Destination
XL Group, Inc. (NASDAQ: DXLG), the largest omni-channel specialty
retailer of big and tall men's apparel, today reported operating results
for the first quarter of fiscal 2015.
First-Quarter Fiscal 2015 Highlights
-
Total comparable sales increased +5.5% versus +3.4% in prior-year
quarter
-
104 DXL retail stores, open at least 13 months, had an +8.7%
comparable sales increase on top of +12.8% in the prior-year quarter
-
Operating income of $0.2 million versus an operating loss of $(2.9)
million in the prior-year quarter
-
EBITDA from continuing operations of $6.8 million versus $2.5 million
in the prior-year quarter
-
Sales per square foot for the DXL retail stores, on a rolling 12-month
basis, were $168 as compared with $153 for the prior-year quarter
Management Comments
“The sales momentum that began in 2014 has continued into the first
quarter of 2015,” said President and CEO David Levin. “Our DXL retail
stores delivered another strong quarter with a sales comp of 8.7% on top
of 12.8% in the first quarter last year. We opened 13 new DXL stores in
the first quarter of the year, and I’m very pleased to report that we
outperformed our first-quarter sales plan despite the severe winter
weather and difficult economic climate.
“We are also excited about our new spring advertising campaign, which
began on NFL draft day with our new TV commercial on ESPN and continues
through Father’s Day in June. This flight represents the start of our
third year with a national advertising presence on television, radio and
digital media. The campaign continues to fuel the growth in our customer
database, which leads to more DXL customer visits.
“This is a transformative year for DXL as we continue to grow sales and
gross margin dollars while beginning to see operating leverage in our
SG&A expenses. EBITDA for the first quarter was $6.8 million, compared
with $2.5 million in the first quarter last year. We expect our
performance to continue to accelerate over the next two years, with a
sales goal of $470 million and EBITDA goal of $35 million for fiscal
2016,” concluded Levin.
First-Quarter 2015 Results
Sales
For the first quarter of fiscal 2015, total sales rose 8.0% to $104.4
million from $96.7 million in the first quarter of fiscal 2014. The
increase of $7.7 million in total sales was the result of an increase in
sales at DXL stores of $13.8 million. On a comparable basis, total
transactions in the Company’s DXL stores were up 6.6% over the
prior-year first quarter. The Company is experiencing higher store
traffic, as well as improved conversion of store traffic to top-line
sales, both of which contributed to an overall increase in transactions.
Gross Margin
For the first quarter of fiscal 2015, gross margin, inclusive of
occupancy costs, was 46.2%, compared with gross margin of 45.5% for the
first quarter of fiscal 2014. The increase of 70 basis points was the
result of a 70-basis-point improvement in occupancy costs as a
percentage of total sales, primarily due to a favorable change in lease
exit accruals of approximately 60 basis points.
Selling, General & Administrative
SG&A expenses for the first quarter of fiscal 2015 were 39.7% of sales,
compared with 42.9% in the first quarter of fiscal 2014. On a dollar
basis, SG&A expense was essentially unchanged from the same quarter a
year ago. Increased payroll and supporting store expenses this quarter
were offset by a $1.7 million decrease in marketing expense largely due
to the later start of the spring campaign.
DXL Transition Costs
The results for the first quarter of fiscal 2015 include DXL transition
costs of approximately $1.7 million. These transition costs include $0.5
million of pre-opening occupancy costs and lease exit costs, $1.1
million of SG&A expenses related to pre-opening payroll, training and
store operations and $0.1 million related to trademark amortization.
Results for the first quarter of fiscal 2014 included DXL transition
costs of approximately $1.5 million.
EBITDA from Continuing Operations (a Non-GAAP measure)
Earnings before interest, taxes, depreciation and amortization (EBITDA)
from continuing operations for the first quarter of fiscal 2015 were
$6.8 million, compared with $2.5 million for the first quarter of fiscal
2014. The improvement was primarily driven by an increase in sales from
the same quarter the prior year.
Net Loss
Net loss for the first quarter of fiscal 2015 was $(0.6) million, or
$(0.01) per diluted share, compared with a net loss of $(3.5) million,
or $(0.07) per diluted share, for the first quarter of fiscal 2014. On a
non-GAAP basis, assuming a normalized tax rate of 40%, adjusted net loss
for the first quarter of fiscal 2015 was $(0.01) per diluted share, as
compared with $(0.04) per diluted share for the first quarter of fiscal
2014.
Cash Flow
Cash flow used for operations for the first quarter of fiscal 2015 was
$(8.0) million, compared with cash flow used for operations of $(13.9)
million in the same quarter of fiscal 2014. After capital expenditures,
free cash flow for the first quarter of fiscal 2015 improved by $7.5
million to $(17.5) million from $(25.0) million for the first quarter of
fiscal 2014.
Capital expenditures for the first quarter of fiscal 2015 were $9.6
million, compared with $11.1 million for the first quarter of the prior
year. All capital expenditures are subject to ROIC (“Return on Invested
Capital”) hurdles.
Non-GAAP measures
EBITDA from continuing operations, adjusted loss per share and free cash
flow are non-GAAP financial measures. Please see “Non-GAAP Measures”
below and a reconciliation of these non-GAAP measures to the comparable
GAAP measures that follows the table below.
Balance Sheet & Liquidity
At May 2, 2015, the Company had cash and cash equivalents of $6.6
million. Total debt at May 2, 2015 consisted of $40.1 million
outstanding under the Company’s credit facility, net of unamortized debt
issuance costs, and approximately $31.7 million outstanding under its
term loan and equipment financing notes, net of unamortized debt
issuance costs. At May 2, 2015, the Company had $68.3 million of excess
availability under its credit facility.
Inventory was $123.8 million at May 2, 2015, compared with $115.2
million at January 31, 2015 and $114.2 million at May 3, 2014. The
increase in inventory over both year end and last year’s first quarter
is due to an increase in total store square footage and the higher mix
of branded product due to having more DXL stores open. Clearance
inventory represented 8.2% of total inventory in the first quarter of
2015, compared with 9.7% of total inventory in the first quarter of 2014.
Retail Store Information
The following is a summary of the store count, with respective square
footage by store concept:
|
|
|
Year End 2013
|
|
|
Year End 2014
|
|
|
At May 2, 2015
|
|
|
Year End 2015E
|
|
|
|
# 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
|
|
|
99
|
|
|
915
|
|
|
138
|
|
|
1,179
|
|
|
149
|
|
|
1,258
|
|
|
170
|
|
|
1,397
|
DXL Outlets
|
|
|
-
|
|
|
-
|
|
|
2
|
|
|
12
|
|
|
4
|
|
|
23
|
|
|
10
|
|
|
51
|
CMXL Retail
|
|
|
198
|
|
|
713
|
|
|
157
|
|
|
557
|
|
|
152
|
|
|
538
|
|
|
125
|
|
|
440
|
CMXL Outlets
|
|
|
52
|
|
|
167
|
|
|
48
|
|
|
153
|
|
|
44
|
|
|
140
|
|
|
38
|
|
|
114
|
Rochester Clothing
|
|
|
10
|
|
|
88
|
|
|
8
|
|
|
74
|
|
|
8
|
|
|
74
|
|
|
5
|
|
|
56
|
Total
|
|
|
359
|
|
|
1,883
|
|
|
353
|
|
|
1,975
|
|
|
357
|
|
|
2,033
|
|
|
348
|
|
|
2,058
|
Fiscal 2015 Outlook
The Company’s current earnings guidance for fiscal 2015 is still within
the original guidance previously provided; however, as a result of
tightening its expectations of SG&A expenses, the Company has affirmed
and narrowed its overall guidance. The Company expects:
-
Total sales in the range of $438.0 to $443.0 million (unchanged).
-
A total comparable sales increase of approximately 5.6% (unchanged).
-
Gross profit margin of approximately 45.9% (unchanged).
-
SG&A costs of approximately $180.5 million (a decrease from $181.5
million).
-
Depreciation and amortization expense of approximately $28.5 million
(unchanged).
-
Interest expense of approximately $3.8 million (unchanged).
-
EBITDA in the range of $21.0 to $23.0 million (a change from $19.0 to
$23.0 million).
-
Operating margin loss of between (1.7%) and (1.2%) (a change from
(2.2%) and (1.2%)).
-
A net loss of $(0.20) to $(0.23) per diluted share (a change from
$(0.20) to $(0.27) per diluted share). On a non-GAAP basis, an
adjusted net loss of $(0.12) to $(0.14) per diluted share (a change
from $(0.12) to $(0.16) per diluted share). This guidance is presented
on a non-GAAP basis for comparative purposes to fiscal 2014 earnings,
assuming a normal tax benefit of approximately 40%. The Company
expects to continue to provide a full valuation allowance against its
deferred tax assets in fiscal 2015 and will not recognize any income
tax benefit on its operating loss in fiscal 2015.
-
To open approximately 32 DXL retail and 8 DXL outlet stores and close
approximately 42 Casual Male XL and 3 Rochester Clothing stores.
-
Capital expenditures, net of tenant allowances of $6.0-$7.0 million,
of approximately $30.0-$32.0 million (a decrease from our original
guidance of $33.0 to $35.0 million).
-
Borrowings at the end of fiscal 2015 in the range of $72.0 to $76.0
million consisting of $45.3 to $49.3 million under the credit
facility, a term loan of approximately $13.8 million, and equipment
financing notes of approximately $12.9 million. Free cash flow in the
range of $(18.5) to $(22.5) million.
Conference Call
The Company will hold a conference call to review its financial results
today, Friday, May 29, 2015 at 9:00 a.m. ET. To listen to the live
webcast, visit the "Investor
Relations" section of the Company's website. The live call also can
be accessed by dialing: (888) 466-4462. Please reference conference ID:
9969221. An archived version of the webcast may be accessed by visiting
the "Events"
section of the Company's website for up to one year.
During the conference call, the Company may discuss and answer questions
concerning business and financial developments and trends. The Company’s
responses to questions, as well as other matters discussed during the
conference call, may contain or constitute information that has not been
disclosed previously.
Non-GAAP Measures
In addition to financial measures prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”), this press release
refers to free cash flow, EBITDA from continuing operations and adjusted
net loss per diluted share. The presentation of these non-GAAP measures
is not in accordance with GAAP, and should not be considered superior to
or as a substitute for net income (loss), earnings (loss) per diluted
share, income (loss) from continuing operations or cash flows from
operating activities or any other measure of performance derived in
accordance with GAAP. In addition, all companies do not calculate
non-GAAP financial measures in the same manner and, accordingly, the
non-GAAP measures presented in this release may not be comparable to
similar measures used by other companies. The Company believes the
inclusion of these non-GAAP measures helps investors gain a better
understanding of the Company’s performance, especially when comparing
such results to previous periods, and that they are useful as an
additional means for investors to evaluate the Company's operating
results, when reviewed in conjunction with the Company's GAAP financial
statements.
The Company calculates free cash flow as cash flow from operating
activities less capital expenditures and less discretionary store asset
acquisitions, if applicable. EBITDA is calculated as earnings before
interest, taxes, depreciation and amortization. EBITDA from continuing
operations is calculated as EBITDA before discontinued operations.
Adjusted net loss per diluted share has been adjusted for a normal tax
rate, assuming 40%. Reconciliations of these non-GAAP measures to their
comparable GAAP measures are provided in the tables below.
About Destination XL Group, Inc.
Destination XL Group, Inc. is the largest omni-channel specialty
retailer of big & tall men's apparel with store locations throughout the
United States and London, England. The retailer operates under five
brands: Destination XL®, Casual Male XL, Rochester Clothing,
ShoesXL and LivingXL. The Company also operates e-commerce sites at www.destinationxl.com
and www.bigandtall.com.
With more than 2,000 private label and name brand styles to choose from,
big and tall customers are provided with a unique blend of wardrobe
solutions not available at traditional retailers. The Company is
headquartered in Canton, Massachusetts. For more information, please
visit the Company’s investor relations website: http://investor.destinationxl.com.
Forward-Looking Statements
Certain statements and information contained in this press release
constitute forward-looking statements under the federal securities laws,
including statements regarding the Company’s expectations with respect
to its projected sales and EBITDA for fiscal 2016 and cash flows,
operating and gross profit margins, store counts, pace of store
openings, costs, capital expenditures, borrowings, sales, EBITDA,
profitability and earnings expectations for fiscal 2015. The discussion
of forward-looking information requires management of the Company to
make certain estimates and assumptions regarding the Company's strategic
direction and the effect of such plans on the Company's financial
results. The Company's actual results and the implementation of its
plans and operations may differ materially from forward-looking
statements made by the Company. The Company encourages readers of
forward-looking information concerning the Company to refer to its
filings with the Securities and Exchange Commission, including without
limitation, its Annual Report on Form 10-K filed on March 25, 2015, that
set forth certain risks and uncertainties that may have an impact on
future results and direction of the Company, including risks relating to
the Company’s execution of its DXL strategy and ability to grow its
market share, its ability to predict customer tastes and fashion trends,
its ability to forecast sales growth trends and its ability to
compete successfully in the United States men’s big and tall apparel
market.
Forward-looking statements contained in this press release speak only
as of the date of this release. Subsequent events or circumstances
occurring after such date may render these statements incomplete or out
of date. The Company undertakes no obligation and expressly disclaims
any duty to update such statements.
DESTINATION XL GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In
thousands, except per share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
May 2, 2015
|
|
|
May 3, 2014
|
Sales
|
|
|
$
|
104,405
|
|
|
|
$
|
96,659
|
|
Cost of goods sold including occupancy
|
|
|
|
56,166
|
|
|
|
|
52,721
|
|
Gross profit
|
|
|
|
48,239
|
|
|
|
|
43,938
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
41,469
|
|
|
|
|
41,447
|
|
Depreciation and amortization
|
|
|
|
6,522
|
|
|
|
|
5,430
|
|
Total expenses
|
|
|
|
47,991
|
|
|
|
|
46,877
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
248
|
|
|
|
|
(2,939
|
)
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
(761
|
)
|
|
|
|
(411
|
)
|
|
|
|
|
|
|
|
Loss from continuing operations before provision for income taxes
|
|
|
|
(513
|
)
|
|
|
|
(3,350
|
)
|
Provision for income taxes
|
|
|
|
61
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
|
(574
|
)
|
|
|
|
(3,397
|
)
|
Loss from discontinued operations
|
|
|
|
-
|
|
|
|
|
(139
|
)
|
Net loss
|
|
|
$
|
(574
|
)
|
|
|
$
|
(3,536
|
)
|
|
|
|
|
|
|
|
Net loss per share -basic and diluted:
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
(0.07
|
)
|
Loss from discontinued operations
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
Net loss per share -basic and diluted:
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
|
49,019
|
|
|
|
|
48,656
|
|
Diluted
|
|
|
|
49,019
|
|
|
|
|
48,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DESTINATION XL GROUP, INC. CONSOLIDATED BALANCE SHEETS May
2, 2015, January 31, 2015 and May 3, 2014 (In thousands) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2, 2015
|
|
|
January 31, 2015
|
|
|
May 3, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
6,553
|
|
|
$
|
4,586
|
|
|
$
|
5,640
|
Inventories
|
|
|
|
|
123,772
|
|
|
|
115,220
|
|
|
|
114,154
|
Other current assets
|
|
|
|
|
16,174
|
|
|
|
12,532
|
|
|
|
16,822
|
Property and equipment, net
|
|
|
|
|
123,888
|
|
|
|
120,328
|
|
|
|
107,106
|
Intangible assets
|
|
|
|
|
3,139
|
|
|
|
3,308
|
|
|
|
4,082
|
Other assets
|
|
|
|
|
3,848
|
|
|
|
3,907
|
|
|
|
2,852
|
Total assets
|
|
|
|
$
|
277,374
|
|
|
$
|
259,881
|
|
|
$
|
250,656
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses and other liabilities
|
|
|
|
$
|
96,939
|
|
|
$
|
99,049
|
|
|
$
|
79,768
|
Long-term debt
|
|
|
|
|
31,675
|
|
|
|
33,506
|
|
|
|
22,437
|
Borrowings under credit facility
|
|
|
|
|
40,143
|
|
|
|
18,817
|
|
|
|
28,769
|
Deferred gain on sale-leaseback
|
|
|
|
|
15,753
|
|
|
|
16,119
|
|
|
|
17,218
|
Stockholders' equity
|
|
|
|
|
92,864
|
|
|
|
92,390
|
|
|
|
102,464
|
Total liabilities and stockholders' equity
|
|
|
|
$
|
277,374
|
|
|
$
|
259,881
|
|
|
$
|
250,656
|
|
|
|
|
|
|
|
|
|
|
|
CERTAIN COLUMNS IN THE FOLLOWING TABLES MAY NOT FOOT DUE TO ROUNDING.
|
|
|
|
GAAP TO NON-GAAP RECONCILIATION OF EBITDA FROM CONTINUING
OPERATIONS
|
|
|
|
For the first quarter
|
|
|
|
Fiscal 2015
|
|
|
Fiscal 2014
|
(in millions)
|
|
|
|
|
|
|
Net loss, on a GAAP basis
|
|
|
$
|
(0.6
|
)
|
|
|
$
|
(3.5
|
)
|
Add back:
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
0.1
|
|
|
|
|
0.0
|
|
Interest expense
|
|
|
|
0.8
|
|
|
|
|
0.4
|
|
Depreciation and amortization
|
|
|
|
6.5
|
|
|
|
|
5.4
|
|
EBITDA
|
|
|
|
6.8
|
|
|
|
|
2.4
|
|
Loss from discontinued operations
|
|
|
|
-
|
|
|
|
|
(0.1
|
)
|
EBITDA from continuing operations
|
|
|
$
|
6.8
|
|
|
|
$
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP TO NON-GAAP RECONCILIATION OF NET LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
May 2, 2015
|
|
|
Per diluted
|
|
|
May 3, 2014
|
|
|
Per diluted
|
|
|
|
|
|
|
share
|
|
|
|
|
|
share
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss, GAAP basis
|
|
|
$
|
(574
|
)
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
(3,536
|
)
|
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add back: Actual income tax provision
|
|
|
|
61
|
|
|
|
|
|
|
|
47
|
|
|
|
|
Income tax benefit, assuming normal tax rate of 40%
|
|
|
|
205
|
|
|
|
|
|
|
|
1,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net loss, non-GAAP basis
|
|
|
$
|
(308
|
)
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
(2,093
|
)
|
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding on a diluted
basis
|
|
|
|
|
|
|
49,019
|
|
|
|
|
|
|
|
48,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP TO NON-GAAP FREE CASH FLOW RECONCILIATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
Projected
|
(in millions)
|
|
|
|
May 2, 2015
|
|
|
May 3, 2014
|
|
|
Fiscal 2015
|
Cash flow from operating activities (GAAP)
|
|
|
|
$
|
(8.0
|
)
|
|
|
$
|
(13.9
|
)
|
|
|
$
|
16.5-$17.5
|
Less: Capital expenditures
|
|
|
|
|
(9.6
|
)
|
|
|
|
(11.1
|
)
|
|
|
$
|
(36.0)-$(39.0)
|
Less: Store acquisitions, if applicable
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
Free Cash Flow (non-GAAP)
|
|
|
|
$
|
(17.5
|
)
|
|
|
$
|
(25.0
|
)
|
|
|
$
|
(18.5) - $(22.5)
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20150529005326/en/
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