Oxford Industries Inc

NYSE:OXM

Earnings Call Transcript 2020-Q4

[Operator]

Greetings, and welcome to Oxford Industries, Inc. Fourth Quarter Fiscal 2020 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to your host, Anne Shoemaker, Treasurer of Oxford. Please go ahead.

[Anne Shoemaker, VP, Capital Markets & Treasurer]

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 may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in the documents filed by us with the SEC, including the risk factors contained in our Form 10-K and first and third quarter 10-Qs. We undertake no duty to update any forward-looking [Technical Difficulty].

[Operator]

Pardon the interruption. Anne Shoemaker, I believe you are muted. Please unmute your line. Pardon the interruption, we seem to have lost the presenters. Please stay on the line as we attempt to retrieve them.

[Thomas Chubb, Chairman, CEO & President]

[Technical Difficulty] restrictions, the need to change operational procedures to protect the health and safety of our people and customers, remote work [Technical Difficulty].

[Operator]

Pardon the interruption, please stay on the line as we retrieve the presenters. Thank you for your patience. We are having technical difficulties. The conference will proceed momentarily. Again, thank you for your patience.

Ladies and gentlemen, we thank you for your patience. The conference will now resume.

[Anne Shoemaker, VP, Capital Markets & Treasurer]

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 may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements.

Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC, including the risk factors contained in our Form 10-K and the first and third quarter 10-Qs. We undertake no duty to update any forward-looking statements.

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

And now I'd like to introduce today's call participants. With me today are Tom Chubb, Chairman and CEO; and Scott Grassmyer, CFO. Thank you for your attention and patience. And now I'd like to turn the call over to Tom Chubb.

[Thomas Chubb, Chairman, CEO & President]

Good afternoon, and thank you for joining us again. We apologize for the technical difficulties that we experienced and would like to assure you that they are not COVID-related. Like most, we are delighted to have 2020 behind us and are excited about the possibilities that lie ahead in 2021 and beyond.

Before I start the discussion of what we learned from 2020 and what we have planned for 2021, I would like to take just a moment to thank our incredible team of people. 2020, of course, presented enormous business challenges as we faced a myriad of shutdowns, restrictions, the need to change operational procedures to protect the health and safety of our people and customers, remote work, and the list goes on and on. In addition, we know that our people faced tremendous personal challenges, both known to us and not known to us. These challenges included personal concerns about COVID amongst their family and friends, homeschooling children, concerns about their own or a spouse's job and many others. While we will never know the full extent of the personal challenges that our people were facing, we do know that they were substantial. And we appreciate our people rising to the occasion and continuing to deliver positive, upbeat brand messaging, products and experiences to our customers. We are extremely grateful for all that our people did and were able to accomplish during the most challenging year than any of us remember.

I'd like to now briefly recap 2020 and some of the key lessons we learned that are informing our plans for 2021 and beyond. You may recall that we were off to a terrific start in 2020 with outstanding results in February and the first couple of weeks of March. Then the pandemic hit. And on March 17, we temporarily shut down all our stores nationwide. At that point, we realized the wonderful plans that we had for 2020 were simply not going to be achievable and we pivoted towards our three defensive priorities: People, brands and liquidity.

With respect to people, we worked hard to follow all the applicable guidelines to protect the health and safety of our own people, our customers and the communities in which we work. This was a significant effort and very difficult, but we were pleased to do our part to help battle the pandemic.

With respect to our brands, we were focused on preserving the integrity of our brands during the pandemic year. Through an excellent inventory management and outside-the-box merchandising and planning, we were able to keep inventories in good shape. Without an overhang of access inventory, we were able to avoid the type of excessive promotion that can damage brand integrity. 2020 also reinforced how much our guests love the happy, optimistic messages, products and experiences that we provide. Put simply, when we deliver happiness to our customers, we succeed.

Finally, on the liquidity front, we finished fiscal 2020 in a strong position, with cash increasing to $66 million from $52 million at the end of fiscal 2019 and no borrowings outstanding at the end of either year. The improvement in our liquidity position was attributable to $84 million of cash flow from operations, which funded capital expenditure investments in data, digital marketing and omni-channel technologies, share repurchases, dividends and minority investments in smaller branded businesses. Our strong cash flow and liquidity puts us in excellent position to invest in our business and execute our strategy going forward.

Given the circumstances of 2020, Lilly Pulitzer once again delivered an outstanding year. In the several years prior to 2020, we had invested in enhancing and developing Lilly's digital commerce and marketing capabilities. In particular, we were focused on having a beautiful and easy-to-shop website as well as being able to simulate, analyze and use customer data to better serve existing customers and target new customers. As a result of these investments and the work the Lilly team has done to capitalize on them, we went into 2020 with a direct-to-consumer business that was balanced in revenue between e-commerce and bricks-and-mortar retail. In addition, we were acquiring new customers through digital means at about twice the rate that we were acquiring them through our bricks-and-mortar retail stores. This set Lilly up very well when the world shifted to digital commerce during the pandemic.

Our digital prowess, combined with our happy brand message and comfortable casual cheerful products drove terrific results. Lilly finished the year with 63% growth in full price e-commerce, which helped drive a 12% operating margin. As we progressed through 2021, and more and more customers are increasingly feeling safe to come back into stores, we are delighted to be able to provide the outstanding Lilly Pulitzer experience. This experience will be enhanced by many of the innovations that we delivered during 2020 that more tightly integrate the in-store and digital experiences.

In addition, we are continuing to invest in projects that will enhance our ability to integrate first, second and third-party data, providing insights to help us develop segments that better understand and target customers and track engagement to inform future enhancements. We are also moving forward with projects that will enhance our customer service by providing more complete information on an automated basis. These are just some of the many projects that are underway that will help us better serve our customers.

Tommy Bahama also has an upbeat positive brand message and easy-to-wear, easy care products that customers love. That said, going into 2020, Tommy Bahama was much more dependent on bricks-and-mortar for both revenue and new customer acquisition. Tommy's pre-pandemic direct-to-consumer business was split roughly 75% stores, outlets and restaurants and 25% e-commerce. In addition, it was acquiring customers in bricks-and-mortar at more than twice the rate that it was through digital. While Tommy Bahama's e-commerce business grew significantly during 2020, and we believe there is substantial opportunity for additional growth, Tommy Bahama's reliance on bricks-and-mortar retail pre-pandemic for both revenue and customer acquisition meant that the challenges posed by the shutdowns and other restrictions were more difficult to overcome in the short term.

As we move into 2021, Tommy is investing in the people, processes and systems that it needs to better compete and win with the consumer of the digital world. These investments will help enhance our ability to build and better develop customer segments and create customer journeys tailored to those segments and to particular use occasions. During 2020, our Tommy Bahama restaurant business was challenged by shutdowns and multiple operating restrictions implemented by state and local government. Given these headwinds, we were very pleased with the results that we were able to achieve, particularly with our Marlin Bars, the fast casual concept that we initiated at Coconut Point, Florida several years ago. With their emphasis on outdoor dining, cocktails and smaller, lighter food items, the Marlin Bar has resonated strongly with guests during the pandemic.

More importantly, leveraging its 25 years of expertise in food and beverage, we believe that the concept delivers our wonderful brand in a way that is highly relevant through today's guests. To that end, we opened 4 Marlin Bars during fiscal 2020, and with our recently opened location at Fashion Valley in San Diego, we now have 7 in total. We believe that the concept provides an excellent avenue for future growth and investment. Not only can we do business on the food and beverage side, but the Marlin Bars had outstanding results of the company and retail store. In particular, the hospitality offered by our Marlin Bars creates an environment that is really helping to grow our women's business.

Amongst our three smaller brands, Southern Tide, The Beaufort Bonnet Company and Duck Head, The Beaufort Bonnet Company was a standout, delivering both top and bottom line growth in fiscal 2020 and operating margin expansion, finishing the year at almost $21 million in sales, with 2/3 coming from e-commerce. All 3 brands, like their larger siblings are focused on enhancing their digital e-commerce and marketing skills in 2021, with projects that are similar to those at Tommy Bahama and Lilly Pulitzer but scaled appropriately for the smaller businesses.

In addition, Southern Tide is continuing to learn from its 3 recently opened stores and refined its retail concept while The Beaufort Bonnet Company's third signature store recently opened. We are very excited about what lies ahead in 2021. Since late February, we have seen a marked improvement in business in our bricks-and-mortar, particularly in warm weather, off-mall locations and at the same time, our e-commerce business remains very strong.

Thank you for your time, and I will now turn it over to Scott for additional detail on 2020 results as well as our plans for 2021. Scott?

[Scott Grassmyer, EVP, Finance, CFO & Controller]

Thank you, Tom. Our operating groups did a good job navigating the pandemic and managing the significant changes that impacted our business in 2020. For fiscal 2020, sales decreased 33% to $749 million, with a meaningful shift in the composition of our revenue. Our e-commerce business grew significantly with double-digit increases in each of our brands. Some of this growth is certainly attributable to store closures, but we also believe this growth represents a permanent shift in how our guest shops. In fiscal 2020, e-commerce sales were $324 million, growing 24% and making up 43% of our total sales compared to 23% in fiscal 2019. On the bricks-and-mortar front, our retail stores and restaurant businesses were impacted by temporary closures and continue to operate under restrictions. We're particularly hard hit in California and Hawaii, where we have a large presence with 34 stores and 7 restaurants. The good news is that as restrictions are being lifted, we're seeing improved traffic and sales.

In fiscal 2020, our adjusted gross margin was 55.1% compared to 57.6% for fiscal 2019. In 2020, we offered deeper discounts in our off-price channels, took inventory markdown charges and a higher proportion of our revenue was generated during promotional and clearance events. At the same time, our gross margin benefited from higher IMUs as we shifted production out of China and designed products where we can demand a higher retail selling price, such as our performance apparel.

As we move through fiscal 2020, we took actions to reduce SG&A. In total, adjusted SG&A was $93 million lower than in fiscal 2019, and cost-saving measures included a $63 million reduction in employment costs, a $10 million reduction in occupancy costs, and reductions in variable and other expenses. As we look to 2021, our business have continued to strengthen. Our e-commerce business continues to expand, and traffic and conversion rates are improving in our stores, restaurants and Marlin Bars. We have also seen a recent uptick in our wholesale businesses and are encouraged by our forward order book.

With higher IMUs and the exit of the lower margin Lanier Apparel business, we expect gross margin expansion in fiscal 2021. We expect SG&A to be approximately 5% lower in fiscal 2021 than in fiscal 2019, as reductions in employment and variable expenses were partially offset with increased investments in marketing.

Putting together these dynamics, we expect to deliver a solid top and bottom line improvement in fiscal 2021. First quarter sales are expected to increase from $160 million in fiscal 2020 to a range of $220 million to $240 million in fiscal 2021, with full year sales increasing from $749 million in fiscal 2020 to a range of $940 million to $980 million in fiscal 2021.

Our fiscal 2021 effective tax rate for the first quarter is expected to be approximately 15%, and for the full year is expected to be approximately 20%. The tax rate for both the quarter and year are expected to benefit from certain discrete items. On an adjusted basis, we returned to profitability in the fourth quarter of fiscal 2020 and expect adjusted EPS in a range of $0.95 to $1.15 in the first quarter of fiscal 2021 and $2.80 to $3.20 in the full fiscal year.

Our business is supported by our strong balance sheet. Here are some highlights. We ended fiscal 2020 with inventory in excellent shape. Inventory decreased 19% to $124 million at the end of the fourth quarter compared to $152 million in the prior year, with double-digit percentage decreases in each operating group. We achieved this reduction by taking a number of onetime actions in 2020, including reducing and canceling orders and shifting goods into different selling seasons. More importantly, our enterprise order management systems will allow us to do more business with lower inventory levels.

Our liquidity position is strong with no debt and $66 million of cash at the end of fiscal 2020. Capital expenditures in 2020 were $29 million and we expect capital expenditures to be approximately $35 million in fiscal 2021. Our Board of Directors increased our quarterly dividend payout from $0.25 per share to $0.37 per share returning us to our pre-COVID level.

Thank you for your time today, and we will now turn the call over for questions. Anastasia?

[Operator]

[Operator Instructions]. The first question comes from Paul Lejuez with Citi.

[Paul Lejuez, Citigroup]

Curious how you're thinking about each of your brand's ability to achieve sales levels back at the F '19 levels. Curious if you would expect that to occur at some point this year? And if so, what quarter might you see that for each of the brands, if at all? And I'm also curious how you're thinking about the gross margin rate in F '21 for each of the major brands. And even just thinking beyond this year, how are you thinking about the potential upside from there?

[Thomas Chubb, Chairman, CEO & President]

Sure, Paul, and thanks for the question. I would say that with each of our brands, we're not going to -- for the full year, we're not going to get probably not quite back to 2019 levels. So it will be a little bit short of that. I think with a little bit a luck, we can get pretty close to those levels, but not probably all the way back.

As we mentioned in the call, first quarter we're seeing -- the first couple of weeks were really a continuation of what we saw in Q3 and Q4. But since the middle of February, things have really picked up pace in our bricks-and-mortar locations and have not really slowed down in e-commerce. And so that's pretty encouraging to us and indicates that there is a lot of pent-up demand out there, and that people are really ready to get out and are starting to think about traveling and going on a vacation and all the types of things that help us a lot. So we're optimistic. I don't think we'll quite get back to 2019 levels this year. But certainly, I would think, going into 2022, we'd be looking to do that. And Scott, I don't know if you want to add anything to that.

[Scott Grassmyer, EVP, Finance, CFO & Controller]

On the gross margin question, we certainly expect expansion in every operating group over fiscal 2020, hopefully, at least 250 to 300 basis points in each.

[Paul Lejuez, Citigroup]

Scott, how about versus F '19? Sorry.

[Scott Grassmyer, EVP, Finance, CFO & Controller]

FY '19, we expect some expansion, especially we think Lilly certainly has an opportunity. They really did a lot of good IMU work in getting better initial gross margins and a lot of that work within '20, it just kind of got masked with some of the extra promotional activity. And I think Tommy's will probably be somewhat flattish to '19, maybe a little bit up. And I think Lilly has some gross margin expansion opportunity in '21 versus '19.

[Paul Lejuez, Citigroup]

Got it. And then just last, you mentioned, I think, being encouraged by some of your order books. Any quantification? Anything further that you could share in terms of what you're seeing?

[Scott Grassmyer, EVP, Finance, CFO & Controller]

It's so fluid right now with -- a lot is dependent on replenishment. So we hate to give a number, but we are -- we have been encouraged.

[Thomas Chubb, Chairman, CEO & President]

And Paul, I would say, I don't think it will quite get back in the fall season to 2019 levels. But beyond that, as we get into resort and spring, the early part of which will sit within this fiscal year, I don't know. It will depend on how the double sale accounts are performing. And some of them, like we are starting to see a meaningful uptick in their business. And Scott said it's still a fluid situation.

[Operator]

Our next question comes from Matthew Degulis with KeyBanc.

[Matthew Degulis, KeyBanc Capital Markets]

So with inventory being down by 19%, I'm wondering how much of that is planned versus how much is due to any impact from the supply chain disruptions? And similarly, how are you thinking about inventory orders and levels through '21?

[Scott Grassmyer, EVP, Finance, CFO & Controller]

We've had very little interruption. I know there's been a lot of things going on in the supply chain out there, but we've had very minor delays. A lot of Lilly's product comes to the East Coast, which has been less impacted. And Tommy actually did some shifting of products, and we were really bringing a lot less for spring. So that really has not been a major issue for us, so far and we're watching that situation.

We believe with our enterprise order management systems and some really more disciplined inventory management that we can operate during the year at lower inventories than we have in the past, and still generate healthy sales. So I think we just expect to be more efficient on inventory going forward.

[Matthew Degulis, KeyBanc Capital Markets]

Got it. That's helpful. And can you update us on how you're feeling about the women's business for Tommy in 2021? And if you could provide any year-to-date or maybe early spring color?

[Thomas Chubb, Chairman, CEO & President]

I don't think we can give you year-to-date stats, but we can give you some year-to-date color, and it's quite good, really. We've been encouraged by what we've seen in women's during the fourth quarter when we launched our new IslandZone performance product. And we had the second holiday season both 2019 and 2020 where we had our Island Soft product. Both of those are women's products that have performed really well for us. And it really put us into some new lanes of business in women's, and I think it helped us find a zone that we can own this around.

Then another factor that's helping women's is the -- sort of the basic fundamental category-type business and bottoms and bits, and key item type categories like that, where over the last couple of years, really, we built the business that we never had before, and that's more of an annuity-type business that we can continue to build on. And then this spring, we're actually seeing our fashion product in women's move well too. And then the last comment, Matthew, that I would make on women's is, as we mentioned, in our Marlin Bar locations, those tend to be our very best women's locations. And we really believe that the Marlin Bars are going to help us build the women's business. We've seen it directly there, and I think we'll start to see it indirectly elsewhere.

[Operator]

Our next question comes from Susan Anderson with B. Riley FBR.

[Susan Anderson, B. Riley Securities]

Nice job on the quarter. I was wondering in terms of first quarter, it's nice to see that it sounds like things have started to pick up. I guess I'm curious, is that being, I guess, all regions being stronger? Or is it being driven by maybe places like Hawaii, that's reopened and maybe there's some traffic going through there now? And then also, I'm curious, is that across -- or are the trends similar across all of the brands?

[Thomas Chubb, Chairman, CEO & President]

I would tell you that the trends are similar across all of the brands. Everybody's experience in -- really everybody's business looks pretty good right now, or at least on a good trajectory right now, which is great to see. What's not uniform is the geographical element of things. So what seems to be performing the best, as we mentioned in our prepared remarks, are the warm weather and off-mall type locations. So anything that's an outdoor mall or a street location or a resort location in a warm weather market, in general, seems to be doing well. The Northeast, the Midwest, some of the Pacific Northwest, some of those geographies are still -- they may have improved somewhat, but they're still pretty beaten down at this point.

And then with respect to Hawaii, we are starting to see a nice rebound there. Actually, Doug Wood, that runs our Tommy Bahama business, he's been out there this week. We talked to him yesterday, he's on Maui, and he said that we really are starting to see the tourism come back there. And I think what's happening in Hawaii is for domestic travelers, so that's the big island, mostly in Maui, it's really picking up nicely. It's still not quite as strong in Waikiki. That depends much more heavily on the international traveler. They have not quite gotten back yet, but we are super excited about the trends that we're seeing there and elsewhere.

And I think it's all a matter of people feeling safer coming out. And you have a -- every day, the number of vaccinated people goes up. A lot of states now are opening it up to anybody over the age of 16. And I think all that's going to continue to fuel an increasing consumer willingness and desire to get out and travel a little bit and visit some stores and that kind of thing.

[Susan Anderson, B. Riley Securities]

Great. That's good to hear. And then I'm curious just your thoughts around acquisitions and kind of what you're seeing out there. Have you seen valuations come down at all? And then I think you noted in the press release that you invested $6 million in minority interest in some smaller branded apparel businesses. I'm curious what those are and could that investment be larger one day?

[Thomas Chubb, Chairman, CEO & President]

Well, as you know, Susan, we have this model that we like a lot that we did with The Beaufort Bonnet Company where we injected some capital into them, I guess, about 4, 4.5 years ago, and that ended up with us buying them. And since the time that we bought them, they've grown very significantly and they still have a lot of growth left in them. So we like that model a lot. And that's the idea behind those minority investments is that hopefully, some of them will turn out to be Beaufort Bonnet-type opportunities. I don't think all of them will. Besides Beaufort Bonnet, we've got 3 right now, 2 of which we've done in the last year. And I think some of them will end up being things where we take a controlling interest, and some of them may not. But that's okay, they don't all have to end up as part of our company to be successful. So we like that strategy, and we're continuing with that.

And then on the larger acquisition front, we remain very interested in doing larger acquisitions. So it's something that's a more fully developed business like Lilly was when we bought it 10 years ago. But the valuations are still pretty high there. And there's a lot of competition for those assets. You've got stacked money and private equity money. There are a lot of bidders out there bidding for a limited number of assets. So we're very interested in that and are looking all the time, but we're going to stay disciplined on valuation there.

And as the main sort of the dollar investment, we -- it's not really appropriate for us to talk about those right now. We're sort of at a 10% stake, and we're really just a quiet investor. So we'll leave it at that for now.

[Susan Anderson, B. Riley Securities]

Got it. Okay. And then just really quick on the SG&A. I think there was a $10 million reduction in the occupancy cost. Is this going to be ongoing, or was that onetime in fourth quarter?

[Thomas Chubb, Chairman, CEO & President]

So it's a mix. Most of it's ongoing. Now we are adding -- we did add some Marlin Bars that will have a full year's worth. And -- but total abatement. Some are marked, right into the P&L immediately, some of them being spread over the life of the lease and some right through the P&L immediately. So we had about, I think, about $4 million of abatements that ran through the P&L in 2020. And we have about a similar number that will run through later years, just through the nature of the deal.

[Operator]

Our next question comes from Steve Marotta with CL King.

[Steven Marotta, CL King & Associates]

Tom, I'm wondering about the -- in the first quarter, if there's any major traffic differentials between the bars and brick-and-mortar and are the restaurants operating on limited hours and still capacity constrained? Or how closely to fully open all of the restaurants? And then I have one quick follow-up.

[Thomas Chubb, Chairman, CEO & President]

Yes. So restaurants have really done well and they've been among the strongest locations, adjusted for geography, of course. But within each geography, the restaurant location has really done well. There's a lot of demand for the outdoor dining that we have in our store locations and for our brand and the experience that we offer. So they really, in a year with limited highlights, they've been a highlight for us. And again, particularly the Marlin Bars, it's been really great to watch. They all -- I think pretty much all of them are still under restrictions of some type. So typically, they're at 50% of seating capacity or something like that.

What's happening in most locations, right now, Steve, is there's a wait. And some people are sticking around and waiting, but some people are just giving up and leaving. So we are capacity constrained right now in restaurants. We're kind of doing about all the business that we can put through there given the restraints. But that's good. It's good to see that. It's good to see that demand and interest in our brand and the experience that we offer. The one that I should call out, New York, of course, is still closed at this point. That's the one that's not open at all.

But bottom line, I would say the restaurants have been a bright spot for us and something that we believe we've reinforced relationships with a lot of our long-time customers by serving them well during this very difficult year and that we've made a lot of new friends through our bars and restaurants, too.

And even in places where we had to shut down completely, for example, in California during December and January, they cut off all on-premise dining, so you could only do takeout. But our teams really rallied to the occasion and did some super creative things with takeout to sort of have not just takeout meals but whole takeout parties to go, just add alcohol and you're ready to go. And that really not only was a way for us to do business, but it was a way to serve our guests during a time period that was really tough for people. And we think that's the hospitality that we've offered these people is really going to pay off for us in 2021 and beyond.

[Steven Marotta, CL King & Associates]

That is super helpful. And Scott, forgive me for asking, you answered the supply chain question there and you mentioned New York City. You mentioned New York Port, East Coast Ports, the new issue in the Suez Canal, a potential bottleneck in coming weeks.

[Scott Grassmyer, EVP, Finance, CFO & Controller]

Yes. We estimate that about 7% to 10% of our product would go through the canal. So it's a pretty small percent of our sourcing mix. And we do have some goods on containers. And then we're looking at -- if need be, some contingency plans for some things that are going to ex-factory soon. But it's not a huge percent of our business.

[Thomas Chubb, Chairman, CEO & President]

And bottom line, we don't expect that to be a major issue for us, Steve. I think we can -- it's a nuisance, but not anything that I think is going to derail our plans.

[Operator]

Our next question our next question comes from Dana Telsey with Telsey Advisory Group.

[Dana Telsey, Telsey Advisory Group]

Nice to see the progress as we anniversary last year's shutdown. As you think about inventory levels, one of the things you had talked about is for each of the brands, it sounds like, especially with Tommy Bahama, the new systems will help you manage inventory better. How are you thinking about inventory as we move through the year, what the -- what it should look like? And then also, as you think about reopening and stores reopening, how much expense comes back into the system for reopening? How do you see the balancing act?

[Scott Grassmyer, EVP, Finance, CFO & Controller]

Yes. Our inventory was in very, very good shape coming out of the year. And we do really believe with some of the system initiatives that Tommy should be able to operate -- I think year-over-year, we should have decreases all year. Really, just depending late in the year, how much business is coming back. And we're -- but in general, we should be lower really in all groups throughout the year.

As far as SG&A, we -- obviously, 2020, we did have a -- very interruptible, a lot of furloughs. And so we mentioned in our prepared remarks that we should be about 5% lower than '19's SG&A. Now some of that is going to be some variable costs, but some -- we did take some -- quite a bit of employment cost out that we think that piece is more permanent. But at the same time, we do expect to invest more into marketing. We really believe that we can do some -- we can acquire a lot more guests by focusing or allocating more money into marketing. So for the year, about 5% lower than 2019 level. And then going forward, hopefully, when we get back to '19 sales, we'll be a little bit lower than '19 SG&A levels, but a lot will depend on the mix of the business.

[Dana Telsey, Telsey Advisory Group]

Got it. And then I believe that in 2019, the Tommy operating margin was 8.3%. Lilly, I think, at 18.3%. Southern Tide just under 13%. Is there anything that prevents you from getting back to those levels?

[Scott Grassmyer, EVP, Finance, CFO & Controller]

No. We certainly would expect, especially in Tommy and Southern Tide's case, to get above those now not in '21. '21, the top line is just something that -- brands don't have the top line getting there yet. But when the top line gets back to '19 levels, we would certainly expect higher operating margins, especially both the Tommy Bahama and Southern Tide. And not saying it's not possible at Lilly, but Lilly is already very, very high.

[Dana Telsey, Telsey Advisory Group]

Got it. And just one last thing. Obviously, you've been focused over the last year or so on the big trend of athleisure, lounge and casual. As the reopening happens and social occasions come back, anything that we should be watching for in new product introductions, launches in Tommy or Lilly?

[Thomas Chubb, Chairman, CEO & President]

Yes. So we are starting to see a little bit of interest in some product categories that did not get as much interest during the pandemic year, including dresses, particularly woven, what we would call social dresses or cocktail-type dresses, that type of thing. Those have picked up. Our wovens business and men's has picked up a bit. In Lilly, the Elsa top, which is that wonderful, sort of, loose fitting silk top that looks great on every one, that it fits all shapes and sizes beautifully, and that was actually our #1 item last week, which was something that was not happening at all during the pickups and the pandemic.

And then swim actually, interestingly last summer, I think a lot of people were spending a lot of time by the pool, but it was their own pool or the neighbor's pool or something like that. And they didn't feel compelled to buy a new bathing suit and cover up. But this year, they're clearly anticipating going somewhere where they want to look their best and look like they had something fresh and new, and we're seeing a big pickup there.

A lot of the trends that we've talked about all year, Dana, about easy to wear and easy care and comfort, I think all those are going to continue to be the sort of macro trends. I don't think we're really going backwards on that. So the silhouettes will get maybe a little more polished in some cases. But the performance inspiration throughout product -- all product categories, I think, is likely to continue.

[Operator]

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Tom Chubb, the CEO, for closing remarks.

[Thomas Chubb, Chairman, CEO & President]

Okay. Thank you, Anastasia, and thanks to all of you for your interest. Please stay safe, and we look forward to talking to you again in June.

[Operator]

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