Big and tall men’s clothing and shoe retailer Destination XL Group saw a small dip in total sales during the second quarter of 2023, down 3.2 percent to $140.0 million from $144.6 million in 2022. Comparable sales decreased 1.4 percent compared to the same period last year.
“Our second quarter comparable sales decrease of 1.4 percent was in line with our expectations,” said Harvey Kanter, president and CEO, Destination XL. “Despite achieving our quarterly forecast, our consumer is battling ongoing adverse economic headwinds, and we are trimming our financial outlook for the remainder of the year.”
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Breaking it down by channel, Destination XL’s comparable sales in its stores were down 1.4 percent while its direct business dipped 1.3 percent. The remainder of the company’s overall comparable sales decrease came from store closures and a decrease in non-comparable sales.
Gross margins also dropped to 50.3 percent from 52.1 percent last year, and the company reported a decrease in merchandise margins of 110-basis points, due to elevated costs related to certain private-label merchandise, which Destination XL has absorbed rather than raising prices.
Kanter said the company now expects its sales to range from $535.0 million to $545.0 million for fiscal 2023, with an adjusted EBITDA margin of 11 to 12 percent. The adjusted EBITDA for the second quarter came in at $22.9 million or 16.4 percent compared to $25.9 million or 17.9 percent for the same period in 2022.
Adjusted net income was $0.23 per diluted share compared to $0.24 in the second quarter of fiscal 2022.
The company reported a cash flow of $26.2 million over the first six months of fiscal 2023 compared to $23.8 million during the same period in 2022. But Destination XL’s free cash flow for the first six months of the fiscal year improved to $21.6 million from $19.8 million in 2022. The retailer said more productive merchandise utilization in the wake of decreased purchases accounted for the bump.
Looking forward, Destination XL said it expects sales to be between $535.0 and $545.0 million for the remainder of fiscal 2023, with net income at $0.45 to $0.53 per diluted share.
CEO’s take: Kanter said that while the past three years have brought Destination XL no shortage of challenges, the company also has made changes to ensure more stability in the future.
“It is important to note that Destination XL is in a fundamentally different position today than it was pre-pandemic,” he said. “We have recapitalized our balance sheet to provide a greater level of financial flexibility, we have invested in our technical capabilities, and we have upgraded our leadership team to drive a heightened level of operational excellence.”
Kanter said the company plans to accelerate its growth strategy over the coming three-to-five years, focusing on three specific initiatives: marketing and brand building, store development, and alliances/collaborations. The company plans to open three new stores in Los Angeles, Cincinnati and New York by the end of this year.
“We have been buying back stock because we believe in our future,” he said. “Let me be clear about this: We believe we are a growth company, and greater growth is yet to come.”
