DESTINATION XL GROUP, INC. Q4 FY2024 earnings call

• Launched a brand awareness campaign with a three-city matched market test.
• Opened 7 new stores and converted 8 Casual Male stores to DXL in 2024 to improve store accessibility.
• Upgraded the e-commerce platform and launched the new DXL Rewards loyalty program.
• Maintained merchandise margins despite soft sales, controlling inventory levels.
• Formed alliances with Nordstrom and is set to launch a collaboration with TravisMathew.
• Implemented promotions and loyalty initiatives, including Fit Exchange by DXL and targeted promotions using customer segmentation data.
• Nearing completion of e-commerce re-platform and planning to expand FitMAP technology to more stores.
• Developed an opening price point strategy to lower entry barriers and enhance perceived value.

In the fourth quarter, comparable sales declined 8.7%. Store sales were down 6.7% while direct was down 12.7%. For the full year, net sales were $467 million, a comp of minus 10.6% compared to the prior year. Merchandise margins increased by 50 basis points in the fourth quarter and 40 basis points for the full year due to a shift in product mix towards higher IMU private label products, reduced outbound shipping costs, and lower loyalty program expense. Inventory at the end of Q4 was $75.5 million, a decrease of 6.8% from the prior year, with clearance penetration at 8.6% remaining in line with the long-term target of below 10%.

• Did not issue fiscal 2025 guidance due to market volatility, waning consumer sentiment, and macro uncertainties like tariffs.
• Comp sales were down 12.5% in the first six weeks of 2025, expected to gradually improve from low-double-digit negative in Q1 to positive in the second half of the year due to strategic initiatives, modest macroeconomic improvement, and easier comp comparisons.

• Challenges in the men's big and tall apparel sector, including consumer uncertainty and lower traffic.
• Market volatility affecting pricing and cost management.
• Uncertainty regarding the impact of tariffs on costs and product pricing.

Q: About GLP-1 study and market share A: Harvey Kanter mentioned that while some customers are dropping out of the size range, quantification is unclear. Competitors' performance is hard to compare using aggregated credit card sales data.

Q: About tariffs and brand mix A: Destination XL has limited exposure to tariffs (around 10 basis points to gross margin). Private brands have seen a small shift, with third-party national brands making up high 40%s of the mix.

Q: About promos and gross margin impact A: Peter Stratton stated that aggressive promos are to reenergize customers, with a slight erosion in merchandise margin expected but less than 100 basis points.

Q: About new rewards program A: Harvey Kanter explained the new program migrated best customers, had higher sign-ups than expected, focusing on engaging active customers to drive productivity.

Q: About new stores A: Harvey Kanter noted new stores underperformed traffic-wise, some outperforming based on awareness. Peter Stratton mentioned average investment per store opened this year was around $1 million, with costs expected to come down for 2025 openings.