WWD.com/business-news/financial/destination-xl-swings-to-loss-on-higher-sales-7700837/
government-trade
government-trade

Destination XL Swings to Loss on Higher Sales

Firm promotes Peter Stratton to chief financial officer.

The ongoing conversion of Casual Male stores to Destination XL superstores continues to lead to improved results for Destination XL Group Inc.

On Thursday, the Canton, Mass.-based big and tall men’s specialty retailer reported a first-quarter loss while generating increases in net and same-store sales.

In a conference call with analysts, David Levin, president and chief executive officer, said: “In the first quarter, our DXL stores continued to deliver strong results with a 12.8 percent comparable sales increase for the 52 stores that have been open at least 13 months. I’m proud to report that we now have four consecutive quarters of double-digit comparable sales in our DXL stores under our belt, since we started our national advertising campaign.”

In the quarter, the retailer opened seven DXL stores and closed 10 Casual Male units, bringing the number of superstores to 109.

Levin said the company remains on track to open 40 DXL stores and close about the same number of Casual Male stores in 2014, with the store openings weighted toward the first three quarters when 35 of the units will open. “The overall DXL square footage at year-end fiscal 2014 is expected to be approximately 1.2 million, or a 34 percent increase from the end of fiscal 2013.”

Levin said by the end of fiscal 2017, the company expects to have 215 to 230 DXL stores in operation.

In the first quarter, he also pointed to improved sales penetration among men with waist sizes between 40 and 46. “We grew these end-of-the-rack consumers by 8.3 percent,” Levin said. “We expect this growth to increase as we communicate more specifically the sizes that we carry.”

That will be achieved through the retailer’s new national advertising campaign, which Levin said has already increased brand awareness to 30 percent from 13 percent last spring.

Levin said all these positive results “demonstrate that the transformation to the DXL concept is the right strategy for our company. During the next few years, we expect to increase our top line, improve profitability, generate cash flow, minimize early lease terminations and grow sales per square foot and four-wall contributions.”

In the three months ended May 3, the company’s net loss was $3.5 million, or 7 cents a diluted share, compared with net income of $1 million or 2 cents, in the comparable 2013 period. On an adjusted basis, the loss in the most recent quarter was 4 cents, deeper than the 2-cent deficit expected, on average, by analysts.

Revenues rose 3 percent to $96.8 million from $94 million in the year-ago period. Comparable sales were up 3.4 percent, with a 4.7 percent increase in same-store sales offset by a 1.6 percent decline in direct channel revenues. The 4.7 percent gain in same-store sales included a 12.8 percent comp increase at Destination XL stores.

“Although the severe winter weather impacted business in February and March, sales rebounded in April and more than offset weakness early in the quarter,” Levin said. “This positive momentum has continued in May.”

He noted that the DXL format stores have had double-digit comp growth for four consecutive quarters.

The company maintained its earnings guidance for the year, during which it expects an adjusted loss of between 12 and 16 cents a share, while lifting revenue guidance to a range of $413 million to $418 million, versus its previous projection of sales of between $405 million and $410 million. However, gross margin, earlier expected to be about 46.2 percent of sales, is now expected to come in lower at between 45.5 and 46.1 percent.

The retailer promoted Peter Stratton Jr. to senior vice president and chief financial officer.

The cfo position now occupied by Stratton had been vacant since the February departure of Dennis Hernreich as executive vice president, chief operating officer and cfo. John Kyees, a DXL director and the former cfo of Urban Outfitters Inc., had filled the job on an interim basis. Stratton had been senior vice president, corporate controller and chief accounting officer since September 2009. He reports to Levin.