Destination XL Group (DXLG) Q4 2019 earnings summary

Executive summary

• Fiscal 2018 sales rose 1.2% to $473.8M; comparable sales increased 3.0%, with positive comps in all four quarters. Higher conversion and dollars per transaction helped offset lower store traffic.

• Net loss narrowed to $13.5M from $18.8M; Adjusted net loss was $3.5M, while Adjusted EBITDA rose to $27.4M from $17.1M.

• Priorities include growing customer count and retention, improving marketing returns, enhancing the omni-channel experience, and developing wholesale while managing costs.

Financial highlights

• Revenue was $473.8M, up 1.2% from $468.0M; comparable sales grew 3.0%, adding $13.3M, while wholesale contributed $2.4M in net sales.

• Gross profit was $211.3M; gross margin declined 40 bps YoY to 44.6%, as lower merchandise margin was partly offset by improved occupancy costs.

• SG&A fell 4.8% to $183.9M, reflecting restructuring savings, lower marketing expense, and one fewer fiscal week.

• GAAP net loss was $13.5M, or $0.28 per diluted share, versus $18.8M, or $0.39; Adjusted net loss was $3.5M, or $0.07 per diluted share.

Outlook and guidance

• Fiscal 2019 outlook calls for low-single-digit comparable sales growth in omni-channel retail and positive free cash flow; detailed earnings and cash-flow guidance was deferred pending the CEO strategic review.

• Long-term objective is a 10% EBITDA margin, supported by customer growth, improved marketing and digital returns, better shopping experiences, and cost management.

• Fiscal 2019 plans: open 2 DXL stores; convert 12 Casual Male XL stores and 1 outlet; close 5 Casual Male XL stores, 1 DXL store, and all 5 Rochester stores.