Destination XL Group expects to have all of its 321 stores open by the end of June. That should help the nation’s largest men’s big and tall retailer start to recover from the losses it posted in the first quarter as a result of the coronavirus.
For the period ended May 2, the Canton, Mass.-based retailer reported a net loss of $41.7 million, or 82 cents a diluted share, as compared with a net loss of $3.1 million, or 6 cents a share, in the first quarter of fiscal 2019. On a non-GAAP basis, adjusting for the impairment of assets of $16.3 million in the first quarter of fiscal 2020 and transition costs of $700,000 related to the change in chief executive officers, the adjusted net loss for the quarter was 37 cents a diluted share, as compared to an adjusted net loss of 4 cents a diluted share for the first quarter of fiscal 2019.
Sales for the quarter fell 49.3 percent to $57.2 million from $113 million in the first quarter of fiscal 2019, and since that time, the retailer has been “highly promotional,” it said, “to encourage our customers to shop online and to mitigate a buildup of seasonal inventory.”
Stores started reopening in April, and as of June 2, 201 units were once again open — with mixed early results.
“Some stores are performing better than others, but overall comparable sales initially were down an average of 70 to 80 percent to last year, but performance has improved week-to-week and today we are seeing comparable sales down approximately 40 percent to last year,” said Harvey Kanter, president and ceo.
“For DXL, the good news is the majority of our stores are freestanding and no store is in a traditional mall setting,” he added during a call with analysts on Thursday morning. “Direct fulfillment by stores is materially higher than it’s ever been in our history,” led by curbside pickup fueled by online orders.
Online sales in the first quarter were up 30 percent and are up 70 percent in the second quarter, Kanter said. Customers are responding to a shift in product offerings, with an enhanced selection of activewear and loungewear, core and basic product offerings rather than tailored clothing. This narrowing of the assortment will continue going forward, the company said.
“We were very fortunate to keep our distribution center operational and we were able to fulfill e-commerce orders uninterrupted throughout the first quarter,” Kanter said. In addition to online, the company’s nascent wholesale business “became our only source of revenue while stores were closed, which was critical to keeping a minimal level of cash flowing into business during the first quarter. However, as you might expect, the online business will only mitigate a fraction of the revenue loss we would experience from closed stores,” he said.
The wholesale arm of the company, led by Amazon Essentials, contributed $2 million in sales during the first quarter, Kanter added, and this segment will continue to be a “key initiative” this year. The company has also launched a new wholesale business for the design and sourcing of protective masks, with sales beginning in the second quarter of fiscal 2020, he noted.
To help shore up the company during the store closures, the company drew $30 million from its credit facility to preserve “financial flexibility,” furloughed its store workers along with 60 percent of its corporate employees, cut executive officer compensation between 10 and 20 percent, and on May 1, permanently cut 34 corporate positions, Kanter said. The company canceled $150 million in orders, about 28 percent of its total fiscal 2020 planned receipts, he added, and is working with vendors to extend payment terms and requesting rent relief from landlords for April through July.
“We have reacted quickly and decisively to do everything we could to avoid a liquidity crisis,” Kanter said. “We are not out of the woods yet, but we are cautiously optimistic in the course we have charted to get us through the next 12 months without any additional cash infusion. To achieve the plan, we need to see a gradual reopening of stores and a gradual ramp of customer traffic and conversion.”
Destination XL’s stock closed at 36 cents on Thursday on the Nasdaq exchange, up 0.84 percent.