Oxford Industries' Q2 2025: Contradictions Emerge on Tariff Mitigation, Pricing Strategies, and Tommy Bahama Promotions

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 10, 2025

Financials Results

• Revenue: $403M, down ~4% YOY (vs $420M); within $395–$415M guidance
• EPS: $1.26 (adjusted), slightly above guidance
• Gross Margin: 61.7%, down 160 bps YOY
• Operating Margin: 7.0%, compared to 13.5% in the prior year

Guidance:

• Full-year net sales expected $1.475B–$1.515B (down ~3% to slightly negative vs $1.52B in FY2024).
• FY2025 adjusted EPS expected $2.80–$3.20 (vs $6.68 in FY2024).
• Q3 sales expected $295M–$310M (vs $308M prior year); Q3 adjusted loss/share $(1.05)–$(0.85).
• Q3 gross margin to contract ~300 bps; SG&A up low–mid single digits; tax rate ~25%; interest expense +$1M.
• FY2025 gross margin to contract ~200 bps, with net tariff impact ~$25M–$35M (~$1.25–$1.75/share).
• Comps flat to modestly positive in 2H; Q3-to-date comps low single-digit positive.
• ~15 net new stores and 3 Marlin Bars in FY2025; CapEx ~ $121M; Lyons, GA DC online late FY2025/early FY2026; CapEx to moderate in 2026; expect to remain in debt through year-end.

Business Commentary:

• Sales and Profitability Impact of Tariffs:
• In Q2 fiscal 2025, Oxford Industries faced a $9 million increase in cost of goods sold due to additional tariffs implemented this fiscal year.
• These tariffs significantly impacted gross margins, which contracted by 160 basis points to 61.7%.

• The company has been mitigating tariff exposure through supply chain shifts and accelerating deliveries to avoid tariff increases.

• Brand Performance and Strategic Adjustments:

• Lilly Pulitzer posted positive direct-to-consumer total comparable sales, driven by exciting product innovations like the Linen Seaspray jacket and the launch of the Vintage Vault, which exceeded expectations.
• Tommy Bahama’s performance was impacted by missed product assortments, particularly in Florida, but improvements have been implemented with better results seen in the West.

• The Boracay Island chino, with a higher price point, showed strong sell-throughs, reflecting brand loyalty and customer acceptance of new, innovative products.

• Emerging Brands and Growth Strategy:

• The Emerging Brands Group, consisting of Southern Tide, Beaufort Bonnet Company, Duck Head, and Jack Rogers, showed solid revenue growth, contributing positively to overall results.

• Despite challenges in Johnny Was, the company remains optimistic about its potential and is implementing a comprehensive plan to improve the brand's merchandising strategy and customer segmentation.

• Capital Expenditures and Long-term Investments:

• Capital expenditures for the fiscal year are expected to be approximately $121 million, with significant investments in the Lyons, Georgia, distribution center and new store openings.
• These investments are part of long-term strategies aimed at improving supply chain efficiency and expanding store presence to drive future growth and profitability.

Sentiment Analysis:

• “Consolidated net sales were $403 million compared to $420 million.” “Adjusted gross margin contracted 160 basis points to 61.7%.” “We feel confident in affirming our previously issued guidance for the remainder of the year.” “Total company comp sales quarter-to-date are modestly positive in the low single-digit range.”

Q&A:

• Question from Ashley Owens (KeyBanc Capital Markets): What is driving positive quarter-to-date comps and any brand-level color?
  Response: Traffic recovery drove gains; conversions and AOV held. Lilly remains positive; Tommy Bahama is about flat but improving from 1H, with momentum starting in July.

• Question from Ashley Owens (KeyBanc Capital Markets): Any changes to back-half promotional cadence by brand?
  Response: No major changes; expect more sales during promo windows; maintained pricing discipline; Tommy Bahama moved Friends & Family from early September to August, which worked well.

• Question from Janine Hoffman Stichter (BTIG): How are you approaching pricing to offset tariffs, and what’s the consumer response?
  Response: Selective, item-level price increases (low–mid single digits) to recover margin dollars; larger for some spring items. New Boracay chino priced at $158 vs $138 with strong sell-through, showing consumer acceptance for improved product.

• Question from Janine Hoffman Stichter (BTIG): Why did Tommy Bahama’s promotional events yield better gross margin, and is it repeatable?
  Response: Higher mix of full-price items sold during promos and fewer markdown units due to tighter inventory, which is repeatable with disciplined inventory.

• Question from Dana Telsey (Telsey Advisory Group): Are tariffs altering competitive dynamics and your market share? Any channel trends?
  Response: Wholesale partners are conservative but supportive of pricing; Oxford believes it’s holding/gaining share in wholesale. In Q2, retail outperformed e-commerce.

• Question from Dana Telsey (Telsey Advisory Group): How are you planning holiday marketing spend and tactics?
  Response: Overall approach similar to past years with a few new tactical twists; specifics withheld.

• Question from Mauricio Serna Vega (UBS): Did timing of Tommy Bahama’s sale drive QTD comp strength and how does this affect comparisons?
  Response: Sale moved from early September to August; timing impact is now flushed. Post-Labor Day, comps are apples-to-apples and positive beyond the timing shift.

• Question from Mauricio Serna Vega (UBS): If net tariff impact is lower than initially expected, why maintain full-year EPS guidance?
  Response: Total tariff exposure rose, but further mitigation (accelerated receipts, sourcing shifts, pricing, vendor concessions) offset the change, resulting in an outlook consistent with prior guidance.

• Question from Mauricio Serna Vega (UBS): Why should inventory decline after being elevated by early receipts?
  Response: Q2 inventory rose mainly from accelerated receipts and capitalized tariffs; with tariffs stabilizing, the need for acceleration subsides, so inventory should decrease excluding tariff capitalization.

• Question from Joseph Civello (Truist Securities): Magnitude and cadence of price increases into spring; how implemented?
  Response: Conservative approach; spring increases slightly higher than fall, aimed to recover margin dollars. Fall wholesale largely set; spring will include DTC and wholesale. Increases compare season-over-season, not cumulative.

• Question from Joseph Civello (Truist Securities): Lilly direct vs wholesale performance?
  Response: Specialty wholesale accounts are cautious on buys; majors performing well. Management is confident in positioning with key accounts.

• Question from Tracy Kogan (Citi): CapEx outlook post-DC and any future major infrastructure projects?
  Response: After Lyons DC completion, ongoing CapEx expected around $75M annually, with no additional major DC projects indicated.

• Question from Tracy Kogan (Citi): Early view on FY2026 store growth?
  Response: Roughly similar to FY2025 with ~15 net openings, including a few Marlin Bars; Tommy & Lilly steady; Johnny Was paused; Southern Tide slower; Beaufort Bonnet a couple.