Pleased to welcome back Oxford Industries. Oxford owns a very powerful portfolio of leading lifestyle brands, including Tommy Bahama, Lilly Pulitzer, and Johnny Was. With us today, we have CEO Tom Chubb, as well as CFO Scott Grassmyer and Head of Financial Reporting and IR Brian Smith. Tom is going to walk us through some slides about the business, and then we're going to transition to some Q&A. So with that, I'll turn it over to Tom.
Okay, thank you very much, Brendan, and good morning to everybody. Thank you for joining us. As Brendan said, I will breeze through a couple of slides here just to help everybody get their bearings on Oxford. If you've followed us for a while, this will probably be sort of old news for you. But just to help people understand who we are, as Brendan said, we're Oxford Industries. We own these seven beautiful lifestyle brands, and they're listed there on the right side of the slide. The biggest is Tommy Bahama, then Lilly Pulitzer and Johnny Was, plus four smaller brands. Very proud of the brands that we have in the portfolio and would stack them up against anything, really. There we go. That's me.
As Brendan mentioned, I've got Scott Grassmyer with me today, our CFO, as well as Brian Smith, our Director of Financial Reporting and Investor Relations. We'll be around all day today. We'll be around a bit more tomorrow. Please come and find us or sit in on one of our other sessions if you have questions that we don't get to today. This is our Safe Harbor Statement. You can read that in detail if you'd like on our website. And I would also point you to our website because we've just recently revamped it to make it much easier to use and to find information about the company. Now, this is our North Star slide. Those of you who have followed us have seen this many times before. We use this all the time.
We do this to remind ourselves, really, of when we come in every day, what it is that we're trying to get done, why we're trying to get it done, and I won't go through it now, but it's worth taking a look at if you have not done so in the past. And then this gives you just a little bit of a recap of the company overall, been around a long time. Started in 1942, went public in 1960, shifted to the New York Stock Exchange in 1964. Have changed a lot during that time as market conditions in the world have changed, but where we land now is this portfolio of these seven beautiful brands, and we've got a couple of breakdowns on the right that I think are worth looking at.
On the left circle, on the right hand of the page, you see the breakdown by brand, and you see that Tommy Bahama is a little more than half of our total business. Lilly Pulitzer is about a quarter, and then the smaller brands make up the balance of the pie. Then on the right, and I think this is a super important slide or part of the slide, is the breakdown by distribution channel. You see retail and e-commerce are about equal. Wholesale is a little bit less than 20%. Then we've got the food and beverage or hospitality element, which is actually all in Tommy Bahama, but so sort of set that aside for a minute. We have this very beautifully balanced omnichannel distribution model. People talk about this all the time. We truly are omnichannel in that retail and e-com are pretty balanced.
They're both big pieces of the business. And then we've got a nice slice of the wholesale there too, which we love. We love our wholesale business. It's not the biggest part of the business, but it's an important part of the equation. And omnichannel is all about being able to satisfy customer demand however they want to connect with us, whether that's through a retailer, through our own retail stores, or through e-commerce, and do that from really a single source of inventory. And that's what we've worked so hard on and are very proud of what we've got there. Moving on to the brands, Tommy is the biggest. It's a complete lifestyle brand. We've got men's, women's, apparel, footwear, beach chairs, which you may be familiar with. I mean, we truly have it all. People talk about being lifestyle.
Nothing's more lifestyle than Tommy Bahama, including the hospitality element, which is a very special, unique, and differentiating element of the brand. And it's one of the brand's superpowers is our ability to bring it to life through that hospitality sector and use that to drive the overall business. What we're working on right now in Tommy Bahama, we've had some challenges over the last year or two, especially in our biggest markets. And these would be places like the desert, the western part of Florida, where we have some of our biggest and most successful stores. And they've been soft over the last couple of years. We're very focused on bringing back the momentum in those areas. Then Lilly Pulitzer. This is our colorful, print-driven, Palm Beach-inspired brand that truly is a beautiful brand.
If you're a student of brands and what makes great brands, Lilly Pulitzer's kind of got it all. It's had a great year this year. And the reason for that, as I suspect Brendan will talk about a little bit more, is really the focus on the top 20% of their customers, really on those core, very die-hard Lilly fans. And then Johnny Was. This is an acquisition that we made a couple of years ago, and I'll hit it straight on. It has not been a great acquisition to date. It has not worked well. But we're actually very excited about Johnny Was because of the turnaround plan that the team has developed. And that team is a great combination of people that have been with the brand for a good while and that have stepped up and taken on new responsibilities and are really bringing their best.
And then we've augmented that team with some great talent from the outside, including our new president of the brand, Lisa Kayser , who spent about 25 years at Neiman Marcus and has really hit the ground running at Johnny Was. And then we've got our emerging brands. And these are the four smallest brands: Southern Tide, The Beaufort Bonnet Company, Duck Head, and Jack Rogers. They're growing at a rapid rate. In the third quarter, they grew 17%. Still a relatively small part of the overall business, just a little less than 10%, but growing rapidly. A couple of them are highly profitable and I think create great opportunities for us for growth going forward. Then just a couple of stats that I think are worth throwing out there. We've got 2.6 million unique customers, average annual spend of $395, which we like that number a lot.
And then one of the ones that I think is the best is the customer retention rate of 62%. That's on a 12-month lookback, and that's a pretty strong number. If you look back 24, 36 months, obviously that number will go up even higher. And then this is important because we had a little bit of a weird year or two from a capital allocation and cash flow standpoint in that you see the CapEx bar, which is the first yellow bar. That's a very large number for us, and we had a large number last year. And that's due to the new state-of-the-art distribution center that we're building in Lyons, Georgia. It's almost complete. We expect to have that go live in the first part of this year.
And it's going to be a big driver of our omnichannel business going forward, but it has taken a lot of cash to build that. And then we also did some share repurchases. And the combination of those two things have left us with a little bit more debt. It's not a ton, but $132 million than we typically have. So the recap for 2025, certainly at a challenging environment with some of the macro conditions in terms of traffic and conversion and margins. Obviously, the tariffs were a big deal for us. Like most of our peers, we're probably 99% plus imported. Almost all of that comes from places that were subject to the tariffs. And then we had mixed performance in the portfolio with Lilly and the emerging brands having a strong performance and that being offset somewhat by softness at Tommy Bahama and Johnny Was.
But we've got great plans in place to address all of that and are very excited about 2026. I want to, before I move on to that, touch on holiday and resort. We filed an 8-K this morning that we do every year at ICR, where we post our presentation. But we also said that we expect now to be at the low end of our guidance range for the quarter. That was very much driven by the Christmas business, if you will, and really a repeat of the story that we've had throughout the year where Lilly and the emerging brands are the stronger part of the portfolio and Tommy and Johnny Was were a little bit weaker. I will also call out that January is a super important month for us.
So we've still got a bit of business to get done, but we feel pretty good about how that's going. And then our outlook for 2026, as I mentioned, we've got great plans, I think, that are things that are completely within our control. Can't control the macro environment. And I do believe there's reason for optimism there as well. But internally, we've got some great cost reduction initiatives. These are around indirect spending. So everything that we buy other than the product, regular SG&A expense reductions, and then a really great initiative that we have around merchandising effectiveness that drives both sales and gross margin. It started as part of the Johnny Was improvement plan, and then we're expanding that across other parts of the enterprise as well because we like it so much.
And then the capital spend will be a lot less this year, and we're going to focus on reducing that debt level and getting the new DC open. So with that, I will flip over here, and Brendan and I will have a nice chat.
Thanks, Tom. That was great. Maybe just picking up where you kind of left off, you touched on it. 2025 was a tough year, tariffs, difficult consumer environment. You're not giving specific guidance for fiscal 2026 at the moment, but talk about how you feel the business is positioned to hopefully deliver a recovery after what is essentially back-to-back challenging years.
Yeah. So I would say that I think when you look at 2025, you've got to remember that we had some really good performances within the portfolio with Lilly Pulitzer in the emerging brands. And what we're trying to do is really extend what they did to be successful across the portfolio. So that's better merchandising. You look back on the mistakes that you made in 2025, and you try to learn from those and have them inform your merchandising going forward. Then I would say it's the other initiatives that we've got. It's the indirect spending that's all the stuff that we buy other than the product itself. That's got its own set of work that's happening on it.
But this is just the hundreds of millions of dollars that we spend every year on other goods and services that we need to run the business. And we build a whole new function around how we do that and have seen a little bit of benefit from that already, but that'll really start to ramp up during fiscal 2026. And then we've got general SG&A type reductions that, beyond the indirect spend, things that we're looking at as ways that we can save. And finally, there's the macro environment. So I do think there's some real reasons to be positive when you think about the GDP growth rate. The unemployment rate is in a great spot. Inflation is in a great spot.
And we've yet to have the tax bill really kick in. And that has both business impacts that I think will actually be pro-business and pro-growth, as well as pro-consumer elements in that I think the average expected tax refund is around $1,000, and everybody will see less of the money going out to the government. So lots of reasons to be optimistic about 2026, both internally and externally.
Great. And then at the same time, hopefully less of an impact from tariffs. I think you touched on it. It was about a $25 million-$30 million headwind this past fiscal year. Maybe just an update on where you guys sit from a sourcing structure and how you're prepared to navigate 2026 in terms of tariffs.
Yeah, so the tariffs were a tough thing to deal with in 2025, but I think we did a great job of dealing with it, and when you look at it, we went into 2025 at about 40% China. We're coming out of it about 10% China, and then when you look at all the other shifts that we made, I think we demonstrated that we can be extremely resilient, and nobody wants to have to do it, but we did a great job. I think as the tariff situation continues to evolve, I think it'll be a lot less volatile than it was in 2025, but it will evolve some, and we will continue to optimize the sourcing structure.
You touched on this on your Q3 call. The tariff situation created some challenges from a product assortment. I think you guys were a little light in certain categories that impacted your top line. How do you think about that, and what are you doing differently to ensure that doesn't happen again going forward to the extent?
Yeah. So I think the issue, and hopefully people understand this, but we're typically buying, call it about six months out. And then product usually comes into our DC at least a couple of weeks before it gets to the floor. And when you think of what was going on with the tariffs last year, at the time we were placing the buys for the product that was on the floor during November and December, it was at what I would call sort of peak tariff chaos. That was when there was an announcement coming out basically every day, or it seemed like their announcements, their tweets. There's just a lot of stuff happening. And at one point, the tariff on China was 145%.
And that happened to coincide right at the time that we were having to place the buys for the product that would be on the floor in November and December. And we made some decisions. We just decided that that was too much for us to eat. And if we couldn't find an alternative source, and I mean, this is like real time. It's happening today. We got to place the buy by no later than tomorrow. We made some sort of battlefield decisions about the assortment and what we were buying, but as we got to holiday, we felt like we were missing some things. And I think that was an issue, especially in Tommy and Lilly, but the good news is that part is behind us. And so I don't think there will be continued evolution, but I don't think it'll be anything like that.
Great. You touched on your presentation. Lilly was the bright spot in fiscal 2025. Maybe talk about, one, what drove that, and how do you take some of those learnings, the successes of Lilly, and apply those maybe to Tommy and Johnny Was to just reinvigorate those two businesses?
Yeah. So, great question, and Lilly Pulitzer, what we did. This really goes back probably two years ago, maybe two and a half years ago. We realized that we were trying to attract a lot of different people. That was working to some degree, but what we really needed to do to drive success, which is what every brand does, is lean into what makes us distinct and special and the things that our best customer loves about us. Our focus in Lilly Pulitzer has been on the top 20% of our customers. Those customers drive about two-thirds of the sale and more than three-quarters of the profit. These are people, and some of you probably have friends or relatives that fall into this camp. I mean, they are all in on Lilly, and we love them, and they love us.
And we focused on really being the Lilly Pulitzer that that customer wants us to be and bring that through to life through our product and our marketing and our creative. And that's what we did, and it's worked. So we're trying to play the same version of that playbook across the company, and especially in Johnny Was and Tommy Bahama. And Tommy, it's a little bit more about focusing on those super critical key markets like Western Florida, the desert, Hawaii, and make sure we're right for them and driving business there. And then in Johnny Was, it's really focusing on what people love about that brand, which is the artisanal details, and then bringing that to life through storytelling in our creative and marketing. And I think that's something that we missed a little bit.
We have some beautiful marketing, but we're not really telling them that story of the artisanal details and what it is about this brand that's so special and unique. But that's the plan.
Well, maybe piggybacking off that, I'm going to jump over to Tommy Bahama just because we have less than three minutes. Talk about Johnny Was. Obviously, an acquisition you made a couple of years ago has not played out like you had hoped. Recently, some management. What else is in store for that business, that brand, as we head into not only this year, but over the next couple of years in terms of kind of figuring that brand out?
Yeah. Well, if you look back and why didn't it work very well? I think one thing, which it's kind of hard to know at the time, but we bought it at what turns out to have been a peak, not just for that brand, but for a lot of brands in the marketplace. And we were in that weird post-COVID time. And so we did buy it sort of at a peak, which was not great, which we could undo that. But then the other thing that I think we did, the key driver was really that we rolled out retail stores very fast. We opened a lot of stores really quickly there. They added some, but we opened a lot more really quickly.
And what happened was we got ahead of ourselves, didn't build the line architecture correctly to support those retail stores as well as we could have. The changes we did make created some challenges for our wholesale business. Overall, I think the team got a bit distracted by the store openings and less of the day-to-day blocking and tackling. The plan is, as I mentioned, refocusing on those artisanal details that Johnny Was is famous for and that people love, then bringing that forward to make sure we're delivering those details in a way that's relevant to today's market and consumer place or consumer and marketplace. We are going to close a few stores. We've closed a few already. We'll close a few more.
That's not really the big objective, but the big objective is to get the line in the assortment correct for the business that we've got, get that stabilized and back on a more profitable track, and then we can resume growth there. The team there, we couldn't be prouder of. We've got some great people that have been there for a long time that, as I said, are really stepping up, and then we've got some new talent as well that we're very excited about.
Well, it's a good time. We have seven seconds left, so it sounds like after a difficult 2025, things are looking better as we head into 2026 across the portfolio.
Absolutely. We're very excited about 2026, and we look forward to talking to all of you while we're down here, and then we'll deliver our guidance in March, so look forward to that. Thank you, Greg.
Great. Thanks, everybody.