It would seem that Oxford Industries (NYSE:OXM) might have a little something for everyone. This clothing manufacturer not only offers a range of brands, including Tommy Hilfiger, Dockers, and Tommy Bahama, but also sells to a wide range of retailers. Impressively, it appears that the company's transition from private-label to branded-label merchandise is paying off with better growth and profits.
For the fiscal first quarter, sales rose 27%. While the Tommy Bahama business was basically flat, menswear chipped in 49% revenue growth and the womenswear business was up 30%. On top of that growth, the company also improved its gross margin by more than 200 basis points. By the time it all hit the bottom line, profits for the quarter were up about 125%.
Turning to the other financial statements, inventory rose 18%, while accounts receivable climbed 25%. That last number does seem large, but with big orders coming from Target (NYSE:TGT) and Wal-Mart (NYSE:WMT) this quarter, I don't think it's a cause for concern. Fools should note that the company does carry a pretty hefty level of debt, even if those interest payments are well-covered by operating earnings.
This stock appeals to my sense of underappreciated value. Earnings have improved markedly over the past three years, and estimates have been heading higher, but the stock trades at a discount to its group. While the company's operating margins aren't quite as high as some peers, the relative return on assets is pretty good. What's more, there is strong insider ownership here and a modest dividend.
The bad news here may be that Oxford is broadly exposed to the retail trade. Customers range from the aforementioned Wal-Mart to Sears (NASDAQ:SHLD), J.C. Penney (NYSE:JCP), Men's Wearhouse (NYSE:MW), and Nordstrom (NYSE:JWN). In other words, as goes the consumer's clothing budget, so goes Oxford. That said, the company's decision to move away from private-label goods and toward branded products like Tommy Bahama should allow the company to grow earnings disproportionately to sales, as branded goods carry better margins.
I'll personally need to dig into this story a bit more before buying it for myself, but I think it passes the initial sniff test on unheralded value. I may have some concerns about whether or not people will continue to pay $300 for jeans, but I don't think clothing demand is going away anytime soon, and I find the combination of a broad range of customers and improving financial performance to be at least worth more research.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
