the core is about getting back to the brand's roots through the type of products that made Johnny Was famous and a favorite with hundreds of thousands of customers. As we've stretched the boundaries of what the brand can be in the last several years, we probably took a little bit of focus off the embroidered and embellished products that consumers came to love. During 2025, we will focus on delighting our engaged customers with an enhanced assortment of what we call our collection product, merchandise that better reflects Johnny Was origin. We believe this focus on what makes Johnny Woz unique and differentiated in the marketplace will also help us attract new loyalists to the brand.
Tom Chubb: Some customers as we stretch the boundaries of what the brand can be in the last several years, we probably took a little bit of focus off the embroidered and embellished products that consumers came to love. During 2025, we will focus on delighting our engaged customers.
Tom Chubb: With an enhanced assortment of what we call our collection product merchandise. That's better reflects Johnny was origins. We believe this focus on what makes Johnny was unique and differentiated in the marketplace will also help us attract new loyalists to the <unk>.
Tom Chubb: Brand.
Thomas Chubb: Scott will provide more detail on our guidance in a minute, but it is fair to say that the ongoing uncertainty in the marketplace has made us a bit more cautious in our view for the full year. That said, we still expect cash flow to remain strong, with cash flow from operations projected to be approximately $170 million for the year. And we intend to continue to invest that cash flow in the areas that we will believe help drive long-term shareholder value. At the top of our investment priorities is continuing to grow and strengthen our omni-channel platform.
Speaker Change: Scott will provide more detail on our guidance in a minute, but it is fair to say that the ongoing uncertainty in the marketplace has made us a bit more cautious in our view for the full year that said, we still expect cash flow to remain strong with cash flow from operations protect it.
Speaker Change: To be approximately $170 million for the year and we intend to continue to invest that cash flow in the areas that we will believe help drive long term shareholder value.
Speaker Change: At the top of our investment priorities is continuing to grow and strengthen our omni channel platform. In recent months, we have completed significant upgrades to our Tommy Bahama Lilly pellets or southern tide, and the Buford Barnett Company E Commerce website.
Thomas Chubb: In recent months, we have completed significant upgrades to our Tommy Bahama, Lily Pelletzer, Southern Tide, and the Buford Bonnet Company e-commerce website. In addition, late this year we expect to complete the new distribution center that will allow us to increase our inventory velocity and sell-throughs as it services our very large omni-channel business in the eastern and southern parts of the country. During the year, we also plan to open approximately 20 new stores, including four new Marlin bars. And we remain focused, as always, on returning capital to shareholders. And we have already purchased $50 million worth of stock during the first part of this fiscal year at prices that we believe, over the long term, will prove to be very attractive.
Speaker Change: In addition.
Speaker Change: And late this year, we expect.
Speaker Change: Expect to complete the new distribution center that will allow us to increase our inventory velocity and sell throughs as it services are very large omnichannel business in the eastern and southern parts of the country.
Speaker Change: During the year. We also plan to open approximately 20, new stores, including four new Marlin bars, and we remain focused as always on returning capital to shareholders and we have already purchased $50 million worth of stock during the first part of this fiscal year.
Speaker Change: At prices that we believe over the long term will prove to be very attractive.
Thomas Chubb: In addition, on Monday, our Board of Directors approved a 3% increase in our quarterly dividend from $0.67 to $0.69. As a reminder, we have paid a dividend every quarter since we went public in 1960. As we navigate the uncertainty, our confidence is buoyed by the fact that as a company, as a team, we know who we are and we know what we are doing.
Speaker Change: In addition on Monday, our board of Directors approved a 3% increase in our quarterly dividend from 67 to.
Speaker Change: 69 cents as a reminder, we have paid a dividend every quarter since we went public in 1960.
Speaker Change: As we navigate the uncertainty about our confidence is buoyed by the fact that as a company as a team we know who we are and we know what we are doing now.
Scott Grassmeyer: I'll now turn the call over to Scott for more detail on the fourth quarter, the full year, and our outlook for fiscal 2025.
Speaker Change: Now I'll turn the call over to Scott for more detail on the fourth quarter, the full year and our outlook for fiscal 2025, Scott. Thank you Tom as.
Scott Grassmeyer: Scott? Thank you, Tom. As Tom mentioned, we finished the fourth quarter in full fiscal year 2024 with top and bottom line results at the top end of our guidance range. Our operating groups had strong holiday seasons and performed well during the fourth quarter despite pullback in consumer spending in January. Consolidated net sales in the 52-week fiscal 2024 decreased 3% to $1.52 billion. As a reminder, 2023 net sales included an approximate $16 million from the 53rd week, resulting in $10 million of additional gross profit. Sales in our full-price brick-and-mortar locations were down 2%, driven by a mid-single-digit negative comp.
Scott Glassmeyer: As Tom mentioned, we finished the fourth quarter and full fiscal year 2024, with top and bottom line results at the top end of our guidance range.
Scott Glassmeyer: Our operating groups had strong holiday seasons and performed well during the fourth quarter. Despite pullback in consumer spending in January.
Scott Glassmeyer: Consolidated net sales in the 52 week fiscal 2024 decreased 3% to 152 billion. As a reminder, 2023 net sales included an approximate $16 million from the 50, <unk> week, resulting in $10 million of additional gross profit.
Scott Glassmeyer: Sales in our full price brick and mortar locations were down 2% driven by a mid single digit negative comp.
Scott Grassmeyer: partially offset by the addition of new store locations. E-commerce sales decreased 4%. Our food and beverage and outlet locations performed better with a 1% and 3% sales increase, respectively, driven by new locations, partially offset by low single-digit negative comps. Our wholesale channel, which had a particularly challenging year, decreased $31 million, or 10%, as the specialty store business across our brands continues to struggle, partially offset by increased sales to major department stores. Adjusted risk margin contracted 80 basis points to 63.2%, driven primarily by a higher proportion of net sales occurring during promotional and clearance events in Tommy Mahama, Lily Poulter, and Johnny Woz.
Scott Glassmeyer: Partially offset by the addition of new store locations E.
Scott Glassmeyer: E Commerce sales decreased 4%, our food and beverage and outlet locations performed better with a 1% and 3% sales increase respectively, driven by new locations, partially offset by a low single digit negative comps.
Speaker Change: <unk> sale channel, which had a particularly challenging year decreased $31 million or 10% as a specialty store business across our brands continues to struggle, partially offset by increased sales to major department stores.
Speaker Change: Adjusted gross margin contracted 80 basis points to 63, 2% driven primarily by a higher proportion of net sales occurring during promotional and clearance events in Tommy Bahama Lilly Pulitzer and Johnny was.
Scott Grassmeyer: Across our three major brands and throughout fiscal 2024, consumer response was strongest to our new and innovative fashion products and during our promotional and end-of-season clearance events. We believe the higher proportion of spending around key promotional periods represents a return to pre-COVID spending habits. The decrease in gross margin resulting from an increase in promotional and clearance sales was partially offset by change in sales mix, with a greater proportion of our sales coming through our direct consumer channels. Our emerging brands group was able to significantly increase gross margin through improved inventory positions and fewer promotional sales.
Across our three major brands and throughout fiscal 2024 consumer response was strongest for our new and innovative fashion products and during our promotional and end of season clearance events. We believe the higher proportion of spending around key promotional periods represents a return to pre COVID-19 spending habits the decrease in <unk>.
Speaker Change: Margin.
Speaker Change: Resulting from an increase in promotional and clearance sales was partially offset by change in sales mix with a greater proportion of ourselves coming through our direct to consumer channels.
Speaker Change: Our emerging brands group was able to significantly increase gross margin through improved inventory positions and fewer promotional sales.
Scott Grassmeyer: Adjusted SG&A expenses increased 4% to $841 million, compared to $807 million in FY20-23, which also included approximately $11 million of incremental SG&A from the 53rd week. During fiscal 2024, we incurred higher expenses related to the annualization of incremental SG&A related to the 23 net new stores added during fiscal 2023. Recent and ongoing investments in our business, primarily from the addition of 30 net new brick-and-mortar locations opened during fiscal 2024, including three new Tommy Bahama Marlin Bar locations. Calls related to some of the approximately five new brick-and-mortar locations that we expect to open early in the year, and the Tommy Bahama, King of Prussia, and Charlotte, North Carolina Mar-a-Lambar locations that opened last week.
Adjusted SG&A expenses increased 4% to $841 million compared to $807 million in fiscal 2023.
Speaker Change: Which also included approximately $11 million of incremental SG&A from the 50 <unk> week during fiscal 2024, we incurred higher expenses related to the.
Speaker Change: The annulus Asian of incremental SG&A related to the 23 net new stores added during fiscal 2023.
Speaker Change: Recent and ongoing investments in our business primarily from the addition of 30 net new brick and mortar locations opened during fiscal 2024, including three new Tommy Bahama Marlin bar locations.
Speaker Change: Cost related to some of the approximately five new brick and mortar locations that we expect to open early in the year and the Tommy Bahama King of Prussia in Charlotte North Carolina, Marlin bar locations that opened last week.
Scott Grassmeyer: And the addition of the Jack Rogers brand acquired in the fourth quarter of fiscal 2023. The result of this yielded $136 million of adjusted operating income, or a 9% operating margin, compared to adjusted operating income of $216 million, or a 13.8% of net sales in the prior year. The decrease in adjusted operating income reflects the impact of our SG&A investments in a difficult consumer environment that resulted in decreased sales and lower gross margins. Moving beyond operating income, we benefited from $4 million of lower interest expense resulting from lower average debt levels and a lower adjusted effective income tax rate.
Speaker Change: And the addition of Jack Rogers, Jack Rogers brand acquired in the fourth quarter of fiscal 2023.
Speaker Change: The result of this yielded 136 million of adjusted operating income, 9% operating margin compared to adjusted operating income of $216 million or a 13, 8% of net sales in the prior year. The decrease in adjusted operating income reflects the impact of our SG&A.
Speaker Change: Investments in a difficult consumer environment that resulted in decreased sales and lower gross margins.
Speaker Change: Moving beyond operating income, we benefited from $4 million of lower interest expense, resulting from lower average debt levels.
Speaker Change: Lower adjusted effective income tax rate, our tax rate was impacted by certain discrete items, including interest income associated with a refund received related to our fiscal 2020 net operating loss with all this we ended with $6 68 of adjusted EPS, which was at the top end of our guidance.
Scott Grassmeyer: Our tax rate was impacted by certain discrete items, including interest income associated with a refund received related to our fiscal 2020 net operating loss. With all this, we ended with $6.68 of adjusted EPS, which was at the top end of our guide.
Speaker Change: Yes.
Scott Grassmeyer: I'll now move on to the balance sheet, beginning with M&20. At the end of fiscal 2024, inventory was up 5% on both a LIFO and FIFO basis. The increase was primarily driven by the early receipts of shipments from Asia, ahead of the effective date of some of the new tariffs. We ended the year with outstanding long-term debt of $31 million, up slightly compared to the prior year. As our $194 million of cash flow from operations in fiscal 2024 were outpaced by our elevated level of capital expenditures of $134 million, primarily related to the Lyons-Georgia Distribution Center project and the addition of new brick-and-mortar locations.
Speaker Change: I'll now move on to the balance sheet beginning with inventory.
Speaker Change: At the end of fiscal 2024 inventory was up 5% on both a LIFO and FIFO basis. The increase was primarily driven by the early receipts of shipments from Asia ahead of the effective date of some of the new tariffs. We ended the year with outstanding long term debt of $31 million up slightly compared to the prior year as our 100 <unk>.
$104 million of cash flow from operations in fiscal 2024 were outpaced by our elevated level of capital expenditures of $134 million, primarily related to Lyons, Georgia distribution Center project and the addition of new brick and mortar locations 40.
Scott Grassmeyer: 43 million of dividends, acquisitions, and changes in working capital needs.
Speaker Change: <unk> $43 million of dividends.
Speaker Change: Acquisitions and changes in working capital needs.
Scott Grassmeyer: I'll now spend some time on our outlook for 2025. For the full year, we expect net sales to be between $1.49 billion and $1.53 billion. We're down 2% to up 1% compared to sales of $1.52 billion in 2024.
Speaker Change: I'll now spend some time on our outlook for 2025 for the full year, we expect net sales to be between $1 49 billion and $1 $5 3 billion or down 2% to up 1% compared to sales of $152 billion in 2024.
Scott Grassmeyer: Sales plan in 2025 includes... a total comp decline of between two and four percent. Growth in our Lilly Pulitzer and emerging brand segments, partially offset by decreases in our Tanya Bahama and Johnny West segments. By distribution channel, the sales plan consists of relatively flat sales in both the brick-and-mortar and wholesale channels, and a mid-single-digit increase in food and beverage. We also expect e-commerce sales to decrease in the low-single-digit range.
Speaker Change: The sales plan in 2025 includes.
Speaker Change: A total comp decline of between 2% and 4%.
Speaker Change: Growth in our Lilly Pulitzer in emerging brands segments, partially offset by decreases in our time Bahama Johnny West segments.
Speaker Change: Distribution channel the sales plan consist of relatively flat sales in both the brick and mortar and wholesale channels and a mid single digit increase in food and beverage. We also expect e-commerce sales to decrease in the low single digit range.
Scott Grassmeyer: We anticipate gross margin will decrease in 2025 between 50 and 100 basis points, primarily driven by the impact of tariffs and the expectation of lower proportion of full price direct to consumer sales. Similar to what we experienced in fiscal 2024, we expect the trend of our consumers responding strongly to our promotional events and all price offerings to continue in fiscal 2025. Related to tariffs, our gross margin forecast includes an unmitigated tariff impact of approximately $9 million to $10 million, or about 45 to 50 cents per share, on goods made in China based on the recently enacted incremental tariffs currently in effect.
Speaker Change: We anticipate gross margin will decrease in 2025 between 50, and 100 basis points, primarily driven by the impact of tariffs and the expectation of lower proportion of full price direct to consumer sales similar to what we experienced in fiscal 2024, we expect the trend of our consumers.
Speaker Change: Responding strongly to our promotional events in off price offerings to continue in fiscal 2025.
Speaker Change: Related to tariffs our gross margin forecast includes an unmitigated tariff impact or approximately $9 million to $10 million or about 45% to <unk> 50 per share on goods made in China based on the recently enacted incremental tariffs currently in fact.
Scott Grassmeyer: As the entire tariff landscape becomes clearer, we will continue to put further mitigation steps in place. Our mitigation steps have and will continue to include receipt of inventory ahead of the effective date of new tariffs, sourcing shifts to countries with lower duty and tariff rates, sharing of tariffs with our vendors, merchandising shifts to more favorable duty products, and select price increases. Our strong brand management teams have a track record of successfully mitigating past tariff increases, and are proactively implementing mitigation strategies related to the known tariff shifts.
Speaker Change: The entire tariff landscape becomes clearer we will continue to put further mitigation steps in place our mitigation steps have and will continue to include receipt of inventory ahead of the effective date of new tariffs sourcing shift to countries with lower duty and tariff rates.
Speaker Change: <unk> of tariffs with our vendors merchandising shifts to more favorable duty products and select price increases.
Speaker Change: Our strong brand management teams have a track record of successfully successfully mitigating past tariff increases and are proactively implementing migrate mitigation strategies related to the known tier shifts we expect to be able to materially mitigate the impact of the known and implemented tariffs by the <unk>.
Scott Grassmeyer: We expect to be able to materially mitigate the impact of the known and implemented tariffs by the spring of 2026 through these mitigation actions.
Speaker Change: Spring of 2026 through these mitigation actions.
Scott Grassmeyer: Moving beyond tariffs and gross margin, we expect SG&A to grow in the low to mid-single-digit range, primarily due to the annualization of incremental SG&A from the 30 net new stores added during fiscal 2021. Investments in additional brick-and-mortar locations openings in 2025, including four new Marlin bars. Our net new brick-and-mortar count is expected to increase by approximately 20 locations. and incremental costs related to the opening of our new distribution center in Lyons, Georgia in the fourth quarter of 2025.
Speaker Change: Moving beyond tariffs and gross margin, we expect SG&A to grow in the low to mid single digit range, primarily due to the annualized <unk> of incremental SG&A from the 30 net new stores added during fiscal 2024.
Investments in additional brick and mortar locations openings in 2025, including four new Marlin bars are net.
Speaker Change: New brick and mortar account is expected to increase by approximately 20 locations.
Speaker Change: And the incremental costs related to the opening of our new distribution center in Lyons, Georgia in the fourth quarter of 2025.
Scott Grassmeyer: While we expect our store count to increase in fiscal 2025, primarily due to signed lease agreements in our store pipeline, we anticipate that our store opening pace will slow during fiscal 2025 and into 2026 as we sign fewer new agreements and open fewer Johnny Was and Southern Tide locations. At the same time, Tommy Bahama and Lily Pulitzer will continue to be highly selective with any new locations. Also, within operating income, we expect royalties and other income to be relatively flat in fiscal 2025.
Speaker Change: While we expect our store count to increase in fiscal 2025, primarily due to sign lease agreements and our store pipeline, we anticipate that our store opening pace will slow during fiscal 'twenty five and ended 2026, as we signed fewer new agreements and opening fewer Johnny was in southern tide locations at this.
Speaker Change: Same Tom Tommy Bahama, and Lilly Pulitzer will continue to be highest highly selective with any new new locations.
Speaker Change: Also within operating income, we expect royalties and other income to be relatively flat in fiscal 2025.
Scott Grassmeyer: Additionally, our fiscal 2025 guidance includes the unfavorable impact of non-operating items, including anticipate higher interest expense at $7 million for the year compared to $2 million in 2024, or an approximate 20% to 25% EPS impact. The increased debt levels in fiscal 2025 are due to our continued capital expenditures on the Lyons-Georgia Distribution Center and return of capital to shareholders exceeding cash flow from operations.
Speaker Change: Additionally.
Speaker Change: Our fiscal 2025 guidance includes the unfavorable impact of nonoperating items, including anticipate higher interest expense at $7 million for the year compared to $2 million in 2024, or an approximate 20% to 25 EPS impact the.
Speaker Change: The increased debt levels in fiscal 2025 due to our continued capital expenditures on the lines, Georgia distribution center and return of capital to shareholders exceeding cash flow from operations. We also expect a higher adjusted effective tax rate of approximately 24, 5% compared to 29% in 2020.
Scott Grassmeyer: We also expect a higher adjusted effective tax rate, approximately 24.5% compared to 20.9% in 2024, which benefited from certain unfavorable items primarily related to interest income from tax receivables that are not expected to reoccur in 2025. The higher tax rate will result in approximately 20 to 25 cents per share impact.
Speaker Change: For which benefited from certain unfavorable items, primarily related to interest income from tax receivables that are not expected to reoccur in 2025.
Speaker Change: The higher tax rate will result in approximately 20% to 25 cents per share impact.
Scott Grassmeyer: Considering all these items, including the 85 cents to $1 impact from tariffs, higher interest expense, and a higher tax rate, we expect 2025 adjusted EPS to be between $4.60 and $5 versus adjusted EPS of $6.68. in the first quarter of 2025. We spent sales of $375 million to $395 million, compared to sales of $398 million in the first quarter of 2020. The sales plan in the first quarter includes decreases in our direct consumer channels, partially offset by an increase in our wholesale channel. We also expect decreased gross margin resulting from lower proportion of full-price sales and the impact of tariffs.
Speaker Change: Considering all of these items, including the.
Speaker Change: <unk> 85 cents to one dollar impact.
Speaker Change: The impact from tariffs higher interest expense and a higher tax rate, we expect 2025 of adjusted EPS to be between <unk>.
Speaker Change: $4 60, and $5 versus adjusted EPS of $6 68 last year.
Speaker Change: In the first quarter of 2025.
Speaker Change: We expect sales of 375 million to $395 million compared to sales of $398 million in the first quarter of 2024.
Speaker Change: The sales plan in the first quarter includes decreases in our direct to consumer channels, partially offset by an increase in our wholesale channel.
Speaker Change: Also expect decreased gross margin, resulting from lower proportion of full price sales and the impact of tariffs.
Scott Grassmeyer: SG&AD leveraging largely from the impact of new stores, as previously mentioned, higher interest expense of approximately a million dollars, an effective tax rate of approximately 100 basis points lower than the first quarter, 2024 rate of 25.6.
Speaker Change: SG&A deleveraging largely from the impact of new stores as previously mentioned.
Speaker Change: Higher interest expense of approximately $1 million and effective tax rate of approximately 100 basis points lower than the first quarter 2024 rate of $25 six.
Scott Grassmeyer: We expect this to result in first quarter adjusted EPS between $1.70 and $1.90, compared to $2.66 in the first quarter of 2024.
Speaker Change: We expect this to result in first quarter adjusted EPS between $1 70, and $1 90.
Compared to $2 66 and <unk>.
Speaker Change: First quarter of 2024.
Scott Grassmeyer: As spending on the investments we intend to make in our business, I'd like to briefly discuss our CapEx in fiscal 2024 and our outlook for 2025. In fiscal 2024, total capital expenditures of $134 million included approximately $70 million spent on the multi-year Lyons-Georgia Distribution Center project that we anticipate will require a total investment of $130 million. Similar to fiscal 2024, the most significant portion of our anticipated $125 million of capital expenditures in fiscal 2025 will relate to the completion of the Lyons, Georgia distribution facility expected in the fourth quarter of fiscal 2025.
Speaker Change: Our spending on the investments we intend to make in our business I'd like to briefly discuss our capex in fiscal 2024, and our outlook for 2025.
Speaker Change: In fiscal 2020 for total capital expenditures of 134 million included approximately $7 million spend on the multiyear Lyons, Georgia distribution center projects that we anticipate will require a total investment of $130 million similar to fiscal 2020 for the most significant portion of.
Speaker Change: Our anticipated $125 million in capital expenditures in fiscal 2020 will relate to the completion lines, Georgia distribution facility expected in the fourth quarter of fiscal 'twenty five.
Scott Grassmeyer: The remaining capital expenditures in fiscal 2025. will relate to the execution of our pipeline of new stores and Marlin bars, including four expected to open in 2025 and increases in store count, primarily across Tommy Bahama, Willie Pulitzer, Southern Tide, TBBC, and store remodels and other maintenance.
Speaker Change: The remaining capital expenditures in fiscal 2025.
Speaker Change: Will relate to the execution of our pipeline of new stores and Marlin bars, including four expected to open in 2020 and increases in store count primarily across Tommy Bahama Lilly Pulitzer Southern tide TBC.
Speaker Change: And store Remodels and other maintenance capital.
Scott Grassmeyer: We expect the elevated level capital expenditures in Fiscal 24 and Fiscal 25 to meaningfully moderate for Fiscal 2026 and beyond after the completion of the Lyons-Georgia Project. Wrapping up our guidance, cash flow from operations are expected to be strong, and along with borrowings on our revolver will provide us with ample room to fund the previously mentioned investments, pay our quarterly dividend, and fund share repurchases.
Speaker Change: We expect the elevated level of capital expenditures in fiscal 'twenty four in fiscal 'twenty five to meaningfully moderate for fiscal 2026 and beyond after the completion of the Lyons, Georgia project.
Speaker Change: Wrapping up our guidance cash flow from operations are expected to be strong along with borrowings under our revolver will provide us with ample room to fund. The previously mentioned investments pay our quarterly dividend and fund share repurchases in the first quarter of fiscal 2025, we initiated and completed a $50 million <unk>.
Scott Grassmeyer: In the first quarter of fiscal 2025, we initiated and completed a $50 million 10B51 program where we repurchased 842,000 shares, or approximately 5% of outstanding shares at what we believe will prove to be an attractive average price of $59.38. Following our recent buying activity, the board authorized a new $100 million share repurchase program on March 24th that replaces our previous authorization.
Speaker Change: One program, where we repurchased 842000 shares or approximately 5% of outstanding shares at what we believe will prove to be an attractive.
Speaker Change: Average price of $59 38.
Speaker Change: Following our recent buying activity the board authorized a new $100 million share repurchase program on March 24 that replaces our previous.
Speaker Change: Optimization.
Operator: Thank you for your time today, and we will now turn the call over for questions. Stacy. Thank you.
Stacy: Thank you for your time today, and we will now turn the call over for questions Stacy.
Speaker Change: Thank you we will now be conducting a question and answer session.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Stacy: Like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Mr. Cohen will indicate your line is in the question queue. You May press Clark here, if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, when may be necessary to pick up your handset before pressing the starkey.
Ashley Owens: Your first question comes from Ashley Owens with KeyBank Capital Markets. Please go ahead. Good afternoon. So to start, I wanted to touch on the first quarter guide. I know you spoke to some of the comps and what you've seen this for thus far. Maybe if you could help us unpack some of the different headwinds you mentioned in the magnitude of each. Did it vary by brand at all?
Speaker Change: Your first question comes from Ashley <unk> with Keybanc capital markets. Please go ahead.
Speaker Change: Good afternoon, so to start I wanted to touch on the first quarter Guide I know you spoke to some of the comps and what you've seen this far thus far maybe if you could help us unpack some of the headwinds you mentioned in the magnitude of each does it vary by brand at all and then Additionally, as we think about the balance of the year.
Thomas Chubb: And then additionally, as we think about the balance of the year, some of the puts and takes and your assumptions for both the low and high end of the revenue guidance ranges. Thank you. Well, on the relative strength of the brands, what I would tell you is that Lilly is the strongest performer right now and is actually doing pretty well right now. The rest of the brands, the bigger brands are off a bit. I will point out that, you know, we do have the Easter shift this year, so not entirely surprising to see March comping down a bit, given that Easter shifted really completely out of March and into April.
Speaker Change: Some of the puts and takes in your assumptions for both the low and high end of that revenue guidance ranges.
Speaker Change: Well on the relative strength of the brands what I would tell you is that Lilly is.
Speaker Change: The strongest performer right now and is actually doing.
Speaker Change: Pretty well right now the rest of the brands the bigger brands are off a bit I will point out that we did.
Speaker Change: Do we have the Easter shift this year, so not entirely surprising to see.
Speaker Change: March comping down a bit given that Easter shifted really completely out of March.
Scott Grassmeyer: And then in terms of the guidance for the balance of the year, puts and takes on the top and bottom end of the revenue range. Yeah, yeah, and we do have the new stores which are helping offset the negative comp assumption. But again, we expect Lilly to comp positive. Maybe some of our smaller brands to comp positive. And Tommy and Johnny Wise, our plans have them comping a little bit. Okay, great.
Speaker Change: And then into April and then in terms of the guidance for the balance of the year puts and takes on the top and bottom end of the revenue range.
Speaker Change: Yes, yes, we do have.
Speaker Change: New stores, which are helping offset yet.
Speaker Change: The negative comp assumption, but again.
Speaker Change: Expect Lilly to.
Speaker Change: Comp positive maybe some of our smaller brands to comp positive and Tommy and Johnny was our plants, having comp a little bit negative.
Speaker Change: Okay, Great and then quick.
Ashley Owens: And then quickly as well, I'm hearing from, you know, some of the other brands we've spoken to, we're hearing from wholesale partners that they're tightening some of the order books for the remainder of the year and becoming cautious again.
Quickly as well.
Speaker Change: Some of the other Brian Mckeon.
Speaker Change: Ms Yang from wholesale partners that Theyre tightening some of the order books for the remainder of the year and becoming cautious again would be curious if this is something ive observed and if theres any variances by brand and then Additionally, just maybe a little bit on the details for the Johnny was plan.
Ashley Owens: I would be curious if this is something you've observed and if there's any variances by brand.
Thomas Chubb: Then additionally, just maybe a little bit on the details for the Johnny Woods plan. You know, it was down nine in the quarter, so where you're observing some of the soft spots, if it's regional or broad based, anything outside of the assortment that you want to or see opportunity to change this year. And anything you can say on wholesale door increases as we move through the year. I believe you mentioned before that the brand was re-entering some accounts in 2025. Yeah, I think in terms of the overall wholesale market, there is, you know, I think concern out there that some of the big retailers will pull back their forward orders a bit on that.
Speaker Change: It was $9 nine in the quarter. So we are serving some of the soft spots of its regional broad base anything outside of the assortment that you want to see opportunity to change. This year and then anything you can say on wholesale door increases as we move toward the year I believe you mentioned before that the brand was re entering some accounts in 2025.
Speaker Change: Yes.
Speaker Change: Yes, I think in terms of the overall wholesale market there is.
Speaker Change: The concern out there that some of the big retailers have pulled back or forward orders a bit.
Speaker Change: <unk>.
Thomas Chubb: And, you know, we would look at that as being a potential headwind for sure. And we've thought about that as we build our forecast. On the other hand, the performance of our brands on the retail floor of our key wholesale accounts has been quite good, quite strong. And usually that helps protect you against some of the downdrafts. So a bit of sort of contrary indications, if you will, the headwind of what they may be feeling in the overall market, but the sort of the tailwind that we might be getting from our very strong performance. In fact, in a lot of cases, we're performing better in those stores than we are in our own stores.
Speaker Change: And we would look at that as being a potential headwind for sure and we've thought about that as we build our forecast on the other hand, the performance of our brands on the retail floor of our key wholesale accounts.
Speaker Change: Been quite good quite strong.
Speaker Change: And usually that helps protect you against some of the downdraft.
Speaker Change: A bit of a sort of.
Speaker Change: Country indications, if you will that headwind.
Speaker Change: What they may be feeling.
Speaker Change: And the overall market.
Speaker Change: But the sort of the tailwind that we might be getting from our our very strong performance in fact in a lot of cases.
Speaker Change: We're performing better in those stores than we are in our own stores in terms of Johnny was we do hope to be able to read.
Thomas Chubb: In terms of Johnny Wise, we do hope to be able to rebuild the wholesale business there, which has slipped a bit in recent years, especially in the majors, and I think are optimistic about that. And I think that was, did she have another question? I think that.
Speaker Change: The wholesale business, there, which has slipped a bit.
Speaker Change: Years, especially in the majors I think are are optimistic about that although again you have the kind of the potential headwind.
Speaker Change: The market.
Speaker Change: More broadly pulling back there.
Speaker Change: And I think that was did you have another question.
Speaker Change: I think that come from him.
Thomas Chubb: The only other thing would have been with Johnny was just anything outside of the assortment for opportunity to change this year. Yeah, well, I think, you know, improving the performance of the retail stores is a, you know, a big focus. I mean, overall, right now, the market is very challenging, but we're doing everything we can from the way that we're visually merchandising the stores to the way that we're staffing them, to the way that we're assorting them, including overall, you know, shifting the assortment a little bit more towards our classic collection type product, but then at a more micro level, trying to sort the individual stores better.
Speaker Change: The only other thing.
Speaker Change: <unk> would've been with Johnny Wise, just anything outside of the assortment for opportunity to change this year.
Speaker Change: Well I think.
Speaker Change: Proving the performance of the retail stores.
A big focus I mean overall right now the market is very challenging, but we're doing everything we can from the way that we're visually.
Speaker Change: Merchandising the stores to the way that we're staffing to.
Speaker Change: To the way that we're sorting them.
Speaker Change: Including overall.
Speaker Change: Shifting the assortment a little bit more towards our classic collection type product.
Speaker Change: And then at a more micro level trying to assort the individual stores better. So we've got a lot of plans there to try to improve the retail performance.
Thomas Chubb: So, we've got a lot of plans there to try to improve the retail performance. We also, obviously, hope to be able to improve our wholesale book of business. The wholesale has a great contribution margin, so every incremental dollar of wholesale does a lot for us on the bottom line. Those are kind of the key things at Johnny Was.
Speaker Change: We also.
Speaker Change: What you hope to.
Speaker Change: Be able to improve our wholesale book of business on the.
Speaker Change: Wholesale has had great contribution margin. So every incremental dollar of wholesale does a lot for us on the bottom line.
Speaker Change: Those are kind of the key things.
Speaker Change: He was and then the last one I'd call out.
Thomas Chubb: And then the last one I'd call out, which I think we talked about maybe in previous quarters, but is really trying to improve the efficiency of the marketing spend. And that's not just for Johnny Was, but I would say especially for Johnny Was, trying to improve the efficiency of the marketing spend.
Speaker Change: I think we talked about maybe in previous quarters, but it is really trying to improve the efficiency of our marketing.
Spend and Thats not just for Johnny was but I would say, especially.
Speaker Change: For John He was trying to improve the efficiency of the marketing spend.
Ashley Owens: Great, thanks all for passing along. Thank you. Thank you guys.
Speaker Change: Okay, great. Thank you I'll pass it along thank you.
Speaker Change: Ashley.
Ethan Sagi: Next question, Janine Stichter with BTIG, please proceed.
Speaker Change: The next question James Fitzgerald with BPI. Please proceed.
Thomas Chubb: Hey, you've got Ethan Sagi on for Janine. First question. Just with, you know, all the macro uncertainty going on so far this year, are customers still responding positively to Nunes in the assortment? Or have they pulled back across the board? And would you say your assortment is more balanced with Nunes now? Or is there still some room to improve? Yeah, no, we have we've got significantly more newness in, especially our biggest brands, Tommy and Lily have taken big steps up in the amount of newness that this spring versus last spring. And it is the newness that's driving the business, you know, when overall, you're a little bit soft, sometimes it's hard to see strength, but, but we do have strength in newness, we're glad we have the level of newness that we have, because the customer is responding to it really nicely.
Speaker Change: Hey, you've got eastern sagging on for Janine first question.
Speaker Change: Just with.
Speaker Change: All of the macro uncertainty going on so far this year, our customer is still responding positively to newness in the assortment or have they pulled back across the board and would you say your assortment is more balanced with newness now or is there still some room to improve.
Speaker Change: Yes, Matt.
Speaker Change: Have we've got significantly more newness in.
Speaker Change: First of all your biggest brands, Tommy and Lilly have taken big steps up in the amount of newness.
Speaker Change: This spring versus last spring and it is the newness that's driving the business.
Speaker Change: When overall youre, a little bit soft, sometimes it's hard to see strength, but.
Speaker Change: But we do have strengths and newness, we are glad we have the level of newness.
Speaker Change: That we have because of the customer is response responding to it.
Thomas Chubb: And Tommy Bahama, we've got the new Barbados Pro short, which, which Ethan, if you, you know, like to be outside during the summer months, it's just a great product. It's, it builds upon a lot of past successes that we've had in shorts and really takes it to a new level. And then Lily Pulitzer, some of the stars have been, I believe it's called the Tessia Dress, which has been a star, our Disney capsule collection that we just released, I believe last week. And it's done really well. And that's a new thing for us. We've had Disney product before in our Disney stores, Disney Springs store, but this is available.
Speaker Change: Really nicely in Tommy Bahama, we've got the new Barbados Pro.
Speaker Change: Sure.
Speaker Change: Even if you.
Speaker Change: Like to be outside during the summer months, it's just great.
Speaker Change: Product, it's builds upon a lot of past successes that we've had in shorts and really takes it to a new level.
Speaker Change: And then literally pellets or some of the stars have been.
Speaker Change: I believe it's called the draw.
Speaker Change: Dress, which has been a star.
Speaker Change: Our Disney capsule collection that we just released I believe last week.
Speaker Change: It's done really well and that's a new thing for US we've had Disney product before in our Disney stores Disney Springs store, but this is available.
Thomas Chubb: Everywhere. And it's done, done really, really well. And then the last example, the ultimate in newness really is Lily Pulitzer menswear, which we last did in a meaningful kind of way about 15 years ago. And that's been, you know, it's, it's small, it's not going to be a huge part of the business, but it's certainly performed very well. So yes, newness is good, and we got some newness, and we're glad we have it.
Speaker Change: Every one here and it's done done really really well.
Speaker Change: And then the last example, the ultimate and eagerness really is Lilly Pulitzer men's wear.
Speaker Change: Which we last did in a meaningful way about 15 years ago.
Speaker Change: And thats been.
Speaker Change: It's small it's not going to be a huge part of that.
Speaker Change: Business, but it certainly performed very well.
Speaker Change: And it was.
Speaker Change: Created a lot of excitement and buzz around the brand.
Speaker Change: So yes newness is good and we've got some newness and we're glad we have it.
Ethan Sagi: That's great to hear.
Speaker Change: That's great to hear and then just one more from me so.
Ethan Sagi: And then just one more from me.
Thomas Chubb: So, you know, besides needing a more bullish consumer, just could you provide us some more detail on internal initiatives you're taking to improve conversion? It's, you know, all kinds of things. Better product knowledge in the stores. Trying to focus the customers, or excuse me, the associates. Help them with the knowledge they need to better sell the products. Tweaking the assortments, as we talked about. It's all kind of blocking and tackling kind of stuff that we're trying to do. Making improvements to the websites that make it easier to get from wherever you start to check out, and then easier to check out.
Speaker Change: I'd needing more bullish consumer just could you provide us some more detail on internal initiatives you are taking to improve conversion.
Speaker Change: Yes.
Speaker Change: All kinds of things better product knowledge in the stores.
Speaker Change: <unk> to focus the customers or excuse me the associates.
Speaker Change: <unk> them with the knowledge they need to better sell the products tweaking the assortments as we talked about it's all kind of blocking and tackling kind of.
Speaker Change: Stuff.
Speaker Change: That we're trying to do making improvements to the websites that make it easier to get from wherever you start to check out and then easier to check out. So I mentioned in the prepared comments that we've done.
Thomas Chubb: So I mentioned in the prepared comments that we've done major upgrades to the Tommy, Bahama, Lilly, Southern Tide, and Buford Bonnet websites. And all of those have a lot of features that are in there that are designed to help move people through to check out and then get them checked out. Got it. That's really helpful.
Speaker Change: Or upgrades to the Tommy Bahama Lilly.
Speaker Change: Southern tide in Buford, Donna websites and all of those have a lot of features that are in there that are designed to help move people through to check out and then get them checked.
Speaker Change: Checked out.
Speaker Change: Yes.
Speaker Change: Got it that's really helpful I'll pass it on and best of luck.
Ethan Sagi: I'll pass it on and best of luck. Okay, thanks, Ethan.
Speaker Change: Thanks Ethan.
Mauricio Serna: Next question, Mauricio Serna with UBS, please go ahead. Great, good afternoon, and thanks for taking my question. First, maybe could you talk about what is like the comp sale on March that you've seen? It sounds like things got a little bit better relative to February. So we just wanted to get a better understanding on that. And maybe, can you help us understand? Oh, sorry. Go ahead. Yeah. Okay, great.
Moderator: Next question Mauricio Serna with UBS. Please go ahead.
Speaker Change: Okay.
Mauricio Serna: Great. Good afternoon, and thanks for taking my question first maybe could you talk about what is like the comp sale.
Mauricio Serna: Have you seen it sounds like you've got a little bit better relative to February.
Mauricio Serna: So just wanted to get a better understanding on that and maybe help us on this.
Mauricio Serna: Oh, sorry go ahead, yes, okay great.
Scott Grassmeyer: I was just gonna say on the sales cadence for the year, I think, you know, like the implied guide is like for the average growth in the next couple of quarters the next three quarters to be like roughly up 1%. Is that mainly a function of the store openings or is there, you know, are you embedding some sort of sales improvement in upcoming quarters? Thank you.
Mauricio Serna: On the sales cadence for the year I think.
Mauricio Serna: The implied guidance.
Mauricio Serna: The average score in the next couple of quarters. The next three quarters to be like roughly up 1% is that mainly a function of the store openings or is there are you embedding some sort of self improvement.
Mauricio Serna: Coming quarters. Thanks.
Thomas Chubb: Okay, I'll let Scott answer the second one, but as to the first one, I would say March feels better than February did. You do have the big sort of non-comp event of Easter shifting out of March and into April. And as you know, it's moved sort of as far as it can move and is about, I think, as late as it can be. And usually that week, 10 days before Easter, are a big selling period. So moving that out of March and into April, you would almost expect March to have some challenges with the comp.
Okay, I'll, let Scott answer the second one but as to the first one I would say March feels better than February did.
Mauricio Serna: You do have the big sort of non comp a ban of Easter shifting out of March and April and as you know.
Mauricio Serna: It sort of as far as it can move.
Mauricio Serna: And is about I think it was late.
Mauricio Serna: Can be.
Mauricio Serna: Usually that we 10 days before Easter.
Mauricio Serna: A big selling period, so moving that out of March and into April you would almost expect March two.
Mauricio Serna: Have some challenges with the comp.
Scott Grassmeyer: So I think we feel better about March than February. It's still negative. But I do think we'll pick up a lot of that in April, and wouldn't be surprised to see April comp positive. Yeah. And the first half we have, you know, the negative comps are a bit bigger. The second half, you know, third quarter, we had a lot of noise last year in the third quarter with the two hurricanes and tropical storm. You know, so we think hopefully third quarter will be a little easier comp, but we still are more flattish there. And kind of that trend into the fourth quarter.
Mauricio Serna: So I think we're we feel better about <unk> than February it's still negative.
Mauricio Serna: But I do think we will pick up a lot of that in April.
Mauricio Serna: You wouldn't.
Mauricio Serna: I wouldn't be surprised to see April comp positive here.
Mauricio Serna: In the first half we have.
Mauricio Serna: Negative comps are a bit bigger or the second half of third quarter. We had a lot of noise last year in the third quarter with the two hurricanes and tropical storm.
Mauricio Serna: So we think hopefully third quarter will be a little easier comp, but we still have more flattish there.
Mauricio Serna: And kind of that trend into the fourth quarter. So we have not.
Scott Grassmeyer: So we have not, we hope we've been very conservative in our comps. You know, obviously time will tell, but we don't have, you know, huge positive comps in the back half. We still have comps closer to flat in the back half and negative in the first half. The new stores will, you know, are helping offset some of that.
Mauricio Serna: We hope we've been very conservative in our comps, obviously time will tell but we don't have.
Mauricio Serna: Huge positive comps in the back half we still have.
Mauricio Serna: It's closer to flat in the back half and negative in the first half.
Mauricio Serna: The new stores will are helping offset some of that we opened two new marlin bars last week.
Scott Grassmeyer: We opened two new Marlin bars last week. King of Prussia, Pennsylvania, and Charlotte, North Carolina, and both are off to very nice starts, so we feel really good about those. And do have some, maybe a little more front-end loaded openings this year. some of the past years. So hopefully we'll get a little more benefit late in the year from new stores that are open during the year than we have in the past. Got it, very helpful.
Speaker Change: King of Prussia.
Speaker Change: <unk> in Charlotte, North Carolina, and both are off to a very nice stores. So we feel really good about those.
Speaker Change: We do have some maybe a little little more front end loaded openings.
Speaker Change: This year then.
Speaker Change: In the past years, so hopefully, we'll get a little more benefit late in the year from new stores that are opened during the year than we have in the past.
Speaker Change: Got it very helpful and then on SG&A I recall like in the last few earnings calls you have talked about trying to get some operating leverage trying to control SG&A.
Scott Grassmeyer: And then on SG&A, I recall, like in the last few earnings calls, you had talked about trying to get some operating leverage, trying to control SG&A, but if you're still going to be growing higher than sales. So, I understand what the drivers of growth, but what are some initiatives that you're doing to kind of like, you know, try to like control the SG&A? We're looking at everything, you know, marketing, efficiency, really marketing spend, and, you know, there have been some people reductions throughout the company. So we're really looking, you know, at everything we can. We're trying to negotiate hard with, you know, vendors on all kinds of contracts, you know, heavy initiative there.
Speaker Change: If you are still going to be growing higher than sales. So yes.
Speaker Change: Drivers of growth, but what are some initiatives that youre doing to kind of like.
Speaker Change: Kind of like controlling SG&A.
Speaker Change: We're looking at everything marketing efficiency really monitor marketing spend and where.
Speaker Change: There have been some people reductions throughout the company.
Speaker Change: So we are really looking.
Speaker Change: At everything we can.
Speaker Change: Trying to negotiate hard with vendors on when all kinds of contracts.
Speaker Change: Heavy initiative there so we're looking at all all things in.
Mauricio Serna: So we're looking at all things, and, you know, a very good part of any SG&A increases really, increases really, you know, these new stores within having negative, and having negative comps and a resisting base, and, you know, so we're not getting, you have to overcome that to get any leverage. So, but it is a real focus. Understood. Thank you so much. Thank you, Mauricio.
Speaker Change: The.
Speaker Change: Very good part of any SG&A increases really increases really these new stores within having negative and having negative comps in our existing base and so we're not getting.
Speaker Change: You have to overcome that to get any leverage so.
Speaker Change: But it is a real focus.
Speaker Change: Yes.
Speaker Change: Understood. Thank you so much.
Speaker Change: Thank you Mauricio.
Tracy Kogan: Next question, Paul Lejuez with Citigroup. Please go ahead. Hey, thanks.
Speaker Change: Next question, Paul Lewis with Citigroup. Please go ahead.
Speaker Change: Hey, Thanks, It's Tracy Kogan filling in for Paul I had a follow up first on an earlier question about what Youre seeing from your wholesale partners. I know you said that they're hearing that theyre expressing constant, but I'm wondering what you're actually seeing in your order book I think you had said your order books look positive.
Tracy Kogan: It's Tracy Kogan filling in for Paul. I had a follow-up first on an earlier question about what you're seeing from your wholesale partners. I know you said others are hearing that they're, you know, expressing caution, but I'm wondering what you're actually seeing in your order books. I think you had said your order books were positive as of your last earnings call, and I'm wondering if you're seeing changes there, or if you haven't really seen it yet, but you maybe anticipate that coming. And then I have another question when you're finished with that one. Thank you.
Speaker Change: The last earnings call and Im wondering if youre seeing.
Speaker Change: Changes there or if you haven't really seen it yet, but maybe anticipate that coming and then I have another question when you're finished with Alan Thank you.
Scott Grassmeyer: Our latest projection has a wholesale business more flat, up a little bit in the spring and down just a little bit, but we're still booking. So I think we put a little caution into our projections of what our future bookings will be for the rest of the year. And as Tom mentioned, we are performing well on the floor, but most retail accounts probably are getting more cautious themselves. We are being more cautious on our inventory buys for the back half of this year, and then we'll probably do the same for going into next year. We'd rather be in a situation instead of having too much inventory, things bounce back, we're chasing a little bit.
Speaker Change: We've now our latest projection has a wholesale business more flat.
Speaker Change: A little bit in the spring and down just a little bit, but we're still booking so I think.
Speaker Change: We've put a little caution into our projections of what our future bookings will be for the rest of the year.
Speaker Change: And as Tom mentioned, we are performing well on the floor, but.
Yes.
Speaker Change: Most retailers most of retail accounts, probably are getting more cautious themselves, we are being more cautious on inventory buys for the.
Speaker Change: Back half of this year and then we'll probably do the same for going into next year, we'd rather be in a situation instead of having too much inventory things bounce back we're chasing a little bit.
Scott Grassmeyer: So we're approaching it with caution, not panic, but just caution.
Speaker Change: So so we're approaching it with caution not panic, but just just caution.
Scott Grassmeyer: And then, I had a question on Paris. I think you said that the The dollar number, the $9 to $10 million, was unmitigated, and I wondered, so is the entire $9 to $10 million in your guidance for this year? You assume no mitigation, and maybe you might be able to mitigate some of that? I know you said you thought you'd mitigate it by 2026, but just kind of wondering if there's some potential there that that comes in better if you can mitigate, or maybe you've already built something in. Thanks. You know, we built some mitigation in, but there were some more actions that, you know, our groups had identified.
Speaker Change: Got you that makes sense and then I.
Speaker Change: I had a question on tariffs I think you said that.
Speaker Change: Dollar number the $9 million to $10 million.
Speaker Change: On mitigated and I wonder is the entire.
Speaker Change: $910 million in your guidance for this year, you assume no mitigation and maybe you might be able to mitigate some of that I know you said you thought you would mitigate it by 2020, thanks, but just kind of wondering if there.
Speaker Change: Some potential there that that comes in better if you can mitigate or maybe you've already built something in thanks.
Speaker Change: We built some mitigation and but there was some more actions that.
Speaker Change: Groups identified they are still negotiating with factories, we're still going through our pricing, where we could change some retail prices for especially the later part of fall and into holiday.
Scott Grassmeyer: They're still negotiating with factories. We're still going through our pricing where, you know, we could change some retail prices for especially the later part of fall and into holiday. You know, so there's still, I would think it maybe gets a little bit better, but a lot of the mitigation will really impact spring of 26 where we think we can be fully mitigated. The challenge is we don't know, you know, what the true playing field is yet because we don't know what's going to happen in early April. You know, different countries might have tariffs, so we might be running to a country that might not have been the right country to run to.
Yes.
Speaker Change: So there is still I would think it maybe gets a little bit better, but a lot of the mitigation will really.
Speaker Change: Really impacts spring of 2006, where we think we can be fully mitigated the challenges we don't know.
Speaker Change: The true playing field as yet because we don't know what's going to happen in early April.
Speaker Change: Different countries might have tariffs, so we might be running to a country that might not have been the right country to run too. So it is the unknown.
Tracy Kogan: So it is the unknown is difficult, but $9 to $10 million, we don't think it could get worse than that for this year, and hopefully it gets a little bit better. Got you. Thanks very much. Good luck, guys. Thanks a lot. Thank you.
Speaker Change: It's difficult, but $9 million to $10 million.
Speaker Change: We don't think it could get worse than that for this year.
Speaker Change: Hopefully it gets a little bit better.
Speaker Change: Got you thanks very much good luck guys.
Speaker Change: Thanks, a lot.
Thomas Chubb: There are no... If there are no further questions, I would like to turn the floor over to Tom for closing remarks. Thank you very much, Stacy. Thanks to all of you for your interest, and we look forward to talking to you again in June. Hope you are well until then. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
Tom Chubb: There are no further questions I would like to turn the floor over to Tom for closing remarks.
Tom Chubb: Thank you very much Stacy. Thanks, all of you for your interest and we look forward to talking to you again in June.
Tom Chubb: You are well until that.
Tom Chubb: This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
Tom Chubb: Yeah.
Tom Chubb: Yeah.