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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.03pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.15pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.20pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+8
negatively+7
failure+5
impairment+2
litigation+2
Positive rising
successfully+2
successful+2
profitability+2
efficiencies+2
enabled+2
Risk Factors (Item 1A)
12,898 words
Item 1A. Risk Factors
The risks described below highlight some of the factors that could materially affect our operations. If any of these risks actually occurs, our business, financial condition, prospects and/or operating results may be adversely affected. These are not the only risks and uncertainties we face. Additional risks and uncertainties that we currently consider immaterial or are not presently known to us may also adversely affect our business.
Risks Related to our Industry and Macroeconomic Conditions
Our business and financial condition are heavily influenced by general economic and market conditions which are outside of our control.
We are a consumer products company and are highly dependent on consumer discretionary spending and retail traffic patterns, particularly in the United States. The demand for apparel products changes as regional, domestic and international economic conditions change and may be significantly impacted by trends in consumer confidence and discretionary consumer spending patterns. These trends may be influenced by employment levels; recessions; inflationary pressures and volatile and/or elevated interest rates; rising fuel and energy costs; tax rates; personal debt levels; savings rates; stock market and housing market volatility; shifting social ideology; about the political and economic climate, including with respect to a potential global ; uncertainty regarding rapidly evolving trade and tariff policy; and general uncertainty about the future. The factors impacting consumer confidence and discretionary consumer spending patterns are outside of our control and to predict, and, often, the apparel industry experiences longer periods of and than the general economy.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
loss+18
impairments+5
losses+4
impairment+3
renegotiations+3
Positive rising
profitability+7
benefit+6
better+2
achieve+1
excellent+1
MD&A (Item 7)
14,574 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our results of operations, cash flows, liquidity and capital resources compares Fiscal 2025 to Fiscal 2024 and should be read in conjunction with our consolidated financial statements contained in this report.
The results of operations, cash flows, liquidity and capital resources for Fiscal 2024 compared to Fiscal 2023 are not included in this report on Form 10-K. For a discussion of our results of operations, cash flows, liquidity and capital resources for Fiscal 2024 compared to Fiscal 2023 and certain other financial information related to Fiscal 2024 and Fiscal 2023, refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II. Item 7 of our 2024 Annual Report on Form 10-K, filed with the SEC on March 31, 2025, which is available on the SEC’s website at www.sec.gov and under the Investor Relations section of our website at www.oxfordinc.com.
OVERVIEW
Business Overview
We are a leading branded apparel company that designs, sources, markets and distributes products bearing the trademarks of our Tommy Bahama, Lilly Pulitzer, Johnny Was, Southern Tide, TBBC, Duck Head and Jack Rogers lifestyle brands.
Our business strategy is to create sustained profitable growth by driving excellent performance across our portfolio of businesses. We consider lifestyle brands to be those brands that have a clearly defined and targeted point of view inspired by an appealing lifestyle or attitude. Furthermore, we believe lifestyle brands that create an emotional connection can command loyalty and higher price points and create licensing . We believe the attraction of a lifestyle brand depends on creating compelling product, effectively communicating the respective lifestyle brand message and distributing products to consumers where and when they want them. We believe the principal competitive factors in the apparel industry are the reputation, value, and image of brand names; design of differentiated, or otherwise compelling product; consumer preference; price; quality; marketing; product fulfillment capabilities; and customer service. Our ability to compete in the apparel industry is dependent on our 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 , differentiated fashion products each season as well as certain core products that consumers expect from us.
In recent years, consumer confidence and discretionary spending have been impacted by uncertainty in the U.S. economic environment, including as a result of fluctuating inflation and foreign currency exchange rates, supply chain challenges and increased tariffs and trade restrictions on products imported into the United States and ongoing uncertainty regarding and evolving judicial and regulatory developments affecting U.S. trade policy, resulting in a complex and challenging retail environment. A decline in consumer confidence or change in discretionary consumer spending could reduce our sales, increase our inventory levels, result in more promotional activities and/or lower our gross margins, any or all of which may adversely affect our business and financial condition.
We operate in a highly competitive industry with significant pricing pressures and heightened customer expectations.
We operate in a highly competitive industry in which the principal competitive factors are the reputation, value and image of brand names; design of differentiated, innovative or otherwise compelling product; consumer preference; price; quality; marketing (including through rapidly shifting digital and social media vehicles); product fulfillment capabilities; and customer service. The highly competitive apparel industry is characterized by low barriers to entry, with new competition entering the marketplace regularly. There are numerous domestic and foreign apparel designers, distributors, importers, licensors and retailers. Some of these companies may be significantly larger or more diversified than us and/or have significantly greater financial resources than we do.
Competition in the apparel industry is particularly enhanced in the digital marketplace for our e-commerce businesses, where there are new entrants in the market, greater pricing pressure, rapid technological developments and heightened customer expectations and competitive pressure related to, among other things, customer engagement, digital functionality and shopping experience, delivery speed, shipping charges and return privileges. In addition, the adoption of artificial intelligence-enabled tools across the industry, including personalized marketing, artificial intelligence-driven shopping assistants, recommendation engines, dynamic pricing and demand forecasting capabilities, has further raised
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consumer expectations for relevance, personalization, speed and convenience. Competitors that are able to more effectively leverage these technologies may gainadvantages in customer acquisition, engagement and retention, and our failure to keep pace with these developments or to make the significant and ongoing investments in technology, talent and infrastructure necessary to do so could adversely affect our competitive position, reduce the visibility of our brands or limit our ability to communicate our brand messaging directly to consumers. Fast fashion, value fashion and off-price retailers, as well as the more recent declines in spending within the consumer and retail sector, have contributed to additional promotional pressure. These and other competitive factors within the apparel industry may result in reduced sales, increased costs, lower prices for our products and/or decreased margins.
Failure to anticipate and adapt to changing fashion trends and consumer preferences could harm our reputation and financial performance.
We believe that our ability to compete successfully is directly related to our proficiency in foreseeing changes and trends in fashion and consumer preference and presenting appealing products for consumers when and where they seek them. Although certain of our products carry over from season to season, the apparel industry is subject to rapidly changing fashion trends and shifting consumer expectations. There can be no assurance that we will be able to successfully evaluate and adapt our products to align with evolving trends. Additionally, the increasing shift to digital brand engagement and social media communication, as well as the attempted replication of our products by competitors, presents emerging challenges for our business. The apparel industry is also impacted by changing consumer preferences regarding spending categories generally, including shifts away from traditional consumer product spending and towards “experiential” spending. Any failure on our part to develop and market appealing products could harm the reputation and desirability of our brands and products and/or result in weakened financial performance.
Our operations and those of our suppliers, vendors and wholesale customers may be affected by changes in weather patterns, natural or man-made disasters, public health crises, war, terrorism or other catastrophes.
Our sales volume and operations and the operations of third parties on whom we rely, including our suppliers, vendors, licensees and wholesale customers, may be adversely affected by unseasonable or severe weather conditions or other climate-related events, natural or man-made disasters, hurricanes, public health crises, pandemics, war, cyberattacks terrorist attacks, including heightened security measures and responsive military actions, or other catastrophes which may cause consumers to alter their purchasing habits or result in a disruption to our operations, such as the damage to, and temporary closure of, our Tommy Bahama restaurant and retail store in Sarasota, Florida, our distribution center in Lyons, Georgia and several of our other retail stores in Florida and the Southeast due to Hurricanes Helene and Milton in 2024 and the destruction of our Tommy Bahama Marlin Bar in Lahaina, Hawaii by wildfires in 2023. Our business may also be adversely affected by instability, disruption or destruction, regardless of cause. These events may result in closures of our retail stores, restaurants, offices or distribution centers and/or declines in consumer traffic, which could have a material adverse effect on our business, results of operations or financial condition. Because of the seasonality of our business, the concentration of a significant proportion of our retail stores and wholesale customers in certain geographic regions, including a resort and/or coastal focus for most of our lifestyle brands, and the concentration of our sourcing and distribution center operations, the occurrence of such events could disproportionately impact our business, financial condition and operating results. While we maintain insurance policies intended to cover losses arising from such events, certain events or losses may not be covered by our insurance policies, we may experience increased insurance premiums or deductibles under our policies as a result of such events and there is no assurance that coverage for such events will continue to be available, including at costs or on terms acceptable to us, any or all of which could negatively impact our financial condition.
Ongoing geopolitical conflicts and related disruptions, including the ongoing war between Russia and Ukraine, the U.S.-Iran conflict and other conflicts in the Middle East have adversely affected the global economy and resulted in economic sanctions, geopolitical instability, fluctuations in the price of oil and market disruption. Although we do not have operations in the impacted regions, the geopolitical tensions related to the wars could result in broader impacts that expand into other markets, cyberattacks, increased freight costs, supply chain and logistics disruptions, including shipping disruptions in the Red Sea region, and could negatively impact consumer sentiment and discretionary spending, any of which could have a material adverse effect on our business and operations.
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Risks Related to our Business Strategy and Operations
Failure to maintain the reputation or value of our brands could harm our business operations and financial condition.
Our success depends on the reputation and value of our brand names. The value of our brands could be diminished by actions taken by us or by our licensees, wholesale customers or others who have an interest in our brands. Actions that could cause harm to our brands include failing to respond to emerging fashion trends or meet consumer quality expectations; selling products bearing our brands through distribution channels that are inconsistent with customer expectations; becoming overly promotional; or setting up consumer expectations for promotional activity for our products. In addition, social media is a critical marketing and customer acquisition and retention strategy in today’s technology-driven retail environment, and the value of our brands could be adversely affected if we do not effectively and accurately communicate our brand message through social media vehicles, including as a result of actions taken by social media influencers or endorsers promoting our products and brands. The concentration in our portfolio heightens the risks we face if one of our larger brands is adversely impacted by actions we or third parties take with respect to that brand.
The improper or detrimental actions of a licensee or wholesale customer, including a third party distributor in an international market, or for example, the operator of the Tommy Bahama Miramonte Resort & Spa, could also significantly impact the perception of our brands. While we enter into comprehensive license and similar collaborative agreements with third party licensees covering product design, product quality, brand standards, sourcing, corporate responsibility, distribution, operations, manufacturing and/or marketing requirements and approvals, there can be no guarantee our brands will not be negatively impacted through our association with products or concepts outside of our core apparel products and by the market perception of the third parties with whom we associate. In addition, we cannot always control the marketing and promotion of our products by our wholesale customers, and actions by such parties could diminish the value or reputation of one or more of our brands and have an adverse effect on our sales, gross margins and business operations.
The appeal of our brands may also depend on the perceived relevance and success of our initiatives related to corporate responsibility and our commitments to operating our business in a responsible fashion. Risks related to corporate responsibility include certain stakeholder focus on social and environmental sustainability matters, including forced labor, chemical use, energy and water use, packaging and waste, animal welfare, land use and related marketing claims. We may also be required to incur substantial costs to comply with the amalgamation of differing or conflicting state, federal or international laws or regulations or the rules of government agencies related to corporate responsibility initiatives, and any failure to comply with such requirements could result in fines or penalties or drive decisions on whether we can continue or expand our business in certain markets. We may also face pressure from certain stakeholders to voluntarily expand our disclosures, make commitments, set targets or establish additional goals and take actions to meet them, which could expose us to market, operational and execution costs or risks. The metrics we disclose may not meet stakeholder expectations and may impact our reputation and the value of our brands, and a failure to achieveprogress on our metrics on a timely basis, or at all, could adversely affect our business and financial performance.
Our inability to execute our direct to consumer strategies in response to shifts in consumer shopping behavior could adversely affect our financial results and operations.
One of our key long-term initiatives over the last several years has been to grow our branded businesses through distribution strategies that allow our consumers to access our brands whenever and wherever they choose to shop. Our ability to anticipate and transform our business in response to the manner in which consumers seek to transact business and access products requires us to introduce new retail, restaurant and other concepts in suitable locations; anticipate and implement innovations in sales and marketing technology to align with our consumers’ shopping preferences; invest in appropriate digital and other technologies; establish the infrastructure necessary to support growth; and maintain brand specific websites and mobile applications that offer the functionality and security customers expect. Successful growth of our business is also subject to our ability to deliver marketing and other strategies that successfully drive key performance indicators including new customer acquisition, customer retention, customer conversion and average order value.
For the last several years, the retail apparel market has been evolving very rapidly in ways that are disruptive to traditional fashion retailers. These changes included declines in bricks and mortar retail traffic; entry into the fashion retail space by large e-commerce retailers and others with significant financial resources and enhanced distribution capabilities; increased costs to attract and retain consumers; increased investment in technology and multi-channel distribution strategies by large, traditional bricks and mortar and big box retailers; ongoing emphasis on off-price and fast fashion channels of distribution, in particular those who offer brand label products at clearance; and increased appeal for consumers of products that incorporate sustainable materials and processes in the supply chain and/or otherwise reflect their social or
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personal values. In response, fashion retailers and competing brands have increasingly offered greatertransparency for consumers in product pricing and engaged in increased promotional activities, both online and in-store. The increasing use of artificial intelligence-enabled shopping assistants, recommendation engines and other automated consumer tools have altered how consumers discover, evaluate and purchase products online. These technologies, which may be operated by third parties such as search platforms, digital marketplaces or other technology providers, may influence product recommendations, pricing visibility and purchasing decisions in ways that favor competing brands or otherwise reduce the visibility of our brands or limit our ability to communicate our brand messaging directly to consumers.
In response to these evolving and rapidly changing trends in consumer shopping behavior, we have made and expect to continue to make significant investments in expanding our digital capabilities and technologies, including mobile technology, digital marketing and the digital customer experience, while also investing in a range of digital and traditional marketing vehicles to attract customers across channels. There is no assurance that we will realize a return on our investments in digital capabilities, be successful in continuing to produce strong results in our e-commerce businesses over the long term or that any increase we may see in net sales from our e-commerce business will not cannibalize, or be sufficient to offset any decreases in, net sales from bricks and mortar retail stores. In addition, we rely on third party services, including search engines and social media platforms, in many of our digital marketing initiatives, and we may not be able to control where and how our advertising is displayed on such platforms or how the privacy standards or other policies of third party service providers are perceived. Furthermore, costs of third party marketing services may increase substantially, and our allocation of marketing investments across digital and traditional marketing vehicles may not be effective in reaching potential customers. Any inability on our part to effectively adapt to rapidly evolving consumer behavioral trends may result in lost sales, increase our costs and/or adversely impact our results of operations, financial condition, reputation and credibility.
We may be unable to grow our business through organic growth or successfully execute our portfolio-level strategic initiatives, which could have a material adverse effect on our business, financial condition, liquidity and results of operations.
A key component of our business strategy is organic growth in our brands. Organic growth may be achieved by, among other things, increasing sales in our direct to consumer channels; selling our products in new markets; increasing our market share in existing markets; expanding the demographic appeal of our brands; expanding our margins through product cost reductions, price increases or otherwise; expanding the customer reach of our brands through new and enhanced advertising initiatives; and increasing the product offerings and concepts within our various operating segments. Successful growth of our business is also subject to our ability to implement plans for expanding and/or maintaining our existing businesses at satisfactory levels. We may not be successful in achieving suitable organic growth, and our inability to grow our business may have a material adverse effect on our business, financial condition, liquidity and results of operations.
We have been implementing strategic initiatives across our portfolio of lifestyle brands to improve operating margins, which may include controlling overhead and operating expenses and refining our marketing strategies and investments to efficiently attract customers in a crowded and constantly evolving marketplace. One component of these initiatives is a focus on improving the operating performance and long-term growth prospects of Johnny Was, including through driving retail store productivity, elevating the customer experience and enhancing marketing and merchandising tactics to drive growth across sales channels. We are also implementing certain of these measures, particularly those relating to merchandising effectiveness, within our other brands, which may magnify the risks of this initiative across our enterprise. A strategic initiative of this nature is inherently challenging and faces significant potential risks, with the current macroeconomic environment and continuing changes in consumer preferences magnifying the challenges facing our brands. We cannot provide assurances that we will successfully execute this initiative or that our strategies will achieve long-term sustainable sales and operating margin expansion. In addition, investments we make in technology, marketing, infrastructure, retail stores and restaurants, office and distribution center facilities, personnel and elsewhere may not yield the full benefits we anticipate, and sales growth may be outpaced by increases in operating costs, putting downward pressure on our operating margins and adversely affecting our results of operations.
Our business could be harmed if we fail to maintain proper inventory levels.
Many factors, such as economic conditions, fashion trends, consumer preferences, the financial condition of our wholesale customers, uncertainty regarding rapidly evolving trade and tariff policies, and weather, make it difficult to accurately forecast demand for our products. In order to meet the expected demand for our products in a cost-effective manner, we make commitments for production several months prior to our receipt of goods and almost entirely without
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firm commitments from our customers. Depending on the demand for our products, we may be unable to sell the products we have ordered or that we have in our inventory, which may result in inventory markdowns or the sale of excess inventory at discounted prices and through off-price channels. These events could significantly harm our operating results and impair the image of our brands. Conversely, if we underestimate the timing or extent of demand for our products or if we are unable to access our products when we need them, for example due to a third party manufacturer’s inability to source materials or produce goods in a timely fashion or as a result of delays in the delivery of products to us, we may experience inventory shortages, which may result in lost sales, unfilled orders and negatively impacted customer relationships. Risks resulting from delays in product delivery and availability, including diminished brand loyalty and demand for our products, may be magnified by the seasonality of our business, shifts in consumer preferences toward newness and fashion product categories and the importance to our business of direct to consumer sales, for which we do not have any advance purchase commitments.
We are subject to risks associated with leasing real estate for our retail stores and restaurants.
We lease all of our retail store and restaurant locations. Successful operation of our retail stores and restaurants depends, in part, on our ability to identify desirable, brand appropriate locations; the overall ability of the location to attract a consumer base sufficient to make sales volume profitable; our ability to negotiate satisfactory lease terms and employ qualified personnel; and our ability to timely construct and complete any build out and open the location in accordance with our plans. During Fiscal 2025, approximately 48% of our consolidated net sales were generated from our bricks and mortar locations, including retail stores and food and beverage locations, and any decline in the volume of consumer traffic at our retail stores and restaurants could have a negative impact on our sales, gross margins and results of operations. We may experience declines in consumer traffic due to economic conditions, shifts in consumer shopping preferences or technology, decreases in tourism or travel, a decline in the popularity of malls or lifestyle centers in general or at those in which we operate, the closing of anchor stores or other adjacent tenants or otherwise. Our growth may be limited if we are unable to identify new locations with consumer traffic sufficient to support a profitable sales level or the local market reception to a new retail store opening is inconsistent with our expectations.
Our retail store and restaurant leases generally represent long-term financial commitments, with substantial costs at lease inception for a location’s design, leasehold improvements, fixtures and systems installation and recurring fixed costs. On an ongoing basis, we review the financial performance of our retail and restaurant locations in order to determine whether continued operation is appropriate. Even if we determine that it is desirable to exit a particular location, we may be unable to close an underperforming location due to continuous use clauses and/or because negotiating an early termination would be cost prohibitive. Negative cash flows at underperforming stores or the closure of a retail store or restaurant could result in impairment of leasehold improvements, impairment of operating lease assets and/or other long-lived assets, severance costs, lease termination costs or the loss of working capital, which could adversely impact our business and financial results. Any closure of retail stores and/or restaurants, decision not to open new retail store and/or restaurant locations or reduced investment in retail stores and/or restaurants could adversely affect consumer perception of our brands and result in reduced sales and missed customer acquisition opportunities, negatively impacting our financial performance. In addition, as each of our leases expire and as competition and rental rates for prime retail and restaurant locations continues to accelerate, as we have experienced in recent years, we may be unable to negotiate renewals, either on commercially acceptable terms or at all, including as a result of shifts in how shopping center operators seek to merchandise the particular center’s lineup, which could force us to close retail stores and/or restaurants in desirable locations.
Furthermore, a deterioration in the financial condition of shopping center operators or developers could, for example, limit their ability to invest in improvements and lead consumers to view these locations as less desirable. In addition, if our e-commerce businesses continue to grow, they may do so in part by attracting existing customers, rather than new customers, who choose to purchase products from us online through our websites rather than from our physical stores, thereby reducing the financial performance of our bricks and mortar operations, which could have a material adverse effect on our results of operations or financial condition.
We make use of debt to finance our operations, which could expose us to risks that adversely affect our business, financial position and operating results.
Our levels of debt vary as a result of the seasonality of our business, investments in our operations, acquisitions we undertake and working capital needs. Our debt levels may increase or decrease from time to time under our existing facility or potentially under new facilities, or the terms or forms of our financing arrangements may change. Our indebtedness under the U.S. Revolving Credit Agreement, which matures in March 2028, includes certain obligations and
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limitations, including the periodic payment of principal, interest and unused line fees, maintenance of certain covenants and certain other limitations. The negative covenants in the U.S. Revolving Credit Agreement limit our ability to, among other things, incur debt, guaranty certain obligations, incur liens, pay dividends, repurchase common stock, make investments, sell assets or make acquisitions. These obligations and limitations may increase our vulnerability to adverse economic and industry conditions, place us at a competitive disadvantage compared to any competitors that may be less leveraged and limit our flexibility in carrying out our business plans and planning for, or reacting to, change.
In addition, we are subject to interest rate risk on the indebtedness under our variable rate U.S. Revolving Credit Agreement, particularly in the current macroeconomic environment, which may be further elevated by any increase in our levels of debt. An increase in the interest rate environment would require us to pay a greater amount towards interest on our borrowings.
The continued growth of our business depends on our access to sufficient funds. If the need arises in the future to finance expenditures in excess of those supported by our U.S. Revolving Credit Agreement, we may need to seek additional funding through debt or equity financing. Our ability to obtain that financing will depend on many factors, including prevailing market conditions, our financial condition and our ability to negotiate favorable terms and conditions. The terms of any such financing or our inability to secure such financing could adversely affect our ability to execute our strategies, and the negative covenants in our debt agreements, now or in the future, may increase our vulnerability to adverse economic and industry conditions and/or limit our flexibility in carrying out our business strategy and plans.
The loss of one or more of our key wholesale customers, or a significant adverse change in a customer’s financial position, could negatively impact our net sales and profitability.
We generate a material percentage of our wholesale sales, which was 18% of our net sales in Fiscal 2025, from a few key customers. Although our largest customer only represented 5% of our consolidated net sales in Fiscal 2025, the failure to increase or maintain our sales with our key customers as much as we anticipate would have a negative impact on our growth prospects and any decrease or loss of these customers’ business could result in a decrease in our net sales and operating income if we are unable to capture these sales through our direct to consumer operations or other wholesale accounts. Over the last several years, department stores and other multi-brand retailers have faced increased competition from online competitors, including AI-driven curation and discovery tools, declining sales and profitability and tightened credit markets, resulting in store closures, bankruptcies and financial restructurings, any of which, if faced by our customers, could negatively impact our net sales and profitability. For example, during Fiscal 2025, Saks Global and one other of our wholesale customers filed for bankruptcies that resulted in a significant increase in our provision for credit losses. Restructuring of our customers’ operations, continued store closures or increased direct sourcing by customers could negatively impact our net sales and profitability and result in further concentration of our wholesale business in a small number of key customers. Furthermore, continued challenges and contraction in the multi-brand and specialty store market may result in the loss of key channels for us to showcase our products and grow market awareness of our brands without significant investments in marketing or new bricks and mortar locations.
We also extend credit to most of our key wholesale customers without requiring collateral, which results in a large amount of receivables from just a few customers. A significant adverse change in a customer’s financial position or ability to satisfy its obligations to us could cause us to limit or discontinue business with that customer, in some cases after we have already made product purchase commitments for inventory; require us to assume greater credit risk relating to that customer’s receivables; or limit our ability to collect amounts related to shipments to that customer. In addition, a decision by one or more of our key wholesale customers to terminate its relationship with us or to reduce its purchases, whether motivated by competitive considerations, a change in desired product assortment, quality or style issues, financial difficulties, economic conditions or otherwise, could also adversely affect our business.
The acquisition of new businesses is inherently risky, and we cannot be certain that we will realize the anticipated benefits of any acquisition.
Growth of our business through acquisitions of lifestyle brands that fit within our business model is a component of our long-term business strategy, and integrating an acquired business, regardless of the size of the acquired operations, is a complex, time-consuming and expensive process. The integration process could create a number of challenges and adverse consequences for us associated with the integration of product lines, support functions, employees, sales teams and outsourced manufacturers; employee turnover, including key management and creative personnel of the acquired business and our existing businesses; disruption in product cycles for newly acquired product lines; maintenance of acceptable standards, controls, procedures and policies; operating a business in new geographic territories; diversion of the attention of
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our management from other areas of our business; and the impairment of relationships with customers of the acquired and existing businesses. As a result of these challenges or other factors, the benefits of an acquisition may not materialize to the extent or within the time periods anticipated.
In addition, the competitive climate for desirable acquisition candidates drives higher market multiples, and we may pay more to consummate an acquisition than the value we ultimately derive from the acquired business. Acquisitions may cause us to incur debt or make dilutive issuances of our equity securities, and may result in certain impairment or amortization charges in our statements of operations. For example, we recognized noncash impairment charges for goodwill and intangible assets of $111 million in Johnny Was in the Fourth Quarter of Fiscal 2023 and additional noncash goodwill and intangible assets impairment charges of $61 million in the aggregate in Johnny Was and Jack Rogers in the Third Quarter of Fiscal 2025. Additionally, as a result of acquisitions, we may become responsible for unexpected liabilities that we failed or were unable to discover in the course of performing due diligence, or may incur material, unrecoverable costs to evaluate and pursue an acquisition that is ultimately not consummated.
A component of our acquisition strategy in recent years has also been to acquire or make minority investments in smaller, burgeoning brands. The limited operating history, less experienced management teams and less sophisticated systems, infrastructure and relationships generally associated with such brands may heighten the risks associated with acquisitions generally. Minority investments present additional risks, including the potential disproportionatedistraction to our management team relative to the potential financial benefit; the potential for a conflict of interest; the damage to our reputation of associating with a brand which may take actions inconsistent with our values; and the financial risks associated with making an investment in an unproven business model, including the potential for impairment charges.
The divestiture or discontinuation of businesses and product lines could result in unexpected liabilities and adversely affect our financial condition, cash flows and results of operations.
From time to time, we may also divest or discontinue businesses, product lines and/or wholesale relationships that do not align with our strategy or provide the returns that we expect or desire. Such dispositions and/or discontinuations may result in unexpected liabilities, which could adversely affect our financial condition and results of operations.
Risks Related to Cybersecurity and Information Technology
Cybersecurity attacks and/or breaches of information security or privacy could disrupt our operations, cause us to incur additional expenses, expose us to litigation and/or cause us financial harm.
We collect, use, store and transmit sensitive and confidential business information and personal information of our customers, employees, suppliers and others as an ongoing part of our business operations, and we are regularly subject to attempts by attackers to gainunauthorized access to our networks, systems and data, or to obtain, change or destroy confidential information. Cybersecurity attacks continue to become increasingly sophisticated, and threat actors are continuously deploying new techniques, including through the use of AI, to attempt to penetrate our network security and misappropriate or compromise our assets or disrupt our systems. In addition, customers may use devices or software that are beyond our control environment to purchase our products, which may provide additional avenues for attackers to gain access to confidential information. Additionally, the security systems of businesses that we acquire could pose additional risks to us, such as those related to the collection, use, maintenance and disclosure of data, or present other cybersecurity vulnerabilities.
Despite our implementation of security measures, if an actual or perceived data security breach occurs, whether as a result of cybersecurity attacks, computer viruses, vandalism, ransomware, human error or otherwise, or if there are perceived vulnerabilities in our systems, the image of our brands and our reputation and credibility could be damaged, and, in some cases, our continued operations may be impaired or restricted. Ongoing and increasing costs to enhance cybersecurity protection and prevent, eliminate or mitigate vulnerabilities are significant. Although we have business continuity plans and other safeguards in place, our operations may be adversely affected by an actual or perceived data security breach. Costs to resolve any litigation or to investigate and remediate any actual or perceived breach could result in significant financial losses and expenses, as well as lost sales, and there is no assurance that our existing cyber liability insurance policies will provide coverage for all losses that may result from a data security breach or that sufficient coverage will continue to be available in the future. While we continue to evolve and modify our business continuity plans, there can be no assurance in an escalatingthreat environment that they will be effective in avoiding disruption and business impacts.
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As part of our routine operations, we also contract with third party service providers, including cloud service providers, to store, process and transmit personal information of our customers and employees. As we pursue operational efficiencies and leverage best practices across our brands, our brands may come to rely on a more concentrated group of service providers, including for critical technology systems such as our point-of-sale and e-commerce platforms. Although we may contractually require that these providers implement reasonable security measures, we cannot guarantee that a security breach will not occur at their location or within their systems. Breaches of confidential information stored or used by our third party service providers or disruptions in their systems may expose us to the same risks as a breach of our own systems, including negative publicity, potential out-of-pocket costs and adverse effects on our business and customer relationships.
In addition, the regulatory environment governing our use of individually identifiable data is complex, and compliance with new and modified state, federal and international privacy and security laws may require us to modify our operations and/or incur costs to make necessary systems changes and implement new administrative processes, which may include deploying additional personnel and protection technologies, training employees and engaging third party experts and consultants. Any failure to comply with applicable laws relating to privacy, data security or data breaches (including SEC and other disclosure and reporting requirements) could result in fines, civil litigation or damage to our reputation. In addition, because we process and transmit payment card information, we are subject to the payment card industry data security standard and card brand operating rules, which provide for a comprehensive set of rules relating to the retention and/or transmission of payment card information. If we or our third party service providers do not comply with the applicable standards, we may be subject to fines or restrictions on our ability to accept payment cards, which could have a material adverse effect on our operations.
Our use of artificial intelligence technologies presents operational, reputational, data security and legal risks that could adversely affect our business and financial performance, and any failure to effectively leverage artificial technologies in our business could negatively impact our customer engagement and competitive position.
We have incorporated, and expect to continue to incorporate, artificial intelligence (“AI”) technologies into various aspects of our business, including digital marketing, customer engagement and certain internal operational processes. The use of AI systems may increase our exposure to cybersecurity threats and may inadvertentlyexpose sensitive or confidential business information or personal information if such systems are not properly configured, monitored or secured. Furthermore, any AI technologies we adopt will be reliant on third party service providers, who may have access to our confidential information, intellectual property and personal data of our customers, employees or business partners. Although we seek to impose contractual obligations on these providers, we may have limited ability to monitor or control their operations, data handling practices, security measures or compliance with applicable laws and contractual requirements. Any failure by such third parties to adequately protect our data, comply with applicable privacy, security or intellectual property laws or deliver reliable and effective AI solutions could result in operational disruptions, regulatory investigations, litigation, reputational harm, loss of competitive advantage and significant costs.
If we are unable to effectively identify, implement and scale AI technologies, or if we fail to adapt our marketing and consumer engagement strategies to the rapidly evolving digital marketplace, including to the use of AI-powered shopping assistants and other automated search and discovery tools, our ability to attract and retain customers and drive sales through our digital channels could be negatively impacted. Additionally, our reputation and competitive position may be adversely affected if our competitors more successfully leverage AI to enhance marketing, expand digital capabilities or otherwise improve their operations. Conversely, our investments in AI technologies and related infrastructure may be significant and there can be no assurances that such investments will yield anticipated operational efficiencies, revenue growth, cost savings or other benefits.
Our operations are reliant on information technology, and any interruption or other failure could have an adverse effect on our business or results of operations.
The efficient operation of our business depends on information technology. This requires us to devote significant financial and employee resources to information technology initiatives and operations. Information systems are used in all stages of our operations and as a method of communication, both internally and with our customers, service providers and suppliers. Many of our information technology solutions are operated and/or maintained by third parties, and we rely on cloud-based solutions provided by third parties to allocate resources, manage operations and forecast, account for and report our operating results. Any issues, problems, and errors in the operation of our information systems may impact the effectiveness of our internal controls and our continued ability to timely and accurately report our financial results or successfully operate our business. Additionally, each of our operating groups uses e-commerce websites, point-of-sale
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systems, enterprise order management systems, warehouse management systems and wholesale ordering systems provided by third parties, including cloud-based solutions, to acquire, manage, sell and distribute goods. Service interruptions may occur as a result of a number of factors, including power outages, consumer traffic levels, computer viruses, sabotage, hacking or other unlawful activities by third parties, human error, disasters or failures to properly install, upgrade, integrate, protect, repair or maintain our various systems, networks and e-commerce websites. All of these events could have a material adverse effect on our financial condition and results of operations. In light of the current geopolitical environment, there are heightened risks that our information technology systems, as well as those of third parties on whom we rely in order to conduct our operations, could be compromised by threat actors.
Reliance on outdated technology or failure to upgrade our information technology systems and capabilities could impair the efficient operation of our business and our ability to compete.
Any failure to timely upgrade our technology systems and capabilities may impair our ability to market, sell and deliver products to our customers, efficiently conduct our operations, facilitate customer engagement in today’s digital marketplace and/or meet the needs of our management. We regularly evaluate upgrades or enhancements to our information systems to more efficiently and competitively operate our businesses, including periodic upgrades to digital commerce and marketing, warehouse management, guest relations, omnichannel and/or enterprise order management systems in our businesses. Digital commerce and marketing have continued to increase in importance to our business, and we have invested and will continue to invest significant capital in the digital strategies, systems, expertise and capabilities necessary for us to compete effectively in this arena. Upgrades to our systems may be expensive undertakings, may not be successful and/or could be abandoned. We may also experience difficulties during the implementation, upgrade or subsequent operation of our systems, including the risk of introducing cybersecurity vulnerabilities into our systems or the loss of certain functionality, information from our legacy systems and/or efficient interfaces with third party and continuing systems. Temporary processes or solutions, including manual operations, which may be required to be instituted in the short term could also significantly increase the risk of loss or corruption of data and information. Additionally, if such upgraded information technology systems fail to operate or are unable to support our growth, our store operations and websites could be severelydisrupted, and we could be required to make significant additional expenditures to remedy any such failure.
Risks Related to our Sourcing and Distribution Strategies
Our reliance on third party producers in foreign countries to meet our production demands exposes us to risks that could disrupt our supply chain, increase our costs and negatively impact our operations.
We source substantially all of our products from non-exclusive, third party producers located in foreign countries. Although we place a high value on long-term relationships with our suppliers, we do not have long-term supply contracts but instead conduct business on an order-by-order basis. Therefore, we compete with other companies for the production capacity of independent manufacturers. We also depend on the ability of these third party producers to secure a sufficient supply of raw materials, adequately finance the production of goods ordered and maintain sufficient manufacturing and shipping capacity, and in some cases, the products we purchase and the raw materials that are used in our products are available only from one source or a limited number of sources.
During Fiscal 2025, we shifted a meaningful portion of our production among sourcing jurisdictions in response to increased tariffs and trade restrictions, and we expect that our sourcing strategies may continue to evolve as the global trade environment remains dynamic. As we diversify the jurisdictions from which we source products, we may face increased risks associated with working with new suppliers, including challenges ensuring compliance with our product specifications, quality standards and delivery requirements. Although we monitor production in third party manufacturing locations and maintain corporate responsibility and supplier compliance programs, expanding production in new jurisdictions and onboarding new suppliers may also increase risks associated with compliance with applicable labor, human rights, environmental and other regulatory requirements. In addition, shifts in sourcing may increase competition for manufacturing capacity in jurisdictions that are perceived to be more favorable under current U.S. trade regulations, which could increase product costs and result in longer production lead times. Manufacturers in these jurisdictions may also lack sufficient infrastructure or production capacity to absorb increased industry demand as companies shift production to these markets.
Although we are making significant progress in diversifying our supply chain, certain of our products by their nature are inherently difficult to source from multiple jurisdictions. Furthermore, any tariffs, trade restrictions or other regulatory actions that apply to the origin of raw materials or fabric inputs could increase our product costs and limit our
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ability to fully realize the benefits of our sourcing diversification efforts. We cannot be certain that we will not experience operational difficulties with our manufacturers, including the reduction of available production capacity and failures to meet production deadlines. Any such difficulties may impact our ability to deliver quality products to our customers on a timely basis, increase our costs, negatively impact our customer relationships and result in lower net sales and profits.
Our operations are dependent on the global supply chain, and the impact of supply chain constraints may adversely impact our business and operating results.
Our operations in recent years have been, and may continue to be, impacted by supply chain constraints, labor shortages and raw material shortages, resulting in increased costs for raw materials, longer lead times, port congestion and increased freight costs. As a result of these factors within the global supply chain, our gross margins may be adversely impacted. We also rely on logistics providers to transport our products to our distribution centers. Delays in shipping may cause us to have to use more expensive air freight or other more costly methods to ship our products. Failure to adequately produce and timely ship our products to customers could lead to increased costs and lost sales, negatively impact our relationships with customers, and adversely impact our brand reputation.
Any disruption or failure in our primary distribution facilities may materially adversely affect our business or operations.
We rely on our primary distribution facilities in order to support our direct to consumer and wholesale operations, meet customer fulfillment expectations, manage inventory, complete sales and achieve operating efficiencies. We may have a greater risk than our peers due to the concentration of our distribution facilities, as substantially all of our products for each operating group are distributed through one or two principal distribution centers. Although we continue to enhance our enterprise order management capabilities to deliver products from other physical locations, our ability to effectively support our direct to consumer and wholesale operations, meet customer expectations, manage inventory and achieve objectives for operating efficiencies depends on the proper operation of these distribution facilities, each of which manages the receipt, storage, sorting, packing and distribution of finished goods.
If any of our primary distribution facilities were to shut down or otherwise become inoperable or inaccessible for any reason, including as a result of natural or man-made disasters, pandemics or epidemics, human error, or cybersecurity attacks or computer viruses, or if we are unable to receive or ship the goods in a distribution center, as a result of a technology failure, labor shortages or otherwise, we could experience a substantial loss of inventory, a reduction in sales, higher costs, insufficient inventory at our retail stores to meet consumer expectations and longer lead times associated with the distribution of our products. In addition, for the distribution facilities that we operate, there are substantial fixed costs associated with these large, highly automated distribution centers, and we could experience reduced operating and cost efficiencies during periods of economic weakness. Any disruption to our distribution facilities or in their efficient operation could negatively affect our operating results and our customer relationships.
In addition, initiatives to build new distribution centers or enhance existing distribution centers, or to transition operations among distribution facilities or third party service providers, may be subject to delays, cost overruns, supply chain disruptions or system integration challenges which could result in substantial expense to us, disrupt our operations and divert the attention of our management. We have substantially completed a multi-year project to build a new distribution center in the Southeastern United States that is expected to provide significant or exclusive support for all of our brands. We are currently operating in the new distribution center for one of our brands and expect to transition most of our remaining brands to the facility during the First Half of Fiscal 2026. This initiative has involved the implementation of a new automation solution and warehouse management system, and we are reliant on third party service providers for the provision, integration and maintenance of many components of these solutions. We may encounter delays or other challenges during the ramp-up of operations at the distribution center, including difficultiesachieving full functionality of new systems and equipment or integrating new technologies with the existing systems supporting our brands. Any delays, interruptions or other challenges associated with transitioning the operations of our brands to the new distribution center could disrupt our distribution operations, impair our ability to meet demand during peak selling seasons or prevent us from achieving our productivity objectives. Furthermore, if our sales fall short of the levels assumed in our projections underlying the design of the new distribution center, the facility may operate below planned capacity, which could adversely affect our ability to achieve the anticipated operating efficiencies and financial benefits of our investments.
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Fluctuations and volatility in the cost and availability of raw materials, labor and freight may materially increase our costs.
We and our third party suppliers rely on the availability of raw materials at reasonable prices. The principal fabrics used in our business are cotton, silk, linen, polyester, cellulosic fibers, leather, and other natural and man-made fibers, or blends of two or more of these materials. The prices paid for these fabrics depend on the market price for raw materials used to produce them. The cost of the materials and components that are used in our manufacturing process, such as oil-related commodity prices and other raw materials, such as dyes and chemicals, and other costs, can fluctuate. We historically have not entered into any futures contracts to hedge commodity prices. In recent years, we have experienced fluctuations in the costs of raw materials, including cotton, that impacted our production costs, and we may experience further price increases for raw materials in future years.
Employment costs represented approximately 42% of our consolidated SG&A in Fiscal 2025, and we have seen increases in the cost of labor in our retail, restaurant and distribution center operations as well as at many of our suppliers in recent years. Employment costs are affected by labor markets, as well as various federal, state and foreign laws governing matters such as minimum wage rates, overtime compensation and other requirements. In addition, in recent years, there has been significant political pressure and legislative action to increase the minimum wage rate in many of the jurisdictions in which we operate. We have also experienced fluctuations in freight costs and distribution and logistics functions and may continue to see cost and capacity pressures. Although we attempt to mitigate the effect of increases in our cost of goods sold, labor costs, occupancy costs, other operational costs and SG&A items through sourcing initiatives and by selectively increasing the prices of our products, we may be unable to fully pass on these costs to our customers, and material increases in our costs may reduce the profitability of our operations and/or adversely impact our results of operations.
Labor-related matters, including labor disputes, may adversely affect our operations.
We may be adversely affected as a result of labor disputes in our own operations or in those of third parties with whom we work. Our business depends on our ability to source and distribute products in a timely manner, and our new retail store and restaurant growth is dependent on timely construction of our locations. While we are not subject to any organized labor agreements and have historically enjoyedgood employee relations, there can be no assurance that we will not experience work stoppages or other labor problems in the future with our employees. In addition, potential labor disputes at independent factories where our goods are produced, shipping ports or transportation carriers create risks for our business, particularly if a dispute results in work slowdowns, lockouts, strikes or other disruptions during our peak manufacturing, shipping and selling seasons. Further, we plan our inventory purchases and forecasts based on the anticipated timing of retail store and restaurant openings, which could be delayed as a result of a number of factors, including labor disputes among contractors engaged to construct our locations or within government licensing or permitting offices or the unavailability of qualified contractors due to labor shortages. Any potential labor dispute, either in our own operations or in those of third parties on whom we rely, could materially affect our costs, decrease our sales, harm our reputation or otherwise negatively affect our operations.
Our geographic concentration exposes us to certain regional risks.
Our operations and retail and restaurant locations are heavily concentrated in the United States and certain geographic areas within the United States, including Florida, California, Texas and Hawaii for our Tommy Bahama operations; Florida for our Lilly Pulitzer operations; California, Texas and Florida for our Johnny Was operations; and Florida for our Emerging Brands operations. Additionally, the wholesale sales for our businesses are also geographically concentrated, including in geographic areas where we have concentrations of our own retail store and restaurant locations. Due to these concentrations, we have heightened exposure to factors that impact these regions, including general economic conditions, weather patterns, climate-related conditions, natural disasters, public health crises, changing demographics and other factors. In addition, our brands are associated with the resort lifestyle, and many of our retail stores and restaurants are located in destinations that are dependent on travel and tourism. Any decrease in resort travel, including as a result of current macroeconomic conditions or geopolitical considerations, could negatively impact our sales and results of operations.
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Our international operations, including foreign sourcing, result in an exposure to fluctuations in foreign currency exchange rates.
We are exposed to certain currency exchange risks in conducting business outside of the United States. Substantially all of our product purchases are from foreign vendors and are denominated in U.S. dollars. If the value of the U.S. dollar decreases relative to certain foreign currencies in the future, then the prices that we negotiate for products could increase and we may be unable to pass this increase on to customers, which would negatively impact our margins. However, if the value of the U.S. dollar increases between the time a price is set and payment for a product, the price we pay may be higher than that paid for comparable goods by competitors that pay for goods in local currencies, and these competitors may be able to sell their products at more competitive prices. An increase in the value of the U.S. dollar compared to other currencies in which we have sales could also result in lower levels of sales and earnings reported in our consolidated statements of operations and lower gross margins. Additionally, currency fluctuations could also disrupt the business of our independent manufacturers by making their purchases of raw materials more expensive and difficult to finance.
Risks Related to Regulatory, Tax and Financial Reporting Matters
Changes in international trade regulation, including increases in tariff rates and the imposition of additional tariffs, could increase our costs and/or disrupt our supply chain, and there can be no assurance that any measures we take to mitigate the impact of tariffs on our business will be successful.
Due to our international sourcing activities, we are exposed to risks associated with changes in the laws and regulations governing the importing and exporting of apparel products into and from the countries in which we operate. These risks include imposition of antidumping, countervailing or other duties, tariffs, taxes or quota restrictions; government-imposed restrictions as a result of public health issues; changes in customs procedures for importing apparel products; restrictions on the transfer of funds to or from foreign countries; and the issuance of sanctions and trade orders. Any of these factors may disrupt our supply chain, increase our product costs, provide our competitors with a material advantage over us or render our products less desirable in the marketplace.
U.S. trade policy is evolving rapidly and continues to be subject to significant uncertainty. Since February 2025, the U.S. government has imposed a broad range of new and increased tariffs on foreign imports into the United States, including new tariffs under Section 122 of the Trade Act of 1974 announced in February 2026, which have resulted and could continue to result in increases in our product costs and disruptions to our supply chain. While certain of these tariffs have been suspended, modified or invalidated, including the recent U.S. Supreme Court decision to invalidate tariffs previously imposed under IEEPA, the trade policy environment continues to evolve, and we cannot predict new or increased tariffs that may be implemented in the future. In addition, there may be ongoing uncertainty regarding the availability, timing and administration of any refund processes associated with tariffs that have been invalidated or otherwise modified, and there can be no assurance that we will be able to obtain refunds or that any refunds will be available to us in amounts or within timeframes that would meaningfully offset the impact of tariffs on our business.
We are closely monitoring the evolving tariff landscape and are continuing to assess the measures we have taken and may continue to take to mitigate the impacts of tariffs on our supply chain, product costs and profitability. Our efforts to continue to diversify the countries and suppliers from which we source products could result in increased costs and disruptions to our operations, and we may be unable to successfully or timely identify new manufacturers with capacity to meet our requirements on terms acceptable to us. We cannot predict the full effects of our diversification efforts, and we may be required to continue to make further changes to our supply chain or to reevaluate our current approach on an accelerated timeframe in order to adapt to rapidly changing trade policies. Furthermore, we may be unable to adapt our business to meet consumer expectations in the dynamic retail environment resulting from shifting tariff rates and market conditions. For example, we may determine that additional selective price increases on some or all of our products are necessary to mitigate the impact of tariffs on our businesses, and if our competitors do not implement similar price increases, or we implement such price increases across a product mix that our customers find unfavorable our reputation, competitive position and financial performance may be adversely affected.
The trade policy environment has been and is expected to continue to be dynamic, and we cannot predict what additional actions may ultimately be taken by the United States or other governments with respect to tariffs or other trade restrictions. Increased geopolitical tensions relating to trade relations and public perception of uncertainties with respect to U.S. trade policy and its impact on the macroeconomic environment could negatively affect consumer sentiment and
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demand for our products and intensify an increasingly competitive promotional environment, all of which could materially adversely impact our sales, results of operations, financial condition and cash flows.
Our business is subject to various federal, foreign, state and local laws and regulations, and the costs of compliance with, or the violation of, such laws and regulations could have an adverse effect on our costs or operations.
We are subject to an increasing number of evolving and stringent standards, laws and other regulations, including those relating to labor, employment, privacy and data security, consumer protection, marketing, health, product performance, content and safety, anti-bribery, taxation, customs, logistics and other operational matters. These laws and regulations, in the United States and abroad, are complex and often vary widely by jurisdiction. As we expand to new markets, including, for example, Tommy Bahama’s expansion into New Zealand that began in Fiscal 2024, we may face challenges ensuring that we are currently or will in the future be compliant with all applicable laws and regulations in all the states and countries in which we operate. In addition to the local laws of the foreign countries in which we operate, we are subject to certain anti-corruption laws, including the U.S. Foreign Corrupt Practices Act. If any of our international operations, or our employees or agents, violates such laws, we could become subject to sanctions or other penalties that could negatively affect our reputation, business and operating results.
We have seen many new laws and regulations going into effect or being proposed in recent years, including in areas such as consumer and data privacy, matters related to corporate responsibility marketing and trade. In particular, the regulatory environment governing the use of AI technologies is rapidly developing, and new laws and regulations may impose additional compliance obligations, restrict certain uses of AI technologies or require disclosures regarding our use of AI in consumer-facing or internal applications. We may be required to make significant expenditures and devote significant time and management resources to comply with any existing or future laws or regulations, and a violation of applicable laws and regulations by us, or any of our suppliers or licensees, may restrict our ability to import products, require a recall of our products, lead to fines or otherwise increase our costs, negatively impact our ability to attract and retain employees or materially limit our ability to operate our business. In addition, regardless of whether any allegations of violations of the laws and regulations governing our business are valid or whether we ultimately become liable, we would incur time and costs, as well as disruption to management focus, in addressing these allegations and may be materially affected by negative publicity as a result of such allegations.
Any violation or perceived violation of our Supplier Code of Conduct or supplier corporate responsibility program, including by our manufacturers or vendors, could have a material adverse effect on our brands.
We have a robust corporate responsibility program that incorporates legal, social, environmental and traceability components, including a Supplier Code of Conduct and supplier compliance standards. The reputation of our brands could be harmed if we or our third-party producers and vendors, substantially all of which are located outside the United States, fail to meet appropriate human rights, environmental, product safety and product quality standards. Despite our efforts, we cannot ensure that our producers and vendors will at all times conduct their operations in accordance with our corporate responsibility requirements or that the products we purchase will always meet our safety and quality control standards, and any failure to do so could disrupt our supply chain and adversely affect our business operations.
The presence or perception of forced labor in our supply chain in spite of our efforts to ensure that our third-party producers and vendors meet human rights and labor standards could result in adverse impacts on our business, including the detention of goods at U.S. ports of entry, challenges in identifying replacement vendors and harm to our reputation. While we have diversified the jurisdictions from which we source products and product inputs, our manufacturing operations remain concentrated in Asia, cotton is among the principal raw materials used in many of our goods and even the cotton used in our products manufactured outside of China largely originates from Chinese fabric mills. Starting in Fiscal 2020, the U.S. Government issued withhold release orders in response to concerns regarding forced labor in the Xinjiang Uyghur Autonomous Region (the “XUAR”) of China. The XUAR is a globally significant source of cotton production. The Uyghur Forced Labor Prevention Act (“UFLPA”), which was enacted in 2021, created a rebuttable presumption that goods produced in whole or in part in the XUAR or connected with certain listed companies were produced using forced labor and are, therefore, barred from entry into the United States. Requirements for enhanced supply chain traceability, monitoring and risk screening, including pursuant to the UFLPA, have increased our compliance costs. Furthermore, while we do not knowingly source any products or product inputs from the XUAR, we have no known involvement with any entity list company and we prohibit our suppliers from using forced labor, our supply chain is complex, and we may not have the ability to completely map and monitor it. We could be subject to penalties, fines or sanctions if any of the producers from which we purchase goods is found or suspected to have dealings, directly or indirectly, with the XUAR or entity list companies, and any actions taken by customs officials to block the import of
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products suspected of being manufactured with forced labor, whether or not founded, could adversely impact our operations and financial results.
As a multi-national apparel company, we may experience fluctuations in our tax liabilities and effective tax rate.
As a multi-national apparel company, we are subject to income taxes in the United States and various foreign jurisdictions. We record our income tax liability based on an analysis and interpretation of local tax laws and regulations, which requires a significant amount of judgment and estimation. In addition, we may from time to time modify our operations in an effort to minimize our consolidated income tax expense. Our effective income tax rate in any particular period or in future periods may be affected by a number of factors, including a shift in the mix of revenues, income and/or losses among domestic and international sources during a year or over a period of years; changes in tax laws, regulations or international tax treaties; the outcome of income tax audits; the difference between the income tax deduction and the previously recognized income tax benefit related to the vesting of equity-based compensation awards; and the resolution of uncertain tax positions, any of which could adversely affect our effective income tax rate and profitability.
In July 2025, the budget reconciliation bill H.R. 1, referred to as the One Big Beautiful Bill Act (“OBBBA”), was signed into law and introduced significant changes to U.S. federal income tax law, including making several provisions of the 2017 Tax Cuts and Jobs Act permanent. The OBBBA enacted changes to U.S. federal income tax law that include provisions related to accelerated depreciation of fixed assets, the expensing of research and development costs, and modifications to limitations on the deductibility of interest expense. Any future changes to U.S. and foreign tax laws and compliance with any such new tax laws could have a material adverse effect on our tax expense, cash flows and operations.
Impairment charges for goodwill or intangible assets could have a material adverse impact on our financial results.
The carrying values of our goodwill and intangible assets, including those recorded in connection with our acquisition of a business, are subject to periodic impairment testing. Impairment testing of goodwill and intangible assets requires us to make estimates about future performance and cash flows that are inherently uncertain and can be affected by numerous factors, including changes in economic conditions, income tax rates, our results of operations and competitive conditions in the industry. In Fiscal 2023, we recognized $111 million of noncash impairment charges for goodwill and intangible assets in connection with the operations of Johnny Was, which was driven by the prevailing macroeconomic environment’s impact on near-term expectations for our business operations and higher interest rates. In Fiscal 2025, we recognized an additional aggregate $61 million of noncash intangible assets and goodwill impairment charges in Johnny Was and Jack Rogers, which reflected the impact of recent net sales trends and challenges in mitigating elevated tariff rates, as well as, in the case of Johnny Was, organizational realignment activities undertaken at Johnny Was in the Third Quarter of Fiscal 2025. Future impairment charges may have a material adverse effect on our consolidated financial statements or results of operations.
Any failure to maintain liquor licenses or comply with applicable regulations could adversely affect the profitability of our restaurant operations.
The restaurant industry requires compliance with a variety of federal, state and local regulations. In particular, all of our Tommy Bahama restaurants and Marlin Bars serve alcohol and, therefore, maintain liquor licenses. Our ability to maintain our liquor licenses and other permits depends on our compliance with applicable laws and regulations. The loss of a liquor license or other critical permits would adversely affect the profitability of that restaurant. Additionally, as a participant in the restaurant industry, we face risks related to food quality, food-borne illness, injury, health inspection scores and labor relations. The negative impact of adverse publicity relating to allegations of actual or perceived violations at one of our restaurants may extend beyond the restaurant involved to affect some or all of our other restaurants, as well as the image of the Tommy Bahama brand as a whole.
General Risks
Our business depends on our senior management and other key personnel, and failure to successfully attract, retain and implement succession of our senior management and key personnel or to attract, develop and retain personnel to fulfill other critical functions may have an adverse effect on our operations and ability to execute our strategies.
Our senior management has substantial experience in the apparel and related industries, with our Chairman and Chief Executive Officer Mr. Thomas C. Chubb III having worked with our company for more than 35 years, including in various executive management capacities. Our success depends on disciplined execution at all levels of our organization,
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including our senior management, and continued succession planning. Competition for qualified personnel is intense, and we compete to attract and retain these individuals with other companies that may have greater financial resources than us. While we believe that we have depth within our management team, the unexpectedloss of any of our senior management, or the unsuccessful integration of new leadership, could harm our business and financial performance. In addition, we may be unable to retain or recruit qualified personnel in key areas such as product design, sales, marketing (including individuals with key insights into digital and social media marketing strategies), distribution, technology, sourcing and other support functions, which could result in missed sales opportunities and harm to key business relationships.
Any inability or failure to recruit, retain and effectively develop skilled personnel could adversely impact our business, financial performance, reputation, ability to keep up with the needs of our customers and overall customer satisfaction.
We may be unable to protect our trademarks and other intellectual property.
We believe that our trademarks and other intellectual property rights have significant value and are important to our continued success and our competitive position due to their recognition by consumers and retailers. Substantially all of our consolidated net sales are attributable to branded products for which we own the trademark. Therefore, our success depends to a significant degree on our ability to protect and preserve our intellectual property. We rely on laws in the United States and other countries to protect our proprietary rights. However, we may not be able to sufficiently prevent third parties from using our intellectual property without our authorization, particularly in those countries where the laws do not protect our proprietary rights as fully as in the United States. We have also experienced challenges with enforcing our intellectual property rights on third party e-commerce websites, especially those based in foreign jurisdictions. In addition, AI-driven design tools and widely available generative AI technologies may enable new or existing competitors to rapidly develop and approximate distinctive designs, prints and other creative elements that differentiate our brands. The use of our intellectual property or similar intellectual property by others could reduce or eliminate any competitive advantage we have developed, causing us to lose sales or otherwise harm the reputation of our brands.
We devote significant resources to the registration and protection of our trademarks and to anti-counterfeiting efforts. Despite these efforts, we regularly discover products that infringe our proprietary rights or that otherwise seek to mimic or leverage our intellectual property. Counterfeiting and other infringing activities typically increase as brand recognition increases, and association of our brands with inferiorcounterfeit reproductions or third-party labels could adversely affect the integrity and reputation of our brands.
Additionally, there can be no assurance that the actions that we have taken will be adequate to prevent others from seeking to block sales of our products as violations of proprietary rights. As we extend our brands into new product categories and new product lines and expand the geographic scope of the sourcing, distribution and marketing of our brands’ products, we could become subject to litigation or challenge based on allegations of the infringement of intellectual property rights of third parties, including claims arising from any generative AI tools we implement in our business and assertions of rights by various third parties who have acquired or claim ownership rights in some of our trademarks internationally. In the event a claim of infringementagainst us is successful or would otherwise affect our operations, we may be required to pay damages, royalties, license fees or other costs to continue to use intellectual property rights that we had been using, or we may be unable to obtain necessary licenses from third parties at a reasonable cost or within a reasonable time. Litigation and other legal action of this type, regardless of whether it is successful, could result in substantial costs to us and diversion of the attention of our management and other resources.
We are subject to periodic litigation, which may cause us to incur substantial expenses or unexpected liabilities.
From time to time, we are involved in litigation matters, which may relate to employment practices, consumer protection, intellectual property infringement, product liability and contract disputes, and which may include a class action, and we are subject to various claims and pending or threatened lawsuits in the ordinary course of our business operations. Often, these cases raise complex factual and legal issues and, due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of any such proceedings. Regardless of the outcome or whether the claims have merit, legal proceedings may be expensive and require significant management time. In addition, we may make changes in our operations and strategies in response to emerging litigation trends, which could result in lost sales or failure to attract new customers and negatively impact our operating results.
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Our common stock price may be highly volatile, and we may be unable to meet investor and analyst expectations.
Our common stock, which is currently listed on the New York Stock Exchange, may be subject to extreme and unpredictable fluctuations in price. The market price of our common stock may decline, or litigation may ensue, if the results of our operations or projected results do not meet the expectations of securities analysts or our shareholders, investors are unreceptive to an announcement of changes in our business or our strategic initiatives or securities analysts who follow our company change their ratings or estimates of our future performance. The stock market has also experienced periods of general volatility which result in fluctuations in stock prices unrelated or disproportionate to operating performance, and our stock price may change suddenly as a result of factors beyond our control, including general economic conditions, new or modified legislation impacting our industry, announcements by our competitors, or sales of our stock by existing shareholders. We cannot provide assurances that there will continue to be an active trading market for our stock, and the price of our common stock may also be affected by illiquidity or perceived illiquidity of our shares.
We have paid dividends in each quarter since we became a public company in July 1960, and our Board of Directors from time to time has authorized share repurchase programs under which we have repurchased shares of our common stock. We may discontinue or reduce dividend payments, or implement, modify, suspend or eliminate share repurchase programs, based upon several factors, including the terms of our credit facility and applicable law, the need for funding for our strategic initiatives or other capital expenditures and our future cash needs. Any modification or suspension of dividends or share repurchase programs could cause our stock price to decline. In addition, we cannot be certain that any share repurchase program we implement will meet the expectations of our investors.
Our business could be impacted as a result of actions by activist shareholders or others.
Our business could be impacted as a result of actions by activist shareholders or others. Sustained periods of stock price or financial underperformance, stagnation or volatility could increase the likelihood of such actions. Responding to activist initiatives could be costly and time-consuming, may not align with our business strategies and could divert the attention of our Board of Directors and senior management from the pursuit of our business priorities. Perceived uncertainties as to our future direction as a result of such activism may adversely affect our relationships with vendors, customers, prospective and current employees and others, and could negatively impact our business and stock price.
Other factors may have an adverse effect on our business, results of operations and financial condition.
Other risks, many of which are beyond our ability to control or predict, could negatively impact our business and financial performance, including changes in social, political, labor, health and economic conditions; changes in the operations or liquidity of any of the parties with which we conduct our business, or in the access to capital markets for any such parties; increasing costs of customer acquisition, activation and retention; consolidation in the retail industry; and other factors. Any of these risks, and others of which we are not aware or that we currently consider to be immaterial, could, individually or in the aggregate, have a material adverse effect on our business, financial condition and results of operations.
greater
opportunities
innovative
successfully
proficiency
exciting
During Fiscal 2025, 82% of our consolidated net sales were through our direct to consumer channels of distribution, which consist of our brand specific full-price retail stores, e-commerce websites and outlets, as well as our Tommy Bahama food and beverage operations. The remaining 18% of our net sales was generated through our wholesale distribution channels, which complement our direct to consumer operations and provide access to a larger base of consumers. Our wholesale operations consist of sales of products bearing the trademarks of our lifestyle brands to various specialty stores, better department stores, Signature Stores, multi-branded e-commerce retailers and other retailers.
For additional information about our business and each of our operating segments, see Part I, Item 1. Business included in this report. Important factors relating to certain risks which could impact our business are described in Part I, Item 1A. Risk Factors of this report.
Industry Overview
We operate in a highly competitive apparel market. No single apparel firm or small group of apparel firms dominates the apparel industry, and our competitors vary by operating segment and distribution channel. The apparel industry is cyclical and highly dependent on the overall level and focus of discretionary consumer spending, which changes as consumer preferences and regional, domestic, and international economic conditions evolve. In recent years, consumers have allocated a smaller portion of discretionary spending to certain product categories, including apparel, while increasing spending on services and other goods. Further, negative economic conditions often have a longer and more pronounced impact on the apparel industry than on other industries, due in part to the discretionary nature of apparel purchases.
This competitive and evolving environment requires brands and retailers to approach their operations, including with respect to marketing, merchandising, advertising, and fulfillment, differently than they have historically and may result in increased operating costs and ongoing investments to generate growth or maintain existing sales levels. The
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expanding use of digital platforms, data analytics, and artificial intelligence-enabled tools across the industry has raised consumer expectations for personalization, convenience, transparency, and speed, while intensifying competition across channels.
These competitive pressures have been further exacerbated by a challenging macroeconomic and geopolitical environment. Significant increases in tariffs on imported goods, subsequent judicial developments affecting certain tariff measures, continued implementation of tariffs under alternative authorities, and broader uncertainty around U.S. trade and tax policy, inflationary pressures, and elevated interest rates for prolonged periods have weighed on consumer confidence and discretionary spending. Geopolitical tensions, including the ongoing war in Ukraine and the U.S.-Iran conflict and potential regime change in Iran as well as other hostilities in the Middle East have added to global uncertainty and have the potential to influence energy markets, transportation costs, and broader supply chain dynamics. Taken together, these conditions have increased volatility and reduced visibility across the global retail and consumer environment.
In response to the uncertain macroenvironment conditions, promotional activity across the industry has increased as retailers seek to offset traffic volatility and stimulate demand, further intensifying price competition. These factors have created a complex and challenging retail environment that impacted our businesses and financial results during Fiscal 2025, exacerbated certain inherent challenges within the apparel industry, and may continue to do so in the future. There remains significant uncertainty in the macroeconomic environment, and the impact of these and other factors could materially affect our businesses.
We believe our lifestyle brands have true competitive advantages, and we continue to invest in our brands’ direct to consumer initiatives and distribution capabilities while further 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 in the current environment. At the same time, we remain cautious in light of extrinsic factors and are proactively taking measures to reassess and realign our operating expenses to drive long-term operating margin expansion across our businesses.
OPERATING SEGMENTS
We identify our operating segments based on the way the chief operating decision maker ("CODM") organizes the components of our business for purposes of allocating resources and assessing performance. Our operating segment 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. Our business is organized as our Tommy Bahama, Lilly Pulitzer, Johnny Was and Emerging Brands reportable segments. For a more extensive description of our reportable segments and Corporate and Other, see Part I, Item 1. Business and Note 2 of our consolidated financial statements, both included in this Annual Report on Form 10-K.
KEY PERFORMANCE INDICATORS
We consider a variety of performance and financial measures in assessing our business, and the key performance indicators used to measure our results are summarized below.
Comparable Sales
We often disclose comparable sales in order to provide additional information regarding changes in our results of operations between periods. Our disclosures of comparable sales include net sales from our full-price retail stores and e-commerce sites. We believe that the inclusion of both full-price retail stores and e-commerce sites in the comparable sales disclosures is a more meaningful way of reporting our comparable sales results, given similar inventory planning, allocation and return policies, as well as our cross-channel marketing and other initiatives for the direct to consumer channels. For our comparable sales disclosures, we exclude (1) outlet store sales as those clearance sales are used primarily to liquidate end of season inventory, which may vary significantly depending on the level of end of season inventory on hand and generally occur at lower gross margins than our non-clearance direct to consumer sales, and (2) food and beverage sales, as we do not currently believe that the inclusion of food and beverage sales in our comparable sales disclosures is meaningful in assessing our total company operations. Comparable sales information reflects net sales, including shipping and handling revenues, if any, associated with product sales.
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For purposes of our disclosures, comparable sales consists of sales through e-commerce sites and any 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 which would result in a closure for an extended period of time (which we define as a period of two weeks or longer), (2) a greater than 15% change in the size of the retail space due to expansion, reduction or relocation to a new retail space or (3) a relocation to a new space that is significantly different from the prior retail space (including relocations to accommodate an adjacent Tommy Bahama food and beverage concept). For those stores which are excluded based on the preceding sentence, the stores continue to be excluded from comparable sales until the criteria for a new store is met subsequent to the remodel, relocation, or other event. A full-price retail store that is remodeled will generally continue to be included in our comparable sales metrics as a store is not typically closed for longer than a two-week period during a remodel; however, a full-price retail store that is relocated generally will not be included in our comparable sales metrics until that store has been open in the relocated space for the entirety of the prior fiscal year because the size or other characteristics of the store typically change significantly from the prior location. Any stores that were closed during the prior fiscal year or current fiscal year, or which we plan to close or vacate in the current fiscal year, as well as any pop-up or temporary store locations, are excluded from our comparable sales metrics.
Definitions and calculations of comparable sales differ among retail companies, and therefore comparable sales metrics disclosed by us may not be comparable to the metrics disclosed by other companies.
Gross Profit and Gross Margin
Gross profit represents net sales less cost of goods sold. Gross profit as a percentage of net sales is referred to as gross margin. Cost of goods sold primarily represents the cost of merchandise sold, including the cost of duties and inbound freight from suppliers. Our gross profit is variable in nature and generally follows changes in net sales. We believe that gross profit and gross margin are useful measures because they allow management, analysts, investors and others to evaluate the profit we generate from our sales, before operating and other expenses and income.
Segment EBITDA
Segment earnings before interest, taxes, depreciation and amortization ("EBITDA") is the measure we use to assess the profitability of our operating segments. Segment EBITDA is calculated as net sales less cost of goods sold and total SG&A of the operating segment, and it excludes amounts reflected in Corporate EBITDA, income tax expense (benefit), interest expense, net, depreciation and amortization and other infrequent operating charges (impairments of goodwill, intangible assets and equity method investments). Segment EBITDA as a percentage of segment net sales is referred to as segment EBITDA margin.
We changed our segment profit measure in the Fourth Quarter of Fiscal 2025 to segment EBITDA. We believe that segment EBITDA is a useful measure because it allows management, analysts, investors, and other interested parties to evaluate the profitability of our business operations before the effects of certain net expenses that directly arise from our capital investment decisions (depreciation, amortization), financing decisions (interest), tax strategies (income taxes), and infrequent operating charges (impairments of goodwill, intangible assets and equity method investments).
Net Earnings (Loss) and EBITDA
We believe that net earnings (loss) and EBITDA, along with the adjusted measure of EBITDA are useful measures of operating performance. Net earnings (loss) represents our profitability after the effects of all operating and other expenses and income. EBITDA helps us, analysts, investors, and other interested parties assess the underlying profitability of our operations before the effects of certain net expenses that directly arise from our capital investment decisions (depreciation, amortization), financing decisions (interest), and tax strategies (income taxes).
The adjusted measure of EBITDA eliminates certain infrequent operating charges (impairments of goodwill, intangible assets and equity method investments) that we do not believe are reflective of our ongoing business performance. This adjusted measure helps us, analysts, investors, and other interested parties evaluate our operating performance on a comparable basis from period-to-period so that we can better understand the ongoing factors and trends affecting our business operations. We also use Adjusted EBITDA to forecast our performance, evaluate our actual results against our forecasts and compare our results to others in the industries that we serve.
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See “Non-GAAP Financial Measures” below for a reconciliation of EBITDA and Adjusted EBITDA to net earnings (loss), the most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”).
Key Operating Results
The following table sets forth our consolidated operating results (in thousands, except per share amounts) for Fiscal 2025 and Fiscal 2024:
Fiscal
Fiscal 2025
Fiscal 2024
Net sales
Gross profit
Gross margin
Net earnings (loss)
EBITDA
Impairment of goodwill, intangible assets and equity method investments
Adjusted EBITDA
Net earnings (loss) per diluted share
Weighted average shares outstanding - diluted
Net loss per diluted share was $1.86 in Fiscal 2025 compared to net earnings per diluted share of $5.87 in Fiscal 2024. The decrease in net earnings in Fiscal 2025 was due to (1) noncash impairment charges of $61 million primarily related to Johnny Was recognized during Fiscal 2025, (2) decreased net sales, (3) lower gross margin, (4) increased SG&A, (5) increased interest expense and (6) decreased royalties and other operating income.
DIRECT TO CONSUMER LOCATIONS
The table below provides information about the number of direct to consumer locations for our brands as of the dates specified. For acquired businesses, locations are only included subsequent to the date of acquisition. The amounts below include our permanent locations and exclude any pop-up or temporary store locations which have an initial lease term of 12 months or less.
January 31,
February 1,
February 3,
January 28,
Tommy Bahama full-price retail stores
Tommy Bahama retail-food and beverage locations
Tommy Bahama outlets
Total Tommy Bahama locations
Lilly Pulitzer full-price retail stores
Johnny Was full-price retail stores
Johnny Was outlets
Total Johnny Was locations
Southern Tide full-price retail stores
TBBC full-price retail stores
Total Oxford direct to consumer locations
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RESULTS OF OPERATIONS
The following table sets forth the specified line items in our consolidated statements of operations both in dollars (in thousands) and as a percentage of net sales. We have calculated all percentages based on actual data, but percentage columns may not add due to rounding.
Fiscal 2025
Fiscal 2024
Fiscal 2023
Net sales
Cost of goods sold
Gross profit
Depreciation and amortization
Impairment of goodwill, intangible assets and equity method investments
Total Operating expenses
Royalties and other operating income
Operating income (loss)
Interest expense, net
Earnings (loss) before income taxes
Income taxes (benefit)
Net earnings (loss)
Net earnings (loss) per share
Weighted average shares outstanding - diluted
The following table presents the proportion of our consolidated net sales by distribution channel for each period presented. We have calculated all percentages below on actual data, and percentages may not add to 100 due to rounding.
Fiscal 2025
Fiscal 2024
Fiscal 2023
Retail
E-commerce
Food and beverage
Wholesale
Total
FISCAL 2025 COMPARED TO FISCAL 2024
The discussion and tables below compare certain line items included in our consolidated statements of operations for Fiscal 2025 to Fiscal 2024, except where indicated otherwise. Each dollar and share amount included in the tables is in thousands except for per share amounts. We have calculated all percentages based on actual data, and percentage columns in tables may not add due to rounding. Individual line items of our consolidated statements of operations, including gross profit, may not be directly comparable to those of our competitors, as classification of certain expenses may vary by company.
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Net Sales
Fiscal
Fiscal 2025
Fiscal 2024
$ Change
% Change
Tommy Bahama
Lilly Pulitzer
Johnny Was
Emerging Brands
Corporate and Other
Consolidated net sales
Consolidated net sales were $1,478 million in Fiscal 2025 compared to net sales of $1,517 million in Fiscal 2024. Net sales decreased in Tommy Bahama and Johnny Was, partially offset by increased sales in Lilly Pulitzer and Emerging Brands.
The decrease in net sales by distribution channel consisted of the following:
• a decrease in full-price retail store sales of $15 million, or 3%, including (1) a $16 million decrease in Tommy Bahama and (2) a $9 million decrease in Johnny Was. These decreases were partially offset by (1) a $5 million increase in Emerging Brands and (2) a $4 million increase in Lilly Pulitzer;
• a decrease in e-commerce sales of $13 million, or 3%, including (1) an $18 million decrease in Tommy Bahama and (2) an $11 million decrease in Johnny Was. These decreases were partially offset by (1) a $10 million increase in Emerging Brands and (2) a $7 million increase in Lilly Pulitzer;
• a decrease in wholesale sales of $13 million, or 5%, including (1) an $11 million decrease in Tommy Bahama, (2) a $5 million decrease in Johnny Was and (3) a $1 million decrease in Emerging Brands. These decreases were partially offset by a $3 million increase in Lilly Pulitzer;
• a decrease in outlet sales of $1 million, or 2%, including (1) a $1 million decrease in Johnny Was and (2) a $1 million decrease in Tommy Bahama; and
• an increase in food and beverage sales of $4 million, or 4%.
Tommy Bahama:
Tommy Bahama net sales decreased $41 million, or 5%, in Fiscal 2025, with a decrease in (1) e-commerce sales of $18 million, or 8%, (2) full-price retail sales of $16 million, or 5%, (3) wholesale sales of $11 million, or 8%, and (4) outlet sales of $1 million, or 1%. These decreases were partially offset by an increase in food and beverage sales of $4 million, or 4%. The following table presents the proportion of net sales by distribution channel for Tommy Bahama for each period presented:
Fiscal 2025
Fiscal 2024
Retail
E-commerce
Food and beverage
Wholesale
Total
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Lilly Pulitzer:
Lilly Pulitzer net sales increased $14 million, or 4%, in Fiscal 2025, with an increase in each channel of distribution including an increase in (1) e-commerce sales of $7 million, or 4%, (2) retail sales of $4 million, or 3%, and (3) wholesale sales of $3 million, or 6%. The following table presents the proportion of net sales by distribution channel for Lilly Pulitzer for each period presented:
Fiscal 2025
Fiscal 2024
Retail
E-commerce
Wholesale
Total
Johnny Was:
Johnny Was net sales decreased $26 million, or 13%, in Fiscal 2025, with a decrease in each channel of distribution including a decrease in (1) e-commerce sales of $11 million, or 13%, (2) full-price retail sales of $9 million, or 13%, (3) wholesale sales of $5 million, or 14% , and (4) outlet sales of $1 million, or 21%. The following table presents the proportion of net sales by distribution channel for Johnny Was for each period presented:
Fiscal 2025
Fiscal 2024
Retail
E-commerce
Wholesale
Total
Emerging Brands:
Emerging Brands net sales increased $14 million, or 11%, in Fiscal 2025. Net sales increased in TBBC, Duck Head and Southern Tide and were partially offset by decreased sales in Jack Rogers. The increase in net sales in Emerging Brands by distribution channel included increases in (1) e-commerce sales of $10 million, or 17%, and (2) retail sales of $5 million, or 27%, as we opened new retail locations. These increases were partially offset by a decrease in wholesale sales of $1 million, or 1%. The following table presents the proportion of net sales by distribution channel for Emerging Brands for each period presented:
Fiscal 2025
Fiscal 2024
Retail
E-commerce
Wholesale
Total
Corporate and Other:
Corporate and Other net sales primarily consist of the elimination of any sales between operating segments.
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Gross Profit
The tables below present gross profit by reportable segment and Corporate and Other and in total for Fiscal 2025 and Fiscal 2024, as well as the change between those two periods and gross margin by reportable segment and Corporate and Other and in total. Our gross profit and gross margin, which is calculated as gross profit divided by net sales, may not be directly comparable to those of our competitors, as the statement of operations classification of certain expenses may vary by company.
Fiscal 2025
Fiscal 2024
$ Change
% Change
Tommy Bahama
Lilly Pulitzer
Johnny Was
Emerging Brands
Corporate and Other
Consolidated gross profit
Notable items included in amounts above:
LIFO adjustments in Corporate and Other
Fiscal 2025
Fiscal 2024
Tommy Bahama
Lilly Pulitzer
Johnny Was
Emerging Brands
Corporate and Other
Consolidated gross margin
The decreased gross profit of 6% was primarily due to (1) the 3% decrease in net sales and (2) decreased consolidated gross margin. The decreased gross margin was primarily due to (1) approximately $30 million of increased cost of goods sold from additional tariffs enacted in Fiscal 2025, (2) a change in sales mix with a higher proportion of net sales occurring during promotional and clearance events at Tommy Bahama and Lilly Pulitzer and (3) a $5 million higher LIFO accounting charge in Fiscal 2025 compared to Fiscal 2024. These decreases were partially offset by (1) lower freight costs to customers due to improved carrier rates from contract renegotiations and (2) a change in sales mix with wholesale sales representing a lower proportion of net sales.
Tommy Bahama:
The lower gross margin for Tommy Bahama was primarily due to (1) increased cost of goods sold from additional tariffs implemented in Fiscal 2025 and (2) a change in sales mix with a higher proportion of net sales occurring during promotional events, including loyalty award cards, Flip Side, end of season clearance events and semi-annual Friends & Family events. These decreases were partially offset by (1) lower freight costs to customers due to improved carrier rates from contract renegotiations, (2) decreased freight rates associated with shipping our products from our vendors and (3) a change in sales mix with wholesale sales representing a lower proportion of net sales.
Lilly Pulitzer:
The lower gross margin for Lilly Pulitzer was primarily due to (1) increased cost of goods sold from additional tariffs implemented in Fiscal 2025, (2) a change in sales mix with a higher proportion of net sales occurring during promotional events, including e-commerce flash sales and (3) a change in sales mix with off-price wholesale sales representing a higher proportion of wholesale sales. These decreases were partially offset by lower freight costs to customers due to improved carrier rates from contract renegotiations.
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Johnny Was:
The lower gross margin for Johnny Was was primarily due to (1) increased cost of goods sold from additional tariffs implemented in Fiscal 2025 and (2) a change in sales mix with full-price wholesale sales representing a lower proportion of wholesale sales. These decreases were partially offset by a change in sales mix with full-price retail and e-commerce sales representing a higher proportion of net sales resulting from fewer sales occurring during promotional and clearance events.
Emerging Brands:
The lower gross margin for Emerging Brands was primarily due to (1) increased cost of goods sold from additional tariffs implemented in Fiscal 2025 and (2) higher markdowns during promotional and clearance events. These decreases were partially offset by a change in sales mix with wholesale sales representing a lower proportion of net sales.
Corporate and Other:
The gross profit in Corporate and Other primarily reflects the impact of LIFO accounting adjustments that resulted in a $5 million higher charge in Fiscal 2025 compared to Fiscal 2024.
Fiscal 2025
Fiscal 2024
$ Change
% Change
SG&A (as a % of net sales)
Notable items included in amounts above:
Johnny Was organizational realignment initiatives
Johnny Was Distribution Center relocation costs
SG&A was $818 million in Fiscal 2025 compared to SG&A of $787 million in Fiscal 2024 with approximately $15 million, or 47%, of the increase due to the increase in bricks and mortar retail locations. The 4% increase in total SG&A in Fiscal 2025 included the following, each of which includes the SG&A of the new bricks and mortar locations:
• $13 million increase in employment costs driven primarily by new bricks and mortar retail locations, increased incentive compensation and increased medical benefit costs;
• $8 million increase in software subscription related costs;
• $6 million increase in occupancy costs driven primarily by new bricks and mortar retail locations;
• $6 million increase in consulting and professional services related costs; and
• $5 million increase in the provision for credit losses primarily due to the Saks Global bankruptcy.
These increases were partially offset by:
• $7 million decrease in advertising costs; and
• $1 million decrease in miscellaneous expenses including samples, supplies and travel related costs.
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Depreciation and Amortization
Fiscal 2025
Fiscal 2024
$ Change
% Change
Depreciation and amortization
Depreciation and amortization (as a % of net sales)
Notable items included in amounts above:
Amortization of Johnny Was intangible assets
The lower depreciation and amortization expense was primarily driven by a $3 million decrease in amortization of intangible assets. This decrease was partially offset by a $2 million increase in depreciation expense primarily driven by a $6 million increase in depreciation related to new retail stores and Marlin Bar locations and partially offset by decreases in other classes of assets.
Impairment of goodwill, intangible assets and equity method investments
We performed interim impairment assessments in the Third Quarter of Fiscal 2025 that resulted in noncash impairment charges for goodwill and intangible assets totaling $61 million, including $57 million related to Johnny Was intangible assets, which is included in our Johnny Was reportable segment, and $4 million related to Jack Rogers intangible assets and goodwill, which is included in our Emerging Brands reportable segment.
For both Johnny Was and Jack Rogers, the impairment charges reflect the recent declines in net sales and operating results, partially due to U.S. import tariffs implemented in Fiscal 2025, performance below forecasted expectations and negative revisions to projected results. Refer to “Note 5—Intangible Assets and Goodwill” for additional disclosure regarding the impairment charges recognized during Fiscal 2025. There were no other impairment charges for goodwill, intangible assets or equity method investments in Fiscal 2025.
There were no impairment charges for goodwill, intangible assets or equity method investments in Fiscal 2024.
Royalties and other operating income
Fiscal 2025
Fiscal 2024
$ Change
% Change
Royalties and other operating income
Royalties and other operating income typically consist of royalty income received from third parties from the licensing of our brands. The decreased royalties and other operating income during Fiscal 2025 was primarily due to decreased royalty income in Tommy Bahama reflecting the lower sales of our licensing partners that were negatively impacted by the additional U.S. import tariffs enacted in Fiscal 2025.
Operating income (loss)
Fiscal 2025
Fiscal 2024
$ Change
% Change
Operating income (loss)
Operating income (loss) (as a % of net sales)
Notable items included in amounts above:
LIFO adjustments in Corporate and Other
Johnny Was organizational realignment initiatives
Amortization of Johnny Was intangible assets
Johnny Was intangible asset impairment charge
Jack Rogers intangible asset and goodwill impairment charge
Johnny Was Distribution Center relocation costs
Operating loss was $31 million in Fiscal 2025 compared to operating income of $119 million in Fiscal 2024. The decreased operating results were primarily due to (1) noncash impairment charges of $61 million primarily related to Johnny Was recognized during Fiscal 2025, (2) decreased net sales, (3) lower gross margin, (4) increased SG&A and (5)
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decreased royalties and other operating income. These decreases were partially offset by decreased depreciation and amortization expenses.
Interest expense, net
Fiscal 2025
Fiscal 2024
$ Change
% Change
Interest expense, net
The higher interest expense in Fiscal 2025 was primarily due to higher average outstanding debt during Fiscal 2025 than Fiscal 2024.
Income taxes
Fiscal 2025
Fiscal 2024
$ Change
% Change
Income tax expense (benefit)
Effective tax rate
Our effective tax rate will vary from period to period from a typical annual effective tax rate of approximately 25% based on various factors including, but not limited to, the geographic mix of earnings, enacted tax legislation, state and local taxes, tax audit findings and settlements, and the interaction of various global tax strategies. Refer to Note 11 of our consolidated financial statements included in this report for our income tax rate reconciliation and other information about our income tax expense (benefit) for Fiscal 2025 and Fiscal 2024.
For Fiscal 2025, our effective tax rate was 26.9%, which primarily reflects the unfavorable net discrete tax expense for shortfalls in stock-based compensation vesting during Fiscal 2025. This unfavorable factor was partially offset by (1) favorable U.S. federal return-to-provision adjustments primarily related to an increase in the research and development tax credit and benefits associated with certain adjustments pertaining to U.S. taxation on foreign earnings, (2) the benefit derived from a reduction in income tax expense as a result of the receipt of interest from a U.S. federal income tax receivable and (3) the remeasurement of deferred tax balances due to changes in state tax rates.
For Fiscal 2024, our effective income tax rate was 20.2%, which primarily reflects (1) the benefit derived from an increase in research and development tax credits, (2) a reduction in income tax expense as a result of the receipt of interest from a U.S. federal net operating loss ("NOL") carryback claim, (3) a benefit attributable to the vesting of restricted stock awards at a price exceeding the grant date fair value, (4) favorable effects of changes in the fair value of life insurance policies and (5) benefits associated with certain adjustments pertaining to U.S. taxation on foreign earnings. These favorable items were partially offset by (1) unfavorable items related to the non-deductible amounts associated with executive compensation and (2) an increase in uncertain tax positions.
Net earnings
Fiscal
Fiscal 2025
Fiscal 2024
Net sales
Operating income (loss)
Net earnings (loss)
Net earnings (loss) per diluted share
Weighted average shares outstanding - diluted
Net loss per diluted share was $1.86 in Fiscal 2025 compared to net earnings per diluted share of $5.87 in Fiscal 2024. The decrease in net earnings in Fiscal 2025 was due to (1) noncash impairment charges of $61 million primarily related to Johnny Was recognized during Fiscal 2025, (2) decreased net sales, (3) lower gross margin, (4) increased SG&A, (5) increased interest expense and (6) decreased royalties and other operating income. These decreases were partially offset by decreased depreciation and amortization expenses.
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EBITDA
Fiscal 2025
Fiscal 2024
$ Change
% Change
Tommy Bahama Segment EBITDA
Lilly Pulitzer Segment EBITDA
Johnny Was Segment EBITDA
Emerging Brands Segment EBITDA
Corporate and Other EBITDA
Adjusted EBITDA
Adjusted EBITDA as a % of net sales
Notable items included in amounts above:
LIFO adjustments in Corporate and Other
Johnny Was organizational realignment initiatives
Johnny Was Distribution Center relocation costs
Adjusted EBITDA was $96 million in Fiscal 2025 compared to $187 million in Fiscal 2024. The decreased Adjusted EBITDA was primarily due to lower segment EBITDA in all operating segments and in Corporate and Other. Changes in segment EBITDA by operating segment are discussed below.
Tommy Bahama:
Fiscal 2025
Fiscal 2024
$ Change
% Change
Net sales
Gross profit
Gross margin
Segment EBITDA
Segment EBITDA as % of net sales
The decreased segment EBITDA for Tommy Bahama was due to (1) decreased net sales, (2) increased SG&A and (3) lower gross margin. The increased SG&A was primarily due to (1) $9 million of higher SG&A associated with new retail store and Marlin Bar locations with retail and food and beverage operations, including related employment costs, occupancy costs and administrative expenses and (2) $2 million of increased software subscription and consulting costs. These increases were partially offset by $1 million of decreased variable and distribution costs primarily driven by lower sales.
Lilly Pulitzer:
Fiscal 2025
Fiscal 2024
$ Change
% Change
Net sales
Gross profit
Gross margin
Segment EBITDA
Segment EBITDA as % of net sales
The decreased segment EBITDA for Lilly Pulitzer was primarily due to (1) increased SG&A and (2) lower gross margin. These decreases were partially offset by increased net sales. The increased SG&A was primarily due to (1) $5 million of increased software subscription and consulting expenses, (2) $3 million of increased variable and distribution costs primarily driven by higher sales and (3) $1 million of higher SG&A associated with new retail store locations, including related employment costs, occupancy costs and administrative expenses. These increases were partially offset by $2 million of decreased advertising costs.
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Johnny Was:
Fiscal 2025
Fiscal 2024
$ Change
% Change
Net sales
Gross profit
Gross margin
Segment EBITDA
Segment EBITDA as % of net sales
Notable items included in amounts above:
Johnny Was organizational realignment initiatives
Johnny Was Distribution Center relocation costs
The decreased segment EBITDA for Johnny Was was primarily due to (1) decreased net sales and (2) lower gross margin. These decreases were partially offset by decreased SG&A. The decreased SG&A was primarily due to (1) $6 million of decreased advertising costs, (2) $3 million of decreased variable and distribution costs primarily due to lower sales and (3) the absence of $3 million in Johnny Was Distribution Center relocation costs incurred during Fiscal 2024. These decreases were partially offset by (1) a $3 million increase in the provision for credit losses primarily driven by the Saks Global bankruptcy and (2) $3 million of costs associated with organizational realignment initiatives.
Emerging Brands:
Fiscal 2025
Fiscal 2024
$ Change
% Change
Net sales
Gross profit
Gross margin
Segment EBITDA
Segment EBITDA as % of net sales
The decreased segment EBITDA for Emerging Brands was primarily due to (1) increased SG&A and (2) lower gross margin. These decreases were partially offset by increased net sales. The increased SG&A was primarily due to new retail store operations, including related employment costs, occupancy costs and administrative expenses.
Corporate and Other:
Fiscal 2025
Fiscal 2024
$ Change
% Change
Net sales
Gross profit
Corporate EBITDA
Notable items included in amounts above:
LIFO adjustments in Corporate and Other
The decreased Corporate EBITDA was primarily due to (1) increased SG&A and (2) a higher LIFO accounting charge. The increased SG&A was primarily due to (1) $4 million of increased employment costs primarily driven by increased incentive compensation and medical benefit costs, (2) $3 million of increased professional and consulting costs and (3) $2 million of increased costs associated with the project to build a new distribution center in Lyons, Georgia.
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Non-GAAP Financial Measures
The following tables set forth reconciliations of net earnings (loss) to EBITDA and Adjusted EBITDA. EBITDA is calculated as net sales less cost of goods sold and total SG&A, and it excludes income tax expense (benefit), interest expense, net and depreciation and amortization. Adjusted EBITDA is EBITDA less other infrequent operating charges (impairments of goodwill, intangible assets and equity method investments). We believe that the presentation of EBITDA and Adjusted EBITDA, which are not GAAP financial measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provide meaningful supplemental information to both management and investors that is indicative of our core operations. We believe that EBITDA is a useful measure of operating performance because it helps us, analysts, investors, and other interested parties assess the underlying profitability of our operations before the effects of certain net expenses that directly arise from our capital investment decisions (depreciation, amortization), financing decisions (interest) and tax strategies (income taxes). Adjusted EBITDA helps us, analysts, investors, and other interested parties evaluate our operating performance on a comparable basis from period-to-period so that we can better understand the ongoing factors and trends affecting our business operations. We also use Adjusted EBITDA, to forecast our performance, evaluate our actual results against our forecasts and compare our results to others in the industries that we serve. We do not, nor do we suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. The table below showing consolidated totals reconciles GAAP net earnings (loss) to EBITDA and Adjusted EBITDA:
Fiscal 2025
Fiscal 2024
GAAP net income (loss)
Depreciation and amortization
Interest expense, net
Income tax expense (benefit)
EBITDA
Impairment of goodwill, intangible assets and equity method investments
Adjusted EBITDA
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Our primary source of revenue and cash flow is through our design, sourcing, marketing and distribution of branded apparel products bearing the trademarks of our Tommy Bahama, Lilly Pulitzer, Johnny Was, Southern Tide, TBBC, Duck Head and Jack Rogers lifestyle brands. We primarily distribute our products to our customers via direct to consumer channels of distribution, but we also distribute our products via wholesale channels of distribution.
Our primary uses of cash flow include the purchase of our branded apparel products from third party suppliers located outside of the United States, as well as operating expenses, including employee compensation and benefits, operating lease commitments and other occupancy-related costs, marketing and advertising costs, information technology costs, variable expenses, distribution costs, other general and administrative expenses and the periodic payment of interest. Additionally, we use our cash to fund capital expenditures and other investing activities, dividends, share repurchases and repayment of indebtedness, if any. In the ordinary course of business, we maintain certain levels of inventory, extend credit to our wholesale customers and pay our operating expenses. Thus, we require a certain amount of ongoing working capital to operate our business. Our need for working capital is typically seasonal with the greatest working capital requirements to support our larger spring, summer and holiday direct to consumer seasons. Our capital needs depend on many factors including the results of our operations and cash flows, future growth rates, the need to finance inventory levels and the success of our various products.
We have a long history of generating sufficient cash flows from operations to satisfy our cash requirements for our ongoing capital expenditure needs as well as payment of dividends and repayment of our debt. Thus, we believe our anticipated future cash flows from operating activities will provide (1) sufficient cash over both the short and long term to satisfy our ongoing operating cash requirements, (2) ample funds to continue to invest in our lifestyle brands, direct to consumer initiatives and information technology projects, (3) additional cash flow to repay outstanding debt and (4) sufficient cash for other strategic initiatives such as acquisitions and share repurchases. Also, if cash inflows are less than cash outflows, we have access to amounts under our $325 million Fourth Amended and Restated Credit Agreement (as amended, the “U.S. Revolving Credit Agreement”), subject to its terms, which is described below.
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Working Capital
($ in thousands)
January 31,
February 1,
$ Change
% Change
Total current assets
Total current liabilities
Working capital
Working capital ratio
Our working capital ratio is calculated by dividing total current assets by total current liabilities. Current assets as of January 31, 2026 were comparable to February 1, 2025. Decreases in current assets included decreases in (1) receivables of $5 million, (2) inventories of $2 million and (3) cash and cash equivalents of $1 million. These decreases were offset by an increase in prepaid expenses and other current assets of $8 million. Current liabilities as of January 31, 2026 increased from February 1, 2025 primarily due to increases in (1) accrued compensation of $6 million, (2) current operating lease liabilities of $6 million and (3) other accrued expenses and liabilities of $5 million.
Balance Sheet
The following tables set forth certain information included in our consolidated balance sheets (in thousands). Below each table are explanations for any significant changes in the balances as of January 31, 2026 as compared to February 1, 2025.
Current Assets:
January 31,
February 1,
$ Change
% Change
Cash and cash equivalents
Receivables, net
Inventories, net
Prepaid expenses and other current assets
Total current assets
Cash and cash equivalents were $8 million as of January 31, 2026, compared to $9 million as of February 1, 2025. The cash and cash equivalents balance as of January 31, 2026 and February 1, 2025 represent typical cash amounts maintained on an ongoi ng 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 decreased receivables, net as of January 31, 2026, was due primarily to (1) a decrease in insurance receivables of $6 million related to payments received in Fiscal 2025 and (2) an increase in the provision for credit losses of $5 million. These decreases were partially offset by an increase in income tax receivables of $6 million. Income tax receivables are now presented within receivables, net, to provide a more concise and meaningful presentation.
Inventories, net, included a $92 million and $85 million LIFO reserve as of January 31, 2026, and February 1, 2025, respectively. The increase in the LIFO reserve was partially offset by slight inventory increases in all operating segments, with the exception of Johnny Was, driven primarily by increased tariffs. As of January 31, 2026, we had $11 million of additional costs capitalized into inventory related to the U.S. tariffs implemented in Fiscal 2025.
The increased prepaid expenses and other current assets as of January 31, 2026, was primarily due to increases in prepaid software costs.
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Non-current Assets:
January 31,
February 1,
$ Change
% Change
Property and equipment, net
Intangible assets, net
Goodwill
Operating lease assets
Other assets, net
Deferred income taxes
Total non-current assets
Property and equipment, net as of January 31, 2026, increased as capital expenditures primarily relating to the project to build a new distribution center in Lyons, Georgia and the opening of new Tommy Bahama Marlin Bars and retail stores across our portfolio exceeded depreciation during Fiscal 2025.
The decrease in intangible assets, net as of January 31, 2026, was primarily due to the $59 million of intangible asset impairment charges primarily related to Johnny Was during Fiscal 2025, as discussed in Note 5 to the consolidated financial statements. Intangible assets, net decreased further due to the amortization of intangible assets acquired in the acquisition of Johnny Was.
The decrease in goodwill as of January 31, 2026, was primarily due to the $2 million goodwill impairment charge related to Jack Rogers during Fiscal 2025, as discussed in Note 5 to the consolidated financial statements.
Operating lease assets as of January 31, 2026, increased primarily due to the addition of new leased locations, or the extension of existing leased locations, exceeding the recognition of amortization related to existing operating leases and the termination or reduced term of certain operating leases.
Other assets as of January 31, 2026, increased primarily due to (1) an increase in capitalizable implementation costs associated with cloud computing arrangements and (2) an increase in the fair value of life insurance policies associated with our deferred compensation plans.
Deferred income taxes increased as of January 31, 2026, due primarily to the recognition of deferred tax benefits associated with the impairment charges related to Johnny Was and Jack Rogers.
Liabilities:
January 31,
February 1,
$ Change
% Change
Total current liabilities
Long-term debt
Non-current portion of operating lease liabilities
Other non-current liabilities
Total liabilities
Current liabilities increased as of January 31, 2026, primarily due to (1) accrued compensation of $6 million primarily due to increased accrued incentive compensation, (2) current operating lease liabilities of $6 million primarily due to the opening of new retail stores and (3) other accrued expenses and liabilities of $5 million primarily due to an increase in accrued duties and tariffs.
The increase in long-term debt as of January 31, 2026, was the result of (1) lower net earnings, (2) capital expenditures primarily associated with the project to build a new distribution center in Lyons, Georgia, (3) share repurchases, (4) payments of dividends and (5) working capital requirements exceeding cash flow from operations.
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The non-current portion of operating lease liabilities increased as of January 31, 2026, due to the addition of new leased locations, and the extension of existing leased locations, exceeding the payments related to existing operating leases and the termination or reduced term of certain operating leases.
The increase in other non-current liabilities as of January 31, 2026, was the result of increases in legal related reserves.
Statement of Cash Flows
The following table sets forth the net cash flows resulting in the change in our cash and cash equivalents (in thousands):
Fiscal 2025
Fiscal 2024
Fiscal 2023
Cash provided by operating activities
Cash used in investing activities
Cash used in financing activities
Net change in cash and cash equivalents
Changes in cash flows in Fiscal 2025 and Fiscal 2024 related to operating activities, investing activities and financing activities are discussed below.
Operating Activities:
In Fiscal 2025 and Fiscal 2024, operating activities provided $120 million and $194 million of cash, respectively. The cash flow from operating activities for each period primarily consisted of net earnings for the relevant period adjusted, as applicable, for non-cash activities including impairment charges, depreciation, amortization, equity-based compensation, gains on sale of assets and other non-cash items as well as the net impact of changes in deferred income taxes and operating assets and liabilities.
In Fiscal 2025, changes in operating assets and liabilities had a favorable impact on cash flow from operations. Increases in noncurrent liabilities and current liabilities and decreases in receivables and inventories increased cash flow from operations. These increases were partially offset by an increase in other noncurrent assets, prepaid expenses and other current assets and income tax receivables, which decreased cash flow from operations. In Fiscal 2024 changes in operating assets and liabilities had a favorable impact on cash flow from operations primarily driven by income tax receivables. We received $19 million in income tax receivables in Fiscal 2024 associated with the benefit of the Fiscal 2020 operating losses filed in Fiscal 2021, which was partially offset by a $5 million receivable associated with our Fiscal 2023 tax return filed in Fiscal 2024. Other changes had a slightly unfavorable impact on cash flow from operations driven by increases in inventories and receivables that decreased cash flow from operations partially offset by an increase in current liabilities and a decrease in prepaid expenses that increased cash flow from operations.
Investing Activities:
In Fiscal 2025 and Fiscal 2024, investing activities used $108 million and $143 million of cash, respectively. On an ongoing basis, our cash flow primarily consists of our capital expenditures, which totaled $108 million and $134 million in Fiscal 2025 and Fiscal 2024, respectively. The decrease in Fiscal 2025 was primarily due to the opening of fewer new retail stores and Tommy Bahama Marlin Bars in Fiscal 2025 than in Fiscal 2024. We also spent $54 million of capital expenditures related to the new distribution center in Lyons, Georgia in Fiscal 2025 compared to $69 million in Fiscal 2024.
During Fiscal 2024, we paid $8 million associated with acquisitions, including the acquisition of intellectual property rights at Lilly Pulitzer and two former Lilly Pulitzer Signature Stores.
Financing Activities:
In Fiscal 2025 and Fiscal 2024, financing activities used $13 million and $49 million of cash, respectively. If net cash requirements exceed our net cash flows, we may borrow amounts from our U.S. Revolving Credit Agreement consistent with our use of long-term debt to satisfy cash flow needs during Fiscal 2025. Alternatively, to the extent we are
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in a net debt position, if net cash requirements are less than our net cash flows, we may repay amounts outstanding on our U.S. Revolving Credit Agreement, if any.
In Fiscal 2025, we also repurchased $55 million of shares, paid $42 million of dividends and repurchased $2 million of shares to cover employee tax liabilities related to the vesting of shares of our common stock. In Fiscal 2024, we paid $43 million of dividends and repurchased $6 million of shares to cover employee tax liabilities related to the vesting of shares of our common stock.
Liquidity and Capital Resources
We have a long history of generating sufficient cash flows from operations to satisfy our cash requirements for our ongoing capital expenditure needs as well as payment of dividends and repayment of our debt. Thus, we believe our anticipated future cash flows from operating activities will provide (1) sufficient cash over both the short and long term to satisfy our ongoing operating cash requirements, (2) funds to complete our multi-year project to build a new distribution center in Lyons, Georgia to enhance the direct to consumer throughput capabilities of our brands, (3) funds to continue to invest in our businesses, including direct to consumer initiatives and information technology projects, (4) additional cash flow to repay debt that may be outstanding and (5) sufficient cash for other strategic initiatives.
Our capital needs depend on many factors including the results of our operations and cash flows, future growth rates, the need to finance inventory and the success of our various products. To the extent cash flow needs in the future exceed cash flow provided by our operations, we will have access, subject to its terms, to our U.S. Revolving Credit Agreement to provide funding for operating activities, capital expenditures and acquisitions, if any, and any other investing or financing activities.
Our cash, short-term investments and debt levels in future periods may not be comparable to historical amounts as we continue to assess, and possibly make changes to, our capital structure, including those related to borrowings from additional credit facilities, sales of debt or equity securities or the repurchase of shares of our stock in the future. Changes in our capital structure, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
$325 Million U.S. Revolving Credit Agreement
On March 6, 2023, we amended the U.S. Revolving Credit Agreement to, among other things, mature in March 2028. The U.S. Revolving Credit Agreement amended and restated our Fourth Amended and Restated Credit Agreement (the “Prior Credit Agreement”).
Pursuant to the U.S. Revolving Credit Agreement, the interest rate applicable to our borrowings under the U.S. Revolving Credit Agreement is based on either the Term Secured Overnight Financing Rate plus an applicable margin of 135 to 185 basis points or prime plus an applicable margin of 25 to 75 basis points.
The 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 interest rate of 5% as of January 31, 2026), unused line fees and letter of credit fees based upon average utilization or unused availability, as applicable, (3) requires periodic interest payments with principal due at maturity and (4) is secured by a first priority security interest in substantially all of the assets of Oxford Industries, Inc. and its domestic subsidiaries, including accounts receivable, books and records, chattel paper, deposit accounts, equipment, certain general intangibles, inventory, investment property (including the equity interests of certain subsidiaries), negotiable collateral, life insurance policies, supporting obligations, commercial tort claims, cash and cash equivalents, eligible trademarks, proceeds and other personal property.
We issue standby letters of credit under the U.S. Revolving Credit Agreement. Outstanding letters of credit under the U.S. Revolving Credit Agreement reduce the amount of borrowings available to us when issued and, as of January 31, 2026, and February 1, 2025, totaled $5 million and $5 million, respectively.
As of January 31, 2026 and February 1, 2025, we had $116 million and $31 million, respectively, of borrowings outstanding and $203 million and $289 million in unused availability, respectively, under the U.S. Revolving Credit Agreement.
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Compliance with Covenants
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.
Additionally, the U.S. Revolving Credit Agreement contains a financial covenant that applies only if excess availability under the agreement for three consecutive business days is less than the greater of (1) $23.5 million or (2) 10% of availability. In such case, our fixed charge coverage ratio as defined in the 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 (1) $23.5 million or (2) 10% of availability for 30 consecutive days.
We believe that the affirmative covenants, negative covenants, financial covenants and other restrictions under the U.S. Revolving Credit Agreement are customary for those included in similar facilities entered into at the time we amended the U.S. Revolving Credit Agreement. During Fiscal 2025 and as of January 31, 2026, no financial covenant testing was required pursuant to our U.S. Revolving Credit Agreement or the Prior Credit Agreement, as applicable, as the minimum availability threshold was met at all times. As of January 31, 2026, we were compliant with all applicable covenants related to the U.S. Revolving Credit Agreement.
Operating Lease Commitments:
In the ordinary course of business, we enter into long-term real estate lease agreements for our direct to consumer locations, which include both retail store and food and beverage locations, and office and warehouse/distribution space, as well as leases for certain equipment. Our real estate leases have varying terms and expirations and may have provisions to extend, renew or terminate the lease agreement at our discretion, among other provisions. Our real estate lease terms are typically for a period of 10 years or less and typically require monthly rent payments with specified rent escalations during the lease term. Our real estate leases usually provide for payments of our pro rata share of real estate taxes, insurance and other operating expenses applicable to the property, and certain of our leases require payment of sales taxes on rental payments. Also, our direct to consumer location leases often provide for contingent rent payments based on sales if certain sales thresholds are achieved. Base rent amounts specified in the leases are included in determining the operating lease liabilities included in our consolidated balance sheet, while amounts for real estate taxes, sales tax, insurance, other operating expenses and contingent rent applicable to the properties pursuant to the respective leases are not included in determining the operating lease liabilities included in our consolidated balance sheets.
These leases require us to make a substantial amount of cash payments on an annual basis. Base rent amounts required to be paid in the future over the remaining lease terms under our existing leases as of January 31, 2026, totaled $572 million, including $88 million, $80 million, $78 million, $62 million and $52 million of required payments in each of the next five years. Additionally, amounts for real estate taxes, sales tax, insurance, other operating expenses and contingent rent applicable to the properties pursuant to the respective operating leases are required to be paid in the future, but the amounts payable in future periods are, in most cases, not quantified in the lease agreement or are dependent on factors which may not be known at this time. Such amounts incurred in Fiscal 2025 totaled $41 million.
Refer to Note 1 and Note 7 of our consolidated financial statements for additional disclosures about our operating lease agreements and related commitments.
Capital Expenditures:
Capital expenditures of $108 million for Fiscal 2025 decreased compared to the $134 million in Fiscal 2024. The decrease in Fiscal 2025 was primarily due to the opening of fewer new retail stores and Tommy Bahama Marlin Bars in Fiscal 2025 than in Fiscal 2024. We also spent $54 million of capital expenditures related to the new distribution center in Lyons, Georgia in Fiscal 2025 compared to $69 million in Fiscal 2024. Our capital expenditure amounts in future years will fluctuate from the amounts incurred in Fiscal 2025 and prior years depending on the investments we believe appropriate for that year to support future expansion of our businesses.
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Dividends:
On March 23, 2026, our Board of Directors approved a cash dividend of $0.70 per share payable on May 1, 2026 to shareholders of record as of the close of business on April 17, 2026.
Although we have paid dividends each quarter since we became a public company in July 1960, including $42 million in total, or $2.76 per common share, in Fiscal 2025, we may discontinue or modify dividend payments at any time if we determine that other uses of our capital, including payment of outstanding debt, funding of acquisitions, funding of capital expenditures or repurchases of outstanding shares, may be in our best interest; if our expectations of future cash flows and future cash needs outweigh the ability to pay a dividend; or if the terms of our credit facility, other debt instruments or applicable law limit our ability to pay dividends. We may borrow to fund dividends or repurchase shares in the short term subject to the terms and conditions of our credit facility, other debt instruments and applicable law. All cash flow from operations will not be paid out as dividends. For details about limitations on our ability to pay dividends, see the discussion of our U.S. Revolving Credit Agreement above and in Note 6 of our consolidated financial statements contained in this report.
Share Repurchases:
On December 10, 2024, our Board of Directors authorized us to spend up to $100 million to repurchase shares of our stock. This authorization superseded and replaced all previous authorizations to repurchase shares of our stock. During Fiscal 2025, we repurchased 842,007 shares of our common stock at an average price of $59.38 for $50 million as part of an open market repurchase program (Rule 10b5-1 plan) under the December 10, 2024 authorization.
On March 24, 2025, our Board of Directors authorized us to spend up to $100 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. During Fiscal 2025, we repurchased 114,477 shares of our common stock at an average price of $40.46 for $5 million in open market repurchases under the March 24, 2025 authorization.
We repurchased a total of 956,484 shares in open market repurchases at an average price of $57.12 for $55 million during Fiscal 2025. As of January 31, 2026, $95 million remained under the Board of Directors' authorization.
We repurchased no shares in open market transactions in Fiscal 2024 and $20 million in Fiscal 2023.
Additionally, during Fiscal 2025, Fiscal 2024 and Fiscal 2023, we purchased $2 million, $6 million and $10 million, respectively, of shares from our employees to cover employee tax liabilities related to the vesting of shares of our stock.
Other Liquidity Items:
We have not entered into agreements which meet the SEC’s definition of an off balance sheet financing arrangement, other than operating leases, and have made no financial commitments or guarantees with respect to any unconsolidated subsidiaries or special purpose entities.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP in a consistent manner. The preparation of these financial statements requires the selection and application of accounting policies. Further, the application of GAAP requires us to make estimates and judgments about future events that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. We base our estimates on historical experience, current trends and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions. We believe it is possible that other professionals, applying reasonable judgment to the same set of facts and circumstances, could develop and support a range of alternative estimated amounts. We believe that we have appropriately applied our critical accounting policies. However, in the event that inappropriate assumptions or methods were used relating to the critical accounting policies, our consolidated statements of operations could be materially misstated.
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A detailed summary of significant accounting policies is included in Note 1 of our consolidated financial statements contained in this report. The following is a brief discussion of the more significant estimates, assumptions and judgments we use or the amounts most sensitive to change from outside factors.
Revenue Recognition and Accounts Receivable
Our revenue consists of direct to consumer sales, including our retail store, e-commerce and food and beverage operations, and wholesale sales, as well as royalty income, which is included in royalties and other income in our consolidated statements of operations. We recognize revenue when performance obligations under the terms of the contracts with our customers are satisfied, which generally occurs when we deliver our products to our direct to consumer and wholesale customers.
In our direct to consumer operations, which represented 82% of our consolidated net sales in Fiscal 2025, consumers have certain rights to return product within a specified period and are eligible for certain point of sale discounts. We make estimates of reserves for products which were sold prior to the balance sheet date but that we anticipate may be returned by the consumer subsequent to that date. The determination of direct to consumer return reserve amounts requires judgment and consideration of historical and current trends, evaluation of current economic trends and other factors. As of January 31, 2026, our direct to consumer return reserve liability was $9 million compared to $10 million as of February 1, 2025. A 10% change in the direct to consumer sales return reserve as of January 31, 2026 would have had an impact of less than $1 million on net earnings in Fiscal 2025.
In the ordinary course of our wholesale operations, we offer discounts, allowances and cooperative advertising support to some of our wholesale accounts for certain products. 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. Significant considerations in determining our estimates for these amounts for wholesale customers may include historical and current trends, agreements with customers, projected seasonal or program results, an evaluation of current economic conditions, specific program or product expectations and retailer performance. As of January 31, 2026 and February 1, 2025, our total reserves for discounts, returns and allowances for our wholesale businesses were $3 million and $3 million, respectively. If these allowances changed by 10% it would have had an impact of approximately $1 million on net earnings in Fiscal 2025.
We extend credit to certain wholesale customers based on an evaluation of the customer’s financial capacity and condition, usually without requiring collateral. We recognize estimated provisions for credit losses based on our historical collection experience, the financial condition of our customers, an evaluation of current economic conditions, anticipated trends, and the risk characteristics of the receivables, each of which is subjective and requires certain assumptions. As of January 31, 2026 and February 1, 2025, our provision for credit losses for our wholesale receivables was $4 million and $1 million, respectively. The increase in the provision was primarily due to losses associated with the bankruptcy of two wholesale customers. If the provision for credit losses changed by 10% it would have had an impact of less than $1 million on net earnings in Fiscal 2025.
Inventories, net
For operating segment reporting, our inventory is carried at the lower of the first-in, first-out (“FIFO”) cost or market. We evaluate the composition of our inventories for identification of distressed inventory at least quarterly. We estimate the amount of goods that we will not be able to sell in the normal course of business and write down the value of these goods as necessary. As the amount to be ultimately realized for the goods is not necessarily known at period end, we must use certain assumptions considering historical experience, inventory quantity, quality, age and mix, historical sales trends, future sales projections, consumer and retailer preferences, market trends, general economic conditions and our anticipated plans to sell the inventory.
For consolidated financial reporting, $153 million, or 93%, of our inventories were valued at the lower of the last-in, first-out (“LIFO”) cost or market after deducting the $92 million LIFO reserve as of January 31, 2026. The remaining $12 million of our inventories were valued at the lower of FIFO cost or market as of January 31, 2026. LIFO reserves are based on the Producer Price Index (“PPI”) as published by the United States Department of Labor. We write down inventories valued at the lower of LIFO cost or market when LIFO cost exceeds market value.
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As of January 31, 2026, we had recorded a reserve of $1 million related to inventory on the lower of FIFO cost or market method and for inventory on the lower of LIFO cost or market method with markdowns in excess of our LIFO reserve. A 10% change in the amount of such markdowns would have had an impact of less than $1 million on net earnings in Fiscal 2025. A change in the markdowns of our inventory valued at the lower of LIFO cost or market method that is not marked down in excess of our LIFO reserve typically would not be expected to have a material impact on our consolidated financial statements. A change in inventory levels, the mix of inventory by category or the PPI at the end of future fiscal years compared to amounts as of January 31, 2026 could result in a material impact on our consolidated financial statements in the future.
Given the significant amount of uncertainty surrounding the year-end LIFO calculation, including the estimate of year-end inventory balances, the proportion of inventory in each category and the year-end PPI, we have not typically adjusted our LIFO reserve in the first three quarters of a fiscal year. However, due to changes in the levels of inflation throughout Fiscal 2025, in addition to our Fourth Quarter adjustment at the end of Fiscal 2025, we also recognized an adjustment to the LIFO reserve in the Third Quarter of Fiscal 2025. Our policy of typically not adjusting the LIFO reserve at interim periods may result in significant LIFO accounting adjustments in the fourth quarter of a fiscal year. We do recognize changes in markdown reserves during each quarter of the fiscal year as those amounts can be estimated on an interim basis.
Business Combinations
From time-to-time, we make strategic acquisitions that may have a material effect on our consolidated results of operations and financial position. The measurement principle for the assets acquired and the liabilities assumed in a business combination is at estimated fair value as of the acquisition date, with certain exceptions.
At acquisition, we use estimates that can be complex and require significant judgments to record the fair value of purchased intangible assets, which primarily consist of trademarks, as well as customer relationships and reacquired rights. The fair values and useful lives of these intangible assets are estimated based on our assessment as well as independent third party appraisals in some cases. Additionally, at acquisition we must determine whether the intangible asset has an indefinite or finite life and account for it accordingly. Refer to “Note 5—Intangible Assets and Goodwill” for additional details about intangible assets.
Goodwill is recognized as the amount by which the cost to acquire a business exceeds the fair value of identified tangible and intangible assets acquired, net of assumed liabilities. Thus, the amount of goodwill recognized in connection with a business combination depends on the fair values assigned to the individual assets acquired and liabilities assumed in a business combination. Goodwill is allocated to the respective reporting unit at the time of acquisition. Refer to “Note 5—Intangible Assets and Goodwill” for additional information about our goodwill amounts.
At acquisition, assumptions and estimates about various items with significant uncertainty are required to determine the fair value of intangible assets and goodwill. When determining the fair value of intangible assets, including trademarks, customer relationships and other items, significant assumptions may include our planned use of the asset as well as estimates of net sales, royalty income, operating income, growth rates, royalty rates for the trademarks, a risk-adjusted, market-based cost of capital for the discount rates, income tax rates, anticipated cash flows and probabilities of cash flows, among other factors. Our fair value assessment may also consider any comparable market transactions. The use of different assumptions related to these uncertain factors at acquisition could result in a material change to the amounts of intangible assets and goodwill initially recorded at acquisition, which could result in a material impact on our consolidated financial statements.
The acquisition method requires us to record provisional amounts for any items for which the accounting is not complete at the end of a reporting period. We must complete the accounting during the measurement period, which cannot exceed one year. Adjustments made during the measurement period could have a material impact on our financial condition and results of operations. If our operating results, plans for the acquired business and/or macroeconomic conditions, anticipated results or other assumptions change after an acquisition, it could result in the impairment of the acquired intangible assets or goodwill. Also, a change in macroeconomic conditions may not only impact the estimated operating cash flows used in our cash flow models but may also impact other assumptions used in our analysis, including but not limited to, the risk-adjusted market-based cost of capital and/or discount rates.
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Goodwill and Intangible Assets, net
We test goodwill for impairment at the reporting unit level annually on the first day of the fourth quarter and more often if an event occurs or circumstances change that indicate the fair value of a reporting unit is below its carrying amount. We have the option to first assess qualitative factors to determine whether it is more likely than not that goodwill is impaired to determine whether it is necessary to perform the quantitative impairment test. We also have the option to bypass the qualitative assessment entirely for any reporting unit in any period and proceed directly to performing the quantitative impairment test. For each impairment test of goodwill in Fiscal 2025, Fiscal 2024 and Fiscal 2023, we bypassed the qualitative test option and instead performed a quantitative test.
When applying the quantitative assessment, we determine the fair value of our reporting units based on an income approach, or in some cases a combination of an income approach and market approach. The income approach calculates a value based upon the present value of estimated future cash flows, while the market approach uses earnings multiples of similarly situated guideline public companies. Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions, which include assumptions regarding the revenue growth rates and operating margins used to calculate estimated future cash flows, risk-adjusted discount rates and future economic and market conditions. If an annual or interim analysis indicates an impairment of goodwill, the amount of the impairment is recognized in our consolidated financial statements based on the amount that the carrying value exceeds the estimated fair value of the reporting unit.
Intangible assets with indefinite lives, which primarily consist of trademarks, are not amortized but instead evaluated for impairment annually or more frequently if events or circumstances indicate that the intangible asset might be impaired. This analysis is dependent upon a number of uncertain factors described below and is typically performed in conjunction with the goodwill impairment analysis discussed above and is similar to the analysis performed at acquisition.
The fair value of our trademarks is principally determined by the “relief from royalty” approach that assumes the trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method includes assumptions regarding revenue growth rates, royalty rates, risk-adjusted discount rates and future economic and market conditions. If an annual or interim analysis indicates an impairment of an intangible asset with an indefinite useful life, the amount of the impairment is recognized in our consolidated financial statements based on the amount that the carrying value exceeds the estimated fair value of the asset for an intangible asset with an indefinite life or the reporting unit for goodwill.
Indefinite-lived intangible assets and goodwill that have been recently acquired or impaired are typically much more sensitive to changes in assumptions than other intangible asset and goodwill amounts as those amounts have recently been recorded at or adjusted to fair value. Consequently, if operating results, plans for the acquired business and/or macroeconomic conditions change after an acquisition, it could result in the impairment of the acquired intangible assets or goodwill. A change in macroeconomic conditions may not only impact the estimated operating cash flows used in our cash flow models but may also impact other assumptions used in our analysis, including but not limited to, the risk-adjusted market-based cost of capital and/or discount rates. Additionally, we are required to ensure that assumptions used to determine fair value in our analyses are consistent with the assumptions a hypothetical market participant would use. Therefore, the cost of capital discount rates used in our analyses may increase or decrease based on market conditions and trends regardless of whether our actual cost of capital changed.
The use of different assumptions could result in the determination of a different fair value and a different impairment charge or charges in different periods. For further discussion of the methods used and factors considered in our estimates as part of the impairment testing for goodwill and intangible assets with indefinite lives see “Note 1—Business and Summary of Significant Accounting Policies.”
In the Third Quarter of Fiscal 2025, we recognized goodwill and indefinite-lived intangible assets impairment charges totaling $59 million, including $57 million related to Johnny Was intangible assets and $2 million related to Jack Rogers goodwill. Refer to “Note 5—Intangible Assets and Goodwill Intangible” for discussion of the impairment charges recognized in Fiscal 2025. The indefinite-lived trademark associated with Johnny Was and goodwill associated with Jack Rogers, that were both acquired in recent years and impaired and adjusted to fair value during Fiscal 2025, had the least excess of fair value over book value as of January 31, 2026 and February 1, 2025. Thus, if the Johnny Was and Jack Rogers businesses do not achieve the anticipated growth and profitability in future years, or if other significant estimates and assumptions change, additional impairments of the Johnny Was and Jack Rogers intangible assets could be necessary in the future.
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No goodwill and indefinite-lived intangible assets impairment charges were recognized in Fiscal 2024.
Intangible assets with finite lives primarily consist of customer relationships, certain trademarks and reacquired rights. These assets are amortized over their estimated useful lives and reviewed for impairment periodically if events or changes in circumstances indicate that the carrying amount may not be recoverable. If the assets are determined to not be recoverable on an undiscounted cash flow basis and the expected future discounted cash flows of the asset group are less than the carrying amount, an asset group is impaired and a loss is recorded for the amount by which the carrying value of the asset group exceeds its fair value.
In the Third Quarter of Fiscal 2025, we recognized finite-lived intangible assets impairment charges of $2 million related to Jack Rogers. Refer to “Note 5—Intangible Assets and Goodwill” for discussion of the impairment charges recognized in Fiscal 2025. If the Jack Rogers business does not achieve anticipated growth and profitability in future years, or if other significant estimates and assumptions change, additional impairments of the Jack Rogers intangible assets could be necessary in the future.
No finite-lived intangible assets impairment charges were recognized in Fiscal 2024.
Other Fair Value Measurements
For many assets and liabilities, the determination of fair value may not require the use of many assumptions or other estimates. However, in some cases the assumptions or inputs associated with the determination of fair value may require the use of many assumptions which may be internally derived or otherwise unobservable. These assumptions may include the planned use of the assets, anticipated cash flows, probabilities of cash flows, discount rates and other factors. We use certain market-based and internally derived information and make assumptions about the information in (1) determining the fair values of assets and liabilities acquired as part of a business combination, (2) adjusting recognized assets and liabilities to fair value and (3) assessing recognized assets for impairment, including intangible assets, goodwill and other non-current assets.
From time to time, we may recognize asset impairment or other charges related to certain lease assets, property and equipment or other amounts associated with us exiting direct to consumer locations, office space or otherwise. In these cases, we must determine the impairment charge related to the asset group if the assets are determined to not be recoverable on an undiscounted cash flow basis and the expected future discounted cash flows of the asset group are less than the carrying amount. While estimated cash outflows can be determined, in certain cases, if there is an underlying lease, the timing and amount of estimated cash inflows for any sublease rental income and other costs are often uncertain, particularly if there is not a sub-lease agreement in place. Also, we could subsequently negotiate a lease termination agreement that would differ from the estimated amount. Thus, our estimate of an impairment charge related to an asset group could change significantly as we obtain better information in future periods.
Income Taxes
Income taxes included in our consolidated financial statements are determined using the asset and liability method, in which income taxes are recognized based on amounts of income tax payable or refundable in the current year as well as the impact of any items that are recognized in different periods for consolidated financial statement reporting purposes and tax return reporting purposes. Significant judgment is required in determining our income tax provision as there are many transactions and calculations where the ultimate tax outcome is uncertain and tax laws and regulations are often complex and subject to interpretation and judgment. These uncertainties relate to the recognition or changes to the realizability of deferred tax assets, loss carry-forwards, valuation allowances, uncertain tax positions and other matters. Our assessment of these income tax matters requires our consideration of taxable income and other items for historical periods, projected future taxable income, projected future reversals of existing timing differences, tax planning strategies and other information.
The use of different assumptions related to the income tax matters above, as well as a shift in earnings among jurisdictions, changes in tax laws, enacted rates or interpretations, court case decisions, statute of limitation expirations or audit settlements, each could have a significant impact on our income tax rate.
We are subject to income taxes in the U.S. and certain other foreign jurisdictions and are periodically under audit by tax authorities. The final determination of tax audits could be materially different from historical outcomes and may adversely impact our tax expense and cash flows. An increase in our consolidated income tax expense rate from 26.9% to
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27.9% during Fiscal 2025 would have changed net earnings by less than $1 million. See Note 11 of our consolidated financial statements included in this report for further discussion of income taxes.
RECENT ACCOUNTING PRONOUNCEMENTS
Refer to Note 1 of our consolidated financial statements included in this report for a discussion of recent accounting pronouncements issued by the FASB that we have not yet adopted that may have a material effect on our financial position, results of operations or cash flows in the future.
SEASONALITY
Each of our operating segments 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 information regarding the impact of seasonality on our business operations, see Part I, Item 1, Business, included in this report.
