牛津工业 (OXM) 2026财年第二季度业绩电话会议：因Lilly Pulitzer走弱下调业绩指引

Oxford Industries（OXM）公布2026财年第二季度销售额下滑，但调整后盈利能力提高。Tommy Bahama实现了正向可比销售额增长，而Lilly Pulitzer的持续疲软促使管理层下调了全年销售额和调整后每股收益（EPS）指引。

核心要点

• 合并净销售额从4.03亿美元降至3.94亿美元。公司可比销售额下降1%，其中零售额下降3%，电子商务销售额持平。
• 受产品组合、采购和定价调整、初始加价率提高以及折扣渠道批发销售减少的支撑，调整后毛利率扩大140个基点至63.1%。
• 调整后EBITDA从4300万美元增加到4500万美元，利润率从10.7%提升至11.4%。调整后每股收益为1.34美元。
• Tommy Bahama实现了低单位数的可比销售额增长，其中佛罗里达州恢复了正向可比销售额。Lilly Pulitzer则录得中单位数的负可比销售额。
• 鉴于Lilly Pulitzer面临的挑战以及审慎的消费者情绪，管理层将2026财年销售额指引下调至14.3亿-14.7亿美元，调整后每股收益指引下调至1.60-2.00美元。
• 在经营现金流、资本支出减少和关税退税的推动下，长期债务从第一季度末的1.43亿美元降至7300万美元。

核心财务数据

公司就先前支付的关税将销售成本减少了4200万美元，并在本季度内或此后不久收到了实质上的全部余额。该影响已被排除在调整后业绩之外。

业务与经营业绩

Tommy Bahama

Tommy Bahama低单位数的正向DTC（直接面对消费者）可比销售额部分抵消了其他业务的疲软。在经历了几季度的软着陆后，佛罗里达州恢复了正向可比销售额。管理层表示男装和女装品类均有增长，其中女装表现好于男装。

批发销售额下滑，主要是由于折扣清仓活动减少。管理层预计Tommy Bahama的全年可比销售额将保持微幅正增长。

Lilly Pulitzer

Lilly Pulitzer仍是品牌组合中的主要承压点，录得中单位数的负可比销售额以及较低的折扣批发销售额。管理层将这一疲软主要归因于产品组合和营销问题，而非对品牌广泛失去信心。

公司将过多库存从入门价格段转移到了较高价格的商品上。今年售价低于200美元的连衣裙约占款式的35%，低于去年的约一半。管理层计划恢复更平衡的价格架构，同时保留在更高价位上的部分拓展。

产品交付周期意味着2027年春季将是Oxford能够大幅重塑完整产品组合的第一个季度。这次重置将解决价格架构、印花/图案与色彩的平衡、适用场合以及新品与延续款的比例问题。在2026财年的剩余时间里，计划推出更有针对性的促销活动，以提升互动和库存动销率。

Johnny Was与新兴品牌

Johnny Was通过提高毛利率、强化库存管理、减少促销和严格控制SG&A，大幅增加了EBITDA。管理层将提高盈利能力——而非短期销售额增长——确定为扭亏计划的核心目标。

在新兴品牌中，管理层指出Southern Tide是主要落后者。Oxford已任命了新的品牌负责人，并在整个集团范围内整合了财务、规划和运营监督。

资产负债表与效率举措

按后进先出法（LIFO）计算，库存减少了2000万美元，降幅为12%。按先进先出法（FIFO）计算，库存减少了900万美元，降幅为4%，主要受新兴品牌、Lilly Pulitzer和Johnny Was库存减少的推动。

Oxford已启动一项全公司范围的审查，重点是在未来几年简化运营、提高效率并提升营业利润率。举措包括提高位于佐治亚州莱昂斯（Lyons, Georgia）的自动化配送中心的利用率、简化技术栈、提升数据分析和AI能力，以及优化门店布局。

管理层指引

修订后的计划假设Lilly Pulitzer和Johnny Was的销售额有所下降，但被Tommy Bahama和新兴品牌的增长部分抵消。按渠道划分，管理层预计DTC将出现低单位数下滑，批发销售将出现高单位数下降，但部分被低双位数的餐饮业务增长所抵消。

对于第三季度，Oxford预计：

• 销售额为2.80亿-3.00亿美元，上年同期为3.07亿美元。
• 调整后每股亏损为1.40-1.20美元，上年同期每股亏损0.92美元。
• 毛利率扩大约100个基点。
• SG&A呈低单位数增长。
• 有效税率约为24%。

管理层还预计第四季度毛利率将改善约100个基点。其第四季度计划假设可比销售额在相对持平至微幅正增长之间，部分受到Lilly Pulitzer促销活动以及相比上年关税相关商品采购中断带来的较低基数的支撑。

风险与关注领域

• 鉴于在2027年春季之前无法进行大幅度的产品重置，Lilly Pulitzer的产品组合和营销问题预计将对2026财年造成拖累。
• Lilly Pulitzer更多的促销活动可能会对实际售价造成压力，不过管理层预计更高的初始加价和渠道组合将抵消其对毛利率的影响。
• 管理层指出，消费者情绪转弱和旅行成本上升对可选服装支出构成了压力。
• 该展望假设现行的301条款关税税率在2026财年剩余时间内继续有效。由于库存接收和销售时点的关系，关税的进一步增加将主要影响未来期间。
• 本季度截至目前的可比销售额微幅为负，但管理层表示，促销时机和较晚的美国劳动节假期对季度初期造成了显着的噪音干扰。

分析师问答亮点

• Tommy Bahama发展势头：管理层强调了佛罗里达州业绩改善以及女装增长强于男装。预计全年可比销售额将取得微幅正增长。
• Lilly Pulitzer复苏时机：2027年春季是融入完整产品组合重置的第一个季度。度假系列商品可能会更早提供迹象，而上年与关税相关的产品缺口可能会在第四季度带来一些上涨空间。
• 门店转型：在管理层认为当地品牌知名度和门店经济效益更有利于Lilly的地方，精选的Johnny Was和Southern Tide门店正被改造为Lilly Pulitzer门店。该公司表示，尽管目前存在疲软，Lilly Pulitzer仍保持盈利。
• 毛利率信心：预计更高的初始加价和较低的批发比例将中和甚至超额抵消Lilly Pulitzer促销节奏加快的影响。
• 运费成本：来自亚洲的进口集装箱成本略有上升，但重新谈判的出港包裹合同提供了部分抵消。管理层认为整体运费影响并不重大。

业绩电话会议完整文字记录

完整财报电话会议逐字稿

管理层陈述

Operator

Greetings, and welcome to the Oxford Industries' Second Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Brian Smith. Please go ahead.

Brian Smith

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 financial conditions 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 will 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 our Investor Relations tab at 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 I can turn the call over to Tom Chubb.

Thomas Chubb

Thank you, Brian. Good afternoon and thank you for joining us. I'm pleased to be here today to discuss our second quarter results, the performance of our brands, and our outlook for the balance of fiscal 2026. Overall, second quarter results were within our expectations, highlighted by year-over-year adjusted earnings per share growth and a low single-digit comparable sales gain at Tommy Bahama. We also delivered meaningful adjusted gross margin expansion despite a higher level of promotional activity, reflecting the progress our teams have made on assortment, sourcing, and pricing across the portfolio.

The strong cash flow we generated enabled us to make meaningful progress reducing debt in the second quarter. Refunds of previously paid tariffs contributed to that reduction. Maintaining a strong balance sheet and generating cash that can be deployed thoughtfully remained important priorities for us. Scott will provide more detail on our cash flow and balance sheet performance.

Tommy Bahama's second quarter results were consistent with our expectations. As our largest brand, its positive comparable sales growth provided important support to the overall portfolio and helped offset pressure elsewhere in the business. We were also encouraged by a return to positive comparable sales in Florida, a key market for the brand that had experienced softer results in recent periods. We are pleased with the consistency of the brand's performance and remain focused on sustaining that momentum through disciplined merchandising, marketing, and operating execution.

While we continue to deliver positive results at Tommy Bahama, performance at Lilly Pulitzer remained weak in the second quarter, and our outlook for the brand for the balance of the year is now below what we anticipated at the end of the first quarter. As we discussed on our first quarter call, Lilly Pulitzer entered the quarter with several product and marketing challenges. The core problem is the assortment, with the key issue being that we shifted far too much of our inventory investment out of our entry price points to higher price points. Second quarter results and the trends we are currently seeing indicate that those challenges have been more significant than we originally anticipated. We are responding with actions aimed at both near-term performance and the longer-term health of the brand.

Because of our product development lead times, spring 2027 is the first season in which we can substantially reshape the full assortment. In the meantime, we are refining our marketing and messaging, adjusting the promotional cadence, and managing inventory and expenses more tightly. Given current trends, we expect Lilly Pulitzer to be more promotional during the balance of the year. We will remain strategic and disciplined, using targeted promotional activity to support customer engagement and inventory sell-through while protecting the long-term integrity of the brand.

Promotions are 1 lever, but lasting improvement will also require stronger product relevance, marketing effectiveness, and execution. We are laser-focused on delivering these requirements. For spring 2027, our work is centered on 4 areas: our pricing architecture strategy, balance of print, pattern, and color, mix of intended use occasions between social and casual, and the proportion of new versus continuing styles. These assortment changes will not drive a positive trend change in fiscal 2026, but we believe they will create a more balanced and compelling assortment and better position Lilly Pulitzer for improved performance beginning with the spring 2027 season.

We remain confident in Lilly Pulitzer's long-term potential. The brand has a clear point of view, a strong emotional connection with its customer, and meaningful opportunities for improvement. That confidence does not lessen the urgency of the current situation. We are focused on addressing the issues directly and returning Lilly Pulitzer to the level of performance we expect from the brand.

At Johnny Was, we continue to make progress on the turnaround plan. The brand significantly increased EBITDA during the second quarter, driven by higher gross margin resulting from tighter inventory management and fewer promotions, together with disciplined SG&A cost management. There is still work to do, but we are encouraged by the improvement in profitability. Stepping back, weaker consumer sentiment has added pressure to discretionary demand. Our customers, particularly at Tommy Bahama and Lilly Pulitzer, tend to be active travelers, and although they continue to travel, higher airfare, lodging, and other travel costs may be leaving less room in their discretionary budgets for apparel. Even so, the steady performance at Tommy Bahama reinforces that compelling product and consistent execution can still produce solid results in this environment.

Our responsibility is to deliver that level of product relevance and execution more consistently across the portfolio. The continued softness at Lilly Pulitzer, including the impact of a more promotional posture for the balance of the year, together with softer demand in certain other parts of the portfolio, led us to lower our top and bottom line guidance for the remainder of the year. At Lilly Pulitzer, the issues are primarily assortment and marketing related, while the pressure elsewhere in the business is more closely tied to a more cautious, discerning consumer. We believe the updated guidance represents a prudent assessment of current business trends, the macro environment, and the actions we expect to take. Scott will provide more detail on our revised outlook and the assumptions underlying it.

Against this backdrop, our priorities are clear: sustain the positive momentum at Tommy Bahama, address the assortment and marketing issues at Lilly Pulitzer, and build on the profitability improvement at Johnny Was. We are managing inventory expenses and capital carefully while maintaining our focus on cash generation, debt reduction, and a strong balance sheet. After Scott's comments, I will turn briefly to discuss several broader actions underway across Oxford. As always, I want to thank our teams across Oxford. Their resilience, creativity, and commitment to our customers are the foundation of everything we do.

With that, I'll turn the call over to Scott for more detailed commentary on our financial performance and outlook.

K. Grassmyer

Thank you, Tom. Consolidated net sales were $394 million in the second quarter of fiscal '26 compared to $403 million in the second quarter of fiscal '25, and near the high end of our guidance range of $380 million to $400 million. The company comparable sales were down slightly at 1%, including a 3% decrease in retail sales and flat e-commerce sales. The decline in retail comp sales was partially offset by sales from non-comp stores open primarily in the prior year. Notably, food and beverage sales increased 11%, driven primarily by non-comp locations. Wholesale sales decreased 14% compared to the prior year, but was primarily driven by lower sales of residual inventory through off-price channels. By brand, sales growth at Tommy Bahama helped to partially offset decreases in our other businesses. Sales decreases at Lilly Pulitzer and Johnny Was were driven by a mid-single-digit negative comp and lower off-price wholesale sales, while the sales decline at Emerging Brands was driven primarily by lower wholesale sales. The positive sales growth at Tommy Bahama was driven by a low single-digit positive comp in our DTC channels, partially offset by a decline in wholesale sales driven primarily by lower off-price clearance sales.

Adjusted gross margin expanded 140 basis points to 63.1%, driven primarily by updated assortment, sourcing, and pricing strategies across our portfolio that resulted in higher IMUs, along with a change in sales mix with off-price wholesale sales representing a lower proportion of net sales. These factors were partially offset by a higher proportion of net sales in our DTC channels occurring during promotional events at Tommy Bahama, Lilly Pulitzer, and Emerging Brands.

Tariff cost included in inventory sold during the year were materially consistent with the prior year. As Tom mentioned, we recorded and received significant tariff refunds during the quarter. We recorded a reduction to cost of goods sold of $42 million of tariffs previously paid and received substantially the entire balance during the second quarter or shortly thereafter. The impact of these refunds was excluded from our adjusted results.

Adjusted SG&A expenses increased slightly to $210 million compared to $209 million last year, impacted primarily by new brick-and-mortar retail and food and beverage locations, as well as increases in software and consulting costs, and costs associated with the transition of our Lyons, Georgia, distribution center operations. These increases were partially offset by lower incentive compensation and cuts in more discretionary categories like travel. The result of this yielded adjusted EBITDA of $45 million, or an 11.4% adjusted EBITDA margin, compared to adjusted EBITDA of $43 million, or 10.7%, in the prior year.

Moving beyond EBITDA, adjusted depreciation and amortization increased by approximately $1 million compared to the prior year, primarily due to increases in depreciation related to our new Lyons facility. Interest expense was relatively flat compared to the prior year, as our average debt levels declined during the year. The effective tax rate of 27.5% was lower than the prior year of 29.6% due to certain discrete items that were more significant in the prior year. With all this, we ended up with $1.34 of adjusted EPS.

Moving to the balance sheet, inventory decreased $20 million to 12% on a LIFO basis that included a $10 million increase in to the LIFO reserve. On a FIFO basis, inventory decreased $9 million, or 4%, compared to the second quarter of 2025, with decreases in Emerging Brands, Lilly Pulitzer, and Johnny Was. We ended the quarter with long-term debt of $73 million, which is down $70 million compared to $143 million at the end of the first quarter, and compared to long-term debt of $81 million at the end of the second quarter of fiscal '25, and $116 million at the end of fiscal 2025.

Cash flow from operations provided $97 million in the first half of 2026, which includes $29 million received related to tariff refunds, compared to $80 million in the first half of 2025. We also had lower capital expenditures of $32 million in the first half of '26, compared to the first half of fiscal '25 of $55 million. The decrease, which primarily related to the addition of fewer new bricks-and-mortar locations and lower expenditures on the Lyons, Georgia, distribution center project, as that project comes to a close, also allowed for further reduction of our long-term debt. We're also paying dividends of $22 million.

And now I'll spend some time on our updated outlook for 2026. As Tom mentioned, the ongoing challenges in the Lilly Pulitzer business, along with our generally conservative view of consumer sentiment, led us to reduce our top and bottom line outlook for the remainder of the year. For the full year, we now expect a low single-digit negative comp for the total company, which is lower than our previous range of slightly negative to slightly positive. As a result of the change in our comp assumptions, we are revising our guidance range for the full year and now expect sales to be between $1.43 billion and $1.47 billion, or a decline of 3% to relatively flat, compared to sales of $1.478 billion in fiscal 2025. Our revised sales plan for the full year of '26 includes a sales decrease in Lilly Pulitzer and Johnny Was, partially offset by a sales increase in Tommy Bahama, and growth in the Emerging Brands. By distribution channel, the full-year sales plan consists of low single-digit decreases in our direct-to-consumer channels and a high single-digit decrease in wholesale, partially offset by a low double-digit increase in our food and beverage channel that is benefiting from the additional -- addition of new locations.

Moving on to gross margin, our outlook assumes that the tariff rates reflecting the recent Section 301 changes will remain in effect for the balance of fiscal 2026. Because those rates are only modestly higher than the rates applicable to most of our first half inventory receipts, we do not expect the changes to materially affect fiscal 2026 results. Any additional tariff increase implemented during the balance of the year would be expected to affect primarily future periods due to the timing of the inventory receipts and sales. When removing any tariff refund-related impact, we now expect an approximate 50 basis points increase in gross margin for the year with improved IMUs and a continuation of the shift to a higher proportion of direct-to-consumer sales to be partially offset by higher promotional activity, particularly at Lilly Pulitzer. As a result of these factors, we expect gross margins to improve approximately 100 basis points in both Q3 and Q4 fiscal '26 compared to the prior year.

In addition to lower sales and higher gross margins, we expect SG&A to grow in the low single-digit range, primarily due to the annualization of incremental SG&A from new stores added primarily in fiscal 2025, additional costs related to transition to the Lyons, Georgia, distribution center, and increased software-related costs. Also within EBITDA, we expect higher royalties and other income of approximately $2 million in fiscal '26, largely due to the normalization of sales from our licensing partners that were heavily impacted by the implementation of tariffs in fiscal '25.

Outside of EBITDA, we expect an increase in depreciation due to significantly all of the incremental costs to operate the new Lyons DC in fiscal '26 being depreciation related. We also expect interest expense of $6 million, which is lower than our previous estimate due to our recent significant reduction in debt. Considering all these items and a tax rate between 27% and 28%, we're revising our 2026 adjusted EPS guidance to $1.60 to $2 versus adjusted EPS of $2.11 last year. In the third quarter of '26, we expect sales of $280 million to $300 million compared to sales of $307 million in the third quarter of '25. This primarily reflects a mid-single-digit negative to low single-digit negative comp assumption and relatively flat wholesale sales.

By brand, we expect lower sales at Lilly Pulitzer and Johnny Was to be partially offset by a sales increase at Tommy Bahama and growth at Emerging Brands. We also expect gross margin to expand approximately 100 basis points, SG&A to grow in the low single-digit range, royalty income of approximately $3 million, an interest expense of $1 million, and an effective tax rate of approximately 24%. We expect this to result in third quarter adjusted loss per share between $1.40 and $1.20, compared to a loss per share of $0.92 last year. Our fourth quarter sales plan includes the benefits of some additional promotional activity, primarily at Lilly Pulitzer, along with most of our groups benefiting from the correction of tariff-related merchandising issues that significantly impacted our holiday season and fourth quarter results last year. As a result, our fourth quarter plan includes a comp assumption of relatively flat to slightly positive.

Moving to our CapEx outlook for the remainder of the year, we expect capital expenditures for the year to be approximately $60 million, including the $32 million spent in the first half of fiscal '26, compared to a total of $108 million in fiscal '25. The remaining capital expenditures relate primarily to new brick-and-mortar locations and the remaining capital expenditures for the new distribution center in Lyons, Georgia.

I will now turn it back to Tom for some closing comments.

Thomas Chubb

Thank you, Scott. Before we open the call for questions, I want to briefly discuss a broader review we recently initiated across the enterprise aimed at meaningfully enhancing operating margins in the next few years. The review is focused on opportunities to simplify the business, improve efficiency, and sharpen how we allocate resources across Oxford in order to become less dependent on historical rates of growth to fuel higher profitability. We are still developing our plans and expect to share more as they are finalized, but we believe it is important to highlight several actions already underway.

First, we have made significant progress ramping up the Lyons, Georgia, distribution center. As the facility matures, we'll look to take full advantage of our investment and move more product into the building, including from a legacy 3PL, to operate more efficiently across our increasingly automated footprint. With the major investment phase nearing completion, we also expect capital expenditures to normalize after several years of elevated spending on Lyons, which will increase the cash available for further debt reduction. With impending retirements within our technology leadership, we have transitions underway that will support a reassessment of our IT infrastructure with an eye towards simplifying our tech stack and advancing our data analytics and AI capabilities across the enterprise. We are also optimizing our store fleet, including converting selected Southern Tide and Johnny Was locations to Lilly Pulitzer, where we believe the market and location are better suited to that brand. We will continue to evaluate the fleet market by market and location by location and make changes where we believe they will create the greatest long-term value.

We have a new brand leader at Southern Tide, and also within our Emerging Brands group, we consolidated oversight of the group's finance, planning, and operations functions to improve consistency and efficiency. These are a few examples of the actions underway alongside the work at Tommy Bahama, Lilly Pulitzer, and Johnny Was. We believe these actions will simplify the business, strengthen execution, and position Oxford for more consistent performance and stronger returns over time. We'll have more to say about all of this in December.

With that, we're happy to take your questions. Paul?

Operator

Thank you. [Operator Instructions] Our first question is from Ashley Owens with KeyBanc Capital Markets.

分析师问答

Ashley Owens

Maybe just to start, I wanted to focus in on Tommy Bahama because I thought the point about you calling out the return to positive comps in Florida was very important, just given the size of that market. Could you unpack what helped drive that improvement in the quarter? Whether you're seeing similar strength across both the men's and women's categories?

Thomas Chubb

Yeah, thank you, Ashley. Great questions. And we were -- and I'm glad you called it out because we really were thrilled to see Florida turn positive. As you know, for a number of quarters now, it's been negative for the most part in Tommy Bahama, and that is such a big and important part of our business that when it's negative, it's tough. When it's positive, it makes the whole world seem better. So very glad to see that. Men's versus women's overall in Tommy this year, men's has been up. Women's has actually been up more than men's, which we're happy to see. As you know, we've believed for a long, long time that women's has a huge opportunity in Tommy Bahama. We've made steady progress in growing that business and what we've seen this year has been really encouraging.

Ashley Owens

Great. And then maybe just quickly on Lilly as well. So I think you were very explicit that spring '27 is that first season where you can and are working to reshape the assortment. And that the changes -- we're not going to see that positive trend change until fiscal -- within this year. I guess, should we now think about Lilly as being a spring '27 recovery story? Could there be improvements in the comp with some of that planned promotionality through the back half of the year?

And then just any proof points to, kind of, watch out for that would tell you that the reset is working ahead of the launch. Then maybe just 1 on the modeling side of things with the gross margin guidance. I think it was 100 bps improvement in both Q3 and Q4, despite those elevated promotions at Lilly. Just anything you can say as to what's giving you the confidence in that outlook, particularly if that consumer demand does remain a little bit pressured.

Thomas Chubb

Yes, so I think you understand this, Ashley, but the length of the product pipeline is really the issue. So you get into spring '26, you realize that you've got a really pretty significant assortment issue, but you've got the rest of the year's product already in the pipeline and you can do limited things to adjust for it. So spring '27 is the first season where we were able to really incorporate what we realized was wrong about the assortment in spring '26. The rest of the seasons for '26 were already fundamentally in the pipeline.

There are some other reasons to think that there might be some fourth quarter upside in Lilly and that's just because last year they were struggling through the tariff-related gaps in the product assortment and they overall had a weak fourth quarter last year. So you might see some upside because of those things in the fourth quarter. And then the other thing is the resort product line, I think, which will look more like the spring '27 line, I think, could give us some early reads, but you're not really going to know till very late in the quarter when you've got some spring stuff. And then on the gross margin question, certainly a good question.

And I'll let Scott walk you through that, why we feel good about what we're projecting.

K. Grassmyer

Yes, we are starting with higher IMUs. Also, wholesale will be a little bit lower percent of the total mix, so that will help neutralize or more than offset the higher promotional cadence that we do expect out of Lilly this year.

Operator

Our next question is from Janine Stichter with BTIG.

Ethan Saghi

You got Ethan on for Janine. First, I was just wondering what's driving the divergence between Tommy and the rest of the portfolio? Is it product, demographic, geography, or something else? Just any color you could give on that.

Thomas Chubb

Well, what I would say is I don't think there's really a big divergence between Tommy and most of the rest of the portfolio. It's a little complicated, but Tommy and Lilly, clearly a big divergence, and I think that's almost all about the assortment challenges that Lilly has. Johnny Was, even though their comp numbers are not where Tommy's are, we, kind of, knew that going into the year just because of the trajectory that we came out of '25 on. As we've talked about extensively, the goal in Johnny Was this year is to improve profitability, even if the sales number comes in a bit lower. And that's exactly what happened in the second quarter. So we really look at Johnny Was as a positive story year to date. We think they're ticking the boxes on their turnaround plan.

And then within the Emerging Brands, it's really a Southern Tide issue. We don't -- they're too small for it to make sense for us to get into breaking out a lot of granularity, but Southern Tide's the laggard there. Everything else looks quite good. And as we talked about, we've -- we brought in a new leader at Southern Tide, very excited about him. I think this is his 6th week, maybe, on the job and we're, kind of, rebooting Southern Tide. He's already seen some good opportunities of things that we can improve closer in and then obviously beyond. So I don't think there's as much of a divergence as it might seem like on the surface.

Ethan Saghi

That's a really helpful color and kind of answered my next question, which is going to be on Emerging Brands. So I'll pass it on.

Thomas Chubb

Okay. Thank you, Ethan.

Operator

Our next question is from Mauricio Serna with UBS.

Mauricio Serna Vega

Maybe could you talk about quarter to date, what, kind of, comps you're seeing overall? And how should we think about the comps specifically for Tommy Bahama? How are you thinking about the level, like, the sustainability of the, kind of, comps that you delivered in Q2? And then after that, I have a follow-up on Lilly Pulitzer.

K. Grassmyer

Yes, the comps quarter-to-date, a little cloudy because you have some promotion timing. You also have Labor Day being late. So it's a little cloudy. They're down slightly, but it's -- there's a lot of noise in them this early in the quarter that will normalize more as the quarter goes on.

Mauricio Serna Vega

And then on specifically on Tommy.

K. Grassmyer

We're not going to get into comps by group this early. It's just 1 month is -- not with some of the timing.

Mauricio Serna Vega

No, I wasn't asking about the comps for Tommy. More like, how are you thinking about the comps for, like, that brand in the year?

K. Grassmyer

Yeah, yeah, for the year, Tommy, I mean, we expect them to be slightly positive for the year. And so yes, slightly positive comps for the year.

Mauricio Serna Vega

Got it. And then just on, on Lilly Pulitzer, I guess, just was wondering how are you thinking about the, the assortment strategy? I guess like on a go forward basis. I guess I recall like last year in '25 one of the things that had been successful was to move that -- bring more assortment that was higher AUR. And now it sounds like it seems maybe it went too far. So is the right strategy being more towards the historical type of AURs? Or just trying to figure out from that perspective, how should we think about the assortment strategy?

And then I think you also mentioned on the prepared remarks that you were converting some, I think it was Johnny Was and Southern Tide stores into Lilly Pulitzer. Like, what's the rationality behind that considering that the brand -- the brand seems to be still, obviously struggling and you expect that to continue throughout the rest of the year?

Thomas Chubb

Yes, good questions, Mauricio. And we have, over the last several years, been able to grow the higher-priced business at Lilly Pulitzer. And even this year we continue to have success in those higher-priced points. But think of your pricing strategy as like a pyramid where that top tier, which for us in dresses is $400 and up, it's the little tiny triangle at the top of the pyramid and then you go down the pyramid, the pieces get bigger and bigger. That's, I think, the way almost any brand in the world is set up from a price architecture standpoint. And so what we did this year, you captured it, is I think we just went too far too fast in shifting up the pricing tiers and so last year in our entry price point bucket -- and for us, that's dresses, which are a big category under $200.

Last year that would have been about half of the styles that we offered, would have been in that price bucket. This year it was down to almost down to a 3rd. I think it was like 35%. That was just too much too quickly. And as a result of that, some of those customers were willing to move up a price point, but a lot of them I think were not. And that's been -- I think the the bigger part of our problem has been the price architecture. So going forward, what we've done is we've gone back to what we had in '25. And '26 will move a little more in the upward direction than '25 -- excuse me, '27 will move a little more upward than '25, but that'll be a lot back from '26, if that makes sense.

Mauricio Serna Vega

Yes.

Thomas Chubb

And then on the why switch the stores, these are all locations. And Lilly Pulitzer, even this year as bad as it is, it's still a profitable brand. We very much believe in the brand and the team there. This is completely a fixable issue. And the locations that we're converting are some that, where we believe Johnny Was and Southern Tide just because of the level of brand awareness in those markets is going to have a long, hard road to profitability, but that Lilly Pulitzer can -- easily be profitable in -- a great example is on King Street, in Charleston, where Lilly Pulitzer had operated a store. The landlord was expanding a jewelry and watch business and needed to take the space back.

So we were about to be off King Street in Charleston in Lilly. At the same time, we had a Johnny Was store that was losing a couple of $100,000. And Charleston's not the most natural market for Johnny Was. I do believe over the long term, that'll be a place where Johnny Was will win. But in the short term, and with all the other challenges we had, we knew if we flipped it to Lilly Pulitzer, we'd immediately start making a lot of money, which is exactly what happened. So it's those types of scenarios, Mauricio.

Operator

Our next question is from Paul Lejuez.

Tracy Kogan

Hi, it's Tracy Kogan filling in for Paul. I was hoping you could talk to us about the traffic, AUR, and average basket in Q2 for Tommy and Lilly. And then secondly, I was just wondering on freight if you're seeing any delays and then also related to freight, what level of pressure you've built into your gross margin, and if that has changed materially from what you expected as of 1Q?

Thomas Chubb

Yes, so in 2Q -- and this has really held pretty constantly throughout the year. Traffic has been pretty good. Conversion rates have been off a little bit. Average order values, average basket sizes have been 1 of the bright spots in the story for us. And then the AURs, I think mostly due to the level of that -- the IMUs are higher and the the MSRPs are higher, but the AURs have actually gone down a bit due to the amount of stuff that we promoted this year.

Tracy Kogan

Is that true? I would guess some of that's a little different though between Tommy and Lilly. Were you speaking about 1 of them in your answer there or was that, kind of, an overall?

Thomas Chubb

It was more of an overall comment. There are differences in the brands, but the trend's been pretty similar.

Tracy Kogan

And then on the freight?

K. Grassmyer

Yeah, on the freight we've built in some slight increases, but we have the a little bit of an offset from some some of our outbound parcels. We have -- we renegotiated contracts. So we're -- in the first half of the year especially, we've got a favorable there that's helping neutralize. Now in the second half, I'm sure we'll get some fuel, additional fuel surcharges that will have a slight increase. But overall, our base rates were starting a little bit lower on our outbound parcels, but our containers coming in from Asia are slightly higher and that's -- it's not a real material.

Operator

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Tom Chubb for any closing comments.

Thomas Chubb

Thank you, Paul, and thanks to all of you for your interest. We look forward to talking to you again in December, and hope all is well until then.

Operator

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