Oxford to Seek Sale of Ben Sherman
Oxford Industries Inc. has taken Ben Sherman as far as it thinks it can. The company said late Thursday as it reported strong fourth-quarter results that it had elected to sell the British brand, acquired for $146 million in 2004, after a long struggle to return it to profitability.
While Ben Sherman didn’t achieve an operating profit in either the fourth quarter or full year, the company managed to cut its losses substantially and return to sales growth in both the quarter and year.
“Ben Sherman made great progress in 2014 and left the year with positive momentum, which we believe now positions it as an attractive acquisition target,” said Thomas Chubb 3rd, president and chief executive officer of the Atlanta-based Oxford Industries. “With the aim of achieving long-term value for our shareholders, we have concluded that the sale of Ben Sherman is the right course of action. We have initiated a sale process and expect a timely conclusion.”
With Financo as its financial adviser, the company expects to complete the sale of the brand this year but has neither a specific timetable for doing so nor an assurance of a successful transaction.
While Oxford has seen its acquisitions of Tommy Bahama and Lilly Pulitzer pay consistent dividends, Ben Sherman has struggled with losses and declining sales for most of its life as an Oxford division.
With top management directly overseeing operations last year, the brand appeared to turn a corner. Fourth-quarter sales were up 26.6 percent to $25.4 million as full-year revenues grew 15.3 percent to $77.5 million. Operating losses were reduced to $861,000 in the fourth quarter, versus $2.6 million in the same period of 2013, while the full-year loss declined to $10.8 million from $13.1 million.
Analysts speculated that Oxford would be looking to off-load the brand to focus on its larger, profitable Tommy Bahama and Lilly Pulitzer brands. Both experienced strong results in the fourth quarter, when Oxford, after reducing guidance when it reported third-quarter results in January, saw the two brands rally strongly.
In the three months ended Feb. 2, the group’s net income was up 5.5 percent to $15.8 million, or 96 cents a diluted share, from $15 million, or 91 cents, in the 2013 quarter. Adjusted EPS was $1.08, 5 cents above the $1.03 expected, on average, by analysts.
Falling just short of consensus estimates, revenues rose 9.6 percent to $274.5 million from $250.4 million. Promotional pressures contributed to a decline in gross margin to 54.3 percent of sales from 55.1 percent a year ago.
With Ben Sherman in play and other operations performing well, Oxford’s shares, after advancing 3.4 percent to $59.51 in regular trading hours, picked up 10.1 percent to $65.61 in after-hours trading following the release of results.
Helped by an 8 percent increase in comparable-store sales, quarterly revenues at Tommy Bahama rose 10.9 percent to $186 million as operating income accelerated 12 percent to $29.1 million. Lilly Pulitzer’s 9 percent boost in comps helped lift sales 15.8 percent to $34.8 million while operating income expanded 47 percent to $2.1 million.
The Lanier tailored clothing division saw sales backtrack 9.5 percent to $27 million, but operating income rose 7.9 percent to $3.2 million.
Oxford’s full-year profits were up 1 percent to $45.8 million, or $2.79 a diluted share, while revenues hit $997.8 million, 8.8 percent above their 2013 level.