On November 17, 2023, Destination XL Group Inc (DXLG, Financial) released its 8-K filing, detailing its financial results for the third quarter of fiscal 2023. The company, a leading retailer of Big + Tall men's apparel, reported a decrease in total sales to $119.2 million, down from $129.7 million in the same quarter of the previous year. Comparable sales also saw a decline of 6.7%. Despite the downturn in sales, the company's cash flow from operations for the nine months ended October 28, 2023, increased slightly to $33.1 million from $30.2 million in the prior year, with free cash flow marginally rising from $22.3 million to $22.7 million.
Financial Performance Overview
DXLG's net income for the third quarter was reported at $0.06 per diluted share, a significant decrease from $0.16 per diluted share in the third quarter of fiscal 2022. Adjusted EBITDA, a non-GAAP measure, was $8.6 million or 7.3% of sales, compared to $16.4 million or 12.7% of sales in the prior year's quarter. The company's gross margin rate, inclusive of occupancy costs, was 47.5%, a decrease from 50.0% in the third quarter of fiscal 2022. The company attributes the decrease in merchandise margin to continued cost pressures and increased shipping costs related to direct-to-consumer shipments.
DXLG's SG&A expenses as a percentage of sales were 40.2%, up from 37.3% in the third quarter of fiscal 2022. The company experienced a decrease in store payroll and performance-based incentive accruals, partially offset by an increase in payroll-related costs from new positions added to support long-range growth initiatives.
Strategic Initiatives and Future Outlook
President and CEO Harvey Kanter commented on the quarter's results and the company's future strategy.
Despite this challenging quarter, we remain disciplined and committed to the strategy and initiatives of which we have spoken previously... We remain incredibly enthusiastic about our prospects and the opportunity to serve a big & tall consumer who needs and wants something better than any other retailer has to offer,"said Kanter.
DXLG's future growth strategy focuses on capturing a greater share of the estimated $23.0 billion total addressable market in the domestic men's big & tall apparel category. The company plans to open new stores, deploy a new web platform, launch a brand awareness campaign, and pursue exclusive merchandise collaborations and alliances.
For the fiscal year 2023, DXLG has revised its full-year guidance, expecting sales to be approximately $520.0 million to $530.0 million, net income to be approximately $0.39 to $0.46 per diluted share, and adjusted EBITDA margin to be approximately 10.0% to 11.0%. The company also expects adjusted net income to be approximately $0.45 to $0.52 per diluted share, adjusting for the expected loss on the termination of the retirement plans.
DXLG's balance sheet remains strong, with cash and investments totaling $60.4 million as of October 28, 2023, and no outstanding debt. Inventory management has been proactive, with clearance inventory at 9.7% of total inventory, below the historical benchmark of approximately 10.0%.
The company will hold a conference call to review its financial results and discuss business and financial developments and trends. This call may include discussions that contain or constitute information not previously disclosed.
For detailed financial tables and a full reconciliation of non-GAAP financial measures to their comparable GAAP measures, please refer to the provided 8-K filing.
Investors and those interested in DXLG's performance can find more information on the company's investor relations website: https://investor.dxl.com.
Explore the complete 8-K earnings release (here) from Destination XL Group Inc for further details.
