10. Tariffs

On February 20, 2026, the U.S. Supreme Court ruled that certain tariffs imposed by the current administration under the International Emergency Economic Powers Act were unlawful. Following this ruling, the U.S. Court of International Trade directed U.S. Customs and Border Protection (“CBP”) to establish a process for the submission and review of refund claims related to affected tariffs.

In April 2026, CBP launched an online portal through which companies may submit refund requests. During the second quarter of fiscal 2026, the Company received refunds totaling approximately $4.6 million related to tariffs previously paid. The $4.6 million was recognized as a reduction in cost of goods sold for the three and six months ended August 1, 2026.

The scope, duration, and rates of existing and proposed tariff measures, as well as the potential for modifications, suspensions, or retaliatory trade actions, remain uncertain. These actions could impact the Company’s operations, supply chain, and cost structure. The Company is continuing to monitor these developments and assessing the potential impact on its business, financial condition, and results of operations.

12. Agreement and Plan of Merger

On December 11, 2025, the Company, Divine Merger Sub I, Inc., a Delaware corporation and wholly owned direct subsidiary of the Company (“Merger Sub”), and FBB Holdings I, Inc., a Delaware corporation (“FBB” or “FullBeauty”), entered into an Agreement and Plan of Merger (as subsequently amended, the “Merger Agreement”). The Merger Agreement provides that, on the terms and subject to the conditions set forth therein, Merger Sub would merge with and into FullBeauty, with FullBeauty being the surviving corporation as a wholly owned subsidiary of the Company (the “Merger”). On August 19, 2026, the Company, Merger Sub and FullBeauty amended the Merger Agreement to extend the end date from September 11, 2026 to October 30, 2026.

If the Merger is consummated, at the effective time of the Merger, each share of common stock, par value $0.01 per share, of FBB (“FBB Common Stock”) would be converted into the right to receive that number of fully paid and nonassessable shares of the common stock, par value $0.01 per share, of the Company (the “DXL Common Stock”) equal to the Exchange Ratio, as defined in the Merger Agreement. A holder of FBB Common Stock who would otherwise be entitled to receive a fraction of a share of DXL Common Stock would have such fractional share rounded up to one whole share of DXL Common Stock. If the Merger is

consummated, holders of FBB Common Stock would own 55% of the combined company and holders of DXL Common Stock would own 45% of the combined company.

The Company filed an Amendment No. 1 to Preliminary Proxy Statement (as amended, the “Preliminary Proxy Statement”) with the U.S. Securities and Exchange Commission (the “SEC”) on September 2, 2026. Upon clearance from the SEC, the Company intends to file a definitive proxy statement, which will be distributed to its stockholders in connection with their vote on the proposal to approve the issuance of shares of the Company’s common stock as consideration in the Merger (the “Issuance Proposal”). As described more fully in the Preliminary Proxy Statement, the Company’s Board of Directors (the “Board”) has continued to evaluate the Merger, including in light of developments since the execution of the Merger Agreement. As part of that evaluation, the Board has considered, among other things, (i) the increasingly challenging consumer environment since the execution of the Merger Agreement in December 2025, (ii) FullBeauty’s continuing decline in operating performance and financial results, including lower-than-expected net sales, net income (loss), adjusted EBITDA and cash flow from operations as compared to both prior-year performance and prior projections (and the corresponding heightened risk that FullBeauty will not achieve its projections for the current fiscal year), (iii) FullBeauty’s increased level of indebtedness, (iv) concerns regarding FullBeauty’s potential negative equity value, and (v) the substantial economic dilution that DXL stockholders would experience if the Merger were consummated on its current terms. Based on this evaluation, including these considerations, the Board has determined that the Merger and the transactions contemplated by the Merger Agreement, including the Issuance Proposal, are no longer advisable and are not in the best interests of the Company and its stockholders. Accordingly, the Board recommends that its stockholders vote “against” the Issuance Proposal that will be included in the definitive proxy statement, when it becomes available.

Under the terms of the Merger Agreement, this change in recommendation by the Board does not permit the Company to terminate the Merger Agreement and, accordingly, the Company remains obligated to submit the Issuance Proposal to its stockholders for a vote. By contrast, as a result of the Board's change in recommendation, FullBeauty has the right to terminate the Merger Agreement under specified circumstances, in which case the Company would be required to pay a termination fee of $2.5 million and/or out-of-pocket fees and expense reimbursement of up to $950,000.

Pursuant to the Merger Agreement, if the Merger is not consummated by October 30, 2026, either party could terminate the Merger Agreement without penalty.

Costs incurred in connection with this Merger, primarily related to professional service fees, of $3.0 million and $0.2 million, were included in “Transaction-related costs” on the Consolidated Statements of Operations for the first six months of fiscal 2026 and fiscal 2025, respectively.