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Oxford Industries Inc. (NYSE:OXM)

2013 Investor Day

May 23, 2013 2:00 PM ET

Executives

Thomas Caldecot Chubb - Chief Executive Officer, President and Director

K. Scott Grassmyer - Chief Financial Officer, Senior Vice President of Finance, Chief Accounting Officer and Controller

Terry R. Pillow - Chief Executive Officer of Tommy Bahama Group

Douglas B. Wood - President and Chief Operating Officer

James B. Bradbeer - President of the Lilly Pulitzer Group

Scott A. Beaumont - Chief Executive Officer of Lilly Pulitzer Group

James Wesley Howard - President of Lanier Clothes

Analysts

Edward J. Yruma - KeyBanc Capital Markets Inc., Research Division

Michael Richardson - Sidoti & Company, LLC

Craig Bernstein - Macellum Capital

Jack Oliver - RBO & Co.

Pamela Nagler Quintiliano - SunTrust Robinson Humphrey, Inc., Research Division

Thomas Caldecot Chubb

Okay. Welcome. Thank you very much to everybody for coming today. As you can see, we've brought some sort of an island and resort type weather with us today to New York to get you in the appropriate mood for Tommy Bahama and Lily and some of the rest of the stuff that we've got going here. Today is Investor Day for Oxford. Just quickly, before we get going, the lawyers like us to point out our Safe Harbor statement there, and you can read more about that on our website. I will no drag you through that now. And then, the agenda for today, what we're going to try to do today, again, this is Investor Day and this is something that we've never done before. We do a lot of communications with the Street. It starts with our 10-K, which of course, we file annually. And if you haven't read our 10-K, I would actually encourage you to do it. We provide a lot of detail, a lot of information. We really try to explain the company and the businesses that we're in, and give you a lot of meaningful statistics and numbers that you can use to try to do your own analysis on the company. In addition to that, we do quarterly press releases of course and conference calls with Q&A. Scott Grassmyer, our CFO; and Anne Shoemaker, our Treasurer are out on the road lot in investor conferences and doing road shows and that type of thing. In addition, they're available pretty much anytime by telephone or for meetings in person to help you understand the business and the company and the numbers and all that.

We are not going to try to do that today. So for today, this is not really a model-building day. This is a day where we want to try to explain the big picture, sort of, story to you from the total company perspective, as well as each of our 4 primary businesses. And so what we'll do today is we'll start off with a little bit of an overview from myself and my right hand, Scott Grassmyer, talking about the total company. Then, we'll move through each of the 4 major businesses. And we'll talk about 2 primary issues with respect to each business. But first being, sort of, what the magic is, what is it that makes this business special and makes it something that we want to have as part of our company. And then, secondly, is what are the growth opportunities there, how do they take that magic and what kind of growth opportunities does that magic formula, if you will, provides to them. For Tommy Bahama and Lilly Pulitzer, it's very much the story of these great lifestyle brands that are functioning very well. And it's just a matter of continuing that great lifestyle brand magic and applying it to the growth opportunities that lie out there.

For Ben Sherman, there's also a lifestyle brand story there. Obviously, it's not working exactly as it needs to right now. And so we'll talk about what the brand story is, but also, what the fixes are that need to happen so that it, too, can contribute to our success. And then, Lanier Clothes is a slightly different story. It's more of a product category specialist that succeeds by providing high-value-added products and services to their customers, and we'll talk about that as well.

Then, we'll end up with Q&A. We're going to ask you to hold your questions until the end of all the presentations, and then, we'll do a consolidated Q&A. And finally, after that, at about 4:20, any -- or those you who are available to do it, we'll walk over to the Tommy Bahama Island, which is half a block away at 45th and 5th. We'll go upstairs there. We'll have some nice drinks. We will have some [indiscernible], we'll have a little gift bag that'll include some small gift items from several of our brands, as well as a gift card from Tommy Bahama that you can use today if you would like to. So you'll have an opportunity to shop in the store, and we'll give you a little head start there with a gift card.

One reminder is that we are in a quiet period right now. Our earnings release for the first quarter is in a couple of weeks, on June 11, so we're really not going to talk about the first quarter today. It's a very awkward time, I think you guys will all understand, for us to be talking about first quarter. We're in the middle of our close-out period, so we won't really be talking about that much today.

Just to sort of put everything in perspective for you, as a company, this is always our North Star. This is the thing that we always go back to, the single sort of litmus test that we try to judge all of our decisions against, and that's the objective of achieving and growing long-term shareholder value. That's always what we focus on, and the way that we believe, obviously, that can deliver long-term shareholder value is by driving sustained growth in profitable sales. So we're trying to grow sales, but not just any sales, we want them to be profitable. And when we talk about profitable, we're always looking at it in terms of a return in excess of the cost of capital. So we do that at the corporate level and then, we try to drive that through to the groups at the operating level, particularly, in terms of what -- the way their bonuses are structured.

Our strategy for delivering that growth in profitable sales is twofold. Our primary strategy is through lifestyle brands that build an emotional connection, that's what Tommy and Lilly are doing very well. That's what we'd like to see Ben Sherman do. And then, our secondary strategy is high-value-added products and services. That's what Lanier does in the tailored clothing category, it does quite well.

Just to give you the breakdown of the business. You see Tommy and Lilly together are 3/4 of the business. You throw in Lanier Clothes, and you're at 90% of the business, roughly. Ben Sherman for last year was 10%. With the growth in the other businesses, it'll be even less than that last year. And then, we've got a tiny little golf business.

The growth, as you can see, is coming largely from Tommy Bahama and Lilly Pulitzer, which is a good story, 3/4 of the business together and they're driving the growth. You've seen some very impressive growth numbers there from Tommy Bahama and some off-the-charts growth figures from Lilly Pulitzer. And here's a little bit breakdown on where the profits are coming from, again, Tommy and Lilly, 3/4 of the business, delivering the lion's share of the profit. Lanier Clothes, there on the light blue, makes a nice contribution. Obviously, that orange block there, Ben Sherman, is not a good thing. That's a negative number there. Our focus is on reducing that significantly. And as you all know, to the extent that we can reduce that, it will add to the consolidated profit. And then, the green piece is the unallocated corporate expense. So that's public company expenses, the costs that Scott, Anne and myself and some other corporate staff, LIFO accounting, and things like that.

The consolidated highlights for last year, you're probably familiar with these. I won't drag you through them. I will highlight one item there,, though. And that's just to remind you that the fiscal '12 numbers included about $15.9 million of operating losses tied to the expansion of our international effort in Tommy Bahama and the opening of the big Tommy Bahama Island on Fifth Avenue that we're going to go to later today. So those were some very deliberate expense investments that we've made during fiscal 2012 because we believe they create the pathway for future growth. So we were happy to make them. We think it was the right thing to do to drive long-term growth and earnings, but they did repress the growth in operating earnings somewhat last year.

With that, I'll turn it over to Scott.

K. Scott Grassmyer

All right. Thanks, Tom. We generated strong cash flow from operations. And we're very fortunate to be in a position where we can take the majority of that free cash flow and reinvest it into the business through growth opportunities. We've got Tommy Bahama U.S. stores, Tommy Bahama international stores, we have Lilly U.S. stores. And we also have things around e-commerce, whether it's through the technology side or whether it's the call centers to support e-commerce, or distribution center enhancements to handle these additional volumes through this rapidly growing channel.

We also -- we've spent about $61 million in capital expenditures last year. That was a little bit higher than I think our normal run rate, and we'll probably spend about $45 million this year. And about, roughly, 70% of our capital expenditures are really right into the growth vehicles, with the other 30% normally being whether it's store remodels or other maintenance-type capital expenditure items.

We pay dividends. It's something that's part of our culture, something we've done every quarter since we became public back in the 1960s. And while we don't have a formal stated payout ratio, it normally runs in the low 20% to right up around 30% of net income. We increased our dividend from $0.15 a share to $0.18 a share in the first quarter of this year. And then, any excess cash flow we generate, we'll reduce our revolver debt. We have a $235 million revolver and we had about a little over $100 million available under that at the end of last year. And we think that facility will support our capital expenditure needs, our working capital needs, and also, the ability to do small type acquisitions under that facility. For example, we purchased our Tommy Bahama Canadian licensed business this year, and just, we're able to fund that through the revolver. And if a good acquisition were to come along, we certainly think the capital markets will cooperate with us in helping us set up a structure that we could finance that. And it could mean increasing leverage at least temporarily, but usually we would expect to reduce that leverage fairly quickly.

Thomas Caldecot Chubb

Okay. Next up will be Tommy Bahama, and we'll give the overview there. That will be done by Doug Wood, the President, who's been with Tommy since several years before we bought Tommy, which is 10 years ago now. And then, Terry Pillow, the CEO who came in when the founding CEO, Tony Margolis retired about 5 years ago, and together, these 2 guys make an incredible team that's delivering incredible results for us.

Terry R. Pillow

Thanks, Tom. Thank you all for joining us today to talk about Tommy Bahama. My father once told me that it's very easy and a lot of fun to talk about something you truly believe in. And I can guarantee you, Doug and I truly believe in this brand and the power of this brand.

2012 was a great year for Tommy Bahama. It was the year that we achieved many milestones in our company. Among them, the first time -- it was the first year, 2012, that we achieved over $500 million in sales, which was a big accomplishment for us. We also successfully opened a very exciting new market for us in Asia, which we're very happy with. It's well underway and performing well. And even despite Hurricane Sandy, we were able to open our Island, as Tom mentioned in New York, and I'm very happy this afternoon to host you all over there. We're very proud of it, and it's very exemplary of our brand message, and we're very happy about that.

As we look at our brand, there are many reasons for the growth that we've experienced over the last few years. But clearly, at the top of the list of the reasons that this brand is as successful as it is, is the clarity of our brand message. And it's a very important factor to us. And internally in the company, we spend a tremendous amount of time talking about this one simple statement. It's very encouraging to me as I walk around the office in Seattle and our other offices to see this pasted on the cubicle of people around. And it's a simple phrase, but it's one that's very loaded, and it's one that everything we do at Tommy Bahama filters through this phrase. And we look at the world through one lens and we focus, it enables us to focus clearly with what we do and everything we do, with the products we design, the stores that we design, where we house our products, the food that we serve in our restaurants. It's very, very important us, and I just want to take a few minutes to break it down for you.

First of all, in that phrase, island lifestyle, the word lifestyle is a very frequently used term in our industry today, there are brands who refer to themselves as lifestyle brands. It's not so easy, and it's a very subjective definition to the word lifestyle brand. But we clearly, at Tommy Bahama, are a lifestyle brand. And when asked, "Well, if you're a lifestyle brand, what is the lifestyle?" We're crystal clear that we're an island lifestyle brand. And not to take island lifestyle literally that every product you buy from us, you've got to lay on the beach or you go away. But it's more of an attitude, a state of mind, a place where people can go to get the feeling of what we do. But we used the definition island lifestyle to define what we do.

Second word up here that's very important is we inspire the world to relax. We at Tommy Bahama, we are an inspirational brand. We want people to come in to our brand. We want to inspire people to come into our brand on their terms. Not -- we choose to look at our guest at high level, not look down or up to them, but on their terms. They can come in and be inspired by what we do through our imagery in and our products and want to be a part of what we do. We establish -- I often say the differences in a brand and a lifestyle brand is they establish an emotional connection with the consumer. The guest wants to become a bigger part of the brand.

And the last word in the sentence is relax. And I guess, if you have to have an elevator, one-word answer to describe your brand, there's no better word than that word, relax, because it defines everything the brand is all about and everything we do. I could sit here and talk about this line, because we do sometimes day on day -- day in. But as I always say, a picture is worth a thousand words. And over the last 1.5 years, we've been on 5 photo shoots to produce the marketing material that drives our catalog business and our e-com business and imagery throughout the store. We've gone from Miami to the Mediterranean on these 5 photo shoots. And so we took all 5 of them and put them together in one video today. And I thought I'd show it to you just to share the experience of the Tommy Bahama brand.

[Presentation]

Terry R. Pillow

I can't help from smiling even -- as many times that I've seen that video, every time I'd see it, it -- I'm more amazed. When you talk an inspirational brand, I want to be those people's friend. I want to join their club. I want to go -- I want to be a part of what they do. And that's the inspiration, the connection that we have with the guest. And it's because of that clear message, is that Tommy Bahama is not exclusive to the United States. It's a global message, a very easy message through imagery to transmit. And that's the reason that we've successfully been able to open in Asia.

I thought today I'd show you, because it's fresh on my mind, it's 4 times I've been in Asia and it's only May. But this is the Tokyo store that we opened. It's -- and as you'll see in New York, it's got 2 bars, a downstairs bar and an upstairs bar and a restaurant in the Ginza section of Tokyo, which is a very hip, exciting area. And it's a very beautiful store. It's a new store concept that we've done, colored coastal beach house, and it's resonating quite well in Tokyo. And the strategy, we also wanted to open not only in an urban area in Tokyo, but we also wanted to test a mall outside of Tokyo, Yokohama, for those who don't know, it's about an hour outside of Tokyo. You'd blink your eyes and you'd think you're in any mall in the United States. So we opened a store there just to get a lay of the land to see where we need to go next.

Next door, we opened at Hong Kong, which is a beautiful neighborhood location. There's a bus that really, still, changing the imagery and runs right in front of our store. That's the location in Wan Chai, street location, neighborhood location, which we are very happy with. And this is another picture of the Hong Kong store.

And Singapore, which is a fantastic market right now for us and a very explosive market. And one that's in Macau, which is in The Venetian, which we're very familiar with because of our presence in Las Vegas with our stores. It's been a very good market for us in Macau. And then, the most recent one that we opened last week was in Sydney in the downtown section of Sydney, which is the first urban store we've opened in Australia. So we're very excited about that. We have a tremendous brand with a tremendous growth opportunity in the future. And it's really because we've got a clear message. Our products that we produce have never been better. Our marketing is focused. Our stores are current.

So don't you see, as the investor community, it's very easy, it's very simple. All you have to do is sit back and relax and watch the next chapter of future growth for our brand.

Thank you very much, and I'll turn it over to my partner, Doug Wood.

Douglas B. Wood

Thanks, Terry. I thought I'd start with -- and just kind of give you a map and layout of our operations. And a couple of key points is our corporate offices are up in Seattle, where we have roughly 350 employees between design and retail. Our distribution center is there and our guest services is there. Some of the best people in the industry are up in our corporate offices in Seattle. We also have a design studio in Pasadena, and we've got a licensing and our footwear group is up here in New York with the sales team.

The really important dot on here is Atlanta, that's where Oxford is. And if you'd say, for us, putting your parent company -- note the distance, you'd say you can't get further away from each other. And then, at Atlanta and say, why don't we go to Alaska? But no, we'll stay here in Seattle. But if we just spend one second on this, 10 years ago next month, Oxford purchased Tommy Bahama. And if you want to say, "What are the success stories?" And I tell this to people all the time. We're a Harvard business case on how acquisitions should work. And the alignment of values, alignment of risk, reward, use of capital, you couldn't be in more alignment than we are with Oxford. And then, the last ingredient is this consistency of management. I mean, Tom, Scott, myself, we've worked together for 10 years now. And I know what they care about, they know what I care about. And we talk regularly. It's a four-way conversation. And that, that works. That really works. And from a -- if you look at the company, the transitions we've went through from a wholesale company to a direct-to-consumer that has wholesale, those are some tough decisions about how to use capital and how to start aligning your business, and has everything to do with our partnership with Oxford.

Let me go to the next slide. I'm not going to go through all the stores we have. We now have over 100 stores in the United States. And as you can tell, it's pretty distributed. It used to be, we're usually more in the Southern Tier, and now we moved up in the Northeast, the Midwest, up in the West, very successfully, I'd like to say. And up until March of last year, this was our world, one market in United States. And it looks like this is what our store layout was, e-commerce and wholesale.

And then, March of last year -- we'll go to the next slide. International. And so now fast forward 15 months, we're not just operating for ourselves in 1 market, we're operating in 7 markets. We bought back our Australian license last July. We just bought back our Canadian license last month, beginning this month. And now we're operating stores in Japan, Hong Kong, Macau, Singapore. So a big shift, and the good news is that group in Seattle -- and also, we have an operation in Hong Kong that had managed the supply chain, which is a big part of how we do things. It's rock solid execution, rock solid supply chain. And that has made it successful to be able to execute at a retail level. We also have a licensee up here in Dubai, he's been with us for about 8 years. And he's opened up 3 new -- 3 stores, I think going for a fourth. A little bit of wholesale, but a good partner up in Dubai.

Terry went over the 2012 accomplishments. I'm not going to read through all of them. '12 was a big year for us. One of the biggest things on that sheet is, as a company, having over $100 million in women's sales, and that's mostly through our own stores and e-commerce. But one of the initiatives that -- when Terry came in the door, was to build a women's business. And I'll say that not only are we on our way, but we are building a very healthy and important part of our business, and that's our women's business, and '12 was a big year.

'13, '13, we're 4 months into 2013, can't really talk about it, so -- until we release it in our earnings. But we do have a couple of big things, and that is 4 new stores we've opened up. Probably, the one that's -- we've already talked about the daily business, the one in Chicago on Michigan Avenue, which really is a great location for us. And also, 2 outlets, it pushed us back to the Canadian business. And we talked about these 7 markets, well, we just opened Hong Kong. But that was January, that was last year. But Tokyo opening up in April with the 2 stores, big accomplishments for this year.

So let's talk about '13 and beyond, the growth opportunity for the business. And I think it's why we're in the room, let's talk about what the future holds for Tommy Bahama. And the good news is that it isn't just one strategy but it's multiple strategies, and it's multiple strategies that we've been for several years now. With regards to North America, we're still on pace to do 7 to 10 new stores each year. We see a lot of opportunity here, and especially as we open up stores like in Chicago. And -- where we already have a Chicago store and you can say, "Wow, how many stores can you have there?" Well, there's opportunity there, multiple stores in multiple markets.

E-commerce, the most important thing in the market today. And I struggled with having these 2 bullets separated because at the end of the day, it's one guest for Tommy Bahama. We strategize, we talk about it all the time, and the future of retail is talking about how do you message and deliver your message to the end guests. And if they would choose to shop online, choose to shop in your store, it's the future, and we're here. The future is already here. And trying to link that together, that's what we are doing and have done. And e-commerce has been explosive and you'll even see more of that as we keep tying together the omni-channel.

Right with that is the guest database. For us, it's -- as many people, and we talked about the fact that Tommy Bahama is our #1 asset. Probably #2 is our guest database, to be able to talk directly to our guests and deliver key messages. And ensuring that those messages are cross-channel every chance we get. And we think we have a differentiator, too, with the restaurant. We have that little extra piece that -- where we have a restaurant in the market, we can do -- be more than about apparel and accessories. We can be about that anniversary, that experience that you can have in our restaurants, which is different than other brands.

If you go to the next slide, we talked about women's. Women's, for us, is critical for the growth of the company. We put a lot of effort into it, but we're getting a lot of success. And it's just not sportswear. We've saw our first success in women's swimwear. Women's swimwear, from that fit standpoint and styling standpoint, they gave us success in our own stores as well as wholesale. We're now into our footwear, and we believe we've bought footwear in-house. We think that's a great opportunity, as well as accessories. And with all of those product categories wholesale is a big opportunity that we really have only started to try to get penetration there.

Men's, we started out being a men's company, and we still believe that, that is critical to the success and the growth and expanding into a four-season, which we've already done. Two of our key items is the heavy net and jeans, in our top 5 of items. You wouldn't think that with Tommy Bahama, it's there. We have a new fit, our modern island fit has been hugely received. And if go to the store, you talk to a sales associate and they'll show you. It's a trimmer fit that is bringing a different guest. I won't say younger, just a different guest. And then, expanding also with footwear and accessories in this area.

And then, the last that we'll talk about, international, 2 markets specifically, Japan and Australia. Australia, we're farther ahead on because of the fact that we have a license there for about 6 years. When we bought it back there, we had stores. We opened our first store by ourselves in Sydney last week. We're going to get traction there, but a smaller market. But we will get traction there and have that traction quicker.

Japan. Japan is a big opportunity for size of market. And the Japanese have been traveling to Hawaii for long time. Familiar with the brand, but not familiar with the direct towards them. So we see that as being a little bit longer to build, but when we grab traction there, we see that as a big opportunity for us.

And then, lastly, where do we go from here? Hong Kong, Macau and Singapore, it was a platform for the bigger play, and the bigger play would be China. But you just don't run into China. You've got to build your brand. And we saw these markets because of -- it's aspirational to travel there and just start to introduce our brand there. And also, for us, to learn some things. You just don't run into market and think you know what you're doing. You've got to learn from these other entry points. And then, as we get knowledge and we have success, then, we'll have our plan to go into China, which we right now are thinking probably around 2015.

So lots of opportunity, lots of success where we really have a lot of momentum right now, more than I've ever seen in the company in my 12 years, and excited about what we're going to be doing here in the future.

So with that, I'll turn it back.

Thomas Caldecot Chubb

Okay. Thanks for that, Doug and Terry. And next up, we will have the Lilly Pulitzer guys. We'll give them just a second to get up here on the stage. And as they're shuffling up here, I'll give you a little bit of background on these 2 gentlemen. They worked together at a sweater company called the Eagle's Eye, that some of you may remember from many years ago. And then, in 1993 -- and Jim will talk more about this in a minute, but they teamed up and basically took over the Lilly Pulitzer brand, and they've developed it over the last 20 years. I reconnected with these guys in 2010, and ended up buying Lilly Pulitzer at the end of 2010. So they've been with us now for a little -- about 2.5 years. And I have to tell you, not only have they been a great addition in terms of what they've brought us with Lilly Pulitzer and their ongoing management and growth and development of that brand, but they've also been a great addition to the total company. We're really glad to have these guys, not only as the 2 that run the company, but also as part of the senior management team at Oxford. On the right is Scott Beaumont, who is the CEO. And then, on my immediate right is Jim Bradbeer, who's the President. Those are their titles, CEO and President. But very much like Doug and Terry, these guys work together in partnership in all big decisions, so really joint decisions made by the 2 of them. So with that, I'll turn it over to Jim.

James B. Bradbeer

Thank you, Tom, appreciate it. Terry and Doug, tough act to follow. I always wanted an older brother. I didn't realize I would have to be the younger sister. But well done, congratulations. It's really fun to be in the Oxford family and to be able to access some of their insights on building business. They've really done a wonderful job.

Well, we're the new guys or girls. And we thought we would use this opportunity to tell you our story. Many of you have heard the Tommy Bahama story and know some of the background. But our story really matters knowing who we are, where we came from, where this brand came from is important because it informs so much of how we behave, how we view the market, how we view the opportunities. So in our few minutes together, we're going to kind of focus -- we're really going to do it in 3 parts because Lilly is a brand with a history. Lilly's the real deal. But it has chapters, as all kind of great brands have a story, ours is a great story in multiple vignettes. We want to take you through the original story with the birth of Lilly from 1959-ish, which you'll learn in her world is just about right. Through 1984, through the closing of the business in 1984, I don't know how many people know that, but the business was completely out of the marketplace for almost a 10-year period. I want to tell you a little bit about what we did and bring it back, who we are and what we did to bring it back.

And then, I'll turn it over to Scott. Because the one thing Lilly taught us, and was very relentless on, she said everybody's going to want to talk about vintage in the past, but the most important thing is the future. It's all about tomorrow, it's never about yesterday. So we'll give you a little bit of history, we'll give you a little bit of yesterday to put it in perspective. But then, what Scott will take you through is always our priority and we don't live in the past, we live in the future. Okay? Everything good? Off we go.

So 1959-ish to 1984, this is Lilly's story. This is Lilly Pulitzer, the woman, and we called it kind of "the birth of an American icon." It is something that we manage everyday, that we are responsible for a business that really is iconic. She was an iconic woman and she created an iconic business, and her story is an interesting one. So let's start by meeting Lilly. And I think many of you are aware, it was in the press pretty thoroughly, unfortunately, just now a couple of weeks ago, at age 82, she passed away in a great place, had lived very full life. I was very fortunate to get to know -- both of us had a great meeting with her on Valentine's Day, where I knew and probably, we both knew it will be the last time we'd see each other. But she was something special, and let me tell you a little about her. She's a New Yorker, born and raised on the Upper East Side into affluence. Her mother, she was born a McKim but she married into the Phipps family. So she lived the life of a pretty highfalutin, as she would say. A lot of summer-ing in the right place and winter-ing in a place called Palm Beach, where when she was on her -- one of her winter-ing missions, she ran across a fellow who she thought was pretty cute, named Peter Pulitzer. And Peter was the grandson of Joe Pulitzer, who was the founder of the Pulitzer Prize. And prior to the big days of investment banks doing deals, families did deals. And the Pulitzers and the Phipps and the McKims all got together, and they had a wedding. It was an elope, Fish[ph] will tell you. And they did, and Peter and Lilly fell madly in love, got married, got together, immediately started having kids. And then, as is the case in all great stories, right, the highs and the lows, and she'll tell you this now. I just have to watch my crowd when I tell this, that she said things weren't going so well. And today, they deal with it sometimes with little blue pills. In those days, they encouraged her to go to Bloomingdale's for a little time, and just sort of get herself pulled together, which she did. And she came out of Bloomingdale's, and the doctor gave her very clear marching orders. And the marching orders were, from this young woman who's been raised from Upper East Side and gone to all right schools, she was to get a job. She was to get a job. Get to work. That's what will fix all these little issues you're having. And so she did.

And so in our world, we use the phrase that sort of grounds us forever because it all started with the juice stand. What everybody in this room doesn't know about the Pulitzers is they were very good at publishing. They also had a lot of orange groves, lots and lots of them down in Florida. And young Peter, the grandson, was chosen to run the family's orange juice business in Florida. And so while musing on the direction they were given from the leaders of Bloomingdale's as to what to do, she said, "I got it! We'll open up a juice stand right here in Palm Beach. It will be great. We'll put it right where we all like to go, right there right off of Worth Avenue. Too expensive to be in Worth Avenue, we're going to do it right in the beach." And so she did. She opened up a juice stand.

And Lilly was a beloved figure in Palm Beach. She was someone that the gills all loved. She had something. She had that charisma. She was from affluence, but she had a tremendous rebellious streak in her. She always wanted to be different. She always -- she never quite got comfortable with that world. And so she set up shop, and they came, and they came to buy her juice. But then, she had that great moment that all great entrepreneurs have, the moment of crisis. Because she was in her juice stand, and she was juicing, and she would show this and she would say yes, we're juicing and we're juicing and we're juicing. And what happened? She spilled on herself, and she was making a mess. And she hated the fact that she was ruining dresses in the juice stand. So she said, "What I need, I need a dress that I can wear in the juice stand, that when I spill on myself, no one will notice." Am I right? We didn't get a shift here, but -- and so was created the Lilly shift. She had her [indiscernible] run down to Woolworths, picked up some fabric that was brightly colored. Think of the colors, right? Your citrus, right? your pinks, your greens, your lemons, right? Put that on, cut it, she was going to -- beautiful woman, wanted to be something she could throw on that was sort of sleeveless, sort of short, she was feeling good about things. And so was created the shift that she wore on juice stand. And as all great entrepreneurs know, the people came in. They said, "Lilly, we love your juice, but more than that, we love your shift. How about making us a few of those shifts?" And so she did.

Now one of the advantages of being from the Upper East Side and having gone to Chapin and then Miss Porter's where she had some friends come to visit her, and this is 1960-ish, as she would say. And one of her friends was that pretty lady sitting up in the top right corner. Her friend Jackie Kennedy brought her daughter in and said, "Lilly, I hear you have this great thing going. This is so exciting. Why don't you make me a couple of those shifts?" And so, on the cover LIFE Magazine appeared Jackie Kennedy in Lilly Pulitzer's -- one of Lilly Pulitzer's shift. And everybody came, and everybody came to see Lilly.

All right, we don't have enough time. This can usually go on for hours, I'll save you, so we'll jump ahead. From there, from a business perspective, this woman with no design background, no business background, but she always had a tremendous eye. One of the few times, she was the most self-deprecating, low key, but when you absolutely pinned her down, "So what do you have?" She understood the lifestyle and she had an eye. She also had a tremendous passion for doing what she did, and she wanted control of it. So Lilly Pulitzer built a business that was completely vertically integrated.

Everybody today wants to talk about going direct. Lilly was like a corpse. "I kiss the box coming out of the factory that arrives from the store, a customer gets it, that's how we have to do it." She owned everything from the printing factory in Key West, all the way through to the retail stores. She built a very complex business. Because she also wanted -- I don't think she knew it, but she wanted to build a business that would sustain and will be defensible, and it was.

She also built a business, well, it is the most overused phrase, it is the right phrase, but only for a view, and you're actually sitting in a room with one -- a brand that truly is a lifestyle brand, Tommy Bahama, but arguably, the first lifestyle brand, which was Lilly Pulitzer. Because the lifestyle brand by definition is one that starts with a vision of the way you live as opposed to a vision of a product category in which you can dominate.

And the industry was filled by people who only were good at shirts or good at pants or good at sweaters. That was the makeup of our industry. And then stores would aggregate them. Lilly was like, "That's just too complicated. I see the way I live. I see the kind of clothes I want to wear. I'm going to do that." And so she did.

And that's such an important thing because that informs the way we think about the business, and I always said that's what she communicated to us. She built a vertically integrated lifestyle brand.

And she also did something that all great entrepreneurs do, she created something that didn't exist before. She created a thing that we call -- she would never be -- she would hate that we're talking about it this way. And she would hate that we've been -- we'd give her this kind of kudos. But she created American resort wear.

We're very proud to hear that on June 3 at the CFDA award dinner that they do every year that Lilly is going to be honored and that CFDA thought it was important to recognize her contribution to fashion. Because she's truly a unique American icon. She created a look that Isaac Mizrahi delivered in a speech a couple of years ago as saying, "We don't go to many, but when we do..." He said, "Great fashion is when whether you're in Kiev, Russia or Palm Beach, Florida, when you see a piece of Lilly, you instantly recognize her." All great designers wish that they could design products that's instantly recognizable, and she did. She created American resort wear.

These pictures, some swimwear and some 70s suits, they capture her, her time. She didn't want to do it, I don't think. I think she did what she liked, and she had fun doing it. But she really created something unique. And in American fashion, she is a pioneer and an icon.

But then the story changes because -- and I'm a guy working in a women's business, so I get these sports analogies, virtually not at all, but she did something that really matters, which is really unique to our story, which is, she retired at her peak. I only know this because my mom ran the Lilly store in La Jolla, and I was in college, 1984, they closed. I got a tearful phone call like 8 in the morning on a Sunday, which isn't a good time to call a college kid. Well, my mom called. But she closed. Her business was fine. But she'd done it for 25 years, which in apparel is kind of like dog years. That's a lot of years, right? And she just closed. "One day," she said, "We've had it." She told us, "So the day I didn't jump out of bed to go to work is the day we decided to shut down." And so she did.

And so the myth began, right? Tom talks about the magic. To get magic, you need to do things like that. Nobody in our industry quits when things are going. What do we do? We sell it off. We trade it down. We get a diffusion brand. Not Lilly. She just closed.

And so was born the saying that kind of got ours as we move to the next chapter. So for 10 years, the business [indiscernible].

For the legal and the lawyers in the room, if you don't actively market a trademark after 7 years, you lose the right to that mark. It falls into public domain. She didn't want that. And she was clever to have lawyers who said, "Hey, listen, you need to deal with this. '84 and '91, you need to do something." So the long story short is that through secondary connections, Scott and I, who were working for a company called Eagle's Eye, working for a guy named Chris Burch, who used to say that didn't really mean anything to anybody. Now apparently, that sort of resonates out there. Chris is a pretty smart guy. But we worked for him, and we actually brought this idea to him. He didn't think that was a good idea. So we left and we started a business over her pool. We launched it. I'm sorry, I don't have a picture of that. We weren't savvy enough to be taking pictures in those days. But this is a picture from an opening party with Lilly, and we actually had a third partner when we started it in 1993. And we launched with a vision of rebuilding this incredible brand that she had built that we felt belonged back in the market.

There a couple of things just on the macro that we want to share. There were fundamentals. We believe there was an opportunity. We didn't think there were many brands in our industry. We -- also, there were some tremendous demographics going on in 1993 that continue today. The world is getting older, richer and moving south. All you need to do is go into -- [indiscernible] somebody I was talking about Palm Beach Gardens Mall. If you remember what that looked like in 1993, those were like -- tumbleweeds up and down the aisles, and now you can't. You can barely squeeze by. It's really a fundamental change, and that will continue as the baby boomers go through their period. But we had a belief there was an opportunity to bring this brand back to greatness, and it belonged. We felt there was a dramatic void in the market.

So they asked us, "What -- so what did you do? And what was it that was mystical about what you did?" And I actually think that there's a ton of work, but there was a simplicity to what we did. We're positioned as American resort wear. But the benefit -- and in all products, in all consumer products, the key to positioning is the benefit. What does Lilly do? It brings happiness back. Lilly is a happy brand. She said that, too. She was very -- she's a great parent. Great parents don't tell you the 11,000 things you should do, they'd tell you the 3 big ones. She was always good on the big ones. She's like, "We sell happy prints. That's what we do. We make people feel good."

In an industry that doesn't -- this industry is pretty serious. I don't wanna -- you all can sit through your magazines. It's pretty serious, and we're not. We're about the best in times. We're about things that make you feel good, all right? Her prints are about that. It's about lifting your spirits. It's about taking you to that place that makes you feel good. Whether you're in Palm Beach, trying to look good -- Tommy Bahama good. It's not about having to be in Palm Beach to wear this. It's about having that tough day when you live somewhere else and a woman goes to her closet find something, it takes her there. And that's our job. And that's a meaningful market opportunity. And so we brought back happy clothes, or we sure tried.

And the other big thing before I turn it over to the future is that the thing that we're most proud of and most excited by and the most intrigued by when people ask, "What's the biggest surprise over the 20 years of kind of going at this?" is that the fascination is that we were able to have the great granddaughters and granddaughters love the product the way their mothers and grandmothers loved it. There's a passion.

This is the Kennedys, the Kennedy mother and daughter. And then, that's -- I think that's Robert's grandkids, who all wear and love the brand. The aesthetic, the feeling, the essence, the things that it stood for, all those good things, those happy things, those positive things really have translated throughout time. And that's been an incredible part of our ability to bring back this iconic brand and return it to realness.

Enough about the past. Scott will tell us what the -- what we've got next.

Scott A. Beaumont

Well, looking at that picture, a couple of pictures ago when we founded the business, when I had a lot of dark brown hair, I was really hoping that in this 20-year period, I was really hoping that my complexion would have cleared before I turned gray. But that just didn't happen that way, and I was hoping for a little better on that.

So our strategy -- and let's turn to the brand vision. What we did, find the key for a brand vision and in an aspirational brand, it's important to have all the elements of a marketing mix consistently aligned. And we'll talk about the elements of the marketing mix, keeping those aligned and also to have competitive advantages. But aligning the elements, the marketing mix, the customer, the positioning of the brand, we'll talk about that. The product, pricing, distribution and communications, keeping those key elements of the marketing mix properly aligned.

And we also need to have competitive advantages. And the 3 competitive advantages for Lilly Pulitzer are print, authentic resort and emotional connection. The reason that you have to have competitive advantages is our whole business, our growth rates are [indiscernible] higher than industry growth rates, so we need to gain market share. We either need to convince customers who are currently buying something to buy us instead, or we need to be so compelling within our subsegment, we have products that are so good that actually expand the size of that market. And you can only do that through having competitive advantages, and we have 3: print, authentic resort and emotional connection.

Let's talk about some of the elements of the marketing mix. First, I'll talk about customers. Our customer is multigenerational. Our customer -- we actually have a girls line that starts with girls who are 3 and 4, 5, and then through high school, college and what we -- and the mothers with young children, and then the true empty nest resort lifestyle. And by the way, I happen to be an empty nest, you're actually not empty nest unless your kids are paying their own cellphone bills. Just because they've moved out of the house and have their own job, but until they're paying their own cellphone bills and E-Zpass is charged to their credit cards, that's when you're actually empty nest, so -- but we're multigenerational, and we also have the lifecycle of Lilly. You see that a lot of people are introduced with the brand as a child. And then when they're late teens, they kind of wear it again. And then when they're a mother with young children, they're wearing it, the children have it. Or maybe then the grandmothers participate in the brand by buying for her children. And this lifecycle of the brand and the multigenerational characteristics, we think, are why the brand has had a 55-year history and is still viewed as like a young brand on the move.

And we're often asked like, "What about this Lilly fad? When is this Lilly fad finally going to be over?" Well, I think 55 years kind of gets you beyond the fad comment. And Brad was talking about the juice stand, I think Lilly really started by kind of clinching first through happy clothes, and that's something that isn't a fad. I think there will always be a need for the happy clothes that we do.

In terms of our positioning, our positioning is resort chic. It's also important to have clear positioning in the brand, and our positioning is resort chic. Positioning is the reason why you exist. That's why people buy from you rather than from someone else. And in resort chic, people always ask, "Well, isn't that narrow? Isn't that too small? Can you really build a business based on that?" 75% of America -- if you consider the Great Lakes as beach and those who live near the Great Lakes consider it as beach, 75% of the United States lives within a 90-minute drive of beach. So that is not niche. Having something that's resort-based, resort chic is not niche. When 75% are within a 90-minute drive, it makes it accessible.

And the other thing about clear positioning that's so important, and we've been very disciplined on this, is that consumer buy like their #1 choice, like if they're looking at 4 things, they don't say, "Hey, this is my fourth favorite. This is what I'll buy." They actually buy their favorite. So it's important to be the first choice to some rather than the fourth choice of many, and clear positioning helps with that.

We have a video that shows a little bit of what resort chic is.

[Presentation]

Scott A. Beaumont

That's a visual of what we mean by resort chic. The -- because one of the hypocrisies in the business, Terry has the same thing, is we actually work too hard to be able to live the lifestyle we sell to, but we'll get around that.

So in terms of elements of the marketing mix, product. And certainly, that side, product is a very important part of the marketing mix and maybe the most important. We are -- our products focus on women's apparel and accessories. And women's apparel is the overwhelming majority of the company. We do some children's business, that's really girls, but we are primarily a women's apparel brand with some accessories. We have, in terms of product categories, by shape design, we have dresses, women's sportswear, some women accessories. But at Lilly Pulitzer, we also measure our business by print, patterned and solid, the way that we think of our business.

Our product strategies are that we create innovative designs that delight our customers, have high retail sell-through and contribute to the profitable growth of the company. And I won't dissect all those. But to create innovative designs, we are design-lead, we innovate first, protect later. We have key words like fashion design vision, key looks by delivery. Newness and inspiration are words that are important for us in terms of shaping our product strategies.

One of the questions the brand is, really, what's the balance between focus, diversification, we are -- the number of product ideas we have been presented with over a 20-year period is extraordinarily broad. But you need to have market superior product to grow at rates faster than the industry growth. And to do that, we've actually found by focusing on the core and staying close to the core -- markets end up being a little bigger than you think when you have market superior products. So we've been a little more in the focused than in the diversified.

Let me talk about pricing. We're still in the elements of the marketing mix. Our pricing is designer at better. It's good positioning for us. We also have a broad range in our price continuum, and that fits with the multigenerational customer. We have some entry-level price points and some more premium. We are -- we have full price integrity in the brand, and that allows for a high-margin business that's sustainable. So that's linked. All the parts of the marketing mix, we link.

Let me talk about the distribution. And our distribution is multi-channel. We are both wholesale and retail. Our retail has e-commerce and our own stores. Our wholesale has a concept called signature stores, which are independent retailers who have -- carry a lot of Lilly and can call themselves Lilly Pulitzer signature stores, and some major store business. Our model has been moving much more to a -- to the direct channels. E-commerce is an important part of the business. High growth, we approach that with a full-price model in terms of the pricing that provides a very good umbrella of communication of full-price and allows us to do full-price business and really not have conflict channel issues.

Our communications is -- primarily now, it's digital and direct to consumer are the main things going on. These are metrics that I always talk about too much 5 years ago. But we'll have over 15 million visits to our website. Those are people who are seeking us out. We issued over 150 e-mails last year, and more than 30% of those are opened. So in terms of our way to get messages, we have statistics in terms of Facebook fans, e-mail names, things like Pinterest, collecting the data for the customer. Doug had mentioned earlier that the database of guests is really one of the important intangible assets of companies like ours.

I want to -- we are going to show a video now on -- I want to get to our competitive advantages of print, and let me show you how we do print. This also is a way that we can communicate digitally because this has been on our e-commerce site.

[Presentation]

Scott A. Beaumont

Prints. We mentioned in the beginning the brand vision that prints are our #1 competitive advantage. They're all done in-house. They're custom. They all have the name Lilly cleverly incorporated in them. That makes them defensible and sustainable. They have a very certain look which were recognizable. We do a high assortment of print, more than most in the industry, that is a sustainable competitive advantage for us. It's important.

The authentic resort is our second competitive advantage. My partner, Brad, talked a lot about this that we -- Lilly is from Palm Beach. It is a true lifestyle brand. What Lilly did is from the lifestyle that she saw. She saw people going to the beach, having lunch, entertaining. She developed clothes that fit that lifestyle, and they were appropriate, but easy and accessible. And Lilly Pulitzer truly is in the first lifestyle brands with an authentic resort heritage that we understand.

And then the last of the competitive advantages is emotional connection. A lot of brands talk about this, very few truly have it. At Lilly Pulitzer, the emotional connection is extremely high. If you go to our website and look at the photo gallery, you'll see it. There's a wedding on the beach, people happy, running afterwards. On the next slide, there's somebody playing tennis, spelling out the word Lilly with tennis balls. This is -- these are -- this is emotional connections. This is more than just buying product. And dogs, somebody making a [indiscernible] with dogs. We have -- in terms of emotional connection we had -- one of our key customers came to us, was telling us how she has 2 dogs, one named Lilly, one named Pulitzer, one's dyed green, one's dyed pink. And she got a certain species of dog whose fur was so white that when you dyed it, it was exactly the tone of green and pink they want. This is emotional connection. It might be something else as well, but it's certainly, emotional connection.

But -- so those are the competitive advantages. And then after 55 years, we're just getting started. Thank you very much.

Thomas Caldecot Chubb

Thank you, Scott and Jim, very much appreciate that. Next up is Lanier Clothes, and we've got the President of Lanier Clothes, Wesley Howard there.

Just briefly before Wesley starts, I'll tell you that Lanier, and Wes is going to talk a bit more about this, is more than 40 years old. Wes has been with Lanier for 20-plus years. He represents a very important transition in Lanier, and I think this will be reflected in his presentation today. For almost all of its history, Lanier very much viewed itself as a manufacturer. The leadership of the company was always manufacturing guys. And they very much approached it is that the reason customers existed and sales teams existed was to create demand to keep those factories full. Wesley represents a transition in that he grew up completely on the marketing and sales side of the business. And his approach to the business is a very healthy attitude of what does the market need from us in the tailored clothing category, and then we're going to figure out a way to profitably meet that need. And that change in mindset, I think, has as a tremendous amount to do with the huge amount of success that we've had in Lanier over the last couple of years.

So with that, I'll turn it over to Wesley Howard.

James Wesley Howard

It was actually almost enough said. Thanks for listening here today. I'm going to first take you through a short video, which will really introduce you to us in a more tangible manner other than my just giving some words. So if we can take a look at that.

[Presentation]

James Wesley Howard

So as you can see, we're a tailored clothing company. We make men's suits, men's sport clothes and men's pants. We're the -- we own some brands. We license brands. And we still do a little of the profit branded business as well.

We're the second largest tailored clothing company in North America. And as Tom said, we're over 40 years old, 42 years old now. We have a very consistent record of profitability.

In the next couple of minutes, I'll kind of give you the -- give the explanation as why I think that's been the case. It starts really with the management team. The associates teams that we've had are really, I think, the best in the business today, for sure, whether it's in our sales, our design, our sourcing. It's a pretty complex business, so we bring the best to the table here.

Beyond that, everything for us starts with product. We know that for us to have sustainably profitable growth, which is really our mantra, we have to make a product that sells through to our retail customer, and that is our channel.

The second very important part that we're involved with and we think is important is the integrity that we have. And that's kind of a big used phrase over the years, but for us, it really represents what we do with -- in having long-term relationships. So we're 42 years old, we have relationships to go back that far with our customer base. And I think in any industry that you're in, whether it's the financial or our business, I think you find that those long-term relationships are also among the more profitable relationships that you have because you do have an understanding of each other. And that's we're about, whether it's the customer side or the vendor side.

Financial management, another key ingredient to the long-term success that we've had. We wake up every day and we know how to control our expenses and how to control the financial workings of our business. It starts with expense management. We spend on things that help us grow our business profitably, whether that's our people, whether that's our brands, whether that's our product, whether it's our customers. I mean, if it doesn't really apply into that framework, we don't spend money on it.

The next part of our financial mix, a very important part for our kind of business, is the work -- is the management of our working capital. And our key goal here is to keep as minimal working capital footprint as we can possibly do. And for us, that means managing our business with a very lean inventory, turning it as fast as we can and not disrupting anything that we -- any of our customers or business for our own and maintain a healthy go-forward.

Execution. Nothing works for us without execution. I don't think anything works for anybody without execution. Our resources are really allocated to ensure that we do execute as flawlessly as we can. And this begins with selling the right product to the right customer. Tom made a comment about how we really go after what sells. In our terms, what does our customer need as opposed to what do we need to do to fill a factory next week or last week. It also extends ourself to sourcing the product through our global network, which includes Italy, Mexico, Asia, really with an eye towards high quality product which we do produce and high margin driving values.

Planning and shipping our clothes into the customers when they want it. And then finally, managing our inventories, again, to -- to get -- enable us to have that minimal footprint that we need to have in order to have a sustainable business -- a sustainably profitable business in a high-growth manner.

Brand diversity. We -- as I said, we own brands, we license brands and we still do private label as well. Each brand that we've got, each segment that we go after, we have a focused reason for why we do it. We also have skill sets for the product there as well.

We got a business broken up into 3 different segments: opening price point, which is really about selling to the JCPenneys, the Kohl's, the Sears that -- our opening price, $99, $119 suit. It also extends to our private label business as well, which includes some of the brands like Lands' End and Sears and also Joseph A. Bank. The next part of our business is the moderate business, more of the department stores that you recognize, Macy's, Men's Wearhouse, Lord & Taylor, towards the top tier, some regional department stores. And then most recently, we've extended ourselves into the upper tier of the business, really, I guess exemplified by our business that we've just started with Saks Fifth Avenue.

This is a list of some of our key customers, not entirely our largest customers, that are out here, but also some strategically very important customers for us.

We'll spend the next couple of minutes just kind of giving you a 10,000-, 15,000-foot view, I guess, of some of the brands.

Dockers is the first brand we have. This is in the opening price point segment. It's one of the more well-known brands. That's one of the things that appeals to us about the brand. Likewise, what appeals to us is the fact we've been able to license, and this is important as we go forward. We've been able to license the Dockers trouser or the dress pants for us as we go forward.

You can see some of the key customers.

Billy London is a brand that we started, we own, has a broad distribution, also found in the opening price point arena. It's a brand that serves the younger customer or more fashion-driven customer. Generally, very often, it's his first suit.

Private brands, as I mentioned, we still have a segment of our business that's there. Really, this is about taking advantage of our skill sets in design and sourcing and in logistics and distribution, which we do it for very large customers. You see some of these listed here.

Importantly, with this, if you've had asked me or asked anybody up here, 4, 5, 6 years ago, this would have represented 45% to 50% of our total volumes of Lanier Clothes. Today, it represents 25 or less percent of our business. It's been a strategic decision for us, I think Tom alluded to that, to move more into a branded mix for a lot of reasons, not the least of which would be the ability to grow profitably.

The next and very exciting for us, Kenneth Cole, and this is a very modern brand, focused on the young fashion guy. It's particularly important for us because it gives the opportunity in our distribution channels, which the Macy's and the Men's Wearhouse, listed up here, of having -- with a very strong diffusion brand, Kenneth Cole Reaction, 2 different price points on the same floor, and so -- which is not something that happens, not certainly in our industry. So it's really been able to help us magnify our volume and our ability to grow.

And likewise, this is one of -- and I'll say one of because I actually feel more strongly about it than this, but I think, maybe the best-selling brand in this marketplace today in tailored clothing. It's really on par, and it's been that way us for the last couple of years.

Geoffrey Beene, a more mature brand, also broad distribution for the more mature guy in the 40- to 60-year old range. [indiscernible] is a brand that we own. This resonates more in Canada. That's really where the distribution is more focused, north of Canada. This is our foray into some of the better or accessible luxury, we'll call it, $695 to $795 per suit.

And you see Ben Sherman, British iconic, as we call it. It's a very modern brand, very fashion-driven brand for the younger guy who's a little more affluent, in the $595 to $695 range.

And then Ike Behar, our most recent brand and is our foray into true luxury. This is a brand that we've just launched at Saks Fifth Avenue a few months ago for this season. This is a $1,200 suit, among some other items that are in their stores. Made in Italy, which has a relative avenue in Saks Fifth Avenue and performing very well. All of my guys are telling me that it's the best launch they've had in this -- we certainly feel like it's a very strong launch right now. Certainly, the indications are there.

Back -- the last thing is that here, also, we have a diffusion brand. Ike Behar has a diffusion brand, Ike Behar, which we will also launch later this year at Lord & Taylor.

So we've spoken to some of this, and design, we've talked about, is important for us. How do succeed, what have -- what do we do as we go forward, and how do we grow? It is, to what Tom had mentioned, is finding the right space, finding those opportunities for us. And it's something that we focus a lot of attention on, whether it's our sales teams, our merchandising teams, myself, whoever, where you look at and you look for opportunities to do business and to grow profitably with your -- with our customer base. It's important to find that white space.

For us, the white space, operating as a void means when you find it, you're the first one there. When you're the first one there, you got a much better opportunity to grow and grow bigger. And the other element about that is particularly important to us as we find and have found for a number of -- over a number of products that we've been able to do this with is, we have much greater pricing power. I mean, first is there -- everyone else comes in to take space away from it. It's generally there with a deal or some sort of an incentive where we represent authenticity and we're able to do that and that's very strong. The next part of it is really how we've handled this ability to help our customers grow their gross profit dollars. That in turn obviously helps us to do that and to expand our footprint within their store. So what are our white spaces? Well, besides the incremental growth that we've seen in some of our brands, really, the first white space that I will talk about for us is a big effort we've made in the last -- within the last 12 months of developing a much larger pant business for developing a large pant business. We see opportunities and are taking advantage of these opportunities now with Kenneth Cole, successfully at this point, Dockers, Ike Behar, as well as some private-label initiatives. And lastly, we see some new channels of distribution that we've not taken advantage of to the fullest extent over the last several years. First would be clubs. It's not necessarily glamorous, but it represents big volume, falls into some of our wheelhouse, the big volume with fast-turn, fast-logistics businesses and it meets with the skills that we have. Next, and I referenced this a moment ago, is Ike Behar. We see that luxury channel as a big opportunity for us. It's not a very big segment in terms of volume of the clothing market, like -- not unlike the other markets, but it does represent a volume -- a business for us that does give us good profitable volume, but with much higher margins and the ability to maintain some pricing power and considerably less price pressure.

So with that, I'm going to close. Thank you. But we're going to show you an Ike Behar video that was taken a few months ago, 2 or 3 months ago with the new store openings. Actually, their first store opening in Charleston, South Carolina for this brand has been very successful to this point and I'm also happy to say that, really, one of the driving forces in the success that they've had for this point has been our product, which I think, took them by surprise. So thank you.

[Presentation]

Thomas Caldecot Chubb

Okay. Last up is Ben Sherman. And as many of you know, we alluded to this at the beginning. Ben Sherman has struggled financially over the last couple of years. We've taken some very positive steps to address that and try to right the ship at Ben Sherman. One of the key steps there has been some changes in management there. We had the departure of the former CEO last November. And then just last month, we appointed a new CEO, who was a guy who'd been within the business, but we elevated him to the CEO role. He's 1 month into his job now. We've made a couple other promotions there. The new team are very focused on doing the things that need to happen in order to correct Ben Sherman and get it on the right path. They're very focused on doing that and 1 month in, I think they're doing a great job. What I didn't want to do was take them out of the business for 3 days to fly them over from London to be here today and go back tomorrow. So for Ben Sherman, what we'd opted to do here is we've got a slightly longer, it's about 3 minutes long, a video that will explain what the brand is and what it stands for and hopefully give you a flavor of the opportunity that Ben Sherman can build on. And then I will walk you through some of the key points of the turnaround plans for 2013 that the management team in London is focused on.

[Presentation]

Thomas Caldecot Chubb

Okay. So that's the sort of the brand story of Ben Sherman. Hopefully, you can see it's not quite as good as having somebody in person to deliver the message the way these guys did, or Terry and Doug did, but the elements, the raw material of having a great lifestyle brand is there. There's no reason that Ben Sherman cannot be successful. However, over the last couple of years, our execution in Ben Sherman has been abysmal. We've failed to pull all those enough those elements together well and have them synced up, as Scott and Jim talked about so eloquently, and as a result, we've had some very poor financial results. There are a couple of key things that we're doing in 2013 to try to remedy that. First is restructuring and strengthening the management team, which I touched on at the beginning of the Ben Sherman discussion. We had a CEO exit. We elevated an internal guy to be CEO. We elevated another internal guy to be Chief Operating Officer and then we've brought in a couple of key people. Most importantly, a very strong Head of Retail, who started with us about 6 weeks ago. So that's the first part of the plan for '13. The second part of the plan is expense reduction. Ben Sherman's expense structure is much bigger than the business this size can support. In order to be successful at Ben Sherman, the expenses must be reduced. We've got a plan to significantly reduce expenses in 2013. We'll get a lot of the benefit of that in '13 and then that will fully annualize in '14. And there's no reason that we can't achieve that. That doesn't depend on external factors at all. That depends on us. The team is very focused on achieving those expense reductions and so that's the second key element. The third key element is what we're calling here distribution control. That's sort of a polite way of saying that we have some relationships with some of our wholesale accounts, but we're set up in such a way that we had no chance of being profitable in those accounts. That was not the fault of the accounts. That's our fault. We did that to ourselves, but there's no point in spending time and energy focusing on relationships that at the end of the day are going to make no contribution to the bottom line. So we have exited those relationships. And the final area that we're focusing on in 2013 is to improve and grow on areas of potential profitability. First and foremost is improving the performance of our own retail stores and e-commerce. We've got the stores. We've made the investment. We need to have them perform better. We're doing a lot of things to try to make that happen, including first and foremost, having the appropriate leadership for the retail operation there. And as I mentioned, we've brought in a new highly qualified Head of Retail in London about 6 weeks ago now and he's off to a terrific start. Second thing we can do is manage inventories better to eliminate some of the very large markdowns that we took last year. And again, this is something that should be largely within our control when we should be able to execute that. And then finally is growing profitable wholesale accounts. While we did have some accounts that we've sort of stacked the deck against ourselves, it didn't have much of a chance to get any contribution from them. We've also got some great wholesale accounts with brand and product working well. It's working for us. It's working for the customer and what we need to do there, obviously, is do everything we can to nurture those relationships and those businesses and grow those accounts. So that's the -- what we're trying to do in Ben Sherman in 2013.

Just a roundup of discussion in case anybody's trying to make all the pieces of the puzzle add up. We had one tiny little additional business and that's Oxford Golf. They sell golf products. Obviously, it's branded as Oxford Golf and the distribution is really on-course pro shops and resort shops. They have a big business. This is an example with the gift shops at the Ritz-Carlton chain in the hotels. That business is about $15 million in sales. They're marginally profitable, but they may need to do to be more profitable and ultimately successful is to grow sales a bit. I'm happy to report after a couple of very tough years in the golf industry during the economic meltdown, things have really started to pick up and they've got some good sales momentum and I think they can make a small but meaningful contribution to our bottom line. Then last, just to recap, today, what we've tried to do is to present you a high-level view of some of the sort of magic that exists within our 4 businesses and how it is that they create the opportunities that we need to grow. We heard from Terry and Doug on Ben Sherman, from Jim and Scott on Lilly Pulitzer, from Wes on Lanier Clothes and then I tried to add a little color on Ben Sherman. I think we covered all of the bullet points out there today and I think those are all very important. I would add one more to that list and that's the people. In this business, nothing happens, there's never success without having the right people. And as the leader of this company, I have never felt better about the team that we have running the operating businesses than I do today. Hopefully, you've got a good taste of that today in the presentations and share my enthusiasm for the management team that we have in place and for how well that bodes for our future.

Last comment, just a reminder, first quarter earnings release is June 11. We are in a quiet period. As much as possible, I would like you to try to tailor your questions to the sort of high-level kind of discussion that we've tried to have today and avoid digging into the first quarter too much because we are going to have to politely evade any such questions. So with that, I'll open it up for Q&A.

Question-and-Answer Session

Edward J. Yruma - KeyBanc Capital Markets Inc., Research Division

Eddie Yruma with KeyBanc. So I know you're not going to touch on the current quarter, but..

Thomas Caldecot Chubb

Sorry, should we take mic now?

Edward J. Yruma - KeyBanc Capital Markets Inc., Research Division

I think on the last call, that you said that the headwind from Asia expenses should be roughly comparable this year as it was last year. I guess from a longer-term perspective, how should we think about the profitability ramp for your Asian businesses particularly if you decide to expand to China in 2015?

Thomas Caldecot Chubb

Scott, do you want to lead off on that one?

K. Scott Grassmyer

Yes, we mentioned that we lost about $10.4 million in Asia last year. We expect to lose about the same amount this year, but the run rate will be -- we'll exit the year at a lower run rate. As far as the future, that's going to depend on how aggressive when we open the stores and the nature of those stores. We think the infrastructure expenses are there, but when you open new stores there, the difference be a big load and we just don't have the four-wall contribution yet to make it profitable. But we believe that where does that come, I understand we need to tell.

Thomas Caldecot Chubb

And Terry or Doug, you might want to add a little color on this generally how you're thinking about the progression.

Terry R. Pillow

The plan we wrote when we went into Asia, we're executing it on schedule. We always said that we wanted to -- we did know what we did know and we wanted to get into this market and find out what we were dealing with and then gauge our strategy after we took a look at that, and we're on that strategy. We're looking at it every day and analyzing the business door by door to see what we need to do and to gauge how fast and where we go next. But I need to say we're pleased at what we see. With very little marketing in these markets -- when you go in to a brand new market with very little marketing where you -- business that you're doing is based on this year on the product offering that you put it in front of the customer and they're coming in, they lock up this in their minds. So, so far, so good.

Edward J. Yruma - KeyBanc Capital Markets Inc., Research Division

And maybe one follow-up on the store growth. I think you addressed the Tommy Bahama is having the 10 domestic stores, but I guess a 2-part question first. On Lilly, how should we think about longer-term store progress now that you have kind of refined store prototype? And I guess with Tommy, is there an opportunity and should we think about a women's-only door?

Thomas Caldecot Chubb

Let me start on that one just for a minute by calling out the comment that Doug had a slide on and that he made some remarks on it, but I thought we were quiet when we announced that [ph]. First of all, I think you'd really need to look at the total direct consumer business together. So retail and e-comm because at the end of day, it's one product line, it's one brand and it's really one customer. So distinguishing too much between how much growth is going to come from e-comm and how much is going to come from bricks and mortar, I think, is a little bit dangerous. Our intent is to grow the total direct business and we'll give you some thoughts on how stores and e-comm play into that, but the big picture is really that total channel and that customer experience. Doug or Terry, do you want -- oh, Scott, you can...

Scott A. Beaumont

Well, in terms of Lilly Pulitzer store growth and Tom says often that we're really targeting for a year in terms of our store growth and we opened 4 new doors in 2012. That's successful. We -- that's the plan for 2013. This year, we opened in Riverside, we opened in Kenwood. Our next opening will be Streets at Southpoint, That will be about June 25 and we recently have a fully executed lease at Waterside Shops in Naples that we're anticipating that would be opened by November 1. So those will be our 4 and that's the pace that we see, and we will only do those if they are terms that work and locations that work and size that works. But those are our plans.

Terry R. Pillow

On the woman's question. It's a good question on the women's-only store. We right now talk to you all on the phone about it so the goal that we were going to be 50% women's and we're well on our way. As a total right now, we're well over 30%. Some of the stores that we recently opened, we've opened those doors with a portion of women's greater than we've had in the past and it's working quite well. You'll see tonight when you go over to the New York store, it's approximately 50/50 right now on the floor set and we're working quite well. The answer is no. We are not considering opening women's-only store because we've talked about in the presentation at lifestyle brand, we think we have the ability to tend that lifestyle like we did in the video and through our stores with home product and other products. So today, the answer is we haven't thought about a women's store. That's the real answer, but who knows, this business has got changes daily and who knows what we looked like in the past that we're -- I would say we're very pleased with our women's business and the performance and strides that we've made. In women's, it's a bigger share of the market and we're happy that our guest is embracing our women's offering more and more every day.

Michael Richardson - Sidoti & Company, LLC

Mike Richardson from Sidoti. Just with Tommy, and though you're doing so well, have you given any thought to accelerating the store openings? And if not -- I guess, why not?

Thomas Caldecot Chubb

Let me -- again, I'm going turn today towards the guys who'd know the real answer, but let me remind you again that I think the way we're really trying to look at it is the total direct business and not yet too fixated on the number of stores -- bricks and mortar stores because from the customers' perspective, they're buying Tommy product or Lilly product whether they're buying it online or in the store, it's somewhat a difference to some of them. So making sure that we've got the right proposition for stores and the right locations is very critical and we are organizing in stores. But again, we're really trying to look at the total picture of all the direct to consumer, not just the bricks and mortar.

Terry R. Pillow

The goal in opening these stores is not to open a number of stores, but open the right stores. And it's not easy that you think that Doug and I made a commitment that we won't open a door unless we visited the site numerous times to look at the space, look at the mall. Takes time to find these locations, the right locations. And even doing all of that, we've had some that have been less -- do less business than we'd like. So we need to -- as we look 7 in a year might not sound like a lot, but this is a lot of work and we spent a lot of time in designing the stores. We don't just throw them up, one cookie-cutter format to all locations. We try to act locally when we go into some of these markets to build this like we did in New York. That's brand new format which we call an urban resort. It fits better. We didn't have a format when we started to go in New York. It worked in New York. We didn't have a format of beach location 3 years ago, 4 years ago and went in -- have gone to a beach. We have to come up with something from an architectural standpoint. It's not so easy.

Douglas B. Wood

think, too, and you all follow retail right now, this crazy dynamics going on between brick and mortar and e-commerce and things that we wouldn't have plan of 3 years ago, now is discussed in every one of our real estate committee meetings with regards to now I can look at an e-commerce map, where our guest is, and say, "Why don't have a store in Ohio?" And because our guy gets there. And there are certain things that we're, at the same time, we're seeing mall traffic down, the business up and business up is, I think, they said it best, we're in an economy that isn't growing, but we're grabbing more market share. We're also in malls where traffic can be declining, but our traffic will be up and that's because we're grabbing that female guest that probably we didn't have 3 years ago. So there's a lot of dynamics going on and the last thing that Terry said is just absolutely right. I challenge anybody to find 7, 10. I mean that's getting out there and really scratching, looking because it's like the old rule in real estate: location, location, location. Same thing in retail. You can be in the right mall on the wrong spot and you're not going to do business there and so that's hard, and you work at it all the time. So we have a good pace going on right now.

Thomas Caldecot Chubb

Scott, do you want to add [indiscernible]?

Scott A. Beaumont

Yes, I mean, they're great questions. And I think the -- if I would look clearly in terms of distribution strategy, the movement towards more direct is part of it. I think the big question is, what's appropriate mix between e-commerce and stores? And that continues to shake out. I remember when e-commerce starting out, catalogs, I think, were never more than 6% of the business and in women's apparel, I think, catalogs were never more than 6% of distribution. And when e-commerce started it's like, "Well that's just going to replace catalog business." It can never be more than 6%, but our women's apparel was more than 20% was sold to e-commerce in the last year. So people keep kind of busting barriers on that. I think it can go pretty far. When we look at the Lilly business, the 2 mega trends that have occurred the past few years that are ideal for the Lilly business are e-commerce and social because the Lilly customer is very much on the move, a little bit pocketed, so e-commerce is good and Lilly Pulitzer really has been a social media brand forever. And we don't need to make preemptive to go along in stores to grow this business well. We will grow it, but it could be that the rate of growth in e-commerce is a more compelling place for the business model and we're managing that. And I guess, kind of another piece of that, as we've grown kind of elements to market mix, sequencing those matter and we really focused on product and then in the past call, we've really focused on distribution. The next leg of the stool for us is really getting our communications strategy and we've been a little quieter there than you might think and that will be a focus for us in terms of elements to marketing mix and it could be that, that's something else that provides greater synergies with e-commerce. And we're -- there's a lot of stuff moving fast and so that's how we're thinking about it.

Michael Richardson - Sidoti & Company, LLC

Just one quick follow-up and then I'll pass it on to somebody else. What do you think the biggest opportunity at Tommy is on the women's side of the business?

Terry R. Pillow

Dresses, dresses and dresses. It seems to be, as we've been working with and growing the women's business, there's a lot of opportunities, but that's the category that we've seen the most explosive growth recently. And that's a good thing for us because the most feminine category that she's embracing all kinds of dresses from us and we're constantly introducing new textile and new ideas all the time. But that's a big growth area for us.

Michael Richardson - Sidoti & Company, LLC

To piggyback the e-commerce question, I'm just curious what your observations are of e-commerce in New York City and some of these locations where you've added a marquee location. And then as you go around to the next iteration of maybe future stores in New York City, how the e-commerce impact of the original stores place into your return assumptions as you plan your real estate going forward?

Thomas Caldecot Chubb

So one of the reasons why we're in New York City is because of e-commerce and being able to see the map of the number of guests that we've got in this, the tristate area here. And knowing that we're underserving from a brick-and-mortar standpoint, but from a model -- that's a great question because we're trying to get out of model right now where I can say, "Okay, after I go into a market that's underserved, what does that have to do with my overall business which encompasses that e-commerce guest?" So give me an example. I gave Ohio and Ohio is my favorite example right now because we didn't have anything in Ohio until 6 months ago. We opened up Easton Town Center in Columbus. Had everything to do with e-commerce guests and we thought like a huge map, although the same. While we've got a guest there, drop a store and my guess is I'm going to get not just brick-and-mortar dollars, but also e-commerce dollars that basically tie into what's the overall profitability of that center. And when we went in, we built the entire financial model around just brick-and-mortar and we don't have -- we're not to the point where I'd say, "Okay, I would ever go into the spot where I'd say, 'You know, Ed, it's going to be acceptable that brick and mortar doesn't deliver return because I'm going to pick up the e-commerce piece.'" We don't do it that way. We go in -- first and foremost, the brick and mortar of the capital has to deliver profitability and if I get the halo effect of e-commerce on top of it, even better. I think that as we go keep going and moving down the road, the model starts to crystallize around both. So you'll have great data where you'd say, "Because you think what we're doing right now, I'm not really moving into a lot of -- New York's a good model. Easton Town Center, where we have haven't had stores before." So it's going to take a while, 12, 18 months, to see what that growth of e-comm business will be as we go into a new market. But there's definitely a halo effect.

Michael Richardson - Sidoti & Company, LLC

But just to be clear, we're sitting here and I ask the same the question 3 years from now, you're still going to be looking for whatever it is a 15% hurdle on your brick-and-mortar location.

Thomas Caldecot Chubb

I wish Saks would give me a 15% [indiscernible].

Douglas B. Wood

Let me tell you, [indiscernible] it's a lot higher [indiscernible] than 15%.

Thomas Caldecot Chubb

I think that it's one of those things where, as I said in an earlier comment, we're talking about a very dynamic space right now. In fact, we look at 2 numbers every day. We look at our -- what we did yesterday in retail and then we had to wait about 2 hours because the product that we shipped to our guests that the orders were taken inside the store from the previous day get against that retail store because those are orders that basically are comp store orders because we generated them inside the brick and mortar. And it's meaningful. It's the difference between making plan and missing plan and that's what's going on inside the store. It didn't have anything to do with what's going on e-comm that where we're dropping e-mails and business is coming through. It's really blurring the lines between what the 2 are.

Michael Richardson - Sidoti & Company, LLC

Just to follow up, accessories is a huge opportunity across the portfolio here and I'm just curious, a, where is accessories in your pecking order of priorities right now from an executive standpoint at each of the brands? And then, b, how do you manage it strategically because I think I've heard it before, I've heard it from Mickey Drexler in the past where it takes away from the focus potentially. That's making the brand function as well as they do, so I'm just curious, if you've been taking about that at this point?

Thomas Caldecot Chubb

Terry, why don't you lead off?

Terry R. Pillow

I don't consider that as a distraction at all. I mean, the synergy and you're right. It's a good question. Accessories, if you look at the landscape of -- the companies are doing well right now, accessories, handbags, especially in women's. We're focusing on it. We're in the early stages now. We've brought somebody and then concentrated on in-house. We're taking a look at each category, back category and choosing to do those ourselves because we think the opportunity is there versus licensing those categories. We just brought in footwear in-house. It was previously licensed because we felt that it was an opportunity for us to grow both men's and women's footwear. So we're looking at -- you're right on. I mean, it's bigger area for us and just like the women's area when we decided we want to grow the women's business, we started focusing on it. And with the power of the brand, if we execute the right product and deliver the right product at the right price and the right time, our customer will be less critical [ph] and then respond. So it's clearly a category and it's not a big category today in our own stores and on the income, but growing very, very nicely.

Douglas B. Wood

If we think about it, it's very simple for us. If we can make a product that is better than what the market currently offers, if we a gap or a hole or a weak competitor or a space that fits under our umbrella, where we can make something better than the market, then we attack it as a product opportunity. We have been down the road. We've been doing this as a private company for a lot of years and we went down the road of chasing a lot of -- or you should try us and Lilly lampshades, why not, right? It's really a dangerous thing unless you're convinced you can bring some in the market that the market doesn't have. We launched the printed scarf in the middle of a downturn so it's one of the key turning points in the business. We made a better product that was in the market. The customer reacted to it, recognized and it became a major piece of business for us. So accessories, you're right, if you can win it, it's a big game, but you could -- that the people you're playing play aggressively and are good. And if you can't see a gap or hole, we won't. So do we look? We look all the time.

Unknown Analyst

[indiscernible]

Thomas Caldecot Chubb

It's same with the brand model. Then we talk about this a lot.

Douglas B. Wood

It's funny the great advantage is even having Tommy Bahama as a brother company. You're able to have conversations that are really meaningful. They've seen some things that we haven't seen that we can share. It's really helpful.

Craig Bernstein - Macellum Capital

Craig Bernstein from Macellum Capital. Ed wanted me to ask you a question about the first quarter, but I refuse on principle. I would never do that. A question for Scott. I think we're trying -- a few people have asked the question about store growth for Lilly and should it be faster and bigger, et cetera, but -- and I kind of agree that e-commerce and stores are kind of merging and you don't think about it in one channel. But maybe taking the broader view -- I think a lot of us would agree that the Lilly brand and what it stands for and what it means and just the brand recognition is, I think, a lot bigger than sales base of $100-ish million, $130 million. And so maybe just without getting a channel, thinking about it bigger term -- so longer-term rather, how big do you think it can be? Do you pattern it? Do you look at other brands and pattern the potential against that? And how high is high, I guess, is ultimately the question?

Scott A. Beaumont

Well, I appreciate the question. We've been told so many times that the company should be bigger than it is. We have concluded that our ineptitude is actually the main constraint that because we've been told that a lot. The brand continues to have meaningful growth opportunity for several years. There are other competitors in the space who are -- companies who have gained market share. Certainly, Kate Spade has done a very good job. Unquestionably, [indiscernible] done a very good job. Tory Burch has done a very good job. Don't do all your models now, by the way. By the way, when we said no model -- there were questions on models, and I think people meant the models in our catalogs that they wanted rather than the business model, but the -- we believe that the company has a good runway. The brand has also done best when that growth hasn't been pushing beyond equilibrium. And we like to -- we think that there will -- we're never going to be the biggest. There will never be a day when everybody wears Lilly Pulitzer. There will never even be a day when the Lilly lovers wear it all the time, every piece of clothing every day. So we're not going to be the biggest. We want to maintain a very profitable model, maintain the full price integrity and we'd grow in measured ways to make sure that we sustain those, and we think we can continue to do it for few more years.

Unknown Analyst

What does the Lilly feel about the franchise network that you have? It's somewhat unique. Where does that go, longer term, as you roll out your own stores and as you roll out your online strategy? How does that fit into the mix?

Scott A. Beaumont

Well, the first thing is, it is not a franchise strategy. The first thing I want to clarify and have that -- we do have agreements with these independent retailers. They're not franchisors, and their responsibility is to present the brand effectively. And in the absence of that, there will be nonrenewal. So these are not franchisors. But I want to let you take in terms of how it fits.

James B. Bradbeer

It's a -- we're a resort brand, so we have -- our job on distribution -- again, we think about distribution simply -- it's about matching supply and demand, putting the product where the customer wants to receive it. We have customers in Duck, North Carolina. A major store doesn't get it down there. E-commerce does at some level, although that customer isn't necessarily online went they're on vacation. So we found a signature model to be an incredibly effective way to distribute our product in a way that was profitable, both to ourselves and for the specialty store operators. We think it's an important part of what we do. We see it growing modestly. Our direct will grow faster, but it's really -- it's one of the mechanisms we have for delighting the customer. Everything -- we're driven around this notion of delighting the customer. And if you go to Duck, North Carolina or Pawleys Island, our signature store there is a very good answer. Boca Grande, Florida.

Thomas Caldecot Chubb

Let me just add to that, Eric. I think it's important to look at signature for what it is, which is not a replacement for a company-owned retail. It's wholesale distribution, and it's very high-quality, brand-appropriate wholesale distribution. To Brad's point, in the places where the customer wants to see the product, and Duck, North Carolina is always my favorite example, I'm glad to use that beautiful little coastal village out on Port [ph] Outer Banks in North Carolina. Their nature is to deal with -- they're never going to have a company-owned store. They're -- but why just sell to a specialty store that's going to have that mismatched [ph] brands with a bunch of other brands, that may or may not be great adjacencies for it? Why not sell in that sort of controlled, very brand-appropriate Lilly Pulitzer environment there? And oh, by the way, the financial model on signature is phenomenal. The contribution we get on a dollar of sales through the signature chain was just phenomenal. It's very, very lucrative with very minimal capital investment from us, so we get back to that idea of earning a return on our capital. Signature is one of the best vehicles we've got for doing that while still controlling the presentation of the brand in a very brand-appropriate way.

Unknown Analyst

Just related to that, we were down at Cheeca Lodge in Florida.

Thomas Caldecot Chubb

In the Keys.

Unknown Analyst

Yes. And there's a store there that's about 90% Tommy and Lilly. I presume that's an independent store. Is that something you're looking to do more of co-branding or co-marketing?

Thomas Caldecot Chubb

We have a number of retailers on the wholesale side, especially retailers that buy a tremendous amount of product for us, and we don't have a formalized agreement that is good wholesale account that we do business with.

K. Scott Grassmyer

And it was their idea. So far, they saw us do this and reached out and said, "What you think?" And we said, "Yes. It's great." And I think they're business is pretty good. I don't know specifically, but I think it's been quite good.

Thomas Caldecot Chubb

And the answer is how they propose to a real deliberate plan. I think it has to do with the quality and the positioning in the 2 brands. And just somebody who like Cheeca Lodge would want to -- naturally want to have these to 2 great brands there.

Unknown Analyst

This is Scott Krasic [ph] from BB&T. Terry, I think it was you who said earlier, when you were talking about the new fit for Tommy to [indiscernible], so we're very quick to say but it's not a younger customer. Do you worry about going sort of the Talbots route, and how do you get younger customers because...

Douglas B. Wood

I don't think I said exactly it's not -- it's a state of mind versus targeted on younger customer. But if I did say that, Terry should hit me. Because that's not what I meant to say. Because candidly, it's -- we have 2 fits for a very -- I got a young guest that likes the traditional fit, and we have a guest who's a traditional guy who wants to go do a trimmer fit. And it's working both ways for us. So direct to your question, and Terry, you -- this is your -- you jump on this, because we're not -- this used to be a concern several years ago. We're not having an issue with an age of a customer or a guest right now.

Terry R. Pillow

So we've had this fit in products before. In the last few years, on the floor, our addendum products have had this fit. So it's -- in some ways, it's not a new fit. We decided to tag it, and we call it Island Modern Fit. So we have inventory in our stores that there's certain products that say Island Modern Fit. I don't want to confuse it with that being a trim fit. Sure, it's just trimmer than our regular fit. It's still quite a bit larger than somebody else's young man's or trim fit shirt. And maybe that's not for our business, but fit is a funny thing. I was looking at a catalog I just got in the mail from a very young vertical retailer and -- just last week, and I was looking through to the models, and they're moving back to big giant fits on these young men, these 18-, 20-year-old [indiscernible] fashion that they're trying to project. So it's kind of all over the place, but we just need to be diversified enough in our fit assortment that we have something for both, plus then the Asian equation required us to do yet another whole fit for the Asian market, which is another fit altogether. But we didn't run to the other side and flip the boat over with changing everything, and we have this crawl, walk, run and yes, we'll do it methodically. And as Doug said, it's working quite well, so maybe we got lucky on this one.

Thomas Caldecot Chubb

Let me add to that, Scott, the -- you asked a question about how do you avoid the Talbots syndrome. And I think for as long as we've been associated with Tommy, I've always said that our core customer was kind of 35 to 55. There are customers younger than that and older than that, but that's kind of the core. And to me, and I've seen Terry and Doug do this really well, the way you avoid being Talbots is not by going after "a younger customer." It's just making sure that you're getting that new crop of 35-year-olds in, and you're not kind of aging with your customer, which was what happened with Talbots is that they just started moving with -- every time their customer base had a birthday, they got a year over in those target customer. And I think Terry is the chief merchant at Tommy Bahama, that's done a good job of making sure that we have product that's relevant every season to the latest crop of 35-year-olds. Not that there's a really magic time when they become a [indiscernible], but I think that's how you avoid being Talbots.

Unknown Analyst

That's helpful. And then just on the follow-up, I think I was at the, I don't know if it's 2005, maybe the Ben Sherman showroom, where you were relaunching the brand. And so at the time, I think it may have made a little money or lost a little money. Since then, it's lost a lot of...

Thomas Caldecot Chubb

It's actually making a lot.

Unknown Analyst

So maybe just go through the 2 or 3 specifics, they're just mistakes that have been made and why you feel confident that now is the time to improve upon them.

Thomas Caldecot Chubb

Well, I think I don't want to drag you through 8 years of history, which is how long we've owned Ben Sherman now. But I think, in the last year, the 3 key mistakes that we made, in Scott's slide, if you remember, where he's got the circle in the middle and he's got the little circles all around it, and he talks about the key elements of brand and how they all need to be in sync. In the key elements of the product, the positioning, the pricing, the distribution, the communication, and I think where we got out of whack in Ben Sherman was principally in the distribution, the pricing, where we had -- it's not so much that our price range was wrong. It's that we had way too much of our product line at the top end of the price line or price range and not enough at the sort of core part of the price range. The classic merchandising pyramid is a pyramid with a little bit of super-expensive stuff at the top and then you got the mid of the range down here in the fat part of the pyramid. Well, Ben got upside down on that. And then I think the marketing communication got out of sync with who the customer really was. And those are a lot of the things that we're focusing on fixing. There were other problems, but those are the biggest problems. And the pricing piece of it was probably the single, biggest, negative impact on the last 12 months, other than external factors. And we don't want to attribute all of our problems to the environment in Europe, because that would be disingenuous, and the bigger problem is our own execution. But it is not a great consumer climate over there either, and that is a -- sort of an additional challenge for Ben.

Unknown Analyst

Just staying with the Ben Sherman for a little bit longer. Tom, you mentioned that you just hired a new Head of Retail, and it sounded like you were very excited about him. Who is he?

Thomas Caldecot Chubb

He's name is Scott Whitefield [ph]. He came from Calvin Klein, and he was running a major part of their European retail operations. After they got bought by PBH, they reorganized things. He had an opportunity to continue with them, but it was going to require a move on his part. He's got kids. He's a, I don't know, late-30s guy. He's got a family. He didn't really want to move out of the London area. So that created an opportunity for us. He came to Ben Sherman. This is the guy that had a lot of options. He came to Ben because he thought he had an opportunity to make a big positive impact. We feel very lucky that we got him on board, because it's not a brand at the moment that has been financially successful and sometimes that's an impediment to getting talented guys here.

Unknown Analyst

I guess it's too early to ask this question but I will. Has his arrival changed your thinking about what you really want to do with Ben Sherman in the short term, which is restore it to breakeven or profitability, and then reassess? Or do you think this guy is somebody to -- you're thinking about?

Thomas Caldecot Chubb

Well, I think he enhances our chances to return it to...

Unknown Analyst

To profitability.

Thomas Caldecot Chubb

To breakeven or profitability. I think he's -- it's one of the key things that we need to do. And if you remember from the discussion, the key things we were focused on in Ben Sherman, and a big part of it's improving our own retail and e-comm. We don't need some kind of crazy kind of improvement to achieve our plan for the year. It's very -- I'm not going to say it's easy, because when you have a business that's not functioning well, nothing comes easily. But it's not like we're looking for 25% or 30% comp growth in retail. It's modest improvement there will go a long way, and I think he enhances our chances of doing that. He's very focused on it. We don't have time for me to go through it today, but he's got a very detailed plan for how he's going to do it. And these sort of things, some of which have already happened, some will happen over the next couple of months. But...

Unknown Analyst

Just a quick question on your omni-channel capabilities, have you fully built out omni channel amongst all the brands? Will it be done on a shared services basis?

Thomas Caldecot Chubb

No. It will not be done on a shared services basis. We are trying to foster a lot of thought sharing among the groups. And a couple of months ago, the Lilly guys were nice enough to host at their office in King of Prussia a company-wide omni-channel summit, we called it. It had Lilly folks there, Tommy folks, Lanier, Ben Sherman and even us from Golf were there, and they shared thoughts on best how to achieve the sort of omni-channel dream. Because these brands grew up independently, they have separate systems. They're geographically disparate. So we're not trying to get there the same way, but they're all focused on the same goal. And they're all sharing ideas about how you do that. And when we say omni-channel, we're talking about one view of the product and one view of the customer is really how we define that, and that requires a lot of foundational systems work. They're in different stages of completing. Some of that foundational systems were, but they're all doing it. We're actually -- that's a -- a good bit of that $40-something million of CapEx for this year is really devoted to IT investments that build the foundation to allow us to really have that omni-channel overview.

Jack Oliver - RBO & Co.

Jack Oliver, RBO & Co. You mentioned acquisitions, and I'm just curious if you can highlight a little bit more about how you think of the -- think about acquisitions at corporate in a sense that you had in the last 10 years. You're batting 2 for 3, and 2 were not hits or grand slams and we talk about the third. So given what great attractive internal growth opportunities you have, why are acquisitions still part of the pie? And if you were to proceed with one, part two of the question is regarding the balance sheet, how do we make sure we're in a better position for the next 100-year storm so we don't experience the 2009 experience with what the capital markets did to them?

Thomas Caldecot Chubb

It's a good question, and I think our priorities line up with what you would think they probably ought to be, which is our #1 priority is supporting the growth, particularly in Tommy and Lilly, where there's very direct and linear path we can take to growth. In Lanier Clothes, there are growth opportunities. They're much more opportunistic, and they don't require a lot of investments. It's typically just a little incremental working capital. So that is the priority is exploiting those organic growth opportunities. The next priority is really resolving the Ben Sherman situation. It's obviously a drag right now. We need to get that on the right path. And for us, this year, what we've said is sort of the objective. Our goal was a significant reduction in GAAP accounting loss there and, from a cash flow perspective, getting it to breakeven to maybe even slightly positive. And if we can achieve that in this year, we feel like we will have made good progress, and then we want to take it a step beyond that in the next year. We're not actively looking for acquisitions in a way that we were when we bought both Tommy and Lilly, where we really wanted to do a deal. But we are open to the possibility of an acquisition. Sometimes, a really great property comes along, and you don't have your -- you don't always get a particular timing. I think we've got away with all those financially and from a management standpoint and the [indiscernible]. But again, to your question, that's not at the top of the list of what we're trying to do over the next year or 2. It's really the organic growth, resolving Ben Sherman and [indiscernible] would really be sort of a tertiary consideration.

Pamela Nagler Quintiliano - SunTrust Robinson Humphrey, Inc., Research Division

Pam Quintiliano from SunTrust. A few quick questions on Tommy. Just the wholesale opportunity, in terms of distribution on the women's side, especially in Nordstrom, if there's any update there? And then just how we think about women's international performance versus domestic?

Thomas Caldecot Chubb

Okay, I'll ask these guys to answer fairly quickly. Let Steve ask his quick question, and we will need to wrap up for this.

Terry R. Pillow

The international women's performance has been a bright spot in the international. So where you open up in a market where you have no history whatsoever. We're all saying -- we said in our presentation, we started as a men's brand domestically and so therefore, you have to work it turning that around. And the international market's been out of the gate. So it's very close to 50/50 men's and women's. As far as the wholesale opportunity, we need to make sure that we saw the growth in our own stores and e-comm, and that means that we get the product right for women's. And we think we have it right now, and we're pursuing the wholesale opportunity. You'd mentioned the account that obviously would be the first target for us, but there are other opportunities beyond Nordstrom. But we've had some inroads, and we've had some good success on a limited basis with Nordstrom in women's in the last 2 years but nothing significant. But we're on that path of pursuing that. We think, as Doug said in his presentation, it's a big opportunity.

Unknown Analyst

Okay. I just have a -- it's getting back to Ben Sherman, you guys have been blessed with great success with Tommy Bahama and Lilly Pulitzer. But again, it's a question of what the central office does, the corporate headquarters does and what you let the divisions do, where clearly, Ben Sherman is the case where -- I mean, how involved are you guys getting into the corporate center and say doing this or they're just getting new management and give them the flexibility to do what that they want to do?

Thomas Caldecot Chubb

Well, Steve, I would analogize to a family situation. If you got 4 kids and 3 of them are taking all the honors class and were on the honor roll, and play in varsity sports, you don't mess with them too much. If you've got one failing geometry and hanging out with the wrong crowd, you focus on that a bit more.

Unknown Analyst

You guys have had [indiscernible] in it.

Thomas Caldecot Chubb

Yes. I mean if my only job was to manage these guys, then I'd be playing golf [indiscernible]. So that's the nature of the beast, and my job really for each of the groups is to make sure that we got the right strategy, the right operating plan and execution and the right people to do it all. And in these works, we've got all that. In Ben Sherman, we haven't had all that. We're well on the path to getting there, I believe. But that's required a lot of my time over the last year or so. That is diminishing now, and that's a good thing. But that's the way it works, and that's the way Oxford has always operated. We've always been a collection of acquired companies. There's no business we have that was organic. Everything we have, we've bought it somewhere. Even Lanier, way back then, was a tailoring plant that we've bought. And so we've always had this scenario, and you deal with the sick child and let the healthy children just do their thing.

Thomas Caldecot Chubb

Okay. We're going to wrap up now.

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