Nov 22, 2024
9:00 AM EST Nov 22, 2024 at 9:00 AM EST
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Destination XL Group, Inc. Reports Fourth-Quarter and Fiscal 2017 Financial Results
FY 2017 Fourth Quarter Comparable Sales up 4.3%; Full Year Comparable Sales Up 0.9%;
Company Announces Hiring of new CMO and
Highlights
- Total sales for the 14-week fourth quarter of
$135.5 million , up$12.9 million from$122.6 million in the prior-year 13-week fourth quarter; total sales for the 53-week year of$468.0 million , up from$450.3 million for the prior year's 52-weeks. - Total comparable sales increased 4.3% for the quarter and 0.9% for the year.
- Net loss for the quarter was
$(3.3) million as compared to prior-year quarter's net income of$1.8 million ; net loss for the year was$(18.8) million as compared to$(2.3) million in the prior year. - On a non-GAAP basis, Adjusted EBITDA for the quarter was
$5.0 million compared to$10.8 million in the prior-year quarter; Adjusted EBITDA for the year was$17.1 million from$31.6 million in the prior year.
Management Comments
"We ended the quarter with a very strong comp of 4.3% and we are off to a good start in fiscal 2018," said
Levin continued, "We are also announcing today the appointment of
Fourth-Quarter and Fiscal 2017 Results
The Company's 2017 fiscal year included 53 weeks compared with 52 weeks in fiscal 2016. Accordingly, year-over-year comparisons of total sales for the fourth quarter and full year are affected by an extra week of sales in fiscal 2017. However, for comparable sales, the Company is reporting on a comparable weeks basis (e.g. the 14 and 53 weeks ended
Sales
For the 14-week fourth quarter of fiscal 2017, total sales increased 10.5% to
For fiscal 2017, total sales increased 3.9% to
Gross Margin
For the fourth quarter of fiscal 2017, gross margin, inclusive of occupancy costs, was 45.0%, compared with gross margin of 44.9% for the fourth quarter of fiscal 2016. The increase of 10 basis points was the result of a 90 basis-point decrease in occupancy costs as a percentage of total sales partially offset by a decrease in merchandise margin of 80 basis points. The decrease in merchandise margin was primarily due to an increase in promotional strategies over the peak December selling weeks. The improvement in occupancy costs was due to leveraging of sales due to the additional week of sales. On a dollar basis, occupancy costs for the fourth quarter increased approximately 3.3% over the prior-year's fourth quarter.
For the fiscal year, gross margin, inclusive of occupancy costs, was 45.0% as compared to 45.5% for fiscal 2016. The decrease of 50 basis points was due to a decrease in merchandise margin as a result of increased promotional activities primarily associated with our inventory reduction initiatives. Occupancy costs, as a percentage of sales, were flat to the prior year. On a dollar basis, occupancy costs for the full year increased 4.0% over fiscal 2016.
Selling, General & Administrative
SG&A expenses for the fourth quarter of fiscal 2017 were 41.3% of sales, compared with 36.1% in the fourth quarter of fiscal 2016. On a dollar basis, SG&A expense increased
For fiscal 2017, SG&A expenses were 41.3% of sales, as
compared to 38.5% in fiscal 2016. In addition to the extra week of expenses, the primary reason for this increase was due to an increase of
Impairment of Assets
For the fourth quarter of fiscal 2017, we recorded impairment charges of
For fiscal 2017, impairment charges totaled
Income Taxes
In
Net Income (Loss)
Net loss for the fourth quarter of fiscal 2017 was
The net loss for fiscal 2017 was
Adjusted EBITDA
Earnings before interest, taxes, depreciation and amortization, adjusted for impairments (Adjusted EBITDA), a non-GAAP measure, for the fourth quarter of fiscal 2017 were
Cash Flow
Cash Flow provided by operations for fiscal 2017 was
| (in millions) | Fiscal 2017 | Fiscal 2016 | ||||||
| Cash flow from operating activities (GAAP) | $ | 31.0 | $ | 35.0 | ||||
| Capital expenditures, infrastructure projects | (9.7 | ) | (9.6 | ) | ||||
| Free Cash Flow before DXL capital expenditures (non-GAAP) | 21.3 | 25.4 | ||||||
| Capital expenditures for DXL stores | (12.9 | ) | (19.6 | ) | ||||
| Free Cash Flow (non-GAAP) | $ | 8.4 | $ | 5.8 | ||||
Non-GAAP Measures
EBITDA, Adjusted EBITDA, adjusted net (income) loss, adjusted net income (loss) per diluted share, free cash flow before DXL capital expenditures 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
At
Inventory was
Retail Store Information
For fiscal 2017, the Company opened 21 new DXL stores, which included 1 outlet:
| Year End 2015 | Year End 2016 | Year End 2017 | Year End 2018E | |||||||||||||||||||||
| # of Stores | Sq Ft. (000's) | # of Stores | Sq Ft. (000's) | # of Stores | Sq Ft. (000's) | # of Stores | Sq Ft. (000's) | |||||||||||||||||
| DXL retail | 166 | 1,369 | 192 | 1,542 | 212 | 1,665 | 215 | 1,678 | ||||||||||||||||
| DXL outlets | 9 | 45 | 13 | 66 | 14 | 72 | 15 | 78 | ||||||||||||||||
| CMXL retail | 125 | 443 | 97 | 340 | 78 | 268 | 69 | 235 | ||||||||||||||||
| CMXL outlets | 40 | 126 | 36 | 113 | 33 | 103 | 29 | 87 | ||||||||||||||||
| Rochester Clothing | 5 | 51 | 5 | 51 | 5 | 51 | 5 | 51 | ||||||||||||||||
| Total | 345 | 2,034 | 343 | 2,112 | 342 | 2,159 | 333 | 2,129 | ||||||||||||||||
Fiscal 2018 Outlook
Our
strategy for fiscal 2018 remains focused on customer acquisition, customer retention, and customer re-activation. We intend to launch a new creative advertising campaign with two flights of television: 6 weeks in Spring, and 5 weeks in Fall. Our marketing spend for the year is expected to be approximately
We expect to open only 3 new DXL stores in fiscal 2018 and plan to remodel 2 Casual Male XL stores, which will be re-branded as DXL in fiscal 2018.
For fiscal 2018, our outlook, based on a 52-week year and without consideration of additional costs that may be incurred in connection with Mr. Levin's retirement and the engagement of a successor CEO, is as follows:
- Sales are expected to range from
$462.0 million to$472.0 million , with a total company comparable sales increase of approximately 1.0% to 3.0%. - Gross margin rate of approximately 45.0%.
- Net loss, on a GAAP basis, of
$(8.3) to$(14.3) million , or$(0.17) to$(0.29) per diluted share. - EBITDA of
$18.0 to$24.0 million .* - Adjusted net loss of
$(0.12) to$(0.22) per diluted share.* Because we expect to continue providing a full valuation allowance against our deferred tax assets, we do not expect to recognize any income tax benefit in fiscal 2018. Our 2018 guidance does not include any estimate for potential impairments that may occur in 2018 because at this time there are none identified. - Capital expenditures of approximately
$11.4 million ,$2.1 million of which will be for new and remodeled stores to the DXL format and$9.3 million of which will be for infrastructure projects, partially offset by approximately$1.1 million in tenant allowances. We expect to fund our capital expenditures primarily from our operating cash flow. - At the end of fiscal 2018, we expect cash flow from operating activities of
$20.5 million to$26.5 million (including tenant allowances), resulting in positive free cash flow, before DXL capital expenditures, of approximately$11.2 million to$17.2 million .* Free cash flow will be approximately$9.1 million to$15.1 million .*
* Reconciliations of these non-GAAP measures to their comparable GAAP measures are provided in the tables below.
Conference Call
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.
Non-GAAP Measures
In addition to financial measures prepared in accordance with
The Company believes that EBITDA (calculated as earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA (calculated as EBITDA adjusted to exclude impairment charges) are useful to investors in evaluating its performance. With the significant capital investment associated with the DXL transformation and, therefore, increased levels of depreciation and interest, management uses EBITDA and Adjusted EBITDA as a key metric to measure profitability and economic productivity.
The Company has fully reserved against its deferred tax assets and, therefore, its net income (loss) is not reflective of earnings assuming a "normal" tax position. In addition, we have added back charges related to the impairment of assets because it provides comparability of results without these non-cash charges. Adjusted net income (loss) provides investors with a useful indication of the financial performance of the business, on a comparative basis, assuming a normalized effective tax rate of 26%, using the statutory rate under the 2017 Tax Act.
Free cash flow and free cash flow before DXL capital expenditures are metrics that management uses to monitor liquidity. The Company has stated that it expects to fund its ongoing DXL capital expenditures with cash flow from operations. Management believes this metric is important to investors because it demonstrates the Company's ability to strengthen liquidity while also contributing to the funding of the DXL store growth and other capital projects. Free cash flow is calculated as cash flow from operating activities, less capital expenditures and excludes the mandatory and discretionary repayment of debt.
About
Forward-Looking Statements
Certain statements and information contained in this press release constitute forward-looking statements under the federal securities laws, including statements regarding the Company's expectations with respect to cash flows, gross profit margins, store counts, capital expenditures, sales, EBITDA, and earnings for fiscal 2018, without consideration of additional costs that may be incurred in connection with Mr. Levin's retirement and the engagement of a successor CEO, the Company's ability to strengthen liquidity in 2018 and the impact of marketing activities on
top-line growth in fiscal 2018. 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 | |||||||||||||||
| Sales | $ | 135,522 | $ | 122,646 | $ | 467,976 | $ | 450,283 | ||||||||
| Cost of goods sold including occupancy | 74,483 | 67,612 | 257,619 | 245,402 | ||||||||||||
| Gross profit | 61,039 | 55,034 | 210,357 | 204,881 | ||||||||||||
| Expenses: | ||||||||||||||||
| Selling, general and administrative | 56,026 | 44,232 | 193,230 | 173,283 | ||||||||||||
| Impairment of assets | 2,377 | 376 | 4,095 | 376 | ||||||||||||
| Depreciation and amortization | 7,736 | 7,882 | 31,073 | 30,245 | ||||||||||||
| Total expenses | 66,139 | 52,490 | 228,398 | 203,904 | ||||||||||||
| Operating income (loss) | (5,100 | ) | 2,544 | (18,041 | ) | 977 | ||||||||||
| Interest expense, net | (860 | ) | (721 | ) | (3,357 | ) | (3,067 | ) | ||||||||
| Income (loss) before provision for income taxes | (5,960 | ) | 1,823 | (21,398 | ) | (2,090 | ) | |||||||||
| Provision (benefit) for income taxes | (2,636 | ) | 40 | (2,572 | ) | 166 | ||||||||||
| Net income (loss) | $ | (3,324 | ) | $ | 1,783 | $ | (18,826 | ) | $ | (2,256 | ) | |||||
| Net income (loss) per share - basic and diluted | $ | (0.07 | ) | $ | 0.04 | $ | (0.39 | ) | $ | (0.05 | ) | |||||
| Weighted-average number of common shares outstanding: | ||||||||||||||||
| Basic | 48,666 | 49,139 | 48,888 | 49,544 | ||||||||||||
| Diluted | 48,666 | 49,139 | 48,888 | 49,544 | ||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands) | ||||||||
| 2018 | 2017 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 5,362 | $ | 5,572 | ||||
| Inventories | 103,332 | 117,446 | ||||||
| Other current assets | 12,973 | 15,931 | ||||||
| Property and equipment, net | 111,032 | 124,347 | ||||||
| Intangible assets | 1,821 | 2,228 | ||||||
| Other assets | 5,885 | 3,804 | ||||||
| Total assets | $ | 240,405 | $ | 269,328 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Accounts payable | $ | 33,987 | $ | 31,258 | ||||
| Accrued expenses and other liabilities | 65,263 | 73,263 | ||||||
| Long-term debt | 12,061 | 19,002 | ||||||
| Borrowings under credit facility | 47,385 | 44,097 | ||||||
| Deferred gain on sale-leaseback | 11,723 | 13,188 | ||||||
| Stockholders' equity | 69,986 | 88,520 | ||||||
| Total liabilities and stockholders' equity | $ | 240,405 | $ | 269,328 | ||||
CERTAIN COLUMNS IN THE FOLLOWING TABLES MAY NOT FOOT DUE TO ROUNDING
GAAP TO NON-GAAP RECONCILIATION OF ADJUSTED NET INCOME (LOSS)
AND ADJUSTED NET INCOME (LOSS) PER DILUTED SHARE
| For the three months ended | For the fiscal year ended | |||||||||||||||||||||||||||||||
| $ | Per diluted share | $ | Per diluted share | $ | Per diluted share | $ | Per diluted share | |||||||||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||||||||||||||
| Income (loss) before tax provision, on a GAAP basis | $ | (5,960 | ) | $ | 1,823 | $ | (21,398 | ) | $ | (2,090 | ) | |||||||||||||||||||||
| Provision (benefit) for income taxes | (2,636 | ) | 40 | (2,572 | ) | 166 | ||||||||||||||||||||||||||
| Net income (loss), on a GAAP basis | $ | (3,324 | ) | $ | (0.07 | ) | $ | 1,783 | $ | 0.04 | $ | (18,826 | ) | $ | (0.39 | ) | $ | (2,256 | ) | $ | (0.05 | ) | ||||||||||
| Add back: | ||||||||||||||||||||||||||||||||
| Impairment of assets | $ | 2,377 | $ | 0.05 | $ | 376 | $ | 0.01 | $ | 4,095 | $ | 0.08 | $ | 376 | $ | 0.01 | ||||||||||||||||
| Actual provision (benefit) for income taxes | (2,636 | ) | $ | (0.05 | ) | 40 | $ | 0.00 | (2,572 | ) | $ | (0.05 | ) | 166 | $ | 0.00 | ||||||||||||||||
| Adjusted income (loss) before income taxes | $ | (3,583 | ) | $ | (0.07 | ) | $ | 2,199 | $ | 0.04 | $ | (17,303 | ) | $ | (0.35 | ) | $ | (1,714 | ) | $ | (0.03 | ) | ||||||||||
| Income tax provision (benefit), assuming normalized tax rate of 26%, with no AMT benefit in 2017 | $ | (932 | ) | $ | (0.02 | ) | $ | 572 | $ | 0.01 | $ | (4,499 | ) | $ | (0.09 | ) | $ | (446 | ) | $ | (0.01 | ) | ||||||||||
| Adjusted net income (loss), non-GAAP basis | $ | (2,651 | ) | $ | (0.05 | ) | $ | 1,627 | $ | 0.03 | $ | (12,804 | ) | $ | (0.26 | ) | $ | (1,268 | ) | $ | (0.03 | ) | ||||||||||
| Weighted average number of common shares | ||||||||||||||||||||||||||||||||
| outstanding on a diluted basis | 48,666 | 49,139 | 48,888 | 49,544 | ||||||||||||||||||||||||||||
GAAP TO NON-GAAP RECONCILIATION OF ADJUSTED EBITDA
| For the three months ended | For the fiscal year ended | ||||||||||||||
| (in millions) | |||||||||||||||
| Net income (loss), on a GAAP basis | $ | (3.3 | ) | $ | 1.8 | $ | (18.8 | ) | $ | (2.3 | ) | ||||
| Add back: | |||||||||||||||
| Provision (benefit) for income taxes | (2.6 | ) | 0.0 | (2.6 | ) | 0.2 | |||||||||
| Interest expense | 0.9 | 0.7 | 3.4 | 3.1 | |||||||||||
| Depreciation and amortization | 7.7 | 7.9 | 31.1 | 30.2 | |||||||||||
| EBITDA (non-GAAP) | 2.6 | 10.4 | 13.0 | 31.2 | |||||||||||
| Add back: Impairment charges | 2.4 | 0.4 | 4.1 | 0.4 | |||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 5.0 | $ | 10.8 | $ | 17.1 | $ | 31.6 | |||||||
GAAP TO NON-GAAP RECONCILIATION OF FREE CASH FLOW
| For the fiscal year ended | ||||||||
| (in millions) | ||||||||
| Cash flow from operating activities (GAAP basis) | $ | 31.0 | $ | 35.0 | ||||
| Capital expenditures, infrastructure projects | (9.7 | ) | (9.6 | ) | ||||
| Free Cash Flow before DXL capital expenditures (non-GAAP) | $ | 21.3 | $ | 25.4 | ||||
| Capital expenditures for DXL stores | (12.9 | ) | (19.6 | ) | ||||
| Free Cash Flow (non-GAAP basis) | $ | 8.4 | $ | 5.8 | ||||
2018 FORECAST GAAP TO NON-GAAP RECONCILIATIONS
| Projected | |||||
| Fiscal 2018 | |||||
| (in millions, except per share data) | per diluted share | ||||
| Net loss (GAAP basis) | |||||
| Add back: | |||||
| Provision for income taxes | 0.1 | ||||
| Interest expense | 3.1 | ||||
| Depreciation and amortization | 29.1 | ||||
| EBITDA (non-GAAP basis) | |||||
| Net loss (GAAP basis) | |||||
| Income tax benefit, assuming 26% rate | |||||
| Adjusted net loss (non-GAAP basis) | |||||
| Weighted average common shares outstanding - diluted | 49.1 | ||||
| Cash flow from operating activities (GAAP basis) | |||||
| Capital expenditures, infrastructure projects | (9.3 | ) | |||
| Free Cash Flow, before DXL capital expenditures (non-GAAP basis) | |||||
| Capital expenditures for DXL stores | (2.1 | ) | |||
| Free Cash Flow (non-GAAP basis) | |||||
Investor Contact:Source:ICR, Inc. Tom Filandro , 646-277-1235 Tom.Filandro@icrinc.com
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