Upgrading Tommy Bahama And Lilly Pulitzer Platforms Will Improve Efficiency

Key Takeaways

• Strengthening of omnichannel platforms and engagement in core markets is expected to drive revenue growth, especially for Tommy Bahama.
  
• Infrastructure investments and strategic focus on Lilly Pulitzer aim to enhance operational efficiency and net margins through increased full-price sales.
  
• Economic uncertainty and inconsistent consumer spending threaten revenue, profitability, and margin stability, amidst challenges in wholesale and increased reliance on promotions.

Catalysts

An apparel company, designs, sources, markets, and distributes products of lifestyle and other brands worldwide.

• Oxford Industries is focusing on driving more traffic and higher conversion across all channels by strengthening its omnichannel platform and engaging core markets for Tommy Bahama, which is expected to positively impact revenue growth.
  
• The company plans to enhance its product offerings and marketing strategies for Lilly Pulitzer, specifically targeting its most loyal and profitable customer segment, which could improve net margins through higher full-price sales.
  
• Investment in infrastructure, such as the new distribution center, is expected to increase inventory velocity and sell-through rates, potentially boosting earnings by improving operational efficiency.
  
• Oxford Industries has completed significant upgrades to its e-commerce platforms and opened new retail locations, which should contribute to revenue growth as these channels expand.
  
• The company is undertaking share repurchases and dividend increases, which, along with efforts to mitigate tariff impacts, may boost earnings per share and provide better value to shareholders.

Oxford Industries Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Oxford Industries's revenue will decrease by 0.4% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 6.1% today to 4.1% in 3 years time.
• Analysts expect earnings to reach $62.6 million (and earnings per share of $5.02) by about April 2028, down from $93.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.7x on those 2028 earnings, up from 6.9x today. This future PE is greater than the current PE for the US Luxury industry at 13.4x.
• Analysts expect the number of shares outstanding to decline by 5.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.18%, as per the Simply Wall St company report.

Oxford Industries Future Earnings Per Share Growth

Risks

• The company experienced a significant downturn in sales and consumer demand in January and February, with comps down 3% and 9% respectively, due to reduced consumer spending outside of major shopping events, impacting overall revenue.
  
• The current economic uncertainty and consumer sentiment could continue to affect consumer spending habits, leading to irregular sales patterns and posing risks to consistent revenue and earnings growth.
  
• Wholesale business is facing challenges as specialty store sectors struggle, leading to a 10% decrease in this segment, which can negatively impact revenues if sustained.
  
• Adjusted gross margin contracted due to increased reliance on promotional and clearance sales, which may continue to pressure net margins if consumer spending remains promotional-driven.
  
• The projected impact of tariffs and potential increases in SG&A could further compress margins and earnings, especially if anticipated mitigations do not materialize or are delayed.

Valuation

• The analysts have a consensus price target of $55.0 for Oxford Industries based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $64.0, and the most bearish reporting a price target of just $47.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.5 billion, earnings will come to $62.6 million, and it would be trading on a PE ratio of 13.7x, assuming you use a discount rate of 9.2%.
• Given the current share price of $43.45, the analyst price target of $55.0 is 21.0% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.