Why Oxford Industries Inc (NYSE: OXM) stock is under pressure

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Oxford Industries Inc (NYSE: OXM) stock fell over 4.3% after the company reported the first quarter of FY 18. The company had reported the adjusted revenue growth of 35.9 percent to $272.6 million in the first quarter of FY 18, missing the analysts’ estimates for revenue of $273.9 million. Additionally, at the end of the first quarter of fiscal 2017, inventory was $132.3 million compared to $127.1 million.  Lilly Pulitzer’s inventories increased to support planned sales increases in the second quarter of fiscal 2018 and the operation of 18 additional retail stores compared to last year.

On the other hand, in the first quarter the company saw a strong growth in the direct-to-consumer business highlighted by positive consolidated comparable sales. The strongest part of the company’s direct-to-consumer business was ecommerce where both Tommy Bahama and Lilly Pulitzer generated solid comp gains driven by increased site traffic. With the high average order size and high gross margin in the ecommerce, growth in ecommerce is accretive to the operating margin.

As of May 5, 2018, the company had $72 million of borrowings outstanding under its $325 million revolving credit agreement compared to $93 million at the end of the first quarter of fiscal 2017, with the decrease attributable to strong cash flow from operations in the last twelve months.  The Company ended the first quarter with $211 million of unused availability under its credit agreement.

For the second quarter, OXM expects its per-share earnings to be in the range from $1.75 to $1.85. Analysts surveyed by Zacks had projected the adjusted earnings per share of $1.97. The company expects revenue to be in the range of $300 million to $310 million for the fiscal second quarter. Analysts surveyed by Zacks had expected revenue of $303 million.

The company’s third quarter is expected to remain its smallest sales and earnings quarter due to the seasonality of its Tommy Bahama and Lilly Pulitzer direct to consumer operations. Therefore, the company expects its third quarter earnings to be comparable to last year and expects to see meaningful direct to consumer growth in the fourth quarter.

Oxford Industries expects full-year earnings to be in the range of $4.45 to $4.65 per share, and revenue is expected to be ranging from $1.13 billion to $1.15 billion.

 

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