SEC Filing | Destination XL Group, Inc.

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 01-34219

DESTINATION XL GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware	04-2623104
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
555 Turnpike Street Canton, MA	02021
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (781) 828-9300

Securities registered pursuant to Section 12(b) of the Act.


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	DXLG	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 10, 2022, the registrant had 63,646,745 shares of common stock, $0.01 par value per share, outstanding.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

DESTINATION XL GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


	April 30, 2022			January 29, 2022
	(Fiscal 2022)			(Fiscal 2021)

ASSETS
Current assets:
Cash and cash equivalents	$	7,540		$	15,506
Accounts receivable		1,172			2,110
Inventories		96,868			81,764
Prepaid expenses and other current assets		8,077			6,615
Total current assets		113,657			105,995

Non-current assets:
Property and equipment, net of accumulated depreciation and amortization		42,150			44,442
Operating lease right-of-use assets		129,877			127,812
Intangible assets		1,150			1,150
Other assets		560			559
Total assets	$	287,394		$	279,958

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	29,413		$	25,165
Accrued expenses and other current liabilities		28,445			35,102
Operating leases, current		36,504			35,191
Total current liabilities		94,362			95,458

Long-term liabilities:
Operating leases, non-current		118,941			120,414
Other long-term liabilities		6,031			5,867
Total long-term liabilities		124,972			126,281

Commitments and contingencies

Stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued		—			—
Common stock, $0.01 par value, 125,000,000 shares authorized, 77,323,419 and 77,025,419 shares issued at April 30, 2022 and January 29, 2022, respectively		773			770
Additional paid-in capital		320,745			319,511
Treasury stock at cost, 13,701,974 shares and 12,755,873 shares at April 30, 2022 and January 29, 2022, respectively		(97,505	)		(92,658	)
Accumulated deficit		(150,491	)		(163,879	)
Accumulated other comprehensive loss		(5,462	)		(5,525	)
Total stockholders' equity		68,060			58,219
Total liabilities and stockholders' equity	$	287,394		$	279,958

The accompanying notes are an integral part of the consolidated financial statements.

DESTINATION XL GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	For the Three Months Ended
	April 30, 2022			May 1, 2021
	(Fiscal 2022)			(Fiscal 2021)

Sales	$	127,655		$	111,494
Cost of goods sold including occupancy costs		63,788			60,661
Gross profit		63,867			50,833

Expenses:
Selling, general and administrative		46,597			37,118
Impairment (gain) of assets		(351	)		(652	)
Depreciation and amortization		3,987			4,500
Total expenses		50,233			40,966

Operating income		13,634			9,867

Interest expense, net		(143	)		(1,142	)

Income before provision for income taxes		13,491			8,725
Provision for income taxes		103			28


Net income	$	13,388		$	8,697


Net income per share - basic	$	0.21		$	0.14
Net income per share - diluted	$	0.20		$	0.14

Weighted-average number of common shares outstanding:
Basic		64,080			62,153
Diluted		68,370			63,000

The accompanying notes are an integral part of the consolidated financial statements.

DESTINATION XL GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	For the Three Months Ended
	April 30, 2022			May 1, 2021
	(Fiscal 2022)			(Fiscal 2021)
Net income	$	13,388		$	8,697

Other comprehensive income before taxes:
Foreign currency translation		(4	)		(25	)
Pension plans		67			78
Other comprehensive income before taxes		63			53
Tax provision related to items of other comprehensive income		—			—
Other comprehensive income, net of tax		63			53
Comprehensive income	$	13,451		$	8,750

The accompanying notes are an integral part of the consolidated financial statements.

DESTINATION XL GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)



																			Accumulated
							Additional												Other
	Common Stock						Paid-in			Treasury Stock						Accumulated			Comprehensive
	Shares			Amounts			Capital			Shares			Amounts			Deficit			Loss			Total
Balance at January 29, 2022		77,025		$	770		$	319,511			(12,755	)	$	(92,658	)	$	(163,879	)	$	(5,525	)	$	58,219
Board of directors compensation		29			—			125															125
Stock compensation expense								366															366
Restricted stock units (RSUs) granted for achievement of performance-based compensation, reclassified from liability to equity								1,138															1,138
Issuance of common stock, upon RSUs release		313			3			(3	)														—
Shares withheld for taxes related to net share settlement		(85	)		(1	)		(414	)														(415	)
Exercise of stock options		41			1			22															23
Repurchase of common stock											(946	)		(4,847	)								(4,847	)
Accumulated other comprehensive income (loss):
Pension plan, net of taxes																				67			67
Foreign currency, net of taxes																				(4	)		(4	)
Net income																	13,388						13,388
Balance at April 30, 2022		77,323		$	773		$	320,745			(13,702	)	$	(97,505	)	$	(150,491	)	$	(5,462	)	$	68,060

The accompanying notes are an integral part of the consolidated financial statements.

DESTINATION XL GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

(Unaudited)


																	Accumulated
					Additional												Other
	Common Stock				Paid-in			Treasury Stock						Accumulated			Comprehensive
	Shares		Amounts		Capital			Shares			Amounts			Deficit			Loss			Total
Balance at January 30, 2021		64,656	$	647	$	314,747			(12,755	)	$	(92,658	)	$	(220,592	)	$	(6,221	)	$	(4,077	)
Issuance of common stock through private direct offering, net of offering costs		11,111		111		4,264															4,375
Board of directors compensation		137		1		108															109
Stock compensation expense						327															327
Issuance of common stock, upon RSUs release		308		3		(3	)														—
Accumulated other comprehensive income (loss):
Pension plan, net of taxes																		78			78
Foreign currency, net of taxes																		(25	)		(25	)
Net income															8,697						8,697
Balance at May 1, 2021		76,212	$	762	$	319,443			(12,755	)	$	(92,658	)	$	(211,895	)	$	(6,168	)	$	9,484

The accompanying notes are an integral part of the consolidated financial statements.

DESTINATION XL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	April 30, 2022			May 1, 2021
	(Fiscal 2022)			(Fiscal 2021)
Cash flows from operating activities:
Net income	$	13,388		$	8,697
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Amortization and write-off of deferred debt issuance costs		19			215
Impairment (gain) of assets		(351	)		(652	)
Depreciation and amortization		3,987			4,500
Stock compensation expense		366			327
Board of directors stock compensation		125			109

Changes in operating assets and liabilities:
Accounts receivable		938			1,745
Inventories		(15,104	)		(3,362	)
Prepaid expenses and other current assets		(1,462	)		(2,692	)
Other assets		(20	)		4
Accounts payable		4,248			4,548
Operating leases, net		(1,874	)		(6,318	)
Accrued expenses and other liabilities		(5,803	)		644
Net cash provided by (used for) operating activities		(1,543	)		7,765

Cash flows from investing activities:
Additions to property and equipment, net		(1,184	)		(803	)
Net cash used for investing activities		(1,184	)		(803	)

Cash flows from financing activities:
Repurchase of common stock		(4,847	)		—
Proceeds from issuance of common stock from private direct offering, net of offering costs		—			4,375
Repayment of FILO loan		—			(15,000	)
Proceeds from new FILO loan		—			17,500
Net repayments under credit facility		—			(26,173	)
Debt issuance costs		—			(818	)
Tax withholdings paid related to net share settlements		(415	)		—
Proceeds from the exercise of stock options		23			—
Net cash used for financing activities		(5,239	)		(20,116	)
Net decrease in cash and cash equivalents		(7,966	)		(13,154	)
Cash and cash equivalents:
Beginning of period		15,506			18,997
End of period	$	7,540		$	5,843

The accompanying notes are an integral part of the consolidated financial statements.

DESTINATION XL GROUP, INC.

Notes to Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

In the opinion of management of Destination XL Group, Inc., a Delaware corporation (collectively with its subsidiaries, referred to as the “Company”), the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary for a fair presentation of the interim financial statements. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with the notes to the Company’s audited Consolidated Financial Statements for the fiscal year ended January 29, 2022 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 17, 2022.

The information set forth in these statements may be subject to normal year-end adjustments. The information reflects all adjustments that, in the opinion of management, are necessary to present fairly the Company’s results of operations, financial position and cash flows for the periods indicated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s business historically has been seasonal in nature, and the results of the interim periods presented are not necessarily indicative of the results to be expected for the full year.

The Company’s fiscal year is a 52- or 53- week period ending on the Saturday closest to January 31. Fiscal 2022 and fiscal 2021 are 52-week periods ending on January 28, 2023 and January 29, 2022, respectively.

Segment Information

The Company has two principal operating segments: its stores and its direct business. The Company considers its stores and direct operating segments to be similar in terms of economic characteristics, production processes and operations, and has therefore aggregated them into one reportable segment, retail segment, consistent with its omni-channel business approach. The Company’s wholesale business was a third operating segment. In the first quarter of fiscal 2022, we ended our relationship with our primary wholesale customer. Due to the immateriality of the wholesale segment’s revenues, profits and assets, its operating results are aggregated with the retail segment for both periods presented.

Fair Value of Financial Instruments

ASC Topic 825, Financial Instruments, requires disclosure of the fair value of certain financial instruments. ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements.

The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities.

The Company utilizes observable market inputs (quoted market prices) when measuring fair value whenever possible.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of these instruments.

Accumulated Other Comprehensive Income (Loss) - (“AOCI”)

Other comprehensive income (loss) includes amounts related to foreign currency and pension plans and is reported in the Consolidated Statements of Comprehensive Income (Loss). Other comprehensive income (loss) and reclassifications from AOCI for the three months ended April 30, 2022 and May 1, 2021, respectively, we