Oxford Industries Inc (OXM) 2011 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to today's Oxford Industries Inc fourth-quarter and fiscal year 2011 earnings results 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'd like turn the conference over to Anne Shoemaker, treasurer. Please go ahead, ma'am.

Thank you, Yolanda, 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 the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of 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.

Also during this call, we will be discussing certain non-GAAP financial measures. You can find a reconciliation of these non-GAAP financial measures to GAAP financial measures in our press release issued earlier today, which is posted under the newsroom tab of our website at OxfordInc.com. And 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'd like to turn the call over to Hicks Lanier.

Good afternoon, and thank you for joining us. With an excellent holiday season under our belt, we are very pleased with our fourth-quarter results. Consolidated net sales rose 27% to $199.7 million. On an adjusted basis, EPS for the quarter was $0.61, compared to $0.32 in the same period last year.

These fourth-quarter results capped an excellent year for Oxford, particularly in our branded businesses. With the strength and momentum evident in Tommy Bahama and Lilly Pulitzer, we are confident in our decision to make some significant investments in 2012 to advance our long-term growth initiatives. Terry and Tom will provide more details, but needless to say, we are thrilled with the opportunities these brands afford us to deliver even more impressive results in the years to come.

I am also pleased to report that our Board of Directors has increased our quarterly dividend to $0.15 per share. Raising the dividend by 15% reflects the continued improvements in our business, and Oxford's commitment to deliver shareholder value. I'll return with some closing comments, but I'd like to now turn the call over to Terry Pillow to discuss Tommy Bahama's results for the quarter and plans for 2012. Terry?

Thank you, Hicks. Our holiday season selling season exceeded our expectations, with a net sales increase of 17% in the quarter compared to last year. Our comp store sales increased in low double digits in our full-priced stores, and e-commerce sales grew more than 50%. Combined, full priced stores and e-commerce had a greater than 20% increase on a comp basis, while maintaining gross margins. Knits were particularly strong for holiday, with the half-zip pullover and infielder polo emerging as perennial favorites. We also benefited from operating additional stores at a modest increase in wholesale sales. The higher sales drove a 20% increase in operating income in the fourth quarter.

Our women's business continued to gain strength in 2011, and represented 26% of our full-price direct-to-consumer business. Women's sales in our direct to consumer channels exceeded $60 million for the year, a 26% increase over 2010. There are clearly a variety of growth opportunities for Tommy Bahama, particularly in retail and e-commerce. Our estimates for 2012 reflect sales growth around 15%, primarily in the direct-to-consumer businesses. These projections reflect continued momentum and strength of the Tommy Bahama brands in the marketplace.

Over the last several years, we have built Tommy Bahama into a major lifestyle brand, with sales expected to exceed $500 million in 2012. Our continued success has given us the confidence to make important investments in the Tommy Bahama brand. In the United States, we will be opening a fabulous bar, restaurant and retail store on Fifth Avenue in New York City. Construction is underway, and we expect to open in late fall. Another high profile location in Chicago is slated to open this summer. This facility will have over 80 feet of frontage on the 50-yard line of Michigan Avenue. We have also planned 8 to 10 additional stores around the country, ending the year with 106 to 108 domestic stores.

Our international plans are well underway. This Thursday, our first Company-owned international store will open at the Venetian in Macau. We have signed a lease for a restaurant, bar and retail store in the Ginza district of Tokyo, Japan, a store on Orchard Road in Singapore, and are continuing to search for additional locations throughout Asia. As you will recall, we've had a long-standing sourcing and merchandising presence in Asia to augment this infrastructure. We have moved key retail management from the US to Hong Kong, hired operations and merchandising personnel in both Hong Kong and Seattle, and have engaged a third-party warehousing and distribution partner.

Our investment in expanding our international infrastructure for Tommy Bahama began in 2011 with expenses of $3.4 million. In 2012, we expect to have approximately $12 million of expenses associated with our Asian expansion and New York store openings. With approximately half associated with the store pre-opening cost and half associated with continuing to build our infrastructure. Our investments in Asia and in New York in 2012 are expected to set the stage for meaningful future growth. However, they do add short-term pressure to operating margins, which we expect will be slightly lower than those in 2011.

We believe that launching Asia ourselves in this initial phase is important. We have hired good, local talent and relied on outside expertise, where needed. This strategy allows us to better control how the Tommy Bahama brand message is delivered in these new markets. As we expand, we may consider bring in local partners in certain markets to facilitate growth. Now I'll turn the call over to Tom Chubb to discuss results in our other opportunities.

Thanks, Terry. Good afternoon, everyone and thank you for joining us. I'll start with Lilly Pulitzer. As you may recall us mentioning, with its resort seat positioning, Lilly is primarily a first-half business. While that remains true, we couldn't be more pleased with the strong results Lilly reported for the fourth quarter. The momentum in this brand continued, with sales of $23.1 million, compared to $16 million last year, a 44% increase. Because we had acquired Lilly Pulitzer on December 21, 2010, only $6 million of the $16 million of net sales were included in our fiscal 2010 consolidated financial statements. E-commerce sales more than doubled, and increases were also reported in the wholesale signature store and Company-owned retail businesses.

The productivity and profitability of our retail stores increased significantly in 2011. One of our most important takeaways was from our Ardmore, Pennsylvania store, where we relocated from a 4,800 square foot space to a 2,200 square foot space, and yet managed to achieve a significant sales increase. We believe that a 2,200 to 2,500 square foot space is ideal for Lilly in most locations. We recently opened a 2,500 square foot store at South Park Mall in Charlotte, and the early results have been spectacular.

A lease has been signed for a similar-sized store in Phipps Plaza, Atlanta, and we hope to have a couple more ready to go before the end of the year. As we enter 2012, the priorities for Lilly Pulitzer are continuing to deliver superior product, developing the e-commerce business, and growing our database of customers. We believe our digital marketing efforts continue to fuel our brand momentum, and drive traffic not only to our e-commerce site, but our stores, wholesale accounts, and signature stores.

Here at the end of March, we are at the core of Lilly's biggest selling season, and we're pleased to be able to say that the business is performing well across all channels. As always, print, pattern, and color are performing very well for Lilly, and addresses remaining strength. At the same time, we are pleased to see that we are selling more sportswear. For the full year 2011, the Lilly Pulitzer business grew 30% to $94.5 million, and generated adjusted operating margins of 18.7%. We are comfortable projecting another year of significant growth, and expect sales to increase in the order of 15% in 2012. While we will need to make some SG&A investments in this business to support the growth, we believe we will continue to achieve a similar operating margin in 2012.

We saw a nice uptick in sales at Ben Sherman in the fourth quarter, increasing from $20.9 million a year ago to $25.9 million for the fourth quarter of fiscal 2011. Operating results also improved over last year, with a small loss of $300,000. That said, the economic conditions affecting the UK and continental Europe continue to be a barrier to accomplishing our objectives on our timetable. As a result, our 2012 plan forecasts only modest improvements in operating results on sales that are relatively flat to 2011.

Net sales for Lanier Clothes for the fourth quarter of fiscal 2011 were essentially flat with last year at $19.8 million. This sales mix continues to shift to branded tailored clothing from private label. Operating income was slightly lower than last year at $1.5 million, due to gross margin pressures and increased SG&A associated with branded sales. This business continues to produce solid results, and in 2012, we are expecting a low double-digit operating margin on roughly flat sales. The corporate and other operating results, as adjusted were a loss of $3.9 million in the fourth quarter of fiscal 2011, compared to a loss of $3.7 million in the fourth quarter of fiscal 2010. I'll now hand the call over to Scott Grassmyer.

Thank you, Tom. I will walk through our consolidated results and our guidance for 2012. Consolidated net sales increased $42 million or 27% in the fourth quarter of fiscal 2011, compared to the fourth quarter of fiscal 2010. The increase was primarily due to higher sales at Tommy Bahama, sales related to the Lilly Pulitzer business, which were only included in our operating results for six weeks in that fourth quarter of fiscal 2010, and the increase in sales at Ben Sherman.

The fourth quarter saw decreases in consolidated gross margins, on both GAAP and adjusted basis. Consolidated gross margins as adjusted for the fourth quarter was 54.8%, compared to 55.9% in the fourth quarter of fiscal 2010. The lower gross margins were private due to the impact of higher product costs, particularly at Ben Sherman, partially offset by a change in sales mix towards higher gross margin branded and direct consumer sales.

For the first half of 2012, particularly in the first quarter, higher product costs will continue to impact gross margins as higher cost goods flow through the P&L. We expect this to improve in the second half of the year, and expect slightly higher consolidated gross margins for the full year. In the fourth quarter, we were able to leverage SG&A, which from an adjusted basis declined to 47.5% of sales from 50.2% in the same period of last year. On a dollar basis, SG&A increased, primarily due to the addition of Lilly Pulitzer, increased costs associated with retail stores, and Tommy Bahama's international expansion.

Consolidated operating income, as adjusted, increased 41% to $18.8 million in the fourth quarter of fiscal 2011 from $13.3 million for the fourth quarter of fiscal 2010. The increase in operating income was primarily due to the strong operating results at Tommy Bahama, and the inclusion of a full quarter of operating income for Lilly Pulitzer, compared to only six weeks in the fourth-quarter fiscal 2010. Interest expense for the fourth quarter of fiscal 2011 was $3.5 million compared to $4.8 million in the fourth quarter of fiscal 2010. The decrease in interest expense was primarily due to repurchase of $45 million of an 11.375% senior secured notes during the second and third quarters of fiscal 2011.

Our balance sheet remains strong, with inventories at an appropriate level to support anticipated sales increases. Total inventories at January 28, 2012, increased 21% to $103.4 million. As of January 28, 2012, we had total debt of $106 million, compared to $147.1 million at January 29, 2011, consistent primarily of our senior secured notes. At the end of the fourth quarter of fiscal 2011, we had $13.4 million of cash on hand, $148.1 million of availability under our US revolving credit facility, and $3.2 million in unused availability under our UK revolving credit facility.

We have the opportunity to refinance our senior secured notes at par plus half coupon premium at the first call date in July 2012. We expect to redeem the note and refinance the debt at a lower interest rate. As a result, our guidance assumes a reduction in interest expense of approximately 30% to $11 million for the full year. Changes in market conditions for other factors could impact this assumption.

Cash flow from operations was $44.6 million in fiscal 2011, compared to $35.7 million in the prior year, primarily due to higher earnings. For fiscal year 2012, which ends on February 2, 2013, we expect solid sales and earnings growth, with sales growing at a slightly faster pace than earnings, due to the investments described earlier. We expect net sales of $840 million to $855 million, compared to $758.9 million in fiscal 2011. Adjusted earnings per diluted share are expected to be between $2.70 and $2.80, excluding approximately $9 million in anticipated charges associated with refinancing the senior secured notes, and approximately $2.4 million associated with a change in fair value in contingent consideration.

We anticipate that the first and fourth quarters will be our largest quarters, both in terms of sales and operating income. Conversely, with retail demand for our brands been weaker in the third quarter, we expect that our lowest operating margins will continue to occur during the third quarter. SG&A is expected to rise at a pace slightly higher than the planned increase in net sales. Depreciation and amortization of intangible assets are expected to be approximately $28 million in fiscal 2012. Royalty income is expected to be flat in fiscal 2011. The effective tax rate in fiscal 2012 is anticipated to rise to approximately 38% compared to an effective tax rate of 32.8% in fiscal 2011. Fiscal 2011 effective tax rate benefited from certain discrete items.

Fiscal 2011 capital expenditures were $35.3 million. Capital expenditures for fiscal 2012 are expected to approach $60 million, as we increase our pace of retail store openings, including Tommy Bahama's high-profile stores in New York and Chicago, Tommy Bahama's international roll-out, and three or four new Lilly Pulitzer stores. We also anticipate capital expenditures for remodeling costs for existing stores and continued investment in information technology and distribution center enhancement.

We expect net sales in the first quarter of fiscal 2012 to be in the range of $220 million to $230 million, compared to net sales of $280.3 million in the first quarter of fiscal 2011. Adjusted earnings per diluted share for the first quarter of fiscal 2012 are expected to be approximately flat with a year ago level of $1.07, due to the impact of increased product costs and expenses to support growth initiatives. Thank you for your attention, and now I'll turn the call back over to Mr. Lanier.

Thank you, Scott. As you can tell, we are pretty excited about our results in 2011, and our plans for 2012. We are particularly proud of our guidance in view of 2012's unusually high levels of investment and increased tax rate. We feel that these strong projections reflect the power and momentum of our brands. Yolanda, we're ready for questions now.

Thank you. (Operator Instructions) We'll hear first from Eric Beder with Brean Murray.

Congratulations on a solid Q4. Could you talk a little bit about Tommy Bahama women's? Where are you seeing the success there? And where do you think the category is taken to the next level, from 25%, 26% to 30%-plus going forward?

Derek, this is Terry Pillow. As I said, the women's business has been strong, and our dress category has been the leader of that business, and it continued to perform well in 2011 and the fourth quarter. We made the statement that we are very happy with 26%, but we've always said that we're not going to stop until we get it to 50% of the business because we feel that if 50% of the business in our stores is women's, that it will be a better brand for it. And we're getting traction across the sportswear piece of the business, the women's swim piece. It's pretty broad across all categories. So we couldn't be happier with it.

And in terms of the expansion for the stores in Asia, how are those going to be configured differently than the US in terms of maybe the mix of product, or the size of the store? How should we think about the Asian side, and what should we think about the potential for that market?

It is early. The size -- not too early. We're opening a store on Thursday in Macau. And we're very excited about that store. It's approximately 2,500 square feet. So it's a bit smaller than the format that we're going with domestically, but we're planning the mix of those stores out of the gate at approximately the same as we did -- as we do in our stores here, about 50% of the mix to be men's and 50% of the mix to be women's. So we can get a read on just how important both are. We spent an extensive amount of time on sizing, Eric, that all the sizing that we'll have for the Asian opening on Thursday are a new size spec, it's not just a graded spec that's smaller, it's a brand-new size of spec. We've done extensive research and found that it's very appropriate for that market.

So the store design of the stores are a very contemporary -- I wouldn't use the word overly contemporary. They still -- we're not walking away from our island theme. So they'll have clearly an island theme, but a little fresher than some of the ones that we have domestically. So we're excited as we move forward, and we're using different formats in Macau and Singapore and Tokyo to test different store formats to see which ones we actually like the best. So we're very, very excited see this store and started in Asia.

Cool. And for Lilly Pulitzer, could you talk a little bit about -- you've been talking about diversifying into white pants and other areas in terms of dresses. What have you seen as early hit in what is I think is still a very strong dress market? And where are you looking to put the other -- are you still looking to focus on the southeast as the place to put the other new openings this year besides Atlanta and Charlotte?

Well, Eric, in terms of the first question about what else besides dresses are working, dresses are very strong. Print, pattern and color is always very important for Lilly Pulitzer, and there is no difference this year. Some of the sportswear products that we're offering, we've done shorts and they had a lot of success with those over recent years, or the business did before we bought them. Those continue to be a strong point.

Colored denim is a natural for Lilly, and we're offering that. We've got skirts. We've got tunic-type tops that do well. And so there's a variety of other products besides dresses. And the objective for this year is to grow the dress category, but to grow sportswear at a little bit faster rate so that it becomes a bigger part of the business.

Great. And in terms of the expansion where you looking to put those other two stores?

The other couple of stores, we don't know exactly yet. We're looking at locations sort of continuously. The Southeast is a good bet, because it's a very good market for Lilly Pulitzer. But we just don't have them signed up yet.

Okay. Great. Again, congratulations and good luck this year.

We'll go next to Edward Yruma with KeyBanc Capital Markets.

Congrats on a great year and thanks for taking my question. For that incremental $12 million in investment, can you disaggregate that and talk about what percentage of that is due to Asia and what piece of that is due to both New York and Chicago?

Yes. A little over -- $3.8 million is our projection, with the rest being Asia. And New York obviously is mostly pre-opening store costs. Asia has got a fair amount of pre-opening store costs in that also. But also as the infrastructure we added to support the Asia expansion.

Got you. So it if I strip that out, what kind of operating margin target does that imply for Tommy Bahama? And I guess, given the strong performance over the past 24 months, how much stronger can the operating margins at Tommy Bahama get?

Obviously we would have expanded operating margins if you didn't have these costs. And that's obviously the goal long-term is to expand those margins. But again, we expanded them nicely this year and I think we will continue that phase.

One other follow-up. How should we think about the Lilly Pulitzer signature stores? And does that number grow this year? And then longer-term, what type of store opening cadence you think you can have at Lilly Pulitzer now that you've gotten strong store economics? Thank you.

Ed, as to the signature stores, they're very important part of the Lilly strategy. They've been a big part of the business for a long time. It is wholesale distribution for us. But it's very high-quality distribution that presents the brand in a way that we can be very proud of. So we expect the signature stores will be part of the mix for the foreseeable future, for sure.

At the same time, we are excited about what's going on in our own retail stores. The profitability of those stores improved dramatically during 2011. And I think we and the Lilly team are feeling pretty confident about our ability to open stores that can be very successful financially. Our plans for this year, as we mentioned, are to open three to four stores. But to be very candid with you, Ed, to do that, we're really having to stretch the staff pretty thin. And one of our objectives is to build the staff, so that we're organized to grow the retail platform going forward.

So we'll probably talk more about what the pace is for Lilly Pulitzer in out years later in this year. But for right now, it's three to four for this year. Great growth in the total business, and that's really coming across all channels, but our emphasis is on growing e-commerce in the retail stores.

Great. Thank you very much.

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

Congratulations on a good year. Directionally, how do you expect the margins to compare the Tommy Bahama New York locations versus the Chicago locations?

I'm not sure -- this is Terry -- I'm not sure, the gross margins --

Or at the operating margin level, Terry. I presume New York would be -- you're expecting to make money in that store?

That's right. I see where you were going. We definitely expect to make money in that store. We're not opening it to write it off against -- as an expense that we've -- square footage that we have on that store with what we're opening there, pro forma that we've got for that store is to make money, and we have looked at it very hard, and we think that we can do that.

Same with Chicago. These are high rent locations. There's no question about it. But we're not looking at them differently than any other store that we've opened. Obviously the economics by store differ but we're approaching this exactly the way we approach other stores. We're in business to make money and we're planning on making money in those two locations.

I know it's early, but do you envision additional high-profile flags like New York elsewhere in the world?

Well, we mentioned -- I guess you'd have to consider the store we're opening in Ginza as flagship. It's got a bar, restaurant, and a store. We think that's a market where we can definitely show up with a store like that. And yes, we like these locations. We're going to get New York open, and get that one under our belt. But there are clearly other locations in the United States and internationally where we can represent the brand well in what we call an island. So, absolutely.

And when you talked about the $12 million additional SG&A this year, attributable to Tommy, half pre-opening, half infrastructure, embedded in that half infrastructure, is that -- I guess that's the movement of some people and processes and placement into Asia?

Absolutely. I'll let Doug --

It's something we started last year, where we started to move people into the market. And we put together -- we have a merchant operations team now based out of Hong Kong. We've also got a group in Seattle, operationally supporting the international efforts. We've also got our distribution group or distribution set up in Hong Kong as well as just the costs associated with all the legal and tax support that you need to do to get yourself to do business in five different markets. And if anything, we're doing this for the long haul. And that's what we've got invested in 2012.

Okay. Great. Let me move on to Lilly Pulitzer. Wanted to ask about any additional color you might be able to provide? I'm frequently asked about Lilly on the West Coast. The strength of the brand on the West Coast. And I wondered if you could provide any insight?

Well, the West Coast as you know is not an area where we do a lot of business. And Lilly Pulitzer -- that said, California is one of our top e-commerce destinations. And we continue to believe that over the longer term, there should be an opportunity out there. But I think the way that we're thinking about it in Lilly Pulitzer is that we're not really even fully developed East of the Mississippi. There's a lot of white space still. And we're going to go from strength to strength, and work our way across the country from East to West. So it's good to have that opportunity out there. But there's a lot of opportunity closer to home to start with.

Lots to fill in still?

Still lots of whitespace.

And then on Ben Sherman, given the difficult UK market, I know you have been watching that continue to have decent hopes for it. But you've been hit with average unit costs in cotton and then of course the difficult UK environment. How do you sit back and think about it and know how long to stick with it, if you will? Given these hurdles.

Yes. There's no doubt that the economic climate particularly in the UK, which is half the business, is sort of making it harder for Ben Sherman to achieve its objectives. And as you know, Robin, our focus at Oxford is very much on maximizing long-term shareholder value. And the long-term part of it tells you that we can be patient to a point that the shareholder value part of it tells you that we do have to see a path to getting a return. And the best I can really tell you, at this point, is that we continue to stay very, very close to the business, and monitor every, single development in it very, very closely. And we will keep you posted.

Okay. All right. And then a last couple of questions if I can. I wanted to see if you had any comments regarding the retail environment. And if you had any comments regarding the acquisition environment? Leave it at that. Thanks, guys.

I'll take the acquisition one first. And as we have said before, one of the reasons we're making these investments in Lilly and Tommy Bahama is to make sure we've got runway going forward, so that we don't have to make acquisitions to generate growth. And we feel very comfortable with that strategy. But on the other hand, our balance sheet is such that if we found a really good fit for us, we certainly have the capabilities to make an acquisition. But our prism is pretty narrow, as to what we think would fit for us. If that answers that question.

And I'd say in terms of the retail environment, and I'll let Terry and Tom comment on this also, but I think we still see plenty of challenges out there. And it is certainly not a time to have a mediocre product or brand. But I think that both Tommy and Lilly have proved that when you have that right combination, regardless of the macroeconomic situation, you can make good progress as we are doing. Terry, do you want?

Robin, I think Hicks is right. It's loosened up a little bit, but it's not near back to where we've seen it. And I think what we're doing, with the results that we experienced in 2011, that our message is getting out there and it's resonating. As long as we stay true to who we are with Tommy Bahama and make great products, and price them fairly, and present them properly, we're winning and outpacing obviously a lot of the people in the market and gaining market share. So we couldn't be more pleased. And in a market that's still a bit challenging.

I would add to what Terry said, Robin, and say that in Lilly Pulitzer, I think it's all about focusing on who we are, and remaining true to who we are, and as long as we continue to provide pretty product that makes women feel good about themselves, I think we'll continue to see a lot of success.

Thank you.

(Operator Instructions). We'll hear next from Susan Sansbury with Miller Tabak.

Again, I want to give my congratulations on a great year and certainly a lot of opportunity in front of you. I wonder if I can get Terry or Tom or Hicks to talk about the new store opening program, post outside the United States, outside of what you have already discussed. Are you going to open these stores and then test and evaluate, or are you going to keep going? What is the long-term opportunity? And in that regard, how much of these infrastructure investments that you're incurring this year are going to roll off in 2013 and 2014? I guess that's dependent on your real estate cadence.

Okay. That's a great question, Susan. And I think we can respond to it. We have detailed three stores that we're opening. And hopefully, there will be more than that within the next 12 to 18 months. And we think there will be. And obviously, there is some testing involved in getting the formula exactly right in them.

But the infrastructure we have and are continuing to put in place is an infrastructure for a long-term play. And those handful of stores that we will open this year and early next year, cannot support the infrastructure we're putting in place. We're planning on a much faster rollout as we get our feet wet in this thing. So we're in it for the long-run. And we are very confident on our ability to succeed at it.

That doesn't mean we're going to have everything perfect the first time out-of-the-box, but we think we've got the team in place, both local people and seasoned veterans, that we're going to make a success of this. And we think we've got huge runway ahead of us as it relates to international expansion. And Terry, you can add to that anyway you want to.

We're very excited about it and we can't wait to see this store on Thursday that we're opening, and see the reaction to that, just following that one in Singapore. We're building beautiful stores that match up perfectly to our brand message. And we've never considered this as a test. We've been working on this for the better part of two years. And we've approached it always is we're going to have a presence. We've done extensive research that tells us the market is ready for Tommy Bahama in that market, and we look forward to sharing with you the results of that as they keep coming.

Okay. Well, I look forward to that. When are we going to have a 53rd week year? Next year or this year?

This year. Our year ends on February 2, 2013. 2012 is a 52-week year.

Okay. Any projections about what the top line and bottom line impact may or may not be?

It's not huge. Because you're -- it's not huge. You're talking about a late week in January that's added, so it's not a huge impact.

Okay. Just product cost increases first half versus second half and then for the year?

First quarter especially, last year the first quarter we really had the low cost products running through the system. This year, it's going to be high-cost product. First quarter will be a difficult gross margin compare. Second quarter will mediate to a degree, and then third and fourth quarter we should put the other way where we should have a positive compare. That's the cost to get all the way back to where they were, but they're getting back, the costs are certainly coming back.

Did you throw out a number for the first quarter or the first half in terms of how much product cost is going to increase and then how much it's going to decline in the back half?

The product costs are probably somewhere in that 6% to 8%. But we've offset a degree of that through price increases. But year-over-year, we're probably somewhere in that range. But we said that for the year, we think that we will actually -- gross margins will actually go up year-over-year for the full year. But there will be mostly a second half, is when we'll get increases.

Okay. And then just one flow of funds question with respect to working capital requirements. As you open these new stores, and as you increase the cadence of the US store opening, or I'll just ask a question bottom line. What type of excess cash flow free cash flow do you expect to generate in 2012?

It will be pretty modest because of our capital expenditure pace being $60 million. But we should be flattish to modestly positive free cash flow after capital expenditures and after dividends.

Okay. Great. Well, best of luck. I think it's marvelous. I can't wait until you are able to talk a little bit more detail.

Terry, you might want to compare the Macau store with other experiences we had in US, and also the experience we've had with Asian customers in Hawaii.

Sorry. What gives us the confidence to do this is that we've got five stores in Hawaii right now. And we've been doing business for over 10 years with this Asian clientele, it's a high concentration of Asians visiting Hawaii and a lot of our stores domestically quite honestly that we've had. So we feel very confident, even though the brand is -- there's not great brand awareness right now. Us being in Asian market, we feel that there is several amount of people that know who we are and are going to help us make this a success.

Do get phone calls to the extent here you're opening -- I don't want to make this conference call too long, but you're doing this by yourself up front, what is the interest level -- or is it too early to gauge with respect to joint venture franchise or distributor partners?

In the last two years, we've been over there quite a bit, Doug and myself, there have been considerable interest from outside partners. We looked at the market and decided the best place for us was to set the tone for what we do, like we do in America, and tell our message ourselves. There's nobody better to do than us. We've retained architects over there that have flown over here, looked at our stores. And we've designed stores that we feel are very brand appropriate. And couldn't be more excited about it.

Okay. Well, best of luck. I'm at 43rd and Madison, and Ann sent the pictures now under construction. So I'll probably be -- first in line to at least get a drink at the bar.

Walk up there and see us, Susan. It's quite impressive. I was there on Saturday and saw it. It is beautiful. The barricade is up. You will get a kick out of it.

Don't look at 43rd. Go to 45th.

I know. I'm a hop, skip and a jump. I can spit. I don't have to walk very far.

(Operator Instructions). We'll hear next from James Ragan with Crowell, Weedon.

Thank you. I had a quick question just looking at the online sales, up 50%. Tommy Bahama I think you mentioned up over 100% and Lilly Pulitzer. It's really impressive performance. And I know you're doing a lot of things in terms of sending out the daily e-mail. Can you just talk a little bit about why you think you've had such a success there? And are you pursuing other social media links? Maybe just talk a little bit about the online part of the business?

James, I think primarily our brand message is getting across. And we're spending a tremendous amount of time and effort on the content of our site. We're going on proximally four photo shoots this year on location, making sure that side is better than anybody in the marketplace. So we think ours is. And we think that's the best place for us to tell our story, or as good a place as in our retail stores. And it's nice to see that channel is performing as well as it is. And our comps in our own retail stores are continuing to be strong as well.

So we think we've got a great brand message and e-commerce is a perfect place to tell that message. And we're gaining a larger database of people that we can talk to by sending mailing pieces and opening new stores, and as we open these new stores, we said we're opening 8 to 10 new stores next year. We bring a lot of people into the brand. We open new stores in markets that we've never been too. So we definitely could see a that peace is going to continue to grow. As we grow these 8 to 10 stores, doing business in those stores, and also doing business online. So I'm sure you've seen our website and you can see how great that site looks. And we're very, very proud of it.

It's impressive. And when you reach out to the customers, through the e-mail or Facebook, how are you choosing which products to highlight or themes to present? Is that based upon what you're seeing in your retail stores, or how are you making those decisions?

Well, we send product on these photo shoots that -- and we say early on in the season what the messaging from a fashion standpoint, and from a basic standpoint, and what we want to say. And we make sure the mix is the right mix, that it doesn't get too basic or too fashion. And we do that up front. We take that product on the shoot, shoot it, put a mailer together, put it on the West Side, on a daily cadence or a weekly cadence where we show the best foot forward of what we think represents the Tommy Bahama brand.

Tom, do you want to talk about social media at Lilly?

Yes. I think most of what Terry said applies very much to Lilly Pulitzer as well. And of course, they've had great success with their e-commerce site. I would say that social media is also very, very important to them, with their customer base being almost all-female of course. And maybe skewing a little bit to the younger side. Social media is hugely important, and Facebook has been a huge part of their communicating with their customers, and frankly, allowing their customers to communicate with each other.

More recently, the one that they're seeing a lot of momentum with is this website called Pinterest, which is a visually-oriented social media website where people can go out and basically do a digital bulletin board of the images that are things that are exciting to them in their life. It's quite interesting, I've spent a good bit of time on it. But that's a website that is particularly attractive to female consumers. And with Lilly Pulitzer being a very visual brand with all the color and print and pattern, that type of thing, it's early in its history. But we think that's going to be a pretty exciting vehicle to help communicate the brand message in yet another way to the consumer.

Do you want to make any comments about the growth rate?

Well, we commented on it before, but the growth rate in Lilly Pulitzer, both the social media participants and the e-mail list has been outstanding. We also have an iPad app. I should have mentioned that earlier. This is a great thing, where we've developed an iPad app specifically for the iPad. You go and download it, and then every time a new catalog comes out, you have that catalog on your iPad. You can go through it page by page. When you're looking at a dress or a pair of pants or whatever, there's a button you can push and change the color of those pants.

As you know, the color quality on the iPad is just outstanding, and the resolution is outstanding. So it looks beautiful. There is some of the behind-the-scene videos that you can see on there. All great stuff.

And then just in terms of the number of Facebook fans and e-mail addresses that we have in our database, I think we basically tripled our e-mail list in the past year or two. Something just short of 600,000, I believe, in 2011. And the Facebook fans finished the year at I think 380,000 or so. Which was a huge increase.

Great. That's a great response. Who would have thought that Oxford Industries would've been one of the leading social media marketers out there? Great job on that.

Well, we picked the right people to align with. I'm not sure Hicks and Tom and Scott, left to their own devices would have come up with this.

Okay. Well, that's it for me. Thank you.

And seeing no further questions in the queue, I'll turn the conference back over to Mr. Lanier for any additional or closing remarks.

Thank you, Yolanda. We would like to thank all of you for your interest on today's call, and your good questions. We believe we have a terrific story here and look forward to presenting our first-quarter results here in early June.

That does conclude today's conference. Thank you all for your participation. Have a wonderful day.