Losses at Destination XL widen despite positive comps
Canton, Massachusetts-based men’s big and tall retailer Destination XL Group, Inc. announced widening quarterly losses on Friday, as moderate improvements in comparable sales were undermined by revenue lost due to store closures and shifts in the fiscal calendar.
For the fourth quarter ended February 2, 2019, Destination XL reported total net sales of $131.2 million, representing a decrease of $4.3 million or 3.2% from the $135.5 million reported in the prior-year period.
Comparable sales actually increased 3.1% but were more than offset by the loss of Q4 2017’s extra week, which negatively impacted net sales to the tune of $8.4 million, and around $2.1 million in lost revenue related to store closures.
Destination XL currently operates 323 stores across its DXL, CMXL and Rochester Clothing banners, compared to 332 at the end of fiscal 2017.
The fourth quarter also saw the launch of the company’s wholesale division, which contributed $2.0 million to the retailer’s total sales.
The retailer’s net loss for the quarter came to $7.2 million, or $0.15 per diluted share, compared to $3.3 million, or $0.07 per diluted share, in the equivalent period in 2017.
Nonetheless, Destination XL managed to narrow its net loss over the course of the full fiscal year, reporting an annual loss of $13.5 million, or $0.28 per diluted share, for 2018, compared with a net loss of $18.8 million, or $0.39 per diluted share, in fiscal 2017.
Full-year net sales saw a slight increase of 1.2% to $473.8 million, up from $468.0 million in the previous year. Annual comparable sales rose 3.0%.
"Fiscal 2018 was a pivotal year for our Company and we believe our core business is well positioned for continued growth in fiscal 2019,” said Destination XL’s acting CEO David Levin in a release. "We completed a customer segmentation study that has provided better insights to focus our marketing strategies. We launched a new website that is faster, more responsive, and easier to navigate. We initiated a corporate reorganization that has lowered our SG&A expense, and we refinanced our credit facility with an extension through the middle of 2023."
In May 2018, the company eliminated approximately 15% of its corporate work force as part of its corporate restructuring efforts, resulting in an aggregate charge of $1.9 million related to employee severance and one-time termination benefits, among other employee-related costs.
The restructuring did, however, allow Destination XL to make savings of $6.0 million in its selling, general and administrative expenses over the course of the year, a figure which is expected to be around $10.0 million on an annualized basis.
Costs related to the retailer’s CEO search and transition processes also led to an aggregate charge of $2.4 million and the company expects to incur a further $1.7 million in charges due to the transition in fiscal 2019.
As previously reported, following a lengthy search process, Harvey S. Kanter will replace Levin as CEO on April 1.
Destination XL announced that it expects to see low single-digit comparable sales growth in 2019 but stated that it would not provide a more detailed financial outlook until it completes its CEO transition and a strategic review.
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