By and  on March 15, 2012

Casual Male Retail Group Inc. is jumping further into the red-hot tailored clothing business.

During its fourth-quarter earnings call Thursday morning, David Levin, chief executive officer, said the company is moving to increase tailored clothing’s share of its business to 30 percent from 20 percent to capitalize on the popularity of the category.

“A key initiative for 2012 is the increase in penetration in our clothing categories,” he told analysts on a Thursday morning conference call after the company released better-than-expected fourth-quarter earnings. “Historically, it’s been about 20 percent of our sales. As we’ve been a casual sportswear-driven company, clothing never really got the real estate, assortments or customer service that it needed. With the DXL [Destination XL] concept, however, we have the space to make these categories something special and we believe we can grow their penetration over time to 30 percent, and this will be accomplished through enhanced selections, associate training in these stores and custom tailored or what we call made-to-measure clothing.”

On the DXL front, this concept, which brings together the best assortments from the company’s Casual Male XL, Rochester Clothing and B&T Factory Direct under one roof, continues to outperform. The company currently operates 16 of these superstores. This year, Levin said, the company will open about 35 stores while closing 70 Casual Male stores. “[This] will give us a national footprint with 51 DXL stores and at least one store located in most major metropolitan cities across the United States.” He stressed, however, that the store closures “are based on the natural expirations of the lease terms.”

By the end of the current year, he added, the DXL stores are expected to generate about 30 percent of overall company sales, a figure that will jump to 50 percent by the end of 2013. By the end of 2015, Casual Male Retail Group expects to have 150 to 175 DXL locations with the eventual goal to expand to 250 stores.

That will include the company’s first store in Kuwait, a unit that will be operated through a franchise agreement with Standard Arabian Business and Enterprise Co.

Within three years, this will leave the company with “only Casual Male Outlets and a few outline Casual Male stores besides a half dozen Rochester stores,” said chief financial officer Dennis Hernreich.

Levin also revealed that the company’s test to operate in-store B&T shops with 15 Bon-Ton stores last year is being halted. Casual Male will continue to sell B&T product on the Bon-Ton Web site.

During the three months ended Jan. 28, the retailer saw net income increase more than sixfold to $33.5 million, or 70 cents a diluted share, from $5.3 million, or 11 cents, in the prior-year quarter. Stripping out a charge for trademark impairment as well as a benefit from the reversal of a valuation allowance, adjusted earnings per share came to 10 cents in the quarter, 2 cents above Wall Street’s expectations.

Revenues were flat at $111.5 million, on par with analysts’ estimates, while comparable-store sales moved up 0.8 percent as comp increases decelerated in the second half of the year. Pressured by markdowns in a highly promotional environment, gross margin pulled back 70 basis points to 44.7 percent of sales.

For the full year, net income, including nonrecurring items, nearly tripled to $42.7 million, or 89 cents a diluted share, from $15.4 million, or 32 cents. Sales rose 1 percent to $397.7 million from $393.6 million as comps advanced 2.1 percent.

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