Over at the Fool's Motley Fool Hidden Gems small-cap newsletter, there's a lot of talk going on about attractive buys in the clothing industry. Today, we'll take a look at one clothier that hasn't (yet) made the cut: Oxford Industries (NYSE:OXM) reports its fiscal Q3 2006 earnings results tomorrow after close of market.
What analysts say:
- Buy, sell, or waffle? Seven analysts follow this billion-dollar company, with four of them rating it a buy and three a hold.
- Revenues. Despite the relative analyst enthusiasm, Oxford's numbers aren't expected to wow anyone tomorrow. Sales are believed to have risen 3% year over year, to $359.2 million.
- Earnings. Profits are expected to come in a bit stronger, up 5% to $0.84 per share.
What management says:
Last quarter, CEO J. Hicks Lanier had this to say about Oxford: "All three operating segments [Tommy Bahama, Menswear, and Womenswear] contributed to the sales growth. Our focus this year on operating discipline and better execution has led to enhanced profitability through higher margins. ... We believe that we are succeeding in our mission to reposition our company ... [W]e are taking important steps to enhance the capabilities and performance of our historical businesses. We still have a great deal of work to do, but we are confident that there are opportunities for additional improvement ahead of us."
What management does:
Sadly, the numbers don't support those optimistic statements. Over the past 18 months, Oxford has seen its rolling gross margins slide 31%. And if the company is focusing on "operating discipline," I doubt that it's pleased with the result: operating margins down 46%, with net margins likewise.
|
Margins % |
8/04 |
11/04 |
2/05 |
5/05 |
8/05 |
11/05 |
|---|---|---|---|---|---|---|
|
Gross |
22.2 |
24 |
22.9 |
20.3 |
17.2 |
15.3 |
|
Op. |
13.5 |
15.4 |
14.9 |
12.4 |
9.1 |
7.3 |
|
Net |
8.2 |
9.5 |
9.2 |
7.6 |
5.6 |
4.4 |
One Fool says:
Seeking a bright note to end on, I recalled that back in January, my Foolish colleague Stephen Simpson and I both expressed interest in Oxford's inventory situation, which didn't look too healthy during fiscal Q1. The good news, then, is that in the first six months of fiscal 2006, Oxford grew its sales by 16% in comparison to H1 2005, but inventories grew only 3% year over year. With Oxford's goods selling like hotcakes (albeit not terribly profitable hotcakes), the miniscule rise in inventories no longer worries me at all. Nor does the 6% increase in finished goods, compared to 3% for inventories overall.
Competitors:
- Phillips-Van Heusen (NYSE:PVH)
- Polo Ralph Lauren (NYSE:RL)
- Tommy Hilfiger (NYSE:TOM)
Fool contributorRich Smithdoes not own shares of any company named above.
