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Casual Male to Add New DXL Units

Retailer is moving into full rollout mode with its Destination XL store concept.

Casual Male’s Destination XL concept.

Casual Male is moving into full rollout mode with its Destination XL store concept.

In reporting nearly a 50 percent jump in profits in the fourth quarter, the Canton, Mass.-based men’s big and tall retailer said it will add 10 to 14 DXL stores this year. The superstore concept, which brings together all the company’s retail businesses under one roof, kicked off with a four-unit test last year.

“We now have two quarters of results on the four stores and are pleased that all four have met their expectations,” said David Levin, chief executive officer. “We collapsed two to three stores in each market to open the new concept, and already the stores are generating sales of 20 percent more than the total of the closed stores.” He said customers at a DXL store typically spend 33 percent more than those at a Casual Male unit.

“We expect the stores to mature in three years and expect EBITDA [earnings before interest, taxes, depreciation and amortization] margins to approximate 30 percent and a return on investment payback in less than two years,” he added.

For 2012, the plan is to open 15 to 20 additional DXL units and by 2015, the company expects to have at least 75 to 100 units in operation, Levin said.

Dennis Hernreich, executive vice president, chief operating officer and chief financial officer, said to accommodate the DXL stores, the company will close between 15 and 20 other units this year. In 2010, he said, DXL accounted for just over 1 percent of the company’s total sales, a figure that should jump to 5 percent this year.

For the fourth quarter ended Jan. 29, the retailer generated net income of $5.3 million, or 11 cents a diluted share, 1 cent shy of the analysts’ consensus estimate of 12 cents. Profits were 49.9 percent above the $3.6 million, or 8 cents, reported in the final quarter of 2009.

Sales rose 0.7 percent, to $111.5 million from $110.7 million a year ago, and were up 2.9 percent on a same-store basis. The company cited markdowns associated with store closures for its decrease in gross margin to 45.4 percent of sales from 46.4 percent in the year-ago period.

In guidance for 2011, the company projected a same-store sales increase of between 4 and 4.5 percent with an expansion of gross margin to between 46.6 and 47.1 percent from the 2010 level of 45.8 percent. Earnings are projected to land between 40 cents and 45 cents a diluted share, above analysts’ preliminary estimates of 39 cents, while sales are seen growing to between $405 million and $410 million, covering the analysts’ projection of $406.5 million.

The bullish guidance helped lift shares of Casual Male 8 cents, or 1.8 percent, to $4.43 in Nasdaq trading Thursday.

For the full year, net income more than doubled to $15.4 million, or 32 cents a diluted share, from $6.1 million, or 14 cents. Sales fell 0.4 percent, to $393.6 million from $395.2 million, but were up 1.5 percent on a comparable-store basis.