What changed in this filing

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Item 1. Financial Statements

2023-05-25 compared with 2022-11-17 · 310 added, 393 removed, 453 unchanged (61% of the section changed)

3 unchanged sentences

(In thousands, except share data)

October 29, 2022

April 29, 2023

January 28, 2023

3 unchanged sentences

Cash and cash equivalents

Short-term investments

Accounts receivable

19 unchanged sentences

Preferred stock, $ 0.01 par value, 1,000,000 shares authorized, none issued

Common stock, $ 0.01 par value, 125,000,000 shares authorized, 78,057,366 and 77,025,419 shares issued at October 29, 2022 and January 29, 2022, respectively

Common stock, $ 0.01 par value, 125,000,000 shares authorized, 78,495,557 and 78,229,861 shares issued at April 29, 2023 and January 28, 2023, respectively

Additional paid-in capital

Treasury stock at cost, 15,625,172 shares and 12,755,873 shares at October 29, 2022 and January 29, 2022, respectively

Treasury stock at cost, 15,625,172 shares at April 29, 2023 and January 28, 2023, respectively

Accumulated deficit

7 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

(Fiscal 2022)

(Fiscal 2021)

April 29, 2023

April 30, 2022

(Fiscal 2023)

6 unchanged sentences

Operating income

Interest expense, net

Income before provision (benefit) for income taxes

Provision (benefit) for income taxes

Interest income (expense), net

Income before provision for income taxes

Provision for income taxes

Net income per share - basic

6 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

(Fiscal 2022)

(Fiscal 2021)

April 29, 2023

April 30, 2022

(Fiscal 2023)

21 unchanged sentences

Exercise of stock options

Repurchase of common stock

Accumulated other comprehensive income (loss):

Pension plan, net of taxes

Foreign currency, net of taxes

Other comprehensive income

Balance at April 29, 2023

Board of directors compensation

Stock compensation expense

Issuance of common stock, upon RSUs release

Shares withheld for taxes related to net share settlement

Exercise of stock options

Repurchase of common stock

Accumulated other comprehensive income (loss):

Pension plan, net of taxes

Foreign currency, net of taxes

Balance at July 30, 2022

Board of directors compensation

Stock compensation expense

Issuance of common stock, upon RSUs release

Exercise of stock options

Shares withheld for taxes related to net share settlement

Accumulated other comprehensive income:

Pension plan, net of taxes

Foreign currency, net of taxes

Balance at October 29, 2022

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

EQUITY (DEFICIT)

(In thousands)

2 unchanged sentences

Balance at January 29, 2022

Issuance of common stock through private direct offering, net of offering costs

Board of directors' compensation

Stock compensation expense

RSUs granted for achievement of performance-based

compensation, reclassified from liability to equity

Issuance of common stock, upon RSUs release

Accumulated other comprehensive income (loss):

Pension plan, net of taxes

Foreign currency, net of taxes

Balance at May 1, 2021

Board of directors compensation

Stock compensation expense

Exercise of stock options

Accumulated other comprehensive income (loss):

Pension plan, net of taxes

Foreign currency, net of taxes

Balance at July 31, 2021

Board of directors compensation

Stock compensation expense

Issuance of common stock, upon PSUs release

Shares withheld for taxes related to net share settlement

Exercise of stock options

Shares withheld for taxes related to net share settlements

Accumulated other comprehensive income (loss):

Repurchase of common stock

Other comprehensive income (loss):

Pension plan, net of taxes

Foreign currency, net of taxes

Balance at October 30, 2021

Balance at April 30, 2022

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

2 unchanged sentences

(In thousands)

For the Nine Months Ended

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

(Fiscal 2023)

1 unchanged sentence

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization and write-off of deferred debt issuance costs

Adjustments to reconcile net income to net cash used for by operating activities:

Amortization of deferred debt issuance costs

Impairment (gain) of assets

Gain from the sale of equipment

Depreciation and amortization

8 unchanged sentences

Accrued expenses and other liabilities

Net cash provided by operating activities

Net cash used for operating activities

Cash flows from investing activities:

Additions to property and equipment, net

Proceeds from sale of equipment

Purchase of short-term investments

Net cash used for investing activities

1 unchanged sentence

Repurchase of common stock

Proceeds from issuance of common stock from private direct offering, net of offering costs

Repayment of FILO loan

Proceeds from new FILO loan

Net repayments under credit facility

Debt extinguishment costs

Debt issuance costs

Tax withholdings paid related to net share settlements

1 unchanged sentence

Net cash used for financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents:

12 unchanged sentences

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.

Fiscal 2023 is a 53-week period ending on February 3, 2024 and fiscal 2022 was a 52-week period which ended on January 28, 2023.

Segment Information

2 unchanged sentences

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, the Company ended its relationship with its 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 all periods presented.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash in banks and short-term investments, which have a maturity of ninety days or less when acquired.

Included in cash equivalents are credit card and debit card receivables from banks, which generally settle within two to four business days.

Short-Term Investments

Short-term investments consists of those investments that have a maturity date, when acquired, that is greater than three months and less than twelve months.

These investments are classified as held-to-maturity and are carried at amortized cost, which approximates fair value due to the short period between purchase and maturity.

Concentration of Credit Risk

Cash and cash equivalents include amounts due from third party financial institutions, which from time to time, may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits.

The Company is potentially exposed to a concentration of credit risk when cash and cash equivalent deposits in these financial institutions are in excess of FDIC limits.

The Company considers the credit risk associated with these financial instruments to be minimal as cash and cash equivalents are held by financial institutions with high credit ratings and it has not historically sustained any credit losses associated with its cash and cash equivalents balances.

In addition, the Company's cash and cash equivalents include money market accounts with Citizens Bank, N.A.

and investments in U.S.

government-backed securities held with Fidelity Investments.

Fair Value of Financial Instruments

15 unchanged sentences

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.

See Note 10 - Fair Value Measurement for information regarding the fair value of certain financial assets.

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 and nine months ended October 29, 2022 and October 30, 2021, respectively, were as follows:

October 29, 2022

October 30, 2021

Other comprehensive income (loss) and reclassifications from AOCI for the three months ended April 29, 2023 and April 30, 2022, respectively, were as follows:

April 29, 2023

April 30, 2022

For the three months ended:

7 unchanged sentences

Balance at end of quarter

October 29, 2022

October 30, 2021

For the nine months ended:

(in thousands)

Balance at beginning of fiscal year

Other comprehensive income (loss) before

reclassifications, net of taxes

Amounts reclassified from accumulated other

comprehensive income, net of taxes (1)

Other comprehensive income (loss) for the period

Balance at end of quarter

(1) Includes the amortization of the unrecognized loss on pension plans, which was charged to “Selling, General and Administrative”

Expense on the Consolidated Statements of Operations for all periods presented.

The Company recognized income of $ 9,000 and $ 13,000 for the three months ended October 29, 2022 and October 30, 2021 , respectively, and income of $ 29,000 and $ 37,000 for the first nine months ended October 29, 2022 and October 30, 2021 , respectively, as a result of a change in amortization from average remaining future service to average remaining lifetime.

There was no related tax effect for the three and nine months ended October 29, 2022 and October 30, 2021.

The Company recognized expense of $ 58,000 , or $ 43,000 net of taxes, for the three months ended April 29, 2023.

For the three months ended April 30, 2022 , the Company recognized income of $ 12,000 , as a result of a change in amortization from average remaining future service to average remaining lifetime.

There was no related tax effect for the three months ended April 30, 2022.

Stock-based Compensation

7 unchanged sentences

Actual results and future changes in estimates may differ from the Company’s current estimates.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model based on the assumptions in the table below as it relates to stock options granted during the first nine months of fiscal 2022 and fiscal 2021.

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

Expected volatility

6 unchanged sentences

2.5 - 3.5 yrs.

3.0 - 4.0 yrs.

Dividend rate

Weighted average fair value of options granted

The Company has outstanding performance stock units (PSUs) with a market condition.

The respective grant-date fair value and derived service periods assigned to the PSUs were determined using a Monte Carlo model.

The valuation included assumptions with respect to the Company’s historical volatility, risk-free rate and cost of equity and the related stock compensation expense was fully expensed by the end of fiscal 2021.

Impairment of Long-Lived Assets

5 unchanged sentences

The amount of impairment, if any, is measured based on projected discounted future cash flows using a discount rate reflecting the Company’s average cost of funds.

There were no impairments or non-cash gains recognized in the third quarter of fiscal 2022.

For the third quarter of fiscal 2021, the Company recognized a non-cash gain of $ 1.2 million, and for the first nine months of fiscal 2022 and fiscal 2021, the Company recognized non-cash gains of $ 0.6 million and $ 2.3 million, respectively.

These non-cash gains related to the Company’s decision to close certain retail stores, which resulted in a revaluation of the existing lease liabilities.

There were no impairments or non-cash gains recognized in the first quarter of fiscal 2023.

For the first quarter of fiscal 2022, the Company recognized a non-cash gain of $ 0.5 million.

This non-cash gain related to the Company’s decision to close certain retail stores, which resulted in a revaluation of the existing lease liabilities.

The portion of the gains that related to previously recorded impairment charges against the operating lease right-of-use asset were included as an offset to previously recorded asset impairment charges.

Accordingly, for the third quarter of fiscal 2021, $ 1.1 million was included as an offset to asset impairment charges.

For the first nine months of fiscal 2022 and fiscal 2021, $ 0.4 million and $ 2.1 million, respectively, were included as an offset to asset impairment charges.

The remaining gains for the third quarter of fiscal 2021 and the first nine months of fiscal 2022 and fiscal 2021 were included as a reduction of store occupancy costs.

The Company adopted ASU 2016-02, “

Leases (Topic 842) ”

in fiscal 2019.

Under ASC 842, the Company determines if an arrangement contains a lease at the inception of a contract.

Accordingly, for the first quarter of fiscal 2022, $ 0.4 million was included as an offset to asset impairment charges.

The remaining gain was included as a reduction of store occupancy costs.

The Company determines if an arrangement contains a lease at the inception of a contract.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

3 unchanged sentences

The Company also made an accounting policy election that the recognition requirement of ASC 842 will not be applied to certain, if any, non-store leases, with a term of 12 months or less, recognizing those lease payments on a straight-line basis over the lease term.

At October 29, 2022 , the Company had no short-term leases.

At April 29, 2023 , the Company had no short-term leases.

The Company’s store leases typically contain options that permit renewals for additional periods of up to five years each.

In general, for store leases with an initial term of 10 years or more, the options to extend are not considered reasonably certain at lease commencement.

For stores leases with an initial term of 5 years, the Company evaluates each lease independently and, when the Company considers it reasonably certain that it will exercise an option to extend, the associated payment of that option will be included in the measurement of the right-of-use asset and lease liability.

For store leases with an initial term of 5 years, the Company evaluates each lease independently and, when the Company considers it reasonably certain that it will exercise an option to extend, the associated payment of that option will be included in the measurement of the right-of-use asset and lease liability.

Renewal options are not included in the lease term for automobile and equipment leases because they are not considered reasonably certain of being exercised at lease commencement.

Renewal options were not considered

for the Company’s corporate headquarters and distribution center lease, which was entered into in 2006 and was for an initial 20 -year term .

Renewal options were not considered for the Company’s corporate headquarters and distribution center lease, which was entered into in 2006 and was for an initial 20 -year term .

At the end of the initial term, the Company will have the opportunity to extend this lease for six additional successive periods of five years .

2 unchanged sentences

Other store leases contain one periodic fixed lease payment that includes real estate taxes, common area maintenance and insurance.

These fixed payments are considered part of the lease payment and included in the right-of-use assets and lease liabilities.

These fixed payments are considered part of the lease payment and

included in the right-of-use assets and lease liabilities.

Tenant allowances are included as an offset to the right-of-use asset and amortized as reductions to rent expense over the associated lease term.

See Note 4 ‘‘

Leases ’’

for additional information.

Recently Issued Accounting Pronouncements -Not Yet Adopted

See Note 4, " Leases" for additional information.

Recently Issued Accounting Pronouncements - Adopted

In September 2022, the FASB issued Accounting Standards Update ("ASU") 2022 - 04, Liabilities –

2 unchanged sentences

The new standard does not affect the recognition, measurement, or financial statement presentation of supplier finance program obligations.

ASU 2022-04 is effective as of the Company's first quarter of fiscal 2023, with the exception of the rollforward information, which is effective for fiscal 2024.

The Company does not plan to elect early adoption of this update and does not expect this pronouncement to materially affect its Consolidated Financial Statements.

No other new accounting pronouncements, issued or effective during the first nine months of fiscal 2022, have had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.

ASU 2022-04 was adopted in the first quarter of fiscal 2023, with the exception of the rollforward information, which is not effective until fiscal 2024.

The adoption of ASU 2022-04 did not have a material effect on the Company's Consolidated Financial Statements as the Company does not participate in supplier finance programs.

Recently Issued Accounting Pronouncements - Not Yet Adopted

There were no other new accounting pronouncements, issued or effective during the first three months of fiscal 2023, which had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.

Revenue Recognition

The Company operates as a retailer of big and tall men’s clothing, which includes stores, direct and wholesale.

The Company operates as a retailer of big and tall men’s clothing, which includes stores and direct.

Revenue is recognized by the operating segment that initiates a customer’s order.

1 unchanged sentence

Direct sales are defined as sales that originate online, including those initiated online at the store level, on its website or on third-party marketplaces.

Wholesale sales are defined as sales made to wholesale customers pursuant to the terms of each customer’s contract with the Company.

Generally, all revenues are recognized when control of the promised goods is transferred to customers, in an amount that reflects the consideration in exchange for those goods.

2 unchanged sentences

Revenue from the Company’s direct operations is recognized at the time a customer order is delivered, net of an allowance for sales returns, which is estimated based upon historical experience.

Revenue from the Company’s wholesale operations was recognized at the time the wholesale customer took physical receipt of the merchandise, net of any identified discounts in accordance with each individual order.

For the first nine months of fiscal 2022 and fiscal 2021, chargebacks were immaterial.

Unredeemed Gift Cards, Gift Certificates, and Credit Vouchers.

3 unchanged sentences

Breakage is recognized over two years in proportion to historical redemption trends and is recorded as sales in the Consolidated Statements of Operations.

The gift card liability, net of breakage, was $ 2.1 million and $ 3.3 million at October 29, 2022 and January 29, 2022, respectively.

The gift card liability, net of breakage, was $ 2.6 million and $ 3.4 million at April 29, 2023 and January 28, 2023, respectively.

Unredeemed Loyalty Coupons.

The Company offers a free loyalty program to its customers for which points accumulate based on the purchase of merchandise.

Approximately 90 % of the Company’s customers participate in the loyalty program.

Under ASC 606, Revenue from Contracts with Customers , these loyalty points provide the customer with a material right and a distinct performance obligation with revenue deferred and recognized when the points are expected to redeem or expire.

The cycle of earning and redeeming loyalty points is generally under one year in duration.

The loyalty accrual, net of breakage, was $ 1.3 million and $ 1.3 million at October 29, 2022 and January 29, 2022, respectively.

The loyalty accrual, net of breakage, was $ 1.6 million and $ 1.6 million at April 29, 2023 and January 28, 2023, respectively.

Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales for all periods presented.

3 unchanged sentences

Substantially all of the Company’s revenue is generated from its stores and direct businesses.

The operating results from the wholesale segment, which were immaterial, have been aggregated with this reportable segment, but the revenues are separately reported below.

Results for the first quarter of fiscal 2022 included operating results from the wholesale segment, which was discontinued in the first quarter of fiscal 2022.

Accordingly, the Company has determined that the following sales channels depict the nature, amount, timing, and uncertainty of how revenue and cash flows are affected by economic factors:

For the Three Months Ended

For the Nine Months Ended

(in thousands)

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

Retail segment

2 unchanged sentences

On October 28, 2021, the Company entered into a credit facility with Citizens Bank, N.A.

(the "Credit Facility”).

On April 20, 2023, the Company entered into the First Amendment to Credit Agreement which provided for the replacement of the London Interbank Offering Rate (“LIBOR”) interest rate options with the secured overnight financing rate ("SOFR") based options (as amended, the "Credit Agreement").

The Credit Facility is a $ 125.0 million secured, asset-based credit facility with a maturity date of October 28, 2026 .

The maximum committed borrowing of $ 125.0 million includes a sublimit of $ 20.0 million for commercial and standby letter of credits and a sublimit of up to $ 15.0 million for swing line loans.

The maximum committed borrowing of $ 125.0 million includes a sublimit of $ 20.0 million for commercial and standby letters of credit and a sublimit of up to $ 15.0 million for swing line loans.

The Company’s ability to borrow under the Credit Facility is determined using an availability formula based on eligible assets .

Borrowings made pursuant to the Credit Facility will be made pursuant to either a Base Rate loan or LIBOR Rate loan, at the Company's option.

As of April 20, 2023, borrowings under the Credit Agreement bear interest at either a Base Rate loan or Daily Simple SOFR rate, at the Company's option .

Base Rate loans will bear interest at a rate equal to (i) the greater of:

(a) the Prime Rate, (b) the Federal Funds effective rate plus 0.50 % per annum and (c) the daily LIBOR rate plus 1.00 % per annum, plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25 % or 0.50 %.

LIBOR Rate loans, which may be either for 1 month or 3 months, will bear interest at (i) the LIBOR rate, or the Benchmark Rate as defined in the credit agreement plus (ii) a varying percentage based on the Company’s average excess availability, of either 1.25 % or 1.50 %.

Any swingline loan will bear interest at a rate equal to the rate of a Base Rate loan, plus a varying percentage based on the Company’s average excess availability, of either 0.25 % or 0.50 %.

The Company will be subject to an unused line fee of 0.25 %.

(a) the Prime Rate, (b) the Federal Funds effective rate plus 0.50 % per annum and (c) the Daily Simple SOFR rate plus 1.00 % per annum (provided the Base Rate shall never be less than the Floor (as defined in the First Amendment)), plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25 % or 0.50 % (the “Applicable Margin”).

Daily Simple SOFR loans will bear interest at a rate equal to (i) the Daily Simple SOFR rate plus an adjustment of 0.10 % (provided the Daily Simple SOFR rate shall never be less than the Floor), plus (ii) the Applicable Margin.

Any swingline loan will continue to bear interest at a rate equal to the Base Rate plus the Applicable Margin.

The Company is subject to an unused line fee of 0.25 %.

The Company’s obligations under the Credit Facility are secured by a lien on substantially all of its assets.

If the Company’s availability under the Credit Facility at any time is less than the greater of (i) 10 % of the Revolving Loan Cap (the lesser of the aggregate revolving commitments or the borrowing base) and (ii) $ 7.5 million, then the Company is required to maintain a minimum consolidated fixed charge coverage ratio of 1.0 :1.0 until such time as availability has exceeded the greater of (1) 10 % of the Revolving Loan Cap and (2) $ 7.5 million for 30 consecutive days.

At October 29, 2022 , the Company had no borrowings outstanding under the Credit Facility and unused availability was $ 90.2 million.

The Company had no borrowings during the first nine months of fiscal 2022, resulting in an average unused excess availability of approximately $ 82.0 million.

Outstanding standby letters of credit were $ 3.8 million and outstanding documentary letters were $ 1.0 million at October 29, 2022.

At October 29, 2022, the Company’s prime-based interest rate was 6.50 % .

Borrowings and repayments for the first nine months ended October 30, 2021 were as follows:

For the nine months ended

(in thousands)

October 30, 2021

Net borrowings (repayments)

Long-Term Debt

The Company had no outstanding long-term debt during the first nine months of fiscal 2022.

During the first quarter of fiscal 2021, the Company refinanced its then existing $ 15.0 million FILO (first-in, last-out) loan and entered into a new $ 17.5 million FILO loan, which was subsequently repaid in full in September 2021.

The Company paid interest and fees totaling $ 0.3 million and $ 3.1 million for the nine months ended October 29, 2022 and October 30, 2021, respectively.

Included in the $ 3.1 million of interest and fees paid in fiscal 2021 was a prepayment fee of $ 1.1 million associated with the prepayment of the Company $ 17.5 million FILO loan.

In connection with the execution of the Credit Facility and prepayment of the FILO loan, in the third quarter of fiscal 2021, the Company also wrote-off a total of $ 0.8 million in unamortized debt issuance costs.

At April 29, 2023 , the Company had no borrowings outstanding under the Credit Facility and unused availability was $ 93.8 million.

The Company had no borrowings during the first three months of fiscal 2023, resulting in an average unused excess availability of approximately $ 82.5 million.

Outstanding standby letters of credit were $ 3.8 million and outstanding documentary letters were $ 1.3 million at April 29, 2023.

At April 29, 2023, the Company’s prime-based interest rate was 8.25 % .

The Company leases all of its store locations and its corporate headquarters, which also includes its distribution center, under operating leases.

The store leases typically have initial terms of 5 years to 10 years , with options that usually permit renewal for additional five-year periods.

The initial term of the lease for the corporate headquarter was for 20 years, with the opportunity to extend for six additional consecutive periods of five years , beginning in fiscal 2026 .

The initial term of the lease for the corporate headquarters is for 20 years, with the opportunity to extend for six additional consecutive periods of five years , beginning in fiscal 2026 .

The Company also leases certain equipment and other assets under operating leases, typically with initial terms of 3 to 5 years .

5 unchanged sentences

The Company opted not to elect this practical expedient and instead accounted for these rent concessions as lease modifications in accordance with ASC 842.

As of October 29, 2022, the Company’s operating leases liabilities represent the present value of the remaining future minimum lease payments updated based on concessions and lease modifications.

As of April 29, 2023, the Company’s operating leases liabilities represent the present value of the remaining future minimum lease payments updated based on concessions and lease modifications.

Lease costs related to store locations are included in cost of goods sold including occupancy costs on the Consolidated Statements of Operations, and expenses and lease costs related to the corporate headquarters and equipment leases are included in selling, general and administrative expenses on the Consolidated Statements of Operations.

The following table is a summary of the Company’s components of net lease cost for the three and nine months ended October 29, 2022 and October 30, 2021:

The following table is a summary of the Company’s components of net lease cost for the three months ended April 29, 2023 and April 30, 2022:

For the three months ended

For the nine months ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

(in thousands)

3 unchanged sentences

(1) Variable lease costs include the cost of property taxes, insurance and common area maintenance fees related to its leases.

Supplemental cash flow and balance sheet information related to leases for the first nine months ended October 29, 2022 and October 30, 2021 was as follows:

Supplemental cash flow and balance sheet information related to leases for the first three months ended April 29, 2023 and April 30, 2022 was as follows:

(dollars in thousands)

For the nine months ended

For the three months ended

Cash paid for amounts included in the measurement of lease liabilities:

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

Operating cash flows for operating leases (1)

3 unchanged sentences

Weighted average discount rate

(1) The cash paid for the first nine months of fiscal 2022 and fiscal 2021 included prepaid rent of $ 4.1 million and $ 3.8 million, respectively.

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the Consolidated Balance Sheet as of October 29, 2022:

(1) The cash paid for the first three months of fiscal 2023 and fiscal 2022 included prepaid rent of $ 4.2 million and $ 4.1 million, respectively.

The decrease in cash paid was due to the timing of prepaid rents, which resulted in approximately four months of rent payments in the first quarter of fiscal 2022 as opposed to three months of rent payments in the first quarter of fiscal 2023.

(in thousands)

5 unchanged sentences

Long-term lease obligations

At April 29, 2023, the Company entered into a ten-year store lease that has not yet commenced with aggregated estimated future lease payments of approximately $ 2.1 million, which are not included in the above table.

The lease is expected to commence in the fall of 2023 .

Long-Term Incentive Plans

6 unchanged sentences

Under each LTIP, 50 % of each participant’s Target Cash Value is subject to time-based vesting and 50 % is subject to performance-based vesting.

Awards for any achievement of performance targets are not granted until the performance targets are achieved and then are subject to additional vesting through August 31 following the end of the applicable performance period.

Awards for any achievement of performance targets are not granted until the

performance targets are achieved and then are subject to additional vesting through August 31 following the end of the applicable performance period.

2020-2022 LTIP

The performance targets for the Company’s 2019-2021 LTIP were approved by the Compensation Committee of the Board of Directors (the "Compensation Committee”) on August 7, 2019 and covered a three-year period performance period, which ended on January 29, 2022.

The performance targets for the Company’s 2020-2022 LTIP were approved by the Compensation Committee of the Board of Directors (the "Compensation Committee”) on June 11, 2020 and covered a three-year period performance period, which ended on January 28, 2023.

The time-vested portion of the 2020-2022 LTIP vests in four annual installments, with the remaining installment vesting on April 1, 2024.

In the first quarter of fiscal 2022, on March 21, 2022, the Compensation Committee approved a 141.9 % payout of its performance targets for the 2019-2021 LTIP.

On that date, the Company granted awards totaling $ 2.7 million, in a combination of 50 % cash and 50 % restricted stock units (RSUs), which vested, net of any forfeitures, on August 31, 2022.

In the first quarter of fiscal 2023, on March 6, 2023, the Compensation Committee approved a grant of awards equal to $ 2.8 million for the achievement of the performance target for the 2020-2022 LTIP.

The awards were granted on March 23, 2023, following completion of the audited financial statements, in a combination of 50 % cash and 50 % restricted stock units ("RSUs").

All awards are subject to further vesting through August 31, 2023.

In connection with the grant of 267,219 RSUs, the Company reclassified $ 1.1 million of its liability accrual from “Accrued expenses and other current liabilities”

2 unchanged sentences

See the Consolidated Statement of Changes in Stockholders’

At October 29, 2022 , the Company had three active LTIPs:

the 2020-2022 LTIP, the 2021-2023 LTIP and the 2022-2024 LTIP.

The time-based awards under the 2020-2022 LTIP were granted in a combination of 50 % stock options and 50 % cash;

the 2021-2023 LTIP time-based awards were granted in a combination of 25 % stock options and 75 % cash;

and the 2022-2024 LTIP time-based awards were granted in a combination of 50 % RSUs and 50 % cash.

Performance targets for the 2020-2022 LTIP, 2021-2023 LTIP and 2022-2024 LTIP were established and approved by the Compensation Committee on June 11, 2020, March 8, 2021 and April 9, 2022, respectively.

At April 29, 2023 , the Company had two active LTIPs:

the 2021-2023 LTIP and the 2022-2024 LTIP.

The time-based awards under the 2021-2023 LTIP were granted in a combination of 25 % stock options and 75 % cash and the 2022-2024 LTIP time-based awards were granted in a combination of 50 % RSUs and 50 % cash.

Performance targets for the 2021-2023 LTIP and 2022-2024 LTIP were established and approved by the Compensation Committee on March 8, 2021 and April 9, 2022, respectively.

The performance period for each LTIP is three years .

Awards for any achievement of performance targets will not be granted until the performance targets are achieved and then will be subject to additional vesting through August 31, 2023, August 31, 2024 and August 31, 2025, respectively.

The time-based awards under the 2020-2022 LTIP, 2021-2023 LTIP and 2022-2024 LTIP vest in four equal installments through April 1, 2024, April 1, 2025 and April 1, 2026, respectively.

Assuming that the Company achieves the performance targets at target levels and all time-based awards vest, the compensation expense associated with the 2020-2022 LTIP, 2021-2023 LTIP and 2022-2024 LTIP is estimated to be approximately $ 3.7 million, $ 4.1 million and $ 4.7 million, respectively.

Approximately half of the compensation expense for each LTIP relates to the time-based awards, which are being expensed straight-line over 46 months, 49 months and 48 months, respectively.

At October 29, 2022 , the Company had accrued $ 2.1 million under the 2020-2022 LTIP, $ 1.4 million under the 2021-2023 LTIP and $ 0.6 million under the 2022-2024 LTIP for the performance awards.

The time-based awards under the 2021-2023 LTIP and 2022-2024 LTIP vest in four equal installments through April 1, 2025 and April 1, 2026, respectively.

Assuming that the Company achieves the performance targets at target levels and all time-based awards vest, the compensation expense associated with the 2021-2023 LTIP and 2022-2024 LTIP is estimated to be approximately $ 4.1 million and $ 4.7 million, respectively.

Approximately half of the compensation expense for each LTIP relates to the time-based awards, which are being expensed straight-line over 49 months and 48 months, respectively.

At April 29, 2023 , the Company had accrued $ 1.8 million under the 2021-2023 LTIP and $ 1.1 million under the 2022-2024 LTIP for the performance awards.

Subsequent to the end of the first quarter of fiscal 2023, on May 1, 2023, the Compensation Committee approved the 2023-2025 LTIP.

The time-based awards, which represent 50 % of the 2023-2025 LTIP, were granted in a combination of 50 % cash and 50 % RSUs on May 1, 2023 and will vest in four equal installments on May 1, 2024, April 1, 2025, April 1, 2026 and April 1, 2027.

The performance-based awards, which represent the remaining 50 % of the 2023-2025 LTIP, will not be granted until the performance targets are achieved and then will be subject to additional vesting through August 31, 2026.

Assuming that the Company achieves the performance target at target level and all time-based awards vest, the compensation expense associated with the 2023-2025 LTIP is estimated to be approximately $ 4.9 million.

Approximately half of that compensation expense relates to the time-based awards, which will be expensed straight-line over 47 months.

At April 29, 2023, the Company had no accrual for the performance-based awards under the 2023-2025 LTIP.

Stock-Based Compensation

The Company has one active stock-based compensation plan:

the 2016 Incentive Compensation Plan (the “2016 Plan”).

the 2016 Incentive Compensation Plan (as amended, the “2016 Plan”).

The initial share reserve under the 2016 Plan was 5,725,538 shares of common stock.

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The Company’s shareholders approved amendments to increase the share reserve by 2,800,000 shares on August 8, 2019, an additional 1,740,000 shares on August 12, 2020 and an additional 4,855,000 on August 5, 2021.

At October 29, 2022, the Company had 3,975,145 shares available under the 2016 Plan.

At April 29, 2023, the Company had 3,916,695 shares available under the 2016 Plan.

In accordance with the terms of the 2016 Plan, any shares outstanding under the previous 2006 Incentive Compensation Plan (the “2006 Plan”) at August 4, 2016 that subsequently terminate, expire or are cancelled for any reason without having been exercised or paid are added back and become available for issuance under the 2016 Plan, with stock options being added back on a one-for-one basis and full-value awards being added back on a 1 to 1.9 basis.

At October 29, 2022 , 263,341 stock options remained outstanding under the 2006 Plan.

At April 29, 2023 , 108,602 stock options remained outstanding under the 2006 Plan.

The 2016 Plan is administered by the Compensation Committee.

The Compensation Committee is authorized to make all determinations with respect to amounts and conditions covering awards.

Options are not granted at a price less than fair value on the date of the grant.

Options are not granted at a price less than fair value on the

date of the grant.

Except with respect to 5 % of the shares available for awards under the 2016 Plan, no award will become exercisable unless such award has been outstanding for a minimum period of one year from its date of grant.

The following tables summarize the share activity and stock option activity for the first nine months of fiscal 2022:

The following tables summarize the share activity and stock option activity for the first three months of fiscal 2023:

Share Units (3)

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Shares vested and/or issued

Shares expired

Shares forfeited

Outstanding non-vested shares at end of quarter

(1) During the first nine months of fiscal 2022, the Company granted RSUs for the achievement of performance metrics under the 2019-2021 LTIP that were subject to additional vesting through August 31, 2022 and time-based RSUs under its 2022-2024 LTIP.

(1) During the first three months of fiscal 2023, the Company granted RSUs for the achievement of performance metrics under the 2020-2022 LTIP that are subject to additional vesting through August 31, 2023.

See Note 5, Long-Term Incentive Plans .

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(3) Represents the remaining performance stock units (“PSUs”) granted to Mr.

Kanter in February 2019.

The 240,000 PSUs will vest when the trailing 90-day volume-weighted average closing stock price (“VWAP”) is $ 8.00 .

The PSUs will expire on April 1, 2023 if the $ 8.00 VWAP is not achieved by that date.

Kanter in February 2019 which expired unvested on April 1, 2023.

(4) Represents compensation, with a fair value of $ 20,249 , to certain directors, who are required to receive shares, in lieu of cash, in order to satisfy their minimum equity ownership under the Non-Employee Director Plan.

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Options exercisable at end of quarter

(1) As a result of net share settlements, of the 752,938 shares underlying stock options that were exercised during the first nine months of fiscal 2022, only 527,712 shares of common stock were issued.

For the first nine months of fiscal 2022, the Company granted stock options to purchase an aggregate of 15,747 shares of common stock, 563,691 restricted stock units and 27,386 fully-vested shares.

For the first nine months of fiscal 2021, the Company granted stock options to purchase an aggregate of 1,518,154 shares of common stock and 8,054 restricted stock units.

For the first three months of fiscal 2023, the Company granted stock options to purchase an aggregate of 1,316 shares of common stock, 270,867 restricted stock units and 2,844 fully-vested shares.

For the first three months of fiscal 2022, the Company granted stock options to purchase an aggregate of 2,040 shares of common stock, 494,444 restricted stock units and 9,352 fully-vested shares.

Non-Employee Director Compensation Plan

The Company granted 57,307 shares of common stock, with a fair value of approximately $ 254,218 , to certain of its non-employee directors as compensation in lieu of cash in the first nine months of fiscal 2022.

The Company granted 12,376 shares of common stock, with a fair value of approximately $ 88,117 , to certain of its non-employee directors as compensation in lieu of cash in the first three months of fiscal 2023.

These shares are in addition to any shares that may be granted under the 2016 Plan related to the requirement to receive equity if a director has not yet satisfied his or her minimum equity ownership requirement under the Non-Employee Director Compensation Plan.

Stock Compensation Expense

The Company recognized total stock-based compensation expense of $ 1.1 million and $ 0.9 million for the first nine months of fiscal 2022 and fiscal 2021, respectively.

The total compensation cost related to time-vested stock options and RSU awards not yet recognized as of October 29, 2022 was approximately $ 2.2 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 32 months.

The Company recognized total stock-based compensation expense of $ 0.4 million and $ 0.4 million for the first three months of fiscal 2023 and fiscal 2022, respectively.

The total compensation cost related to time-vested stock options and RSU awards not yet recognized as of April 29, 2023 was approximately $ 1.7 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 27 months.

Equity and Earnings per Share

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For the three months ended

For the nine months ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

(in thousands )

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Diluted weighted average common shares outstanding

The following potential common stock equivalents were excluded from the computation of diluted earnings per share in each period, because the exercise price of such options was greater than the average market price per share of common stock for the respective periods or because the unearned compensation associated with stock options, restricted stock units, or deferred stock had an anti-dilutive effect.

The following potential common stock equivalents were excluded from the computation of diluted earnings per share in each period, because the exercise price of such options was greater than the average market price per share of common stock for the respective periods or because the unearned compensation associated with stock options or restricted stock units had an anti-dilutive effect.

For the three months ended

For the nine months ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

(in thousands, except exercise prices)

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$ 4.87 - $ 5.50

$ 4.19 - $ 5.50

The above options, which were outstanding at October 29, 2022 , expire from May 28, 2023 to October 26, 2032 .

Excluded from the computation of basic and diluted earnings per share were 240,000 shares for the third quarter and first nine months of fiscal 2022 and 480,000 shares for the third quarter and first nine months of fiscal 2021 of unvested performance stock units.

These performance-based awards are included in the computation of basic and diluted earnings per share if, and when, the respective performance targets are achieved.

In addition, 435,568 shares of deferred stock at October 29, 2022 and at October 30, 2021 were excluded from basic earnings per share.

Outstanding shares of deferred stock are not considered issued and outstanding until the vesting date of the deferral period.

The above options, which were outstanding at April 29, 2023 , expire from April 3, 2032 to March 20, 2033 .

Deferred stock of 435,568 shares at April 29, 2023 and at April 30, 2022 was excluded from the computation of basic earnings per share.

Shares of deferred stock are not considered issued and outstanding until the vesting date of the deferral period.

Stock Repurchase Program

On March 15, 2022, the Company’s Board of Directors approved a stock repurchase program.

Under the stock repurchase program, the Company may repurchase up to $ 15.0 million of its common stock through open market and privately negotiated transactions.

On March 14, 2023, the Company's Board of Directors approved a stock repurchase program, effective March 16, 2023.

Under the program, the Company is authorized to repurchase up to $ 15.0 million of its common stock through open market and privately negotiated transactions.

The timing and the amount of any repurchases of common stock will be determined based on the Company’s evaluation of market conditions and other factors.

The stock repurchase program commenced in the first quarter of fiscal 2022 and will expire on March 15, 2023 , but may be suspended, terminated or modified at any time for any reason.

The Company expects to finance the repurchases from operating funds and/or periodic borrowings on its credit facility.

There were no stock repurchases in the third quarter of fiscal 2022.

For the first nine months of fiscal 2022, the Company repurchased 2.9 million shares at an aggregate cost of $ 12.7 million, including fees, from available cash on hand.

Shares of repurchased common stock are held as treasury stock.

Since the end of fiscal 2013, the Company has maintained a full valuation allowance against its deferred tax assets.

During the second quarter of fiscal 2022, the Company determined that it was more likely than not that it would be able to realize the benefit of substantially all of its deferred tax assets in the United States.

In reaching this determination, the Company considered the cumulative three years of profitability, its expectations regarding the generation of future taxable income as well as the overall improvement in the Company's business and its current market position.

As a result, in the second quarter of fiscal 2022, the Company recognized a discrete tax benefit related to the release of approximately $ 35.5 million in valuation allowance against its deferred tax assets in the United States that are expected to be realized in future years.

At October 29, 2022, the Company continued to provide a valuation allowance of $ 2.4 million primarily against certain state and foreign net operating losses ("NOLs").

For the third quarter of fiscal 2022, the Company recorded an income tax provision of $ 2.1 million, which included a $ 2.0 million discrete tax expense to adjust the release of the valuation allowance to reflect an increase in the Company's third quarter earnings and full-year earnings forecast.

For the first nine months of fiscal 2022, the Company recorded an income tax benefit of $ 32.9 million, which included a discrete tax benefit of $ 33.5 million for the release of the valuation allowance discussed above.

For the third quarter and first nine months of fiscal 2021, the Company recorded an income tax provision of $ 94,000 and $ 548,000 , respectively, primarily related to income tax in states where NOL usage was statutorily limited.

The Company made tax payments of $ 0.3 million and $ 0.1 million for the first nine months of fiscal 2022 and fiscal 2021, respectively.

For federal income tax purposes, at the end of fiscal 2021, the Company had net operating loss carryforwards of approximately $ 100.7 million, which will expire from fiscal 2028 through fiscal 2037 , and net operating loss carryforwards of $ 43.1 million that are not subject to expiration.

For state purposes, at the end of fiscal 2021, the Company had $ 90.0 million of net operating losses that are available to offset future taxable income, the majority of which will expire from fiscal 2028 through fiscal 2041 .

The stock repurchase program will expire on March 16, 2024 , but may be suspended, terminated or modified at any time for any reason.

There were no stock repurchases during the first quarter of fiscal 2023.

In the first quarter of fiscal 2022, the Company’s effective tax rate was reduced from the statutory rate due to the utilization of the Company’s fully reserved net operating loss carryforwards.

Then in the second quarter of fiscal 2022, the Company determined that it was more likely than not that it would be able to realize the benefits of substantially all of its deferred tax assets in the United States.

Accordingly, in the second quarter of fiscal 2022, the Company released substantially all of its deferred tax valuation allowance.

As a result of the valuation allowance being released, the Company has returned to a normal tax provision for fiscal 2023.

For the first quarter of fiscal 2023, the Company’s effective tax rate was 26.6 % compared to 0.8 % for the first quarter of fiscal 2022.

The Company made no tax payments for the first three months of fiscal 2023 and fiscal 2022, respectively.

Fair Value Measurement

At April 29, 2023, the Company held U.S.

treasury bills which were classified as held-to maturity and carried at amortized cost.

The Company had no investments at April 30, 2022.

Fair Value at April 29, 2023

(in thousands)

Carrying value

Quoted Prices

Identical Assets

Significant Unobservable

Inputs (Level 3)

Cash equivalents:

Treasury Bills

Short-term investments:

Treasury Bills

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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The forward-looking statements contained in this Quarterly Report are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”

but may be found in other locations as well, and include statements regarding our expectations with respect to sales trends, including expected sales growth in the fourth quarter of 2022, expected marketing costs in 2022, gross margin rate, improved inventory levels and our management of inventory levels, our ability to realize our deferred tax assets, increased freight costs, increases in certain raw materials cost, our long-term outlook, expected capital expenditures in 2022, our ability to attract new customers, and our plans with respect to our store portfolio, including anticipated closures, re-brandings, and new and relocated stores.

but may be found in other locations as well, and include statements regarding our expectations with respect to the impact of our brand re-positioning efforts on sales, strategic initiatives to grow our business, expected marketing costs in 2023, gross margin rates in 2023, expected capital expenditures in 2023, expected timing of stock repurchases under our board-approved stock repurchase program, and our plans with respect to our store portfolio, including anticipated re-brandings and new stores.

These forward-looking statements generally relate to plans and objectives for future operations and are based upon management’s reasonable estimates of future results or trends.

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Numerous factors could cause our actual results to differ materially from such forward-looking statements.

This discussion sets forth certain risks and uncertainties that may have an impact on future results and direction of our Company, including, without limitation, risks related to labor shortages, increased labor costs, changes in consumer spending in response to the economy, the ongoing effects of the COVID-19 pandemic, the economic impact of the war in Ukraine, our ability to navigate supply chain uncertainties, our ability to maintain appropriate inventory levels, our ability to successfully execute on our corporate strategy, our ability to predict customer tastes and fashion trends, our ability to grow market share, and the other risks and uncertainties set forth in the “Risk Factors”

federal government to avoid a default and potential federal government shutdown, changes in consumer spending in response to the economy, increased labor costs, the continuing economic impact of the war in Ukraine, our ability to manage appropriate inventory levels, our ability to successfully execute on our corporate strategy, our ability to predict customer tastes and fashion trends, our ability to grow market share, and the other risks and uncertainties set forth in the “Risk Factors”

section in Part I, Item 1A of our Fiscal 2022 Annual Report.

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We operate under the trade names of Destination XL ® , DXL ® , DXL Outlets, Casual Male XL ® and Casual Male XL Outlets.

At October 29, 2022, we operated 218 Destination XL stores, 16 DXL outlet stores, 30 Casual Male XL retail stores, 19 Casual Male XL outlet stores and a digital business, including an e-commerce site at dxl.com and a mobile site, m.destinationXL.com, mobile app and third-party marketplaces.

At April 29, 2023, we operated 218 Destination XL stores, 16 DXL outlet stores, 28 Casual Male XL retail stores, 19 Casual Male XL outlet stores and a digital business, including an e-commerce site at dxl.com and a mobile site, m.destinationXL.com, mobile app and third-party marketplaces.

Unless the context indicates otherwise, all references to “we,”

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and our consolidated subsidiaries.

We refer to our fiscal years, which end on January 28, 2023, January 29, 2022 and January 30, 2021 as “fiscal 2022,”

“fiscal 2021”

We refer to our fiscal years, which end on February 3, 2024, January 28, 2023 and January 29, 2022 as "fiscal 2023", “fiscal 2022,”

and “fiscal 2021”

respectively.

All three fiscal years are 52-week periods.

Fiscal 2023 is a 53-week period and fiscal 2022 and fiscal 2021 were 52-week periods.

SEGMENT REPORTING

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We consider our stores and direct business segments to be similar in terms of economic characteristics, production processes and operations, and have therefore aggregated them into one reportable segment, retail segment, consistent with our omni-channel business approach.

Our wholesale segment was a third operating segment.

In the first quarter of fiscal 2022, we ended the relationship with our primary wholesale customer.

Due to the immateriality of the wholesale segment’s revenues, profits and assets, its operating results have been aggregated with the retail segment for all periods.

COMPARABLE SALES

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The majority of our stores have the capability of fulfilling online orders if merchandise is not available in the warehouse.

result, we continue to see more transactions that begin online but are ultimately completed at the store level.

As a result, we continue to see more transactions that begin online but are ultimately completed at the store level.

Similarly, if a customer visits a store and the item is out of stock, the associate can order the item through our website.

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Stores that have been expanded by more than 25% are considered non-comparable for the first 13 months.

If a store becomes a clearance center, it is also removed from the calculation of comparable sales.

If a store is temporarily closed for more than 7 days, it is removed from the calculation of comparable sales until it reopens and upon its anniversary is once again removed from the calculation until the reopen date.

The method of calculating comparable sales varies across the retail industry and, as a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other retailers.

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For the three months ended

For the nine months ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

(in millions, except percentage of sales and per share data)

Adjusted net income (Non-GAAP basis)

Adjusted EBITDA (Non-GAAP basis)

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Per diluted share:

We are pleased to report continued earnings and sales growth this quarter, with results exceeding our internal expectations, especially up against a very strong third quarter last year.

Comparable sales increased 8.7% for the quarter, with strong performance from our stores, which were up 10.1% for the third quarter, with all regions reporting sales growth over last year.

This growth was primarily driven by higher dollars per transactions and conversion.

The increase in dollars per transactions was attributable to our reduced reliance on promotions and a shift in merchandise mix to higher-price items, such as tailored clothing.

Our direct business had a comparable sales increase of 5.5% for the third quarter, driven primarily by our web, app and marketplaces.

Our gross margin rate for the third quarter continued to benefit from the low promotions and clearance enabling us to partially offset the increase in freight and raw material costs that we continue to experience.

In line with our expectations, our selling, general and administrative expenses (SG&A) increased by 280 basis points during the third quarter, with our marketing costs representing approximately 140 basis points of this increase.

The remainder of the increase in SG&A was primarily due to increased payroll costs to support sales growth and higher accruals for performance-based incentive plans.

As a result, net income for the third quarter was $10.5 million, or $0.16 per diluted share, as compared to net income for the third quarter of fiscal 2021 of $13.7 million, or $0.20 per diluted share.

At October 29, 2022, we had no debt outstanding and we did not borrow from our credit facility during the first nine months.

Our unused excess availability at October 29, 2022 was $90.2 million.

At the end of the third quarter, we are in a strong inventory position and have been able to replenish those categories that were depleted last year.

As a result, our inventory level at the end of the third quarter was intentionally up 29.8% from last year, but was down 11.1%, when compared to the end of the third quarter in fiscal 2019 inventory, or pre-pandemic levels.

In addition, we have improved our inventory turn by over 30% from the third quarter of fiscal 2019.

As we previously disclosed, the Company's Board of Directors approved a $15.0 million stock repurchase program in March 2022 and, during the first nine months of fiscal 2022, we utilized our free cash flow to repurchase 2.9 million shares of our common stock, at an aggregate cost of $12.7 million, including fees.

There were no repurchases of stock during the third quarter of fiscal 2022.

Our results year-to-date have outperformed our expectations and we believe that we are well-positioned as we head into the fourth quarter.

While we remain optimistic, we are cognizant of the potential impact that inflation and other macro-economic factors may have on fourth quarter consumer spending.

We expect to grow our comparable sales in the fourth quarter by single digits.

Adjusted net income (Non-GAAP basis)

We are pleased to report our ninth consecutive quarter of positive comparative sales growth.

The first quarter was a more challenging growth quarter for the retail industry as a whole, which was affected by the macroeconomic headwinds that have impacted consumer spending.

While we saw a softening in consumer demand this quarter, we do believe that the work that we have done over the past two years to transform and reposition the DXL brand enabled us to mitigate some of this consumer weakness.

For the first quarter of fiscal 2023, we had a comparable sale increase of 0.6%, which was driven primarily by our stores which were up 1.5%, partially offset by our direct business which decreased 1.6%.

Our merchandise margins decreased approximately 110 basis points from the first quarter of fiscal 2022 due to increased costs on certain private-label merchandise, much of which we absorbed rather than passing on to the customer through price increases.

We also experienced increased shipping costs for our direct-to-consumer orders and increased costs related to our loyalty program, which we relaunched late in fiscal 2022.

These costs were partially offset by reduced inbound freight costs.

Our SG&A costs were higher by approximately $1.7 million, due primarily to an increase in payroll costs for roles that were added last year to support our sales growth, merit increases in the prior year, as well as increased benefit costs.

Net income for the first quarter of fiscal 2023 was $7.0 million, or $0.11 per diluted share, as compared to net income of $13.4 million, or $0.20 per diluted share, for the first quarter of fiscal 2022.

Assuming a normalized tax rate and adjusting for asset impairments (gains), if any, on a non-GAAP basis, net income for the first quarter of fiscal 2023 was $7.0 million, or $0.11 per diluted share, as compared to adjusted net income of $9.7 million, or $0.14 per diluted share, for the first quarter of fiscal 2022.

At April 29, 2023, we had cash and investments of $46.0 million as compared to $7.5 million at April 30, 2022.

At April 29, 2023, we had no debt outstanding and no borrowings during the quarter.

Our unused excess availability at April 29, 2023 was $93.8 million.

Our inventory was in a healthy position at quarter-end, down 11% to 2019 (pre-pandemic) levels with turnover up over 25%, and we expect to continue to maintain our low promotional cadence.

With cash on hand, no outstanding debt and full availability under our credit facility, we are continuing to pursue our strategic initiatives this year to further grow our business.

As discussed below, the Company's Board of Directors approved a $15.0 million stock repurchase program in March 2023.

There were no repurchases of stock during the first quarter of fiscal 2023.

We expect to begin executing on the stock repurchase program in the second quarter of fiscal 2023, however the timing and the amount of any repurchases will be determined based on the Company’s evaluation of market conditions and other factors.

The stock repurchase program will expire on March 16, 2024 and may be suspended, terminated or modified at any time for any reason.

Financial Summary

The following table presents sales by segment for the three and nine months ended October 29, 2022 and October 30, 2021:

The following table presents sales by segment for the three months ended April 29, 2023 and April 30, 2022:

For the Three Months Ended

For the Nine Months Ended

(in thousands)

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

Retail segment

Wholesale segment

Total sales for the third quarter of fiscal 2022 were $129.7 million, as compared to $121.5 million in the third quarter of fiscal 2021.

Comparable sales for the third quarter were up 8.7% with comparable sales from our stores up 10.1% and our direct business up 5.5%.

Store sales for the third quarter exceeded our plan, driven primarily by increases in dollars per transaction and conversion.

The increase in dollars per transaction was attributable to a combination of factors, including less markdowns as a result of fewer promotions and deeper penetration in high-ticket categories such as tailored clothing.

All regions outperformed the prior year third quarter, with the southeast region showing the strongest sales increase.

The growth in our direct business of 5.5% was driven primarily by our web and app with continued growth from online marketplaces.

Stores accelerated and outpaced the direct business in total during the third quarter, as consumers continued to return to stores at an increasing level.

Compared to the third quarter of fiscal 2019, the last normalized selling year, our comparable sales for the third quarter of fiscal 2022 were up 33.7%.

We believe the comparison to fiscal 2019 is relevant when evaluating our sales performance given the impact of the pandemic on the past two years.

As compared to the third quarter of fiscal 2021, for the third quarter of fiscal 2022 comparable sales were up 7.4% in August, up 8.5% in September and up 10.3% in October.

We are aware of the potential macro-economic impact on consumer spending in the fourth quarter.

As a result, while we remain optimistic, we are conservatively forecasting comparable sales growth for the fourth quarter of fiscal 2022 to be single digits.

For the first nine months of fiscal 2022, total sales increased 8.2% to $402.0 million, as compared to $371.6 million for the first nine months of fiscal 2021.

Comparable sales for the first nine months of fiscal 2022, as compared to fiscal 2021, increased 10.9%, with comparable sales from our stores up 10.7% and our direct business up 11.5%.

As we previously disclosed, during the first quarter of fiscal 2022, we ended our relationship with our primary wholesale customer.

As a result, our wholesale revenues for the first nine months of fiscal 2022 were $0.4 million as compared to $4.8 million for the first nine months of fiscal 2021.

Total sales for the first quarter of fiscal 2023 were $125.4 million, as compared to $127.7 million in the first quarter of fiscal 2022.

Comparable sales for the first quarter were up 0.6% with comparable sales from our stores up 1.5% and our direct business down 1.6%.

This increase in comparable sales was offset by sales from closed stores and a decrease in non-comparable sales.

Sales for the quarter started off strong with a comparable sales increase of 9.1% in February.

However, we saw a comparable sales decline in March of (2.8)% and in April of (1.9)%.

The slowdown in sales was primarily driven by decreases in traffic, both to our stores and web, but was partially offset by increased dollars per transaction and conversion.

Throughout the quarter, our stores performed better than our direct business, but we continued to see sales growth from online marketplaces and our mobile app.

Gross Margin Rate

For the third quarter of fiscal 2022, our gross margin rate, inclusive of occupancy costs, was 50.0% as compared to a gross margin rate of 50.2% for third quarter of fiscal 2021.

Our gross margin rate decreased by 20-basis points, with a decrease in merchandise margin of 70-basis points, partially offset by a 50-basis point improvement in occupancy costs due to the increased leverage from sales.

The decrease in merchandise margin of 70-basis points was due to increased costs for raw materials, increased shipping costs per package, driven by higher fuel costs and surcharges, and a higher penetration of our marketplace business, which has commission costs.

Those increases were partially offset by lower promotional markdowns.

We continue to optimize our pricing and promotional cadence to mitigate cost increases and preserve our margin rates.

For the first nine months of fiscal 2022, our gross margin rate, inclusive of occupancy costs, was 50.8%, as compared to a gross margin rate of 49.4% for the first nine months of fiscal 2021.

The increase of 140-basis points was due to an improvement of 110-basis points in occupancy costs, due to the increased leverage from sales, and an increase in merchandise margins of 30-basis points, due primarily to lower promotional markdowns partially offset by an increase in freight and shipping costs.

For the first quarter of fiscal 2023, our gross margin rate, inclusive of occupancy costs, was 48.6% as compared to a gross margin rate of 50.0% for the first quarter of fiscal 2022.

Our gross margin rate decreased by 140-basis points, with a decrease in merchandise margin of 110-basis points and an increase of 30-basis points in occupancy costs, primarily due to the deleveraging of sales.

The decrease in merchandise margin of 110-basis points was due to increased costs on certain private-label merchandise, much of which we absorbed rather than passing on to the customer through price increases.

We also experienced increased shipping costs related to direct-to-consumer shipments, and costs related to our loyalty program with more sales tendered with loyalty certificates as compared to the first quarter of fiscal 2022.

These cost increases were partially offset by lower inbound freight costs.

For the year, we expect gross margin rates to be approximately 100-basis points lower than fiscal 2022.

Selling, General and Administrative Expenses

As a percentage of sales, SG&A (selling, general and administrative) expenses for the third quarter of fiscal 2022 were 37.3% as compared to 34.5% for the third quarter of fiscal 2021.

The SG&A rate for third quarter of fiscal 2021 was abnormally low due to the surge in sales from pent-up demand and stimulus money while at the same time experiencing a shortage in store staffing.

our SG&A rate as a percentage of sales is favorable when compared against 39.5% in the third quarter of fiscal 2019, which was our last normalized third quarter, pre-pandemic.

On a dollar basis, SG&A expenses increased by $6.4 million as compared to the third quarter of fiscal 2021.

The increase was primarily due to an increase in marketing costs to drive customer acquisition and engagement, payroll costs to support sales growth, including merit adjustments and filling open positions, and an increase in performance-based incentive accruals.

Our marketing costs for the third quarter of fiscal 2022 represented 5.9% of sales as compared to 4.5% in the third quarter of fiscal 2021.

For fiscal 2022, we are expecting marketing costs to be approximately 6.2% of sales.

For the first nine months of fiscal 2022, SG&A expenses were 35.9% of sales as compared to 32.5% of sales for the first nine months of fiscal 2021.

Similar to the third quarter, the prior year rate was abnormally low.

When compared against the first nine months of fiscal 2019 when the rate was 39.1% of sales, the savings that we have been able to realize in our SG&A costs is evident.

As compared to the first nine months of fiscal 2021, SG&A costs increased $23.6 million, or 19.5%, as a result of increased marketing costs, payroll costs to support sales growth, annual merit adjustments, filling open positions and an increase in performance-based incentive accruals.

Marketing costs represented 5.5% of sales for the first nine months of fiscal 2022 as compared to 3.7% for the first nine months of fiscal 2021.

As a percentage of sales, SG&A (selling, general and administrative) expenses for the first quarter of fiscal 2023 were 38.5% as compared to 36.5% for the first quarter of fiscal 2022.

On a dollar basis, SG&A expenses increased by $1.7 million as compared to the first quarter of fiscal 2022.

The increase was primarily due to an increase in payroll-related costs from new positions added in the past year and last year's merit increases.

We also saw increases in benefit costs over the first quarter of the prior year.

The increase in payroll last year was added to support the Company's growth initiatives.

Management views SG&A expenses through two primary cost centers:

Customer Facing Costs and Corporate Support Costs.

Customer Facing Costs, which include store payroll, marketing and other store and direct operating costs, represented 20.4% of sales in the first nine months of fiscal 2022 as compared to 18.1% of sales in the first nine months of fiscal 2021.

Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 15.5% of sales in the first nine months of fiscal 2022 compared to 14.4% of sales in the first nine months of fiscal 2021.

Customer Facing Costs, which include store payroll, marketing and other store and direct operating costs, represented 21.1% of sales in the first quarter of fiscal 2023 as compared to 20.2% of sales in the first quarter of fiscal 2022.

Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 17.4% of sales in the first quarter of fiscal 2023 as compared to 16.3% of sales in the first quarter of fiscal 2022.

Marketing costs for the first quarter were 5.5% of sales as compared to 5.3% of sales for the first quarter of fiscal 2022.

For fiscal 2023, marketing costs are expected to be approximately 5.7% of sales.

Impairment (Gain) of Assets

There were no impairments or non-cash gains recognized in the third quarter of fiscal 2022.

During the third quarter of fiscal 2021, we recorded non-cash gains of $1.2 million, and for the first nine months of fiscal 2022 and fiscal 2021, we recorded non-cash gains of $0.6 million and $2.3 million, respectively.

These non-cash gains related to the reduction of our operating lease liability in connection with our decision to close certain retail stores, which resulted in a revaluation of the lease liability.

Accordingly, $1.1 million for the third quarter of fiscal 2021, and $0.4 million and $2.1 million for the first nine months of fiscal 2022 and fiscal 2021, respectively, were included in the Impairment (Gain) of Assets line of the Consolidated Statement of Operations.

The remaining gains were recorded as a reduction to occupancy costs in each period.

There were no impairments or non-cash gains recognized in the first quarter of fiscal 2023.

During the first quarter of fiscal 2022, we recorded a non-cash gain of $0.5 million related to the reduction of our operating lease liability in connection with our decision to close certain retail stores, which resulted in a revaluation of the lease liability.

The portion of the gain that related to a previously recorded impairment charge against the operating lease right-of-use asset was included as an offset to previously recorded asset impairment charge.

Accordingly, $0.4 million was included in the Impairment (Gain) of Assets line of the Consolidated Statement of Operations.

The remaining gain was recorded as a reduction to occupancy costs.

Depreciation and Amortization

Depreciation and amortization for the third quarter of fiscal 2022 decreased to $3.8 million as compared to $4.1 million for the third quarter of fiscal 2021.

For the first nine months of fiscal 2022, depreciation and amortization decreased to $11.7 million as compared to $13.0 million for the first nine months of fiscal 2021.

Depreciation and amortization for the first quarter of fiscal 2023 decreased to $3.5 million as compared to $4.0 million for the first quarter of fiscal 2022.

The decrease was due to a lower depreciable cost base, especially from our store assets, due to our limited capital spending since fiscal 2020.

Interest Expense, Net

Interest expense for third quarter of fiscal 2022 was $0.1 million, as compared to $2.2 million for the third quarter of fiscal 2021.

For the first nine months of fiscal 2022, interest expense was $0.4 million as compared to $4.3 million for the first nine months of fiscal 2021.

The Company had no outstanding debt and no borrowings under its credit facility during the third quarter and first nine months of fiscal 2022 resulting in a decrease in interest expense as compared to the third quarter and first nine months of fiscal 2021.

Interest expense for the third quarter and first nine months of fiscal 2021 included a prepayment penalty of $1.1 million associated with the Company's early prepayment of its long-term debt.

Since the end of fiscal 2013, we have maintained a full valuation allowance against our deferred tax assets.

During the second quarter of fiscal 2022, we determined that it was more likely than not that we would be able to realize the benefit of substantially all of our deferred tax assets in the United States.

In reaching this determination, we considered the cumulative three years of profitability, our expectations regarding the generation of future taxable income as well as the overall improvement in the Company's business and its current market position.

As a result, in the second quarter of fiscal 2022, we recognized a tax benefit related to the release of approximately $35.5 million in valuation allowance against our deferred tax assets in the United States.

At October 29, 2022, we continued to provide a valuation allowance of $2.4 million, primarily against certain state and foreign net operating losses ("NOLs").

For the third quarter of fiscal 2022, we recorded an income tax provision of $2.1 million, which included a $2.0 million discrete tax expense to adjust the release of the valuation allowance to reflect an increase in third quarter earnings and full-year earnings forecast.

For the first nine months of fiscal 2022, we recorded an income tax benefit of $32.9 million, which included a discrete tax benefit of $33.5 million for the release of the valuation allowance.

For the third quarter and first nine months of fiscal 2021, we recorded an income tax provision of $94,000 and $548,000, respectively, primarily related to income tax in states where NOL usage was statutorily limited.

For the third quarter of fiscal 2022, we recorded net income of $10.5 million, or $0.16 per diluted share, as compared to net income of $13.7 million, or $0.20 per diluted share, for the third quarter of fiscal 2021.

The decrease in earnings from the prior year third quarter was primarily due to the planned investment in marketing, an increase in payroll to support the increased sales volume and an increase in tax provision as a result of the reversal of the valuation allowance.

As mentioned previously, our operating cost structure in fiscal 2021 was insufficient to support our 2022 sales growth objectives and was unsustainable over the long-term.

For the first nine months of fiscal 2022, we have recorded net income of $80.8 million, or $1.20 per diluted share, as compared to net income of $46.8 million, or $0.69 per diluted share, for the first nine months of fiscal 2021.

Results for the first nine months of fiscal 2022 include a non-cash tax benefit of $33.5 million, or $0.50 per diluted share, related to the release of substantially all of the Company's valuation allowance against its deferred tax assets.

As of October 29, 2022, our inventory increased approximately $24.5 million to $106.8 million, as compared to $82.3 million at October 30, 2021.

We are in a stronger inventory position at October 29, 2022 than at the end of the third quarter last year.

This increase was purposeful in order to replenish several categories that were depleted last year.

While our inventory has increased over last year's third quarter, inventory is down 11.1% and inventory turnover is up over 30% from the third quarter of fiscal 2019, or pre-pandemic levels.

Net interest income for the first quarter of fiscal 2023 was $0.3 million, as compared to interest expense of $0.1 million for the first quarter of fiscal 2022.

For the first quarter of fiscal 2023, interest income was earned from investments in U.S.

government-backed investments and money market accounts.

Interest costs for both periods were minimal because we had no outstanding debt and no borrowings under our credit facility during either period.

As a result of the valuation allowance against our deferred tax assets being substantially released during fiscal 2022, we have returned to a normal tax provision for fiscal 2023.

Accordingly, for the first quarter of fiscal 2023, the effective tax rate was 26.6% as compared to 0.8% for the first quarter of fiscal 2022.

The effective tax rate for the first quarter of fiscal 2022 was reduced from the statutory rate due to the utilization of fully reserved net operating loss carryforwards ("NOLs").

For the first quarter of fiscal 2023, we recorded net income of $7.0 million, or $0.11 per diluted share, as compared to net income of $13.4 million, or $0.20 per diluted share, for the first quarter of fiscal 2022.

On a non-GAAP basis, assuming a normalized tax rate of 26% and adjusting for asset impairments (gains), if any, adjusted net income for the first quarter of fiscal 2023 was $7.0 million, or $0.11 per diluted share, as compared to adjusted net income of $9.7 million, or $0.14 per diluted share for the first quarter of fiscal 2022.

There was no asset impairment (gains) for the first quarter of fiscal 2023 and an asset impairment (gain) of $(0.4) million for the first quarter of fiscal 2022.

As of April 29, 2023, our inventory increased approximately $3.4 million to $100.3 million, as compared to $96.9 million at April 30, 2022.

While our inventory increased over last year's first quarter, inventory levels were down 11% and turnover was up over 25% from the first quarter of fiscal 2019, or pre-pandemic levels.

Managing our inventory remains a primary focus for us given the potential impact that inflation may have on consumer spending.

As we head into the fourth quarter of fiscal 2022, we believe that we are in a strong inventory position.

At October 29, 2022, our clearance inventory was 6.7% of our total inventory, as compared to 8.9% at October 30, 2021 and 10.0% at November 2, 2019.

Historically, and consistent with the retail industry, we have experienced seasonal fluctuations as it relates to our operating income and net income.

Traditionally, a significant portion of our operating income and net income is generated in the fourth quarter, as a result of the “Holiday”

Based on the sales trends we started to see in March 2023, we took proactive measures and adjusted our receipt plan.

At April 29, 2023, our clearance inventory was 7.8% of our total inventory, as compared to 6.9% at April 30, 2022 and below our historical benchmark of approximately 10.0%.

Historically, and consistent with the retail industry, we have experienced seasonal fluctuations as it relates to our operating income, net income, and free cash flow.

Traditionally, a significant portion of our operating income, net income, and free cash flow is generated in the second and fourth quarters.

Our inventory is typically at peak levels by the end of the third quarter, which represents a significant use of cash, which is then relieved in the fourth quarter as we sell-down our inventory through the holiday shopping season.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash generated from operations and availability under our credit facility.

At October 29, 2022, we had no outstanding debt, including no borrowings under our credit facility during the first nine months of fiscal 2022.

We believe our cash on hand, availability under our credit facility, and ongoing cash generated from our operations will be sufficient to fund our working capital requirements, our stock repurchase program and capital expenditures for the next 12 months.

Our primary sources of liquidity are our cash and cash equivalents, short-term investments, cash generated from operations and availability under our credit facility, which is discussed below.

At April 29, 2023, we had no outstanding debt, including no borrowings under our credit facility during the first three months of fiscal 2023.

Cash that is in excess of our forecasted needs may be invested in money market accounts and U.S.

government-backed securities.

We believe that our cash and cash equivalent balances, short-term investments, cash generated from operations, and borrowings available to us under our credit facility will be adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months.

However, we remain cautious regarding the effect that the current macroeconomic conditions, including inflation and rising interest costs, may have on consumer spending as well as the continuing geopolitical impact of Russia's invasion of Ukraine on our business and the global economy.

We believe that cash flows from operating activities and cash on hand will also be sufficient to satisfy our capital requirements in the longer-term, however, to the extent future capital requirements exceed cash on hand plus cash flows from operating activities, we anticipate that working capital will be financed by our credit facility, as discussed below.

For the first nine months of fiscal 2022, cash flow from operations decreased to $30.2 million as compared to $64.2 million for the first nine months of fiscal 2021.

Free cash flow, a non-GAAP measure, decreased to $22.3 million for the first nine months of fiscal 2022 as compared to $61.3 million for the first nine months of fiscal 2021.

The decrease in free cash flow was due to our purposeful replenishment of inventory in several categories that were depleted last year, the payout of incentive-based awards, and an increase in capital expenditures.

Cash flow used from financing activities for the first nine months of fiscal 2022 improved by $59.1 million as compared to the first nine months of fiscal 2021, primarily due to the repayment in the prior year of amounts outstanding under our credit facility and the early repayment of our long-term debt.

This was partially offset by the stock offering in February 2021 and the repurchase of our common stock, as discussed below, in the first nine months of fiscal 2022.

For the first three months of fiscal 2023, cash flow from operations decreased to $(4.2) million as compared to $(1.5) million for the first three months of fiscal 2022.

Free cash flow, a non-GAAP measure, decreased to $(5.9) million for the first three months of fiscal

2023 as compared to $(2.7) million for the first three months of fiscal 2022.

The first quarter is historically a period of net cash outflows as we build our seasonal inventories and pay out prior year performance incentive accruals.

The year-over-year decrease in free cash flow was primarily due to our lower earnings.

Cash flow used for investing activities increased by $16.5 million for the first quarter of fiscal 2023 as compared to the first quarter of fiscal 2022, primarily due to the purchase of $16.1 million of short-term investments.

Cash flow used for financing activities for the first three months of fiscal 2023 decreased by $5.0 million as compared to the first three months of fiscal 2022, primarily due to the repurchase of $5.0 million shares of the Company's common stock in the first quarter of fiscal 2022.

There were no repurchases of common stock during the first quarter of fiscal 2023.

Stock Repurchase Program

1 unchanged sentence

Under the stock repurchase program, the Company may repurchase up to $15.0 million of its common stock through open market and privately negotiated transactions.

the first nine months of fiscal 2022, the Company repurchased 2.9 million shares at an aggregate cost, including fees, of $12.7 million from available cash on hand.

There were no stock repurchases in the third quarter of fiscal 2022.

Shares of repurchased common stock are held as treasury stock.

The stock repurchase program will expire in March 2023.

The Company did not repurchase any shares in the first quarter of fiscal 2023.

Any shares of repurchased common stock will be held as treasury stock.

The stock repurchase program will expire on March 16, 2024 and may be suspended, terminated or modified at any time for any reason.

Credit Facility

On October 28, 2021, we entered into a $125.0 million revolving credit agreement with a five-year term, which replaced our prior credit facility that was due to expire in May 2023 (the "Credit Facility").

The Credit Facility includes a sublimit of $20.0 million for commercial and standby letters of credit and a sublimit of up to $15.0 million for swingline loans.

Borrowings made pursuant to the Credit Facility will be made pursuant to either a Base Rate loan or LIBOR Rate loan, at the Company's option.

Base Rate loans bear interest, at a rate equal to (i) the greater of:

(a) the Prime Rate, (b) the Federal Funds effective rate plus 0.50% per annum and (c) the daily LIBOR rate plus 1.00% per annum, plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25% or 0.50%.

LIBOR Rate loans, which may be either for 1 month or 3 months, bear interest at (i) the LIBOR rate, or the Benchmark Rate as defined in the credit agreement plus (ii) a varying percentage based on the Company’s average excess availability, of either 1.25% or 1.50%.

We had no outstanding borrowings under our Credit Facility at October 29, 2022 and no borrowings during the first nine months of fiscal 2022.

At October 29, 2022, outstanding standby letters of credit were $3.8 million and outstanding documentary letters of credit were $1.0 million.

The average unused excess availability during the first nine months of fiscal 2022 was approximately $82.0 million and the unused excess availability at October 29, 2022 was $90.2 million.

On October 28, 2021, we entered into a $125.0 million revolving credit agreement with Citizens Bank, N.A., with a maturity date of October 28, 2026.

The Credit Agreement includes a sublimit of $20.0 million for commercial and standby letters of credit and a sublimit of up to $15.0 million for swingline loans.

April 20, 2023, borrowings under the Credit Agreement bear interest at either a Base Rate loan or Daily Simple SOFR rate, at the Company's option.

Base Rate loans will bear interest at a rate equal to (i) the greater of:

(a) the Prime Rate, (b) the Federal Funds effective rate plus 0.50% per annum and (c) the Daily Simple SOFR rate plus 1.00% per annum (provided the Base Rate shall never be less than the Floor (as defined in the First Amendment)), plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25% or 0.50% (the “Applicable Margin”).

Daily Simple SOFR loans will bear interest at a rate equal to (i) the Daily Simple SOFR rate plus an adjustment of 0.10% (provided the Daily Simple SOFR rate shall never be less than the Floor), plus (ii) the Applicable Margin.

Any swingline loan will continue to bear interest at a rate equal to the Base Rate plus the Applicable Margin.

We are subject to an unused line fee of 0.25%.

We had no outstanding borrowings under our Credit Agreement at April 29, 2023 and no borrowings during the first three months of fiscal 2023.

At April 29, 2023, outstanding standby letters of credit were $3.8 million and outstanding documentary letters of credit were $1.3 million.

The average unused excess availability during the first three months of fiscal 2023 was approximately $82.5 million and the unused excess availability at April 29, 2023 was $93.8 million.

Capital Expenditures

The following table sets forth the open stores and related square footage at October 29, 2022 and October 30, 2021, respectively:

October 29, 2022

October 30, 2021

The following table sets forth the open stores and related square footage at April 29, 2023 and April 30, 2022, respectively:

April 29, 2023

April 30, 2022

Store Concept

2 unchanged sentences

Casual Male Outlets

Our capital expenditures in fiscal 2021 and fiscal 2020 were very limited due to the pandemic.

For fiscal 2022, we expect our capital expenditures will be approximately $10.0-$12.0 million as we make investments in technology related to our marketing and merchandising initiatives.

We are also actively pursuing opportunities to relocate or convert our remaining Casual Male XL stores to DXL stores which may require some capital investment in fiscal 2022.

During the first nine months of fiscal 2022, we closed 5 Casual Male XL retail stores and 2 DXL retail stores.

We are also reviewing white space opportunities in markets where our store footprint is underpenetrated and relocation opportunities where we have an existing Casual Male XL store.

We believe that our store portfolio is a vital asset to our business strategy and we expect to continue to invest in stores over the next several years as we further strengthen the store portfolio.

Over the next three to five years, based on our preliminary store development plan, we believe that we could potentially open up to 50 new and relocated stores.

We have executed our first lease agreement this year for a new store in the Los Angeles market.

We are very close on our second new store which will be in the New York market and we expect to sign at least one more lease for a third whitespace store that we expect to open by the end of 2023.

We have also started to convert four Casual Male stores to the DXL store format and we have started to remodel one existing DXL store.

By the end of fiscal 2023, we expect to open 3 new DXL stores and 10 Casual Male to DXL conversion stores.

We expect to have begun construction on at least 5 DXL remodels by the end of the year.

Over the next three to

five years, we believe we could potentially open 50 new DXL stores across the country.

We expect our capital expenditures to range from $19.0 million to $21.0 million in fiscal 2023.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Non-GAAP Financial Measures

Free cash flow and Adjusted EBITDA are non-GAAP measures.

Free cash flow, adjusted net income, adjusted net income per diluted share, adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures.

These non-GAAP measures are not presented in accordance with GAAP and should not be considered superior to or as a substitute for net income or cash flows from operating activities or any other measure of performance derived in accordance with GAAP.

In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, the non-GAAP measures presented in this Quarterly Report may not be comparable to similar measures used by other companies.

We believe that inclusion of these non-GAAP measures helps investors gain a better

understanding of our performance, especially when comparing such results to previous periods and that they are useful as an additional means for investors to evaluate our operating results, when reviewed in conjunction with our GAAP financial statements.

We believe that inclusion of these non-GAAP measures helps investors gain a better understanding of our performance, especially when comparing such results to previous periods and that they are useful as an additional means for investors to evaluate our operating results, when reviewed in conjunction with our GAAP financial statements.

Reconciliations of these non-GAAP measures are presented in the following tables (certain columns may not foot due to rounding) :

5 unchanged sentences

The following table reconciles free cash flow:

For the nine months ended

For the three months ended

(in millions)

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

Cash flow from operating activities (GAAP basis)

1 unchanged sentence

Free Cash Flow (non-GAAP basis)

Adjusted Net Income and Adjusted Net Income Per Diluted Share:

The above discussion includes adjusted net income, on a non-GAAP basis.

For comparability, the adjusted net income has been calculated to adjust for asset impairment charge (gain), if any, and to apply a normal tax rate of 26%.

For the three months ended

April 29, 2023

April 30, 2022

(in millions, except per share data)

Net income (GAAP basis)

Adjust for impairment (gain) of assets

Add back actual income tax provision

Add income tax provision, assuming a normal tax rate of 26%

Adjusted net income (non-GAAP basis)

Weighted average number of common shares outstanding on a diluted basis

Adjusted EBITDA .

3 unchanged sentences

For the three months ended

For the nine months ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

(in millions)

1 unchanged sentence

Impairment (gain) of assets

Provision (benefit) for income taxes

Interest expense

Provision for income taxes

Interest (income) expense

Depreciation and amortization

Adjusted EBITDA (non-GAAP basis)

Adjusted EBITDA margin (non-GAAP), as a percentage of sales

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements