Oxford Industries Inc (OXM) 2006 Q4 法說會逐字稿

Welcome to today's Oxford Industries Incorporated fourth quarter 2006 conference call. [OPERATORS INSTRUCTIONS] Now, I would like to turn the conference over to Mr. Reese Lanier. Please go ahead.

Thank you, Mark. Good afternoon everyone and thank you for joining us this afternoon. Before we get started I like to point out that some of the statements made on this call as part of the prepared remarks are in response to your questions which are not historical facts may be deemed to constitute forward-looking statements with in 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 at the bottom of our earnings release and in our other filings for the U.S. Securities and Exchange Commission. A copy of this report is available on line or upon request from Oxford Investors Relations Department. Oxford disclaims any duty to update any forward-looking statements. Now, I would like to introduce today's call participants. With me today are Hicks Lanier, Chairman and CEO; Michael Setola, President; Tony Margolis, CEO of our Tommy Bahama Group; Tom Chubb, Executive Vice President and Scott Grassmyer, our Controller. Thank you for your attention and now I'd like to turn the call over to Hicks Lanier. Thanks, Reese. Good afternoon and thank you for joining us today. Were are please to have finished our year in line with our expectations and with a strong sense of optimism for the up coming fiscal year. I would like to begin today with a summary of the key financial highlights of our fiscal year 2006.

As you know we have completed the sale of our Womenswear Group on June 2, 2006. As a result, the financial results of the Womenswear Group for the current and prior period are presented as discontinued operations. For fiscal 2006 net sales from continuing operations increased 5% to $1.109 billion from $1.057 billion last year, with growth in both Tommy Bahama and the Menswear Group.

We were extremely pleased with the results of the Tommy Bahama Group, which despite the shorter year enjoyed a 2% sales increase over last year. The Menswear Group reported sales growth of 7% over last year, which included 12 months of Ben Sherman in fiscal 2006 compared to ten months in fiscal 2005. Gross margins from continuing operations increase modestly to 38.9 % in fiscal 2006 from 38.2 % in fiscal 2005.

Operating margins from continuing operations also increased modestly to 8.9 % in fiscal '06 from 8.7 last year. Diluted earnings from continuing operations for common share increased 14% to $2.88 from $ 2.53 last year. Our net earnings which incorporate the Womenswear Group results as well as the gain on the sale of the Womenswear Group totaled $70 million or $ 3.96 per common share for fiscal 2006.

Our fourth quarter and full results were in line with our expectations and consistent with what we have communicated in the last two calls. We are extremely pleased with the performance of the Tommy Bahama Group which continues to prove itself to be a dynamic and exciting brand and business model.

In our Menswear Group we're anticipating an upside, so we are being careful to keep our expectations modest in a market environment that it is stable but not particularly robust at the moment. We're also very pleased with the tremendous progress that we've made in the ongoing strategically positioning of our businesses in fiscal 2006. The sale of the Womenswear Group freed up significant capital and resources that will be devoted to our key strategic objective of developing, growing and acquiring consumer life style brands.

Following the divestiture, we believe that we have a stronger more focused strategic position in our operating margins a more efficient capital structure and improved opportunities for growth in sales and earnings. In our historic Menswear businesses we have taken steps to improve our competitive positioning in Lanier Tailored Clothing and Oxford Apparel. Last fall we acquired SFR Apparel, owner of the Upscale Tailored Clothing brands, Arnold brand and Silverstone. These brands strengthen our presence in the tailored market at the high-price points in premier department and independent specialty stores like Nordstrom, Saks and Harry Rosen.

At Oxford Apparel we acquired Solitude a California lifestyle brand that we lost in 500 doors at J. C. Penney. Other Sportswear growth initiatives assisted us in transitions away from more moderate commodity private label programs. We closed four offshore manufacturing facilities and consolidated related U.S. base support functions in an effort to streamline our infrastructure and improve our return on assets. We expect that these acquisitions and divestitures will improve our competitive positioning and lead to higher sales earnings in fiscal 2007.

With Ben Sherman we encountered some product challenges in the U.S. business that resulted in excess inventory and had a negative impact on our results during the second half. Our response has been both swift and in the best interest of the brand over the long-term. The brand is a great asset and an important growth opportunity for our company.

During the period we initiated our company owned retail strategy with the opening of two new retail stores in the U.S. Under new leadership in the U.S. we believe that merchandising and operational issues have been resolved and the financial impact has been fully recognized in fiscal 2006.

In the U.K. we brought in-house the distributorship in Germany which will serve as a platform for continued expansion in continental Europe. We also opened our second retail store in the U.K. We are anticipating a dramatic improvement and profitability for our Ben Sherman business beginning in the second half of fiscal 2007. The Tommy Bahama Group capped off an outstanding year with strong fourth quarter performance.

Operational improvements to most closely managed inventories and drive full-price sales resulted in significant high profitability. Operating margins for the full year increased four percentage points over last year to 17.5% of sales. I'll let Tony walk you through the details but for fiscal 2007 we are projecting sales growth in Tommy Bahama's to accelerate to 10% or better driven by a continued strength in the Core Men's Sportswear and by product extension like Relax and [inaudible].

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

Thank you, Hicks. Good afternoon everyone. Menswear Group reported a fourth quarter sale decline of 9.7% to 169 million and 188 million last year.

Our historical Menswear businesses, sales were down approximately 11% year-over-year reflecting our continuing transition away from the more moderate commodity private label programs particularly in the bottoms businesses. Ben Sherman sales for the fourth quarter were down from last year by approximately 6%.

In the U.S. we exited a number of doors that we believe were inappropriate for our positioning as a premium contemporary brand. Looking ahead we expect to see better performance from existing doors and the opportunity to add productive new doors. We believe that our distribution and focus design direction are appropriate and will ensure the long-term health of the brand. Early selling on initial fall shipments have been extremely well received by our retail accounts as wells as our own retail stores.

Ben Sherman is a strong differentiated brand and continues to have a loyal following in both the U.K. and here in the U.S. For the full year, sales for the Menswear Group increased 7% to 700 million from 657 million last year. Our historical businesses saw sales increase of approximately 6% aided by the acquisition of Arnold brand and Solitude. Ben Sherman sales for the year increased approximately 8% over fiscal 2005, which included ten months of operations following its acquisition in July 2004.

Operating income for the group declined 27% to $42 million and fiscal 2006 from 58 million in fiscal 2005. As we have discussed over the last two quarters, the decline in profitability was attributable primarily to Ben Sherman's U.S. business and plant closures and related consolidations in our Lanier and the Oxford Apparel private label businesses. Expenses associated with these closures and consolidations totaled approximately 3.4 million in the second half. This amounts to approximately $0.12 per common share after tax for the fiscal year.

We're glad to get these issues behind us and look forward to a dramatic improvement in profitability in fiscal 2007. Now I'd like to turn the call over to Tony Margolis to take you through the Tommy Bahama Group.

Thank you, Michael. And good afternoon, everyone. We had an outstanding year in the Tony Bahama Group in fiscal 2006. Sales increased 2.4% to 409 million from 400 million last year.

Please note that fiscal 2005 contained approximately ten million in private label sales that were discontinued prior to fiscal 2006. So the sales growth was closer to 5%. Sales for the fourth quarter were up slightly over last year to 119 million despite one less week in the fiscal quarter. Our wholesale business performed very well during the fourth quarter and the full year.

Our Men's sports wear has remained strong and we're capturing a growing share of our major retail partners selling space. Our Indigo Palms and Island Soft brands continue to develop and getting recognition with the consumer. The Relaxed line enjoyed a fantastic launch in spring 2006 and we see opportunities for significant growth in this most casual portion of our Tommy Bahamas product offerings.

Lastly we began initial shipments of the Tommy Bahama Golf 18 in June and are very pleased with our placement in Top Tier, Green Grass and Resort locations for fall 2006. Our retail expansion continued at a steady pace in 2006. We opened five retail stores and an outlet during the fiscal year bringing our total to 59 retail locations. We have plans of opening approximately eight retail stores including two compounds in fiscal 2007.

We continue to be very pleased with the performance of our retail operation which now represents more than half of the total sales of Tommy Bahama. Operating income for the Tommy Bahama Group increased 32% to 72 million in fiscal 2006 from 54 million last year. Our operating margin rose four percentage points to 17.5% of net sales from 13.5% in fiscal 2005.

For the fourth quarter, our operating income increased 20% over last year to 27 million, which generated an operating margin for the quarter of 23%. We have continued to see benefits from a more disciplined approach to planning and inventory control which has resulted in faster turns and an improved level of full price sales.

Our profitability was also aided by the growing percentage of sales through company-owned retail stores on a decline in intangible asset amortization expense from last year. As Hicks mentioned earlier we are looking for sales growth in fiscal 2007 of 10% or better. I think it important to mention that this growth is balanced between wholesale and retail. New product categories like Relax and TB Golf 18 should complement organic growth in our existing brands at both wholesale and retail.

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

Thank you, Tony. I'd like to walk you through the key metrics on the consolidated income statement, balance sheet and cash flow statement for the fourth quarter and fiscal 2006. Net sales for the fourth quarter declined 6% to $288 million from 360 million in the fourth quarter last year. The fourth quarter of fiscal 2006 contained one less week compared to the 14 week fourth quarter of fiscal 2005.

As we communicated in the last two conference calls the sales decline was attributable to the Menswear Group more specifically to Ben Sherman's U.S. business and [inaudible] our historical Menswear business. Gross margins for the fourth quarter were 39.4% compared to 39.6% for the fourth quarter last year.

For the full year, gross margins from continuing operations increased to 38.9% from 38.2%. This margin expansion was driven primarily by the strong performance in the Tommy Bahamas business and a growing percentage of total sales through company-owned retail stores. I think you'll find it interesting to note that our retail businesses accounted for just over 20% of our total sales in fiscal 2006.

Selling, general and administrative expenses declined in the fourth quarter to 85.1 million or 29.6% of net sales from $91.2 million or 29.8% of net sales in last year's fourth quarter. The fourth quarter decline in expenses was primarily attributable to lower incentive compensation due to our second half financial performance. For the full year, SG&A increased to $339 million or 30.6% of net sales in fiscal 2006 from $314 million or 29.8% of net sales last year.

Increase in expenses was due to the inclusion of Ben Sherman for 12 full months. Costs associated with opening and operations of the Tommy Bahamas and Ben Sherman retail stores and start up expenses for new marketing initiatives in the Menswear Group. Intangible assets amortization expense declined from last year in both the fourth quarter and the fiscal year.

This amortization expense is attributable to the value assigned at acquisition to the Tommy Bahamas, and Ben Sherman customer relationships, licensing agreements and other intangible assets. The amortization expense is greater in the period immediately following the acquisitions than in later periods.

On an after tax basis, these non-cash charges reduced our reported diluted earnings from continuing operations per common share by approximately a $0.27 for fiscal 2006. Royalties and other operating income with up slightly for the fourth quarter and increased 9% for fiscal 2006 to $13.1 million from $12.1 million last year.

We changed out licensees in a handful of product categories that negatively impacted our royalty income during the year, but we believe that these changes will result in an improvement in the compense and in growth rate of our overall licensed product portfolio in the future. You will notice that our balance sheet reflects the sale of the Womenswear Group on the last day of fiscal 2006. The assets and liabilities of the Womenswear Group that were not included in the transaction namely accounts receivable, in transit inventories and associated liabilities are classified as assets or liabilities related to discontinued operations.

We received $35 million in net proceeds at closing and expect to collect another $32 million during the course of the first half as in transit inventories are cleared, accounts receivables are collected and our escrow is released. Our balance sheet at year-end was the strongest and most liquid that it has been in the past three years. Proceeds from the sale of the Womenswear Group and strong cash flow from operations led to a $92 million reduction in our outstanding indebtedness.

Our year-end inventories declined by 15% from last year to $124 million reflecting a conservative inventory position in each major line of business. Our cash flow from continuing operations for fiscal 2006 was $81 million compared to $41.3 million last year. Again, the activities related to the sale of the Womenswear Group have been segregated as as discontinued operations. The increase in cash flow from continuing operations was due primarily to higher net earnings and lower investment in working capital assets.

During the fourth quarter we repatriated approximately $23 million of undistributed earnings of certain foreign subsidiaries under provisions of the American jobs creation act of 2004. This repatriation resulted in a one time $3 million reduction in our tax expense or a $0.17 addition to diluted earnings per common share for the fourth quarter.

I appreciate your attention. I'll turn the call over to Reese Lanier to update our guidance.

Thank you, Tom. We are reiterating the first quarter and fiscal year 2007 guidance we initiated in our conference call June 1, 2006.

Fiscal 2007 net sales are projected to be between $1.160 billion and $1.180 billion and diluted earnings per common share are projected to be within a range of $3.25 and $3.40. For the first quarter of fiscal 2007 net sales are expected to be between $280 million and $290 million. And diluted earnings per common share are expected to be between $0.60 and $0.65.

Our guidance reflects the adoption of FAS123R expensing of stock options and employee stock purchases, which is expected to reduce diluted earnings from continued operations per common share by approximately $0.01 per quarter or $0.04 in fiscal year 2007. Thank you. Now I'd like to turn the call back to Hicks for some closing remarks. Thanks. Before we take your questions, I'd like to say we're very pleased with what we have accomplished over the past fiscal year.

Our flagship property Tommy Bahama has proven it has numerous opportunities for growth and continued to be an extremely strong relevant brand for a wide range of consumers. We have continued to grow the wholesale business carefully particularly through product and brand extensions that are no where near that potential. We continue to prudently expand our portfolio of retail stores which are very profitable and reinforce our brand position extremely well.

The brand is unique and compelling and we'll continue to provide us with strong cash flow and sales growth as we go forward. We are also pleased, despite our recent challenges with the edition of Ben Sherman business to our mix. Ben Sherman has advanced our strategy to become a branded lifestyle company and extended our foot print to Europe and and beyond.

The Womenswear Group [inaudible] is also a very important step in our transformation. The Womenswear Group was a solid business but it was inconsistent with our long-term direction.

We are looking forward to redeploying the capital and though we have nothing imminent to report, we are confident that we will find the right opportunity to take our business to the next level of diversification growth and profitability. As we look ahead to fiscal 2007, we are truly enthusiastic about our prospects. All of our key lines look good and have received very positive responses from our retail partners. We are planning aggressively for next spring and look forward to showing you our new product ranges that [inaudible] at the end of this month.

With that I would like to thank everyone for joining us today and we're ready to open it up for questions. Mark?

Thank you very much. [OPERATOR INSTRUCTIONS] Our first question today will come from Jeff Klinefelter with Piper Jaffray.

Yes. Congratulations to the team on the Tommy Bahama performance this last year. Wanted to just hit a couple of questions maybe starting Tommy Bahama just recapping, Tony, if you could, for us on this opt margin improvement. Can you put in context of the improvement how much of it has come from your inventory management and subsequent markdown reductions or pursuing the cycle of scarcity versus scale in the operation and cost of goods reductions? How much of it, I guess, has been better business management just versus structural changes that you've made. Also on Tommy Bahama any thoughts now on the use of ecommerce potentially to start testing demand in international markets?

It's a tough thing to pinpoint on a percentage basis exactly what percent of this improvement came from reduced margin or reduced inventories. But clearly it had a positive impact. The reward for that doesn't just come from the fact that you don't take as many markdowns. There is a little bit of actually lost top line sales that you could have obtained. So I think it's a combination of -- it just -- I think that better management results in a higher gross margin performance that takes the brand to a safer and healthier business position. So for me to try to give you the exact percent that one element represents versus another is something I probably can't do for you. If you guys need that, I'm sure we could develop it for you. I think the results are clear that the opportunity for growth exists throughout all of these brands. And we are not diluting that opportunity by flooding the market with product that needs to be reduced in price to sell it off.

In answer to your second question, ecommerce question, we have actually started to build internal staff to walk through that process as you'll probably note from other companies that you've looked at, the ecommerce opportunity is a good one and a great long-term one if the process that you start with is a healthy one. On the downside of not doing that properly is just as great as the upside. So we are investing in an organizational structure that allows us to build that process from the beginning with all the strength that we need.

Okay, great. Any anticipation for when you might be looking at ecommerce and is that something you might use to put your toe in the water with international?

I would say to you there's nothing planned for the fiscal 2007. So I wouldn't want to look at anything further down the road or quote you anything further down the rode than that. Surely if we're doing ecommerce properly we would see some expansion into distribution throughout the world.

Okay. Great, maybe as a follow-up then within the Men's kind of legacy business, can you give us an update again on kind of running through percent of your business, you top accounts, where that's concentrated now, how that looks going into this next fiscal year versus last year have there been any changes as a result of the realignment of the business. We talked last quarter about the bottoms category being weak kind of across the board, maybe just a little more color on how that's trending going into the fall season.

Sure, Jeff. The customer mix hasn't changed that dramatically what's change has been the product mix that's selling in to those customers as an example through the Federated May merger which are pretty dominant customers. We simply have a product mix change. It's not about a total change in ranking of customers. So we really can't speak to any dramatic change in customer profile of our top five. What really has changed has been the content from both the Ben Sherman business and from the Legacy business. Specifically your question on the Bottoms business. We suffered the greatest erosion in Bottoms businesses, classification of Bottoms business especially in the second half of this past year. But that continues to belly our communication to our customers and to our stockholders of what we hope to be the overriding continuing transition of our legacy businesses away from these classification, high volume low margin businesses to more branded lifestyle businesses through both acquisition, licensing and proprietary brand direction.

So any feel now going into the fall season? It appears from your guidance that you maintaining that you're encouraged and it sounds like some favorable comments on Ben Sherman. Any read at this point with respect to whether it be the bottoms, that key category which you have a fairly strong presence in are you seeing any change in trend year-over-year or season-over-season?

We've forecasted into '07 what we believe will be a decline in those classification businesses and an improvement and an increase in our branded businesses namely, Solitude, our Arnold brand business, the Orvis business, our Oxford Golf brand for example. That transition will just continue.

Okay.

Specifically on Ben Sherman, I'll take the opportunity to answer the question directly. We have delivered Fall One, which has been in the stores now about three weeks. It delivered right at the beginning of the Nordstrom's anniversary sale. We have had some tremendous selling. We're very excited about it. Not only in the anniversary sale with Nordstrom's but within the Macey's organization and specifically in our own stores. We've got two doors currently open here in the U.S., both in Soho and in Beverly Center.

Our early fall selling, which was really transitional. But more than anything the product mix relating to more the heritage of our Ben Sherman businesses as opposed to the younger, trendy, fast delivers that we got out with on spring and summer, which were really the roots of our problems at retail. We feel very positive about what's currently going on. We have a request to move up to our Fall Two delivery we are doing everything we can to get that product to market as quickly as possible.

That's great. Just lastly, would be then the bookings coming into the fall season for that Ben Sherman product versus bookings last year and how about holiday bookings? Any clarification there?

We have -- we have an overall bookings forecast that is roughly flat with where we were a year ago. And really that's a result of increase in the overall businesses and a result of the retail stores, which will have increased in '07 versus '06.

That includes holiday as well?

It does.

Okay. Thank you.

Our next question will come from John Rouleau with Wachovia securities.

First and for most you can help me reconcile a little bit. On June 1, you laid out some revised guidance out there for the quarter I think it was $1.64 to $1.69. That did not include the gains from the Womenswear but can you kind of help me back down from that number into the $1.02?

The $1.64 to $1.69 did include.

Right. It did include the gains from the Womenswear, correct. So you have to back that out.

Correct, that was $0.52. Then the impact of repatriation of foreign earnings was $0.16. The cost related to the plant shutdowns were $0.06. That gets you to the $1.02 to $1.07 that you referred to.

Okay so 1.02 to 1.07 so 1.02 we are in the range but at the low end of where we kind of thought we might be?

That's correct. Upper end of the range.

Mid to upper. Important things here. On the Ben Sherman side, it sounds very encouraging what's going on there in the early stages here of fall delivery. Mike, can you give us an idea of door accounts, just roughly what sort of reduction we're looking at without putting exact numbers here? Are we -- where do we stand on that?

The number of doors is down approximately 10%. As we talked about on the last call, we've eliminated a number of C and D doors that we probably shouldn't have been in in the first place and have also eliminated a number of what we would call noninvestment customers. We feel really good about the base of the A on some B doors, that we are currently trading in, our specialty store account indoors is relatively flat and stable in terms of total number. As the SKU count is down slightly. More important is the mix of the SKUs that are being presented and the quality of the fashion offering which are being presented and are the result of trending to the brand heritage as opposed to chasing the most current trend.

In looking at both the U.S. business and the U.K. over the past couple of quarters, have the real significant problems have been to the U.S. I know th U.K. the overall economy over there has been a little bit weaker and maybe the brands performed a little bit less than expectations. Is this really a fix to the U.S. issue?

Yes, it's a fix the U.S. issue. Our U.K. business, despite what has been a tough U.K. overall economic and retail trend environment, our U.K. business is remaining very strong. It's a dominant brand, great brand loyalty especially with our largest department store base there. We feel very good about what's going on there. Just also add as we include in our U.K. analysis the opportunities that are developing for the EC, through our German distributorship and other licensing opportunities as we go into '07, we are very well positioned to take advantage of that going forward. The issues really have been centered around the U.S.

Okay. And if you look at fall trends from merchandising and styling standpoint, it would seem like those would be at your back here a little bit. There's kind of a rock and roll British going on there. Factor positively -- is that not a factor at this point? How should we kind of view those trends in light of what's been going on?

I think one of the things that caused some of the problem with prior management in the U.S. was trying to be very specific and unique to a point in time and to hit a trend with a specific look. There should be items that address it. We really taking the heritage of the Ben Sherman brand. It's what we at Oxford first were attracted to. It's what the business was built on here initially at the U.S. And it was really this track away from the heritage or the Ben Sherman product line which is exactly deep in the that British mode music driven product. If this were not an immediate trend, we've made the right decision with regard to returning the heritage of the line. The line is much more wearable to a modern, young, thinking consumer, not just a young consumer.

So you're saying I could fit it in now?

Yes.

The last question is really, given what you'r thinking of Ben Sherman. Hicks made the comment that we're looking for improvement and profitability in the second half. Is that a year-over-year comparison where the profitability was still pretty good in the first half last year? As memory serves, I think it was the second quarter last year where profitability was down. When might we see early improvements in?

Improvement will start in the second half. Your memory serves you correctly. We had a pretty good first half as we were kind of shifting a lot of this product. Then we solved a lot of those problems in our second half.

Okay. Should sort of tangible things should we look for in the second half? Sales growth is that what we should be focussed in on? What are the metrics?

Our metrics for Ben Sherman for the year will continue to be profitable selling, not just top line selling. So I think what we need to be looking for and listening for is what's happening at retail, what our trends and are in managing our inventories along with the discounts in allowances so that we end on a very positive upbeat.

Great, thanks, guys.

Next is Beth Montgomery with Cowen and Company

Hi, guys. I apologize if I missed it somewhere. Are you going to give out the pro forma for the quarter I guess for Q1 to Q3 so that we can kind of see where margins would be with out the Womenswear business?

The pro forma for the prior period numbers adjusted for the Womenswear divestitures?

Yes.

Those numbers would be included in the prior year period as those quarters are released.

So we kind of have to take a stab at what the difference in margins look like kind of from Q1 to Q3 '07.

You've got the historical sales in operating income figures.

We don't have it for the whole company of P&L, perspective.

You don't have the whole company P&L, that's correct.

Okay.

We just completed --

Right.

It's going to make it a little bit harder for everybody. I guess on the Tommy Bahama Womenswear business Tony could we have an update kind of on how that's progressing, how that looks?

Yes. I will tell you that I'm going to use controlled enthusiasm here. In Seattle, we just attended the spring '07 sales meetings. And the line continues to go down a path where we're very confident of. I think I've mentioned to you that we turned the reins of the Womenswear line over to a woman by the name of Lynn Copeland who came to us with an significant amount of experience and had been running our Women's swim division, which was the bright spot of Womenswear in our company..

The holiday line which we showed about two and a half months ago that will start to arrive in stores this October was pretty well received in the marketplace and the spring collection is an extension of that. It's way too early, obviously, to give you any specific consumer reaction. But we've learned over the years that our retail partners are pretty insightful and we have made significant inroads back into a market that had sort of lost faith in us based on the strength of the line that we show for holiday and we expect more of the same this spring.

Okay, That's great. Did I miss the press release about the $1 million share repurchase plan?

That information was included in the press release that went out at 4:00 today.

It's just hidden in the very back?

It's just included in one of the factual recitals in the release.

I totally didn't see it. All right, I'll look for it again. Can you tell me how long that goes? Is there a time limit on that?

We haven't disclosed any more detail other than it's 1 million shares and we will very judiciously evaluate the market over the next couple of quarters and buy when we deem it appropriate to buy.

Okay. Thanks, guys.

Susan Sansbury with Miller Tabak has your next question.

Thanks, Beth I missed that too. Mr. Margolis, would you be able to share with us the major components of this 10% increase in sales,how much of it is organic, how much of it is a result of a rollout of Relax and Tommy Bahama Golf?

I'm going to turn to Scott or Reese on those specifics. I don't have those numbers in front of me. Can somebody help me there?

It's a combination. We've got new store a total of 8 new stores, which include 2 compounds. Between what we expect to be some comp store gains in addition to those stores is always all at once were spread throughout the year. It's a little bit difficult to have a model on that. Then we do expect between the Golf and the Relax for that to be as it has been the last couple of seasons. The starting was a significant part of the wholesale growth.

Let me just add to that Susan. To some degree when you -- as we expand our TB 18 Golf business, what has some negative impact on the existing Tommy Bahamas Golf and locations are now shifted over to the golf line. You have a little tradeoff there. There's some of that that goes on with Relaxed product. The swim wear component of Relax used to be part of the Tommy Bahama business and now it is the Relax business. Sometimes you take something out of one division and put it in another and it's hard to track exactly what percentage of sales one represents to another.

Okay. Margins were up so much last year. Is there any carryover benefit that you're projecting for '07?

I don't think that we've done this -- the finest job we could ever do. I think there's always room for a little improvement. I think it would be difficult to have the same percentage level of improvement, but I think we're looking for a continued slight improvement each season as we fine tune our phone controls, our retail component controls, so there might be a little tweak here or there.

Okay. What about --[inaudible] I don't know what you'd be about right now. Is it just --

The Men's spring line broke about 2 weeks ago. There is some Men's spring already in the hopper. But 90% of what, 95% of what's backlog right now would be holiday sales.

I take it they are up?

Yes.

Out of got fall product too. We've got a pretty significant improvement in our order backlog today versus the same time a year ago, which makes us pretty confident about the double-digit sales increase that we've projected for the wholesale side of the business.

In total, are we talking Tommy Bahamas?

I am Tommy Bahamas.

Okay. Reese can you give us an updated CapEx in a DNA projection for '07 and can you part out the amortization expense.

Yes. It hasn't changed since we released that June 1. The CapEx number is expected to approach 30 million, somewhere between 29 and $30 million. I don't expect the D&A to change significantly from last year somewhere in the $22 million range, $23 million range.

But the A is going down, right?

The A is going down, the D is going up with new store additions.

How much is the A going down?

I think we laid it out in the K last year-- The --

Okay, that's great. Thanks very much.

All right.

Eric Tracy with BB&T Capital Markets has our next question.

Good afternoon, guys. Just a follow on to the Tommy Bahamas, if you could talk a little bit about the margin implications of some of these new lines, the Relax and Tommy Bahama Golf relative to obviously retail becoming a greater percentage of the mix?

Well, I think you just said a mouthful there. As a retail component grows, obviously the corporate margin would grow. But I think Relax business is in it's infant stage. We specifically sort of went back to that business because there is opportunity for us to grow business above and beyond the main stay of Tommy Bahamas' silk component. We expect higher margins to come through in both divisions. I think Relax-- Tommy Bahama Golf 18 just as an industry the golf market has the ability to work with slightly higher margins, so we're doing that. The other place where we would hope to see some improvement in margins is as our Womens business grow, clearly that's a higher margin industry. And that new direction we've taken is to the better side of the market in general. I think you'll see a nice improvement on the margins in Womenswear as well.

Okay, thanks. And then Michael just on the Ben Sherman, just whatever -- feel good about the number of doors and the actual door that you're in, so no continued sort of betting through that? Still a little bit continued in the first half?

No, I think we're at the bottom of that range. We'll continue to analyze specifically stores that are underperforming and continue to analyze opportunity for doors. We have both of those situations ongoing. It will be a regular adjustment process for us.

Just in terms of the kind of growth characteristics going forward, would you more towards greater penetration of those doors or again opportunistically adding doors as we look into '07 and obviously longer-term as well ?

For the balance of '07 and into the early part of '08 the number one in primary focus is profitable sales growth and to do that we believe we've got to make the doors that we are currently in operate efficiently and profitably for us and the retailer move beyond would it been the discount allowance and return on processes of the past and focus on our own doors. The 2 stores that are currently open are big opportunities for us, both in top line and margin. We've got a third door which will open in Las Vegas frankly just before Magic, hope to see everybody there on the Tuesday night of Magic.

Just in terms of the retail doors, you guys disclosed or the number you made?

We don't have plans for any additional doors in '07. The Vegas door will put us previously stated in a position where we've gotten the opportunity to evaluate really an urban door, suburban door and a tourist door between Beverly Center, Soho and Las Vegas. I think we'll become a lot smarter about what works, what doesn't. Draw any parallels we can with our existing Tommy Bahama Businesses to understand some metrics that work best for us. We'll develop in the second half really our strategy for what '08 will look like at that point.

Okay. Then Hicks maybe if I could delicately ask this question in terms of obviously a much better financial position in terms of the balance sheet as you assess strategic alternatives without getting too specific, maybe get a little bit of color, remind us some of the metrics you all use in pursuing potential and views you're marketing and opportunities out there?

Well, that's sort of a brief question with a lot of potential answers to it. I would say that it's pretty well discussed the impact for the private equity as it relates to pricing transactions. And I think that we're going to be best served in making acquisitions. We really need a strategic buyer on opposed to a financial buyer. We think there are a number of those. We had discussions with a number of those and are in discussions with some of them. As we said in our comments at the beginning of the call, we don't have anything to announce at this time on that subject, no.

Okay, great. Thank you all.

Our next question will come with Robin Murchinson with Suntrust Robinson Humphrey.

Hi, good afternoon. Most of my questions have been asked and answered. I did want to piggyback on Ben Sherman. There is an angle file sort of think going on certainly with fashion fall '06. But the transition of Ben Sherman's business is really less about playing into that trend and more just about historical heritage, correct?

That's correct.

Okay. And the product that I see in the Nordstrom's web site would be -- not again been into one of your flagship stores recently, but the web site would that be fairly indicative of what I might see in the store right now?

It depends when you look. If it was summer-related product, it would not be indicative of what you'll be seeing in the current fall delivers as we trend out of summer. Summer was very bright, colorful, very young.

Right.

Form fitting. Some of that product still does exist in the clearance side of our stores as well as Nordstrom. If you look at the Fall One product which was most of what we have anniversary sale. It will be the front of our store now. Fall One is completely indicative of where we are for the balance of the fall and holiday season.

Okay. Thank you very much.

Sure.

Our next question will come from Jeff Klinefelter with Piper Jaffray.

Just a quick follow-up, guys. I just wanted to clarify the Q4 results, because I think it might have been a little confusing from the initial press release in the street accounts. Just apples-to-apples from your last guidance that you gave on that, I guess it was June 1st. Didn't that previous guidance include the Womens revenue and earnings in it which really boiled down to that $1.02 to $1.07? Because it did you come up with what you just posted after making these adjustments would be $1.05, would that be the right way to look at it?

That's fine.

You add back $0.14 from those discontinued ops?

That's correct.

So 1.02 plus 14 then you back off from repatriation, yes back it up and add back the $0.06 from streamlining and that gets you to $1.05?

Yes.

Thank you.

As a reminder, if you would like to ask a question, you can do so by pressing star one. We'll take a question from David [Click] with Buckingham Research Group.

Good afternoon. I just wanted to -- one last clarifying question on Tommy Bahama. If you could break out the rate of growth you're anticipating from retail versus wholesale for Tommy Bahama in '07 up to our 10%. I assume retail is at a higher rate of growth. I just wanted to clarify that.

It's equally divided.

It's 50/50? Expect the same rate?

Right.

In terms of your department store distribution for '07 versus '06, you could break that out for us.

I apologize guys for not being able to give you more specifics. As I told you earlier I'm in the midst of a Womens sales meeting. Our distribution is very marginal. They have not done any across the board additions of the federate stores or the merger with May Company. There's a couple of doors that have been added each season and we are continuing with what we described in-house as a crawl, walk, run expansion to business. I've learned over the years that significant changes sometimes will end up being painful. So we are continuing to judiciously add a limited number of doors through any distribution channels.

That limited growth in department stores are you including Nordstrom in that -- in those numbers?

Nordstrom's has obviously been the size and magnitude of account they are for us if they are building a door we are in it.

Very good. Thank you.

Once again as a reminder to ask a question, star one on your telephone keypad. We'll take a follow-up question John Rouleau with Wachovia Securities.

Couple follow-ups. One really with Tommy Bahama, given the early success of Relax I am just-- it seems like it could be a huge opportunity, dare I say something in line with maybe where the Core silk business has grown to. Can you give us an idea of how maybe aggressively you're going to be with this, are you going to grow it kind of expeditiously this year? Are you going to step on the gas and grow it? At what point could we see a real acceleration in this line because of all the tremendous potential that it processes?

John, I will tell we have learned over the years that it's great to have versus us forcing product into the market. Obviously there are trends in the market that we are responsive too. Relax is a piece of that response. As you see movement in Men's fashion, it's always wise to sort of let it prove itself a little bit and prove its longevity. I think our customer has come to expect us to develop product for us. It isn't fashionable today they want something that has longevity to it. It fits that description. We are building lines to a larger extent.

The percentage of those relaxed lines has increased significantly -- increased significantly, but in the end it's still finding proper balance. There's a huge core business that we have in our silk business. The best selling items in our company continued to come out of the silk product. Retail currently and in our spring '07 wholesale bookings and so you don't walk away from those kinds of successes to bet on the if come.. Relax grows and the enthusiasm for that product shows itself with the consumer, you will see bigger and bigger lines coming from that direction. I'm not sure if you guys will be in Las Vegas in August, but we'll show you our spring presentation. And I think you'll see a significantly larger relaxed offering than there was the prior season.

That's very helpful. If you would combine Relax, Indigo Palms, Island Soft, the Golf and maybe the Womens. Without giving us a firm number. Is that starting to be meaningful as a percentage of sales of the total or is it really just very small compared to the core?

Are you asking about Relax as a percentage?

All of it. If you combined Relax everything.

Sure. The answer to that is absolutely. Those businesses have grown. The silk business continues to grow but no where near the pace of those other expansion labels. Sure.

It is meaningful to the mix at this point?

It is a significant number, yes.

The accelerated in growth your now seeing 10% plus is that a combination from faster growth out of the core, the core silk business picking up a little bit or just accelerated growth coming out of some of these newer lines and having it being kind of meaningful part of the and part of the mix?

I think there's -- the answer is a little bit of both. In the stores silk to continues to be a large component. And therefore that business is growing. But the relaxed business as a total and the Indigo Palms business is a total significantly growing. Our Indigo Palms business our second largest account, which is Nordstrom is having large double digit increases every among.

Great, that's very helpful. Maybe asking some similar questions on the historical legacy side. If you were to kind of group together the older legacy classification business versus some of the newer brands, newer initiatives, maybe give us an idea what's classification business? Is it kind of a 70/30 type thing or closer to 50/50?

It's not a 50/50. But it's a moving target that will continue to change and evolve. We're going to move out of some of those classification businesses as quickly as we can where they become necessary and not great business for us. As the '07 plan scopes up, what branded or proprietary branded or licensed branded segment will be a greater percent to total than it was a year ago and we'll continue to move the needle that way through the balance of the year. And looking for '08 for really all the new initiatives and new opportunities to be driven towards this direction for the company as well as all for legacy.

And then last question. I applaud you guys in putting the buyback in place. In the past you've already looked to keep the powder dry. Does does this represent change in thinking of what you will acquire out there will be smaller in size of scope?

We're open-minded and flexible at this point. I don't think it's necessarily a major change in strategy.

Gives you one more bullet. I like it. Thanks, guys.

Okay. At this time there are no further questions in the queue. I will now turn the conference back over to Mr. Hicks Lanier for closing or additional remarks.

I'd just like to thank you for joining us today. I hope you can ascertain the enthusiasm that we've brought about fiscal '07 prospect and beyond. [inaudible] Thank you very much.

And that does conclude our conference call. Thank you for joining us today.