US' Destination XL Q3 FY25 sales slide 5.2% as demand softens

Store comparable sales declined 5.2 per cent, while the direct business fell 13.1 per cent, largely due to reduced traffic and lower average transaction values as customers gravitated towards more value-driven merchandise.

The gross margin, including occupancy costs, declined to 42.7 per cent from 45.1 per cent a year earlier. The 240 basis-point contraction was driven mainly by higher occupancy costs and increased markdown activity, partially offset by a favourable mix shift towards private brands. The company estimated that, assuming no additional tariffs, the impact of tariffs on gross margin for fiscal 2025 would be approximately $2 million.

The selling, general and administrative (SG&A) expenses represented 44.7 per cent of sales, compared with 44.1 per cent a year earlier, while marketing costs increased to 6 per cent of sales. Net interest income declined to $0.1 million due to lower average investment balances, DXL said in a press release.

The company posted a net loss of $4.1 million, or loss of $0.08 per diluted share, compared with a net loss of $1.8 million, or a loss of $0.03 per diluted share, a year earlier. Adjusted EBITDA, a non-GAAP measure, was a loss of $2 million, versus positive $1 million in the prior-year quarter.

At quarter-end, total cash and investments stood at $27 million, with no outstanding debt in either period. The company said the decline reflected $13.1 million in capital expenditure over the past 12 months for new store development. During the quarter, it also extended its credit facility through August 13, 2030, providing access to up to $100 million in future borrowing capacity.

“Since the start of the fiscal year, we have pursued three critically important strategic initiatives to address ongoing volatility, evolving consumer dynamics, and challenges specific to the Big +Tall retail sector: assortment, our proprietary FiTMAP technology, and promotions. We believe these strategic initiatives will better position the Company’s return to growth and enhance value for our shareholders,” said Harvey Kanter, president and CEO at Destination XL.

“Our sales results continue to reflect a big and tall customer who is not shopping as frequently or spending as much money with DXL as we have seen in prior years. There has been a discernable shift in customer preference towards entry level price points and private brands, which compels us to extend and evolve our core assortment to provide a greater selection of our private and value-driven brands,” added Kanter. “In addition, we are also accelerating the roll out of our FiTMAP scanning technology to additional stores, which allows us to build a deeper level of engagement with our customers.”

Digital commerce sales, defined as sales originating online, declined to $27.3 million, or 26.8 per cent of total sales, from $31.3 million, or 29.1 per cent, in the prior-year quarter, primarily due to lower online traffic. The decrease in direct sales was driven primarily by a decrease in online traffic, added the release.

For the first nine months (9M) of FY25, operating cash flow was a negative $3.2 million, compared with positive $12.5 million a year earlier. Free cash flow was a negative $20.2 million, reflecting weaker earnings and continued investment in store development.

At the end of the third quarter (Q3), DXL operated a total of 296 stores across formats, with total retail square footage of approximately 2 million square feet. During the 9M period, the company opened eight new DXL stores and completed multiple store conversions. Capital expenditure for the full fiscal is expected to range between $17 million and $19 million, net of tenant incentives.

ALCHEMPro News Desk (SG)