Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Destination XL Group Inc (DXLG, Financial) has successfully managed its inventory, reducing it by over 10% compared to last year and by 23.2% compared to 2019.
- The company’s brand advertising campaign showed positive outcomes in test markets, with online sessions up 30% and new user sessions up 60%.
- DXLG's collaboration with Nordstrom has shown encouraging initial sales, with plans to expand the product offering.
- The company has opened new whitespace stores and relocated its Manhattan store to a more favorable location, which is expected to drive better performance.
- DXLG has made significant improvements in its website platform, leading to better latency times and overall transaction speed.
Negative Points
- Comparable sales declined by 10.9% for the second quarter, with both store and direct sales experiencing significant drops.
- Traffic issues continue to plague the stores, with a notable lack of foot traffic impacting overall sales.
- The company had to increase promotional activities due to heightened competition, leading to more markdowns.
- SG&A expenses increased significantly, rising to 43% of sales compared to 33.9% last year, primarily due to higher marketing costs.
- DXLG has revised its sales outlook for the year to a range of $470 million to $490 million, representing a negative 10% to negative 6% comp.
Q & A Highlights
Q: Can you provide an update on the Nordstrom collaboration and the rollout of UNTUCKit in your stores?
A: Harvey Kanter, CEO: The Nordstrom collaboration is progressing well. We recently launched the first marketing element of the partnership, and initial sales are encouraging. For UNTUCKit, we are extending to 100 stores and are in the final stages of bringing on at least one or two more versions for Spring 2025. Other brands are also showing interest in extending their product lines to the big and tall category through us.
Q: What are you learning from your customers regarding their shopping behavior and preferences?
A: Harvey Kanter, CEO: The overall men's business appears to be soft, and our customers are shopping less frequently due to economic pressures. We are seeing a shift towards lower-priced brands. To address this, we are augmenting our assortment with more entry-level brands while maintaining our proprietary fit and unique shopping experience.
Q: How do you plan to adjust your marketing and promotional strategies for the rest of the year?
A: Harvey Kanter, CEO: We will increase our marketing spend, focusing on SEM, streaming media, and other advertising channels. We will also enhance our loyalty program to offer greater value. While we aim to stay competitive with national brands, we will not always match dollar-for-dollar promotions but will navigate based on what drives customer traffic and conversions.
Q: Are you seeing any improvement in sales trends as you move into August?
A: Harvey Kanter, CEO: Yes, we are seeing a slight improvement, particularly in store traffic. While we are still in a negative comp, the decline has lessened, and we expect further improvement in the fall as we lap last year's negative comps.
Q: What are your plans for new store openings and capital investments?
A: Harvey Kanter, CEO: We are slowing down on new store openings and capital investments to focus on short-term tactics that can enhance our results. We still plan to open 10 stores next year instead of 15 and believe we can open approximately 50 net new stores over the next five years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
