By and  on November 19, 2010

Improvements in same-store sales and gross margin helped Casual Male Retail Group Inc. turn a third-quarter profit versus a year-ago loss.

In the three months ended Oct. 30, the Canton, Mass.-based operator of big & tall men’s wear stores generated net income of $289,000, or 1 cent a diluted share. The performance matched analysts’ expectations, as compiled by Yahoo Finance, and came against a year-ago net loss of $1.4 million, or 3 cents.

Sales for the quarter ticked up 1.4 percent, to $89.9 million from $88.7 million, and gained 3 percent on a same-store basis. Gross margin rose 300 basis points to 45.7 percent of sales.

“We continue to be pleased with our customers’ response to the DXL stores opened over the past two quarters,” said David Levin, president and chief executive officer. “We are currently planning for improved business trends in 2011, including opening between eight and 12 more DXL stores in locations throughout the U.S.”

Destination XL, which melds the mix from the company’s Casual Male, Rochester and Shoes XL operations under one roof, made its debut this summer. The company said Thursday that, based on the performance so far, it plans to have between 75 and 100 DXL stores in operation by fiscal 2015. A DXL Web site is planned for the first quarter of fiscal 2011.

The company currently operates 445 Casual Male XL stores, four DXL units and 17 Rochester stores. It expects to reduce its store count to about 350 by 2015 but, according to Levin, square footage will remain about the same.

Thomas Filandro, retail analyst with Susquehanna Financial Group, called Casual Male “a formidable operator. And the DXL format is pretty impressive. It has an upscale feel, offers more sku’s [stockkeeping units] and has a lifestyle feel. They’re definitely moving in the right direction.”

The analyst feels Casual Male’s momentum will serve it well as it fights off a new challenge from J.C. Penney Co. Inc., which recently unveiled plans for The Foundry Big & Tall Supply Co., which will launch its Web site in April, followed by 10 stores in May, with plans for 300 units within five years.

Filandro said the men’s big & tall market is so complex, there’s not really room for a second player. “It takes time to build critical client mass. If J.C. Penney were doing this three years ago, they could be a competitor, but DXL is so unique and draws such a wide audience, I don’t think a competitor can come in and take share.”

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