Oxford Industries Inc (OXM) 2012 Q2 法說會逐字稿

Good day, everyone, and welcome to the Oxford Industries Inc. second-quarter fiscal 2012 financial results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Anne Shoemaker, Treasurer. Please go ahead, ma'am.

Thank you, Jamie, 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 investor relations tab of our website at OxfordInc.com. And now I'd like to introduce today's call participants. With me today are Hicks Lanier, Chairman and CEO, Tom Chubbs, 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 to discuss our second-quarter results. We are pleased to report strong growth in both sales and earnings for the second quarter, driven in particular by excellent performances in our Tommy Bahama and Lilly Pulitzer direct-to-consumer businesses. We achieved these results while, at the same time, making significant investments in the future growth of our Company. Among other things we signed a lease for a Tommy Bahama retail store that will open later this year in Hong Kong, bought the business of our Australian Tommy Bahama licensee, and recruited a highly-qualified executive to serve as Senior Managing Director of Tommy Bahama International. We also continued to expand the Lilly Pulitzer direct-to-consumer footprint by opening three stores so far this year, and we expect to open the fourth in December. Finally, we were able to significantly improve our already strong balance sheet, by completing the redemption of our senior secured notes, and increasing our revolving credit facility to $235 million. We believe the amended revolver is very attractively priced, and gives us ample financial capacity to execute our strategy. As we begin the second half, the health of our key growth brands is outstanding, and our people are well-prepared to complete a great year. I'll return with some closing comments before Q&A, 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. Strong momentum in the Tommy Bahama business continued through the second quarter. Sales in the second quarter were fueled by the best Mother's Day we have ever had, and we were fortunate to then head into a very strong Father's Day. Net sales for the second quarter of fiscal 2012 increased 16.8% to $127.5 million. Comparable store sales in our full-priced stores were in the low double-digits. We saw substantial increases in our e-commerce channel of distribution.

The fastest-growing segment of our direct-to-consumer business was women's, which grew 29% over last year. The women's business was led by dresses and accessories, and in men's, continued to see growth in both knits and wovens. We also had a modest increase in our wholesale business for the quarter. At the end of the second quarter, we operated 105 retail stores compared to 90 on July 30, 2011. We opened four new stores in the United States, and one in Singapore in the second quarter. In July, we also acquired our Australian license business, and folded it into our international operations. The licensee operated four small resort retail stores and one outlet, as well as a limited wholesale distribution. We expect this to be a good market for Tommy Bahama, with an opportunity for future growth in major Australian cities.

We continue to build our international infrastructure, with systems and staffing. During the second quarter, we added a very experienced Hong Kong-based Senior Managing Director of International to the Tommy Bahama team. SG&A increased in the quarter, primarily related to growth initiatives for the brand. In addition to costs associated with operating additional retail stores, the second quarter of fiscal 2012 included a negative impact to operating income of approximately $3.5 million, related to certain infrastructure, pre-opening rent and other costs associated with Tommy Bahama's international expansion, and upcoming New York store. This consisted of $4 million of expenses, partially offset by $500,000 of gross margin from sales in our international stores. As a result, Tommy Bahama's operating income for the second quarter was $16.6 million, compared to $17 million in the quarter of fiscal 2011.

We are looking forward to November, when we plan to roll out three high-profile retail stores. During the quarter we signed the lease and began a build-out of our 5,000 square foot store in Wan Chai district of Hong Kong. This is a very attractive street location, giving us a major store in this important international gateway. Our plans are to open this store in early November. Tommy Bahama's sales into Manhattan Island, our marketing plans for holiday include a well-integrated approach using mailers, our website, and an extensive pre-opening marketing campaign in New York. A new barricade wrap will be at our New York site in the next few weeks, reflecting this holiday marketing campaign, and we expect to open both our New York flagship and our Michigan Avenue store in Chicago in mid-November. We clearly have a lot of important brand-growing initiatives, and we believe that this is, along with a fantastic product and an exciting integrated marketing campaign, sets us up well for the holiday season. Now, I'll turn the call over to Tom Chubb to discuss results for the rest of our operating groups.

Thanks, Terry. Good afternoon, everyone, and thank you for joining us. Lilly Pulitzer reported a net sales increase of 24.5% to $30.9 million for the quarter. All channels of distribution reported increases. We saw high single-digit comparable store sales increases, and significant increases in both e-commerce and wholesale. We saw growth in all product categories, with particular strength in sportswear.

As a result of increased sales and gross margins, Lilly Pulitzer's operating income increased 32% to $7.4 million, from $5.6 million in the second quarter of fiscal 2011. Operating margins were a very strong 24%. Lilly Pulitzer has opened three stores in 2012, South Park in Charlotte, Phipps Plaza in Atlanta, and Towson Town Center in Baltimore. Each of these stores represents our smaller store model, and we couldn't be more delighted with their performance. A fourth store is planned for December in Tyson's Galleria in suburban Washington DC, and we are filling the pipeline quickly.

E-commerce also continues to impress with dramatic growth. E-commerce is well-established as a full-price vehicle. In addition, our semi-annual e-commerce sales are proving to be a very effective clearance channel, while at the same time, creating tremendous excitement among diehard Lilly fans, as well as introducing new customers to the brand. Fall will remain our smallest season by far. That said, our fall collection is selling well and we will be well-positioned for the upcoming resort holiday season.

We saw modest but important progress at Ben Sherman this quarter, notwithstanding a very difficult consumer climate in the UK in Europe. Ben Sherman reported slightly lower sales of $20.1 million for the second quarter, compared to $20.9 million in the second quarter of fiscal 2011, but improved operating results with an operating loss of $1.5 million compared to an operating loss of $1.8 million in the same period last year. The improvement in operating results was primarily due to higher gross margins, partially offset by the lower sales and decreased royalty income. Net sales for Lanier Clothes increased 8.1% to $24.8 million, in the second quarter of fiscal 2012. Operating income in the second quarter was $2.4 million, slightly ahead of last year's operating income of $2.3 million. With an operating margin of 9.7%, Lanier continues to make solid contributions to our business.

Corporate and other reported an operating loss of $4.6 million for the second quarter of fiscal 2012, compared to an operating loss of $5.4 million in the second quarter of fiscal 2011. With the improved results reflecting the favorable impact of LIFO accounting. I'll now hand the call over to Scott Grassmyer to comment on our consolidated financial results.

Thanks, Tom. I'll now walk through our consolidated results. As Hicks mentioned, we had a strong sales increase over last year, and as a result, earnings from continuing operations on an adjusted basis increased to $0.55 per share, compared to $0.57 per share last year. On a US GAAP basis, earnings from continuing operations per diluted share were $0.30 in the second quarter of fiscal 2012, compared to $0.21 in the same period of the prior year. Adjusted earnings per share for both periods excludes charges related to the repurchases of senior secured notes, a change in the fair value of contingent consideration, and LIFO accounting adjustments. Consolidated gross margins increased modestly to 57.2% of sales, compared to 57% in the second quarter of fiscal 2011, reflecting the favorable impact of LIFO accounting.

SG&A for the second quarter of fiscal 2012 was $100.7 million or 48.7% of net sales, compared to $88.6 million, or 49.1% of net sales in the second quarter of fiscal 2011. The Company achieved this modest leveraging of SG&A while making investments of approximately $4 million in the Tommy Bahama international expansion and the New York store. We continued to incur pre-opening rent expense as we build-out New York, Tokyo, and now our store in Hong Kong. The increase in SG&A dollars was primarily due to the above-mentioned investments. The cost of operating additional retail stores and other SG&A expenses support the growing Tommy Bahama and Lilly Pulitzer businesses.

Royalties and other operating income for the second quarter of fiscal 2012 were $3.3 million, compared to $4 million in the second quarter of fiscal 2011. The decrease was primarily due to lower royalty income in Ben Sherman, due to the impact of macroeconomic conditions on international licensees and transitions between certain licensees. We are very pleased with the 14.7% increase in operating income for the quarter, to $20.3 million. Interest expense for the second quarter of fiscal 2012 was $3.3 million, compared to $4.3 million in the second quarter of fiscal 2011. The decrease in interest expense was primarily due to the repurchase of $45 million of our 11.375% senior secured notes last year. This July, we redeemed the remaining $105 million outstanding notes, which will result in further decreases in interest expense going forward. We anticipate that interest expense for each of the third and fourth quarters of fiscal 2012 will be approximately $1.1 million.

The effective tax rate the second quarter of fiscal 2012 was 36% higher than last year's rate of 32.2%. The effective tax rate in both periods benefited from certain discrete items. Total inventories at the close of the second quarter of fiscal 2012 were $88.4 million, compared to $77.7 million at the close of the second quarter of fiscal 2011. Our increased inventory levels reflect the anticipated sales growth and the operation of additional retail stores by Tommy Bahama and Lilly Pulitzer. As Hicks mentioned, in the second quarter of fiscal 2012, we made important changes in our capital structure. In June 2012, we amended and restated our US revolving credit facility in a new credit agreement. The facility increased from $175 million to $235 million, with additional borrowing capacity provided by the inclusion of certain trademarks as collateral.

In July 2012, we redeemed all of our outstanding 11.375% senior secured notes, which were scheduled to mature in July 2015. Redemption of the $105 million in notes resulted in a $9.1 million charge, comprised of a $6 million premium payment, and the write off of approximately $3.1 million of unamortized deferred financing costs, and unamortized bond discount. Redemption of the notes was funded through borrowings under our US revolving credit agreement, and cash on hand. As of July 28, 2012, we had $95.2 million of borrowings outstanding, and $95.1 million of unused availability under this credit agreement.

As we continue to make investments in our brands, capital expenditures for fiscal 2012, including $27.3 million incurred during the first half of fiscal 2012, are expected to be approximately $60 million. These expenditures consist primarily of costs associated with opening new retail stores in the US and Asia, information technology investments, retail store remodeling, and distribution center enhancements. For fiscal 2012, we affirmed our previously-issued guidance of adjusted earnings from continuing operations per diluted share in a range of $2.85 to $2.95, and net sales of $850 million to $865 million. I note that we were able to affirm our previously-issued guidance despite the increased impact of expenses associated with the Tommy Bahama International rollout, and the New York store. The earnings estimates for the year include a negative impact to operating income of approximately $14 million, compared to our early estimate of $12 million. The increase is primarily due to pre-opening expenses associated with the high-profile store in Hong Kong, the addition of a Senior Managing Director of International, and costs associated with the acquisition of Tommy Bahama's Australian license business. We've already incurred $5.9 million of the estimated $14 million during the first half of the year.

For the third quarter, ending on October 27, 2012, the Company anticipates net sales in a range from $175 million to $185 million, and adjusted earnings from continuing operations per diluted share of $0.18 to $0.23. With the seasonality of the Tommy Bahama and Lilly Pulitzer businesses, and their significance to our results, the third quarter is a small sales quarter. This, along with the fixed expense structure of our retail businesses results in a lower operating margin compared to other quarters. Our Board of Directors has approved a cash dividend of $0.15 per share. Oxford has paid dividends every quarter since it became publicly owned in 1960. Thanks for your attention, and now I'll turn the call back over to Hicks Lanier.

Thank you, Scott, thanks for your attention today, and I believe we are now ready to take your questions. Jamie?

(Operator Instructions)

Edward Yruma, KeyBanc Capital Markets.

Congratulations on a good quarter. You gave some interesting statistics around the growth of the women's business. We've noticed that you've increased the amount of square footage that women's has received in a number of stores. Can you talk about the difference in performance in the women's business when you've added incremental square footage and if that's been a meaningful lift to your results?

Ed, do you want to take that?

Sure, Ed, this is Terry, I'm glad you noticed. We have been, as our product has gotten better, which it has over the last few seasons and the last few years, we have started allocating a bit more floor space especially in some of the new stores that we are opening, and I can tell you that it is proportionately performing quite well. Even where we haven't increased the percentage of floor space, we are seeing increases, as well. So, it is not just the increases we're seeing in women's is because we've allocated more space to them, it is organic all the way through our women's business. So, it's coming from both, but in some of these stores we were just in one the other day, clearly we have a breadth of products right now than what we are able to show that in the stores. Clearly, the guest response to it. So it is coming from both angles.

Got you. And how should we think about the opportunity for the Tommy Bahama women's product in the wholesale channel other than just swim, which you guys seem to have a pretty wide distribution of?

We do have a very good distribution of swim and on the wholesale side in women's, it's, as we do most things, it's a crawl-walk-run. We're just starting to get some traction in wholesale sportswear for us, but we wanted to make sure that we got it right and we now do think we have it right, and then we will start pursuing the wholesale business, but it will come in due time.

Great and a final question on Lilly Pulitzer. I know you had talked about success with your recent store remodel or your store size. If we think about this longer-term, what do you think the right store opening cadence is for this business a couple years of out? Thank you.

Ed, growth is obviously important to us, and what we are looking for is sustained profitable growth. And as you know, Lilly has really exceeded our plans in the first two years that we've had it. We've been very pleased with the pace. Obviously, it is growing at more than 20% a year. That is a good pace.

They went from opening no stores for the several years before we bought them, and no stores during the first year we owned them, to having opened three this year and a fourth planned for later in the year. At present, we think is it at least three to four next year, but there are things going on where we are adding infrastructure within the business, to support retail store growth. And like Terry commented on the women's wholesale for Tommy, we're going to take a crawl-walk-run approach and make sure we don't get out in front of ourselves. But I think the store opening pace will pick up as the years go by. But I would still think in the three to four range for next year.

Got you, thanks so much.

And we will keep updating you quarterly on that.

Super.

Thank you. We'll take our next question from Eric Beder with Brean Murray.

Congratulations on a solid quarter. On Lilly Pulitzer, could you talk about, I know Lilly Pulitzer has done very well in direct sales, now entering fall where it is not as strong. What should be the -- you talked about white pants and other key items. What are the key items for fall asides from dresses for Lilly Pulitzer?

Well, I think the first delivery of fall for Lilly Pulitzer, Eric, they basically have three. 7/25, 8/25, 9/25. The 7/25, delivery was knit dresses which were in Lilly Pulitzer colors, but fall sort of Lilly Pulitzer colors. And if you go on the website you can see them, they are a lot of beautiful, what they called jewel-tone colors and I think they worked well for Lilly. So, that was the key look for 7/25. We have been pleased with the selling results. The 8/25 delivery, which has only been out there roughly at week not even a week yet. But it's printed tops and colored bottoms, and the initial selling on that has been quite good, and again, this is something that not too big of a stretch for Lilly, but at the same time, it is legitimate fall product.

And then the 9/25 delivery is party dresses that are in again fall fabrications and colors, but still consistent with the Lilly Pulitzer DNA. And I think that they -- everybody in the business feels very good about them. Third quarter is a very small quarter for us, Eric, and it's -- third and fourth are both small, that's probably going to continue to stay that way. But we are seeing some success in what we're doing there.

Okay, and then in Tommy Bahama women's, you said before about 30% of sales is women's, is that still about the number, or has it gone up a little bit?

It is hedging up but you're pretty on with the 30% number. But as I've always said, Eric, our goal is to get it to where it is half our business, and it's grown nicely over the last couple of years, and we're encouraged by the growth that we see. The good news about that is the reason we're having a hard time getting it over 30% is the men's business keeps growing, which is kind of a high-quality problem to have, but it makes a little bit harder to get to that. We're still charging that up.

Okay and how should we think, you took over the Australian distributorship, how should we think about the impact of that, I guess on this year and going forward?

I'll let Doug Wood handle that.

We're excited about Australia but it's a really small business today and underdeveloped. We are looking at next year of adding at least one store, possibly in Sydney, and to try and grow some more of the wholesale business there, but overall, it's still going to be very small business for us.

And I guess last question you -- did any of the Chicago, or any of yours store openings get pushed out from Q3 into Q4, or get pushed back in Q3, to make it a little bit more Q4-weighted than we in the Street had?

No, no, we were always -- these are the target dates we have had on these stores, at Chicago and New York. I think we would have loved to open New York in the end of October, but it's just -- we're not going to push it. These are stores that are very high-profile stores, and we need to get them right, and we will.

Okay great we look forward to visiting the New York store.

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

A question for everybody here. Let me start out with Lilly Pulitzer and piggybacking off of Eric's questions. In terms of the third quarter, is there a tick-up in SKU count? I have seen the new product and it strikes me as a tick-up but just wondering if there is an expansion there?

I don't think there is a material increase in SKUs for the third quarter. I can't state that with absolute certainty, but getting over-assorted is never a great thing in our business, and it is an area of focus for the management team at Lilly. They try to keep the line from getting too big and I don't believe we got a material uptick for Q3.

Having visited the fifth Lilly store, the personalization and the nice touches, the store looked fabulous. But then, I have to admit in my analyst mind, I'm thinking, good gracious, how much did this cost to build out? Is that the prototype going forward? There's a lot of individual hand-painted and personalized stuff going on in the store, more than I usually see in specialty stores.

That's a great question and what Robin is referring to for those of you who haven't been in one of the newer Lilly Pulitzer stores is that a lot of the decoration is individualized and tailored to the locality. So, the Atlanta store includes a lot of Georgia references, peach flowers and peaches and magnolias and magnolia blossoms, and that kind of thing. As two the cost of it, Robin, it turns out, it is actually fairly economical for us to do that. The build-out that we see in Lilly Pulitzer per square foot is currently -- is comparable to what we see in Tommy Bahama, where we are opening a lot of stores, and it is a very manageable expense. That painting is actually done by our print design team. They plan out what they are going to do, the creative team up in King of Prussia, and then they actually fly down for a couple of days, the week before store opening, and do that painting by hand. In fact, I believe you can go to the website right now and there should be a video on there of the decoration process at the new store that opened recently in Towson, Maryland. It is quite entertaining to watch, but also will help answer your questions, all the ladies you see in that video are part of the print team from Lilly.

Well, it's a beautiful store, and as you do with all your stores. Will you comment on the Lilly web crash and I think that your sale -- the first day it was down at least, seemed to be down half the day and I know you did extend the sale a day or so. Were you able to correct it so the next time that doesn't happen, or what can you tell us about that? Did you -- were you able to get what you wanted out of the sale, and how did it all shake out?

Basically, Robin, it was what our Chairman, Hicks Lanier, your good friend, would call a high-class problem. The demand so far exceeded our wildest expectations that even though we prepared for and tested for very high volume, it just went so far by our -- even our upside expectations, that it did crash for most of the first day, so we did extend the sale, and it absolutely blew away our expectations.

Okay.

Obviously, a little bit of frustration for customers, but fortunately, they were willing to stick with us, and we just did a massive amount of business.

Okay.

So, it was a very effective clearance channel for us, and at the same time, we think it created -- actually created a lot of excitement. As you know, the Lilly consumer tends to be quite enthusiastic about the brand, and its a party, basically.

Two more, if I may. We'll switch gears for a second. Ben Sherman, I just -- you are obviously coming up against some easing averaging at cost, but can we just hear also what you're thinking in terms of -- we all waited so long for some sort of a turn in his business. How are you feeling about the brand now? Is there anything to say coming out of some of the menswear shows there in Italy, or more recently, Magic that you can share with us on that division? And then, and then for Tommy, just relative to the Asian performance, and the on-again off-again slowdown that we continue to hear regarding Asia, any changes there in expectations?

Robin, I'll handle the first one about Ben Sherman, and then flip it over to Terry and Doug to talk about Tommy Bahama maybe. But with regard to Ben Sherman, I think Robin, as you know, we've been in this painful process of trying to reposition the brand upwards. I think we've had some success with that. It's been more difficult than we would have hoped. I think a lot of that has to do with the economic situation in the UK, which is by far our biggest market, and to a lesser degree in continental Europe. That said, coming out of the menswear shows, both the Pitti show in Italy and then the Las Vegas shows, as well as selling in the UK, we're in the middle of booking spring-summer 2013.

Where we are now, we project that we will have a nice increase versus spring-summer 2012, but we still have some work to be done before we have secured all the bookings. And then I think most importantly, we expect that, really two things, I think that the proportion of better product that we are booking versus the old legacy-type product will be much higher for this spring then last spring. So, we are making progress in the repositioning. And then the second thing is that the gross margins are in much better shape. In fact that even showed up some this quarter, although it -- you can't fully see it, but we started to see very meaningful improvement in gross margins there, where as you know, Ben Sherman probably got hit the hardest by some of the cost issues of any of our businesses, but they have started to recover nicely from at least that issue. Still plenty of challenges, but the gross margin picture is looking a lot better.

Robin, this is Terry, I'll answer your question on International. As you know, we've got two stores open in Macau which is, both stores are very encouraging, but the Macau store, we are in the Venetian in Macau is -- we're finding and we're learning in both of these stores, but primarily a mainland Chinese customer without a whole lot of marketing, the acceptance they've shown towards the brand is very encouraging, and the sizing that we have -- we've opened this with an international fit and it's being accepted very well. The Singapore store is on Orchard Road in the mall, and the mall is still under construction. They're going to have a grand opening in the next few weeks, so I think we will get a truer read on exactly what Singapore is going to look like but it's a mix, it's a mix of ex-pats and local Singapore people, and so we will see on that. But these two to stores that we've opened our basically both mall stores.

The next two Hong Kong on Wan Chai is a street location, and Tokyo is a street location with a bar and restaurant. So, we wanted to, in our initial international expansion, get as many diverse kinds of stores open, so that we could get a read on what the future is, and where we start the expansion, and how we go forward and open more stores over there. But I've got to tell you, everything that we plan to do, and everything we planned for these stores to do, they are doing, and we are very encouraged by what we're seeing. So, looking forward to continue to bring you up to speed on our international expansion.

Thank you for your time.

(Operator Instructions)

We'll go next to Susan Sansbury, with Miller Tabak.

I guess, keeping on the international or Asian theme, if the Australian -- well okay, why did you buy the Australian license, and if it's so small and maybe some of the valuation metrics or cash purchase price? Second question is, you just tired a Senior VP in charge of International, does he have a name can you tell us about his background a little bit? And then I am the third one.

Yes, Susan, this is Terry. His name is Raymond and the reason I didn't remember his name is I can't pronounce it. He is a Frenchman, de Malherbem, I think is the best, every time that I mention it, he says I don't quite have it right. He has been living in that market for 20-plus years. He comes from a very great background and a lot of different businesses, Ferragamo, he ran Ferragamo's Asian business, Lancel, he ran early in his career, Chanel in the cosmetic side early on in his career, so he was living in Shanghai and he has since relocated to Hong Kong because that's where were basically running business out of, but a highly-seasoned executive that is really going to help us in understanding that market. So we couldn't be happier about that. On the Australian question, I'll let Doug, Doug was heavily involved in the acquisition, and I'll Doug continue.

I don't want to say that we're not excited about it, and when I compare the size it really comes down to the materiality of how big of an impact to our sales. When you look at Australia as a market, the entire country, the market is about the size of Southern California. And you've got, today, we've got these four really small resort stores that -- our license opened up over the last five years. When we went to the license five years ago, we didn't have the infrastructure that we have now set up in Hong Kong to support an Asian store rollout. So, really, it became a situation where we see an opportunity in Australia, we think we can actually grow the market to be much bigger than what it is today. It is in the international, Australia is actually a US business in Australia, so there's a lot of good things that we can immediately get some economies of scale going there. So, it's a growth opportunity, it's actually a business we know and have already got some infrastructure. So, it just really made business sense, financial sense, but also branding sense.

And even though we said, this is Terry again, so even though we said the stores are small, they're absolutely beautiful. This partner we had over there really understood the brand and really opened very brand-appropriate stores and very brand-appropriate locations. So we've got a great history there, and an infrastructure and history that bodes well for the brand.

So does the partner and/or the management team, store teams stay with you, and just in terms of timing, was the license up, or was he running out of money or --?

We've actually -- we are still -- we've bought back the assets, we kept the people. The licensee is now my wholesale rep and is -- we actually have a presence in David Jones in Australia, and he has a relationship, there. Mainly a men's wholesale licensee and we are really undeveloped in women's swim, women's sportswear, we just see a lot of opportunity there, and it's a market that -- Australians travel, as a group. There's just a lot of good reasons why it made sense, and it allows us to now go into some markets that I don't know if the licensee really had the capital to really expand the brand the way they needed to.

Okay. We got the name -- I have two other questions, and I'll be really quick. I was in the Westchester Mall in White Plains, and noticed that you're about to open a store there, which I think is great. Can you just refresh me in terms of the Tommy Bahama and the store opening program for the balance of the year, and beyond Westchester, in the New York City metro region, what else is going to open?

We just opened this year, knowing that we were going to open New York, it seemed to make sense we've opened Garden State Mall, we've opened a store there, we've opened at King of Prussia, we've opened -- and these are all in Q2, Susan. Easton Town Center in Columbus Ohio, we opened a store in St. Louis in the Galleria, and we opened in the Houston Galleria in the quarter. For Westchester and the balance of the year will be Westchester, Chicago - Michigan Avenue, New York, and then Hong Kong. We are excited that this store and Westchester is a bit of a smaller build-out but it is still very ample for us to represent men's and women's appropriately, and we're very excited. We've looked at that mall for years. Couldn't find the right space, and we were able to take -- the mall divided up a couple of spaces there, if you saw that, you know who was in there, and they made room for us, and we think we're a natural fit for that center. We think it's going to be good. Having said -- all of the new stores, we're very encouraged with the new stores that we've opened this year. They've opened with very little marketing that we do in these towns to great success so were very happy about it and looking forward, we're looking at new stores every day. We are trying to look out for 2013 and 2014, but rather than just look for spaces to look for space, we're trying to make sure that we get the right space, because we're in this for the long-term.

Okay some other a Short Hills is on the agenda, or are you still? That's on the wish list.

We've been wishing for 20 years to get in Short Hills, and in the five years I've been here, we've had two spaces and we have been able to put it together, but we need a bigger space in Short Hills and the spaces that we have been offered in Short Hills just haven't been -- that's one mall where we think we can be very successful, but we needed space to really show women's and accessories and men's to do the whole thing there. We will get there, we are constantly talking to those people about getting in Short Hills. That's the natural for us.

Okay. I know people are waiting. Just one final question on Lilly Pulitzer, I may be wrong, but I think comps slowed down in the second quarter from the first. Was that a comparison issue, an assortment issue, or a traffic issue? Or am I totally wrong?

The comp increase was smaller in the second than in the first. Are you talking about the comp stores or the total sales?

Right. I'm talking about comps but also total sales, same comment.

I don't think they were materially lower, Susan, the business has been extremely strong, as we said, across all channels. It's wholesale, retail and --.

My expectations may have been too high.

Yes, and you may be right, maybe retail, but bricks and mortars were slightly higher in the first quarter of the comps, but they were still quite robust in the second quarter, and e-com, which is part of the total direct-to-consumer has been very strong all year, and I think we are very pleased with the results.

And the new store openings have wildly exceeded our plan.

Absolutely, excellent point.

All right, best of luck for the upcoming, well for the back half, and great job. Talk to you later.

We'll take our next question from Mike Richardson with Sidoti.

Actually, most of my questions have been answered, but I do have one quick one on Ben Sherman. You talked about seeing some gross margin improvement there, and I apologize if I missed this, but I'm just wondering how you're thinking about sales there for the year. I think on the last call you had mentioned you were playing them down mid-single digits.

I think that's right they will be somewhere down just slightly couple of points I think for the year, Mike. And that's the net impact of adding slightly less good distribution than the bad distribution that we are subtracting. It is a bit of a give-and-take, where you're trying to move up the ladder, and you're moving away from some less desirable distribution at the same time you're trying to add better distribution. So, we're actually growing in some areas, including direct to consumer, where we are growing above bricks and mortar stores, and in e-commerce, which we only had for a couple of months last year, will have for the full-year this year. And then we're growing in some better wholesale distribution, but shrinking in some less desirable wholesale distribution. So you at all that up and the net is probably slightly down for the year.

Okay, that's helpful. Thank you very much.

At this time, I'm showing no further questions. I'd like to turn the call back to management for any additional or closing remarks.

Thank you, Jamie. In closing, I would just like to say that our investment in our brands is significant, planned, and purposeful. We are confident that we will execute our long-term strategy effectively, and as a result, deliver meaningful rewards to our shareholders. Thanks for your time and interest today, and we look forward to our next call.

And again, that does conclude today's conference. We do thank you for your participation.