Oxford Industries - Q1 2024

Transcript

Operator (participant)

Greetings. Welcome to the Oxford Industries Inc. first quarter fiscal 2023 earnings conference call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Jevon Strasser, of Investor Relations. You may begin.

Jevon Strasser (Senior Director of Financial Reporting and Investor Relations)

Thank you. Good afternoon. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC, including the risk factors contained in our Form 10-K. We undertake no duty to update any forward-looking statements. During this call, we will be discussing certain non-GAAP financial measures.

You can find a reconciliation of non-GAAP to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website at oxfordinc.com. Now I'd like to introduce today's call participants. With me today are Tom Chubb, Chairman and CEO, and Scott Grassmyer, CFO and COO. Thank you for your attention, now I'd like to turn the call over to Tom Chubb.

Tom Chubb (Chairman and CEO)

Good afternoon. Thank you for joining us. We appreciate your interest in our company. We are pleased to be reporting a solid first quarter of fiscal 2023, which happens to be our eighth consecutive record quarter. Sales of $420 million were up 19% over the prior year, with 14% of the growth coming from the addition of Johnny Was, which we acquired last year, and 5% organic growth in our other five brands. Our adjusted EPS was $3.78 for the quarter, compared to $3.50 for the first quarter of last year.

Our trailing 12-month active customer count at quarter end was 2.6 million, which increased 9% compared to the end of the first quarter last year, while our new customer add rate on a trailing 12-month basis was 6% higher than it was at the end of the first quarter in fiscal 2022. The average annual spend with our consumers is more than $400. We believe these results are directly attributable to our North Star pillars, our objective, our strategy, our purpose, and our focus, our formula for delivering on these pillars, and our execution of that formula. As always, our objective is to maximize long-term shareholder value. Our strategy is to own a portfolio of lifestyle brands that can deliver sustained, profitable growth.

Our purpose is to evoke happiness, and our focus is to generate cash to fund organic growth in our brands, acquisition opportunities, and the return of capital to our shareholders, all while maintaining our rock-solid balance sheet. Within each of our aspirational happy lifestyle brands, the formula for delivering the sustained, profitable growth that drives long-term shareholder value is first to focus and be crystal clear on what the brand stands for, and then deliver on that brand promise through terrific products, a balanced mix of retail, e-commerce, and wholesale, designed to serve the customer where and how she wants to be served, and effective and efficient in attaining, retaining, and developing customers through a variety of communication channels. Nowhere did we execute on this formula better than in our Tommy Bahama brand, where growth in all channels of distribution delivered top-line growth of 5%.

A highlight of growth was that while both men's and women's grew, our women's business and our direct-to-consumer channels grew at a faster rate than our men's business, and for the quarter, comprised 42% of the total, as compared to 40% of the total in the first quarter of fiscal 2022. Developing our women's business in Tommy Bahama remains both a priority and a huge opportunity for us, given that the women's market is roughly double the size of the men's market. A clear indication of the strength of our Tommy Bahama brand is that we were able to expand gross margin during the quarter to 66.1% from 64.6% last year. We continued to invest in the business, in people, marketing, IT, stores and restaurants, and as a result, experienced some modest SG&A deleveraging.

Our strong gross margin performance and sales growth allowed us to expand operating margin to 23.2% for the quarter, compared to 23.1% last year. All in all, it was a very good quarter for Tommy Bahama, especially given the unseasonably cold, wet weather on the West Coast, which includes some of the brand's largest markets and the numerous macro headwinds pressuring consumer spending. We could not be more bullish about the long-term prospects for the brand, continue to invest in its future, including plans to open three Marlin Bars, one of which is in Palm Beach Gardens, scheduled to open later this month, and our first Tommy Bahama resort during late 2023. In our second-largest brand, Lilly Pulitzer, we also had a good quarter, with sales growing 6% from $92 million last year to $97 million this year.

Our direct-to-consumer channels delivered the growth, while we had a modest decline in the wholesale channel, owing, we believe, to the cautiousness of many retailers in the marketplace. We experienced some SG&A deleveraging in Lilly Pulitzer as we continue to invest in the brand, but we were able to expand gross margin during the quarter to 70.1% from 69% last year. The sales growth, combined with the expanded gross margin, allowed us to deliver a very strong 25.2% operating margin for the quarter. One of the keys to our success in Lilly Pulitzer during the quarter was a change in our customer call-to-action strategy as compared to the first quarter of last year. In April 2022, we had one of our well-known Lilly Pulitzer flash sales, comprised of Resort 2021 merchandise, marked down in the 60%-70% off range.

This year, we did not hold a flash event, and replaced that instead with a 30% off current merchandise sale online and in-store in April. The results were spectacular, as we recorded sales of about $25 million in a three-day period at a very attractive gross margin. As we move forward through the year, we will continue to evaluate the most effective ways to call our customer to action and drive continued top-line growth in a brand-appropriate manner, all while generating very healthy margins at both the gross margin and operating margin level. Johnny Was is our newest brand, having been added to the portfolio during the third quarter of 2022, and we are delighted to have it as part of our company.

Our focus this year, the first full year that Johnny Was is part of the Oxford portfolio, is on completing its integration onto our powerful platform and enhancing the foundation for sustained, profitable growth in the brand. We have completed most of the earlier stage parts of this project and are now focused primarily on leveraging our best-in-class existing Lilly Pulitzer e-commerce platform to improve the already robust Johnny Was e-commerce business, which generates about 40% of the brand's sales. To be clear, Johnny Was will continue to maintain its own website with its distinctive look and feel, while utilizing the technical functionality and features we have developed in the Lilly Pulitzer e-com platform. Our three smaller brands, Southern Tide, The Beaufort Bonnet Company, and Duck Head, comprise our Emerging Brands group. We were pleased to post 7% year-over-year sales growth in the Emerging Brands group.

Profitability during the quarter was suppressed by our continued investment in people, marketing, IT, and stores, and by the financial impact of the over-inventory position that we discussed on last quarter's conference call. We have our arms completely around the inventory situation and are working through it methodically, but it will be a drag on the margin of the Emerging Brands group during this year. The first quarter of fiscal 2023 was a very good quarter, but it is worth noting that it started in February, stronger than it finished in April. Starting in late March, the consumer became noticeably more cautious in their spending. Our traffic trends remain positive, signifying increasing affinity for and interest in our brands, but conversion rates have been lower than they were last year.

We believe this is the result of consumers being more cautious in how they spend their discretionary dollars, which in turn has led to a much more promotional marketplace than it has been in recent years at this time of year. While we are encouraged that our May sales trend was sequentially better than April, and early June business appears to be incrementally stronger, our performance second quarter-to-date is tracking below where we thought it would be when we provided our initial full year outlook in March. Based on this, along with what we now expect to be a highly promotional environment for the next few quarters, we believe it is appropriate to moderate our forecast for the year, which Scott will detail in just a moment.

While we are moderating our forecast for the year, we remain extremely bullish on our six powerful, aspirational, happy brands and on our ability to capitalize on the strength of our brands to deliver the sustained, profitable growth that drives long-term shareholder value. While year-over-year growth will be a bit lower than previously expected, it will still be a solid year in absolute terms, and cash flow, as Scott will discuss, should be exceptionally strong. Accordingly, we will continue to invest in people, marketing, IT, fulfillment capabilities, stores, and food and beverage locations to set ourselves up for continued future growth in 2024 and beyond.

We believe our North Star pillars, our formula for delivering on those pillars, our execution of that formula, and our brand leaders, an incredible team of people, will allow us in future years to grow total portfolio sales mid to upper single digits annually, while maintaining a 15% or greater operating margin. I will now turn the call over to Scott for more details on the quarter and the forecast for the balance of the year. Scott?

Scott Grassmyer (CFO and COO)

Thank you, Tom. We are pleased to report another solid quarter in sales and earnings growth. Our operating groups executed well in an uncertain macroeconomic environment during the first quarter of 2023. Both of our two largest brands, Tommy Bahama and Lilly Pulitzer, generated a mid-single digit percentage sales increase, achieved strong operating margins in excess of 20%. Consolidating net sales for the first quarter of fiscal 2023 were $420 million, which included $49 million of sales for Johnny Was, and increases in each operating group, growing 19% above last year's first quarter net sales of $353 million.

In the aggregate for Tommy Bahama, Lilly Pulitzer, and Emerging Brands, we generated growth across all our full price distribution channels, with increases of 2% in full price bricks and mortar, 20% in full price e-commerce, 4% in wholesale sales, and 4% in food and beverage sales. We did have a $7 million decrease in Lilly Pulitzer e-commerce flash sales after not anniversarying last year's Q1 flash event. Importantly, in addition to increased sales, adjusted gross margin expanded 130 basis points over last year to 65.8%, driven by higher gross margins in both Tommy Bahama and Lilly Pulitzer. We benefited from lower freight costs, where inbound freight has returned to approximately pre-pandemic levels.

We saw additional gross margin benefits from a better mix of sales, which was influenced by the addition of the higher gross margin, Johnny Was, and no e-commerce flash sales in the first quarter of 2023, as well as higher IMUs. Adjusted SG&A expenses were $200 million, compared to $157 million last year. This quarter included $28 million of SG&A associated with the Johnny Was business, which we did not own in the prior year period. There were also SG&A increases in our other businesses for employment costs, advertising costs, variable expenses, and other expenses to fuel and support anticipated future sales growth. Of note, we incurred $1 million of SG&A costs related to the ongoing replatforming of Johnny Was e-commerce website to Salesforce by utilizing the existing Lilly Pulitzer e-commerce tech stack, which is expected to be completed this summer.

The result of all this yielded $83 million of adjusted operating income, or a 20% operating margin, compared to $77 million in 2022. This increased operating income was partially offset by increased interest expense due to the borrowings associated with the acquisition of Johnny Was, and higher tax expense due to an increased tax rate compared to the prior year period. Despite the higher interest and higher taxes, we achieved year-over-year EPS growth of 8% to $3.78. I'll now move on to our balance sheet, beginning with inventory. We're in a good position to deliver on our forecast for the remainder of the year, with inventories up 32% or $60 million year-over-year on a FIFO basis, including $17 million of Johnny Was inventory.

In addition to supporting planned sales growth, inventory balances grew due to increased product costs and the addition of higher quantities of core styles that live for many seasons or even years. Looking forward, we expect year-end inventory balances to be at or below last year levels. We used our cash equivalents, and short-term investments on our balance sheet last year, as well as some borrowings under a revolving credit agreement to fund our acquisition of Johnny Was. We finished the quarter with $94 million of borrowings under a revolving credit facility, after having $119 million of borrowings at the beginning of the year.

Our $53 million of cash flow from operations, compared to $22 million in the first quarter last year, allowed us to meaningfully reduce outstanding debt by $25 million during the first quarter, while also funding $17 million of CapEx and $10 million of dividends. We expect robust cash flows for the rest of the year and anticipate repaying substantially all of our outstanding borrowings by the end of the year. I'll now spend some time on our outlook for 2023. For the full year, we expect net sales to be between $1.59 billion and $1.63 billion, growth of 13%-16% compared to sales of $1.41 billion in 2022.

The planned increase in sales in the 53-week 2023 includes the benefit of the full year of Johnny Was, as well as growth in our existing brands in the low to mid-single-digit range, which consist of full-price brick-and-mortar and e-commerce channel growth and generally flat wholesale. We anticipate much more modest gross margin expansion for the full year of 2023 than we achieved in the first quarter, which was more favorably impacted by the year-over-year freight cost reduction, as freight rates continued to decrease throughout 2022. The modest gross margin expansion will also include our expectation of a higher proportion of full-price direct-to-consumer sales, a lower proportion of wholesale sales, and the inclusion of the higher gross margin Johnny Was business for the full year in 2023.

These higher sales and modestly higher gross margins are expected to be partially offset by increased SG&A, which is expected to grow at a rate higher than sales in 2023 as we continue to invest in our business, including information technology spend and SG&A in both IT people and IT infrastructure, higher employment costs, higher advertising expenses, including more awareness-driving spend, additional brick-and-mortar locations opening in 2023, and increased depreciation expense resulting from both IT spend and brick-and-mortar locations. Considering all these, we expect that operating margin will decrease from 2022 levels to a percentage of between 14.5% and 15% of sales.

We anticipate higher interest expense at $5 million, with about half of that interest expense incurred in the first quarter, and interest expense of $1 million or less for each of the second, third, and fourth quarters as we continue to reduce our outstanding debt levels during 2023. This compares to $3 million of interest expense for the full year of 2022, when we had no debt outstanding until the third quarter. We also expect a higher effective tax rate of approximately 25%, compared to 23% in 2022, which benefited from certain favorable items, such as prior year operating loss utilizations and the reversal of some valuation allowances.

After considering these items, 2023 adjusted EPS is expected to be between $10.80 and $11.20, versus adjusted EPS of $10.88 last year, with the inclusion of a full year of operating income at Johnny Was, being offset by a lower operating income in our existing businesses as we invest in those businesses in 2023, and the incremental income tax expense and interest expense. In the second quarter of 2023, we expect sales of $415 million-$435 million, compared to sales of $363 million in the second quarter of 2022.

In the second quarter of 2023, we expect higher sales, slightly lower gross margin, SG&A deleveraging, higher interest expense, but a lower effective tax rate at approximately 24%, as we expect the tax rate in the quarter to be favorably impacted by the tax benefit associated with the vesting of certain restricted share awards late in the quarter. We expect this to result in second quarter adjusted EPS of between $3.30 and $3.50, compared to $3.61 in the second quarter of 2022. The lower year-over-year EPS expectation in the quarter is primarily driven by increased SG&A investments and interest expense, being larger than the gross profit generated from the increased sales. Expanding on the theme of 2023 being an investment year, I'd like to briefly discuss our CapEx outlook for 2023.

Capital expenditures in fiscal 2023 are expected to be approximately $90 million, compared to $47 million in fiscal 2022. As we mentioned last quarter, the planned CapEx increase includes spend associated with brick-and-mortar locations, including build-out associated with approximately 35 locations across all brands, including three new Marlin Bars and about 10 new Johnny Was locations. A number of these are relocations and remodels, which, along with a few store closures, should result in a net increase of full-price stores of about 25 by the end of the year, with these additions being more second-half weighed. The spend associated with these brick-and-mortar locations represent about one half of the planned capital expenditure amount for 2023. Additionally, we will also.

with our investments in our various technology system initiatives, including e-commerce and omni-channel capabilities, data management and analytics, customer data and insights, cybersecurity, automation, including artificial intelligence, and infrastructure. Finally, we anticipate spend associated with a multi-year project at Alliance Georgia Distribution Channel Center to enhance its direct-to-consumer throughput capabilities for our brands. We have a very positive outlook on our cash and liquidity position as well. After generating cash flow from operations of $126 million in 2022, which including a working capital increase of $85 million, we expect to increase our cash flow from operations significantly to a level in excess of $200 million in 2023.

This level of positive cash flow from operations provides ample cash flow to fund all of our planned 2023 CapEx, payment of dividends at the current rate, and the repayment of substantially all of our outstanding debt by the end of the year. Although investments will put pressure on 2023 margins, these actions set the table well for mid- to upper-single-digit top line growth and operating margins at or above 15% in 2024 and beyond. Thank you for your time today, and we'll now turn the call for questions. Shimali?

Operator (participant)

Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Edward Yruma with Piper Sandler. Please proceed with your question.

Edward Yruma (Managing Director)

Hey, good afternoon, guys. Thanks for taking the questions. I guess two for me. First, I want to link back to kind of overall inventory levels and the shape of the balance of the year. I know you said that you were going to end the year with inventory levels down year-over-year, but I guess kind of how should we think about when you kind of get them, you know, maybe more in line with sales growth? I guess, specifically, with the Emerging Brands group, is there a particular brand where the excess inventory was most pronounced? Just as a follow-up to that, in terms of the earnings estimate adjustment for the balance of the year, I know you obviously have adjusted second quarter.

How should we think about the kinds of reductions you put into place for the back half of the year? Thank you.

Tom Chubb (Chairman and CEO)

Okay, Ed, thank you for your being on the call today, and I actually think I'm going to let Scott take both of these. Other than I'll say that the, you know, the inventory level in the EBG group, and Scott will elaborate on this a little more, it was the biggest piece of it was in The Beaufort Bonnet Company. It was, you know, it was a little bit dispersed, too. As we said in the prepared remarks, we're working through it methodically. We've got our arms around it. It's just, it's going to continue to drag on profitability probably through the year.

Scott Grassmyer (CFO and COO)

Yeah. Yeah, Ed, our inventory, you know, each quarter will be, you know, closing the gap to last year, and by the end of the year, we expect to be lower. Part of it is, I think we've discussed before, we had baked in a lot of cushion in our supply chain, due to some supply chain issues. We're able to start cutting some of those weeks out, and we also are just trying to run on leaner inventory with some of our systems. It will be a good...

Inventory will be a good story this year, and our cash flow will be a good story, whereas I mentioned in the prepared remarks, you know, last year we had quite a working capital build, and this year, working capital is probably neutral or maybe even providing a little cash this year. I think it's going to speak really well for our cash flow. We, we believe by end of the year, we should be lower and are able to kind of pull some of that cushion out of the supply chain that we had to build in. As Tom mentioned, you know, some of the inventory build was Beaufort Bonnet and a little bit in Southern Tide.

We've got you know, we've done the markdowns, and we took a little bit of more markdown in Q1, but most of the markdowns were taken last year. As we liquidate those goods, they go through at, you know, zero to little margins. They do push a little pressure on both gross and operating margins as we actually ship those goods out the door.

Edward Yruma (Managing Director)

On the reduction in the back half guide or what's implied within the revised overall guidance?

Scott Grassmyer (CFO and COO)

Yeah, yeah. Overall, we've got, we've kind of reduced comps to, from more mid-single down to low single digits. It's just really what we've been seeing. As Tom mentioned, you know, April was, you know, tough month, May got a little bit better. June's getting a little bit better, but we're kind of looked at that, you know, May, June pace to date and are kind of projecting out. Hopefully, the June trend continues, and I think there's some upside. The consumer is cautious. We've definitely seen them being more cautious. We are seeing them come in our stores. They're just not converting at the same rates.

You know, I think they bought an awful lot the last 2 years, and we have added a lot of customers, which is great, and they still are into our brands. I think they've, you know, bought very robustly, you know, last year especially, and I think they're just being a little more cautious on their spend this year.

Edward Yruma (Managing Director)

Thanks so much.

Tom Chubb (Chairman and CEO)

Thank you, Ed.

Operator (participant)

Our next question comes from the line of Noah Zatzkin with KeyBanc Capital Markets. Please proceed with your question.

Noah Zatzkin (VP and Equity Research Analyst)

Hi, thanks for taking my question. Just wondering if you could provide a little bit of color on kind of the trends by brand embedded in the second quarter guidance, as well as just any color by brand on the exit rate, you know, leaving the first quarter? Then separately, was hoping you could just provide some color on Johnny Was and how they performed relative to your expectations, and just kind of any early-ish warnings there. Thank you.

Tom Chubb (Chairman and CEO)

I'll tackle a little bit of that and then turn it over to Scott, maybe to fill in sort of the details on the second quarter guide. What I would say is, if you look back at what we said, in the prepared remarks, you know, Tommy Bahama really had a very good quarter, in the first quarter. You know, all metrics up for the quarter, year-over-year growth in all channels, expanded gross margin, expanded operating margin, really good. They did suffer a bit, as we referred to, from the tough weather on the West Coast, but they were actually able to more than overcome that, in the other regions of the country.

I think in terms of just the shape of the quarter, you know, nobody was really immune from that phenomenon of it started stronger in February than it ended, the quarter. Sort of the back half of March, you really could noticeably see the consumer getting more cautious. I think that coincided and, you know, not that there aren't things that we'll look to improve on next year, but I think a lot of it had to do with what was going on externally in terms of weather, the bank failures, the highly promotional market, and all of this sort of had the consumer a little more cautious. Then, as we said, you know, April was kind of the low point.

May got a little better. June has been even better than May was so far. That's sort of the way it shaped up. I think you had asked about maybe a little more detail on where the second quarter guidance is coming from.

Scott Grassmyer (CFO and COO)

Yeah. Yeah. You know, remember, you know, last year in Q2, we comped up 14%, so we're going against a, you know, very robust comp. We have Tommy, you know, comping up a very, very, marginally. Yeah, and Lilly, on full price, probably comping down a little bit. And then our other brands, you know, kind of flattish, to last year. You know, we think in, you know, total, we'll, eke out a little bit of growth in the quarter in our existing brands. It, you know, the quarter did start slowly, but we are seeing, you know, June, you know, rebounding a little bit. Hopefully, we'll, hopefully, June will continue, and we can deliver numbers a little bit better than this.

Tom Chubb (Chairman and CEO)

Noah, I'll come back to your question about Johnny Was. As we said in the prepared remarks, this is our first full year of owning Johnny Was. We're looking at it as the baseline year, where we get the foundation firmly under Johnny Was and set it up for future growth, and we're doing all of that. As we said, we've completed most of the earlier stage, sort of more basic parts, if you will, of the integration. The big focus now that we're very excited about is utilizing the Lilly Pulitzer e-commerce platform to help power the Johnny Was website. They already have a great e-commerce business. They have a beautiful website. That will continue.

It'll only be the kind of the behind the scenes about the technology that's used and the functionality and features that that provides, and what that really is all about is increasing the shoppability of the website, making it easier for the guest to shop, for her to find things, and for her to transact with us. We think that'll provide, you know, a boost to an already very robust e-commerce business. As Scott mentioned, we're also investing in stores in Johnny Was, with about 10 new locations coming this year, which we're very excited about. In terms of just the overall business, it was a little less in the first quarter than we would have planned for it to be.

I think that they got hurt particularly hard by California, and what was going on out there. You know, dealing with probably the highest demographic customer that we have in our portfolio, I think some of the caution creeped into that part of the market a little more. You know, a little tougher conditions, but nothing that we are concerned about at all for the long term. It's a great brand with a great dedicated base of customers. The addressable market is much larger than we're currently reaching, and we're very focused on reaching the broader part of the market that's available to us there. We've got great leadership and a great team there who we love working with, and we continue to feel extremely positive about what Johnny Was...

Can do both on its own and as part of our portfolio going forward.

Noah Zatzkin (VP and Equity Research Analyst)

Thank you.

Operator (participant)

Our next question comes from the line of Dana Telsey with Telsey Group. Please proceed with your question.

Dana Telsey (CEO and Chief Research Officer)

Hi, good afternoon, everyone. As you think about the current consumer environment, I always think of wholesale as a small part of your business. When you think about the different brands, how are you positioning the product assortment as we move forward? Basics versus fashion or color or print, whatever you want to call it, core versus others in each of the businesses. Is that an opportunity for margin?

Tom Chubb (Chairman and CEO)

What I would say is I think that our wholesale business is very strong relative to our peer group. We're hanging in there. I think overall, we're going to be flattest for the year, which I think in this year, Dana, you follow all this very closely, I know. I think flat's a great number in wholesale. We do get sales readouts from the, you know, the bigger customers. We get detailed feedback on how we're doing and how we stack up against a lot of our peers, and it's really, really good. It's one of the things that we take a lot of comfort in a year that's, you know, not as strong as we would like overall. We've had a couple of just, you know, extraordinarily strong years.

While we're still gonna be up and it's still gonna be a very solid year, it's not like last year was. When we look at our total business, all channels of distribution, we look at wholesale and how well we're performing on the floor, where we're going head-to-head, you know, rounder to rounder against some of our peers, and we just look great from that perspective. In terms of the assortment and how they buy it, different retailers buy it very differently. I was just going through last week with our head of wholesale and Tommy Bahama, and we went by customer by customer, and he sort of recapped how they'd just come in and place their buys. You know, everybody's got a different job that they wanted to do on their floor.

You know, we provide a lot of partnership with them on, and the help on that. Of course, we're looking to maximize both, their margin first, because it's got to work for them, and our margin. I would say, given the strength of our performance there, I do think we can incrementally boost their margin and our margin over time. We don't totally direct that, of course. It's a partnership with them in terms of what they buy and different retailers come to us with a different idea in mind about how they want to buy it.

Dana Telsey (CEO and Chief Research Officer)

Got it. Then can you remind us the cadence of flash sales at Lilly Pulitzer? Is it at all different than prior years, or what are you looking for in terms of that cadence?

Tom Chubb (Chairman and CEO)

Well, last year we did the little flash sale in April, then we did the big one at the end of the summer and the big one in early January. We mentioned in the prepared remarks, we're gonna mix it up a little bit this year, keep the consumer surprised and delighted, as we like to say. That absolutely worked in April, where, as I mentioned last year, we did a flash sale of Resort 21 merchandise and did $7 million in one or two days, I can't remember exactly, but that was at sort of 60%, 70% off. This year, we did a 30% off of current merchandise and did $25 million in three days. Dana, you being you, I know how good you are at retail math.

When you start at the kind of IMUs we do, a 30% off sale, you can still come out with just a fantastic, great margin. We did, so we love that. As we look at the back half of the year, we're looking to, you know, to be creative about how we do it, because we think the customer really likes that. She likes being surprised and delighted. She loved the, you know, the mix up this year. It worked for us, it worked for her. I would say that, you know, you'll see more of that sort of mixing things up from us this year. Scott, I don't know if you want to add anything to that from a guidance perspective?

Scott Grassmyer (CFO and COO)

Yeah, we will. Yeah, we will mix things up, and we'll do something in Q2 with Lilly, but we haven't announced exactly what that will be. We do have baked into our projection on doing something at Lilly in Q2.

Dana Telsey (CEO and Chief Research Officer)

Thank you.

Tom Chubb (Chairman and CEO)

Thank you, Dana.

Operator (participant)

Our next question comes from the line of Paul Lejuez with Citigroup. Please proceed with your question.

Tracy Kogan (VP)

Thanks. It's Tracy Kogan filling in for Paul. First, I had a clarification on your inventory comments. I think when you were talking about your inventory by brand, you mentioned having too much of some of the emerging brands inventory. I was just wondering, at Tommy and Lilly, I'm not sure if I heard whether you feel comfortable with your inventory levels there, and where you expect those brands' inventory levels to trend for the year. I have a follow-up. Thanks.

Scott Grassmyer (CFO and COO)

Yeah, we do feel comfortable with their inventories. We think they're very appropriate. We do have a little bit more core-oriented at Tommy, so we brought a little bit of that in earlier. We as I mentioned earlier, we did have, we were bringing goods earlier, you know, for supply chain reasons, and we're starting to wean off of that, and that's helping us reduce. So we feel good about those inventories, and we think at the end of the year, we'll, you know, in total, be lower year-over-year.

Tracy Kogan (VP)

Got it. I was wondering just what your pricing strategy is for this year at each brand. I imagine you're not planning any more price increases, but just wanted to double-check on that. I was wondering what you guys think about whether, you know, your consumer is telling you maybe they're more price sensitive and showing some price resistance to prior price increases. I'm not sure, based on what you saw in 1Q versus what you're seeing quarter to date, what you think on the price resistance. Thanks.

Tom Chubb (Chairman and CEO)

First of all, Tracy, I don't think we've got a whole lot more pricing flowing through at this point. I think that's mostly in. I can't say there's no more, but I think that's mostly in. Secondly, on the price resistance, I really don't think we're seeing that. I think, you know, one thing we do is benchmark closely against our peers, and, you know, we really feel, if anything, maybe we've been a little less aggressive than some of them in the pricing. The other thing that I would say is that when we look at AUR, so the average unit retail and the average dollars per transaction, so when they're buying, those metrics are actually either flat or up, which, to me, tells me there's not any serious price resistance out there.

I think it's more about just being generally cautious about, you know, spending money. Another thing, and this was in the prepared remarks, but you might not have fully zeroed in on, is our restaurant business is actually performing really, really well. We've pushed prices in restaurants, too, as we've needed to to cover the cost increases there, and our restaurant business is really, really strong. I think it's more about they bought a lot of stuff over the last couple of years. They're being slightly more cautious and more judicious, if you will, about when they're actually pulling the credit card out. But when they do, they seem very happy to spend on our products.

Tracy Kogan (VP)

Great. Thanks very much. Good luck, guys.

Tom Chubb (Chairman and CEO)

Thank you, Tracy.

Operator (participant)

We have reached the end of the question-and-answer session. I'll now turn the call back over to Tom Chubb for closing remarks.

Tom Chubb (Chairman and CEO)

Thank you, Shimali, and thank you all for your interest in our company. We look forward to talking to you again next quarter, and I hope all of you have a great summer until then.

Operator (participant)

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.