Oxford Industries Fails To Meet Analyst Expectations: Is A Lower Price Target Justified?

Telsey Advisory Group analyst Dana Telsey reiterated a Market Perform rating on Oxford Industries, Inc. OXM, lowering the price target to $107 from $115.

The company reported second-quarter FY23 sales growth of 16% year-on-year to $420.32 million, missing the analyst consensus of $424.27 million.

The earnings beat came from better expense management and a ten-cent benefit from a lower tax rate relative to consensus, partially offset by lower-than-expected sales and slightly worse gross margin performance for the quarter, notes the analyst.

The quarter also benefited from the inclusion of Johnny Was (acquired September last year), while organic sales from existing brands increased by 1% for the quarter (vs. 11% growth in the prior year period).

Read More: Oxford Industries: Owner Of Tommy Bahama Reports Mixed Q2 Earnings; Slashes Outlook

The analyst believes the assortment in H2 has more newness than the first half of the year, which should be supportive as styles should be more aligned with consumer preferences.

On the negative side, the Q2 gross margin deleverage for the quarter resulted from increased e-commerce flash sales at Lilly Pulitzer and a greater proportion of sales during loyalty award cards, flipside and end-of-season clearance events at Tommy Bahama.

For the third quarter, OXM expects sales of $320 million-$335 million, with Adjusted EPS of $0.90-$1.00

(vs. $1.46 last year).

The analyst thinks, for the second time in as many quarters this year, OXM moderated its annual sales and EPS outlook as it sees conversion moderate and as its customers shift purchases to promotional

events.

Telsey believes the tragic wildfires in Maui look to have an outsized impact on the business for the back half of the year.

The analyst lowered FY23 EPS to $10.50, down from $11.00 prior, and compared to the prior consensus of $10.82.

Telsey lowered the FY24 EPS estimate to $11.40 from $11.86 previously, which compares to the prior consensus of $11.46.

Price Action: OXM shares are trading higher by 2.1% to $103.11 on the last check Friday.