Destination XL Group Inc. continued to make progress in its larger Destination XL stores even as company results fell slightly short of Wall Street’s expectations.
In the fourth quarter ended Jan. 31, the Canton, Mass.-based big and tall retailer reported net income of $1.6 million, or 3 cents a diluted share, versus a net loss of $55.1 million, or $1.14, in the 2013 period. Excluding special items, such as a $51.3 million pretax charge to establish a full valuation allowance in 2013, adjusted EPS was 2 cents a share, 1 cent below the 3-cent profit consensus estimate of analysts, versus a loss of 3 cents in the prior-year quarter.
Gross margin expanded to 47.9 percent of sales from 44.8 percent.
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Revenues in the quarter totaled $119.6 million, below the consensus estimate of $120.9 million but 11 percent above the $107.7 million logged in the 2013 period. Comparable sales were up 8.9 percent, following a 4.2 percent increase in the 2013 quarter, with the expanded Destination XL stores to which the company is transitioning generated a 16.4 percent comp increase.
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“Our Destination XL customer base continues to grow both overall and on a per-store basis,” said David Levin, president and chief executive officer. “In addition to the higher conversion rate, we are seeing an increase in our end-of-rack customers, who now make up 45 percent of our bottoms business.
“All of these factors have driven our sales per-square-foot to $165 at the end of Q4, compared with $150 a year ago,” he said.
End-of-rack customers are those in the company’s lower size ranges, a coveted group among big and tall merchants as they can often buy their merchandise in stores not specializing in big and tall.
The company is phasing out its Casual Male stores, but Levin noted that the firm’s decision to keep them open longer in locales that have Destination XL stores is working in its favor. “In these markets, we are seeing a higher rate of Casual Male customers transitioning to the Destination XL brand, and our 2014 conversion rate is up 19 percent,” the ceo said.
The company also benefited from a decision to delay the launch of its fall marketing campaign by three weeks, which helped holiday sales and helped sales in January.
The company ended the year with 138 Destination XL stores and 157 of the smaller Casual Male stores. By the end of the current year, the company expects to have 178 Destination XL units, with approximately 1.5 million square feet of space, and 124 Casual Male stores with 438,000 square feet. Those figures don’t include outlet stores under the two banners.
This year, the firm expects sales of $438 million to $443 million, under the $446.6 million expected, on average, by analysts. For the full year, the adjusted net loss is seen at between 12 and 16 cents a diluted share, versus consensus estimates of a 1-cent profit.
Shares, which fell following the release of the results Wednesday morning, closed up 2.1 percent to $4.93.
For the full year, the net loss was trimmed to $12.3 million, or 25 cents a diluted share, from $$59.8 million, or $1.23. Revenues were up 7.1 percent, to $414 million from $386.5 million, while comps rose 6.4 percent, including a 13.7 percent increase at the larger DXL stores.