管理層發言
Greetings. And welcome to the Oxford Industries First Quarter Fiscal Year 26 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Brian Smith of Oxford Industries. Please go ahead.
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 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-Ks. 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 on our website at oxfordinc.com. I would 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 will turn the call over to Tom Chubb.
Thank you, Brian. Good afternoon, and thank you for joining us. I am pleased to be here today to discuss our first quarter results, the progress we are making across the portfolio, and our outlook for the balance of the year. Overall, sales in the first quarter were in line with our expectations and earnings were better than we anticipated, primarily due to stronger-than-expected gross margin. That gross margin performance reflects meaningful work done by our teams over the past year to respond to tariff pressure, including updates to our sourcing strategies, refinements to our pricing architecture, improved freight rates through vendor negotiations, and the benefit from a higher mix of direct-to-consumer sales. Importantly, we achieved this margin performance while absorbing $11 million, or $0.55 a share, year-over-year increase in tariff costs during the quarter. Absent that increase, both gross margin and earnings would have improved over the prior year. Looking across the portfolio, the first quarter included several important positive takeaways. Tommy Bahama, our largest brand, performed well led by healthy direct-to-consumer results, and our emerging brands continued to generate strong growth, particularly Beaufort Bonnet Company and Duckhead. However, these positive results were not consistent across the portfolio. Johnny Was is progressing through its turnaround plan and we are encouraged by the progress on gross margin and direct-to-consumer performance, even as wholesale remains pressured. Lilly Pulitzer was below our expectations while lapping a strong prior-year first quarter, and its softness weighed on our overall result. The consumer backdrop remains unsettled. Consumers continued to navigate macroeconomic and geopolitical pressures, including conflicts around the world, higher energy prices, uncertainty around trade policy and tariffs, and pressured sentiment around discretionary spending. As we have discussed in recent quarters, while some hard data may suggest consumers have the ability to spend, the soft data and what we are seeing continue to point to consumers that are more cautious, selective, and highly discerning. In this type of environment, product relevance and brand connection are especially important. Consumer response is strongest to differentiated products and brands that create an emotional connection. That is where our portfolio is advantaged. Our brands are built around lifestyle, optimism, and experiences. Our job is to stay focused on the product, storytelling, and service that bring those brands to life for our consumers. Tommy Bahama delivered the strongest performance in the quarter. Our direct-to-consumer business comped positive in the mid-single-digit range with encouraging results in retail and e-commerce and continued contribution from food and beverage. More broadly, the brand benefited from a better assortment balance, improved key item execution, and the enduring appeal of its relaxed warm-weather lifestyle position. We are pleased with the execution at Tommy Bahama. The brand continues to occupy a unique position in the market with a lifestyle proposition that extends beyond any one product category or channel. Its advantage comes from the combination of compelling product, clear storytelling, strong customer engagement, and distinctive experiences across retail, digital, and hospitality. That combination continues to support our confidence in Tommy Bahama's long-term opportunity even in an uncertain near-term environment. At Lilly Pulitzer, first quarter results were below our expectations, and we have work to do. Lilly Pulitzer remains a distinctive and beloved brand with a highly engaged customer and a very clear point of view. The business did not execute to its potential in the first quarter. Sales were pressured particularly in e-commerce, and we believe that pressure reflects in part some merchandising and execution issues including gaps in certain entry price points and allocation opportunity. We want to be clear that Lilly Pulitzer's performance was below our expectations and below where we are confident it can be. The brand has tremendous equity with its customer, but in the first quarter, we did not bring together product, pricing, allocation, and messaging. That is on us. The team is focused on correcting these issues. Keep in mind, this is the same highly talented Lilly team that has consistently delivered strong results, and we are very confident in their ability to address these issues. The good news is that we have identified what we believe are the core issues and we believe they are addressable. Some can be corrected relatively quickly, like messaging and marketing, while others related to merchandising only move as fast as the product development life cycle and will accordingly take more time. We are focused on addressing these issues and reestablishing Lilly Pulitzer's positive trajectory and unlocking its long-term growth potential. The brand is strong, and we believe the team has the talent, experience, and urgency to restore the level of performance we expect. Turning to Johnny Was, we believe the brand is on track with its turnaround plan. As we have discussed previously, our focus has been primarily on improving profitability and reinforcing the fundamentals. During the first quarter, gross margin increased as the team made significant progress buying inventory tighter, reducing promotional activity, and improving gross margin return on investment. In terms of top-line results, sales were most under pressure in wholesale, where Johnny Was has had greater exposure than our other brands to specialty stores, a market that has declined meaningfully in recent years. Sales were also lower to off-price retailers due to healthier inventory levels and to Saks Global which has been impacted by its bankruptcy process. Historically, Neiman Marcus and Saks have been very important venues for Johnny Was. Importantly, performance in the direct-to-consumer business was much more in line with our expectations and we believe that side of the business is becoming healthier. We are focused on bringing greater cohesion to the design process, refining the assortment, improving marketing effectiveness, and driving better execution across retail, e-commerce, and wholesale. With the new management team in place, we have also become more aggressive in reassessing and rationalizing our store base, closing five underperforming locations in the first quarter. We will continue to assess retail performance and opportunity on a market-by-market and location-by-location basis and close underperforming stores where appropriate to ensure that our footprint is aligned with the brand's long-term potential. Turnarounds do not happen overnight, and there is still a lot of work to do. But we believe Johnny Was has meaningful long-term potential. Our objective is to build a stronger, more disciplined, and more profitable business that better reflects the strength and resonance of the brand. Our emerging brands also contributed positively with notable strength, particularly in the Beaufort Bonnet Company and Duckhead businesses. These brands continue to bring energy and growth potential to the portfolio, and we remain focused on building them in a disciplined way through stronger storytelling and growing distribution. Across the enterprise, we are also continuing to strengthen the operational foundation of the company. Our new Lyons, Georgia distribution center is an important part of that work. As we have said before, we do not expect a ramp-up to be without initial costs or complexity, particularly while we are transitioning between facilities. But over time, we believe Lyons will be a meaningful competitive advantage, particularly as direct-to-consumer demand continues to gain share across our portfolio. Stepping back from the individual brands, we were pleased with the way we started the fiscal year. At the same time, sales trends softened as we moved through April, and that deceleration continued into May and early June. Some of that reflects the broader consumer environment and the increased caution we are seeing in discretionary spending along with the shift in timing of the important Father's Day holiday. Continued softness at Lilly Pulitzer is also an important factor, particularly given that some of the product and merchandise improvements we are making will take some time to fully flow through the assortment. Given these trends, we believe it is appropriate to take a more measured view of the upside sales opportunity for the balance of the year. As a result, we are narrowing our full-year sales outlook by lowering the top end of the range. We believe this is a prudent approach based on what we are seeing in the business and the broader environment today. At the same time, we are tightening our EPS guidance range for the remainder of the year by raising the low end of our previous range due to the impact of the current lower tariff rates flowing through for the balance of the year combined with focused expense and inventory management. Tariffs remain a major topic and source of uncertainty. Scott will provide more detail on the updated assumptions embedded in our outlook. From an operating standpoint, our priorities remain unchanged: optimize sourcing, manage pricing thoughtfully, protect gross margin where we can, and avoid actions that would undermine the long-term health of our brands. Periods like this can push companies to become defensive and overly short-term. We are not going to do that. Our brands exist to bring happiness, optimism, and a sense of possibility to our customers. That is a real source of differentiation and we believe the near-term adjustments we are making in the current environment will capitalize on each brand's unique attributes and position us to deliver long-term value to our shareholders. As always, I want to thank our teams across Oxford. Their resilience, creativity, and commitment to our customers are the foundation of everything we do. With that, I will turn the call over to Scott for more detail on our financial performance and outlook.
Thank you, Tom. As Tom mentioned, our teams have shown great discipline and resilience in executing our plan against the backdrop of a challenging consumer and macro environment. Consolidated net sales were $391 million in the first quarter of fiscal 26, compared to $393 million in the first quarter of fiscal 25, and above the midpoint of our guidance range of $385 million to $395 million. Total company comparable sales decreased 2%, including 2% decreases in both retail and e-commerce. The decline in retail comp sales was offset by sales from non-comp stores opened primarily in the prior year. Notably, food and beverage sales increased 14% driven primarily by non-comp locations. Wholesale sales decreased 5% compared to the prior-year period, which is better than our original forecast. By brand, Tommy Bahama delivered solid results with total sales increasing year over year, driven by mid-single-digit comps in our DTC channels, partially offset by a decline in wholesale sales. Emerging brands continued their momentum with sales growth in the low double digits. The positive comps at Tommy Bahama and growth in emerging brands were offset by sales declines at Lilly Pulitzer and Johnny Was. At Lilly Pulitzer, significant declines in the e-commerce channel and a difficult comparison to the prior year led to overall low-teen negative comps. And at Johnny Was, as Tom mentioned, the sales decline was driven by a significant decrease in the wholesale channel and mid-single-digit negative comps in our DTC channels. Adjusted gross margin contracted 90 basis points to 63.4%, driven by approximately $11 million or 280 basis points of increased cost of goods sold from additional tariffs implemented starting in fiscal 25. Despite the U.S. Supreme Court's ruling in late February, the previously paid tariffs were capitalized in the inventory that we sold during the first quarter. The increased tariffs were partially offset by updated sourcing and pricing architecture strategies across our portfolio, lower freight cost to customers due to improved carrier rates from contract renegotiations, and a change in sales mix with wholesale sales representing a lower proportion of total sales. Adjusted SG&A expenses increased 1% to $209 million compared to $206 million last year, impacted primarily by new brick-and-mortar retail and food and beverage locations as well as increases in software and consulting costs and costs associated with the transition of our Lyons, Georgia distribution center operations. These increases were partially offset by lower advertising cost and cuts to more discretionary categories like travel. The result of this yielded adjusted EBITDA of $45 million or an 11.6% adjusted EBITDA margin, compared to adjusted EBITDA of $54 million or 13.7% in the prior year. Moving beyond EBITDA, adjusted depreciation and amortization was flat compared to the prior year with increases in depreciation related to our new Lyons facility and new brick-and-mortar locations, offset by lower software-related depreciation. Interest expense of $2 million was higher than the prior year due to higher average debt levels, and our effective tax rate of 25.4% was higher than the prior year due to certain discrete items. With all this, we ended with $1.39 of adjusted EPS. Moving to the balance sheet, inventory decreased $15 million or 9% on a LIFO basis and $3 million or 1% on a FIFO basis as compared to the first quarter of fiscal 25, despite $9 million of additional tariff costs capitalized into inventory compared to $3 million at the end of the first quarter of fiscal 25. Inventory decreased across our three larger brands, partially offset by higher inventory in the emerging brands group to support their higher levels of growth. We ended the quarter with long-term debt of $143 million as opposed to $118 million at the end of the first quarter of fiscal 25 and $116 million at the end of fiscal 25. Cash flows from operations provided $8 million in the first quarter of fiscal 26 compared to cash flows used in operations of $4 million in the first quarter of fiscal 2025, with lower earnings offset by positive changes in working capital. We also had capital expenditures of $23 million primarily related to the Lyons, Georgia distribution center project and the addition of new brick-and-mortar locations, and $11 million of dividends that led to an increase in our long-term debt balance since the beginning of the fiscal year. I will now spend some time on our updated outlook for 2026. As Tom mentioned, the positive momentum we saw at the start of the year decelerated a bit at the end of the first quarter and continued into the second quarter. For the second quarter, we now expect our total company comp to be in the low-single-digit negative to flat range. And for the full year, our updated comp assumption assumes a range of slightly negative to slightly positive. The updated second-quarter and full-year comp assumptions are lower than our previous expectations of flat to low-single-digit positive comps. As a result of the change in our comp assumptions, we are revising the top end of our revenue guidance range for the full year. For the full year, net sales are expected to be between $1.48 billion and $1.505 billion, relatively flat to up 2% compared to sales of $1.48 billion in fiscal 25. Our revised sales plan for the full year of 2026 includes a sales increase in Tommy Bahama and continued growth in emerging brands, partially offset by a sales decrease in Lilly Pulitzer and Johnny Was. Our updated sales plan does include improvement in the second half as we correct the issues discussed at Lilly Pulitzer, and Johnny Was continues its turnaround plan. We will also benefit from correcting the tariff-related merchandising issues that impacted the results of most of our brands in the second half of the prior year, specifically in the fourth quarter and during the holiday season. By distribution channel, the full-year sales plan consists of a high-single-digit increase in our food and beverage channel that is benefiting from the addition of new locations added during fiscal 25, partially offset by low-single-digit decreases to flat sales in our direct-to-consumer channels and a mid-single-digit decrease in wholesale. Moving on to gross margin. Our current assumption is that the current lower tariff rate of 10% will remain in place for the remainder of the year. These rates are generally consistent with the rates in effect for most of our inventory receipts during the first quarter of 26. While we are not including the impact of tariff refunds in our guidance, we paid approximately $40 million of tariffs in fiscal 25 and an additional $5 million of tariffs in the first quarter of 26 that were ultimately invalidated by the Supreme Court ruling in February. Today, we have filed for approximately $25 million in phase 1 claims and have begun to receive refunds. A refund process for phase 2 and the remainder of our unfiled claims has not yet been established, but we are ready to file claims for refunds as soon as a process is established. It is important to note that given the timing of our planned inventory receipts for the balance of the year, changes in tariff rates during fiscal 26 would be expected to have a more limited impact on fiscal 26 results than they would on future periods. In addition to lower tariff assumptions, we expect that gross margins will benefit significantly from the shifts in sourcing and updates to our pricing architecture that our teams have worked on for the last year, and a shift to a higher proportion of direct-to-consumer sales. As a result, we expect gross margins to improve 100 to 200 basis points in Q2, Q3 and Q4 of fiscal 26 compared to the prior-year periods, and an overall approximate 100-basis-point increase for the year when including the headwind from the first quarter. In addition to lower sales and higher gross margins, we expect SG&A to grow in the low-single-digit range, primarily due to increased software-related costs and the annualization of incremental SG&A from new stores added since the end of the second quarter of fiscal 25. Also within EBITDA, we expect higher royalties and other income of approximately $2 million in fiscal 26. Outside of EBITDA, we expect an increase in depreciation due to essentially all the incremental costs to operate the new Lyons DC in fiscal 26 being depreciation-related. Considering all these items, interest expense of $7 million, and a higher tax rate of 28%, we are tightening our 2026 adjusted EPS guidance to $2.30 to $2.70 versus adjusted EPS of $2.11 last year. Again, our guidance does not include the impact of any tariff refund. For the second quarter of 26, we expect sales of $380 million to $400 million compared to sales of $403 million in the second quarter of 25. This primarily reflects our low-single-digit negative to flat comp assumption and decreased wholesale sales in the high-single-digit range. By brand, we expect lower sales at Lilly Pulitzer and Johnny Was to be partially offset by a sales increase at Tommy Bahama and continued growth at emerging brands. We also expect gross margin to expand approximately 100 basis points, SG&A to grow in the low-single-digit range, royalty income of approximately $5 million, interest expense of $2 million, and a higher effective tax rate of approximately 29% primarily related to the impact of our annual stock vesting. We expect this to result in second-quarter adjusted EPS between $1.20 and $1.40 compared to $1.26 last year. Moving to our CapEx outlook for the remainder of the year. We expect capital expenditures for the year to be approximately $60 million, including the $23 million spent in the first quarter of fiscal 26, compared to a total of $108 million in fiscal 25. Remaining capital expenditures relate to the new distribution center in Lyons, Georgia, and new brick-and-mortar locations. Thank you for your time today. We will now turn the call over for questions.
分析師問答
Thank you. We will now be conducting a question-and-answer session. It may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Our first question is from Ashley Owens with KeyBanc Capital Markets.
Thanks. Good afternoon. Maybe just to start, I want to dig down on the comments about the trend softening through April into May and then early June, and then you flagged that Father's Day shift. Is there any way to help us isolate how much of that deceleration is calendar versus genuine demand softness? Like, when you normalized for that Father's Day timing, what does the underlying trend look like there? And I have a follow-up.
So I would say we built into our guidance flat to low-single-digit negative for Q2. I think we are, at the moment, in the low-single-digit negative. I think when we get past Father's Day, we will be in that zone of flat to low-single-digit negative. I believe that is where we will land. I think we are going to pick up a bit through Father's Day, and then right now we are tracking fine.
Understood. Maybe then just secondly, more broadly on wholesale, just curious, since we last spoke, there has obviously been elevated gas prices and consumer discretionary sentiment is weak. I would just be curious if you are seeing any shifts in some of the wholesale order behavior across your portfolio for the balance of the year. Any retailers trimming buys here, pushing out deliveries, anything to call out? Thanks.
They are still being cautious and we still think we will be down, but we are not seeing a drastic change. Given the environment, everyone is being a bit cautious, so the opportunity for some increases might not be there quite the way we had hoped. A lot of people are trying to sort through the current business and how much this Father's Day shift is impacting it versus how much is the consumer, and that is a hard thing to really tell. I think it is some of both.
And, Ashley, it always comes down to how you are performing on their floor. Our wholesale performance overall has hung in pretty well so far year to date. Some places are stronger than others, but overall it has been pretty strong.
Okay. Understood. Thank you. I will pass it along.
Our next question is from Dana Telsey with Telsey Advisory. Good afternoon.
I want to unpack the performances of Tommy Bahama and Lilly. Certainly, the improvement in the performance of Tommy Bahama, even from the fourth quarter to the first quarter, is impressive and I wanted to get whether it is men's, women's, price, or category — what is driving that? And then the Lilly downtick: I think last quarter when we all spoke, you talked about the headwinds, whether it was Florida weather, but felt like the structural components of Lilly were very much intact. What has changed? Where's the softness coming from? Is it by region, by channel, by customer? Is it print, pattern, solid? Promotions? And what is the timeline of the Lilly fix? Thank you.
Okay. So let me start with Tommy Bahama. I would say it was a very nice quarter for Tommy Bahama and we are very proud of it. Men's had an increase in our direct-to-consumer business year over year. We talked about this in March, but that was really driven by core product that we were sort of weak on last year, and that is things like the Amfielder, the Boracay, and some of our big linen programs. That really drove it. The real strength in the quarter was that women's was even better. The women's DTC business was up about 7.5% for the quarter, which is quite strong, and it was driven by what we would consider the fashion part of the business — a couple of categories within fashion. I think pants and wovens were both strong during the quarter. We are still very much a men's-driven business, but seeing that strength in women's helped drive our quarterly results to a large degree. One other stat I will throw out that I love is that during the first quarter of 26, 30% of our e-commerce orders included both a men's and a women's item. That is up from last year when it was 25%. We do not have any great benchmarking on that, but we believe that is a strong indicator of our ability to sell both genders effectively when almost a third of our orders are dual-gender orders. So we really liked what we saw in Tommy Bahama during the quarter. Some of that softness that we saw in April and May had to do with some timing shifts and a little planning hiccup. I really believe that once we get through Father's Day we will be back on a very good track. It is a little hard to see it today just because of the shift; it is still good, just not quite as strong as it was. On Lilly Pulitzer, I do believe that the February weather in Florida was a contributing factor. At the time we were talking in March, that was valid because it was especially during February and the first part of March where the average daily temperatures were much lower than normal, and that is a time of year when it matters a lot in Florida as to whether people are motivated to shop. As we got deeper into the quarter, we realized that there were other issues with both the assortment and with the messaging and marketing around them. As identified in our prepared remarks, we were under-inventoried in our opening price-point bucket, and I think that cost us some business. Some customers were willing to move up the price-point scale, but some of them simply did not buy. From a print and color perspective, we leaned heavily into vintage prints. While we love those prints and they are beautiful, I think we probably overdid that. Those tend to appeal a bit more to the most dedicated Lilly fans and maybe less so to newer Lily fans. The last issue I would identify is what we are calling novelty. There has been a lot of emphasis across the market on newness and novelty. I believe we swung the pendulum a little too far on novelty this spring. It is good to have newness, but we had too much of it and not enough of our assortment was versatile. When consumers are being more discerning, they look at versatility more closely. For example, this spring we had a gorgeous dress that would be appropriate for a charity ball or gala — stunning, but likely only worn once, and it was over $700, which for us is a high price point. We had a little too much of that. In terms of timeline to fixing things, messaging and marketing can be addressed more quickly and we are already adapting promotions and marketing. Product development cycles take longer. We feel some of our later summer deliveries are a bit stronger and do not have quite the degree of issues. The Lilly team is responding in an agile way to correct these matters. I am proud of the Lilly team and how they have responded. This is a fashion business and hiccups happen occasionally; the key is how you respond short-term and long-term, and the Lilly team is tackling both fronts.
Very helpful. Thank you.
Our next question is from Janine Stichter with BTIG.
Hi. Thanks for taking my question. I want to delve into the gross margin side a bit. You talked about having some big wins on the sourcing side. Maybe you could just talk about what is working there, how much you view as kind of structural and able to continue? And then as you think about the guidance for gross margin to increase throughout the balance of the year, what does that assume in terms of promotions by brand, how you are planning them, and also how consumers are shopping around those promotions? Thank you.
On gross margin, we have done a lot of sourcing shifts. We also captured benefits from price increases and from newness items, which tend to have better margins. At Tommy Bahama, especially, we sold through at full price nicely, which helped our gross margin. As mentioned, the tariffs are at 10% now, and that is our assumption going forward. We also had overall lower promotions both in the first quarter and on sales to off-price wholesale accounts, which helped. Direct-to-consumer was a higher percentage of our total sales versus wholesale, which also helps. As far as promotions, Lilly will probably be a little more promotional than we planned at the beginning of the year given the start. Tommy will have pretty much the normal cadence. Overall, I don't think the total company promotional cadence will be dramatically different; it will be a little more Lilly, quite a bit less at Johnny Was — Johnny Was is being much more disciplined, has lower inventory, is being disciplined on promotional events, and their gross margins were very good and should continue to be. There are some structural things at Johnny Was that are starting to show through on gross margin and some SG&A controls, and I think they will begin to show on the top line later in the year.
Got it. And with the price increases, have you seen any pushback at either of the brands? And then just any more plans for ticket increases the rest of the year?
I would say there is a nuanced answer to that, but there has not really been any direct pushback. If you look at our numbers, we are selling fewer units, while average retail price is up and average unit retail is up. So customers are paying the price, but the total number of units sold during the quarter was down a bit. It is hard to know exactly how to interpret that. I think some of that is about the softness and general caution among the consumer, but we are looking at it to ensure we are not out of whack with what the consumer is willing to pay. We do not believe we are out of whack with the market; we believe we are in sync with our peers. But it bears further scrutiny.
Thanks for the color. Thank you.
Our next question is for Mauricio Serna with UBS.
Great. Thanks for taking my questions. First on Tommy Bahama: could you talk about your expectations in terms of the comps for Q2 and the rest of the year? Thinking about the traction you got in Q1, is it fair to assume the brand can sustain a mid-single-digit comp? And then a similar question on Johnny Was: it seemed like you have really been able to bring that business into a healthier place at least in terms of margins. How should we think about the timing for an inflection to positive sales growth of the brand? Could it happen by the second half of the year? Thank you.
For Tommy, we think we can have positive comps for the rest of the year, though our model is a little lower than the mid-single we saw in the first quarter. A lot of it depends on the Father's Day timing and how that settles out; once we get through Father's Day we expect to be in a good place. For Johnny Was, we think we can start having positive comps in the second half. A lot of the discipline we have put in place and the product changes will be more visible in the second half. We could not materially impact product in the first half of the year, but in the second half we will have better commercial lines and more essentials that work with the prints. We have very little of that now, but we will have quite a bit more in the second half. So first-half comps for Johnny Was will be tough, but with healthier gross margins and more expense discipline, we really think comps can start turning around in the second half.
And then on the tariffs: it seems like the assumption is even if tariffs change later, it should have limited impact on fiscal 26 given how inventory flows. Is that a correct interpretation? Also, if tariff refunds are received, what would be the primary use of the proceeds — debt repayment or something else?
Yes, given the timing of our planned inventory receipts, changes in tariff rates during fiscal 26 would be expected to have a more limited impact on fiscal 26 results than on future periods. The tariffs remain uncertain and we are monitoring the situation closely. Regarding tariff refunds, we would use refunds to pay down debt, and seasonality also plays a role. We expect second-quarter debt to come down, and if we get tariff refunds then debt will come down even more significantly.
Awesome. Well, thanks for answering the questions, and best of luck. Bye.
Our next question is from Joseph Civello with Truist Securities.
Hey, guys. Thanks so much for taking my questions. Just trying to zero in a little bit more on the consumer versus Father's Day. Is there any way you could break down the tax refund impact on Q1?
I am not sure we can do that. I don't know that we can accurately break that down.
I believe it was probably a positive for us for sure, but I do not know that we have a good way to break that down. There are many folks trying to estimate tax return impacts, but we cannot translate it exactly. Separately, on gas prices, some analyses suggest when gas gets to $4.50 a gallon you've eaten up a lot of the benefit of tax returns. We are not at $4.50 a gallon in most places. With where oil has settled — high $80s to low $90s — it impacts sentiment but I do not think it will cripple the economy. People do not like it, but I do not think it will cripple spending broadly.
That is helpful. And then, can you give any more color on regional performance for Tommy and maybe how the new distribution center has impacted operations?
Regarding the new distribution center, we moved our first brand over at the very end of February. We now have four brands over there and have three more brands to move. Lyons was doing a tiny bit for Tommy; they have been doing all the emerging brands and a small amount for Lilly and Johnny Was. We will continue moving brands over; the Jack Rogers operation in a third-party logistics provider will move as well. We expect by the end of July or early August to have all the brands moved over. We are in the start-up phase, working out kinks and moving brands over slowly, absorbing them, getting more efficient, and then moving the next brand. This summer we will get all the brands over and then continue to move more Tommy Bahama over as efficiencies improve. It will be a great long-term asset for the company.
From a geographic standpoint, Tommy Bahama's strength this year has been in the West or the western part of the country versus the East. The West has been strong this year, which is good to see. We had a couple of years where it was lagging, so this is very encouraging.
Got it. Thanks so much, guys.
There are no further questions at this time. I would like to turn the floor back over to Tom Chubb for any closing remarks.
Thank you very much for your time and attention today. We appreciate your interest in our company, and we look forward to talking to you again at the end of the summer.
This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.