View:
Download DOC
Download PDF
Download XLS
Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 9, 2014

 

 

DESTINATION XL GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   01-34219   04-2623104
(State or Other Jurisdiction   (Commission   (I.R.S. Employer
of Incorporation)   File Number)   Identification No.)

 

555 Turnpike Street, Canton, Massachusetts   02021
(Address of Principal Executive Offices)   (Zip Code)

(781) 828-9300

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 7.01 -Regulation FD Disclosure

The Company will be presenting a slide presentation to various investment groups at upcoming investor conferences beginning September 9, 2014. A copy of the slides is attached to this report as Exhibit 99.1 and is incorporated by reference herein.

One of the slides includes financial information not prepared in accordance with generally accepted accounting principles (“Non-GAAP Financial Measures”). The Company believes that the non-GAAP measures are useful as an additional means for investors to evaluate the Company’s operating results, when reviewed in conjunction with the Company’s GAAP financial statements. A reconciliation of the Non-GAAP Financial Measures to financial information prepared in accordance with generally accepted accounting principles (“GAAP”), as required by Regulation G, is included as Appendix A to the investor presentation.

The full slide presentation is available on the investor relations page of the Company’s website at www.destinationxl.com.

The slides contained in the exhibit include statements intended as “forward-looking statements,” which are subject to the cautionary statement about forward-looking statements set forth in the exhibit. The additional slides are being furnished, not filed, pursuant to Regulation FD. Accordingly, the slides will not be incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference. The furnishing of these slides is not intended to, and does not, constitute a determination or admission by the Company that the information in the slide presentation is material or complete, or that investors should consider this information before making an investment decision with respect to the Company.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit

No.

   

Description

99.1    Investor Presentation dated September 2014.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    DESTINATION XL GROUP, INC.
Date: September 9, 2014     By:   

/s/ Robert S. Molloy

    Name:    Robert S. Molloy
    Title:   

Senior Vice President, General Counsel

and Secretary

EX-99.1
September 2014
Investor Presentation
Exhibit 99.1
Destination XL Group, Inc.

Destination XL Group, Inc.
FORWARD LOOKING STATEMENTS AND NON-GAAP MEASURES
Forward Looking Statements:
Certain information contained in this presentation, including, but not limited to, future store projections of sales per square foot,
gross margin, occupancy and selling, general administrative expenses as well four-wall cash flow, constitute forward-looking
statements under the federal securities laws. 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. Such forward-looking statements are subject to various risks and uncertainties that could
cause actual results to differ materially from those indicated. Such risks and uncertainties may include, but are not limited to: the
failure to implement the Company's business plan for increased profitability and growth in the Company's retail stores sales and
direct-to-consumer business, the failure to achieve improvement in the Company's competitive position, changes in or
miscalculation of fashion trends, extreme or unseasonable weather conditions, economic downturns, a weakness in overall
consumer demand, trade and security restrictions and political or financial instability in countries where goods are manufactured,
increases in raw material costs from inflation and other factors, the interruption of merchandise flow from the Company's
distribution
facility,
competitive
pressures,
and
the
adverse
effects
of
natural
disasters,
war,
acts
of
terrorism
or
threats
of
either,
or other armed conflict, on the United States and international economies. These, and other risks and uncertainties, are detailed
in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended
February 1, 2014 filed on March 17, 2014 and other Company filings with the Securities and Exchange Commission. The
Company assumes no duty to update or revise its forward-looking statements even if experience or future changes make it clear
that
any
projected
results
expressed
or
implied
therein
will
not
be
realized.
Non-GAAP Measures:
Adjusted Net Loss, Adjusted Net Loss Per Diluted Share, EBITDA, Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA
Margin are non-GAAP measures. The Company believes that these non-GAAP measures are useful as additional means for
investors to evaluate the Company's operating results, when reviewed in conjunction with the Company's GAAP financial
statements. Please see Appendix A for additional information concerning these non-GAAP measures and a reconciliation to
their respective GAAP measures.
2

3
LARGEST MEN’S B&T SPECIALTY RETAILER
354
Total stores
80% -
85%
Retail sales
15% -
20%
Direct sales
15
Private label brands
40
Name brands
20
Exclusive brands
40 million
Addressable market
1.4 million
Active customers
90%
Enrolled in
loyalty program
Destination XL Group, Inc.

UNIQUE CUSTOMER
Not determined by demographic
Males of all ages with a waist
size 40”
and greater
Values convenience, comfort,
selection and fit over price
Desires a good, better, best
array of product assortments in
all primary lifestyles
4
Destination XL Group, Inc.

TRANSFORMING OUR BRAND
5
Began transformation to DXL brand in 2010 to provide customers
with a one-stop shopping destination and grow the business
Capture greater wallet share
Attract broader customer audience
Opportunity for Growth
Target end-of-rack
1
customers
Leverage website to drive sales
1
Waist sizes 40 to 46 inches
Destination XL Group, Inc.

ONE-STOP SHOPPING AT ITS BEST
6
More
brands
Bright
Atmosphere
Wide
aisles
Highly
Trained
Staff
Onsite
tailoring
Large
changing
rooms
Destination XL Group, Inc.

LARGE SELECTION OF NAME BRANDS
10
Destination XL Group, Inc.

COMPLETE DXL STORE ROLL-OUT IN 2017
11
Majority of store openings are timed prior to the holiday shopping
season to maximize profitability
August 2, 2014
2017 Estimate
DXL Stores
Casual Male XL Retail
CM Outlet Stores
Rochester Clothing
Additional Stores
Open ~40/year
Close ~40/year
Destination XL Group, Inc.
181
113
51
9
220
250
50
50
3

SQUARE FOOTAGE COMPOSITION
12
DXL Stores
Casual Male XL Retail
CM Outlet Stores
Rochester Clothing
Additional Stores
DXL stores will account for the majority of square footage by end of fiscal 2017
Total square footage to increase 10% to 25% by end of fiscal 2017
August 2, 2014
2017 Estimate
DXL Stores
Casual Male XL Retail
CM Outlet Stores
Rochester Clothing
Sq. Ft. (000’s)
1,893 sq. ft.
~2,095 –
2,395 sq. ft.
Destination XL Group, Inc.
1,700 –
2,000
~200
~155
~40
1,003
643
164
83

Destination XL Group, Inc.
DXL
Year 1
DXL
Year 2
DXL
Year 3
DXL
Year 4
DXL
Year 5
Sales per square foot
$150
$170
$190
$205
$220
Gross margin, net of
occupancy costs
42.0%
44.0%
45.0%
46.0%
47.0%
SG&A as a % of sales
26.0%
22.0%
21.0%
21.0%
20.0%
Four-wall cash flow
16.0%
22.0%
24.0%
25.0%
27.0%
Build out costs
$75
IMPROVED PROFITABILITY AT MATURITY
13
1
Average store results
2
Average store pro forma
1
2
1
1
2

Destination XL Group, Inc.
DXL 5K STORES DRIVE PROFITABILITY
14
Introduced 5,000 square foot store concept in Q2 2014, which increased
opportunity for continued store growth by ~50 more stores
Lowers cap ex and occupancy costs by 25%
as compared to a 7,000 sq. ft. store
Penetrate smaller markets, where the economics of a full-size DXL would not work,
and certain larger markets that warrant an additional presence due to geographical
considerations
Economics of a 5,000 square foot DXL in year one in a sample market with expected
annual sales of ~$800K:
Sales per square foot
$160
Gross margin, net of occupancy costs
45.5%
SG&A as a % of sales
30.5%
Four-wall cash flow
15.0%
Build out costs
$80

Destination XL Group, Inc.
Per Square Foot
Average Sq. Ft.
Year One
Sales
Year One
4-Wall Cash Flow
ROI
2010 –
2012 (48 stores)
9,590
$151
$22
30.0%
2013 (51 stores)
8,441
$145
$25
38.0%
2014 (40 stores)
7,428
$153
$26
42.0%
INCREASING RETURN ON INVESTMENT
15
1
Average store results 
2
ROI is defined as the internal rate of return calculated on a store four-wall basis over 5 years
1
1
1
1,2
Achieving stronger return on investment in first year with smaller store sizes

Destination XL Group, Inc.
SUCCESSFUL DXL MARKETING CAMPAIGNS
16
You’re Looking Good
Since first flight launched (Q2 2014 vs. Q2 2013):
+6.5%
Traffic
+13.1%
Transactions
+6.2%
Retail Conversion
+5.6%
Web Conversion
+7.6%
End-of-Rack
+11.0%
Customer Count

Destination XL Group, Inc.
Experience Book & $50 Gift Card
35% Response Rate
Free Polo Offer
22% Response Rate
DRIVING TRAFFIC TO DXL STORES
17
+65%
+26%
More customers in an average DXL store’s active database
than at the average Casual Male XL store
Higher retention rate at an average DXL store compared with
an average Casual Male XL store

Destination XL Group, Inc.
CONVERTING THE CASUAL MALE CUSTOMER
Begin promoting new DXL store at ambassador Casual Male XL
stores 6 months prior to closing
18
Extending leases at certain Casual Male XL locations
Greater conversion rate of Casual Male XL
customers in Spring 2014 than Spring 2013
+24%

Destination XL Group, Inc.
FALL 2014 MARKETING CAMPAIGN
19
Commence campaign two weeks later than prior year
Will run from mid-October through mid-December
Aligned with peak holiday selling season and targeting gift givers
Greater quality of program for ad placement (NFL, ESPN, Prime Time)
Increased media presence for Thanksgiving week to mid-December
Implement a “lead into the weekend”
strategy

Destination XL Group, Inc.
GREATER PRESENCE IN METRO MARKETS
20
Customers typically
willing to drive up to 20
miles to shop at DXL
Chicago metro market
large enough for
multiple full-sized and
5K DXL stores
Prior to conversion,
there were 19 Casual
Male XL stores that
serviced this market
Full size DXL
5K DXL
Future DXL

Destination XL Group, Inc.
IMPRESSIVE DOUBLE-DIGIT COMP SALES
21
(11 stores)
(16 stores)           (23 stores)           (29 stores)      
(36 stores)           (48 stores)          (52 stores)     
(61 stores)
1
Spring marketing campaign ran from 5/5/13 to 6/14/13
2
Fall marketing campaign ran from 9/28/13 to 11/23/13
3
Spring marketing campaign ran from 4/27/14 to 6/14/14
1
2
5 quarters of double-digit comp sales increases
3
1
(2.7)%
5.9%
4.7%
16.5%
11.3%
13.6%
12.8%
11.3%
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014

IMPROVING DIRECT BUSINESS
22
Eliminated catalog
circulation in May 2013
Improved website
functionality
Omnichannel retailer
•Ship to store
•Preferred delivery
•Store inventory available online
•Free shipping on orders above $100
•Mobile coming soon
Increased digital display
marketing
Stronger promotional
cadence
Destination XL Group, Inc.

Destination XL Group, Inc.
FINANCIAL PERFORMANCE
Destination XL Group, Inc.

Q2 2014 SALES HIGHLIGHTS
Total sales (Retail and Direct)
Comparable sales (all stores)
DXL comparable store sales
Casual Male XL and Rochester Clothing stores
24
+5.8%
+7.0%
+11.3%
+7.1%
Destination XL Group, Inc.

Destination XL Group, Inc.
25
SALES AND GROSS MARGINS
Strong gross margins provide opportunity for significant sales leverage
$192.2
$195.8
$196.0
$192.0
$200.5
$392.0
$395.9
$399.7
$388.0
45.9%
46.3%
46.5%
46.0%
45.6%
2010
2011
2012
2013
2014 YTD
($MM)
Sales Q1 & Q2
Total Annual Sales
Gross Margin

Destination XL Group, Inc.
26
EBITDA & EBITDA MARGIN
1
EBITDA, Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA Margin are non-GAAP measures. The above Adjusted EBITDA
for fiscal 2011 excludes a trademark impairment charge of $23.1 million. For additional information about these non-GAAP
measures, including a reconciliation to their respective GAAP measures, see Appendix A attached to this presentation.
1
1
$31.4
$31.2
$29.4
$7.7
$4.5
8.0%
7.9%
7.4%
2.2%
2010
2011
2012
2013
2014 YTD
($MM)
EBITDA
EBITDA as a Percentage of Sales
2.0%

Destination XL Group, Inc.
OPERATING MARGIN & COMPARABLE SALES
Focus on improving operating margins through greater DXL sales
(continuing operations)
Total DXLG Comp Sales
27
Total DXLG Operating Margin
1
Before impairment charge of $23.1 million
4.6%
4.7%
3.5%
(3.4)%
(3.3)%
2010
2011
2012
2013
2014 YTD
1.5%
2.1%
1.5%
3.0%
5.2%
2010
2011
2012
2013
2014 YTD
Destination XL Group, Inc.

Destination XL Group, Inc.
28
INCREASING SG&A WITH DXL ROLL-OUT
$19.0
$19.6
$18.5
$27.8
$14.3
$148.4
$152.0
$156.4
$170.7
$86.8
37.9%
38.4%
39.1%
44.0%
43.3%
2010
2011
2012
2013
2014 YTD
Marketing Expense
Total SG&A
SG&A as a Percentage of Sales
($MM)

Destination XL Group, Inc.
29
SOLID BALANCE SHEET
2010
2011
2012
2013
Q2
2014
Inventory
$92.9
$104.2
$104.2
$105.6
$116.0
Net borrowings under revolver
$0
$0
$0
$9.0
$25.7
Cash on hand
$4.1
$10.4
$8.2
$4.5
$5.6
Fixed term loan
$0
$0
$0
$16.7
$22.6
($MM)
Unused excess availability under credit facility
at August
2, 2014 was $71.0 million

Destination XL Group, Inc.
30
CASH FLOW & CAPITAL EXPENDITURES
1
1
Before tenant allowances
$18.7
$23.4
$29.9
$24.9
$(2.7)
$9.0
$18.0
$32.4
$54.1
$18.9
2010
2011
2012
2013
2014 YTD
($MM)
Cash Flow from Operating Activities
CAPEX

Destination XL Group, Inc.
31
DXLG INVESTMENT HIGHLIGHTS
Transformation to DXL concept creates compelling
investment opportunity
Significant market share/sales growth opportunity
Strong gross margins
Ability to significantly improve operating margins
Solid balance sheet with borrowing capacity

Destination XL Group, Inc.
NON-GAAP RECONCILIATION
•
In addition to Operating Income (Loss) determined in accordance with United States Generally Accepted Accounting Principles (GAAP), the Company uses
certain non-GAAP financial measures, such as “EBITDA,”
“Adjusted  EBITDA,”EBITDA  Margin”
and “Adjusted EBITDA Margin”
in assessing its operating
performance. The Company believes that these non-GAAP measures serve as appropriate measures to be used in evaluating the performance of its
business.
•
The Company defines EBITDA as Operating Income (Loss) before Depreciation and Amortization.  In addition, Adjusted EBITDA for fiscal 2011 excludes
the impact of a non-recurring trademark impairment charge.  The Company defines EBITDA Margin and Adjusted EBITDA  Margin as EBITDA or Adjusted
EBITDA divided by Sales. 
•
EBITDA and Adjusted EBITDA as defined by the Company may not be comparable to similarly titled measures reported by other companies. The Company
does not intend for non-GAAP financial measures to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP.
•
The following table provides a reconciliation of Operating Income (Loss), on a GAAP basis, to  EBITDA and Adjusted EBITDA, on a non-GAAP basis (in
millions, except percentages)
Fiscal year:
2010
2011
2012
2013
2014
YTD
Sales
$  392.0
$  395.9
$   399.6
$   388.0
$   200.5
Operating Income (Loss), GAAP Basis
$    18.2
$    (4.4)
$     13.9
$  (13.1)
$   (6.6)
Add back:
Depreciation and Amortization
$    13.2
$   12.5
$      15.5
$   20.8
$   11.1
EBITDA
$    31.4
$     8.1
$       29.4
$     7.7
$   4.5
Adjustment for Trademark Impairment
-
$    23.1
-
-
-
ADJUSTED EBITDA
-
$    31.2
-
-
-
EBITDA MARGIN
8.0%
2.0%
7.4%
2.0%
2.2%
ADJUSTED EBITDA MARGIN
7.9%
Appendix A

Destination XL Group, Inc.
INVESTOR CONTACT
Jeffrey Unger
V. P. Investor Relations
Destination XL Group, Inc.
jeffunger@usa.net
561-482-9715 (o)
561-543-9806 (c)
www.DestinationXL.com
33