Oxford Industries Inc (OXM) 2005 Q4 法說會逐字稿

Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to today's Oxford Industries Incorporated fourth quarter fiscal conference call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. As a reminder again, today's call is being recorded. And now I'd like to turn the conference over to Reese Lanier, from Oxford Industries. Please go ahead, sir.

Thank you, Cynthia. Good afternoon, everyone. Before we get started, I would 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 S3 registration statement, dated September 24, 2004. A copy of this registration statement is available online or upon request from Oxford's Investor Relations Department. Oxford disclaims any duty to update any forward-looking statements.

I would also like to point out that our fourth quarter contains 14 weeks, compared to 13 weeks last year, and our fiscal year 2005 contains 53 weeks, compared to 52 weeks in fiscal 2004. In addition, the Tommy Bahama acquisition was closed on June 13th of 2004, meaning that its fiscal 2005 contains 53 weeks, compared to 50 weeks in fiscal 2004. Ben Sherman, which was acquired on July 30th of 2004, was included in our results for 44 weeks in fiscal 2005 and was not included in 2004.

I appreciate your attention and now I would like to introduce Hicks Lanier, Chairman and Chief Executive Officer of Oxford Industries.

Good afternoon and thank you for joining us. With me today are Mike Setola, our President; Tony Margolis, CEO of our Tommy Bahama Group; Tom Chubb, Executive Vice President; Scott Grassmyer, Controller; and Reese Lanier, Treasurer.

We are extremely pleased to report financial results for the fourth quarter of fiscal year 2005, which ended June 3rd. We made significant progress in the ongoing strategic repositioning of our business. And as a result, enjoyed the highest sales and earnings in the Company's history.

I'd like to start with a summary of the key financial highlights for the fourth quarter. Consolidated net sales increased 14% to a fourth quarter record of $387 million, from $339 million last year. Sales growth was driven by a $43 million contribution from Ben Sherman, new marketing initiatives in the Menswear Group and continuing growth in the branded divisions of the Tommy Bahama Group.

Consolidated gross margins increased 360 basis points to 34.8%. This reflects the increasing contribution of the Ben Sherman and Tommy Bahama brands. Our royalty income once again showed solid growth, rising 66% to $3.1 million from $1.9 million in the year ago quarter. The inclusion of Ben Sherman's licensing income and the higher sales volume of Tommy Bahama license fees generated the growth in royalty income.

Diluted earnings per share increased 21% to a fourth quarter record of $1.17 a share, from $0.97 last year. This was above our previously issued guidance range of $1.00 to $1.10 and the current First Call consensus estimate of $1.11. We're certainly pleased to end the year with such a strong fourth quarter result. Not only have we performed well financially, but our vision for Oxford as a vibrant growing provider of both strong brands and high quality private label programs is becoming a reality.

In our guidance call in June, I mentioned that the Tommy Bahama and Ben Sherman brands now account for more than 40% of our total sales and 70% of our total operating earnings. I think this statistic clearly illustrates the strategic progress that we've made thus far and the direction in which we're headed.

I would also point out that just over 14% of our fiscal 2005 sales were generated by Company-owned retail stores under the Tommy Bahama, Indigo Palm and Ben Sherman nameplates, and this percentage is expected to increase in the future.

We will continue to build our business through both organic growth and by acquisition, with a focus on lifestyle brands and high value-added private labels.

Now I'd like to ask Mike Setola to give you an overview of our Menswear Group.

Thank you, Hicks. Good afternoon, everyone. The Menswear Group reported a fourth quarter sales increase of 59%, to $188 million from $118 million last year. The strength in our Menswear business this quarter continued to be broad-based. Excluding the $43 million contribution of Ben Sherman, our historical Menswear businesses generated a sales increase of 23% over last year, driven by broad-based growth across most major product categories and divisions.

I'd also like to call out our tailored clothing division, who had an exceptional year in one of the more challenging sectors in our industry. Their efforts were a major contributor to our success this year and I think they deserve some recognition for it.

Ben Sherman continued to exceed our expectations and we couldn't be more pleased with the job that Miles Gray and his team are doing. The brand performed well in the UK and Western Europe, despite a very tough retail climate. In recent months, we've taken the German business in house and are adding additional distributors in Europe and the Middle East.

In the US, the Men's and Women's collections as well as denim and footwear continue to perform well at retail. Tailored clothing, neckwear and dress shirts launched for Fall with shipments beginning this month to more than 120 doors. We've had a great reaction to our Fall collections from our major customers and are truly enthusiastic about our opportunities for a strong Fall selling season.

Fourth quarter operating earnings for the Menswear group rose 13% to $17.2 million, from $15.2 million last year. The increase in operating earnings was driven by a considerable contribution from the higher margin Ben Sherman business, partially offset by startup expenses for new marketing initiatives and weaker performance in private label sportswear and casual pants, due to higher markdowns and unfavorable sourcing variances.

Thanks. I'll now turn the call back over to Hicks.

Thanks, Michael. In the Womenswear Group we faced significant challenges in fiscal 2005. In response to intense margin pressures, we focused our efforts on improving profitability, even at the expense of market share. Expense reductions and a more efficient sourcing structure resulted in improved profitability in the second half of fiscal 2005.

Our fourth quarter sales declined 15%, to $80 million, from $95 million last year, but our operating earnings increased 98%, to $6.2 million, from $3.1 million last year. As I mentioned in our last call, we believe this business is stabilized at the current revenue and we expect to see the recent profitability improvement continue into fiscal 2006.

I'd now like to turn the call over to Tony Margolis to give us an update on Tommy Bahama.

Thank you, Hicks. Good afternoon, everyone. Results for the Tommy Bahama Group were once again on plan for the quarter. We reported fourth quarter sales of 118 million, versus 126 million last year. This decline is due to the previously reported discontinuation of our private label business, which accounted for just over $15 million in sales last year's fourth quarter and less than $0.5 million this fourth quarter.

Excluding private label, our core branded sales actually increased by 6% in the fourth quarter, and 18% for the full year. Operating income for the fourth quarter increased to 22.8 million, from 21.3 million last year. We generated a fourth quarter operating margin of just over 19%, which reflects the benefit of increased retail sales as a percent of our total sales.

As Hicks reported in the guidance call in early June, the Tommy Bahama Group enjoyed a highly successful year, driven by strength in the core Men's business, that addition of 11 new retail stores and the continuing development of the Indigo Palms and Island Soft brands.

The Tommy Bahama Women's business showed some tangible signs of improvement in our Company owned retails stores and we are increasingly enthusiastic about the direction this business taking.

You may have seen in a recent trade publications that we have launched for Spring 2006, a new brand extension under the Tommy Bahama Relax label. This group of products will address the most casual part of our core customers' wardrobe. It will include our existing businesses in men's swimwear, beach towels, baseball caps, etc., and add a full line of complimentary cotton and linen-based, heavily washed casual sportswear.

It has a unique color story from the regular Tommy Bahama line and it is a bit of a throwback to the original Tommy Bahama concept. It has received a very favorable response at wholesale and will start to arrive in the stores starting in February 2006.

Thank you for your attention, and now I'd like to turn the call over to Tom Chubb.

Thank you, Tony. Consolidated net sales for fiscal 2005 increased to $197 million, or 18%, to $1,313,000,000. By dollar volume, Ben Sherman added 154 million, Tommy Bahama added 31 million, despite the net loss of approximately 29 million in private label sales. Our historical Menswear businesses excluding Ben Sherman, added 54 million and the Womenswear group had a decline of 41 million.

Consolidated gross margins for fiscal 2005 rose 290 basis points, to 33.4%. This reflects the increased contribution of the Tommy Bahama and Ben Sherman brands, which generate higher gross margins than our corporate average.

Selling, general and administrative expenses for fiscal 2005 increased to 337 million, or 25.6% of net sales, from 252 million, or 22.6% of net sales last year. The increase in expenses was primarily attributable to the inclusion of Ben Sherman, which carries a higher expense structure than the corporate average, and also included additional infrastructure to support store growth, sales growth and new marketing initiatives in other areas of our business.

We incurred $9 million of intangible asset and amortization expense during fiscal 2005. As a reminder, amortizable value was assigned to the Tommy Bahama and Ben Sherman customer relationships, licensing agreements and other intangible assets.

For fiscal 2005, on an after-tax basis, these non-operational, non-cash charges reduced our reported earnings by approximately $0.34 per share. Royalty income for fiscal 2005 grew 136%, to 12 million, from 5 million last year. Higher sales volume for Tommy Bahama license fees and the addition of Ben Sherman generated the increase.

We continue to be pleased with the condition of our balance sheet. Year-end inventories increased 45% over last year, to 169 million. The increase was driven by additional inventory to support growth in our Menswear and Tommy Bahama businesses and the inclusion of approximately 26 million in Ben Sherman inventory. We believe our inventories are clean and properly valued.

Our accounts receivable increased 12% over last year, to $197 million, which is consistent with our fourth quarter sales increase of 14%. Debt to total capitalization at year-end stood at 49%, up slightly from last year's figure of 45%. Our long-term debt consisted of $199 million in senior unsecured notes and $90 million outstanding on our bank revolver. Excess availability under our bank revolver totaled approximately $77 million at year-end.

For fiscal 2005, we generated cash flow from operations of $52 million, compared to $65 million last year. Significantly higher net earnings, depreciation and amortization were offset by additional investment in working capital assets and lower accrued expenses, primarily from the timing of the semiannual interest payments on our senior unsecured notes.

Thanks for your attention, and I'll turn the call over now to Reese Lanier.

Thank you, Tom. With the Fall season on the books and the Spring 2006 season coming into view, we are increasingly enthusiastic about the upcoming year. Accordingly, we are raising our first quarter and full-year guidance to reflect favorable market conditions and developing opportunity.

For the full year, we are continuing to project total revenues of between $1,370,000,000 and $1,390,000,000 and raising diluted earnings per share guidance to a range of $3.25 to $3.35. For the first quarter of fiscal 2006, we are continuing to project total revenues of between $325 million and $335 million, and we're raising our diluted earnings per share guidance to a range of $0.57 to $0.62 per diluted share.

Now I'd like to turn the call back Hicks for some closing comments.

This has been an outstanding year for Oxford. The Ben Sherman acquisition has added an important lifestyle brand with a global reach, a licensed product portfolio, a developing retail strategy and a significant opportunity for growth in the years ahead.

Our Tommy Bahama Group enjoyed a very successful year in fiscal 2005, with continuing growth in its Tommy Bahama Indigo Palms and Island Soft brands, as well as their addition of 11 new retail stores.

While we still have challenges in certain areas of our business, we believe our portfolio is better positioned competitively and strategically than ever before. It's our mission to continue to execute in each of our businesses and to search for growth opportunities that can be developed internally or through acquisition.

I am delighted with our progress and look forward to another excellent year in fiscal 2006. Thank you for your continued interest and support and we are now ready to take questions, Cynthia.

[OPERATOR INSTRUCTIONS] John Rouleau, Wachovia Securities.

Nice quarter. I wanted to start with Tommy Bahama, I guess, and talk a little bit about the sales growth between the retail stores and the wholesale side. I know you don't break it out, but maybe you could talk to each side of the business, retail versus wholesale?

And then a follow-up question on the Relax label. We've all read about it a little bit but we don't know kind of what to expect. Maybe you could explain the rationale for a separate label, how this will be positioned at retail, whether it's going to sit in the same section on the Men's floor as the Tommy Bahama product and then how it might compare to Indigo Palms and what you're doing on the Tommy Bahama side, maybe just a little more color there.

Be happy to do that for you. As to the balance between our regular retail or our own retail business and our wholesale business, I would tell you that as we have mentioned before, last year I believe we had about 44 retail doors open and this year we are sitting at somewhere around 50 or 51, plus a couple of outlet doors. I think the grand total is about 54.

Our long-term projection for our retail project has always been somewhere in that 75 range, we said was about the number that we felt we could open without having a dramatic impact on our third party distribution. So we've got still plenty of room for growth there.

I would tell you that our business this past year, particularly in Menswear, with our third party accounts, I believe was record setting for most of our major stores. Whenever we open one of our own stores, there is some negative impact to some of the local smaller specialty stores, but clearly on a per capita basis, we do significantly more business having our own store in those markets than to rely on the business that is generated by our third-party clients--our smaller third party clients.

But clearly, our business in our larger major outlets is continuing to grow and be very strong. So both sides of the business are progressing very, very nicely. And that is again, the result of the strength of our Men's brand, along with Indigo Palms and on a smaller level, the Island Soft brand.

I apologize for not remembering the order of your questions, but I would tell you that to give you a little more highlight on Relax, I would tell you that over the years, Tommy Bahama has established itself as probably the premier dominant resource for silk influenced sportswear for men and women.

I think the difference between the two brands is that Relax really caters to a much more casual part of our customers' wardrobe. It is cotton and linen and cotton-based. It is heavily washed product. If the core Tommy Bahama line would be acceptable product to wear let's say to go out of an evening, to go to dinner in a nice casual restaurant, the Relax line is attire that you might wear in your back yard to your own barbecue. It's in many ways active and more outdoor attire.

I would tell you that the color palette is distinctly different, where the Tommy Bahama core line revolves primarily around what I'll call neutral shades, dominated by blackgrounds and things of that nature, the Relax line is very color driven, but again, heavily washed.

So they're quite distinct and different. They are different, again, from Indigo Palms in that it is a casual sportswear concept versus a jeanswear concept. And for those of you who are more knowledgeable of what the differences are there, the jeanswear business is a denim driven, bottoms driven business and sportswear, I would say, certainly in our Company, is more dominated by the tops side of the business.

So, they are very separate and distinct. In major department stores you would find them in potentially different departments. It is our belief that the opportunity for Relax, the bulk of it still resides in our existing account structure. There are a few notable exceptions where Relax might well open a door or two for us that we would not normally--you would not expect to find Tommy Bahama, or might increase the opportunity of an existing door to do significantly more business, because of the attitude of the Relax line, versus the dressier elements of the Tommy Bahama line.

And I don't know that I covered all your questions, but I think I got most of it.

You really did. And then as far as the actual label is concerned, will it say Tommy Bahama Relaxed or how will that read?

It will say Tommy Bahama Relax.

Great. And then one quick follow-up if I could. Inventory growth kind of 45%. I know you said you're comfortable with that, but maybe you could help us put that into perspective with some of the things you're planning here. That's a relatively high number, given the sales growth in the quarter. Maybe you could just add a little bit more to that.

I think the inventory growth, we pointed out the amount that was the result of the Ben Sherman acquisition, which was a significant part of it. We probably ended the year with a little more inventory than we would have liked, but I think by the end of the first quarter all that will be worked off, with one exception.

And that is we started a number of replenishment dress shirt programs last year with Men's Warehouse and Sam's Club in particular. They required a heavier inventory than norm since the ADI programs and they will reach a level that I think we're probably carrying a little too heavy an inventory there and we'll get that adjusted over the next year.

Jeff Klinefelter; Piper Jaffray.

Congratulations on a great finish to the year to everybody. A question for you first, Hicks. Because of the diversity of your business, you've always had a very good view of what's going on in the marketplace, getting cautious last year, going into the Fall season, getting seemingly a lot more comfortable or maybe even bullish about the overall environment now.

Could you talk a little bit more about that from the discount channel to the moderate channel to the higher end? I think there maybe are some mixed messages coming out of retailers here just recently with July results and it would seem with your guidance that you're feeling like the state of the industry is actually quite healthy.

Well, I'm not sure we gave that message, but we think our position is quite healthy right now. And starting with the discount tier, I think over the last few months Target in particular has performed pretty well in terms of same-store sales increase. Wal-Mart not quite as good. They did better in July with I think a 4.2% same-store sales increase in their Wal-Mart stores.

There's no question that the price of gas problem has affected that tier of distribution and I think there's some other issues with Wal-Mart in apparel which have affected them negatively, which I think they're trying to fix but there's not a lot of tangible signs that they've done that yet.

Going to the other extreme, in the better end, and that's where our two lifestyle brands are targeted, they're less sensitive to things like the price of gasoline and have performed better over the past few seasons. So, there was some moderation in July in that tier, but by and large it's still pretty healthy.

And the mid-tier, whether you're talking about a conventional department stores or the Penney's or Cole's or Sears-Kmart, there's a lot more inconsistency there than there is in the other two extremes. I'm sort of rambling here. I don't know whether I'm giving you what you want or not.

I guess stated another way, it would appear that there's a fairly healthy profile of bookings out there at least for your key retailers, given this guidance and pricing wise. Are you using price stability year-over-year? Is that helping to drive your sales, versus just pushing more units through the channel?

I would say in our brands there's definitely price stability if not some upward movement. In the lower tiers, obviously, price is always a factor. I'm sure we may get at one point or another to the Chinese adjustment in their currency, which at this point is around 2%, so it's not a major factor at this point. But that tends to have a slight inflation in our pricing.

Okay. Two final questions. One would just be dealing with this embargo issue. I know you were early to try to avoid or to deal with the pre-China entry into the WTO last year at the end of the year. Now with an embargo, is there a strategy in place for you guys to navigate around that?

And then just in terms of the Women's business, Tommy Bahama and Ben Sherman, any further updates you can give us on those two lines?

Why don't we start with your last question first and Tony, you want to comment on the Women's business?

Yes. As I mentioned, we've seen our own tangible improvements within our own retail stores in the last quarter--actually probably the last half of last year. And we are definitely--we're comfortable that the Women's line has rounded the curve, if you will, in the turnaround that we've been hoping for. We are out currently with our Spring '06 collection, getting very positive reaction.

I would tell you that the repositioning of that line into a more spirited, younger, fashion oriented demographic has had some negative impact on what I'll call the old-line accounts that have. And we are just starting to reap the benefit of that repositioning with the new accounts that we hoped to cater to.

And so, we have very, very positive expectation for our Women's business over the next year or two. The turnaround that I'm alluding to will probably have minimal impact on the fiscal '06 reports that we give you, in that this new line that we're showing will only catch the last quarter of next year.

The Ben Sherman Women's business is predominantly in the US on plan. We met our goals for door openings and distribution hurdles. And we're anticipating a good Fall season coming up. The future will be told by the retail selling.

Jeff, as you know, we sort of planned to go in China. We knew that there was a risk going into calendar 2005, that there would be safeguard quotas and ultimately embargoes. And so we had a close eye on that, had contingency plans in place.

The quotas came as expected. They filled a little bit more quickly than we might have expected and we did incur some air freight expense. During the first quarter have incurred some airfreight expense, both in expediting finished goods to get them here ahead of the embargo, which we were successful in doing, as well as expediting raw materials to alternative manufacturing locations.

All that, however, was built into both our original guidance and the revised guidance for the first quarter, so there's no negative surprise there.

And to finish up, from the beginning we've had our eye on what alternatives we would need to have available to us in the event that the safeguards came into being. So we're in pretty good shape then.

Eric Tracy, BB&T Capital Markets.

Congrats on the great quarter. Michael, if you could talk a little bit more with respect to the Menswear Group, pretty solid strength, excluding Ben Sherman of 23%. Can you just give a little bit more clarity as to where that's coming from?

The top line portion is coming pretty broad-based. We've got a number of new dress shirt initiatives. Hicks spoke to the inventory investments in them across all tiers of distribution in wrinkle-free and in fashion areas.

In the sportswear categories, some pretty strong initiatives that have started up for both JC Penney's and Cole's specifically that have had positive impact in the fourth quarter and will again in the first quarter.

In our linear group, the tailored clothing, I called them out earlier. They had a very strong year and their growth is broad-based as well, from Men's Warehouse to department stores, to JC Penney's. So there is a broad-based approach to the top end.

I would just make note on the--you didn't ask it specifically, but it will be in here somewhere. The lack of profitability at that same rate of growth really came on the downside of manufacturing and variances related to some markdowns that we took. Specifically a big portion of those on the ending of the woven striped shirt craze. We provided for those appropriately and extinguished those in the fourth quarter. And some operational issues with regard to specifically our Dominican Republic facilities and the peso valuations. Just high energy and operating costs down there, which have put a little bit of a squeeze on our margins for the quarter.

Okay. And do you see that kind of margin pressure stabilizing going forward?

I think it's going to stabilize as being pressure. We'll continue to deal with the issues. I think we've planned for them appropriately and we'll deal with it.

Okay. And then just real quick on the Orvis line, I think that was scheduled to arrive kind of late July-early August on I think 100 doors. Kind of sense of early reception to that?

It's out the door, we shipped it on time. The product is in the new Orvis catalogue under the Charles F. Orvis Collection. We're excited about that. They did a great job with the photography and the presentation of it. The specialty stores will begin to receive inventory really now. We had a very good and positive feedback to it at the Collective this past month as well.

It's a specialty store driven line in the top end in the better tier distribution.

Okay. And then, maybe Hicks or Tony, just talk about the release today on Phoenix acquiring Paradise, any real material changes there to the Tommy Bahama licensing?

Hicks, I'll take that one if you don't mind. For us, this is pure opportunity to strengthen our position in a market where we believe there's a significant growth opportunity available for the brand. The original license was actually a startup business. The infrastructure that it holds doesn't even begin to compare to the strength that our new Phoenix licensee has.

And we believe that the internal strength that they have both in design and sourcing and operational skills, in concert with them retaining Mike Rena, who oversaw the marketing and sales of the line, he will remain with the project. And I believe we will just have a stronger shoe company operating the Tommy Bahama license.

Okay. And then just lastly, kind of housekeeping. Reese noted a significantly lower tax rate, kind of going forward, how should we look at that?

This year we told you guys we thought that the tax rate would be somewhere in the 35 to 36% range. It came in a little bit lower than that in the second half and actually still lower in the fourth quarter. I would think about it as being sort of in the 35 to 36% range again, maybe a little closer to the bottom of that range than we had originally projected.

Susan Sansbury, Miller Tabak.

I have a question for Tony. With respect to Relax, Tony, can you--I know you don't like to provide specific numbers, but can you give us some indication of what the first full-year annual incremental contribution to top line might be from Relax and/or the potential from this line in dollars or doors? Is it going to move the needle?

The answer is, you're correct, we don't like to get too specific about the expectations of the launch of a new label. I would tell you that the elements that exist already in the Company, which would include the swimwear, the beach towels, the baseball hats, etc., that sort of very casual accessory side of our business, I think combined currently represents approximately 10% of the base volume of the Company, 7.5 to 10%, somewhere in there.

I will tell you that it is our expectation that by flushing this out dramatically--let me back up and say, most of those products as part of our regular line release were certainly not the thrust of the line, nor did they get the time and attention that the printed silk camp shirts got or the bottoms in the regular line. And so, I don't want to say that they were an afterthought. I would say that they were certainly way down the food chain in terms of the time that our design and product development people spent on them.

Now that it is a significant core to this new business, there's a great deal more time and energy being spent on it. The line content has been dramatically improved. The quantities of the offering are dramatically larger. And so, we expect that business to grow significantly just by the additional focus on those individual products. But I think it also touches on a part of our customers' wardrobe that really we haven't been addressing as we've been building our position in the silk market.

In many cases, that cotton element or the cotton-linen element that is the backbone of this line didn't exist in our Company at all. It certainly didn't in the Tommy Bahama brand. And so, some of the successes that we will have there are a little unpredictable in the sense of how big they could be. That line or that concept could grow to be as large as the core Company. But realistically, we think that's going to take some time and will come over a number of seasons and not in one fell swoop.

So, the answer--a very vague answer is we expect it to be a significant new addition to the Company. We would not have launched this particular effort if we didn't think the opportunity to generate significant volume wasn't there.

Okay. Just one little follow-on. Are the retailers going to take floor space away to put this on the floor or are you really encouraging them to segregate it or what are we doing about the balance of the Tommy Bahama Relax and Indigo Palms?

The answer is very different with each store. I think that there are stores where clearly it should be positioned elsewhere. There are stores that have departments that cater to what I'll call swim and casual, and it would be very appropriate for this product to sit in that area.

But then there are stores where spaces is much more limited and as a result of that it can sit as a segment of the Tommy Bahama presentation, as it already does. Some of those products are sitting in the department as we speak. It's just an enhanced group of products that they may have in the past turned to other people to buy elements of it, but no one in the marketplace has put it together as a complete vision of its own. And I think the Tommy Bahama brand was a natural company to attack it as we have. I think the market sees it as a natural extension for our label and are reacting to it very well.

That sounds great. Thanks. Hicks or Mike, we haven't talked about Sears Lands End in a while. Can you bring me up to date on what's going on there?

Well, during the course of this past year, our Lands End business stabilized, I guess I will say. We had had a big increase when Sears first bought Lands End, in our fiscal '03. Big increase in '03, big decrease in '04, then '05 was a moderate increase. So, it is what it is and we don't have any more insight into what the future of the Sears-Kmart combination is going to mean than anybody else does. So I can't shed any light on that.

Okay. Then I have two quickies for Reese. I'm being democratic this evening. Reese, what did the extra week add to top and bottom line in fiscal year '05?

I'm not sure how to answer that. I'm not going to lay it out specifically. I would say that the week added a couple of percentage points top and bottom line. It might have added a little more to bottom line than top line, because that particular week came in the fourth quarter, which is a period during which Tommy Bahama's retail store performance is exceptionally strong. So I think the impact on the bottom line would be a little bit more than the impact on the top line.

Okay. And is that the reason why even though you "beat" estimates by $0.07 a share in the fourth quarter, you only raised the forward number by a nickel, on average?

We raised the number in the first quarter by a nickel, because that was the sum total of everything that we could assess and see at this point in time. I don't think it had anything to do with the 14th week in the fourth quarter of fiscal '05.

It's a typical conservative Oxford forward-looking statement?

I would say it is net result of the sum total of what we expect to happen at this point in time.

Okay. Refresh my memory what the D&A is going to be this year?

Depreciation and amortization is going to be approaching probably about $20 million.

No, the P&L portion, the amortization portion, I'm sorry.

It's going to be $0.25 per diluted share for the full year.

Okay, that's very helpful. Thanks very much. Gentlemen, you're doing a fabulous job. Thanks.

[Kara Gallagher], [Harrison Company].

If you could just spend a minute--and I'm sorry if I'm asking you to repeat what you've already talked about. On the inventory, you mentioned that they were a little bit higher than maybe you were expecting, but you talked about a replenishment program within the Menswear Group. Were you implying that some of the inventory was more weighted towards Menswear than the other segments within your Company? If you could maybe just clarify that for me, that would be great.

I think what I was trying to indicate is that compared to the same time a year ago, we have several new dress shirts programs which are replenishment programs and dress shirts, as you know, are sized by neck size and sleeve, so you've got a lot of SKUs. And to be able to service programs of this type, you have to carry a fairly heavy inventory. So that was one of the factors in our inventory increase. And we were probably a little heavy in those inventories at the end of the year and think we can manage them down to a lower level going forward.

So do you expect inventories to grow more in line with sales, going into Q1 and Q2 of '06?

Well, we hope that--disregarding the seasonal pattern, we think that in Q1 the inventories will go down some.

[OPERATOR INSTRUCTIONS] Dennis Van Zelfden; SunTrust Robinson.

I guess my question starts off with the Womenswear Group. In the press release it says that the Company believes that this business has stabilized at the current revenue level. I'm assuming that you do not mean that you're going to generate $80 million per quarter going forward?

No. What we meant is that we thought with the revenue level that we had in the year, with $256 or $257 million is where we think that we will not have further attrition from that level as we did have in '05. So we're looking for a 260ish year for '06.

Okay. That's what I had figured. Just wanted to clarify that. And lastly, Reese, regarding the guidance, does that include or exclude the options expensing, and if it includes it, roughly how much do you think that impact will be?

It does not include any expensing and we won't expense options this year.

[OPERATOR INSTRUCTIONS] Eric [Name], SG Cowen.

I was wondering what your expectation is for operating margins by division for '06 and the store openings for '06 if you had sort of a net amount, and if you had changes in door account distribution expected for Tommy Bahama and Ben Sherman? Thanks.

What was the last part of the question, I didn't understand it?

The last question was changes in door account distribution for Tommy Bahama and Ben Sherman?

I don't think there's any significant change in our distribution in either one of those [bits]. Tony commented when he was talking about Tommy Bahama Relax it's possible that there'll be some doors that we're not currently selling, that we might sell, and I think he's probably thinking about some specialty shirt shop or swim shops that might be candidates. But the general distribution plot is pretty much the same. No change there.

In terms of operating margins, that's one of your questions?

Yes, operating margin by division for '06?

I think the Tommy Bahama margins, which we've broken out before, we expect to be a little better than they have been. We expect some improvement in our markdowns for the year in Tommy Bahama as a result of a little better planning and more conservative buying, I guess you might say. And also we expect some gross margin increases [inaudible]. So we expect those to go up.

And also as the retail component of Tommy Bahama, becomes a larger percentage, that ups our operating margin there. Ben Sherman I would say that we're looking at a solid operating margin in the 12 to 14% area, which is consistent with what we generated this past year. And in the remaining part of the business, we expect the Womenswear margins, at least near-term, to continue to increase as they have the past two quarters. And we expect in the legacy menswear segment to have some improvement there also.

I think we've got a pretty good picture in terms of operating margins going [inaudible] historical performance. And there was one other part of the question I forgot.

Yes, thanks, that's been helpful. The last part was store openings for '06?

I think we've got about--in Ben Sherman, Mike, we've got 2 at the end of the year, 1 in New York and 1 in Los Angeles?

2 in the US and 1 in the UK.

Okay, so 3 Ben Sherman stores and about 8 or so in Tommy Bahama.

John Rouleau, Wachovia Securities.

Hey, guys, a couple of follow-ups. You haven't talked about Federated-May, which obviously is a big merger out there and it's been a while since I inquired. If you look at the legacy business and the Tommy Bahama business, with both Federated and May, which is the larger account and how are you looking at that merger? I know you don't know obviously what they're going to do and the strategy going forward, but which of the two do you have more exposure with right now?

Well, at this point, if you include Tommy Bahama and Ben Sherman, both of whom do fairly significant business with Bloomingdale's and Macy's West in particular, Federated would be more if you put the two together and you include the Tommy Bahama and Ben Sherman business that we do with Marshall Fields and Lord and Taylor, the combination of those two would become our corporate second largest customer or right at that. So they're significantly important, but even at that level it's under 10%.

So we know that there's going to be a shake out of 80 or 100 stores there, but I think our position on that merger is that we think long-term we will benefit by that, because they're going to want strong brands and strong suppliers and I think we're very well positioned to do business with them.

Okay. And then a follow-up to Tommy Bahama. Historically, the split between retail and wholesale had been kind of 40/60ish, 40% kind of retail, 60% wholesale.

That's been changing pretty rapidly. We ended this past year at about 48/52 or 47/53. We expect the retail restaurant component to exceed the wholesale component in fiscal '06.

Okay. And then breaking down the wholesale side again, not in numbers or anything, but if you look at kind of the department store business versus the smaller specialty store business, is that roughly 50/50 or what's a general breakdown for that?

That would be more like a 70/30 or an 80/20. Nordstrom is a huge account. So when you put that into the equation it dramatically swings it in that direction. And as Tony mentioned earlier, as we continue to open our stores we lose some of our specialty store base, because they just can't compete with a Tommy Bahama store in their trading area.

That was the rationale for the question. And then finally, Mike, I know Nickit started off extremely well at Penney's and you were pleased with that. In the midst of it all we had a bit of a woven slowdown in the cycle there, which certainly it's not woven based. But I'm wondering if you could just provide a quick update on how Nickit's doing at Penney's?

JC Penney's remains very pleased with the performance. Frankly, some of the better performing product in the assortment turned out to be the wovens. They were very appropriate to that consumer. Some of the items that didn't perform were the more traditional products like twill pants and solid wovens on the floor. So, I think the fashion sensibility is correct and Penney's is very positive about it.

It appears there are no further questions at this time? Mr. Lanier, I'd like to turn the conference back to you for any additional or closing remarks.

We thank you for your interest today and repeat once again that everything [inaudible] we feel pretty pleased about our positioning right now going forward and not to discount the challenges out there, but we're pretty pleased. So thanks and we'll look forward to talking to you at the end of our first quarter.

That does conclude today's conference. Thank you for your participation.