Destination XL Group (DXLG) Q3 2026 earnings summary

Executive summary

• Announced a merger agreement between DXL and FullBeauty, creating a scaled, category-defining inclusive apparel retailer, with DXL shareholders owning 45% and FullBeauty shareholders 55% of the combined company, expected to close in the first half of fiscal 2026.

• The merger aims to accelerate growth, improve operational efficiency, and deliver long-term shareholder value by combining complementary strengths in Big and Tall and plus-size apparel.

• Third quarter sales were $101.9 million, down 5.2% year-over-year, with a net loss of $4.1 million or $(0.08) per diluted share, and adjusted EBITDA of $(2.0) million.

• Strategic initiatives include expanding private brands, rolling out FITMAP sizing technology, and refining promotional strategies to address evolving consumer preferences.

• The combined company will have approximately $1.2 billion in net sales and $45 million in Adjusted EBITDA for the last twelve months ending October 2025, with $25 million in expected annual run rate cost synergies by 2027.

Financial highlights

• Q3 net sales were $101.9 million, down 5.2% year-over-year, primarily due to a 7.4% decrease in comparable sales, partially offset by new store sales.

• Gross margin rate was 42.7%, down from 45.1% last year, mainly due to higher occupancy costs, tariffs, and increased promotional activity.

• Adjusted EBITDA for Q3 was $(2.0) million, compared to $1.0 million in the prior year quarter.

• Cash and short-term investments at quarter-end were $27 million, with no outstanding debt and $73.6 million in excess availability under the revolving credit facility.

• Free cash flow for the nine-month year-to-date was a use of $20.2 million, compared to a use of $7 million last year, mainly due to lower earnings.

Outlook and guidance

• The combined company expects to generate $25 million in annual run rate cost synergies by 2027, with a significant portion actioned within the first 12 months post-closing.

• FITMAP technology expansion is planned to reach 100 more stores by mid-2026.

• Capital expenditures for fiscal 2025 are projected at $17 million–$19 million, net of tenant incentives.

• Marketing costs for fiscal 2025 are expected to be about 6.0% of sales.

• The company will maintain a disciplined approach to capital allocation and expects to invest in long-term growth and operational improvements.