Oxford Industries Inc (OXM) 2005 Q1 法說會逐字稿

Welcome to the Oxford Industries first quarter fiscal 2005 earnings conference call. At this time all parties have been placed in a listen-only mode and the floor will be open for questions following the presentation. It is now my pleasure to turn the floor over to your host, Treasurer, Mr. Reese Lanier. Sir, the floor is yours.

Thank you. Good afternoon everyone and thank you for joining us today. Before we get started I'd like to point out that 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 uncertainties which are described in the Company's Form S-3 dated September 24, 2004. A copy of this form is available online upon request from Oxford's Investor Relations department. Oxford disclaims any duty to update any forward-looking statements.

Thank you for your attention, and now I'd like to introduce Hicks Lanier, the Chairman and Chief Executive Officer of Oxford Industries.

Thank you, Reese. I have a disclaimer myself in that I married off a daughter this past weekend, and somehow in the process lost most of my voice. But hopefully we can get through this and I'll be somewhat legible.

Thanks for joining us today. With me are Mike Setola, President; Ben Blount, Chief Financial Officer; Tony Margolis, CEO of our Tommy Bahama group; Tom Chubb, Executive Vice President; Scott Grassmyer, our Controller; and Reese Lanier, our Treasurer.

We are pleased to report financial results for the first quarter of our fiscal 2005 which ended August 27, 2004. I will begin today by briefly touching on the key financial highlights for the quarter and then we'll walk you through our three operating segments. You should keep in mind that we owned the Tommy Bahama business for 11 weeks in the year-ago quarter, and that Ben Sherman, which closed on July 30th, contributed only one month of operations to the quarter.

For the first quarter, consolidated net sales increased 9 percent, to 265 million from 242 million in the year-ago quarter. The increase was driven by growth in the Tommy Bahama group and the contribution of Ben Sherman for the last month of the first quarter. This sales level was slightly lower than we had anticipated, but entirely the result of softness in our historical businesses, primarily womenswear.

Both Tommy Bahama and Ben Sherman had very strong results for the period. Diluted earnings per share were 36 cents versus 42 cents in the same period last year and was slightly lower than our guidance of 37 to 39 cents. The year-ago decline in diluted EPS included the write-off of 1.8 million in deferred financing fees to amend our revolving credit facility and an increase in diluted shares outstanding of approximately 1 million compared to last year. The write-off of deferred financing fees amounted to approximately 7 cents per diluted share, approximately 2 cents greater than we had estimated when we issued guidance last quarter. Additionally, the sales shortfall in the historical businesses contributed to our miss on the earnings line. We'll go into more detail about our guidance in a moment, but we are confident that our full-year expectations for both sales and earnings are not at risk as a result of the slightly lower-than-expected performance in the first quarter.

Consolidated gross margins increased 2.8 percentage points to 32.1 percent, also driven by the Tommy Bahama group and the addition of Ben Sherman for part of the (indiscernible). The increasing gross margin illustrates the attractiveness of these two acquisitions and their importance to our strategy going forward. Operating income increased 4 percent, to 7.4 million from 16.8 million in the year-ago quarter. Please note that 1.7 million in noncash intangible asset amortization expense related to acquisitions has been deducted from operating income for both years.

I would like to reiterate that while our historical businesses did not perform quite as strongly as we had hoped, we are confident that we will achieve our performance targets for the full year. We are well-positioned for a strong second half. In addition to benefiting from the continued strong performance from Tommy Bahama and the inclusion of the Ben Sherman business, we also believe that the second half will show improvement for our historical businesses.

While some of our major customers have had to reevaluate their near-term inventory and sales plan, we believe inventory levels at retail are relatively clean. A number of external factors relating to weather and the economy have impacted traffic levels in the retail market. (indiscernible) we have strong product offerings that we believe will get a good response from our customers and consumers, particularly for the second half. We had a very good reaction to our products at the magic (ph) apparel show and received very positive feedback from our major customers.

Now I'd like to take a moment to discuss some specifics in our menswear and womenswear segments for the first quarter, and then I'll turn the call over to Tony to discuss the Tommy Bahama group.

The menswear group reported first-quarter sales of 119 million, an increase of 3 percent over the year-ago quarter. Ben Sherman, which was included in our financial results for one month during the first quarter, contributed 16.6 million in sales. Excluding Ben Sherman's contribution, the menswear group's first-quarter sales were down by 13.6 million and slightly below our plan. Last year's first quarter included approximately 11 million in sales attributable to the last of the initial (indiscernible) sets for the rollout of Lands End merchandise to Sears retail stores and to the discontinued Izod Club business, neither of which were repeated in this year's first quarter. Cleaner inventories and lower markdowns during the quarter also resulted in lower off-price sales compared to last year.

Despite the addition of Ben Sherman, the menswear group reported a 6 percent decline in operating income, due to lower sales in the historical business and a moderate deleveraging of operating expenses. Although operating income was below last year, it exceeded our plan. On a more positive note, we are seeing strength in our private-label dress shirts, sports shirts and golf-inspired sportswear businesses for spring. We have booked new programs with Sears, Kohl's and Target. Combined with solid expectations for Ben Sherman, we should have a big year in this segment despite the current market environment (indiscernible).

Mike Setola, would you say a few words about our Ben Sherman acquisition?

Thanks, Hicks. Good afternoon, everybody.

Obviously, it's very early in our working relationship with the Ben Sherman organization, but this past month has been a great start. Shipments during the month of August were strong at 16.6 million and above plan. Operating profitability was also above plan. We continue to believe that we'll see approximately a 10 percent operating contribution from this business for a full fiscal year.

The Ben Sherman brand position in the UK and European markets is solid and improving. In the United Kingdom the companies efforts to expand into new categories of business such as wholesale womenswear and licenses for both tailored clothing and furnishings have been well-received. These initiatives aren't new; they're about a year old, but are now just hitting their strides and should augment our growth opportunities going forward.

In the United States, where the business is still very underdeveloped, we will continue to penetrate better department stores such as Nordstrom's, Bloomingdale's, and select Federated and Lord & Taylor doors, as well as the better men's specialty store accounts. The business at retail had a very strong Spring and Summer season and the early Fall read is promising.

Business continues to be on plan and we are executing well. Similar to the European market, we're making efforts to expand the brand to new classifications, and here too we've gotten positive feedback from our customers on these initiatives. It is clear to us that this brand is capable of supporting a full lifestyle collection. While we will of course be evaluating opportunities for synergy and expects that there will be some, however, it's far too early for specific estimates.

We did not include any synergistic savings in our acquisition projections. What I can tell you is that one of the most attractive aspects of the acquisition is the quality of the management team, and we have no doubt that they will prove to be a tremendous asset to our organization in both this transitional period and into the future.

Thanks Mike. Now let me turn your attention to the womenswear group.

Our womenswear group continued to face significant challenges during the first quarter. Several of the group's mass merchant customers reported sluggish apparel sales during this period, and in some cases failed to meet downwardly revised comp store sales estimates. This poor performance resulted in order deferrals and a first quarter sales decline of 16.7 percent for the womenswear group.

As the case has been for the last two quarters, our womenswear group continued to experience severe margin pressure due to extremely competitive market conditions, highlighted by the continuing growth of self sourcing (ph) by our key customers. These margin pressures, combined with the sales decline, resulted in an operating loss of $1 million for the quarter compared to operating income of 3.2 million in the year-ago quarter. This is a significant reversal from last year and below our plan, and was the primary reason we were at the lower end of our guidance range.

We expect this challenging situation in the womenswear group to continue through the second quarter and then show improvement in the second half, based on changes already made in our sourcing structure. This gives us opportunities to improve profitability with key customers in the second half despite relatively flat sales.

Before I turn the call over to Tony, I would like to say that we are very pleased with the performance of our newly acquired branded businesses. The strategic repositioning of our company has gone very well and should drive significant returns and value to our shareholders.

Tommy Bahama continues to show undeniable strength and we are very excited about the potential for Ben Sherman. While our historical business is a bit soft at the moment because of the current market environment, we do not believe that this will affect our ability to reach our full-year earnings target. We are positioned to have a very strong second half. I am confident that we have the product, people and processes in place to make this another record year.

Thank you and I'll give the floor to Tony.

Thank you, Hicks. I am pleased to report that the Tommy Bahama group enjoyed a strong first quarter. We contributed sales of 93.5 million, an increase of 48 percent over last year's 11-week first quarter. On a direct comparable pro forma basis, the Tommy Bahama group sales increased approximately 25 percent for the first quarter. Operating earnings for the quarter were 11.9 million, an increase of 71 percent versus last year's 11-week contribution. On a pro forma basis, operating income was up approximately 46 percent versus last year.

Our Tommy Bahama men's business continues to perform well. Advanced bookings and margins for menswear remain strong and our performance at retail is on plan. We have continued to receive good feedback on performance from our key customers and we are excited about the opportunity to grow the business over the course of the year.

Tommy Bahama womenswear performances has continued to perform at or near our expectations, which are down from last year. But we're looking forward to the new product that will be shipped for this holiday season. These will be the first deliveries of the newly redesigned line, and we believe that they will be very well received. The line is now younger, more feminine, and more fit-conscious. We have received very positive feedback about this new direction from our wholesale customers.

Indigo Palms is performing well. Our over-the-counter performance for the men's product is exceptionally strong at several major customers, and the advanced bookings continue to be gratifying. The Indigo Palms women's line is just completing its second full season. We are continuing to build on our successes and to adjust the assortments to be a bit more youthful and feminine. We think this will improve our performance and generate improved rates of growth.

In the first quarter, our retail stores continued to perform well. Obviously, four hurricanes in Florida during the months of August and September will have an impact on our sales. Fortunately we have suffered no significant physical damage to our stores and the storms came at a comparatively slow time of year for our Florida locations. Based on month-to-date performance, we estimate the retail sales impact on our own stores in Florida to be less than $1 million. Strong performance in other parts of the country should mitigate the impact on our overall performance.

I would also like to bring you up to date on the status of our private-label business within the Tommy Bahama group. We established it when we were a much smaller company to help support the overhead and defray some of the costs of our branded business. Our company is in a much different place today, and as private-label generates much lower margins than our branded businesses and has become a much smaller percentage of our total business, we have made a decision to discontinue this division.

Our private-label operations generated approximately $29 million in sales last year's second half and are expected to contribute approximately 3 million of sales for this year's second half as we phase out of this business. The impact on sales will be much greater than the impact on earnings. We believe this is the right choice for our future and are evaluating opportunities to move some of this business to other areas of Oxford that are better suited for this type of activity.

To conclude, we continue to believe we have excellent opportunities for growth in our business in men's, women's, Indigo Palms and retail. We're looking forward to the Tommy Bahama challenge as a marketing vehicle for the brand, and think that we will continue to garner more and more recognition and acceptance for the brand. We think we can grow at a solid pace without compromising the integrity of our distribution, and that through an expanded suite of licenses, we can leverage the considerable power of our brands.

Thank you, and I will now turn the call over to Ben.

Thank you, Tony. Since Hicks, Michael and Tony have already walked you through the sales figures, I will review the key elements of the income statement and balance sheet for the quarter.

Consolidated gross margins for the first quarter rose 2.8 percentage points to 32.1 percent versus the year-ago level of 29.3 percent. Both Tommy Bahama and Ben Sherman enjoyed significantly higher gross margins than our historical businesses. As these acquired businesses have increased as a percentage of total sales, overall gross margins have increased.

Total operating expenses for the first quarter were 69.3 million compared to 55.3 million in the year-ago quarter. As a percentage of net sales, operating expenses increased 330 basis points to 26.2 percent from 22.8 percent in the year-ago quarter. Again, this increase was primarily the result of the inclusion of Tommy Bahama and Ben Sherman, which carry higher expense structures than the corporate average. The deleveraging expenses resulting from the sales decline in our historical business also contributed to the percentage increase.

Also included in operating expenses for the quarter were 1.7 million of intangible asset amortization expense. As a reminder, amortizable value was assigned to both the Tommy Bahama and Ben Sherman customer relationships, licensing agreements and other intangible assets. For the current and prior year's quarter, on an after-tax basis these non-operational, noncash charges reduced our reported earnings per share by approximately 6 cents. For the balance of the year, we estimate the quarterly intangible amortization expense to be approximately 2.3 million, or about 8 cents per diluted share.

Operating income for the first quarter increased 3.7 percent to 17.4 million, generating an operating margin of 6.6 percent. Interest expense during the quarter increased to 7.9 million from 5.7 million in the year-ago quarter. The increase reflects higher levels of bank debt used to finance the acquisition of Ben Sherman, as well as the write-off of 1.8 million in deferred financing fees associated with the amendment and restatement of our senior revolving credit facility. This write-off of deferred financing fees was a onetime noncash charge that amounted to 7 cents per diluted share in the first quarter. In total, we incurred approximately 13 cents per diluted share in noncash, non-operating charges for the quarter.

Diluted earnings per share for the quarter were 36 cents compared to 42 cents in last year's first quarter. Excluding the write-off of deferred financing fees, our diluted earnings per share were flat with last year despite a higher share count. Diluted shares outstanding for the quarter increased to 17.2 million from a split-adjusted 16.2 million in the year-ago quarter. The increase was primarily the result of shares granted to the selling shareholders of Tommy Bahama, increased option exercises, and the higher dilutive effect of outstanding options due to the increase in our stock price.

We continue to be pleased with the condition of our balance sheet. At quarter end, inventories totaled 143.1 million and included 25 million in Ben Sherman inventory. Excluding Ben Sherman, our inventories were flat over the year-ago quarter. Overall, we believe our inventories are clean and properly valued.

Accounts receivable totaled 160.5 million at quarter end and included 29.9 million in Ben Sherman accounts receivable. Our accounts receivable were actually down excluding the addition of Ben Sherman. To finance the Ben Sherman acquisition, we incurred approximately 86 million in debt, and at quarter end, our total debt stood at 310.9 million.

You'll also note a number of other changes in our balance sheet as a result of the acquisition, namely, increases in intangible assets, goodwill and deferred income taxes. As with the Tommy Bahama acquisition last year, these charges reflect the preliminary purchase price allocation analysis conducted during the first quarter.

With respect to guidance, we remain comfortable with our previously issued estimates for full-year sales of 1.285 billion to 1.325 billion and diluted earnings per share of $2.70 to $2.85. Note that these figures reflect the impact of intangible asset amortization expenses and the write-off of deferred financing fees of approximately 38 cents per diluted share for the full year.

Despite the impact of the storms on our Florida Tommy Bahama stores and the below-plan performance of our womenswear group in the first quarter, we remain comfortable with our previously issued estimates for the second-quarter sales of 305 to 315 million and diluted earnings per share of 48 to 52 cents. As Hicks mentioned earlier, we booked several new programs in the second half that will offset the current weakness in some of our private-label businesses.

Thank you, Ben. I think you can all see that Oxford is on a very good path. We have dramatically increased our profitability through the acquisitions we have made and leveraged the strength of our balance sheet to open the door to further growth opportunity. As a significant private-label producer, we have some exposure to market conditions, but we believe the environment will improve by our second half. As we've said several times, we remain comfortable with our full-year financial plan.

Before I conclude I would like to recognize Ben Blount for over 40 years of distinguished service to Oxford Industries. Ben will be retiring following our annual shareholders meeting on Monday. He has made an immeasurable contribution to Oxford during his tenure and we are deeply indebted to him for his judgment, his leadership, and his steadfast loyalty to our organization. On behalf of all of our Oxford employees around the world, I would like to say thank you, Ben.

With that, I'd like to conclude our prepared remarks. Thank you for your attention, and we will open the floor to questions.

(OPERATOR INSTRUCTIONS). Tim Geyer, Piper Jaffray.

Good job on another strong quarter. I have a couple of questions for you. First of all, I know your women's Tommy Bahama pant business has seen some improvement since last spring. How has that business grown and what have you learned that can be transferred from that business over to women's sportswear or the Indigo Palms line?

I think it's nice of you to recognize that point. We have been very, very pleased with the reaction to the new fit spec. That adjustment has not only impacted the way in which the bottoms part of the line is being developed, but it affects the way the tops are being developed as well. When you alter a fit spec, you can't just look at the bottom half of the silhouette; you've got to kind of face the whole body and say we have to make adjustments across the board. And that has happened to us throughout the sportswear collection. I alluded to it earlier; we're very excited about the new direction of the line and feel that this holiday will be the first of the significant turnaround that we're hoping for.

That same thought process is part of what went into the development of Indigo Palms from its inception, and I will tell you that the single greatest strength of the Indigo Palms women's collection at this point is the response to the fit characteristic of the jeans. They fit extremely well. They were developed for an adult woman. We are consciously not soliciting or going after the Brittany Spears group of people or their wannabes; we are trying to cater to an adult woman and have developed a fit spec specifically for her, and we are getting great reaction to it already. I hope that answers your question.

Great. One other question regarding the Ben Sherman line. I have seen that the men's product has been anchoring the young men's department of Nordstrom's with a great display. How has the women's product been received? And also, do you have any update on the Ben Sherman product licenses?

Starting in reverse order, there is no update on the Ben Sherman licenses in the U.S. I did mention briefly that the tailored clothing and neckwear licenses in the UK are doing rather well. So is the recent sunglass launch there. So we are continuing to evaluate our opportunities here in the United States and currently are not making any announcements about any forward movement. As for the anchoring of the young men's department, as you probably know, Nordstrom's tends to look at their younger men's area in the department they call the rail not as a true young men's very fast-moving department, but we do have a dominant position there. Our business happens to be very strong at retail, not only through the Summer season, but we're having a very good Fall start there. As for women's, women's is really just making its initial launch and momentum into the market. We have hired a very strong sales manager. She has made some terrific inroads with this season and we expect that actually for what would be the spring season upcoming to be the most significant appearance of the product at retail.

Lee Backus, Buckingham Research.

Hicks or Mike, you have alluded to several initiatives in the legacy business. Could you expand on your plans for the second half, maybe talk a little bit strategically what you're thinking about for that business? Sort of give us a sense of embedded in your guidance for the rest of the year, how that business -- how you expect that business to perform.

I can tell you from an overview standpoint, even though the menswear business in the first quarter was down, we expect it to be up substantially for the full year, and that will start in the second quarter and continue in the third and fourth quarters. It is a combination of new initiatives but also some significant new programs, particularly with Kohl's, would be the most significant there. And as it happens, that increase in business will probably offset for the year the attrition we expect in womenswear. So we're still sort of holdings with our comments that for the year we'll be fairly flat in the legacy Oxford portion of the business.

Flat sales? What about margins?

Basically we're anticipating for the year for it to be flat on both the top and bottom line. Just as a follow-up to give you a little more information, I said the womenswear problems would persist into the second quarter. The top line erosion will continue into the second half but not the bottom line. We expect to have improved profitability in women's in the second half of the year. And we've got enough tangible information on our spring bookings in March that we feel pretty comfortable making that statement at this point.

Tony, you have signed a lot of licenses for Tommy Bahama. Could you discuss those and the potential for those?

I think it's hard to be the fiduciarily (ph) correct and talk about the potentials, but obviously the fragrance license is a huge opportunity for our company. It was one that was a long time in the signing. We are extremely pleased with the initial response that we are getting to the presentations that are being made as we speak. The very first exposure of the scent itself and the packaging concept was at the magic show, and it got great response there. We have since had separate meetings with a significant number of the larger retailers throughout the United States, and the response to the collection has been great. So we think that's going to be a huge addition to our pie.

On a smaller level, but kind of exciting in its own right, the Tommy Bahama sailboats that are being done by Benato (ph) will be on display at the latter part of this month. And although we don't expect great revenues from that one, we think it's a great brand-enhancing effort. And we are also -- I think two weeks ago at Vision Expo, the reintroduction of the Tommy Bahama eyewear occurred and was received extremely well, not just domestically but through a number of international opportunities as well. That's been getting great response. And the sunglass piece of that, I believe, will be released the latter part of this month as well. So we're getting very, very positive development on all the new licenses that have been signed and some of the old standbys continue to pound away. I know that Lexington Home Products has been delivering a product called Rumba del Sol, which is a new collection for them, and they are getting, again, very strong response to that one.

John Rouleau, Wachovia Securities.

Ben, let me just say congratulations upfront on your retirement here.

Thank you, John.

You're welcome. The new initiative with Kohl's, I'm assuming that that's private-label or is that some sort of an exclusive brand to Kohl's, and is that in men's and women's? Maybe you can just allude a little bit more to that?

The strategies with not only Kohl's but Target and with Penney's really evolve around a mixture of private-brand opportunities, potentially licensed brand opportunities and pure private label, where we're either designing into and with them, their brand labels into some of our expertise. But not only to answer your question but as a bit of a follow-up to Lee's prior question, a number of the initiatives are very sportswear-driven and multi classification-driven coordinated efforts, as opposed to many of the prior efforts were very classification-driven.

So when you kind of look at your businesses, in the past you've talked about them a little bit on a product category basis, a little bit on a channel basis and a little bit on an individual customer basis. Are there any trends out there in terms of the channels, maybe which customers are having a more difficult time, or is it really on a customer-by-customer basis? For instance, the Wal-Mart business on the women's side, maybe another area on the men's side. How do you break that down and how should we be thinking about that?

In men's specifically, this quarter the reduction -- primarily planned reduction was not a result of any tier distribution customer; it was primarily the Lands End ramp-up from a year ago that we were up against. So on a by-customer basis we are not excluding or including anybody as a primary target. We share distribution from Wal-Mart through Nordstrom's, and (indiscernible) find strategies for each one.

And then the sourcing changes that you're making on the women's business, maybe -- are you going offshore with that more, or what are some specifics behind that?

We're totally offshore and have been for some time in women's, so that's not a factor. I think some of it has to do with changing to lower-cost sourcing to meet the price requirements.

Okay. Because historically you guys have kind of followed a value-added type strategy with some of these customers, and you're taking that downstream a little bit it sounds like.

That's correct.

Last question. The guidance, the range of 270 to 285, fairly wide. I know it's still early in the year, but kind of a 15 cent range there. You know, what are some of the key variables that would cause it to be on one end or the other of that range?

I think there'd be more macro issues than micro issues at this point.

So related to traffic and just overall (indiscernible) spending?

I think so.

(OPERATOR INSTRUCTIONS). Clarke Ardski (ph), KDP Asset Management.

Just had a quick question on the new revolver and what the availability was at the end of the quarter?

We had approximately 100 million in (indiscernible) and 100 million in direct borrowings outstanding under that line, leaving us with about $80 million in availability.

Sort of when through the year does the borrowing peak? Or is that now?

We are at a little bit of a peak now. We sort of have a late Summer, early Fall peak in preparation for our Fall shipments, and then we have another peak in the February/March timeframe and preparation for really the peaks come when we convert the inventory buildup to accounts receivable. So our next peak and our highest annual peak will be in the February/March range.

Lee Backus, Buckingham Research.

Tony, could you just update us on your retail store opening plans for the rest of the year?

Sure. We are actually on plan in Tommy Bahama. As described earlier, we will be opening, I believe, seven stand-alone stores in this fiscal year and one compound. And we will be opening two additional Indigo Palms stores. We have two open currently and we'll be opening two more.

Could you update us on the performance of those Indigo Palm stores?

It's still -- it's way early for us to give you any sort of firm answers on this. I will tell you that the second store that we opened was a much stronger prototype store for us in terms of size. It was about 25 percent larger than the original store that was opened, and that is a much more suitable space for presenting both men's and women's within the concept. But it is -- I will tell you that they are running approximately on plan, although there are some months where they come in a little bit low and some months where they come in a little bit high. But on an annualized basis it appears that they will be on plan.

John Rouleau, Wachovia Securities.

A real quick one, maybe for Reese. The write-off of the financing expense ended up being 7 cents versus the 5 that you were initially thinking. What else is behind that?

We had lined up the bank group beforehand, but that was immediately before we issued guidance and closed on the transaction. So we knew what the lending institutions were but we still had some jockeying to do in terms of the commitment amount, and they were still moving around when we got there. We went from a larger bank group to a smaller bank group with big commitments, and that really -- it was a mathematical equation that drove the amount of the write-off.

The second follow-up. We're starting to hear that there's some logjams in the ports. Obviously logistically in the Southeast it's difficult to move merchandise around a little bit, given the conditions down there. And we're hearing that it's getting tougher to get containers out of Asia. I'm just wondering if you could speak to all of that and what you're dealing with right now?

Sure. We'll let Tom Chubb address that. He's our expert on both the Far East and logistics.

We have not really experienced any real problems in moving containers through Florida. That hasn't been a big issue for us. Like everybody else in the world, we are affected or we have to plan to avoid being impacted by the congestion in Southern California. And basically we've been on top of that situation for months and have planned to either make all order shipments to the East Coast, or to just build in more transit time because the delays there are unavoidable.

Right, out of the West Coast. But now rerouting those shipments to the East is a problem in the East, (indiscernible) cause some additional problems there, or --

No. That has not been an issue. We may have slowed down by a couple of hours or something, but there's been no material impact at all.

Is your sense that the problems in the West Coast ports, the West Coast docks, are getting worse or are we still pretty bottlenecked there?

They're not getting better. And from everything we can tell they're still months away from getting better, and we're planning accordingly and have been for a number of months now.

Okay. Last question, another general one for you. In terms of the health or the state of the overalls men's business, it's obviously been very good for the past year. We're hearing that it's a little bit soft, particularly in some pockets. What is your state of the union of the overall men's business and maybe some of the trends that are affecting that business right now?

Mike, you want to tackle that one?

Sure. You're correct, it's been a fairly strong trend for at least the 12 prior months and maybe a little before. Things started slowing down a little bit, a little bit past Father's Day this year. And admittedly I think most retail distributions would say that they had a difficult August, and what we're hearing so far in September hasn't been terrific either. The segment of the market that seemed to have been doing very well which was the better tier is slowing down a little as well. Our view on it is that especially in the areas where we have replenishment businesses, we've tightened up the inventories and we've looked at our forecast on them; still feel comfortable. And barring any very poor Christmas season we should be in a proper forecast position.

Mike, just drilling down a little bit further. Do you think just because some of the trends that we have out there in terms of colors, wovens, striped shirts and things like that -- have they just been around long enough? Do you have a thought on maybe what is causing the general slowdown? I know men typically wait for weather and the weather really hasn't broke and gotten cold yet. Any thoughts as to what is maybe behind the overall slowdown in men's?

No. Before there was fashion on the floor, everybody complained that business was bad because there was no fashion on the floor. There has been fashion on the floor for the last year. I think that has been a positive and significant piece of the better men's business. But if you also drill down a little bit deeper, there's been a lot of innovation in non-fashion product with stain-resistant and wrinkle-free processes that have also energized the customer. And finally, the tailored clothing business has been very good, and that was a significant comeback from what was a very poor 24 months prior. All of those added up to a pretty good trend. We still had fashion on the floor. The Fall fashion assortments at retail, I think, are the best they have been. I'm not specifically talking about Lanier, but there is a tremendous amount of new product and exciting product on the floor. So it's not fashion. The tailored clothing business is still better than it was, but it has slowed down significantly and has tended to trend towards related separates -- separate pants and jackets that can be bought as opposed to a suit. And the classification business, the basic business, we have seen a slowdown in the replenishment businesses there, but those total units are still up over what we were again doing during the slow periods. So I think it's a general accumulation of not only product related issues but economic related issues, our election period coming up, perhaps just a wait-and-see perspective on what our future holds here in the United States.

Let's hope they get out there and shop.

(OPERATOR INSTRUCTIONS). Thank you. There appear to be no further questions. I will now turn the call back over to management.

Okay. Thank you. We appreciate everybody's interest and attention today. I'd like to just summarize my thoughts if I can for a minute.

We obviously had a significant problem in our women's segment this past quarter, and it kept it from being a really terrific quarter for us. Our guys in that operation have had a lot of success in the past, and they are working like crazy to get their situation turned around, and there are tangible signs that that's happening.

Having said that, we couldn't be more pleased with the progress we have made on our strategic repositioning. Tommy Bahama continues to be a complete home run for us, and every indication at this point is that Ben Sherman is of the same ilk. So we still have -- as we have repeated a number of times in this conference, we still feel very confident that this is going to be another record year for us.

Thanks for your attendance and hopefully I'll be able to talk more fluently the next call. Thank you.

Thank you. This does conclude this afternoon's teleconference.