Destination XL Group, Inc. Reports Second Quarter Financial Results
Destination XL Group, Inc. (DXLG) reported strong second quarter results for fiscal 2021, with total sales reaching $138.6 million, an 81.3% increase from the previous year. Net income was $24.5 million, or $0.36 per diluted share, compared to a net loss of $(10.7) million last year. The company raised its fiscal 2021 guidance to anticipated sales between $490-$505 million and EPS of $0.64-$0.76. Improved gross margin at 51.7% and adjusted EBITDA of $29.8 million highlight operational strength, despite caution over supply chain issues and COVID-19 variants.
- Net income increased to $24.5 million from a net loss of $(10.7) million year-over-year.
- Total sales rose 81.3% compared to the previous year's second quarter.
- Raised fiscal 2021 sales guidance from $415-$435 million to $490-$505 million.
- Adjusted EBITDA improved to $29.8 million from $(4.3) million year-over-year.
- Comparable sales up 21.6% compared to fiscal 2019.
- Concerns over ongoing supply chain challenges could impact future sales.
- Potential negative effects from COVID-19 variants may affect demand.
Second Quarter Comparable Sales up
Raises Guidance for Fiscal 2021: Sales
CANTON, Mass., Aug. 31, 2021 (GLOBE NEWSWIRE) -- Destination XL Group, Inc. (OTCQX: DXLG), the leading omni-channel specialty retailer of Big + Tall men’s clothing and shoes, today reported operating results for the second quarter of fiscal 2021 and provided updated guidance for the fiscal year.
Second Quarter Financial Highlights
- Total sales for the second quarter were
$138.6 million , up81.3% from$76.4 million in the second quarter of fiscal 2020 and up12.5% from$123.2 million in the second quarter of fiscal 2019. Compared to the second quarter of fiscal 2019, comparable sales increased21.6% . - Net income for the second quarter was
$24.5 million , or$0.36 per diluted share, as compared to a net loss of$(10.7) million , or$(0.21) per diluted share, in the second quarter of fiscal 2020 and break-even net income, or$0.00 per diluted share, in the second quarter of fiscal 2019. - Adjusted EBITDA for the second quarter was
$29.8 million compared to$(4.3) million in the second quarter of fiscal 2020 and$7.1 million in the second quarter of fiscal 2019. - Cash Flow from operations for the first six months was
$42.2 million as compared to the first six months of fiscal 2020 of$(9.0) million and the first six months of fiscal 2019 of$0.9 million . Free Cash Flow was$40.5 million as compared to$(11.1) million for the first six months of 2020 and$(6.7) million for the first six months of fiscal 2019. - At July 31, 2021, total debt, net of cash, was
$11.0 million as compared to$61.0 million at August 1, 2020 and$58.7 million at August 3, 2019. Remaining availability under our credit facility was$65.1 million at July 31, 2021 as compared to$12.4 million at August 1, 2020 and$44.5 million at August 3, 2019.
Management’s Comments
“We are very pleased to report second quarter results that far surpassed our internal expectations. We believe that we are witnessing a material shift in how consumers are thinking about and engaging with DXL. As a result, we are raising our full year 2021 guidance to reflect the revised outlook we have for the future of DXL, but also caution our optimism given the ongoing surges of the Covid Delta variant and ongoing risk in the supply chain,” said Harvey Kanter, President & Chief Executive Officer.
Kanter continued, “Many of our existing customers have returned to shop after months of staying close to home, and many new customers are discovering DXL for the first time. We believe we are increasing our market share in the big + tall market. The transformative strategic changes that we have authored over the past two years around digital engagement, customer-first orientation, and repositioning the brand are coming to life and driving sales. Our 12-month active customer file is almost back to pre-pandemic levels and our second quarter new-to-file rate increased
The operating leverage that we have talked about for the past 6 months is becoming more evident in our results. We have made substantial reductions in promotions as part of our brand repositioning, which is driving the improvement in gross margin. We have restructured over one-third of our store lease portfolio which is driving occupancy leverage. And lastly, we have preserved many of the cost savings initiated during the pandemic to reduce our corporate and supporting overhead. All of these elements, combined with a robust resurgence in demand for big + tall apparel, contributed to a
Second Quarter Results
In addition to referring to fiscal 2020, the following review of our second quarter results for fiscal 2021 also includes comparisons to our second quarter results for fiscal 2019. Due to the COVID-19 pandemic and its impact on our results during the second quarter of fiscal 2020, we believe that comparisons to our results from the second quarter of fiscal 2019 are more informative.
Sales
Total sales for the second quarter of fiscal 2021 were
As compared to the second quarter of fiscal 2019, comparable sales for the second quarter were up
Sales accelerated throughout the quarter, with substantial month-over-month increases in both our stores and direct business. Against fiscal 2019, comparable sales in our stores increased
Our direct business continued to outperform during the second quarter. Similar to our stores, we saw month-over-month improvement against fiscal 2019 sales, with a
Sales from our wholesale business were
Gross Margin
For the second quarter of fiscal 2021, our gross margin rate, inclusive of occupancy costs, was
As compared to fiscal 2019, our gross margin rate improved by 740 basis points, driven by a 350 basis point improvement in merchandise margins and a 390 basis point improvement in occupancy costs. On a dollar basis, our occupancy costs decreased by
Selling, General & Administrative
As a percentage of sales, SG&A (selling, general and administrative) expenses for the second quarter of fiscal 2021 were
SG&A expenses decreased by
Management views SG&A expenses through two primary cost centers: Customer Facing Costs and Corporate Support Costs. Customer Facing Costs, which include store payroll, marketing and other store and direct operating costs, represented
Impairment of Assets
During the second quarter of fiscal 2021, the Company recorded a non-cash gain of
Net Income (Loss)
For the second quarter of fiscal 2021, we recorded net income of
On a non-GAAP basis, adjusting for asset impairment charges and a normalized tax rate of
Adjusted EBITDA
Adjusted EBITDA, a non-GAAP measure, for the second quarter of fiscal 2021 was
Cash Flow
Cash flow from operations for the first six months of fiscal 2021 was
Our capital expenditures for fiscal 2021 are expected to be limited to maintenance capital necessary to support our business strategy and we have no new or remodeled stores planned for fiscal 2021.
For the six months ended | ||||||||||||
(in millions) | July 31, 2021 | August 1, 2020 | August 3, 2019 | |||||||||
Cash flow from operating activities (GAAP basis) | $ | 42.2 | $ | (9.0 | ) | $ | 0.9 | |||||
Capital expenditures | (1.7 | ) | (2.1 | ) | (7.6 | ) | ||||||
Free Cash Flow (non-GAAP basis) | $ | 40.5 | $ | (11.1 | ) | $ | (6.7 | ) |
Non-GAAP Measures
Adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per diluted share and free cash flow are non-GAAP financial measures. Please see “Non-GAAP Measures” below and reconciliations of these non-GAAP measures to the comparable GAAP measures that follow in the tables below.
Balance Sheet & Liquidity
At July 31, 2021, we had a cash balance of
As of July 31, 2021, our inventory decreased approximately
Retail Store Information
Total retail square footage has steadily decreased since the end of fiscal 2018:
Year End 2018 | Year End 2019 | Year End 2020 | At July 31, 2021 | |||||||||||||||||||||
# of Stores | Sq Ft. (000’s) | # of Stores | Sq Ft. (000’s) | # of Stores | Sq Ft. (000’s) | # of Stores | Sq Ft. (000’s) | |||||||||||||||||
DXL retail | 216 | 1,684 | 228 | 1,729 | 226 | 1,718 | 221 | 1,685 | ||||||||||||||||
DXL outlets | 15 | 78 | 17 | 82 | 17 | 82 | 16 | 82 | ||||||||||||||||
CMXL retail | 66 | 221 | 50 | 164 | 46 | 152 | 40 | 132 | ||||||||||||||||
CMXL outlets | 30 | 91 | 28 | 85 | 22 | 66 | 20 | 60 | ||||||||||||||||
Rochester Clothing | 5 | 51 | - | - | - | - | - | - | ||||||||||||||||
Total | 332 | 2,125 | 323 | 2,060 | 311 | 2,018 | 297 | 1,959 |
We do not plan to open any new stores or rebrand any of our Casual Male XL stores during fiscal 2021. We have 119 stores that have leases with either a natural lease expiration or a kick-out option within the next two years. This provides us an opportunity to right size our store portfolio, through lease renegotiations or lease-term expirations, to ensure that we are optimizing our store profitability and omni-channel distribution. Since the beginning of fiscal 2020, we have renegotiated approximately 133 of our store leases that we expect will deliver over
E-Commerce Information
The Company distributes its licensed branded and private label products directly to consumers through its stores, website and third-party marketplaces. E-commerce sales, which we also refer to as direct sales, are defined as sales that originate online, whether through our website, at the store level or through a third-party marketplace. Our direct business is a critical component of our business and an area of significant growth opportunity for us. We continue to see quarter over quarter growth in our direct business, even as customers return to our stores. For the second quarter of fiscal 2021, our direct sales were
Financial Outlook
Results for the second quarter of fiscal 2021 exceeded our expectation and, based on our sales performance and trend, we are cautiously optimistic for the second half of the year. Accordingly, we are increasing our guidance for fiscal 2021. The high-end of our revised guidance is based on achieving a comparable sales increase for the year in the low double-digits as compared to fiscal 2019 with our direct business representing approximately
Our revised guidance for fiscal 2021 is as follows:
- Sales of approximately
$490.0 million to$505.0 million (an increase from our previously revised guidance of approximately$415.0 million to$435.0 million ). - Adjusted EBITDA of approximately
$65.0 million to$72.0 million (an increase from our previously revised guidance of approximately$20.0 million to$30.0 million ). - Net income is expected to be
$0.64 t o$0.76 per diluted share. - Free cash flow in excess of
$50.0 million .
Conference Call
The Company will hold a conference call to review its financial results today, August 31, 2021 at 9:00 a.m. ET. To listen to the live webcast, visit the "Investor Relations" section of the Company's website. The live call also can be accessed by dialing: (866) 680-2311. Please reference conference ID: 8531188. An archived version of the webcast may be accessed by visiting the "Events" section of the Company's website for up to one year.
During the conference call, the Company may discuss and answer questions concerning business and financial developments and trends. The Company’s responses to questions, as well as other matters discussed during the conference call, may contain or constitute information that has not been disclosed previously.
Non-GAAP Measures
In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), this press release contains non-GAAP financial measures, including adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per diluted share and free cash flow. The presentation of these non-GAAP measures is not in accordance with GAAP, and should not be considered superior to or as a substitute for net income (loss), net income (loss) per diluted share or cash flows from operating activities or any other measure of performance derived in accordance with GAAP. In addition, not all companies calculate non-GAAP financial measures in the same manner and, accordingly, the non-GAAP measures presented in this release may not be comparable to similar measures used by other companies. The Company believes the inclusion of these non-GAAP measures help investors gain a better understanding of the Company’s performance, especially when comparing such results to previous periods, and that they are useful as an additional means for investors to evaluate the Company's operating results, when reviewed in conjunction with the Company's GAAP financial statements. Reconciliations of these non-GAAP measures to their comparable GAAP measures are provided in the tables below.
The Company believes that adjusted EBITDA (calculated as earnings before interest, taxes, depreciation and amortization and adjusted for asset impairment charges and CEO transition costs, if applicable) is useful to investors in evaluating its performance and is a key metric to measure profitability and economic productivity. Adjusted EBITDA margin is calculated as adjusted EBITDA divided by total sales.
The Company has fully reserved against its deferred tax assets and, therefore, its results are not reflective of earnings assuming a “normal” tax position. In addition, we have added back charges for asset impairment charges and CEO transition costs, if applicable, because it provides comparability of results without these charges. Adjusted net income (loss) provides investors with a useful indication of the financial performance of the business, on a comparative basis, assuming a normalized effective tax rate of
Free cash flow is a metric that management uses to monitor liquidity. Management believes this metric is important to investors because it demonstrates the Company’s ability to strengthen liquidity while supporting its capital projects and new store growth. Free cash flow is calculated as cash flow from operating activities, less capital expenditures and excludes the mandatory and discretionary repayment of debt.
About Destination XL Group, Inc.
Destination XL Group, Inc. is the leading retailer of Men’s Big + Tall apparel that delivers a Big + Tall shopping experience that fits -- fits his body, fits his style, fits his life. Subsidiaries of Destination XL Group, Inc. operate DXL Big + Tall retail and outlet stores throughout the United States as well as Toronto, Canada, Casual Male XL retail and outlet stores in the United States, and an e-commerce website, DXL.com, which offers a multi-channel solution similar to the DXL store experience with the most extensive selection of online products available anywhere for Big + Tall men. The Company is headquartered in Canton, Massachusetts, and its common stock is listed on the OTCQX market under the symbol "DXLG." For more information, please visit the Company's investor relations website: https://investor.dxl.com.
Forward-Looking Statements
Certain statements and information contained in this press release constitute forward-looking statements under the federal securities laws, including statements regarding our updated guidance for fiscal 2021, including assumptions with respect to such guidance and expected return to profitability, sales trends given the continuing pandemic and whether demand for apparel will keep pace for fiscal 2021, our strategic initiatives for fiscal 2021, our efforts to right-size our lease structure and store portfolio, expected gross margin rate for fiscal 2021, expected leverage from reduced operating costs, expected capital expenditures for fiscal 2021, and expected increases in freight costs and certain raw materials. The discussion of forward-looking information requires management of the Company to make certain estimates and assumptions regarding the Company's strategic direction and the effect of such plans on the Company's financial results. The Company's actual results and the implementation of its plans and operations may differ materially from forward-looking statements made by the Company. The Company encourages readers of forward-looking information concerning the Company to refer to its filings with the Securities and Exchange Commission, including without limitation, its Annual Report on Form 10-K filed on March 19, 2021, its Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission that set forth certain risks and uncertainties that may have an impact on future results and direction of the Company, including risks relating to the COVID-19 pandemic and its impact on the Company’s results of operations, the Company’s execution of its digital and store strategy and ability to grow its market share, predict customer tastes and fashion trends, forecast sales growth trends and compete successfully in the United States men’s big and tall apparel market.
Forward-looking statements contained in this press release speak only as of the date of this release. Subsequent events or circumstances occurring after such date may render these statements incomplete or out of date. The Company undertakes no obligation and expressly disclaims any duty to update such statements.
DESTINATION XL GROUP, INC. | ||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||
For the three months ended | For the six months ended | |||||||||||||||||||||||||
July 31, 2021 | August 1, 2020 | August 3, 2019 | July 31, 2021 | August 1, 2020 | August 3, 2019 | |||||||||||||||||||||
Sales | $ | 138,590 | $ | 76,442 | $ | 123,245 | $ | 250,084 | $ | 133,669 | $ | 236,218 | ||||||||||||||
Cost of goods sold including occupancy | 66,988 | 54,945 | 68,676 | 127,649 | 98,958 | 132,236 | ||||||||||||||||||||
Gross profit | 71,602 | 21,497 | 54,569 | 122,435 | 34,711 | 103,982 | ||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||
Selling, general and administrative | 41,776 | 25,795 | 47,478 | 78,894 | 57,907 | 92,089 | ||||||||||||||||||||
Impairment of assets | (365 | ) | — | — | (1,017 | ) | 16,335 | — | ||||||||||||||||||
CEO transition costs | — | — | — | — | — | 702 | ||||||||||||||||||||
Depreciation and amortization | 4,389 | 5,340 | 6,210 | 8,889 | 11,072 | 12,548 | ||||||||||||||||||||
Total expenses | 45,800 | 31,135 | 53,688 | 86,766 | 85,314 | 105,339 | ||||||||||||||||||||
Operating income (loss) | 25,802 | (9,638 | ) | 881 | 35,669 | (50,603 | ) | (1,357 | ) | |||||||||||||||||
Interest expense, net | (925 | ) | (1,052 | ) | (851 | ) | (2,067 | ) | (1,793 | ) | (1,715 | ) | ||||||||||||||
Income (loss) before provision (benefit) for income taxes | 24,877 | (10,690 | ) | 30 | 33,602 | (52,396 | ) | (3,072 | ) | |||||||||||||||||
Provision (benefit) for income taxes | 426 | 24 | (8 | ) | 454 | 44 | (29 | ) | ||||||||||||||||||
Net income (loss) | $ | 24,451 | $ | (10,714 | ) | $ | 38 | $ | 33,148 | $ | (52,440 | ) | $ | (3,043 | ) | |||||||||||
Net income (loss) per share: | ||||||||||||||||||||||||||
Basic | $ | 0.38 | $ | (0.21 | ) | $ | 0.00 | $ | 0.53 | $ | (1.03 | ) | $ | (0.06 | ) | |||||||||||
Diluted | $ | 0.36 | $ | (0.21 | ) | $ | 0.00 | $ | 0.50 | $ | (1.03 | ) | $ | (0.06 | ) | |||||||||||
Weighted-average number of common shares outstanding: | ||||||||||||||||||||||||||
Basic | 63,527 | 51,078 | 49,867 | 62,840 | 50,918 | 49,734 | ||||||||||||||||||||
Diluted | 67,615 | 51,078 | 50,175 | 65,938 | 50,918 | 49,734 |
DESTINATION XL GROUP, INC. | |||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||
July 31, 2021, January 30, 2021 and August 1, 2020 | |||||||||||
(In thousands) | |||||||||||
(unaudited) | |||||||||||
July 31, | January 30, | August 1, | |||||||||
2021 | 2021 | 2020 | |||||||||
ASSETS | |||||||||||
Cash and cash equivalents | $ | 5,845 | $ | 18,997 | $ | 20,414 | |||||
Inventories | 73,368 | 85,028 | 87,388 | ||||||||
Other current assets | 7,767 | 10,105 | 12,482 | ||||||||
Property and equipment, net | 48,808 | 56,552 | 65,258 | ||||||||
Operating lease right-of-use assets | 124,946 | 134,321 | 157,095 | ||||||||
Intangible assets | 1,150 | 1,150 | 1,150 | ||||||||
Other assets | 568 | 602 | 593 | ||||||||
Total assets | $ | 262,452 | $ | 306,755 | $ | 344,380 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||||||||
Accounts payable | $ | 19,877 | $ | 27,091 | $ | 18,533 | |||||
Accrued expenses and other liabilities | 32,071 | 29,934 | 26,140 | ||||||||
Operating leases | 159,244 | 179,417 | 210,936 | ||||||||
Long-term debt | 16,834 | 14,869 | 14,841 | ||||||||
Borrowings under credit facility | — | 59,521 | 66,545 | ||||||||
Stockholders' equity (deficit) | 34,426 | (4,077 | ) | 7,385 | |||||||
Total liabilities and stockholders' equity | $ | 262,452 | $ | 306,755 | $ | 344,380 |
CERTAIN COLUMNS IN THE FOLLOWING TABLES MAY NOT FOOT DUE TO ROUNDING GAAP TO NON-GAAP RECONCILIATION OF ADJUSTED NET INCOME (LOSS) AND ADJUSTED NET INCOME (LOSS) PER DILUTED SHARE (unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||
For the three months ended | For the six months ended | |||||||||||||||||||||||||||||||||||||||||||||||
July 31, 2021 | August 1, 2020 | August 3, 2019 | July 31, 2021 | August 1, 2020 | August 3, 2019 | |||||||||||||||||||||||||||||||||||||||||||
$ | Per diluted share | $ | Per diluted share | $ | Per diluted share | $ | Per diluted share | $ | Per diluted share | $ | Per diluted share | |||||||||||||||||||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) (GAAP basis) | $ | 24,451 | $ | 0.36 | $ | (10,714 | ) | $ | (0.21 | ) | $ | 38 | $ | 0.00 | $ | 33,148 | $ | 0.50 | $ | (52,440 | ) | $ | (1.03 | ) | $ | (3,043 | ) | $ | (0.06 | ) | ||||||||||||||||||
Adjust: | ||||||||||||||||||||||||||||||||||||||||||||||||
Impairment of assets | (365 | ) | - | - | (1,017 | ) | 16,335 | - | ||||||||||||||||||||||||||||||||||||||||
CEO transition costs | - | - | - | - | - | 702 | ||||||||||||||||||||||||||||||||||||||||||
Add back actual income tax provision (benefit) | 426 | 24 | (8 | ) | 454 | 44 | (29 | ) | ||||||||||||||||||||||||||||||||||||||||
Add income tax (provision) benefit, assuming a normal tax rate of | (6,373 | ) | 2,779 | (8 | ) | (8,472 | ) | 9,376 | 616 | |||||||||||||||||||||||||||||||||||||||
Adjusted net income (loss) (non-GAAP basis) | $ | 18,139 | $ | 0.27 | $ | (7,911 | ) | $ | (0.15 | ) | $ | 22 | $ | 0.00 | $ | 24,113 | $ | 0.37 | $ | (26,685 | ) | $ | (0.52 | ) | $ | (1,754 | ) | $ | (0.04 | ) | ||||||||||||||||||
Weighted average number of common | ||||||||||||||||||||||||||||||||||||||||||||||||
shares outstanding on a diluted basis | 67,615 | 51,078 | 50,175 | 65,938 | 50,918 | 49,734 |
GAAP TO NON-GAAP RECONCILIATION OF ADJUSTED EBITDA (unaudited) | |||||||||||||||||||||||||||||
For the three months ended | For the six months ended | ||||||||||||||||||||||||||||
July 31, 2021 | August 1, 2020 | August 3, 2019 | July 31, 2021 | August 1, 2020 | August 3, 2019 | Projected 2021 | |||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Net income (loss) (GAAP basis) | $ | 24.5 | $ | (10.7 | ) | $ | 0.0 | $ | 33.1 | $ | (52.4 | ) | $ | (3.0 | ) | ||||||||||||||
Add back: | |||||||||||||||||||||||||||||
Impairment of assets | (0.4 | ) | - | - | (1.0 | ) | 16.3 | - | (1.0 | ) | |||||||||||||||||||
CEO transition costs | - | - | - | - | - | 0.7 | - | ||||||||||||||||||||||
Provision (benefit) for income taxes | 0.4 | - | - | 0.5 | 0.0 | (0.0 | ) | 0.7-0.8 | |||||||||||||||||||||
Interest expense | 0.9 | 1.1 | 0.9 | 2.1 | 1.8 | 1.7 | 3.1-3.6 | ||||||||||||||||||||||
Depreciation and amortization | 4.4 | 5.3 | 6.2 | 8.9 | 11.1 | 12.5 | 17.4-17.7 | ||||||||||||||||||||||
Adjusted EBITDA (non-GAAP basis) | $ | 29.8 | $ | (4.3 | ) | $ | 7.1 | $ | 43.5 | $ | (23.2 | ) | $ | 11.9 |
GAAP TO NON-GAAP RECONCILIATION OF FREE CASH FLOW (unaudited) | ||||||||||||||||
For the six months ended | Projected | |||||||||||||||
(in millions) | July 31, 2021 | August 1, 2020 | August 3, 2019 | Fiscal 2021 | ||||||||||||
Cash flow from operating activities (GAAP basis) | $ | 42.2 | $ | (9.0 | ) | $ | 0.9 | $ > 54.3 | ||||||||
Capital expenditures | (1.7 | ) | (2.1 | ) | (7.6 | ) | (4.3 | ) | ||||||||
Free Cash Flow (non-GAAP basis) | $ | 40.5 | $ | (11.1 | ) | $ | (6.7 | ) | $ > 50.0 |
Investor Contact:
Investor.relations@dxlg.com
603-933-0541
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