Oxford Industries: Impressive Quarterly Performance (NYSE:OXM)

Investment Thesis: I take a long-term bullish view on Oxford Industries due to strong growth in net sales across the Tommy Bahama range, along with an attractive EV/EBITDA ratio.

In a previous article back in June, I made the argument that Oxford Industries, Inc. (NYSE:OXM) could be poised to see an upside once the broader macroeconomic situation improves, and provided that the stock could hold sufficient cash reserves to compensate for a potential slowdown in growth. I also expressed my view that the stock could potentially be undervalued from an earnings standpoint.

While the stock recently saw a sharp drop – Oxford Industries is still up by just over 7% since my last article:

The purpose of this article is to evaluate whether the stock could see further upside from here on the basis of recent earnings results.

Performance

When looking at recently released results, we can see that net sales for the Tommy Bahama range performed particularly strongly – up by 17% from that of Q2 2021:

Moreover, the company also raised cash, cash equivalents and short-term investments to $186 million from a prior $180 million at the end of Q2 2021. However, it is worth qualifying that the majority of cash and cash equivalents from last year now comprise short-term investments – this could potentially allow Oxford Industries to keep its overall cash reserves in line with inflation.

While the company’s total current liabilities increased slightly on that of last year – it is still encouraging that Oxford Industries has not had to incur long-term debt.

Moreover, on both a basic and diluted basis – we can see that earnings are up significantly compared to both Q2 2021 and the first half of the Fiscal 2021 year:

Given that we have seen strong growth in both earnings and dividends – the recent sell-off in the stock may have been profit-driven – or investors may not have been expecting strong quarterly performance as we have subsequently seen.

Looking Forward

As we head into the winter months – there is a possibility that the strong net sales growth we have been seeing for the Tommy Bahama range could start to weaken owing to seasonal fluctuations in demand.

From an earnings standpoint – we can see that EBITDA per share is at a five-year high – while the EV to EBITDA ratio is still trading below levels seen pre-2020.

From this standpoint, I maintain the view that there could still be longer-term upside in the stock going forward – particularly given recent performance.

I had previously cautioned that with a significant portion of the Tommy Bahama range being produced in China – the company could see supply chain issues going forward. However, given that net sales growth does not seem to be been impeded greatly in the most recent earnings release – I take the view that the company is in a good position to withstand broader supply chain issues – even with China continuing to impose lockdowns to control COVID-19 outbreaks.

Moreover, while inflation has been a concern – the growth that we have continued to see across the Tommy Bahama range indicate that customers are still willing to pay a premium for luxury lifestyle clothing.

Conclusion

To conclude, Oxford Industries has seen a strong earnings quarter. While inflation and a drop in seasonal demand could mean a short-term dip for the stock, I continue to take a long-term bullish view.

Additional disclosure: This article is written on an “as is” basis and without warranty. The content represents my opinion only and in no way constitutes professional investment advice. It is the responsibility of the reader to conduct their due diligence and seek investment advice from a licensed professional before making any investment decisions. The author disclaims all liability for any actions taken based on the information contained in this article.