Oxford Industries Inc

NYSE:OXM

Earnings Call Analysis

Oxford Industries Reports Lower Q2 Sales and Adjusts Full-Year Forecast

In the second quarter of fiscal 2024, Oxford Industries saw net sales of $420 million, falling short of their $430-$450 million guidance. The adjusted EPS was $2.70, amid a challenging consumer environment. Adjusted gross margin fell by 100 basis points to 63.3%, driven by increased promotional activity. Inventory levels improved by 13%, and the company ended the quarter with $18 million in cash. However, due to ongoing consumer caution, the full-year sales forecast has been revised down to $1.51-$1.54 billion. With strategic initiatives in place, Oxford remains optimistic about long-term growth but wary of near-term financial headwinds.

Navigating Consumer Sentiment Challenges

In the second quarter of fiscal 2024, Oxford Industries reported sales of $420 million and an adjusted EPS of $2.70, both below expectations. The company pointed to a significant pullback in consumer spending, with consumer sentiment hitting an eight-month low. This decline was particularly concerning as the company targets affluent customers, who are more sensitive to economic trends. Despite a strong traffic flow to stores, conversion rates fell, indicating that consumers were interested but hesitant to spend. The management attributed the slowdown to several factors: a crowded promotional landscape, increased consumer caution, and strategic missteps in product offering timings.

Market Dynamics and Sales Performance

Sales trends varied across channels. Outlet stores saw a 4% increase, benefiting from consumers seeking bargains. However, the full-price retail locations experienced only a 1% rise, hampered by low conversion rates and diminished consumer spending power. The wholesale channel fell by 5%, underscoring the strain felt in this segment. E-commerce and food and beverage sales remained flat year-over-year, also reflecting the soft consumer demand across the board. Given these dynamics, presumable risks linger for the remaining fiscal year.

Revised Guidance for the Fiscal Year

Looking ahead, Oxford has adjusted its sales expectation for the full year to between $1.51 billion and $1.54 billion, marking a decrease of 2% to 4% compared to 2023's $1.57 billion. Expectations for comparable sales now predict declines in the low to mid-single-digit range across key brands like Tommy Bahama and Lilly Pulitzer. On a more granular level, for Q3 of 2024, expected sales are projected between $310 million and $325 million, a reduction from the prior year's comparative period.

Margins and Profitability Outlook

Margins are expected to compress, with gross margins projected to decline by approximately 50 to 100 basis points largely due to increased promotional activities aimed at driving sales. Furthermore, SG&A expenditures are anticipated to grow faster than sales, driven by investments in expanding store operations and the undetermined costs associated with the Jack Rogers brand, which is expected to incur an operating loss of approximately $2.5 million this year. All of this results in a revised adjusted EPS forecast ranging between $7.00 and $7.30, a significant drop from the previous year's $10.15.

Strategic Focus Moving Forward

In response to the shifting market and economic landscape, Oxford is embracing a strategy focused on innovation and product differentiation to entice consumers. New collections, such as the 'Indigo Palms' line for Tommy Bahama, have already shown promise in early reception. Management is also looking to refine promotional strategies, with plans to initiate targeted marketing campaigns and promotional events earlier in the season to boost sales momentum. The emphasis on value through curated promotions reflects an urgent need to adapt to current consumer behavior.

Resilient Financials Amid Market Pressures

Despite disappointing performance and outlook, Oxford Industries maintains a robust balance sheet, with reduced inventories compared to the previous year. They continue to generate strong cash flow, allowing investments in future growth and the ability to return value to shareholders through dividends. With targeted investments and strategic operational shifts, the company remains confident in its potential to navigate current challenges and strengthen relationships with consumers.

Earnings Call Transcript 2025-Q2

[Operator]

Greetings, and welcome to the Oxford Industries Second Quarter Fiscal 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to turn the call over to Brian Smith. Thank you, Brian. You may begin.

[Brian Smith, executive]

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

During this call, we will be discussing certain non-GAAP financial measures. You will find a reconciliation of non-GAAP to GAAP financial measures in our press release issued earlier today, which is posted under our Investor Relations tab of our website at oxfordinc.com.

I'd now like to introduce today's call participants. With me today are Tom Chubb, Chairman and CEO; and Scott Grassmyer, CFO and COO.

Thank you for your attention. And now I'd like to turn the call over to Tom Chubb.

[Thomas Chubb, executive]

Good afternoon, and thank you for joining us. I'm going to start with an update on the execution of our plan for the second quarter of fiscal 2024 and our current expectations for the balance of the year. During the second quarter, we continued to make excellent progress on long-term strategic goals but fell short of delivering on our near-term financial targets.

Sales of $420 million and adjusted EPS of $2.70 for the quarter were below our guidance range primarily due to a continued pullback from the consumer. The pullback worsened sequentially during the quarter, coinciding with consumer sentiment hitting an 8-month low in July with a trend continuing into August and the start of our third quarter. While most underlying economic indicators remain reasonably strong, the cumulative effect of several years of inflation may be catching up with the consumer.

Simultaneously, the second quarter was also marked by several national and global noteworthy events that led to a more distracted consumer at several points over the summer. Certain factors that we may believe may have amplified these headwinds with respect to our particular business, include: first, our focus on affluent 45 and up customers who tend to be more headline and market sensitive.

Second, our significant exposure to Florida which accounts for over 1/3 of our bricks and mortar business and grew at an exceptional pace coming out of the pandemic, but has slowed down as the new post-pandemic world settles in. And finally, some commercial and merchandising missteps on our part, including assortment misses and timing of promotional events.

The slowdown we experienced in our business has been driven by reduced conversion, while traffic has remained strong, which indicates that consumers are very interested in our leading brands but have become cautious when making purchase decisions.

Looking across the marketplace, the 2 areas where the consumer continues to respond positively are newness and value. During the quarter, we saw a strong full price response to fashion and new and differentiated products, while interest in core styles was more muted. The consumer also responded to value in the quarter with a higher proportion of sales during the quarter, occurring during promotional events and at our outlet stores than in last year's second quarter.

The greater proportion of off-price selling put pressure on gross margin versus our expectation, which, along with lower-than-anticipated sales resulted in operating margin, operating profit and ultimately EPS that were below our plan.

Importantly, our balance sheet remains strong. Inventories were down on a year-over-year basis to end the quarter while strong cash flows allowed us to continue investing in the future of our business, including investing in our store pipeline and Lyons, Georgia distribution center project which Scott will detail shortly, pay off our debt and return cash directly to shareholders through our quarterly dividend.

For the balance of the year, we expect to continue to see a more cautious consumer and accordingly, we have reduced our forecast for the year. Our playbook for achieving forecasted results will be, as always, to protect the strength and integrity of our brands for the long term by avoiding brand damaging shortsighted reactions to current market conditions.

At the same time, we will create excitement and enthusiasm for our brands via some specific initiatives in the second half. These include new collections such as our Tommy Bahama Indigo Palms' collection of denim and denim-friendly products, which launched early in the third quarter. Initial reception to the collections launch has been strong. The Indigo Palms collection encompasses a range of styles for both men and women and the early success is fueling our optimism for how it can help us continue to build and grow our business going forward in both our direct channels as well as wholesale.

By offering our guests a completely on brand assortment of Tommy Bahama product that is appropriate for cooler weather, it enhances our ability to be relevant in the cooler months, particularly in the western part of the country, the Midwest, the Mid-Atlantic and the Northeast. Also in the denim universe, Johnny Was collaborating with Sussan denim playing to Nostalgia for the original premium denim brand and featuring a beautiful marketing campaign with Lily Aldridge as the face of the brand. A campaign like this is new territory for us, and we are excited to see what we learned from it.

From a value perspective, we will again protect the integrity of our brands, but within that constraint, offer plenty of opportunities for our customers to get lots of value for their money in brand-friendly ways. Some examples of this include the seasonal Lilly Pulitzer flash sale which is happening right now, and our holiday marketing plans, which feature special value products, gift with purchase, gift cards, bounce back deals and many others.

In addition to our focus on top line initiatives, our second half will include focus on our operating margin with a keen interest in opportunities for SG&A reductions. As an example, we invested in the relocation of Johnny Was distribution center operations from high-cost distribution centers in Los Angeles to Lyons, Georgia that will result in significant operating cost reductions that Scott will discuss more in a minute. We will also continue to look across all areas of business for opportunities to reduce SG&A spend without impairing our future growth prospects.

While we are disappointed in our recent performance and revised outlook for this year, our teams have successfully navigated challenging economic cycles before, and I am confident that we have the right people and strategies in place to emerge on the other side of this difficult market with the health of our brands and our consumer connections stronger than ever.

Thanks for your attention, and I will now turn the call over to Scott for additional detail. Scott?

[K. Grassmyer, executive]

Thank you, Tom. As Tom mentioned, there were several macroeconomic headwinds across the marketplace that negatively affected our financial results during the quarter. Most notably lower consumer sentiment and an increase in the promotional environment. Despite these headwinds, our teams are focused on executing against our strategies of delivering newness and compelling products that resonate with consumers to combat these challenges and encourage full price selling.

In the second quarter of fiscal 2024, consolidated net sales of $420 million were comparable to the second quarter of fiscal 2023 and below our initial guidance range of $430 million to $450 million. Notably, sales in our outlets increased 4% and as this channel benefited from consumers looking for deals and promotions while sales in full price brick-and-mortar locations were up 1%, driven by new stores and increased promotional activity, partially offset by low single-digit negative comps.

Our wholesale channel, which was particularly challenging in the first quarter of this year, had a difficult second quarter with sales down 5% compared to the second quarter of 2023 as the specialty store business across our brands continues to struggle, partially offset by increased sales to major department stores. E-commerce and food and beverage sales were relatively flat compared to the second quarter of 2023.

Adjusted gross margin contracted 100 basis points to 63.3%, driven primarily by a higher proportion of net sales occurring during promotional events in Tommy Bahama, Lilly Pulitzer and Johnny Was. Across our 3 brands, we saw a strong response from consumers to our promotions -- promotional and indices and clearance events. We were able to partially offset this decrease in our Emerging Brands group through our continued efforts to improve our inventory position and reduce the need for all price, wholesale and promotional direct-to-consumer sales.

Adjusted SG&A expenses increased 5.7% to $213 million compared to $202 million last year. During the second quarter of fiscal 2024, we incurred higher expenses related to recent and ongoing investments in our business, primarily from the addition of 30 new brick-and-mortar locations opened since the second quarter of last year and the addition of Jack Rogers brand acquired in the fourth quarter of 2023. We also have incurred costs on some of the approximately 15 net new brick-and-mortar locations, including 4 Marlin Bar locations that we expect to open in the second half of the fiscal year.

Additionally, we incurred approximately $1 million of expenses, which are emitted from adjusted SG&A associated with the relocation of Johnny Was' distribution center operations from Los Angeles to Georgia. We expect to incur an additional $1 million of charges related to the relocation in the second half of the year but are projecting this move to save Johnny Was approximately $4 million in operating costs per year with the potential for additional savings.

The result of this yielded -- excuse me, the results of this yielded $57 million of adjusted operating income or 13.5% operating margin compared to $73 million or 17.3% in the prior year. The decrease in adjusted operating income reflects the SG&A investments amidst the challenging consumer environment for sales and gross margin.

Moving beyond operating income. Our effective tax rate was flat. Our interest expense was $1 million lower compared to the second quarter of 2023, resulting from lower average debt levels. With all this, we achieved $2.77 of adjusted EPS.

I'll now move on to our balance sheet, beginning with inventory. During the second quarter of fiscal 2024, we were able to decrease inventory by 6% or 13% or $13 million year-over-year on a FIFO basis. The decrease in inventories resulted from our continued inventory discipline across our portfolio. We're also able to repay our remaining outstanding debt and ended the quarter with an $18 million cash position.

From a liquidity standpoint, our $122 million of cash flows from operations in the first half of fiscal 2024 allowed us to fund our elevated level of capital expenditures of $54 million and pay $22 million of dividends, all while being able to repay the $29 million of borrowings that was outstanding at the end of fiscal 2023.

I'll now spend some time on our outlook for 2024. We finished the second quarter fiscal '24 with negative comps of 1%, which was lower than our previous forecast of mid-single-digit positive comps for the quarter. Similar to the results we saw in the second quarter, comp sales figures in the third quarter to date are negative. We believe the negative comp trend will continue and result in negative comps in the low to mid-single-digit range for the remainder of the year on top of similar comps in the prior year. These assumptions compared to our previous expectations from June that assume mid-single-digit positive comps for the remainder of the year, and we revised our sales forecast accordingly.

For the full year, we now expect net sales to be between $1.51 billion and $1.54 billion or a decline of 2% to 4% compared to sales of $1.57 billion in 2023. Our updated sales plan for 2024 now includes low to mid-single-digit sales declines in Tommy Bahama and Lilly Pulitzer, partially offset by sales growth in the low single-digit range for Johnny Was and Emerging Brands Group.

By channel, wholesale comprises the majority of the sales decrease with a partial offset from a slight increase in our direct-to-consumer channels. We expect wholesale sales which were down approximately $20 million in the first half of the year to be relatively flat in the second half of the year compared to fiscal 2023 as we go against easier comps relative to what we saw in the first half.

In our direct-to-consumer channels, we expect growth in our outlets as those locations continue to perform well in the current environment, and in our full-price retail food and beverage locations that will benefit from the addition of the approximately 30 new locations during the year. We expect sales in our e-commerce channel will be flat to slightly negative for the year.

Looking across the marketplace, there are many macroeconomic risks and uncertainties that could affect our outlook, including consumer headwinds and industry trends that we have already discussed. They're also the upcoming elections in November and the related consequences that could have the potential to disrupt demand. Other challenges, including the shipping disruptions to global trade caused in part by the attacks in the Red Sea, also have the potential to disrupt the supply of goods across the economy and increased freight cost.

We now anticipate gross margin for the year will decline by approximately 50 to 100 basis points compared to the prior year as expected increased activity during promotional events across our brands will more than offset the gross margin benefit from proportionally lower wholesale sales. We also anticipate a slightly negative impact in the second half from an increase in freight rates.

Our guidance contains our best estimate of the impact of that increased freight will have on our earnings. In addition to slightly lower sales and negative gross margin, we expect SG&A to grow at a rate higher than sales in 2024, primarily due to the investments in our business, including expanding our store count by the net of approximately 30 locations with 5 new Tommy Bahama Marlin Bars, continued IT investments and the addition of Jack Rogers. Additionally, as discussed during our last call, we expect the Jack Rogers brand acquired in the fourth quarter of fiscal 2023 to generate an operating loss of approximately $2.5 million in 2024 as we reset and refocus the business. We also anticipate lower interest expense of $2 million for the year compared to $6 million in 2023 and higher royalty and other income, primarily from a full year of the time Bahama Miramonte Resort.

Additionally, we expect a higher adjusted effective tax rate of approximately 24% compared to 23% in 2023, which benefited from certain favorable items that are not expected to reoccur in 2024.

Considering all these items, we expect operating margin to decrease from 2023 levels and now expect 2024 adjusted EPS to be between $7 and $7.30 versus adjusted EPS of $10.15 last year, with decreases in all of our businesses and a higher tax rate being partially offset by the lower interest expense and higher adjusted royalties and other income.

In the third quarter of 2024, we expect sales of $310 million to $325 million compared to sales of $327 million in the second quarter of 2023. We also expect gross margin to contract by approximately 50 to 100 basis points with the trend of increased sales during promotional events expected to continue. SG&A deleveraging $1 million of lower interest expense and a flat royalty in other income. We expect this to result in third quarter adjusted EPS between $0 and $0.20 compared to $1.01 in the third quarter of 2023.

Given our fixed cost structure and the seasonality of our business, the third quarter is typically the smallest of the year from a sales and EPS perspective and will be further impacted in 2024 by heavy preopening costs for new stores and Marlin Bars, expanding on the investments we are making in 2024.

I'd like to briefly discuss our updated CapEx outlook for the remainder of the year due to refined cash flow timing projections for our Lyons, Georgia distribution center project and adjustments to other capital projects. Capital expenditures in fiscal 2024 have been moderated and are now expected to be approximately $150 million, including $54 million incurred during the first half of the year, compared to $74 million in fiscal 2023, with approximately $75 million related to the significant multiyear project to build a new distribution center in Lyons, Georgia that will enhance the direct-to-consumer throughput capabilities of our brands.

The remaining capital expenditures related to the execution of our pipeline of Marlin Bars increases in store count across Tommy Bahama, Lilly Pulitzer, Johnny Was, Southern Tide and The Beaufort Bonnet Company and increased investment in our various direct-to-consumer technology systems initiatives. We expect this elevated capital expenditure level to moderate in 2025 and further moderate in 2026 and beyond after the completion of the Lyons, Georgia project.

We also have a positive outlook on our cash and liquidity position as well. Cash flow from operations are expected to remain to be very strong, giving us ample room to fund the previously mentioned investments. Our quarterly dividend and limited need to borrow under our revolver. Although we do expect a modest deposition for much of the second half due to the elevated capital expenditures.

Thanks for your time today. We'll now turn the call over for questions. Paul?

[Operator]

[Operator Instructions] Our first question is from Ashley Owens with KeyBanc Capital Markets.

[Chandana Naga Madaka, analyst]

This is Chandana Madaka on for Ashley. So I just wanted to dig into maybe a little bit more about how you're thinking about promotional events going into the back half. Maybe any color you could provide there by brand, just now that they are thinking around promotions a little bit differently? I also wanted to see if you could dig in further for us on what you're hearing from wholesale partners, maybe an update on the order books?

[Thomas Chubb, executive]

Okay. So on the promotions, I wouldn't say that we're really thinking about it differently. I think what we're thinking is just we recognize that they're going to be very important this year, especially as they always are during the holiday period. So we're going to start a bit earlier. As you know, the shopping season is about 5 days, [ shouldn't or about ]. It's exactly 5 days shorter this year than it was last year. So it's going to be important that we jump on at the beginning of the November.

We're going to have an assortment of mailers. We're doing a mailer in Tommy Bahama that we haven't done in a couple of years. So that would be a little bit of a change. We've got a great gift with purchase offering that we're going to do over the Cyber Weekend, starting with Black Friday and going through the weekend, actually starting on Thursday, I believe. We've got our normal gift cards. We've got bounce-back sales, we will have the Lilly Pulitzer flash sale in January.

So it's really the same types and things. I think it's just that our focus on those, maybe it will be a little bit more intent than it has been in the past. In terms of the wholesale performance that Scott mentioned in his prepared remarks, the year overall has been tougher in the wholesale. We do expect the second half to be about flat with last year, which the first half was down, I think, about 5% or so. But our performance with our majors, which is where we have the most visibility to how we're doing, it's actually been quite good. And I think as we're starting to see spring bookings, we're actually encouraged with what we're seeing there.

[Operator]

Our next question is from Dana Telsey with Telsey Advisory Group.

[Dana Telsey, analyst]

As you think about the state of the consumer and what you saw in outlets versus the other channels of distribution with the brands with Tommy with Lilly, what are you seeing that's different? How did the cadence of the quarter go and are there categories that performed better or worse than others and with the promotional environment, how deep are the markdowns and how you're thinking about promotions for Q3 and Q4?

[Thomas Chubb, executive]

Okay. Thank you, Dana. So the cadence of the quarter, as we mentioned was that it got worse sequentially through the quarter. May was actually an okay month. June softened a bit, but not terribly and then July got a lot worse, especially in the back half of July. And then as we mentioned, August was weak as well.

In terms of what the consumer is looking for, as you know, I think very well, it is a value-driven market right now. We are intent on maintaining our strategy of being a full portfolio of full price premium brands, and we're not really veering away from that. But we are going to be paying a lot of attention and be very focused on sort of the types of promotional activities that you've seen from us in the past, Dana.

And then as we mentioned in our prepared remarks, we -- during the second quarter, did a greater proportion of our sales during those events. We may have had a little bit more in terms of the number of promotional days. But the biggest factor was just that was the time when the consumer was most interested in shopping in the time where they were most interested in converting, if you will.

I would say that the discounts were also a little bit steeper during the second quarter. And I think it's reasonable to expect that we're going to see a similar pattern in the third and fourth quarter. And that is what we built into our guidance. And Scott, you may want to reiterate and elaborate on our guidance a bit.

[K. Grassmyer, executive]

Yes. As we mentioned in the call, we have moderated the comps where we were expecting positive comps in our earlier guidance. And we moderated down to kind of the low to mid-single-digit range. And just basically what we've been seeing recently in the state of the consumer, we just thought it was prudent to do that. And we do have the shorter period between Thanksgiving and Christmas, and we do think it's going to be a promotional period. And we're going to try to do similar type of bets but as we found in the second quarter, we tended to have a little bit more inventory to fuel those events than we might have last year, which did erode gross margin a little bit.

[Thomas Chubb, executive]

And then, Dana, in terms of products, I would say anything that's truly new, truly innovative, truly differentiated are the products that are most likely to get the consumers' attention. And then just broadly, I would say that the more casual categories, the athleisure-type product, Swim has been slower. Those types of things have been slower. Dresses have really been strong across the portfolio and more the dress year end of the spectrum, I would say, the more presentable end of the spectrum, I think, is where we've seen the relative strength in general.

[Dana Telsey, analyst]

And then just picking apart freight costs, how are you thinking about the puts and takes on margins?

[K. Grassmyer, executive]

Yes. We built in about 15 to 20 basis points in margin hit due to elevated freight. So it's not a huge, huge amount. We are watching -- and that's mainly some of the Red Sea issues that have inflated rates. We are seeing -- we are watching closely the East Coast situation with the union negotiations. And are diverting some product to the West Coast and then we'll have to bring it across the country in some cases. So that's something we continue to watch. But we have built in some disruption from that. Obviously, if the East Coast ports do go on strike, that's going to be a disruptor to, I think, everyone.

[Dana Telsey, analyst]

And then just one last thing. With the change in business patterns, any -- whether it's marketing or store openings or Marlin Bars, any adjustments that you're thinking about, whether in terms of timing or shifts in how you're thinking about any of the initiatives?

[Thomas Chubb, executive]

Not really. We're pretty much full steam ahead.

[K. Grassmyer, executive]

On the growth initiatives. We are -- SG&A is something we always look at, but it's obviously, we're looking at opportunities there when they present themselves. We mentioned the Johnny Was' distribution center move, which we -- was going to save us a bit of money and we're looking at other opportunities to reduce SG&A. But as far as growth initiatives, we're moving forward.

[Thomas Chubb, executive]

Which would include the stores that we're opening, the Marlin Bars and the distribution center in Lyons. And look, Dana, we don't -- we believe that this is at worst an old school recession, maybe not even that. It's not the type of event that we saw in the pandemic or the financial crisis. And we want to be ready when business starts to pick up.

We believe in our direct-to-consumer channels as we do our wholesale channel, and building stores and Marlin Bars and having a DC that can serve us both retail, wholesale and our e-com business is going to be very important as we get a year or 2, 3 years out. So we want to make sure that we're there. These are long-term projects that we need to manage for the long term.

[Operator]

Our next question is from Mauricio Serna with UBS.

[Mauricio Serna Vega, analyst]

I guess maybe if you could elaborate a little bit more on the promotional activity across each of 3 big brands. I know I recall like there was some shift in promotional events in Lilly Pulitzer. But outside of that, like anywhere where you saw, like promotions really surprised you on the negative side? And like just a bit more detail on that would be very helpful.

[K. Grassmyer, executive]

I would -- Mauricio, I'd say is this more we just had -- we sold through a bit less at full price than we expected, so we had more inventory when we did Tommy's end of the season sale had more inventory than did the prior year, Lilly, Johnny Was. That was more the case. So it just resulted in -- and you had a consumer much more willing to buy during those events. So it wasn't that we had major change in the events or were majorly different on the degree of discounts. It was -- there was just more inventory available that sold. So we've kind of traded some full price sales for off-price sales during typical clearance periods.

[Mauricio Serna Vega, analyst]

Understood. And then just a quick follow-up. Surprised to see also kind of like the slowdown on the restaurant business. Could you elaborate a little bit more about what happened there? And lastly, could you remind us the comp sales, the compares you're up against in the second half of the year? I think, yes, just to be mindful of that.

[Thomas Chubb, executive]

Yes. I think the restaurants slowdown. As you know, Mauricio, the restaurants just had not slowed down really up until the second quarter. They had been extremely strong as they reopened. Even during the pandemic when service was much more limited, they were quite strong and then just had been super strong. And I think a little bit of that has slowed down. Florida, for example, is a big restaurant market. And as we talked about, in the retail business in Florida as well, which had been just sort of nonstop go, go, go since the pandemic. And it sort of settled down to where it was performing more like the rest of the country during the quarter.

[K. Grassmyer, executive]

As far as comps, last year, Q3 and Q4, we're kind of that -- we're kind of in the 3% to 5% range negative. And so we're projecting similar type comps in our second half this year, and where before we were projecting positive comps. So that's the big change in guidance is really that comp movement is the biggest change.

[Thomas Chubb, executive]

And we're going to be working very hard, of course, Mauricio to try to turn that negative comp assumption into a positive result. But given what we've seen over the last 6 or 8 weeks, we just thought it was prudent to lower that expectation.

[Operator]

Our next question is from Janine Stichter with BTIG.

[Janine Hoffman Stichter, analyst]

So to start out, on the consumer, you went through a whole host of factors that might have contributed to the slowdown. I think you talked about distraction and inflation and merchandising missteps. Maybe just help us rank order in your opinion, which are the most meaningful in terms of the change you've seen in the top line trend? And then within that, we'd love some more context around Florida. It grew a lot in the years after COVID and you're talking about some normalization. Just maybe your thoughts on what inning we're in with the normalization there? And maybe some context on how much it grew post-COVID?

[Thomas Chubb, executive]

So with respect to Florida, what I want to be very clear about is that it's not underperforming so much the rest of the country is that it's just no longer outperforming the rest of the country, which was really what happened continuously for the 3 previous years was that it outperformed everybody else. Now it's sort of more running with the pack. What I believe we're going to see going forward, at least for the next several quarters is that it's probably just going to run with the pack a bit more.

So if things pick up nationally, I would expect Florida to pick up with that, I believe. And if they don't pick up as quickly, I think, Florida will sort of stay more or less where most of the other regions are. And then in terms of trying to rank order the 3 factors that we talked about, the headline distraction, Florida and the merchandising missteps, kind of hard to do that. I would say that they're all meaningful factors, Janine, I think they all had a material impact on results.

There's some data from a big advertising agency that sort of supports our theory on the headline distraction where they looked at, I think, over 100 brands that mostly cater to a 45 and up type consumer and saw that during July, they were down 14% year-over-year and that would tend to support the theory that, that was a material factor for us. Our merchandising missteps, some of them we can measure a little bit more than others. But we, again, think that they were material.

And then the Florida thing, I mean, it's 1/3 of our business, and it went from -- 1/3 of our retail business. And it went from a significant outperform to running with the plaque, which cost us a lot of incremental contribution dollars.

[Janine Hoffman Stichter, analyst]

Okay. Great. And then on the merchandising missteps, it sounds like you have a lot of things already in the works, but I just would love to hear your sense of when we should expect to see some improvement there?

[Thomas Chubb, executive]

Well, certainly, on a year-over-year basis, as we get to the second quarter of next year, they're all completely fixable. Undoubtedly, we will make some other missteps next year. It's a part of the business. Hopefully, they'll just be a little less pronounced than this year, and we believe they will. And then in terms of what we've got coming for the third and fourth quarter, from a merchandise and commercial standpoint, we really like a lot.

One of the things that we've got that we think will be a meaningful plus for us this year, we've got the Indigo Palms launch in Tommy Bahama, which is already driving some positive results in the getting cooler month that we're in now and should help as we get further into the cooler months. And then in January, they're actually going to have an early spring delivery that's going to hit a floor in January. Typically, January has just have been out at everything that's left over from sort of the pre-holiday and resort time. And this year, we're actually going to give our guests a taste of spring in January that we think they'll be receptive to and they'll like.

So we like our lineup for the second half. We wish that consumer were a little bit stronger than they are, but we do think we've got good tools to work with to try to capitalize on the demand that is there.

[Operator]

Our next question is from Paul Lejuez with Citigroup.

[Paul Lejuez, analyst]

Can you talk about which regions were performing this quarter, it sounds like Florida was in line with the chain, but where did you see better results by region and where did you see weaker results? And then can you talk about where each of the brands are in terms of full price selling relative to all-time peaks and also maybe relative to pre-pandemic levels? Just trying to understand the level of markdowns that you're seeing, what percentage of the assortment for each of the brands are selling at full price today versus what you saw last year, a year before, maybe pre-pandemic just to kind of frame where you are in that continuum?

[Thomas Chubb, executive]

Okay. Thank you, Paul. And first, with respect to the regional question, this is on a relative basis. Nowhere was really great. Almost everywhere was soft during the quarter. But the places that were relatively strong were some of the cooler weather places like the Midwest, the Mid-Atlantic, New England, were some of the -- and then some of the spots out West, I think, especially the Northwest, some of the desert areas were relatively strong as compared to Florida, Texas, some of the places that were a little bit weaker.

But again, nowhere was really what I would call strong. It was -- everywhere was soft. And again, on Florida, it's not that it was way worse than other places. It's just that it looked more like other places where for the last couple of years, it had been an outlier on the positive side. And now on the relative level of discount.

[K. Grassmyer, executive]

Yes, one more to add to that. The Marlin Bars locations held -- the retail side of the Marlin Bars held much better than the averages out there. So that part was encouraging.

[Thomas Chubb, executive]

Yes, very important.

[K. Grassmyer, executive]

Yes. As far as the level of discount, we were pretty low levels. Since the pandemic, I would say this year is kind of reverting back to closer to a pre-pandemic level. I don't have exact percentages, but it's not a big outlier from where we operated pre-pandemic. It's just been more promotional than we've been since the pandemic. And again, it's the lower full-price sales this is yielding it's not because we're doing a lot more events. It's just the lower full-price sales. It's just fuel -- providing more inventory that we need to clear. And we're -- so some of our clearance and promotional events are just a bit bigger.

[Paul Lejuez, analyst]

Got it. How are you thinking about ticket prices? Do they need to be adjusted lower to avoid having to use more discounts to drive sales? Or you prefer to leave them where they are and show the customer that discount as a call to action?

[Thomas Chubb, executive]

I think that we want to -- we don't want to reprice existing product or the same style if it goes forward. There's a little bit of an opportunity to adjust the AUR by buying more heavily into some of our lower price point offerings in future seasons. And I think we will do a little bit of that. I don't think it will be dramatic, but I think we'll probably invest a little bit more in some of the lower price points that we already have, where we were lighter in inventory this year, and we -- in upcoming seasons, I think, we'll probably invest a little bit more.

That was an example of one of the issues, Paul, that we had in the second quarter was our opening price point dresses in Tommy Bahama, which for Tommy Bahama is sort of $90 to $120, we were significantly underinvested in inventory in that price point for dresses during the second quarter, and we felt that. We I think lost some revenue as a result of that. And so when we get to next spring, I think, you'll see us more heavily invest in. So again, not so much changing the prices on existing products, but we do have some ability to tweak the AUR just by the mix of price points that we're offering.

[Operator]

Thank you. There are no further questions at this time. I would like to hand the floor back over to management for any closing comments.

[Thomas Chubb, executive]

Okay. Paul, thank you very much for hosting our call and thanks to all of you for your interest in our company, and we look forward to talking to you again in December and I hope all is well until then.

[Operator]

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