Destination XL Group, Inc. Reports Fiscal 2021 Fourth-Quarter and Full-Year Financial Results
Reports Record Annual Sales and Profit;
Full-Year Sales of
Adjusted EBITDA of
Fourth Quarter Highlights
- Total sales for the fourth quarter were
$133.5 million, up 33.3% from $100.1 millionfor fiscal 2020 and up 1.7% from $131.2 millionfor fiscal 2019. Comparable sales increased 41.5% as compared to fiscal 2020 and 9.4% as compared to fiscal 2019.
- Net income for the fourth quarter was
$9.9 million, or $0.14per diluted share, as compared to a net loss of $(5.1) million, or $(0.10)per diluted share, for fiscal 2020 and net income of $2.4 million, or $0.05per diluted share for fiscal 2019.
- Adjusted EBITDA, a non-GAAP measure, was
$14.3 millionfor the fourth quarter as compared to $0.7 millionfor fiscal 2020 and $9.9 millionfor fiscal 2019.
Fiscal 2021 Highlights
- Total sales for fiscal 2021 were
$505.0 millionas compared to total sales of $318.9 millionfor fiscal 2020 and $474.0 millionfor fiscal 2019. Comparable sales increased 68.5% as compared to fiscal 2020 and 14.2% as compared to fiscal 2019.
- Net income was
$56.7 million, or $0.83per 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 $(0.16)per diluted share, in fiscal 2019. Our significant net operating loss carryforwards minimized our cash tax payments and made this income substantially tax-free.
- Adjusted EBITDA was
$76.9 millionas compared to $(24.2) millionfor fiscal 2020 and $23.5 millionfor fiscal 2019.
- Cash flow from operations for fiscal 2021 was
$75.5 million, as compared to $(1.2) millionfor fiscal 2020 and $15.8 millionfor fiscal 2019. Free cash flow was $70.3 millionas compared to $(5.5) millionfor fiscal 2020 and $2.4 millionfor fiscal 2019.
January 29, 2022, the Company had total cash of $15.5 millionand no outstanding debt, compared to total debt, net of cash, of $55.4 millionat January 30, 2021and $49.8 millionat February 1, 2020. Excess availability under our credit facility was $68.9 millionat January 29, 2022, as compared to $11.5 millionat January 30, 2021and $48.5 millionat February 1, 2020.
March 15, 2022, the Board authorized a $15.0 millionstock repurchase program.
“This has been a historic year for DXL as we exceeded
Kanter continued, “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.
“We recognize that our business in fiscal 2021 benefited from many macro-level tailwinds, including emergence from pandemic restrictions, pent-up demand and fiscal stimulus policy. As we head into fiscal 2022, concerns around the current Russia Ukraine conflict, Fed Monetary Policy, record costs and inflation all present challenges. 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
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.”
Fourth-Quarter and Fiscal 2021 Results
In addition to referring to fiscal 2020, the following review of our fourth quarter and full-year results for fiscal 2021 also includes comparisons to our fourth quarter and full-year results for fiscal 2019. Due to the COVID-19 pandemic and its impact on our results during the fourth quarter and full-year of fiscal 2020, we believe that comparisons to our results from the fourth quarter and full-year fiscal 2019 are more informative.
For the fourth quarter of fiscal 2021, total sales were
As compared to fiscal 2020, comparable sales for the fourth quarter increased 41.5%, driven by a 58.4% comparable sales increase from stores and a 17.8% increase in the direct business. As compared to fiscal 2019, comparable sales for the fourth quarter were up 9.4%, with our direct business up 33.1% and our stores flat. During the fourth quarter of fiscal 2021, our comparable sales, when compared to the same periods in fiscal 2019, increased by 17.4% in November and 7.8% in December, reflecting an earlier shopping season as customers responded to concerns around global supply chain issues and product availability, and slowed to 1.8% in January, as the Omicron variant impacted shopping behavior. We were also less promotional in the 2021 holiday season as compared to previous years, which impacted sales but strengthened margins. Regionally, our southeast and south central stores were our strongest performers in the fourth quarter of fiscal 2021, consistent with the trend we saw throughout much of fiscal 2021.
For fiscal 2021, total sales increased 58.3% to
For fiscal 2021, wholesale revenues were
For the fourth quarter of fiscal 2021, gross margin, inclusive of occupancy costs, was 49.8%, compared with a gross margin of 39.0% for the fourth quarter of fiscal 2020 and a gross margin of 43.0% for the fourth quarter of fiscal 2019. For fiscal 2021, gross margin, inclusive of occupancy costs, was 49.5%, compared to 32.9% for fiscal 2020 and 43.1% for fiscal 2019.
As compared to the fourth quarter of fiscal 2019, our gross margin rate for the fourth quarter improved by 680 basis points, driven by a 410 basis point improvement in merchandise margins and a 270 basis point improvement in occupancy costs. On a dollar basis, our occupancy costs decreased by
For the full year, our gross margin rate improved by 640 basis points as compared to fiscal 2019, driven by a 300 basis point improvement in merchandise margins and a 340 basis point improvement in occupancy costs. As a result of our lease renegotiations as well as closed stores, on a dollar basis, occupancy costs for fiscal 2021 decreased by approximately
The improvement in merchandise margin for the fourth quarter and fiscal year 2021 was primarily driven by our low promotional strategy and low clearance levels. Partially offsetting the savings from the reduction in markdowns was the continuing increase in the cost of freight due to shortages of vessels for overseas product, port congestion and labor shortages of truck drivers. For the full year, we estimate that the supply chain disruptions negatively impacted gross margin by approximately 84 basis points, and we expect that we will continue to experience cost increases related to these supply chain issues as well as due to the increase in the cost of certain raw materials, particularly cotton, throughout fiscal 2022.
Selling, General & Administrative
SG&A expenses for the fourth quarter of fiscal 2021 were 39.0% of sales, compared with 38.3% in the fourth quarter of fiscal 2020 and 35.4% in the fourth quarter of fiscal 2019.
On a dollar basis, compared to the fourth quarter of fiscal 2019, SG&A expense increased by
For fiscal 2021, SG&A expenses were 34.2% of sales, compared to 40.5% in fiscal 2020 and 38.1% in fiscal 2019.
On a dollar basis, compared to fiscal 2019, SG&A expense for fiscal 2021 decreased
Management views SG&A expenses through two primary cost centers: Customer Facing Costs and Corporate Support Costs. Customer Facing Costs, which include store payroll, marketing and other store operating costs, represented 19.1% of sales for fiscal 2021, compared to 20.2% of sales for fiscal 2020 and 22.6% of sales for fiscal 2019. Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 15.1% of sales, compared to 20.3% of sales for fiscal 2020 and 15.5% of sales for fiscal 2019.
Impairment of Assets
Asset impairment charges primarily represent the write-down of operating lease right-of-use assets, where the carrying value exceeds fair value, and the write-down store fixed assets. In addition, any subsequent gains recognized in connection with a store closure related to a previously recorded operating lease right-of-use asset impairment will be included as an offset to impairment charges, with the remainder of the gain included as a reduction in store occupancy costs.
For the fourth quarter and fiscal year fiscal 2021, the Company recorded non-cash gains of
Net Income (Loss)
Net income for the fourth quarter of fiscal 2021 was
Net income for fiscal 2021 was
Earnings before interest, taxes, depreciation and amortization, adjusted for asset impairments, exit costs associated with
Cash flow from operations for fiscal 2021 was
|(in millions)||Fiscal 2021||Fiscal 2020||Fiscal 2019|
|Cash flow from operating activities (GAAP)||$||75.5||$||(1.2||)||$||15.8|
|Free cash flow (non-GAAP)||$||70.3||$||(5.5||)||$||2.4|
Adjusted EBITDA, adjusted EBITDA margin and free cash flow are non-GAAP financial measures. Please see “Non-GAAP Measures” below and reconciliations of these non-GAAP measures to the comparable GAAP measures that follow in the tables below.
Balance Sheet & Liquidity
During fiscal 2021, the Company closed 21 stores. There were no new or rebranded stores during fiscal 2021.
|Year End 2019||Year End 2020||Year End 2021|
We believe that our store portfolio is a vital asset to our omni-channel business strategy. We are actively reviewing opportunities to relocate or convert Casual Male XL stores to DXL, and we are reviewing white space opportunities in markets where our store footprint is underpenetrated. We expect to continue to invest in stores over the next several years as we further strengthen the store portfolio.
The Company distributes its licensed branded and private label products directly to consumers through its stores, website and third-party marketplaces. E-commerce sales, which we also refer to as direct sales, are defined as sales that originate online, whether through our website, at the store level or through a third-party marketplace. Our direct business is a critical component of our business and an area of signification growth opportunity, as we continue to see our customers migrate to online shopping. Through fiscal 2021, we continued to see quarter-to-quarter growth in our direct business, even as customers returned to our stores. For the fourth quarter of fiscal 2021, our direct sales increased by
Stock Repurchase Program
The Company’s Board of Directors has authorized the Company to repurchase up to
The timing and the amount of any repurchases of common stock will be determined based on the Company’s evaluation of market conditions and other factors. The stock repurchase program is expected to commence in the first quarter of fiscal 2022 and will expire on
We experienced a remarkable recovery and growth in sales for fiscal 2021. We expect to grow our top line in fiscal 2022, but we also recognize that our business benefited from some level of pent-up demand and fiscal stimulus policy last year. In addition, the continuing uncertainty with respect to global supply chain disruptions, inflation, labor shortages, COVID-19 and geopolitical instability from the Russian invasion of
The Company will hold a conference call to review its financial results today,
During the conference call, the Company may discuss and answer questions concerning business and financial developments and trends. The Company’s responses to questions, as well as other matters discussed during the conference call, may contain or constitute information that has not been disclosed previously.
In addition to financial measures prepared in accordance with
Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and excluding exit costs related to our
Free cash flow is a metric that management uses to monitor liquidity. Management believes this metric is important to investors because it demonstrates the Company’s ability to maintain liquidity while supporting its capital projects and new store growth. Free cash flow is calculated as cash flow from operating activities, less capital expenditures and excludes the mandatory and discretionary repayment of debt.
Certain statements and information contained in this press release constitute forward-looking statements under the federal securities laws, including statements regarding our outlook for fiscal 2022, including expected sales and adjusted EBITDA margin, an expected increase in markdowns, our strategic initiatives for fiscal 2022 and related costs, the potential impact of
Forward-looking statements contained in this press release speak only as of the date of this release. Subsequent events or circumstances occurring after such date may render these statements incomplete or out of date. The Company undertakes no obligation and expressly disclaims any duty to update such statements.
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|(In thousands, except per share data)|
|For the three months ended||For the fiscal year ended|
|Cost of goods sold including occupancy||67,019||61,024||74,825||255,197||214,081||269,837|
|Selling, general and administrative||52,106||38,335||46,466||172,962||129,062||180,663|
|Exit costs associated with
|CEO transition costs||—||—||41||—||—||743|
|Impairment of assets||(241||)||(359||)||889||(2,344||)||14,841||889|
|Depreciation and amortization||4,195||5,103||5,686||17,226||21,477||24,563|
|Operating income (loss)||10,372||(3,997||)||3,332||61,980||(60,515||)||(4,394||)|
|Interest expense, net||(94||)||(1,044||)||(712||)||(4,350||)||(3,917||)||(3,297||)|
|Income (loss) before provision for income taxes||10,278||(5,041||)||2,620||57,630||(64,432||)||(7,691||)|
|Provision for income taxes||369||35||183||917||106||105|
|Net income (loss)||$||9,909||$||(5,076||)||$||2,437||$||56,713||$||(64,538||)||$||(7,796||)|
|Net income(loss) per share - basic||$||0.15||$||(0.10||)||$||0.05||$||0.89||$||(1.26||)||$||(0.16||)|
|Net income(loss) per share - diluted||$||0.14||$||(0.10||)||$||0.05||$||0.83||$||(1.26||)||$||(0.16||)|
|Weighted-average number of common shares outstanding:|
|CONDENSED CONSOLIDATED BALANCE SHEETS|
|Cash and cash equivalents||$||15,506||$||18,997||$||4,338|
|Other current assets||8,725||10,105||17,102|
|Property and equipment, net||44,442||56,552||78,279|
|Operating lease right-of-use assets||127,812||134,321||186,413|
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)|
|Accrued expenses and other liabilities||40,969||29,934||23,390|
|Borrowings under credit facility||—||59,521||39,301|
|Stockholders' equity (deficit)||58,219||(4,077||)||58,423|
|Total liabilities and stockholders' equity (deficit)||$||279,958||$||306,755||$||390,917|
|CERTAIN COLUMNS IN THE FOLLOWING TABLES MAY NOT FOOT DUE TO ROUNDING
GAAP TO NON-GAAP RECONCILIATION OF ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
|For the three months ended||For the fiscal year ended|
|(in millions, except margin percentages)|
|Net income (loss), on a GAAP basis||$||9.9||$||(5.1||)||$||2.4||$||56.7||$||(64.5||)||$||(7.8||)|
|Provision for income taxes||0.4||0.0||0.2||0.9||0.1||0.1|
|Depreciation and amortization||4.2||5.1||5.7||17.2||21.5||24.6|
|Exit Costs associated with
|CEO transition costs||-||-||0.0||-||-||0.7|
|Adjusted EBITDA (non-GAAP)||$||14.3||$||0.7||$||9.9||$||76.9||$||(24.2||)||$||23.5|
|Adjusted EBITDA margin (non-GAAP), as a percentage of sales||10.7||%||0.7||%||7.6||%||15.2||%||(7.6||%)||5.0||%|
|GAAP TO NON-GAAP RECONCILIATION OF FREE CASH FLOW
|For the fiscal year ended|
|Cash flow from operating activities (GAAP basis)||$||75.5||$||(1.2||)||$||15.8|
|Free cash flow (non-GAAP)||$||70.3||$||(5.5||)||$||2.4|
Source: Destination XL Group, Inc.