A Destination XL store.

Destination XL saw sales slip during the first quarter and posted a net loss, but it’s not taking kindly to being listed among retailers with the highest risk of default.

The big and tall men’s retailer counted a net loss of $6.1 million for the quarter from a net income of $200,000 a year ago on net sales of $107.7 million, compared with $107.9 million at the start of 2016. Comparable store sales fell by 2.1 percent while that start of last year saw a 2 percent increase.

Earnings before interest, tax, depreciation and amortization came in at $2.5 million, down from $8.4 million.

Chief executive officer David Levin said sales in February and March were particularly challenging, but since the launch of a new ad campaign in early April, sales trends have been improving. April comp sales grew by 6.4 percent and the positive momentum is expected to carry through May.

“Our top priorities for fiscal 2017 are customer acquisition and retention, which we are fueling by reinvesting in marketing and in our digital capabilities,” Levin said. “These investments, which will have an adverse impact on EBITDA and net income in the near term, have been factored into our guidance and, more importantly, are building the foundation for sustained future sales growth with attractive profit margins.”

Levin then shifted focus to rebutting Destination XL’s position on a late April list gathered by S&P Global Markets of the retailers most “at risk” for a credit default in the next year.

While the ratings agency only gave the company an 8 percent chance of default, Levin said he was “pretty upset that our name got on there” and argued the metrics used in the analysis “were not realistic.”

Chief financial officer Peter Stratton added that while there are retailers “in serious trouble” on the S&P list, Destination XL is not in such a position.

“We’ve been in a very capital intensive transition for the last five to seven years that’s added a lot of depreciation expense,” Stratton said. “Our operating margins and net income haven’t been exactly stellar, but that’s not the best indicator of the ability of a company to repay debt. We’re on sound footing.”

The company added that its total debt at the end of the first quarter was $78.8 million, including a $62.1 million revolving credit facility with borrowing availability of $45.7 million, and expects to generate $15 to $20 million in free cash flow.

Levin added that the company is also looking to slow down its previous rate of 20 to 30 store openings a year to maybe five beginning in 2018, and said money saved there will be used to pay down debt.

“Were taking a pause and until we see a stabilization of the industry,” Levin said.

This year Destination XL plans to open 19 stores and close 16 Casual Male stores and three outlet stores.

Looking forward, the company expects full year sales to be in the range of $470 to $480 million and comp store sales to grow by 1 percent to 4 percent. A net loss of between $5.7 million and $11.7 million is also expected.

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