Destination XL Group (DXLG) Q4 2013 earnings summary

Executive summary

• Fiscal 2012 sales rose 1.0% to $399.6M; comparable sales increased 1.5%. DXL stores and e-commerce represented 28% of revenue as the accelerated store transformation began.

• DXL stores delivered 15.6% comparable sales growth, while legacy stores near DXL locations faced sales pressure; management accelerated openings and closures to capture the new format’s growth potential.

Financial highlights

• Revenue was $399.6M, gross profit $185.8M, operating income $13.9M and net income $6.1M in fiscal 2012.

• Diluted EPS was $0.13, including a $0.04 loss from discontinued operations; continuing-operations EPS was $0.17.

• Operating cash flow was $29.9M; capital expenditures were $32.4M and non-GAAP free cash flow was $(2.5)M.

• SG&A rose 2.9% to $156.4M, including $6.2M of incremental DXL rollout costs and $2.7M related to the 53rd week.

Outlook and guidance

• Fiscal 2013 sales forecast: $415M–$420M; gross margin expected within 20 bps of fiscal 2012 as merchandise margin gains of 40–60 bps offset occupancy-cost increases of 40–60 bps.

• Fiscal 2013 operating margin guidance was breakeven to 0.5%, with diluted EPS from breakeven to $0.03; SG&A expected to increase $15.0M–$17.1M.

• Fiscal 2013 plans called for 57–64 DXL openings and 110–119 Casual Male XL and Rochester closures; rollout completion was targeted by fiscal 2015 with 215–230 DXL stores.

• Longer-term targets: sales above $600M, operating margin above 10% and free cash flow of $60M–$70M by fiscal 2016.