Sales of $115.5 million, Net Income of $0.06 per diluted share, Confirms Lower End of Full-Year Guidance Continues to Invest in Strategic Growth Initiatives CANTON, Mass., May 30, 2024 (GLOBE NEWSWIRE) --  Destination XL Group, Inc. (NASDAQ:DXLG), the leading integrated-commerce specialty retailer of Big + Tall men's clothing and shoes, today reported operating results for the first quarter of fiscal 2024, and updated sales and earnings guidance for the fiscal year. First Quarter Financial Highlights Total sales for the first quarter were $115.5 million, down 7.9% from $125.4 million in the first quarter of fiscal 2023. Comparable sales for the first quarter of fiscal 2024 decreased 11.3% as compared to the first quarter of fiscal 2023. Net income for the first quarter was $0.06 per diluted share, as compared to net income of $0.11 per diluted share in the first quarter of fiscal 2023. Adjusted EBITDA (a non-GAAP measure) for the first quarter was $8.2 million, or 7.1% of sales, as compared to $12.6 million, or 10.1% of sales in the first quarter of fiscal 2023. Total cash and investments were $53.2 million at May 4, 2024, as compared to $46.0 million at April 29, 2023, with no outstanding debt for either period. During the first quarter of fiscal 2024, the Company completed its $25.0 million stock repurchase program. Management's Comments "We expected fiscal 2024 to be challenging, but our first quarter sales results were disappointing. Our guidance for fiscal 2024 assumed an improvement in first quarter sales; however, the macroeconomic pressures we observed in the second half of fiscal 2023 persisted, continuing to negatively impact store traffic and online conversion. Despite the difficult environment, our regimented operating process, structure and discipline helped us to deliver gross margins, inventory levels and operating expenses that were better than expected and we remain energized and focused on our strategic long-range plan growth initiatives," said Harvey Kanter, President and Chief Executive Officer. "As we outlined in our last earnings call, we are investing in four significant strategic initiatives to accelerate the growth trajectory of DXL while maintaining an acceptable level of profitability. We do not believe that our first quarter results reflect the growth potential of the DXL brand and expect that our growth initiatives will provide meaningful catalysts to drive sales and take share of the addressable Big & Tall market. Marketing & Brand Building: We launched our new brand advertising campaign on May 13th to address very low awareness levels for the DXL offering. This campaign is driven by the extensive Big & Tall consumer insights work completed in 2023. The campaign is the first true brand marketing campaign work we have done since 2017, and began with a three-matched-market test in Boston, Detroit, and St. Louis. Store Development: Our initiative to open new stores was driven by insights into the frustrations our customers have with limited access to our stores. Consumers told us that they do not shop with us because no store is near them. On May 25th, we opened our second store this year with six more expected later this year. New Website Platform: We are transitioning to a new and improved eCommerce platform with the first element to launch in the next few weeks. The platform addresses friction online and will drive a richer and simpler consumer experience, as well as drive measurably greater speed and agility. Alliances & Collaborations: On April 29th, we announced our alliance with Nordstrom to launch DXL's Big & Tall assortment on their digital marketplace platform which will allow us to bring the DXL experience beyond our four walls and directly to the Nordstrom customer. "We knew fiscal 2024 would be a year of significant investment with an expectation of longer-range returns. While the immediate sales challenges are painful, we are very enthusiastic and we believe that these initiatives will drive meaningful sales growth and double-digit EBITDA margins," Kanter concluded. First Quarter Results Sales Total sales for the first quarter of fiscal 2024 were $115.5 million, as compared to $125.4 million in the first quarter of fiscal 2023. Comparable sales for the first quarter decreased 11.3% with comparable sales from our stores down 11.4% and our direct business down 11.0%. The decrease in comparable store sales was slightly offset by an increase in non-comparable sales of $1.8 million and a $3.0 million shift in calendar weeks due to the 53rd week in fiscal 2023. The decrease in comparable sales during the first quarter was primarily driven by a decrease in traffic in our stores and decreased conversion in our direct business. While traffic was down, our three new stores that opened last Fall in Queens, New York, Cincinnati, Ohio, and Pasadena, California all drove strong dollars per transaction and new-to-file rates that are approximately three times the chain average. The eleven Casual Male stores that were converted to DXL in fiscal 2023 performed stronger than the chain, with comparable sales to date approximately flat. Gross Margin For the first quarter of fiscal 2024, our gross margin rate, inclusive of occupancy costs, was 48.2% as compared to a gross margin rate of 48.6% for the first quarter of fiscal 2023. Our gross margin rate decreased by 40-basis points, with an increase of 175-basis points in occupancy costs primarily due to the deleveraging of sales and increased rents as a result of lease extensions, which was partially offset by an increase in merchandise margin of 135-basis points. The improvement in merchandise margin of 135-basis points was due to a shift in merchandise mix, favorable shipping costs and a reduction in loyalty expense and marketplace commissions. For 2024, we expect gross margin rates to be approximately 30- to 50-basis points lower than fiscal 2023 and reflect some occupancy deleveraging due to lower sales expectations. Selling, General & Administrative As a percentage of sales, SG&A (selling, general and administrative) expenses for the first quarter of fiscal 2024 were 41.1% as compared to 38.5% for the first quarter of fiscal 2023. On a dollar basis, SG&A expenses decreased by $0.8 million as compared to the first quarter of fiscal 2023. The decrease was primarily due to a decrease in store payroll and performance-based incentive accruals, partially offset by an increase in advertising costs and operating costs to support our long-range growth initiatives. Marketing costs were 6.3% of sales for the first quarter of fiscal 2024 as compared to 5.5% of sales for the first quarter of fiscal 2023. For fiscal 2024, marketing costs are expected to be approximately 7.0%-7.5% of sales. 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 23.0% of sales in the first quarter of fiscal 2024 as compared to 21.1% of sales in the first quarter of fiscal 2023. Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 18.1% of sales in the first quarter of fiscal 2024 as compared to 17.4% of sales in the first quarter of fiscal 2023. Interest Income (Expense), Net Net interest income for the first quarter of fiscal 2024 was $0.6 million, as compared to $0.3 million for the first quarter of fiscal 2023. For both periods, interest income was earned from investments in U.S. government-backed investments and money market accounts. Interest costs for both periods were minimal because we had no outstanding debt and no borrowings under our credit facility during either period. Income Taxes Our tax provision for income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any. Each quarter, we update our estimate of the annual effective tax rate and make a year-to-date adjustment to the provision. For the first quarter of fiscal 2024, the effective tax rate was 30.4% as compared to an effective tax rate of 26.6% for the first quarter of fiscal 2023. The increase in the effective tax rate was primarily due to permanent book to tax differences combined with a lower pretax income as compared to the first quarter of fiscal 2023. Net Income For the first quarter of fiscal 2024, net income was $3.8 million, or $0.06 per diluted share, as compared to net income for the first quarter of fiscal 2023 of $7.0 million, or $0.11 per diluted share. Adjusted EBITDA Adjusted EBITDA, a non-GAAP measure, for the first quarter of fiscal 2024 was $8.2 million, as compared to $12.6 million for the first quarter of fiscal 2023. Cash Flow Cash flow from operations for the first three months of fiscal 2024 was $(1.1) million as compared to $(4.2) million for the first three months of fiscal 2023. Free cash flow, a non-GAAP measure, was $(7.0) million for the first three months of fiscal 2024 as compared to $(5.9) million for the first three months of fiscal 2023. The decrease in free cash flow was primarily due to an increase in capital expenditures primarily related to the store openings as well as due to a decrease in operating income.                     For the three months ended (in millions)   May 4, 2024     April 29, 2023     Cash flow from operating activities (GAAP basis)   $ (1.1 )   $ (4.2 )   Capital expenditures     (5.9 )     (1.7 )   Free Cash Flow (non-GAAP basis)   $ (7.0 )   $ (5.9 )                   Non-GAAP Measures Adjusted EBITDA, adjusted EBITDA margin 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 As of May 4, 2024, we had cash and investments of $53.2 million as compared to $46.0 million as of April 29, 2023, with no outstanding debt in either period. We did not have any borrowings under our credit facility during either period and, as of May 4, 2024, the availability under our credit facility was $79.2 million, as compared to $93.8 million as of April 29, 2023. Availability under our credit facility is primarily driven by our available inventory. As of May 4, 2024, our inventory decreased approximately $9.0 million to $91.2 million, as compared to $100.3 million as of April 29, 2023. We continue to take proactive measures to manage our inventory and adjust our receipt plan given the ongoing macroeconomic factors affecting consumer spending.   At May 4, 2024, our clearance inventory was 9.7% of our total inventory, as compared to 7.8% at April 29, 2023 and still below our historical benchmark of approximately 10.0%. Our inventory turnover rate has improved by almost 30% from fiscal 2019. Stock Repurchase Program In March 2023, our Board of Directors approved a stock repurchase program. Under the stock repurchase program, we were initially authorized to repurchase up to $15.0 million of our common stock through open market and privately negotiated transactions. On November 15, 2023, our Board increased the authorization from $15.0 million to $25.0 million.  During the first quarter of fiscal 2024, we repurchased 52,802 shares at a total cost, including fees, of $211,182, completing our stock repurchase program. Retail Store Information The following is a summary of our retail square footage since the end of fiscal 2021 through the end of the first quarter of fiscal 2024:   At May 4, 2024   Year End 2023   Year End 2022   Year End 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   233     1,732     232     1,725     218     1,663     220     1,678   DXL outlets   15     76     15     76     16     80     16     80   CMXL retail   17     55     17     55     28     92     35     115   CMXL outlets   19     57     19     57     19     57     19     57   Total   284     1,920     283     1,913     281     1,892     290     1,930   During the first quarter of fiscal 2024, we opened a new DXL store in Coon Rapids, Minnesota. Subsequent to the end of the first quarter, we opened our second store in Thousand Oaks, California and expect to open six additional DXL stores by end of fiscal 2024. During fiscal 2024, ...