Oxford Industries Posts 4% Drop in Q2

Key Points

• Revenue for the quarter was $403 million, down 4.0% year over year but within management’s guidance range.

• Adjusted earnings per share fell to $1.26, a 54.5% decrease year over year, but exceeded the guidance provided by management.

• Quarterly dividend increased 2.99% to $0.69 per share compared to Q2 FY2024, inventory grew 19% compared to the end of Q2 FY2024, reflecting ongoing tariff mitigation efforts.

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Oxford Industries (NYSE:OXM), known for lifestyle apparel brands such as Tommy Bahama and Lilly Pulitzer, reported results for Q2 FY2025 on September 10, 2025. The company delivered revenue and adjusted earnings per share within or above its projected ranges, despite year-over-year declines in most key financial measures. The quarter was marked by persistent pressure from tariffs, inventory build-up, and higher operating expenses, but also by early signs of sales stability in Q3 FY2025.

Business Overview and Strategic Priorities

Oxford Industries is an apparel company featuring well-known brands that focus on lifestyle and leisure, including Tommy Bahama, Lilly Pulitzer, and Johnny Was. The company operates with a dual focus on consumer-facing direct-to-consumer sales—through its own stores, e-commerce, and food and beverage operations—as well as a wholesale segment serving department stores and specialty retailers.

Strengthening brand identity is a central focus. Oxford Industries invests heavily in marketing to sustain consumer loyalty and promote a premium image, which supports higher price points. The direct-to-consumer channel is especially important, as it provides more control over the customer experience and supports profitability. Effective supply chain management is also a top priority, especially due to ongoing tariffs and concentration of suppliers in key Asian markets. Economic conditions, including changes in consumer spending and inflation, remain key factors influencing the company’s performance.

Quarter Highlights: Financials, Operations, and Brand Performance

Quarterly revenue landed at $403 million for Q2 FY2025, a 4% decline from the prior year, but within management’s projected range of $395 million to $415 million. Adjusted earnings per share fell to $1.26 from $2.77 year over year, but topped the company’s $1.05–$1.25 guidance. Gross margin, a measure of profitability after accounting for cost of goods sold, declined to 61.7% from 63.3% on an adjusted basis. This margin pressure stemmed mainly from higher tariffs, but actions like sourcing diversification and early product receipts helped limit the impact. Additional tariffs raised costs by approximately $9 million, less than the $15 million management had forecasted.

The adjusted operating margin decreased to 7.0% from 13.5%. Higher selling, general, and administrative (SG&A) expenses—up 4.9% year over year—outpaced sales growth. SG&A cost increases were driven by new store openings and higher employment expenses. Oxford Industries ended the quarter with net debt of $81 million, compared to no debt a year ago, and cash flow from operations in the first half of FY2025 dropped to $80 million from $122 million in the first half of FY2024. Inventory rose 19% on a LIFO basis, in part due to front-loaded purchases to get ahead of tariff increases, posing possible risk if sales remain soft.

Breaking down the brand performance, Tommy Bahama saw sales fall 6.6% to $229.0 million, and operating income dropped almost 35 %. Lilly Pulitzer experienced a slight 1.5% sales decline with a smaller profit decrease than other segments. Johnny Was sales fell 9.7% year over year and the segment swung to a loss. Emerging Brands was the only segment with sales growth ( 17.0%), though operating margin remained in the single digits. Direct-to-consumer sales remained the dominant channel at $292 million, down 4% year over year. Wholesale revenue was $61 million, down 6.6% for Tommy Bahama net sales, consistent with the company’s broader strategy to focus efforts on more profitable direct channels.

On tariffs, management reported moderate success with mitigation steps. Approximately half of the forecasted $80 million full-year tariff exposure for FY2025 is already mitigated by strategies such as faster inventory receipts, supply diversification, and some price adjustments. Despite these efforts, the company still expects tariffs to weigh on full-year results.

Dividend payments increased 2.99% compared to Q2 FY2024, with a quarterly cash dividend of $0.69 per share declared. This move underscores Oxford Industries’ ongoing capital return approach even as cash flow and profitability declined. Interest expense also rose sharply due to higher average debt stemming from capital expenditures, extra inventory, and prior share repurchases. The effective tax rate increased to 30.1% from 22.5% compared to Q2 FY2024, with discrete stock compensation impacts denting net earnings.

Looking Ahead: Guidance and Investor Watchpoints

Management affirmed its full-year guidance. Net sales for FY2025 are projected at $1.475 billion to $1.515 billion, compared to $1.52 billion the prior year. Adjusted earnings per share guidance is $2.80 to $3.20 for FY2025, about half of the $6.68 reported last year. Gross margin is expected to remain under pressure, with a net tariff impact of $25 million to $35 million in FY2025. Third quarter guidance projects sales between $295 million and $310 million for Q3 FY2025, with adjusted earnings per share ranging from a loss of $1.05 to a loss of $0.85 for Q3 FY2025, both reflecting continued cost and sales headwinds.

Investors should pay close attention to further developments in tariffs, inventory management, and cash generation. Management notes that early Q3 FY2025 comparable sales are tracking positively in the low single digits, suggesting potential for stabilization ahead. Still, risks remain for profitability if consumer purchasing does not rebound, especially given the higher inventory levels. The impact of tariffs, rising SG&A expenses, and underperformance at the Johnny Was segment will be key watchpoints heading into the second half of FY2025.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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Motley Fool Markets Team is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. The Motley Fool takes ultimate responsibility for the content of these articles. Motley Fool Markets Team cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool recommends Oxford Industries. The Motley Fool has a disclosure policy.