Tommy Bahama's Q2 2026: Contradictions Emerge on Pricing Strategies, Traffic Recovery, and Sale Impacts

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

Date of Call: None provided

Financials Results

• Revenue: $403M, down ~4% YOY; within guidance of $395–$415M
• EPS: Adjusted EPS $1.26, slightly above guidance (prior-year EPS not disclosed)
• Gross Margin: 61.7%, down 160 bps YOY; would have increased absent incremental tariffs
• Operating Margin: 7.0%, down from 13.5% in the prior year (~650 bps decline)

Guidance:

• Q3 sales expected at $295–$310M (vs $308M prior year)
• Q3 GM to contract ~300 bps; SG&A up low–mid single digits; tax rate ~25%; adjusted loss/share $(1.05)–$(0.85) vs $(0.11) last year
• FY25 net sales: $1.475–$1.515B (down ~3% to flat vs $1.52B)
• Comps expected flat to modestly positive in Q3 and Q4
• FY GM to contract ~200 bps; net tariff impact $25–$35M ($1.25–$1.75/share); SG&A up mid-single digits
• FY adjusted EPS: $2.80–$3.20 (vs $6.68 last year)
• Capex ~$121M; ~15 net new stores and 3 Marlin Bars in 2025; inventory to decrease in 2H (excl. capitalized tariffs); remain in debt through year-end

Business Commentary:

• Revenue Performance and Challenges:
• Oxford Industries reported consolidated net sales of $403 million for Q2 fiscal 2025, down from $420 million in the same quarter last year.
• The decline was driven by a negative total company comp of 5%, with decreases in wholesale sales, e-commerce sales, and outlet sales.

• Challenges included higher tariffs, elevated promotional activity, and cautious consumer behavior.

• Brand-Specific Performance:

• Lilly Pulitzer posted positive direct-to-consumer total comparable sales, contributing to the offset of negatively performing segments like Tommy Bahama and Johnny Was.

• The brand's success was attributed to popular new products and engaging the core customer base through heritage storytelling.

• Tommy Bahama Turnaround Efforts:

• Tommy Bahama's Q2 results did not meet expectations, due to initial missteps in delivery and assortment.

• The brand has since identified areas for improvement, specifically in color assortment and regional relevance, leading to better performance in late summer deliveries.

• Inventory and Tariff Mitigation Strategies:

• Inventory increased by 19% on a LIFO basis and 13% on a FIFO basis due to accelerated purchases to mitigate U.S. tariffs.

• The company implemented various mitigations, including supply chain shifts and vendor concessions, to offset tariff pressures.

• Financial Outlook and Tariff Impact:

• The company anticipates a $80 million potential incremental tariff exposure in fiscal 2025, with half mitigated through various strategies.
• Despite these challenges, Oxford Industries maintains its full-year EPS guidance, reflecting disciplined management of inventory and pricing strategies.

Sentiment Analysis:

• Management delivered sales within and EPS above guidance despite headwinds. QTD comps are modestly positive, and full-year guidance was affirmed. However, Q2 gross margin contracted 160 bps due to tariffs, operating margin fell to 7% from 13.5%, and FY EPS guided to $2.80–$3.20 vs $6.68 last year, reflecting promotional pressure and higher interest/taxes.

Q&A:

• Question from Ashley Anne Owens (KeyBanc Capital Markets): What is driving the positive quarter-to-date comps, and any brand-level color?
  Response: Traffic recovered in July–August; conversions/AOV held; Lilly remains positive; Tommy Bahama is roughly flat, a notable improvement from earlier quarters.

• Question from Ashley Anne Owens (KeyBanc Capital Markets): How are you adjusting promotional cadence for the back half across brands?
  Response: No major changes; expect more sales during promo windows; Tommy Bahama shifted Friends & Family to August within the quarter and it performed better.

• Question from Janine Stichter (BTIG): How are pricing actions offsetting tariffs, and how are customers responding?
  Response: Selective, item-level low–mid single-digit increases (higher at Lilly) focused on recouping margin dollars; early sell-through and wholesale feedback are strong, e.g., $158 Boracay chino performing well.

• Question from Janine Stichter (BTIG): What drove improved promo gross margin at Tommy Bahama and is it repeatable?
  Response: Less clearance inventory and milder markdowns led to more full-price mix during promos; approach is repeatable if inventory discipline holds.

• Question from Dana Telsey (Telsey Advisory Group): What were the comp components across DTC vs stores?
  Response: Physical retail outperformed e-commerce in Q2; both saw softness, but stores showed relative strength.

• Question from Dana Telsey (Telsey Advisory Group): Are tariffs reshaping competition and share, and how are you planning holiday marketing?
  Response: Strong wholesale partnerships and disciplined pricing likely aiding share despite cautious buys; holiday tactics similar with a few new twists (details withheld).

• Question from Mauricio Serna (UBS): How did F&F timing affect QTD comps, and why keep EPS guidance with changing tariff impacts?
  Response: F&F timing effects netted within the quarter; additional mitigation (early receipts, sourcing shifts, pricing, vendor concessions) offset higher tariff exposure, supporting unchanged EPS guidance.

• Question from Mauricio Serna (UBS): Why should inventory decrease in 2H despite tariffs?
  Response: Acceleration tied to tariff uncertainty will unwind as tariffs stabilize; excluding capitalized tariff costs, no need for early receipts, so inventories should decline.

• Question from Joseph Vincent Civello (Truist Securities): Magnitude and implementation of further price increases into spring?
  Response: Remain conservative until tariffs settle; broader increases come in spring across DTC and wholesale to recover margin dollars; fall recovers less given earlier wholesale pricing.

• Question from Joseph Vincent Civello (Truist Securities): Update on Lilly DTC versus wholesale trends?
  Response: Lilly DTC comps positive; wholesale softer due to specialty/majors’ cautious buys, not share loss.

• Question from Tracy Jill Kogan (Citi): Capex run-rate after the distribution center is completed?
  Response: Post-Lions DC, steady-state Capex expected around $75M annually, dependent on store opening pace.

• Question from Tracy Jill Kogan (Citi): Early view on store growth next year?
  Response: Plan roughly 15 net openings: a few Marlin Bars; Tommy/Lilly at normal pace; Southern Tide slower; Johnny Was largely paused.