Oxford Industries Inc (OXM) 2004 Q1 法說會逐字稿

Welcome to the Oxford Industries first quarter of fiscal 2004 earnings conference call. (OPERATOR INSTRUCTIONS). It is now my pleasure to turn the call over to your host, Reese Lanier. Sir, the floor is yours.

Thank you. Good afternoon everyone. Before we get started, I would like to point out some of the statements made on this call as part of the prepared remarks or in response to your questions, which are not historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results might differ materially from those projected in such statements due to a number of risks and un-certainties which are described in the Company's current report on form 8-K dated July 16, 2003. A copy of this report is available online or upon request from Oxford's Investor Relations department. Oxford disclaims any duty to update any forward-looking statements. Thanks for your attention, and now I would like to introduce Hicks Lanier, the Chairman and Chief Executive Officer of Oxford Industries.

Thank you, Reese, and good afternoon, and thank you for joining us for our first quarter conference call. With me today are Tony Margolis, Chief Executive Officer of the Tommy Bahama Group; Ben Blount, our Chief Financial Officer; Scott Grassmyer, our Controller, and Reese Lanier, our Treasurer and Director of Investor Relations. We are off to an excellent start for the year and have some impressive results to discuss with you today. Not only did our results greatly benefit from the contribution of the Tommy Bahama Group, but our original four operating groups also showed strength. On today's call, I would like to give you some details on our operations, some insights into how we view the retail market and outline what we expect to see over the next few quarters. To begin, I would like to review the operational and financial highlights from the first quarter, which ended August 29. Sales increased by 41 percent to [$240] million -- (technical difficulty) versus $172 million in the year ago quarter. This was driven both by the contribution of the Tommy Bahama Group and a 4 percent sales increase from our original four operating groups. Gross margin for the quarter was up sharply, due primarily to the superior margins of the Tommy Bahama Group, which are significantly higher than our corporate average. Our operating expenses increased significantly as a percent of sales, again due to the acquisition of Tommy Bahama. In order to get a true picture of our performance during the quarter, you should keep in mind that on a tax effective basis we incurred approximately 13 cents of non-cash amortization expenses for the acquisition. After giving effect to this intangible asset amortization expense, we reported first quarter net income of $6.8 million or diluted earnings per share of 84 cents compared with net income of $4.5 million or 60 cents per diluted share in the year ago quarter.

This is the first quarter in which we have shown the impact of the Tommy Bahama acquisition. As you can see, the combination should be a strong catalyst for our financial results. We are fortunate that both our historical businesses and the Tommy Bahama business are performing very well on a stand-alone basis, and we are enthusiastic about our prospects for the future. We do believe that the Tommy Bahama organization will ultimately benefit from our solid infrastructure and operating control. Similarly, we are fortunate to be in a position to learn from some of the best brand management merchandising and product teams in the apparel industry. We will proceed carefully and purposely down an integration path at what we believe is an appropriate pace. With respect to the external environment, I think it is fair to say that it remains quite challenging. Comparable store sales performance for many of our major retail customers has been better over the past two months but continues to be inconsistent. The promotional environment, particularly in department stores, has had an impact on some segments of our business, but, by and large, we have performed well. We are encouraged by some of the positive chatter in the industry, but we remain conservative with respect to our forward planning. Before I turn the call over to Tony, who will give you some additional detail on the Tommy Bahama business, I would just like to reiterate that we are very pleased with our first quarter results. Ben will detail our new guidance for you in a few moments, but I would like to comment that we have good visibility on the second quarter, and while it is still somewhat early, I am growing more confident with our prospects for growth during the second half. Thanks for your attention, and I will turn it over to Tony.

Good afternoon, everybody. I am pleased to report that the Tommy Bahama business remains very strong. As you can see from our release, the Tommy Bahama Group contributed sales of approximately 63 million during the quarter. Our margins were steady, and the acceptance of our product by retailers and consumers continues to be excellent. In fact, retail sales -- retail sell-troughs in third party accounts ran well above last year's performance. Advanced bookings are also ahead of last year. Our Indigo Palms Women's launch, which occurred in this past quarter, has met with wider and greater success than our budgets planned. Our retail store openings also ran slightly ahead of schedule, and as a result of that, we were able to capture additional sales during this quarter. During the quarter, we opened three additional retail stores. One in Denver at Cherry Creek; one in Woodbury Commons, New York; and one at Walnut Creek in California. I know that some of you have particular interest in the development of our Women's business, and in this past quarter, we have developed a few design team which has taken responsibility for the development of the Spring -- I am sorry -- the Fall 2004 line. They have also established a fit and specking (ph) division which will be tracking and closely monitoring the incoming fit silhouettes of our Women's product.

Our retail stores provide a wonderful test facility for us as well, and we are getting very, very good early feedback on some of the new product that is arriving in the stores. We still see Women's Sportswear as our ultimate opportunity. I would like to echo some of Hicks' comments. There is a tremendous respect for the quality of operations that Oxford has developed over the past several decades. They are clearly one of the sharpest, most efficient organizations in the business. One of the key reasons we decided to join their organization was that this expertise will allow us to focus on the areas in which we are most competent. Thank you, and now I would like to turn it over to Ben, who will go through the quarterly numbers.

Thank you, Tony. Good afternoon, everyone. I will start by taking you through the income statement for the first quarter. As Hicks mentioned, these results include nearly a full quarter's contribution from the Tommy Bahama acquisition. Net sales for the first quarter increased 40.7 percent to $242 million versus 172.1 million in the first quarter of last year. This is at the high-end of our previous guidance for revenue. As for sales by segment, Oxford Slacks reported a sales increase of 51 percent to 32.3 million for the first quarter, driven by new programs with major customers. Sales in The Oxford Shirt Group decreased 12 percent to 41.5 million. This decline was attributable to planned reductions in Golf apparel shipments. Oxford Womens-wear Group reported a 6 percent sales decrease to $63 million due to our decision last December to discontinue our business with Kmart. Excluding Kmart, womens-wear revenues increased approximately 5 percent. Sales for Lanier Clothes, the Company's tailored clothing group, increased by 14 percent for the first quarter to $42 million, again driven by new programs with major customers. Tommy Bahama, which was consolidated for 11 of 13 weeks in the first quarter, contributed 63.3 million in sales. Consolidated gross margin increased by 700 basis points to 29.3 percent from 22.3 percent. This increase was driven by the consolidation of the Tommy Bahama business, which carries significantly higher margins than our corporate average.

SG&A expenses as a percent of sales increased to 22.1 percent versus 18 percent in the year ago quarter. Once again, the inclusion of the Tommy Bahama business, which has a heavier expense structure than our other businesses, was responsible for the increase. As explained in the press release, purchase price accounting requires that certain acquired intangible assets must be valued and amortized. We engaged an independent appraisal firm to conduct an asset valuation analysis during the first quarter. Preliminary results of the valuation analysis assigned a value of $26 million to Viewpoint's customer relationships and license agreements, which are being amortized over periods ranging from 4-15 years. The amortization of these intangibles will result in approximately $1.7 million of non-cash expenses or 12.5 cents per share on a tax affected basis in each quarter of this fiscal year. We have broken out these expenses as a separate line item in the income statement so that they can be clearly identified. Earnings before interest and taxes for the quarter increased 124 percent to 16.8 million from 7.5 million in the first quarter of last year. This resulted in an EBIT margin of 6.9 percent compared to 4.4 percent in the prior period. Interest expense for the quarter was 5.8 million compared to 41,000 for the same period last year. The higher interest expense was due to the debt required to finance the purchase of Tommy Bahama. Net income for the quarter was 6.8 million versus 4.5 million in last year's first quarter. Diluted earnings per share, including the 12.5 cents in intangible amortization expense, were 84 cents versus 60 cents for the first quarter of fiscal 2003. As we discussed on our last conference call, our guidance of 75 to 80 cents for the quarter had excluded this 12.5 cents.

Now if I can turn your attention to some key balance sheet items. Inventories at the close of the first quarter were 117.9 million compared to 90 million at the close of the first quarter last year, an increase of 31 percent. 25 million of the 28 million increase was attributable to Tommy Bahama. We are very comfortable with both the level and aging of our inventories. Accounts Receivable increased to 134 million from 121 million last year, due to the inclusion of 25 million in Tommy Bahama receivables. Our receivables are in excellent shape, with approximately 98 percent current to 30 days past due. The other balance sheet items of note are all related to the acquisition. The purchase price allocation resulted in the addition of 82 million goodwill and 152 million of other intangibles, 26 million of which will be amortized as earlier discussed. The balance, along with the goodwill, will remain on the books indefinitely. The large increase you see in Other Assets is primarily deferred financing cost. In the Liability section, the 53 million in deferred income taxes represents imputed taxes on the intangible assets. You will note that we have added a cash flow statement for your convenience and that we generated $4 million in cash flow from operations compared to using $12 million in last year's first quarter. Finally, before I turn the call back over to Hicks for some closing comments, I would like to update and clarify our guidance based on the out-performance during the quarter and the intangible amortization issue. In our last conference call, we had issued annual earnings per share guidance in the range of $4.35 to $4.65 per share, which, as we clarified at the time, excluded the intangible asset amortization expense. Following the out-performance in the quarter, we are increasing our guidance to a new range of $4.67-4.89. In the interest of clarity, we are restating our guidance to now include the intangible asset amortization expense. Accordingly, our adjusted annual diluted earnings per share guidance is now within a range of $4.17-4.39.

Laid out by fiscal quarter, we are projecting the following. For the second quarter, we continue to expect to see net sales in the range of $245-255 million and are now targeting diluted earnings per share of between 75 and 80 cents. Weighted average shares outstanding for the quarter are projected to be approximately 8.3 million. For the third quarter, we continue to expect to see net sales in the range of 280-295 million and diluted earnings per share between $1.08 and $1.15. Weighted average diluted shares outstanding for the third quarter are projected to be approximately 8.3 million. For the fourth quarter, we continue to expect to see sales in the range of 295-310 million and diluted earnings per share of between $1.50 and $1.60. Weighted diluted average shares outstanding for the fourth quarter are projected to be approximately 8.5 million. Thank you and I would like to now turn the call back over to Hicks.

Thanks, Ben. Before we take your questions, I would like to say once again how pleased we are with the Tommy Bahama acquisition. Both Oxford's and Tommy Bahama's employees have done a terrific job of bringing these organizations together and executing the business plan. As we look ahead, we are very excited about the opportunities we have to grow our presence in the market and to continue to deliver strong returns to our shareholders. Thank you and we are now prepared to take your questions. Operator, if you would open it up for questions?

(OPERATOR INSTRUCTIONS). Our first question this evening comes from Lee Backus with Buckingham Research.

First, congratulation Hicks and Tony on a great quarter. I notice on the guidance that you are giving going forward, you left the sales flat, but you upped the EPS. So where is the increase? I mean, is it on the gross margin line, or are you beginning to see some leverage on SG&A? Just give me a sense.

Well, the first quarter results had a slight increase in sales above our guidance. But the increase in earnings over the guidance was not fundamentally sales based; it was based on margin and expense control.

So you see that continuing going forward?

Well, we think those trends will continue, yes.

Could you give a comparison for Tommy Bahama versus last year? I know it was only 11 of 13 weeks. Is there any way to give a comparison of how that business performed this year versus last year (multiple speakers)?

As you know, we had it 11 weeks in the quarter, and so it is hard to compare it with the same 11 weeks a year ago. But if you take half of June from a year ago and cut that off and just compare apples-to-apples, we think the sales increase was roughly 10 percent. Is that about what you have, Tony?

That is correct.

Okay. Tony, do you have any sense -- just give us a sense of the results from the recent Magic show -- (multiple speakers)?

I think we met with good reception to our Spring collections. Our sales, as I mentioned earlier in the conference call, are running ahead of last year by a meaningful amount. We have captured them earlier this year, which is also, I think, a positive sign. And so, we felt very good about the way we left Magic.

Okay. Thank you.

In particular, the reception of Indigo Palms Women's --

To Hicks' point, if we had to single out one area where we see great future opportunity, it is in the Indigo Palms Company, and in particular, the new release of the Women's line met with very good reception, not only at Magic, but this last week in New York at the Kotery (ph) show.

Okay. Thank you.

Our next question of the evening comes from Jeff Klinefelter with U.S. Bancorp Piper Jaffray.

Yes, congratulations as well from me. That was a terrific quarter. A couple of questions. Maybe I could start off, Ben; I just wanted to clarify a couple of things on the amortization expenses. To read this correctly, without the expense, the 84 cents then in the Q1 would have been 96 or 97 cents versus your prior guidance of 75 to 80 -- is that the way to read that?

Yes.

Okay. Such as going forward, we are going to be taking off 12.5 cents a quarter. Is that going to go forward beyond this year? Can you give me a sense? I mean, is that on a go-forward basis for several years now, or how should we look at that going forward? Is that a normal course of business, a normal operating expense?

Yes, Jeff, I can. The amount that we amortized in the first quarter will repeat in all four of the -- all three of the remaining quarters this year. In the subsequent years, there will be a decline in the amortization amount. In '05, it will be about $1 million and about 1.5 million in '06; another million plus in '07; then it is down to getting to be pretty small figures after '08.

Okay. Can you repeat that? Next year it will be about a million less in total?

That is correct.

And then gradually increasing --

Gradually decreasing (multiple speakers) --

Decreasing, but increasing in the reduction each year? Right?

Yes.

Okay. Great. (multiple speakers)

Can I put a caveat on that?

Sure.

Let me just make sure everybody understood and understands that this is a non-cash issue and it is really non-operational, too. And that is the reason we broke it out on a separate line in the income statement.

Okay. Great. Question on the Oxford side of the business. Hicks, if you could talk a little bit about -- again, repeat where some of the successes were in those divisions; what the pricing environment is like; what you're anticipating going forward; are you seeing the best reception in the Discount channel; the Catalog channel, just a little bit more color, and then I have a few questions on the Tommy Bahama side.

Okay. As I think everybody who has followed the figures on comp store sales knows that the Discount sector has done pretty well the last few months, and I would say we are having success in that channel, particularly with Target. We happen to have a item there that is a stain-resistant, wrinkle-resistant plain front twill pant that is doing exceedingly well that has been selling in the 10 percent per week area that we are particularly pleased with. This is in the Men's area. The catalog sector -- and by the way, our business with Target for the quarter was up; our business with Wal-Mart for the quarter was up; our business with J.C. Penney for the quarter was up in total, and our business with Sears/Lands' End for the quarter was up. So our four largest customers we had sales increases with each of them during the quarter. In terms of other items that we are sort of excited about, you may have seen in the D&R this week an ad we put in there by Tailored Clothing Group on what we call the Smart Suit, and this is a product that has also stain resistance and wrinkle resistance and water repellency and all kind of pockets and expandable waist bands and everything but the kitchen sink on it. We are having a very good response to it. At Kohl's, we have established a Golf label with them under the label of Wedge, as in sand wedge. It is a label we happen to own, and we are pretty excited about that, because we have are in the process of working on our fourth season with me -- excuse me, third season with that product. So that, we are pleased with.

We have also got a shirt in Tommy Hilfiger dress shirts called The Traveler, which includes our TLC collar, stain resistance and wrinkle resistance, so we are pretty pleased about that. Tony mentioned the enthusiasm we have for the Indigo Palms Women's line. I might add that we mentioned on our last call that we had just introduced an Oxford Golf line to the green grass market, and that has dramatically exceeded our expectations. So we are real pleased about that right now; we will start shipping that product for the first time in November. Does that give you a flavor?

That gives us a great flavor. One last thing on the Sears/Lands' End, any update there? I know you filled the channel last year, and that is why we are seeing some decreases this year. Any updates on the sell-through there to the catalog or the Sears stores themselves?

Well, you are not seeing decreases now because we still have fixture fill in about all of the remaining stores they had not been on the program until Fall '04, so we actually had a pretty significant increase in the Sears portion of the Lands' End business in the first quarter. Where we expect to see some decreases is the next couple of quarters where we have all the fixture fill last year. In certain product categories, they overshot the market in terms of what they ordered, and they are having to work that off either in the (Lands’) by sending it back to Lands' End. They have in dress shirts and are replacing it with average sleeve length dress shirts which happen to be -- which we have in the Sears network. The sales per week are dramatically improved over the exact sleeve lengths because they just don't need as much inventory to support it. As far as the Lands' End Catalog business itself, it has been rather soft in most of our product categories for the last few months.

Okay. Tony, on the Tommy Bahama side, what percent, roughly, of the business -- can you tell us for the quarter recording the 63 million in sales, how much was wholesale versus retail?

I will have to look over here for somebody else -- just give me a second.

It is about 60 percent wholesale/40 percent retail.

Did you hear that?

I heard that. And in terms of your division, about how much of the business right now or for the first quarter was Indigo Palms?

I going to give you a real ballpark estimate on that and tell you that it probably represents -- you are asking for that quarter?

Yeah, just for the first quarter.

I would think it was in the single digit percent -- probably 8 percent.

That does not include any Women's Indigo Palms product, because that will not be shipped until November. The first shipments will go out in November.

Also, understand that that business is in its first year of operation, and so, you know, it is dealing with a significant growth rate, but it is still a small business.

Okay.

I think, just to clarify that a little bit more, that business, if you look at in terms of the calendar of our last fiscal year, which ended in May, the Men's portion was about a $10 million business. We thought we would double that this year our FY '04, and it looks like that may be a conservative target.

Okay, last year Q4, this most recent year was 10 million, and Indigo Palms --? (multiple speakers)

Full-year. (multiple speakers)

Full year was 10 million, and you think you can double that this year?

That is what we thought when we entered the year. We have raised our sights a bit.

Okay. And then, in terms of the bookings, Tony, you mentioned that your advanced bookings are running, you know, well ahead or significantly ahead of last year. You are also getting the orders earlier. So that is primarily coming -- continuing to come from your core Men's business in the existing doors. Are you continuing to gain space, or is just the sellthrough that much faster in the category?

I think is actually a combination of those two things. I think our space continues to grow. I think the shifting of tides that seems to be occurring in the better department store arena has served our purposes well. I think there is a continued interest and enthusiasm for building business with Tommy Bahama as compared to some brands that they have carried in the past, and I think that our line expansions have opened new doors for us as well that, in the past, they would not have thought of us for, and now we are a player for them in those areas as well.

Okay. And then finally on the Tommy side, Tony, you are going to be shipping -- when will we see shipments -- initial shipments of the new Women's product -- the new Tommy Women's product?

I believe the first -- there are some shipments actually going out in late November --

He is talking about the Tommy Women's product.

Oh, I am sorry. You are talking about the Tommy Women's product?

Yes.

Well, obviously we ship Tommy Women's products every day. But the new design team's first line release will occur in late December and January for shipping in May of '04.

Okay. A lot of the brands right now are coming up with new sort of moderate to, you know, upper end Women's lines. Tommy. Polo has taken back their line. It seems like that is a real emphasis right now. Has that changed your -- is this part of the reason it is driving your change in design? Any feedback on that that you are sensing from the marketplace? It just seems like there are a lot of brands going after that more sophisticated upper-end female customer.

I think that there is -- the one thing that a lot of people in the market have discovered is that sometimes you can't get low enough to be low, and so the alternative is to go high. That does not mean it is always going to work. One of the things that I think we pride ourselves on is that we stay relatively consistent in the vision of the consumer is that we cater to, and I think that the moves that we are making in our line are more of a tactical effort to get the Women's product back to the roots of what the concept of the company was. It had drifted a little bit into what I will describe as an urban vision rather than an island vision, and we are re-establishing what I will call the core of the company back to the roots and the direction I alluded to last quarter, which was to target it at a slightly younger demographic than the way it had drifted.

Okay. How are bookings for Women's right now?

They are right on plan. They are not anywhere near the long-term strategy that we have, but they are on the planned budgets that we had for them for this quarter.

Okay. And then lastly -- thank you for your time today -- just in total now between Tommy Bahama and Oxford, how would you characterize the business right now out in the channels and sort of your expectations for the holiday season -- maybe between both Hicks and Tony?

I think we will continue to view the environment out there as challenging. There is no question that there is a lack of vibrancy of consumer confidence, and as a result, we are planning relatively conservatively. And I think until this economic issue of jobs or employment -- there is some turn in that that would possibly influence consumer confidence and then consumer spending, it is going to be sort of in bits and pieces. I think that the holiday season as it is unfolding, we are certainly hopeful that it will be better than the last couple of years.

I would like to add -- because I think that to some degree, we play in a slightly different arena. There was a pretty energetic retail spirit, I am going to say, at the Magic show. We felt a better energy than we did over the last year, and I think a similar experience occurred this week at the Kotery (ph) show in New York. I think the better specialty store market seems to be feeling slightly more energetic than they did a year ago.

Okay. Great.

Just to add do that. I think there is no question that the better department stores are specialty department stores like the Nordstroms, the Neimans and the Saks Fifth Avenues of the world which are outperforming most other segments of the retail community, so that would bear out what Tony has just said. But even on the other tiers of distribution, I share Tony's comment about the mood at the Magic show. It just was a little more ebullient than it has been for the past three or four shows.

Okay.

You cannot take ebullience and go to the grocery with it.

That is right. Thank you very much for your time.

Our next question comes from Michelle Lynch with Apex Capital.

Actually this is Sandy Cowen (ph) at Apex. Just a couple of follow-ups on a few of your comments. I guess you were talking about the 26 million of intangible asset value that is going to be amortized. In the release, you talked about amortizing over periods ranging from 4-15 years. But, what I think you just said in this conference call is that the bulk of that will be amortized over the next five years.

That is correct.

Okay.

We put out a schedule on that.

Okay. So the total to be amortized is 26 million; you are starting out with roughly 7 in the first year and then it declines? Got it. Okay. And then to Indigo Palms Women's business, just one point of clarification. I think you said 20 million was your sort of conservative estimate for doubling the business this year in Indigo Palms, but I assume that was Men's only and did not include the Women's in that number?

I think in this particular fiscal year, the Women's number is not going to impact very much because it is only I think the last quarter that we are shipping product. So it does include it, but it is primarily coming from the Men's division.

Isn't it more than one quarter if you are going to start shipping in November? It is probably two quarters, right?

The actual -- the shipments that are going out in that first quarter are nothing more than what I will call test orders to some of our own stores and to actually an Indigo Palms store that we are opening. The November shipments are minuscule, an the first real shipments start, I think, in February or March of '04.

But then the Southern California store opening, when is that slated for?

I think it is right around Thanksgiving.

Okay. You did mention that initial reaction from Magic was above your expectations. I wonder if you could just, you know, provide any commentary in terms of what the initial sell-in might look like in terms of number of doors and what kind of tests or average order size you are getting per door?

I will tell you we will probably have product in 150 to 200 doors for Spring of '04, not including our own outlets. And what was your second part there?

Just in terms of relative size, I mean, is this going to be -- I mean, how does that work relative to the existing Women's business? I mean, will it sit apart from that? Will it be combined with, I mean --?

It completely fits apart. First of all, it is a jeans-wear concept versus sportswear. And in most cases, the product assortments are priced at higher price points than in the Tommy Bahama line, and so both from a marketing strategy standpoint and a product standpoint, it will be presented not only in different space within stores that carry both, but the strength of the line actually of the purchases in many cases are coming from stores that do not buy the Tommy Bahama Women's Sportswear line.

Will you be testing any in-store shops with the Women's?

No. The only shops we are going to build are going to have our name on them, and we are going to take that profit.

Okay. Great. Thanks so much.

(OPERATOR INSTRUCTIONS). Our next question comes from Rush Grumman with Merrill Lynch.

Good afternoon, gentlemen. A very good quarter. I just wanted to ask one question about the margin performance inside the Tommy Bahama operation with respect to a stub period going in. It seems, based upon your bottom line, that the margin might even be a bit better than its historical range. Could you give a little bit of guidance on that?

Hang on one second. That is correct, Rush. The margins for the Tommy business -- this includes wholesale and retail - were over 50 percent for the first quarter.

Could you drill down a little bit and give us perhaps an EBIT margin or something along those lines?

Yes, I could. The EBIT margin was about 11 percent.

Okay, great. Thanks very much.

Our final question of the evening comes from John Kurty with Principal Global Investments.

Good afternoon. A question on the Shirt Group. The earnings before interest and taxes was down rather substantially on your sales decline. What is kind of the outlook for that group for the remaining quarters of the year?

Well, let me explain a little bit about what drove those numbers. As you know from our previous release, we made the decision to get out of the Izod Club golf business, and our last season there was Fall '03. And as a result of making that exit decision, we planned that business very conservatively from a sales standpoint. We accrued most of the expenses for that in our last -- most of the expenses for the exit of that business in our last fiscal year, so we don't have that burden to carry forward. But we did not have the topline either. Concurrently, we are launching this Oxford Golf line and have no sales to offset those expenses. So, our total Golf operations were basically the reason for the slump there.

We also had another peculiarity in the quarter, in that last year in the first quarter in our Tommy Hilfiger Golf business; we had a big corporate program in the first quarter last year that will be in the second quarter this year. So sort of an aberration there.

Lots of moving parts there.

Lots of moving parts there. But I think the message on the Golf business -- and of course, the quarter -- June, July, August in the Golf business is a very weak quarter because none of the pro shops want to take in goods as the season is coming to a close. So it is historically a poor quarter, and it was exacerbated in this quarter for us.

Going forward, we think our Shirt Group is going to probably suffer the biggest sales attrition because of the Lands' End/Sears situation. Particularly, I mentioned earlier, Lands' End took a lot of the dress shirts and exact sleeve lengths back from the Sears stores to use in the Catalog operation and were replaced with every sleeve length product in the Sears stores. And that has been a positive, but what it means is that the Catalog portion has to work through all that inventory before we ship them new goods. So we are seeing a pretty weak sales scenario there for the next quarter or two up against the same period a year ago.

okay. Your corporate and other unallocated expenses came down about 600,000 or 700,000. Is the number there for the current quarter a good representation of the number you will probably be using for the remainder of the year on a quarterly basis? About 2.9 million?

It is probably a good estimate. But the one thing that goes through that corporate and other is a lot of things rolling through LIFO accounting, and that can move around more. So that is kind of the wild-card there. But given that there is no unusual impact there, that is a pretty good bar.

And capital spending for this year?

Yes. In our last conference, we had forecasted it would be about $10 million. For the year on fixed assets, that we believe is still -- I am sorry; I was giving you the depreciation figure -- about $15 million in total, which is the same figure that we gave you at the beginning of the year.

And then lastly, your stock prices continue to appreciate. You have got a relatively small share base. Any thought to doing a possible stock split or a stock dividend?

We review that at each of our quarterly board meetings, and we happen to have one coming up next Monday.

Okay. Thank you very much.

You are welcome.

(OPERATOR INSTRUCTIONS). Our next question comes as a follow-up from Michelle Lynch with Apex Capital.

This is Sandy Cowen again. Just one other clarification. You mentioned that the EBIT margin in the quarter from the Tommy Bahama business was 11 percent. I was wondering if that was before or after the amortization of intangibles?

It is after.

Okay. (multiple speakers)

The first quarter historically is not one of the bigger quarters for Tommy Bahama. (multiple speakers). That margin has the opportunity to expand in that larger quarter.

If I were take the 11 percent of the 63 -- that is roughly 7 million -- and add back the amortization, that gets you to 8.6 million-ish, and if you add back the amortization to the EBIT number you reported as [16.8], it is about 18.5. So it still accounted for roughly half of the EBIT for the amortization; is that about right?

Yes. That sounds about right.

Okay. That is terrific. You are off to a pretty quick start there. Congratulations.

We are very pleased.

Thanks.

At this time, we show no further audio questions. I would like to turn the floor back over to management for any closing comments.

We appreciate your interest and attendance, and we look forward to visiting with you in about three months. Thanks.

Ladies and gentleman we thank you for participating in today’s conference call, and you may disconnect your lines at this time, and have a pleasant evening.