Oxford Industries Inc: Form 10-Q for the period ended Jul 29, 2023

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto contained in this report and the consolidated financial statements, notes to consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Fiscal 2022 Form 10-K.

OVERVIEW

Business Overview

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, TBBC and Duck Head lifestyle brands.

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 technology infrastructure, and streamlining corporate and operational support structures.

During Fiscal 2022, 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.

For additional information about our business and our operating groups, see Part I, Item 1. Business of our Fiscal 2022 Form 10-K. Important factors relating to certain risks which could impact our business are described in Part I. Item 1A. Risk Factors of our Fiscal 2022 Form 10-K.

Industry Overview

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.

We believe our lifestyle brands have true competitive advantages, 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 in the current environment.

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 continued increases in interest rates, combined with heightened promotional activity in our industry, is creating a complex and challenging retail environment, which may impact our businesses and exacerbate some of the inherent challenges to our operations. There remains significant uncertainty in the macroeconomic environment, and the impact of these and other factors could have a major effect on our businesses.

Key Operating Results:

The following table sets forth our consolidated operating results (in thousands, except per share amounts) for the First Half of Fiscal 2023 compared to the First Half of Fiscal 2022:

Net earnings per diluted share were $6.86 in the First Half of Fiscal 2023 compared to $6.94 in the First Half of Fiscal 2022. The 1% decrease in net earnings per diluted share included a 4% decrease in net earnings as well as a 2% reduction in weighted average shares outstanding due to open market share repurchases in Fiscal 2023 and Fiscal 2022. The decreased net earnings were primarily due to (1) lower operating income at Tommy Bahama, Lilly Pulitzer, and Emerging Brands and (2) increased interest expense. These decreases were partially offset by (1) the inclusion of the operating income of Johnny Was in the First Half of 2023, (2) a lower operating loss at Corporate and Other and (3) a lower effective tax rate.

COMPARABLE SALES

We often disclose comparable sales 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 branded apparel businesses. 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 stores that were 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.

Definitions and calculations of comparable sales differ among companies, and therefore comparable sales metrics disclosed by us may not be comparable to the metrics disclosed by other companies.

DIRECT TO CONSUMER LOCATIONS

The table below provides information about the number of direct to consumer locations for our brands as of the dates specified. For Johnny Was, locations are only included subsequent to the date of acquisition. The amounts below include our permanent locations and exclude any pop-up or temporary store locations which have an initial lease term of 12 months or less.

RESULTS OF OPERATIONS

SECOND QUARTER OF FISCAL 2023 COMPARED TO SECOND QUARTER OF FISCAL 2022

The discussion and tables below compare our statements of operations for the Second Quarter of Fiscal 2023 to the Second Quarter of Fiscal 2022. Each dollar and percentage change provided reflects the change between these fiscal periods unless 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.

The following table sets forth the specified line items in our unaudited condensed consolidated statements of operations both in dollars (in thousands) and as a percentage of net sales as well as the dollar change and the percentage change as compared to the same period of the prior year. The table also includes net earnings per diluted share and diluted weighted average shares outstanding (in thousands), as well as the change and the percentage change for each of these items as compared to the same period of the prior year.

Net Sales

Consolidated net sales were $420 million in the Second Quarter of Fiscal 2023 compared to net sales of $363 million in the Second Quarter of Fiscal 2022. The 16% increase in net sales included (1) $52 million in sales for Johnny Was, which was acquired during the Third Quarter of Fiscal 2022, and (2) increases in each operating group.

The increase in net sales by distribution channel consisted of the following:

• an increase in full-price e-commerce sales of $17 million, or 15%, including (1) $22 million of e-commerce sales in Johnny Was, (2) a $2 million increase in Tommy Bahama and (3) a $1 million increase in Emerging Brands. These increases were partially offset by an $8 million decrease in Lilly Pulitzer;
• an increase in Lilly Pulitzer e-commerce flash clearance sales of $16 million with no similar e-commerce flash clearance sales in the Second Quarter of Fiscal 2022;
• an increase in full-price retail sales of $15 million, or 11%, including (1) $18 million of retail sales in Johnny Was and (2) a $2 million increase in Emerging Brands as we opened new retail locations. These increases were partially offset by (1) a $3 million decrease in Tommy Bahama and (2) a $3 million decrease in Lilly Pulitzer;
• an increase in wholesale sales of $6 million, or 9%, including $10 million of wholesale sales in Johnny Was. This increase was partially offset by (1) a $3 million decrease in Lilly Pulitzer and (2) a $2 million decrease in Emerging Brands;
• an increase in food and beverage sales of $2 million, or 8%; and
• an increase in outlet sales of $2 million, or 9%, primarily due to the addition of Johnny Was.

The following table presents the proportion of our consolidated net sales by distribution channel for each period presented. We have calculated all percentages below on actual data, and percentages may not add to 100 due to rounding.

Tommy Bahama:

Tommy Bahama net sales increased $1 million, or 1%, in the Second Quarter of Fiscal 2023, with an increase in (1) food and beverage sales of $2 million, or 8%, (2) e-commerce sales of $2 million, or 2%, and (3) wholesale sales. These increases were partially offset by a decrease in full-price retail sales of $3 million, or 3%. The following table presents the proportion of net sales by distribution channel for Tommy Bahama for each period presented:

Lilly Pulitzer:

Lilly Pulitzer net sales increased $3 million, or 3%, in the Second Quarter of Fiscal 2023. The increase was primarily driven by an increase in e-commerce sales of $8 million, or 22%, including an increase in e-commerce flash sales of $16 million, with no e-commerce flash sales in the Second Quarter of 2022, and a decrease in full-price e-commerce sales of $8 million, or 21%. This increase was partially offset by decreases in (1) retail sales of $3 million, or 8%, and (2) wholesale sales of $3 million, or 19%. The following table presents the proportion of net sales by distribution channel for Lilly Pulitzer for each period presented:

Johnny Was:

Johnny Was net sales were $52 million during the Second Quarter of Fiscal 2023. The following table presents the proportion of net sales by distribution channel for Johnny Was for the Second Quarter of Fiscal 2023:

Emerging Brands:

Emerging Brands net sales increased $2 million, or 6%, in the Second Quarter of Fiscal 2023. By distribution channel, the $2 million increase included increases of (1) $2 million, or 89%, in retail sales as we opened new retail locations and (2) $1 million, or 10%, in e-commerce sales. These increases were partially offset by a $2 million, or 11%, decrease in wholesale sales that includes the impact of the acquisition and conversion of three 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:

Corporate and Other:

Corporate and Other net sales primarily consist of net sales of our Lyons, Georgia distribution center business, our Oxford America business, which we exited in Fiscal 2022, and the elimination of any sales between operating groups.

Gross Profit

The tables below present gross profit by operating group and in total for the Second Quarter of Fiscal 2023 and the Second Quarter of Fiscal 2022, as well as the dollar change and percentage 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 16% was primarily due to the 16% increase in net sales. The comparable gross margin included (1) increased e-commerce flash clearance sales in Lilly Pulitzer and (2) increased sales during the loyalty award, Flip Side marketing, and end of season clearance events in Tommy Bahama. These decreases were partially offset by (1) the 69.1% gross margin of Johnny Was, (2) a $1 million lower LIFO accounting charge in the Second Quarter of Fiscal 2023 compared to the Second Quarter of Fiscal 2022, (3) higher gross margin in Emerging Brands resulting from lower inventory markdowns and (4) lower freight costs.

Tommy Bahama:

The lower gross margin for Tommy Bahama was primarily due to an increased proportion of direct to consumer sales occurring during periodic loyalty award, Flip Side marketing and end of season clearance events. This decrease was partially offset by (1) reduced freight costs and (2) increased food and beverage gross margins.

Lilly Pulitzer:

The lower gross margin for Lilly Pulitzer was primarily due to a change in sales mix with e-commerce flash clearance sales representing a larger proportion of net sales. There were no e-commerce flash sales in the Second Quarter of Fiscal 2022. This decrease was partially offset by (1) lower freight costs and (2) a change in sales mix with wholesale sales representing a lower proportion of Lilly Pulitzer net sales.

Johnny Was:

Gross margin for the Second Quarter of Fiscal 2023 was 69.1%.

Emerging Brands:

The higher gross margin for Emerging Brands was primarily due to (1) lower inventory markdowns and (2) a change in sales mix with direct to consumer sales representing a larger proportion of net sales. These increases were 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.

Corporate and Other:

The gross profit in Corporate and Other primarily reflects the impact of LIFO accounting adjustments, which was a $1 million charge in the Second Quarter of Fiscal 2023 and $3 million in the Second Quarter of Fiscal 2022, and the gross profit of the Lyons, Georgia distribution center and Oxford America businesses. 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, if any.

SG&A

SG&A was $205 million in the Second Quarter of Fiscal 2023 compared to $163 million in the Second Quarter of Fiscal 2022, with approximately $32 million, or 76%, of the increase due to the SG&A of Johnny Was. The 26% increase in total SG&A in the Second Quarter of Fiscal 2023 included the following, each of which includes the SG&A of Johnny Was: (1) increased employment costs of $12 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 $9 million increase in advertising expense, (3) a $6 million increase in occupancy expenses, (4) a $6 million increase in variable expenses related to higher sales, including credit card transaction fees, supplies, commissions, royalties and other expenses, (5) a $5 million increase in administrative expenses including professional fees, travel and other items, (6) a $3 million increase in amortization of intangible assets and (7) a $1 million increase in depreciation expense.

Royalties and other operating income

Royalties and other operating income typically consists primarily of income received from third parties from the licensing of our brands. The decreased royalties and other operating income in the Second Quarter of Fiscal 2023 was primarily due to decreased royalty income in Tommy Bahama reflecting the lower sales of our licensing partners.

Operating income (loss)

Operating income was $68 million in the Second Quarter of Fiscal 2023 compared to $75 million in the Second Quarter of Fiscal 2022. The decreased operating income included lower operating income in Tommy Bahama, Lilly Pulitzer, and Emerging Brands. These decreases were partially offset by (1) the operating income of Johnny Was and (2) a lower operating loss in Corporate and Other. Changes in operating income (loss) by operating group are discussed below.

Tommy Bahama:

The decreased operating income for Tommy Bahama was due to (1) increased SG&A, (2) lower gross margin and (3) lower royalty income. These decreases were partially offset by higher net sales. The increased SG&A was primarily due to (1) $2 million in increased employment costs, (2) a $2 million increase in advertising expense, (3) $1 million of increased variable expenses and (4) a $1 million increase in occupancy expenses.

Lilly Pulitzer:

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 net sales. The increased SG&A was primarily due to (1) $1 million in increased employment costs and (2) $1 million of increased depreciation expense.

Johnny Was:

Operating income for the Second Quarter of Fiscal 2023 represents the acquired operations of Johnny Was that were negatively impacted by $3 million of amortization of intangible assets.

Emerging Brands:

The decreased operating income for Emerging Brands was primarily due to increased SG&A partially offset by higher sales and 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.

Corporate and Other:

The improved operating results in Corporate and Other were primarily a result of (1) decreased SG&A, including decreased incentive compensation amounts and (2) a lower net LIFO accounting charge in the Second Quarter of Fiscal 2023.

Interest expense, net

The higher interest expense in the Second Quarter of Fiscal 2023 was primarily due to debt utilized to fund a portion of the acquisition of Johnny Was, while there was no debt outstanding in the Second Quarter of Fiscal 2022. The interest expense for the Second Quarter of Fiscal 2022 primarily consisted of unused line fees and amortization of deferred financing fees associated with the Prior Credit Agreement.

Income tax

Both the Second Quarter of Fiscal 2023 and the Second Quarter of Fiscal 2022 benefitted from certain items that resulted in a lower tax rate than the more typical annual effective tax rate of approximately 25%.

The income tax expense in the Second Quarter of Fiscal 2023 included the vesting of restricted stock awards at a price higher than the grant date fair value and certain other items. Income tax expense in the Second Quarter of Fiscal 2022 included the benefit of the utilization of certain net operating loss carryforward amounts in certain state and foreign jurisdictions and certain other items.

Net earnings

Net earnings per diluted share were $3.22 in the Second Quarter of Fiscal 2023 compared to $3.49 in the Second Quarter of Fiscal 2022 reflecting the (1) increased SG&A, (2) increased interest expense and (3) decreased royalties and other operating income. These decreases were partially offset by (1) higher sales and gross margin, (2) a decreased effective income tax rate and (3) share repurchases as noted above.

FIRST HALF OF FISCAL 2023 COMPARED TO FIRST HALF OF FISCAL 2022

The discussion and tables below compare our statements of operations for the First Half of Fiscal 2023 and the First Half of Fiscal 2022. Each dollar and percentage change provided reflects the change between these fiscal periods unless 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.

The following table sets forth the specified line items in our unaudited condensed consolidated statements of operations both in dollars (in thousands) and as a percentage of net sales as well as the dollar change and the percentage change as compared to the same period of the prior year. The table also includes net earnings per diluted share and diluted weighted average shares outstanding (in thousands), as well as the change and the percentage change for each of these items as compared to the same period of the prior year.

Net Sales

Consolidated net sales were $840 million in the First Half of Fiscal 2023 compared to net sales of $716 million in the First Half of Fiscal 2022. The 17% increase in net sales included (1) $102 million in sales for Johnny Was, which was acquired during the Third Quarter of Fiscal 2022 and (2) increases in each operating group.

The increase in net sales by distribution channel consisted of the following:

• an increase in full-price retail sales of $35 million, or 14%, including (1) $36 million of retail sales in Johnny Was and (2) a $4 million increase in Emerging Brands as we opened new retail locations. These increases were partially offset by (1) a $2 million decrease in Tommy Bahama and (2) a $1 million decrease in Lilly Pulitzer;
• an increase in full-price e-commerce sales of $54 million, or 26%, including (1) $41 million of e-commerce sales in Johnny Was, (2) a $5 million increase in Lilly Pulitzer, (3) a $4 million increase in Tommy Bahama and (4) a $4 million increase in Emerging Brands;
• an increase in wholesale sales of $22 million, or 14%, including (1) $23 million of wholesale sales in Johnny Was and (2) a $6 million increase in Tommy Bahama. These increases were partially offset by (1) a $4 million decrease in Lilly Pulitzer and (2) a $3 million decrease in Emerging Brands;
• an increase in Lilly Pulitzer e-commerce flash clearance sales of $9 million, or 115%;
• an increase in food and beverage sales of $3 million, or 6%; and
• an increase in outlet sales of $3 million, or 9%, primarily driven by the addition of Johnny Was.

The following table presents the proportion of our consolidated net sales by distribution channel for each period presented. We have calculated all percentages below on actual data, and percentages may not add to 100 due to rounding.

Tommy Bahama:

Tommy Bahama net sales increased $13 million, or 3%, in the First Half of Fiscal 2023, with an increase in (1) wholesale sales of $6 million, or 8%, (2) e-commerce sales of $5 million, or 4%, (3) food and beverage sales of $3 million, or 6%, and (4) outlet sales of $1 million, or 3%. These increases were partially offset by a decrease in full-price retail sales of $2 million, or 1%. The following table presents the proportion of net sales by distribution channel for Tommy Bahama for each period presented:

Lilly Pulitzer:

Lilly Pulitzer net sales increased $8 million, or 5%, in the First Half of Fiscal 2023. The First Half of Fiscal 2023 benefited from a larger e-commerce flash clearance sale and a 30% off direct to consumer event. The increase in net sales by distribution channel included an increase in e-commerce sales of $13 million, or 17%, including increased e-commerce flash clearance sales of $9 million, or 115%, and increased full-price e-commerce sales of $5 million or 7%. This increase was partially offset by decreased (1) wholesale sales of $4 million, or 11% and (2) retail sales of $1 million, or 2%. The following table presents the proportion of net sales by distribution channel for Lilly Pulitzer for each period presented:

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Johnny Was:

Johnny Was net sales were $102 million during the First Half of Fiscal 2023. The following table presents the proportion of net sales by distribution channel for Johnny Was for each period presented:

Emerging Brands:

Emerging Brands net sales increased $4 million, or 6%, in the First Half of Fiscal 2023 with increased sales in each brand. By distribution channel, the $4 million increase included increases of (1) $4 million, or 17%, in e-commerce and (2) $3 million, or 73%, in retail sales as we opened new retail locations. These increases were partially offset by a $3 million, or 8%, decrease in wholesale sales that includes the impact of the acquisition and conversion of three 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:

Corporate and Other:

Corporate and Other net sales primarily consist of net sales of our Lyons, Georgia distribution center business, our Oxford America business, which we exited in Fiscal 2022, and the elimination of any sales between operating groups.

Gross Profit

The tables below present gross profit by operating group and in total for the First Half of Fiscal 2023 and the First Half of Fiscal 2022, as well as the dollar change and percentage 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.

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The increased gross profit of 19% was primarily due to the 17% increase in net sales as well as increased consolidated gross margin. The higher gross margin included (1) the 68.5% gross margin of Johnny Was, (2) reduced freight costs, (3) improved initial product margins, as certain sales prices were increased more than the increased product costs during the last year and (4) a $1 million lower LIFO accounting charge in the Second Quarter of Fiscal 2023 compared to the Second Quarter of Fiscal 2022. These increases were partially offset by (1) increased e-commerce flash clearance sales in Lilly Pulitzer and (2) increased sales during the loyalty award, Flip Side marketing, and end of season clearance events in Tommy Bahama.

Tommy Bahama:

The higher gross margin for Tommy Bahama was primarily due to (1) reduced freight costs, (2) improved initial product margins and (3) increased food and beverage gross margins. These increases were partially offset by increased sales during the loyalty award, Flip Side marketing, and end of season clearance events in Tommy Bahama.

Lilly Pulitzer:

The lower gross margin for Lilly Pulitzer was primarily due to a change in sales mix with e-commerce flash clearance sales representing a larger proportion of net sales. This decrease was partially offset by (1) lower freight costs, (2) an increase in initial product margins and (3) a change in sales mix with wholesale sales representing a lower proportion of Lilly Pulitzer net sales.

Johnny Was:

Gross margin for the First Half of Fiscal 2023 was 68.5%.

Emerging Brands:

The lower gross margin for Emerging Brands was primarily due to lower gross margin on wholesale sales due to off-price wholesale sales of previously marked down inventory representing a greater proportion of wholesale sales. This decrease was partially offset by a change in sales mix with direct to consumer sales representing a greater proportion of net sales.

Corporate and Other:

The gross profit in Corporate and Other primarily reflects the impact of LIFO accounting adjustments, which was a $3 million charge in the First Half of Fiscal 2023 and $4 million in the First Half of Fiscal 2022, and the gross profit of the Lyons, Georgia distribution center and Oxford America businesses. 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, if any.

SG&A

SG&A was $408 million in the First Half of Fiscal 2023 compared to $321 million in the First Half of Fiscal 2022, with approximately $63 million, or 72%, of the increase due to the SG&A of Johnny Was. The 27% increase in total SG&A in the First Half of Fiscal 2023 included the following, each of which includes the SG&A of Johnny Was: (1) increased employment costs of $25 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) an $18 million increase in advertising expense, (3) a $12 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 expenses, (5) a $11 million increase in administrative expenses including professional fees, travel and other items, (6) a $7 million increase in amortization of intangible assets and (7) a $2 million increase in depreciation expense.

Royalties and other operating income

Royalties and other operating income typically consists primarily of income received from third parties from the licensing of our brands. The decreased royalties and other operating income in the First Half of Fiscal 2023 was primarily due to decreased royalty income in Tommy Bahama reflecting the lower sales of our licensing partners. This decrease was partially offset by a $2 million gain recorded in the First Half of Fiscal 2023 on the sale of the Merida manufacturing facility in Mexico previously operated by our Lanier Apparel operating group, which we exited in Fiscal 2021.

Operating income (loss)

Operating income was $148 million in the First Half of Fiscal 2023 compared to $151 million in the First Half of Fiscal 2022. The decreased operating income included lower operating income in Tommy Bahama, Lilly Pulitzer and Emerging Brands. These decreases were partially offset by (1) the operating income of Johnny Was and (2) a lower operating loss in Corporate and Other.

Tommy Bahama:

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 and gross margin. The increased SG&A was primarily due to (1) $6 million of increased employment costs, (2) $3 million increase in advertising expense, (3) $2 million of increased variable expenses and (4) $2 million increase in occupancy expenses.

Lilly Pulitzer:

The decreased operating income for Lilly Pulitzer was due to increased SG&A and lower gross margin, partially offset by higher sales. The increased SG&A was primarily due to (1) $3 million in increased advertising expense, (2) a $2 million increase in administrative expenses including professional fees, travel and other items, (3) $1 million of increased employment costs, (4) $1 million of increased variable expenses and (5) $1 million of increased depreciation.

Johnny Was:

Operating income for the First Half of Fiscal 2023 represents the acquired operations of Johnny Was that were negatively impacted by (1) $7 million of amortization of intangible assets and (2) $1 million of costs associated with the implementation of a new e-commerce platform.

Emerging Brands:

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The decreased operating income for Emerging Brands was due to increased SG&A and lower gross margin, partially offset by higher sales. 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.

Corporate and Other:

The improved operating results in Corporate and Other were primarily a result of (1) a $2 million gain on the sale of the Merida manufacturing facility in Mexico, (2) decreased SG&A, including decreased incentive compensation amounts and (3) a lower net LIFO accounting charge in the First Half of Fiscal 2023.

Interest expense, net

The higher interest expense in the First Half of Fiscal 2023 was primarily due to debt utilized to fund a portion of the acquisition of Johnny Was, while there was no debt outstanding in the First Half of Fiscal 2022. The interest expense for the First Half of Fiscal 2022 primarily consisted of unused line fees and amortization of deferred financing fees associated with the Prior Credit Agreement.

Income tax

Both the First Half of Fiscal 2023 and the First Half of Fiscal 2022 benefited from the net favorable impact of certain items that resulted in a lower effective tax rate than the more typical annual effective tax rate of approximately 25%.

The income tax expense in the First Half of Fiscal 2023 included the benefit of the vesting of restricted stock awards at a price higher than the grant date fair value and certain other items. The First Half of Fiscal 2022 benefited from the utilization of certain net operating loss carryforward amounts in certain state and foreign jurisdictions and certain other items.

Net earnings

36

Weighted average shares outstanding - diluted ​ 16,025 ​ 16,430

Net earnings per diluted share were $6.86 in the First Half of Fiscal 2023 compared to $6.94 in the First Half of Fiscal 2022 reflecting the (1) increased SG&A, (2) increased interest expense and (3) decreased royalties and operating other income. These decreases were partially offset by (1) higher sales and gross margin, (2) a decreased effective income tax rate and (3) share repurchases as noted above.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

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 and Duck Head 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, anticipated 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 businesses, (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 Revolving Credit Agreement, subject to its terms, which is described below.

Working Capital

($ in thousands)

Our working capital ratio is calculated by dividing total current assets by total current liabilities. Current assets as of July 29, 2023, decreased from July 30, 2022 primarily due to the decrease in cash and cash equivalents and short-term investments, which was used to fund a portion of the Johnny Was acquisition purchase price, partially offset by increased inventories, receivables, and prepaid expenses and other current assets, primarily due to the assets related to Johnny Was. Current liabilities as of July 29, 2023 increased from July 30, 2022 primarily due to the current liabilities associated with Johnny Was, partially offset by lower accrued incentive compensation and accrued taxes. Changes in current assets and current liabilities are discussed below.

Balance Sheet

The following tables set forth certain information included in our consolidated balance sheets (in thousands). Below each table are explanations for any significant changes in the balances as of July 29, 2023 as compared to July 30, 2022.

Current Assets:

Cash and cash equivalents and short-term investments were $8 million as of July 29, 2023, compared to $186 million as of July 30, 2022. The decrease in cash and cash equivalents and short-term investments from July 30, 2022 was due to the use of cash and short-term investments to fund a portion of the Johnny Was acquisition purchase price, with the remainder funded via borrowings pursuant to our Revolving Credit Agreement.

The increased receivables, net as of July 29, 2023, included $9 million of receivables associated with Johnny Was partially offset by decreases in receivables of our other brands primarily due to lower wholesale sales.

Inventories, net, included a $76 million and $74 million LIFO reserve as of July 29, 2023, and July 30, 2022, respectively. The increased inventories, net as of July 29, 2023 included inventories of $18 million associated with Johnny Was. The increase in inventories of our other brands included (1) anticipated sales growth in each of our brands, (2) higher levels of core product and (3) increased product costs.

The increase in prepaid expenses and other current assets as of July 29, 2023 was primarily due to prepaid expenses and other current assets associated with Johnny Was.

Non-current Assets:

Property and equipment, net as of July 29, 2023, increased primarily due to the addition of $20 million of property and equipment associated with Johnny Was. The additional increase was due to capital expenditures exceeding depreciation since July 30, 2022.

Intangible assets, net and goodwill as of July 29, 2023, increased primarily due to the $135 million of intangible assets, less accumulated amortization, and $98 million of goodwill associated with the acquisition of Johnny Was.

Operating lease assets as of July 29, 2023, increased primarily due to the operating lease assets associated with Johnny Was of $55 million and additional increases in operating lease assets associated with new or extended operating leases in our other businesses. The increase in other assets, net as of July 29, 2023, was primarily due to an increase in equity investments in unconsolidated entities including the $8 million investment in Fiscal 2022 in the entity that owns the Tommy Bahama resort.

Liabilities:

Current liabilities increased as of July 29, 2023 primarily due to current liabilities of $27 million associated with Johnny Was. This increase was partially offset by lower accrued incentive compensation amounts and lower accrued income taxes.

The long-term debt of $48 million as of July 29, 2023, was primarily due to borrowing certain amounts to fund a portion of the acquisition of Johnny Was. The non-current portion of operating lease liabilities as of July 29, 2023 increased primarily due to the addition of $47 million of operating lease liability amounts associated with Johnny Was partially offset by the net impact of the payment of operating lease liabilities and reductions in liabilities.

Statement of Cash Flows

The following table sets forth the net cash flows for the First Half of Fiscal 2023 and the First Half of Fiscal 2022 (in thousands):

Cash and cash equivalents and short-term investments, in the aggregate, were $8 million and $186 million as of July 29, 2023, and July 30, 2022, respectively. The decrease in cash and cash equivalents and short-term investments from July 30, 2022, was due to the use of cash and short-term investments to fund the acquisition of Johnny Was, with the remainder of the purchase price funded through borrowings pursuant to our Revolving Credit Agreement. Changes in cash flows in the First Half of Fiscal 2023 and the First Half of Fiscal 2022 related to operating activities, investing activities and financing activities are discussed below.

Operating Activities:

In the First Half of Fiscal 2023 and the First Half of Fiscal 2022, operating activities provided $153 million and $91 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 depreciation, amortization of intangible assets, equity-based compensation, gain 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 the First Half of Fiscal 2023, the net change in operating assets and liabilities was primarily due to a decrease in inventories that increased cash flow from operations, partially offset by a decrease in current liabilities and an increase in receivables that decreased cash flow from operations. In the First Half of Fiscal 2022, the net change in operating assets and liabilities was primarily due to an increase in inventories, receivables and prepaid expenses that decreased cash flow from operations.

Investing Activities:

In the First Half of Fiscal 2023 and the First Half of Fiscal 2022, investing activities used $33 million and $10 million of cash, respectively. On an ongoing basis, our cash flow used in investing activities primarily consists of our capital expenditures, which totaled $31 million and $20 million in the First Half of Fiscal 2023 and the First Half of Fiscal 2022, respectively. In addition to our capital expenditures in the First Half of Fiscal 2023, we paid $3 million in the aggregate for a working capital settlement associated with the acquisition of Johnny Was and the acquisition of three former Southern Tide Signature Stores. We also received $2 million from the sale of the Merida manufacturing facility in Mexico. In the First Half of Fiscal 2022, we converted $10 million of short-term investments to cash based on our short-term cash needs.

On an ongoing basis, our cash flow used in investing activities is expected to primarily consist of our capital expenditure investments in (1) direct to consumer operations, including opening, relocating and remodeling locations, and facilities enhancements for distribution centers and offices, and (2) information technology initiatives, including e-commerce capabilities.

Financing Activities:

In the First Half of Fiscal 2023 and the First Half of Fiscal 2022, financing activities used $121 million and $95 million of cash, respectively. In the First Half of Fiscal 2023, we repurchased $29 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 $21 million of dividends and paid $2 million in deferred financing costs associated with the amendment of the Revolving Credit Agreement. In the First Half of Fiscal 2022, we repurchased $76 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 $18 million of dividends and paid $2 million of contingent consideration for the final contingent consideration payment related to the TBBC acquisition.

If net cash requirements are less than our net cash flows, we may repay amounts outstanding on our Revolving Credit Agreement, if any, consistent with our repayment of $71 million of long-term debt in the First Half of 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 Revolving Credit Agreement.

Liquidity and Capital Resources

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.

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 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 September 2022. We anticipate our debt will be further reduced during the Second Half of Fiscal 2023 following the reduction of long-term debt by $71 million in the First Half of Fiscal 2023. 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.

$325 Million Revolving Credit Agreement

On March 6, 2023, we amended the Revolving Credit Agreement to, among other things, mature in March 2028. As of July 29, 2023, we had borrowings of $48 million, issued standby letters of credit of $6 million, and availability of $266 million under the Revolving Credit Agreement.

Pursuant to the Revolving Credit Agreement, the interest rate applicable to our borrowings under the Revolving Credit Agreement are 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 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 8% as of July 29, 2023), 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 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 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 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 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 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 Revolving Credit Agreement are customary for those included in similar facilities entered into at the time we amended the Revolving Credit Agreement. During Fiscal 2023 and as of July 29, 2023, no financial covenant testing was required pursuant to our Revolving Credit Agreement or the Prior Credit Agreement, as applicable, as the minimum availability threshold was met at all times. As of July 29, 2023, we were compliant with all applicable covenants related to the Revolving Credit Agreement.

Operating Lease Commitments:

Refer to Note 4 in our unaudited condensed consolidated financial statements included in this report for additional information about our operating lease commitments as of July 29, 2023.

Dividends:

On August 30, 2023, our Board of Directors approved a cash dividend of $0.65 per share payable on October 27, 2023 to shareholders of record as of the close of business on October 13, 2023. 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.

Capital Expenditures:

Our anticipated capital expenditures for Fiscal 2023, including the $31 million incurred in the First Half of Fiscal 2023, are expected to be approximately $90 million, as compared to $47 million for Fiscal 2022. The planned increase in capital expenditures includes spend associated with new brick and mortar locations and relocations and remodels of existing locations resulting in a year-over-year net increase of full price stores of approximately 25 by the end of Fiscal 2023. The spend associated with these brick and mortar locations represents about one-half of the planned capital expenditure amount for 2023. Additionally, we will continue with our investments in our various technology systems initiatives, including e-commerce and omnichannel capabilities, data management and analytics, customer data and insights, cybersecurity, automation including artificial intelligence and infrastructure. Finally, we anticipate spend associated with a multi-year Southeastern United States distribution center enhancement project to ensure best-in-class direct-to-consumer throughput capabilities for our brands.

Other Liquidity Items:

Our contractual obligations as of July 29, 2023 except for the decreased debt outstanding, as discussed above, have not changed materially from the contractual obligations outstanding at January 28, 2023, as disclosed in our Fiscal 2022 Form 10-K. We have not entered into agreements which meet the SEC’s definition of an off balance sheet financing arrangement, other than operating leases, and have made no financial commitments or guarantees with respect to any unconsolidated subsidiaries or special purpose entities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon our condensed 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 policies. However, in the event that inappropriate assumptions or methods were used relating to the critical accounting policies, our consolidated statements of operations could be materially misstated.

Our critical accounting policies and estimates are discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Fiscal 2022 Form 10-K. There have not been any significant changes to our critical accounting policies and estimates during the First Half of Fiscal 2023. A detailed summary of significant accounting policies is included in Note 1 to our consolidated financial statements contained in our Fiscal 2022 Form 10-K.

SEASONAL ASPECTS OF OUR BUSINESS

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 in the First Half of Fiscal 2023 is indicative of the expected proportion of amounts by quarter for future periods.

We are exposed to certain interest rate, foreign currency, commodity and inflation risks as discussed in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk in our Fiscal 2022 Form 10-K. There have not been any material changes in our exposure to these risks during the First Half of Fiscal 2023 other than our decreased exposure to interest rates resulting from our decreased borrowings relative to January 28, 2023.

Evaluation of Disclosure Controls and Procedures

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 our principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act during the Second Quarter of Fiscal 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our business is subject to numerous risks. Investors should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Fiscal 2022 Form 10-K, which could materially affect our business, financial condition or operating results. We operate in a competitive and rapidly changing business environment and additional risks and uncertainties that we currently consider immaterial or not presently known to us may also adversely affect our business. The risks described in our Fiscal 2022 Form 10-K are not the only risks facing our company.