Tommy Bahama Powers Oxford to Q2 Gains

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NEW YORK – Tommy Bahama’s operating income leapfrogged over that of the Menswear Group as Oxford Industries registered increases in sales and earnings during its second quarter.

Ben Sherman and the rest of Oxford’s Menswear Group, however, continued to struggle.

During the three months ended Dec. 1, Tommy Bahama’s operating income skyrocketed 37.8% to $13.9 million from $10.1 million during the second quarter of fiscal 2006. The Menswear Group’s contribution to operating income fell 14.3% to $13.7 million from $16 million a year ago.

Tommy Bahama’s share of corporate sales also grew, to 37% of the total from 32.5% in the prior year quarter. Revenues rose 19.3% to $107.8 million from $90.4 million last year, while those of the Menswear Group were off 2.3% to $183.1 million from $187.3 million.

Overall, net income during the quarter grew 10.4% to $12.2 million, or 68 cents a diluted share, from $11 million, or 62 cents. Year-ago earnings per share include 5 cents from Oxford’s discontinued women’s apparel operations.

Net sales grew 4.7% to $291 million from $277.9 million as gross margin expanded to 38.4% of sales from 37%.

J. Hicks Lanier, chairman and chief executive officer of the Atlanta-based firm, said, “We continue to be very pleased with the outstanding results that have been generated by Tommy Bahama, which have tracked consistently above plan. The Ben Sherman business is continuing its recovery in the U.S. and we remain confident that, with controlled distribution and sell-in, this brand can become a leading global lifestyle brand.

“At the same time, we clearly continue to have challenges to address in our historical menswear business,” the CEO continued. “We are moving aggressively to respond to these challenges and, while our near-term results will be affected by some transitioning and refocusing, we believe we will be able to improve the profitability and competitive position of our historical menswear business.”

However, those adjustments will be costly in the short term, and Oxford reduced its full-year earnings guidance accordingly. Reduced expectations of and rationalization of the Menswear Group are expected to subtract 23 cents a share from fiscal 2007 earnings. Full-year profit is now expected to reach $3 to $3.15 a share with sales expectations reduced $20 million from previous projections to a range of $1.14 billion to $1.16 billion. The bulk of charges associated with the Menswear Group are expected in the third quarter.

For the first half of the year, net income declined 7.2% to $23.1m, or $1.30 a diluted share, from $24.9m, or $1.40. Discontinued women’s operations added 16 cents a share to year-ago earnings and cost 1 cent a share in the most recent period. Sales were up 5.3% to $575.1m from $546.4m.

Additionally, Oxford’s board approved a 20% increase the firm’s quarterly cash dividend to 18 cents a share, payable on 2 March to shareholders of record 15 February.

The company announced on Dec. 20 that Michael Setola had resigned as president for “personal and professional reasons” and would be leaving on Jan. 31. Oxford has offered no comment since on any plans for succession. Those who’d reported to Setola will report to Lanier.

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