Destination XL outlines growth strategy after challenging FY23

Specialty retailer Destination XL Group reported its financials for the fourth quarter and fiscal 2023 ahead of what is to be a year defined by “ambitious” strategic growth initiatives that aim to unlock the potential of its respective men’s big and tall market.

For the fourth quarter, the 14-week period of fiscal 2023, total sales came to 137.1 million dollars, a slight drop from its prior 143.9 million dollars in the 13-week fourth quarter of the year prior. The company said the drop was due to a 10.1 percent decrease in comparable sales, for which store sales fell 9.4 percent and direct business dropped 11.3 percent.

For the year, sales also dropped by 4.4 percent to 521.8 million dollars, representing a comparable sales decrease of 4.6 percent, with store sales down 4.5 percent and direct business down 4.8 percent. The company said there had been a “gradual slowdown in store traffic across all regions of the country”, with consumer spending negatively impacted by inflationary pressures.

While gross margin for the fourth quarter came to 47 percent, compared to the prior 47.7 percent, for the year the margin fell from the previous 49.9 percent to 48.4 percent, a decrease of 150 basis points.

‘Over the next five years, we expect to grow our top line significantly…’

Its selling, general and administrative (SG&A) expenses for the fourth quarter totalled 38.5 percent of sales, compared to 37.8 percent of fiscal 2022, while for the year expenses were at 37.7 percent of sales.

Net income, meanwhile, dropped from 8.3 million dollars, or 13 cents per diluted share, to 5.2 million dollars, or eight cents per diluted share, for the fourth quarter. Over the year, net income came to 27.9 million dollars, down from 89.1 million dollars. The company’s adjusted EBITDA for the fourth quarter and fiscal year equaled 11.7 million dollars and 55.9 million dollars, respectively.

While the report was marked by a series of decreases, president and CEO, Harvey Kanter, remained positive about the results, noting that the sales and adjusted EBITDA for fiscal 2023 were the “second and third highest, respectively, in the history of [the] company”.

For the year ahead, Kanter said that the focus would be on launching strategic growth initiatives in marketing, store expansion, the DXL digital experience and collaborations. He added: “These initiatives are ambitious, and necessary, and will require us to make significant investments in our future. They will begin to come online in late spring and will be a catalyst for sales growth for the balance of the year.”

Kanter continued: “We believe that we can invest in these growth initiatives while maintaining an acceptable level of profitability and free cash flow.

“And, over the next five years, we expect to grow our top line significantly and, with scale, return to double-digit adjusted EBITDA margins, finally unlocking the potential that exists in the men’s big and tall market.”

For fiscal 2024, Destination XL is anticipating sales in the region of 500 to 530 million dollars, with a net income of 17 million dollars. Its adjusted EBITDA is forecast to come to 36 million dollars.