Destination XL Group, Inc. Q4 FY2025 earnings call

Merger agreement with FullBeauty Brands: Working through key deliverables, proxy statement to outline combined company pro forma financials, etc., expected to file fiscal 2025 Form 10-K later today, preliminary proxy statement to be completed and filed in next 30 days, transaction expected to close in 2026 subject to conditions. Operating results: 2025 comparable sales decreased 7.3% and full-year 8.4% vs. fiscal 2024. Q4 quarter-to-date comp sales down 5.8% prior to arctic weather, 2026 saw improved sales momentum with Feb at negative 1.3% and Mar similar trend, expecting comp sales improvement in 2026. Focus on strategic initiatives: FitMap, assortment, strategic promotions. Inventory balance at end of Q4 was $73.5 million, down 2.6% from last year. Private brands outperformed national collection brands. New store openings: Opened 8 new stores, converted stores, paused further new store openings for 2026, short-term plans include converting stores, relocations, etc. Alliance with Nordstrom: Active on online marketplace, refining assortment. Key strategic initiatives in 2026: Scaling FitMap, evolving assortment, marketing with disciplined promotions and CRM/loyalty, improving digital experience.

Fourth quarter sales were $112.1 million vs. $119.2 million in 2024. Comparable sales decreased 7.3% (stores down 8.6%, direct down 4.3%). Full-year total sales were $435.0 million vs. $467.0 million last year. Comparable sales decreased 8.4% (stores down 6.9%, direct down 11.8%). Gross margin inclusive of occupancy costs was 40.8% in 2025 vs. 44.4% in 2024. For full year, gross margin inclusive of occupancy was 43.4% vs. 46.5% last year. SG&A expense for fourth quarter was 42.4% of sales vs. 41.7% in 2024. Full-year SG&A expense was $187.4 million, down 5.5% from fiscal 2024. Adjusted EBITDA for full year was $1.6 million vs. $19.9 million last year. Ended year with $28.8 million of total cash and investments and no outstanding debt.

Not providing specific forward-looking financial guidance for fiscal 2026 at this time, will revisit after completion of merger.

Realization of deferred tax assets depends on future taxable income. Current year net operating loss and near-term forecast present negative evidence outweighing positive evidence regarding realizability of deferred tax assets, leading to $20.4 million noncash charge in fourth quarter. Impact of various factors on big and tall retail sector including tariffs, GLP-1 drugs, economic conditions, etc., affecting sales and consumer behavior.

Q: Asks about FitMap technology momentum, number of scanned customers in 2025, and sales associate training.

A: Harvey Kanter talks about FitMap rollout, scanning numbers, training importance.

Q: Asks about competitive responses in big and tall category.

A: Harvey Kanter discusses impact of various factors on customer shopping behavior and sales.

Q: Asks about gross margin impact of private brand initiative.

A: Harvey Kanter and Peter Stratton talk about private brand vs national brand margins.

Q: Asks about rightsizing store fleet in 2026.

A: Harvey Kanter talks about store fleet based on customer feedback.

Q: Asks about recapture rate of sales after storm events.

A: Harvey Kanter says there is a rebound.

Q: Asks about impact of GLP-1.

A: Harvey Kanter talks about anecdotal impact and volatility of GLP-1 on customers