FinanceLooker

Excrept from filing document 2024-02-03

As of July 28 2023 which is the last business day of the registrant s most recently completed second fiscal quarter the aggregate market value of the voting stock held by non affiliates of the registrant based upon the closing price for the common stock on the New York Stock Exchange on that date was 1 132 153 021 For purposes of this calculation only shares of voting stock directly and indirectly attributable to executive officers directors and holders of 10 or more of the registrant s voting stock based on Schedule 13G filings made as of or prior to July 28 2023 are excluded This determination of affiliate status and the calculation of the shares held by any such person are not necessarily conclusive determinations for other purposes
Our SEC filings and public announcements may include forward looking statements about future events Generally the words believe expect intend estimate anticipate project will and similar expressions identify forward looking statements which generally are not historical in nature We intend for all forward looking statements contained herein in our press releases or on our website and all subsequent written and oral forward looking statements attributable to us or persons acting on our behalf to be covered by the safe harbor provisions for forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995 Such statements are subject to a number of risks uncertainties and assumptions including without limitation demand for our products which may be impacted by macroeconomic factors that may impact consumer discretionary spending and pricing levels for apparel and related products many of which may be impacted by inflationary pressures elevated interest rates concerns about the stability of the banking industry or general economic uncertainty and the effectiveness of measures to mitigate the impact of these factors competitive conditions and or evolving consumer shopping patterns acquisition activities such as the acquisition of Johnny Was including our ability to integrate key functions recognize anticipated synergies and minimize related disruptions or distractions to our business as a result of these activities supply chain disruptions costs and availability of labor and freight deliveries including our ability to appropriately staff our retail stores and food and beverage locations costs of products as well as the raw materials used in those products as well as our ability to pass along price increases to consumers energy costs our ability to respond to rapidly changing consumer expectations unseasonal or extreme weather conditions or natural disasters including the ultimate impact of the recent wildfires on the island of Maui the ability of business partners including suppliers vendors wholesale customers licensees logistics providers and landlords to meet their obligations to us and or continue our business relationship to the same degree as they have historically retention of and disciplined execution by key management and other critical personnel cybersecurity breaches and ransomware attacks as well as our and our third party vendors ability to properly collect use manage and secure business consumer and employee data and maintain continuity of our information technology systems the effectiveness of our advertising initiatives in defining launching and communicating brand relevant customer experiences the level of our indebtedness including the risks associated with heightened interest rates on the debt and the potential impact on our ability to operate and expand our business changes in international federal or state tax trade and other laws and regulations including the potential imposition of additional duties the timing of shipments requested by our wholesale customers fluctuations and volatility in global financial and or real estate markets the timing and cost of retail store and food and beverage location openings and remodels technology implementations and other capital expenditures the timing cost and successful implementation of changes to our distribution network pandemics or other public health crises expected outcomes of pending or potential litigation and regulatory actions the increased consumer employee and regulatory focus on corporate responsibility issues the regulation or prohibition of goods sourced or containing raw materials or components from certain regions and our ability to evidence compliance access to capital and or credit markets factors that could affect our consolidated effective tax rate the risk of impairment to goodwill and other intangible assets risks related to a shutdown of the US government and geopolitical risks including ongoing challenges between the United States and China and those related to the ongoing war in Ukraine the Israel Hamas war and the conflict in the Red Sea region Forward looking statements reflect our expectations at the time such forward looking statements are made based on information available at such time and are not guarantees of performance
Our business is subject to numerous risks The following summary highlights some of the risks you should consider with respect to our business and prospects This summary is not complete and the risks summarized below are not the only risks we face You should review and carefully consider the risks and uncertainties described in more detail in Part I Item 1A Risk Factors which includes a more complete discussion of the risks summarized below
Our business depends on our senior management and other key personnel and failure to successfully attract retain and implement succession of our senior management and key personnel or to attract develop and retain personnel to fulfill other critical functions may have an adverse effect on our operations and ability to execute our strategies
As used in this report unless the context requires otherwise our us or we means Oxford Industries Inc and its consolidated subsidiaries SG A means selling general and administrative expenses SEC means the United States Securities and Exchange Commission FASB means the Financial Accounting Standards Board ASC means the FASB Accounting Standards Codification GAAP means generally accepted accounting principles in the United
Our business strategy is to develop and market compelling lifestyle brands and products that evoke a strong emotional response from our target consumers We consider lifestyle brands to be those brands that have a clearly defined and targeted point of view inspired by an appealing lifestyle or attitude Furthermore we believe lifestyle brands that create an emotional connection can command greater loyalty and higher price points and create licensing opportunities We believe the attraction of a lifestyle brand depends on creating compelling product effectively communicating the respective lifestyle brand message and distributing products to consumers where and when they want them We believe the principal competitive factors in the apparel industry are the reputation value and image of brand names design of differentiated innovative or otherwise compelling product consumer preference price quality marketing including through rapidly shifting digital and social media vehicles product fulfillment capabilities and customer service Our ability to compete successfully in the apparel industry is dependent on our proficiency in foreseeing changes and trends in fashion and consumer preference and presenting appealing products for consumers Our design led commercially informed lifestyle brand operations strive to provide exciting differentiated fashion products each season as well as certain core products that consumers expect from us
To further strengthen each lifestyle brand s connections with consumers we directly communicate through digital and print media on a regular basis with our loyal consumers including the approximately 2 7 million who have transacted with us in the last year We believe our ability to effectively communicate the images lifestyle and products of our brands and create an emotional connection with consumers is critical to the success of our brands as evidenced by our advertising which engages our consumers by conveying the lifestyle of the brand
We believe the attraction of each of our lifestyle brands is a direct result of years of maintaining appropriate quality and design and appropriately restricting the distribution of our products We believe this approach to quality design distribution and communication has been critical in allowing us to achieve the current retail price points high gross margins and success for our brands
During Fiscal 2023 80 of our consolidated net sales were through our direct to consumer channels of distribution which consist of our brand specific full price retail stores e commerce websites and outlets as well as our Tommy Bahama food and beverage operations During Fiscal 2023 the breakdown of our consolidated net sales by direct to consumer channel was as follows e commerce of 538 million or 34 full price retail of 533 million or 34 food and beverage of 116 million or 7 and outlet operations of 73 million or 5 Our direct to consumer operations provide us with the opportunity to interact directly with our customers present to them a broad assortment of our current season products and immerse them in the theme of the lifestyle brand We believe that presenting our products in a digital or physical setting specifically designed to showcase the lifestyle on which the brands are based enhances the image of our brands
Our brand specific e commerce business continues to grow Our e commerce business is very profitable as we have a high gross margin on e commerce sales that allow us to absorb any incremental picking packing and freight expense associated with operating an e commerce business and still maintain a high profit margin on e commerce sales
Our 278 full price retail stores allow us the opportunity to carry a full line of current season merchandise including apparel accessories and other products all presented in an aspirational brand specific atmosphere We believe that our full price retail stores provide high visibility for our brands and products and allow us to stay close to the
preferences of our consumers Further we believe that our presentation of products and our strategy to operate the full price retail stores with limited in store promotional activities enhance the value and reputation of our lifestyle brands and in turn strengthen our business and relationships with key wholesale customers Approximately one half of our full price retail stores are located in warm weather resort or travel to destinations and states We believe there are still opportunities for new stores in both warmer and colder climates as we believe the more important consideration is whether the location attracts the affluent consumer that we are targeting
Additionally our Tommy Bahama brand operates 22 food and beverage locations including Marlin Bars and full service restaurants generally adjacent to a Tommy Bahama full price retail store These food and beverage locations provide us with the opportunity to immerse customers in the ultimate Tommy Bahama experience as well as attract new customers to the Tommy Bahama brand Both Tommy Bahama and Johnny Was operate brand specific outlet stores which are typically utilized for end of season inventory clearance
The remaining 20 of our net sales were generated through our wholesale distribution channels which complement our direct to consumer operations provide access to a larger base of consumers and generate high operating margins given the lower fixed costs associated with these operations Our wholesale operations consist of sales of products bearing the trademarks of our lifestyle brands to various specialty stores better department stores multi branded e commerce retailers and other retailers
At the same time as we seek to maintain the integrity and continued success of our lifestyle brands by limiting promotional activity in our full price retail stores and e commerce websites we intend to maintain controlled distribution with careful selection of the retailers through which we sell our products and generally target wholesale customers that follow a limited promotions approach We continue to value our long standing relationships with our wholesale customers and are committed to working with them to enhance the success of our lifestyle brands within their stores
We operate in a highly competitive apparel market that continues to evolve rapidly with the expanding application of technology to fashion retail The application of technology including the internet and mobile devices to fashion retail provides consumers increasing access to multiple responsive distribution platforms and an unprecedented ability to communicate directly with brands and retailers and capabilities by some competitors to offer same day or next day delivery of products to online consumers As a result consumers have more information and greater control over information they receive as well as broader faster and cheaper access to goods than ever before This is revolutionizing the way that consumers shop for fashion and other goods which continues to be evidenced by weakness and store closures for certain department stores and mall based retailers uncertain consumer retail traffic patterns a more promotional retail environment expansion of off price and discount retailers and a shift from bricks and mortar to internet purchasing
This competitive and evolving environment requires that brands and retailers approach their operations including marketing and advertising very differently than they have historically and may result in increased operating costs and investments to generate growth or even maintain existing sales levels While the competition and evolution present significant risks especially for traditional retailers who fail or are unable to adapt we believe it also presents a tremendous opportunity for brands and retailers to capitalize on the changing consumer environment
No single apparel firm or small group of apparel firms dominates the apparel industry and our competitors vary by operating group and distribution channel The apparel industry is cyclical and very dependent on the overall level and focus of discretionary consumer spending which changes as consumer preferences and regional domestic and international economic conditions change Also in recent years consumers have chosen to spend less of their discretionary spending on certain product categories including apparel while spending more on services and other product categories
Further negative economic conditions often have a longer and more severe impact on the apparel industry than on other industries due in part to apparel purchases often being more of a discretionary purchase The current macroenvironment with heightened concerns about continued inflation a global economic recession geopolitical issues the availability and cost of credit and elevated interest rates for prolonged periods is creating a complex and challenging retail environment which may impact our businesses and exacerbate some of the inherent challenges to our operations
The evolution in the fashion retail industry presents significant risks especially for traditional retailers and others who fail or are unable to adapt but we believe it also presents a tremendous opportunity for brands and retailers to capitalize on the changing consumer environment We believe our lifestyle brands have true competitive advantages in this new retailing paradigm and we continue to invest in and leverage technology to serve our consumers when and where they want to be served We continue to believe that our lifestyle brands with their strong emotional connections with consumers are well suited to succeed and thrive in the long term while managing the various challenges facing our industry Further each of our brands aims to further enhance its customer focused dynamic thriving digitally driven mobile centered cross channel personalized and seamless shopping experience that recognizes and serves customers in their brand discovery and purchasing habits of the future
We believe there are ample opportunities to expand the reach of each of our lifestyle brands in the future including the opening of new direct to consumer locations e commerce growth and wholesale operations expansion In order to expand the reach and maximize the success of each of our brands we believe we must continue to invest in the lifestyle brands to take advantage of their long term growth opportunities We expect Fiscal 2024 will be a particularly heavy year for investment in capital expenditures and expect such investments to primarily be associated with a multi year project to build a new distribution center in the Southeastern United States to ensure best in class direct to consumer throughput capabilities for our brands direct to consumer location build outs for new relocated or remodeled locations technology and related enhancements to support our direct to consumer operations and administrative office expenditures In addition to our capital investments we will continue to invest in our SG A expense infrastructure including people technology advertising and other resources While we believe that our investments will generate long term benefits the investments are likely to have a short term negative impact on our operating margin as it will take some time for the anticipated sales growth to absorb the incremental costs of these expenditures
While we believe we have significant opportunities to appropriately deploy our capital and resources in our existing lifestyle brands we will continue to evaluate opportunities to add additional lifestyle brands both large and small to our portfolio if we identify appropriate targets that meet our investment criteria and or take strategic measures to return capital to our shareholders as and when circumstances merit
We identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance Our operating group structure reflects a brand focused management approach emphasizing operational coordination and resource allocation across each brand s direct to consumer wholesale and licensing operations as applicable Subsequent to our acquisition of Johnny Was our business is organized as our Tommy Bahama Lilly Pulitzer Johnny Was and Emerging Brands operating groups Operating results for periods prior to Fiscal 2022 also include the Lanier Apparel operating group which we exited in Fiscal 2021 For additional information about each of our reportable operating groups as well as Corporate and Other see Part II Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations and Note 2 of our consolidated financial statements each included in this report The table below presents certain financial information about each of our operating groups as well as Corporate and Other in thousands
Tommy Bahama designs sources markets and distributes men s and women s sportswear and related products Tommy Bahama s typical consumer is older than 45 years old has a household annual income in excess of 100 000 lives in or travels to warm weather and resort locations and embraces a relaxed and casual approach to daily living Tommy Bahama products can be found in our Tommy Bahama stores and on our Tommy Bahama e commerce website tommybahama com as well as at better department stores independent specialty stores and multi branded e commerce retailers We also operate Tommy Bahama food and beverage locations and license the Tommy Bahama name for various product categories During Fiscal 2023 96 of Tommy Bahama s sales were in the United States with the remaining sales in Australia and Canada
In Fiscal 2023 we increased Tommy Bahama s sales by 2 to 899 million from 880 million in Fiscal 2022 Operating income decreased by 7 to 161 million or 17 9 of sales compared to 173 million or 19 6 of sales in Fiscal 2022 resulting primarily from our SG A investments during Fiscal 2023 The operating income achieved in Fiscal 2023 and Fiscal 2022 is considerably higher than the 7 9 operating margin on 677 million of net sales generated in the last pre pandemic year of Fiscal 2019 The significant improvement in operating margin reflects the results of important initiatives for us in recent years to increase the profitability of the Tommy Bahama operating group Maintaining the significantly higher post pandemic operating margin levels continues to be a focus area for the long term prospects of the Tommy Bahama business
A key component of our Tommy Bahama strategy is to operate retail stores e commerce websites and food and beverage concepts which we believe permits us to develop and build brand awareness by presenting our products in a setting specifically designed to showcase the aspirational lifestyle on which the products are based Our Tommy Bahama direct to consumer channels which consist of full price retail store e commerce food and beverage and outlet store operations in the aggregate represented 83 of Tommy Bahama s net sales in Fiscal 2023 Full price retail store e commerce food and beverage and outlet store net sales accounted for 37 25 13 and 8 respectively of Tommy Bahama s net sales in Fiscal 2023
Our Tommy Bahama e commerce business which generated 224 million of net sales in Fiscal 2023 has grown significantly over the last few years including a 5 increase in net sales compared to Fiscal 2022 Our Tommy Bahama websites including the tommybahama com website allow consumers to buy Tommy Bahama products directly from us via the internet These websites also enable us to increase our database of consumer contacts which allows us to communicate directly and frequently with consenting consumers As we reach more customers in the future we anticipate that our e commerce distribution channel for Tommy Bahama will continue to grow at a faster pace than our retail store or wholesale operations
Our direct to consumer strategy for the Tommy Bahama brand also includes locating and operating full price retail stores in lifestyle shopping centers resort destinations brand appropriate street locations and upscale malls Generally we seek to locate our full price retail stores in shopping areas and malls that have high profile or upscale consumer brand adjacencies As of February 3 2024 the majority of our Tommy Bahama full price retail stores were in street front locations or lifestyle centers with the remainder primarily in regional indoor malls with a number of those regional indoor locations in resort travel destinations We believe that we have opportunities for continued sales growth for Tommy Bahama particularly in our women s business which represented 36 and 34 of sales in our direct to consumer operations in Fiscal 2023 and Fiscal 2022 respectively with women s swim representing about one third of the women s business For Tommy Bahama s domestic full price retail stores and retail food and beverage locations operating for the full Fiscal 2023 year sales per gross square foot excluding food and beverage sales and food and beverage space were approximately 815 compared to approximately 790 in Fiscal 2022
As of February 3 2024 we operated 22 Tommy Bahama food and beverage locations including 13 restaurants and nine Marlin Bar locations generally adjacent to a Tommy Bahama full price retail store location These retail food and beverage locations which generated over 25 of Tommy Bahama s net sales in Fiscal 2023 provide us with the opportunity to immerse customers in the ultimate Tommy Bahama experience We do not anticipate that the majority of our full price retail locations will have an adjacent food and beverage location however we have determined that an adjacent food and beverage location can further enhance the image or exposure of the brand in select high profile brand appropriate locations The net sales per square foot in our domestic full price retail stores that are adjacent to a food and beverage location have historically been approximately twice the sales per square foot of our other domestic full price retail stores We believe that the customer immersing themselves into the Tommy Bahama lifestyle by having a meal or a drink at the Tommy Bahama food and beverage location and visiting the adjacent full price retail store may entice the customer to purchase additional Tommy Bahama merchandise and potentially provide a memorable consumer experience that further enhances the relationship between Tommy Bahama and the consumer The Marlin Bar concept like our traditional restaurant locations is adjacent to one of our full price retail store locations and serves food and beverages but in a smaller space and with food options more focused on fast yet upscale casual dining with small plate offerings rather than entrees We believe that the smaller footprint reduced labor requirements and lower required capital expenditure of the Marlin Bar concept provides us with the long term potential for opening additional retail food and beverage locations that are more in line with evolving customer trends toward fast casual dining particularly with younger consumers
Typically at the end of the summer and holiday season Tommy Bahama will conduct sales both in store and online to move end of season product Utilizing Tommy Bahama s Enterprise Order Management EOM system many online orders will be fulfilled from retail stores greatly reducing the amount of goods that ultimately get transferred from full price retail stores to outlet stores Tommy Bahama utilizes its outlet stores which generated 8 of total Tommy Bahama sales in Fiscal 2023 and sales to off price retailers to sell the remaining end of season or excess inventory Our Tommy Bahama outlet stores are generally located in outlet shopping centers that include other upscale retailers and serve
an important role in overall inventory management by often allowing us to sell discontinued and out of season products at better prices than are otherwise available from outside parties We believe that this approach has helped us protect the integrity of the Tommy Bahama brand by allowing our full price retail stores to limit promotional activity while controlling the distribution of discontinued and out of season product To supplement the clearance items sold in Tommy Bahama outlets and offer a more comprehensive selection of products and sizes we merchandise our Tommy Bahama outlets with certain made for products Currently we operate one outlet store for approximately every four full price retail stores
During Fiscal 2023 Florida California Hawaii and Texas represented 34 16 12 and 8 respectively of our Tommy Bahama direct to consumer retail and retail food and beverage location sales Including e commerce sales during Fiscal 2023 Florida California Hawaii and Texas represented 28 15 9 and 8 respectively of total Tommy Bahama direct to consumer sales
In future periods we anticipate that many of our new Tommy Bahama store openings will be Marlin Bar locations that are either new locations or conversions of existing full price retail stores Currently we have five Marlin Bar openings scheduled for Fiscal 2024 including the conversion of Tommy Bahama full price retail locations in San Antonio Texas Charlotte North Carolina and King of Prussia Pennsylvania as well as new locations in Sarasota Florida and Oklahoma City Oklahoma We also have other locations in the pipeline for openings in Fiscal 2025 and beyond and anticipate opening at least three Marlin Bar locations in Fiscal 2025 subject to lease negotiation construction timing and other factors We continue to look for other appropriate locations for full price retail stores and Marlin Bars In addition to the planned Marlin Bars in Fiscal 2024 we are also targeting three new full price locations and three full price retail store relocations We believe that in Fiscal 2024 we may close a limited number of locations including certain outlets and full price retail locations
The construction and or relocation of retail stores requires a greater amount of initial capital investment than wholesale operations as well as greater operating costs In addition to new store openings we also incur capital expenditure costs related to remodels or expansions of existing stores particularly when we renew or extend a lease beyond the original lease term or otherwise determine that a remodel of a store is appropriate The cost of a Tommy Bahama Marlin Bar is significantly more than the cost of a full price retail store and can vary significantly depending on a variety of factors The cost to build out a Marlin Bar location averages 4 million and future locations may be more or less expensive than that amount For most of our full price retail stores and our Marlin Bar locations the landlord often provides certain incentives to fund a portion of our capital expenditures
To complement our direct to consumer operations and have access to a larger group of consumers we maintain a wholesale business for Tommy Bahama Tommy Bahama s wholesale customers include better department stores specialty stores and multi brand e commerce retailers that generally follow a retail model approach with limited discounting We value our long standing relationships with our wholesale customers and are committed to working with them to enhance the success of the Tommy Bahama brand within their stores
With its wide distribution currently we believe that domestic sales growth in our men s apparel wholesale business may be somewhat limited in the long term However we believe that we may have opportunities for wholesale sales increases for our Tommy Bahama women s business in the future with its appeal evidenced by its performance in our full price retail stores and e commerce websites Wholesale sales for Tommy Bahama accounted for 17 of Tommy Bahama s net sales in Fiscal 2023 Approximately 10 of Tommy Bahama s net sales reflects sales to major department stores with our remaining wholesale sales primarily to specialty stores During Fiscal 2023 12 of Tommy Bahama s net sales were to Tommy Bahama s 10 largest wholesale customers with its largest customer representing less than 5 of Tommy Bahama s net sales
In Fiscal 2022 Tommy Bahama entered into a licensing arrangement for the first Tommy Bahama resort Pursuant to the licensing agreement the Miramonte Resort Spa in Indian Wells California was converted into the Tommy Bahama Miramonte Resort Spa with a successful relaunch in the Third Quarter of Fiscal 2023 Tommy Bahama will earn royalty income calculated as a percentage of revenues associated with the resort The property is managed and operated by a national commercial and hospitality real estate company with considerable experience in premier resort development and operations
Lilly Pulitzer designs sources markets and distributes upscale collections of women s and girl s dresses sportswear and related products The Lilly Pulitzer brand was originally created in the late 1950s by Lilly Pulitzer and is an affluent brand with a heritage and aesthetic based on the Palm Beach resort lifestyle The brand is somewhat unique among women s brands in that it has demonstrated multi generational appeal including among young women in college or recently graduated from college young mothers with their daughters and women who are not tied to the academic calendar The brand s 65th anniversary in Fiscal 2024 sets the stage for continued investment in brand enhancement that is the culmination of a multi year initiative of modernizing the brand Enhancements in Fiscal 2024 will include a visual refresh of the brand across retail store locations marketing packaging and merchandising
Lilly Pulitzer products can be found on our Lilly Pulitzer website lillypulitzer com in our owned Lilly Pulitzer stores and in Lilly Pulitzer Signature Stores which are described below as well as in independent specialty stores and better department stores During Fiscal 2023 38 35 and 14 of Lilly Pulitzer s net sales were for women s dresses sportswear and Luxletic athleisure products respectively with the remaining sales consisting of Lilly Pulitzer accessories including scarves bags jewelry and belts children s apparel swim footwear and licensed products
Lilly Pulitzer s direct to consumer distribution channel which consists of e commerce operations and full price retail stores represented 84 of Lilly Pulitzer s net sales in Fiscal 2023 A key element of our Lilly Pulitzer strategy is the lillypulitzer com website which generated 175 million or 51 of Lilly Pulitzer s net sales in Fiscal 2023 Another key component of our Lilly Pulitzer direct to consumer strategy is to operate our own Lilly Pulitzer stores which represented 33 of Lilly Pulitzer s net sales in Fiscal 2023
The Lilly Pulitzer e commerce business has experienced double digit percentage growth for many years and we anticipate that the net sales growth of the e commerce business will remain strong in the future We utilize the Lilly Pulitzer website as an effective means of liquidating discontinued or out of season inventory in a brand appropriate manner and at gross margins in excess of 40 via e commerce flash clearance sales These sales create a significant amount of excitement with loyal Lilly Pulitzer consumers who are looking for an opportunity to purchase Lilly Pulitzer products at a discounted price and are also important in attracting new consumers to the Lilly Pulitzer brand These e commerce flash clearance sales typically run for two to three days during end of season clearance periods allowing the Lilly Pulitzer website to generally remain full price for the remainder of the year During Fiscal 2023 35 of Lilly Pulitzer s e commerce sales or 18 of Lilly Pulitzer s net sales were e commerce flash clearance sales
Our full price retail store strategy for the Lilly Pulitzer brand includes operating full price retail stores in higher end lifestyle shopping centers and malls resort destinations and brand appropriate street locations As of February 3 2024 about 40 of our Lilly Pulitzer full price stores were located in outdoor regional lifestyle centers and approximately one quarter of our Lilly Pulitzer stores were located in indoor regional malls with the remaining locations in resort or street locations In certain seasonal locations such as Nantucket Massachusetts and Watch Hill Rhode Island our stores are only open during the resort season Additionally we may open temporary pop up stores in certain locations
Lilly Pulitzer s full price retail store sales per gross square foot for Fiscal 2023 were approximately 737 for the full price retail stores which were open the full Fiscal 2023 year as compared to 765 in Fiscal 2022 The table below provides certain information regarding Lilly Pulitzer direct to consumer locations as of February 3 2024
Currently we expect to open at least five new full price retail stores in Fiscal 2024 with the anticipated new stores in Florida Rhode Island Massachusetts Georgia and Arizona We are in the process of identifying sites or negotiating leases for additional locations We continue to look for other appropriate locations and anticipate returning to a pace of opening as many as five to six locations per year in the future At the same time we may relocate or close a limited number of locations at lease expiration or sooner based on store performance The construction or relocation of retail stores requires a greater amount of initial capital investment than wholesale operations as well as greater operating costs In addition to new store openings we also incur capital expenditure costs related to remodels or expansions of existing stores particularly when we renew or extend a lease beyond the original lease term or otherwise determine that a remodel of a store is appropriate
To complement our direct to consumer operations and have access to a larger group of consumers we maintain wholesale operations for Lilly Pulitzer These wholesale operations which represented 16 of Lilly Pulitzer s net sales in Fiscal 2023 are primarily with Signature Stores independent specialty stores better department stores and multi branded e commerce retailers that generally follow a retail model approach with limited discounting During Fiscal 2023 approximately one quarter of Lilly Pulitzer s wholesale sales were to Lilly Pulitzer s Signature Stores approximately one fifth of Lilly Pulitzer s wholesale sales were to specialty stores and less than one fifth of Lilly Pulitzer s wholesale sales or less than 5 of Lilly Pulitzer s net sales were to department stores The remaining wholesale sales were primarily to off price retailers and national accounts including on line retailers Lilly Pulitzer s net sales to its 10 largest wholesale customers represented 9 of Lilly Pulitzer s net sales in Fiscal 2023 with its largest customer representing less than 5 of Lilly Pulitzer s net sales
An important part of Lilly Pulitzer s wholesale distribution is sales to Signature Stores For these stores we enter into agreements whereby we grant the other party the right to independently operate one or more stores as a Lilly Pulitzer Signature Store subject to certain conditions including designating substantially all floor space specifically for Lilly Pulitzer products and adhering to certain trademark usage requirements We sell products to these Lilly Pulitzer Signature Stores on a wholesale basis and do not receive royalty income associated with these sales As of February 3 2024 there were 46 Lilly Pulitzer Signature Stores
In the Third Quarter of Fiscal 2022 we acquired the Johnny Was California lifestyle brand and related operations which includes the design sourcing marketing and distribution of collections of affordable luxury artisan inspired bohemian apparel accessories and home goods The Johnny Was brand was founded in 1987 and continues to transcend fashion trends with its beautifully crafted globally inspired products and demonstrates a unique ability to combine and mix elevated fabrics patterns bespoke prints and artisanal embroidery that distinguishes its product in the marketplace Johnny Was products can be found on the Johnny Was website johnnywas com and in our full price retail stores as well as select department stores and specialty stores During Fiscal 2023 approximately 90 of the net sales of Johnny Was were for women s apparel with the remaining sales consisting of Johnny Was accessories including home products shoes scarves handbags and jewelry
The Johnny Was direct to consumer distribution channel which consists of e commerce operations and the Johnny Was retail stores represented 79 of the Johnny Was net sales in Fiscal 2023 A key element of the Johnny Was strategy is the johnnywas com website which generated 84 million of net sales or 41 of the net sales of Johnny Was in Fiscal 2023 Another key component of our Johnny Was direct to consumer strategy is to operate our own Johnny Was stores which represented 38 of the net sales of Johnny Was in Fiscal 2023
Our full price retail store strategy for the Johnny Was brand includes operating full price retail stores in higher end lifestyle shopping centers and malls resort destinations and brand appropriate street locations As of February 3 2024 about 75 of the Johnny Was full price stores were located in lifestyle centers open air shopping environments or street front locations with the remaining 25 of locations in indoor regional malls Full price retail store sales per gross square foot for Johnny Was for Fiscal 2023 were approximately 664 Full price retail store sales per gross square foot for Johnny Was were approximately 740 for the full price retail stores which were open the full 12 months ended January 28 2023
Our Johnny Was outlet stores are generally located in outlet shopping centers that include other upscale retailers and serve an important role in overall inventory management by often allowing us to sell discontinued and out of season products at better prices than are otherwise available from outside parties
During Fiscal 2023 28 14 and 13 of the retail store sales of Johnny Was were in stores located in California Texas and Florida respectively During Fiscal 2023 including e commerce sales California Texas and Florida represented 23 14 and 11 respectively of our total Johnny Was direct to consumer sales
Currently we expect to open approximately 10 new full price retail stores in Fiscal 2024 During Fiscal 2024 we anticipate opening full price retail stores across the country including stores in California Florida Idaho Missouri Massachusetts and New York We believe that in Fiscal 2024 we may relocate or close a limited number of locations at lease expiration or sooner based on store performance The construction or relocation of retail stores requires a greater amount of initial capital investment than wholesale operations as well as greater ongoing operating costs The cost to build out a Johnny Was retail store is typically less than 0 5 million In addition to new store openings we also incur capital expenditure costs related to remodels or expansions of existing stores particularly when we renew or extend a lease beyond the original lease term or otherwise determine that a remodel of a store is appropriate
To complement our direct to consumer operations and have access to a larger group of consumers we maintain wholesale operations for Johnny Was These wholesale operations are primarily with better independent specialty and department stores and multi branded e commerce retailers that generally follow a retail model approach with limited discounting During Fiscal 2023 21 of the net sales of Johnny Was were sales to wholesale customers and approximately 40 and 35 of the wholesale sales of Johnny Was were to specialty stores and department stores respectively The remaining wholesale sales were primarily to off price retailers and retailers in countries outside of the United States Net sales to the 10 largest wholesale customers of Johnny Was represented 10 of the net sales of Johnny Was during Fiscal 2023 with its largest customer representing less than 5 of Johnny Was net sales
Emerging Brands which was organized in Fiscal 2022 consists of the operations of our smaller earlier stage Southern Tide TBBC Duck Head and Jack Rogers brands Investments in smaller lifestyle brands that are unconsolidated entities are included within Emerging Brands Each of the brands included in Emerging Brands designs sources markets and distributes apparel and related products bearing its respective trademarks and is supported by Oxford s emerging brands team that provides certain support functions to the smaller brands including marketing and advertising execution analysis and other functions The shared resources provide for operating efficiencies and enhanced knowledge sharing across the brands We acquired Southern Tide in 2016 Duck Head in 2016 TBBC in 2017 and Jack Rogers a footwear brand in 2023
The brands distribute their products on their brand specific e commerce websites southerntide com thebeaufortbonnetcompany com duckhead com and jackrogersusa com as well as wholesale channels of distribution for each brand that may include independent specialty retailers better department stores and brand specific Signature Stores During Fiscal 2023 the majority of the net sales of both Southern Tide and Duck Head were wholesale sales while the majority of TBBC and Jack Rogers sales were direct to consumer sales
Also a key component of our Southern Tide and TBBC growth strategy is to expand our direct to consumer retail store operations after both brands opened their first retail store locations in recent years The table below provides certain information regarding the Emerging Brands direct to consumer locations as of February 3 2024
We opened a total of 13 new Southern Tide stores during Fiscal 2023 including the acquisition of three former Southern Tide signature stores located in Massachusetts during the First Quarter of Fiscal 2023 and three additional former signature stores in the Fourth Quarter of Fiscal 2023 two of which are in South Carolina and one in Georgia We also opened a total of seven stores in Florida South Carolina North Carolina and Texas During Fiscal 2024 we expect to open approximately 10 additional Southern Tide stores with stores in Florida Texas Alabama Virginia and New York Additionally for TBBC we anticipate opening at least one new store during Fiscal 2024 We continue to look at additional opportunities for new full price store locations for both Southern Tide and TBBC The operation of full price retail stores requires a greater amount of initial capital investment than wholesale operations as well as greater ongoing operating costs We anticipate that most future retail store openings for Southern Tide and TBBC will generally be approximately 1 500 to 2 000 square feet however the determination of actual size of the store will depend on a variety of criteria including the potential opportunities that become available
In Fiscal 2021 we exited our Lanier Apparel business which had been focused on moderately priced tailored clothing and related products This decision aligns with our stated business strategy of developing and marketing compelling lifestyle brands It also took into consideration the increased macroeconomic challenges faced by the Lanier Apparel business many of which were magnified by the COVID 19 pandemic The operating results of the Lanier Apparel business in Fiscal 2021 largely consisted of activities associated with the wind down of operations following our Fiscal 2020 decision to exit the business Refer to Note 12 and Note 2 of our consolidated financial statements included in this report for additional information about the Lanier Apparel exit and Fiscal 2021 operating results
Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices substantially all financing activities the elimination of inter segment sales any other items that are not allocated to the operating groups including LIFO inventory accounting adjustments as our LIFO pool does not correspond to our operating group definitions the operations of our Lyons Georgia distribution center our Oxford America business which generated net sales of 1 million and was exited in Fiscal 2022 and our initial 8 million minority ownership interest in a property in Indian Wells California that was converted and rebranded in Fiscal 2023 as the Tommy Bahama Miramonte Resort Spa
We own trademarks many of which are very important and valuable to our business including Tommy Bahama Lilly Pulitzer Johnny Was Southern Tide The Beaufort Bonnet Company Duck Head and Jack Rogers Generally our trademarks are subject to registrations and pending applications throughout the world for use on apparel and in some cases apparel related products accessories and home furnishings as well as in connection with retail services We continue to evaluate our worldwide usage and registration of our trademarks In general trademarks remain valid and enforceable as long as the trademarks are used in connection with our products and services in the relevant jurisdiction and the required registration renewals are filed Important factors relating to risks associated with our trademarks include but are not limited to those described in Part I Item 1A Risk Factors
During Fiscal 2023 we incurred 105 million or 7 of net sales of advertising expense Advertising and marketing are an integral part of the long term strategy for our lifestyle brands and we therefore devote significant resources to these efforts Thus we believe that it is very important that our brands communicate regularly with consumers about product offerings or other brand events in order to maintain and strengthen connections with consumers Our advertising emphasizes the respective brand s image and lifestyle and attempts to engage individuals within the target consumer demographic and guide them on a regular basis to our e commerce websites direct to consumer locations or wholesale customers stores and websites in search of our products
We increasingly utilize digital marketing social media and email and continue to use traditional direct mail communications to interact with our consumers We vary our engagement tactics to elevate the consumer experience as we attract new consumers drive conversion build loyalty activate consumer advocacy and address the transformation of consumer shopping behaviors Our creative marketing teams design and produce imagery and content social media strategies and email and print campaigns designed to inspire the consumer and drive traffic to the brand We attempt to increase our brand awareness through a strategic emphasis on technology and the elevation of our digital presence which encompasses e commerce mobile e commerce digital media social media and influencer marketing In this environment where many people are digital first consumers we continue to enhance our approach to digital marketing and invest in analytical capabilities to promote a more personalized experience across our distribution channels At the same time we continue to innovate to better meet consumer online shopping preferences e g loyalty ratings and reviews and mobile phone applications and build brand equity The ongoing trend towards a digital first consumer provided a catalyst for accelerating the implementation of new direct to consumer business models and consumer engagement programs such as selling through social media
Marketing initiatives in our direct to consumer operations may include special event promotions including loyalty award card Flip Side Friends Family and gift with purchase events and a variety of public relations activities designed to create awareness of our brands and products drive traffic to our websites and stores convert new consumers and increase demand and loyalty Our various initiatives are effective in increasing online and in store traffic resulting in the proportion of our sales that occur during our promotional marketing initiatives such as Tommy Bahama s Friends Family events increasing in recent years which puts some downward pressure on our direct to consumer gross margins
Our marketing may also include sponsorships collaborations and co branding initiatives which may be for a particular cause or non profit organization that is expected to resonate with target consumers For certain of our wholesale customers we may also provide point of sale materials and signage to enhance the presentation of our products at their retail locations and or participate in cooperative advertising programs
We believe that one of the key competitive factors in the apparel industry is the design of differentiated innovative or otherwise compelling product that resonates with our target consumers Our ability to compete successfully in the apparel industry is dependent on our proficiency in foreseeing changes and trends in fashion and consumer preference and presenting appealing products for consumers Our design led commercially informed lifestyle brand operations strive to provide exciting differentiated products each season
Each of our lifestyle brands products are designed and developed by dedicated brand specific teams who focus on the target consumer for the respective brand The design process includes feedback from buyers consumers and sales agents along with market trend research Our apparel products generally incorporate fabrics made of cotton silk linen polyester cellulosic fibers leather and other natural and man made fibers or blends of two or more of these materials
We intend to maintain flexible diversified cost effective sourcing operations that provide high quality apparel and related products Our operating groups either internally using in house employees located in the United States and or Hong Kong or through the use of third party vendors or buying agents manage the production and sourcing of substantially all of our apparel and related products from non exclusive third party producers located in foreign countries
Although we place a high value on long term relationships with our suppliers of apparel and related products and have used many of our suppliers for a number of years we do not have long term contracts with our suppliers Instead we conduct business on an order by order basis Thus we compete with other companies for the production capacity of independent manufacturers We believe that this approach provides us with the greatest flexibility in identifying the appropriate manufacturers while considering quality cost timing of product delivery and other criteria During Fiscal 2023 we purchased our products from approximately 260 suppliers with a significant concentration of suppliers in Asia Our 10 largest suppliers provided approximately one third of our product purchases During Fiscal 2023 no individual third party manufacturer licensee or other supplier provided more than 10 of our product purchases in total We generally acquire products sold in our food and beverage operations from various third party domestic suppliers
During Fiscal 2023 approximately 41 and 23 of our apparel and related products acquired directly by us or via vendors or buying agents were from producers located in China and Vietnam respectively with no other country representing more than 10 of such purchases Johnny Was which was acquired in 2022 sources approximately 90 of its products from China While we have and will continue to work on diversifying our supplier base and reducing the concentration of manufacturing from China in the future the majority of fibers included in our apparel and other products currently originate in China even if the products are manufactured elsewhere
We purchase our apparel and related products from third party producers substantially all as package purchases of finished goods These products are manufactured to our design and fabric specifications with oversight by us or our third party vendors or buying agents The use of third party producers reduces the amount of capital investment required by us as operating manufacturing facilities requires a significant amount of capital investment labor and oversight We depend on third party producers to secure a sufficient supply of specified raw materials adequately finance the production of goods ordered and maintain sufficient manufacturing and shipping capacity We believe that purchasing substantially all of our products as package purchases allows us to reduce our working capital requirements as we are not required to purchase or finance the purchase of the raw materials or other production costs related to our apparel and related product purchases until we take ownership of the finished goods which typically occurs when the goods are shipped by the third party producers
As the manufacture and transportation of apparel and related products for our brands may take as many as six months for each season we typically make commitments months in advance of when products will arrive in our full price retail stores or our wholesale customers stores As our merchandising departments must estimate our requirements for finished goods purchases for our own full price retail stores and e commerce sites based on historical product demand data and other factors and as purchases for our wholesale accounts must be committed to prior to the receipt of all wholesale customer orders we carry the risk that we have purchased more inventory than will ultimately be desired or that we will not have purchased sufficient inventory to satisfy demand resulting in lost sales opportunities
We recognize that our business operations throughout the value chain impact people and the environment and believe that as a leading apparel company we have a responsibility to reduce those impacts Our Board is ultimately charged with overseeing the risks to our business on behalf of our shareholders and we believe that our Board s active involvement in oversight of environmental social and governance ESG initiatives affords us tremendous benefits We
We are committed to identifying and executing commercially viable corporate responsibility initiatives in furtherance of a safer more sustainable world To support this objective we organized a new Corporate Responsibility team at the end of Fiscal 2022 to efficiently manage environmental sustainability social responsibility and traceability across the enterprise Drawing on existing expertise from our Tommy Bahama initiatives the new function ensures a consistent approach to corporate responsibility across our brands The team reports to our General Counsel with input from our Executive Leadership Team and will focus in the immediate future on assessing corporate responsibility risks and opportunities establishing baseline metrics and objectives and collaborating with our brands on potential brand specific initiatives
As part of our commitment to source our products in a lawful ethical and socially responsible manner we have implemented a supplier corporate responsibility program applicable to vendors and producers from whom we purchase apparel and related products The program includes a comprehensive Supplier Code of Conduct that requires compliance with applicable laws as well as other international business and ethical standards including related human rights health safety working conditions environmental and other requirements We also require all vendors from whom we purchase goods to adhere to the United States Customs and Border Protection s Customs Trade Partnership Against Terrorism program including standards relating to facility procedural personnel and cargo security
We monitor compliance with our Supplier Code of Conduct and applicable laws and regulations through social assessments performed by credible third parties and require our suppliers to partner with us to remediate issues identified Social assessments of our tier 1 and strategic tier 2 producers are required annually or more frequently In the event we determine that a supplier cannot or will not remediate issues we will discontinue use of the supplier
We also continue to participate in various trade associations and organizations to drive industry wide collective action and ensure we remain informed about emerging laws risks opportunities and best practices We are an active member of the American Apparel Footwear Association AAFA and in 2023 we transitioned Tommy Bahama s membership in Cascale formerly the Sustainable Apparel Coalition to an enterprise wide membership to support each of our brands in their journeys toward more responsible production Additionally various combinations of our brands are members of the Textile Exchange Better Cotton and the Good Cashmere Standard by the Aid by Trade Foundation to further our adoption of preferred materials
Since our founding in 1942 we have prided ourselves on being model citizens for the communities in which we operate We focus our community initiatives on programs that can impact a broad set of constituents where we operate Our community partners include the United Way of Greater Atlanta the Woodruff Arts Center and Grady Hospital and each of our operating groups partners with organizations improving quality of life in the communities where our customers and employees live and work
In 2020 we announced the launch of the Oxford Educational Access Initiative to further our goal of reducing economic and racial inequality through access to education We believe that every child regardless of race or economic circumstance deserves the chance to learn and be successful Over the course of four years beginning in 2021 we have committed to fund an aggregate of 1 million to community organizations with innovative program models that address a broad spectrum of educational challenges that children in underserved communities face Each of our brands has selected recipient organizations that are working to address disparities in educational access and barriers to success for children in our local communities
We are exposed to certain risks as a result of our international operations as substantially all of our merchandise as well as the products purchased by our licensing partners is manufactured by foreign suppliers Products imported by us or imported by others and ultimately sold to us are subject to customs trade and other laws and regulations governing their entry into the United States and other countries where we sell our products including various federal state local and foreign laws and regulations that govern any of our activities that may have adverse environmental health and safety effects Noncompliance with these laws and regulations may result in significant monetary penalties
Substantially all of the merchandise we acquire is subject to certain duties which are assessed on the value of the imported product These amounts represent a component of the inventories we sell and are included in cost of goods sold in our consolidated statements of operations We paid total duties of 58 million on products imported into the United States directly by us in Fiscal 2023 with the average duty rate on those products of approximately 19 of the value of the imported product in Fiscal 2023 Duty rates vary depending on the type of garment fiber content and country of origin and are subject to change in future periods In addition while the World Trade Organization s member nations have eliminated quotas on apparel and textiles the United States and other countries into which we import our products are still allowed in certain circumstances to unilaterally impose anti dumping or countervailing duties in response to threats to their comparable domestic industries
Although we have not been materially inhibited from sourcing products from desired markets in the past we cannot assure that significant impediments will not arise in the future as we expand product offerings and enter into new markets In recent years the United States government has implemented additional duties on certain product categories across various industries It is possible that additional duty increases could occur in future years which could have a significant unfavorable impact on the apparel retail industry and our cost of goods sold operations net sales net earnings and cash flows Our management regularly monitors proposed regulatory changes and the existing regulatory environment including any impact on our operations or on our ability to import products As a result of these changes and increased costs of production in certain countries that unfavorably impact our cost of goods sold we continue to make changes in our supply chain including exiting certain factories and sourcing those products from a factory in a different foreign country
In addition apparel and other related products sold by us are subject to stringent and complex product performance and security and safety standards laws and other regulations These regulations relate principally to product labeling product content certification of product safety and importer security procedures We believe that we are in material compliance with those regulations Our licensed products and licensing partners are also generally subject to such regulations
We operate a number of distribution centers Our Auburn Washington King of Prussia Pennsylvania and Los Angeles California distribution centers serve our Tommy Bahama Lilly Pulitzer and Johnny Was operating groups respectively Additionally a third party distribution center in Los Angeles California provides distribution services for the Johnny Was e commerce operations Our Lyons Georgia distribution center provides primary distribution services for our smaller Southern Tide TBBC and Duck Head businesses as well as certain distribution services for our Lilly Pulitzer and Tommy Bahama businesses
In Fiscal 2023 we began a multi year Southeastern United States distribution center enhancement project in Lyons Georgia to build a new facility to ensure best in class direct to consumer throughput capabilities for our brands The new facility will provide direct to consumer support for all of our brands including the East Coast operations of Tommy Bahama We anticipate total capital expenditures in excess of 130 million over the life of the project with the majority of the spend occurring in Fiscal 2024 and expect completion of the new facility in the Second Half of Fiscal 2025
Activities at the distribution centers include receiving finished goods from suppliers inspecting the products and shipping the products to our retail store e commerce and wholesale customers as applicable We seek to maintain sufficient levels of inventory at the distribution centers to support our direct to consumer operations as well as pre booked at once and some in stock replenishment orders for our wholesale customers We use a local third party distribution center for our Tommy Bahama Australia operations
We believe that sophisticated information systems and functionality are important components of maintaining our competitive position and supporting continued growth of our businesses particularly in the ever changing consumer shopping environment Our information systems are designed to provide effective retail store e commerce food and beverage and wholesale operations while emphasizing efficient point of sale distribution center design sourcing order processing marketing customer relationship management accounting and other functions We periodically evaluate the adequacy of our information technologies and upgrade or enhance our systems to gain operating efficiencies to provide additional consumer access and to support our anticipated growth as well as other changes in our business We believe that where possible continuous upgrading and enhancements to our information systems with newer technology that offers greater efficiency functionality and reporting capabilities is critical to our operations and financial condition
We license certain of our trademarks including the Tommy Bahama and Lilly Pulitzer names to licensees in categories beyond our brands core product categories We believe licensing is an attractive business opportunity for our larger lifestyle brands Once a brand is more fully established licensing typically requires modest additional investment but can yield high margin income It also affords the opportunity to enhance overall brand awareness and exposure In evaluating a licensee for our brands we consider the candidate s experience financial stability sourcing expertise and marketing ability We also evaluate the marketability and compatibility of the proposed licensed products with the brand image and our own products
Our agreements with our licensees are brand specific relate to specific geographic areas and have expirations at various dates in the future with contingent renewal options in limited cases Generally the agreements require minimum royalty payments as well as royalty payments based on specified percentages of the licensee s net sales of the licensed products as well as certain obligations for advertising and marketing Our license agreements generally provide us the right to approve all products advertising and proposed channels of distribution
We license the Tommy Bahama brand for a broad range of product categories including indoor furniture outdoor furniture beach chairs bedding and bath linens fabrics leather goods and gifts headwear hosiery sleepwear shampoo toiletries fragrances cigar accessories distilled spirits resort operations and other products Third party license arrangements for Lilly Pulitzer products include stationery and gift products home furnishing products and eyewear
In addition to our license arrangements for the specific product categories listed above we may enter into certain international distributor agreements which allow third parties to distribute apparel and other products on a wholesale and or retail basis within certain countries or regions As of February 3 2024 we have agreements for the distribution of Tommy Bahama products in the Middle East and parts of Latin America The products sold by the distributors generally are identical to the products sold in our own Tommy Bahama stores In addition to selling Tommy Bahama goods to wholesale accounts the distributors may in some cases operate a limited number of their own retail stores Additionally we have arrangements for distribution of Johnny Was products in certain countries None of our international distributor agreements are expected to generate growth that would materially impact our operating results in the near term
Each of our operating groups is impacted by seasonality as the demand by specific product or style as well as by distribution channel may vary significantly depending on the time of year As a result our quarterly operating results and working capital requirements fluctuate significantly from quarter to quarter Typically the demand for products for our larger brands is higher in the spring summer and holiday seasons and lower in the fall season the third quarter of our fiscal year Thus our third quarter historically has had the lowest net sales and net earnings compared to other quarters Further the impact of certain unusual or non recurring items economic conditions our e commerce flash clearance sales wholesale product shipments weather acquisitions or other factors affecting our operations may vary from one year to the next Therefore due to the potential impact of these items we do not believe that net sales or operating income by quarter in Fiscal 2023 are necessarily indicative of the expected proportion of amounts by quarter for future periods
As of February 3 2024 we employed over 6 000 individuals globally more than 96 of whom were in the United States Approximately 77 of our employees were retail store and food and beverage employees Our employee base fluctuates during the year as we typically hire seasonal employees to support our retail store and food and beverage operations primarily during the holiday selling season None of our employees as of February 3 2024 were represented by a union
We are committed to respecting human rights in our business operations including throughout our supply chain and product life cycle As part of our supplier audit processes we conduct human rights due diligence to identify risks and work to mitigate them and our Supplier Code of Conduct sets forth minimum social responsibility requirements to ensure that the human rights of all people in our value chain are respected We do not tolerate harassment discrimination violence or retaliation of any kind
Our Code of Conduct applies to all employees officers and directors in our organization and addresses among other topics compliance with laws avoiding conflicts of interest gifts and entertainment bribery and kickbacks anti discrimination and anti harassment and reporting misconduct Our General Counsel takes responsibility for reviewing and refreshing our Code of Conduct educating our team members about our expectations and as applicable enforcing the Code of Conduct All employees at the time of hire are required to read and certify compliance with the Code of Conduct and are given an opportunity to ask questions
We are always looking for great people to join our team We recognize that in order to remain competitive we must attract develop and retain top caliber employees in our design marketing merchandising information technology and other functions as well as in our direct to consumer locations and distribution centers Competition for talented employees is intense
In furtherance of attracting and retaining employees committed to our core values and business strategy we maintain competitive compensation programs that include a variety of components including competitive pay consistent with skill level experience and knowledge as well as comprehensive benefit plans consisting of health and welfare plans retirement benefits and paid leave for our employee base in the United States
We continue to assess how well we are doing in managing performance developing our people and putting our talent to its highest and best use across our company Our aim is greater employee engagement and ultimately a more effective organization As part of our commitment to our people throughout our brands and businesses we provide employees with training growth and development opportunities including on the job training learning and development programs and other educational programs Outside of the United States we work with outside partners familiar with the local markets and laws to ensure our rewards are competitive within that jurisdiction and support employee well being
Our ongoing commitment to having the best people includes a commitment to equal opportunity We believe in a diverse and inclusive workplace that respects and invites differing ideas and perspectives We have a number of initiatives to ensure that our hiring retention and advancement practices promote fair and equal opportunities across our workforce and ensure that we will have the best people in the industry to support our businesses going forward
Our diversity and inclusion strategies begin at the recruiting stage where we seek to attract and hire the most qualified candidates possible without regard to race ethnicity national origin gender age sexual orientation genetics or other protected characteristics We reinforce our values and goals through our Code of Conduct and other workplace policies with an anonymous confidential ethics hotline that allows our employees to voice concerns We also seek to ensure that our pay and rewards programs and advancement opportunities are consistent with our culture of equality
As of February 3 2024 our domestic workforce which comprised over 96 of our employee population was self disclosed as 34 male 66 female and less than 1 undisclosed or choosing not to identify Among our management employees who comprise approximately 19 of our workforce the self disclosed figures were 29 male 71 female and less than 1 undisclosed or choosing not to identify As of February 3 2024 the self disclosed ethnicity of our domestic workforce was 59 white not Hispanic or Latino and 41 non white whereas for management employees the self disclosed ethnicity figures were 71 white not Hispanic or Latino and 29 non white
Oxford Industries Inc is a Georgia corporation originally founded in 1942 Our corporate headquarters are located at 999 Peachtree Street N E Ste 688 Atlanta Georgia 30309 Our internet address is oxfordinc com Copies of our annual report on Form 10 K proxy statement quarterly reports on Form 10 Q and current reports on Form 8 K and amendments to those reports filed or furnished pursuant to Section 13 a or 15 d of the Securities Exchange Act of 1934 as amended are available free of charge on our website the same day that they are electronically filed with the SEC We also use our website as a means of disclosing additional information including for complying with our disclosure obligations under the SEC s Regulation FD Fair Disclosure The information on our website is not and should not be considered part of this Annual Report on Form 10 K and is not incorporated by reference in this document
We are a consumer products company and are highly dependent on consumer discretionary spending and retail traffic patterns particularly in the United States The demand for apparel products changes as regional domestic and international economic conditions change and may be significantly impacted by trends in consumer confidence and discretionary consumer spending patterns These trends may be influenced by employment levels recessions inflation and elevated interest rates fuel and energy costs tax rates personal debt levels savings rates stock market and housing market volatility shifting social ideology concerns about the political and economic climate and general uncertainty about the future The factors impacting consumer confidence and discretionary consumer spending patterns are outside of our control and difficult to predict and often the apparel industry experiences longer periods of recession and greater declines than the general economy
Recently the U S economy has been impacted by elevated inflation rates which has created a complex and challenging retail environment that has affected consumer spending and consumer preferences In Fiscal 2023 and continuing into Fiscal 2024 the prevailing macroeconomic concerns have led to conservative purchase order decisions for future seasons by many of our wholesale customers A decline in consumer confidence or change in discretionary consumer spending could reduce our sales increase our inventory levels result in more promotional activities and or lower our gross margins any or all of which may adversely affect our business and financial condition
We operate in a highly competitive industry in which the principal competitive factors are the reputation value and image of brand names design of differentiated innovative or otherwise compelling product consumer preference price quality marketing including through rapidly shifting digital and social media vehicles product fulfillment capabilities and customer service The highly competitive apparel industry is characterized by low barriers to entry with new competition entering the marketplace regularly There are numerous domestic and foreign apparel designers distributors importers licensors and retailers Some of these companies may be significantly larger or more diversified than us and or have significantly greater financial resources than we do
Competition in the apparel industry is particularly enhanced in the digital marketplace for our rapidly growing e commerce businesses where there are new entrants in the market greater pricing pressure and heightened customer expectations and competitive pressure related to among other things customer engagement delivery speed shipping charges and return privileges In addition fast fashion value fashion and off price retailers as well as the more recent declines in spending within the consumer and retail sector have contributed to additional promotional pressure These and other competitive factors within the apparel industry may result in reduced sales increased costs lower prices for our products and or decreased margins
We believe that our ability to compete successfully is directly related to our proficiency in foreseeing changes and trends in fashion and consumer preference and presenting appealing products for consumers when and where they seek them Although certain of our products carry over from season to season the apparel industry is subject to rapidly changing fashion trends and shifting consumer expectations The increasing shift to digital brand engagement and social media communication as well as the attempted replication of our products by competitors presents emerging challenges for our business The apparel industry is also impacted by changing consumer preferences regarding spending categories generally including shifts away from traditional consumer product spending and towards experiential spending and sustainable products There can be no assurance that we will be able to successfully evaluate and adapt our products to
Our sales volume and operations and the operations of third parties on whom we rely including our suppliers vendors licensees and wholesale customers may be adversely affected by unseasonable or severe weather conditions or other climate related events natural or man made disasters hurricanes public health crises pandemics war terrorist attacks including heightened security measures and responsive military actions or other catastrophes which may cause consumers to alter their purchasing habits or result in a disruption to our operations such as the damage to and temporary closure of our Tommy Bahama restaurant and retail store in Naples Florida due to Hurricane Ian in September 2022 and the destruction of our Tommy Bahama Marlin Bar in Lahaina Hawaii by wildfires in August 2023 Our business may also be adversely affected by instability disruption or destruction regardless of cause These events may result in closures of our retail stores restaurants offices or distribution centers and or declines in consumer traffic which could have a material adverse effect on our business results of operations or financial condition Because of the seasonality of our business the concentration of a significant proportion of our retail stores and wholesale customers in certain geographic regions including a resort and or coastal focus for most of our lifestyle brands and the concentration of our sourcing and distribution center operations the occurrence of such events could disproportionately impact our business financial condition and operating results
The ongoing war between Russia and Ukraine and the ongoing war between Israel and Hamas have adversely affected the global economy and resulted in economic sanctions geopolitical instability and market disruption Although we do not have operations or generate revenues in the impacted regions the geopolitical tensions related to the wars could result in broader impacts that expand into other markets cyberattacks supply chain and logistics disruptions including shipping disruptions in the Red Sea region and lower consumer demand any of which could have a material adverse effect on our business and operations
Our success depends on the reputation and value of our brand names The value of our brands could be diminished by actions taken by us or by our licensees wholesale customers or others who have an interest in our brands Actions that could cause harm to our brands include failing to respond to emerging fashion trends or meet consumer quality expectations selling products bearing our brands through distribution channels that are inconsistent with customer expectations becoming overly promotional or setting up consumer expectations for promotional activity for our products In addition social media is a critical marketing and customer acquisition and customer retention strategy in today s technology driven retail environment and the value of our brands could be adversely affected if we do not effectively and accurately communicate our brand message through social media vehicles including with respect to our social responsibility and environmental sustainability initiatives The concentration in our portfolio heightens the risks we face if one of our larger brands is adversely impacted by actions we or third parties take with respect to that brand
The improper or detrimental actions of a licensee or wholesale customer including a third party distributor in an international market or for example the operator of the Tommy Bahama Miramonte Resort Spa which opened in late 2023 and is an unproven concept with previously untested brand and operating standards could also significantly impact the perception of our brands While we enter into comprehensive license and similar collaborative agreements with third party licensees covering product design product quality brand standards sourcing social compliance distribution operations manufacturing and or marketing requirements and approvals there can be no guarantee our brands will not be negatively impacted through our association with products or concepts outside of our core apparel products and by the market perception of the third parties with whom we associate In addition we cannot always control the marketing and promotion of our products by our wholesale customers and actions by such parties could diminish the value or reputation of one or more of our brands and have an adverse effect on our sales gross margins and business operations
The appeal of our brands may also depend on the perceived relevance and success of our initiatives related to corporate responsibility and our commitments to operating our business in a socially responsible fashion Risks related to corporate responsibility include increased stakeholder focus on social and environmental sustainability matters including forced labor chemical use energy and water use packaging and waste animal welfare and land use We may also be required to incur substantial costs to comply with the amalgamation of differing or conflicting state federal or international laws or regulations or the rules of government agencies requiring disclosure of risks and initiatives related to corporate responsibility and the collection certification and disclosure of operational data and any failure to comply with such requirements could result in fines penalties or negative public perception of our brands or drive decisions on whether we can continue or expand our business in certain markets We may also face increased pressure from stakeholders or the public to voluntarily expand our disclosures make commitments set targets or establish additional goals and take actions to meet them which could expose us to market operational and execution costs or risks The metrics we disclose may not meet stakeholder expectations and may impact our reputation and the value of our brands and a failure to achieve progress on our metrics on a timely basis or at all could adversely affect our business and financial performance
One of our key long term initiatives over the last several years has been to grow our branded businesses through distribution strategies that allow our consumers to access our brands whenever and wherever they choose to shop Our ability to anticipate and transform our business in response to the manner in which consumers seek to transact business and access products requires us to introduce new retail restaurant and other concepts in suitable locations anticipate and implement innovations in sales and marketing technology to align with our consumers shopping preferences invest in appropriate digital and other technologies establish the infrastructure necessary to support growth maintain brand specific websites and mobile applications that offer the functionality and security customers expect and effectively enhance our advertising and marketing activities including our social media presence to maintain our current customers and attract and introduce new consumers to our brands and offerings
For the last several years the retail apparel market has been evolving very rapidly in ways that are disruptive to traditional fashion retailers These changes included declines in bricks and mortar retail traffic entry into the fashion retail space by large e commerce retailers and others with significant financial resources and enhanced distribution capabilities increased costs to attract and retain consumers increased investment in technology and multi channel distribution strategies by large traditional bricks and mortar and big box retailers ongoing emphasis on off price and fast fashion channels of distribution in particular those who offer brand label products at clearance and increased appeal for consumers of products that incorporate sustainable materials and processes in the supply chain and or otherwise reflect their social or personal values In response fashion retailers and competing brands have increasingly offered greater transparency for consumers in product pricing and engaged in increased promotional activities both online and in store These trends accelerated in recent years and are likely to continue to evolve in ways that may not yet be evident
In response to these evolving and rapidly changing trends in consumer shopping behavior we have made and expect to continue to make significant investments in expanding our digital capabilities and technologies in three key areas mobile technology digital marketing and the digital customer experience Although we have experienced significant growth in our e commerce businesses in recent years there is no assurance that we will realize a return on these investments be successful in continuing to grow our e commerce businesses over the long term or that any increase we may see in net sales from our e commerce business will not cannibalize or be sufficient to offset any decreases in net sales from bricks and mortar retail stores Any inability on our part to effectively adapt to rapidly evolving consumer behavioral trends may result in lost sales increase our costs and or adversely impact our results of operations financial condition reputation and credibility
A key component of our business strategy is organic growth in our brands Organic growth may be achieved by among other things increasing sales in our direct to consumer channels selling our products in new markets increasing our market share in existing markets expanding the demographic appeal of our brands expanding our margins through
product cost reductions price increases or otherwise expanding the customer reach of our brands through new and enhanced advertising initiatives and increasing the product offerings and concepts within our various operating groups Successful growth of our business is also subject to our ability to implement plans for expanding and or maintaining our existing businesses at satisfactory levels We may not be successful in achieving suitable organic growth and our inability to grow our business may have a material adverse effect on our business financial condition liquidity and results of operations
In addition investments we make in technology advertising and infrastructure retail stores and restaurants office and distribution center facilities personnel and elsewhere may not yield the full benefits we anticipate and sales growth may be outpaced by increases in operating costs putting downward pressure on our operating margins and adversely affecting our results of operations If we are unable to increase our revenues organically we may be required to pursue other strategic initiatives including reductions in costs and or acquisitions which may inhibit our ability to increase profitability
Integrating an acquired business regardless of the size of the acquired operations is a complex time consuming and expensive process The integration process could create a number of challenges and adverse consequences for us associated with the integration of product lines support functions employees sales teams and outsourced manufacturers employee turnover including key management and creative personnel of the acquired business and our existing businesses disruption in product cycles for newly acquired product lines maintenance of acceptable standards controls procedures and policies operating a business in new geographic territories diversion of the attention of our management from other areas of our business and the impairment of relationships with customers of the acquired and existing businesses As a result of these challenges or other factors the benefits of an acquisition may not materialize to the extent or within the time periods anticipated
In addition the competitive climate for desirable acquisition candidates drives higher market multiples and we may pay more to consummate an acquisition than the value we ultimately derive from the acquired business Acquisitions may cause us to incur debt or make dilutive issuances of our equity securities and may result in certain impairment or amortization charges in our statements of operations as evidenced by the noncash impairment charges for goodwill and intangible assets of 111 million recognized in Johnny Was in the Fourth Quarter of Fiscal 2023 which was driven by the challenging macroeconomic environment and elevated interest rates during Fiscal 2023 Additionally as a result of acquisitions we may become responsible for unexpected liabilities that we failed or were unable to discover in the course of performing due diligence or may incur material unrecoverable costs to evaluate and pursue an acquisition that is ultimately not consummated
As the fashion retail environment evolves our investment criteria for acquisitions has grown to include smaller brands and non controlling investments in burgeoning brands seeking debt or equity financing The limited operating history less experienced management teams and less sophisticated systems infrastructure and relationships generally associated with such brands may heighten the risks associated with acquisitions generally Minority investments present additional risks including the potential disproportionate distraction to our management team relative to the potential financial benefit the potential for a conflict of interest the damage to our reputation of associating with a brand which may take actions inconsistent with our values and the financial risks associated with making an investment in an unproven business model including the potential for impairment charges such as the 2 million noncash impairment charges recognized in Fiscal 2023 from our equity method investment in a smaller lifestyle brand that resulted from that entity which we do not control forecasting continued future losses
From time to time we may also divest or discontinue businesses product lines and or wholesale relationships that do not align with our strategy or provide the returns that we expect or desire Such dispositions and or discontinuations may result in unexpected liabilities which could adversely affect our financial condition and results of operations
Many factors such as economic conditions fashion trends consumer preferences the financial condition of our wholesale customers and weather make it difficult to accurately forecast demand for our products In order to meet the expected demand for our products in a cost effective manner we make commitments for production several months prior to our receipt of goods and almost entirely without firm commitments from our customers Depending on the demand for our products we may be unable to sell the products we have ordered or that we have in our inventory which may result in inventory markdowns or the sale of excess inventory at discounted prices and through off price channels These events could significantly harm our operating results and impair the image of our brands Conversely if we underestimate the timing or extent of demand for our products or if we are unable to access our products when we need them for example due to a third party manufacturer s inability to source materials or produce goods in a timely fashion or as a result of delays in the delivery of products to us we may experience inventory shortages which might result in lost sales unfilled orders negatively impacted customer relationships and diminished brand loyalty any of which could harm our business These risks relating to inventory may also escalate as our direct to consumer sales for which we do not have any advance purchase commitments continue to increase as a proportion of our consolidated net sales
We lease all of our retail store and restaurant locations Successful operation of our retail stores and restaurants depends in part on our ability to identify desirable brand appropriate locations the overall ability of the location to attract a consumer base sufficient to make sales volume profitable our ability to negotiate satisfactory lease terms and employ qualified personnel and our ability to timely construct and complete any build out and open the location in accordance with our plans A decline in the volume of consumer traffic at our retail stores and restaurants due to economic conditions shifts in consumer shopping preferences or technology a decline in the popularity of malls or lifestyle centers in general or at those in which we operate the closing of anchor stores or other adjacent tenants or otherwise could have a negative impact on our sales gross margins and results of operations Our growth may be limited if we are unable to identify new locations with consumer traffic sufficient to support a profitable sales level or the local market reception to a new retail store opening is inconsistent with our expectations
Our retail store and restaurant leases generally represent long term financial commitments with substantial costs at lease inception for a location s design leasehold improvements fixtures and systems installation and recurring fixed costs On an ongoing basis we review the financial performance of our retail and restaurant locations in order to determine whether continued operation is appropriate Even if we determine that it is desirable to exit a particular location we may be unable to close an underperforming location due to continuous use clauses and or because negotiating an early termination would be cost prohibitive In addition due to the fixed cost structure associated with these operations negative cash flows or the closure of a retail store or restaurant could result in impairment of leasehold improvements impairment of operating lease assets and or other long lived assets severance costs lease termination costs or the loss of working capital which could adversely impact our business and financial results Furthermore as each of our leases expire and as competition and rental rates for prime retail and restaurant locations continues to accelerate as we have experienced in recent years we may be unable to negotiate renewals either on commercially acceptable terms or at all including as a result of shifts in how shopping center operators seek to merchandise the particular center s lineup which could force us to close retail stores and or restaurants in desirable locations
Furthermore a deterioration in the financial condition of shopping center operators or developers could for example limit their ability to invest in improvements and finance tenant improvements for us and other retailers and lead consumers to view these locations as less desirable In addition if our e commerce businesses continue to grow they may do so in part by attracting existing customers rather than new customers who choose to purchase products from us online through our websites rather than from our physical stores thereby reducing the financial performance of our bricks and mortar operations which could have a material adverse effect on our results of operations or financial condition
Our levels of debt vary as a result of the seasonality of our business investments in our operations acquisitions we undertake and working capital needs Our debt levels may increase or decrease from time to time under our existing facility or potentially under new facilities or the terms or forms of our financing arrangements may change Our indebtedness under the U S Revolving Credit Agreement includes certain obligations and limitations including the periodic payment of principal interest and unused line fees maintenance of certain covenants and certain other limitations The negative covenants in the U S Revolving Credit Agreement limits our ability to among other things incur debt guaranty certain obligations incur liens pay dividends repurchase common stock make investments sell assets or make acquisitions These obligations and limitations may increase our vulnerability to adverse economic and industry conditions place us at a competitive disadvantage compared to any competitors that may be less leveraged and limit our flexibility in carrying out our business plans and planning for or reacting to change
The continued growth of our business depends on our access to sufficient funds If the need arises in the future to finance expenditures in excess of those supported by our U S Revolving Credit Agreement we may need to seek additional funding through debt or equity financing Our ability to obtain that financing will depend on many factors including prevailing market conditions our financial condition and our ability to negotiate favorable terms and conditions The terms of any such financing or our inability to secure such financing could adversely affect our ability to execute our strategies and the negative covenants in our debt agreements now or in the future may increase our vulnerability to adverse economic and industry conditions and or limit our flexibility in carrying out our business strategy and plans
We generate a material percentage of our wholesale sales which was 20 of our net sales in Fiscal 2023 from a few key customers Although our largest customer only represented less than 4 of our consolidated net sales in Fiscal 2023 the failure to increase or maintain our sales with our key customers as much as we anticipate would have a negative impact on our growth prospects and any decrease or loss of these customers business could result in a decrease in our net sales and operating income if we are unable to capture these sales through our direct to consumer operations or other wholesale accounts Over the last several years department stores and other large retailers have faced increased competition from online competitors declining sales and profitability and tightened credit markets resulting in store closures bankruptcies and financial restructurings Restructuring of our customers operations continued store closures or increased direct sourcing by customers could negatively impact our net sales and profitability
We also extend credit to most of our key wholesale customers without requiring collateral which results in a large amount of receivables from just a few customers A significant adverse change in a customer s financial position or ability to satisfy its obligations to us could cause us to limit or discontinue business with that customer in some cases after we have already made product purchase commitments for inventory require us to assume greater credit risk relating to that customer s receivables or limit our ability to collect amounts related to shipments to that customer In addition a decision by one or more of our key wholesale customers to terminate its relationship with us or to reduce its purchases whether motivated by competitive considerations a change in desired product assortment quality or style issues financial difficulties economic conditions or otherwise could also adversely affect our business
Cybersecurity attacks continue to become increasingly sophisticated and experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our assets or disrupt our systems We collect use store and transmit sensitive and confidential business information and personal information of our customers employees suppliers and others as an ongoing part of our business operations and we are regularly subject to attempts by attackers to gain unauthorized access to our networks systems and data or to obtain change or destroy confidential information In addition customers may use devices or software that are beyond our control environment to purchase our products which may provide additional avenues for attackers to gain access to confidential information and our embracing and implementation of remote work arrangements for a substantial portion of our employees may increase our vulnerability to cybersecurity attacks Additionally the security systems of businesses that we acquire could pose additional risks to us such as those related to the collection use maintenance and disclosure of data or present other cybersecurity vulnerabilities
Despite our implementation of security measures if an actual or perceived data security breach occurs whether as a result of cybersecurity attacks computer viruses vandalism ransomware human error or otherwise or if there are perceived vulnerabilities in our systems the image of our brands and our reputation and credibility could be damaged and in some cases our continued operations may be impaired or restricted Ongoing and increasing costs to enhance cybersecurity protection and prevent eliminate or mitigate vulnerabilities are significant Although we have business continuity plans and other safeguards in place our operations may be adversely affected by an actual or perceived data security breach Costs to resolve any litigation or to investigate and remediate any actual or perceived breach could result in significant financial losses and expenses as well as lost sales While we continue to evolve and modify our business continuity plans there can be no assurance in an escalating threat environment that they will be effective in avoiding disruption and business impacts
In addition the regulatory environment governing our use of individually identifiable data is complex and compliance with new and modified state federal and international privacy and security laws may require us to modify our operations and or incur costs to make necessary systems changes and implement new administrative processes which may include deploying additional personnel and protection technologies training employees and engaging third party experts and consultants In addition because we process and transmit payment card information we are subject to the payment card industry data security standard and card brand operating rules which provide for a comprehensive set of rules relating to the retention and or transmission of payment card information If we do not comply with the applicable standards we may be subject to fines or restrictions on our ability to accept payment cards which could have a material adverse effect on our operations
As part of our routine operations we also contract with third party service providers to store process and transmit personal information of our customers and employees Although we may contractually require that these providers implement reasonable security measures we cannot control third parties and cannot guarantee that a security breach will not occur at their location or within their systems Privacy breaches of confidential information stored or used by our third party service providers or disruptions in their systems may expose us to the same risks as a breach of our own systems including negative publicity potential out of pocket costs and adverse effects on our business and customer relationships
The efficient operation of our business depends on information technology This requires us to devote significant financial and employee resources to information technology initiatives and operations Information systems are used in all stages of our operations and as a method of communication both internally and with our customers service providers and suppliers Many of our information technology solutions are operated and or maintained by third parties including our use of cloud based solutions Additionally each of our operating groups uses e commerce websites point of sale systems enterprise order management systems warehouse management systems and wholesale ordering systems to acquire manage sell and distribute goods Our management also relies on information systems to provide relevant and accurate information in order to allocate resources manage operations and forecast account for and report our operating results Service interruptions may occur as a result of a number of factors including power outages consumer traffic levels computer viruses sabotage hacking or other unlawful activities by third parties human error disasters or failures to properly install upgrade integrate protect repair or maintain our various systems networks and e commerce websites
All of these events could have a material adverse effect on our financial condition and results of operations In light of the current geopolitical environment there are heightened risks that our information technology systems as well as those of third parties on whom we rely in order to conduct our operations could be compromised by threat actors
Any failure to timely upgrade our technology systems and capabilities may impair our ability to market sell and deliver products to our customers efficiently conduct our operations facilitate customer engagement in today s digital marketplace and or meet the needs of our management We regularly evaluate upgrades or enhancements to our information systems to more efficiently and competitively operate our businesses including periodic upgrades to digital commerce and marketing warehouse management guest relations omnichannel and or enterprise order management systems in our businesses Digital commerce and marketing have continued to increase in importance to our business and we have invested and will continue to invest significant capital in the digital strategies systems expertise and capabilities necessary for us to compete effectively in this arena Upgrades to our systems may be expensive undertakings may not be successful and or could be abandoned We may also experience difficulties during the implementation upgrade or subsequent operation of our systems including the risk of introducing cybersecurity vulnerabilities into our systems or the loss of certain functionality information from our legacy systems and or efficient interfaces with third party and continuing systems Temporary processes or solutions including manual operations which may be required to be instituted in the short term could also significantly increase the risk of loss or corruption of data and information Additionally if such upgraded information technology systems fail to operate or are unable to support our growth our store operations and websites could be severely disrupted and we could be required to make significant additional expenditures to remedy any such failure
We source substantially all of our products from non exclusive third party producers located in foreign countries Although we place a high value on long term relationships with our suppliers we do not have long term supply contracts but instead conduct business on an order by order basis Therefore we compete with other companies for the production capacity of independent manufacturers We also depend on the ability of these third party producers to secure a sufficient supply of raw materials adequately finance the production of goods ordered and maintain sufficient manufacturing and shipping capacity and in some cases the products we purchase and the raw materials that are used in our products are available only from one source or a limited number of sources Although we monitor production in third party manufacturing locations we cannot be certain that we will not experience operational difficulties with our manufacturers such as the reduction of available production capacity errors in complying with product specifications insufficient quality control failures to meet production deadlines or increases in manufacturing costs In addition we may experience disruptions in our supply chain as we continue to diversify the jurisdictions from which we source products Any such difficulties may impact our ability to deliver quality products to our customers on a timely basis increase our costs negatively impact our customer relationships and result in lower net sales and profits
Our operations in recent years have been and may continue to be impacted by supply chain constraints labor shortages and raw material shortages resulting in increased costs for raw materials longer lead times port congestion and increased freight costs As a result of these factors within the global supply chain our gross margins may be adversely impacted We also rely on logistics providers to transport our products to our distribution centers Delays in shipping may cause us to have to use more expensive air freight or other more costly methods to ship our products Failure to adequately produce and timely ship our products to customers could lead to increased costs and lost sales negatively impact our relationships with customers and adversely impact our brand reputation
We rely on our primary distribution facilities in order to support our direct to consumer and wholesale operations meet customer fulfillment expectations manage inventory complete sales and achieve operating efficiencies We may have a greater risk than our peers due to the concentration of our distribution facilities as substantially all of our products for each operating group are distributed through one or two principal distribution centers Although we continue to enhance our enterprise order management capabilities to deliver products from other physical locations our ability to effectively support our direct to consumer and wholesale operations meet customer expectations manage inventory and achieve objectives for operating efficiencies depends on the proper operation of these distribution facilities each of which manages the receipt storage sorting packing and distribution of finished goods In addition initiatives to build new distribution centers or enhance existing distribution centers such as our multi year project to build a new distribution center in the Southeastern United States that will provide significant or exclusive support for all of our brands or to transition operations among distribution facilities or third party service providers may be subject to delays cost overruns supply chain disruptions or inability to obtain labor or materials which could result in substantial expense to us disrupt our operations and divert the attention of our management In addition we may face challenges integrating the distribution center with the systems supporting our brands and transitioning operations to the distribution center around peak selling seasons and there can be no assurance that any such investments will achieve anticipated efficiencies
If any of our primary distribution facilities were to shut down or otherwise become inoperable or inaccessible for any reason including as a result of natural or man made disasters pandemics or epidemics human error or cybersecurity attacks or computer viruses or if we are unable to receive or ship the goods in a distribution center as a result of a technology failure labor shortages or otherwise we could experience a substantial loss of inventory a reduction in sales higher costs insufficient inventory at our retail stores to meet consumer expectations and longer lead times associated with the distribution of our products In addition for the distribution facilities that we operate there are substantial fixed costs associated with these large highly automated distribution centers and we could experience reduced operating and cost efficiencies during periods of economic weakness Any disruption to our distribution facilities or in their efficient operation could negatively affect our operating results and our customer relationships
We and our third party suppliers rely on the availability of raw materials at reasonable prices The principal fabrics used in our business are cotton silk linen polyester cellulosic fibers leather and other natural and man made fibers or blends of two or more of these materials The prices paid for these fabrics depend on the market price for raw materials used to produce them The cost of the materials and components that are used in our manufacturing process such as oil related commodity prices and other raw materials such as dyes and chemicals and other costs can fluctuate We historically have not entered into any futures contracts to hedge commodity prices In recent years we experienced increased costs of raw materials including cotton that impacted our production costs These price increases could continue in future years
Employment costs represented more than 40 of our consolidated SG A in Fiscal 2023 and we have seen increases in the cost of labor in our retail restaurant and distribution center operations as well as at many of our suppliers in recent years Employment costs are affected by labor markets as well as various federal state and foreign laws governing matters such as minimum wage rates overtime compensation and other requirements In addition in recent years there has been significant political pressure and legislative action to increase the minimum wage rate in many of the jurisdictions in which we operate We have also experienced increases in freight costs and distribution and logistics functions and may continue to see such cost and capacity pressures Although we attempt to mitigate the effect of increases in our cost of goods sold labor costs occupancy costs other operational costs and SG A items through sourcing initiatives and by selectively increasing the prices of our products we may be unable to fully pass on these costs to our customers and material increases in our costs may reduce the profitability of our operations and or adversely impact our results of operations
We may be adversely affected as a result of labor disputes in our own operations or in those of third parties with whom we work Our business depends on our ability to source and distribute products in a timely manner and our new retail store and restaurant growth is dependent on timely construction of our locations While we are not subject to any organized labor agreements and have historically enjoyed good employee relations there can be no assurance that we will not experience work stoppages or other labor problems in the future with our employees In addition potential labor disputes at independent factories where our goods are produced shipping ports or transportation carriers create risks for our business particularly if a dispute results in work slowdowns lockouts strikes or other disruptions during our peak manufacturing shipping and selling seasons Further we plan our inventory purchases and forecasts based on the anticipated timing of retail store and restaurant openings which could be delayed as a result of a number of factors including labor disputes among contractors engaged to construct our locations or within government licensing or permitting offices or the unavailability of qualified contractors due to labor shortages Any potential labor dispute either in our own operations or in those of third parties on whom we rely could materially affect our costs decrease our sales harm our reputation or otherwise negatively affect our operations
Our operations and retail and restaurant locations are heavily concentrated in the United States and certain geographic areas within the United States including Florida California Texas and Hawaii for our Tommy Bahama operations Florida for our Lilly Pulitzer operations California for our Johnny Was operations and Florida for our Emerging Brands operations Additionally the wholesale sales for our businesses are also geographically concentrated including in geographic areas where we have concentrations of our own retail store and restaurant locations Due to these concentrations as well as our brands association with the resort lifestyle and destinations we have heightened exposure to factors that impact these regions including general economic conditions weather patterns climate related conditions natural disasters public health crises changing demographics and other factors
We are exposed to certain currency exchange risks in conducting business outside of the United States Substantially all of our product purchases are from foreign vendors and are denominated in U S dollars If the value of the U S dollar decreases relative to certain foreign currencies in the future then the prices that we negotiate for products could increase and we may be unable to pass this increase on to customers which would negatively impact our margins However if the value of the U S dollar increases between the time a price is set and payment for a product the price we pay may be higher than that paid for comparable goods by competitors that pay for goods in local currencies and these competitors may be able to sell their products at more competitive prices An increase in the value of the U S dollar compared to other currencies in which we have sales could also result in lower levels of sales and earnings reported in our consolidated statements of operations and lower gross margins Additionally currency fluctuations could also disrupt the business of our independent manufacturers by making their purchases of raw materials more expensive and difficult to finance
We are subject to an increasing number of evolving and stringent standards laws and other regulations including those relating to labor employment privacy and data security consumer protection marketing health product performance content and safety anti bribery taxation customs logistics and other operational matters These laws and regulations in the United States and abroad are complex and often vary widely by jurisdiction making it difficult for us to ensure that we are currently or will in the future be compliant with all applicable laws and regulations in all the states and countries in which we operate In addition to the local laws of the foreign countries in which we operate we are subject to certain anti corruption laws including the U S Foreign Corrupt Practices Act If any of our international operations or
We have seen many new laws and regulations going into effect or being proposed in recent years including in areas such as consumer and data privacy matters related to corporate responsibility marketing and trade We may be required to make significant expenditures and devote significant time and management resources to comply with any existing or future laws or regulations and a violation of applicable laws and regulations by us or any of our suppliers or licensees may restrict our ability to import products require a recall of our products lead to fines or otherwise increase our costs negatively impact our ability to attract and retain employees or materially limit our ability to operate our business In addition regardless of whether any allegations of violations of the laws and regulations governing our business are valid or whether we ultimately become liable we may be materially affected by negative publicity as a result of such allegations
Due to our international sourcing activities we are exposed to risks associated with changes in the laws and regulations governing the importing and exporting of apparel products into and from the countries in which we operate These risks include imposition of antidumping countervailing or other duties tariffs taxes or quota restrictions government imposed restrictions as a result of public health issues changes in customs procedures for importing apparel products restrictions on the transfer of funds to or from foreign countries and the issuance of sanctions and trade orders Any of these factors may disrupt our supply chain and we may be unable to offset any associated cost increases by shifting production to suitable manufacturers in other jurisdictions in a timely manner or at acceptable prices and future regulatory actions or changes in international trade regulation may provide our competitors with a material advantage over us or render our products less desirable in the marketplace
There has been heightened trade tension between the United States and China from which we sourced 41 of our products in Fiscal 2023 and from which Johnny Was has sourced more than 90 of its products in recent years with multiple rounds of increased U S tariffs on China imported goods implemented in 2018 and 2019 It is unclear what if any additional actions might be considered or implemented particularly in the current geopolitical environment Significant tariffs or other restrictions placed on Chinese imports and any related countermeasures that are taken by China could have an adverse effect on our financial condition or results of operations
We have a robust legal social and environmental compliance program including a Supplier Code of Conduct and vendor compliance standards The reputation of our brands could be harmed if we or our third party producers and vendors substantially all of which are located outside the United States fail to meet appropriate human rights environmental product safety and product quality standards Despite our efforts we cannot ensure that our producers and vendors will at all times conduct their operations in accordance with ethical practices or that the products we purchase will always meet our safety and quality control standards and any failure to do so could disrupt our supply chain and adversely affect our business operations
The presence or perception of forced labor in our supply chain in spite of our efforts to ensure that our third party producers and vendors meet human rights and labor standards could result in adverse impacts on our business including the detention of goods at U S ports of entry challenges in identifying replacement vendors and harm to our reputation While we have diversified the jurisdictions from which we source products and product inputs our manufacturing operations remain concentrated in Asia cotton is among the principal raw materials used in many of our goods and even the cotton used in our products manufactured outside of China largely originates from Chinese fabric mills Starting in Fiscal 2020 the U S Government issued withhold release orders in response to concerns regarding forced labor in the Xinjiang Uyghur Autonomous Region the XUAR of China The XUAR is a globally significant source of cotton production much of which is controlled by the Xinjiang Production and Construction Corporation XPCC and its affiliates The Uyghur Forced Labor Prevention Act UFLPA which was enacted in 2021 created a rebuttable presumption that goods produced in whole or in part in the XUAR or connected with certain listed companies including
the XPCC and its affiliates were produced using forced labor and are therefore barred from entry into the United States Requirements for enhanced supply chain traceability monitoring and risk screening including pursuant to the UFLPA have increased our compliance costs Furthermore while we do not knowingly source any products or product inputs from the XUAR we have no known involvement with the XPCC its affiliates or other entity list companies and we prohibit our suppliers from using forced labor our supply chain is complex and we may not have the ability to completely map and monitor it We could be subject to penalties fines or sanctions if any of the producers from which we purchase goods is found or suspected to have dealings directly or indirectly with the XUAR or entity list companies and any actions taken by customs officials to block the import of products suspected of being manufactured with forced labor whether or not founded could adversely impact our operations and financial results
Furthermore consumers are increasingly attuned to the environmental and social impact of the products they purchase and companies with which they do business A failure to effectively convey our core principles to our customers and investors or to accurately communicate our social responsibility and environmental sustainability initiatives and respond to concerns raised about them including through our websites and social media channels could result in a negative public perception of our brands and products and negatively impact our business
As a multi national apparel company we are subject to income taxes in the United States and various foreign jurisdictions We record our income tax liability based on an analysis and interpretation of local tax laws and regulations which requires a significant amount of judgment and estimation In addition we may from time to time modify our operations in an effort to minimize our consolidated income tax expense Our effective income tax rate in any particular period or in future periods may be affected by a number of factors including a shift in the mix of revenues income and or losses among domestic and international sources during a year or over a period of years changes in tax laws regulations or international tax treaties the outcome of income tax audits the difference between the income tax deduction and the previously recognized income tax benefit related to the vesting of equity based compensation awards and the resolution of uncertain tax positions any of which could adversely affect our effective income tax rate and profitability Further changes to U S and foreign tax laws and compliance with new tax laws could have a material adverse effect on our tax expense cash flows and operations
The carrying values of our goodwill and intangible assets including those recorded in connection with our acquisition of a business are subject to periodic impairment testing Impairment testing of goodwill and intangible assets requires us to make estimates about future performance and cash flows that are inherently uncertain and can be affected by numerous factors including changes in economic conditions income tax rates our results of operations and competitive conditions in the industry In Fiscal 2023 we recognized 111 million of noncash impairment charges for goodwill and intangible assets in connection with the operations of Johnny Was which was driven by the prevailing macroeconomic environment s impact on near term expectations for our business operations and higher interest rates Future impairment charges may have a material adverse effect on our consolidated financial statements or results of operations
The restaurant industry requires compliance with a variety of federal state and local regulations In particular all of our Tommy Bahama restaurants and Marlin Bars serve alcohol and therefore maintain liquor licenses Our ability to maintain our liquor licenses and other permits depends on our compliance with applicable laws and regulations The loss of a liquor license or other critical permits would adversely affect the profitability of that restaurant Additionally as a participant in the restaurant industry we face risks related to food quality food borne illness injury health inspection scores and labor relations The negative impact of adverse publicity relating to allegations of actual or perceived violations at one of our restaurants may extend beyond the restaurant involved to affect some or all of our other restaurants as well as the image of the Tommy Bahama brand as a whole
Our business depends on our senior management and other key personnel and failure to successfully attract retain and implement succession of our senior management and key personnel or to attract develop and retain personnel to fulfill other critical functions may have an adverse effect on our operations and ability to execute our strategies
Our senior management has substantial experience in the apparel and related industries with our Chairman and Chief Executive Officer Mr Thomas C Chubb III having worked with our company for more than 30 years including in various executive management capacities Our success depends on disciplined execution at all levels of our organization including our senior management and continued succession planning Competition for qualified personnel is intense and we compete to attract and retain these individuals with other companies that may have greater financial resources than us While we believe that we have depth within our management team the unexpected loss of any of our senior management or the unsuccessful integration of new leadership could harm our business and financial performance In addition we may be unable to retain or recruit qualified personnel in key areas such as product design sales marketing including individuals with key insights into digital and social media marketing strategies distribution technology sourcing and other support functions which could result in missed sales opportunities and harm to key business relationships
In recent years we have experienced staffing shortages higher turnover rates and challenges in recruiting and retaining qualified employees at all levels of our organization which may continue in the future Our inability or failure to recruit and retain skilled personnel or the still undeterminable longer term impact of our embracing remote and hybrid work arrangements on professional development and progression retention and company culture could adversely impact our business financial performance reputation ability to keep up with the needs of our customers and overall customer satisfaction
We believe that our trademarks and other intellectual property rights have significant value and are important to our continued success and our competitive position due to their recognition by consumers and retailers Substantially all of our consolidated net sales are attributable to branded products for which we own the trademark Therefore our success depends to a significant degree on our ability to protect and preserve our intellectual property We rely on laws in the United States and other countries to protect our proprietary rights However we may not be able to sufficiently prevent third parties from using our intellectual property without our authorization particularly in those countries where the laws do not protect our proprietary rights as fully as in the United States We have also experienced challenges with enforcing our intellectual property rights on third party e commerce websites especially those based in foreign jurisdictions The use of our intellectual property or similar intellectual property by others could reduce or eliminate any competitive advantage we have developed causing us to lose sales or otherwise harm the reputation of our brands
We devote significant resources to the registration and protection of our trademarks and to anti counterfeiting efforts Despite these efforts we regularly discover products that infringe our proprietary rights or that otherwise seek to mimic or leverage our intellectual property Counterfeiting and other infringing activities typically increase as brand recognition increases and association of our brands with inferior counterfeit reproductions or third party labels could adversely affect the integrity and reputation of our brands
Additionally there can be no assurance that the actions that we have taken will be adequate to prevent others from seeking to block sales of our products as violations of proprietary rights As we extend our brands into new product categories and new product lines and expand the geographic scope of the sourcing distribution and marketing of our brands products we could become subject to litigation or challenge based on allegations of the infringement of intellectual property rights of third parties including by various third parties who have acquired or claim ownership rights in some of our trademarks internationally In the event a claim of infringement against us is successful or would otherwise affect our operations we may be required to pay damages royalties license fees or other costs to continue to use intellectual property rights that we had been using or we may be unable to obtain necessary licenses from third parties at a reasonable cost or within a reasonable time Litigation and other legal action of this type regardless of whether it is successful could result in substantial costs to us and diversion of the attention of our management and other resources
From time to time we are involved in litigation matters which may relate to employment practices consumer protection intellectual property infringement product liability and contract disputes and which may include a class action and we are subject to various claims and pending or threatened lawsuits in the ordinary course of our business operations Often these cases raise complex factual and legal issues and due to the inherent uncertainties of litigation we cannot accurately predict the ultimate outcome of any such proceedings Regardless of the outcome or whether the claims have merit legal proceedings may be expensive and require significant management time
Our common stock which is currently listed on the New York Stock Exchange may be subject to extreme and unpredictable fluctuations in price The market price of our common stock may decline or litigation may ensue if the results of our operations or projected results do not meet the expectations of securities analysts or our shareholders investors are unreceptive to an announcement of changes in our business or our strategic initiatives or securities analysts who follow our company change their ratings or estimates of our future performance Our stock price may also change suddenly as a result of other factors beyond our control including general economic conditions new or modified legislation impacting our industry announcements by our competitors or sales of our stock by existing shareholders
The stock market has also experienced periods of general volatility which result in fluctuations in stock prices unrelated or disproportionate to operating performance We cannot provide assurances that there will continue to be an active trading market for our stock and the price of our common stock may also be affected by illiquidity or perceived illiquidity of our shares In addition although we have paid dividends in each quarter since we became a public company in July 1960 we may discontinue or reduce dividend payments based upon several factors including the terms of our credit facility and applicable law the need for funding for our strategic initiatives or other capital expenditures and our future cash needs Any modification or suspension of dividends could cause our stock price to decline We also may be subject from time to time to legal and business challenges or disruptions in the operation of our company due to actions instituted by activist shareholders or others
Other risks many of which are beyond our ability to control or predict could negatively impact our business and financial performance including changes in social political labor health and economic conditions changes in the operations or liquidity of any of the parties with which we conduct our business or in the access to capital markets for any such parties increasing costs of customer acquisition activation and retention consolidation in the retail industry and other factors Any of these risks and others of which we are not aware or that we currently consider to be immaterial could individually or in the aggregate have a material adverse effect on our business financial condition and results of operations
We maintain a comprehensive process for identifying assessing and managing material risks from cybersecurity threats We obtain input as appropriate for our cybersecurity risk management program from threat intelligence services cybersecurity consultants and multiple external sources Our cybersecurity program is managed by our Head of Cyber Security whose team is responsible for leading enterprise wide cybersecurity strategy risk assessment and management policies standards architecture and processes The Head of Cyber Security has a master s degree in cybersecurity maintains industry certifications and has over 20 years of prior work experience in various roles involving information technology cybersecurity and compliance We augment our cybersecurity team with consultants contract resources and managed security service providers when needed Our executive leadership team along with input the Head of Cyber Security are responsible for our overall enterprise risk management system and processes and regularly consider cybersecurity risks in the context of other material risks to the company
Our Board has delegated to its Audit Committee oversight responsibility for cyber risks and incidents relating to cybersecurity threats including compliance with disclosure requirements The Head of Cyber Security provides quarterly reports to our Audit Committee regarding cyber risk trends technology security risks projects to continually enhance our information security systems cybersecurity strategy and the emerging threat landscape The Audit Committee reports any findings and recommendations as appropriate to the full Board for consideration Our cybersecurity program is periodically evaluated by internal and external resources to evaluate and enhance the effectiveness of our information security policies controls and procedures The results of those reviews are reported to senior management and the Audit Committee As part of our cyber risk management program we track and log security incidents across our enterprise and perform third party risk assessments to identify and attempt to mitigate risks from third parties such as vendors and suppliers
Despite our efforts we cannot eliminate all risks from cybersecurity threats or incidents or provide assurances that we have not experienced an undetected cybersecurity incident In addition while we have implemented a risk management process to mitigate cybersecurity risks that arise from utilizing third party service providers suppliers and vendors our control over and ability to monitor the security posture of third parties with whom we do business remains limited and there can be no assurance that we can prevent mitigate or remediate the risk of any compromise or failure in the security infrastructure owned or controlled by such third parties
In the ordinary course of business we enter into lease agreements for our direct to consumer operations including leases for full price retail store food and beverage and outlet store space The leases have varying terms and expirations and may have provisions to extend renew or terminate the lease agreement among other terms and conditions At times we may determine that it is appropriate to close certain direct to consumer or other locations that no longer meet our investment criteria by either not renewing the lease exercising an early termination option negotiating an early termination or otherwise Despite prevailing market conditions becoming increasingly competitive and commanding significantly higher rents for the most desired properties we anticipate that we will be able to extend our leases for existing leases in desirable locations to the extent that they expire in the near future on terms that are satisfactory to us or if necessary locate substitute properties on acceptable terms The terms and conditions of lease renewals or relocations may not be as favorable as existing leases
From time to time we are a party to litigation and regulatory actions arising in the ordinary course of business These actions may relate to trademark and other intellectual property employee relations matters real estate licensing arrangements importing or exporting regulations product safety requirements taxation or other topics We are not currently a party to any litigation or regulatory action or aware of any proceedings contemplated by governmental authorities that we believe could reasonably be expected to have a material impact on our financial position results of operations or cash flows However our assessment of any litigation or other legal claims could potentially change in light of the discovery of additional factors not presently known or determinations by judges juries or others which are not consistent with our evaluation of the possible liability or outcome of such litigation or claims
On March 25 2024 our Board of Directors approved a cash dividend of 0 67 per share payable on May 3 2024 to shareholders of record as of the close of business on April 19 2024 Although we have paid dividends each quarter since we became a public company in July 1960 we may discontinue or modify dividend payments at any time if we determine that other uses of our capital including payment of outstanding debt funding of acquisitions funding of capital expenditures or repurchases of outstanding shares may be in our best interest if our expectations of future cash flows and future cash needs outweigh the ability to pay a dividend or if the terms of our credit facility other debt instruments or applicable law limit our ability to pay dividends We may borrow to fund dividends or repurchase shares in the short term subject to the terms and conditions of our credit facility other debt instruments and applicable law All cash flow from operations will not be paid out as dividends or repurchases of our common stock For details about limitations on our ability to pay dividends see the discussion of our 325 million Fourth Amended and Restated Credit Agreement as amended the U S Revolving Credit Agreement in Note 6 of our consolidated financial statements and Part II Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations both contained in this report
We have certain stock incentive plans as described in Note 8 to our consolidated financial statements included in this report all of which are publicly announced plans Under the plans we can repurchase shares from employees to cover employee tax liabilities related to the vesting of shares of our stock During the Fourth Quarter of Fiscal 2023 no shares were repurchased pursuant to these plans
As disclosed in our Quarterly Report on Form 10 Q for the Third Quarter of Fiscal 2021 and in subsequent filings on December 7 2021 our Board of Directors authorized us to spend up to 150 million to repurchase shares of our stock This authorization superseded and replaced all previous authorizations to repurchase shares of our stock and has no automatic expiration Pursuant to the Board of Directors authorization in the First Quarter of Fiscal 2023 we entered into a 20 million open market stock repurchase program Rule 10b5 1 plan to acquire shares of our stock During the Second Quarter of Fiscal 2023 and the Third Quarter of Fiscal 2023 we repurchased 186 000 and 10 000 shares respectively of our common stock for 19 million and 1 million respectively Over the life of the 20 million open market repurchase program we repurchased 196 000 shares or 1 of our outstanding shares at the commencement of the program for an average price of 102 per share
During the Fourth Quarter of Fiscal 2023 we did not repurchase any shares of our stock pursuant to this authorization After considering the repurchases during Fiscal 2023 as of February 3 2024 there were no amounts remaining under the open market repurchase program and 30 million remaining under the Board of Directors authorization
The graph below reflects cumulative total shareholder return assuming an initial investment of 100 and the reinvestment of dividends on our common stock compared to the cumulative total return for a period of five years beginning February 2 2019 and ending February 3 2024 of 1 The S P SmallCap 600 Index and 2 The S P 500 Apparel Accessories and Luxury Goods
The results of operations cash flows liquidity and capital resources for Fiscal 2022 compared to Fiscal 2021 are not included in this report on Form 10 K For a discussion of our results of operations cash flows liquidity and capital resources for Fiscal 2022 compared to Fiscal 2021 and certain other financial information related to Fiscal 2022 and Fiscal 2021 refer to the Management s Discussion and Analysis of Financial Condition and Results of Operations in Part II Item 7 of our 2022 Annual Report on Form 10 K filed with the SEC on March 28 2023 which is available on the SEC s website at www sec gov and under the Investor Relations section of our website at www oxfordinc com
Our business strategy is to drive excellence across a portfolio of lifestyle brands that create sustained profitable growth We consider lifestyle brands to be those brands that have a clearly defined and targeted point of view inspired by an appealing lifestyle or attitude Furthermore we believe lifestyle brands that create an emotional connection can command greater loyalty and higher price points and create licensing opportunities We believe the attraction of a lifestyle brand depends on creating compelling product effectively communicating the respective lifestyle brand message and distributing products to consumers where and when they want them We believe the principal competitive factors in the apparel industry are the reputation value and image of brand names design of differentiated innovative or otherwise compelling product consumer preference price quality marketing including through rapidly shifting digital and social media vehicles product fulfillment capabilities and customer service Our ability to compete successfully in the apparel industry is dependent on our proficiency in foreseeing changes and trends in fashion and consumer preference and presenting appealing products for consumers Our design led commercially informed lifestyle brand operations strive to provide exciting differentiated fashion products each season as well as certain core products that consumers expect from us
On September 19 2022 we acquired Johnny Was Johnny Was products are sold through the Johnny Was website and full price retail stores and outlets as well as select department stores and specialty stores We continue to execute acquisition and integration activities in connection with the Johnny Was acquisition such as investing in distribution and technology infrastructure The financial information included in the results of operations discussion below for Fiscal 2022 includes only the nineteen weeks from the September 19 2022 acquisition through January 28 2023 Therefore the amounts included in the results of operations below for Fiscal 2022 are not indicative of results for a full year Refer to Note 4 and Note 2 of our consolidated financial statements included in this report for additional information about the Johnny Was acquisition
During Fiscal 2023 80 of our consolidated net sales were through our direct to consumer channels of distribution which consist of our brand specific full price retail stores e commerce websites and outlets as well as our Tommy Bahama food and beverage operations The remaining 20 of our net sales was generated through our wholesale distribution channels which complement our direct to consumer operations and provide access to a larger base of consumers Our wholesale operations consist of sales of products bearing the trademarks of our lifestyle brands to various specialty stores better department stores Signature Stores multi branded e commerce retailers and other retailers
We operate in a highly competitive apparel market that continues to evolve rapidly with the expanding application of technology to fashion retail No single apparel firm or small group of apparel firms dominates the apparel industry and our competitors vary by operating group and distribution channel The apparel industry is cyclical and very dependent on the overall level and focus of discretionary consumer spending which changes as consumer preferences and regional domestic and international economic conditions change Also in recent years consumers have chosen to spend less of their discretionary spending on certain product categories including apparel while spending more on services and other product categories Further negative economic conditions often have a longer and more severe impact on the apparel industry than on other industries due in part to apparel purchases often being more of a discretionary purchase
This competitive and evolving environment requires that brands and retailers approach their operations including marketing and advertising very differently than they have historically and may result in increased operating costs and investments to generate growth or even maintain existing sales levels While the competition and evolution present significant risks especially for traditional retailers who fail or are unable to adapt we believe it also presents a tremendous opportunity for brands and retailers to capitalize on the changing consumer environment
The current macroenvironment with heightened concerns about continuing inflationary trends a global economic recession geopolitical issues the availability and cost of credit and elevated interest rates for prolonged periods combined with heightened promotional activity in our industry is creating a complex and challenging retail environment which has impacted our businesses and financial results during Fiscal 2023 and exacerbated some of the inherent challenges to our operations and may continue to do so in the future There remains significant uncertainty in the macroeconomic environment and the impact of these and other factors could have a major effect on our businesses
However we believe our lifestyle brands have true competitive advantages and we continue to invest in our brands direct to consumer initiatives and distribution capabilities while further leveraging technology to serve our consumers when and where they want to be served We continue to believe that our lifestyle brands with their strong emotional connections with consumers are well suited to succeed and thrive in the long term while managing the various challenges facing our industry in the current environment
Net earnings per diluted share were 3 82 in Fiscal 2023 compared to 10 19 in Fiscal 2022 The 63 decrease in net earnings per diluted share was primarily due to a 63 decrease in net earnings partially offset by a 2 reduction in weighted average shares outstanding due to open market share repurchases in Fiscal 2022 and Fiscal 2023 The decreased net earnings was primarily due to 1 lower operating income at Johnny Was primarily resulting from the noncash 111 million impairment charge recognized in the Fourth Quarter of Fiscal 2023 2 lower operating income at Tommy Bahama Lilly Pulitzer and Emerging Brands 3 increased interest expense 4 a higher operating loss at Corporate and Other and 5 lower royalty income These decreases were offset by a lower effective tax rate
exceeding cash requirements for capital expenditures and dividends and our strong balance sheet we believe our anticipated future cash flows from operations will provide sufficient cash to satisfy our ongoing operating cash requirements ample funds to continue to invest in our lifestyle brands the project to build a new distribution center in the Southeastern United States direct to consumer initiatives and information technology projects additional cash flow to repay outstanding debt and sufficient cash for other strategic initiatives
We identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance Our operating group structure reflects a brand focused management approach emphasizing operational coordination and resource allocation across each brand s direct to consumer wholesale and licensing operations as applicable Subsequent to our acquisition of Johnny Was in September 2022 our business is organized as our Tommy Bahama Lilly Pulitzer Johnny Was and Emerging Brands operating groups Operating results for periods prior to Fiscal 2022 also include the Lanier Apparel operating group which we exited in Fiscal 2021 For a more extensive description of our reportable operating groups and Corporate and Other see Part I Item 1 Business and Note 2 of our consolidated financial statements both included in this report
We often disclose comparable sales in order to provide additional information regarding changes in our results of operations between periods Our disclosures of comparable sales include net sales from our full price retail stores and e commerce sites excluding sales associated with e commerce flash clearance sales We believe that the inclusion of both full price retail stores and e commerce sites in the comparable sales disclosures is a more meaningful way of reporting our comparable sales results given similar inventory planning allocation and return policies as well as our cross channel marketing and other initiatives for the direct to consumer channels For our comparable sales disclosures we exclude 1 outlet store sales and e commerce flash clearance sales as those clearance sales are used primarily to liquidate end of season inventory which may vary significantly depending on the level of end of season inventory on hand and generally occur at lower gross margins than our non clearance direct to consumer sales and 2 food and beverage sales as we do not currently believe that the inclusion of food and beverage sales in our comparable sales disclosures is meaningful in assessing our total company operations Comparable sales information reflects net sales including shipping and handling revenues if any associated with product sales
For purposes of our disclosures comparable sales consists of sales through e commerce sites and any physical full price retail store that was owned and open as of the beginning of the prior fiscal year and which did not have during the relevant periods and is not within the current fiscal year scheduled to have 1 a remodel or other event which would result in a closure for an extended period of time which we define as a period of two weeks or longer 2 a greater than 15 change in the size of the retail space due to expansion reduction or relocation to a new retail space or 3 a relocation to a new space that is significantly different from the prior retail space For those stores which are excluded based on the preceding sentence the stores continue to be excluded from comparable sales until the criteria for a new store is met subsequent to the remodel relocation or other event A full price retail store that is remodeled will generally continue to be included in our comparable sales metrics as a store is not typically closed for longer than a two week period during a remodel however a full price retail store that is relocated generally will not be included in our comparable sales metrics until that store has been open in the relocated space for the entirety of the prior fiscal year because the size or other characteristics of the store typically change significantly from the prior location Any stores that were closed during the prior fiscal year or current fiscal year or which we expect to close or vacate in the current fiscal year as well as any pop up or temporary store locations are excluded from our comparable sales metrics
The discussion and tables below compare certain line items included in our consolidated statements of operations for Fiscal 2023 which includes 53 weeks to Fiscal 2022 which includes 52 weeks except where indicated otherwise Each dollar and share amount included in the tables is in thousands except for per share amounts We have calculated all percentages based on actual data and percentage columns in tables may not add due to rounding Individual line items of our consolidated statements of operations including gross profit may not be directly comparable to those of our competitors as classification of certain expenses may vary by company
Consolidated net sales were 1 6 billion in the 53 week Fiscal 2023 compared to net sales of 1 4 billion in the 52 week Fiscal 2022 The 11 increase in net sales included 1 a 130 million increase in sales for Johnny Was which we owned for 19 out of the 52 weeks of Fiscal 2022 and 2 single digit percentage increases in each of our Tommy Bahama Lilly Pulitzer and Emerging Brands operating groups We estimate that the 53rd week in Fiscal 2023 provided an approximate 16 million benefit to our consolidated net sales
Tommy Bahama net sales increased 19 million or 2 in Fiscal 2023 with an increase in 1 e commerce sales of 10 million or 5 2 wholesale sales of 8 million or 5 3 food and beverage sales of 7 million or 6 and 4 outlet sales of 3 million or 5 These increases were partially offset by a decrease in full price retail sales of 9 million or 3 The following table presents the proportion of net sales by distribution channel for Tommy Bahama for each period presented
Lilly Pulitzer net sales increased 4 million or 1 in Fiscal 2023 with an increase in e commerce flash clearance sales of 7 million or 13 This increase was partially offset by a decrease in full price e commerce sales of 3 million or 3 Wholesale sales and full price retail sales were comparable in Fiscal 2023 to Fiscal 2022 The following table presents the proportion of net sales by distribution channel for Lilly Pulitzer for each period presented
partially offset by a slight sales decrease in TBBC By distribution channel the 10 million increase included increases of 1 7 million or 126 in retail sales as we opened new retail locations and 2 6 million or 12 in e commerce These increases were partially offset by a 3 million or 5 decrease in wholesale sales that includes the impact of the acquisition and conversion of six former Southern Tide Signature Store operations to company owned retail stores The following table presents the proportion of net sales by distribution channel for Emerging Brands for each period presented
The tables below present gross profit by operating group and in total for Fiscal 2023 and Fiscal 2022 as well as the change between those two periods and gross margin by operating group and in total Our gross profit and gross margin which is calculated as gross profit divided by net sales may not be directly comparable to those of our competitors as the statement of operations classification of certain expenses may vary by company
The increased gross profit of 12 was primarily due to the 11 increase in net sales as well as increased consolidated gross margin The higher gross margin included 1 the higher gross margin of Johnny Was for a full Fiscal 2023 relative to only 19 weeks in Fiscal 2022 with Fiscal 2022 gross margin for Johnny Was impacted by purchase accounting 2 fewer inventory markdowns in the Emerging Brands operating group and 3 reduced freight costs resulting primarily from lower ocean freight rates These increases were partially offset by 1 increased e commerce flash clearance sales in Lilly Pulitzer 2 increased sales during the loyalty award Flip Side marketing and end of season clearance events in Tommy Bahama and 3 7 million in higher LIFO accounting charges in Fiscal 2023 compared to Fiscal 2022 We estimate that the 53rd week in Fiscal 2023 resulted in approximately 10 million of additional gross profit
The comparable gross margin for Tommy Bahama was primarily due to increased sales during special event promotions including loyalty award card Flip Side Friends Family and gift with purchase events and end of season clearance events This decrease was partially offset by 1 reduced freight costs resulting primarily from lower ocean freight rates 2 improved gross margin at food beverage locations primarily resulting from lower food costs and 3 improved gross margin in outlet stores due primarily to the availability of newer product from full price retail stores
The lower gross margin for Lilly Pulitzer was primarily due to 1 a change in sales mix with flash clearance sales representing a larger proportion of net sales 2 higher loyalty reward discounts driven by the new loyalty program implemented in 2023 and 3 a change in sales mix with off price sales representing a larger proportion of wholesale sales These decreases were partially offset by 1 an increase in initial product margins and 2 reduced freight costs resulting primarily from lower ocean freight rates
Gross margin for Fiscal 2023 was 67 8 compared to 61 7 in Fiscal 2022 for the 19 weeks from September 19 2022 through the end of Fiscal 2022 Gross margin in Fiscal 2022 was unfavorably impacted by 4 million of incremental cost of goods sold resulting from the charge related to the step up of inventory to fair value at acquisition
The higher gross margin for Emerging Brands was primarily due to 1 fewer inventory markdowns and 2 a change in sales mix with direct to consumer sales representing a greater proportion of net sales This increase was partially offset by lower gross margin on wholesale sales due to off price wholesale sales of previously marked down inventory representing a greater proportion of wholesale sales
The gross profit in Corporate and Other primarily includes the impact of LIFO accounting adjustments the sales of the Lyons Georgia distribution center operations to third parties and the sales of the Oxford America business The primary driver for the decreased gross profit was the 7 million higher LIFO accounting charge The LIFO accounting impact in Corporate and Other in each period includes the net impact of 1 a charge in Corporate and Other when inventory that had been marked down in an operating group in a prior period was ultimately sold 2 a credit in Corporate and Other when inventory had been marked down in an operating group in the current period but had not been sold as of period end and 3 the change in the LIFO reserve
SG A was 821 million in Fiscal 2023 compared to SG A of 692 million in Fiscal 2022 with approximately 85 million or 66 of the increase due to the SG A of Johnny Was The 19 increase in total SG A in Fiscal 2023 included the following each of which includes the SG A of Johnny Was 1 increased employment costs of 46 million primarily due to increased head count pay rate increases and other employment cost increases including in our direct to
consumer and distribution center operations partially offset by lower incentive compensation amounts 2 a 22 million increase in advertising expense 3 a 15 million increase in occupancy expenses 4 a 12 million increase in variable expenses related to higher sales including credit card transaction fees supplies commissions royalties and other expense 5 a 9 million increase in amortization of intangible assets 6 a 6 million increase in depreciation expense and 7 a 5 million increase in administrative expenses including professional fees travel and other items These increases were partially offset by the lack of 3 million in transaction expenses associated with the Johnny Was acquisition in Fiscal 2022 We estimate that the 53rd week in Fiscal 2023 resulted in approximately 11 million of incremental SG A
As a result of the annual impairment assessments performed in the Fourth Quarter of Fiscal 2023 noncash impairment charges for goodwill and intangible assets totaling 111 million were recognized in the Johnny Was reporting unit The impairment charges for Johnny Was reflect the current challenging macroeconomic environment that has resulted in a more cautious consumer and elevated interest rates for prolonged periods The more cautious consumer has both negatively impacted Johnny Was wholesale customers and direct to consumer operations resulting in Johnny Was not performing as originally projected for Fiscal 2023 and the moderation of forecasted revenue and operating income in future years Interest rates also increased significantly after the acquisition of Johnny Was in September 2022 and have remained at elevated levels leading to an increase in discount rates used in our impairment analyses Refer to Note 5 in the consolidated financial statements included in this report for additional disclosure regarding the Johnny Was impairment charges recognized in Fiscal 2023 There were no impairment charges for goodwill or intangible assets in Fiscal 2022
In the Fourth Quarter of Fiscal 2023 we also recognized noncash impairment charges of 2 million related to an equity method investment in a smaller lifestyle brand that resulted from the entity s forecast of future losses Refer to Equity Investments in Unconsolidated Entities in Note 1 in the consolidated financial statements for additional disclosure regarding the impairment charge recognized in Fiscal 2023 There were no impairment charges for equity method investments in Fiscal 2022
Royalties and other operating income typically consist of royalty income received from third parties from the licensing of our brands Royalty income in Fiscal 2023 decreased by 2 million primarily due to 1 2 million of lower royalties and other operating income in Tommy Bahama resulting from lower sales of our licensing partners and 2 a 2 million loss recognized in the Tommy Bahama Miramonte Resort Spa reflected in Corporate and Other The Tommy Bahama Miramonte Resort Spa was remodeled and rebranded during Fiscal 2023 which led to increased expenses during the remodel and relaunch periods These decreases were partially offset by a 2 million gain on the sale of the Merida manufacturing facility in Mexico in Fiscal 2023
Operating income was 81 million in Fiscal 2023 compared to 219 million in Fiscal 2022 The decreased operating income included lower operating income in all operating groups including an increased operating loss in Corporate and Other Changes in operating income loss by operating group are discussed below
The decreased operating income for Tommy Bahama was primarily due to 1 increased SG A and 2 lower royalty income These decreases were partially offset by higher sales The increased SG A was primarily due to 1 14 million of increased employment costs 2 a 4 million increase in advertising expense 3 4 million of increased variable expenses and 4 a 1 million increase in occupancy expenses These increases were partially offset by a 3 million decrease in administrative expenses including professional fees travel and other items
The decreased operating income for Lilly Pulitzer was due to 1 increased SG A and 2 lower gross margin These decreases were partially offset by higher sales The increased SG A was primarily due to 1 4 million of increased employment costs 2 4 million of increased depreciation and 3 2 million of increased variable expenses
The operating results for Johnny Was in Fiscal 2023 include a full year of operations Fiscal 2022 only included the 19 weeks from September 19 2022 through the end of the fiscal year The lower operating results for Johnny Was in Fiscal 2023 were primarily due to 1 the 111 million impairment charge for goodwill and intangible assets in the Fourth Quarter of Fiscal 2023 2 a 9 million increase in amortization of intangible assets and 3 1 million of costs associated with the implementation of a new e commerce platform These decreases were offset by the absence of 4 million of inventory step up charges recorded in Fiscal 2022
The decreased operating income for Emerging Brands was due to 1 increased SG A and 2 an impairment charge in an unconsolidated entity These decreases were partially offset by 1 higher sales and 2 higher gross margin The increased SG A included 1 higher SG A associated with new retail store operations including related employment costs occupancy costs and administrative expenses 2 higher advertising expense and 3 increased variable expenses resulting from increased sales
The increased operating loss in Corporate and Other was primarily a result of 1 the 7 million higher LIFO accounting charge in Fiscal 2023 relative to Fiscal 2022 and 2 a 2 million equity investment loss associated with the Tommy Bahama Miramonte Resort Spa This decrease was partially offset by 1 decreased SG A including decreased incentive compensation amounts 2 a 2 million gain on the sale of the Merida manufacturing facility in Mexico and 3 the lack of 3 million of transaction expenses and integration costs associated with the Johnny Was acquisition incurred in Fiscal 2022
Both Fiscal 2023 and Fiscal 2022 benefitted from the net favorable impact of certain items that resulted in a lower tax rate than the more typical annual effective tax rate of approximately 25 Thus the effective tax rates for Fiscal 2023 and Fiscal 2022 are not indicative of the effective tax rate expected in future periods Refer to Note 11 of our consolidated financial statements included in this report for our income tax rate reconciliation and other information about our income tax expense for Fiscal 2023 and Fiscal 2022
The income tax expense in Fiscal 2023 included the benefit of the vesting of restricted stock awards at a price significantly higher than the grant date fair value the favorable utilization of research and development tax credits changes in the fair value of life insurance policies associated with our deferred compensation plans and certain adjustments to the U S taxation on foreign earnings These favorable items were partially offset by unfavorable items related to the non deductible amounts associated with executive compensation
The income tax expense in Fiscal 2022 included the benefit of the reversal of 2 million of valuation allowances associated with net operating loss carry forward amounts the utilization of net operating loss carry forward amounts to offset current year income in certain jurisdictions a favorable provision to return adjustment and the impact of the vesting of employee stock awards These favorable items were partially offset by various unfavorable items related to non deductible amounts associated with executive compensation changes in the fair value of life insurance policies associated with our deferred compensation plans and other items
Net earnings per diluted share were 3 82 in Fiscal 2023 compared to 10 19 in Fiscal 2022 The 63 decrease in net earnings per diluted share included a 63 decrease in net earnings as well as a 2 reduction in weighted average shares outstanding due to open market share repurchases in Fiscal 2022 and Fiscal 2023 The decreased net earnings were primarily due to 1 lower operating income at Johnny Was primarily due to the 111 million Johnny Was impairment charge recognized in the Fourth Quarter of Fiscal 2023 2 lower operating income at Tommy Bahama Lilly Pulitzer and Emerging Brands 3 increased interest expense 4 a higher operating loss at Corporate and Other and 5 lower royalty income These decreases were partially offset by a lower effective tax rate
Our primary source of revenue and cash flow is through our design sourcing marketing and distribution of branded apparel products bearing the trademarks of our Tommy Bahama Lilly Pulitzer Johnny Was Southern Tide TBBC Duck Head and Jack Rogers lifestyle brands We primarily distribute our products to our customers via direct to consumer channels of distribution but we also distribute our products via wholesale channels of distribution
Our primary uses of cash flow include the purchase of our branded apparel products from third party suppliers located outside of the United States as well as operating expenses including employee compensation and benefits operating lease commitments and other occupancy related costs marketing and advertising costs information technology costs variable expenses distribution costs other general and administrative expenses and the periodic payment of interest Additionally we use our cash to fund capital expenditures and other investing activities dividends share repurchases and repayment of indebtedness if any In the ordinary course of business we maintain certain levels of inventory extend credit to our wholesale customers and pay our operating expenses Thus we require a certain amount of ongoing working capital to operate our business Our need for working capital is typically seasonal with the greatest working capital requirements to support our larger spring summer and holiday direct to consumer seasons Our capital needs depend on many factors including the results of our operations and cash flows future growth rates the need to finance inventory levels and the success of our various products
We have a long history of generating sufficient cash flows from operations to satisfy our cash requirements for our ongoing capital expenditure needs as well as payment of dividends and repayment of our debt Thus we believe our anticipated future cash flows from operating activities will provide 1 sufficient cash over both the short and long term to satisfy our ongoing operating cash requirements 2 ample funds to continue to invest in our lifestyle brands direct to consumer initiatives and information technology projects 3 additional cash flow to repay outstanding debt and 4 sufficient cash for other strategic initiatives Also if cash inflows are less than cash outflows we have access to amounts under our 325 million Fourth Amended and Restated Credit Agreement as amended the U S Revolving Credit Agreement subject to its terms which is described below
Our working capital ratio is calculated by dividing total current assets by total current liabilities Current assets as of February 3 2024 decreased from January 28 2023 primarily due to decreased inventories of 61 million These decreases were partially offset by an increase in 1 receivables of 19 million and 2 prepaid expenses and other current assets of 5 million Current liabilities as of February 3 2024 decreased from January 28 2023 primarily due to decreases in 1 accrued compensation of 11 million driven primarily by decreased accrued incentive compensation 2 accounts payable of 9 million and 3 current operating lease liabilities of 9 million
Cash and cash equivalents were 8 million as of February 3 2024 compared to 9 million as of January 28 2023 The cash and cash equivalents balance as of February 3 2024 and January 28 2023 represent typical cash amounts maintained on an ongoing basis in our operations which generally ranges from 5 million to 10 million at any given time Any excess cash is generally used to repay amounts outstanding under our U S Revolving Credit Agreement
The increased receivables net as of February 3 2024 was primarily due to 1 higher wholesale trade receivables resulting primarily from higher wholesale sales in Tommy Bahama and Lilly Pulitzer in the Fourth Quarter of Fiscal 2023 2 increased tenant improvement allowance receivables due from landlords resulting from our increased store openings during Fiscal 2023 and 3 an insurance claim filed as a result of the wildfire on the island of Maui that destroyed the Tommy Bahama Marlin Bar in Lahaina Hawaii in the Third Quarter of Fiscal 2023
Inventories net included a 83 million and 76 million LIFO reserve as of February 3 2024 and January 28 2023 respectively Inventories decreased in our Tommy Bahama Lilly Pulitzer and Emerging Brands operating groups primarily due to continuing initiatives to focus on closely managing inventory purchases and reducing on hand inventory levels We believe that inventory levels in all operating groups are appropriate to support anticipated sales plans
The decrease in goodwill and intangible assets net as of February 3 2024 was primarily due to the 99 million and 12 million goodwill and intangible assets net impairment charges in Johnny Was during Fiscal 2023 respectively as discussed in Note 5 of our consolidated financial statements included in this report Intangible assets net as of February 3 2024 further decreased due to the amortization of intangible assets acquired in the acquisition of Johnny Was The decrease in goodwill resulting from the Johnny Was impairment charge was partially offset by 1 the acquisition of Jack Rogers 2 the acquisition of six former Southern Tide signature stores and 3 measurement period adjustments related to the acquisition of Johnny Was
Current liabilities decreased as of February 3 2024 primarily due to 1 decreases in accounts payable which was primarily due to decreased payables associated with lower inventory in transit 2 decreases in accrued incentive compensation and 3 lower current operating lease related liabilities resulting from lease payments partially offset by the addition and extension of several leased locations During Fiscal 2023 several new leased locations were added and several locations were extended which led to the addition of primarily non current operating lease liabilities
In Fiscal 2023 and Fiscal 2022 operating activities provided 244 million and 126 million of cash respectively The cash flow from operating activities for each period primarily consisted of net earnings for the relevant period adjusted as applicable for non cash activities including impairment charges depreciation amortization equity based compensation gains on sale of assets and other non cash items as well as the net impact of changes in deferred income taxes and operating assets and liabilities In Fiscal 2023 changes in operating assets and liabilities had a slightly unfavorable impact on cash flow from operations primarily driven by decreases in current liabilities and increases in prepaid expenses and receivables partially offset by significant decreases in inventory balances In Fiscal 2022 the changes in operating assets and liabilities had a significant net unfavorable impact on cash flow from operations driven primarily by increases in inventory and prepaid expenses
In addition to our capital expenditures in Fiscal 2023 we paid 1 12 million during Fiscal 2023 associated with acquisitions including Jack Rogers and six former Southern Tide Signature Stores and a working capital settlement associated with the acquisition of Johnny Was We also received 2 million from the sale of the Merida manufacturing facility in Mexico During Fiscal 2022 we paid 264 million for the acquisition of Johnny Was and also converted 165 million of short term investments into cash to fund a portion of the acquisition
In Fiscal 2024 our cash flow used in investing activities is expected to primarily consist of our capital expenditure investments in 1 the multi year project to build a new distribution center in the Southeastern United States 2 direct to consumer operations including opening relocating and remodeling locations and 3 information technology initiatives including e commerce capabilities
In Fiscal 2023 and Fiscal 2022 financing activities used 161 million and 12 million of cash respectively In Fiscal 2023 we repurchased 30 million of shares including repurchased shares of our stock pursuant to an open market stock repurchase program and equity awards in respect of employee tax withholding liabilities paid 42 million of dividends and paid 2 million in deferred financing costs associated with the amendment of the U S Revolving Credit Agreement In Fiscal 2022 we repurchased 95 million of shares including repurchased shares of our stock pursuant to an open market stock repurchase program and of equity awards in respect of employee tax withholding liabilities paid
If net cash requirements are less than our net cash flows we may repay amounts outstanding on our U S Revolving Credit Agreement if any consistent with our net repayment of 90 million of long term debt in Fiscal 2023 Alternatively to the extent we are in a net debt position and our net cash requirements exceed our net cash flows we may borrow amounts from our U S Revolving Credit Agreement consistent with our borrowing of 119 million in Fiscal 2022 to fund our investing and financing activities that exceeded cash flow from operations
We have a long history of generating sufficient cash flows from operations to satisfy our cash requirements for our ongoing capital expenditure needs as well as payment of dividends and repayment of our debt Thus we believe our anticipated future cash flows from operating activities will provide 1 sufficient cash over both the short and long term to satisfy our ongoing operating cash requirements 2 ample funds to continue to invest in our lifestyle brands the project to build a new distribution center in the Southeastern United States direct to consumer initiatives and information technology projects 3 additional cash flow to repay outstanding debt and 4 sufficient cash for other strategic initiatives
Our capital needs depend on many factors including the results of our operations and cash flows future growth rates the need to finance inventory and the success of our various products To the extent cash flow needs in the future exceed cash flow provided by our operations we will have access subject to its terms to our U S Revolving Credit Agreement to provide funding for operating activities capital expenditures and acquisitions if any and any other investing or financing activities
Our cash and debt as well as availability levels in future periods will not be comparable to historical amounts particularly after the completion of the acquisition of Johnny Was in Fiscal 2022 Further we continue to assess and may possibly make changes to our capital structure which we may achieve by borrowing from additional credit facilities selling debt or equity securities or repurchasing additional shares of our stock in the future Changes in our capital structure if any will depend on prevailing market conditions our liquidity requirements contractual restrictions and other factors The amounts involved may be material
On March 6 2023 we amended the U S Revolving Credit Agreement to among other things mature in March 2028 As of February 3 2024 we had borrowings of 29 million issued standby letters of credit of 5 million and availability of 288 million under the U S Revolving Credit Agreement The U S Revolving Credit Agreement amended and restated our Fourth Amended and Restated Credit Agreement the Prior Credit Agreement
Pursuant to the U S Revolving Credit Agreement the interest rate applicable to our borrowings under the U S Revolving Credit Agreement is based on either the Term Secured Overnight Financing Rate plus an applicable margin of 135 to 185 basis points or prime plus an applicable margin of 25 to 75 basis points
The U S Revolving Credit Agreement generally 1 is limited to a borrowing base consisting of specified percentages of eligible categories of assets 2 accrues variable rate interest weighted average interest rate of 7 as of February 3 2024 unused line fees and letter of credit fees based upon average utilization or unused availability as applicable 3 requires periodic interest payments with principal due at maturity and 4 is secured by a first priority security interest in substantially all of the assets of Oxford Industries Inc and its domestic subsidiaries including accounts receivable books and records chattel paper deposit accounts equipment certain general intangibles inventory investment property including the equity interests of certain subsidiaries negotiable collateral life insurance policies supporting obligations commercial tort claims cash and cash equivalents eligible trademarks proceeds and other personal property
Also the U S Revolving Credit Agreement is subject to certain negative covenants or other restrictions including among other things limitations on our ability to 1 incur debt 2 guaranty certain obligations 3 incur liens 4 pay dividends to shareholders 5 repurchase shares of our common stock 6 make investments 7 sell assets or stock of subsidiaries 8 acquire assets or businesses 9 merge or consolidate with other companies or 10 prepay retire repurchase or redeem debt
Additionally the U S Revolving Credit Agreement contains a financial covenant that applies only if excess availability under the agreement for three consecutive business days is less than the greater of 1 23 5 million or 2 10 of availability In such a case our fixed charge coverage ratio as defined in the U S Revolving Credit Agreement must not be less than 1 0 to 1 0 for the immediately preceding 12 fiscal months for which financial statements have been delivered This financial covenant continues to apply until we have maintained excess availability under the U S Revolving Credit Agreement of more than the greater of 1 23 5 million or 2 10 of availability for 30 consecutive days
We believe that the affirmative covenants negative covenants financial covenants and other restrictions under the U S Revolving Credit Agreement are customary for those included in similar facilities entered into at the time we amended the U S Revolving Credit Agreement During Fiscal 2023 and as of February 3 2024 no financial covenant testing was required pursuant to our U S Revolving Credit Agreement or the Prior Credit Agreement as applicable as the minimum availability threshold was met at all times As of February 3 2024 we were compliant with all applicable covenants related to the U S Revolving Credit Agreement
In the ordinary course of business we enter into long term real estate lease agreements for our direct to consumer locations which include both retail store and food and beverage locations and office and warehouse distribution space as well as leases for certain equipment Our real estate leases have varying terms and expirations and may have provisions to extend renew or terminate the lease agreement at our discretion among other provisions Our real estate lease terms are typically for a period of 10 years or less and typically require monthly rent payments with specified rent escalations during the lease term Our real estate leases usually provide for payments of our pro rata share of real estate taxes insurance and other operating expenses applicable to the property and certain of our leases require payment of sales taxes on rental payments Also our direct to consumer location leases often provide for contingent rent payments based on sales if certain sales thresholds are achieved Base rent amounts specified in the leases are included in determining the operating lease liabilities included in our consolidated balance sheet while amounts for real estate taxes sales tax insurance other operating expenses and contingent rent applicable to the properties pursuant to the respective leases are not included in determining the operating lease liabilities included in our consolidated balance sheets
These leases require us to make a substantial amount of cash payments on an annual basis Base rent amounts required to be paid in the future over the remaining lease terms under our existing leases as of February 3 2024 totaled 368 million including 79 million 64 million 58 million 45 million and 39 million of required payments in each of the next five years Additionally amounts for real estate taxes sales tax insurance other operating expenses and contingent rent applicable to the properties pursuant to the respective operating leases are required to be paid in the future but the amounts payable in future periods are in most cases not quantified in the lease agreement or are dependent on factors which may not be known at this time Such amounts incurred in Fiscal 2023 totaled 48 million
We anticipate capital expenditures for Fiscal 2024 to increase compared to the 74 million in Fiscal 2023 The planned increase is primarily due the commencement of a significant multi year project at our new Lyons Georgia distribution center to modernize the operations into a more efficient e commerce distribution center for our brands increased investment in our various technology systems initiatives increased Marlin Bar openings and increases in store openings in Tommy Bahama Lilly Pulitzer Johnny Was Southern Tide and TBBC Our capital expenditure amounts in
Although we have paid dividends each quarter since we became a public company in July 1960 including 42 million in total or 2 60 per common share in Fiscal 2023 we may discontinue or modify dividend payments at any time if we determine that other uses of our capital including payment of outstanding debt funding of acquisitions funding of capital expenditures or repurchases of outstanding shares may be in our best interest if our expectations of future cash flows and future cash needs outweigh the ability to pay a dividend or if the terms of our credit facility other debt instruments or applicable law limit our ability to pay dividends We may borrow to fund dividends or repurchase shares in the short term subject to the terms and conditions of our credit facility other debt instruments and applicable law All cash flow from operations will not be paid out as dividends For details about limitations on our ability to pay dividends see the discussion of our U S Revolving Credit Agreement above and in Note 6 of our consolidated financial statements contained in this report
As disclosed in our Quarterly Report on Form 10 Q for the Third Quarter of Fiscal 2021 and in subsequent filings on December 7 2021 our Board of Directors authorized us to spend up to 150 million to repurchase shares of our stock This authorization superseded and replaced all previous authorizations to repurchase shares of our stock and has no automatic expiration Pursuant to the Board of Directors authorization we entered into a 20 million open market stock repurchase program Rule 10b5 1 plan in the First Quarter of Fiscal 2023 to acquire shares of our stock under which we repurchased shares of our stock totaling 1 19 million in Second Quarter of Fiscal 2023 and 2 1 million in the Third Quarter of Fiscal 2023 which completed the purchases pursuant to the open market stock repurchase program Over the life of the 20 million open market repurchase program we repurchased 196 000 shares or 1 of our outstanding shares at the commencement of the program for an average price of 102 per share
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which have been prepared in accordance with GAAP in a consistent manner The preparation of these financial statements requires the selection and application of accounting policies Further the application of GAAP requires us to make estimates and judgments about future events that affect the reported amounts of assets liabilities revenues and expenses and related disclosures We base our estimates on historical experience current trends and various other assumptions that we believe are reasonable under the circumstances the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources
Actual results may differ from these estimates under different assumptions or conditions We believe it is possible that other professionals applying reasonable judgment to the same set of facts and circumstances could develop and support a range of alternative estimated amounts We believe that we have appropriately applied our critical accounting
A detailed summary of significant accounting policies is included in Note 1 of our consolidated financial statements contained in this report The following is a brief discussion of the more significant estimates assumptions and judgments we use or the amounts most sensitive to change from outside factors
Our revenue consists of direct to consumer sales including our retail store e commerce and food and beverage operations and wholesale sales as well as royalty income which is included in royalties and other income in our consolidated statements of operations We recognize revenue when performance obligations under the terms of the contracts with our customers are satisfied which generally occurs when we deliver our products to our direct to consumer and wholesale customers
In our direct to consumer operations which represented 80 of our consolidated net sales in Fiscal 2023 consumers have certain rights to return product within a specified period and are eligible for certain point of sale discounts We make estimates of reserves for products which were sold prior to the balance sheet date but that we anticipate may be returned by the consumer subsequent to that date The determination of direct to consumer return reserve amounts requires judgment and consideration of historical and current trends evaluation of current economic trends and other factors As of February 3 2024 our direct to consumer return reserve liability was 13 million compared to 12 million as of January 28 2023 A 10 change in the direct to consumer sales return reserve as of February 3 2024 would have had an impact of less than 1 million on net earnings in Fiscal 2023
In the ordinary course of our wholesale operations we offer discounts allowances and cooperative advertising support to some of our wholesale accounts for certain products As certain allowances other deductions and returns are not finalized until the end of a season program or other event which may not have occurred yet we estimate such discounts allowances and returns on an ongoing basis to estimate the consideration from the customer that we expect to ultimately receive Significant considerations in determining our estimates for these amounts for wholesale customers may include historical and current trends agreements with customers projected seasonal or program results an evaluation of current economic conditions specific program or product expectations and retailer performance As of February 3 2024 our total reserves for discounts returns and allowances for our wholesale businesses were 3 million compared to 4 million as of January 28 2023 If these allowances changed by 10 it would have had an impact of less than 1 million on net earnings in Fiscal 2023
We extend credit to certain wholesale customers based on an evaluation of the customer s financial capacity and condition usually without requiring collateral We recognize estimated provisions for credit losses based on our historical collection experience the financial condition of our customers an evaluation of current economic conditions anticipated trends and the risk characteristics of the receivables each of which is subjective and requires certain assumptions As of both February 3 2024 and January 28 2023 our provision for credit losses for our wholesale receivables was 1 million If the provision for credit losses changed by 10 it would have had an impact of less than 1 million on net earnings in Fiscal 2023
For operating group reporting our inventory is carried at the lower of the first in first out FIFO cost or market We evaluate the composition of our inventories for identification of distressed inventory at least quarterly We estimate the amount of goods that we will not be able to sell in the normal course of business and write down the value of these goods as necessary As the amount to be ultimately realized for the goods is not necessarily known at period end we must use certain assumptions considering historical experience inventory quantity quality age and mix historical sales trends future sales projections consumer and retailer preferences market trends general economic conditions and our anticipated plans to sell the inventory
For consolidated financial reporting 146 million or 92 of our inventories were valued at the lower of the last in first out LIFO cost or market after deducting the 83 million LIFO reserve as of February 3 2024 The remaining 13 million of our inventories were valued at the lower of FIFO cost or market as of February 3 2024 LIFO reserves are based on the Producer Price Index PPI as published by the United States Department of Labor We write down inventories valued at the lower of LIFO cost or market when LIFO cost exceeds market value
As of February 3 2024 we had recorded a reserve of 4 million related to inventory on the lower of FIFO cost or market method and for inventory on the lower of LIFO cost or market method with markdowns in excess of our LIFO reserve A 10 change in the amount of such markdowns would have had an impact of less than 1 million on net earnings in Fiscal 2023 A change in the markdowns of our inventory valued at the lower of LIFO cost or market method that is not marked down in excess of our LIFO reserve typically would not be expected to have a material impact on our consolidated financial statements A change in inventory levels the mix of inventory by category or the PPI at the end of future fiscal years compared to amounts as of February 3 2024 could result in a material impact on our consolidated financial statements in the future
Given the significant amount of uncertainty surrounding the year end LIFO calculation including the estimate of year end inventory balances the proportion of inventory in each category and the year end PPI we have not typically adjusted our LIFO reserve in the first three quarters of a fiscal year However due to changes in the levels of inflation throughout Fiscal 2023 in addition to our Fourth Quarter adjustment at the end of Fiscal 2023 we also recognized an adjustment to the LIFO reserve in the Third Quarter of Fiscal 2023 Our policy of typically not adjusting the LIFO reserve at interim periods may result in significant LIFO accounting adjustments in the Fourth Quarter of the fiscal year We do recognize changes in markdown reserves during each quarter of the fiscal year as those amounts can be estimated on an interim basis
From time to time we make strategic acquisitions that may have a material effect on our consolidated results of operations and financial position The measurement principle for the assets acquired and the liabilities assumed in a business combination is at estimated fair value as of the acquisition date with certain exceptions
At acquisition we use estimates that can be complex and require significant judgments to record the fair value of purchased intangible assets which primarily consist of trademarks as well as customer relationships and reacquired rights The fair values and useful lives of these intangible assets are estimated based on our assessment as well as independent third party appraisals in some cases Additionally at acquisition we must determine whether the intangible asset has an indefinite or finite life and account for it accordingly Refer to Note 5 for additional details about intangible assets
Goodwill is recognized as the amount by which the cost to acquire a business exceeds the fair value of identified tangible and intangible assets acquired net of assumed liabilities Thus the amount of goodwill recognized in connection with a business combination depends on the fair values assigned to the individual assets acquired and liabilities assumed in a business combination Goodwill is allocated to the respective reporting unit at the time of acquisition Refer to Note 5 Intangible Assets and Goodwill Intangible Assets and Goodwill for additional information about our goodwill amounts
At acquisition assumptions and estimates about various items with significant uncertainty are required to determine the fair value of intangible assets and goodwill When determining the fair value of intangible assets including trademarks customer relationships and other items significant assumptions may include our planned use of the asset as well as estimates of net sales royalty income operating income growth rates royalty rates for the trademarks a risk adjusted market based cost of capital for the discount rates income tax rates anticipated cash flows and probabilities of cash flows among other factors Our fair value assessment may also consider any comparable market transactions The use of different assumptions related to these uncertain factors at acquisition could result in a material change to the amounts of intangible assets and goodwill initially recorded at acquisition which could result in a material impact on our consolidated financial statements
The acquisition method requires us to record provisional amounts for any items for which the accounting is not complete at the end of a reporting period We must complete the accounting during the measurement period which cannot exceed one year Adjustments made during the measurement period could have a material impact on our financial condition and results of operations If our operating results plans for the acquired business and or macroeconomic conditions anticipated results or other assumptions change after an acquisition it could result in the impairment of the acquired intangible assets or goodwill Also a change in macroeconomic conditions may not only impact the estimated operating cash flows used in our cash flow models but may also impact other assumptions used in our analysis including but not limited to the risk adjusted market based cost of capital and or discount rates
We test goodwill for impairment at the reporting unit level annually on the first day of the fourth quarter and more often if an event occurs or circumstances change that indicate the fair value of a reporting unit is below its carrying amount We have the option to first assess qualitative factors to determine whether it is more likely than not that goodwill is impaired to determine whether it is necessary to perform the quantitative impairment test We also have the option to bypass the qualitative assessment entirely for any reporting unit in any period and proceed directly to performing the quantitative impairment test For each impairment test of goodwill in Fiscal 2023 Fiscal 2022 and Fiscal 2021 we bypassed the qualitative test option and instead performed a quantitative test
When applying the quantitative assessment we determine the fair value of our reporting units based on an income approach or in some cases a combination of an income approach and market approach The income approach calculates a value based upon the present value of estimated future cash flows while the market approach uses earnings multiples of similarly situated guideline public companies Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions which include assumptions regarding the revenue growth rates and operating margins used to calculate estimated future cash flows risk adjusted discount rates and future economic and market conditions If an annual or interim analysis indicates an impairment of goodwill the amount of the impairment is recognized in our consolidated financial statements based on the amount that the carrying value exceeds the estimated fair value of the reporting unit
Intangible assets with indefinite lives which primarily consist of trademarks are not amortized but instead evaluated for impairment annually or more frequently if events or circumstances indicate that the intangible asset might be impaired This analysis is dependent upon a number of uncertain factors described below and is typically performed in conjunction with the goodwill impairment analysis discussed above and is similar to the analysis performed at acquisition
The fair value of our trademarks is principally determined by the relief from royalty approach that assumes the trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them This method includes assumptions regarding revenue growth rates royalty rates risk adjusted discount rates and future economic and market conditions If an annual or interim analysis indicates an impairment of an intangible asset with an indefinite useful life the amount of the impairment is recognized in our consolidated financial statements based on the amount that the carrying value exceeds the estimated fair value of the asset for an intangible asset with an indefinite life or the reporting unit for goodwill
Indefinite lived intangible assets and goodwill that have been recently acquired or impaired are typically much more sensitive to changes in assumptions than other intangible asset and goodwill amounts as those amounts have recently been recorded at or adjusted to fair value Consequently if operating results plans for the acquired business and or macroeconomic conditions change after an acquisition it could result in the impairment of the acquired intangible assets or goodwill A change in macroeconomic conditions may not only impact the estimated operating cash flows used in our cash flow models but may also impact other assumptions used in our analysis including but not limited to the risk adjusted market based cost of capital and or discount rates Additionally we are required to ensure that assumptions used to determine fair value in our analyses are consistent with the assumptions a hypothetical market participant would use Therefore the cost of capital discount rates used in our analyses may increase or decrease based on market conditions and trends regardless of whether our actual cost of capital changed
The use of different assumptions could result in the determination of a different fair value and a different impairment charge or charges in different periods For further discussion of the methods used and factors considered in our estimates as part of the impairment testing for goodwill and intangible assets with indefinite lives see Note 1 Business and Summary of Significant Accounting Policies See Note 5 Intangible Assets and Goodwill Intangible Assets and Goodwill for discussion of the impairment charges recognized in Fiscal 2023 The indefinite lived trademarks and goodwill associated with Johnny Was that were impaired and adjusted to fair value during Fiscal 2023 have the least excess of fair value over book value as of February 3 2024 since they are the most recently acquired and impaired Thus if the Johnny Was business does not achieve the anticipated growth and operating income in future years or if interest rates or tax rates increase additional impairments of the Johnny Was intangible assets could be necessary in the future No impairment charges related to intangible assets or goodwill were recognized in Fiscal 2022 and Fiscal 2021
Intangible assets with finite lives primarily consist of customer relationships certain trademarks and reacquired rights These assets are amortized over their estimated useful lives and reviewed for impairment periodically if events or changes in circumstances indicate that the carrying amount may not be recoverable If the assets are determined to not be recoverable on an undiscounted cash flow basis and the expected future discounted cash flows of the asset group are less than the carrying amount an asset group is impaired and a loss is recorded for the amount by which the carrying value of the asset group exceeds its fair value
For many assets and liabilities the determination of fair value may not require the use of many assumptions or other estimates However in some cases the assumptions or inputs associated with the determination of fair value may require the use of many assumptions which may be internally derived or otherwise unobservable These assumptions may include the planned use of the assets anticipated cash flows probabilities of cash flows discount rates and other factors We use certain market based and internally derived information and make assumptions about the information in 1 determining the fair values of assets and liabilities acquired as part of a business combination 2 adjusting recognized assets and liabilities to fair value and 3 assessing recognized assets for impairment including intangible assets goodwill and other non current assets
From time to time we may recognize asset impairment or other charges related to certain lease assets property and equipment or other amounts associated with us exiting direct to consumer locations office space or otherwise In these cases we must determine the impairment charge related to the asset group if the assets are determined to not be recoverable on an undiscounted cash flow basis and the expected future discounted cash flows of the asset group are less than the carrying amount While estimated cash outflows can be determined in certain cases if there is an underlying lease the timing and amount of estimated cash inflows for any sublease rental income and other costs are often uncertain particularly if there is not a sub lease agreement in place Also we could subsequently negotiate a lease termination agreement that would differ from the estimated amount Thus our estimate of an impairment charge related to an asset group could change significantly as we obtain better information in future periods
Income taxes included in our consolidated financial statements are determined using the asset and liability method in which income taxes are recognized based on amounts of income tax payable or refundable in the current year as well as the impact of any items that are recognized in different periods for consolidated financial statement reporting purposes and tax return reporting purposes Significant judgment is required in determining our income tax provision as there are many transactions and calculations where the ultimate tax outcome is uncertain and tax laws and regulations are often complex and subject to interpretation and judgment These uncertainties relate to the recognition or changes to the realizability of deferred tax assets loss carry forwards valuation allowances uncertain tax positions and other matters Our assessment of these income tax matters requires our consideration of taxable income and other items for historical periods projected future taxable income projected future reversals of existing timing differences tax planning strategies and other information
The use of different assumptions related to the income tax matters above as well as a shift in earnings among jurisdictions changes in tax laws enacted rates or interpretations court case decisions statute of limitation expirations or audit settlements each could have a significant impact on our income tax rate
We are subject to income taxes in the U S and certain other foreign jurisdictions and are periodically under audit by tax authorities The final determination of tax audits could be materially different from historical outcomes and may adversely impact our tax expense and cash flows An increase in our consolidated income tax expense rate from 19 0 to 20 0 during Fiscal 2023 would have reduced net earnings by 1 million See Note 11 of our consolidated financial statements included in this report for further discussion of income taxes
Each of our operating groups is impacted by seasonality as the demand by specific product or style as well as by distribution channel may vary significantly depending on the time of year For information regarding the impact of seasonality on our business operations see Part I Item 1 Business included in this report
We are exposed to market risk in the ordinary course of business from changes in interest rates commodity prices and foreign currency exchange rates In recent years we have not used financial instruments to mitigate our exposure to these risks and we do not use financial instruments for trading or other speculative purposes However we could use financial instruments to mitigate our exposure to these risks in the future
We are exposed to market risk from changes in interest rates on our U S Revolving Credit Agreement when we have any borrowings outstanding which could impact our financial condition and results of operations in future periods Our U S Revolving Credit Agreement accrues interest based on variable interest rates while providing the necessary borrowing flexibility we require due to the seasonality of our business and our need to fund certain product purchases with trade letters of credit Additionally for the amounts of unused credit under the U S Revolving Credit Agreement we pay unused line fees which are based on a specified percentage of the unused line amounts
As of February 3 2024 we had 29 million of borrowings outstanding under our U S Revolving Credit Agreement after borrowing amounts to fund the Johnny Was acquisition in Fiscal 2022 We do not consider that amount to necessarily be indicative of the average borrowings outstanding expected for Fiscal 2024 due to our expectation that we will reduce debt levels during Fiscal 2024 particularly in the first quarter Our expected cash flows from operations is expected to be sufficient to fund our planned capital expenditures and dividends as well as allow for the repayment of a portion of our outstanding debt in Fiscal 2024 As of February 3 2024 the weighted average interest rate on our borrowings was 7 which includes borrowings pursuant to arrangements based on the Term Secured Overnight Financing Rate or the lender s prime rate plus an applicable margin Using the 29 million of variable rate debt outstanding as of February 3 2024 as an example a 100 basis point increase in interest rates would increase interest expense by less than 1 million
We have exposure to foreign currency exchange rate changes including the impact of the re measurement of transaction amounts into the respective functional currency and the translation of our foreign subsidiary financial statements into U S dollars Also although we purchase substantially all of our product purchases pursuant to a U S dollar
With 97 of our consolidated net sales in the United States we do not anticipate that the impact of foreign currency changes on our foreign operations would have a material impact on our consolidated net sales operating income or net earnings in the near term Our foreign currency exchange rate risk is discussed in Foreign Currency in Note 1 of our consolidated financial statements included in this report
We are affected by inflation and changing prices through the purchase of full package finished goods from suppliers who manufacture products consisting of various raw material components including fabrics made of cotton silk linen polyester cellulosic fibers leather and other natural and man made fibers or blends of two or more of these materials Inflation deflation risks are managed by each operating group when possible through negotiating product prices in advance selective price increases and cost containment initiatives We have not historically entered into significant long term sales or purchase contracts or engaged in hedging activities with respect to our commodity risks
We are a leading branded apparel company that designs sources markets and distributes products bearing the trademarks of our Tommy Bahama Lilly Pulitzer Johnny Was Southern Tide The Beaufort Bonnet Company Duck Head and Jack Rogers lifestyle brands We distribute our products through our direct to consumer channels consisting of our brand specific full price retail stores e commerce websites and outlet stores and our wholesale distribution channel which includes sales to various specialty stores Signature Stores better department stores multi branded e commerce websites and other retailers Additionally we operate Tommy Bahama food and beverage locations including Marlin Bars and full service restaurants generally adjacent to a Tommy Bahama full price retail store
On September 19 2022 we acquired the Johnny Was lifestyle apparel brand and its related assets and operations which is discussed in further detail in Note 4 Also in Fiscal 2021 we exited our Lanier Apparel business as discussed in Note 12 Additionally refer to Note 2 for certain financial information about the Johnny Was and Lanier Apparel operating groups
The COVID 19 pandemic had a significant effect on overall economic conditions and our operations in recent years and accelerated or exacerbated many of the challenges in the industry Exceptionally strong consumer demand along with the strength of our brands resulted in record earnings for us during both Fiscal 2021 and Fiscal 2022 The strong earnings in recent periods are despite certain challenges in the retail apparel market including labor shortages supply chain disruptions and product and operating cost increases in Fiscal 2021 and Fiscal 2022 We as well as others in our industry have increased prices to attempt to offset inflationary pressures
Further negative economic conditions often have a longer and more severe impact on the apparel industry than on other industries due in part to apparel purchases often being more of a discretionary purchase The current macroenvironment with heightened concerns about inflation a global economic recession geopolitical issues the stability of the U S banking system the availability and cost of credit and elevated interest rates for prolonged periods is creating a complex and challenging retail environment which impacted our businesses during Fiscal 2023 and continues to affect our operations As a result of the macroeconomic environment we saw reduced conversion rates in our direct to consumer operations and a year over year decline in net earnings and operating income There remains significant uncertainty in the macroeconomic environment and the impact of these and other factors could have a major effect on our businesses
We operate and report on a 52 53 week fiscal year Our fiscal year ends on the Saturday closest to January 31 and is designated by the calendar year in which the fiscal year commences As used in our consolidated financial statements the terms Fiscal 2021 Fiscal 2022 Fiscal 2023 and Fiscal 2024 reflect the 52 weeks ended January 29 2022 52 weeks ended January 28 2023 53 weeks ended February 3 2024 and 52 weeks ending February 1 2025 respectively
Our consolidated financial statements include the accounts of Oxford Industries Inc and any other entities in which we have a controlling financial interest including our wholly owned domestic and foreign subsidiaries or variable interest entities for which we are the primary beneficiary if any Generally we consolidate businesses in which we have a controlling financial interest which may be evidenced through ownership of a majority voting interest or other rights which might indicate that we are the primary beneficiary of the entity The primary beneficiary has both the power to direct the activities of the entity that most significantly impact the entity s economic performance and the obligation to absorb
From time to time we make strategic acquisitions that may have a material effect on our consolidated results of operations and financial position The measurement principle for the assets acquired and the liabilities assumed in a business combination is at estimated fair value as of the acquisition date with certain exceptions
At acquisition we use estimates that can be complex and require significant judgments to record the fair value of purchased intangible assets which primarily consist of trademarks as well as customer relationships and reacquired rights The fair values and useful lives of these intangible assets are estimated based on our assessment as well as independent third party appraisals in some cases The cost of each acquired business is allocated to the individual tangible and intangible assets acquired and liabilities assumed or incurred as a result of an acquisition based on their estimated fair values pursuant to the acquisition method of accounting Additionally at acquisition we must determine whether the intangible asset has an indefinite or finite life and account for it accordingly
Goodwill is recognized as the amount by which the cost to acquire a business exceeds the fair value of identified tangible and intangible assets acquired net of assumed liabilities Thus the amount of goodwill recognized in connection with a business combination depends on the fair values assigned to the individual assets acquired and liabilities assumed in a business combination Goodwill is allocated to the respective reporting unit at the time of acquisition As of February 3 2024 substantially all goodwill included in our consolidated balance sheet is deductible for income tax purposes
At acquisition as well as any subsequent impairment tests assumptions and estimates about various items with significant uncertainty are required to determine the fair value of intangible assets and goodwill When determining the fair value of intangible assets including trademarks customer relationships and other items significant assumptions may include our planned use of the asset as well as estimates of net sales royalty income operating income growth rates royalty rates for the trademarks a risk adjusted market based cost of capital for the discount rates income tax rates anticipated cash flows and probabilities of cash flows among other factors Our fair value assessment may also consider any comparable market transactions The use of different assumptions related to these uncertain factors at acquisition could result in a material change to the amounts of intangible assets and goodwill initially recorded at acquisition which could result in a material impact on our consolidated financial statements Additionally the definition of fair value of inventories acquired as part of a business combination generally will equal the expected sales price less certain costs associated with selling the inventory which may exceed the actual cost of the acquired inventories resulting in an inventory step up to fair value at acquisition which would be recognized in our consolidated statements of operations as the acquired inventory is sold
Our estimates of the purchase price allocation of a business combination may be revised during a measurement period as necessary when and if information becomes available to revise the fair values of the assets acquired and the liabilities assumed Actual fair values ultimately assigned to the acquired assets and liabilities when final information is available may materially differ from our preliminary estimates during the measurement period The allocation period may not exceed one year from the date of the acquisition Should information become available after the allocation period indicating that an adjustment to the purchase price allocation is appropriate that adjustment will be included in our consolidated statements of operations The results of operations of acquired businesses are included in our consolidated statements of operations from the respective dates of the acquisitions Transaction costs related to business combinations are included in SG A in our consolidated statements of operations as incurred
Our revenue consists of direct to consumer sales including our retail store e commerce and food and beverage operations and wholesale sales as well as royalty income which is included in royalties and other income in our consolidated statements of operations Revenue is recognized at an amount that reflects the consideration expected to be received for those goods and services pursuant to a five step approach 1 identify the contracts with the customer 2 identify the separate performance obligations in the contracts 3 determine the transaction price 4 allocate the transaction price to separate performance obligations and 5 recognize revenue when or as each performance obligation is satisfied The table below quantifies the amount of net sales by distribution channel in thousands for each period presented
We recognize revenue when performance obligations under the terms of the contracts with our customers are satisfied which generally occurs when we deliver our products to our direct to consumer and wholesale customers Control of the product is generally transferred upon providing the product to consumers in our bricks and mortar retail stores and food and beverage locations upon physical delivery of the products to consumers in our e commerce operations and upon shipment from our distribution center to customers in our wholesale operations Once control is transferred to the customer we have completed our performance obligations related to the contract and have an unconditional right to consideration for the products sold as outlined in the contract Our receivables resulting from contracts with customers in our direct to consumer operations are generally collected within a few days upon settlement of the credit card transaction while our receivables resulting from contracts with our customers in our wholesale operations are generally due within one quarter in accordance with established credit terms All of our performance obligations under the terms of our contracts with customers in our direct to consumer and wholesale operations have an expected original duration of one year or less We only recognize revenue to the extent that it is probable that we will not have a significant reversal of revenue in a future period Our revenue including any freight income is recognized net of applicable taxes in our consolidated statements of operations
In our direct to consumer operations consumers have certain rights to return product within a specified period and are eligible for certain point of sale discounts thus retail store e commerce and food and beverage revenues are recorded net of estimated returns and discounts as applicable The sales return allowance is based on historical direct to consumer return rates and current trends and is recognized on a gross basis as a return liability for the amount of sales estimated to be returned and a return asset for the right to recover the product estimated to be returned by the customer The value of inventory associated with a right to recover the goods returned in our direct to consumer operations is included in prepaid expenses and other current assets in our consolidated balance sheets The changes in the return liability are recognized in net sales and the changes in the return asset are recognized in cost of goods sold in our consolidated statements of operations An estimated sales return liability of 13 million and 12 million for expected direct to consumer returns is classified in accrued expenses and other liabilities in our consolidated balance sheet as of February 3 2024 and January 28 2023 respectively
In the ordinary course of our wholesale operations we offer discounts allowances and cooperative advertising support to some of our wholesale customers for certain products Some of these arrangements are written agreements while others may be implied by customary practices or expectations in the industry As certain allowances other deductions and returns are not finalized until the end of a season program or other event which may not have occurred
yet we estimate such discounts allowances and returns on an ongoing basis to estimate the consideration from the customer that we expect to ultimately receive Significant considerations in determining our estimates for discounts allowances operational chargebacks and returns for wholesale customers may include historical and current trends agreements with customers projected seasonal or program results an evaluation of current economic conditions specific program or product expectations and retailer performance We record the discounts returns allowances and operational chargebacks as a reduction to net sales in our consolidated statements of operations and as a reduction to receivables net in our consolidated balance sheets with the estimated value of inventory expected to be returned in prepaid expenses and other current assets in our consolidated balance sheets As of February 3 2024 and January 28 2023 reserve balances recorded as a reduction to wholesale receivables related to these items were 3 million and 4 million respectively
We extend credit to certain wholesale customers based on an evaluation of the customer s financial capacity and condition usually without requiring collateral In circumstances where we become aware of a specific wholesale customer s inability to meet its financial obligations a specific provision for credit losses is taken as a reduction to accounts receivable to reduce the net recognized receivable to the amount reasonably expected to be collected Such amounts are ultimately written off at the time that the amounts are not considered collectible For our wholesale customer receivable amounts not specifically provided for we recognize estimated provisions for credit losses using the current expected loss model based on our historical collection experience the financial condition of our customers an evaluation of current economic conditions anticipated trends and the risk characteristics of the receivables Provisions for credit loss expense which is included in SG A in our consolidated statements of operations for Fiscal 2023 Fiscal 2022 and Fiscal 2021 were a credit of less than 1 million a credit of less than 1 million and a credit of 1 million respectively while write offs of credit losses for Fiscal 2023 Fiscal 2022 and Fiscal 2021 were less than 1 million less than 1 million and less than 1 million respectively As of both February 3 2024 and January 28 2023 receivables net in our consolidated balance sheet included a provision for credit losses related to trade receivables of 1 million
In addition to trade receivables tenant allowances due from landlord of 6 million and 2 million are included in receivables net in our consolidated balance sheet as of February 3 2024 and January 28 2023 respectively Substantially all other amounts recognized in receivables net represent trade receivables related to contracts with customers including receivables from wholesale customers credit card receivables related to our direct to consumer operations and receivables from licensing partners As of both February 3 2024 and January 28 2023 prepaid expenses and other current assets included 4 million representing the estimated value of inventory for expected direct to consumer and wholesale sales returns in the aggregate We did not have any significant contract assets related to contracts with customers other than trade receivables and the value of inventory associated with expected sales returns as of February 3 2024 and January 28 2023
In addition to our estimated expected return amounts contract liabilities related to contracts with our customers include gift cards and merchandise credits issued by us as well as unredeemed loyalty program award points Gift cards and merchandise credits issued by us are redeemable on demand by the holder do not have an expiration date and do not incur administrative fees Historically substantially all gift cards and merchandise credits are redeemed within one year of issuance Gift cards and merchandise credits are recorded as a liability until our performance obligation is satisfied which occurs when redeemed by the consumer at which point revenue is recognized However we recognize estimated breakage income for certain gift cards and merchandise credits using the redemption recognition method subject to applicable laws in certain states Contract liabilities for gift cards purchased by consumers and merchandise credits received by customers but not yet redeemed less any breakage income recognized to date is included in accrued expenses and other liabilities in our consolidated balance sheets and totaled 20 million and 19 million as of February 3 2024 and January 28 2023 respectively Gift card breakage income which is included in net sales in our consolidated statements of operations was 1 million in each of Fiscal 2023 Fiscal 2022 and Fiscal 2021
In Fiscal 2021 each of our brands in our Emerging Brands operating group initiated brand specific loyalty award programs These programs allow consumers to earn loyalty points associated with the brand Lilly Pulitzer initiated also initiated a program in Fiscal 2023 These programs are primarily spend based loyalty programs with varying terms and conditions for each respective brand s program The consumer earns points which depending on the program allows the
consumer to 1 achieve a specified status with the brand which provides the consumer with benefits such as early access to events free shipping or other benefits for a specified period and or 2 earn a monetary reward by accumulating loyalty points that can be redeemed in association with future purchases from the brand As loyalty points are earned we defer revenue based on the estimated fair value of the loyalty points with a corresponding liability in accrued expenses and other liabilities in our consolidated balance sheets The loyalty points liability is generally recognized as revenue when the loyalty points are redeemed or expire Deferred revenue associated with the loyalty programs totaled 3 million and 1 million as of February 3 2024 and January 28 2023 respectively
Royalties from the license of our owned brands are recognized over the time that licensees are provided access to utilize our trademarks i e symbolic intellectual property and benefit from such access through their sales of licensed products Payments are generally due quarterly and depending on time of receipt may be recorded as a liability until recognized as revenue Royalty income is based upon the contractually guaranteed minimum royalty obligations and adjusted as sales data or estimates thereof received from licensees reflects that the related royalties based on a percentage of the licensee s sales exceed the contractually determined minimum royalty amount Royalty income which is included in royalties and other operating income in our consolidated statements of operations were 19 million 22 million and 18 million during Fiscal 2023 Fiscal 2022 and Fiscal 2021 respectively
We include in cost of goods sold 1 the cost paid to the suppliers for the acquired product 2 sourcing procurement and other costs incurred prior to or in association with the receipt of finished goods at our distribution facilities and 3 freight from our distribution facilities to our own retail stores e commerce consumers and wholesale customers The costs prior to receipt at our distribution facilities include inbound freight charges duties and other import costs brokers fees consolidators fees insurance direct labor and depreciation expense associated with our sourcing operations We generally classify amounts billed to customers for freight in net sales and classify freight costs for shipments to customers in cost of goods sold in our consolidated statements of operations
We include in SG A costs incurred subsequent to the receipt of finished goods at our distribution facilities such as the cost of inspection stocking warehousing picking and packing and costs associated with the operations of our e commerce sites retail stores food and beverage locations and concessions such as labor lease commitments and other occupancy costs direct to consumer location pre opening costs including rent marketing store set up costs and training expenses depreciation and other amounts SG A also includes product design costs selling costs royalty expense provision for credit losses advertising promotion and marketing expenses professional fees supplies travel other general and administrative expenses our corporate overhead costs and amortization of intangible assets
Distribution network costs including costs associated with preparing goods to ship to customers and our costs to operate our distribution facilities are included as a component of SG A We consider distribution network costs to be the costs associated with operating our distribution centers as well as the costs paid to third parties who perform those services for us In Fiscal 2023 Fiscal 2022 and Fiscal 2021 distribution network costs included in SG A totaled 40 million 36 million and 28 million respectively
All costs associated with advertising promotion and marketing of our products are expensed in SG A during the period when the advertisement is first shown Costs associated with cooperative advertising programs under which we agree to make general contributions to our wholesale customers advertising and promotional funds are generally recorded as a reduction to net sales Advertising promotion and marketing expenses excluding employment costs for our advertising and marketing employees for Fiscal 2023 Fiscal 2022 and Fiscal 2021 were 105 million 82 million and
Royalty expense related to our license of third party brands which are generally based on the greater of a percentage of our actual net sales for the licensed product or a contractually determined minimum royalty amount are recorded based upon any guaranteed minimum levels and adjusted based on our net sales of the licensed products as appropriate Royalty expenses recognized as SG A in Fiscal 2023 Fiscal 2022 and Fiscal 2021 were 6 million 4 million and 6 million respectively As of February 3 2024 we do not have any royalty agreements with material guaranteed minimum royalty amounts for future periods as future royalty amounts are generally dependent on our future sales of the specified licensed products
During Fiscal 2023 Fiscal 2022 and Fiscal 2021 cash paid for income taxes was 39 million 56 million and 34 million respectively During Fiscal 2023 Fiscal 2022 and Fiscal 2021 cash paid for interest net of interest income was 6 million 3 million and 1 million respectively Non cash investing activities included capital expenditures incurred but not yet paid at period end which were included in accounts payable in our consolidated balances sheets of 2 million 3 million and 3 million as of Fiscal 2023 Fiscal 2022 and Fiscal 2021 respectively Additionally during Fiscal 2023 Fiscal 2022 and Fiscal 2021 we recorded a non cash net increase in operating lease assets and corresponding operating lease liability amounts of 83 million 47 million and 18 million respectively related to the net impact of new modified and terminated operating lease amounts excluding any operating lease amounts recognized in the opening balance sheet of an acquired business
For operating group reporting inventory is carried at the lower of FIFO cost or market We evaluate the composition of our inventories for identification of distressed inventory at least quarterly In performing this evaluation we consider slow turning products an indication of lack of consumer acceptance of particular products prior seasons fashion products broken assortments discontinued products and current levels of replenishment program products as compared to expected sales We estimate the amount of goods that we will not be able to sell in the normal course of business and write down the value of these goods as necessary based on various assumptions about the amounts we ultimately expect to realize for the inventories Also we provide an allowance for shrinkage as appropriate for the period between the last physical inventory count and each balance sheet date
For consolidated financial reporting as of February 3 2024 and January 28 2023 146 million or 92 and 204 million or 93 respectively of our inventories were valued at the lower of LIFO cost or market after deducting our LIFO accounting reserve The remaining 13 million and 16 million of our inventories were valued at the lower of FIFO cost or market as of February 3 2024 and January 28 2023 respectively Generally for consolidated financial reporting inventories of our domestic operations are valued at the lower of LIFO cost or market and our inventories of our international operations are valued at the lower of FIFO cost or market Our LIFO reserves are based on the estimated Producer Price Index as published by the United States Department of Labor We write down inventories valued at the
lower of LIFO cost or market when LIFO cost exceeds market value We deem LIFO accounting adjustments to not only include changes in the LIFO reserve but also includes changes in markdown reserves As our LIFO inventory pool does not correspond to our operating group definitions LIFO inventory accounting adjustments are not allocated to our operating groups Thus the impact of accounting for inventories on the LIFO method is reflected in Corporate and Other for operating group reporting purposes included in Note 2
There was a 2 million LIFO inventory layer liquidation in Fiscal 2023 There were no material LIFO inventory layer liquidations in Fiscal 2022 or Fiscal 2021 As of February 3 2024 and January 28 2023 the LIFO reserve included in our consolidated balance sheet was 83 million and 76 million respectively
Property and equipment including leasehold improvements that are reimbursed by landlords as a tenant improvement allowance and assets under capital leases if any is carried at cost less accumulated depreciation Additions are capitalized while repair and maintenance costs are charged to our consolidated statements of operations as incurred Depreciation is calculated using both straight line and accelerated methods generally over the estimated useful lives of the assets as follows
We test goodwill for impairment at the reporting unit level annually on the first day of the fourth quarter and more often if an event occurs or circumstances change that indicate the fair value of a reporting unit is below its carrying amount We have the option to first assess qualitative factors to determine whether it is more likely than not that goodwill is impaired to determine whether it is necessary to perform the quantitative impairment test We also have the option to bypass the qualitative assessment entirely for any reporting unit in any period and proceed directly to performing the quantitative impairment test For each impairment test of goodwill in Fiscal 2023 Fiscal 2022 and Fiscal 2021 we bypassed the qualitative test option and instead performed a quantitative test
When applying the quantitative assessment we determine the fair value of our reporting units based on an income approach or in some cases a combination of an income approach and market approach The income approach calculates a value based upon the present value of estimated future cash flows while the market approach uses earnings multiples of similarly situated guideline public companies Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions which include assumptions regarding the revenue growth rates and operating margins used to calculate estimated future cash flows risk adjusted discount rates and future economic and market conditions If an annual or interim analysis indicates an impairment of goodwill the amount of the impairment is recognized in our consolidated financial statements based on the amount that the carrying value exceeds the estimated fair value of the reporting unit
As of October 29 2023 our reporting units consisted of the following Tommy Bahama Lilly Pulitzer Johnny Was Southern Tide TBBC Duck Head and Oxford of Lyons As of October 29 2023 we performed a quantitative assessment of impairment for the Lilly Pulitzer Johnny Was Southern Tide and TBBC reporting units Our other reporting units do not have goodwill We determined on the basis of the quantitative assessments of our Lilly Pulitzer Southern Tide and TBBC reporting units that the fair value of each reporting unit was greater than its respective carrying amount indicating no impairment Based on the quantitative assessment of our Johnny Was reporting unit we recognized an impairment charge of 99 million in the Fourth Quarter of Fiscal 2023 which was recorded within impairment of goodwill intangible assets and equity method investments in our Consolidated Statements of Operations See Note 5 Intangible Assets and Goodwill for further discussion
Intangible assets with indefinite lives which primarily consist of trademarks are not amortized but instead evaluated for impairment annually or more frequently if events or circumstances indicate that the intangible asset might be impaired This analysis is dependent upon a number of uncertain factors described below and is typically performed in conjunction with the goodwill impairment analysis discussed above and is similar to the analysis performed at acquisition
The fair value of our trademarks is principally determined by the relief from royalty approach that assumes the trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them This method includes assumptions regarding revenue growth rates royalty rates risk adjusted discount rates and future economic and market conditions If an annual or interim analysis indicates an impairment of an intangible asset with an indefinite useful life the amount of the impairment is recognized in our consolidated financial statements based on the amount that the carrying value exceeds the estimated fair value of the asset for an intangible asset with an indefinite life or the reporting unit for goodwill
Based on the quantitative assessment of our Johnny Was related intangible assets with an indefinite life we recognized noncash impairment charges of 12 million in the Fourth Quarter of Fiscal 2023 which was recorded within impairment of goodwill intangible assets and equity method investments in our Consolidated Statements of Operations See Note 5 Intangible Assets and Goodwill for further discussion For all other intangible assets with an indefinite life we determined on the basis of the quantitative assessments that the fair value of each intangible asset with an indefinite life was greater than its respective carrying amount indicating no impairment
Intangible assets with finite lives primarily consist of customer relationships certain trademarks and reacquired rights These assets are amortized over the estimated useful life of the asset using a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise realized or the straight line method Certain of our intangible assets with finite lives may be amortized over periods of up to 20 years The determination of an appropriate useful life for amortization considers our plans for the intangible assets the remaining contractual period of the reacquired right and factors that may be outside of our control including expected customer attrition Amortization of intangible assets is included in SG A in our consolidated statements of operations Intangible assets with finite lives are reviewed periodically for impairment if events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable as discussed below under Impairment of Long Lived Assets other than Goodwill and Intangible Assets with Indefinite Lives Any costs associated with extending or renewing recognized intangible assets are generally expensed as incurred
Amounts included in prepaid expenses and other current assets primarily consist of prepaid operating expenses including subscriptions maintenance and other services contracts advertising insurance samples and direct to consumer supplies as well as the estimated value of inventory for anticipated direct to consumer and wholesale sales returns Other non current assets primarily consist of assets set aside for potential liabilities related to our deferred compensation plan
Officers life insurance policies that are owned by us which are included in other non current assets net are recorded at their cash surrender value less any outstanding loans associated with the life insurance policies that are payable to the life insurance company with which the policy is outstanding As of both February 3 2024 and January 28 2023 officers life insurance policies net recorded in our consolidated balance sheets totaled 4 million
Deferred financing costs for our revolving credit agreement are included in other non current assets net in our consolidated financial statements Deferred financing costs are amortized on a straight line basis which approximates the effective interest method over the term of the related debt Amortization of deferred financing costs is included in interest expense in our consolidated statements of operations In March of 2023 we capitalized debt issuance costs of 2 million in connection with commitments upon entering into the U S Revolving Credit Agreement Unamortized deferred financing costs included in other non current assets net totaled 2 million as of February 3 2024 and 1 million as of January 28 2023
We have a non qualified deferred compensation plan offered to a select group of highly compensated employees and our non employee directors The plan provides participants with the opportunity to defer a portion of their cash compensation in a given plan year of which a percentage may be matched by us in accordance with the terms of the plan We make contributions to rabbi trusts or other investments to provide a source of funds for satisfying these deferred compensation liabilities Investments held for our deferred compensation plan consist of insurance contracts and are recorded based on valuations which generally incorporate unobservable factors Realized and unrealized gains and losses on the deferred compensation plan investments are recorded in SG A in our consolidated statements of operations and substantially offset the changes in deferred compensation liabilities to participants resulting from changes in market values These securities approximate the participant directed investment selections underlying the deferred compensation liabilities
The total value of the assets set aside for potential deferred compensation liabilities as of February 3 2024 and January 28 2023 was 17 million and 16 million respectively Substantially all of these amounts are held in a rabbi trust and included in other non current assets net in our consolidated balance sheet Substantially all the assets set aside for potential deferred compensation liabilities are life insurance policies recorded at their cash surrender value less any outstanding loans associated with the life insurance policies that are payable to the life insurance company with which the policy is outstanding The liabilities associated with the non qualified deferred compensation plan are included in other non current liabilities in our consolidated balance sheets and totaled 18 million and 15 million at February 3 2024 and January 28 2023 respectively
We account for equity investments in which we do not directly or indirectly hold a controlling interest using the equity method of accounting Generally we determine that we exercise significant influence over a corporation or a limited liability company when we own 20 or more or 3 or more respectively of the voting interests unless the facts and circumstances of that investment indicate that we do not have the ability to exhibit significant influence Under the equity method of accounting original investments are recorded at cost and are subsequently adjusted for our contributions to distributions from and share of income or losses of the entity We account for equity investments in which we do not control or exercise significant influence using the fair value method of accounting unless there is not a readily determinable fair value for the equity investment If there is no readily determinable fair value for such equity investment we account for the equity investment using the alternative measurement method of cost adjusted for impairment and any identified observable price changes of the investment
Equity investments accounted for using the equity method of accounting fair value method of accounting or alternative measurement method are included in other non current assets in our consolidated balance sheets while the income or loss related to such investments is included in royalties and other operating income in our consolidated statements of operations Income or loss related to investments in smaller lifestyle brands are included within Emerging Brands while income or loss related to investments in entities that are not lifestyle brands are included within Corporate and Other including the income or loss from the Tommy Bahama Miramonte Resort Spa We made no equity investments during Fiscal 2023 During Fiscal 2022 we paid 8 million for an investment in the Tommy Bahama Miramonte Resort Spa accounted for using the equity method of accounting The investment made in Fiscal 2022 is included in other investing activities in our consolidated statements of cash flows
As of February 3 2024 and January 28 2023 our consolidated balance sheet included equity investments accounted for using the equity method of accounting fair value and alternative measurement method totaling in the aggregate 7 million and 11 million respectively The primary drivers of the decrease were 1 a 2 million noncash impairment of an equity method investment in a smaller lifestyle apparel brand in Fiscal 2023 and 2 a 2 million loss recognized related to the Tommy Bahama Miramonte Resort Spa The impairment in the equity method investment resulted from the investee s forecast of future losses and was recorded within impairment of goodwill intangible assets and equity method investments in our Consolidated Statements of Operations The equity investments in unconsolidated entities included in our consolidated balance sheet represents substantially all our exposure or loss related to these investments as there are no meaningful obligations to fund additional amounts or losses related to these investments Our primary equity method investment is our minority ownership interest in a property in Indian Wells California that operates as the Tommy Bahama Miramonte Resort Spa that opened during Fiscal 2023 During Fiscal 2023 Fiscal 2022 and Fiscal 2021 we recognized amounts related to equity method investments in royalties and other income of a loss of 2 million loss of 1 million and income of 12 million respectively The income in Fiscal 2021 was related to our minority ownership interests in an unconsolidated entity that was redeemed upon that entity consummating a change in control transaction resulting in proceeds to us of 15 million and a gain on sale of 12 million
We assess our long lived assets other than goodwill and intangible assets with indefinite lives for impairment whenever events indicate that the carrying amount of the asset or asset group may not be fully recoverable This recoverability and impairment assessment is performed for a specific asset or asset group and includes any property and equipment operating lease assets intangible assets with finite lives and other non current assets included in the asset group Events that would typically result in such an assessment would include a change in the estimated useful life of the assets including a change in our plans of the anticipated period of operating a leased direct to consumer location the decision to vacate a leased space before lease expiration the abandonment of an asset or other factors These events may also result in a change in the determination of the assets included in an asset group for impairment testing To analyze recoverability we consider undiscounted net future cash flows over the remaining life of the asset or asset group If the amounts are determined to not be recoverable an impairment is recognized resulting in the write down of the asset or asset group and a corresponding charge to our consolidated statements of operations Impairment losses are measured based on the difference between the carrying amount and the estimated fair value of the assets For any assets impaired during Fiscal 2023 Fiscal 2022 and Fiscal 2021 there was no significant fair value at the date of impairment testing
During Fiscal 2023 and Fiscal 2022 we did not recognize any operating lease asset impairment charges During Fiscal 2021 we recognized 5 million of operating lease asset impairment charges which were primarily included in SG A During Fiscal 2021 these charges primarily related to our Tommy Bahama New York office and showroom lease which was vacated in Fiscal 2021 and provides the landlord the ongoing right to terminate the lease
Liabilities for accounts payable accrued compensation and accrued expenses and other liabilities are carried at cost which approximates the fair value of the consideration expected to be paid in the future for goods and services received whether or not billed to us as of the balance sheet date Accruals for medical insurance and workers compensation which are included in accrued expenses and other liabilities in our consolidated balance sheets include estimated settlements for known claims as well as accruals for estimates of incurred but not reported claims based on our claims experience and statistical trends
We are subject to certain litigation claims and assessments in the ordinary course of business The claims and assessments may relate among other things to disputes about trademarks and other intellectual property employee relations matters real estate licensing arrangements importing or exporting regulations product safety requirements taxation or other topics For those matters where it is probable that we have incurred a loss and the loss or range of loss can be reasonably estimated we have recorded reserves in accrued expenses and other liabilities or other non current liabilities in our consolidated financial statements for the estimated loss and related expenses such as legal fees In other instances because of the uncertainties related to both the probable outcome or amount or range of loss we are unable to make a reasonable estimate of a liability if any and therefore have not recorded a reserve As additional information becomes available or as circumstances change we adjust our assessment and estimates of such liabilities accordingly Additionally for any potential gain contingencies we do not recognize the gain until the period that all contingencies have been resolved and the amounts are realizable We believe the outcome of outstanding or pending matters individually and in the aggregate will not have a material impact on our consolidated financial statements based on information currently available
In connection with acquisitions we may enter into contingent consideration arrangements which provide for the payment of additional purchase price consideration to the sellers if certain performance criteria are achieved during a specified period We recognize the fair value of the contingent consideration based on its estimated fair value at the date of acquisition Such valuation requires assumptions regarding anticipated cash flows probabilities of cash flows discount rates and other factors Each of these assumptions may involve a significant amount of uncertainty Subsequent to the date of acquisition we periodically adjust the liability for the contingent consideration to reflect the fair value of the contingent consideration by reassessing our valuation assumptions as of that date A change in assumptions related to contingent consideration amounts could have a material impact on our consolidated financial statements Any change in the fair value of the contingent consideration is recognized in SG A in our consolidated statements of operations
A change in the fair value of contingent consideration of 1 million associated with the 2017 acquisition of TBBC was recognized in our consolidated statements of operations in Fiscal 2021 As of February 3 2024 and January 28 2023 no contingent consideration related to the TBBC acquisition was recognized as a liability in our consolidated balance sheet In the aggregate 4 million was earned by the sellers pursuant to the four year contingent consideration arrangement which ended on January 29 2022 with the final payment of 2 million paid in Fiscal 2022 One of the sellers of TBBC is an employee and continues to manage the operations of TBBC
In the ordinary course of business we enter into real estate lease agreements for our direct to consumer locations which include both retail and food and beverage locations office and warehouse distribution space as well as leases for certain equipment Our real estate leases have varying terms and expirations and may have provisions to extend renew or terminate the lease agreement at our discretion among other provisions Our real estate lease terms are typically for a period of ten years or less and typically require monthly rent payments with specified rent escalations during the lease term Our real estate leases usually provide for payments of our pro rata share of real estate taxes insurance and other operating expenses applicable to the property and certain of our leases require payment of sales taxes on rental payments Also our direct to consumer location leases often provide for contingent rent payments based on sales if certain sales thresholds are achieved For many of our real estate lease agreements we obtain lease incentives from the landlord for tenant improvement or other allowances Our lease agreements do not include any material residual value guarantees or material restrictive financial covenants Substantially all of our leases are classified as long term operating leases
For our leases we recognize operating lease liabilities equal to our obligation to make lease payments arising from the leases on a discounted basis and operating lease assets which represent our right to use or control the use of a specified asset for a lease term Operating lease liabilities which are included in current portion of operating lease liabilities and non current portion of operating lease liabilities in our consolidated balance sheets are recognized at the lease commencement date based on the present value of lease payments over the lease term The significant judgments in calculating the present value of lease obligations include determining the lease term and lease payment amounts which are dependent upon our assessment of the likelihood of exercising any renewal or termination options that are at our discretion as well as the discount rate applied to the future lease payments The operating lease assets which are included in operating lease assets in our consolidated balance sheets at commencement represent the amount of the operating lease liability reduced for any lease incentives including tenant improvement allowances Typically we do not include any renewal or termination options at our discretion in the underlying lease term at the time of lease commencement as the probability of exercise generally is not reasonably certain Variable rental payments for real estate taxes sales tax insurance other operating expenses and contingent rent based on a percentage of net sales or adjusted periodically for inflation are not included in lease expense used to calculate the present value of lease obligations recognized in our consolidated balance sheet but instead are recognized as incurred
Lease expense for operating leases is generally recognized on a straight line basis over the lease term even if there are fixed escalation clauses lease incentives for rent holidays or other similar items from the date that we take possession of the space Substantially all of our lease expense is recognized in SG A in our consolidated statements of operations
We account for the underlying operating lease at the individual lease level The lease guidance requires us to discount future lease payments using the interest rate implicit in the lease or if that rate cannot be readily determined our estimated incremental borrowing rate As our leases do not provide an implicit rate we use an estimated incremental borrowing rate based on information available at the applicable commencement date Our estimated incremental borrowing rate for a lease is the rate of interest we estimate we would have to pay on a collateralized basis over the lease term to borrow an amount equal to the lease payments
We are exposed to foreign currency exchange risk when we generate net sales or incur expenses in currencies other than the functional currency of the respective operations The resulting assets and liabilities denominated in amounts other than the respective functional currency are re measured into the respective functional currency at the rate of exchange in effect on the balance sheet date and income and expenses are re measured at the average rates of exchange prevailing during the relevant period The impact of any such re measurement is recognized in our consolidated statements of operations in that period Net losses gains included in our consolidated statements of operations related to foreign
Additionally the financial statements of our operations for which the functional currency is a currency other than the U S dollar are translated into U S dollars at the rate of exchange in effect on the balance sheet date for the balance sheet and at the average rates of exchange prevailing during the relevant period for the statements of operations The impact of such translation is recognized in accumulated other comprehensive income loss in our consolidated balance sheets and included in other comprehensive income loss in our consolidated statements of comprehensive income resulting in no impact on net earnings for the relevant period We view our foreign investments as long term and we generally do not hedge such foreign investments
As of February 3 2024 our foreign currency exchange risk exposure primarily results from our businesses operating outside of the United States which are primarily related to 1 our Tommy Bahama operations in Canada and Australia purchasing goods in U S dollars or other currencies and 2 certain other transactions including intercompany transactions During Fiscal 2023 Fiscal 2022 and Fiscal 2021 we did not enter into and were not a party to any foreign currency exchange contracts
As all of our indebtedness is variable rate debt we are exposed to market risk from changes in interest rates If we determine that our exposure to interest rate changes is higher than we believe is appropriate we may attempt to limit the impact of interest rate changes on earnings and cash flow through a mix of variable rate and fixed rate debt or by entering into interest rate swap arrangements Our assessment of appropriate levels of exposure to changes in interest rates also considers our need for flexibility in our borrowing arrangements resulting from the significant seasonality of our business and cash flows anticipated future cash flows and our expectations about the risk of future interest rate changes among other factors During Fiscal 2023 Fiscal 2022 and Fiscal 2021 we did not enter into and were not a party to any interest rate swap agreements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date GAAP establishes a fair value hierarchy that categorizes the inputs to valuation techniques into three broad levels Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities Level 2 inputs are based on other observable market data such as quoted prices for similar assets and liabilities and inputs other than quoted prices that are observable such as interest rates and yield curves Level 3 inputs are developed from unobservable data reflecting our assumptions and include situations where there is little or no market activity for the asset or liability
As of February 3 2024 our financial instruments consist primarily of our cash and cash equivalents accounts receivable accounts payable accrued expenses other current liabilities and debt Given their short term nature the carrying amounts of cash and cash equivalents receivables accounts payable accrued expenses and other current liabilities generally approximate their fair values The fair values of any cash and cash equivalents invested on an overnight basis in money market funds as well as short term investments are based upon the quoted prices in active markets provided by the holding financial institutions which are considered Level 1 inputs in the fair value hierarchy Additionally we believe the carrying amounts of our variable rate borrowings if any approximate fair value
We have determined that our operating lease assets property and equipment intangible assets goodwill and certain other non current assets included in our consolidated balance sheets are non financial assets measured at fair value on a non recurring basis We have determined that our approaches for determining fair values of each of these non current assets are generally based on Level 3 inputs as discussed in Goodwill and Intangibles above
We have certain equity compensation plans as described in Note 9 which provide for the ability to grant restricted shares restricted share units options and other equity awards to our employees and non employee directors We recognize compensation expense related to equity awards to employees and non employee directors in SG A in our consolidated statements of operations based on the fair value of the awards on the grant date The fair value of restricted share awards that are service and performance based are determined based on the fair value of our common stock on the grant date The fair value of restricted share awards that are market based e g relative total shareholder return TSR are determined based on a Monte Carlo simulation model which models multiple TSR paths for our common stock as well as the comparator group as applicable to evaluate and determine the estimated fair value of the restricted share award
For awards with specified service requirements the fair value of the awards granted to employees is recognized over the requisite service period For performance based awards e g awards based on our earnings per share during the performance period we assess expected performance versus the predetermined performance goals and adjust the cumulative equity compensation expense to reflect the relative expected performance achievement The fair value of the performance based awards if earned is recognized on a straight line basis over the aggregate performance period and any additional required service period For market based awards e g TSR based awards with specified service requirements that are equal to or longer than the market based specification period the fair value of the awards granted to employees is recognized over the requisite service period regardless of whether and to the extent to which the market condition is ultimately satisfied The impact of stock award forfeitures on compensation expense is recognized at the time of forfeiture as no estimate of future forfeitures is considered in our calculation of compensation expense for our service based performance based or market based awards
Comprehensive income consists of net earnings and specified components of other comprehensive income loss Other comprehensive income loss includes changes in assets and liabilities that are not included in net earnings pursuant to GAAP such as foreign currency translation adjustments between the functional and reporting currencies and certain unrealized gains losses if any For us other comprehensive income for each period presented primarily consists of the impact of the foreign currency translation of our international operations These other comprehensive income loss amounts are deferred in accumulated other comprehensive loss which is included in shareholders equity in our consolidated balance sheets As of February 3 2024 the amounts included in accumulated other comprehensive loss in our consolidated balance sheet primarily consist of the net foreign currency translation adjustment related to our Tommy Bahama operations in Canada and Australia No material amounts of accumulated other comprehensive loss were reclassified from accumulated other comprehensive loss into our consolidated statements of operations during Fiscal 2023 Fiscal 2022 or Fiscal 2021
Dividends are accrued at the time declared by our Board of Directors and typically paid within the same fiscal quarter Certain restricted share units as described in Note 9 earn dividend equivalents which are accrued at the time of dividend declaration by the Board of Directors in accrued expenses and other liabilities but only paid if the restricted share units are ultimately earned Dividends accrued related to these restricted share units which are included in accrued expenses and other current liabilities in our consolidated balance sheet were 1 million and 1 million as of February 3 2024 and January 28 2023 respectively
We are exposed to concentrations of credit risk as a result of our receivables balances for which the total exposure is limited to the amount recognized in our consolidated balance sheets We sell our merchandise to wholesale customers operating in a number of distribution channels in the United States and other countries We extend credit to certain wholesale customers based on an evaluation of the customer s credit history and financial condition usually without requiring collateral Credit risk is impacted by conditions or occurrences within the economy and the retail industry and is principally dependent on each customer s financial condition As of February 3 2024 one customer represented 14 and another customer represented 12 of our receivables net included in our consolidated balance sheet
No individual customer represented greater than 10 of our consolidated net sales in Fiscal 2023 Fiscal 2022 or Fiscal 2021 However a decision by the controlling owner of a group of stores or any significant customer to decrease the amount of merchandise purchased from us or to cease carrying our products could have an adverse effect on our results of operations in future periods
Income taxes included in our consolidated financial statements are determined using the asset and liability method Under this method income taxes are recognized based on amounts of income taxes payable or refundable in the current year as well as the impact of any items that are recognized in different periods for consolidated financial statement reporting and tax return reporting purposes Prepaid income taxes and income taxes payable are recognized in prepaid expenses and other accrued expenses and liabilities respectively in our consolidated balance sheets
As certain amounts are recognized in different periods for consolidated financial statement and tax return reporting purposes financial statement and tax bases of assets and liabilities differ resulting in the recognition of deferred tax assets and liabilities The deferred tax assets and liabilities reflect the estimated future tax effects attributable to these differences as well as the impact of net operating loss capital loss and federal and state credit carry backs and carry forwards each as determined under enacted tax laws at rates expected to apply in the period in which such amounts are expected to be realized or settled We account for the effect of changes in tax laws or rates in the period of enactment
We recognize deferred tax assets to the extent we believe it is more likely than not that these assets will be realized In making such a determination we consider all available positive and negative evidence including future reversals of existing taxable temporary differences projected future taxable income taxable income in any carry back years tax planning strategies and recent results of operations
Valuation allowances are established when we determine that it is more likely than not that some portion or all of a deferred tax asset will not be realized Valuation allowances are analyzed periodically and adjusted as events occur or circumstances change that would indicate adjustments to the valuation allowances are appropriate If we determine that we are more likely than not to realize our deferred tax assets in the future in excess of their net recorded amount we will reduce the deferred tax asset valuation allowance which will reduce income tax expense
Also we use a two step approach for evaluating uncertain tax positions Under the two step method recognition occurs when we conclude that a tax position based solely on technical merits is more likely than not to be sustained upon examination The second step measurement is only addressed if step one has been satisfied The tax benefit recorded is measured as the largest amount of benefit determined on a cumulative probability basis that is more likely than not to be realized upon ultimate settlement Those tax positions failing to qualify for initial recognition are recognized in the first subsequent interim period they meet the more likely than not threshold or are resolved through settlement or litigation with the relevant taxing authority upon expiration of the statute of limitations or otherwise Alternatively de recognition of a tax position that was previously recognized occurs when we subsequently determine that a tax position no longer meets the more likely than not threshold of being sustained
In the case of foreign subsidiaries there are certain exceptions to the requirement that deferred tax liabilities be recognized for the difference in the financial statement and tax bases of assets If we consider the investment to be essentially permanent in duration and the financial statement basis of the investment in a foreign subsidiary excluding undistributed earnings exceeds the tax basis in such investment the deferred tax liability is not recognized Further deferred tax liabilities are not required to be recognized for undistributed earnings of foreign subsidiaries when we consider those earnings to be permanently reinvested outside the United States While distributions of foreign subsidiary earnings are generally not subject to federal tax there are other possible tax impacts including state taxes and foreign withholding tax that must be considered if the earnings are not considered to be permanently reinvested Further a gain realized upon the sale of a foreign subsidiary if any is not exempt from federal tax and consideration must therefore be given to the impact of differences in the book and tax basis of foreign subsidiaries not arising from earnings when determining whether a liability must be recorded if the investment is not considered permanently reinvested
Additionally United States tax regulations currently include certain tax provisions including a tax on global intangible low taxed income GILTI disallowance of deductions for certain payments the base erosion anti abuse tax or BEAT and certain deductions enacted for certain foreign derived intangible income FDII While the calculations for GILTI BEAT and FDII are complex calculations these provisions did not have a material impact on our effective tax rate in Fiscal 2023 Fiscal 2022 and Fiscal 2021 We recognize the impact of GILTI as a period cost
On March 27 2020 the Coronavirus Aid Relief and Economic Security Act CARES Act was signed into law with applicable provisions reflected in our financial statements upon enactment This law included several taxpayer favorable provisions which impacted us including allowing the carry back of our Fiscal 2020 net operating losses to years prior to the enactment of the United States Tax Cuts and Jobs Act in 2017 U S Tax Reform resulting in an increased benefit for those losses accelerated depreciation of certain leasehold improvement costs relaxed interest expense limitations and certain non income tax benefits including deferral of employer FICA payments and an employee retention credit Substantially all of the income tax receivable in our consolidated balance sheets as of February 3 2024 and January 28 2023 relates to the carry back of our Fiscal 2020 net operating losses to prior years
We file income tax returns in the United States and various state local and foreign jurisdictions Our federal state local and foreign income tax returns filed for years prior to Fiscal 2020 with limited exceptions are no longer subject to examination by tax authorities We are currently under federal audit The audit may conclude in the next 12 months and the unrecognized tax benefits recognized in relation to the audits may differ from actual settlement amounts It is not possible to estimate the effect if any of the amount of such change during the next 12 months to previously recognized uncertain tax positions in connection with the audits however we do not anticipate that total unrecognized tax benefits will significantly change in the next 12 months
Diluted net earnings per share amounts are calculated similarly to the amounts above except that the weighted average shares outstanding in the diluted net earnings per share calculation also include the potential dilution using the treasury stock method that could occur if dilutive securities including restricted share awards or other dilutive awards were converted to shares The treasury stock method assumes that shares are issued for any restricted share awards options or other dilutive awards that are in the money and that we use the proceeds received to repurchase shares at the average market value of our shares for the respective period For purposes of the treasury stock method proceeds consist of future compensation expense to be recognized and any cash to be paid Performance based and market based restricted share units are included in the computation of diluted shares only to the extent that the underlying performance or market conditions 1 have been satisfied as of the end of the reporting period or 2 if the measurement criteria has been satisfied and the result would be dilutive even if the contingency period has not ended as of the end of the reporting period
The preparation of our consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the amounts reported as assets liabilities revenues and expenses in the consolidated financial statements and accompanying notes Actual results could differ from those estimates Changes to our estimates and assumptions could have a material impact on our consolidated financial statements
In November 2023 the Financial Standards Accounting Board FASB issued Accounting Standards Update ASU 2023 07 Segment Reporting Topic 280 Improvements to Reportable Segment Disclosures which expands annual and interim disclosure requirements for reportable segments primarily through enhanced disclosures about significant segment expenses ASU 2023 07 is effective for our annual periods beginning January 1 2024 and for interim periods beginning January 1 2025 with early adoption permitted We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures
In December 2023 the FASB issued ASU 2023 09 Income Taxes Topics 740 Improvements to Income Tax Disclosures to expand the disclosure requirements for income taxes specifically related to the rate reconciliation and income taxes paid ASU 2023 09 is effective for our annual periods beginning January 1 2025 with early adoption permitted We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures
We identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance Our operating group structure reflects a brand focused management approach emphasizing operational coordination and resource allocation across each brand s direct to consumer wholesale and licensing operations as applicable With our acquisition of Johnny Was on September 19 2022 our business is organized as our Tommy Bahama Lilly Pulitzer Johnny Was and Emerging Brands operating groups Results for periods prior to Fiscal 2022 also include the Lanier Apparel operating group which we exited in Fiscal 2021
Tommy Bahama Lilly Pulitzer and Johnny Was each design source market and distribute apparel and related products bearing their respective trademarks and may license their trademarks for other product categories The Emerging Brands operating group which was organized in Fiscal 2022 consists of the operations of our smaller earlier stage Southern Tide TBBC Duck Head and Jack Rogers which is a footwear brand acquired during Fiscal 2023 Prior to Fiscal 2022 Southern Tide was reported as a separate operating group while both TBBC and Duck Head were included in Corporate and Other All prior year amounts have been restated to conform to the current year presentation
Each of the brands included in Emerging Brands designs sources markets and distributes apparel and related products bearing its respective trademarks and is supported by Oxford s emerging brands team that provides certain support functions to the smaller brands including marketing and advertising execution analysis and other functions The shared resources provide for operating efficiencies and enhanced knowledge sharing across the brands
Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices substantially all financing activities the elimination of inter segment sales any other items that are not allocated to the operating groups including LIFO inventory accounting adjustments as our LIFO pool does not correspond to our operating group definitions and the operations of our Lyons Georgia distribution center and our Oxford America business which we exited in Fiscal 2022
The tables below quantify net sales for each operating group and in total in thousands and the percentage of net sales by distribution channel for each operating group and in total for each period presented except that the amounts included for Johnny Was in Fiscal 2022 represent the post acquisition period only We have calculated all percentages below based on actual data and percentages may not add to 100 due to rounding
During Fiscal 2023 we completed business combinations that were insignificant individually and in the aggregate to the consolidated financial statements for an aggregate purchase price of 11 million The business combinations included the acquisition of certain assets from Jack Rogers LLC and Jack Rogers Holding Company LLC and their subsidiaries collectively Jack Rogers and the acquisition of six former Southern Tide signature stores The assets acquired and liabilities assumed were recorded based on the provisional estimated fair values including intangible assets of 5 million inventory of 3 million and goodwill of 3 million See Note 5 Intangible Assets and Goodwill for the allocation of goodwill to the respective segments The operating results of each acquisition have been included in the consolidated financial statements since the respective acquisition dates
On September 19 2022 we acquired 100 of the ownership interests in JW Holdings LLC and its subsidiaries collectively Johnny Was Johnny Was owns the Johnny Was California lifestyle brand and its related operations including the design sourcing marketing and distribution of collections of affordable luxury artisan inspired bohemian apparel accessories and home goods
This acquisition was accounted for under the acquisition method of accounting for business combinations The preliminary purchase price for the acquisition of Johnny Was totaled 270 million in cash After giving effect to the initial working capital adjustment the purchase price paid at closing was 271 million including acquired cash of 7 million We used cash and short term investments on hand and borrowings under our U S Revolving Credit Agreement to fund the transaction During Fiscal 2023 additional consideration of 2 million was transferred related to measurement period adjustments There were no contingent consideration arrangements associated with this transaction
Goodwill represents the amount by which the cost to acquire Johnny Was exceeds the fair value of individual acquired assets less liabilities of the business at acquisition We made measurement period adjustments as shown in the table above that increased the amount of provisional goodwill by 3 million Substantially all the goodwill is deductible for income tax purposes
We acquired tradenames and trademarks as well as customer relationships as part of the acquisition We used the relief from royalty method to estimate the fair value of trademarks and tradenames and the multi period excess earnings method under the income approach to estimate the fair value of customer relationships Intangible assets allocated in connection with our preliminary purchase price allocation consisted of the following in thousands
The consolidated pro forma information presented below in thousands except per share data gives effect to the September 19 2022 acquisition of Johnny Was as if the acquisition had occurred as of the beginning of Fiscal 2021 The information presented below is for illustrative purposes only is not indicative of results that would have been achieved if the acquisition had occurred as of the beginning of Fiscal 2021 and is not intended to be a projection of future results of operations The consolidated pro forma information has been prepared from historical financial statements for Johnny Was and us for the periods presented including without limitation purchase accounting adjustments but excluding any seller specific management advisory or similar expenses and any synergies or operating cost reductions that may be achieved from the combined operations in the future
The Fiscal 2022 pro forma information above includes amortization of acquired intangible assets but excludes the transaction expenses and integration costs associated with the transaction and the 4 million of incremental cost of goods sold associated with the step up of inventory at acquisition that was recognized by us in our Fiscal 2022 consolidated statement of operations The Fiscal 2021 pro forma information above includes amortization of acquired intangible assets transaction expenses and integration costs associated with the transaction and the 4 million of incremental cost of goods sold associated with the step up of inventory at acquisition Additionally the pro forma adjustments for each period prior to the September 2022 acquisition reflect an estimate of incremental interest expense associated with additional borrowings and income tax expense that would have been incurred subsequent to the acquisition
We assess the recoverability of goodwill and other indefinite lived intangible assets annually at the beginning of the fourth quarter of each fiscal year and between annual tests if an event occurs or circumstances change that would indicate that it is more likely than not that the carrying amount may be impaired Intangible assets with finite lives are amortized over their estimated useful life and are tested for impairment along with other long lived assets when events and circumstances indicate that the assets might be impaired Please see Note 1 Summary of Significant Accounting Policies for discussion of the Company s goodwill and intangible assets impairment testing process
Based on our annual quantitative assessment as of October 29 2023 and in conjunction with our fourth quarter annual forecasting process for 2024 which impacts key assumptions used in our impairment assessments it was determined that the Johnny Was reporting unit and intangible assets with an indefinite life were impaired The impairment charges for Johnny Was reflect the current challenging macroeconomic environment that has resulted in a more cautious consumer and an increase in interest rates The more cautious consumer has both negatively impacted Johnny Was wholesale customers and direct to consumer operations resulting in Johnny Was not performing as originally projected in Fiscal 2023 and the moderation of forecasted revenue and operating income in future years Interest rates also increased significantly after the acquisition of Johnny Was in September 2022 leading to an increase in discount rates used in our impairment analyses We recorded 111 million of noncash impairment charges during the fourth quarter of Fiscal 2023 including a goodwill impairment of 99 million and an intangible asset impairment of 12 million which were included in Impairment of goodwill intangible assets and equity method investments in our Consolidated Statements of Operations
On March 6 2023 we entered into a Second Amendment to the Fourth Amended and Restated Credit Agreement the U S Revolving Credit Agreement The U S Revolving Credit Agreement provides for a revolving credit facility of up to 325 million which may be used to fund working capital to fund future acquisitions and for general corporate purposes The U S Revolving Credit Agreement amended and restated our Fourth Amended and Restated Credit Agreement the Prior Credit Agreement The U S Revolving Credit Agreement 1 extended the maturity of the facility from July 2024 to March 2028 and 2 modified certain provisions of the agreement In other non current assets we capitalized debt issuance costs of 2 million in connection with commitments upon entering into the U S Revolving Credit Agreement
Pursuant to the U S Revolving Credit Agreement the interest rate applicable to our borrowings under the U S Revolving Credit Agreement is based on either the Term Secured Overnight Financing Rate plus an applicable margin of 135 to 185 basis points or prime plus an applicable margin of 25 to 75 basis points
The U S Revolving Credit Agreement generally 1 is limited to a borrowing base consisting of specified percentages of eligible categories of assets 2 accrues variable rate interest weighted average interest rate of 7 as of February 3 2024 unused line fees and letter of credit fees based upon average utilization or unused availability as applicable 3 requires periodic interest payments with principal due at maturity and 4 is secured by a first priority security interest in substantially all of the assets of Oxford Industries Inc and its domestic subsidiaries including accounts receivable books and records chattel paper deposit accounts equipment certain general intangibles inventory investment property including the equity interests of certain subsidiaries negotiable collateral life insurance policies supporting obligations commercial tort claims cash and cash equivalents eligible trademarks proceeds and other personal property
The U S Revolving Credit Agreement is subject to a number of affirmative covenants regarding the delivery of financial information compliance with law maintenance of property insurance requirements and conduct of business Also the U S Revolving Credit Agreement is subject to certain negative covenants or other restrictions including among other things limitations on our ability to 1 incur debt 2 guaranty certain obligations 3 incur liens 4 pay dividends to shareholders 5 repurchase shares of our common stock 6 make investments 7 sell assets or stock of subsidiaries 8 acquire assets or businesses 9 merge or consolidate with other companies or 10 prepay retire repurchase or redeem debt
Additionally the U S Revolving Credit Agreement contains a financial covenant that applies only if excess availability under the agreement for three consecutive business days is less than the greater of 1 23 5 million or 2 10 of availability In such case our fixed charge coverage ratio as defined in the U S Revolving Credit Agreement must not be less than 1 0 to 1 0 for the immediately preceding 12 fiscal months for which financial statements have been delivered This financial covenant continues to apply until we have maintained excess availability under the U S Revolving Credit Agreement of more than the greater of 1 23 5 million or 2 10 of availability for 30 consecutive days
We believe that the affirmative covenants negative covenants financial covenants and other restrictions under the U S Revolving Credit Agreement are customary for those included in similar facilities entered into at the time we amended the U S Revolving Credit Agreement During Fiscal 2023 and as of February 3 2024 no financial covenant testing was required pursuant to our U S Revolving Credit Agreement or the Prior Credit Agreement as applicable as the minimum availability threshold was met at all times As of February 3 2024 we were compliant with all applicable covenants related to the U S Revolving Credit Agreement
119 million For Fiscal 2022 operating lease expense which includes amounts used in determining the operating lease liability and operating lease asset was 61 million and variable lease expense was 43 million resulting in total lease expense of 104 million For Fiscal 2021 operating lease expense was 58 million and variable lease expense was 35 million resulting in total lease expense of 93 million As of both February 3 2024 and January 28 2023 the weighted average remaining operating lease term was six years The weighted average discount rate for operating leases was 5 7 and 4 7 as of February 3 2024 and January 28 2023 respectively Cash paid for lease amounts included in the measurement of operating lease liabilities in Fiscal 2023 Fiscal 2022 and Fiscal 2021 was 89 million 75 million and 70 million respectively
As of February 3 2024 the required lease liability payments which include base rent amounts but excludes payments for real estate taxes sales taxes insurance other operating expenses and contingent rents incurred under operating lease agreements for the fiscal years specified below were as follows in thousands
During Fiscal 2023 Fiscal 2022 and Fiscal 2021 we paid 42 million 35 million and 28 million respectively of dividends to our shareholders Although we have paid dividends in each quarter since we became a public company in July 1960 we may discontinue or modify dividend payments at any time if we determine that other uses of our capital including payment of outstanding debt funding of acquisitions funding of capital expenditures or repurchases of outstanding shares may be in our best interest if our expectations of future cash flows and future cash needs outweigh the ability to pay a dividend or if the terms of our credit facility other debt instruments or applicable law limit our ability to pay dividends
During Fiscal 2023 Fiscal 2022 and Fiscal 2021 we repurchased 20 million 92 million and 8 million respectively in open market transactions Additionally during Fiscal 2023 Fiscal 2022 and Fiscal 2021 we purchased 10 million 3 million and 3 million respectively of shares from our employees to cover employee tax liabilities related to the vesting of shares of our stock
On December 7 2021 our Board of Directors authorized us to spend up to 150 million to repurchase shares of our stock in open market transactions This authorization superseded and replaced all previous authorizations to repurchase shares of our stock and has no automatic expiration Pursuant to the Board of Directors December 7 2021 authorization we repurchased 196 000 shares of our common stock for 20 million an average price of 102 per share in open market transactions during Fiscal 2023 As of February 3 2024 30 million of the authorization remained available for future repurchases of our common stock
As of February 3 2024 shares available for issuance under our Long Term Stock Incentive Plan the Long Term Stock Incentive Plan were less than 1 million shares which includes the additional shares approved for grant under the Long Term Stock Incentive Plan by shareholders in June 2022 The Long Term Stock Incentive Plan allows us to grant equity based awards to employees and non employee directors in the form of among other things stock options stock appreciation rights restricted shares and or restricted share units No additional shares are available under any predecessor plans
The specific provisions of restricted share awards are evidenced by agreements with the employee as determined by the compensation committee of our Board of Directors Restricted shares and restricted share units granted to officers and other key employees in recent years generally vest three years from the date of grant if 1 the performance or market threshold if any was met and 2 the employee is still employed by us on the vesting date The employee generally is restricted from transferring or selling any restricted shares or restricted share units and forfeits the awards upon the termination of employment prior to the end of the vesting period The restricted share unit awards granted during Fiscal 2022 and Fiscal 2023 include certain clauses related to accelerated vesting upon the occurrence of qualifying retirement death or disability of the employee prior to the vesting date while the restricted share awards granted in prior years did not include such clauses
In recent years we have granted a combination of service based restricted share awards and awards based on total shareholder return TSR to certain of our employees As of February 3 2024 there was 20 million of unrecognized compensation expense related to the unvested service based and TSR based restricted share awards included in the tables below which have been granted to employees but have not yet vested As of February 3 2024 the weighted average remaining life of the outstanding service based and TSR based awards was one year and two years respectively
During Fiscal 2023 and Fiscal 2022 we granted service based restricted share and restricted share unit awards while in Fiscal 2021 and years prior we granted service based restricted shares At the time that service based restricted share unit awards are granted the employee is generally subject to the terms of the respective agreement entitled to dividend equivalents payable at the time of payment of any dividends paid on our common stock as long as the awards are outstanding but do not have any voting rights Whereas at the time that service based restricted share awards were issued the shareholder is generally subject to the terms of the respective agreement entitled to the same dividend and voting rights as other holders of our common stock as long as the restricted shares are outstanding
The table below summarizes the service based restricted share awards including both restricted shares and restricted share units and performance based award activity for officers and other key employees during Fiscal 2023 Fiscal 2022 and Fiscal 2021 which do not include the TSR based Restricted Share Unit activity described below
The restricted share units granted in the table above are at target The TSR based restricted share units are subject to 1 our achievement of a specified TSR based ranking by us relative to a comparator group during a period of approximately three years from the date of grant and 2 generally the recipient remaining an employee through the vesting date which is approximately three years from the date of grant The number of shares ultimately earned which will be settled in shares of our common stock on the vesting date will be between 0 and 200 of the restricted share units at target These TSR based restricted share units are entitled to dividend equivalents for dividends declared on our common stock prior to the vesting date which are payable after vesting of the restricted shares solely for the number of shares ultimately earned These TSR based restricted share units do not have any voting rights prior to the vesting date
Additionally during the First Quarter of Fiscal 2024 we granted 0 1 million of TSR based restricted share units at target subject to 1 our achievement of a specified TSR based ranking by Oxford relative to a comparator group during a period of approximately three years from the date of grant and 2 the recipient remaining an employee through the May 2027 vesting date The number of shares ultimately earned will be between 0 and 200 of the restricted share units at target
In addition to shares granted to employees we grant restricted share awards to our non employee directors for a portion of each non employee director s annual compensation The non employee directors must complete certain service requirements otherwise the restricted shares are subject to forfeiture On the date of issuance the non employee directors
There were less than 1 million shares of our common stock authorized for issuance under our Employee Stock Purchase Plan ESPP as of February 3 2024 The ESPP allows qualified employees to purchase shares of our common stock on a quarterly basis based on certain limitations through payroll deductions The shares purchased pursuant to the ESPP are not subject to any vesting or other restrictions On the last day of each calendar quarter the accumulated payroll deductions are applied toward the purchase of our common stock at a price equal to 85 of the closing market price on that date Equity compensation expense related to the employee stock purchase plan recognized was less than 1 million in each of Fiscal 2023 Fiscal 2022 and Fiscal 2021
We have a tax qualified voluntary defined contribution retirement savings plan covering substantially all United States employees If an eligible participant elects to contribute a portion of the contribution may be matched by us Additionally we incur certain charges related to our non qualified deferred compensation plan as discussed in Note 1 Our aggregate expense under these defined contribution and non qualified deferred compensation plans in Fiscal 2023 Fiscal 2022 and Fiscal 2021 was 7 million 5 million and 4 million respectively The increase in Fiscal 2023 was primarily due to an increase in the company match percentage for our defined contribution plan
Certain amounts of foreign earnings are subject to U S federal tax currently pursuant to the GILTI rules regardless of whether those earnings are distributed and actual distributions of foreign earnings are generally no longer subject to U S federal tax We continue to assert that our investments in substantially all of our foreign subsidiaries and substantially all of the related earnings are permanently reinvested outside the United States We believe that any other taxes such as foreign withholding or U S state tax payable would be immaterial if we were to repatriate the foreign earnings Therefore we have not recorded any deferred tax liabilities related to these foreign investments and earnings in our consolidated balance sheets as of February 3 2024 and January 28 2023
Accounting for income taxes requires that we offset deferred tax liabilities and assets within each tax jurisdiction and present the net deferred tax amount for each jurisdiction as a net deferred tax amount in our consolidated balance sheets The amounts of deferred income taxes included in our consolidated balance sheets are as follows in thousands
Approximately 2 million of our uncertain tax positions as of February 3 2024 if recognized would reduce the future effective tax rate in the period settled The total amount of unrecognized tax benefits relating to our tax positions is subject to change based on future events including but not limited to settlements of ongoing audits and assessments and the expiration of applicable statutes of limitation The ultimate occurrence outcomes and timing of such events could differ from our current expectations Interest and penalties associated with unrecognized tax positions are recorded within income tax expense in our consolidated statements of operations During each of Fiscal 2023 Fiscal 2022 and Fiscal 2021 we recognized less than 1 million of interest and penalties associated with unrecognized tax positions in our consolidated statements of operations
On August 16 2022 the U S government enacted the Inflation Reduction Act IRA into law The IRA implemented a corporate alternative minimum tax subject to certain thresholds being met and a 1 excise tax on share repurchases effective beginning January 1 2023 We do not currently expect that the tax related provisions of the IRA will have a material effect on our reported results cash flows or financial position For Fiscal 2023 excise taxes included as part of the price of common stock repurchased during the period did not have a material effect on our reported results
In December 2022 the EU Member States formally adopted the Pillar Two Directive which generally provides for a minimum effective tax rate of 15 as established by the Organization for Economic Co operation and Development Pillar Two Framework The EU effective dates are January 1 2024 and January 1 2025 for different aspects of the directive A significant number of other countries are expected to also implement similar legislation with varying effective dates in the future We are continuing to evaluate the potential effect on future periods of the Pillar Two Framework pending legislative adoption by additional individual countries
In Fiscal 2021 we exited our Lanier Apparel business which had been focused on moderately priced tailored clothing and related products The Lanier Apparel exit aligns with our stated business strategy of developing and marketing compelling lifestyle brands It also took into consideration the increased macroeconomic challenges faced by the Lanier Apparel business many of which were magnified by the COVID 19 pandemic
During Fiscal 2021 we recognized in the Lanier Apparel operating group a benefit of 2 million related to the Lanier Apparel exit primarily consisting of 1 4 million of reductions in inventory markdowns previously recognized of which the substantial majority of this amount was reversed in Corporate and Other as part of LIFO accounting and 2 a 3 million gain on the sale of Lanier Apparel s Toccoa Georgia distribution center These items were partially offset by 1 2 million of severance and employee retention costs 2 2 million of termination charges related to certain license agreements and 3 1 million of additional charges related to the Merida manufacturing facility
For Fiscal 2021 the estimated inventory markdown charges and manufacturing facility charges are included in cost of goods sold in Lanier Apparel while the charges for operating lease asset impairments employee charges and fixed asset impairments are included in SG A in Lanier Apparel The gain on sale of the Toccoa Georgia distribution center in Fiscal 2021 is included in royalties and other income in Lanier Apparel The 2 million gain on sale of the Merida manufacturing facility in Mexico that was sold in the First Quarter of Fiscal 2023 is also included in royalties and other income
We do not expect to incur any additional Lanier Apparel exit charges Substantially all of the cumulative accrued employee charges termination charges related to contractual commitments and charges related to the Merida manufacturing facility have been paid During Fiscal 2023 lease amounts totaling 2 million related to the Lanier Apparel office leases that were previously impaired and vacated were paid with no other anticipated significant future cash requirements related to the Lanier Apparel business
We have audited the accompanying consolidated balance sheets of Oxford Industries Inc the Company as of February 3 2024 and January 28 2023 the related consolidated statements of operations comprehensive income shareholders equity and cash flows for each of the three years in the period ended February 3 2024 and the related notes and financial statement schedule listed in the Index at Item 15 a collectively referred to as the consolidated financial statements In our opinion the consolidated financial statements present fairly in all material respects the financial position of the Company at February 3 2024 and January 28 2023 and the results of its operations and its cash flows for each of the three years in the period ended February 3 2024 in conformity with U S generally accepted accounting principles
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of February 3 2024 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework and our report dated April 1 2024 expressed an unqualified opinion thereon
These financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on the Company s financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
As disclosed in Note 5 to the consolidated financial statements in connection with the annual impairment test the Company recorded impairment charges of 99 million related to goodwill and 12 million related to the trademark indefinite lived intangible asset As disclosed in Note 1 to the consolidated financial statements goodwill and indefinite lived intangible assets are tested for impairment at least annually on the first day of the fourth quarter or whenever changes in circumstances may indicate the carrying amounts may not be recoverable Subsequent to the impairment charges recorded the Company s goodwill and trademark indefinite lived intangible asset balances for the Johnny Was reporting unit were 0 and 66 million respectively at February 3 2024
Auditing management s goodwill and indefinite lived intangible asset impairment tests for the Johnny Was reporting unit was complex and highly judgmental due to the significant estimation required to determine the fair values of the Johnny Was reporting unit and trademark indefinite lived intangible asset In particular the fair value estimate of the Johnny Was reporting unit for purposes of assessing the amount of impairment was sensitive to significant assumptions such as revenue growth rates operating margin and the discount rate In addition the fair value estimate of the Johnny Was indefinite lived intangible asset was sensitive to significant assumptions such as royalty rates for the trademark revenue growth rates and discount rate These significant assumptions are affected by expectations about future market and economic conditions
We obtained an understanding evaluated the design and tested the operating effectiveness of the Company s controls over the Johnny Was goodwill and indefinite lived intangible asset impairment processes For example we tested controls over management s review of the significant assumptions described above
To test the estimated fair value of the Johnny Was reporting unit and trademark indefinite lived intangible asset we performed audit procedures that included among others assessing methodologies used by the Company testing the significant assumptions discussed above and evaluating the completeness and accuracy of the underlying data used by the Company in its analyses For example we compared the significant assumptions described above to current market and economic trends the assumptions used to value similar assets in acquisitions historical results of the business and other guidelines used by companies in the same industry We involved our valuation specialists to assist in our evaluation of the Company s valuation methodology and certain significant assumptions In addition we assessed the historical accuracy of management s prospective financial information and performed sensitivity analyses on significant assumptions to evaluate the potential changes in the fair value of the Johnny Was reporting unit and trademark indefinite lived intangible asset that would result from changes in the assumptions We also recalculated the resulting impairment charges recorded by the Company
Our company under the supervision and with the participation of our management including our principal executive officer and principal financial officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report Based upon that evaluation our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report our disclosure controls and procedures were effective
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a 15 f and 15d 15 f under the Securities Exchange Act of 1934 Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States Our internal control over financial reporting is supported by a program of appropriate reviews by management written policies and guidelines careful selection and training of qualified personnel and a written code of conduct
We assessed the effectiveness of our internal control over financial reporting as of February 3 2024 In making this assessment management used the updated framework issued by the Committee of Sponsoring Organizations of the Treadway Commission COSO in Internal Control Integrated Framework 2013 Based on this assessment we believe that our internal control over financial reporting was effective as of February 3 2024
Because of their inherent limitations our disclosure controls and procedures and our internal controls over financial reporting may not prevent or detect misstatements Projections of any evaluation of effectiveness for future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate A control system no matter how well designed and operated can provide only reasonable not absolute assurance that a control system s objectives will be met
We have audited Oxford Industries Inc s internal control over financial reporting as of February 3 2024 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework the COSO criteria In our opinion Oxford Industries Inc the Company maintained in all material respects effective internal control over financial reporting as of February 3 2024 based on the COSO criteria
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated balance sheets of Oxford Industries Inc as of February 3 2024 and January 28 2023 the related consolidated statements of operations comprehensive income shareholders equity and cash flows for each of the three years in the period ended February 3 2024 and the related notes and financial statement schedule listed in the Index at Item 15 a collectively referred to as the consolidated financial statements and our report dated April 1 2024 expressed an unqualified opinion thereon
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
Our audit included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists testing and evaluating the design and operating effectiveness of internal control based on the assessed risk and performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
The information required by this Item 10 of Part III will appear in our definitive proxy statement under the headings Corporate Governance and Board Matters Directors Executive Officers Common Stock Ownership by Management and Certain Beneficial Owners Section 16 a Beneficial Ownership Reporting Compliance Corporate Governance and Board Matters Website Information Additional Information Submission of Director Candidates by Shareholders and Corporate Governance and Board Matters Board Meetings and Committees of our Board of Directors and is incorporated herein by reference
The information required by this Item 11 of Part III will appear in our definitive proxy statement under the headings Corporate Governance and Board Matters Director Compensation Executive Compensation Nominating Compensation Governance Committee Report and Compensation Committee Interlocks and Insider Participation and is incorporated herein by reference
The information required by this Item 14 of Part III will appear in our definitive proxy statement under the heading Audit Related Matters Fees Paid to Independent Registered Public Accounting Firm and Audit Related Matters Audit Committee Pre Approval of Audit and Permissible Non Audit Services of Independent Auditors and is incorporated herein by reference
Fourth Amended and Restated Pledge and Security Agreement dated as of May 24 2016 among Oxford Industries Inc Tommy Bahama Group Inc the additional entities grantor thereto as Grantors and Truist Bank f k a SunTrust Bank as administrative agent filed as Exhibit 10 2 to the Company s Form 8 K filed on May 24 2016

Company Name	OXFORD INDUSTRIES INC Vist SEC web-site
Category	MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS
Trading Symbol	OXM