Oxford Industries Inc (OXM) 2009 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen.

Thank you for standing by.

Welcome to today's Oxford Industries Incorporated Third 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.

Instructions will be provided at that time for you to queue up for questions.

As a reminder, today's conference is being recorded.

And now I would like to turn the conference over to Ms.

Anne Shoemaker, Treasurer.

Please go ahead.

Thank you, Nancy and 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 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 our operations 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.

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.

And now I'd like to introduce today's call participants.

With me today are J.

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 an now I'd like to turn the call over to Hicks Lanier.

Good afternoon and thank you for joining us to discuss our Third Quarter results.

Consolidated net sales for the quarter were $200.5 million and earnings were $0.27 per share.

These results included $1.3 million of LIFO accounting charges.

Excluding the impact of these charges adjusted diluted net earnings per share in the third quarter of Fiscal 2009 were $0.32 compared to an adjusted EPS of $0.37 in the third quarter of Fiscal 2008.

We continued to be pleased with the positioning and strength of our brands and the way our teams have executed our strategies.

Effective gross management, inventory control and operating discipline allowed each of our operating groups to contribute positive operating results.

We are particularly encouraged by the fact that for the months of September, October, and November, we have realized modest same-store sales growth at our Tommy Bahama retail stores.

We have been thrilled with the results of the Lanier clothes at Oxford and the apparel continues to deliver and we are happy to see Ben Sherman return to profitability in the quarter.

I'll return with some closing comments before Q&A, but I'd like to now turn the call over to Terry Pillow to discuss Tommy Bahama's results for the quarter.

Terry?

Thank you, Hicks.

As you know, the third quarter at Tommy Bahama is seasonally by far our smallest quarter.

Tommy Bahama reported net sales of $75.4 million for the third quarter of Fiscal 2009 compared to $83.7 million in the third quarter of Fiscal 2008.

The sales decrease was due to a difficult wholesale environment, partially offset by the sales in stores opened after the beginning of the Third Quarter of Fiscal 2008 and increased eCommerce sales.

Tommy Bahama's operating income for the third quarter of Fiscal 2009 was $2.1 million compared to $700,000 in Third Quarter of Fiscal 2008.

The increase in operating income was primarily due to reduced SG&A, partially offset by the reduction in wholesale sales and decreased royalty income.

At the end of the Third Quarter, Tommy Bahama operated 85 retail stores compared to 79 on November 1, 2008.

For holiday and Spring we bought inventory to cover modest increases in our retail stores.

Therefore, we will be able to support the sales uptick we are currently experiencing.

For our wholesale customers, we bought to the order book.

As it turns out, our wholesale customers may have been a bit too conservative with their bookings and now are chasing Tommy Bahama merchandise.

While we obviously won't be able to fulfill all of the demand, we feel that we have made responsible, prudent risk management decisions relating to inventory.

As Hicks mentioned, we have been delighted to see modest comp store sales growth in the months of September, October, and November and even through the first week in December.

Our product and merchandising strategy is driving improved conversion rates.

We are very encouraged to see the sales trend headed in the right direction.

I should remind you that we have not wavered from our strategy of being a full price retailer and our gross margins have remained steady.

The strong gross margin means a majority of any comp store sales growth drops to the bottom line.

In addition to what we are seeing in our brick and mortar stores, our eCommerce business has been extremely strong.

When I came to the Company roughly 21 months ago we had three separate businesses, wholesale, retail and eCommerce.

Since that time, our eCommerce channel has shown us the power that the internet has, not only to drive revenue but to reach our direct consumer.

Our website which will attract over three million visitors this year is used by our customers to learn about now deliveries, new product offerings, restaurant reservations and store events.

It has allowed us to more clearly focus our brand especially with women and to be more relevant to our target 35 year old customer.

The eCommerce site has become an inseparable part of our direct-to-consumer business.

As you may recall, this year we made very modest investment in new retail stores.

We only opened four outlet stores and no full price stores.

This brought our ratio of full price stores to outlet stores to approximately five to one which allows us to clear excess inventory in a brand appropriate manner.

We are constantly looking for new retail opportunities and believe there are good strategic opportunities that exist in the marketplace for our brand.

However, due to the long lead time, we anticipate opening only a handful of stores in 2010 and are likely to resume our historical pace of seven to 10 stores in 2011.

On a closing note, even though this is a Third Quarter call, I'm happy to comment on our early read on holiday selling.

We are very pleased with all our distribution channels.

We remain positive about the remainder of the holiday season and the Fourth Quarter in general.

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

Thanks, Terry.

Good afternoon, everyone and thank you for joining us.

I'll start with Ben Sherman.

Ben Sherman reported net sales of $29.8 million for the third quarter of Fiscal 2009 compared to $38.2 million in the third quarter of Fiscal 2008.

The reduction in sales was primarily due to reduced wholesale shipments resulting from the challenging market conditions, a 10% reduction in the average exchange rate of the British pound versus the United States dollar, and the transition of footwear and kids businesses to third-party licensees.

Ben Sherman reported operating income of $2.3 million in the third quarter of Fiscal 2009 compared to operating income of $3.2 million in the third quarter of Fiscal 2008.

The reduction in operating income was primarily due to lower sales and the unfavorable impact on cost of goods sold related to inventory purchases denominated in US dollars but sold in other currencies, all partially offset by reductions in SG&A.

While the challenges to the Ben Sherman business this year have been enormous, every day we see evidence of the strength and power of this brand.

This is particularly the case with some of our newer initiatives such as the Ben Sherman Stop & Shop located in the top men's store on Oxford Street in London, as well as the eight Stop & Shops in the Frazier locations located throughout England.

These stop & shops which were opened during the third quarter are another important step in building the more premium distribution that we have been targeting and our sell-through to date has been quite strong.

In addition, despite the very weak conditions in the overall market, our own Ben Sherman retail stores have comped up year-to-date versus the prior year in both sales and gross profits.

We were also delighted to recently open stores on both sides of the pond.

Newbury Street in Boston opened in October and Covent Garden in London opened last week.

Both of these stores feature our new store designs similar to what we used in Berlin and are located in the kind of hip street front locations that seem to work well for us.

In addition, our tailored clothing licensee in the UK opened a Ben Sherman store on the Savile Row in London, the home of the Bespoke tailored clothing.

Having a beautiful Ben Sherman branded store located on this iconic street makes an incredible statement for the brand.

Finally, as you may know, Miles Gray will be passing the leadership baton at Ben Sherman to Pan Philippou in January.

Miles informed Hicks and me several years ago that he planned to retire from an active role in the business in 2010.

As we were approaching that date, Miles was instrumental in helping us identify and recruit his successor.

Pan will assume CEO responsibility for Ben Sherman on January 4 with Miles at his disposal to ensure a seamless transition.

We very much appreciate everything that Miles has done for the business and Hicks, Miles and I are all very excited about Pan coming on Board.

We believe he is the right person to continue our strategy with the Ben Sherman brand and help it reach its full potential.

Once again our legacy business has delivered a strong performance and in the last year, we have reduced working capital in these two businesses by over $30 million.

Net sales for Lanier Clothes were $35.6 million in the third quarter of Fiscal 2009 compared to $44.3 million reported in the third quarter of Fiscal 2008.

The reduction in revenue was primarily due to our exit from certain underperforming license businesses last year.

In the third quarter, which is typically Lanier's strongest quarter, operating margins improved to 14.7% compared to 10.1% in the same period of the prior year.

Operating income in the third quarter of Fiscal 2009 was $5.2 million compared to operating income of $4.5 million in the third quarter of Fiscal 2008.

The increase in operating income was primarily due to reduced SG&A and increased gross margins, resulting from the restructuring initiatives taken last year.

The results delivered by Lanier Clothes are truly remarkable and demonstrate the rewards that can be reaped from the focus on risk management.

Oxford Apparel also delivered an excellent quarter, reporting net sales of $60.2 million for the third quarter of Fiscal 2009 compared to $78.1 million in the third quarter of Fiscal 2008.

The reduction in sales was due to the exit from certain lines of business as well as the difficult economic environment.

Operating margin improved to 10.5% in the third quarter of Fiscal 2009 compared to 9.4% in the same period of the prior year.

Operating income for Oxford Apparel was $6.3 million in the third quarter of Fiscal 2009 compared to $7.3 million for the third quarter of Fiscal 2008.

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

The corporate and other operating loss increased to $4.9 million for the third quarter of Fiscal 2009 from $2.9 million in the third quarter of Fiscal 2008.

The increased loss was due primarily to a LIFO accounting charge of $1.3 million.

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

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

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

I'll 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 $200.5 million in the third quarter ended October 31, 2009 compared to $244.2 million in the Third Quarter of Fiscal 2008.

Consolidated gross margins for the Third Quarter of Fiscal 2009 increased to 40% compared to 38.3% in the Third Quarter of Fiscal 2008.

Gross margins were positively impacted by the sales mix between our retail operations and wholesale operations.

Retail sales which generally have higher gross margins, represented a higher proportion of our net sales during the quarter.

Gross margins were negatively impacted by the $1.3 million LIFO accounting charge.

SG&A for the Third Quarter Fiscal 2009 decreased to $72.4 million or 36.1% of net sales, compared to $84.6 million or 34.7% of net sales in the third quarter of Fiscal 2008.

The decrease in SG&A is primarily due to significant reductions in our employment and other overhead costs.

Expense reductions associated with the exit from certain business and the impact of the decline in the British pound versus the United States dollar..

These cost savings were partially offset by expenses associated with the operation of additional retail stores which opened subsequent to the beginning of the Third Quarter of Fiscal 2008.

Royalties and other operating income for the Third Quarter of Fiscal 2009 were $3.6 million compared to $4.6 million in the Third Quarter of Fiscal 2008.

The decrease was primarily due to Tommy Bahama termination of its license agreement for footwear, the challenging economic conditions and a decline in the British pound versus the United States dollar, which impacted Ben Sherman royalty income.

As a result of these factors, operating income for the quarter was $11.1 million versus $12.9 million for the same period in the prior year.

Interest expense for the Third Quarter Fiscal 2009 was $5.3 million compared to $6.4 million in the Third Quarter Fiscal 2008 In the Third Quarter of Fiscal 2008, we reported a charge of $900,000 associated with the writeoff of unamortized deferred financing cost as a result of the amendment restatement of our US revolving credit facility.

We expect to incur approximately $5.3 million of interest expense in the Fourth Quarter of Fiscal of 2009.

Turning to the balance sheet , total inventories at October 31, 2009 are $83.7 million, down 23% at November 1, 2008.

Inventory levels at Ben Sherman, Lanier Clothes and Oxford Apparel have each decreased as we have focused on mitigating inventory markdown 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.

We're very pleased with how each of our operating groups have managed their inventory levels in this environment.

Receivables totaled $94.5 million at quarter end, down 21% from the end of last year's Third Quarter.

The decrease was attributable to lower wholesale sales.

As a result of strong cash flow from operations, total debt was reduced from $235.6 million at November 1, 2008 to $178.7 million at October 31, 2009.

As of October 31, 2009, we had approximately $105 million in unused availability under our US revolving Credit Facility and $11 million in unused availability under our UK revolving Credit Facility.

Our Capital Expenditures for Fiscal 2009 are expected to be approximately $10 million, including $8.4 million incurred during the first nine months of Fiscal 2009.

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

For the full Fiscal Year 2009, we expect net sales in the range of $790 million to $800 million compared to previously issued guidance of net sales in the range of $765 million to $780 million.

Adjusted diluted net earnings per share for Fiscal 2009 are expected to be between $1.20 and $1.25 compared to previously issued guidance of adjusted diluted net earnings per share 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 January 29, 2010 to shareholders of record as of the close of business on January 15, 2010.

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

Thanks for your attention and now I'll turn the call over to Hicks for some closing

Thank you, Scott.

This quarter's operating results, which exceeded our expectations, reflect solid performance despite all four of our operating groups.

Our efforts to maintain the integrity of our brands, manage risks, control expenses, and strengthen our Balance Sheet have worked and we believe that we have good momentum going into the holiday selling season.

Thank you for your time this afternoon and your continued support and Nancy, we're ready for questions now.

Thank you, sir.

(Operator Instructions).

We'll go first to Jeff Blaeser from Morgan Joseph.

Good evening.

Thanks for taking my question.

If I could just address the Fourth Quarter a little bit, what do you see as the year-over-year comparison in mix retail versus wholesale?

And what kind of visibility in the Fourth Quarter do you think you have in the revenues in terms of sell in versus replenishment orders as you overlap the holiday season?

Jeff, are you talking Company-wide or Tommy Bahama specific?

Tommy Bahama specific, most likely.

(inaudible) About sales momentum for the Fourth Quarter and inventory levels and I'll make a couple of general comments and you guys can pick up.

Obviously from Terry's comments and mine in the opening remarks, we are more than pleased about our sales trajectory and our own retail stores in Tommy Bahama.

As Terry mentioned, we planned modestly aggressively, if it related to retail stores so we think we can handle this uptick and cycle back.

On the wholesale end of the business as he mentioned, we did not plan or speculate on much merchandise beyond what the order bookings were.

Our ability to chase goods if you will is somewhat limited for the Fourth Quarter.

And quite frankly, we look back and evaluated our thought process and at the time we made the decisions, we still concur we made the appropriate decision.

Jeff, this is Terry.

We had the third quarter incline (inaudible) all the way from August, September, object and we're very happy we saw that in November as well.

But it's been getting -- our comps have been getting steadily better throughout.

As Hicks mentioned, has been very exciting to see that and we're happy that we -- in our retail stores we anticipated -- we thought based on our assortments and based on the product we have and based on the way our presentations and retail group has been operating and the enthusiasm in stores, we felt that we had the ability to capture in the back half of this year some business.

And luckily it's coming to fruition so we're very excited about it and hope and think that we'll continue.

Just broadening the subject to all of the operating groups, I think you can see from a total inventory reduction that we're probably as clean on inventory at this time of year as we've ever been in those three groups.

We like that positioning very much at this point.

Okay.

Great.

And is it fair to say that the store traffic has increased year-over-year?

I know it was down mid-teens in the third quarter.

Has that changed pretty dramatically?

We have not seen store traffic increase to the degree that our sales have increased.

It's been quite interesting to watch.

Matter of fact, traffic has continued to be down over last year in the third quarter.

But our convergent rates are significantly higher.

Very gratifying.

Okay.

Great.

And where do you stand in terms of the cost reduction of program and the legacy rationalization?

Are you primarily complete with both of those initiatives?

Well, as you know on the last call -- if you don't know, we were projecting approximately $50 million reduction in SG&A for the year.

If you look at our figures through nine months, we have accomplished almost all of that.

My guess is we'll exceed our estimate of $50 million.

But we are beginning to anniversary some of the expense reductions so the reductions in the Fourth Quarter will not be as dramatic as they have been in the first three quarters.

And as far as the rationalization in the legacy businesses, I think we're pretty much through taking segment of a business that we don't want.

What we cannot predict with a huge amount of accuracy at this point and what the general market is going to hold.

We've got to be pretty much dependent on the macroeconomic situation and the health and vibrancy of our customers.

Great.

Thank you very much.

We'll move to our next question from Bill Reuter from Banc of America Securities.

Good afternoon, guys.

Hi, Bill.

It sounds like or -- it's great that you had some positive same-store sales in the Tommy Bahama stores for the last three or four months.

Can you talk about sequentially whether you've seen improvement as you go from one to the next or whether they've been pretty stable over that time period?

Glad you asked that question.

Throughout the first part of the year, obviously we saw some depressed comps.

But as we got into August, we started seeing it be positive comp and it continued to escalate all the way through the quarter so it was going in the right direction.

It wasn't -- just we're seeing it all of a sudden.

We've been seeing a gradual increase in our comps throughout the quarter which is the best news and good news for us.

We saw starting in the early Third Quarter our strategies kick into place that we've been working on for quite some time.

And then they continue as we look at our business obviously every day, they continue to go in the right direction.

It's been a steady incline.

Okay, so it continued to get better throughout the quarter?

Absolutely.

That's correct.

Great.

And in terms of the guidance, your EPS guidance of $120 million to $125 million, I'm coming up with that equating to an EBITDA of around $67ish million.

Does that sound to be in the ballpark?

Yes.

That's in the ballpark.

Okay.

That was our CFO Scott answering that question so you can take it to the bank.

And then lastly, this might be just asking the same question a different way that you guys have already been asked.

But in terms of your retail trends that sound like you're better than the wholesale trends, can you talk a little bit more about that?

We've seen the wholesale numbers that have been reported and the numbers that we see because we track our best wholesale customers.

They've been seeing an increase in their business, but -- especially with us.

All of our biggest retailers are experiencing a very strong business as we alluded to in the call on demand that we're seeing for our goods.

Commenting on their total store results -- I can't really comment on that, but we are clearly seeing our brand being strong in the wholesale channels that we currently sell.

How do you think your inventory levels are at your wholesale partners?

As I said earlier, they were very, very conservative.

They plan their bookings down year-on-year.

I do think especially with us again their demand is out pacing the inventories they bought.

I hate to pack a number that their inventories were down, but we know they were down significantly based on their bookings.

However we have been able -- we talk about chasing goods, we're not able to fill all their demand.

However we have found in season opportunities where we can help where we can, but clearly their inventories are significantly down year-over-year with us.

I can't comment on the total store.

But we feel that that trend, the way they plan for the Fourth Quarter is healthy and it will benefit us and others.

Great.

That's all for me, thanks, guys.

Sure.

We'll move to our next question from Robin Murchison from SunTrust.

Thanks very much and congratulations.

I've got a string of questions so let me start and maybe we can just fill them out one at a time.

When you think about the wholesale Tommy Bahama and you think about other wholesale margins better in the legacy business of course, but does it point to a [by location] of demand?

Do you think that demand on the Tommy side is outpacing it because of the target customer base might be a little more fluent, especially considering the rise in the markets or paper wealth?

I think first of all, Robin, that the demand is up base as we got great looking products that we're putting in the stores.

It's just a testimony that our strategies are paying off and people I think -- the wholesale customers are experiencing what they went through last year and have been better that they do to0 and presenting the products and everything we can get whatever business is out there.

Our products, we're very happy to say is performing quite well for the wholesale customers.

But from the legacy side and maybe that's for Tom, I'm just wondering if you compare and contrast the legacy wholesale with the Tommy wholesale.

I'm not sure of a direct correlation and there's any conclusions you can draw from it.

Okay.

Obviously we wouldn't be having the financial success unless our products there were working.

Right.

And still accruing at retail.

But we've been -- as you know, we've been pretty selective and pretty cautious in that end of the business not to be over inventoried and to maintain decent gross margins.

And to focus on lines of business that can be profitable for us and our wholesale customers.

Those by definition are product categories that are working for them.

Yes, but in the legacy businesses, Robin, you're dealing all the way from the budget up to the better end in terms of products.

It's not something you can make some summary judgments about the legacy business as far as other businesses, I don't think, because each of them got different segments.

And then notwithstanding the wobbly start that we've got to the beginning of the Fourth Quarter for the department store centers and some of the mass --

(inaudible) We have elected not to be in that wobbly status, and we are doing quite well as Terry said too.

Well, that's just it.

I don't want to entirely focus on Tommy.

I'm just looking at the overall health of your wholesale customer base.

It's clear that Tommy is really tracking quite well, just in trying to get at what you feel like the non-Tommy part of the business, the wholesale part of the business, how comfortable --

I think that everybody was reasonably pleased with September and October sales.

It was a disappointment in many segments with November, but the saving grace is back to the inventory question we discussed earlier is that it's not loaded with merchandise.

The cartage that happened last year at this time, we're not anticipating.

Okay.

That's very helpful.

Thank you.

But I have more.

Okay.

Wanted to ask you, going back to Tommy for a second.

You've repositioned the marketing of the brand.

You're introducing new iconic models that you're using in and some of the messaging.

Just wondered what kind of feedback -- if there's anything you're able to determine in terms of draw of the customer base.

And also wanted to ask you about -- give us an update if you will on the opening price point repositioning at Nordstrom, and this is Tommy also.

And then also talk to Tommy women's products and how the conversion of Tommy ones.

Those three things on Tommy.

(multiple speakers) First, Robin, I'm glad you got a copy of -- I'm assuming you're talking about our holiday mailing piece which we are very excited about.

Three things about the marketing you talked about.

It's the first time we've been burning on all cylinders because when we drop that book in the mail we also went up with all that imagery on our website and the windows in all our retail stores around the country.

We were sending a consistent message across all channels of distribution.

We did as I like to say cast a broader net on that mailing piece to a broader demographic of customer than historically we've gone after.

And it's been I think to a large degree, the success we're having in the sales we just reported, especially in November and December are due to that marketing initiative and where we strategically place the product.

It's been overwhelmingly accepted very very well.

And we're very very happy with it and plan on continuing to try to bring more people to the brand.

As far as the opening price point, our assortments -- we did make sure that our assortments that we had every category covered in classifications and including some opening price points in every classification.

But we didn't dramatically change the positioning of where we are priced as a brand.

We're still an aspirational premium price brand not only in our stores, but our wholesale customers, so we don't intend to change that.

We like where we stand at the marketplace as far as price.

However, we did put some keener price points in that mailing piece.

But I can tell you that it's been consistent over all the pieces in that book, not only the opening price point pieces, but the aspirational pieces as well.

It's on our website and in our retail stores.

We couldn't be happier about where our marketing efforts have gone.

Doug, do you want to comment?

I think too when -- you brought up Nordstroms and price point there, it's still an aspirational price point for them.

But they've changed their strategy as they went into holiday.

If you were to look at what their price points are, certainly have come more closer to where we're positioned versus where us having to reposition all of our lines.

It's actually played well to us.

I think there was one other question you had and Terry, you want to talk about with regards to women's?

The women's piece of the business, if you look at the mailing piece that we did, that book is approximately -- as far as the images are concerned a 50/50.

Obviously our women's business is not to the 50% level from a total business.

But on a comp basis throughout the third quarter and for November and December, we've seen those numbers increase quite significantly which again supports our strategy.

One of our initial or big strategies in Tommy Bahama has continued to grow that business because we wouldn't continue to harp on this strategy if it wasn't working.

It is working.

With the acceptance we're having to our women's product has been overwhelming throughout this period.

However the men's business we couldn't be achieving these comps that we're achieving without having comps increases in our men's business and our women's business.

I hope you can tell in my voice that we're pretty happy here in Seattle with Tommy Bahama right now -- about our strategies being accepted by consumer.

That's the best gratification you could have.

That comes through quite well.

Just a couple more if I can.

How should we think about the tax rate going forward?

And then also, do we think that the long term -- the eventual operating margin structure of Tommy and Ben gets back to respectively high teens and maybe low teens or low to mid-teens for Ben?

Scott will address the tax question first.

Our tax rate for the Fourth Quarter will be slightly below 30% and then going forward, plan on about 30% going forward.

Okay.

And as it relates to operating margins in the future, this is the first call we've had in awhile since we got an uptick so let us enjoy and get a little better fix on it before we start prognosting -- indicating out two years from now or one year from now.

Very good.

Congratulations again.

Thank you.

It's going to be our objective to do everything we can to get the margins up -- the operating margins up in both of those entities.

Thank you.

Thanks, Robin.

We'll move to our next question from Edward Yruma from KeyBanc.

Thanks very much and congratulations on a very solid quarter.

Can you talk a little bit more about Ben Sherman?

You had a nice swing back to profitability there.

Do you think you finally turned the corner of that business or how should we think about Ben Sherman's profitability next year?

Well, here is one thing you can think about.

When we made Tom Chubb President in June, we gave him direct responsibility for this business and he's waived a magic wand over it.

I think we found a combination here.

Tom?

The third quarter in Ben Sherman is traditionally the strongest quarter.

While we are happy given the overall climate with the results in the third quarter, I think you don't want to read too much into that.

We still have a lot of challenges in Ben Sherman.

It's a little early for us to call what we think 2010 will look like, but I think we're all confident that it will mark a meaningful improvement in performance there.

As you know, we've done a lot of restructuring this year.

We've incurred some restructuring costs.

We've also transitioned two pretty significant pieces of business in the footwear and kids businesses from doing them ourselves in-house to a licensed basis so we won't have the top line from those next year.

But they were also -- they were not making money.

Again, you'll know exactly what it's going to look like, but it should be a significant improvement from this year.

And of course, we'll comment more on what the outlook for 2010 is early next year.

Got you.

And maybe one other follow-up.

Obviously a nice turn in the Tommy comps.

Can you talk about the performance of your sunbelt stores?

I know that had been a little bit of a weaker region.

And maybe looking forward, do you have the confidence in how that store opening growth can reaccelerate next year?

Thank you.

The commenting on the sunbelt regions, you're right.

Generally, we've seen this increase that has been pretty broad spread over all of our regions.

However the Florida region -- Eastern and western Florida where we have a significant amount of retail stores is one of the first areas that were affected hard for us and its come back with a vengeance in the last quarter.

It's pretty much mirrored our results throughout the quarter.

When the calendar turned after Thanksgiving, we found that people this year -- our traffic in those stores has been significantly affected.

People are back in those regions and they're spending.

It's been very very good for us in that region.

I'm sorry, the last part of your question?

(inaudible)

In this -- we plan to -- as we said -- get back to -- we're going to open three full price stores next year and we hope to get back to that seven to 10 in 2011.

There are opportunities around in retail, not only in new locations but finding better locations.

Some of these leases that we have are coming up and we're constantly looking at every lease that we have and making sure we have the right location.

Or if there's a better location in these markets, but there's still some places out there where we don't have stores that Doug and I talk about all the time that we think we should have a store.

And we can't wait to get there.

We're feeling good about -- especially now as we're seeing an uptick in the business getting back to opening some more stores.

Excellent.

Thank you very much.

We'll take our next question from Susan Sansbury from Miller Tabak.

I can't convince people that you pronounce this Miller Tabak.

But anyway, I just think it's wonderful that the business is finally turning so congratulations on all your hard work.

Thank you.

Just before I forget this, how many leases are coming up for renewal in 2009, 2010 and 2011?

Is this a significant percentage of the fleet base?

No.

This is Doug.

It's not -- I'd say if you put 2010 and 2011 together, you're probably looking at maybe 10%, 10% to 15%.

And it really, I think we're sitting here with 85 stores today, but we started that rollout back in the 1999-2000 time frame at about a pace of anywhere from six to eight to eight to 10, depending on what we were doing that given year.

It does bounce around and we have gotten aggressive on a couple and have already renewed.

We renewed a lease just last year so -- but it is an opportunity especially for -- as reach out there for three years and just capture -- okay, do we want to be there.

Do we want to renegotiate an extension because right now is definitely a good time to be working with landlords.

Okay.

And are you going to be opening combo stores on a go-forward basis or are you tired of being in the restaurant business?

No.

One of the stores I mentioned we'll open three next year.

One of them has a restaurant format to it or a hospitality restaurant format to it which is we're taking a look at what -- they aren't all going to be like the one, Susan, that you may know.

But we're opening one at Laguna, California that has a retail store and a restaurant.

As we've talked about in these calls before, those retail stores that have restaurant components to them do a significant portion of our business.

We're not tired of the restaurant business and it works well for us in these locations where we have them.

I'm glad to hear that because I might have been too sensitive, but I thought there was mumbling about the fact that during this very difficult period that you really didn't want to go there.

They were too expensive to build, but anyway that's great to hear.

Foods great.

I love them.

Anyway, a couple of other questions, back to the backlog.

For Spring 2010 and Fall 2010, can you comment on if you -- basically everybody is probably looking to see if retailers are ready to change their open to buys or continuing to book only to order and to need.

In other words, are they restocking inventory.

And when you look for it in your wholesale accounts and this really relates to Tommy Bahama, but it could also perhaps be pertinent to your legacy businesses.

Is Spring still being booked down and do you think Fall will be booked up and can you maybe tell us what's going on?

Or your sense of what's going to go on.

I'll speak for Tommy Bahama, Susan.

On Spring bookings because we have Spring bookings in and retailers are being a bit more aggressive as they see this economy thaw.

I wouldn't say they're getting very aggressive with their inventories.

Everybody is still playing it pretty cautious, but we've seen our bookings for most retailers flat to slightly ahead so that's encouraging.

We're right in the middle of our sales meeting this week for how we plan Fall 2010.

It's early to tell, but based on the results that a lot of the retailers are having right now, I'm assuming people are going to come in, especially as it regards Tommy Bahama.

The success we're having with our product versus the overall business, I'm hoping that we're going to see the booking increases when we get to Fall.

Because I had the luxury of seeing the products we have for Fall.

AndI think our strategy is good or better and our products are better than they've ever been.

If you let them be -- on a heads up basis, I think we'll win this one as we go into Fall bookings.

I think what Terry is saying is we anticipate increasing our market share with those customers we do business with as a result of the superior performance of our product.

Okay.

Rough order of magnitude, is it up single digits or -- for Fall?

Susan, the thing we have to remember, especially with the Tommy's wholesale business is we've got a department store business and a specialty store segment.

And where our department store businesses is -- just as Terry said, we've been able to get our bookings back to flat or even maybe a little bit more.

Specialty stores in America are not as aggressive as they have been.

As we go into holiday, they're watching holiday very closely.

This is a segment that relies a lot for in season type ordering.

For what you're going to see for Spring from specialty stores, they didn't get back up to flat.

I just want to caution as we start looking at Spring for us, it's like getting to flat for total business meant that we had to have both of these segments step up and specialty stores, they are still lagging behind.

What's the mix of specialty versus department store?

It's about 65/35.

65 department stores, 35 specialty?

Yes.

And as you can imagine in this economy, specialty stores are definitely just taking it on the chin for the recession.

Well, they were the real credit risks because this happens in every recession.

These smaller retailers get into a bad liquidity situation so I understand that.

Going back to comps, I'm a little bit confused about -- so we had the negative double-digit comps in the Second Quarter and now they are trending up.

But can you just remind me again what the order of magnitude is here?

I think you said modest increases in comps so is that flat to up low single digits.

Or is it bigger than that in the third quarter and do you expect it to continue to accelerate in the fourth?

It's modest.

And that's for September, October and November in Tommy Bahama stores.

Right.

First part of December.

Okay.

And you're gathering the positive comps because the conversion improved traffic is still down.

Traffic is still down in the order of what?

And how are you measuring this because I don't know if you have the counters or not.

We do, Susan, we do have counters so it is a real number.

And I would just say the traffic is down modest.

It's modest decreases in comp traffic.

But modest is improving month after month after month.

Okay.

But is it the change -- is the change from a double-digit decline to a flat up modestly?

Is that the inflection or change Second Quarter to Third Quarter?

We indicated the third quarter -- at least the last two months of the Third Quarter were up and that has continued in November in the first part of December.

Okay.

Could you remind me, I feel like a Robin -- I apologize for the number of questions, but we get to talk to you so infrequently.

What is going to be the retail-wholesale mix or ratio at the end of '09?

Again, this is a Tommy Bahama question.

It's going to be approaching 60.

It's 60/40.

I'm sorry, say that again?

60/40.

Retail to wholesale.

Approximately.

With eCommerce being in that retail direct-to-consumer.

Have you ever discussed how much business you're doing at eCommerce, dollar volume?

We haven't and don't intend to today.

It's significant and it is the fastest growing part of our business and has been consistently now since we opened the website.

And when do you do that?

When did you launch the website?

October of '07.

And then the men to women's ratio and if you have a number for how much volume the women is doing, that would be great.

It's approximately in our retail stores, Susan, it's about 20% of the business is women's and 80% is men's.

If we -- as I said, we're focusing on making the bigger share of total business, but right now it's about 80/20.

How much volume on average did you do in store?

You're doing -- I'm just throwing numbers out.

It's just -- don't want to get into the numbers, but it's been a very healthy piece for us and we feel very strongly about the women's piece of the business.

All right.

This is great.

I'll get back into queue.

Thanks.

Thanks and good luck with the Fourth Quarter.

Thank you, Susan.

We'll take a follow-up question from Robin Murchison from SunTrust.

Thanks and Susan start thinking of yours.

Just quick, you commented on Florida, just wondered if you could comment on Arizona, Nevada, and California, some of the markets that got hit the worst.

As I said, Robin, all regions are contributing to the good news that we're having.

And we have six stores in those regions and they have been very positive for us in the last quarter, and especially in November and December.

We're seeing -- the Las Vegas area has been the one that has been slowest to come back.

However it's sporadic and then we'll run into some pockets of business there.

But I guess if I had to look at the region that you're talking about, the Vegas region would probably be the one that hasn't come back as strong as the other ones.

Great and the Ben Sherman store in Vegas, that's tracking better too.

I think you said domestic Ben Sherman was doing all right?

Yes, in retail both sides of the pond, we've comped up year-to-date in Ben Sherman retail.

And then in Germany, we didn't really have a comp because we opened the first store in October I believe of last year.

But both the Sherman stores have exceeded our expectations.

They've done well.

We're pretty pleased with the way that retail in Ben Sherman has performed, given the very tough environment out there.

Thanks guys.

We'll take a follow-up question from Susan Sansbury from Miller Tabak.

Thank you very much.

What about Hawaii?

Everybody forgets about Hawaii, but that used to be a very significant percentage of your business and nobody ever asks you about it.

(multiple speakers)

Yes, Hawaii is also part of that modest comp increase.

If you -- we would never forget about Hawaii.

Hawaii is a big market for us and what we've seen over the last couple months is Hawaii's business improving.

A good way to track Hawaii is actually just track what are their reservations, what are their hotel bookings.

And the good news for that is they're loaded for this holiday and beyond so we're feeling really good about Hawaii right now.

Is that how you're measuring Arizona also and the big resort states -- the winter resort states, all those people that fly in from Chicago?

It's a little harder in Arizona to measure because Hawaii is such a closed -- it's like its own little sub market.

And it's so based around tourism that you can really follow what's the trends are there.

Arizona is a little different.

You've got people driving in and things.

It's harder to track.

But with us with Arizona, the good news for us is we get our daily sales every day and we're able to track it.

We've been watching the trend in Arizona right along.

Okay.

Good..

Have a great holiday.

Thank you.

Thanks, Susan.

It appears there are no further questions at this time.

I'd like to turn the conference back over to our speakers for any additional or closing remarks.

We want to thank you for your interest and support and hope you could tell we have a little (inaudible) in our voice this time.

And we'll look forward to our next call.

That concludes today's presentation.

Thank you for your participation.