UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended ~~July 29, 2017~~May 5, 2018

	or

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

Commission File Number: 1-4365

OXFORD INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)



Georgia		58-0831862
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

999 Peachtree Street, N.E., Suite 688, Atlanta, Georgia 30309

(Address of principal executive offices) (Zip Code)

(404) 659-2424

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer x	Accelerated filer o	Non-accelerated filer ¨	Smaller reporting company ¨	Emerging growth company ¨
		(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



		Number of shares outstanding
Title of each class		as of ~~August 25, 2017~~May 31, 2018
Common Stock, $1 par value		~~16,826,814~~16,936,543

Table of Contents

OXFORD INDUSTRIES, INC.

INDEX TO FORM 10-Q

For the ~~Second~~First Quarter of Fiscal ~~2017~~2018



	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)	5
Condensed Consolidated Statements of Operations (Unaudited)	6
Condensed Consolidated Statements of Comprehensive Income (Unaudited)	7
Condensed Consolidated Statements of Cash Flows (Unaudited)	8
Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1113
Item 3. Quantitative and Qualitative Disclosures About Market Risk	3630
Item 4. Controls and Procedures	3630

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	3631
Item 1A. Risk Factors	3631
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3631
Item 3. Defaults Upon Senior Securities	3731
Item 4. Mine Safety Disclosures	3731
Item 5. Other Information	3731
Item 6. Exhibits	3731
Signatures	3732

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

Our SEC filings and public announcements may include forward-looking statements about future events. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which typically are not historical in nature. We intend for all forward-looking statements contained herein, in our press releases or on our website, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). Such statements are subject to a number of risks, uncertainties and assumptions including, without limitation, competitive conditions, which may be impacted by evolving consumer shopping patterns; the impact of economic conditions on consumer demand and spending for apparel and related products, particularly in light of general economic uncertainty; changes in international, federal or state tax, trade and other laws and regulations, including changes in corporate tax rates, quota restrictions or the imposition of safeguard controls;products; demand for our products; timing of shipments requested by our wholesale customers; expected pricing levels; retention of and disciplined execution by key management; the timing and cost of store openings and of planned capital expenditures; weather; changes in international, federal or state tax, trade and other laws and regulations; costs of products as well as the raw materials used in those products; costs of labor; acquisition and disposition ~~activities;~~activities, including our ability to timely recognize our expected synergies from any acquisitions we pursue; expected outcomes of pending or potential litigation and regulatory actions; access to capital and/or credit markets; ~~our ability to timely recognize our expected synergies from any acquisitions we pursue;~~ and factors that could affect our consolidated effective tax rate, ~~such as~~including the ~~results~~impact of ~~foreign operations or stock based compensation.~~the recently enacted U.S. Tax Reform. Forward-looking statements reflect our expectations at the time such forward looking statements are made, based on information available at such time, and are not guarantees of performance. Although we believe that the expectations reflected in such forward-looking statements are reasonable, these expectations could prove inaccurate as such statements involve risks and uncertainties, many of which are beyond our ability to control or predict. Should one or more of these risks or uncertainties, or other risks or uncertainties not currently known to us or that we currently deem to be immaterial, materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Important factors relating to these risks and uncertainties include, but are not limited to, those described in Part I, Item 1A. Risk Factors contained in our Annual Report on Form 10-K for Fiscal ~~2016~~2017, and those described from time to time in our future reports filed with the SEC. We caution that one should not place undue reliance on forward-looking statements, which speak only as of the date on which they are made. We disclaim any intention, obligation or duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

DEFINITIONS

As used in this report, unless the context requires otherwise, "our," "us" or "we" means Oxford Industries, Inc. and its consolidated subsidiaries; "SG&A" means selling, general and administrative expenses; "SEC" means ~~U.S.~~the United States Securities and Exchange Commission; "FASB" means Financial Accounting Standards Board; "ASC" means the FASB Accounting Standards Codification; "GAAP" means generally accepted accounting principles in the United States; ~~and~~ "discontinued operations" means the assets and operations of our former Ben Sherman operating group which we sold in ~~Fiscal 2015.~~2015; and "U.S. Tax Reform" means the United States Tax Cuts and Jobs Act as enacted on December 22, 2017. Unless otherwise indicated, all references to assets, liabilities, revenues, expenses or other information in this report reflect continuing ~~operations and exclude any amounts related to the discontinued operations of our former Ben Sherman operating group.~~operations. Additionally, the terms listed below reflect the respective period noted:



Fiscal 2019		52 weeks ending February 1, 2020
Fiscal 2018		52 weeks ending February 2, 2019
Fiscal 2017		53 weeks ~~ending~~ended February 3, 2018
Fiscal 2016		52 weeks ended January 28, 2017
Fourth Quarter Fiscal ~~2015~~2018		5213 weeks ending February 2, 2019
Third Quarter Fiscal 2018		13 weeks ending November 3, 2018
Second Quarter Fiscal 2018		13 weeks ending August 4, 2018
First Quarter Fiscal 2018		13 weeks ended ~~January 30, 2016~~May 5, 2018
Fourth Quarter Fiscal 2017		14 weeks ~~ending~~ended February 3, 2018
Third Quarter Fiscal 2017		13 weeks ~~ending~~ended October 28, 2017
Second Quarter Fiscal 2017		13 weeks ended July 29, 2017
First Quarter Fiscal 2017		13 weeks ended April 29, 2017
~~Fourth Quarter Fiscal 2016~~		~~13 weeks ended January 28, 2017~~
~~Third Quarter Fiscal 2016~~		~~13 weeks ended October 29, 2016~~
~~Second Quarter Fiscal 2016~~		~~13 weeks ended July 30, 2016~~
~~First Quarter Fiscal 2016~~		~~13 weeks ended April 30, 2016~~

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par amounts)

(unaudited)


	July 29, 2017			January 28, 2017			July 30, 2016			May 5, 2018			February 3, 2018			April 29, 2017
ASSETS
Current Assets
Cash and cash equivalents	$	5,983		$	6,332		$	8,192		$	4,662		$	6,343		$	6,554
Receivables, net	59,264			58,279			61,081			81,274			67,542			79,042
Inventories, net	119,620			142,175			133,662			132,342			126,812			127,061
Prepaid expenses	19,626			24,842			22,917
Prepaid expenses and other current assets										31,994			35,421			24,325
Total Current Assets	$	204,493		$	231,628		$	225,852		$	250,272		$	236,118		$	236,982
Property and equipment, net	193,668			193,931			190,195			196,734			193,533			192,734
Intangible assets, net	174,262			175,245			186,565			178,111			178,858			174,603
Goodwill	60,059			60,015			50,911			66,577			66,703			60,002
Other non-current assets, net	24,265			24,340			23,041			25,037			24,729			24,258
Total Assets	$	656,747		$	685,159		$	676,564		$	716,731		$	699,941		$	688,579

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	60,332		$	76,825		$	58,957		$	51,615		$	66,175		$	63,982
Accrued compensation	25,403			19,711			20,689			19,153			29,941			16,593
Other accrued expenses and liabilities	32,757			32,000			32,963			40,421			36,802			35,591
Liabilities related to discontinued operations	3,425			2,860			—			—			2,092			3,143
Total Current Liabilities	$	121,917		$	131,396		$	112,609		$	111,189		$	135,010		$	119,309
Long-term debt	37,601			91,509			105,941			72,244			45,809			93,289
Other non-current liabilities	70,836			70,002			68,529			73,588			74,029			69,370
Deferred taxes	15,520			13,578			12,620			16,045			15,269			16,183
Liabilities related to discontinued operations	1,507			2,544			3,469			—			—			2,022
Commitments and contingencies
Shareholders’ Equity
Common stock, $1.00 par value per share	16,827			16,769			16,769			16,937			16,839			16,821
Additional paid-in capital	132,668			131,144			127,595			136,297			136,664			131,011
Retained earnings	264,282			233,493			234,142			295,086			280,395			246,136
Accumulated other comprehensive loss	(4,411		)	(5,276		)	(5,110		)	(4,655		)	(4,074		)	(5,562		)
Total Shareholders’ Equity	$	409,366		$	376,130		$	373,396		$	443,665		$	429,824		$	388,406
Total Liabilities and Shareholders’ Equity	$	656,747		$	685,159		$	676,564		$	716,731		$	699,941		$	688,579

See accompanying notes.

Table of Contents

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)


	Second Quarter Fiscal 2017		Second Quarter Fiscal 2016		First Half Fiscal 2017		First Half Fiscal 2016		First Quarter Fiscal 2018		First Quarter Fiscal 2017
Net sales	$	284,709	$	282,996	$	557,072	$	539,231	$	272,628	$	272,363
Cost of goods sold	118,740		118,201		231,693		222,971		108,482		112,953
Gross profit	$	165,969	$	164,795	$	325,379	$	316,260	$	164,146	$	159,410
SG&A	132,911		129,437		266,102		252,936		139,720		133,191
Royalties and other operating income	3,344		3,332		7,084		7,372		3,947		3,740
Operating income	$	36,402	$	38,690	$	66,361	$	70,696	$	28,373	$	29,959
Interest expense, net	742		1,177		1,672		1,791		781		930
Earnings from continuing operations before income taxes	$	35,660	$	37,513	$	64,689	$	68,905
Earnings before income taxes									$	27,592	$	29,029
Income taxes	12,971		13,638		24,803		24,853		7,025		11,832
Net earnings from continuing operations	$	22,689	$	23,875	$	39,886	$	44,052
Earnings from discontinued operations, net of taxes	—		—		—		—
Net earnings	$	22,689	$	23,875	$	39,886	$	44,052	$	20,567	$	17,197
Net earnings from continuing operations per share:
Basic	$	1.37	$	1.45	$	2.41	$	2.67
Diluted	$	1.36	$	1.44	$	2.39	$	2.65
Earnings from discontinued operations, net of taxes, per share:
Basic	$	—	$	—	$	—	$	—
Diluted	$	—	$	—	$	—	$	—

Net earnings per share:
Basic	$	1.37	$	1.45	$	2.41	$	2.67	$	1.24	$	1.04
Diluted	$	1.36	$	1.44	$	2.39	$	2.65	$	1.23	$	1.03

Weighted average shares outstanding:
Basic	16,605		16,515		16,577		16,509		16,639		16,549
Diluted	16,700		16,623		16,698		16,620		16,769		16,695

Dividends declared per share	$	0.27	$	0.27	$	0.54	$	0.54	$	0.34	$	0.27

See accompanying notes.

Table of Contents

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Second Quarter Fiscal 2017		Second Quarter Fiscal 2016			First Half Fiscal 2017		First Half Fiscal 2016		First Quarter Fiscal 2018			First Quarter Fiscal 2017
Net earnings	$	22,689	$	23,875		$	39,886	$	44,052	$	20,567		$	17,197
Other comprehensive income (loss), net of taxes:
Net foreign currency translation adjustment	1,151		(261		)	865		1,719		(581		)	(286		)
Total other comprehensive (loss) income, net of taxes	$	1,151	$	(261	)	$	865	$	1,719
Total other comprehensive loss, net of taxes										$	(581	)	$	(286	)
Comprehensive income	$	23,840	$	23,614		$	40,751	$	45,771	$	19,986		$	16,911

See accompanying notes.

Table of Contents

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	First Half Fiscal 2017			First Half Fiscal 2016			First Quarter Fiscal 2018			First Quarter Fiscal 2017
Cash Flows From Operating Activities:
Net earnings	$	39,886		$	44,052		$	20,567		$	17,197
Adjustments to reconcile net earnings to net cash provided by operating activities:
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:
Depreciation	19,486			19,278			9,435			9,651
Amortization of intangible assets	1,082			1,120			691			539
Equity compensation expense	3,075			3,477			1,718			1,739
Amortization of deferred financing costs	211			480			106			105
Deferred income taxes	1,942			4,985			660			2,605
Changes in working capital, net of acquisitions and dispositions:
Receivables, net	(1,336		)	5,370			(13,795		)	(20,474		)
Inventories, net	23,731			12,985			(5,763		)	15,000
Prepaid expenses	5,298			144
Prepaid expenses and other current assets							3,402			508
Current liabilities	(9,955		)	(18,475		)	(23,429		)	(12,171		)
Other non-current assets, net	22			(714		)	(395		)	7
Other non-current liabilities	(307		)	173			(341		)	(1,095		)
Cash provided by operating activities	$	83,135		$	72,875
Cash (used in) provided by operating activities							$	(7,144	)	$	13,611
Cash Flows From Investing Activities:
Acquisitions, net of cash acquired	(614		)	(94,960		)	(302		)	(225		)
Purchases of property and equipment	(18,527		)	(24,643		)	(12,838		)	(8,545		)
Other investing activities	—			(2,029		)
Cash used in investing activities	$	(19,141	)	$	(121,632	)	$	(13,140	)	$	(8,770	)
Cash Flows From Financing Activities:
Repayment of revolving credit arrangements	(163,703		)	(304,212		)	(64,265		)	(67,373		)
Proceeds from revolving credit arrangements	109,794			366,178			90,700			69,153
Deferred financing costs paid	—			(1,385		)
Proceeds from issuance of common stock	713			677			384			386
Repurchase of equity awards for employee tax withholding liabilities	(2,206		)	(1,868		)	(2,372		)	(2,206		)
Cash dividends declared and paid	(9,096		)	(9,062		)	(5,758		)	(4,552		)
Cash (used in) provided by financing activities	$	(64,498	)	$	50,328
Cash provided by (used in) financing activities							$	18,689		$	(4,592	)
Net change in cash and cash equivalents	$	(504	)	$	1,571		$	(1,595	)	$	249
Effect of foreign currency translation on cash and cash equivalents	155			298			(86		)	(27		)
Cash and cash equivalents at the beginning of year	6,332			6,323			6,343			6,332
Cash and cash equivalents at the end of the period	$	5,983		$	8,192		$	4,662		$	6,554
Supplemental disclosure of cash flow information:
Cash paid for interest, net	$	1,543		$	1,477		$	635		$	876
Cash paid for income taxes	$	18,128		$	16,996		$	334		$	833

See accompanying notes.

Table of Contents

OXFORD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

~~SECOND~~FIRST QUARTER OF FISCAL ~~2017~~2018

Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial reporting and the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. We believe the accompanying unaudited condensed consolidated financial statements reflect all normal, recurring adjustments that are necessary for a fair presentation of our financial position and results of operations as of the dates and for the periods presented. Results of operations for the interim periods presented are not necessarily indicative of results to be expected for our full fiscal year. The significant accounting policies applied during the interim periods presented are consistent with the significant accounting policies described in our Annual Report on Form 10-K for Fiscal ~~2016~~2017.

Unless otherwise indicated, all references to assets, liabilities, revenues and expenses in these financial statements reflect continuing operations and exclude any amounts related to our former Ben Sherman operating group, which is classified as discontinued operations for all periods presented.

In order to conform to current period classification, certain gift with purchase amounts, totaling $0.9 million and $1.6 million previously reported as SG&A, have been reclassified to cost of goods sold for the Second Quarter of Fiscal 2016 and the First Half of Fiscal 2016, respectively. This reclassification resulted in a decrease in SG&A and a corresponding increase in cost of goods sold in the Second Quarter of Fiscal 2016 and the First Half of Fiscal 2016, with no impact on previously reported net earnings.

In January 2017, the FASB issued new guidance that provides a more narrow framework for evaluating whether a set of assets and activities constitute a business. We early adopted this guidance in the Second Quarter of Fiscal 2017. The adoption of this guidance did not have a material impact upon adoption. The impact of the guidance in the future will depend on the facts and circumstances of any specific future transactions.

Recently Issued Accounting Standards Applicable to Future Periods

In February 2016, the FASB issued revised lease accounting guidance. The guidance will require companies to record substantially all leases as assets and liabilities on the balance sheet. For these leases, we will be required to recognize (1) a right to use asset which will represent our right to use, or control the use of, a specified asset for a lease term and (2) a lease liability equal to our obligation to make lease payments arising from a lease measured on a discounted basis. Also, the revised guidance will require additional qualitative and quantitative footnote disclosures in our consolidated financial statements. This guidance will be effective in the First Quarter of Fiscal 2019 with early adoption permitted. The guidance requires the use of the modified retrospective transition approach, which includes a number of optional practical expedients that companies may elect to apply. In March 2018, the FASB approved a new, optional transition method that will provide companies the option to use the effective date as the date of initial application on transition.

We are in the process of evaluating the potential impact of the revised lease accounting guidance on our consolidated balance sheet, statement of operations and statement of cash flows, as well as our systems, processes and controls. This plan includes assessing lease arrangements, evaluating practical expedient and policy elections, implementing software to meet the accounting and reporting requirements of the guidance and identifying changes to our business processes and controls to support the adoption of the revised guidance. Considering the magnitude of our existing operating leases to our business operations, we anticipate that the new lease guidance will have a significant impact on our consolidated balance sheet by requiring the recognition of a significant amount of lease-related right of use assets and liabilities. While we are still evaluating the potential impact of the revised guidance, we do not anticipate the adoption of the guidance will have a material impact on our consolidated statement of operations and statement of cash flows.

In June 2016, the FASB issued guidance on the measurement of credit losses on financial instruments. This guidance amends the impairment model by requiring companies to use a forward-looking approach based on expected losses to estimate credit losses on certain financial instruments, including trade receivables. This guidance will be effective in Fiscal 2020 with early adoption permitted. We are currently assessing the impact that adopting this guidance will have on our consolidated financial statements.

2. Operating Group Information: Our business is primarily operated through our Tommy Bahama, Lilly Pulitzer, Lanier Apparel and Southern Tide operating groups. We identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance. Our operating group structure reflects a brand-focused management approach, emphasizing operational coordination and resource allocation across each brand's direct to consumer, wholesale and licensing operations, as applicable.

Tommy Bahama, Lilly Pulitzer and Southern Tide each design, source, market and distribute apparel and related products bearing their respective trademarks and license their trademarks for other product categories, while Lanier Apparel designs, sources and distributes branded and private label men's tailored clothing, sportswear and other products. Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, substantially all financing activities, elimination of inter-segment sales, LIFO accounting adjustments for inventory, other costs that are not allocated to the operating groups and operations of our other businesses which are not included in our operating groups. Corporate and Other includes the operations of our Lyons, Georgia distribution center and The Beaufort Bonnet Company, which we refer to as TBBC, which we acquired in December 2017. Our LIFO inventory pool does not correspond to our operating group definitions; therefore, LIFO inventory accounting adjustments are not allocated to our operating groups. For a more extensive description of our operating groups, see Part I, Item 1. Business included in our Annual Report on Form 10-K for Fiscal 2017. The table below presents certain financial information (in thousands) about our operating groups, as well as Corporate and Other.

Table of Contents



	First Quarter Fiscal 2018			First Quarter Fiscal 2017
Net sales
Tommy Bahama	$	167,132		$	172,496
Lilly Pulitzer	68,627			63,343
Lanier Apparel	19,909			23,356
Southern Tide	13,472			12,642
Corporate and Other	3,488			526
Total net sales	$	272,628		$	272,363
Depreciation and amortization
Tommy Bahama	$	7,066		$	7,574
Lilly Pulitzer	2,479			1,995
Lanier Apparel	141			148
Southern Tide	125			106
Corporate and Other	315			367
Total depreciation and amortization	$	10,126		$	10,190
Operating income (loss)
Tommy Bahama	$	14,303		$	16,038
Lilly Pulitzer	15,826			17,687
Lanier Apparel	362			858
Southern Tide	2,487			2,104
Corporate and Other	(4,605		)	(6,728		)
Total operating income	$	28,373		$	29,959
Interest expense, net	781			930
Earnings before income taxes	$	27,592		$	29,029

3. Accumulated Other Comprehensive Loss: Substantially all amounts included in accumulated other comprehensive loss in our consolidated balance sheets, as well as any related changes, for each period presented, reflect the net foreign currency translation adjustment related to our Tommy Bahama operations in Canada, Japan and Australia. No amounts of accumulated other comprehensive loss were reclassified to our consolidated statements of operations during any period presented.

4. Income Taxes: U.S. Tax Reform, as enacted on December 22, 2017, made significant changes in the taxation of our domestic and foreign earnings. The federal corporate tax rate was lowered from 35% to 21% effective January 1, 2018, resulting in a blended federal rate applicable to our fiscal year ended February 3, 2018 to reflect the weighted average of the rate applicable to the period prior to the effective date and the period on and after the effective date. The change in the federal corporate tax rate also required revaluation of our deferred tax assets and liabilities to reflect the enacted rate at which we expect those differences to reverse. U.S. Tax Reform moved the U.S. to a territorial taxation system under which the earnings of foreign subsidiaries will generally not be subject to U.S. federal income tax upon distribution and imposed a one-time transition tax on the amount of previously untaxed earnings of those foreign subsidiaries measured as of November 2, 2017 or December 31, 2017, whichever resulted in the greater taxable amount. Additional changes included the increase in bonus depreciation available for certain assets acquired after September 27, 2017 and limitations on the deduction for certain expenses, including executive compensation and interest incurred in taxable years beginning on or after January 1, 2018. New taxes were imposed related to foreign income including, for years beginning after December 31, 2017, a tax on global intangible low-taxed income (“GILTI”), disallowance of deductions for certain payments (the base erosion anti-abuse tax, or “BEAT”) and new deductions enacted for certain foreign-derived intangible income (“FDII”).

The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides us with up to one year to finalize accounting for the impacts of U.S. Tax Reform. Since our initial accounting for U.S Tax Reform impact is incomplete, we may include provisional amounts when reasonable estimates can be made or continue to apply the prior tax law if a reasonable estimate cannot be made. In accordance with SAB 118, as of May 5, 2018 and February 3, 2018, we estimated provisional tax amounts related to our deferred income tax assets and liabilities, including the impacts of the change in the federal corporate tax rate, deductions for executive compensation, our indefinite reinvestment assertion, the transition tax, GILTI, BEAT and FDII. Also,

Table of Contents

as of May 5, 2018 and February 3, 2018, we have not yet elected an accounting policy related to how we will account for GILTI and therefore have not provided any deferred tax impacts of GILTI in our consolidated financial statements. Further, as of May 5, 2018 and February 3, 2018, we continue to assert that our investments in foreign subsidiaries and related earnings are permanently reinvested outside of the United States on a provisional basis, and thus we have not recorded any deferred tax liabilities related to these investments and earnings.

As a result of the provisional revaluation impact on our deferred taxes and certain other items related to U.S. Tax Reform, we recognized a reduction in tax expense of $11.5 million in our Fiscal 2017 statement of operations. During the First Quarter of Fiscal 2018, we did not recognize any measurement period adjustments to the provisional amounts recognized during Fiscal 2017. We are still finalizing our calculations related to the impact of U.S. Tax Reform. In accordance with SAB 118, we are required to finalize our accounting for the impacts of U.S. Tax Reform during Fiscal 2018.

The effective tax rate for the First Quarter of Fiscal 2018 decreased from the First Quarter of Fiscal 2017, primarily due to the lower federal corporate tax rate resulting from U.S. Tax Reform. Our effective tax rate for the full year of Fiscal 2018 is expected to be approximately 26%, which includes the U.S. federal statutory rate of 21% and state income taxes, net of the related federal income tax benefit; the rate differential related to foreign operations; valuation allowances against operating losses and other carryforwards; the excess tax benefit related to restricted stock vesting; and any other items impacting the effective tax rate. In addition to the typical items that may result in an effective tax rate that differs from our expectations, the effective rate for Fiscal 2018 may vary from 26% as a result of adjustments to the provisional amounts recognized for U.S. Tax Reform as discussed above. The final impact of U.S. Tax Reform may differ from our provisional amounts recognized in Fiscal 2017 due to, among other things, additional regulatory guidance that may be issued, us obtaining additional information to refine our estimated tax amounts and changes in current interpretations and assumptions.

5. Accounting Standards Adopted in Fiscal 2018:

Revenue Recognition for Contracts with Customers

In May 2014, the FASB issued guidance which ~~provides~~provided a single, comprehensive accounting model for revenue arising from contracts with customers. This guidance ~~has been~~was revised and clarified through supplemental adoption guidance subsequent to May 2014. This new revenue recognition guidance ~~supersedes~~superseded most of the ~~existing~~prior revenue recognition guidance, which ~~specifies~~specified that revenue isshould be recognized when risks and rewards transfer to a customer. Under the new guidance, revenue ~~will~~is recognized at an amount that reflects the consideration expected to be ~~recognized~~received for those goods and services pursuant to a five-step approach: (1) identify the contracts with the customer; (2) identify the separate performance obligations in the contracts; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognize revenue when, or as, each performance obligation is satisfied. The new guidance also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flow arising from customer contracts, including significant judgments and changes in judgments. ~~The new~~

We adopted the revised revenue recognition guidance ~~is effective for us beginning in Fiscal 2018 and may be applied via~~as of the full retrospective method or through the modified retrospective method. At this time we anticipate utilizing the modified retrospective method with a cumulative adjustment to opening retained earnings at the datefirst day of ~~adoption in~~ the First Quarter of Fiscal 2018. We are currently reviewing our revenue streams, including retail, e-commerce, wholesale and royalty income, to evaluate the potential impact of the adoption of the revised guidance on our consolidated financial statements, but we have not yet completed this assessment. While we do not anticipate a significant change in the timing of revenue recognition at this time, areas of focus include certain variable consideration items such as estimates of anticipated wholesale customer allowances, returns or other reserves.

In February 2016, the FASB issued a new accounting standard on leasing. The new standard will require companies to record most leases as assets and liabilities on the balance sheet. For these leases, we will be required to recognize a right to use asset and lease liability for the obligations created by the leases. This guidance will be effective in Fiscal 2019 with early adoption permitted. The guidance requires the use of2018 using the modified retrospective ~~transition approach.~~method, applying the guidance only to contracts that were not completed prior to Fiscal 2018. We ~~are currently in~~have implemented this guidance for all contracts at the ~~process~~effective date. There was no adjustment for the cumulative effect of ~~evaluating~~applying the guidance to retained earnings upon adoption. We have changed our accounting policies and practices and designed and implemented specific controls over our evaluation of the impact of the new guidance, onincluding disclosure requirements and the collection of relevant data for the reporting process.

Our revenue streams consist of direct to consumer sales, including retail store, e-commerce and restaurant operations, and wholesale sales, as well as royalty income, which is included in royalties and other income in our consolidated ~~financial~~ statements ~~but considering our existing operating leases, we anticipate that~~of operations. The table below quantifies the ~~new lease guidance will have a significant impact on our consolidated balance sheet by requiring the recognition of a significant~~ amount of ~~lease-related assets~~net sales by distribution channel (in thousands) and ~~liabilities.~~as a percentage of net sales.

In June 2016, the FASB issued revised guidance on the measurement of credit losses on financial instruments. This guidance amends the impairment model by requiring companies to use a forward-looking approach based on expected losses to estimate credit losses on certain financial instruments, including trade receivables. This guidance will be effective in Fiscal 2020 with early adoption permitted. We are currently assessing the impact that adopting this guidance will have on our consolidated financial statements.



	First Quarter of Fiscal 2018				First Quarter of Fiscal 2017
Retail	$	107,735	40	%	$	102,663	38	%
E-commerce	44,522		16	%	35,673		13	%
Restaurant	25,293		9	%	23,409		9	%
Wholesale	94,376		35	%	109,850		40	%
Other	702		—	%	768		—	%
Net sales	$	272,628	100	%	$	272,363	100	%

Table of Contents

The tables below provide net sales by operating group (in thousands) and the percentage of net sales by distribution channel for each operating group.



	First Quarter of Fiscal 2018
	Net Sales		Retail	E-commerce	Restaurant	Wholesale	Other
Tommy Bahama	$	167,132	46%	15%	15%	24%	—%
Lilly Pulitzer	68,627		44%	24%	—%	32%	—%
Lanier Apparel	19,909		—%	—%	—%	100%	—%
Southern Tide	13,472		—%	12%	—%	88%	—%
Corporate and Other	3,488		—%	60%	—%	23%	17%

	First Quarter of Fiscal 2017
	Net Sales		Retail	E-commerce	Restaurant	Wholesale	Other
Tommy Bahama	$	172,496	46%	12%	14%	28%	—%
Lilly Pulitzer	63,343		37%	20%	—%	43%	—%
Lanier Apparel	23,356		—%	—%	—%	100%	—%
Southern Tide	12,642		—%	12%	—%	88%	—%
Corporate and Other	526		—%	—%	—%	—%	100%

Revenue is recognized when performance obligations under the terms of the contracts with our customers are satisfied. Our performance obligation generally consists of delivering our products to our direct to consumer and wholesale customers. Control of the products is generally transferred upon providing the products to consumers in our brick and mortar retail stores and restaurants, upon physical delivery of the products to consumers in our e-commerce operations and upon shipment from the distribution center to customers in our wholesale operations. Once control is transferred to the customer, we have completed our performance obligations related to the contract. After completion of our performance obligation, we have an unconditional right to consideration as outlined in the contract. Our receivables resulting from contracts with customers in our direct to consumer operations are generally collected within a few days, upon settlement of the credit card transaction. Our receivables resulting from contracts with our customers in our wholesale operations are generally collected within one quarter, in accordance with established credit terms. All of our performance obligations under the terms of our contracts with customers in our direct to consumer and wholesale operations have an expected original duration of one year or less. Our revenue, including any freight income, is recognized net of applicable taxes in our consolidated statements of operations.

In our direct to consumer operations, consumers have certain rights to return products within a specified period and are eligible for certain point of sale discounts, thus retail store, e-commerce and restaurant revenues are recorded net of estimated returns and discounts, as applicable. The sales return allowance is recognized on a gross basis, with the recognition of a return liability for the estimated amount of sales that would be returned and a return asset for the right to recover the goods returned by the customer, measured at the previous carrying amounts of the goods. The value of inventory associated with right to recover the goods returned are included in prepaid expenses and other current assets in our consolidated balance sheet as of May 5, 2018, whereas in all prior periods those amounts were included in inventories. The changes in the return liability are recognized in net sales in our consolidated statements of operations and the changes in the return asset are recognized in cost of goods sold in our consolidated statements of operations for all periods presented.

In the ordinary course in certain of our wholesale operations, we offer discounts, allowances and cooperative advertising support to our wholesale customers. Certain of these arrangements are written agreements, while others may be implied by customary practices or expectations in the industry. Wholesale sales are recorded net of such discounts, allowances and cooperative advertising support for our customers, operational chargebacks and provisions for estimated wholesale returns. As certain allowances, other deductions and returns are not finalized until the end of a season, program or other event which may not have occurred yet, we estimate such discounts, allowances and returns on an ongoing basis to estimate the consideration from the customer that we expect to ultimately receive. In accordance with the new revenue recognition guidance, we only recognize revenue to the extent that it is probable that we will not recognize a significant reversal of revenue when the uncertainties related to the variability are ultimately resolved. Significant considerations in determining our estimates for discounts, allowances, operational chargebacks and returns for wholesale customers may include historical and current trends, agreements with customers, projected seasonal results, an evaluation of current economic conditions, specific program or product expectations and retailer performance. We record the discounts, returns and allowances as a reduction to net sales in our consolidated statements of operations and as a reduction to receivables, net in our consolidated balance sheets, with the estimated value of inventory expected to be returned in prepaid expenses and other current assets in our consolidated balance

Table of Contents

sheets as of May 5, 2018. As of May 5, 2018, February 3, 2018 and April 29, 2017, reserve balances recorded as a reduction to receivables related to these items were $6 million, $7 million and $9 million, respectively.

In addition to trade and other receivables, an income tax receivable of $5 million is included in receivables, net in our consolidated balance sheet as of both May 5, 2018 and February 3, 2018, with no material income tax receivable as of April 29, 2017. Substantially all other amounts recognized in receivables, net as of those dates represent receivables related to contracts with customers. As of May 5, 2018, prepaid expenses and other current assets includes $3 million representing the estimate of the value of inventory for wholesale and direct to consumer sales returns, which would have been recognized in inventories pursuant to the previous guidance, while the estimated sales returns amount of $5 million for expected direct to consumer returns is classified in other accrued expenses and liabilities in our consolidated balance sheet as of May 5, 2018. We do not have any significant contract assets related to contracts with customers, other than receivables and the value of inventory associated with reserves for expected sales returns, as of May 5, 2018, February 3, 2018 or April 29, 2017. In addition to our estimated return amounts, our contract liabilities related to contracts with customers include gift cards and merchandise credits issued by us, which do not have an expiration date, but are redeemable on demand by the holder of the card. Substantially all gift cards and merchandise credits are redeemed within one year of issuance.

Gift cards and merchandise credits are recorded as a liability until our performance obligation is satisfied, which occurs when redeemed by the consumer, at which point revenue is recognized. However, we recognize breakage income for gift cards and merchandise credits using the redemption recognition method, subject to applicable laws in certain states. Contract liabilities for gift cards purchased by consumers and merchandise credits received by customers but not yet redeemed, less any breakage income recognized to date, is included in other accrued expenses and liabilities in our consolidated balance sheets and totaled $10 million, $10 million and $9 million as of May 5, 2018, February 3, 2018, and April 29, 2017, respectively. Gift card breakage, which was not material in any period presented, is included in net sales in our consolidated statements of operations.

Royalties from the license of our owned brands, which are generally based on the greater of a percentage of the licensee's actual net sales or a contractually determined minimum royalty amount, are recognized over time based upon the guaranteed minimum levels and adjusted as sales data, or estimates thereof, is received from licensees. Royalty income represents substantially all of the amounts included in royalties and other operating income in our consolidated statements of operations.

We have made the following accounting policy elections and practical expedients related to the new revenue recognition guidance:

•We exclude any taxes collected from customers that are remitted to taxing authorities from net sales;

•We deem charges incurred by us before and after the customer obtains control of goods, as applicable, as fulfillment costs;

•As customer payment terms are less than one year from the transfer of goods, we do not adjust receivable amounts for the effects of time value of money; and

•We utilize the portfolio approach when multiple contracts or performance obligations are involved in the determination of revenue recognition.

We do not believe the use of any practical expedients utilized by us had a material impact on our financial statements upon our adoption of the revised guidance.

Deferred income taxes for intra-entity asset transfers

In October 2016, the FASB issued ~~revised~~ guidance on the recognition of current and deferred income taxes for intra-entity asset transfers. The revised guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset (other than inventory) when the transfer occurs. ~~This~~We adopted this guidance ~~will be effective~~ in the First Quarter of Fiscal 2018, ~~with early adoption permitted. The guidance requires the use of the modified retrospective method of adoption which results~~resulting in a ~~cumulative adjustment~~$0.1 million reduction to retained earnings as of ~~the beginning of the period of adoption. We are currently in the process of assessing the~~February 4, 2018 and no impact ~~that adopting this guidance will have~~ on ~~our consolidated financial statements.~~

In January 2017, the FASB issued revised guidance on the subsequent measurement of goodwill which eliminates the second step from the quantitative goodwill impairment test. The revised guidance requires companies to compare the fair value of a reporting unit with its carrying amount and record an impairment chargenet earnings for the amount that the carrying amount exceeds the fair value, up to the total amount of goodwill allocated to that reporting unit. This guidance will be effective in 2020 with early adoption permitted for goodwill impairment testing dates after January 1, 2017. We are currently assessing the impact that adopting this guidance will have on our consolidated financial statements.

~~Operating Group Information:~~ Our business is primarily operated through our Tommy Bahama, Lilly Pulitzer, Lanier Apparel and Southern Tide operating groups. We acquired Southern Tide on April 19, 2016 during the First Quarter of Fiscal 2016. We identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance. Our operating group structure reflects a brand-focused management approach, emphasizing operational coordination and resource allocation across each brand's direct to consumer, wholesale and licensing operations, as applicable.

Tommy Bahama, Lilly Pulitzer and Southern Tide each design, source, market and distribute apparel and related products bearing their respective trademarks and also license their trademarks for other product categories, while Lanier Apparel designs, sources and distributes branded and private label men's products. Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, substantially all financing activities, elimination of inter-segment sales, LIFO accounting adjustments for inventory, other costs that are not allocated to the operating groups and operations of our other businesses which are not included in our operating groups, including our Lyons, Georgia distribution center operations. For a more extensive description of our Tommy Bahama, Lilly Pulitzer, Lanier Apparel and Southern Tide operating groups, see Part I, Item 1. Business included in our Annual Report on Form 10-K for Fiscal 2016. The table below presents certain financial information (in thousands) about our operating groups, as well as Corporate and Other.

~~Table of Contents~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 First Half Fiscal 2017 First Half Fiscal 2016
Net sales
Tommy Bahama $ 187,580
$ 184,111
$ 360,076
$ 346,830
Lilly Pulitzer 69,458
69,724
132,801
134,458
Lanier Apparel 17,848
19,541
41,204
46,152
Southern Tide 9,395
9,155
22,037
10,580
Corporate and Other 428
465
954
1,211
Total net sales $ 284,709
$ 282,996
$ 557,072
$ 539,231
Depreciation and amortization
Tommy Bahama $ 7,714
$ 7,869
$ 15,288
$ 15,574
Lilly Pulitzer 2,079
1,867
4,074
3,595
Lanier Apparel 150
118
298
212
Southern Tide 103
210
209
267
Corporate and Other 332
380
699
750
Total depreciation and amortization $ 10,378
$ 10,444
$ 20,568
$ 20,398
Operating income (loss)
Tommy Bahama $ 21,916
$ 20,578
$ 37,954
$ 33,896
Lilly Pulitzer 20,982
22,640
38,669
43,434
Lanier Apparel 195
78
1,053
2,943
Southern Tide 645
(1 ) 2,749
47
Corporate and Other (7,336 ) (4,605 ) (14,064 ) (9,624 )
Total operating income $ 36,402
$ 38,690
$ 66,361
$ 70,696
Interest expense, net 742
1,177
1,672
1,791
Earnings from continuing operations before income taxes $ 35,660
$ 37,513
$ 64,689
$ 68,905

~~3. Accumulated Other Comprehensive Loss:~~ Substantially all amounts included in accumulated other comprehensive (loss) income, as well as the change in the balance, for each period presented, reflect the net foreign currency translation adjustment related to our Tommy Bahama operations in Canada, Japan and Australia. No amounts of accumulated other comprehensive loss were reclassified from accumulated other comprehensive loss into our consolidated statements of operations during any period presented. ~~The following table details the changes in our accumulated other comprehensive loss (in thousands), net of related income taxes, for the periods specified:~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 First Half Fiscal 2017 First Half Fiscal 2016
Beginning balance $ (5,562 ) $ (4,849 ) $ (5,276 ) $ (6,829 )
Net foreign currency translation adjustment 1,151
(261 ) 865
1,719
Ending balance $ (4,411 ) $ (5,110 ) $ (4,411 ) $ (5,110 )

~~Income Taxes:~~ Income taxes reflects effective tax rates of 36.4%, 36.4%, 38.3% and 36.1% for the Second Quarter of Fiscal 2017, the Second Quarter of Fiscal 2016, the First Half of Fiscal 2017 and First Half of Fiscal 2016, respectively. The effective tax rates for each period presented were impacted by our earnings in certain foreign jurisdictions, which have lower tax rates than domestic earnings resulting in a lower consolidated effective tax rate, as well as the net impact of other items, including the proportion of domestic versus foreign earnings or losses during the period, which varies during the year and from one year to the next. Additionally, for the First Half of Fiscal 2016 the effective tax rate was favorably impacted by the utilization of certain foreign operating loss carryforward amounts, while the First Half of Fiscal 2017 was unfavorably impacted by certain stock awards that vested during the First Quarter of Fiscal 2017, which had a higher grant date fair value for accounting purposes than the vesting date fair value for tax deduction purposes, resulting in an increase in income tax expense.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Table of Contents~~

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to the unaudited condensed consolidated financial statements contained in this report and the consolidated financial statements, notes to consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for Fiscal ~~2016~~2017.

OVERVIEW

Table of Contents

We are a global apparel company that designs, sources, markets and distributes products bearing the trademarks of our Tommy ~~Bahama®,~~Bahama, Lilly ~~Pulitzer®~~Pulitzer and Southern ~~Tide®~~Tide lifestyle brands, other owned brands and licensed brands as well as private label apparel products. During Fiscal ~~2016,~~2017, 92% of our net sales were from products bearing brands that we own, and 66% of our net sales were through our direct to consumer channels of distribution. In Fiscal ~~2016, 96%~~2017, 97% of our consolidated net sales were to customers located in the United States, with the sales outside the United States consisting primarily of our Tommy Bahama ~~product~~ sales in Canada and the Asia-Pacific region.

Our business strategy is to develop and market compelling lifestyle brands and products that evoke a strong emotional response from our target consumers. We consider lifestyle brands to be those brands that have a clearly defined and targeted point of view inspired by an appealing lifestyle or attitude. Furthermore, we believe lifestyle brands that create an emotional connection, like Tommy Bahama, Lilly Pulitzer and Southern Tide, ~~that create an emotional connection with consumers~~ can command greater loyalty and higher price points at retail and create licensing opportunities, which may drive higher earnings. We believe the attraction of a lifestyle brand depends on creating compelling product, effectively communicating the respective lifestyle brand message and distributing products to consumers where and when they want ~~it.~~them.

Our ability to compete successfully in styling and marketing is directly related to our proficiency in foreseeing changes and trends in fashion and consumer preference and presenting appealing products for consumers. Our design-led, commercially informed lifestyle brand operations strive to provide exciting, differentiated products each season.

To further strengthen each lifestyle brand's connections with consumers, we directly communicate with consumers through ~~electronic~~digital and print media on a regular basis. We believe our ability to effectively communicate the images, lifestyle and products of our brands and create an emotional connection with consumers is critical to the success of ~~the~~our brands. Our advertising for our brands often attempts to convey the lifestyle of the brand as well as a specific product.

We distribute our owned lifestyle branded products primarily through our direct to consumer channels, consisting of our Tommy Bahama and Lilly Pulitzer retail stores and our e-commerce sites for Tommy Bahama, Lilly Pulitzer and Southern Tide, and through our wholesale distribution channels. Our direct to consumer operations provide us with the opportunity to interact directly with our customers, present to them a broad assortment of our current season products and immerse them in the theme of the lifestyle brand. We believe that presenting our products in a setting specifically designed to showcase the lifestyle on which the brands are based enhances the image of our brands. Our Tommy Bahama and Lilly Pulitzer full-price retail stores provide high visibility for our brands and products and allow us to stay close to the preferences of our consumers, while also providing a platform for long-term growth for the brands. In Tommy Bahama, we also operate a limited number of restaurants, including Marlin Bars, generally adjacent to a Tommy Bahama full-price retail store location, which we believe further enhance the brand's image with consumers.

Additionally, our e-commerce websites, which represented ~~18%~~19% of our consolidated net sales in Fiscal ~~2016,~~2017, provide the opportunity to increase revenues by reaching a larger population of consumers and at the same time allow our brands to provide a broader range of products. Our e-commerce flash clearance sales on our websites and our Tommy Bahama outlet stores play an important role in overall brand and inventory management by allowing us to sell discontinued and out-of-season products in brand appropriate settings and often at better prices than are typically available from third-party off-price retailers.

The wholesale operations of our lifestyle brands complement our direct to consumer operations and provide access to a larger group of consumers. As we seek to maintain the integrity of our lifestyle brands by limiting promotional activity in our full-price retail stores and e-commerce websites, we generally target wholesale customers that follow this same approach in their stores. Our wholesale customers for our Tommy Bahama, Lilly Pulitzer and Southern Tide brands generally include ~~better department stores and~~various specialty stores, including Signature Stores for Lilly Pulitzer and Southern ~~Tide.~~Tide, better department stores and multi-branded e-commerce retailers.

Within our Lanier Apparel operating group, we sell tailored clothing and sportswear products under licensed brands, private labels and owned brands. Lanier Apparel's customers include department stores, discount and off-price retailers, warehouse clubs, national chains, specialty retailers, multi-branded e-commerce retailers and others throughout the United States.

All of our operating groups operate in highly competitive apparel markets in which numerous ~~U.S.-based~~U.S. and ~~foreign~~foreign-based apparel firms compete. No single apparel firm or small group of apparel firms dominates the apparel industry, and our direct competitors vary by operating group and distribution channel. We believe the principal competitive factors in the apparel

~~Table of Contents~~

industry are reputation, value, and image of brand names; design; consumer preference; price; quality; marketing; product fulfillment capabilities; and customer service.

The disposal of discontinued, end of season or excess inventory is an ongoing part of any apparel business, and our operating groups have historically utilized a variety of methods to sell such inventory, including outlet stores in Tommy Bahama, e-commerce flash sales on our various e-commerce websites, and off-price retailers. Our focus in disposing of the excess inventory for our lifestyle brands is to do so in a brand appropriate setting and achieve an acceptable margin.

Table of Contents

The apparel industry is cyclical and very dependent upon the overall level and focus of discretionary consumer spending, which changes as consumer preferences and regional, domestic and international economic conditions change. ~~Often,~~Increasingly, consumers are choosing to spend less of their discretionary spending on certain product categories, including apparel, while spending more on services and other product categories. Further, negative economic conditions often have a longer and more severe impact on the apparel industry than on other industries. We believe the changes in consumer preferences for discretionary spending, the current global economic conditions and ~~the resulting~~ economic uncertainty continue to impact the business of each of our ~~business,~~operating groups, and the apparel industry as a whole.

We believe the retail apparel market is evolving very rapidly and in ways that are having a disruptive impact on traditional fashion retailing. The application of technology, including the internet and mobile devices, to fashion retail provides consumers increasing access to multiple, responsive distribution platforms and an unprecedented ability to communicate directly with brands ~~retailers~~ and ~~others.~~retailers. As a result, consumers may have more information and greater control over information they receive as well as broader, faster and cheaper access to goods than ever before. This, along with the coming of age of the “millennial” generation, is revolutionizing the way that consumers shop for fashion and other goods. The evidence of the evolution is ~~increasingly~~ apparent with ~~marked~~ weakness and store closures for certain department stores and mall-based retailers, decreased consumer retail traffic, a more promotional retail environment, expansion of off-price and discount retailers, and ~~growing~~a shift from bricks and mortar to internet ~~purchases.~~purchasing. These changes may require that brands and retailers approach their operations, including marketing and advertising, differently than historical practices.

While this evolution in the fashion retail industry presents significant risks, especially for traditional retailers who fail or are unable to adapt, we believe it also presents a tremendous opportunity for brands and retailers to capitalize on the changing consumer ~~preferences.~~environment. We believe our brands have true competitive advantages in this new retailing paradigm, and we are leveraging technology to serve our consumers when and where they want to be served. We continue to believe that our lifestyle brands, with their strong emotional connections with consumers, are well suited to succeed and thrive in the long-term while managing the various challenges facing our industry.

Specifically, we believe our lifestyle brands have opportunities for long-term growth in ~~their~~our direct to consumer businesses. We anticipate increased sales in our e-commerce operations, which are expected to grow at a faster rate than bricks and mortar comparable store sales. We also believe growth can be achieved through prudent expansion of bricks and mortar full-price retail store operations and modest comparable full-price retail store sales increases. Despite the changes in the retail environment, we expect there will continue to be desirable locations for additional stores.

~~Our~~We believe our lifestyle brands ~~also~~ have an opportunity for modest sales increases in their wholesale businesses in the long-term. We anticipate that any such increases will stem primarily from current customers adding within their existing door count and increasing their on-line business, increased sales to on-line retailers, and our selective addition of new wholesale customers who generally follow a retail model with limited discounting; however,However, we must be diligent in our effort to avoid compromising the integrity of our brands by maintaining or growing sales with wholesale customers that may not be aligned with our long-term strategy. This is particularly important with the challenges in the department store channel, which represented ~~about one-half of our consolidated wholesale sales, or 16%~~approximately 14% of our consolidated net sales in Fiscal 2017, compared to approximately 16% in Fiscal 2016. ~~Our approach to diligently managing~~As a result, this management of our wholesale distribution ~~may~~for our lifestyle brands is likely to result in lower wholesale sales ~~during certain quarters or years~~in Fiscal 2018, as well as in the near-term future, as we may reduce the amount of sales to certain wholesale accounts by reducing the number of doors ~~with~~that carry our product, reducing the volume sold for a particular door or ~~exit~~exiting the account altogether. We anticipate that sales increases in our wholesale businesses in the long-term will stem primarily from current customers adding within their existing door count and increasing their online business; increased sales to online retailers; and our selective addition of new wholesale customers who generally follow a ~~wholesale account entirely.~~retail model with limited discounting and who present and merchandise our products in a way that is consistent with our full-price, direct to consumer distribution strategy. We also believe that there are opportunities for modest sales growth for Lanier Apparel in the future through new product programs ~~for existing~~ and ~~new customers.~~licenses.

We believe we must continue to invest in our lifestyle brands to take advantage of their long-term growth opportunities. Investments include capital expenditures primarily related to the direct to consumer operations such as technology enhancements, e-commerce initiatives and retail store and restaurant build-out for new, relocated or remodeled locations, as well as distribution center and administrative office expansion initiatives. Additionally, ~~while~~ we anticipate increased advertising, employment ~~advertising~~ and other costs to support ongoing business operations and fuel future sales ~~growth, we remain focused~~growth. Fiscal 2018 advertising expense is expected to increase for each of our brands with a focus on ~~appropriately managing our operating expenses.~~new consumer acquisition as well as consumer retention and engagement.

In the midst of the ~~challenges~~changes in our industry, an important ~~focus~~initiative for us in Fiscal 2017 ~~has been advancing various initiatives~~was to increase the profitability of the Tommy Bahama business. These initiatives generally ~~focus~~focused on increasing gross margin and operating margin through efforts such as: product cost reductions; selective price increases; reducing inventory purchases; redefining our approach to inventory clearance; effectively managing controllable and discretionary operating expenses; taking a more conservative approach to ~~full-price~~ retail store ~~and outlet~~ openings and lease renewals; and continuing our efforts to reduce Asia-Pacific operating losses. In ~~the First Half~~

Table of Contents

Fiscal 2017, we made ~~some initial~~ progress with these initiatives and expect to make additional progress in ~~the second half of the year.~~Fiscal 2018.

We continue to believe it is important to maintain a strong balance sheet and liquidity. We believe positive cash flow from operations in the future, coupled with the strength of our balance sheet and liquidity, will provide us with sufficient resources to

~~Table of Contents~~

fund future investments in our owned lifestyle brands. While we believe we have significant opportunities to appropriately deploy our capital and resources in our existing lifestyle brands, we will continue to evaluate opportunities to add additional lifestyle brands to our portfolio if we identify appropriate targets that meet our investment criteria. With the evolving fashion retail environment, our interest in acquiring smaller brands and earlier stage companies is evolving, particularly where we may have the opportunity to more fully integrate the brand into our existing infrastructure and shared services functions.

Important factors relating to certain risks, many of which are beyond our ability to control or predict, which could impact our business are described in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for Fiscal ~~2016.~~2017.

The following table sets forth our consolidated operating results from continuing operations (in thousands, except per share amounts) for the First ~~Half~~Quarter of Fiscal ~~2017~~2018 compared to the First ~~Half~~Quarter of Fiscal ~~2016:~~

2017:


	First Half Fiscal 2017		First Half Fiscal 2016		First Quarter Fiscal 2018		First Quarter Fiscal 2017
Net sales	$	557,072	$	539,231	$	272,628	$	272,363
Operating income	$	66,361	$	70,696	$	28,373	$	29,959
Net earnings from continuing operations	$	39,886	$	44,052
Net earnings from continuing operations per diluted share	$	2.39	$	2.65
Net earnings					$	20,567	$	17,197
Net earnings per diluted share					$	1.23	$	1.03

The ~~lower~~higher net earnings ~~from continuing operations~~ per diluted share in the First ~~Half~~Quarter of Fiscal ~~2017~~2018 was primarily due to ~~lower operating income and~~(1) the ~~higher~~lower effective tax rate resulting from U.S. Tax Reform as discussed in Note 4, (2) the ~~First Half~~improved operating results in Corporate and Other, including the favorable impact of ~~Fiscal 2017. The lower~~LIFO accounting, and (3) the increased operating income in ~~the First Half of Fiscal 2017 was due to the~~Southern Tide. These items were partially offset by lower operating income in Lilly Pulitzer, Tommy Bahama and Lanier Apparel primarily due to lower wholesale sales in each of these operating groups as well as ~~lower operating results in Corporate and Other, which were primarily driven by the unfavorable impact of LIFO accounting. These items were partially offset by increased operating income~~higher SG&A in Tommy Bahama and ~~Southern Tide, the latter of which was not owned for the full period~~Lilly Pulitzer. Changes in the prior year. The higher effective tax rate was primarily due to the unfavorable tax impact of certain stock awards that vested during the First Half of Fiscal 2017 while the First Half of Fiscal 2016 was favorably impactedoperating results by ~~the utilization of certain foreign operating loss carryforward amounts.~~group are discussed below.

COMPARABLE STORE SALES

We often disclose comparable store sales in order to provide additional information regarding changes in our results of operations between periods. Our disclosures of comparable store sales include net sales from full-price retail stores and our e-commerce sites, excluding sales associated with e-commerce flash clearance sales. We believe that the inclusion of both our full-price retail stores and e-commerce sites in ~~our~~the comparable store sales disclosures is a more meaningful way of reporting our comparable store sales results, given similar inventory planning, allocation and return policies, as well as our cross-channel marketing and other initiatives for the direct to consumer channel. For our comparable store sales disclosures, we exclude (1) outlet store sales, warehouse sales and e-commerce flash clearance sales, as those clearance sales are used primarily to liquidate end of season inventory, which may vary significantly depending on the level of end of season inventory on hand and generally occur at lower gross margins than our non-clearance direct to consumer sales, and (2) restaurant sales, as we do not currently believe that the inclusion of restaurant sales in our comparable store sales disclosures is meaningful in assessing our consolidated results of operations. Comparable store sales information reflects net sales, including shipping and handling revenues, if any, associated with product sales.

For purposes of our disclosures, we consider a comparable store to be, in addition to our e-commerce sites, a physical full-price retail store that was owned and open as of the beginning of the prior fiscal year and which did not have during the relevant periods, and is not within the current fiscal year scheduled to have, (1) a remodel or other event resulting in the store being closed for an extended period of time (which we define as a period of two weeks or longer), (2) a greater than 15% change in the size of the retail space due to expansion, reduction or relocation to a new retail space, (3) a relocation to a new space that was significantly different from the prior retail space, or (4) a closing or opening of a Tommy Bahama restaurant adjacent to the full-price retail store. For those stores which are excluded from comparable stores based on the preceding sentence, the stores continue to be excluded from comparable store sales until the criteria for a new store is met subsequent to the remodel, relocation or restaurant closing or ~~opening.~~opening, or other event. A store that is remodeled will generally continue to be included in our comparable store sales metrics as a store is not typically closed for longer than a ~~two week~~two-week period during a remodel; however, in some cases a store may be closed for more than two weeks during a remodel. A store that is relocated

Table of Contents

generally will ~~generally~~ not be included in our comparable store sales metrics until that store has been open in the relocated space for the entirety of the prior fiscal year because the size or other characteristics of the store typically change significantly from the prior location. Additionally, any stores that were closed during the prior fiscal year or current fiscal year, or which we expect to close or vacate in the current fiscal year, are excluded from the definition of comparable store sales.

Because Fiscal 2017 had 53 weeks, each fiscal quarter in Fiscal 2018 starts and ends one calendar week later than in Fiscal 2017 (e.g., the First Quarter of Fiscal 2018 is the period from February 4, 2018 to May 5, 2018, inclusive, while the First Quarter of Fiscal 2017 is the period from January 29, 2017 to April 29, 2017, inclusive). Due to the significant seasonality of our direct to consumer sales, particularly during the first and second fiscal quarters each year, as well as the timing of our merchandising and marketing initiatives, the one-week shift may significantly impact our comparable store sales if presented on a fiscal period basis. To provide a more accurate assessment of our Fiscal 2018 comparable store productivity, we are presenting our Fiscal 2018 comparable store sales on a calendar-adjusted basis by comparing the Fiscal 2018 period to the comparable calendar period in the preceding year, rather than the comparable fiscal period in the preceding year. By way of example, our First Quarter of Fiscal 2018 comparable store sales presentation compares the First Quarter of Fiscal 2018 to the 13-week period ended May 6, 2017. Except as otherwise specified, all references to comparable store sales during Fiscal 2018 contained in this report refer to the calendar-adjusted comparable store sales as opposed to the fiscal period comparable store sales.

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

~~Table~~

STORE COUNT

The table below provides store count information for Tommy Bahama and Lilly Pulitzer as of ~~Contents~~the dates specified.



	May 5, 2018	February 3, 2018	April 29, 2017	January 28, 2017
Tommy Bahama Full-Price Retail Stores	111	110	112	111
Tommy Bahama Retail-Restaurant Locations	18	18	17	17
Tommy Bahama Outlet Stores	38	38	40	40
Total Tommy Bahama Retail Locations	167	166	169	168

Lilly Pulitzer Full-Price Retail Stores	59	57	41	40

Total Oxford Retail Locations	226	223	210	208

RESULTS OF OPERATIONS

~~SECOND~~FIRST QUARTER OF FISCAL ~~2017~~2018 COMPARED TO ~~SECOND~~FIRST QUARTER OF FISCAL ~~2016~~2017

The following table sets forth the specified line items in our unaudited condensed consolidated statements of operations both in dollars (in thousands) and as a percentage of net sales. The table also sets forth the dollar change and the percentage change of the data as compared to the same period of the prior year. We have calculated all percentages based on actual data, but percentage columns may not add due to rounding.

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 $ Change % Change
Net sales $ 284,709
100.0 % $ 282,996
100.0 % $ 1,713
0.6 %
Cost of goods sold 118,740
41.7 % 118,201
41.8 % 539
0.5 %
Gross profit $ 165,969
58.3 % $ 164,795
58.2 % $ 1,174
0.7 %
SG&A 132,911
46.7 % 129,437
45.7 % 3,474
2.7 %
Royalties and other operating income 3,344
1.2 % 3,332
1.2 % 12
0.4 %
Operating income $ 36,402
12.8 % $ 38,690
13.7 % $ (2,288 ) (5.9 )%
Interest expense, net 742
0.3 % 1,177
0.4 % (435 ) (37.0 )%
Earnings from continuing operations before income taxes $ 35,660
12.5 % $ 37,513
13.3 % $ (1,853 ) (4.9 )%
Income taxes 12,971
4.6 % 13,638
4.8 % (667 ) (4.9 )%
Net earnings from continuing operations $ 22,689
8.0 % $ 23,875
8.4 % $ (1,186 ) (5.0 )%
Earnings from discontinued operations, net of taxes —
— % —
— % —
— %
Net earnings $ 22,689
8.0 % $ 23,875
NM
$ (1,186 ) (5.0 )%

The discussion and tables below compare certain line items included in our statements of operations for the Second Quarter of Fiscal 2017 to the Second Quarter of Fiscal 2016. Each dollar and percentage change provided reflects the change between these periods unless indicated otherwise. Each dollar and share amount included in the tables is in thousands except for per share amounts. Individual line items of our consolidated statements of operations may not be directly comparable to those of our competitors, as classification of certain expenses may vary by company. Unless otherwise indicated, all references to assets, liabilities, revenues, expenses or other information in this report reflect continuing operations and exclude any amounts related to the discontinued operations of our former Ben Sherman operating group.

~~Net Sales~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 $ Change % Change
Tommy Bahama $ 187,580
$ 184,111
$ 3,469
1.9 %
Lilly Pulitzer 69,458
69,724
(266 ) (0.4 )%
Lanier Apparel 17,848
19,541
(1,693 ) (8.7 )%
Southern Tide 9,395
9,155
240
2.6 %
Corporate and Other 428
465
(37 ) NM
Total net sales $ 284,709
$ 282,996
$ 1,713
0.6 %

Consolidated net sales increased $1.7 million, or 0.6%, in the Second Quarter of Fiscal 2017 compared to the Second Quarter of Fiscal 2016. The increase in consolidated net sales was primarily driven by (1) an incremental net sales increase of $5.0 million associated with the operation of non-comp full-price retail stores, (2) a $1.7 million, or 1%, increase in comparable store sales to $141.5 million in the Second Quarter of Fiscal 2017 from $139.7 million in the Second Quarter of Fiscal 2016 and (3) a $1.6 million increase in restaurant sales in Tommy Bahama. These increases were partially offset by (1) a $3.8 million decrease in net sales through our off-price direct to consumer clearance channels, which includes our e-commerce flash

~~Table of Contents~~

~~clearance sales and outlets, and (2) a $2.8 million decrease in wholesale sales, primarily consisting of declines in our Lanier Apparel and Lilly Pulitzer operating groups.~~

We believe that certain macroeconomic factors, including lower retail store traffic and the evolving impact of digital technology on consumer shopping habits, continue to impact the sales in each of our direct to consumer and wholesale businesses. The changes in net sales by operating group are discussed below.

~~The following table presents the proportion of our consolidated net sales by distribution channel for each period presented:~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016
Full-price retail stores and outlets 45 % 45 %
E-commerce 19 % 19 %
Restaurant 7 % 7 %
Wholesale 29 % 29 %
Total 100 % 100 %

~~Tommy Bahama:~~

The Tommy Bahama net sales increase of $3.5 million, or 1.9%, was primarily driven by (1) a $4.1 million, or 4%, increase in comparable store sales to $103.8 million in the Second Quarter of Fiscal 2017 from $99.7 million in the Second Quarter of Fiscal 2016, (2) a $1.6 million increase in restaurant sales reflecting increased sales at existing restaurants as well as sales from a new Marlin Bar location, (3) an incremental net sales increase of $1.3 million associated with the operation of non-comp full-price retail stores and (4) a $0.2 million increase in wholesale sales reflecting higher off-price wholesale sales, as Tommy Bahama sold some excess prior season inventory, partially offset by lower full-price wholesale sales, as Tommy Bahama continues to manage its exposure to department stores. These increases were partially offset by $3.7 million of lower sales in our off-price direct to consumer clearance channel, primarily resulting from the absence of any e-commerce flash clearance sales in the Second Quarter of Fiscal 2017. Tommy Bahama's direct to consumer sales benefited from increased sales from Tommy Bahama's loyalty award card and Flip Side events held in the second quarter of each year and initial markdowns on select items at the end of the selling season in our retail stores and on our e-commerce website in the Second Quarter of Fiscal 2017, which was new in Fiscal 2017.

As of July 29, 2017, we operated 167 Tommy Bahama stores globally, consisting of 111 full-price retail stores, 17 restaurant-retail locations and 39 outlet stores. As of July 30, 2016, we operated 168 Tommy Bahama stores consisting of 111 full-price retail stores, 16 restaurant-retail locations and 41 outlet stores.

~~The following table presents the proportion of net sales by distribution channel for Tommy Bahama for each period presented:~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016
Full-price retail stores and outlets 52 % 53 %
E-commerce 19 % 19 %
Restaurant 11 % 10 %
Wholesale 18 % 18 %
Total 100 % 100 %

~~Lilly Pulitzer:~~

The Lilly Pulitzer net sales decrease of $0.3 million, or 0.4%, was primarily a result of (1) a $2.4 million, or 6%, decrease in comparable store sales to $37.7 million in the Second Quarter of Fiscal 2017 compared to $40.1 million in the Second Quarter of Fiscal 2016, with negative retail comparable store sales offsetting positive e-commerce comparable store sales and (2) a $1.4 million decrease in wholesale sales. These sales decreases were partially offset by an incremental net sales increase of $3.5 million associated with the operation of additional full-price retail stores. The decrease in comparable store sales

~~Table of Contents~~

reflects reduced retail store traffic. The lower wholesale sales were primarily a result of lower sales to department stores as Lilly Pulitzer continues to manage its exposure to this channel of distribution.

As of July 29, 2017, we operated 50 Lilly Pulitzer retail stores, compared to 37 retail stores as of July 30, 2016. During the First Half of Fiscal 2017, we added 10 new Lilly Pulitzer store locations, which consisted of five new Lilly Pulitzer stores that were opened and five Lilly Pulitzer Signature Stores we acquired in July 2017. Also, in the Third Quarter of Fiscal 2017, we acquired an additional seven of our Lilly Pulitzer Signature Stores. The following table presents the proportion of net sales by distribution channel for Lilly Pulitzer for each period presented:

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016
Full-price retail stores 42 % 41 %
E-commerce 26 % 25 %
Wholesale 32 % 34 %
Total 100 % 100 %

~~Lanier Apparel:~~

The decrease in net sales for Lanier Apparel of $1.7 million, or 8.7%, reflects lower sales in both the branded and private label businesses. The sales decreases reflect lower sales in certain replenishment and seasonal programs including reductions in volume and the exit from various programs. These reductions in sales in certain programs were partially offset by higher sales in other programs.

~~Southern Tide:~~

The increase in net sales of $0.2 million, or 2.6%, for Southern Tide in the Second Quarter of Fiscal 2017 was due to increases in both wholesale and e-commerce sales. The following table presents the proportion of net sales by distribution channel for Southern Tide for each period presented:

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016
E-commerce 23 % 22 %
Wholesale 77 % 78 %
Total 100 % 100 %

~~Corporate and Other:~~

Corporate and Other net sales primarily consist of the net sales of our Lyons, Georgia distribution center to third party warehouse customers as well as the impact of the elimination of any intercompany sales between our operating groups.

~~Gross Profit~~

The table below presents gross profit by operating group and in total for the Second Quarter of Fiscal 2017 and the Second Quarter of Fiscal 2016, as well as the change between those two periods. Our gross profit and gross margin, which is calculated as gross profit divided by net sales, may not be directly comparable to those of our competitors, as the statement of operations classification of certain expenses may vary by company.

~~Table of Contents~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 $ Change % Change
Tommy Bahama $ 109,992
$ 108,192
$ 1,800
1.7 %
Lilly Pulitzer 46,629
46,463
166
0.4 %
Lanier Apparel 6,150
5,099
1,051
20.6 %
Southern Tide 4,468
3,771
697
18.5 %
Corporate and Other (1,270 ) 1,270
(2,540 ) NM
Total gross profit $ 165,969
$ 164,795
$ 1,174
0.7 %
LIFO charge (credit) included in Corporate and Other $ 1,565
$ (959 )

Inventory step-up charge included in Southern Tide $ —
$ 976

The increase in consolidated gross profit was primarily due to higher net sales, as discussed above. Changes in gross margin by operating group are discussed below. The table below presents gross margin by operating group and in total for the Second Quarter of Fiscal 2017 and the Second Quarter of Fiscal 2016.

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016
Tommy Bahama 58.6 % 58.8 %
Lilly Pulitzer 67.1 % 66.6 %
Lanier Apparel 34.5 % 26.1 %
Southern Tide 47.6 % 41.2 %
Corporate and Other NM
NM
Consolidated gross margin 58.3 % 58.2 %

On a consolidated basis, gross margin was comparable in the Second Quarter of Fiscal 2017 and the Second Quarter of Fiscal 2016. The comparable gross margin reflects (1) a change in sales mix with Tommy Bahama representing a greater proportion of sales and Lanier Apparel representing a lower proportion of sales, (2) the improved gross margin in Lanier Apparel and (3) the Second Quarter of Fiscal 2016 including $1.0 million of incremental cost of goods sold associated with the step-up of inventory recognized at acquisition of Southern Tide. These favorable items were partially offset by the net unfavorable impact of LIFO accounting in the Second Quarter of Fiscal 2017.

~~Tommy Bahama:~~

The slight decrease in gross margin for Tommy Bahama in the Second Quarter of Fiscal 2017 primarily resulted from lower wholesale gross margins as Tommy Bahama sold substantially all of the aged inventory, which was marked down to estimated net realizable value during the Fourth Quarter of Fiscal 2016, resulting in a nominal amount of gross profit. Additionally, the full-price direct to consumer business gross margin decreased due to (1) a greater proportion of our Tommy Bahama sales in our stores and on our e-commerce website in the Second Quarter of Fiscal 2017 relating to our marketing events, which typically have lower gross margins than sales during non-promotional periods and (2) the impact of taking initial markdowns in the Second Quarter of Fiscal 2017 on select items at the end of the selling season in our retail stores and on our e-commerce website. These items were partially offset by the favorable impact of a change in sales mix with the direct to consumer business representing a greater proportion of sales in the Second Quarter of Fiscal 2017 and the impact of improved gross margins in our off-price direct to consumer business.

~~Lilly Pulitzer:~~

~~The increase in gross margin for Lilly Pulitzer was primarily driven by a change in sales mix with full-price direct to consumer sales representing a greater proportion of Lilly Pulitzer sales.~~

~~Lanier Apparel:~~

The increase in gross margin for Lanier Apparel for the Second Quarter of Fiscal 2017 primarily resulted from the favorable impact of certain customer allowance amounts related to replenishment programs and inventory markdowns

~~Table of Contents~~

compared to the Second Quarter of Fiscal 2016 as well as a change in sales mix as branded sales represented a greater proportion of Lanier Apparel sales in the Second Quarter of Fiscal 2017. Due to the favorable impact of the customer allowance amounts in the Second Quarter of Fiscal 2017, we do not consider the gross margin for Lanier Apparel for the Second Quarter of Fiscal 2017 to be indicative of the ongoing gross margin anticipated for future periods for Lanier Apparel.

~~Southern Tide:~~

The increase in gross margin for Southern Tide in the Second Quarter of Fiscal 2017 was primarily due to the Second Quarter of Fiscal 2016 including $1.0 million of incremental cost of goods sold associated with the step-up of inventory recognized at acquisition with no such amounts recognized in the Second Quarter of Fiscal 2017. This was partially offset by the impact of the Second Quarter of Fiscal 2017 including a greater proportion of off-price wholesale sales as Southern Tide sold certain prior season inventory to reduce on-hand inventory levels.

~~Corporate and Other:~~

The gross profit in Corporate and Other in each period primarily reflects (1) the gross profit of our Lyons, Georgia distribution center operations, (2) the impact of LIFO accounting adjustments and (3) the impact of certain consolidating adjustments, including the elimination of intercompany sales between our operating groups. The primary driver for the lower gross profit was the unfavorable impact of a $1.6 million LIFO accounting charge in the Second Quarter of Fiscal 2017 compared to a $1.0 million LIFO accounting credit in the Second Quarter of Fiscal 2016. The LIFO accounting charge in Corporate and Other in the Second Quarter of Fiscal 2017 primarily reflects the sale of inventory that had been marked down to the estimated net realizable value in prior periods in an operating group, but generally reversed in Corporate and Other as part of LIFO accounting. The LIFO accounting credit in Corporate and Other in the Second Quarter of Fiscal 2016 primarily reflects the reversal of inventory markdowns to net realizable value recognized in the operating groups during that quarter.

~~SG&A~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 $ Change % Change
SG&A $ 132,911
$ 129,437
$ 3,474
2.7 %
SG&A as % of net sales 46.7 % 45.7 %

Amortization of intangible assets included in Tommy Bahama associated with Tommy Bahama Canada acquisition $ 373
$ 379

Amortization of intangible assets included in Southern Tide $ 72
$ 159

Distribution center integration charges $ —
$ 454

The increase in SG&A was primarily due to (1) $2.2 million of incremental costs in the Second Quarter of Fiscal 2017 associated with additional retail stores, (2) a $1.2 million increase in incentive compensation, reflecting higher incentive compensation amounts in Tommy Bahama and Corporate and Other, which was partially offset by lower incentive compensation amounts in Lilly Pulitzer and (3) other infrastructure and employment cost increases related to expanding certain of our business operations. These increases were partially offset by the Second Quarter of Fiscal 2016 including $0.5 million of distribution center integration charges associated with our acquisition of Southern Tide, with no such charges in the Second Quarter of Fiscal 2017.

~~Royalties and other operating income~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 $ Change % Change
Royalties and other operating income $ 3,344
$ 3,332
$ 12
0.4 %

Royalties and other operating income in the Second Quarter of Fiscal 2017 primarily reflects income received from third parties from the licensing of our Tommy Bahama, Lilly Pulitzer and Southern Tide brands.

~~Operating income (loss)~~

~~Table of Contents~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 $ Change % Change
Tommy Bahama $ 21,916
$ 20,578
$ 1,338
6.5 %
Lilly Pulitzer 20,982
22,640
(1,658 ) (7.3 )%
Lanier Apparel 195
78
117
150.0 %
Southern Tide 645
(1 ) 646
NM
Corporate and Other (7,336 ) (4,605 ) (2,731 ) (59.3 )%
Total operating income $ 36,402
$ 38,690
$ (2,288 ) (5.9 )%
LIFO charge (credit) included in Corporate and Other $ 1,565
$ (959 )

Inventory step-up charge included in Southern Tide $ —
$ 976

Amortization of intangible assets included in Tommy Bahama associated with Tommy Bahama Canada acquisition $ 373
$ 379

Amortization of intangible assets included in Southern Tide $ 72
$ 159

Distribution center integration charges $ —
$ 454

The decrease in operating income in the Second Quarter of Fiscal 2017 was primarily due to a more significant operating loss in Corporate and Other, which was primarily due to the impact of LIFO accounting, and the lower operating income in Lilly Pulitzer. These items were partially offset by increased operating income in Tommy Bahama, Southern Tide and Lanier Apparel. Changes in operating income (loss) by operating group are discussed below.

~~Tommy Bahama:~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 $ Change % Change
Net sales $ 187,580
$ 184,111
$ 3,469
1.9 %
Gross margin 58.6 % 58.8 %

Operating income $ 21,916
$ 20,578
$ 1,338
6.5 %
Operating income as % of net sales 11.7 % 11.2 %

Amortization of intangible assets included in Tommy Bahama associated with Tommy Bahama Canada acquisition $ 373
$ 379

The higher operating income for Tommy Bahama was primarily due to increased sales, as discussed above, partially offset by higher SG&A. The higher SG&A for the Second Quarter of Fiscal 2017 includes (1) a $2.6 million increase in incentive compensation amounts and (2) $1.0 million of incremental SG&A associated with operating non-comp retail stores. These cost increases were partially offset by cost reductions in corporate, retail store and wholesale operations as Tommy Bahama has focused on reducing certain employment and other operating costs.

~~Lilly Pulitzer:~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 $ Change % Change
Net sales $ 69,458
$ 69,724
$ (266 ) (0.4 )%
Gross margin 67.1 % 66.6 %

Operating income $ 20,982
$ 22,640
$ (1,658 ) (7.3 )%
Operating income as % of net sales 30.2 % 32.5 %

The lower operating income in Lilly Pulitzer was primarily due to increased SG&A, partially offset by higher gross margin. The higher SG&A for the Second Quarter of Fiscal 2017 includes $1.2 million of incremental SG&A associated with the cost of operating additional retail stores and SG&A increases to support the planned growth of the business, including additional employee headcount, which were partially offset by lower incentive compensation amounts in the Second Quarter of Fiscal 2017.

~~Table of Contents~~

~~Lanier Apparel:~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 $ Change % Change
Net sales $ 17,848
$ 19,541
$ (1,693 ) (8.7 )%
Gross margin 34.5 % 26.1 %

Operating income $ 195
$ 78
$ 117
150.0 %
Operating income as % of net sales 1.1 % 0.4 %

The higher operating income for Lanier Apparel was primarily due to the improved gross margin and was partially offset by lower sales and higher SG&A. The SG&A increase primarily resulted from certain incremental infrastructure costs associated with our Strong Suit and Duck Head businesses, which we acquired in Fiscal 2016.

~~Southern Tide:~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 $ Change % Change
Net sales $ 9,395
$ 9,155
$ 240
2.6 %
Gross margin 47.6 % 41.2 %

Operating income $ 645
$ (1 ) $ 646
NM
Operating income as % of net sales 6.9 % — %
Inventory step-up charge included in Southern Tide $ —
$ 976

Amortization of intangible assets included in Southern Tide $ 72
$ 159

Distribution center integration charges $ —
$ 454

The increase in operating income for Southern Tide in the Second Quarter of Fiscal 2017 was primarily due to the Second Quarter of Fiscal 2016 including $1.0 million of incremental cost of goods sold associated with the step-up of inventory and $0.5 million of distribution center integration charges associated with our acquisition of Southern Tide, with no such charges in the Second Quarter of Fiscal 2017. These items were partially offset by the impact of increased SG&A to support planned growth for the business, including advertising expense, as well as increased bad debt expense.

~~Corporate and Other:~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 $ Change % Change
Net sales $ 428
$ 465
$ (37 ) NM
Operating loss $ (7,336 ) $ (4,605 ) $ (2,731 ) (59.3 )%
LIFO charge (credit) included in Corporate and Other $ 1,565
$ (959 )

The lower operating results in Corporate and Other in the Second Quarter of Fiscal 2017 were primarily due to the net unfavorable impact of LIFO accounting and higher incentive compensation expense amounts.

~~Interest expense, net~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 $ Change % Change
Interest expense, net $ 742
$ 1,177
$ (435 ) (37.0 )%

Interest expense for the Second Quarter of Fiscal 2017 decreased from the prior year primarily due to (1) the Second Quarter of Fiscal 2016 including the write off of $0.3 million of deferred financing costs associated with our amendment and restatement of our revolving credit agreement and (2) lower average debt outstanding in the Second Quarter of Fiscal 2017

~~Table of Contents~~

~~compared to the Second Quarter of Fiscal 2016. These items were partially offset by higher interest rates in the Second Quarter of Fiscal 2017.~~

~~Income taxes~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016 $ Change % Change
Income taxes $ 12,971
$ 13,638
$ (667 ) (4.9 )%
Effective tax rate 36.4 % 36.4 %

The effective tax rates for both the Second Quarter of Fiscal 2017 and the Second Quarter of Fiscal 2016 were impacted by certain favorable items. The primary item benefiting the Second Quarter of Fiscal 2017 was the favorable impact of our foreign jurisdiction earnings, which have lower tax rates than domestic earnings, including the proportion of domestic versus foreign earnings or losses during the period. The effective tax rate for the Second Quarter of Fiscal 2016 benefited from the impact of our foreign jurisdiction earnings and the utilization of certain foreign operating loss carryforward amounts. The effective tax rate for the Second Quarter of Fiscal 2017 is not indicative of the expected effective tax rate for the full year of Fiscal 2017 due to the impact on the full year tax expense of the vesting of certain restricted stock awards in the First Quarter of Fiscal 2017, other discrete items and the differences in the proportion of income and losses by jurisdictions between the Second Quarter of Fiscal 2017 and the amounts anticipated for the full year of Fiscal 2017.

~~Net earnings from continuing operations~~

Second Quarter Fiscal 2017 Second Quarter Fiscal 2016
Net earnings from continuing operations $ 22,689
$ 23,875
Net earnings from continuing operations per diluted share $ 1.36
$ 1.44
Weighted average shares outstanding - diluted 16,700
16,623

The lower net earnings from continuing operations per diluted share in the Second Quarter of Fiscal 2017 was primarily due to the lower operating income in the Second Quarter of Fiscal 2017, as discussed above.

~~FIRST HALF OF FISCAL 2017 COMPARED TO FIRST HALF OF FISCAL 2016~~

Table of Contents


	First Half Fiscal 2017				First Half Fiscal 2016				$ Change			% Change		First Quarter Fiscal 2018				First Quarter Fiscal 2017				$ Change			% Change
Net sales	$	557,072	100.0	%	$	539,231	100.0	%	$	17,841		3.3	%	$	272,628	100.0	%	$	272,363	100.0	%	$	265		0.1	%
Cost of goods sold	231,693		41.6	%	222,971		41.3	%	8,722			3.9	%	108,482		39.8	%	112,953		41.5	%	(4,471		)	(4.0	)%
Gross profit	$	325,379	58.4	%	$	316,260	58.7	%	$	9,119		2.9	%	$	164,146	60.2	%	$	159,410	58.5	%	$	4,736		3.0	%
SG&A	266,102		47.8	%	252,936		46.9	%	13,166			5.2	%	139,720		51.2	%	133,191		48.9	%	6,529			4.9	%
Royalties and other operating income	7,084		1.3	%	7,372		1.4	%	(288		)	(3.9	)%	3,947		1.4	%	3,740		1.4	%	207			5.5	%
Operating income	$	66,361	11.9	%	$	70,696	13.1	%	$	(4,335	)	(6.1	)%	$	28,373	10.4	%	$	29,959	11.0	%	$	(1,586	)	(5.3	)%
Interest expense, net	1,672		0.3	%	1,791		0.3	%	(119		)	(6.6	)%	781		0.3	%	930		0.3	%	(149		)	(16.0	)%
Earnings from continuing operations before income taxes	$	64,689	11.6	%	$	68,905	12.8	%	$	(4,216	)	(6.1	)%
Earnings before income taxes														$	27,592	10.1	%	$	29,029	10.7	%	$	(1,437	)	(5.0	)%
Income taxes	24,803		4.5	%	24,853		4.6	%	(50		)	(0.2	)%	7,025		2.6	%	11,832		4.3	%	(4,807		)	(40.6	)%
Net earnings from continuing operations	$	39,886	7.2	%	$	44,052	8.2	%	$	(4,166	)	(9.5	)%
Earnings from discontinued operations, net of taxes	—		—	%	—		—	%	—			—	%
Net earnings	$	39,886	7.2	%	$	44,052	NM		$	(4,166	)	(9.5	)%	$	20,567	7.5	%	$	17,197	6.3	%	$	3,370		19.6	%

The discussion and tables below compare certain line items included in our statements of operations for the First ~~Half~~Quarter of Fiscal ~~2017~~2018 to the First ~~Half~~Quarter of Fiscal ~~2016.~~2017. Each dollar and percentage change provided reflects the change between these fiscal periods unless indicated otherwise. Each dollar and share amount included in the tables is in thousands except for per share amounts. Individual line items of our consolidated statements of operations may not be directly comparable to those of our competitors, as classification of certain expenses may vary by company. Unless otherwise indicated, all references to assets, liabilities, revenues, expenses or other information in this report reflect continuing ~~operations and exclude any amounts related to the discontinued operations of our former Ben Sherman operating group.~~operations.

Net Sales


	First Half Fiscal 2017		First Half Fiscal 2016		$ Change			% Change		First Quarter Fiscal 2018		First Quarter Fiscal 2017		$ Change			% Change
Tommy Bahama	$	360,076	$	346,830	$	13,246		3.8	%	$	167,132	$	172,496	$	(5,364	)	(3.1	)%
Lilly Pulitzer	132,801		134,458		(1,657		)	(1.2	)%	68,627		63,343		5,284			8.3	%
Lanier Apparel	41,204		46,152		(4,948		)	(10.7	)%	19,909		23,356		(3,447		)	(14.8	)%
Southern Tide	22,037		10,580		11,457			108.3	%	13,472		12,642		830			6.6	%
Corporate and Other	954		1,211		(257		)	NM		3,488		526		2,962			NM
Total net sales	$	557,072	$	539,231	$	17,841		3.3	%	$	272,628	$	272,363	$	265		0.1	%

Consolidated net sales increased ~~$17.8~~$0.3 million, or ~~3.3%~~0.1%, in the First ~~Half~~Quarter of Fiscal ~~2017~~2018 compared to the First ~~Half~~Quarter of Fiscal ~~2016.~~2017. The increase in consolidated net sales ~~was primarily driven by~~includes (1) a $7 million increase in direct to consumer sales at comparable stores resulting from the calendar shift in Fiscal 2018, (2) an incremental net sales increase of ~~$11.9~~$7 million associated with the operation of non-comp full-price retail stores in Lilly Pulitzer and Tommy Bahama as well as the ~~Southern Tide~~operation of an e-commerce ~~operations,~~website by The Beaufort Bonnet Company, which we refer to as TBBC,which is a business we acquired in ~~April 2016, (2)~~the Fourth Quarter of Fiscal 2017, (3) a ~~$3.7~~$2 million increase in restaurant sales in Tommy Bahama ~~(3)~~and (4) a ~~$3.4~~$1 million, or 1%, ~~increase in~~calendar-adjusted comparable store sales increase from $120 million in the 13-week period ended May 6, 2017 to ~~$246.3~~$122 million in the First ~~Half~~Quarter of Fiscal ~~2017 from $242.8~~2018, driven by positive e-commerce comparable store sales in both Tommy Bahama and Lilly Pulitzer. These increases in consolidated net sales were partially offset by (1) a $15 million ~~in the First Half of Fiscal 2016 and (4) a net $2.7 million aggregate increase~~decrease in wholesale sales, consisting of ~~higher sales~~decreases in ~~Southern Tide, which we acquired in April 2016, and~~ Tommy Bahama, ~~partially offset by declines in our~~ Lilly Pulitzer and Lanier Apparel, ~~businesses. These increases were partially offset by~~and (2) a ~~$3.9~~$2 million decrease in net sales through our off-price direct to consumer clearance ~~channels.~~

~~We believe that certain macroeconomic factors, including lower retail~~channels in Tommy Bahama. By way of comparison, on a fiscal period basis, consolidated comparable store ~~traffic and~~sales increased 8% in the ~~evolving impact~~First Quarter of ~~digital technology on consumer shopping habits, continue~~Fiscal 2018 relative to ~~impact~~ the ~~sales in each~~First Quarter of ~~our direct to consumer and wholesale businesses.~~Fiscal 2017. The changes in net sales by operating group are discussed below.

The following table presents the proportion of our consolidated net sales by distribution channel for each period presented:

Table of Contents


	First Half Fiscal 2017		First Half Fiscal 2016		First Quarter Fiscal 2018		First Quarter Fiscal 2017
Full-price retail stores and outlets	41	%	42	%	40	%	38	%
E-commerce	17	%	16	%	16	%	13	%
Restaurant	8	%	7	%	9	%	9	%
Wholesale	34	%	35	%	35	%	40	%
Total	100	%	100	%	100	%	100	%

Tommy Bahama:

The Tommy Bahama net sales ~~increase~~decrease of ~~$13.2~~$5 million, or ~~3.8%~~3.1%, was primarily driven by (1) a ~~$7.9~~$9 million or 5%, increase in comparable store sales to $178.8 million in the First Half of Fiscal 2017 from $170.9 million in the First Half of Fiscal 2016, (2) a $3.7 million increase in restaurant sales reflecting increased sales at existing restaurants as well as sales from a new Marlin Bar location, (3) an incremental net sales increase of $3.5 million associated with the operation of non-comp full-price retail stores and (4) a $2.0 million increasedecrease in wholesale sales, ~~reflecting higher off-price sales, as Tommy Bahama sold some excess prior season inventory, and lower~~including decreases in full-price wholesale sales as Tommy Bahama continues to manage its exposure to department ~~stores.~~stores by reducing department store door count and off-price wholesale sales as Tommy Bahama disposed of a more significant amount of aged inventory in the First Quarter of Fiscal 2017, (2) a $2 million decrease in off-price direct to consumer sales, reflecting lower sales in outlet stores including decreases in existing stores and the closure of certain outlet stores, (3) a $1 million, or 1%, decrease in calendar-adjusted comparable store sales from $85 million in the 13-week period ended May 6, 2017 to $84 million in the First Quarter of Fiscal 2018, reflecting the impact of a cool, wet spring in much of the United States, which offset the positive e-commerce comparable store sales, and (4) a $1 million decrease in non-comp full-price retail stores due to certain retail store closures in the twelve months ended May 5, 2018. These ~~increases~~decreases were partially offset by ~~$3.9~~(1) a $5 million ~~of lower sales~~increase in ~~our off-price~~ direct to consumer ~~clearance channel, primarily~~sales at comparable stores resulting from the ~~absence of any e-commerce flash clearance~~calendar shift in Fiscal 2018 and (2) a $2 million increase in restaurant sales resulting from increased sales at existing restaurants as well as sales at a new restaurant location in Plano, Texas which opened in the ~~Second~~Third Quarter of Fiscal 2017. ~~Tommy Bahama's direct to consumer sales benefited from (1)~~By way of comparison, on a ~~132 page Spring 2017 catalog, which presented the wide breadth of~~fiscal period basis, Tommy Bahama ~~products in one place, (2)~~comparable store sales increased ~~sales from its semiannual Friends & Family event held during the first quarter of each year, (3) increased sales from Tommy Bahama's loyalty award card and Flip Side events held~~5% in the ~~second quarter of each year and (4) Tommy Bahama taking initial markdowns on select items at the end of the selling season in our retail stores and on our e-commerce website in the Second~~First Quarter of Fiscal ~~2017, which was new in~~2018 relative to the First Quarter of Fiscal 2017.


	First Half Fiscal 2017		First Half Fiscal 2016		First Quarter Fiscal 2018		First Quarter Fiscal 2017
Full-price retail stores and outlets	49	%	50	%	46	%	46	%
E-commerce	16	%	15	%	15	%	12	%
Restaurant	12	%	12	%	15	%	14	%
Wholesale	23	%	23	%	24	%	28	%
Total	100	%	100	%	100	%	100	%

Lilly Pulitzer:

The Lilly Pulitzer net sales ~~decrease~~increase of ~~$1.7~~$5 million, or ~~1.2%~~8.3%, was primarily a result of (1) a $4.5 million, or 6%, decrease in comparable store sales to $67.5 million in the First Half of Fiscal 2017 compared to $72.0 million in the First Half of Fiscal 2016, with negative retail comparable store sales offsetting positive e-commerce comparable store sales and (2) a $4.1 million decrease in wholesale sales resulting from lower wholesale sales. These sales decreases were partially offset by an incremental net sales increase of ~~$7.0~~$5 million associated with the operation of ~~additional~~non-comp full-price retail ~~stores. The decrease~~stores, including stores opened by Lilly Pulitzer and the 12 Signature Stores acquired in Fiscal 2017, (2) a $3 million increase in direct to consumer sales at comparable stores resulting from the calendar shift in Fiscal 2018 and (3) a $2 million, or 7%, increase in calendar-adjusted comparable store sales ~~reflects reduced~~from $34 million in the 13-week period ended May 6, 2017 to $36 million in the First Quarter of Fiscal 2018, with increases in both e-commerce and retail store ~~traffic. The lower~~comparable store sales. These increases were partially offset by a $5 million decrease in wholesale sales, ~~were primarily a result of lower sales to department stores as~~reflecting Lilly ~~Pulitzer continues~~Pulitzer's efforts to manage its exposure to department ~~stores.~~

~~As of July 29, 2017, we operated 50 Lilly Pulitzer retail~~ stores ~~compared to 37 retail stores as of July 30, 2016. During~~and the First Half of Fiscal 2017, we added 10 new Lilly Pulitzer store locations, which consisted of five new Lilly Pulitzer stores that were opened and five Lilly Pulitzer Signature Stores we acquired in July 2017. Also, in the Third Quarter of Fiscal ~~2017, we~~2018 not including any wholesale sales to the Signature Stores acquired ~~an additional seven~~in Fiscal 2017. By way of ~~our~~comparison, on a fiscal period basis, Lilly Pulitzer ~~Signature Stores.~~

comparable store sales increased 16% in the First Quarter of Fiscal 2018 relative to the First Quarter of Fiscal 2017. The following table presents the proportion of net sales by distribution channel for Lilly Pulitzer for each period presented:



	First Quarter Fiscal 2018		First Quarter Fiscal 2017
Full-price retail stores	44	%	37	%
E-commerce	24	%	20	%
Wholesale	32	%	43	%
Total	100	%	100	%

Table of Contents

First Half Fiscal 2017 First Half Fiscal 2016
Full-price retail stores 40 % 38 %
E-commerce 23 % 22 %
Wholesale 37 % 40 %
Total 100 % 100 %

Lanier Apparel:

The decrease in net sales for Lanier Apparel of ~~$4.9~~$3 million, or ~~10.7%~~14.8%, was due to ~~lower~~decreased sales in ~~our branded and private label businesses. The sales decrease resulted~~various programs resulting from lower ~~sales in certain replenishment and seasonal programs including reductions in~~ volume and the exit from ~~various programs.~~certain programs and customers, including the impact of a customer who filed for bankruptcy. These ~~reductions in~~ sales ~~in certain programs~~reductions were partially offset by higher sales in other programs, including initial shipments for certain programs. We anticipate that the full year Fiscal 2017 sales will modestly exceed the full year Fiscal 2016 sales of $101 million as our Lanier Apparel sales are expected to be more heavily weighted towards the third quarter during Fiscal 2017 compared to Fiscal 2016.

Southern Tide:

The increase in net sales ~~of $11.5 million, or 108.3%,~~ for Southern Tide ~~in the First Half~~ of ~~Fiscal 2017~~$1 million, or 6.6%, was ~~primarily~~ due to the First Half of Fiscal 2017 including a full six months of operations, while the First Half of Fiscal 2016 only included the operations from the date of our acquisition on April 19, 2016 through July 30, 2016. We estimate that Southern Tide's net sales for Fiscal 2017 will be in excess of $40 million, with approximately 80% of the sales consisting ofincreased wholesale sales, primarily driven by initial sales to recently opened Signature Stores, and ~~the remainder consisting of~~higher e-commerce ~~sales on the Southern Tide website.~~sales. The following table presents the proportion of net sales by distribution channel for Southern Tide for each period presented:


	First Half Fiscal 2017		First Half Fiscal 2016		First Quarter Fiscal 2018		First Quarter Fiscal 2017
E-commerce	17	%	21	%	12	%	12	%
Wholesale	83	%	79	%	88	%	88	%
Total	100	%	100	%	100	%	100	%

Corporate and Other:

Corporate and Other net sales primarily consist of the net sales of TBBC, which include e-commerce and wholesale operations, and our Lyons, Georgia distribution center operations. The increase in net sales was primarily due to ~~third party warehouse customers as well as~~ the ~~impact~~December 2017 acquisition of ~~the elimination of any intercompany sales between our operating groups.~~TBBC.

Gross Profit

The table below presents gross profit by operating group and in total for the First ~~Half~~Quarter of Fiscal ~~2017~~2018 and the First ~~Half~~Quarter of Fiscal ~~2016,~~2017, as well as the change between those two periods. Our gross profit and gross margin, which is calculated as gross profit divided by net sales, may not be directly comparable to those of our competitors, as the statement of operations classification of certain expenses may vary by company.


	First Half Fiscal 2017			First Half Fiscal 2016			$ Change			% Change		First Quarter Fiscal 2018		First Quarter Fiscal 2017			$ Change			% Change
Tommy Bahama	$	215,149		$	206,984		$	8,165		3.9	%	$	104,290	$	105,157		$	(867	)	(0.8	)%
Lilly Pulitzer	88,766			89,139			(373		)	(0.4	)%	45,505		42,137			3,368			8.0	%
Lanier Apparel	13,163			13,689			(526		)	(3.8	)%	5,968		7,013			(1,045		)	(14.9	)%
Southern Tide	10,965			4,340			6,625			152.6	%	6,737		6,497			240			3.7	%
Corporate and Other	(2,664		)	2,108			(4,772		)	NM		1,646		(1,394		)	3,040			NM
Total gross profit	$	325,379		$	316,260		$	9,119		2.9	%	$	164,146	$	159,410		$	4,736		3.0	%
LIFO charge (credit) included in Corporate and Other	$	3,272		$	(1,253	)
Inventory step-up charge included in Southern Tide	$	—		$	1,129
LIFO charge included in Corporate and Other												$	287	$	1,707
Inventory step-up charges for TBBC included in Corporate and Other												$	157	$	—

~~Table of Contents~~

The increase in consolidated gross profit was ~~primarily~~ due to a higher ~~net~~gross margin primarily resulting from a change in sales ~~as discussed above, partially offset by~~mix with direct to consumer sales representing a greater proportion of sales in the First Quarter of Fiscal 2018 and the net ~~unfavorable~~favorable impact of LIFO accounting. Changes in gross margin by operating group are discussed below. The table below presents gross margin by operating group and in total for the First ~~Half~~Quarter of Fiscal ~~2017~~2018 and the First ~~Half~~Quarter of Fiscal ~~2016.~~2017.

Table of Contents


	First Half Fiscal 2017		First Half Fiscal 2016		First Quarter Fiscal 2018		First Quarter Fiscal 2017
Tommy Bahama	59.8	%	59.7	%	62.4	%	61.0	%
Lilly Pulitzer	66.8	%	66.3	%	66.3	%	66.5	%
Lanier Apparel	31.9	%	29.7	%	30.0	%	30.0	%
Southern Tide	49.8	%	41.0	%	50.0	%	51.4	%
Corporate and Other	NM		NM		NM		NM
Consolidated gross margin	58.4	%	58.7	%	60.2	%	58.5	%

On a consolidated basis, the increase in gross margin ~~decreased~~ in the First ~~Half~~Quarter of Fiscal ~~2017,~~2018 was primarily ~~as a result of~~due to (1) the ~~net impact of unfavorable LIFO accounting of $4.5 million between the First Half of Fiscal 2017 and the First Half of Fiscal 2016, which was partially offset by~~ improved gross ~~margins~~margin in Tommy Bahama, ~~Lilly Pulitzer~~(2) a change in sales mix as direct to consumer sales represented a greater proportion of sales due to the decrease in consolidated wholesale sales, and ~~Lanier Apparel and~~(3) the ~~First Half~~net favorable impact of ~~Fiscal 2016 including $1.1 million incremental cost of goods sold associated with the step-up of inventory recognized at acquisition in Southern Tide.~~LIFO accounting,

Tommy Bahama:

The ~~improved~~increase in gross margin for Tommy Bahama in the First ~~Half~~Quarter of Fiscal ~~2017~~2018 primarily resulted from (1) a change in sales mix ~~with~~as full-price direct to consumer sales ~~representing~~represented a greater proportion of sales, aswhile full-price and off-price wholesale sales and off-price direct to consumer sales ~~decreased. This was partially offset by~~represented a lower proportion of sales in the ~~gross margin impact of Tommy Bahama selling substantially all of the aged inventory which was marked down to estimated net realizable value during the Fourth~~First Quarter of Fiscal ~~2016 resulting~~2018, and (2) improved gross margins in ~~a nominal amount of gross profit. Additionally, the full-price~~our off-price direct to consumer business gross margin decreased due to (1) a greater proportion of our Tommy Bahama sales in our stores and on our e-commerce website in the First Half of Fiscal 2017 relating to our marketing events, which typically have lower gross margins than sales during non-promotional periods and (2) the impact of taking initial markdowns in the First Half of Fiscal 2017 on select items at the end of the selling season in our retail stores and on our e-commerce website .business.

Lilly Pulitzer:

The ~~increase~~decrease in gross margin for Lilly Pulitzer was ~~primarily~~ driven by lower gross margins in the direct to consumer business as more sales resulted from gift with purchase promotion events and in-store end of season sales as well as increased freight for e-commerce sales and lower gross margin in the wholesale business reflecting a greater proportion of off-price sales in the First Quarter of Fiscal 2018. These items were partially offset by a change in sales mix ~~with full-price~~as direct to consumer sales ~~representing~~represented a ~~greater~~larger proportion of Lilly Pulitzer sales in the First ~~Half~~Quarter of Fiscal ~~2017.~~2018.

Lanier Apparel:

~~The increase in gross~~Gross margin for Lanier Apparel was comparable for the First ~~Half~~Quarter of Fiscal 2018 and the First Quarter of Fiscal 2017 ~~primarily resulted from~~as the ~~favorable impact of certain customer allowance amounts related to replenishment programs and inventory markdowns compared to the First Half of Fiscal 2016 as well as a change~~unfavorable changes in sales mix ~~as branded~~towards lower gross margin programs and lower sales ~~represented a greater proportion of Lanier Apparel sales~~prices on certain existing programs were offset by the lower margin support and other allowances recognized in the First ~~Half~~Quarter of Fiscal ~~2017. Due to the favorable impact of the customer allowance amounts in~~2018 than the First ~~Half~~Quarter of Fiscal 2017, we do not consider the gross margin for Lanier Apparel for the First Half of Fiscal 2017 to be indicative of ongoing gross margin anticipated for future periods, but instead expect longer term gross margins for Lanier Apparel to be more in line with the gross margin in the First Half of Fiscal 2016.2017.

Southern Tide:

The ~~increase~~decrease in gross margin for Southern Tide in the First ~~Half~~Quarter of Fiscal ~~2017~~2018 was primarily due to the gross profit of Southern Tide for the First Half of Fiscal 2016 including $1.1 million of incremental cost of goods sold associated with the step-up of inventory recognized at acquisition. All amounts related to the step-up of inventory were recognized during Fiscal 2016. This increase inlower gross margin ~~was partially offset by a change in~~on off-price sales ~~mix~~and increased cooperative advertising and gift with wholesale sales representing a greater proportion of Southern Tide sales, primarily due to seasonality as the prior year did not include a full six months of operations and therefore included a greater proportion of e-commerce sales.purchase amounts.

Corporate and Other:

~~Table of Contents~~

The gross profit in Corporate and Other ~~in each period~~ primarily reflects (1) the gross profit of TBBC, (2) the gross profit of our Lyons, Georgia distribution center ~~operations, (2)~~for sales to third parties and (3) the impact of LIFO accounting ~~adjustments and (3) the impact of certain consolidating adjustments, including the elimination of intercompany sales between our operating groups.~~adjustments. The primary driver for the ~~lower~~improved gross profit was (1) the ~~unfavorable~~net favorable impact of ~~a $3.3 million~~ LIFO accounting ~~charge~~ in the First ~~Half~~Quarter of Fiscal 2018 compared to the First Quarter of Fiscal 2017 ~~compared to a $1.3 million LIFO accounting credit in~~and (2) the First ~~Half~~Quarter of Fiscal ~~2016.~~2018 including the gross profit of TBBC. The LIFO accounting charge in Corporate and Other in ~~the First Half of Fiscal 2017~~each period primarily reflects the sale of inventory that had been marked down to the estimated net realizable value in prior periods in an operating group, but generally reversed in Corporate and Other as part of LIFO accounting. The LIFO accounting credit in Corporate and Other in the First Half of Fiscal 2016 primarily reflects the reversal of inventory markdowns to net realizable value recognized in the operating groups during that period.

SG&A

Table of Contents

First Half Fiscal 2017 First Half Fiscal 2016 $ Change % Change
SG&A $ 266,102
$ 252,936
$ 13,166
5.2 %
SG&A as % of net sales 47.8 % 46.9 %

Amortization of intangible assets included in Tommy Bahama associated with Tommy Bahama Canada acquisition $ 743
$ 749

Amortization of intangible assets included in Southern Tide $ 144
$ 209

Transaction expenses associated with the Southern Tide acquisition included in Corporate and Other $ —
$ 762

Distribution center integration charges $ —
$ 454



	First Quarter Fiscal 2018			First Quarter Fiscal 2017			$ Change		% Change
SG&A	$	139,720		$	133,191		$	6,529	4.9	%
SG&A as % of net sales	51.2		%	48.9		%
Amortization of Tommy Bahama Canadian intangible assets	$	385		$	370
Amortization of Lilly Pulitzer Signature Store intangible assets	$	95		$	—
Amortization of Southern Tide intangible assets	$	72		$	72

The increase in SG&A was primarily due to (1) ~~$5.2~~increased advertising expense of $3 million, with much of the increased expenses focused on consumer acquisition initiatives, (2) $2 million of incremental costs in the First ~~Half~~Quarter of Fiscal ~~2016~~2018 associated with additional retail stores ~~(2) $3.9~~and restaurants and (3) $1 million of incremental SG&A ~~in the First Quarter of Fiscal 2017~~ associated with the Southern Tide business, which was acquired in April 2016, (3) a $3.4 million increase in incentive compensation, reflecting higher incentive compensation amounts in Tommy Bahama and Corporate and Other, partially offset by lower amounts in Lilly Pulitzer, (4) a $1.7 million increase in brand advertising in Tommy Bahama, including the cost of the 132 page Spring 2017 catalog, and (5) other infrastructure and employment cost increases related to expanding certain of our business operations.TBBC. These ~~increases in~~increased SG&A costs were partially offset by ~~the First Half of Fiscal 2017 not including (1) any transaction expenses associated with an acquisition after incurring $0.8~~$1 million of transaction expenses associated with the Southern Tide acquisition in the First Half of Fiscal 2016 or (2) any distribution center integration charges after incurring $0.5 million of distribution center integration charges associated with Southern Tide inventory that was relocated from a third party distribution center to our Lyons, Georgia distribution center in the First Half of Fiscal 2016.lower incentive compensation amounts.

Royalties and other operating income

First Half Fiscal 2017 First Half Fiscal 2016 $ Change % Change
Royalties and other operating income $ 7,084
$ 7,372
$ (288 ) (3.9 )%



	First Quarter Fiscal 2018		First Quarter Fiscal 2017		$ Change		% Change
Royalties and other operating income	$	3,947	$	3,740	$	207	5.5	%

Royalties and other operating income in the First ~~Half~~Quarter of Fiscal ~~2017~~2018 primarily reflects income received from third parties from the licensing of our Tommy Bahama, Lilly Pulitzer and Southern Tide brands. ~~The $0.3 million decrease in royalties and other operating income primarily resulted from decreased royalty income for Lilly Pulitzer.~~

Operating income (loss)

~~Table of Contents~~


	First Half Fiscal 2017			First Half Fiscal 2016			$ Change			% Change		First Quarter Fiscal 2018			First Quarter Fiscal 2017			$ Change			% Change
Tommy Bahama	$	37,954		$	33,896		$	4,058		12.0	%	$	14,303		$	16,038		$	(1,735	)	(10.8	)%
Lilly Pulitzer	38,669			43,434			(4,765		)	(11.0	)%	15,826			17,687			(1,861		)	(10.5	)%
Lanier Apparel	1,053			2,943			(1,890		)	(64.2	)%	362			858			(496		)	(57.8	)%
Southern Tide	2,749			47			2,702			NM		2,487			2,104			383			18.2	%
Corporate and Other	(14,064		)	(9,624		)	(4,440		)	(46.1	)%	(4,605		)	(6,728		)	2,123			31.6	%
Total operating income	$	66,361		$	70,696		$	(4,335	)	(6.1	)%	$	28,373		$	29,959		$	(1,586	)	(5.3	)%
LIFO charge (credit) included in Corporate and Other	$	3,272		$	(1,253	)
Inventory step-up charge included in Southern Tide	$	—		$	1,129
Amortization of intangible assets included in Tommy Bahama associated with Tommy Bahama Canada acquisition	$	743		$	749
Amortization of intangible assets included in Southern Tide	$	144		$	209
Transaction expenses associated with the Southern Tide acquisition included in Corporate and Other	$	—		$	762
Distribution center integration charges	$	—		$	454
LIFO charge included in Corporate and Other												$	287		$	1,707
Inventory step-up charges for TBBC included in Corporate and Other												$	157		$	—
Amortization of Tommy Bahama Canadian intangible assets												$	385		$	370
Amortization of Lilly Pulitzer Signature Store intangible assets												$	95		$	—
Amortization of Southern Tide intangible assets												$	72		$	72

The decrease in operating income in the First ~~Half~~Quarter of Fiscal ~~2017~~2018 was primarily due to ~~the~~ lower operating income in Lilly Pulitzer, Tommy Bahama and Lanier Apparel, reflecting lower wholesale sales in each of these operating groups as well as higher SG&A in Tommy Bahama and Lilly Pulitzer. These items were partially offset by improved operating results in Corporate and Other, ~~primarily due to~~including the net favorable impact of LIFO accounting, and ~~lower operating income in Lilly Pulitzer and Lanier Apparel. These items were partially offset by~~ increased operating income in ~~Tommy Bahama and~~ Southern ~~Tide, which was not owned for the full six months in the prior year.~~Tide. Changes in operating income (loss) by operating group are discussed below.

Tommy Bahama:

Table of Contents

First Half Fiscal 2017 First Half Fiscal 2016 $ Change % Change
Net sales $ 360,076
$ 346,830
$ 13,246
3.8 %
Gross margin 59.8 % 59.7 %

Operating income $ 37,954
$ 33,896
$ 4,058
12.0 %
Operating income as % of net sales 10.5 % 9.8 %

Amortization of intangible assets included in Tommy Bahama associated with Tommy Bahama Canada acquisition $ 743
$ 749



	First Quarter Fiscal 2018			First Quarter Fiscal 2017			$ Change			% Change
Net sales	$	167,132		$	172,496		$	(5,364	)	(3.1	)%
Gross margin	62.4		%	61.0		%
Operating income	$	14,303		$	16,038		$	(1,735	)	(10.8	)%
Operating income as % of net sales	8.6		%	9.3		%
Amortization of Tommy Bahama Canadian intangible assets	$	385		$	370

The ~~increase in~~lower operating income for Tommy Bahama was primarily due to ~~increased~~lower sales ~~as discussed above,~~and higher SG&A, partially offset by ~~higher SG&A.~~improved gross margins. The higher SG&A for the First ~~Half~~Quarter of Fiscal ~~2017 includes (1) a $4.3 million increase in incentive compensation amounts, (2) $2.6~~2018 was primarily due to $2 million of ~~incremental SG&A associated~~increased advertising expense, with ~~non-comp retail stores and (3) $1.7 million~~much of ~~incremental brand advertising expense. These cost increases were~~the increased expenses focused on consumer acquisition initiatives, partially offset by ~~cost reductions in corporate, retail store and wholesale operations as Tommy Bahama has focused on reducing certain employment and other operating costs.~~$1 million of lower incentive compensation amounts.

Lilly Pulitzer:


	First Half Fiscal 2017			First Half Fiscal 2016			$ Change			% Change		First Quarter Fiscal 2018			First Quarter Fiscal 2017			$ Change			% Change
Net sales	$	132,801		$	134,458		$	(1,657	)	(1.2	)%	$	68,627		$	63,343		$	5,284		8.3	%
Gross margin	66.8		%	66.3		%						66.3		%	66.5		%
Operating income	$	38,669		$	43,434		$	(4,765	)	(11.0	)%	$	15,826		$	17,687		$	(1,861	)	(10.5	)%
Operating income as % of net sales	29.1		%	32.3		%						23.1		%	27.9		%
Amortization of Lilly Pulitzer Signature Store intangible assets												$	95		$	—

The lower operating income in Lilly Pulitzer was primarily due to ~~lower net sales and increased~~higher SG&A, ~~partially offset by~~which exceeded the gross margin impact of the higher ~~gross margins.~~sales. The higher SG&A for the First ~~Half~~Quarter of Fiscal ~~2017~~2018 includes ~~$2.7~~(1) $2 million of incremental SG&A associated with the cost of operating additional retail stores, including the 12 Signature Stores acquired in Fiscal 2017, (2) $1 million of increased advertising expense and (3) SG&A increases to support the planned growth of the business, including additional employee ~~headcount, which were partially offset by lower incentive compensation amounts in the First Half of Fiscal 2017.~~headcount.

~~Table of Contents~~

Lanier Apparel:


	First Half Fiscal 2017			First Half Fiscal 2016			$ Change			% Change		First Quarter Fiscal 2018			First Quarter Fiscal 2017			$ Change			% Change
Net sales	$	41,204		$	46,152		$	(4,948	)	(10.7	)%	$	19,909		$	23,356		$	(3,447	)	(14.8	)%
Gross margin	31.9		%	29.7		%						30.0		%	30.0		%
Operating income	$	1,053		$	2,943		$	(1,890	)	(64.2	)%	$	362		$	858		$	(496	)	(57.8	)%
Operating income as % of net sales	2.6		%	6.4		%						1.8		%	3.7		%

The ~~lower~~decrease in operating income for Lanier Apparel was primarily due to ~~reduced~~the lower sales ~~and higher SG&A,~~ partially offset by ~~higher gross margins.~~lower SG&A. The SG&A ~~increase~~decrease was primarily ~~resulted from certain incremental infrastructure costs associated with the Strong Suit~~due to lower sales-related variable expenses, including royalties and ~~Duck Head businesses, which were acquired in Fiscal 2016.~~advertising.

Southern Tide:


	First Half Fiscal 2017			First Half Fiscal 2016			$ Change		% Change		First Quarter Fiscal 2018			First Quarter Fiscal 2017			$ Change		% Change
Net sales	$	22,037		$	10,580		$	11,457	108.3	%	$	13,472		$	12,642		$	830	6.6	%
Gross margin	49.8		%	41.0		%					50.0		%	51.4		%
Operating income	$	2,749		$	47		$	2,702	NM		$	2,487		$	2,104		$	383	18.2	%
Operating income as % of net sales	12.5		%	0.4		%					18.5		%	16.6		%
Inventory step-up charge included in Southern Tide	$	—		$	1,129
Amortization of intangible assets included in Southern Tide	$	144		$	209
Distribution center integration charges	$	—		$	454
Amortization of Southern Tide intangible assets											$	72		$	72

Table of Contents

The increase in operating income for Southern Tide in the First ~~Half~~Quarter of Fiscal ~~2017~~2018 was primarily due to the ~~First Half~~increased wholesale sales. Due to the seasonality of ~~Fiscal 2017 including a full six months of operations, while~~ the ~~First Half of Fiscal 2016 only included~~Southern Tide business, the ~~operations from~~first quarter is typically the ~~date of our acquisition on April 19, 2016 through July 30, 2016. Additionally,~~largest sales, operating income and operating margin quarter for the ~~First Half of Fiscal 2016 included a $1.1 million of inventory step-up charge and $0.5 million of distribution center integration charges, with no such charges in the First Half of Fiscal 2017.~~Southern Tide business.

Corporate and Other:


	First Half Fiscal 2017			First Half Fiscal 2016			$ Change			% Change		First Quarter Fiscal 2018			First Quarter Fiscal 2017			$ Change		% Change
Net sales	954			1,211			$	(257	)	NM		$	3,488		$	526		$	2,962	NM
Operating loss	(14,064		)	(9,624		)	$	(4,440	)	(46.1	)%	$	(4,605	)	$	(6,728	)	$	2,123	31.6	%
LIFO charge (credit) included in Corporate and Other	$	3,272		$	(1,253	)
Transaction expenses associated with the Southern Tide acquisition included in Corporate and Other	$	—		$	762
LIFO charge included in Corporate and Other												$	287		$	1,707
Inventory step-up charges for TBBC included in Corporate and Other												$	157		$	—

The ~~lower~~improved operating results in Corporate and Other in the First Quarter of Fiscal 2018 were primarily due to (1) the $1 million net ~~unfavorable~~favorable impact of LIFO accounting, ~~and~~ (2) ~~higher~~lower incentive compensation ~~expense amounts. These~~and other employment cost items ~~were partially offset by~~and (3) the ~~First Half~~operating income of Fiscal 2017 not including any transaction expenses associated with an acquisition after incurring $0.8 million of transaction expenses associated with the Southern Tide acquisition in the First Half of Fiscal 2016.TBBC.

Interest expense, net

First Half Fiscal 2017 First Half Fiscal 2016 $ Change % Change
Interest expense, net 1,672
1,791
$ (119 ) (6.6 )%



	First Quarter Fiscal 2018		First Quarter Fiscal 2017		$ Change			% Change
Interest expense, net	$	781	$	930	$	(149	)	(16.0	)%

Interest expense ~~for the First Half of Fiscal 2017~~ decreased ~~from the prior year~~ primarily due to ~~(1) the First Half of Fiscal 2016 including the write off of $0.3 million of deferred financing costs associated with our amendment and restatement of our revolving credit agreement and (2)~~ lower average debt outstanding during the First ~~Half~~Quarter of Fiscal ~~2017 compared to the First~~

~~Table of Contents~~

~~Half of Fiscal 2016. These items were~~2018 partially offset by higher interest rates in the First ~~Half~~Quarter of Fiscal ~~2017. Interest expense for the full year of Fiscal 2017 is expected to be $3.4 million.~~2018.

Income taxes


	First Half Fiscal 2017		First Half Fiscal 2016		$ Change			% Change		First Quarter Fiscal 2018			First Quarter Fiscal 2017			$ Change			% Change
Income taxes	24,803		24,853		$	(50	)	(0.2	)%	$	7,025		$	11,832		$	(4,807	)	(40.6	)%
Effective tax rate	38.3	%	36.1	%						25.5		%	40.8		%

Income taxes in the First Quarter of Fiscal 2018 decreased from the First Quarter of Fiscal 2017 primarily due to the impact of U.S. Tax Reform. The impact of U.S. Tax Reform results in the income tax amounts and effective tax ~~rate~~rates for Fiscal 2018 and Fiscal 2017 not being comparable. Additionally, income tax expense for the First ~~Half~~Quarter of Fiscal 2017 ~~was unfavorably impacted by~~includes the unfavorable impact of certain stock awards that vested during the quarter, while the First Quarter of Fiscal ~~2017, which had a higher grant date fair value for accounting purposes than the vesting date fair value for tax deduction purposes, which increased income tax expense by $0.8 million and offset~~2018 includes the favorable impact of our income in foreign jurisdictions that are taxed at lower rates than domestic earnings. The effective tax rate for the First Half of Fiscal 2016 was favorably impacted by (1) income in foreign jurisdictions that are taxed at lower rates than domestic earnings, (2) the utilization of certain foreign operating loss carryforward amounts and (3) certain stock awards that vested during the ~~period which had a lower grant date fair value for accounting purposes than the vesting date fair value for tax deduction purposes.~~ quarter.

Our effective tax rate for the full year of Fiscal ~~2017~~2018 is expected to ~~approach 39%~~be approximately 26%. In addition to the typical items that may result in an effective tax rate that differs from our expectations, the effective rate for Fiscal 2018 may vary from 26% as a result of adjustments to the provisional amounts recognized for U.S. Tax Reform, as discussed in Note 4. The final impact of U.S. Tax Reform may differ from our provisional amounts recognized in Fiscal 2017 due to additional regulatory guidance that may be issued, us obtaining additional information to refine our estimated tax amounts and changes in current interpretations and assumptions. Refer to Note 4 for additional information about income taxes.

Net earnings ~~from continuing operations~~

First Half Fiscal 2017 First Half Fiscal 2016
Net earnings from continuing operations $ 39,886
$ 44,052
Net earnings from continuing operations per diluted share $ 2.39
$ 2.65
Weighted average shares outstanding - diluted 16,698
16,620



	First Quarter Fiscal 2018		First Quarter Fiscal 2017
Net earnings	$	20,567	$	17,197
Net earnings per diluted share	$	1.23	$	1.03
Weighted average shares outstanding - diluted	16,769		16,695

The ~~lower~~higher net earnings ~~from continuing operations~~ per diluted share in the First ~~Half~~Quarter of Fiscal ~~2017~~2018 was primarily due to (1) the lower effective tax rate resulting from U.S. Tax Reform as discussed in Note 4, (2) the improved operating results in Corporate and Other,

Table of Contents

including the favorable impact of LIFO accounting, and (3) the increased operating income in Southern Tide. These items were partially offset by lower operating income in Lilly Pulitzer, Tommy Bahama and ~~the~~Lanier Apparel primarily due to lower wholesale sales in each of these operating groups as well as higher ~~effective tax rate~~SG&A in ~~the First Half of Fiscal 2017, as discussed above.~~Tommy Bahama and Lilly Pulitzer.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Our primary source of revenue and cash flow is through our design, sourcing, marketing and distribution of branded apparel products bearing the trademarks of our Tommy Bahama, Lilly Pulitzer and Southern Tide lifestyle brands, other owned ~~brands~~ and licensed brands, and private label apparel products. Our primary uses of cash flow include the purchase of products in the operation of our business from third party contract manufacturers outside of the United States, as well as operating expenses, including employee compensation and benefits, occupancy-related costs, marketing and advertising costs, distribution costs, other general and administrative expenses and the payment of periodic interest payments related to our financing arrangements.

Additionally, we use cash for the funding of capital expenditures, dividends and repayment of indebtedness. In the ordinary course of business, we maintain certain levels of inventory, extend credit to our wholesale customers and pay ~~certain~~our operating expenses. Thus, we require a certain amount of working capital to operate our business. If cash inflows are less than cash outflows, we have access to amounts under our U.S. Revolving Credit Agreement, subject to its terms, which is described below. We may seek to finance our future cash requirements through various methods, including cash flow from operations, borrowings under our current or additional credit facilities, sales of debt or equity securities, and cash on hand.

As of ~~July 29, 2017,~~May 5, 2018, we had ~~$6.0~~$5 million of cash and cash equivalents on hand, with ~~$37.6~~$72 million of borrowings outstanding and ~~$215.3~~$211 million of availability under our U.S. Revolving Credit Agreement. We believe our balance sheet and anticipated future positive cash flow from operating activities provide ~~us with~~ sufficient cash flow to satisfy our ongoing cash requirements ~~and~~as well as ample opportunity to continue to invest in our brands and our direct to consumer initiatives.

Key Liquidity Measures

~~Table of Contents~~



($ in thousands)	May 5, 2018			February 3, 2018			April 29, 2017			January 28, 2017
Total current assets	$	250,272		$	236,118		$	236,982		$	231,628
Total current liabilities	$	111,189		$	135,010		$	119,309		$	131,396
Working capital	$	139,083		$	101,108		$	117,673		$	100,232
Working capital ratio	2.25			1.75			1.99			1.76
Debt to total capital ratio	14		%	10		%	19		%	20		%

($ in thousands) July 29, 2017 January 28, 2017 July 30, 2016 January 30, 2016
Total current assets $ 204,493
$ 231,628
$ 225,852
$ 216,796
Total current liabilities, including liabilities related to discontinued operations $ 121,917
$ 131,396
$ 112,609
$ 128,899
Working capital $ 82,576
$ 100,232
$ 113,243
$ 87,897
Working capital ratio 1.68
1.76
2.01
1.68
Debt to total capital ratio 8 % 20 % 22 % 12 %

Our working capital ratio is calculated by dividing total current assets by total current ~~liabilities. Current~~liabilities, each including any assets decreased from July 30, 2016 to July 29, 2017 primarily due to a $14.0 million reduction in inventories. Current liabilities increased $9.3 million from July 30, 2016 to July 29, 2017 primarily due to an increase in accrued compensation of $4.7 million and a $3.4 million increase inor liabilities related to discontinued operations. Current assets increased from April 29, 2017 to May 5, 2018 primarily due to increases in prepaid expenses and inventories. Current liabilities decreased primarily due to lower accounts payable at May 5, 2018 compared to April 29, 2017. Changes in current assets and current liabilities are discussed below.

For the ratio of debt to total capital, debt is defined as short-term and long-term debt, and total capital is defined as debt plus shareholders' equity. Debt was ~~$37.6~~$72 million at ~~July~~May 5, 2018 and $93 million at April 29, 2017, ~~and $105.9 million at July 30, 2016,~~ while shareholders’ equity was ~~$409.4~~$444 million at ~~July 29, 2017~~May 5, 2018 and ~~$373.4~~$388 million at ~~July 30, 2016.~~April 29, 2017. The decrease in debt since ~~July 30, 2016~~April 29, 2017 was primarily due to ~~$128.8~~$98 million of cash flow from operations which was partially offset by ~~$43.3~~$43 million of capital expenditures, ~~and~~ the payment of ~~$18.2~~$19 million of ~~dividends.~~dividends and payments related to various acquisitions of $16 million. Shareholders' equity increased from ~~July 30, 2016,~~April 29, 2017, primarily as a result of net earnings less dividends paid. Our debt levels and ratio of debt to total capital in future periods may not be comparable to historical amounts as we continue to assess, and possibly make changes to, our capital structure. Changes in our capital structure in the future, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Balance Sheet

The following tables set forth certain information included in our consolidated balance sheets (in thousands). Below each table are explanations for any significant changes in the balances from ~~July 30, 2016~~April 29, 2017 to ~~July 29, 2017.~~May 5, 2018.

Current Assets:

Table of Contents

July 29, 2017 January 28, 2017 July 30, 2016 January 30, 2016
Cash and cash equivalents $ 5,983
$ 6,332
$ 8,192
$ 6,323
Receivables, net 59,264
58,279
61,081
59,065
Inventories, net 119,620
142,175
133,662
129,136
Prepaid expenses 19,626
24,842
22,917
22,272
Total current assets $ 204,493
$ 231,628
$ 225,852
$ 216,796



	May 5, 2018		February 3, 2018		April 29, 2017		January 28, 2017
Cash and cash equivalents	$	4,662	$	6,343	$	6,554	$	6,332
Receivables, net	81,274		67,542		79,042		58,279
Inventories, net	132,342		126,812		127,061		142,175
Prepaid expenses and other current assets	31,994		35,421		24,325		24,842
Total current assets	$	250,272	$	236,118	$	236,982	$	231,628

Cash and cash equivalents as of ~~July~~May 5, 2018 and April 29, 2017 ~~and July 30, 2016~~ represent typical cash amounts maintained on an ongoing basis in our operations, which generally ranges from $5 million to $10 million at any given time. Any excess cash is generally used to repay amounts outstanding under our U.S. Revolving Credit Agreement. The ~~decrease~~increase in receivables, net as of ~~July 29, 2017~~May 5, 2018 was primarily due to a $5 million income tax receivable as of May 5, 2018 with no meaningful income tax receivable as of April 29, 2017, as well as higher credit card receivables, with these increases partially offset by lower wholesale trade receivables resulting from the lower wholesale sales in Tommy Bahama, Lilly Pulitzer and Lanier Apparel ~~and Lilly Pulitzer as well as lower amounts of tenant improvement allowances receivable~~ in the ~~Second~~First Quarter of Fiscal 2017.

Inventories, net as of ~~July 29, 2017 decreased from July 30, 2016~~May 5, 2018 increased as a result of ~~lower inventory levels in Lanier Apparel, Southern Tide and Tommy Bahama partially offset by~~ higher inventory levels in Lilly ~~Pulitzer.~~Pulitzer and Lanier Apparel, partially offset by lower inventory levels in Tommy Bahama, Southern Tide and Corporate and Other. The ~~reduced~~higher inventory in Lilly Pulitzer reflects planned sales increases in the Second Quarter of Fiscal 2018 as well as higher retail inventories related to the increased number of Lilly Pulitzer retail stores, while the higher inventory in Lanier Apparel reflects higher anticipated sales in the Second Quarter of Fiscal 2018 and a more typical inventory level for Lanier Apparel as the prior year inventories were impacted by the transition of certain replenishment and other programs. Inventories in Tommy Bahama and Southern Tide decreased primarily due to each operating group's continuing initiatives to focus on closely managing inventory purchases, reducing on-hand inventory levels and clearing prior season inventory more quickly. The decrease in Corporate and Other was primarily due to the ~~exit from or reduction~~impact of LIFO accounting including changes in ~~volume for certain replenishment or heavy~~the amounts of inventory ~~requirement programs~~markdowns requiring reversal as well as ~~the transition from certain existing replenishment programs to new replenishment programs resulting in lower inventory levels~~an increase in the ~~short term. Southern Tide's inventory decreased primarily~~LIFO accounting reserve in the Fourth Quarter of Fiscal 2017 due to ~~Southern Tide's focus on reducing inventory levels by selling prior season inventory and reducing on hand inventory levels as well as~~ the July 30, 2016 inventory including a $2 million inventory step-up from cost to fair value at acquisition. Tommy Bahama's inventory decreased primarily due to Tommy Bahama's focus on managing inventory buys and the sale of certain prior season inventory through off-price wholesale channels and outlet stores. The increase in the Producer Price Index, partially offset by the inventory ~~in Lilly Pulitzer was primarily due to lower sales than anticipated during the First Half~~ of ~~Fiscal 2017; however, the substantial majority of incremental Spring inventory was sold~~

~~Table of Contents~~

~~during the e-commerce flash clearance sale held in August 2017.~~TBBC. We believe that inventory levels in each operating group are appropriate to support ~~the~~ anticipated sales for the ~~Third~~Second Quarter of Fiscal ~~2017.~~2018.

Prepaid expenses and other current assets as of ~~July 29, 2017 decreased from July 30, 2016~~May 5, 2018 increased as a result of ~~lower~~(1) higher prepaid ~~rent due to~~advertising associated with our 2018 advertising campaigns and the timing of ~~payment~~certain advertising payments, (2) reclassification of ~~monthly rent~~certain amounts ~~as certain August 2017 rent payments had not been paid as~~from inventory to prepaid expenses and other current assets related to estimated inventory returns, in accordance with the new revenue recognition guidance using the modified retrospective method of ~~July 29, 2017, but substantially all August 2016 rent payments had been made as of July 30, 2016.~~transition, and (3) higher other prepaid operating expenses primarily related to information technology related maintenance, services and software licenses.

Non-current Assets:


	July 29, 2017		January 28, 2017		July 30, 2016		January 30, 2016		May 5, 2018		February 3, 2018		April 29, 2017		January 28, 2017
Property and equipment, net	$	193,668	$	193,931	$	190,195	$	184,094	$	196,734	$	193,533	$	192,734	$	193,931
Intangible assets, net	174,262		175,245		186,565		143,738		178,111		178,858		174,603		175,245
Goodwill	60,059		60,015		50,911		17,223		66,577		66,703		60,002		60,015
Other non-current assets, net	24,265		24,340		23,041		20,839		25,037		24,729		24,258		24,340
Total non-current assets	$	452,254	$	453,531	$	450,712	$	365,894	$	466,459	$	463,823	$	451,597	$	453,531

Property and equipment, net as of ~~July 29, 2017~~May 5, 2018 increased ~~from July 30, 2016~~ primarily as a result of capital expenditures in the twelve months ended ~~July 29, 2017,~~May 5, 2018, partially offset by depreciation expense during the same period. The ~~decrease~~increase in intangible assets, net and ~~the increase in~~ goodwill at ~~July 29, 2017~~May 5, 2018 were primarily due to the ~~consolidated balance sheet as~~acquisitions of ~~July 30, 2016 including provisional amounts related to the First Quarter of~~certain Lilly Pulitzer Signature Stores and TBBC during Fiscal ~~2016 acquisition of Southern Tide, which were finalized in the Fourth Quarter of Fiscal 2016,~~2017, as disclosed in Note 12 to our consolidated financial statements contained in our Annual Report on Form 10-K for Fiscal ~~2016.~~2017, partially offset by the amortization of intangible assets in the twelve months ended May 5, 2018.

Liabilities:

Table of Contents

July 29, 2017 January 28, 2017 July 30, 2016 January 30, 2016
Total current liabilities $ 121,917
$ 131,396
$ 112,609
$ 128,899
Long-term debt 37,601
91,509
105,941
43,975
Other non-current liabilities 70,836
70,002
68,529
67,188
Deferred taxes 15,520
13,578
12,620
3,657
Non-current liabilities related to discontinued operations 1,507
2,544
3,469
4,571
Total liabilities $ 247,381
$ 309,029
$ 303,168
$ 248,290



	May 5, 2018		February 3, 2018		April 29, 2017		January 28, 2017
Total current liabilities	$	111,189	$	135,010	$	119,309	$	131,396
Long-term debt	72,244		45,809		93,289		91,509
Other non-current liabilities	73,588		74,029		69,370		70,002
Deferred taxes	16,045		15,269		16,183		13,578
Non-current liabilities related to discontinued operations	—		—		2,022		2,544
Total liabilities	$	273,066	$	270,117	$	300,173	$	309,029

Current liabilities as of ~~July 29, 2017 increased compared to July 30, 2016~~May 5, 2018 decreased primarily resulting from (1) lower accounts payable primarily due to the timing of payment of certain payable amounts and (2) the payment of all liabilities related to discontinued operations. These decreases were partially offset by higher (1) ~~a $4.7 million~~other accrued expenses and liabilities resulting from higher duties payable, sales taxes and estimated direct to consumer return reserves, each reflecting higher direct to consumer sales during the month ended May 5, 2018, as well as an increase in deferred rent amounts and (2) accrued compensation ~~primarily reflecting higher accrued bonus amounts in Tommy Bahama~~resulting from the timing of payment of bi-weekly employee salaries at quarter end due to the 53 week Fiscal 2017 shifting the relationship between pay periods and ~~Corporate and Other~~fiscal periods, which was partially offset by lower accrued bonus amounts in Lilly Pulitzer and (2) a $3.4 million increase in liabilities related to discontinued operations as all amounts recognized in the prior year were classified in non-current liabilities, but as of July 29, 2017 certain amounts are classified as current liabilities.incentive compensation amounts. The decrease in debt ~~since July 30, 2016~~as of May 5, 2018 was primarily due to ~~$128.8~~cash flows during the twelve months ended May 5, 2018, including $98 million of cash flow from operations which was partially offset by ~~$43.3~~cash payments of $43 million offor capital expenditures, $19 million for dividends and ~~the payment of $18.2~~$16 million ~~of dividends.~~for various acquisitions.

Other non-current liabilities increased as of ~~July 29, 2017 compared to July 30, 2016~~May 5, 2018 primarily due to increases in deferred rent liabilities, including tenant improvement allowances from ~~landlords. The increase in~~landlords, and deferred compensation liabilities. Deferred taxes ~~was~~were comparable as of May 5, 2018 and April 29, 2017 primarily due to the $12 million impact on depreciation expense timing differences ~~associated with depreciation and amortization recognized for tax and book purposes and~~resulting from a cost segregation analysis completed in Fiscal 2017, which was offset by the ~~deferred tax~~$12 million impact of the ~~restricted stock that vested in the First Quarter~~revaluation of ~~Fiscal 2017, partially offset by a Fourth Quarter of Fiscal 2016 reduction of $2 million of the provisional~~ deferred tax ~~amount associated with the Southern Tide acquisition and the deferred tax impact of a Fourth Quarter of~~amounts resulting from U.S. Tax Reform in Fiscal ~~2016 increase in lease obligations related to our discontinued operations.~~

~~Non-current~~2017. There were no liabilities related to discontinued operations, including current and non-current amounts, as of ~~July 29, 2017 decreased primarily~~May 5, 2018 as a result of ~~certain amounts as~~negotiated lease terminations in Fiscal 2017 for the remaining lease agreements, with the final satisfaction of ~~July 29, 2017 classified as current liabilities~~the liability associated with the lease obligations completed in February 2018. We do not anticipate cash flows or earnings related to the discontinued operations ~~rather than non-current liabilities~~in future periods as we have satisfied all obligations related to discontinued operations, which was partially offset by an increase in total liabilities related to discontinued operations recognized in the Fourth Quarter of Fiscal 2016. The aggregate amount included in current and non-current liabilities related to discontinued operations represents our best estimate of the future net loss anticipated with respect to certain retainedthese lease

~~Table of Contents~~

obligations; however, the ultimate loss to be recognized remains uncertain as the amount of any sub-lease income is dependent upon a variety of factors including anticipated future sublease income and market rental amounts. agreements.

Statement of Cash Flows

The following table sets forth the net cash flows, including continuing and discontinued operations, for the First ~~Half~~Quarter of Fiscal ~~2017~~2018 and First ~~Half~~Quarter of Fiscal ~~2016~~2017 (in thousands):


	First Half Fiscal 2017			First Half Fiscal 2016			First Quarter Fiscal 2018			First Quarter Fiscal 2017
Cash provided by operating activities	$	83,135		$	72,875
Cash (used in) provided by operating activities							$	(7,144	)	$	13,611
Cash used in investing activities	(19,141		)	(121,632		)	(13,140		)	(8,770		)
Cash (used in) provided by financing activities	(64,498		)	50,328
Cash provided by (used in) financing activities							18,689			(4,592		)
Net change in cash and cash equivalents	$	(504	)	$	1,571		$	(1,595	)	$	249

Cash and cash equivalents on hand were ~~$6.0~~$5 million and ~~$8.2~~$7 million at ~~July~~May 5, 2018 and April 29, 2017, ~~and July 30, 2016,~~ respectively. Changes in cash flows in the First ~~Half~~Quarter of Fiscal ~~2017~~2018 and the First ~~Half~~Quarter of Fiscal ~~2016~~2017 related to operating activities, investing activities and financing activities are discussed below.

Operating Activities:

In the First ~~Half~~Quarter of Fiscal 2018 and First Quarter of Fiscal 2017, ~~and First Half of Fiscal 2016,~~ operating activities ~~provided $83.1~~used $7 million and ~~$72.9~~provided $14 million of cash, respectively. The cash flow from operating activities for each period was primarily the result of net earnings for the relevant period adjusted, as applicable, for non-cash activities including depreciation, amortization and equity-based compensation as well as the net impact of changes in deferred taxes and our working capital accounts. In both the First ~~Half~~Quarter of Fiscal 2018 and First Quarter of Fiscal 2017, working capital account changes had ~~a favorable~~an unfavorable impact on cash flow from operations, ~~while in~~reflecting the seasonality of our working capital requirements, with the First ~~Half~~Quarter of Fiscal ~~2016,~~2018 more unfavorably impacted than the First Quarter of Fiscal 2017. In the First Quarter of Fiscal 2018, the more significant changes in working capital ~~account changes did not have~~were a ~~significant impact on~~decrease in current liabilities, an increase in receivables and an increase in inventories, which reduced

Table of Contents

cash flow from operations, partially offset by a reduction in prepaid expenses, which increased cash flow from operations. In the First ~~Half~~Quarter of Fiscal 2017, the more significant changes in working capital accounts were ~~a decrease~~an increase in ~~inventories, net and prepaid expenses, which increased cash flow from operations,~~receivables and a decrease in current liabilities, which ~~decreased cash flow from operations. During the First Half of Fiscal 2016, the more significant changes in working capital accounts were a decrease in current liabilities which decreased~~reduced cash flow from operations, ~~and~~partially offset by a decrease in inventories, which increased cash flow from operations.

Investing Activities:

During the First ~~Half~~Quarter of Fiscal 2018 and the First Quarter of Fiscal 2017, investing activities used ~~$19.1~~$13 million and $9 million, respectively, of cash. Our cash ~~while~~flow used in ~~the First Half of Fiscal 2016,~~ investing activities ~~used $121.6 million~~on an ongoing basis typically consists of ~~cash.~~our capital expenditure investments in our existing brands and acquisitions of assets and operations of new businesses. Our capital expenditures primarily consist of costs associated with information technology initiatives, including e-commerce capabilities; opening, relocating and remodeling full-price retail stores and restaurants; and facilities enhancements for distribution centers and offices. In the First ~~Half~~Quarter of Fiscal ~~2017,~~2018, we paid ~~$18.5~~$13 million for capital expenditures compared to ~~$24.6~~$9 million in the First ~~Half~~Quarter of Fiscal ~~2016.~~2017. During the First ~~Half~~Quarter of Fiscal 2018 and the First Quarter of Fiscal 2017, we paid $0.6 million for acquisitions, which were related to the acquisition of five Lilly Pulitzer Signature Stores as well as working capital settlements related to certain Fiscal 2016 acquisitions. During the First Half of Fiscal 2016, we paid $95.0 millionamounts for acquisitions, consisting of ~~the acquisition of the operations and assets of Southern Tide and the Duck Head trademark, and $2.0 million for the final~~ working capital ~~settlement~~and other related settlements associated with our ~~Ben Sherman discontinued operations.~~Fiscal 2017 and Fiscal 2016 acquisitions, respectively.

Financing Activities:

During the First ~~Half~~Quarter of Fiscal ~~2017,~~2018, financing activities ~~used $64.5~~provided $19 million of cash, while in the First ~~Half~~Quarter of Fiscal ~~2016,~~2017, financing activities ~~provided $50.3~~used $5 million of cash. In the First ~~Half~~Quarter of Fiscal 2018, we increased debt to fund our capital expenditures, working capital requirements and dividends. During the First Quarter of Fiscal 2017, we decreased debt as our cash flow from operations exceeded our capital ~~expenditures, payment of dividends~~expenditure and ~~payment of employee taxes associated with the vesting of certain restricted share awards.~~dividend payments. During the First ~~Half~~Quarter of Fiscal ~~2016, we increased debt primarily for the purpose of purchasing the Southern Tide business, funding our capital expenditures, payment of dividends~~2018 and the ~~payment of employee taxes associated with the vesting of certain restricted share awards, which in the aggregate exceeded our cash flow from operations. During both the~~ First ~~Half~~Quarter of Fiscal 2017, ~~and the First Half of Fiscal 2016,~~ we paid ~~$9.1~~$6 million and $5 million, respectively, of dividends.

We anticipate that cash flow provided by or used in financing activities in the future will be dependent upon whether our cash flow from operating activities exceeds our capital expenditures, dividend payments, acquisitions and any other investing or financing activities. Generally, we anticipate that excess cash, if any, will be used to repay debt on our U.S. Revolving Credit Agreement.

Liquidity and Capital Resources

~~Table of Contents~~

We had ~~$37.6~~$72 million outstanding as of ~~July 29, 2017~~May 5, 2018 under our $325 million Fourth Amended and Restated Credit Agreement ("U.S. Revolving Credit Agreement") compared to ~~$105.9~~$93 million of borrowings outstanding as of ~~July 30, 2016.~~April 29, 2017. The U.S. Revolving Credit Agreement generally (1) is limited to a borrowing base consisting of specified percentages of eligible categories of assets, (2) accrues variable-rate interest (weighted average borrowing rate of ~~2.8%~~3.5% as of ~~July 29, 2017)~~May 5, 2018), unused line fees and letter of credit fees based upon average unused availability or utilization, (3) requires periodic interest payments with principal due at maturity (May 2021) and (4) is secured by a first priority security interest in substantially all of the assets of Oxford Industries, Inc. and ~~substantially all of~~ its domestic subsidiaries, including accounts receivable, books and records, chattel paper, deposit accounts, equipment, certain general intangibles, inventory, investment property (including the equity interests of certain subsidiaries), negotiable collateral, life insurance policies, supporting obligations, commercial tort claims, cash and cash equivalents, eligible trademarks, proceeds and other personal property.

To the extent cash flow needs exceed cash flow provided by our operations, we will have access, subject to its terms, to our U.S. Revolving Credit Agreement to provide funding for operating activities, capital expenditures and acquisitions, if any. Our U.S. Revolving Credit Agreement is also used to establish collateral for certain insurance programs and leases and to finance trade letters of credit for product purchases, which reduce the amounts available under our line of credit when issued. As of ~~July 29, 2017, $4.6~~May 5, 2018, $5 million of letters of credit were outstanding against our U.S. Revolving Credit Agreement. After considering these limitations and the amount of eligible assets in our borrowing base, as applicable, as of ~~July 29, 2017,~~May 5, 2018, we had ~~$215.3~~$211 million in unused availability under the U.S. Revolving Credit Agreement, subject to certain limitations on borrowings.

Covenants and Other Restrictions:

The U.S. Revolving Credit Agreement is subject to a number of affirmative covenants regarding the delivery of financial information, compliance with law, maintenance of property, insurance requirements and conduct of business. Also, the U.S. Revolving Credit Agreement is subject to certain negative covenants or other restrictions including, among other things, limitations on our ability to (1) incur debt, (2) guaranty certain obligations, (3) incur liens, (4) pay dividends to shareholders, (5) repurchase shares of our common stock, (6) make investments, (7) sell assets or stock of subsidiaries, (8) acquire assets or businesses, (9) merge or consolidate with other companies or (10) prepay, retire, repurchase or redeem debt.

Table of Contents

Additionally, the U.S. Revolving Credit Agreement contains a financial covenant that applies if excess availability under the agreement for three consecutive days is less than the greater of (i) $23.5 million or (ii) 10% of availability. In such case, our fixed charge coverage ratio as defined in the U.S. Revolving Credit Agreement must not be less than 1.0 to 1.0 for the immediately preceding 12 fiscal months for which financial statements have been delivered. This financial covenant continues to apply until we have maintained excess availability under the U.S. Revolving Credit Agreement of more than the greater of (i) $23.5 million or (ii) 10% of availability for 30 consecutive days.

We believe that the affirmative covenants, negative covenants, financial covenants and other restrictions under the U.S. Revolving Credit Agreement are customary for those included in similar facilities entered into at the time we entered into the U.S. Revolving Credit Agreement. During the ~~Second~~First Quarter of Fiscal ~~2017~~2018 and as of ~~July 29, 2017,~~May 5, 2018, no financial covenant testing was required pursuant to our U.S. Revolving Credit Agreement as the minimum availability threshold was met at all times. As of ~~July 29, 2017,~~May 5, 2018, we were compliant with all covenants related to the U.S. Revolving Credit Agreement.

Other Liquidity Items:

We anticipate that we will be able to satisfy our ongoing cash requirements, which generally consist of working capital and other operating activity needs, capital expenditures, interest payments on our debt and dividends, if any, primarily from positive cash flow from operations supplemented by borrowings under our U.S. Revolving Credit Agreement. Our need for working capital is typically seasonal with the greatest requirements generally in the fall and spring of each year. Our capital needs will depend on many factors including our growth rate, the need to finance inventory levels and the success of our various products. We anticipate that at the maturity of the U.S. Revolving Credit Agreement or as otherwise deemed appropriate, we will be able to refinance the facility or obtain other financing on terms available in the market at that time. The terms of any future financing arrangements may not be as favorable as the terms of the current agreement or current market terms.

WeAlthough we have paid dividends in each quarter since we became a public company in July ~~1960. However,~~1960, we may discontinue or modify dividend payments at any time if we determine that other uses of our capital, including payment of outstanding debt, funding of acquisitions, funding of capital expenditures or repurchases of outstanding shares, may be in our best interest; if our expectations of future cash flows and future cash needs outweigh the ability to pay a dividend; or if the terms of our ~~U.S. Revolving Credit Agreement,~~credit facility, other debt instruments or applicable law limit our ability to pay dividends. We may borrow to fund dividends in the short term based on our expectation of operating cash flows in future periods subject to the terms and conditions of ~~the U.S. Revolving Credit Agreement,~~our credit facility, other debt instruments and applicable law. All cash flow from operations

~~Table of Contents~~

will not be paid out as dividends in all periods. For details about limitations on our ability to pay dividends, see the discussion of the U.S. Revolving Credit Agreement above.

Our contractual obligations as of ~~July 29, 2017~~May 5, 2018 have not changed materially from the contractual obligations outstanding at ~~January 28, 2017,~~February 3, 2018, as disclosed in our Annual Report on Form 10-K for Fiscal ~~2016~~2017 filed with the SEC, other than changes in amounts outstanding under our U.S. Revolving Credit Agreement, as discussed above.

Our anticipated capital expenditures for Fiscal ~~2017,~~2018, including the ~~$18.5~~$13 million incurred in the First ~~Half~~Quarter of Fiscal ~~2017,~~2018, are expected to ~~be approximately $50~~approach $60 million compared to ~~$49.4~~$39 million in Fiscal ~~2016.~~2017. These expenditures are expected to consist primarily of costs associated with information technology initiatives, including e-commerce ~~capabilities,~~capabilities; opening, relocating orand remodeling full-price retail stores and ~~restaurants~~restaurants; and ~~facility~~facilities enhancements. Our capital expenditure amounts in future years may increase or decrease from the amounts incurred in prior years ~~or the amount expected for Fiscal 2017~~ depending on the information technology initiatives, full-price retail store and restaurant openings, relocations and remodels and other infrastructure requirements deemed appropriate for that year to support future expansion of our businesses.

Off Balance Sheet Arrangements

We have not entered into agreements which meet the SEC’s definition of an off balance sheet financing arrangement, other than operating leases, and have made no financial commitments to or guarantees with respect to any unconsolidated subsidiaries or special purpose entities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with ~~GAAP in a consistent manner.~~GAAP. The preparation of these financial statements requires the selection and application of accounting policies. Further, the application of GAAP requires us to make estimates and judgments about future events that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. On an ongoing basis, we evaluate our ~~estimates, including those discussed below.~~estimates. We base our estimates on historical experience, current trends and

Table of Contents

various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions. We believe it is possible that other professionals, applying reasonable judgment to the same set of facts and circumstances, could develop and support a range of alternative estimated amounts. We believe that we have appropriately applied our critical accounting policies. However, in the event that inappropriate assumptions or methods were used relating to the critical accounting policies, our consolidated statements of operations could be misstated.

Our critical accounting policies and estimates are discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for Fiscal ~~2016.~~2017. There have not been any significant changes to the application of our critical accounting policies and estimates during the First ~~Half~~Quarter of Fiscal ~~2017.~~

~~Additionally, a~~2018, except for changes in our revenue recognition policy as disclosed in Note 5. A detailed summary of significant accounting policies is included in Note 1 to our consolidated financial statements contained in our Annual Report on Form 10-K for Fiscal ~~2016.~~2017.

SEASONAL ASPECTS OF OUR BUSINESS

Each of our operating groups is impacted by seasonality as the demand by specific product or style, as well as by distribution channel, may vary significantly depending on the time of year. For details of the impact of seasonality on each of our operating groups, see the business discussion for each operating group discussed in Part I, Item 1, Business in our Annual Report on Form 10-K for Fiscal ~~2016.~~ 2017.

As the timing of certain unusual or non-recurring items, economic conditions, wholesale product shipments, weather or other factors affecting ~~the business~~our operations may vary from one year to the next, we do not believe that net sales or operating income for any particular quarter or the distribution of net sales and operating income for Fiscal ~~2016~~2017 are necessarily indicative of anticipated results for ~~the full fiscal year~~Fiscal 2018 or expected distribution in future years. Our third quarter has historically been our smallest net sales and operating income quarter and that result is expected to ~~continue as we continue the expansion of our direct to consumer operations in the future.~~continue. The following table presents our percentage of net sales and

~~Table of Contents~~

operating ~~income from continuing operations~~results by quarter for Fiscal ~~2016:~~2017:


	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Net sales	25	%	28	%	22	%	25	%	25	%	26	%	22	%	27	%
Operating income (loss)	36	%	43	%	—	%	21	%
Operating income									35	%	42	%	1	%	22	%

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain interest rate, foreign currency, commodity and inflation risks as discussed in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for Fiscal ~~2016.~~2017. There have not been any significant changes in our exposure to these risks during the First ~~Half~~Quarter of Fiscal ~~2017.~~2018.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our company, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting during the ~~Second~~First Quarter of Fiscal ~~2017~~2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Table of Contents

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are a party to litigation and regulatory actions arising in the ordinary course of business. These actions may relate to trademark and other intellectual property, licensing arrangements, real estate, importing or exporting regulations, taxation, employee ~~relation~~relations matters or other topics. We are not currently a party to any litigation or regulatory action or aware of any proceedings contemplated by governmental authorities, that we believe could reasonably be expected to have a material impact on our financial position, results of operations or cash flows. However, our assessment of any litigation or other legal claims could potentially change in light of the discovery of additional factors not presently known or determinations by judges, juries, or others which are not consistent with our evaluation of the possible liability or outcome of such litigation or claims.

ITEM 1A. RISK FACTORS

Our business is subject to numerous risks. Investors should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for Fiscal ~~2016,~~2017, which could materially affect our business, financial condition or operating results. We operate in a competitive and rapidly changing business environment, and additional risks and uncertainties not presently known to us or that we currently consider immaterial may also adversely affect our business. The risks described in our Annual Report on Form 10-K for Fiscal ~~2016~~2017 are not the only risks facing our company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) During the ~~Second~~First Quarter of Fiscal ~~2017,~~2018, we did not make any unregistered sales of our equity securities.

(c) We have certain stock incentive plans as described in Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K for Fiscal ~~2016,~~2017, all of which are publicly announced plans. Under the plans, we can repurchase

~~Table of Contents~~

shares from employees to cover employee tax liabilities related to the vesting of shares of our stock. During the ~~Second~~First Quarter of Fiscal ~~2017, no~~2018, we purchased the following shares ~~were repurchased~~ pursuant to these plans.



Fiscal Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs
February (2/4/18 - 3/3/18)	—	$	—	0	0
March (3/4/18 - 4/7/18)	—	$	—	0	0
April (4/8/18 - 5/5/18)	30,186	$	78.60	0	0
Total	30,186	$	78.60	0	0

In March 2017, our Board of Directors authorized us to spend up to $50 million to repurchase shares of our stock. This authorization superseded and replaced all previous authorizations to repurchase shares of our stock and has no automatic expiration. As of ~~July 29, 2017,~~May 5, 2018, no shares of our stock had been repurchased pursuant to this authorization.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Table of Contents



3.1		Restated Articles of Incorporation of Oxford Industries, Inc.* (filed as Exhibit 3.1 to the Company's Form 10-Q for the fiscal quarter ended July 29, 2017)
3.2		Bylaws of Oxford Industries, Inc., as amended.* (filed as Exhibit 3.2 to the Company's Form 10-K for Fiscal 2017)
31.1		Section 302 Certification by Principal Executive Officer.*
31.2		Section 302 Certification by Principal Financial Officer.*
32		Section 906 Certification by Principal Executive Officer and Principal Financial Officer.*
101.INS		XBRL Instance Document*
101.SCH		XBRL Taxonomy Extension Schema Document*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB		XBRL Taxonomy Extension Label Linkbase Document*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*

		* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



~~September 1, 2017~~June 13, 2018	OXFORD INDUSTRIES, INC.
	(Registrant)

	/s/ K. Scott Grassmyer
	K. Scott Grassmyer
	Executive Vice President - Finance, Chief Financial Officer and Controller
	(Authorized Signatory)

3732