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Welcome to the Oxford Industries, Inc. Fourth quarter fiscal 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Brian Smith of Oxford Industries. Thank you. You may begin.

Thank you and good afternoon. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC, including the risk factors contained in our Form 10-K. We undertake no duty to update any forward-looking statements. During this call, we'll be discussing certain non-GAAP financial measures. In the fourth quarter of fiscal 2025, we changed our measure of profitability from segment operating income to segment EBITDA.

You can find a reconciliation of non-GAAP to GAAP financial measures, including segment EBITDA, in our press release issued earlier today, which is posted under the Investor Relations tab of our website at oxfordinc.com. Now I'd like to introduce today's call participants. With me today are Thomas Chubb, Chairman and CEO, and Scott Grassmyer, CFO and COO. Thank you for your attention, and now I'd like to turn the call over to Thomas Chubb.

Good afternoon, and thank you for joining us. I'm glad to be here today to discuss our fourth quarter results, the progress we made in fiscal 2025, and our outlook for fiscal 2026. We were pleased that fourth quarter net sales and adjusted earnings per share, helped by late January momentum of our largest brand, Tommy Bahama, landed at the midpoint of our guidance ranges, excluding charges associated with the bankruptcy of Saks Global that were not known when we last updated our outlook. While we operated against an uneven consumer backdrop during the holiday season with pressured traffic and conversion trends across much of our portfolio and a highly promotional marketplace, the actions we took throughout the year to strengthen our business helped deliver improving trends late in the fourth quarter.

The holiday quarter unfolded broadly in line with the pressures we described last quarter, particularly in categories and assortments most affected by tariff-related sourcing decisions and a highly promotional market. Despite the challenges of higher tariff costs and a competitive environment, our efforts to strengthen the supply chain and diversify sourcing helped us protect strong gross margins and maintain healthy inventory levels. Importantly, absent the impact of higher tariff costs, gross margin would have increased versus the prior year. As fiscal 2025 concluded, we were encouraged by the improvement we saw as we exited the holiday season and entered our important resort and early spring periods. Comparable sales, led by mid-single digit positive comps at Tommy Bahama, improved and turned positive for the total company in late January.

In the first quarter of fiscal 2026 to date, comps at Tommy Bahama have remained mid-single-digit positive, while comps for the total company have remained modestly positive. At Lilly Pulitzer, first quarter comps have run below our plan, which we believe is largely attributable to colder weather along the eastern seaboard, including Florida and the Southeast, the brand's most important markets. At Johnny Was, while comps remain negative, the business is performing in line with our expectations and improving through the quarter as our marketing and merchandising effectiveness actions begin to take hold. Quarter to date, business in the emerging brands group is quite strong, with comps well into double digits. We are especially encouraged that performance improved as we moved into resort and early spring, when our product offerings were better aligned with customer demand compared with our holiday assortments.

We view that improvement as particularly meaningful because these are seasons when our brands are especially well-positioned, given their connection to warm weather lifestyles and the occasions that matter most to our customers. While the environment remains uncertain, these trends reinforce our confidence that the actions we have taken are gaining traction. We also made meaningful progress in fiscal 2025 to strengthen our operational foundation. Shortly after year-end, we completed construction of our new state-of-the-art distribution center in Lyons, Georgia, and began receiving initial inventory shipments. Lyons represents the most significant infrastructure investment Oxford has made in many years, and we are proud of the teams who brought it to this point. As we indicated previously, we do not expect meaningful near-term financial benefit during the early stages of the ramp. Reaching this milestone is an important step in strengthening our long-term operating platform.

In addition to completing Lyons, we continue to invest in technology, data and analytics and artificial intelligence, while also advancing our strategic sourcing initiatives to further diversify our sourcing profile. Early in fiscal 2025, approximately 40% of our apparel and related products were expected to be sourced from producers located in China. Through the actions we took during the year, that figure declined to slightly less than 30% of our product purchases in fiscal 2025, and our annualized run rate entering fiscal 2026 has been reduced to approximately 15%. Together, these actions have increased our flexibility and better positioned us to navigate continued uncertainty in the marketplace. Turning to fiscal 2026, our outlook assumes that we build on the encouraging momentum we have seen early in the first quarter, particularly at Tommy Bahama.

While the tariff situation remains fluid and we face meaningful tariff pressure in Q1 that we did not incur last year, we believe the actions we have taken to diversify sourcing and improve execution across the business will help limit the impact on earnings as we move through fiscal 2026 and allow us to leverage low single-digit sales growth into meaningful earnings improvement. Scott will provide more detail on the factors shaping our outlook, but our priorities are clear. Sustain momentum, improve profitability, and continue strengthening our brands for the long term. Stepping back, our operational priorities remain consistent and straightforward regardless of the macro environment. Serving our customer, protecting the integrity of our lifestyle brands, and generating cash so we can reinvest thoughtfully in the business, maintain a strong balance sheet, and create long-term shareholder value.

In an uncertain consumer environment, success comes from controlling what we can control and staying focused on execution. Each of our brands has specific priorities for fiscal 2026 tailored to its opportunities, but they share a common thread. A focus on what makes each brand special, the product, the storytelling, and the experiences that keep customers engaged. At Tommy Bahama, our top priority in fiscal 2026 is to build on the momentum the brand has generated with comps in the mid-single-digit range in the first quarter to date. We believe that momentum reflects the work the team has done to improve assortment balance, strengthen key in-stock programs, and better align product offerings with customer demand. In fiscal 2026, we are focused on sharpening merchandising, elevating brand storytelling, improving hospitality performance, and evolving our marketing approach to build demand, deepen retention, and reach new audiences.

We believe that combination positions Tommy Bahama to deliver improved profitable growth while reinforcing its position as a leading premium lifestyle brand. At Lilly Pulitzer, we are focused on a set of strategic levers designed to unlock more sustainable profitability while positioning the brand for long-term growth. We see meaningful opportunities to sharpen our assortment strategy, improve pricing architecture and allocation effectiveness, strengthen our connection with the core customer through more personalized storytelling, and optimize Lilly's distribution and channel mix in ways that support both growth and brand awareness. At Johnny Was, our priority remains executing the brand revitalization plan we have been building. That begins with product as we work to bring greater cohesion to the design process, refine assortments, and create a more seamless commercial model across retail, e-commerce, and wholesale.

At the same time, we remain focused on the merchandising discipline, go-to-market consistency, and marketing effectiveness needed to improve execution and stabilize performance over time. We believe these actions, along with the leadership changes we announced in the third quarter, will strengthen the foundation of the business and better position the brand for the future and result in a meaningfully improved EBITDA for the year. Within our emerging brands group, our focus in fiscal 2026 is on accelerating brand heat, expanding distribution in a disciplined way, and continuing to leverage our shared operating platform to drive profitable growth. This group continued to provide encouraging growth and energy in fiscal 2025, and we believe there is meaningful opportunity to build on that momentum through stronger storytelling, better merchandising tools, and more effective allocation across channels.

Across our portfolio, we are taking a disciplined, phased approach to developing our data and AI capabilities. Initially focus on areas where we see the clearest near-term return on investment, including marketing and e-commerce use cases, enterprise productivity tools, and selected IT applications such as developer productivity. We are starting with practical use cases while continuing to strengthen the data foundation needed to support more advanced capabilities over time. As always, I want to express my deep appreciation for our teams across the enterprise. Their resilience, creativity, and focus on our customers are the foundation of everything we do. With that, I'll turn the call over to Scott for more detailed commentary on our financial performance and outlook.

Thank you, Tom. As Tom mentioned, we finished the fourth quarter and full fiscal year 2025 with top-line results within our guidance range and bottom line results within our guidance range, excluding $0.19 Per share of charges related to the Saks Global bankruptcy. Consolidated net sales in fiscal 2025 decreased 3% to $1.48 billion. Sales in our full price brick-and-mortar locations and e-commerce were down 3%, driven by a total DTC comp of -4%, partially offset in our retail channel by the addition of new store locations. Outlet sales were also down 2%. Our food and beverage locations grew by 4%, driven primarily by the addition of four new food and beverage locations added during the year, partially offset by a slightly negative comp.

Our wholesale channel, which has continued to be pressured primarily from the decline in the specialty store market, decreased $13 million or 5%. Despite the decline of the specialty market, we have been pleased with our sell-throughs at our most important department store customers and our ability to grow or at least maintain market share. By brand, sales declines at Tommy Bahama and Johnny Was were driven by negative comps in the high single-digit and low double-digit range, respectively. While sales at Lilly Pulitzer were driven by positive comp in the low single-digit range. Our emerging brands continue to be a bright spot, with sales growth in the low double-digit range as the brand continues to grow and mature.

Adjusted gross margin contracted 190 basis points to 61.3%, driven primarily by higher tariffs of $30 million or 200 basis points. Absent tariffs, a higher proportion of net sales occurred during promotional and clearance events at Tommy Bahama and Lilly Pulitzer were partially offset by lower freight costs to customers from successful contract renegotiations during the year, along with a change in sales mix with a higher proportion of DTC sales. Across our three major brands, consumer responses continue to be strongest during our promotional end-of-season clearance events into our new and innovative fashion products, continuing a trend from the last couple of years. Adjusted SG&A expenses, which have been adjusted in the current year to remove depreciation and amortization, increased 4% to $815 million, compared to $784 million in fiscal 2024.

During fiscal 2025, we incurred higher expenses related to the 10 net new retail stores opened in fiscal 2025, including four new food and beverage locations, along with the 30 net new stores added during fiscal 2024. Combined, these locations accounted for almost half of the SG&A increase during the year. We also incurred higher costs related to software and professional service fees. Credit loss is primarily related to the Saks bankruptcy, partially offset by lower advertising costs. The result of this yielded adjusted EBITDA of $107 million or 7.2% EBITDA margin, compared to adjusted EBITDA of $193 million or 12.7% of net sales in the prior year. Moving beyond EBITDA, adjusted depreciation and amortization was flat compared to fiscal 2024.

We incurred $4 million of higher interest expense resulting from higher average debt levels, and we had a higher adjusted effective tax rate. With all this, we ended with $2.11 of adjusted EPS, which includes $0.19 of charges related to the Saks bankruptcy. I'll now move on to our balance sheet, beginning with inventory. At the end of FY 2025, inventory decreased 1% on a LIFO basis, which was impacted by a large increase in our LIFO reserve. Inventory increased 2% on a FIFO basis. The increase was driven by $11 million of incremental tariff costs capitalized into inventory relating to tariffs implemented during FY 2025. Inventory was up just slightly in all brands except for Johnny Was, primarily due to the additional tariff cost. On tariffs, I also want to address some important points.

During fiscal 2025, we paid approximately $40 million of tariffs imposed under IEEPA that were struck down by the Supreme Court. While those payments could potentially translate into a receivable, the timing and collectability remain uncertain and no potential recovery was included in our fiscal 2025 results or is included in our fiscal 2026 guidance. We ended the year with outstanding long-term debt of $116 million, up from $31 million at the end of the prior year. Our $120 million of cash flows from operations in fiscal 2025 were outpaced by our capital expenditures of $108 million, primarily related to the Lyons, Georgia distribution center project and the addition of new brick-and-mortar locations. $55 million of share repurchases and $42 million of dividends. I'll now spend some time on our outlook for 2026.

For the full-year, we expect net sales to be $1.475-1.53 billion, approximately flat to up 4% compared to sales of $1.478 billion in 2025. The sales plan in 2026 includes growth in the Tommy Bahama, Lilly Pulitzer, and Emerging Brands segments, partially offset by a decrease at Johnny Was. A total comp of approximately flat to positive 3%, with some additional lift from non-comp locations opened in 2025. By distribution channel, the sales plan consists of mid-single-digit increases in brick-and-mortar and retail channels, along with a low double-digit increase in food and beverage locations that includes the annualization of four new locations from 2025. The wholesale channel is expected to contract in the mid-single digit range, due primarily to continued declines in the specialty store market.

More broadly, our guidance balances the modestly positive first quarter-to-date comps with the uncertainty we continue to see in the consumer environment. This includes the potential for additional pressure from the conflict involving Iran and the possibility that higher oil prices could weigh on consumer spending, freight, and raw material cost. Moving on to gross margin. Let me first lay out the tariff assumptions embedded in our outlook. We are assuming tariff rates for the full-year fiscal 2026 will remain generally consistent with the incremental tariff rates put in place during fiscal 2025. These rates are consistent with the rates reflected in our inventory balances at the beginning of fiscal 2026 and what we expect for future receipts during the year. We are not incorporating any benefit from the recent Supreme Court decision or any related subsequent actions on other tariff matters.

We are also not assuming any refunds of tariffs previously paid. Using these assumptions, we expect total IEEPA-related tariff headwinds of $50 million during fiscal 2026 or an incremental $20 million or 150 basis points of gross margin impact and a $1 per share impact on top of the $30 million of tariff headwinds we absorbed in fiscal 2025. Additional tariff costs are not expected to be evenly distributed throughout the year. As we have discussed previously, we recognize very little incremental tariff costs in the first quarter of fiscal 2025 due to the timing of when tariffs were enacted and our efforts to accelerate large portions of our inventory purchases. As a result, we expect an approximate $12 million or 300 basis points headwind to gross margin in the first quarter of 2026.

Beginning the second quarter, we expect the incremental tariff impact to moderate significantly as we anniversary periods of FY 2025 that did include more substantial tariff impacts. After Q1, we expect year-over-year tariff headwinds of approximately $2-4 million or 50-100 basis points per quarter. Outside of tariffs, we expect a full-year benefit from price increases, a change in sales mix with a greater proportion of direct-to-consumer sales, and a slightly lower promotional cadence to result in a modest adjusted gross margin expansion to approximately 62%. The price increases implied in our guidance range from 4%-8% and vary by brand. These increases reflect a more elevated assortment as well as higher pricing on new product with relatively limited like-for-like increases on existing product.

Moving beyond tariffs and gross margin, we expect SG&A, which now excludes depreciation and amortization, to grow in the low single-digit range, primarily due to increased software-related costs, the annualization of incremental SG&A from the 10 new stores added during fiscal 2025 and a handful of locations, including a new Tommy Bahama Marlin Bar in fiscal 2026, and increased incentive compensation primarily due to lower payouts in recent years. Also, within EBITDA, we expect royalties and other income to increase by approximately $2 million in fiscal 2026. Additionally, our fiscal 2026 guidance includes the unfavorable impact of increased losses of $5 million or $0.25 per share related to the opening of our new Lyons DC.

These losses reflect the ramp-up cost of opening and operating the facility before we have achieved targeted inventory levels and the cost of operating two facilities while we transition out of the old facility and into the new facility. We expect that all the incremental costs to operate the new Lyons DC in fiscal 2026 will be depreciation related with some offsetting reductions in cash operating cost. We also expect an increase in non-operating items, including anticipated higher interest expense of $1 million for the year or an approximate $0.05 EPS impact from anticipated higher average debt levels. We also expect a higher adjusted effective tax rate of approximately 28% compared to 24% in 2025. We're resulting in approximately $2 million of additional tax expense or $0.15 per share impact.

The increase in effective tax rate is primarily due to expected shortfalls in stock-based compensation vesting during fiscal 2026. Considering all of these items, we expect 2026 adjusted EPS to be between $2.10 and $2.70 versus adjusted EPS of $2.11 last year that included the $0.19 of charges related to the Saks Global bankruptcy. Before moving on to the first quarter, I wanna briefly discuss the completion of the new distribution center in Lyons. As Tom mentioned, we are still in the early ramp-up phase to bring the facility online and want to be careful about attributing specific financial benefits before it's fully operational and handling the level of volume we expect over time. Over the long term, we believe Lyons will be an important asset for Oxford.

The facility is designed to improve the efficiency and flexibility of our distribution network, supported by a more modern layout and state-of-the-art automation. In the near term, fiscal 2026 will include the additional depreciation costs mentioned earlier as we move through the early stages of ramp up following the start-up activity incurred in 2025. Even at this early stage, Lyons is already providing several strategic benefits to the business. These include being able to eliminate 2 higher cost L.A.-based distribution facilities acquired with Johnny Was in fiscal 2024. Reducing lease space across other parts of our distribution network. Increasing flexibility as we continue to evolve our sourcing network. Improving our ability over time to operate the business with lower inventory levels.

Enhancing service to important Southeast and East Coast markets for Tommy Bahama, which have historically been serviced from our Auburn, Washington, facility on the West Coast. Moving on to the first quarter of fiscal 2026, we expect sales of $385-395 million, compared to sales of $393 million in the first quarter of 2025. The sales plan in the first quarter includes a flat to modestly positive comp in the low single-digit range. By channel, we expect low- to mid-single-digit increases in our retail and e-com direct to consumer channels, and mid- to high-teens growth in our food and beverage channel to be partially offset by a low double-digit decrease in our wholesale channel.

We also expect the $12 million of higher cost of goods sold or approximately 300 basis points of gross margin impact, or $0.60 per share from higher tariff costs, as I mentioned previously, along with a higher mix of promotional and clearance sales to be partially offset by a higher mix of direct to consumer sales. SG&A de-leveraging largely from the anniversaring of new stores opened in 2025, some additional costs related to the new Lyons, Georgia, facility and increased incentive compensation as previously mentioned. Higher interest expense of approximately $1 million and a higher effective tax rate of approximately 25% compared to 24% in the first quarter of 2025.

We expect this to result in first quarter adjusted EPS between $1.20 and $1.30 compared to $1.82 in the first quarter of 2025. Excluding the additional $12 million or $0.60 per share in tariffs, adjusted EPS at the low end of our range is nearly flat with a year ago. Related primarily to the completion of the new Lyons DC and significant reduction in new store openings, we expect total capital expenditures of approximately $65 million in fiscal 2026 compared to $108 million in fiscal 2025. The $65 million includes approximately $20 million of final cost to complete the new Lyons facility early in fiscal 2026, which were previously planned to be incurred in late 2025.

Remaining capital expenditures in 2026 will relate to ongoing investments in the execution of our pipeline of new stores and Marlin Bars, including one Marlin Bar expected to open in 2026 and capital expenditures related to relocations and renovations of current brick-and-mortar locations. Across the company, we expect to open a handful of new locations at Tommy Bahama and Lilly Pulitzer, but expect to close some stores and other brands, which should result in a relatively flat store count for the year. Wrapping up our guidance, we expect cash flow from operations of approximately $130 million to allow us to pay down a significant portion of our debt while completing the previously mentioned investments and the payment of our quarterly dividend that was increased by 1% to $0.70 per share by the board in our latest March meeting.

Thank you for your time today. We now turn the call over for questions. Jameelah?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from the line of Ashley Owens with KeyBank Capital Markets. Please proceed with your question.

Hi. Great, thanks, and good afternoon. Maybe just to start on Tommy Bahama. You know, you've been very transparent around the assortment changes that you've been working to implement there. As you started to see that improvement, you know, with the mid single digit comps so far this quarter, could you just help us further unpack what's driving that momentum? Are you seeing any encouraging signals across traffic, basket size or conversion that give you confidence that the trends you're seeing now could be sustainable?

Yeah. Thank you, Ashley. No, we're very excited about what we're seeing in Tommy Bahama because not only are we seeing the mid-single-digit, and it really goes back to the back half of January, so very end of last year and then through quarter-to-date of this year. It's been pretty consistent. It's not, you know, even this week, you know, it's been a good week. Yesterday was a great day for us on a Wednesday. We're seeing the kinda consistent results that give us a lot of confidence. The next thing I would say Ashley, it's very much about having the right product in the right depth in the stores. It's really, you know, of course, online as well, but that's really what's driving it. A couple of the best sellers on the men's side, which is the biggest part of our business, have been the Emfielder Polo, which is, you know, our bread and butter polo. It's made a couple of tweaks to it. It's a new and improved Emfielder Polo, but it's the Emfielder Polo. Then you're familiar with our Boracay pant franchise that, you know, has been with us for quite a while now. It started with a chino way back when, then we added a short, then a five pocket, then a new chino this past fall, which has performed very, very well for us.

Then for the spring, the new Boracay short. We had a Boracay short before, but like the pant, this is a new and improved version of it, and that's really helping drive business a lot. On the women's side, dresses are performing well. Wovens, shorts and pants, I believe, are all performing well. We're also seeing, Ashley, that what we're talking about in our marketing materials, like a mailer we did last month, that's what's selling too, and it's good to see that connection. We look at all these things, and we get pretty excited.

The last thing I'll tell you is that the results that we posted so far, you know, this time of year, Florida is the most important part of our business, but Florida is still not as strong as we want it to be, and it's really the West that's driving the results. The great thing about that, Ashley, is that as we get into second quarter, the West becomes proportionately more important to our business. The fact that we have a lot of momentum overall, but particularly out there, I think bodes well for our ability to sustain this momentum. It's, you know, it's all about product and having the products that the customer wants to see from us.

For a variety of reasons last year, a lot of them having to do with the tariffs, but other reasons as well, we were not on that as much as we needed to be. We are this year, and it's working.

All right. Great. That's super helpful. Then maybe just one follow-up on the gross margin. Appreciate all the color you gave us there, but I think there was a call about some of the channel mix shifts. You know, as that takes place and it moves more towards the D2C and food and beverage, just how should we think about the margin implications and contribution to overall profitability in 2026?

Yeah. Definitely on gross margins, you know, with DTC growing and wholesale, we talked about pulling back a little bit, it certainly helps the gross margin. We, you know, are performing well at the wholesale doors, especially the majors. You know, we think we can get some momentum back at wholesale. They both, you know, definitely on the gross margin line, they help. Then when the DTC is coming through, you know, comps, it really falls to the bottom line. If we can, you know, get, you know, comps meaningfully positive, it really does flow through.

All right. Great. I'll pass it along. Thank you again.

Thank you, Ashley.

Thank you. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.

Hi, good afternoon, everyone. As you think about the Saks and the loss of Saks, and you just mentioned about wholesale distribution, other places that you would go or you would look to, is it any of the existing, like the Dillard's, Macy's or Nordstrom? How do you see the wholesale channel going forward? You just mentioned Florida performance, I believe, was weaker than the West Coast. How much weaker is it than the West Coast and any takes there? Just lastly, as you think about the framework for margins and the income statement and balance sheet this year, the lower CapEx this year, what does that mean? How do you think of the opportunity for that cash? How do you think about margins and SG&A spend as we go through the year? Thank you.

Okay. I will start with Florida. Just to be very clear, Florida is actually getting stronger. It's improving. It's just that the West has really been kind of on fire. I don't wanna leave anybody with the impression that Florida is where it's been for a while. It is actually picking up. We've been glad to see it. February was extremely cold in Florida. You may have been down there or have friends or family that was down there. February was a really cold month in Florida, and that didn't help. I think we're seeing really good signs out of Florida. The point, though, is just that the West is on fire, and that bodes well for us, especially as we get into second quarter.

As you know, Dana, for us, you have a good first quarter and second quarter, I mean, that's the makings of a really good year there. We're excited about that. In terms of Saks, look, we're rooting for them. We want them to be successful. Obviously, it's gonna be a smaller footprint. We, you know, we like doing business with them. We think it's a great venue, especially for our Johnny Was brand, which has historically had a nice business with both the Saks side and the Neiman side of the business. We're rooting for that. I think you know, there is some business to be had out there as they move away from certain locations and certain markets.

I believe the winners will be the people that you said, you know, Macy's, but more specifically, I think Bloomingdale's, as well as some of the top-tiered doors at Macy's. Then Dillard's and Nordstrom, I think are also in a position to win. I think if you look out across that perspective, you know, we have good relationships with all of those and we like doing business with all of them. You know, we'll play to win as the market evolves. On the CapEx and margin questions, I'll kick that over to Scott.

Lower CapEx. A little, you know, obviously the Lyons DC, we still have some that carried forward from last year, but quite a bit lower and lower in stores. We plan to, you know, we raised our dividend modestly, and then we plan to pay debt down. We think we can take a, you know, meaningful bite out of our debt level. That's, you know, the current plans with the cash. Your margin question was. Can you repeat that one, Dana? I'm sorry.

Sure. As you think about the margins going through this year, any puts and takes on the levers on growth or SG&A, the quarterly cadence of what you'd be looking for, what could be a headwind or a tailwind?

Yeah. I'd say for the year, you know, depending on where in the sales guidance range we come and if we can be closer to the upper end of it, you know, we should be able to leverage SG&A a little bit, which would be nice and having a little bit growth in our gross margin percentage also. You know, as far as there won't be too wild of swings year-over-year on the percentage, maybe a little bit more in Q2 than Q1, relatively flattish on gross margin percentage by quarter, so no wild swings there.

You know, just with some of the price increases, I think even though we have the tariff headwinds, we think we can overcome that in our gross margin, which I think is important. Obviously, there's a lot of upside if, you know, we did bake in at the IEEPA rates. You know, today the rates are lower, no telling what's gonna happen. So if they held where they are today, there's certainly some upside. Again, we did not build in any refund for what we paid last year. So there's certainly some upsides out there, depending on where the tariffs go.

Thank you.

Thank you, Dana.

Thank you. Our next question comes from the line of Janine Stichter with BTIG. Please proceed with your question.

Hey, you got Ethan on for Janine. Thanks for taking the questions. First, just, you know, I think you said you're looking to pay down a meaningful amount of debt this year. Was just wondering if you have a level you're looking to end the year at, and then where does it rank in your overall capital allocation plans for the year?

We hope to take it down absent any refunds of tariffs, you know, $30-40 million reduction is what our current plan shows.

Yeah, on the capital allocation, nothing's really changed there, Ethan. As you know, we believe paying a dividend is important and have paid one every single quarter since we went public in 1960. Our dividend CAGR over the last 10 years is actually somewhere around 10%. We increased it by a penny a quarter, the board did earlier this week. Dividends, part of it, debt repayment. The CapEx will come way down this year, as Scott outlined in his comments. I think, you know, the big sort of blob of CapEx that we had over the last two years is largely behind us. A little bit carried over into this year. That was really just a timing thing.

You know, what we think going this year and going forward is that we'll be at much more normalized levels of CapEx. There should be, you know, plenty of cash flow and free cash flow.

Got it. That's super helpful. Just one more for me. Could you just give us a little more detail on exactly what the marketing and merchandising actions at Johnny Was will look like this year as you look to reinvigorate the brand?

Yeah. The marketing is really about more elevated, better storytelling that emphasizes what's special and unique about the brand and presents it in an elevated way and also one that hopefully reaches a bit of a broader audience than we had in the past. We have a very dedicated fan base at Johnny Was, but we think there are more people out there that we can appeal to, and some of that's already showing up. From a product and merchandising standpoint, it's really about making sure that we have the right silhouettes, the right fabrications, very importantly, the right price points that we're offering innovation and newness, all consistent with the Johnny Was DNA, and then investing appropriate levels of inventory.

This is a big project that we've had going, it started really last summer. We are starting to see the results of some of it already. We have a weekly report that we look at every week that's got of course sales and margin and a couple other KPIs. One of the great things about it is that we look at it, you know, this year, pretty much every week we're seeing almost all green on that report, whereas for a couple of years it was largely red, and now it's almost all green. We're also seeing the benefits of some of that merchandising work that we did show up. For example, that work indicated that dresses in the $200-300 price bucket were very important.

We invested more inventory dollars in that for spring, and it's paying off. It's really working well. Those are the kinds of things that we're doing. What I'll tell you, Ethan, though, is the full impact of the work really doesn't show up until the fall product hits the floor, which is July 30. July 30 is when we ship fall. Then you'll see, I think a more complete extent of the work that we've done there. Another thing that I would be remiss if I didn't mention is the inclusion of some items that I think we're calling essentials or core essentials. These are solid pieces.

There's like a top, a pant, a skirt, maybe one or two other things, and they come in, I believe, three solid colors that merchandise beautifully with all our, you know, embroidered and printed product. They give a woman a way to come in and, you know, if she wants to buy a printed top but would prefer to have a solid pant or skirt to go with that, we've got it for her. It's a way to, you know, let her complete the outfit in our store, which will be a plus. Then it also from a visual merchandising standpoint, it just helps break up all the embroidery and print that we've got in the store.

Sorta in concert with that, we're also, I would say, calming down the interiors of a store, our store a little bit to make them a little less overwhelming and easier to shop. A lot of this is well in flight. A lot of it'll take a little bit longer to fully come to fruition, but we're super excited about it. One of the things that we love even is that one of our very important wholesale customers, when they came in to see fall, they absolutely loved it. They bought into it. They loved what we were doing, and they actually upped their budget for their buy for us, which is a very strong indicator of what they think about the line. I think that's an early indicator.

Obviously, ultimately, the consumer is the one that votes, but you know, retailers that are great merchants, you know, their opinions tend to be pretty good indicators of where you're headed.

Yeah, absolutely. That's really great to hear, and I appreciate all the color. I'll pass it on.

Thanks a lot, Ethan.

Thank you. To allow everyone a chance to ask their question, we ask that everyone in the queue to please limit themselves to only one question and one follow-up. Again, please limit yourself to only one question and one follow-up to allow everyone a chance to ask a question. Our next question comes from the line of Mauricio Serna with UBS. Please proceed with your question.

Great. Good morning. Thanks for taking my question. I guess I'm just trying to understand from the guidance that you laid out for the year. I think it implies some acceleration, at least if you look at the ranges. I think like, you know, first being Q1 versus what you're projecting for the year. Maybe could you just help us reconcile that? Also, could you give us more details on, you know, what you're seeing on Lilly Pulitzer? I think, you know, you alluded to like a soft start of the year, maybe because of weather. How are you thinking about that business improving as the year progresses? Thank you.

Yeah. Mauricio, I think you're referring to comps. You accelerate a little bit in the guidance from. Part of it is February was extremely cold. We had, you know, February was not a great comp month, and it's really where, you know, Tommy Bahama has really overcome that, as Tom mentioned, with the West Coast business. Lilly has started a bit behind on comp and behind their initial plan on comp, but they are such East Coast centric, and East Coast is where weather patterns had. They don't have the West Coast offset. So with the weather normalizing, we really believe, you know, we'll have a little bit better comp because of that. We're seeing it more in March, especially at Tommy.

Then on the Lilly thing, I mean, it's the, you know, in February, as Scott mentioned, it was not a great comp month. Florida is an enormous part of Lilly's business all year, but especially in the spring. We did a really interesting look back where we looked at the weather patterns in Florida over the last, I don't know, seven or eight years, something like that. When it's cold in February, comps are weak. By cold, I mean, when the average temperature is colder than normal on a daily basis, the comps tend to be weak. When the weather is warmer than the normal on an average daily basis, the comps are good. This year we just didn't have it.

Lilly, you know, is so dependent on Florida, especially at that time of year, and the whole East Coast. They do a lot in the Northeast, as you know, from where you live. There was just so much snow up there that I think that had an impact on us. Of all of our brands, you know, Lilly is the warmest of a bunch of warm weather brands. I think we saw it not only in the financial results, but in terms of what was selling. The dress business, which, you know, in colder weather, dresses are gonna be less popular, was the weakest category. The strongest categories were things like pants and jackets that, you know, go better with cooler weather. We look at the product. We don't think we have any issue there.

We think, you know, the weather will turn and is turning, and we expect things to pick up, but we've obviously factored what we've seen to date into our forecast.

Got it. Very helpful. A couple of follow-ups maybe on the margins. First, on gross margin, I think you alluded to first quarter still being impacted with some promotions, I think, or some, like, you know, higher proportion of sales happening during promotional events. Like, for the full-year, I think it's like the opposite so or less promotions or trying to reconcile that. Specifically on Johnny Was, anything that you can tell us in terms of, like, how you're thinking about the margin outlook of this business for the year? Or maybe, I guess, like I said, more of a top line first recovery. How should we think about the inflection of that business or how much inflection we should see in 2026? Thank you.

I think Johnny Was, it's gonna be a little bit more of a gross margin story, which will get better after the first quarter. We still have some goods to clear and still had to have some, you know, little more promotions. The number of promotional days are expected to come way down. Our inventory levels are in really good shape. We think so part of the gross or the promotional cadence is, you know, Johnny Was will get less promotional as the year goes on and as, you know, we buy better, buy more in the right categories and buy appropriate levels, we think the amount of promotions we'll have to do is less.

For the year, we have Johnny Was gross margins maybe moving backwards slightly in Q1, but for the year, they move forward. That's kind of explaining part of the promotional comments that we had.

Got it, chief. Thanks so much.

Thank you.

Thank you, Mauricio.

Thank you. Our next question comes from the line of Joseph Civello with Truist Securities. Please proceed with your question.

Hey, guys. Thanks so much for taking my question. First one, just on the, you know, the inventory planning stuff that you've done with Johnny Was. I think you were talking about kind of porting that over to the other brands. Can you just talk about, you know, what we should be expecting there, I guess, near and long term, and what the impacts might be?

Yeah. We are porting it over really across the entire company. I think after Johnny Was, the next one up was Lilly, but they're several months behind Johnny Was, so the time period before they'll start to really see impact will be pushed out a bit too. Of the big brands, Tommy was the last, and they're really getting going on it now. There's this, it's probably really for Tommy more spring 2027 before you see anything. In Lilly, you'll get some probably in the later part of this year. The key things that I think it helps ultimately is the most important things, sales, margin, customer satisfaction. It's pretty good.

Joe, it's I think the potential to really transform the profitability of our business pretty materially is very real. I don't wanna put too much on 2026 just because of the timing of when this happened. But I think as we get into, you know, into 2027, we'll get some in 2026, but as we get into 2027, you'll see a lot more.

Got it. Sounds good. Just on the Lyons facility, I know that, you know, the financial benefits are further down the road, but can you talk about, like, the logistical lift you might get from having it closer to the core of the Tommy market?

Yeah. You know, right now, a lot of the East Coast store replenishment, a lot of East Coast e-commerce is being fulfilled from Auburn, Washington. So just having fulfilled closer to source will take a lot of the guesswork out of the retail replenishment and will be really replenishing what the stores really need. It will lead to once we have the rhythm to us being able to carry less inventory 'cause we'll have. You know, the individual stores can carry less knowing they can get replenished very quickly.

That's gonna be a huge benefit and one that, you know, we obviously gotta get up and running, and getting the right volumes in there and then getting the confidence level of the stores that they can, you know, cut back on their buffer stock and get replenished very quickly with the right things. We'll continue to add the amount of Tommy Bahama that goes in this facility as the facility ramps up.

Got it. Thanks so much, guys. Appreciate it.

Thank you.

Thanks, Jeff.

Thank you. Our next question comes from the line of Paul Lejuez with Citigroup. Please proceed with your question.

Thank you. It's Tracy Kogan filling in for Paul. I had two questions. The first, I think you guys mentioned it was traffic and conversion that were the issues in Q4, and I'm wondering which of the metrics has really changed and improved as you're talking about the improvement quarter-to-date. I think in your prepared remarks, you mentioned optimizing Lowe's distribution and channel mix and changing their pricing architecture. I was just hoping you could go into a little more detail on that. Thank you.

On the pricing architecture, it's really that same thing I was talking about in Johnny Was, where we've implemented a tool that helps us to do much more detailed analytics on what price points really work well from, I'm sure you're familiar with GMROI or gross margin return on investment. Looking at the business on a very granular basis and understanding the best places to invest our inventory dollars. The example I gave in Johnny Was was dresses in the $200-300 price point bucket, where historically, according to the data, we were a bit underinvested. We were overinvested in some other places, and it's really trying to adjust those, you know, those, I guess, imbalances, if you will, in the line.

When you know where you need to be, you can design into it. It's not like you know, you have to raise prices or cut prices to get there. You just, you know, design your future line into the price architecture that, you know, the analytics indicate will work best. Again, on the Johnny Was example, that finding came out, I guess, back in the summer, and we were able to action it at least to some degree, and it's working. There are a lot of others too, but that's the idea. It's basically, Tracy, about having better tools and processes. We've got great merchants across the company and across the country.

We've got, you know, just superb merchants, but it's about putting better processes and tools in their hands and letting them do their job better.

Thank you. On the quarter to date traffic conversion

What I would tell you is that, you know, the big star of the show has really been the average order value, which is a combination of both the average unit price and the unit per transaction, which the trend lines on those are really good. Traffic has been okay. You know, conversion has still been, you know, a little bit of a challenge, but the very strong positives I would say is the average order value growth. That's kind of the story.

Great. Thank you very much.

Okay. Thank you.

Thank you. We have reached the end of the question and answer session. I would like to turn the floor back over to CEO Tom Chubb for closing remarks.

Okay. Thank you, Jameela, and thank you for your interest, everybody. We look forward to talking to you again in June, and I hope all is well until then. Thank you.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Greetings, and welcome to Oxford Industries Third Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Brian Smith from Oxford. Thank you, and you may begin.

Thank you, and good afternoon. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC including the risk factors contained in our Form 10-K. We undertake no duty to update any forward-looking statements. During this call, we'll be discussing certain non-GAAP financial measures. You can find a reconciliation of non-GAAP to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website at oxfordinc.com. And now I'd like to introduce today's call participants. With me today are Tom Chubb, Chairman and CEO; and Scott Grassmyer, CFO and COO. Thank you for your attention. And now I'd like to turn the call over to Tom Chubb.

Good afternoon, and thank you for joining us today. As is typical for our third quarter, I'll keep my comments on Q3 relatively brief before turning to what we're seeing in the early weeks of the fourth quarter and how we are approaching the holiday season and the rest of the year. We are pleased with what we were able to accomplish during the third quarter with our financial results broadly in line with the expectations we set earlier in the year. The environment remained highly competitive and promotional, and the consumer continued to be selective with their discretionary spending, often requiring new and innovative product to catch our attention. Against that backdrop, our team stayed focused on our long-term priorities and executed well on the fundamentals of our strategy. Strong sales growth in both the Emerging Brands Group and Lilly Pulitzer offset declines at Tommy Bahama and Johnny Was. Total company comp sales were slightly positive. And while gross margins continue to reflect the pressures we've discussed in prior quarters related to tariffs, our underlying adjusted gross margin, absent that pressure, improved over last year's even in a highly promotional environment. In addition to the financial results, we made important progress on a number of key initiatives across the enterprise, starting with people, we were pleased to have realigned and strengthened our teams in Johnny Was and the Emerging Brands Group through a combination of internal promotions and hiring key executive talent from outside the company. Also at Johnny Was, we made significant progress with the business improvement plan we discussed last quarter. In Tommy Bahama, our bars and restaurants are a distinct competitive advantage, and we were pleased to have added 2 important restaurant openings during the quarter. In Lilly Pulitzer, we anniversaried last year's very successful Palm Beach Fashion show with a fashion show in Key West. Last year's event has helped fuel creative content and commercial success throughout 2025, and we expect this year's event to do the same for 2026. We also completed the renovation of our Worth Avenue Lilly Pulitzer flagship location in Palm Beach. Finally, we are in the final stages of construction of the new state-of-the-art fulfillment center that will be such an important asset to our direct-to-consumer businesses. None of these items will have immediate impact on our financial results, but are critical parts of the foundation of future success. As I previously mentioned, across the portfolio, performance varied by brand as it has for much of this year. The bright spot continued to be Lilly Pulitzer, where the brand again demonstrated a deep connection with its core consumer and delivered healthy growth in the quarter. Our Emerging Brands business also posted strong year-over-year sales gains, reflecting growing recognition, relevance, customer engagement and growth potential. Moving to Tommy Bahama. While our third quarter results did not meet our goals for the brand, we did see encouraging progress. Comps improved sequentially to down low single digits from down high single digits earlier in the year. We believe we've made meaningful headway in addressing key areas that contributed to softness early in the year, particularly around color assortment and completeness of the line, which led to disparate regional performance and softness in Florida, our most important market. There is still work to do, but we feel good about the adjustments made so far. At the same time, we continue to invest in the long-term health of the brand through thoughtful expansion of our retail and hospitality footprint. During the quarter, we reentered the important St. Armands Circle outside of Sarasota with a beautiful new full-service restaurant and retail store, which replaced our previous restaurant that was damaged and closed in 2024 due to a hurricane. This new location reinforces the strength of our hospitality model in one of our most important markets. We also opened a new Marlin Bar in the Big Island of Hawaii, further deepening our connection to a region that has been central to the Tommy Bahama brand for decades. Both locations are off to encouraging starts, and we believe they will be long-term assets for the brand. Turning to Johnny Was. We made several important changes during the quarter to strengthen the foundation of the brand and position it for long-term success. As we discussed last quarter, Johnny Was is an incredible brand with beautiful product, a loyal and engaged customer base and a hard-working, deeply dedicated team. To ensure the brand can fully capitalize on that potential, we have refreshed key leadership roles, including the promotion of Lisa Caser, our formal Chief Commercial Officer at Johnny Was, to lead the brand as President of Johnny Was. Lisa is an experienced business leader with over 25 years of leadership roles at Neiman Marcus, including 10 years as SVP, General Merchandising Manager of Women's ready-to-wear. We also made changes to the lead designer and Head of retail positions to bring sharper creative focus, strong merchandising discipline and more consistent execution across the business. Earlier in the year, we also engaged an outside specialist to help us assess the Johnny Was business and identify the actions needed to meaningfully improve profitability. That comprehensive project has now been largely completed, and we have begun executing against its recommendations with clear priorities around creative direction, merchandising and planning, marketing efficiency and retail performance. While we are still early in the process, we're encouraged by the focus, energy and alignment we are seeing across the team. We believe that the combination of refreshed leadership with a very capable incumbent team and a clear actionable plan will allow us to reinforce the fundamentals of the brand and unlock the substantial long-term opportunity we continue to see in Johnny Was. With that backdrop, let me turn to the fourth quarter and our early read on the holiday. As a reminder, our comps in the fourth quarter last year were flat and benefited from a post-election bounce. When evaluating the early results of the fourth quarter this year, it is clear that the softer start to the holiday season reflects a combination of tariff-related product limitations and a holiday period that has been more promotional across the industry compared with last year that made for a difficult environment, along with the more challenging comps than earlier in the year. Most significantly, our brands have experienced challenges in our product assortments that trace back to the tariff-related sourcing decisions made earlier in the year. When our brands were building their holiday and resort lines last spring, the tariff landscape was highly uncertain with the potential for substantial increases on certain China origin categories. As a result, we made difficult but prudent choices to reduce our exposure in categories heavily reliant on China, for example, sweaters and other cold weather product that are important at this time of year. Those decisions were appropriate given the information available at the time. However, they left us with assortments that were not as complete or as comprehensive as we would like for the holiday season. Sweaters in particular have historically been strong drivers of fourth quarter demand across our portfolio and our reduced presence in this category has been a meaningful headwind. At the same time, the holiday selling period has been more promotional than last year with consumers showing heightened sensitivity to value and a willingness to wait for deeper discounts. While our promotional cadence and depth were consistent with our brand-appropriate approach, many competitors entered the season earlier and more aggressively. That dynamic contributed to a slower start for us in the opening weeks of the quarter. At Lilly Pulitzer, our holiday promotions included curated gift with purchase events and a broader seasonal sale, both of which resonated well with our core consumer, and we saw strong engagement with many of our most giftable styles and capsules. Unfortunately, our successful gift with purchase events were somewhat limited due to high Chinese tariffs and the difficulty of shifting the production of these items elsewhere. Similarly, we identified that there were gaps in our assortments related to the tariff environment, particularly in novelty items and certain other seasonal products that could not be quickly moved out of China, which limited our ability to fully serve demand. We also leaned into our core programs to mitigate tariff exposure, which reduced the level of newness we might have otherwise offered. At Tommy Bahama, we built on themes introduced earlier in the year, offering a compelling mix of gift-ready items and cold weather seasonal product. But as with Lilly, many of the categories that historically carry momentum for us during holiday, especially sweaters and other cold weather essentials that are heavily China reliant were reduced as a result of the tariff uncertainty earlier in the year. Those gaps, coupled with a promotional marketplace that moved earlier and deeper than usual, created incremental pressure. Despite these challenges, we have seen continued encouraging response in our Tommy Bahama Boracay pants that we discussed last quarter. While the price point increased from $138 to $158, new product innovation has led to significant sell-throughs and the Boracay pant has played meaningfully into the holiday gifting mindset. This success also highlights some of the trends we have seen in the market where consumers are gravitating to versatile products that can be worn to work and casual events and are less discretionary than some other categories. At Johnny Was, the customer continues to connect most strongly with the unique artful product that defines the brand. Elevated embellished pieces, rich textures and vibrant color stories, again resonated with loyalists. But similar to our other brands, limitations in certain seasonal categories due to tariff-driven sourcing adjustments, along with heightened promotional intensity across the marketplace created a more challenging backdrop for converting that interest at the levels we had anticipated early in the season. While still small in absolute terms, our emerging brand group continues to be a meaningful source of energy and growth within the portfolio. Southern Tide, The Beaufort Bonnet Company and Duck Head have each built strong momentum this year, and we are seeing that momentum carry into the holiday season with a stronger start than what we have seen in our 3 larger brands. These brands benefit from exceptionally loyal customer bases, focused product stories and highly engaged teams and their performance is a testament to the opportunity we believe exists in each of them. As we continue to invest in their capabilities, particularly in product, marketing and retail expansion, we remain very encouraged by the role of the Emerging Brands Group can play in our long-term growth algorithm. Taken together, these early holiday trends reinforce what we observed throughout the year when we deliver fresh, differentiated product that aligns with our brand heritage, the customer responds. However, given today's promotional climate, achieving that response requires a more competitive value proposition. As a result. And as Scott will detail in a few minutes, we now expect our fourth quarter performance to land below our previous guidance, and we are revising our outlook for the remainder of the year. And that is our focus across the portfolio, concentrating on what makes each brand special and ensuring that what we put in front of the consumer inspires confidence, joy and a sense of possibility. That same focus has guided our product development and marketing plans throughout the year. It's why we have leaned into newness and innovation across our brands, and it's why we continue refining our offerings to match the customers' mindset heading into resort in the early spring period. While the environment remains dynamic, we are approaching the remainder of the year with clear-eyed realism. We recognize that the consumer continues to navigate uncertainty and that promotional intensity remains high, but our teams are executing with discipline, and we believe we are well positioned to meet the consumer where she is today while investing in the long-term strength and potential of our business through initiatives such as those I outlined at the beginning of the call. As we look ahead to fiscal 2026, we are approaching the year with a clear focus on improving profitability and with confidence in the levers we have already begun to put in place. We expect to begin realizing the benefit of cost reduction initiatives that we started during fiscal 2025, including efforts around indirect spend and other SG&A-related efficiencies across the enterprise. At Johnny Was, the significant merchandising and marketing work we undertook this year should begin to bear fruit, and we also expect to extend the merchandising efficiency project we piloted at Johnny Was to the other brands in our portfolio. In addition, we will continue to focus on input cost reductions and tariff mitigation as we refine our sourcing strategies. Capital expenditures will decline significantly as we complete our new fulfillment center in Lyon, Georgia, which will allow us to meaningfully reduce our debt levels. All of these actions position us well to make tangible progress on profitability while continuing to invest with discipline in the long-term strength of our brands. As always, I want to express my deep appreciation for our people across the enterprise. Their resilience, creativity and focus on our customer continue to be the foundation of everything we do. With that, I'll turn the call over to Scott for more detailed commentary on our updated financial outlook.

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. In the third quarter, our teams were able to deliver top and bottom line results within our previously issued guidance range. In the third quarter of fiscal 2025, consolidated net sales were $307 million compared to sales of $308 million in the third quarter of fiscal 2024 and within our guidance range of $295 million to $310 million. Our direct-to-consumer channels were up in total with a total company comp increase of 2%, which was in line with our guidance for the quarter. The direct-to-consumer increase was led by increased e-commerce sales of 5% and increased sales in our food and beverage and full-price brick-and-mortar locations of 3% and 1%, respectively. The increases in full-price brick-and-mortar were driven primarily by the addition of noncomp locations, with comps in our restaurant and full-price brick-and-mortar locations down slightly at 2% and 1%, respectively. Sales in our outlet locations were comparable to the prior year. Our increased direct-to-consumer sales were offset by decreased sales in the wholesale channel of 11%, driven primarily by decreases in off-price business. By brand, Lilly Pulitzer delivered another strong quarter with total sales increasing year-over-year, driven by double-digit growth in retail and high single-digit growth in e-commerce, partially offset by a decline in the wholesale channel. The positive comp sales at Lilly Pulitzer, along with positive comp sales and overall sales growth in our emerging brands businesses helped to offset the low single-digit negative comp at Tommy Bahama and high single-digit negative comp at Johnny Was that led to sales decreases in both businesses. Adjusted gross margin contracted 200 basis points to 61%, driven by approximately $8 million or 260 basis points of increased cost of goods sold from additional tariffs implemented in fiscal 2025, net of mitigation efforts and a change in sales mix with a higher proportion of net sales occurring during promotional and clearance events at Tommy Bahama and Lilly Pulitzer. These decreases were partially offset by lower freight cost to consumers due to improved carrier rates from contract renegotiations, a change in sales mix with wholesale sales representing a lower proportion of net sales and decreased freight rates associated with shipping our products from our vendors. Adjusted SG&A expenses increased 4% to $209 million compared to $201 million last year, with approximately 5% or approximately 70% of the increase due to increases in employment costs, occupancy costs and depreciation expenses due to the opening of 16 net new brick-and-mortar locations since the third quarter of fiscal 2024. This includes the 13 net new stores, including 3 Tommy Bahama Marlin Bars and 1 full-service restaurant opened in the first 9 months of 2025. We also incurred preopening expenses related to some planned new stores scheduled to open in the fourth quarter. The result of this yielded an $18 million adjusted operating loss or negative 5.8% operating margin compared to a 3% operating loss or negative 1.1% in the prior year. The decrease in adjusted operating income reflects the impact of our investments in a challenging consumer and macro environment. Moving beyond operating income. Our adjusted effective tax rate was 30.3% was higher than we anticipated due to certain discrete items that were amplified by our operating loss. Interest expense was $1 million higher compared to the third quarter of fiscal 2024, resulting from higher average debt levels. With all this, we ended with $0.92 of adjusted net loss per share. As a result of interim impairment assessments performed in the third quarter of fiscal 2025, the company recognized noncash impairment charges totaling $61 million, primarily related to the Johnny Was trademark. The impairment charges for Johnny Was reflect the impact of organizational realignment activities in the third quarter of 2025, including changes to the Johnny Was executive team that Tom discussed. Revised future projections based on Johnny Was recent negative trends in net sales and operating results and challenges in mitigating elevated tariffs. I'll now move on to our balance sheet, beginning with inventory. During the third quarter of fiscal 2025, inventory increased $1 million or 1% on a LIFO basis and $6 million or 3% on a FIFO basis compared to the third quarter of 2024, with inventory increasing primarily as a result of $4 million of additional costs capitalized into inventory related to the U.S. tariff implemented in 2025. We ended the quarter with long-term debt of $140 million compared to $81 million at the end of the second quarter and $31 million at the end of fiscal 2024. Our debt historically increases during the third quarter, primarily due to seasonal fluctuations in cash flow with lower earnings during the third quarter, resulting in increased cash needs. Cash flow from operations provided $70 million in the first 9 months of fiscal 2025 compared to $104 million in the first 9 months of fiscal 2024, driven primarily by lower net earnings and changes in working capital needs. We also had $55 million of share repurchases, capital expenditures of $93 million, primarily related to Lyons, Georgia distribution center project, which remains on track for completion and go live in early 2026 and the addition of new brick-and-mortar locations and $32 million of dividends that led to an increase in our long-term debt balance since the beginning of the year. I'll now spend some time on our updated outlook for 2025. Comp sales figures in the fourth quarter to date are negative in the mid-single-digit range, which is lower than our previous expectations of flat to low single-digit positive comps. While our average order value has increased nicely, traffic has been mixed, but mostly down, and conversion has been very challenging across our portfolio. Due to the slow start to the holiday season, we are revising our guidance for the remainder of the year with the expectation that the mid-single-digit comp will continue for the remainder of the year. For the full year, net sales are expected to be between $1.47 billion and $1.49 billion, reflecting a decline of 2% to 3% compared to sales of $1.52 billion in fiscal 2024. Our revised sales plan for the full year of '25 includes decreases in our Tommy Bahama and Johnny West segments, driven primarily by negative comps, partially offset by growth in our Lilly Pulitzer and Emerging Brands segments, driven by positive comps and new store locations. By distribution channel, the sales plan consists of a low single-digit decrease in most channels, including wholesale, full-price retail, e-commerce and outlets, partially offset by a low to mid-single-digit increase in our food and beverage channel that is benefiting from the addition of 3 new Marlin Bar locations and 1 new full-service restaurant opened during the year. For fiscal 2025, our current annual guidance reflects a net tariff impact of approximately $25 million to $30 million or approximately $1.25 to $1.50 per share. While tariffs represent the primary driver of margin contraction this year, we also expect continued promotional activity across our brands to weigh on margins as consumers remain highly responsive to value and deal-oriented shopping in the current macroeconomic environment. We expect our gross margins for the year to contract by approximately 200 basis points. In addition to lower sales and gross margins, we expect SG&A to grow in the mid-single-digit range, primarily due to the impact of our recent continued investments in our businesses, including the annualization of incremental SG&A from the 30 net new locations added during fiscal 2024, incremental SG&A related to the addition of approximately 15 net new locations this year, including 3 new Tommy Bahama Marlin bars and a new full-service restaurant. Also within operating income, we expect lower royalties and other income of approximately $3 million in fiscal 2025. Additionally, our fiscal 2025 guidance includes the unfavorable impact of nonoperating items, including $7 million of interest expense compared to $2 million in 2024 or an approximate $0.20 to $0.25 incremental EPS impact. Increased debt levels in fiscal 2025 are due to our continued capital expenditures on the Lyons, Georgia distribution center, technology investments and return of capital to shareholders exceeding cash flow from operations. We also expect a higher adjusted effective tax rate of approximately 25% compared to 20.9% in 2024. The higher tax rate is primarily a result of a significant change in the impact that our annual stock vesting had on income tax expense in 2025 compared to 2024. We anticipate the higher tax rate will result in an approximate $0.15 to $0.20 per share impact. Considering all these items, including the $1.25 to $1.50 per share impact from tariffs, higher interest expense and a higher tax rate, we have revised our guidance and expect 2025 adjusted EPS to be between $2.20 and $2.40 versus adjusted EPS of $6.68 last year. The biggest drivers of the decrease in EPS guidance includes a reduction of our fourth quarter comp assumption from low single-digit positive comps to a mid-single-digit negative comp. A decrease in royalty and other income from lower order expectations from key licensing partners who customers have elevated inventory levels that will lead to a shift in orders from Q4 to Q1 of next year; an increase in SG&A, primarily resulting from increased consulting costs related to our ongoing projects to improve operating results and some additional costs related to our new Lyons, Georgia distribution center. In the fourth quarter of 2025, we expect sales of $365 million to $385 million compared to sales of $391 million in the fourth quarter of 2024. This primarily reflects our mid-single-digit negative comp assumption and decreased wholesale sales in the low single-digit range, partially offset by the impact from noncomp stores. We also expect gross margin to contract approximately 300 basis points, primarily driven by increased tariffs and a higher proportion of net sales occurring during promotional and clearance events. SG&A to grow in the low to mid-single-digit range, primarily related to the new store locations, increased interest expense of $1 million, decreased royalty and other income of $1 million and an effective tax rate of approximately 26%. We expect this to result in fourth quarter adjusted EPS between $0 and $0.20 compared to $1.37 last year. I will now discuss our CapEx outlook for the remainder of the year. Consistent with our prior guidance, we expect capital expenditures for the year to be approximately $120 million compared to a total of $134 million in fiscal 2024. The remaining capital expenditures relate to completing the new distribution center and the execution of our current pipeline of new stores at Tommy Bahama and Lilly Pulitzer. We expect this elevated capital expenditure level to moderate significantly in 2026 and beyond after the completion of the Lions Georgia project. Consistent with the seasonal nature of our business, we expect a modest decrease in outstanding borrowings in the fourth quarter. Thank you for your time today, and we will now turn the call over for questions. Bond?

[Operator Instructions] Our first question comes from Ashley Owens with KeyBanc Capital Markets.

So just first and foremost, I appreciate all the color on what was exactly a gap within each of the banners in terms of assortment for the holiday. But just moving forward as we navigate the quarter, just how meaningful would you expect this to be for the upcoming season? Is it something that's been corrected? Or are you observing some disruption still? Just want to understand how much of holiday is now fully aligned versus where you originally planned? And then maybe on that, I know China is complex right now and that it might be ironing out a little bit, but would ask if this gap -- is this shifting your viewpoint or sourcing strategy moving forward? Would you try to diversify further, place orders further in advance? Just any color there.

Yes. I think the big thing and while we did give a lot of detail, one thing that we didn't really call out specifically was that it's really what's on the floor right now that most impacted some of our sourcing decisions. And the reason is at the time that we were placing the buys for what's on the floor right now corresponded with that brief period of time where the duty or the tariff on China was going to be 145%. When it's been 20% or 27% or whatever, that's something that we could make a conscious decision to just stay in China with a particular product if we needed to and just try to take various routes to mitigate that tariff. When we were looking at 145%, which that's off the table at this point, but that was right when we were placing the buys for what's on the floor now. lots of stuff we were able to move out of China. Tommy and Lilly are mostly out of China, if not completely. But sweaters are the one category, and there are a couple of other ones. Sweater is the big one, but there are just not a lot of -- haven't historically been great resources that we could go to outside of China. So what we decided to do, Ashley, and at the time, I think it was the right call. We knew we couldn't bear that much tariff. So we really cut back the sweater assortment and tried to fill it in with other products. You look at our assortment right now, and you wish you had the sweaters. And that's really what we were talking about. So by the time you get to spring, that had settled down a lot. The tariff stuff is still a little bit up in the air, but it settled down a lot, and we were able to either move the stuff or know that it was going to come in at a tariff rate that we could deal with otherwise. So for spring, I don't think we have the same kind of impacts. We still have tariff issues that we have to deal with, but they're not going to impact the assortment the way that they have for this season. Does that help?

Yes, that's super helpful. Just a couple of other questions really quickly. So I think you mentioned earlier that competitors were more aggressive with promotions for holiday and also earlier, which created that tougher backdrop. Any insight as to what you're seeing in the marketplace now in terms of that and if the intensity has moderated, but also how that's helping to inform your promo strategy for the balance of the year? And then additionally, just following your leadership refresh and then the external assessment on Johnny Was. Would be curious as to what emerged as the key priorities you're now focused on? And then also as you look out to 2026, key objectives for the brand? And should we be thinking of this as another period of stabilization? Or any color you could provide us on some of the road map or some of the key building blocks for stabilizing Johnny?

Okay. So with respect to the promotional sort of intensity out there, I would say right now, it still feels quite high, but we're a little bit in that in between time between the Black Friday, Cyber Monday weekend and the final stretch, and those are usually the most promotional times. I don't think it's really retracted, but I'm not sure it's taken another step up yet but wouldn't be surprised to see that happen. And we're going to try to be responsive to that in brand-appropriate ways. I think the catchword in all the brands is to stay nimble. We do want to make sure that we're not totally selling out our brands, but we're also thinking about things that we can do to respond to the marketplace. The one other thing I'll point out, and this is this calendar that we have this year where there are 27 days between Thanksgiving and Christmas and Christmas falls on a Thursday. The last time we had that calendar was in 2014. And that year, the business sort of came very late. If you looked at the sales build through the Thanksgiving to Christmas selling period, it really came on late. Last year, if you remember, you had Christmas on Wednesday. So this year, they got an additional weekday to shop, which could be meaningful. And also, it allows us to cut off e-com shipments probably on Saturday or in some cases, even Sunday and still have people feeling good that they're going to get them by Christmas, while last year, that was mostly on Friday that we were cutting off. So there are some things there that we kind of built the current trajectory into our forecast, but I think there's some reason to hope that it could -- the season could rally a bit. I don't think it's going to be a great one, but there are some differences there that are worth noting. And then on the Johnny Was plan, the -- I will say a couple of things that the game plan was developed by the team at Johnny Was with some outside assistance, but it's very much the team's plan. Lisa Kaiser, who's now the President of Johnny Was, was part of that team. She's relatively new to Johnny Was, but she's been with us for several months. She was the Chief Commercial Officer before, and she was very, very much central to the development of that plan. So the refreshment of the leadership does not entail, I would say, any change in the direction of the plan that we've been working on. And as we talked about last quarter, the keys to that are merchandising effectiveness, which is about having better assortments that hit -- have the right level of investment in the right price points, the right product categories, getting that to the stores at the right time and in the right store level assortments. And all of that will drive, we believe, some incremental sales versus what we would have otherwise had and also improve the margins, improve full price sell-through and ultimately gross margin. And then the other -- 2 other big areas of focus by the team, and again, it's the team's plan, really the same team. We've just added a few more people and elevated a few people, including Lisa, who we're very excited about. But the second element is about marketing efficiency. And that's really just more effectively spending the dollars that we spend to drive better results. And some of that, we've already started to kick in. And I will say what we're seeing to date is encouraging in that we're actually getting, I would call it, better efficiency out of the spend that we've done in the last month or so, maybe a little longer than that. And then the last thing is about improving the go-to-market process and calendar, and that's something that the whole team led by Lisa is they're very bought into that. Lisa is a big believer in that kind of discipline. So I think this -- the refreshment of the leadership team and the elevation doesn't change the plan because they all developed the plan, but it enhances our ability to execute it well.

Great. Appreciate all the information, and I'll pass it along, but best of luck.

Our next question comes from Janine Stichter with BTIG.

I wanted to dig into wholesale a little bit. I know it's a relatively smaller piece of the business, but just curious if you can share what's going on there. It sounds like your wholesale partners are being a bit more cautious with orders, but there's maybe a little bit more inventory in the channel. And then I think you mentioned that off-price was going to be down. Is that a strategic plan? And maybe just elaborate on what's going on there.

I think on the -- overall on the wholesale, I think it is a level of concern and caution by the retailers. And I would say most, especially the specialty retailers that are a big part of our wholesale base. And during uncertain times, they tend to pull back a bit, and I think we're seeing that now. And Scott, I don't know if you want to elaborate on the off-price situation a bit.

Yes. Yes, we did have less inventory that needed to be liquidated through those channels. So we are trying to keep our owner inventory and hopefully, we'll continue to have less that we have to put through those channels.

Got it. And then just thinking through the tariffs, as you're just now seeing the impact of the products that you were planning, I guess, in April or May when the China tariffs were 145%, is the Q4 what we should think of as a peak headwind from tariffs? Or how much should we think about continuing into the first quarter of next year?

Well, I think in terms of it -- the impact it had on our product assortment, I think it is peak. I think as we get into spring, we were able to make the product that we wanted to make it somewhere that was a manageable level of tariff. In terms of the impact, the financial impact of tariffs, remember, we didn't have them during the first quarter of last year. really, they didn't really kick in until later in the year. So first quarter, you're not going apples-to-apples. And then as you get later in the year, you start to lap the tariffs. I don't know if you want to add.

Yes, yes. We accelerated a lot of products early in the year, knowing that tariffs were going to be coming or fearful they are going to be coming. So we were able to most of the first quarter had very, very minimal. Now we go into first quarter of next year, everything will have some tariff on it, but we will have some price increases to at least help mitigate that impact. As we get later in the year, we'll be going apples-to-apples with tariffs and hopefully have a little bit more mitigation price-wise as the year moves on.

Our next question comes from Joseph Civello with Truist Securities.

Following up on wholesale a bit, I understand the general cautious tone from retail partners. But can you give any incremental color on your sort of competitive positioning within the channel and maybe as we get past the tariff pressures on inventory and stuff like that, that you're facing right now?

Well, I think through third quarter, our relative performance to the extent we know, and we don't always have perfect information, but I think we performed well, and I don't think we -- for the -- overall, I would say, well, there were small pockets where maybe that was not the case. But I would say, overall, our performance was quite good on the retail floor. For the fourth quarter and the holiday, I think it's too early to know for sure. We don't have enough data, but my hunch is that we're going to continue to perform well relative to the rest of the floor, and it's more about the general caution.

Got it. Makes sense. And then if we could also just get a little bit more color on thoughts around price increases as we go through the spring, which I believe is like the original trajectory you're looking at?

Yes. We do have some price increases in for the fall holiday. period, but there will be more in the spring. But again, we'll have the full tariff load coming in that inventory. And then we're looking at next fall pricing on are there any adjustments we -- additional adjustments we need to make. So I think there will be -- once we get out the early part of next year, the pricing should -- the goal is to have it mitigate the tariff dollars. I don't think we'll get the percentage quite mitigated, but the dollars once we get out of the early part of the year. The goal is to have the pricing mitigate the tariff dollars.

Our next question comes from Paul Lejuez with Citigroup.

It's Tracy Kogan filling in for Paul. I had a question about what you're seeing quarter-to-date. And outside of the key sweater category, can you talk about the trends there in some of those other categories and also talk about trends by brand quarter-to-date. Is it pretty broad-based weakness you're seeing across the brands? Or is there a big deviation of one brand or the other?

Sure. Thank you, Tracy. Well, I would say that -- and we talked about this in the prepared remarks, but the big 3 brands are all relatively weak at the moment. And the smaller brands are still sort of humming along. They were plus 17% in the third quarter, and they're continuing to have a strong fourth quarter, while the big brands are where we're really seeing the softness. And then in terms of product, we also talked about that a little bit. And I think in Lilly, we're -- because of the China tariff situation and the threat of 145%, China is where we make a lot of our more embellished kind of novelty type stuff, things with sparkles and [indiscernible] and bows and that kind of stuff. And so we've just got less of that stuff. And so the consumer is almost being forced into some things that -- I mean, Lilly is never basic product that within the Lilly spectrum are a little more tame. And then in Tommy Bahama, we've actually seen very good performance in things like the Boracay pant which is basically a Chino. It's a really great one, really nice one, but it's a chino pant. And that, as we talked about third quarter and again this quarter, we introduced a new one or I say third quarter, second quarter. We introduced it earlier in the year. It's at 158 versus 138. It does have some new features and benefits, but it's sold just incredibly well. And actually, we're selling a lot more of them than we sold the old one last year. And then also things like long sweet sleeve wovens are performing well, some of the second layer knits. And I think the kind of theme to a lot of those things is versatility, things that can be worn on a lot of different use occasions. But we'll see more as the season develops, Tracy.

Our next question comes from Mauricio Serna with UBS.

I guess I understand now in this fourth quarter, you're experiencing some assortment issues that's related to the sweaters and the move out of China for that -- for this particular season. But as you think about the spring 2026 season, how are you thinking about your assortment, how ready you are in terms of different -- the 3 big brands, I guess, and the potential for maybe after getting through this bit of a hiccup in Q4, maybe having stronger results in the first half of next year?

I think the challenges to the assortment were really mostly for what's on the floor right now. I think as we get into spring, by the time we were placing those buys the 145% tariff was off the table and/or we had found other places to make things. So I don't think we'll have that challenge so much in the spring. As Scott mentioned a minute ago, the tariff issue for the spring will just be that this year we will have tariffs, whereas in spring of last year, we didn't really have them yet because that been implemented and/or we were pulled in inventory ahead of them.

Got it. And just a reminder, what kind of price increase are you planning for Spring '26 to offset the tariffs?

Yes. It's kind of varying, but it's ranging from 4 to say 8%, but some of it, the ones that are more in the 8% or more of the -- it's more a little more elevated in mix. So I think for the tariff piece of it around 4 which kind of offsets the dollar impact. Yes. Yes, not quite the margin impact, but the dollar impact.

This now concludes our question-and-answer session. I would like to turn the call back over to Tom Chubb for closing comments.

Thanks to all of you very much for your interest. We look forward to talking to you again in March. And until then, I hope you have a happy holiday season.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines, and have a wonderful day.