Oxford Industries Inc (OXM) 2009 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen.

Thank you for standing by and welcome to today's Oxford Industries, Inc.,second quarter 2009 earnings conference call.

At this time all participants are in a listen-only mode.

Following the presentation we will conduct a question-and-answer session.

(Operator Instructions).

As a reminder today's conference is being recorded.

And now I would like to turn the conference over to Anne Shoemaker, Treasurer.

Please go ahead ma'am.

Thank you, Jamie, good afternoon, everyone.

Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the Federal Securities Laws.

Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in forward-looking statements.

Important factors that could cause actual results of the operation or our financial condition to differ are discussed in the documents filed by us with the SEC.

We undertake no duty to update any forward-looking statements.

Finally, during this call, in talking about our results, we will discuss some non-GAAP financial measures about earnings per share.

You can find a reconciliation of these non-GAAP financial measures to GAAP financial measures in our earnings release, which is posted under the newsroom tab of our website at Oxfordinc.com.

Now I would like to introduce today's call participants.

With me today are Hicks Lanier, Chairman and CEO; Tom Chubb, President; Scott Grassmyer, CFO; Terry Pillow, CEO of Tommy Bahama; and Doug Wood, President of Tommy Bahama.

Thank you for your attention and now I would like to turn the call over to Hicks Lanier.

Good afternoon and thank you for joining us to discuss our second quarter results.

Consolidated net sales for the quarter were $192.9 million, and we reported earnings of $0.03 per share.

These results included $0.27 per share of restructuring charges and other unusual items.

Excluding the impact of these charges, adjusted diluted net earnings per share in the second quarter of fiscal 2009 were $0.30, compared to an adjusted $0.37 in the second quarter of fiscal 2008.

Tommy Bahama, Lanier Clothes and Oxford Apparel all gave solid performances in the quarter.

The discipline and skills of our management teams are evident as we reported very clean inventories, down 25% over last year, and expenses down 17%.

I'm proud of the work our associates have done.

Lanier Clothes, in particular, has returned to a good level of profitability, and Oxford Apparel continues to demonstrate consistent execution.

In this challenging environment, we have maintained the strength of our brands.

We have avoided undue promotional activity and preserved the integrity of our distribution and our brands.

And our core market presence remains strong in both Tommy Bahama and in Ben Sherman.

Maintaining the cache of these brands is central to our long-term strategy.

We expect initiatives taken by Ben Sherman in this quarter to deliver improved results next year.

I'll return with some closing comments before questions and answers, but I would like to now turn the call over to Terry Pillow to discuss Tommy Bahama's results for the quarter.

Terry.

Thank you, Hicks.

Tommy Bahama reported net sales of $94.4 million for the second quarter of fiscal 2009, compared to $112 million in the second quarter of fiscal 2008.

Sales decrease was due to the difficult economic environment partially offset by sales in stores opened after the beginning of the second quarter of fiscal 2008, and increased e-commerce sales.

Tommy Bahama's operating income for the second quarter of fiscal 2009 was $13.4 million, compared to $18.1 million in the second quarter of fiscal 2008.

The decrease in operating income was primarily due to the sales reduction and decreased royalty income partially offset by reductions in SG&A and higher gross margins.

At the end of the second quarter, Tommy Bahama operated 84 retail stores compared to 78 on August 2, 2008.

Our wholesale customers continue to buy their -- continue to plan their buys and inventory very conservatively.

They bought fall and holiday conservatively, and it appears that this conservatism will remain through spring.

That said, we know our wholesale customers are experiencing solid sell-through of Tommy Bahama product, and we are seeing strong demand for in-season products this fall.

In our own retail stores, we're seeing some signs of stabilization.

We feel this has been helped by more focused assortments, enhanced visual merchandising presentations, and our key item philosophy.

Our design and merchandising teams have been working closely with our sourcing organization to make sure that we have key price points in every category without sacrificing our core strategy of quality and design while maintaining our gross margins.

We're seeing positive signs that our strategy of growing our Women's business and focusing on our target 35-year-old demographic is working.

We started back in the spring with refreshed on-line inventory, and we continue to reinforce our strategy through our holiday catalogs and on-line mailings.

Women's now represents approximately one-fifth of our direct-to-consumer business and has performed quite well over the last quarter.

Our efforts of our Pasadena Design Group to offer compelling on-brand product have resonated with our customer.

Women's swimwear, a perennial strength, has had another strong season this summer and dresses have been a particularly strong category for us.

Several women's categories have delivered some of the best sell-through's in our entire retail operation.

We continue to be very pleased with the progress of our [burgeoning] e-commerce operation, now close to its second anniversary.

Our e-commerce business continues to grow at a very healthy pace and provides us with excellent insight into our customer base.

We are feeling positive about our strategy, the strength of our product offering, and our marketing plans going into the back half of the year.

We are well poised to take advantage of any up turn in the economy.

Now I will turn the call over to Tom Chubb for details on the other three operating groups.

Thanks, Terry.

Good afternoon, everyone, and thank you for joining us.

I will start with Ben Sherman.

Ben Sherman reported net sales of $23.6 million for the second quarter of fiscal 2009, compared to $32.5 million in the second quarter of fiscal 2008.

The reduction in sales was primarily due to the 18% reduction in the average exchange rate of the British pound versus the United States dollar as well as reduced wholesale shipments due to challenging market conditions.

Ben Sherman reported an operating loss of $6.3 million in the second quarter fiscal 2009, compared to an operating loss of $2 million in the second quarter of fiscal 2008.

The increased loss was primarily due to the lower sales, the unfavorable impact on cost of goods sold related to inventory purchases, denominated in US dollars, but sold in other currencies, $1.4 million of restructuring charges, and lower royalty income.

These items were partially offset by reductions in SG&A.

In the second quarter, we've taken a page from our successful efforts to refocus our Oxford Apparel and Lanier Clothes businesses and have instituted several important strategic steps in Ben Sherman.

First, we decided to discontinue operating the footwear and kids business ourselves.

As we migrate footwear and kids to license businesses it will allow management to focus on core businesses, extract working capital, and move us from an operating loss in those businesses, to a stream of royalty income.

We were flatter by the enormous interest we received from first-rate licensees when we announced our exit from footwear and kids.

We are pleased to have secured an excellent licensee partner, the Hudson Suit Company, for footwear, and expect to announce the appointment of a new kids wear licensee in the near future.

The actions taken to secure new licensing partners have ensured that we will not miss a selling season in either footwear or kids.

Under the direction of our London-based creative team, we expect our licensees to deliver compelling product that will be well received by our customers and will enhance our brand.

The strength of the Ben Sherman brand remains evident as our owned retail in the right markets performs very well.

Our fashionable city center locations, such as SoHo in New York, Carnaby Street in London, and our two newest stores in Berlin and Cologne are delivering strong results.

In a few weeks we will be opening a store on Newbury Street in Boston, and our UK tailored clothing licensee will be opening a store on Savile Row in London in October.

Finally we have made significant expense reductions and expect our second half to be materially better than the first half, due to our efforts in the seasonality of the brand.

While second quarter financial results were clearly not what we strive for, we believe the management team is making the right moves, and we believe firmly in the future of the Ben Sherman brand.

Our legacy businesses delivered a very strong second quarter performance.

Net sales for Lanier Clothes were $25.2 million in the second quarter of fiscal 2009, compared to $28.2 million reported in the second quarter of fiscal 2008.

Lanier Clothes reported a material improvement in operating results due to improved gross margins and reductions in SG&A.

We are pleased with the positioning of Kenneth Cole tailored clothing in the marketplace, and the results that this business is delivering.

We just renewed our license agreement with Geoffrey Beene, a partner of ours since 1997, and are optimistic about our prospects for this brand.

Operating income in the second quarter of fiscal 2009 was $2.7 million, compared to a $11.4 million operating loss in the second quarter of fiscal 2008.

The second quarter of fiscal 2008 included $9.5 million of restructuring charges and certain other unusual items.

Oxford Apparel reported net sales of $49.5 million for the second quarter of fiscal 2009, compared to $58 million in the second quarter of fiscal 2008.

Despite the decrease in net sales, largely due to the exit of certain businesses, we saw a nice rebound in our Land's End business and significant growth in both the Kirkland Signature and Hathaway businesses at Costco.

Operating income for Oxford Apparel improved to $4.1 million for the second quarter of fiscal 2009, compared to $3.7 million in the second quarter of fiscal 2008.

The impact of decreased sales was offset by reductions in SG&A related to reduced employment costs and variable operating expenses.

The second quarter of fiscal 2008 included a net charge of $300,000 related to impairment and other charges partially offset by gains from the resolution of a contingent liability and the sale of a trademark.

The corporate and other operating loss increased to $6.4 million for the second quarter of fiscal 2009, from $0.5 million in the second quarter of fiscal 2008.

The increased loss was due primarily to a LIFO accounting charge of $2.9 million in the second quarter of fiscal 2009, compared to a LIFO accounting credit of $3.3 million in the second quarter of fiscal 2008.

The LIFO charges recognized in the current year represent the reversal of LIFO income recognized in prior periods related to marked-down inventories that were sold during the year.

The impact of LIFO inventory markdowns is deferred until goods are sold.

As marked-down goods ship, the impact is reflected as cost of goods sold in our corporate and other operating group.

I will now hand the call over to Scott Grassmyer to comment on our consolidated financial results.

Thanks, Tom.

As Hicks mentioned earlier, consolidated net sales were $192.9 million in the second quarter ended August 1, 2009, compared to $230.5 million in the second quarter of fiscal 2008.

Consolidated gross margins for the second quarter fiscal 2009 were 40.7% compared to 41.9% in the second quarter of fiscal 2008.

The decrease in gross margin was primarily due to the impact of LIFO accounting adjustments and a negative impact on Ben Sherman's gross margins related to inventory purchases denominated in US dollars but sold in other currencies.

In the second quarter of fiscal 2008 included $5.3 million of restructuring charges which impacted cost of goods sold on Lanier Clothes and Oxford Apparel.

SG&A for the second quarter of fiscal 2009 decreased to $73.6 million or 38.2% of net sales compared to $89 million or 38.6% of net sales in the second quarter of fiscal 2008.

The decrease in SG&A was primarily due to significant reductions in our overhead cost structure, cost reductions associated with the exit from certain businesses, the impact of the decline in the British pound versus the US dollar and reductions in advertising expense.

The second quarter fiscal 2009 and the second quarter fiscal 2008 included net charges of $1.4 million and $1.6 million respectively related to restructuring charges and other unusual items.

Amortization impairment of intangible assets was $300,000 in the second quarter of fiscal 2009 compared to $4.1 million in the second quarter of fiscal 2008.

The decrease is primarily due to $3.3 million of impairment charges taken by Lanier Clothes and Oxford Apparel in the second quarter of fiscal 2008.

Royalties and other operating income for the second quarter of fiscal 2009 were $2.9 million compared to $4.4 million in the second quarter of fiscal 2008.

The decrease is primarily due to our termination of the license agreement for footwear in Tommy Bahama.

The decline in the British pound versus the US dollar, which impacted Ben Sherman royalty income, and the generally difficult economic conditions.

We note that the second quarter fiscal 2008 included a gain on the sale of a trademark by Oxford Apparel.

As a result, operating income for the quarter was $7.5 million versus $8 million in the same period of the prior year.

Interest expense for the second quarter of fiscal 2009 was $6.2 million, which includes the write-off of $1.8 million of unamortized deferred financing costs, compared to $6 million in the second quarter of fiscal 2008.

We are projecting approximately $5.3 million of interest expense in each of the third and fourth quarters of fiscal 2009.

We believe our annual effective tax rate for fiscal 2009 before the impact of any discrete events will be approximately 30%.

Turning to the balance sheet, total inventories at the close of the second quarter were $97.4 million, down 25% over last year.

Inventories -- inventory levels at Ben Sherman, Lanier Clothes and Oxford Apparel have each decreased as we focused on mitigating inventory markdown risk and promotional pressure as well as exiting certain lines of business.

Inventory levels increased slightly year-over-year at Tommy Bahama to support additional retail stores.

Accounts receivable totaled $78.5 million at quarter end down 19% from last year's second quarter.

The decrease was attributable to lower wholesale sales.

During the second quarter, we completed a private offering of $150 million of 11.375% Senior Secured Notes due 2015.

The net proceeds from the offering, together with borrowings under our US revolving credit facility were used to repurchase, repay, and discharge all $166.8 million of our 8.875% Senior Unsecured Notes due 2011.

As a result of strong cash flow from operations total debt was reduced from $221.6 million at August 2, 2008 to $180.8 million at August 1, 2009.

As of August 1, 2009, we had approximately $97.3 million in unused availability under our US revolving credit facility, and $3.7 million in unused availability under our UK revolving credit facility.

Our capital expenditures for fiscal 2009 are expected to be approximately $10 million.

These expenditures will consist primarily of additional Tommy Bahama and Ben Sherman retail stores and the costs associated with the implementation of a new integrated financial system.

For the full fiscal year 2009, we expect net sales in the range of $765 million to $780 million with a greater year-over-year sales decrease in the third quarter than the fourth quarter.

Adjusted diluted earnings per share for fiscal 2009 are expected to be between $0.90 and $1.05.

We also announced that our Board of Directors has approved a cash dividend of $0.09 per share, payable on October 30, 2009, to shareholders of record as of the close of business on October 15, 2009.

We have paid dividends every quarter since we became publicly owned in 1960.

Thanks for your attention.

Now I will turn the call back over to Hicks for some closing comments.

Thanks, Scott.

This quarter's operating results which exceeded our original plan reflects solid performances by Tommy Bahama, Lanier Clothes and Oxford Apparel businesses.

Our people have performed well in these challenging times, and this has enabled us to turn in enhanced results particularly through their focus on careful inventory management and comprehensive cost reduction efforts .

We are confident that we have the right team and the right strategies to deliver value to our customers and shareholders.

Thanks for your time this afternoon and your continued support.

Jamie, we're ready for questions

Thank you, sir.

(Operator Instructions).

We'll take our first question from Edward Yruma with Keybanc.

Thanks very much for taking my question, congratulations on a solid quarter.

Can you talk about your ability to meet increased retailer demand?

I know you've talked about buying conservatively for the upcoming season, but should retailers decide to chase inventory what is your ability to scale up to that need?

Companywide, I'd say it's limited near-term.

We're happy to see some signs, and I think, Terry, you might specifically comment on Tommy Bahamas, but we are definitely having a situation where people are looking for more goods near-term as a result of our successful sell-through, but our ability to fill those needs are pretty limited.

That's right, Hicks.

This is Terry Pillow, Tommy Bahama.

We're right in the middle of market week right now selling spring, summer 2010.

So we're meeting with a lot of retailers at this time, What we're hearing, with our products sell-through's are quite good and they would prefer if we had additional inventory to reorder at once product from us.

As Hicks said, we don't have that available inventory right now, and we're trying to help wherever we can and find pockets of inventory to help out, but I think that the retailers are experiencing their businesses a little better in the fall than they thought it was going to be and they bought (inaudible) conservatively.

Got you.

And one final question, if I may.

I know that you've been very aggressive with SG&A reductions.

How much more is left, and at some point when does SG&A pick up again?

Thank you.

Well, I would say we're at close to the bottom on that, and I think SG&A will not pick up until our top line picks up, but we hope that's relatively soon.

Great.

Thank you very much.

Okee-doke.

And we'll take our next question from Jeff Blaeser with Morgan Joseph.

Good evening.

Thanks for taking my question.

Following up on the SG&A, are you trending [hot of] for more cost savings in the $40 million previously?

I know earlier your looking at simular run rate to Q1 and certainly looks like you're a lot lower than that this quarter ex-charges or cost.

At some point we start an anniversary costs reduction from a year ago, but we will still have -- I think we'll be more that slightly north of $50 million when the total year is finished.

Year-to-year instead of the $40 million, it will be like $50 million.

Are those new initiatives the first quarter that you've begun?

It's an ongoing process.

Okay, fair enough.

And --

Particularly, new initiatives in Ben Sherman as reflected in special charges for the second quarter.

Okay.

Quickly on the gross margin, a gross margin number ex- the various charges on an apples to apples.

The Tommy Bahama's benefited from some of the restructuring you have been doing because you had a pretty good sequential increase with lower sales so wondering what the positive impact was there.

The main impact on our gross margin in the second quarter was the LIFO, and that was a negative and brought it down.

In Tommy Bahama we had an absolute increase in gross margin -- in percentage of gross margin.

And part of that has to do with the blend between retail and wholesale and other part happens to -- has to do with just increased gross margin.

Thank you very much.

Okay.

And we'll take our next question from Bill [Roiter] with Banc of America Securities.

Good afternoon.

Hey.

In terms of your guidance, the $0.90 to $1.05, by my calculation I am coming up with an EBITDA number that that would be about $62 million to $65 million, does that make sense?

Scott, what you got there?

It should be in the lower 60's.

Somewhere in the lower 60s?

Pretty much on the mark.

Okay.

And by my calculation, I think you guys should be doing some pretty good free cash flow.

I was wondering how you guys are thinking about your different priorities for uses of this cash flow.

Well, I think near-term, it would probably be debt reduction.

But that's very near term.

Long-term, it's a whole different ball game.

Say near-term it would be the revolver.

Obvious we've got a little balance on that bill, and we would just pay that down, and then as Hicks mentioned, I think we're optimistic and hopeful that at some point the business will start to pick up a bit.

As you know, we've stepped on CapEx quite hard this year, and aren't really opening many stores, and we hope there's a point where we're resuming that, spending a little money on investing in the business and opening stores, as well as just working capital, if we're going to -- if the business starts to grow, what he need to -- if the business starts to grow, what he need a little bit more inventory, and we'll have more receivables than we have now.

So that would be the hope.

Okay.

I guess just one last one, if I could.

I'm wondering how you guys are thinking about acquisition opportunities at this point, whether you guys feel comfortable enough with your liquidity situation that if you saw something that was attractive you would go for it, or if you're kind of in, play defense mode?

We feel pretty good about our liquidity situation.

And as you pointed out we've generated a lot of free cash flow over the last couple years.

We would certainly evaluate any acquisition that we thought fit into our strategy, but we think we've got some excellent opportunities organically.

As Tom just mentioned, more retail stores we think that ensuing periods are going to offer some opportunities in prime space and in Tommy Bahama we've got international expansion opportunities that are pretty high on our list.

Great.

That's it for me, thank you.

Thanks, Bill.

And we'll take our next question from Robin Murchison with SunTrust.

Thank you, and congratulations.

Thanks, Robin.

Let me just, since you just mentioned the international economy, can you characterize international versus domestic for us please, what you are seeing in terms of consumer reaction.

Well, I'd say recently -- we're seeing the UK market, not dissimilar to the US market, if anything maybe a little more challenging.

Tom mentioned in his comments the two stores we've recently opened in Germany, we're seeing some vibrancy there.

Also in France -- but this macroeconomic situation is (inaudible) all over the place.

So there are not many places where we would categorize business as booming.

Okay.

But certainly the continent is a little more stable than the UK, and the UK is more similar to the US, maybe a little less strong.

A little worse.

I think, Robin what most people attribute it to is that while the economies are down around the world, as Hicks pointed out, in some of the markets on the continent else where in the world there's not as much consumer debt, so people are not as terrified as they tend to be in the UK and US.

And that's particularly true in Germany where the cultural is one of savings and not going into debt.

And then I wanted to also circle back.

The SG&A on the fourth quarter call you indicated about adds $40 million savings this year.

On the first quarter call, I think you said that there would be more so it sounds like we are hearing today that that more piece is quantified to the tune of about $10 million to get to $50 million for the year.

That's accurate.

Then also just circling on the Tommy Bahama question that came up earlier, you guys were streamlining that division's brand profile, and I'm thinking that the question is did you by process of elimination of some of the sub brands -- is that helping the -- division in terms of margin, also?

You're talking about Indigo Palms and Island [Pesade], is that what you are referring to Robin?

Yes, Terry, thank you.

I think the gross margin issue with us is just the strength of the brand, as you well know our strategy is being a full priced merchant in our retail stores and that people are -- we're still sticking with that strategy, and we' able to have the demand for our product is -- speaks to gross margin increase that we are experiencing; however, those two -- we feel by integrating those two divisions under the Tommy Bahama brand has helped dramatically from our wholesale and our own retail.

It's much more clear to our wholesale account.

Much easier for us to merchandise to that in our retail stores so we -- clearly our confident it's the right thing to do but I think generally the overall gross margin increase just speaks to the power of our brand.

Just one other comment adding on to that.

We said this on a previous call but we have some duplication between those sub brands and the Tommy Bahama brand which we were able to eliminate with this consolidation under the Tommy Bahama umbrella and that has led to operating efficiency and better risk management, which effects gross margin.

Just staying with Tommy Bahama for a second, did you want to release or say anything about same-store sales in th stores or no?

No.

Okay.

Actually, I think Terry could give you some color on what we feel about our business particularly (inaudible) going forward.

Absolutely, Robin.

We had a much better August than we did July, we are seeing some regions -- some stores performing better than they did a year ago, so that's what I was referring to and the stabilization comment, that we feel very good, better as we watch this continue as you know, going into September and October is when we saw really the worst of the economic conditions.

So we feel very confident about going up against September numbers in October right now, we think that we've got the right strategy in place from our inventories are in good shape, we have got plenty of inventory to manage these stores.

Our marketing strategies are in place, so we're feeling the Tommy Bahama pretty good about the back half of the year.

Just a couple more if I may and it does have to deal with that.

I wanted to ask you about price points.

I know that some of your key customers had requested lower opening price points, although I think that maybe affecting product that is in the store now or arriving in the store in the fall.

If you could tell us, mentioned how that program -- how that is working for you, how that is going for you and how your customers apparently seem well.

Just lastly, we can get an update in terms of what your guys are seeing in some of your key markets.

Nevada, Florida, California, the resort markets.

Thank you very much.

Robin, on the key item strategy, I just want to point out that we didn't change our pricing strategy overall in the Company.

We're still a premium price brand; however, what we did early on is take a look at every category, every classification of business, from knits, woven and pants and just made sure that we were balanced correctly between opening price merchandise and higher price merchandise as we look at our sell-through's, I was just reviewing with it the group last week at retail.

Some of the best selling styles, even though those key items presentations have been affective for us it is not the only that we have that is working that we're seeing continually where, we have a great fashion item at a high price that seems to be selling just as well so we are very happy with this key item strategy, even though we say key items they're still not inexpensive products.

They're still a premium product, but they're just a little more focused to price points.

On the regions, Las Vegas continues to be very difficult for us.

Some of the desert regions are a little difficult for us; however, we are seeing a pretty good bounce back in Florida, some locations -- as I said our business in August was very encouraging from what we have seen.

Thanks very much.

Good luck.

And we'll take our next question from Susan Sansbury with Miller Tabak.

Just to extend this conversation on the regions, I understand, if I remember correctly, southern California and Texas were also regions that we're improving, yet, recently I heard commentary from other retailers suggesting Texas is getting weak because what is going on in oil related businesses and the northwest is also, for whatever reason, I'm not sure I understand, showing some weakness.

Can you talk more about the -- or add a little meat on to your commentary about the resort regions -- at this point do you really see a pickup in, in that resort business in Hawaii and Scottsdale and what not and how can you prognosticate for the big winter months -- what do you call them?

Fly in from Chicago?

The cold people.

Snowbirds.

Snowbirds, thank you.

Susan, I can tell that you our business in our Texas region has been very strong.

Stronger than -- that's one of the regions I was referring to that is actually performing quite well, same with us in the northwest.

We haven't really seen what -- your seeing or other customers seeing in the northwest, it's been quite strong for us there too.

And Hawaii -- in August was quite good for us, we think that some of that could have been from more people traveling to Hawaii because of the swine flu epidemic in Mexico.

We don't know but traffic increased there, too.

So those three markets that you mentioned have been very strong for us.

Second question is sort of off subject to what you just released, but Hicks, you just hired a gentlemen called Scott Sennett as an Executive VP for Oxford Apparel, he has a fashion accessories background and the press release doesn't exactly say would he's going to do at Oxford Apparel, can you shed some light on that for me?

Well that's part of our succession planning process there.

We think we have taken advantage of this environment to try to upgrade our talent in a number of areas and this is just a case in point that we think this guy is terrific.

We have had a lot of dialogue, the reason it is a little vague is because he is not from the apparel industry per se and we have got to put him through an extensive orientation program but he is targeted for a top management position.

At Oxford Apparel?

Yes.

Okay.

The top management position, if that's clear.

How can we leverage his experience in fashion accessory?

Well I think the leveraging is more with the customers that he has dealt with, most of the customers that we are currently dealing with in Oxford Apparel now so we think he is a brand manager, he is a marketing guy, he is a sales guy, I think he is going to be a terrific leader for us.

That doesn't necessary signal that you are going to get into the fashion accessory business on a private label basis?

No, absolutely not.

I appreciate it, thanks so much.

(Operator Instructions).

We will take our next question from Kelly Duval with BB&T Capital Markets.

Hi, good afternoon just a couple of followups on the retail business.

Wanted to discuss just how much you have thought that strategy of better focusing on price points into retail does that sort mirror what you are doing at wholesale and if so, give us an idea of how that is driving retail business?

Kelly, absolute, when I was explaining that basically I was referring to primarily the retail business.

That's where we started simultaneously between wholesale and retail but it is working in both places quite well and both our wholesale customers are very excited about this and in our retail stores that pricing philosophy on those key items coupled with we engaged with some new visual merchandising techniques where we have called those out and segregated those products on the floor has really helped too but it is clearly working in this economy.

Because we don't offer wholesale goods in our retail stores that it is a nice thing that a lot of our customers come in and see a value product that a proposition from us that's not with a big sale sign on it saying that it is a discount.

It is working quite well for us.

Okay.

On another note related to retail, I know you have done some sort of in the past some loyalty kind of marketing where core customers can purchase, get some sort of a discount, are you still doing those and what are the results.

Are you seeing any difference in behavior amongst those sort of core customers.

Kelly, the first time we did that was last holiday season.

We are spending a lot of time now analyzing the results of that and it was a very successful loyalty program.

We are going to anniversary it this year.

Basically it was a $50 gift card to our best customers, coupled with a mailing piece and because of the success last year we are planning on doing it again this year.

It was quite successful for us and we feel very brand appropriate for us that we don't offer discounts in the store that this a very brand appropriate promotion for us.

Finally, just want to ask what you expect the final store count or any openings expected for Tommy Bahama's or you mentioned Ben Sherman what are the ending store counts for both of those this year and next year?

For Tommy Bahama we are opening one additional outlet store this year and we have two signed leases for full price stores next year; however, as Hicks said in this environment we are looking at every lease that we have and advantageous opportunities around as a lot of these retailers are abandoning quality spaces but right now that what we have on the books currently.

Okay.

Thank you.

Those are all my questions, thank you.

Thank you.

And we will take a followup question from Susan Sansbury with Miller Tabak.

Yes, thanks, you mentioned that you are having a positive and sounds like accelerating sell-through at your wholesale accounts but you can't chase, does that --- if the same is happening in your retail stores how long would it take you to -- is your ability to chase as limited as it is for your wholesale accounts and how long would it take do you think before you can increase your ability to restock and/or at the replacement rate.

(inaudible).

That is a very good question and we work on that everyday.

Doug Wood is working very diligently as we speak so I am going to let him talk to that.

So Susan there is two parts to this, the first part is we are seeing increase sell-through to both our retail and our wholesale accounts but remember we -- our wholesalers took a little bit of a more conservative view of the second half then we did in our own retail stores so where we talk about not having the ability to chase into goods that is not the case with our retail accounts, our own stores.

As we look at the second half we think we are posed to at least take advantage of this increase sell-through.

We feel really good about where we stand, if we see an uptick in the economy we are going to be able to take advantage of it.

With regards to our wholesale accounts, there is a process going on where that they are pulling forward there deliveries instead of taking deliveries at the end of their windows they are bringing them forward and what that is causing is basically a hole at the end and basically January, February timeframe so what we are working on now is the pulled goods into that -- back into this year as well as the beginning of next year.

Shipping in December.

(inaudible).

If you can, as you know retailers are skittish about bring a lot more goods in to December, especially anything that would be fall or holiday so it is really a discussion of what type of goods but as you can imagine these are active conversations that we are having with our key accounts.

We want to help them be positioned for holiday at the same time we also want to sell more to them so this is something we are working on really well but I do want to make sure you understand for our own retail stores right now we believe that we are positioned to take care of any upside we see this holiday.

Okay.

And going into next year, I mean I assume there is worldwide production -- excess apparel production out there.

Yes, anything that anybody wants to put on order for next spring we are ready to take that order.

Okay.

All right, that helps, thanks ever so much.

We will take a followup question from Robin Murchison with SunTrust.

Thank you I just had a followup question regarding International, are you in the International market seen any change in order flow to smaller more frequent deliveries?

Just any change in pattern, requested delivery pattern.

Well, yes, some and this is for Ben Sherman and that has been really driven a bit more by us where we have tried to, as you know Robin over the last couple of years gone to having a single line, the black and orange collection as we call it for the whole world.

We have tried to adopt basically a US style flow of goods around most of the world and that is the way we are offering it so it is available to them that way and more and more that is the way people are buying it.

Okay.

Thank you, Tom.

That does conclude our question-and-answer session.

At this time I would like to turn the call back over to your Mr.

Lanier for any closing remarks.

Thanks everybody for your interest and support today and we will look forward to talking to you as our plans proceed.

Thanks and have a good day.

That does conclude today's' conference, that you for you participation.