Oxford Industries' Q3 2026 Earnings Call: Contradictions in Pricing Strategy, Tariff Mitigation, Wholesale Growth, and Promotional Strategies

Date of Call: None provided

Financials Results

• Revenue: $307.0M (Q3 fiscal 2025), compared to $308.0M in Q3 fiscal 2024
• EPS: $0.92 adjusted net loss per share (Q3 fiscal 2025); revised 2025 adjusted EPS guidance $2.20-$2.40 versus $6.68 in fiscal 2024
• Gross Margin: 61% adjusted gross margin, down 200 basis points (driven by approximately $8M / ~260 bps of additional tariffs and promotional mix)
• Operating Margin: Adjusted operating loss of $18M, or negative 5.8% operating margin, vs negative 1.1% in prior year

Guidance:

• Full-year 2025 net sales expected $1.47B-$1.49B, down ~2%-3% year-over-year.
• Full-year 2025 adjusted EPS revised to $2.20-$2.40 vs $6.68 in FY2024.
• Fiscal 2025 net tariff impact ~$25M-$30M (~$1.25-$1.50 per share); gross margins expected to contract ~200 bps for the year and ~300 bps in Q4.
• Q4 sales expected $365M-$385M (vs $391M prior year); Q4 adjusted EPS $0.00-$0.20 (vs $1.37 prior year).
• CapEx ~$120M for 2025; expect significant CapEx decline post-Lyons fulfillment center completion.

Business Commentary:

• Sales Performance and Promotional Environment:
• Oxford Industries' total company comp sales were slightly positive in Q3, with strong performance in Emerging Brands Group and Lilly Pulitzer offsetting declines in Tommy Bahama and Johnny Was.

• The fourth quarter started with a mid-single-digit negative comp due to tariff-related product limitations and a more promotional holiday environment across the industry.

• Impact of Tariffs on Product Assortment:

• Assortments, particularly sweaters, were affected by tariffs, with reduced exposure in categories reliant on China, resulting in incomplete product lines for the holiday season.

• This led to a meaningful headwind for Tommy Bahama and Lilly Pulitzer, as these brands historically rely on sweaters and other China-origin products during the holidays.

• Leadership and Strategic Initiatives:

• Significant changes were made in Johnny Was, including leadership changes and a comprehensive business improvement plan, to address profitability challenges and enhance future growth potential.
• These initiatives were aimed at improving merchandising effectiveness, marketing efficiency, and the go-to-market process, with a focus on better assortments, pricing, and calendar discipline.

• Financial Outlook and Guidance Adjustment:
• For fiscal 2025, adjusted EPS is now expected to be between $2.20 and $2.40, reflecting a decrease from last year's $6.68, due to revisions in fourth-quarter comp sales expectations and higher SG&A expenses.
• This adjustment is attributed to slower start to the holiday season, decreased wholesale sales, and increased interest and tax expenses.

Sentiment Analysis:

Overall Tone: Negative

• Management lowered Q4 and full-year guidance, cited tariff-driven assortment and margin pressure and recorded $61M impairment (Johnny Was). Q3 produced a $0.92 adjusted net loss per share and adjusted operating loss of $18M; tariffs expected to reduce EPS by ~$1.25-$1.50 and gross margin to contract ~200 bps for the year.

Q&A:

• Question from Ashley Owens (KeyBank Capital Markets): How meaningful is the holiday assortment gap, is it corrected for upcoming seasons, and will sourcing strategy change (diversify/place orders earlier)? Also context on promotional intensity and Johnny Was priorities and roadmap?
  Response: Assortment gaps were driven by buys made during a brief 145% China-tariff threat (notably sweaters) and primarily affect current holiday inventory; spring assortments should be largely restored as tariff uncertainty eased.

• Question from Janine Stichter (BTIG): What’s happening in wholesale (retailer caution, inventory in channel) and is the off-price decline strategic; is Q4 the peak tariff headwind or will it continue into Q1?
  Response: Retail partners are pulling back cautiously, off-price is lower because there is less inventory to liquidate, and the assortment impact is peaking in Q4—spring should be less affected though tariffs will continue to have financial impact.

• Question from Joseph Civello (Truist Securities): Any color on competitive positioning in wholesale and plans for price increases going into spring to offset tariff pressure?
  Response: Company believes it performed relatively well on the retail floor and plans price increases in spring (generally ~4%, up to ~8% on select items) to offset tariff dollar impact.

• Question from Tracy Kogan (Citigroup, filling in for Paul Lejuez): Quarter-to-date trends beyond sweaters and by brand—are weaknesses broad-based or concentrated?
  Response: The three large brands (Tommy Bahama, Lilly Pulitzer, Johnny Was) are relatively weak quarter-to-date while Emerging Brands remain strong; consumers are favoring versatile, non-discretionary items.

• Question from Mauricio Serna (UBS): How ready are assortments for spring 2026 across the three big brands and outlook for potentially stronger results in H1 after this holiday hiccup?
  Response: Spring assortments are expected to be healthier because buys were placed after the 145% tariff threat subsided, and management expects to price to mitigate tariff dollars (target ≈4% on average).

Contradiction Point 1

Pricing Strategy and Tariff Impact

It involves the company's pricing strategy and how it addresses tariff impacts, which directly affect profitability and competitive positioning.

What is the plan for price increases for spring? - Joseph Civello (Truist Securities)

2026Q3: Price increases are planned for spring, with a focus on mitigating tariff impacts but not necessarily fully covering margin loss. - Scott Grassmyer(CFO and COO)

How are you planning pricing and pricing increases in response to tariffs? - Janine Hoffman Stichter (BTIG, LLC)

2025Q2: Pricing increases are selective and item-specific, balancing the impact of tariffs with the need to maintain price integrity. Current increases average low to mid-single digits. - Thomas Chubb(Chairman, CEO & President)

Contradiction Point 2

Tariff Impact and Mitigation Strategy

It involves the company's response to tariff impacts and the strategies implemented to mitigate them, which directly affects financial forecasts and operational efficiency.

How significant are the assortment gaps for the upcoming season? Will this shift your sourcing strategy going forward? - Ashley Owens (KeyBank Capital Markets)

2026Q3: The current assortment gaps, particularly in sweaters, are due to a past 145% tariff threat on China. We adjusted to reduce exposure, but recent stability in tariffs allows for better planning moving forward. We are also exploring further diversification and ordering earlier. - Scott Grassmyer(CFO and COO)

Can you explain the tariff impact in your outlook? Does the $40 million gross impact account for current tariffs? - Mauricio Serna Vega (UBS Investment Bank, Research Division)

2025Q1: The $40 million is the gross tariff impact, an increase from $9 million to $10 million due to changes in tariff rates. Mitigation efforts include shifting sourcing from China and are expected to be in place by spring of next year. - K. Scott Grassmyer(CFO and COO)

Contradiction Point 3

Wholesale Growth and Market Performance

It involves the company's evaluation of its wholesale growth and market performance, which are crucial for understanding the company's competitive positioning and revenue forecasts.

What is your competitive positioning in the wholesale channel? - Joseph Civello (Truist Securities)

2026Q3: Our performance in wholesale has been good relative to others, with continued expectations for strong relative performance. - Scott Grassmyer(CFO and COO)

How is wholesale growth progressing compared to expectations and retailer conversations in the back half of the year? - Joseph Vincent Civello (Truist Securities, Inc., Research Division)

2025Q1: The wholesale growth this quarter was pleasing, and we were performing well in head-to-head competition with other brands. - Thomas Chubb(CEO)

Contradiction Point 4

Promotional Intensity in the Market

It highlights differing perspectives on the promotional intensity in the market, which can impact pricing strategies and profitability.

What is the current level of promotional activity in the market and how is it shaping your strategy? - Ashley Owens (KeyBank Capital Markets)

2026Q3: Promotional intensity remains high, particularly around key shopping periods. - Scott Grassmyer(CFO)

What caution are partners showing in wholesale order books, and what is the current state of your books? - Tracy Kogan (CitiGroup)

2025Q4: We've continued to have strong wholesale performance, particularly during our key holiday wholesale selling season. - Thomas Chubb(CEO)

Contradiction Point 5

Promotional Strategy and Its Impact

It reflects differing perspectives on the company's promotional strategy and its impact on financial performance, which is crucial for investor expectations.

How is current market promotional intensity affecting your strategy? - Ashley Owens (KeyBank Capital Markets)

2026Q3: Promotional intensity remains high, particularly around key shopping periods. We are being responsive while maintaining brand integrity. - Scott Grassmyer(CFO and COO)

What changes are you making to your promotional cadence for the back half of the year given the volatile environment? - Ashley Owens (KeyBanc Capital Markets Inc.)

2025Q2: Promotional events will follow historical patterns, but there will be a shift in Tommy Bahama's Friends & Family event from September to August. More business is expected to occur during promotional periods. - Thomas Chubb(Chairman, CEO & President)