US' Destination XL swings to Q2 loss as sales decline 7.5%

The adjusted EBITDA dropped to $4.6 million in Q2 FY24, and the gross margin contracted 300 basis points (bps) to 45.2 per cent, impacted by higher occupancy costs and tariff-driven freight expenses, DXL said in a press release.

The cash and investments stood at $33.5 million, down from $63.2 million a year ago, reflecting share repurchases and capital spending on store development. The company has no outstanding debt and recently extended its $100 million credit facility through 2030.

Destination XL ended Q2 with 294 stores across formats, covering 1.99 million square feet, up from 288 stores and 1.95 million square feet at year-end 2024. The growth was driven by six new DXL store openings and conversions of select Casual Male XL outlets into DXL formats.

On the digital side, direct-to-consumer (DTC) sales—which include the website, app, and third-party marketplaces—fell to $31.8 million, representing 27.5 per cent of sales, compared to $37 million or 29.6 per cent of sales a year earlier. The decline was attributed mainly to lower online traffic, though management reiterated that digital remains a critical growth driver.

“DXL continues to act with agility to address shifts in consumer behaviour, while staying focused on positioning the company for long-term growth. Our second quarter results continue to reflect big and tall sector softness, plus the macroeconomic challenges and geopolitical environment affecting consumer discretionary spending. Over the past year, our customer has been gravitating more towards lower priced goods and select promotions, signalling a consumer who is carefully choosing where and how he spends his money,” said Harvey Kanter, president and CEO at Destination XL.

“In response to these challenges, and given our consumers' shift toward our private brands, we recognize and are focused on bringing product to market that offers higher quality, lower price points and greater value. We are extending our core assortment to provide breadth and depth to our private brand mix,” added Kanter.

Meanwhile, in the first half (H1) of FY25, sales declined 8 per cent to $221 million, and net loss stood at $2.2 million. The operating income swung to a loss of $2.8 million, down from $8 million. Adjusted EBITDA was $8.6 million.

Cash flow from operations was negative $2.1 million in H1, reflecting weaker earnings and accelerated inventory receipts to mitigate tariff exposure. Free cash flow was negative $14.2 million, compared with a positive $3.2 million.

During the first six months of fiscal 2025, the company opened six new DXL stores, converted three Casual Male XL retail stores and one Casual Male XL outlet to DXL retail stores and one Casual Male XL outlet to a DXL outlet. The company plans to open two more stores in FY25, with capital expenditures projected between $17 million and $19 million, net of tenant incentives.

Despite tariff volatility and cautious consumer sentiment, DXL expects that tighter promotional discipline, private brand expansion, and fit technology will improve results and position the business for sustainable long-term growth.

Programmes such as the newly launched Fit Exchange, Heroes Discounts, and enhanced loyalty benefits are being deployed to reinforce customer engagement.

DXL aims to grow private brand penetration from 56.5 per cent to over 60 per cent in 2026 and 65 per cent in 2027, supported by targeted promotions and reduced investment in underperforming national brands.

The company is also rolling out its proprietary FiTMAP sizing technology, which offers precision fit across private and select national brands. Currently available in 86 stores, FiTMAP is expected to expand to 200 locations by fiscal 2027, reinforcing DXL’s position as a Big + Tall technology leader, added the release.

ALCHEMPro News Desk (SG)