OXFORD INDUSTRIES INC (OXM) FY 2025 MD&A

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our results of operations, cash flows, liquidity and capital resources compares Fiscal 2024 to Fiscal 2023 and should be read in conjunction with our consolidated financial statements contained in this report.

The results of operations, cash flows, liquidity and capital resources for Fiscal 2023 compared to Fiscal 2022 are not included in this report on Form 10-K. For a discussion of our results of operations, cash flows, liquidity and capital resources for Fiscal 2023 compared to Fiscal 2022 and certain other financial information related to Fiscal 2023 and Fiscal 2022, refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II. Item 7 of our 2023 Annual Report on Form 10-K, filed with the SEC on April 1, 2024, which is available on the SEC’s website at www.sec.gov and under the Investor Relations section of our website at www.oxfordinc.com.

OVERVIEW

Business Overview

We are a leading branded apparel company that designs, sources, markets and distributes products bearing the trademarks of our Tommy Bahama, Lilly Pulitzer, Johnny Was, Southern Tide, TBBC, Duck Head and Jack Rogers lifestyle brands.

Our business strategy is to drive excellence across a portfolio of lifestyle brands that create sustained, profitable growth. We consider lifestyle brands to be those brands that have a clearly defined and targeted point of view inspired by an appealing lifestyle or attitude. Furthermore, we believe lifestyle brands that create an emotional connection can command greater loyalty and higher price points and create licensing opportunities. We believe the attraction of a lifestyle brand depends on creating compelling product, effectively communicating the respective lifestyle brand message and distributing products to consumers where and when they want them. We believe the principal competitive factors in the apparel industry are the reputation, value, and image of brand names; design of differentiated, innovative or otherwise compelling product; consumer preference; price; quality; marketing; product fulfillment capabilities; and customer service. Our ability to compete successfully in the apparel industry is dependent on our proficiency in foreseeing changes and trends in fashion and consumer preference and presenting appealing products for consumers. Our design-led, commercially informed lifestyle brand operations strive to provide exciting, differentiated fashion products each season as well as certain core products that consumers expect from us.

In Fiscal 2022, we acquired Johnny Was. Johnny Was products are sold through the Johnny Was website and full-price retail stores and outlets as well as select department stores and specialty stores. The financial information included in the results of operations discussion below for Fiscal 2022 includes only the nineteen weeks from the September 19, 2022 acquisition date through January 28, 2023. Therefore, the amounts included in the results of operations below for Fiscal 2022 are not indicative of results for a full year. Refer to Note 4 of our consolidated financial statements included in this report for additional information about the Johnny Was acquisition.

During Fiscal 2024, 81% of our consolidated net sales were through our direct to consumer channels of distribution, which consist of our brand specific full-price retail stores, e-commerce websites and outlets, as well as our Tommy Bahama food and beverage operations. The remaining 19% of our net sales was generated through our wholesale distribution channels, which complement our direct to consumer operations and provide access to a larger base of consumers. Our wholesale operations consist of sales of products bearing the trademarks of our lifestyle brands to various specialty stores, better department stores, Signature Stores, multi-branded e-commerce retailers and other retailers.

For additional information about our business and each of our operating segments, see Part I, Item 1. Business included in this report. Important factors relating to certain risks which could impact our business are described in Part I, Item 1A. Risk Factors of this report.

Industry Overview

We operate in a highly competitive apparel market. No single apparel firm or small group of apparel firms dominates the apparel industry, and our competitors vary by operating segment and distribution channel. The apparel industry is cyclical and very dependent on the overall level and focus of discretionary consumer spending, which changes as consumer preferences and regional, domestic and international economic conditions change. Also, in recent years

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consumers have chosen to spend less of their discretionary spending on certain product categories, including apparel, while spending more on services and other product categories. Further, negative economic conditions often have a longer and more severe impact on the apparel industry than on other industries due, in part, to apparel purchases often being more of a discretionary purchase.

This competitive and evolving environment requires that brands and retailers approach their operations, including marketing and advertising, very differently than they have historically and may result in increased operating costs and investments to generate growth or even maintain existing sales levels. The competition and evolution within the industry present significant risks, particularly in the current macroenvironment, with heightened concerns about inflation, compounded by significant uncertainty about U.S. trade and tax regulations, geopolitical issues, the availability and cost of credit and elevated interest rates for prolonged periods. Other factors such as disruptions to global shipping and distribution networks from the recent attacks on commercial shipping vessels in the Red Sea have led to container shortages and changes to vessel availability resulting in shipment delays and increased freight costs. The future geopolitical landscape also remains particularly uncertain following the results of the recent elections in the United States in November 2024. Any resulting changes in international trade relations, legislation and regulations, including those related to taxation and importation, notably, the new administration’s implementation of recently enacted tariffs and threats of additional tariff increases, economic and monetary policies, or heightened diplomatic tensions or political and civil unrest, among other potential impacts, could adversely impact the global economy and our operating results. These factors, when combined with heightened promotional activity in our industry, create a complex and challenging retail environment, which impacted our businesses and financial results during Fiscal 2024 and has exacerbated some of the inherent challenges to our operations and may continue to do so in the future. There remains significant uncertainty in the macroeconomic environment, and the impact of these and other factors could have a major effect on our businesses.

We believe our lifestyle brands have true competitive advantages, and we continue to invest in our brands’ direct to consumer initiatives and distribution capabilities while further leveraging technology to serve our consumers when and where they want to be served. We continue to believe that our lifestyle brands, with their strong emotional connections with consumers, are well suited to succeed and thrive in the long term while managing the various challenges facing our industry in the current environment. At the same time, we remain cautious in light of extrinsic factors and are proactively taking measures to reassess and realign our operating expenses to drive long-term operating margin expansion across our businesses.

Key Operating Results

The following table sets forth our consolidated operating results (in thousands, except per share amounts) for Fiscal 2024 and Fiscal 2023:

Net earnings per diluted share were $5.87 in Fiscal 2024 compared to $3.82 in Fiscal 2023. The 54% increase in net earnings per diluted share was primarily due to the 53% increase in net earnings. The increase in net earnings in Fiscal 2024 was due to (1) the absence of $114 million in impairment charges in goodwill, intangible assets, and equity method investments recognized in Fiscal 2023, (2) decreased interest expense and (3) improved operating results in Corporate and Other. These increases were partially offset by (1) lower operating results in Tommy Bahama and Lilly Pulitzer and (2) a higher effective tax rate.

OPERATING SEGMENTS

We identify our operating segments based on the way the chief operating decision maker ("CODM") organizes the components of our business for purposes of allocating resources and assessing performance. Our operating segment structure reflects a brand-focused management approach, emphasizing operational coordination and resource allocation across each brand’s direct to consumer, wholesale and licensing operations, as applicable. Subsequent to our acquisition of

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Johnny Was in Fiscal 2022, our business is organized as our Tommy Bahama, Lilly Pulitzer, Johnny Was and Emerging Brands reportable segments. For a more extensive description of our reportable segments and Corporate and Other, see Part I, Item 1. Business and Note 2 of our consolidated financial statements, both included in this Annual Report on Form 10-K.

COMPARABLE SALES

We often disclose comparable sales in order to provide additional information regarding changes in our results of operations between periods. Our disclosures of comparable sales include net sales from our full-price retail stores and e-commerce sites. We believe that the inclusion of both full-price retail stores and e-commerce sites in the comparable sales disclosures is a more meaningful way of reporting our comparable sales results, given similar inventory planning, allocation and return policies, as well as our cross-channel marketing and other initiatives for the direct to consumer channels. For our comparable sales disclosures, we exclude (1) outlet store sales as those clearance sales are used primarily to liquidate end of season inventory, which may vary significantly depending on the level of end of season inventory on hand and generally occur at lower gross margins than our non-clearance direct to consumer sales, and (2) food and beverage sales, as we do not currently believe that the inclusion of food and beverage sales in our comparable sales disclosures is meaningful in assessing our total company operations. Comparable sales information reflects net sales, including shipping and handling revenues, if any, associated with product sales.

For purposes of our disclosures, comparable sales consists of sales through e-commerce sites and any physical full-price retail store that was owned and open as of the beginning of the prior fiscal year and which did not have during the relevant periods, and is not within the current fiscal year scheduled to have, (1) a remodel or other event which would result in a closure for an extended period of time (which we define as a period of two weeks or longer), (2) a greater than 15% change in the size of the retail space due to expansion, reduction or relocation to a new retail space or (3) a relocation to a new space that is significantly different from the prior retail space (including relocations to accommodate an adjacent Tommy Bahama food and beverage concept). For those stores which are excluded based on the preceding sentence, the stores continue to be excluded from comparable sales until the criteria for a new store is met subsequent to the remodel, relocation, or other event. A full-price retail store that is remodeled will generally continue to be included in our comparable sales metrics as a store is not typically closed for longer than a two-week period during a remodel; however, a full-price retail store that is relocated generally will not be included in our comparable sales metrics until that store has been open in the relocated space for the entirety of the prior fiscal year because the size or other characteristics of the store typically change significantly from the prior location. Any stores that were closed during the prior fiscal year or current fiscal year, or which we expect to close or vacate in the current fiscal year, as well as any pop-up or temporary store locations, are excluded from our comparable sales metrics.

Definitions and calculations of comparable sales differ among retail companies, and therefore comparable sales metrics disclosed by us may not be comparable to the metrics disclosed by other companies.

DIRECT TO CONSUMER LOCATIONS

The table below provides information about the number of direct to consumer locations for our brands as of the dates specified. For acquired businesses, locations are only included subsequent to the date of acquisition. The amounts

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below include our permanent locations and exclude any pop-up or temporary store locations which have an initial lease term of 12 months or less.

RESULTS OF OPERATIONS

The following table sets forth the specified line items in our consolidated statements of operations both in dollars (in thousands) and as a percentage of net sales. We have calculated all percentages based on actual data, but percentage columns may not add due to rounding.

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The following table presents the proportion of our consolidated net sales, including the net sales of Johnny Was that was acquired during Fiscal 2022, by distribution channel for each period presented. We have calculated all percentages below on actual data, and percentages may not add to 100 due to rounding.

FISCAL 2024 COMPARED TO FISCAL 2023

The discussion and tables below compare certain line items included in our consolidated statements of operations for Fiscal 2024, which includes 52 weeks, to Fiscal 2023, which includes 53 weeks, except where indicated otherwise. Each dollar and share amount included in the tables is in thousands except for per share amounts. We have calculated all percentages based on actual data, and percentage columns in tables may not add due to rounding. Individual line items of our consolidated statements of operations, including gross profit, may not be directly comparable to those of our competitors, as classification of certain expenses may vary by company.

Net Sales

Consolidated net sales were $1.5 billion in the 52 week Fiscal 2024 compared to net sales of $1.6 billion in the 53 week Fiscal 2023. Net sales decreased in Tommy Bahama, Lilly Pulitzer, and Johnny Was, which were partially offset by increased sales in Emerging Brands. We estimate that the 53rd week in Fiscal 2023 provided an approximate $16 million benefit to our consolidated net sales for the prior year.

The decrease in net sales by distribution channel consisted of the following:

•a decrease in wholesale sales of $31 million, or 10%, including (1) a $17 million decrease in Tommy Bahama, (2) an $8 million decrease in Emerging Brands, (3) a $4 million decrease in Johnny Was and (4) a $2 million decrease in Lilly Pulitzer;

•a decrease in e-commerce sales of $19 million, or 4%, including (1) an $18 million decrease in Lilly Pulitzer, (2) a $2 million decrease in Tommy Bahama and (3) a $1 million decrease in Johnny Was. These decreases were partially offset by a $2 million increase in Emerging Brands;

•a decrease in full-price retail store sales of $9 million, or 2%, including (1) a $14 million decrease in Tommy Bahama and (2) a $2 million decrease in Johnny Was. These decreases were partially offset by (1) a $7 million increase in Emerging Brands and (2) a $1 million increase in Lilly Pulitzer;

•an increase in outlet sales of $2 million, or 3%, including a $3 million increase in Tommy Bahama. This increase was partially offset by a $1 million decrease in Johnny Was; and

•an increase in food and beverage sales of $1 million, or 1%.

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Tommy Bahama:

Tommy Bahama net sales decreased $29 million, or 3%, in Fiscal 2024, with a decrease in (1) wholesale sales of $17 million, or 11%, driven primarily by decreases in sales to off-price, department store, and specialty store wholesale customers, (2) full-price retail sales of $14 million, or 4%, and (3) e-commerce sales of $2 million, or 1%. These decreases were partially offset by an increase in (1) outlet sales of $3 million, or 5%, and (2) food and beverage sales of $1 million, or 1%. The following table presents the proportion of net sales by distribution channel for Tommy Bahama for each period presented:

Lilly Pulitzer:

Lilly Pulitzer net sales decreased $20 million, or 6%, in Fiscal 2024, with a decrease in (1) e-commerce sales of $18 million, or 11%, and (2) wholesale sales of $2 million, or 3%. These decreases were partially offset by an increase in retail sales of $1 million, or 1%. The following table presents the proportion of net sales by distribution channel for Lilly Pulitzer for each period presented:

Johnny Was:

Johnny Was net sales decreased $8 million, or 4%, in Fiscal 2024, with a decrease in (1) wholesale sales of $4 million, or 10%, (2) full-price retail sales of $2 million, or 3%, (3) outlet sales of $1 million, or 23%, and (4) e-commerce sales of $1 million, or 1%. The following table presents the proportion of net sales by distribution channel for Johnny Was for each period presented:

Emerging Brands:

Emerging Brands net sales increased $2 million, or 1%, in Fiscal 2024, including (1) an increase in sales in Jack Rogers that was acquired during the Fourth Quarter of Fiscal 2023 and (2) an increase in Duck Head sales. These increases were partially offset by a decrease in (1) Southern Tide sales and (2) TBBC sales. By distribution channel, increased net sales included (1) an increase in retail sales as we opened new retail locations and (2) e-commerce sales. These increases

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were partially offset by a decrease in wholesale sales. The following table presents the proportion of net sales by distribution channel for Emerging Brands for each period presented:

Corporate and Other:

Corporate and Other net sales primarily consist of the elimination of any sales between operating segments.

Gross Profit

The tables below present gross profit by reportable segment and Corporate and Other and in total for Fiscal 2024 and Fiscal 2023, as well as the change between those two periods and gross margin by reportable segment and Corporate and Other and in total. Our gross profit and gross margin, which is calculated as gross profit divided by net sales, may not be directly comparable to those of our competitors, as the statement of operations classification of certain expenses may vary by company.

The decreased gross profit of 4% was primarily due to (1) the 3% decrease in net sales and (2) decreased consolidated gross margin. The decreased gross margin was primarily due to full-price retail and e-commerce sales representing a lower proportion of net sales at Tommy Bahama, Lilly Pulitzer and Johnny Was with more sales occurring during promotional and clearance events. This decrease was partially offset by (1) a $6 million lower LIFO accounting charge in Fiscal 2024 compared to Fiscal 2023, (2) higher gross margin in Emerging Brands driven by decreased promotional and off-price sales resulting from improved inventory levels and (3) a change in sales mix with wholesale sales representing a lower proportion of net sales. We estimate that the 53rd week in Fiscal 2023 resulted in approximately $10 million of additional gross profit in the prior year.

Tommy Bahama:

The lower gross margin for Tommy Bahama was primarily due to full-price retail and e-commerce sales representing a lower proportion of net sales with more sales occurring during promotional and clearance events, including

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loyalty award cards, Flip Side, end of season clearance events and the semi-annual Friends & Family event. This decrease was partially offset by a change in sales mix with wholesale sales representing a lower proportion of net sales.

Lilly Pulitzer:

The lower gross margin for Lilly Pulitzer was primarily due to (1) full-price retail and e-commerce sales representing a lower proportion of net sales with more sales occurring during promotional and clearance events, including the e-commerce flash clearance events, (2) a change in sales mix with off-price wholesale sales representing a higher proportion of wholesale sales and (3) higher loyalty reward discounts driven by increased participation in Lilly Pulitzer’s loyalty program.

Johnny Was:

The lower gross margin for Johnny Was was primarily due to (1) full-price retail and e-commerce sales representing a lower proportion of net sales with more sales occurring during promotional and clearance events, including events to reduce inventory levels during the transition period associated with the movement of Johnny Was' distribution center operations from Los Angeles, California to Lyons, Georgia and (2) a change in sales mix with sales to department stores and off-price wholesale customers that result in lower gross margins representing a higher proportion of wholesale sales than specialty store customers that generate higher gross margins. These decreases were partially offset by a change in sales mix with wholesale sales representing a lower proportion of net sales.

Emerging Brands:

The higher gross margin for Emerging Brands was primarily due to (1) improved inventory levels resulting in lower off-price wholesale sales and lower promotional e-commerce sales and (2) a change in sales mix with retail sales representing a larger proportion of net sales.

Corporate and Other:

The gross profit in Corporate and Other primarily reflects the impact of LIFO accounting adjustments that resulted in a $6 million lower charge in Fiscal 2024 compared to Fiscal 2023. The LIFO accounting impact in Corporate and Other in each period includes the net impact of (1) a charge in Corporate and Other when inventory that had been marked down in an operating segment in a prior period was ultimately sold, (2) a credit in Corporate and Other when inventory had been marked down in an operating segment in the current period, but had not been sold as of period end and (3) the change in the LIFO reserve, if any.

SG&A

SG&A was $855 million in Fiscal 2024 compared to SG&A of $821 million in Fiscal 2023 with approximately $24 million, or 71%, of the increase due to the increase in bricks and mortar retail locations. The 4% increase in total SG&A in Fiscal 2024 included the following, each of which includes the SG&A of the new bricks and mortar locations:

•$11 million increase in occupancy costs primarily due to new retail store and Marlin Bar locations;

•$7 million increase in depreciation expense primarily due to new retail stores and Marlin Bar locations;

•$7 million increase in software subscription and consulting costs associated with IT projects;

•$6 million increase in advertising costs due to increases in market advertising rates; and

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•$6 million in increased employment costs, primarily related to new bricks and mortar retail locations.

These increases were partially offset by:

•$3 million decrease in amortization of intangible assets; and

•$2 million decrease in incentive compensation.

We estimate that the 53rd week in Fiscal 2023 resulted in approximately $11 million of incremental SG&A.

Impairment of goodwill, intangible assets and equity method investments

There were no impairment charges recognized for goodwill, intangible assets or equity method investments in Fiscal 2024. In Fiscal 2023, noncash impairment charges for goodwill and intangible assets totaling $111 million were recognized in the Johnny Was reporting unit. Refer to Note 5 in the consolidated financial statements included in this report for additional disclosure regarding the Johnny Was impairment charges recognized in Fiscal 2023. We also recognized noncash impairment charges of $2 million related to an equity method investment in a smaller lifestyle brand in the Emerging Brands reporting unit. Refer to “Equity Investments in Unconsolidated Entities” in Note 1 in the consolidated financial statements for additional disclosure regarding the impairment charge recognized in Fiscal 2023.

Royalties and other operating income

Royalties and other operating income typically consist of royalty income received from third parties from the licensing of our brands. Royalty income in Fiscal 2024 was comparable to Fiscal 2023. The absence of a $2 million gain recorded in Fiscal 2023 on the sale of the Merida manufacturing facility in Mexico previously operated by our Lanier Apparel operating group, which we exited in Fiscal 2021, was partially offset by increased royalty income received from third parties.

Operating income (loss)

Operating income was $119 million in Fiscal 2024 compared to $81 million in Fiscal 2023. The increased operating income was primarily due to the absence of (1) a $111 million impairment charge for goodwill and intangible assets in the Johnny Was reporting unit recorded in Fiscal 2023, (2) a $2 million impairment charge in an investment in an unconsolidated entity in the Emerging Brands reporting unit in Fiscal 2023 and (3) improved operating results in Corporate

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and Other. These increases were partially offset by lower operating income in Tommy Bahama and Lilly Pulitzer. Changes in operating income (loss) by operating segment are discussed below.

Tommy Bahama:

The decreased operating income for Tommy Bahama was due to (1) decreased net sales, (2) increased SG&A and (3) lower gross margin. The increased SG&A was primarily due to (1) $11 million of increased SG&A associated with new retail stores and Marlin Bar locations with retail and food and beverage operations, including related employment costs, occupancy costs, depreciation expense and other administrative expenses, (2) $3 million of increased advertising costs and (3) $3 million of increased software related costs. These increases were partially offset by a $6 million decrease in employment costs not associated with new retail stores and Marlin Bar locations.

Lilly Pulitzer:

The decreased operating income for Lilly Pulitzer was primarily due to (1) decreased net sales and (2) lower gross margin. SG&A in Fiscal 2024 was comparable to Fiscal 2023. SG&A was largely flat with increases of $3 million associated with new retail store operations, including related employment costs, occupancy costs, administrative expenses and depreciation expense. These increases were partially offset by a decrease in employment costs not associated with new retail stores of $3 million.

Johnny Was:

The increased operating results for Johnny Was was primarily due to the absence of a $111 million impairment charge for goodwill and intangible assets recorded in Fiscal 2023. The absence of an impairment charge was partially offset by (1) decreased net sales, (2) increased SG&A and (3) lower gross margin. The increased SG&A was primarily due to (1) $4 million of higher SG&A associated with new retail store operations, including related employment costs, occupancy costs, administrative expenses and depreciation expense and (2) $3 million of costs related to the relocation of Johnny Was' distribution center operations from Los Angeles, California to Lyons, Georgia including systems integrations, employee

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transitional arrangements, moving costs and occupancy expenses related to the vacated distribution centers. These increases were partially offset by $3 million of decreased amortization of acquired intangible assets.

Emerging Brands:

Operating income in Fiscal 2024 was comparable to Fiscal 2023. Increases in operating income included (1) higher gross margin, (2) the absence of a $2 million impairment charge in an unconsolidated entity recorded in Fiscal 2023 and (3) increased net sales. These increases were partially offset by increased SG&A. The increased SG&A included (1) higher SG&A associated with new retail store operations, including related employment costs, occupancy costs, administrative expenses and depreciation expense and (2) the addition of Jack Rogers in the Fourth Quarter of Fiscal 2023.

Corporate and Other:

The improved operating results in Corporate and Other were primarily a result of a $6 million lower LIFO accounting charge in Fiscal 2024 relative to Fiscal 2023. This improvement was partially offset by (1) increased SG&A, including increased employment costs partially offset by decreased incentive compensation and (2) the absence of a $2 million gain on the sale of the Merida manufacturing facility in Mexico.

Interest expense, net

The lower interest expense in Fiscal 2024 was primarily due to lower average outstanding debt during Fiscal 2024 than Fiscal 2023.

Income taxes

Both Fiscal 2024 and Fiscal 2023 benefited from the net favorable impact of certain items that resulted in a lower tax rate than the more typical annual effective tax rate of approximately 25%. Thus, the effective tax rates for Fiscal 2024 and Fiscal 2023 are not indicative of the effective tax rate expected in future periods. Refer to Note 11 of our consolidated financial statements included in this report for our income tax rate reconciliation and other information about our income tax expense for Fiscal 2024 and Fiscal 2023.

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The income tax expense in Fiscal 2024 reflects the benefit derived from an increase in research and development tax credits, a reduction in income tax expense as a result of the receipt of interest from a U.S. federal NOL carryback claim, a benefit attributable to the vesting of restricted stock awards at a price exceeding the grant date fair value, favorable effects of changes in the fair value of life insurance policies, and benefits associated with certain adjustments pertaining to U.S. taxation on foreign earnings. These favorable items were partially offset by unfavorable items related to the non-deductible amounts associated with executive compensation and an increase in uncertain tax positions.

The income tax expense in Fiscal 2023 included the benefit of the vesting of restricted stock awards at a price significantly higher than the grant date fair value, the favorable utilization of research and development tax credits, changes in the fair value of life insurance policies associated with our deferred compensation plans and certain adjustments to the U.S. taxation on foreign earnings. These favorable items were partially offset by unfavorable items related to the non-deductible amounts associated with executive compensation.

Net earnings

Net earnings per diluted share were $5.87 in Fiscal 2024 compared to $3.82 in Fiscal 2023. The 54% increase in net earnings per diluted share was primarily due to the 53% increase in net earnings. The increase in net earnings in Fiscal 2024 was primarily due to (1) the absence of $114 million in impairment charges in goodwill, intangible assets, and equity method investments recognized in Fiscal 2023, (2) decreased interest expense and (3) improved operating results in Corporate and Other. These increases were partially offset by (1) lower operating results in Tommy Bahama and Lilly Pulitzer and (2) a higher effective tax rate.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Our primary source of revenue and cash flow is through our design, sourcing, marketing and distribution of branded apparel products bearing the trademarks of our Tommy Bahama, Lilly Pulitzer, Johnny Was, Southern Tide, TBBC, Duck Head and Jack Rogers lifestyle brands. We primarily distribute our products to our customers via direct to consumer channels of distribution, but we also distribute our products via wholesale channels of distribution.

Our primary uses of cash flow include the purchase of our branded apparel products from third party suppliers located outside of the United States, as well as operating expenses, including employee compensation and benefits, operating lease commitments and other occupancy-related costs, marketing and advertising costs, information technology costs, variable expenses, distribution costs, other general and administrative expenses and the periodic payment of interest. Additionally, we use our cash to fund capital expenditures and other investing activities, dividends, share repurchases and repayment of indebtedness, if any. In the ordinary course of business, we maintain certain levels of inventory, extend credit to our wholesale customers and pay our operating expenses. Thus, we require a certain amount of ongoing working capital to operate our business. Our need for working capital is typically seasonal with the greatest working capital requirements to support our larger spring, summer and holiday direct to consumer seasons. Our capital needs depend on many factors including the results of our operations and cash flows, future growth rates, the need to finance inventory levels and the success of our various products.

We have a long history of generating sufficient cash flows from operations to satisfy our cash requirements for our ongoing capital expenditure needs as well as payment of dividends and repayment of our debt. Thus, we believe our anticipated future cash flows from operating activities will provide (1) sufficient cash over both the short and long term to satisfy our ongoing operating cash requirements, (2) ample funds to continue to invest in our lifestyle brands, direct to consumer initiatives and information technology projects, (3) additional cash flow to repay outstanding debt and (4) sufficient cash for other strategic initiatives such as acquisitions and share repurchases. Also, if cash inflows are less than cash outflows, we have access to amounts under our $325 million Fourth Amended and Restated Credit Agreement (as amended, the “U.S. Revolving Credit Agreement”), subject to its terms, which is described below.

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Working Capital

Our working capital ratio is calculated by dividing total current assets by total current liabilities. Current assets as of February 1, 2025 were comparable to February 3, 2024 primarily due to decreases in (1) income tax receivables of $14 million and (2) prepaid expenses and other current assets of $5 million. These decreases were offset by an increase in (1) receivables of $9 million, (2) inventories of $8 million and (3) cash and cash equivalents of $2 million. Current liabilities as of February 1, 2025 increased from February 3, 2024 primarily due to increases in accounts payable of $19 million. This increase was partially offset by decreases in (1) current operating lease liabilities of $6 million, (2) retail return reserve liabilities of $3 million and (3) accrued taxes payable of $1 million.

Balance Sheet

The following tables set forth certain information included in our consolidated balance sheets (in thousands). Below each table are explanations for any significant changes in the balances as of February 1, 2025 as compared to February 3, 2024.

Current Assets:

Cash and cash equivalents were $9 million as of February 1, 2025, compared to $8 million as of February 3, 2024. The cash and cash equivalents balance as of February 1, 2025 and February 3, 2024 represent typical cash amounts maintained on an ongoing basis in our operations, which generally ranges from $5 million to $10 million at any given time. Any excess cash is generally used to repay amounts outstanding under our U.S. Revolving Credit Agreement.

The increased receivables, net as of February 1, 2025, was primarily due to (1) increased trade receivables resulting from the timing of sales and cash receipts and (2) increased tenant improvement allowance receivables due from landlords resulting from our increased store openings during Fiscal 2024.

Inventories, net, included a $85 million and $83 million LIFO reserve as of February 1, 2025, and February 3, 2024, respectively. Inventories increased in Tommy Bahama and Lilly Pulitzer primarily due to the early shipment of inventory related to the timing of the Chinese New Year. Inventories decreased in Johnny Was. We believe that inventory levels in all operating segments are appropriate to support anticipated sales plans.

We received $19 million in income tax receivables in Fiscal 2024 associated with the benefit of a Fiscal 2020 NOL carryback claim which we filed in Fiscal 2021, which was partially offset by a $5 million receivable associated with our Fiscal 2023 tax return filed in Fiscal 2024.

The decrease in prepaid expenses and other current assets as of February 1, 2025, was primarily due to a decrease in prepaid taxes partially offset by prepaid software costs.

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Non-current Assets:

Property and equipment, net as of February 1, 2025, increased primarily due to capital expenditures related to the new distribution center in Lyons Georgia and the opening of new retail stores across our portfolio that exceeded depreciation during the 12 months ended February 1, 2025.

The decrease in intangible assets, net as of February 1, 2025, was primarily due to the amortization of intangible assets acquired in the acquisition of Johnny Was partially offset by the purchase of intellectual property rights by Lilly Pulitzer during Fiscal 2024.

Operating lease assets as of February 1, 2025, increased primarily due to the addition of new leased locations, or the extension of existing leased locations, exceeding the recognition of amortization related to existing operating leases and the termination or reduced term of certain operating leases.

Other assets as of February 1, 2025, increased primarily due to (1) an increase in capitalizable implementation costs associated with cloud computing arrangements and (2) an increase in the fair value of life insurance policies associated with our deferred compensation plans.

Deferred income taxes decreased as of February 1, 2025, due primarily to the amortization of acquired intangible assets.

Liabilities:

Current liabilities increased as of February 1, 2025, primarily due to the increase in accounts payable due to the timing of invoice receipts and payments to vendors. This increase was partially offset by a decrease in current operating lease liabilities resulting from the change in timing of our fiscal year end in Fiscal 2024 compared to Fiscal 2023. Lower revenues in the Fourth Quarter of Fiscal 2024 also resulted in decreases in retail return reserve liabilities and accrued taxes payable.

The increase in long-term debt as of February 1, 2025, was the result of (1) capital expenditures primarily associated with the project to build a new distribution center in Lyons, Georgia, (2) payments of dividends and (3) and working capital requirements exceeding cash flow from operations.

The non-current portion of operating lease liabilities increased as of February 1, 2025, due to the addition of new leased locations, and the extension of existing leased locations, exceeding the payments related to existing operating leases and the termination or reduced term of certain operating leases.

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The increase in other non-current liabilities as of February 1, 2025, was the result of increases in (1) liabilities associated with our deferred compensation plans and (2) uncertain tax positions related to our research and development tax credits.

Statement of Cash Flows

The following table sets forth the net cash flows resulting in the change in our cash and cash equivalents (in thousands):

Cash and cash equivalents were $9 million as of February 1, 2025, compared to $8 million as of February 3, 2024. Changes in cash flows in Fiscal 2024 and Fiscal 2023 related to operating activities, investing activities and financing activities are discussed below.

Operating Activities:

In Fiscal 2024 and Fiscal 2023, operating activities provided $194 million and $244 million of cash, respectively. The cash flow from operating activities for each period primarily consisted of net earnings for the relevant period adjusted, as applicable, for non-cash activities including impairment charges, depreciation, amortization, equity-based compensation, gains on sale of assets and other non-cash items as well as the net impact of changes in deferred income taxes and operating assets and liabilities.

In Fiscal 2024, changes in operating assets and liabilities had a favorable impact on cash flow from operations primarily driven by income tax receivables. We received $19 million in income tax receivables in Fiscal 2024 associated with the benefit of the Fiscal 2020 operating losses filed in Fiscal 2021, which was partially offset by a $5 million receivable associated with our Fiscal 2023 tax return filed in Fiscal 2024. Other changes had a slightly unfavorable impact on cash flow from operations driven by increases in inventories and receivables partially offset by an increase in current liabilities and a decrease in prepaid expenses. In Fiscal 2023 changes in operating assets and liabilities had a favorable impact on cash flow from operations primarily driven by a decrease in inventories partially offset by a decrease in current liabilities and an increase in receivables and prepaid expenses.

Investing Activities:

In Fiscal 2024 and Fiscal 2023, investing activities used $143 million and $84 million of cash, respectively. On an ongoing basis, our cash flow primarily consists of our capital expenditures, which totaled $134 million and $74 million in Fiscal 2024 and Fiscal 2023, respectively. The increase in Fiscal 2024 is primarily due to the opening of new retail stores across our portfolio and $69 million of capital expenditures related to the new distribution center in Lyons, Georgia.

In addition to our capital expenditures in Fiscal 2024, we paid $8 million during Fiscal 2024 associated with acquisitions, including the acquisition of intellectual property rights at Lilly Pulitzer and two former Lilly Pulitzer Signature Stores. During Fiscal 2023, we paid $12 million during Fiscal 2023 associated with acquisitions, including Jack Rogers and six former Southern Tide Signature Stores, and a working capital settlement associated with the acquisition of Johnny Was. We also received $2 million from the sale of the Merida manufacturing facility in Mexico.

Financing Activities:

In Fiscal 2024 and Fiscal 2023, financing activities used $49 millions and $161 million of cash, respectively.

In Fiscal 2024, we paid $43 million of dividends and repurchased $6 million of shares to cover employee tax liabilities related to the vesting of shares of our common stock. In Fiscal 2023, we paid $42 million of dividends; repurchased $30 million of shares, including repurchased shares of our stock pursuant to an open market stock repurchase

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program and equity awards in respect of employee tax withholding liabilities; and paid $2 million in deferred financing costs associated with the amendment of the U.S. Revolving Credit Agreement.

If net cash requirements exceed our net cash flows, we may borrow amounts from our U.S. Revolving Credit Agreement consistent with our use of long-term debt to satisfy cash flow needs during Fiscal 2024. Alternatively, to the extent we are in a net debt position, if net cash requirements are less than our net cash flows, we may repay amounts outstanding on our U.S. Revolving Credit Agreement, if any.

Liquidity and Capital Resources

We have a long history of generating sufficient cash flows from operations to satisfy our cash requirements for our ongoing capital expenditure needs as well as payment of dividends and repayment of our debt. Thus, we believe our anticipated future cash flows from operating activities will provide (1) sufficient cash over both the short and long term to satisfy our ongoing operating cash requirements, (2) funds to complete our multi-year project to build a new distribution center in Lyons, Georgia to enhance the direct to consumer throughput capabilities of our brands, (3) funds to continue to invest in our businesses, including direct to consumer initiatives and information technology projects, (4) additional cash flow to repay debt that may be outstanding and (5) sufficient cash for other strategic initiatives.

Our capital needs depend on many factors including the results of our operations and cash flows, future growth rates, the need to finance inventory and the success of our various products. To the extent cash flow needs in the future exceed cash flow provided by our operations, we will have access, subject to its terms, to our U.S. Revolving Credit Agreement to provide funding for operating activities, capital expenditures and acquisitions, if any, and any other investing or financing activities.

Our cash, short-term investments and debt levels in future periods may not be comparable to historical amounts as we continue to assess, and possibly make changes to, our capital structure, including those related to borrowings from additional credit facilities, sales of debt or equity securities or the repurchase of shares of our stock in the future. Changes in our capital structure, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

$325 Million U.S. Revolving Credit Agreement

On March 6, 2023, we amended the U.S. Revolving Credit Agreement to, among other things, mature in March 2028. The U.S. Revolving Credit Agreement amended and restated our Fourth Amended and Restated Credit Agreement (the “Prior Credit Agreement”).

Pursuant to the U.S. Revolving Credit Agreement, the interest rate applicable to our borrowings under the U.S. Revolving Credit Agreement is based on either the Term Secured Overnight Financing Rate plus an applicable margin of 135 to 185 basis points or prime plus an applicable margin of 25 to 75 basis points.

The U.S. Revolving Credit Agreement generally (1) is limited to a borrowing base consisting of specified percentages of eligible categories of assets, (2) accrues variable-rate interest (weighted average interest rate of 6% as of February 3, 2024), unused line fees and letter of credit fees based upon average utilization or unused availability, as applicable, (3) requires periodic interest payments with principal due at maturity and (4) is secured by a first priority security interest in substantially all of the assets of Oxford Industries, Inc. and its domestic subsidiaries, including accounts receivable, books and records, chattel paper, deposit accounts, equipment, certain general intangibles, inventory, investment property (including the equity interests of certain subsidiaries), negotiable collateral, life insurance policies, supporting obligations, commercial tort claims, cash and cash equivalents, eligible trademarks, proceeds and other personal property.

We issue standby letters of credit under the U.S. Revolving Credit Agreement. Outstanding letters of credit under the U.S. Revolving Credit Agreement reduce the amount of borrowings available to us when issued and, as of February 1, 2025, and February 3, 2024, totaled $5 million and $5 million, respectively.

As of February 1, 2025 and February 3, 2024, we had $31 million and $29 million, respectively, of borrowings outstanding and $289 million and $288 million in unused availability, respectively, under the U.S. Revolving Credit Agreement.

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Compliance with Covenants

The U.S. Revolving Credit Agreement is subject to a number of affirmative covenants regarding the delivery of financial information, compliance with law, maintenance of property, insurance requirements and conduct of business. Also, the U.S. Revolving Credit Agreement is subject to certain negative covenants or other restrictions including, among other things, limitations on our ability to (1) incur debt, (2) guaranty certain obligations, (3) incur liens, (4) pay dividends to shareholders, (5) repurchase shares of our common stock, (6) make investments, (7) sell assets or stock of subsidiaries, (8) acquire assets or businesses, (9) merge or consolidate with other companies or (10) prepay, retire, repurchase or redeem debt.

Additionally, the U.S. Revolving Credit Agreement contains a financial covenant that applies only if excess availability under the agreement for three consecutive business days is less than the greater of (1) $23.5 million or (2) 10% of availability. In such case, our fixed charge coverage ratio as defined in the U.S. Revolving Credit Agreement must not be less than 1.0 to 1.0 for the immediately preceding 12 fiscal months for which financial statements have been delivered. This financial covenant continues to apply until we have maintained excess availability under the U.S. Revolving Credit Agreement of more than the greater of (1) $23.5 million or (2) 10% of availability for 30 consecutive days.

We believe that the affirmative covenants, negative covenants, financial covenants and other restrictions under the U.S. Revolving Credit Agreement are customary for those included in similar facilities entered into at the time we amended the U.S. Revolving Credit Agreement. During Fiscal 2024 and as of February 1, 2025, no financial covenant testing was required pursuant to our U.S. Revolving Credit Agreement or the Prior Credit Agreement, as applicable, as the minimum availability threshold was met at all times. As of February 1, 2025, we were compliant with all applicable covenants related to the U.S. Revolving Credit Agreement.

Operating Lease Commitments:

In the ordinary course of business, we enter into long-term real estate lease agreements for our direct to consumer locations, which include both retail store and food and beverage locations, and office and warehouse/distribution space, as well as leases for certain equipment. Our real estate leases have varying terms and expirations and may have provisions to extend, renew or terminate the lease agreement at our discretion, among other provisions. Our real estate lease terms are typically for a period of 10 years or less and typically require monthly rent payments with specified rent escalations during the lease term. Our real estate leases usually provide for payments of our pro rata share of real estate taxes, insurance and other operating expenses applicable to the property, and certain of our leases require payment of sales taxes on rental payments. Also, our direct to consumer location leases often provide for contingent rent payments based on sales if certain sales thresholds are achieved. Base rent amounts specified in the leases are included in determining the operating lease liabilities included in our consolidated balance sheet, while amounts for real estate taxes, sales tax, insurance, other operating expenses and contingent rent applicable to the properties pursuant to the respective leases are not included in determining the operating lease liabilities included in our consolidated balance sheets.

These leases require us to make a substantial amount of cash payments on an annual basis. Base rent amounts required to be paid in the future over the remaining lease terms under our existing leases as of February 1, 2025, totaled $533 million, including $79 million, $76 million, $69 million, $65 million and $50 million of required payments in each of the next five years. Additionally, amounts for real estate taxes, sales tax, insurance, other operating expenses and contingent rent applicable to the properties pursuant to the respective operating leases are required to be paid in the future, but the amounts payable in future periods are, in most cases, not quantified in the lease agreement or are dependent on factors which may not be known at this time. Such amounts incurred in Fiscal 2024 totaled $47 million.

Refer to Note 1 and Note 7 of our consolidated financial statements for additional disclosures about our operating lease agreements and related commitments.

Capital Expenditures:

Capital expenditures of $134 million for Fiscal 2024 increased compared to the $74 million in Fiscal 2023. The planned increase was primarily due to the multi-year project to build a new distribution center in Lyons, Georgia to create a modern and more efficient e-commerce distribution center for our brands, increased investment in our various technology systems initiatives, increased Marlin Bar openings and increases in store openings across our portfolio. Our capital expenditure amounts in future years will fluctuate from the amounts incurred in Fiscal 2024 and prior years depending on the investments we believe appropriate for that year to support future expansion of our businesses.

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Dividends:

On March 24, 2025, our Board of Directors approved a cash dividend of $0.69 per share payable on May 2, 2025 to shareholders of record as of the close of business on April 17, 2025.

Although we have paid dividends each quarter since we became a public company in July 1960, including $43 million in total, or $2.68 per common share, in Fiscal 2024, we may discontinue or modify dividend payments at any time if we determine that other uses of our capital, including payment of outstanding debt, funding of acquisitions, funding of capital expenditures or repurchases of outstanding shares, may be in our best interest; if our expectations of future cash flows and future cash needs outweigh the ability to pay a dividend; or if the terms of our credit facility, other debt instruments or applicable law limit our ability to pay dividends. We may borrow to fund dividends or repurchase shares in the short term subject to the terms and conditions of our credit facility, other debt instruments and applicable law. All cash flow from operations will not be paid out as dividends. For details about limitations on our ability to pay dividends, see the discussion of our U.S. Revolving Credit Agreement above and in Note 6 of our consolidated financial statements contained in this report.

Share Repurchases:

As disclosed in our Quarterly Report on Form 10-Q for the Third Quarter of Fiscal 2024, on December 10, 2024, our Board of Directors authorized us to spend up to $100 million to repurchase shares of our stock. This authorization superseded and replaced all previous authorizations to repurchase shares of our stock and has no automatic expiration. No shares were repurchased during the Fourth Quarter of Fiscal 2024 and $100 million remained under the Board of Directors’ authorization as of February 1, 2025. During Fiscal 2024, we did not repurchase any shares of our stock pursuant to any previous authorization.

Other Liquidity Items:

We have not entered into agreements which meet the SEC’s definition of an off balance sheet financing arrangement, other than operating leases, and have made no financial commitments or guarantees with respect to any unconsolidated subsidiaries or special purpose entities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP in a consistent manner. The preparation of these financial statements requires the selection and application of accounting policies. Further, the application of GAAP requires us to make estimates and judgments about future events that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. We base our estimates on historical experience, current trends and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions. We believe it is possible that other professionals, applying reasonable judgment to the same set of facts and circumstances, could develop and support a range of alternative estimated amounts. We believe that we have appropriately applied our critical accounting policies. However, in the event that inappropriate assumptions or methods were used relating to the critical accounting policies, our consolidated statements of operations could be materially misstated.

A detailed summary of significant accounting policies is included in Note 1 of our consolidated financial statements contained in this report. The following is a brief discussion of the more significant estimates, assumptions and judgments we use or the amounts most sensitive to change from outside factors.

Revenue Recognition and Accounts Receivable

Our revenue consists of direct to consumer sales, including our retail store, e-commerce and food and beverage operations, and wholesale sales, as well as royalty income, which is included in royalties and other income in our consolidated statements of operations. We recognize revenue when performance obligations under the terms of the contracts with our customers are satisfied, which generally occurs when we deliver our products to our direct to consumer and wholesale customers.

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In our direct to consumer operations, which represented 81% of our consolidated net sales in Fiscal 2024, consumers have certain rights to return product within a specified period and are eligible for certain point of sale discounts. We make estimates of reserves for products which were sold prior to the balance sheet date but that we anticipate may be returned by the consumer subsequent to that date. The determination of direct to consumer return reserve amounts requires judgment and consideration of historical and current trends, evaluation of current economic trends and other factors. As of February 1, 2025, our direct to consumer return reserve liability was $10 million compared to $13 million as of February 3, 2024. A 10% change in the direct to consumer sales return reserve as of February 1, 2025 would have had an impact of less than $1 million on net earnings in Fiscal 2024.

In the ordinary course of our wholesale operations, we offer discounts, allowances and cooperative advertising support to some of our wholesale accounts for certain products. As certain allowances, other deductions and returns are not finalized until the end of a season, program or other event which may not have occurred yet, we estimate such discounts, allowances and returns on an ongoing basis to estimate the consideration from the customer that we expect to ultimately receive. Significant considerations in determining our estimates for these amounts for wholesale customers may include historical and current trends, agreements with customers, projected seasonal or program results, an evaluation of current economic conditions, specific program or product expectations and retailer performance. As of February 1, 2025 and February 3, 2024, our total reserves for discounts, returns and allowances for our wholesale businesses were $3 million and $3 million, respectively. If these allowances changed by 10% it would have had an impact of approximately $1 million on net earnings in Fiscal 2024.

We extend credit to certain wholesale customers based on an evaluation of the customer’s financial capacity and condition, usually without requiring collateral. We recognize estimated provisions for credit losses based on our historical collection experience, the financial condition of our customers, an evaluation of current economic conditions, anticipated trends, and the risk characteristics of the receivables, each of which is subjective and requires certain assumptions. As of February 1, 2025 and February 3, 2024, our provision for credit losses for our wholesale receivables was $1 million and $1 million, respectively. If the provision for credit losses changed by 10% it would have had an impact of less than $1 million on net earnings in Fiscal 2024.

Inventories, net

For operating segment reporting, our inventory is carried at the lower of the first-in, first-out (“FIFO”) cost or market. We evaluate the composition of our inventories for identification of distressed inventory at least quarterly. We estimate the amount of goods that we will not be able to sell in the normal course of business and write down the value of these goods as necessary. As the amount to be ultimately realized for the goods is not necessarily known at period end, we must use certain assumptions considering historical experience, inventory quantity, quality, age and mix, historical sales trends, future sales projections, consumer and retailer preferences, market trends, general economic conditions and our anticipated plans to sell the inventory.

For consolidated financial reporting, $156 million, or 93%, of our inventories were valued at the lower of the last-in, first-out (“LIFO”) cost or market after deducting the $85 million LIFO reserve as of February 1, 2025. The remaining $11 million of our inventories were valued at the lower of FIFO cost or market as of February 1, 2025. LIFO reserves are based on the Producer Price Index (“PPI”) as published by the United States Department of Labor. We write down inventories valued at the lower of LIFO cost or market when LIFO cost exceeds market value.

As of February 1, 2025, we had recorded a reserve of $1 million related to inventory on the lower of FIFO cost or market method and for inventory on the lower of LIFO cost or market method with markdowns in excess of our LIFO reserve. A 10% change in the amount of such markdowns would have had an impact of less than $1 million on net earnings in Fiscal 2023. A change in the markdowns of our inventory valued at the lower of LIFO cost or market method that is not marked down in excess of our LIFO reserve typically would not be expected to have a material impact on our consolidated financial statements. A change in inventory levels, the mix of inventory by category or the PPI at the end of future fiscal years compared to amounts as of February 1, 2025 could result in a material impact on our consolidated financial statements in the future.

Given the significant amount of uncertainty surrounding the year-end LIFO calculation, including the estimate of year-end inventory balances, the proportion of inventory in each category and the year-end PPI, we have not typically adjusted our LIFO reserve in the first three quarters of a fiscal year. However, due to changes in the levels of inflation throughout Fiscal 2024, in addition to our Fourth Quarter adjustment at the end of Fiscal 2024, we also recognized an adjustment to the LIFO reserve in the First Quarter of Fiscal 2024. Our policy of typically not adjusting the LIFO reserve at

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interim periods may result in significant LIFO accounting adjustments in the fourth quarter of a fiscal year. We do recognize changes in markdown reserves during each quarter of the fiscal year as those amounts can be estimated on an interim basis.

Business Combinations

From time-to-time, we make strategic acquisitions that may have a material effect on our consolidated results of operations and financial position. The measurement principle for the assets acquired and the liabilities assumed in a business combination is at estimated fair value as of the acquisition date, with certain exceptions.

At acquisition, we use estimates that can be complex and require significant judgments to record the fair value of purchased intangible assets, which primarily consist of trademarks, as well as customer relationships and reacquired rights. The fair values and useful lives of these intangible assets are estimated based on our assessment as well as independent third party appraisals in some cases. Additionally, at acquisition we must determine whether the intangible asset has an indefinite or finite life and account for it accordingly. Refer to Note 5 for additional details about intangible assets.

Goodwill is recognized as the amount by which the cost to acquire a business exceeds the fair value of identified tangible and intangible assets acquired, net of assumed liabilities. Thus, the amount of goodwill recognized in connection with a business combination depends on the fair values assigned to the individual assets acquired and liabilities assumed in a business combination. Goodwill is allocated to the respective reporting unit at the time of acquisition. Refer to “Note 5—Intangible Assets and Goodwill” for additional information about our goodwill amounts.

At acquisition, assumptions and estimates about various items with significant uncertainty are required to determine the fair value of intangible assets and goodwill. When determining the fair value of intangible assets, including trademarks, customer relationships and other items, significant assumptions may include our planned use of the asset as well as estimates of net sales, royalty income, operating income, growth rates, royalty rates for the trademarks, a risk-adjusted, market-based cost of capital for the discount rates, income tax rates, anticipated cash flows and probabilities of cash flows, among other factors. Our fair value assessment may also consider any comparable market transactions. The use of different assumptions related to these uncertain factors at acquisition could result in a material change to the amounts of intangible assets and goodwill initially recorded at acquisition, which could result in a material impact on our consolidated financial statements.

The acquisition method requires us to record provisional amounts for any items for which the accounting is not complete at the end of a reporting period. We must complete the accounting during the measurement period, which cannot exceed one year. Adjustments made during the measurement period could have a material impact on our financial condition and results of operations. If our operating results, plans for the acquired business and/or macroeconomic conditions, anticipated results or other assumptions change after an acquisition, it could result in the impairment of the acquired intangible assets or goodwill. Also, a change in macroeconomic conditions may not only impact the estimated operating cash flows used in our cash flow models but may also impact other assumptions used in our analysis, including but not limited to, the risk-adjusted market-based cost of capital and/or discount rates.

Goodwill and Intangible Assets, net

We test goodwill for impairment at the reporting unit level annually on the first day of the fourth quarter and more often if an event occurs or circumstances change that indicate the fair value of a reporting unit is below its carrying amount. We have the option to first assess qualitative factors to determine whether it is more likely than not that goodwill is impaired to determine whether it is necessary to perform the quantitative impairment test. We also have the option to bypass the qualitative assessment entirely for any reporting unit in any period and proceed directly to performing the quantitative impairment test. For each impairment test of goodwill in Fiscal 2024, Fiscal 2023 and Fiscal 2022, we bypassed the qualitative test option and instead performed a quantitative test.

When applying the quantitative assessment, we determine the fair value of our reporting units based on an income approach, or in some cases a combination of an income approach and market approach. The income approach calculates a value based upon the present value of estimated future cash flows, while the market approach uses earnings multiples of similarly situated guideline public companies. Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions, which include assumptions regarding the revenue growth rates and operating margins used to calculate estimated future cash flows, risk-adjusted discount rates and future economic and market conditions. If an annual or interim analysis indicates an impairment of goodwill, the amount of the impairment is

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recognized in our consolidated financial statements based on the amount that the carrying value exceeds the estimated fair value of the reporting unit.

Intangible assets with indefinite lives, which primarily consist of trademarks, are not amortized but instead evaluated for impairment annually or more frequently if events or circumstances indicate that the intangible asset might be impaired. This analysis is dependent upon a number of uncertain factors described below and is typically performed in conjunction with the goodwill impairment analysis discussed above and is similar to the analysis performed at acquisition.

The fair value of our trademarks is principally determined by the “relief from royalty” approach that assumes the trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method includes assumptions regarding revenue growth rates, royalty rates, risk-adjusted discount rates and future economic and market conditions. If an annual or interim analysis indicates an impairment of an intangible asset with an indefinite useful life, the amount of the impairment is recognized in our consolidated financial statements based on the amount that the carrying value exceeds the estimated fair value of the asset for an intangible asset with an indefinite life or the reporting unit for goodwill.

Indefinite-lived intangible assets and goodwill that have been recently acquired or impaired are typically much more sensitive to changes in assumptions than other intangible asset and goodwill amounts as those amounts have recently been recorded at or adjusted to fair value. Consequently, if operating results, plans for the acquired business and/or macroeconomic conditions change after an acquisition, it could result in the impairment of the acquired intangible assets or goodwill. A change in macroeconomic conditions may not only impact the estimated operating cash flows used in our cash flow models but may also impact other assumptions used in our analysis, including but not limited to, the risk-adjusted market-based cost of capital and/or discount rates. Additionally, we are required to ensure that assumptions used to determine fair value in our analyses are consistent with the assumptions a hypothetical market participant would use. Therefore, the cost of capital discount rates used in our analyses may increase or decrease based on market conditions and trends regardless of whether our actual cost of capital changed.

The use of different assumptions could result in the determination of a different fair value and a different impairment charge or charges in different periods. For further discussion of the methods used and factors considered in our estimates as part of the impairment testing for goodwill and intangible assets with indefinite lives see “Note 1—Business and Summary of Significant Accounting Policies.” No impairment charges were recognized in Fiscal 2024.

In Fiscal 2023, we recognized $111 million of impairment charges related to goodwill and intangible assets. See “Note 5—Intangible Assets and Goodwill Intangible” for discussion of the impairment charges recognized in Fiscal 2023. The indefinite-lived trademarks and goodwill associated with Johnny Was that were impaired and adjusted to fair value during Fiscal 2023 had the least excess of fair value over book value as of February 1, 2025 and February 3, 2024, since they were the most recently acquired and impaired. Thus, if the Johnny Was business does not achieve the anticipated growth and operating income in future years or if interest rates or tax rates increase, additional impairments of the Johnny Was intangible assets could be necessary in the future.

Intangible assets with finite lives primarily consist of customer relationships, certain trademarks and reacquired rights. These assets are amortized over their estimated useful lives and reviewed for impairment periodically if events or changes in circumstances indicate that the carrying amount may not be recoverable. If the assets are determined to not be recoverable on an undiscounted cash flow basis and the expected future discounted cash flows of the asset group are less than the carrying amount, an asset group is impaired and a loss is recorded for the amount by which the carrying value of the asset group exceeds its fair value.

Other Fair Value Measurements

For many assets and liabilities, the determination of fair value may not require the use of many assumptions or other estimates. However, in some cases the assumptions or inputs associated with the determination of fair value may require the use of many assumptions which may be internally derived or otherwise unobservable. These assumptions may include the planned use of the assets, anticipated cash flows, probabilities of cash flows, discount rates and other factors. We use certain market-based and internally derived information and make assumptions about the information in (1) determining the fair values of assets and liabilities acquired as part of a business combination, (2) adjusting recognized assets and liabilities to fair value and (3) assessing recognized assets for impairment, including intangible assets, goodwill and other non-current assets.

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From time to time, we may recognize asset impairment or other charges related to certain lease assets, property and equipment or other amounts associated with us exiting direct to consumer locations, office space or otherwise. In these cases, we must determine the impairment charge related to the asset group if the assets are determined to not be recoverable on an undiscounted cash flow basis and the expected future discounted cash flows of the asset group are less than the carrying amount. While estimated cash outflows can be determined, in certain cases, if there is an underlying lease, the timing and amount of estimated cash inflows for any sublease rental income and other costs are often uncertain, particularly if there is not a sub-lease agreement in place. Also, we could subsequently negotiate a lease termination agreement that would differ from the estimated amount. Thus, our estimate of an impairment charge related to an asset group could change significantly as we obtain better information in future periods.

Income Taxes

Income taxes included in our consolidated financial statements are determined using the asset and liability method, in which income taxes are recognized based on amounts of income tax payable or refundable in the current year as well as the impact of any items that are recognized in different periods for consolidated financial statement reporting purposes and tax return reporting purposes. Significant judgment is required in determining our income tax provision as there are many transactions and calculations where the ultimate tax outcome is uncertain and tax laws and regulations are often complex and subject to interpretation and judgment. These uncertainties relate to the recognition or changes to the realizability of deferred tax assets, loss carry-forwards, valuation allowances, uncertain tax positions and other matters. Our assessment of these income tax matters requires our consideration of taxable income and other items for historical periods, projected future taxable income, projected future reversals of existing timing differences, tax planning strategies and other information.

The use of different assumptions related to the income tax matters above, as well as a shift in earnings among jurisdictions, changes in tax laws, enacted rates or interpretations, court case decisions, statute of limitation expirations or audit settlements, each could have a significant impact on our income tax rate.

We are subject to income taxes in the U.S. and certain other foreign jurisdictions and are periodically under audit by tax authorities. The final determination of tax audits could be materially different from historical outcomes and may adversely impact our tax expense and cash flows. An increase in our consolidated income tax expense rate from 20.2% to 21.2% during Fiscal 2024 would have reduced net earnings by $1 million. See Note 11 of our consolidated financial statements included in this report for further discussion of income taxes.

RECENT ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 of our consolidated financial statements included in this report for a discussion of recent accounting pronouncements issued by the FASB that we have not yet adopted that may have a material effect on our financial position, results of operations or cash flows in the future.

SEASONALITY

Each of our operating segments is impacted by seasonality as the demand by specific product or style, as well as by distribution channel, may vary significantly depending on the time of year. For information regarding the impact of seasonality on our business operations, see Part I, Item 1, Business, included in this report.