Things are looking up for Casual Male Retail Group Inc.

 

The Canton, Mass.-based big and tall men’s wear retailer reported Thursday that net income for the first quarter ended May 1 spiked to $4.2 million, or 9 cents a diluted share, from $336,000, or 1 cent, despite a 2.6 percent sales decline to $95 million from $97.6 million. The earnings per share figure was 3 cents above analysts’ consensus estimates of 6 cents.

 

Comparable-store sales for the period declined 0.7 percent overall with the higher-priced Rochester chain increasing 4.6 percent while the Casual Male XL business decreased 2.4 percent. In the previous first quarter, comps had declined 8.2 percent. Gross margin gained 330 basis points to 45.9 percent of sales.

 

The improved business trend led the retailer to raise its earnings guidance for 2010 to a range of between 26 cents and 29 cents a share, up from a prior range of 23 cents to 26 cents. Sales projections were unchanged at $385 million to $395 million based on a 1 percent gain to a 1 percent decline in comps. The company expects earnings improvements in the third and fourth quarters of fiscal 2010 but no improvement in the current second quarter.

 

Investors warmed to the figures and sent shares up 7 cents, or 2 percent, to $3.61 despite the poor performance of retail stocks on Thursday.

 

The company is also moving ahead with plans to open four Destination XL superstores, a new concept that brings together all of the company’s divisions: Casual Male, Rochester B&T Factory Direct, Shoes XL and Living XL. The first store is scheduled to open in July in Schaumburg, Ill., followed by Memphis later that month and Las Vegas and Houston in August. As these stores open, two to three Casual Male XL stores will be shuttered in those markets, the company said, but the total square footage will remain the same.
David Levin, president and chief executive officer, said on a conference call that if the stores are successful, there will be a rollout of the concept “in the back half of 2011,” which would be accelerated in 2012 and continue over the next three to four years.

 

He said this concept offers the company “a tremendous opportunity to change the strategic direction of the company. Long-term, we’re still focused on improving the existing operating margins. We’ve lost about $70 million in top-line sales over the last two years and if consumer confidence continues to improve over time, there is no reason we can’t recapture a good portion of those lost sales. Getting back half of those sales will bring our operating margins up to 8 percent.”

 

In the quarter, Levin said he saw recent improvement in traffic trends that brought “a strong customer response to fresh new merchandise around key selling weeks. While customers continue to be mindful of their discretionary spending on apparel, we are seeing an increased willingness to spend when the weather is favorable.”

 

Levin said sales were strongest in March, but slowed down at the end of April. Looking ahead to summer, he said inventories are “well balanced and sell-throughs are meeting our projections,” particularly in shorts, denim bottoms, golfwear and other activewear and screen T-shirts.

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