Destination XL Group is back in the black and has hit a milestone — exceeding $500 million in sales last year for the first time in its history.
Its goal now is to increase its market share within the $10 billion men’s big and tall market beyond the current 5 percent by offering a curated assortment of national and private brands and providing a welcoming shopping experience in stores and online.
“The U.S. men’s big and tall market is highly fragmented,” Harvey Kanter, president and chief executive officer of DXL said on a conference call Thursday. “There are many retailers who dabble in big and tall, offering a piecemeal product here and there to a traditionally underserved customer. We are changing that narrative. At DXL, big and tall isn’t a section. It’s the entire store, and it is all we do. We believe that the total addressable men’s big and tall market is in excess of $10 billion, and we currently hold 5 percent of that market. Going forward, we believe that we can grow that market share profitably by shifting further away from discounting and into greater differentiation.”
But one blow came as a result of the company ending its wholesale relationship with Amazon. For fiscal 2021, wholesale revenues fell to $5.4 million as compared to $12.5 million in fiscal 2019. So as a result of the “volatility in the global supply chain, increasing lead times, lower margins and the shifting dynamics of the business,” Kanter said “the company and Amazon have agreed to end the wholesale relationship.” In 2019, the online behemoth tapped DXL to be the big and tall provider for its Amazon Essentials line. But Kanter said the company will be seeking other potential partners for its wholesale offering.
On Thursday, the Canton, Mass.-based men’s retailer reported net income for the fourth quarter of $9.9 million, or 14 cents a diluted share, as compared to a loss of $5.1 million for fiscal 2019. Adjusted earnings before interest, taxes, depreciation and amortization were $14.3 million for the fourth quarter as compared to $700 million for fiscal 2020 and $9.9 million for fiscal 2019.
Total sales for the period rose 33.3 percent to $133.5 million from $100.1 million in fiscal 2020 and 1.7 percent from $131.2 million in fiscal 2019. Comparable-store sales rose 41.5 percent as compared to fiscal 2020 — 58.4 percent from stores and 17.8 percent from online — and 9.4 percent against fiscal 2019.
But it was the yearly sales figure — $505 million in fiscal 2021, a rise from $318.9 million in fiscal 2020 and $474 million in fiscal 2019 — that had the company banging its chest. Comparable-store sales for the year jumped 68.5 percent against fiscal 2020 and 14.2 percent against fiscal 2019.
In the earnings call, Kanter said: “At the onset of the pandemic in 2020, DXL was in survival mode and we took meaningful and sometimes difficult actions to ensure we would live to fight another day.” But thanks to the “macro-level tailwinds,” which included the lifting of pandemic restrictions, pent-up demand and a fiscal stimulus policy, as well as some internal moves — reducing reliance on markdowns, reducing its number of stores and cutting costs — the company experienced an “unprecedented financial outcome in 2021.”
Kanter called 2021 an “historic year, as we exceeded $500 million in sales for the first time in our company’s history. The structural changes to our business model we have implemented and the digital transformative work we have accomplished is driving our customers to engage with the DXL brand in new and meaningful ways. Our future is driven by an unrelenting passion to deliver a differentiated experience that resonates with big and tall guys everywhere and to remain focused on driving initiatives in marketing, technology and merchandising.”
Specifically, he said sales of tailored clothing dipped a bit in the fourth quarter, dropping to 15.3 percent of the total from 18.4 percent in the third quarter, but he expects a rebound for spring as guys head back to the office and spring events kick off. In sportswear, he singled out Polo Ralph Lauren, Nautica and Reebok as among the top performers.
For the year, net income hit $56.7 million, or 83 cents per diluted share, as compared to a net loss of $64.5 million, or $1.26 per diluted share, in fiscal 2020 and a net loss of $7.8 million, or 16 cents per diluted share, in fiscal 2019. Adjusted EBITDA was $76.9 million as compared to a loss of $24.2 million for fiscal 2020 and $23.5 million for fiscal 2019.
Although Kanter remains upbeat about the future, he did acknowledge the headwinds the company is facing this year. “Concerns around the current Russia Ukraine conflict, Fed monetary policy, record costs and inflation all present challenges,” he said. “However, despite these potential headwinds, we are very excited about our plan for fiscal 2022, and are cautiously optimistic that we will continue to grow our business with robust margins. Given the record-setting year we just finished and non-comparable year-over-year elements, we are taking a thoughtful and pragmatic approach to our financial projections and are guiding to sales from $510 million to $530 million and an EBITDA margin greater than 10 percent.”
The goal for this year, Kanter said, is to continue to build its customer base while retaining its existing customers. And the company will once again begin adding to its store base, which sits at 235 DXL stores and 54 for Casual Male. Over the next three to five years, he said, it’s believed the company can potentially open up to 50 stores.
Kanter concluded, “In fiscal 2022, we intend to build off the many successes we achieved last year to drive new customer acquisition, lifetime customer value through greater retention and new channels of distribution, all of which will strengthen our brand and provide new opportunities for greater top-line growth. Our strong balance sheet and substantial free cash flow will allow us to withstand market volatility, invest in our business and return capital to shareholders through a stock repurchase program.”