After enduring a year of survival in 2020 and one of recovery in 2021, last year was one of “sustained progress.”
That’s the way Harvey Kanter, chief executive officer of Destination XL Group Inc., summed up the performance of the men’s big and tall retailer in the fourth quarter and fiscal year 2022.
In the fourth quarter, the Canton, Massachusetts-based retailer reported net income slipped to $8.3 million, or 13 cents a share, from $9.9 million, or 14 cents a share, in the fourth quarter of fiscal 2021. Comparable-store sales increased 10.8 percent for the quarter while total sales were up 7.8 percent to $143.9 million from $133.5 million the prior year.
Physical store sales rose 13.2 percent in the period while the direct business was up 6.2 percent, Kanter said. Momentum built in the quarter with November comps up 7 percent, December up 10.8 percent and January up 23.7 percent.
Promotions were controlled with only private discounts being offered to customers — a strategy that “paid off as we were able to maintain a high gross margin in Q4,” he said during a conference call with analysts.
Kanter said the company is benefiting from its laser focus on the big or tall men’s consumer only — a category it believes “has the potential to propel our business to new heights.”
“While 2022 was another historic year for DXL, our work is not done,” Kanter said. “I believe it is worth reiterating that the U.S. men’s big and tall market is still highly fragmented. There are many retailers who dabble in big and tall, offering piecemeal products here and there to a traditionally underserved customer. We are changing that narrative and, at DXL, big and tall isn’t a section. It’s the entire store and we believe that the total addressable men’s big and tall market is more than $23 billion and, while we currently hold a meaningful slice of the better and best market share, we have a far greater opportunity.”
To enhance its position, DXL will continue to move away from discounting and will focus instead on “fit, assortment and experience.”
This is possible because more than 80 percent of the assortment — in both national and private brands which represent 45 percent and 55 percent of the mix respectively — is exclusive to DXL, Kanter said. Specifically, he said tailored clothing, which accounted for 16 percent of sales in the fourth quarter compared to 13 percent last year, benefited from a greater return to offices as well as spring events. And in sportswear, Polo Ralph Lauren, Nautica and Reebok were among the top performers.
Last year the stores added four new national brands — Vineyard Vines, Nautica, Life is Good and Original Penguin Golf — to the assortment.
Last week DXL introduced a new marketing campaign, Wear What You Want, intended to highlight the company’s wide assortment as well as the style and fit options targeted exclusively to the big and tall customer.
The store experience is also a priority, Kanter said. “Whether in-store or online, we create spaces that are built solely with the big and tall man in mind.”
In fiscal 2023, the company will open three new DXL stores, remodel five, close five and convert 10 of the remaining Casual Male units to the DXL nameplate. Over the next three to five years, the company is expecting to open up to 15 net new DXL stores, convert more than 30 Casual Males and remodel more than 50 units.
For the year, net income rose to $89.1 million, or $1.33 a share, from $56.7 million or 83 cents a share in fiscal 2021 and included a non-recurring tax benefit of $31.6 million. Sales for the year dropped to $545.8 million from $505 million the prior year and comparable-store sales rose 10.9 percent.
Kanter said that in the first six weeks of the current fiscal quarter, DXL has seen “a greater volatility and an overall trend of slowing.” Although comps are running up in the low single-digits, Kanter said the company remains cautious about the future as the consumer experiences “macro headwinds.”
Looking ahead to fiscal 2023, the company maintained its guidance of net income of $41 million to $47 million and sales for $550 million to $570 million and comps of flat to 5 percent ahead.