The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to the unaudited condensed consolidated financial statements contained in this report and the consolidated financial statements, notes to consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for fiscal 2008.
We generate revenues and cash flow primarily through the design, production, sale and distribution of branded and private label consumer apparel for men and women and the licensing of company-owned trademarks. Our principal markets and customers are located in the United States and, to a lesser extent, the United Kingdom. We source substantially all of our products through third-party producers located outside of the United States and United Kingdom. We distribute the majority of our products through our wholesale customers, which include chain stores, department stores, specialty stores, specialty catalog retailers, mass merchants and Internet retailers. We also sell products of certain owned brands through our owned and licensed retail stores and e-commerce websites.
As a result of the weak global economic conditions, fiscal 2008 was a particularly challenging year for our company. These challenging economic conditions continued to impact each of our operating groups in the first half of fiscal 2009. We expect that these challenging economic conditions will continue to impact each of our operating groups through fiscal 2009 and perhaps beyond. In the current economic environment, we believe it is important to continue to focus on maintaining a healthy balance sheet and sufficient liquidity. Significant initiatives we have taken in fiscal 2008 and the first half of fiscal 2009 to achieve these objectives have included reducing working capital requirements, moderating capital expenditures for future retail stores, reducing overhead and issuing the $150 million aggregate principal amount of 11 3/8% Senior Secured Notes in June 2009 and the related satisfaction and discharge of the remaining 8 7/8% Senior Unsecured Notes.
The apparel and retail industry is cyclical and dependent upon the overall level of discretionary consumer spending, which changes as regional, domestic and international economic conditions change. Often the impact of negative economic conditions may have a longer and more severe impact on the apparel and retail industry than the same conditions would have on other industries. Therefore, even if conditions improve in the general economy, the negative impact on the apparel and retail industry may continue.
Diluted net earnings per common share were $0.45 in the first half of fiscal 2009 compared to diluted net earnings per common share of $0.69 in the first half of fiscal 2008. The primary reasons for the decrease in earnings per share were:
• Net sales declined across all operating groups from the first half of fiscal 2008 primarily due to the impact of the challenging economic conditions.

• Operating results for Ben Sherman were also impacted by the change in the average exchange rate between the British pound sterling and the United States dollar and Ben Sherman restructuring charges totaling approximately $1.4 million in the first half of fiscal 2009, which were primarily related to our exit from, and subsequent licensing of, the Ben Sherman footwear operations, as well as other streamlining initiatives.

• Net sales for Lanier Clothes and Oxford Apparel were also impacted by our exit from certain businesses in fiscal 2008.

• Royalty income decreased primarily as a result of the termination of the Tommy Bahama footwear license agreement, as well as the impact of the challenging economic conditions.

• A charge of $1.8 million was recognized in interest expense, net, in the second quarter of fiscal 2009 related to the satisfaction and discharge of the remaining $166.8 million aggregate principal amount of 8 7/8% Senior Unsecured Notes.

• Higher interest expense following issuance of the $150 million aggregate principal amount of 11 3/8% Senior Secured Notes issued in June 2009 as compared to the $200 million aggregate principal amount of 8 7/8% Senior Unsecured Notes outstanding during the second quarter of fiscal 2008.

These items were partially offset by:
• Lanier Clothes, Oxford Apparel and Corporate and Other operations for the first half of fiscal 2008 were impacted by certain restructuring charges totaling $8.9 million and other unusual items resulting in a net benefit of $0.9 million.

• Significant reductions were made in our SG&A across all operating groups as we streamline our operations and focus on our core businesses during the recent economic conditions.

• Changes in our debt facilities which impacted interest expense, net included
(1) the amendment and restatement of our U.S. Revolving Credit Agreement in August 2008 which provided more favorable borrowing terms than the Prior Credit Agreement, (2) our repurchase of $33.2 million of our 8 7/8% Senior Unsecured Notes resulting in a gain of $7.8 million in December 2008 and
(3) varying levels of debt outstanding under our U.S. Revolving Credit Agreement between the two periods as a result of positive cash flows for the twelve months ended August 1, 2009.

See the discussion below for net sales and operating income results for each operating group.

RESULTS OF OPERATIONS
   The following tables set forth the specified line items in our unaudited
condensed consolidated statements of operations both in dollars (in thousands)
and as a percentage of net sales. The tables also set forth the percentage
change of the data as compared to the same period of the prior year. We have
calculated all percentages based on actual data, but percentage columns may not
add due to rounding. Individual line items of our consolidated statements of
operations may not be directly comparable to those of our competitors, as
statement of operations classification of certain expenses may vary by company.

                                Second               Second
                                Quarter              Quarter            Percent          First Half          First Half          Percent
                              Fiscal 2009          Fiscal 2008          Change          Fiscal 2009         Fiscal 2008          Change

Net sales                    $   192,887          $   230,520            (16.3 %)        $ 409,618           $ 503,462            (18.6 %)
Cost of goods sold               114,344              133,849            (14.6 %)          241,304             290,482            (16.9 %)

Gross profit                      78,543               96,671            (18.8 %)          168,314             212,980            (21.0 %)
SG&A                              73,637               88,972            (17.2 %)          152,320             188,606            (19.2 %)
Amortization and
impairment of
intangible assets                    315                4,058            (92.2 %)              623               4,846            (87.1 %)
Royalties and other
operating income                   2,916                4,351            (33.0 %)            5,385               8,539            (36.9 %)

Operating income                   7,507                7,992             (6.1 %)           20,756              28,067            (26.0 %)
Interest expense, net              6,245                5,985              4.3 %            10,810              12,317            (12.2 %)

Earnings before income
taxes                              1,262                2,007            (37.1 %)            9,946              15,750            (36.9 %)
Income taxes                         729                  534             36.5 %             2,901               4,760            (39.1 %)

Net earnings                 $       533          $     1,473            (63.8 %)        $   7,045           $  10,990            (35.9 %)




                                                                          Percent of Net Sales
                                                   Second              Second
                                                  Quarter             Quarter            First Half          First Half
                                                Fiscal 2009         Fiscal 2008         Fiscal 2009         Fiscal 2008

Net sales                                            100.0 %             100.0 %             100.0 %             100.0 %
Cost of goods sold                                    59.3 %              58.1 %              58.9 %              57.7 %

Gross profit                                          40.7 %              41.9 %              41.1 %              42.3 %
SG&A                                                  38.2 %              38.6 %              37.2 %              37.5 %
Amortization and impairment of intangible
assets                                                 0.2 %               1.8 %               0.2 %               1.0 %
Royalties and other operating income                   1.5 %               1.9 %               1.3 %               1.7 %

Operating income                                       3.9 %               3.5 %               5.1 %               5.6 %
Interest expense, net                                  3.2 %               2.6 %               2.6 %               2.4 %

Earnings before income taxes                           0.7 %               0.9 %               2.4 %               3.1 %
Income taxes                                           0.4 %               0.2 %               0.7 %               0.9 %

Net earnings                                           0.3 %               0.6 %               1.7 %               2.2 %

OPERATING GROUP INFORMATION
Our business is operated through our four operating groups: Tommy Bahama, Ben Sherman, Lanier Clothes and Oxford Apparel. We identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance.
Tommy Bahama designs, sources and markets collections of men's and women's sportswear and related products. Tommy Bahama® products can be found in our owned and licensed Tommy Bahama retail stores and on our e-commerce website as well as in certain department stores and independent specialty stores throughout the United States. The target consumers of Tommy Bahama are affluent men and women age 35 and older who embrace a relaxed and casual approach to daily living. We also license the Tommy Bahama name for various product categories and operate Tommy Bahama restaurants.
Ben Sherman is a London-based designer, marketer and distributor of branded sportswear and related products. Ben Sherman was established in 1963 as an edgy, young men's, "Mod"-inspired shirt brand and has evolved into a British lifestyle brand of apparel targeted at youthful-thinking men and women age 19 to 35 throughout the world. We offer a full Ben Sherman sportswear collection as well as tailored clothing and accessories. Our Ben Sherman products can be found in certain department stores and a variety of independent specialty stores, as well as in our owned and licensed Ben Sherman retail stores and on our e-commerce websites. We also license the Ben Sherman name for various product categories.
Lanier Clothes designs and markets branded and private label men's suits, sportcoats, suit separates and dress slacks across a wide range of price points. Certain Lanier Clothes products are sold using trademarks licensed to us by third parties, including Kenneth Cole®, Dockers®, and Geoffrey Beene®. We also offer branded tailored clothing products under our Arnold Brant® and Billy London® trademarks. In addition to our branded businesses, we design and source certain private label tailored clothing products, which are products sold exclusively to one customer under a brand name that is owned or licensed by such customer. Significant private label brands include Stafford®, Alfani®, Tasso Elba® and Lands' End®. Our Lanier Clothes products are sold to national chains, department stores, mass merchants, specialty stores, specialty catalog retailers and discount retailers throughout the United States.
Oxford Apparel produces branded and private label dress shirts, suited separates, sport shirts, casual slacks, outerwear, sweaters, jeans, swimwear, westernwear and golf apparel. We design and source certain private label programs for several customers, including programs for Men's Wearhouse, Lands' End, Target, Macy's and Sears. Significant owned brands of Oxford Apparel include Oxford Golf®, Ely®, Cattleman® and Cumberland Outfitters®. Oxford Apparel also owns a two-thirds interest in the entity that owns the Hathaway® trademark in the United States and several other countries. Additionally, Oxford Apparel also licenses from third parties the right to use certain trademarks including Dockers and United States Polo Association® for certain apparel products. Our Oxford Apparel products are sold to a variety of department stores, mass merchants, specialty catalog retailers, discount retailers, specialty stores, "green grass" golf merchants and Internet retailers throughout the United States.
Corporate and Other is a reconciling category for reporting purposes and includes our corporate office, substantially all financing activities, LIFO inventory accounting adjustments and other costs that are not allocated to the operating groups. LIFO inventory calculations are made on a legal entity basis which does not correspond to our operating group definitions, as portions of Lanier Clothes and Oxford Apparel are on the LIFO basis of accounting. Therefore, LIFO inventory accounting adjustments are not allocated to operating groups.
The tables below present certain information about our operating groups (in thousands):

                                Second               Second
                                Quarter              Quarter            Percent          First Half          First Half          Percent
                              Fiscal 2009          Fiscal 2008          Change          Fiscal 2009         Fiscal 2008          Change

Net Sales
Tommy Bahama                 $    94,439          $   112,007            (15.7 %)        $ 192,859           $ 241,265            (20.1 %)
Ben Sherman                       23,627               32,495            (27.3 %)           47,846              69,082            (30.7 %)
Lanier Clothes                    25,204               28,184            (10.6 %)           56,711              66,871            (15.2 %)
Oxford Apparel                    49,464               58,024            (14.8 %)          112,668             126,708            (11.1 %)
Corporate and Other                  153                 (190 )          180.5 %              (466 )              (464 )           (0.4 %)

Total                        $   192,887          $   230,520            (16.3 %)        $ 409,618           $ 503,462            (18.6 %)

                                Second               Second
                                Quarter              Quarter            Percent           First Half          First Half          Percent
                              Fiscal 2009          Fiscal 2008           Change          Fiscal 2009         Fiscal 2008           Change

Operating Income
Tommy Bahama                 $    13,379          $    18,143             (26.3 %)        $  25,629           $  37,626             (31.9 %)
Ben Sherman                       (6,308 )             (2,002 )          (215.1 %)           (8,284 )            (1,747 )          (374.2 %)
Lanier Clothes                     2,701              (11,355 )           123.8 %             5,438             (11,376 )           147.8 %
Oxford Apparel                     4,129                3,738              10.5 %             9,322               9,063               2.9 %
Corporate and Other               (6,394 )               (532 )            NM               (11,349 )            (5,499 )          (106.4 %)

Total                        $     7,507          $     7,992              (6.1 %)        $  20,756           $  28,067             (26.0 %)

For further information regarding our operating groups, see Note 4 to our unaudited condensed consolidated financial statements included in this report and Part I, Item 1, Business in our Annual Report on Form 10-K for fiscal 2008.
SECOND QUARTER FISCAL 2009 COMPARED TO SECOND QUARTER OF FISCAL 2008 The discussion below compares our operating results for the second quarter of fiscal 2009 to the second quarter of fiscal 2008. Each change provided below reflects the change between these periods unless indicated otherwise.
Net sales decreased $37.6 million, or 16.3%, in the second quarter of fiscal 2009 compared to the second quarter of fiscal 2008 primarily as a result of the changes discussed below.
Tommy Bahama's net sales decreased $17.6 million, or 15.7%. The decrease was primarily due to a reduction in net sales at wholesale and in our existing owned retail stores resulting from the challenging retail environment. This decrease in wholesale sales and existing store retail sales was partially offset by sales at our retail stores opened after the beginning of the second quarter of fiscal 2008 and increased e-commerce sales. Unit sales decreased 21.8% due primarily to the challenging retail environment. The average selling price per unit increased by 7.4%, as sales at our retail stores and our e-commerce sales, both of which have higher sales prices than wholesale sales, represented a greater proportion of total Tommy Bahama sales. As of August 1, 2009 and August 2, 2008, we operated 84 and 78 Tommy Bahama retail stores, respectively.
Ben Sherman's net sales decreased $8.9 million, or 27.3%. The decrease in net sales was primarily due to the 18% reduction in the average exchange rate of the British pound sterling versus the United States dollar during the second quarter of fiscal 2009 compared to the average exchange rate during the second quarter of fiscal 2008, as well as the impact of the challenging economic environment on wholesale shipments. During the second quarter, unit sales for Ben Sherman declined by 18.4% due primarily to the challenging economic conditions. The average selling price per unit decreased 10.9%, resulting primarily from the impact of the weaker British pound sterling, which was partially offset by a larger percentage of total Ben Sherman sales being sales at our own retail stores, which generally have a higher sales price than wholesale sales.
Lanier Clothes' net sales decreased $3.0 million, or 10.6%. The decrease was primarily due to (1) the challenging economic conditions, (2) our exit from the Oscar de la Renta and Nautica licensed businesses, with fiscal 2009 sales consisting of close out sales, and (3) the restructuring of the Arnold Brant business in fiscal 2008. The challenging economic conditions and the close out sales resulted in a decrease in the average selling price per unit of 21.4%. Unit sales increased by 13.8% for Lanier Clothes due to an increase in the number of close out sales in the second quarter of fiscal 2009.
Oxford Apparel's net sales decreased $8.6 million, or 14.8%. The decrease in net sales was generally anticipated in connection with our strategy to focus on key product categories and exit underperforming lines of business, but was also impacted by the challenging economic conditions. Unit sales decreased by 15.9% as a result of our exit from certain lines of business and economic conditions, and the average selling price per unit increased by 1.4% due to changes in product mix.
Gross profit decreased $18.1 million, or 18.8%, in the second quarter of fiscal 2009. The decrease was primarily due to lower sales in each operating group, as described above. Gross margins decreased to 40.7% of net sales during the second quarter of fiscal 2009 from 41.9% in the second quarter of fiscal 2008. The second quarter of fiscal 2009 included a LIFO accounting charge of $2.9 million compared to a LIFO accounting credit of $3.3 million in the second quarter of fiscal 2008. Ben Sherman's gross margins were negatively impacted by increased cost of goods sold related to inventory purchases denominated in United States dollars but sold in other currencies. These items, which negatively impacted gross margin in the second quarter of fiscal 2009, were partially offset by the restructuring

charges impacting cost of goods sold in Lanier Clothes and Oxford Apparel totaling approximately $5.3 million in the second quarter of fiscal 2008. Gross margins were also impacted by the sales mix between our retail operations and wholesale operations, with retail sales, which generally have higher gross margins, representing a higher proportion of our net sales during the second quarter of fiscal 2009. Our gross profit may not be directly comparable to those of our competitors, as statement of operations classification of certain expenses may vary by company.
SG&A decreased $15.3 million, or 17.2%, in the second quarter of fiscal 2009. SG&A was 38.2% of net sales in the second quarter of fiscal 2009 and 38.6% in the second quarter of fiscal 2008. The decrease in SG&A was primarily due to
(1) significant reductions in our overhead cost structure, (2) cost reductions associated with our exit from certain businesses, (3) the impact on Ben Sherman of the 18% reduction in the average value of the British pound sterling versus the United States dollar, (4) reductions in advertising expenses and (5) the second quarter of fiscal 2008 including restructuring charges and other unusual items totaling a charge of approximately $1.6 million. These cost savings were partially offset by expenses associated with the operation of additional retail stores which opened subsequent to the beginning of the second quarter of fiscal 2008 and $1.4 million of restructuring charges during the second quarter of fiscal 2009 primarily associated with our exit from, and subsequent licensing of, the Ben Sherman footwear operations as well as other streamlining activities. Amortization and impairment of intangible assets decreased $3.7 million to $0.3 million in the second quarter of fiscal 2009. The decrease was primarily due to the $3.3 million of impairment charges related to the Arnold Brant and Solitude intangible assets in Lanier Clothes and Oxford Apparel, respectively, in the second quarter of fiscal 2008. This decrease was also partially the result of amortization typically being greater in the earlier periods following an acquisition. Royalties and other operating income decreased $1.4 million, or 33.0%, in the second quarter of fiscal 2009. The decrease was primarily due to the termination of the license agreement for footwear in Tommy Bahama, the 19% decline in the average value of the British pound sterling versus the United States dollar, which impacted Ben Sherman royalty income, and the challenging economic conditions. The second quarter of fiscal 2008 included a gain on the sale of a trademark by Oxford Apparel. Operating income decreased to $7.5 million in the second quarter of fiscal 2009 from $8.0 million in the second quarter of fiscal 2008. The $0.5 million decrease in operating income was primarily due to the decreases in net sales and royalty income, which were partially offset by decreases in SG&A and lower restructuring charges in the second quarter of fiscal 2009. Tommy Bahama's operating income decreased $4.8 million to $13.4 million in the second quarter of fiscal 2009. The decrease was primarily due to the reduction in sales and decreased royalty income, both as discussed above. These items were partially offset by (1) decreased employment, advertising and other SG&A and (2) higher gross margins due to retail sales representing a greater proportion of Tommy Bahama sales in the second quarter of fiscal 2009. Ben Sherman's operating results declined by $4.3 million to a loss of $6.3 million. The decline in operating results was primarily due to (1) lower sales, (2) the unfavorable impact on cost of goods sold related to inventory purchases denominated in United States dollars but sold in other currencies,
(3) lower royalty income and (4) the $1.4 million of restructuring charges primarily related to our exit from, and subsequent licensing of, the Ben Sherman footwear operations and other streamlining initiatives, as discussed above. These items were partially offset by overhead reductions. Lanier Clothes' operating results increased $14.1 million, from a loss of $11.4 million in the second quarter of fiscal 2008 to a profit of $2.7 million in the second quarter of fiscal 2009. The second quarter of fiscal 2008 included $9.5 million of restructuring charges associated with our exit from the Nautica and Oscar de la Renta licensed businesses and restructuring of our Arnold Brant business and certain other unusual items. Aside from the restructuring charges in fiscal 2008, improved gross margins and reductions in SG&A contributed to the improved in operating results during the second quarter of fiscal 2009. Oxford Apparel's operating income increased $0.4 million to $4.1 million in the second quarter of fiscal 2009. The impact of the decreased sales in the current quarter, discussed above, was offset by reductions in SG&A. The reductions in SG&A in the current quarter were attributable to reductions in employment costs and variable operating expenses. The second quarter of fiscal 2008 included a net charge of $0.3 million related to (1) an impairment charge for the Solitude intangible assets, (2) certain inventory disposal costs associated with exiting the Solitude business, (3) the resolution of a contingent liability and (4) a gain on the sale of a trademark.

The Corporate and Other operating loss increased $5.9 million from a loss of $0.5 million in the second quarter of fiscal 2008 to a loss of $6.4 million in the second quarter of fiscal 2009. The second quarter of fiscal 2009 included a charge of $2.9 million related to LIFO accounting adjustments compared to a credit of $3.3 million in the second quarter of fiscal 2008.
Interest expense, net increased $0.3 million, or 4.3%, in the second quarter of fiscal 2009. The increase in interest expense was primarily due to the write-off of $1.8 million of unamortized deferred financing costs and discount related to the 8 7/8% Senior Unsecured Notes, which were satisfied and discharged in June 2009. This charge was partially offset by lower average daily borrowings due to strong cash flow from operations during the twelve months ended August 1, 2009 and the gain on the repurchase of certain of our 8 7/8% Senior Unsecured Notes for a $7.8 million gain in the third quarter of fiscal 2008.
Income taxes had an effective rate of 57.8% and 26.6% for the second quarter of fiscal 2009 and 2008, respectively. The second quarter of fiscal 2009 was impacted by a reduction in the anticipated benefit of favorable permanent differences expected for the year, as compared to the first quarter of fiscal 2009, resulting from changes in the mix of earnings between certain taxing jurisdictions. The second quarter of fiscal 2008 was impacted by lower projected earnings for fiscal 2008, as compared to the first quarter of fiscal 2008, resulting from the restructuring charges recognized in the second quarter of fiscal 2008.
Diluted net earnings per common share decreased to $0.03 in the second . . .