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Men'sWeek issue 03/20/2014

Destination XL Group is preparing to open its first superstore in Manhattan.

This story first appeared in the March 20, 2014 issue of WWD. Subscribe Today.

The 12,000-square-foot DXL unit will be located at 699 Sixth Avenue, between 22nd and 23rd Streets, in the heart of the Flatiron retail corridor. It is expected to open in June and will include an upscale offering of more than 40 brands including True Religion, Michael Kors, Lacoste and Brooks Brothers, as well as its own private label. The store will feature a new retail design with wider aisles and larger fitting rooms as well as sofas, chairs and flat-screen televisions.

David Levin, president and chief executive officer of DXL, said the Massachusetts-based big and tall men’s retailer has been searching for a spot in Manhattan for more than a year. “It’s difficult with our business to afford the kinds of rents [they’re asking in Manhattan], so we’re always looking for creative solutions.” When the company heard that Staples was seeking to downsize, it jumped at the chance to take the lower level. “From our customer’s point of view, there will be a street-level entrance,” he explained. “They’ll walk in the door and go downstairs. Our customer doesn’t care if he has to take an escalator.”

DXL used a similar strategy in Chicago, where it recently opened a store on the second floor at Michigan Avenue and East Chicago Avenue, next to a Ralph Lauren store.

Levin said the Manhattan unit will offer a “premium assortment,” and is not expected to cannibalize the company’s Rochester Big & Tall store in Midtown. Over the past several years, DXL, formerly known as Casual Male Retail Group, has been closing its Casual Male and Rochester nameplates to concentrate on the DXL superstore concept. “Out of the 27 Rochesters we had, we’ll keep three or four: New York, London and Beverly Hills,” Levin said. “Manhattan can support another high-end concept.”

The Casual Male store on 23rd Street and Third Avenue, however, will be shuttered.

Levin said the average transaction within a Rochester store is $400, while those of DXL are $150. He said the Rochester store on Sixth Avenue and 52nd Street “caters to tourists. We do a strong percentage of our sales with people from outside New York. But we think the new store will attract more residents. It’ll be a different clientele.”

Last week, the retailer said it was slowing its planned conversion to the DXL superstore format and closure of its Casual Male stores, a process now expected to be completed in 2017, two years later than planned.

“The long-term goal was to have 215 to 230 DXL stores open and to have closed all of our Casual Male stores, excluding outlets, by 2016,” Levin told analysts last week. “We now believe that we should be opening approximately 40 DXLs and close approximately the same number of Casual Male stores in 2014 and extend the rollout through the end of 2017.”

Currently, the retailer operates 102 DXL stores around the country, and those stores represented 25 percent of total business in fiscal 2013, up from 11 percent the year before. There are 250 remaining Casual Male XL units. “By accelerating the closing of our Casual Male stores, we were incurring unnecessary expenses related to early lease exit penalties,” he said.

The company also said it would be modifying its footprint for DXL stores. The typical size now is 8,400, but a new, smaller footprint of 5,000 to 6,000 will be used going forward. “We’re opening seven this year, and if they’re successful, we will be able to open even more going forward,” he said. These smaller stores will be utilized in secondary markets.

Levin said that while the planned Manhattan store is quite large, “that’s the size of the box, and it will get the full complement of brands.” He said that there’s not much competition for big and tall men’s wear in Manhattan, especially in sportswear, so he’s expecting the new store to perform well. He declined to provide a volume projection, but said, “We expect it to be in our top 10 percent.”

In the 13 weeks ended Feb. 1, DXL’s net loss was $55.1 million, or $1.14 a share, versus net income of $4.2 million, or 9 cents, in the 14-week 2012 period. Stripping out $1.10 in charges, mostly for the establishment of a full valuation allowance, the adjusted loss was 4 cents a share, 1 cent below the bottom end of the range of a loss of between 1 and 3 cents implied in its Feb. 2 profit warning.

Revenues were down 5.5 percent to $108.5 million from $114.9 million during the longer year-ago quarter. However, comparable sales rose 4.2 percent, with same-store sales up 4.9 percent, direct sales ahead 1.2 percent and sales of the 48 DXL stores open more than a year up 13.6 percent on a comp basis.

For the full year, the company swung to a net loss of $59.8 million, or $1.23 a diluted share, from a net profit of $6.1 million, or 13 cents, in 2012. Sales declined 2.9 percent to $388 million.

The company expects an adjusted loss for the new year of between 12 and 16 cents a diluted share, translating to a loss of between 21 and 27 cents on the basis of generally accepted accounting principles. Comps are expected to increase about 5.6 percent with net sales growing between 4.4 and 5.7 percent to between $405 million and $410 million.