Oxford (OXM) Q1 2026 Earnings Transcript

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DATE

Wednesday, June 10, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chairman, CEO & President — Thomas Caldecot Chubb
• Executive Vice President & CFO — K. Scott Grassmyer

TAKEAWAYS

• Consolidated Net Sales -- $391 million, slightly below the prior year's $393 million, but above the guidance midpoint of $385 million to $395 million.
• Comparable Sales -- Decreased 2% companywide, with both retail and e-commerce down 2%, and total wholesale sales down 5%.
• Tommy Bahama Results -- Generated mid single digit positive comparable sales in direct-to-consumer channels, with women's DTC business up approximately 7.5% and 30% of e-commerce orders including both men's and women's items.
• Emerging Brands Growth -- Beaufort Bonnet Company and Duck Head achieved low double digit sales growth.
• Lilly Pulitzer Performance -- Saw overall comps decline in the low teens, with significant weakness in e-commerce and noted issues in entry price points, assortment, and overemphasis on vintage and novelty.
• Johnny Was Turnaround -- Reported meaningful gross margin improvement, closed five underperforming stores, but experienced significant wholesale declines and mid single digit negative comps in DTC.
• Gross Margin -- Adjusted gross margin contracted 90 basis points to 63.4%, impacted by $11 million (280 basis points) in additional tariff costs compared to the previous year.
• SG&A Expense -- Rose 1% to $209 million, driven by spending for new stores, food and beverage, software, consulting, and Lyons, Georgia distribution center transition.
• Adjusted EBITDA -- $45 million (11.6% margin), down from $54 million (13.7% margin) in the prior year.
• Adjusted EPS -- $1.39, reported for the first quarter.
• Inventory -- Inventory decreased by $15 million (9%) on a LIFO basis—despite $9 million in capitalized tariffs—and by $3 million (1%) on a FIFO basis.
• Long-Term Debt -- Ended at $143 million, compared to $118 million a year earlier and $116 million at fiscal year-end.
• Cash Flow From Operations -- Provided $8 million versus a $4 million outflow in the prior-year quarter.
• Capital Expenditures -- Totaled $23 million, primarily for the Lyons, Georgia distribution center and new brick-and-mortar locations.
• Full-year Sales Guidance -- Updated to $1.48 billion to $1.505 billion, implying flat to up 2% growth, led by Tommy Bahama and emerging brands, but offset by declines at Lilly Pulitzer and Johnny Was.
• Adjusted EPS Guidance -- Tightened to $2.30 to $2.70, compared to $2.11 last year, excluding any benefit from tariff refunds.
• Tariff Refunds -- Phase 1 claims of $25 million filed; primary use for proceeds will be debt repayment once received.
• Gross Margin Outlook -- Expected to improve 100-200 basis points in each of Q2, Q3, and Q4, resulting in a full-year increase of about 100 basis points, driven by lower tariffs, improved sourcing, and higher mix of DTC sales.
• SG&A 2026 Outlook -- Projected to increase in the low single digit range due to software and new store costs, offset by expense control in travel and advertising.
• Second Quarter Guidance -- Sales expected between $380 million and $400 million, adjusted EPS of $1.20 to $1.40, and gross margin expansion of approximately 100 basis points.
• Distribution Center Transition -- New Lyons, Georgia facility now operational for four brands, with full brand transition expected by early August 2026.

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RISKS

• Lilly Pulitzer's performance was described as "below our expectations," with management explicitly stating ongoing sales softness and the need for corrective actions that "will take some time" for full impact.
• Management noted continued market uncertainty, citing "sales trends softened as we moved through April, and that deceleration continued into May and early June," leading to lowered top-end sales guidance.
• Johnny Was experienced significant pressure in wholesale, with management acknowledging continued weakness in specialty stores and lingering challenges in achieving positive DTC comps in the near term.
• Tariffs remain "a major topic and source of uncertainty," with management stating any change in trade policy could disrupt cost stability during the fiscal year.

SUMMARY

Oxford Industries (NYSE:OXM) delivered first-quarter sales of $391 million, slightly lower year over year but meeting the upper end of company guidance. Revenue growth was led by Tommy Bahama’s direct-to-consumer strength and emerging brands’ solid expansion, while declines at Lilly Pulitzer and Johnny Was tempered results. Adjusted gross margin fell by 90 basis points to 63.4%, reflecting $11 million in incremental tariff costs, partially offset by better sourcing strategies and a higher DTC sales mix. The company updated its full-year sales outlook to $1.48 billion to $1.505 billion and narrowed adjusted EPS guidance to $2.30 to $2.70, reflecting lowered top-end growth expectations but higher gross margin confidence for subsequent quarters. Management called out further SG&A discipline, capital expenditures focused on distribution infrastructure, and clear prioritization of debt reduction as tariff refund proceeds materialize.

• Leadership expects Tommy Bahama to maintain positive comparable sales through year-end, albeit modestly lower than first-quarter trends, and predicts emerging brands will continue to outperform core segments.
• Product assortment and merchandising improvements at Lilly Pulitzer and Johnny Was are underway but projected by management to have limited impact before the second half of the year.
• SG&A growth will mainly stem from new stores, software upgrades, and consulting expenses, while advertising and travel budgets remain tightly controlled.
• New Lyons, Georgia distribution center is operational for most brands, with full integration planned by early August to enhance logistics efficiency.
• Tariff refunds initiated in March are earmarked for direct debt repayment, with $25 million in claims already filed and additional claims awaiting process establishment.

INDUSTRY GLOSSARY

• Direct-to-Consumer (DTC): Sales made directly from the company to end customers, excluding wholesale channels, often via company-operated stores or e-commerce platforms.
• LIFO/FIFO: Inventory valuation methods; LIFO (Last In, First Out) assumes last goods purchased are sold first, FIFO (First In, First Out) assumes first goods purchased are sold first.
• Comparable Sales (Comps): Year-over-year growth metric comparing sales from stores open for at least 12 months and relevant e-commerce channels.

Full Conference Call Transcript

Thomas Caldecot Chubb: Thank you, Brian. Good afternoon, and thank you for joining us. I am pleased to be here today to discuss our first quarter results the progress we are making across the portfolio and our outlook for the balance of the year. Overall, sales in the first quarter were in line with our expectations and earnings were better than we anticipated. Primarily due to stronger than expected gross margin. That gross margin performance reflects meaningful work done by our teams over the past year to respond to tariff pressure including updates to our sourcing strategies refinements to our pricing architecture, improve freight rates through vendor negotiations, and the benefit from a higher mix of direct to consumer sales.

Importantly, we achieved this margin performance while absorbing $11 million or $0.55 a share year over year increase in tariff costs during the quarter. Absent that increase, both gross margin and earnings would have improved over the prior year. Looking across the portfolio, the first quarter included several important positive takeaways. Tommy Bahama, our largest brand, performed well led by healthy direct to consumer results and our emerging brands continued to generate strong growth particularly in the Beaufort Bonnet Company and Duckhead. However, these positive results were not consistent across the portfolio. Johnny Was is progressing through its turnaround plan and we are encouraged by the progress on gross margin and direct to consumer performance. Even as wholesale remains pressured.

Lilly Pulitzer was below our expectations while lapping a strong prior-year first quarter and its softness weighed on our overall result. The consumer backdrop remains unsettled. Consumers continued to navigate macroeconomic and geopolitical pressures, including conflicts around the world, higher energy prices, uncertainty around trade policy and tariffs, and pressured sentiment around discretionary spending. As we have discussed in recent quarters, while some hard data may suggest consumers have the ability to spend, the soft data and what we are seeing continue to point to consumers that are more cautious, selective, and highly discerning. In this type of environment, product relevance and brand connection are especially important.

Consumer response is strongest to differentiated products and brands that create an emotional connection. That is where our portfolio is advantaged. Our brands are built around lifestyle, optimism, and experiences And our job is to stay focused on the product, storytelling, and service that bring those brands to life for our consumers. Tommy Bahama delivered the strongest performance in the quarter. Our direct to consumer business comped positive in the mid single digit range with encouraging results in retail and e commerce and continued contribution from food and beverage. More broadly, the brand benefited from a better assortment balance improved key item execution, and the enduring appeal of its relaxed warm weather lifestyle position.

We are pleased with the execution at Tommy Bahama. The brand continues to occupy a unique position in the market with a lifestyle proposition that extends beyond any 1 product category or channel Its advantage comes from the combination of compelling product clear storytelling, strong customer engagement, and distinctive experiences across retail, digital, and hospitality. That combination continues to support our confidence in Tommy Bahama's long term opportunity even in an uncertain near term environment. At Lilly Pulitzer, first quarter results were below our expectations, and we have work to do. Lilly Pulitzer remains a distinctive and beloved brand with a highly engaged customer and a very clear point of view.

The business did not execute to its potential in the first quarter. Sales were pressured particularly in e commerce, and we believe that pressure reflects in part some merchandising and execution issues including gaps in certain entry price points and allocation opportunity. We want to be clear that Lilly Pulitzer's performance was below our expectations and below where we are confident it can be. The brand has tremendous equity with its customer, but in the first quarter, we did not bring together product pricing, allocation and messaging That is on us. And the team is on focused on correcting these issues.

Keep in mind, this is the same highly talented Lilly team that has consistently delivered strong results and we are very confident in their ability to address these issues. Good news is that we have identified what we believe are the core issues and we believe they are addressable. Some can be corrected relatively quickly like messaging and marketing, while others related to merchandising only move as fast as the product development life cycle. And will accordingly take more time. We are focused on addressing these issues and reestablishing Lilly Pulitzer's positive trajectory and unlocking its long term growth potential.

The brand is strong, and we believe the team has the talent, experience, and urgency to restore the level of performance we expect. Turning to Johnny Was, we believe the brand is on track with its turnaround plan. As we have discussed previously, our focus has been primarily on improving profitability and reinforcing the fundamentals. During the first quarter, gross margin increased as the team made significant progress buying inventory tighter reducing promotional activity, and improving gross margin return on investment. In terms of top line results, sales were most under pressure in wholesale, where Johnny Was has had the greater exposure than our other brands to specialty stores a market that has declined meaningfully in recent years.

Sales were also lower to off priced off-price retailers due to healthier inventory levels and to Saks Global which has been impacted by its bankruptcy process. Historically, Neiman Marcus and Saks have been very important venues for Johnny Was. Importantly, performance in the direct to consumer business was much more in line with our expectations and we believe that side of the business is becoming healthier. We are focused on bringing greater cohesion to the design process refining the assortment, improving marketing effectiveness, and driving better execution across retail, ecommerce and wholesale. With the new management team in place, we have also become more aggressive in reassessing and rationalizing our store base closing 5 underperforming locations in the first quarter.

We will continue to assess retail performance and opportunity on a market by market basis and location by location and close underperforming stores where appropriate to ensure that our footprint is aligned with the brand's long term potential. Turnarounds do not happen overnight, and there is still a lot of work to do. But we believe Johnny Was has meaningful long term potential. Our objective is to build a stronger, more disciplined, and more profitable business that better reflects the strength and resonance of the brand. Our emerging brands also contribute positively with notable strength, particularly in the Beaufort Bonnet Company and Duckhead businesses. These brands continue to bring energy and growth potential to the portfolio.

And we remain focused on building them in a disciplined way through stronger storytelling and growing distribution. Across the enterprise, we are also continuing to strengthen the operational foundation of the company. Our new Lyons, Georgia distribution center is an important part of that work. As we have said before, we do not expect a ramp up to be without initial costs or complexity. Particularly while we are transitioning between facilities. But over time, we believe Lyons will be a meaningful competitive advantage particularly as direct to consumer demand continues to gain share across our portfolio. Stepping back from the individual brands, we were pleased with the way we started the fiscal year.

At the same time, sales trends softened as we moved through April, and that deceleration continued into May and early June. Some of that reflects the broader consumer environment and the increased caution we are seeing in discretionary spending along with the shift in timing of the important Father's Day holiday. Continued softness at Lilly Pulitzer is also an important factor particularly given that some of the product and merchandise improvements we are making will take some time to fully flow through the assortment. Given these trends, we believe it is appropriate to take a more measured view of the upside sales opportunity for the balance of the year.

As a result, we are narrowing our full year sales outlook by lowering the top end of the range We believe this is a prudent approach based on what we are seeing in the business and the broader environment today. At the same time, we are tightening our EPS guidance range for the remainder of the year by raising the low end of our previous range due to the impact of the current lower tariff rates flowing through for the balance of the year combined with focused expense and inventory management. Tariffs remain a major topic and source of uncertainty. Scott will provide more detail on the updated assumptions embedded in our outlook.

From an operating standpoint, our priorities remain unchanged. Optimize sourcing, manage pricing thoughtfully, protect gross margin where we can, and avoid actions that would undermine the long term health of our brands. Periods like this can push companies to become defensive and overly short term. We are not going to do that. Our brains exist to bring happiness, optimism, and a sense of possibility to our customers. That is a real source of differentiation and we believe the near term adjustments we are making in the current environment will capitalize on each brand's unique attributes and position us to deliver long term value to our shareholders. As always, I want to thank our teams across Oxford.

Their resilience, creativity, and commitment to our customers are the foundation of everything we do. With that, I will turn the call over to Scott for more detail on our financial performance and outlook.

K. Scott Grassmyer: Thank you, Tom. As Tom mentioned, our teams have shown great discipline and resilience in executing our plan against the backdrop of a challenging consumer and macro environment. Consolidated net sales were $391 million in the first quarter of fiscal 26, compared to $393 million in the first quarter of fiscal 25. And above the midpoint of our guidance range of $385 million to $395 million Total company comparable sales decreased 2%, including 2% decreases in both retail and e commerce. The decline in retail comp sales was offset by sales from non comp stores opened primarily in the prior year. Notably, food and beverage sales increased 14% driven primarily by non comp locations.

Wholesale sales decreased 5% compared to the prior year period. Which is better than our original forecast. By brand, Tommy Bahama, delivered solid results with a total sales increasing year over year, driven by mid single digit comps in our DTC channels, partially offset by a decline in wholesale sales. Emerging brands continued their momentum with sales growth in the low double digits. The positive comps at Tommy Bahama and growth in emerging brands were offset by sales declines at Lilly Pulitzer and Johnny Was. At Lilly Pulitzer, significant declines in the ecommerce channel, and a difficult comparison to the prior year. Led to overall low teen negative comps.

And at Johnny Was, as Tom mentioned, the sales decline was driven by a significant decrease in the wholesale channel. And mid single digit negative comps in our DTC channels. Adjusted gross margin contracted 90 basis points to 63.4%, driven by approximately $11 million or 280 basis points of increased cost of goods sold from additional tariffs implemented starting in fiscal 25. Despite this US Supreme Court's ruling in late February, the previously paid tariffs were capitalized in the inventory that we sold during the first quarter. The increased tariffs were partially offset by up updated sourcing and pricing architecture strategies across our portfolio.

Lower freight cost to customers, due to improved carrier rates from contract renegotiations, and a change in sales mix with wholesale sales representing a lower proportion of mass sales. Adjusted SG&A expenses increased 1% to $209 million compared to $206 million last year, impacted primarily by a new brick and mortar retail and food and beverage locations as well as increases in software and consulting cost and costs associated with the transition of our Lyons, Georgia, distribution center operations. These increases were partially offset by lower advertising cost and cuts to more discretionary categories like travel.

The result of this yielded adjusted EBITDA of $45 million or an 11.6% adjusted EBITDA margin, compared to adjusted EBITDA of $54 million or 13.7% in the prior year. Moving beyond EBITDA, adjusted depreciation and amortization was flat compared to the prior year with increases in depreciation related to our new Lyons facility and new brick and mortar locations, offset by lower software related depreciation. Interest expense of $2 million was higher than the prior year due to higher average debt levels, and our effective tax rate of 25.4% was higher than the prior year due to certain discrete items. With all this, we ended with $1.39 of adjusted EPS.

Moving to the balance sheet, inventory decreased $15 million or 9% on a LIFO basis. And $3 million or 1% on a FIFO basis as compared to the first quarter of 25. Despite $9 million of additional tariff costs capitalized, into inventory compared $3 million at the end of first quarter of 25. Inventory decreased across our 3 larger brands partially offset by higher inventory in the emerging brands group to support their higher levels of growth. We ended the quarter with long term debt of $143 million as opposed to $118 million at the end of the first quarter of 25. and $116 million at the end of fiscal 25.

Cash flows from operations provided $8 million in the first quarter of fiscal 26 compared to cash flows used in operations $4 million in the first quarter of fiscal 2025, with lower earnings offset by positive changes in working capital. We also had capital expenditures of $23 million primarily related to the Lions Georgia distribution center project and the addition of new brick and mortar locations. and $11 million of dividends that led to an increase in our long term debt balance since the beginning of the fiscal year. I will now spend some time on our updated outlook for 2026.

As Tom mentioned, the positive momentum we saw at the start of the year decelerated a bit at the end of the first quarter and continued into the second quarter. For the second quarter, we now expect our total company comp to be in the low single digit negative to flat range. And for the full year, our updated comp assumption assumes a range of slightly negative to slightly positive. The updated second quarter and full year comp assumptions are lower than our previous expectations of flat to low single digit positive comps. As a result of the change in our comp assumptions, we are revising the top end of our revenue guidance range for the full year.

For the full year, net sales are expected to be between $1.48 billion and $1.505 billion, a relatively flat to up 2% compared to sales of 1.48 billion in fiscal 25. Our revised sales plan for the full year of 2026 includes a sales increase in Tommy Bahama and continued growth in emerging brands, partially offset by a sales decrease in Lilly Pulitzer and Johnny Was. Our updated sales plan does include improvement in the second half, as we correct the issues discussed at Lilly Pulitzer. and Johnny Was continues its turnaround plan.

We will also benefit from correcting the tariff related merchandising issues that impacted the results of most of our brands in the second half of the prior year, specifically in the fourth quarter and during the holiday season. By distribution channel, the full year sales plan consists of high single digit increase in our food and beverage channel that is benefiting from the addition of new locations added during fiscal 25 partially offset by low single digit decreases to flat sales in our direct-to-consumer channels and a mid single digit decrease in wholesale. Moving on to gross margin. Our current assumption is that the current lower tariff rate of 10% will remain in place for the remainder of the year.

These rates are generally consistent with the rates in effect for most of our inventory receipts during the first quarter of 26. While we are not including the impact of tariff refunds in our guidance, we paid approximately $40 million of tariffs in fiscal 25, an additional $5 million of tariffs in the first quarter of 26 that were ultimately invalidated by the Supreme Court ruling in February. Today, we have filed for approximately $25 million in phase 1 claims and have begun to receive refunds. A refund process for phase 2 and the remainder of our unfiled claims has not yet been established, but we are ready to file claims for refunds as soon as a process is established.

It is important to note that given the timing of our planned inventory receipts for the balance of the year, changes in tariff rates during fiscal 26 would be expected to have a more limited impact on fiscal 26 results than they would on future periods. In addition to lower tariff assumptions, we expect that gross margins will benefit significantly from the shifts in sourcing and updates to our pricing architecture that our teams have worked on for the last year. And a shift to a higher proportion of direct to consumer sales.

As a result, we expect gross margins to improve 100 to 200 basis points in Q2, Q3 and Q4 of fiscal 26 compared to the prior year periods. And an overall approximate 100-basis-point increase for the year when including the headwind from the first quarter. In addition to lower sales and higher gross margins, we expect SG&A to grow in the low single digit range, primarily due to increased software related costs and the annualization of incremental SG&A from new stores added since the end of the second quarter of fiscal 25. Also within EBITDA, we expect higher royalties and other income of approximately $2 million in fiscal 26. Outside of EBITDA, we expect an increase in depreciation.

Due to essentially all the incremental costs to operate the new Lyons DC in fiscal 26 are depreciation-related. Considering all these items, interest expense of $7 million, a higher tax rate of 28%, we are tightening our 2026 adjusted EPS guidance to $2.30 to $2.70 versus adjusted EPS of $2.11 last year. Again, our guidance does not include the impact of any tariff refund. The second quarter of 26, we expect sales of $380 million to $400 million compared to sales of $403 million in the second quarter of 25. This primarily reflects our low single digit negative to flat comp assumption and decreased wholesale sales in the high single digit range.

By brand, we expect lower sales at Lilly Pulitzer and Johnny Was to be partially offset by a sales increase at Tommy Bahama. And continued growth at emerging brands. We also expect gross margin to expand approximately 100 basis points SG&A to grow in the low single digit range, royalty income of approximately $5 million interest expense of $2 million, and a higher effective tax rate of approximately 29% primarily related to the impact of our annual stock vesting. We expect this to result in second quarter adjusted EPS between $1.20 and $1.40 compared to $1.26 last year. Moving to our CapEx outlook for the remainder of the year.

We expect capital expenditures for the year to be approximately $60 million, including the $23 million spent in the first quarter of fiscal 26. Compared to a total of $108 million in fiscal 25. Remaining capital expenditures relate to the new distribution center in Lyons, Georgia, and a new brick and mortar locations. Thank you for your time today. We will now turn the call over for questions.

Operator: Thank you. We will now be conducting a question and answer session. May be necessary to pick up your handset before pressing the star key. 1 moment, please, while we poll for questions. Our first question is from Ashley Owens with KeyBanc Capital Markets.

Ashley Owens: Thanks. Good afternoon. Maybe just to start, I want to click down on the comments about the trend softening through April into May and then early June, and then you flagged that Father's Day shift. Is there any way to help us isolate how much of that deceleration is calendar versus the genuine demand softness? Like, when you normalized for that Father's Day timing, what does the underlying trend look like there? And I have a follow-up.

K. Scott Grassmyer: So I would say, we built into our guidance flat to low single digit negative for Q2. And I think we are you know, we are more on at the moment, in the low single digit negative I think when we get past Father's Day, we will be in that zone of flat to low single digit, negative. I believe that is where we will land. I think we are gonna pick up a bit you know, through Father's Day. And then right now, we are you know, we are tracking fine Understood.

Ashley Owens: Maybe then just secondly, more broadly on wholesale, just be curious, since we last spoke, there is obviously been elevated. Gas prices have continued. Consumer discretionary sentiment is weak. I would just be curious if you are seeing any shifts in some of the wholesale order behavior across your portfolio for the balance of the year. Any retailers trimming buys here pushing out deliveries anything to call out Thanks.

K. Scott Grassmyer: They are still being cautious and we still think we will be down. But we are not seeing a drastic change. But I think everybody is, given the environment, is being a bit cautious. And, you know, so I think the opportunity for some you know, increases might not be there quite the way we had hoped. But I think they are seeing a lot of what we are seeing right now. And, yeah, you do have the shift, so I think a lot of people are trying to sort through the current business and how much this Father's Day shift is impacting it versus how much is the consumer.

And that is a hard thing to really tell. there is, I think, some of both. In what is going on.

Thomas Caldecot Chubb: And, you know, Ashley, it always comes down to how your performing on their floor and our wholesale performance overall. Has hung in pretty well so far year to date. There you know, that is some places are stronger than I have others, but I would say overall, it is been pretty strong.

Ashley Owens: Okay. Understood. Thank you. I will pass it along.

Operator: Our next question is from Dana Telsey with Telsey Advisory. Good afternoon.

Dana Telsey: I want to unpack the performances of Tommy Bahama and Lilly Certainly, the improvement in the performance of Tommy Bahama, even from the fourth quarter to the first quarter is impressive and wanted to get whether it is men's, women's prices category, what is driving that? And then the Lilly downtick, I think last quarter when we all spoke, you talked about the headwinds, whether it was the Florida, weather, but felt like the structural components of Lilly was very much intact. what is changed Where's the softness coming from? Is it by region, by channel, by customer? Is it print, pattern, solid? Promotions, and what is the timeline of the Lily Fix? Thank you.

Thomas Caldecot Chubb: Okay. So let me start with Tommy Bahama, and I would say the you know, it is a very nice quarter for Tommy Bahama. We are very proud of it. Men's had an increase in our direct to consumer business year over year. We talked about this in March, but that was really driven by core product that we were sort of weak on last year, and that is things like the Emfielder, the Boracay, and some of our big linen programs. That really drove it. The real strength in the quarter, you know, men's was good, but women's was even better.

And the numbers were really driven by the women's side of the business, which we love seeing because as you know, long term, we continue to believe we have a very large opportunity in Tommy Bahamas women. So the women's DTC business was up, I think, about 7.5% for the quarter, which is quite strong. And it was driven by what we would consider the fashion part of the business or a couple of categories within fashion. I think pants and wovens were both strong during the quarter, but we were glad to see that.

And, you know, we are still very much at men's driven business, but seeing that strength in women's where it really helped drive our quarterly results to a large degree. Great. And then 1 other little stat that I will throw out at you that I love is that during the first quarter of 26, 30% of our e comm orders in included both a men's and a women's item. that is up from last year when it was 25%. And we do not have any great benchmarking on that.

But we are we believe that benchmark really well in terms of our ability to sell both genders effectively when you got you know, almost a third of your orders. are dual-gender orders. We think that is really great. So really like what we saw in Tommy Bahama during the quarter. Some of that softness that we saw in April and May had to do with some timing shifts and maybe, you know, a little planning hiccup.

I really believe that, we are gonna get through Father's Day and still be on a very good track. it is a little hard to see it, today just because of the shift. it is still good. it is just not quite as strong as it was, but I think that is you know, the Father's Day shift that we are seeing.

And then on Lilly Pulitzer, you know, I do believe that the February weather in Florida was a contributing factor And at the time we were talking in March, I think that was very valid because it was especially during February and the first part of March where the average daily temperatures were much, much lower than the normal average daily temperatures. And that is a time of year when it matters a lot in Florida. As to whether people are motivated or not. But then as we got deeper into the quarter, we realized that there were other issues with both the assortment and with the messaging and marketing around them.

So as we identified during the prepared remarks, Dana, some of the issues that we were we were way under inventoried in our opening price point bucket, and I think that cost us some business. You know, some of those customers were willing to move up the price point scale, but I think some of them just ended up not buying, you know, I think that is where we saw a lot of the sales erosion. And then from a print and color perspective, if you have been watching it, we leaned heavily into the sort of vintage prints and while, you know, we love those prints, and they are beautiful, I think we probably overdid that.

And those tend to appeal a little bit more to the you know, the most dedicated Lily fans and maybe a little less so to the newer Lily fans. So I think that was an issue. And then the last big 1 I would identify is what we are calling novelty. So as you know, Dana, there is been a lot of emphasis not only from us, but across the market on newness and novelty and that kind of thing. And I believe we just swung the pendulum a little bit too far on that. This spring, and that it is good to have a good bit of that, but we just had too much of it.

And not enough of our assortment was more versatile. And I think especially when you get into a time period where people are being a little bit more discerning about their purchase I think she's looking at the versatility of that dress maybe a little more than she would when she's in more of a free spending mode. So we were talking about this yesterday, but we have had this spring a absolutely gorgeous dress that was the type of dress that you would wear to some kind of charity ball or gala or something like that. Absolutely gorgeous, but it is really 1 of those dresses that you are probably only gonna wear once.

And because it is so unique and so special and so dramatic and stunning, And, you know, it was over $700, which for us is a high price point. And we just have you know, a little too much of that So in terms of the timeline to fixing, I would also say that leaning into vintage and the nostalgia, I think, also showed up in our messaging and marketing. You know the way this works, Dana Messaging and marketing can be addressed more quickly, generally, and how we are targeting and some of that stuff, we can you know, we are already adapting and things like promotions, You may have watched.

We did a big Lilly Pulitzer promotion this past weekend. That was something that we did in what I would call an agile response to the situation. So those things can be done more quickly The product development timeline is what it is. So it is more of a resort before you can really you know, up until resort, you are kind of dealing with the product that you know, you designed and bought way back when you did that. And you know, I do think I believe we feel that some of our later summer deliveries are a bit stronger and maybe do not have quite the degree of issues.

And then what we are doing just in sort of our agile response and rethinking promotions and all, I think we are gonna, you know, we are gonna make the best of it. I am super proud of the Lily team and the way that they have responded to it. Dana, you know this well, but this is a fashion business, and you are going to have a hiccup like this every now and again. And the issue, you know, that is just that is part of the business. it is hopefully, it is not very often, but it is gonna happen every once in a while.

And then the key is how do you respond to that in the short term and then in the long term. And I think as they do, the Lilly team is doing a terrific job on both fronts. So that was a lot. That hopefully answered your question.

Dana Telsey: Very helpful. Thank you.

Operator: Our next question is from Janine Stichter with BTIG.

Janine Stichter: Hi. Thanks for taking my question. I want to delve into the gross margin side a bit. You talked about having some big wins on the sourcing side. So maybe you could just talk about what is working there, how much you view as kind of structural and able to continue? And then as you think about the guidance for gross margin to increase throughout the balance of the year, What does that assume in terms of promotions by brand, how you are planning them and also how consumers are shopping around those promotions? Thank you.

K. Scott Grassmyer: Yeah. Go ahead. Yeah. Yeah. On the gross margin, yeah, we have know, we had done a lot of sourcing shifts. We also you know, a lot of the price increases a lot of it was on newness. And so we do have some products with some good margins. And you know, at Tommy, especially, you know, we sold through at full price nicely. And so we had a, you know, pretty nice you know, higher than expected gross margin there. And then, you know, as we mentioned, you know, the tariffs are, yeah, 10% now. that is our assumption going forward.

So we, you know, And we did have overall some lower promotions both in the first quarter and internally and on sales of off-price to wholesale accounts. That helped. We also had direct was a higher percentage of our total sales, versus wholesale, so that always helps also. As far as promotions, you know, Lily will probably be a little more promotional than we planned at the beginning of the year just kind of given the start. Tommy, you know, pretty much the normal cadence at Tommy. So I think overall, I do not think our overall total company promotional cadence will be probably a little bit more Lilly.

Quite a bit less at Johnny Was, Johnny Was is really, you know, the inventory down, are being much more disciplined. On promotional events, and their gross margins were very good. And I think they will continue to be for the rest of the year. I think some structural things that Johnny Was that are really starting to show through on the on the gross margin line and some of the SG&A controls there. And I think they will begin to show on the top line later in the year.

Janine Stichter: Got it. And with the price increases, have you seen any pushback at either of the brands, the price increases, and then just any more plans for ticket increases the rest of the year.

Thomas Caldecot Chubb: I would say, Janine, that is a there is a nuanced answer to that, but there has not really been any direct pushback to it. But if you look at our numbers, we are you know, we are selling fewer units. The ARB is going up. The AUR is going up. So people are selling or are paying the price, but the you know, the total number of units that we sold during the quarter was you know, down a bit. Not you know, the it is not drastic, but so it is hard to know exactly how to interpret that.

I think some of that is about the softness and just general caution among the consumer, but we are looking at it hard to make sure we are not you know, out of whack with what the consumer is willing to pay. We do not believe we are out of whack with the market. You know, at all. I think we are in sync with our you know, peers or competitors, whatever you wanna call them. But you know, it bears further scrutiny for sure. Great.

Janine Stichter: Thanks for the color. Thank you, Janine.

Operator: Our next question is for Mauricio Serna with UBS.

Mauricio Serna: Great. Thanks for taking my questions. I guess just first on Tommy Bahama. Could you talk about your expectations in terms of the comps for Q2 and the rest of the year? Just thinking about the very good traction you are getting you got in Q1, is it fair to assume that you know, the brand can sustain a mid single digit comp? And then similar question on, I guess, similar question on Johnny Wass. It seemed like, you know, the you have really been able to bring that business into a healthier place at least in terms of margins, gross margin. How should we think about the timing for an inflection to positive sales growth of the brand?

Could it happen by second half of the year? Thank you.

K. Scott Grassmyer: Yeah. Tommy, we think we can have positive comps the rest of the year. Our model has a little bit lower than the mid single, just slightly, lower than the first quarter. But you know, a lot of it is just, you know, some of what we are seeing now, and we got the whole Father's Day shift. So I think it is really, you know, once we get through Father's Day and kind of get that dust settled, you know, I think we will be in a good place there. At Johnny Was, we think, you know, that we can start having positive comps in the second half.

I think just some of the discipline that we have got and then the product, you know, would we really could not impact product in the first half of the year. In second half of the year, we really think a lot of the, work we have been doing in identifying how we ought to be assorting the line that was known going into the design process. So we I think we will have better commercial lines, and we also will have an our line of more essentials that kind of go with the print. So we do not have we have very little of that right now.

We will have quite a bit more of that in the second half. So we think you know, first half, you know, the comp will be a little tough Johnny Was, but a lot more disciplined on, you know, healthier gross margins, a lot more expense discipline than the second half. We really think the comp can start turning around. Got it. And then and then just a couple follow ups on the gross margin side. It seems like the assumption is even though like, I guess, even though, like, if tariffs go back to AIP, like, after July, the way that you flow your inventory, it should not have, like, a meaningful impact for at least fiscal 26.

That I just wanna make sure that I understood that. Yeah. But I guess that means that you could face, like, headwind in 2026. Pretty much. Fall would pretty much be in house, and then you have got some core that also goes even further during the year. So if tariff rates did go back to AIP, and right now, I think what they are talking is more of a 10% to 12%. Is at least what is being discussed, and how quickly that happens. You know, you could have a gap where you do not have any You know, these are going to expire, the Section 301 as expire in July.

And I do not know if these others can be in place right away. So it is a the tariffs are still fairly uncertain. But even if they went all the way back to AIP, it would not have a huge impact, you know, because I think falls pretty much in at 10, and, you know, resort could have a little bit of impact. Got it.

Mauricio Serna: And then just the last point on that, like, with tariff refunds, what would be you know, the primary use of the proceeds? Debt repayment. Pay down debt?

K. Scott Grassmyer: Yeah. Yeah. And our debt -- you know, we are not surprised -- support it for some of that. Some of that is seasonal, and we expect second quarter, you know, debt to come down. And then if we get the tariff refunds, then we will come down even more significantly.

Mauricio Serna: Awesome. Well, thanks for answering the questions, and best of luck. Bye.

Operator: Thank you, Mauricio. Our next question is from Joseph Civello with Truist Securities.

Joseph Civello: Hey, guys. Thanks so much for taking my questions. Just trying to zero in a little bit more on the consumer versus Father's Day. Is there any way you could break down the tax refund impact on Q1?

K. Scott Grassmyer: I am not sure we can do that. I do not know.

Thomas Caldecot Chubb: You know, I believe it was probably a positive you know, for us for sure, but I do not know that we have a good way to break that down. As you know, Joe, there are a lot of people, including some of your peers, out there in the analyst world that you know, are trying to do all kinds of things about tax returns, and I have read a lot of that. But I am not sure we can translate it exactly.

Joseph Civello: Yeah. I figured it would be pretty tough, but figured I would ask.

Thomas Caldecot Chubb: And then secondly, just talk a little bit more about 1 analysis that I have read is that when you get to $4.50 a gallon,, you have eaten up all the benefit of the tax return. Some people are thinking about it. Now we are not at $4.50 a gallon most places. And, you know, with where oil settled down, you know, it is been in the high $80s, low nineties, and seems pretty immune to what the news headlines are. Terms of any big swings.

And at that level, you are looking at, you know, $3.75 a gallon on average, I think, which is I do not think it is gonna cripple the economy I mean, people do not like it. It impacts sentiment but I do not think it is gonna cripple the economy. Got it.

Joseph Civello: that is helpful. And then, I guess, on the-- can you give any more color on the regional performance, Tommy, and maybe how the, the new DC has impacted operations?

Thomas Caldecot Chubb: You wanna talk about DC, please?

K. Scott Grassmyer: Yeah. Yeah. New DC, we moved our first brand over at the very end of February. We now have 4 brands over there. So we have got 3 more brands. To move. You know, as member, Lions was doing a tiny bit for Tommy. They were doing all the emerging brands. They are doing a tiny bit for Lily and all that Johnny was. So we will and then we will end up moving You know, once we get all the brands in and get it all settled down, we will actually start shifting more Tommy over.

We currently have Jack Rogers in a 3 p l, and that will move And so the move, you know, it will probably end of July, early August, we will have all the brands moved over. And then as our efficiencies get better, we will move more and more Tommy there. So know, we are kinda in the start up phase and, you know, with something project like this, you know, you kinda you work out the different kinks and you kinda move the brands over slowly, and then you really absorb them. And get more efficient, and then you move the next brand. So we are kinda in that phase now.

But, you know, this summer will, you know, get all the brands over and then and then you know, continue to move more Tommy over and continue to get more So but it is a good gonna be a great operation. And it is gonna be a great long term asset for the company.

Thomas Caldecot Chubb: And then, Joe, from a geographic standpoint, for Tommy, it is really a West Coast or Western part of the country. Versus Eastern. Issue. And the West has been strong this year, which is really good to see. We had a couple of years where it was lagging, and that is really been the strongest part of the country for us, which we are we are really glad to see. Got it. Thanks so much, guys. Thanks, Joe.

Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to Tom Chubb for any closing remarks.

Thomas Caldecot Chubb: Thank you very much for your time and attention today. We appreciate your interest in our company, and we look forward to talking to you again at the end of the summer.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.

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