Macro Economy Impacts Destination XL in First Quarter

The men’s big and tall market is not immune to the larger economic issues impacting the retail industry.

On Thursday, Destination XL Group, the country’s leading retailer of men’s big and tall apparel and footwear, reported net income in the first quarter of fiscal 2023 dropped substantially to $6.9 million from $13.3 million in the year-ago period.

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Adjusted earnings before interest, taxes, depreciation and amortization was $12.6 million, as compared to $17.3 million for the first quarter of fiscal 2022.

Sales dipped to $125.4 million from $127.6 million in the prior year. Comparable-store sales did manage to tick up slightly, rising 0.6 percent, with sales from the company’s brick-and-mortar fleet of 311 units rising 1.5 percent while the direct business dropped 1.6 percent.

Sales for the quarter started off strong with a comparable-store sales increase of 9.1 percent in February, the company said, but declined 2.8 percent in March and 1.9 percent in April.

“The slowdown in sales was primarily driven by decreases in traffic, both to our stores and web, but was partially offset by increased dollars per transaction and conversion,” said Harvey Kanter, president and chief executive officer. “Throughout the quarter, our stores performed better than our direct business, but we continued to see sales growth from online marketplaces and our mobile app.”

He added on an earnings call Thursday morning that expectations had been for comp sales to be flat to up 5 percent for the full year, but as a result of the first-quarter results, they are now expected to be closer to the lower end of that range. Shares climbed 5 percent to close at $4 on Thursday.

Specifically, tailored clothing continued to increase its percentage of sales in the period, growing to 21 percent of overall sales from 18 percent in the year-ago period. In sportswear, Polo Ralph Lauren, Nautica and Reebok were top sellers with Life Is Good and Original Penguin Golf being added to the assortment.

Kanter said the quarter was marked by “more challenging growth” as a result of “broader macro headwinds that have impacted consumer spending.” But by continuing to zero in on the big and tall man, he believes Destination XL will be able to navigate the headwinds.

“We believe the work that we have done over the past two years to transform and reposition the DXL brand has enabled us to mitigate some of the inherent risk in the broader economy,” Kanter said. “We believe that our positive comp for the quarter is outperforming the overall retail apparel market, which gives us confidence that the DXL concept is still resonating in the minds of big and tall consumers.”

He also pointed to the company’s lean inventory position — 11 percent below pre-pandemic levels at the end of the quarter — as a positive along with its turnover, which was up over 25 percent from the first quarter of 2019.

“With cash on hand, no outstanding debt and full availability under our credit facility, we are continuing to pursue our strategic initiatives this year as we look to further grow our business,” Kanter said.

He added that over the next two to three years, he believes the company can grow top line and take market share profitably by focusing on more personalized communication and continuing to shift away from discounting.

The company said fiscal 2023 sales, net income and adjusted EBITDA margin are all projected to come in at the lower end of its previously announced guidance.

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