Destination XL Group, Inc. Reports Fiscal 2022 Fourth Quarter and Full-Year Financial Results
Fourth Quarter Highlights
- Total sales for the fourth quarter were
$143.9 million, up 7.8% from $133.5 millionfor fiscal 2021. Comparable sales for the fourth quarter increased 10.8% as compared to the fourth quarter of fiscal 2021.
- Net income for the fourth quarter was
$8.3 million, or $0.13per diluted share, as compared to net income of $9.9 million, or $0.14per diluted share, for the fourth quarter of fiscal 2021.
- Adjusted EBITDA, a non-GAAP measure, was
$14.2 millionfor the fourth quarter as compared to $14.3 millionfor the fourth quarter of fiscal 2021.
Fiscal 2022 Highlights
- Total sales for fiscal 2022 were
$545.8 millionas compared to $505.0 millionfor fiscal 2021. Comparable sales increased 10.9% as compared to fiscal 2021.
- Net income was
$89.1 million, or $1.33per diluted share, as compared to $56.7 million, or $0.83per diluted share, in fiscal 2021. Net income for fiscal 2022 included a non-recurring tax benefit for the release of our tax valuation allowance of $31.6 million, or $0.47per diluted share.
- Adjusted EBITDA was
$73.8 millionas compared to $76.9 millionfor fiscal 2021.
- Cash flow from operations for fiscal 2022 was
$59.9 million, as compared to $75.5 millionfor fiscal 2021. Free cash flow, a non-GAAP measure, was $50.3 millionas compared to $70.3 millionfor fiscal 2021.
January 28, 2023, total cash and cash equivalents were $52.1 millionas compared to $15.5 millionat January 29, 2022, with no outstanding debt for either period.
March 14, 2023, the Board authorized a $15.0 millionstock repurchase program, effective March 16, 2023.
“We are pleased to report our second year of record-breaking sales, with eight consecutive quarters of positive comparable sales and two consecutive years of double-digit adjusted EBITDA margins. We exceeded our sales and margin plan this year, in both our stores and direct business, with an increase of 10.9% in comparable sales which we believe was driven by the brand’s strategic transformational repositioning,” said
“Heading into fiscal 2023, we remain focused on our primary objective of serving the underserved Big + Tall consumer by providing him the opportunity to wear what he wants,” Kanter continued. “Earlier this month, we launched our new brand initiative “Wear What You Want”℠, further supporting this positioning. We believe our greater gains in market share, by increasing brand awareness and introducing our guy to the breadth of exclusivity in our assortment, will give him the freedom to choose his own style. At DXL, Big + Tall is all we do and we trade on the belief that we offer superior fit, assortment, and experience to him. This leads to a deeper level of engagement and relationship with our customers that is built on respect, trust, and belonging. We believe that the brand positioning is resonating with the customer and is helping to grow market share as the brand and category leader for the Big + Tall man.
“We are excited about the results of the past two years and are equally excited about the opportunity to operationalize “Wear What You Want” and believe that this will support the greater growth potential to drive our 2023 strategic initiatives. We also recognize that there are many macro-economic pressures that could impact us in the short term and our growth strategy as we head into fiscal 2023 and so we continue to be conservatively optimistic when thinking about guidance. As such, we are planning for sales in fiscal 2023 of
Fourth-Quarter and Fiscal 2022 Results
For the fourth quarter of fiscal 2022, total sales were
For fiscal 2022, total sales increased 8.1% to
For the fourth quarter of fiscal 2022, gross margin, inclusive of occupancy costs, was 47.7%, compared with a gross margin of 49.8% for the fourth quarter of fiscal 2021. Our gross margin rate for the fourth quarter decreased by 210 basis points, due to a 270 basis point decrease in merchandise margins partially offset by a 60 basis point improvement in occupancy costs. The merchandise margin decrease was due to an increase in cost associated with the launch of our loyalty program, an anticipated increase in markdown rate against the prior year's exceptionally low rate, increased direct shipping costs, and a shift in overall merchandise mix from own brands to national brands. These factors were partially offset by lower inbound freight costs.
For fiscal 2022, gross margin, inclusive of occupancy costs, was 49.9% as compared to 49.5% for fiscal 2021. For the full year, our gross margin rate improved by 40 basis points, driven by a 90 basis point improvement in occupancy costs due to increased leverage from sales partially offset by a 50 basis point decrease in merchandise margins. The decrease in merchandise margin was due to increased costs for raw materials, increased shipping costs driven by higher fuel costs and surcharges, and a higher penetration of our marketplace business, which includes commission costs. Those increases were partially offset by lower promotional markdowns. We continue to optimize our pricing and strategic promotional cadence to mitigate cost increases and preserve our margin rates.
Selling, General & Administrative
SG&A expenses for the fourth quarter of fiscal 2022 were 37.8% of sales, compared with 39.0% in the fourth quarter of fiscal 2021. On a dollar basis, SG&A expense increased by
For fiscal 2022, SG&A expenses were 36.4% of sales, compared to 34.2% in fiscal 2021. On a dollar basis, SG&A expense for fiscal 2022 increased
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 20.8% of sales for fiscal 2022 as compared to 19.1% of sales for fiscal 2021. Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 15.6% of sales, compared to 15.1% of sales for fiscal 2021.
Interest Income (Expense)
Interest income for fourth quarter of fiscal 2022 was
For fiscal 2022, interest expense was
Since the end of fiscal 2013, we had maintained a full valuation allowance against our deferred taxes assets. During the second quarter of fiscal 2022, we determined that it was more likely than not that the majority of our deferred tax assets will be realized. In reaching this determination, we considered the cumulative three years of profitability, our expectations regarding the generation of future taxable income as well as the overall improvement in our business and our current market position. As a result, for fiscal 2022, the valuation allowance against our deferred tax assets decreased by
For fiscal 2022 and 2021, we recorded a current income tax provision of
Net income for the fourth quarter of fiscal 2022 was
Net income for fiscal 2022 was
Earnings before interest, taxes, depreciation and amortization, adjusted for impairment (gain) of assets (adjusted EBITDA), a non-GAAP measure, for the fourth quarter of fiscal 2022 were
For fiscal 2022, adjusted EBITDA was
Cash flow from operations for fiscal 2022 was
The decrease in free cash flow was due to replenishment of inventory in several categories that were depleted last year, the payout of incentive-based awards, and an increase in capital expenditures.
|(in millions)||Fiscal 2022||Fiscal 2021|
|Cash flow from operating activities (GAAP)||$||59.9||$||75.5|
|Free cash flow (non-GAAP)||$||50.3||$||70.3|
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
Stock Repurchase Program
There were no repurchases of stock during the fourth quarter of fiscal 2022. For fiscal 2022, we repurchased 2.9 million shares at an aggregate cost, including fees, of
During fiscal 2022, we closed nine stores, converted one Casual Male XL store to a DXL store, and remodeled two DXL stores. There were no new stores opened in fiscal 2022.
|Year End 2020||Year End 2021||Year End 2022|
We believe that our store portfolio is a vital asset to our business strategy and we expect to invest in stores over the next several years as we strengthen the store portfolio. Over the next three to five years, based on our preliminary store development plan, we believe that we could potentially open up to 50 net new stores. For fiscal 2023, our plan is to convert 10 of our existing Casual Male XL stores to DXL stores, remodel 5 of our existing DXL stores, close 5 stores and open 3 new DXL stores. We expect our capital expenditures to range from
Digital Commerce Sales
We distribute our national brands and own brand merchandise directly to consumers through our stores, website, app and third-party marketplaces. Digital 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 through our Universe platform or through a third-party marketplace. Our direct business is a critical component of our business and an area of significant growth opportunity for us. From fiscal 2019 to fiscal 2022, comparable sales in this channel have increased 58.3%.
Our comparable sales in our direct business increased 9.9% as compared to fiscal 2021. For the fourth quarter of fiscal 2022, our direct sales were
As we head into fiscal 2023, we are maintaining our sales growth orientation as we build off the sales momentum from the past two years. Despite the macro-economic challenges and uncertainties regarding consumer spending and how that might impact sales demand, we believe our expectations for fiscal 2023 are appropriately balanced.
Our guidance for fiscal 2023, based on a 53-week year, is:
- Sales of
$550.0- $570.0 million
- Net income of
$41.0- $47.0 million
- Adjusted EBITDA margin of 12.5% - 13.5%
The Company will hold a conference call to review its financial results on
To participate in the live webcast, please pre-register at: https://register.vevent.com/register/BI565a4d5dcf7b4be5a8d1a74b891bb7c2. Upon registering, you will be emailed a dial-in number, and unique PIN.
For listen-only, please join and register at: https://edge.media-server.com/mmc/p/ev6a3bfw. An archived version of the webcast may be accessed by visiting the "Events" section of the Company's investor relations website for up to one year.
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 any asset impairment charges or gains. Adjusted EBITDA margin is calculated as adjusted EBITDA divided by sales. The Company believes that providing adjusted EBITDA and adjusted EBITDA margin is useful to investors to evaluate the Company's performance and are key metrics to measure profitability and economic productivity.
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, if any.
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 2023, including expected sales, net income, adjusted EBITDA margin, expected capital expenditures and our strategic initiatives for fiscal 2023; our ability to continue to attract new customers and gain market share; expectations regarding the realizability of our deferred tax assets; our ability to manage inventory; and expected changes in our store portfolio and plan for new or relocated stores. The discussion of forward-looking information requires management of the Company to make certain estimates and assumptions regarding the Company's strategic direction and the effect of such plans on the Company's financial results. The Company's actual results and the implementation of its plans and operations may differ materially from forward-looking statements made by the Company. The Company encourages readers of forward-looking information concerning the Company to refer to its filings with the
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||75,280||67,019||273,240||255,197|
|Selling, general and administrative||54,349||52,106||198,790||172,962|
|Impairment (gain) of assets||239||(241||)||(159||)||(2,344||)|
|Depreciation and amortization||3,633||4,195||15,381||17,226|
|Interest income (expense), net||99||(94||)||(251||)||(4,350||)|
|Income before provision for income taxes||10,476||10,278||58,335||57,630|
|Provision (benefit) for income taxes||2,156||369||(30,788||)||917|
|Net income per share - basic||$||0.13||$||0.15||$||1.42||$||0.89|
|Net income per share - diluted||$||0.13||$||0.14||$||1.33||$||0.83|
|Weighted-average number of common shares outstanding:|
|CONDENSED CONSOLIDATED BALANCE SHEETS|
|Cash and cash equivalents||$||52,074||$||15,506|
|Other current assets||8,934||8,725|
|Property and equipment, net||39,062||44,442|
|Operating lease right-of-use assets||124,356||127,812|
|Deferred income taxes, net of valuation allowance||31,455||—|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Accrued expenses and other liabilities||41,581||40,969|
|Total liabilities and stockholders' equity||$||350,598||$||279,958|
CERTAIN COLUMNS IN THE FOLLOWING TABLES MAY NOT FOOT DUE TO ROUNDING
GAAP TO NON-GAAP RECONCILIATION OF ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
|For the three months ended||For the fiscal year ended|
|(in millions, except margin percentages)|
|Net income, on a GAAP basis||$||8.3||$||9.9||$||89.1||$||56.7|
|Provision (benefit) for income taxes||2.2||0.4||(30.8||)||0.9|
|Interest (income) expense||(0.1||)||0.1||0.3||4.4|
|Depreciation and amortization||3.6||4.2||15.4||17.2|
|Impairment (gain) of assets||0.2||(0.2||)||(0.2||)||(2.3||)|
|Adjusted EBITDA (non-GAAP)||$||14.2||$||14.3||$||73.8||$||76.9|
|Adjusted EBITDA margin (non-GAAP), as a percentage of sales||9.9||%||10.7||%||13.5||%||15.2||%|
GAAP TO NON-GAAP RECONCILIATION OF FREE CASH FLOW
|For the fiscal year ended|
|Cash flow from operating activities (GAAP basis)||$||59.9||$||75.5|
|Free cash flow (non-GAAP)||$||50.3||$||70.3|
FISCAL 2023 FORECAST GAAP TO NON-GAAP ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN RECONCILIATION
|(in millions, except per share data and percentages)||per diluted share|
|Sales (53-week basis)|
|Net income (GAAP basis)|
|Provision for income taxes||14.3 -16.5|
|Interest income, net||(1.5||)|
|Depreciation and amortization||15.0|
|Adjusted EBITDA (non-GAAP basis)|
|Adjusted EBITDA margin as a percentage of sales (non-GAAP basis)||12.5% - 13.5%|
|Weighted average common shares outstanding - diluted||66.6|
Source: Destination XL Group, Inc.