Destination XL Group (DXLG) Q4 2018 earnings summary

Executive summary

• Fiscal 2017 sales rose 3.9% to $468.0M, but net loss widened to $18.8M; Q4 comparable sales increased 4.3%, the strongest quarterly comp in nine quarters.

• Priorities for fiscal 2018: acquire and retain customers, improve store productivity, grow digital sales and reduce corporate support costs by ~$10M.

Financial highlights

• Fiscal 2017 gross profit was $210.4M; operating loss was $18.0M and net loss was $18.8M, or $0.39 per diluted share.

• Adjusted net loss, excluding impairment charges and assuming a normalized 26% tax benefit, was $12.8M, or $0.26 per diluted share; adjusted EBITDA was $17.1M versus $31.6M.

• Cash from operations was $31.0M and free cash flow was $8.4M; inventory declined $14.1M to $103.3M.

Outlook and guidance

• Fiscal 2018 sales outlook: $462M–$472M and comparable sales growth of 1%–3%; guidance assumes 52 weeks and excludes possible CEO-transition costs.

• Forecast gross margin ~45.0%, GAAP net loss $8.3M–$14.3M ($0.17–$0.29 per diluted share), and EBITDA $18M–$24M.

• Adjusted net loss guidance is $0.12–$0.22 per diluted share; capital expenditures ~$11.4M and free cash flow $9.1M–$15.1M.

• Marketing spend expected at $24.0M versus $29.5M in fiscal 2017; plans include two TV campaign flights, three new DXL stores and two Casual Male XL remodels to DXL.