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Bear of the Day: Oxford Industries (OXM)

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Oxford Industries, Inc. (OXM - Free Report) is finding it tough going in the competitive retail market. This Zacks Rank #5 (Strong Sell) recently disappointed on its fourth quarter as its flagship brand struggled.

Oxford Industries operates three distinctive apparel and accessory brands: Tommy Bahama, Lilly Pulitzer and Southern Tide.

Big Miss in the Fiscal Fourth Quarter of 2016

On Mar 23, Oxford reported its fourth quarter and full year fiscal 2016 results. It missed on the Zacks Consensus Estimate by 28 cents reporting earnings of just $0.63 versus the consensus of $0.91.

Net sales rose slightly to $261 million from $259.6 million a year ago.

So what went wrong?

In the quarter, it took a charge of $7.1 million, or $0.27 per share, for inventory markdowns, severance and the closing of three Tommy Bahama outlet locations as the Tommy brand has struggled.

Tommy net sales fell 5% in the quarter to $186.1 million from $195.9 million a year ago.

The good news is that the smaller brands are performing better.

Lilly Pulitzer net sales jumped 26% to $46.5 million from $36.9 million a year ago and Southern Tide brought in $8.2 million. Southern Tide is a new acquisition so there is no year over year comparison.

The company emphasized that each brand has a "meaningful and profitable" e-commerce business so its not afraid to compete with Amazon or others in the online space.

It is also encouraged by what it has seen in the first quarter of 2017. Tommy Bahama’s results in the first quarter are "encouraging" and same store sales comps are modestly positive.

Full Year Estimates Cut

The analysts are less bullish than the company as 5 estimates have been cut for the full year since the earnings report.

The 2017 Zacks Consensus Estimate has fallen to $3.57 from $4.05 in the last month.

But even with the cuts that's still earnings growth of 8.2%. That's not too shabby compared to peers in the apparel industry who are lucky if they are seeing ANY earnings growth.

Shares Sink But Are They Cheap?

Oxford shares have been on a steady decline the last 2 years as Wall Street frets about the apparel retailers.

Shares are now trading with a forward P/E of 15.3, which is pretty cheap compared to the average of the S&P 500.

But the apparel industry is really uncertain right now given the struggles at the shopping malls. It's probably the worst retail area to own.

If you must own a retailer, consider one outside of apparel such as Home Depot (HD - Free Report) or Ulta (ULTA - Free Report) . Both are Zacks Rank #3 (Hold) stocks expected to produce double digit earnings growth.

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