What changed in this filing

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Item 1. Financial Statements

2023-11-17 compared with 2023-08-24 · 346 added, 290 removed, 622 unchanged (51% of the section changed)

3 unchanged sentences

(In thousands, except share data)

July 29, 2023

October 28, 2023

January 28, 2023

25 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, 78,605,837 and 78,229,861 shares issued at July 29, 2023 and January 28, 2023, respectively

Common stock, $ 0.01 par value, 125,000,000 shares authorized, 78,885,187 and 78,229,861 shares issued at October 28, 2023 and January 28, 2023, respectively

Additional paid-in capital

Treasury stock at cost, 17,874,322 shares at July 29, 2023 and 15,625,172 shares at January 28, 2023

Treasury stock at cost, 18,712,467 shares at October 28, 2023 and 15,625,172 shares at January 28, 2023

Accumulated deficit

7 unchanged sentences

For the Three Months Ended

For the Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

For the Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

(Fiscal 2023)

8 unchanged sentences

Operating income

Loss on termination of pension plan

Loss on termination of retirement plans

Interest income (expense), net

9 unchanged sentences

For the Three Months Ended

For the Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

For the Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

(Fiscal 2023)

4 unchanged sentences

Foreign currency translation

Pension plans

Recognized loss on termination of pension plan

Retirement plans

Recognized loss on termination of retirement plans

Other comprehensive income before taxes

Tax provision related to items of other comprehensive income

Tax effect related to items of other comprehensive income

Other comprehensive income, net of tax

22 unchanged sentences

Balance at July 29, 2023

Board of directors' compensation

Stock compensation expense

Exercise of stock options

Issuance of common stock, upon RSUs release

Shares withheld for taxes related to net share settlement

Repurchase of common stock, including excise tax

Other comprehensive income, net of taxes

Balance at October 28, 2023

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

23 unchanged sentences

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

Other comprehensive income

Balance at October 29, 2022

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

2 unchanged sentences

(In thousands)

For the Six Months Ended

July 29, 2023

July 30, 2022

For the Nine Months Ended

October 28, 2023

October 29, 2022

(Fiscal 2023)

4 unchanged sentences

Impairment (gain) of assets

Loss on pension plan termination

Loss on retirement plan terminations

Gain from the sale of equipment

14 unchanged sentences

Purchase of short-term investments

Maturity of short-term investments

Net cash used for investing activities

56 unchanged sentences

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 six months ended July 29, 2023 and July 30, 2022 were as follows:

July 29, 2023

July 30, 2022

Other comprehensive income (loss) includes amounts related to foreign currency and retirement 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 28, 2023 and October 29, 2022 were as follows:

October 28, 2023

October 29, 2022

For the three months ended:

3 unchanged sentences

reclassifications, net of taxes

Recognition of loss on pension termination, net of taxes (1)

Recognition of loss on retirement plan termination, net of taxes (1)

Amounts reclassified from accumulated other

2 unchanged sentences

Balance at end of quarter

July 29, 2023

July 30, 2022

For the six months ended:

October 28, 2023

October 29, 2022

For the nine months ended:

(in thousands)

2 unchanged sentences

reclassifications, net of taxes

Recognition of loss on pension termination, net of taxes (1)

Recognition of loss on retirement plan termination, net of taxes (1)

Amounts reclassified from accumulated other

2 unchanged sentences

Balance at end of quarter

(1) In connection with the Company's decision to terminate its pension plan, during the second quarter of fiscal 2023 the Company completed a partial settlement and accordingly recognized a pro-rated portion of AOCI in the amount of $ 4.2 million, or $ 3.1 million net of taxes.

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

(1) In connection with the Company's decision to terminate its frozen retirement plans, the Company completed a termination of its Supplemental Executive Retirement Plan ("SERP") in the third quarter of fiscal 2023 and recognized the loss in AOCI of $ 31,000 , with no related tax effect.

Results for the nine months ended October 28, 2023 also reflect the partial settlement of the Pension Plan which resulted in the recognition of $ 4.2 million loss on termination, or $ 3.1 million net of taxes.

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

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

The Company recognized expense of $ 34,000 , or $ 25,000 net of taxes, for the three months ended July 29, 2023 and expense of $ 92,000 , or $ 68,000 net of taxes, for the six months ended July 29, 2023.

For the three and six months ended July 30, 2022 , the Company recognized income of $ 8,000 and $ 20,000 , 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 six months ended July 30, 2022.

The Company recognized expense of $ 47,000 , or $ 35,000 net of taxes, for the three months ended October 28, 2023 and expense of $ 139,000 , or $ 103,000 net of taxes, for the nine months ended October 28, 2023.

For the three and nine months ended October 29, 2022 , the Company recognized income of $ 9,000 and $ 29,000 , 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.

Stock-based Compensation

6 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 six months of fiscal 2023 and fiscal 2022.

July 29, 2023

July 30, 2022

October 28, 2023

October 29, 2022

Expected volatility

8 unchanged sentences

Weighted average fair value of options granted

During the third quarter of fiscal 2023, the Company granted 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 volatility, risk-free rate and cost of equity are discussed in Note 6, " Stock-Based Compensation ."

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 three months and six months ended July 29, 2023.

For the three months and six months ended July 30, 2022, the Company recognized non-cash gains of $ 0.1 million and $ 0.6 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.

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 three months and six months ended July 30, 2022, $ 0.1 million and $ 0.4 million, respectively, were included as an offset to asset impairment charges.

The remaining gains for the three months and six months ended July 30, 2022 were included as a reduction of store occupancy costs.

There were no impairments or non-cash gains recognized in the three and nine months ended October 28, 2023 or for the three months ended October 29, 2022.

For the nine months ended October 29, 2022, the Company recognized a non-cash gain of $ 0.6 million.

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

Accordingly, for the nine months ended October 29, 2022, $ 0.4 million was included as an offset to asset impairment charges.

The remaining gain for the nine months ended October 29, 2022 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.

Right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments, initial direct costs and any lease incentives are included in the value of those right-of use assets.

As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, based on information available at the lease measurement date, to determine the present value of future payments.

The Company elected the lessee non-lease component separation practical expedient, which permits the Company to not separate non-lease components from the lease components to which they relate.

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

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 28, 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 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.

4 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 ROU 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.

14 unchanged sentences

ASU 2023 - 03 is not expected to have a material impact on the Company's Consolidated Financial Statements.

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

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

Revenue Recognition

10 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 $ 2.3 million and $ 3.4 million at July 29, 2023 and January 28, 2023, respectively.

The gift card liability, net of breakage, was $ 2.0 million and $ 3.4 million at October 28, 2023 and January 28, 2023, respectively.

Unredeemed Loyalty Coupons.

2 unchanged sentences

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

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

The loyalty accrual, net of breakage, was $ 1.7 million and $ 1.6 million at October 28, 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.

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

Results for the nine months ended October 29, 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 Six Months Ended

For the Nine Months Ended

(in thousands)

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Retail segment

6 unchanged sentences

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

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

Effective April 20, 2023, borrowings under the Credit Facility 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:

5 unchanged sentences

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 July 29, 2023 , the Company had no borrowings outstanding under the Credit Facility and unused availability was $ 81.8 million.

The Company had no borrowings during the first six months of fiscal 2023, resulting in an average unused excess availability of approximately $ 85.6 million.

Outstanding standby letters of credit were $ 4.0 million and outstanding documentary letters were $ 1.2 million at July 29, 2023.

At July 29, 2023, the Company’s prime-based interest rate was 8.75 % .

At October 28, 2023 , the Company had no borrowings outstanding under the Credit Facility and unused availability was $ 87.6 million.

The Company had no borrowings during the first nine months of fiscal 2023, resulting in an average unused excess availability of approximately $ 84.3 million.

Outstanding standby letters of credit were $ 4.3 million and outstanding documentary letters were $ 0.4 million at October 28, 2023.

At October 28, 2023, the Company’s prime-based interest rate was 8.75 % .

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 headquarters is 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 .

2 unchanged sentences

Lease modification accounting requires the recalculation of the ROU asset, lease liability and lease expense over the respective lease term.

As of July 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.

As of October 28, 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 six months ended July 29, 2023 and July 30, 2022:

The following table is a summary of the Company’s components of net lease cost for the three and nine months ended October 28, 2023 and October 29, 2022:

For the three months ended

For the six months ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

For the nine months ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

(in thousands)

2 unchanged sentences

Total lease costs

(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 six months ended July 29, 2023 and July 30, 2022 was as follows:

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

Supplemental cash flow and balance sheet information related to leases for the first nine months ended October 28, 2023 and October 29, 2022 was as follows:

(dollars in thousands)

For the six months ended

For the nine months ended

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

July 29, 2023

July 30, 2022

October 28, 2023

October 29, 2022

Operating cash flows for operating leases (1)

3 unchanged sentences

Weighted average discount rate

(1) The cash paid for the first six months of fiscal 2023 and fiscal 2022 included prepaid rent of $ 3.7 million and $ 3.6 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 July 29, 2023:

(1) The cash paid for the first nine months of fiscal 2023 and fiscal 2022 included prepaid rent of $ 0.6 million and $ 4.1 million, respectively.

(in thousands)

5 unchanged sentences

Long-term lease obligations

As of July 29, 2023, the Company had entered into a ten-year store lease that has not yet commenced with aggregated estimated future lease payments of approximately $ 3.0 million, which are not included in the above table.

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

As of October 28, 2023, the Company had entered into a ten-year store lease that has not yet commenced with aggregated estimated future lease payments of approximately $ 1.5 million, which are not included in the above table.

The lease is expected to commence in the first quarter of fiscal 2024 .

Long-Term Incentive Plans

12 unchanged sentences

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.

All awards were 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”

1 unchanged sentence

See the Consolidated Statement of Changes in Stockholders’

At July 29, 2023 , the Company had three active LTIPs:

At October 28, 2023 , the Company had three active LTIPs:

the 2021-2023 LTIP, the 2022-2024 LTIP and the 2023-2025 LTIP.

6 unchanged sentences

Approximately half of the compensation expense for each LTIP relates to the time-based awards, which are being expensed straight-line over 49 months, 48 months and 47 months, respectively.

At July 29, 2023 , the Company had accrued $ 2.0 million under the 2021-2023 LTIP and $ 1.4 million under the 2022-2024 LTIP for the performance awards.

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

At October 28, 2023 , the Company had accrued $ 2.3 million under the 2021-2023 LTIP and $ 1.4 million under the 2022-2024 LTIP for the performance awards.

At October 28, 2023 , the Company had no accrual for the performance-based awards under the 2023-2025 LTIP.

Stock-Based Compensation

1 unchanged sentence

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.

A grant of a stock option award or stock appreciation right will reduce the outstanding reserve on a one-for-one basis, meaning one share for every share granted.

A grant of a full-value award, including, but not limited to, restricted stock, restricted stock units and deferred stock, will reduce the outstanding reserve by a fixed ratio of 1.9 shares for every share granted.

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 July 29, 2023, the Company had 3,374,231 shares available under the 2016 Plan.

At October 28, 2023 , 15,120,538 shares were authorized under the 2016 Plan, of which 2,288,734 shares remained available for grant.

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 July 29, 2023 , 90,487 stock options remained outstanding under the 2006 Plan.

At October 28, 2023 , 90,487 stock options remained outstanding under the 2006 Plan.

The 2016 Plan is administered by the Compensation Committee.

2 unchanged sentences

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 six months of fiscal 2023:

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

Share Units (3)

5 unchanged sentences

Outstanding non-vested shares at end of quarter

(1) During the first six 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 and time-based RSUs under its 2023-2025 LTIP.

(1) During the first nine months of fiscal 2023, the Company granted RSUs for the achievement of performance metrics under the 2020-2022 LTIP that were subject to additional vesting through August 31, 2023 and time-based RSUs under its LTIPs.

See Note 5, Long-Term Incentive Plans .

1 unchanged sentence

(2) The outstanding deferred shares will be issued upon the director’s separation from service.

(3) Represented the remaining performance share units (“PSUs”) granted to Mr.

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

(3) On August 11, 2023, the Company granted 573,000 performance share units ("PSUs") in connection with the extension of Mr.

Kanter's employment agreement.

The award consists of nine tranches, with the first tranche vesting if and when the 30-day volume-weighted closing price of the Company's common stock is equal to or greater than $ 6.50 per share.

Each subsequent tranche will vest upon achievement of the 30-day volume-weighted closing price of the Company's common stock in $0.25 installments with the ninth tranche vesting when such price is equal to or greater than $ 8.50 per share.

The PSUs are subject to a one-year minimum vesting period, and any unvested PSUs will expire on August 11, 2026.

The $ 2.4 million fair value is being expensed over the respective derived service periods of each tranche which range from 12 to 13 months.

The respective fair value and derived service periods assigned to the PSUs were determined using a Monte Carlo model based on:

a weighted historical volatility of 57.8 %, a term of 3 years, stock price on the date of grant of $ 4.98 per share, a risk-free rate of 4.6 % and a cost of equity of 11.0 %.

(4) Represented compensation, with a fair value of $ 101,242 , 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 Compensation Plan.

7 unchanged sentences

Options exercised

Options expired and canceled

Options expired

Options forfeited

Outstanding options at end of quarter

Options exercisable at end of quarter

For the first six months of fiscal 2023, the Company granted stock options to purchase an aggregate of 1,317 shares of common stock, 547,294 restricted stock units and 11,924 fully-vested shares.

For the first six months of fiscal 2022, the Company granted stock options to purchase an aggregate of 3,640 shares of common stock, 496,467 restricted stock units and 17,532 fully-vested shares.

Subsequent to the end of the second quarter of fiscal 2023, on August 11, 2023, in connection with the extension of Mr.

Kanter's employment agreement, the Company granted 573,000 PSUs to Mr.

The award consists of nine tranches, with the first tranche vesting if and when the 30-day volume-weighted closing price of the Company's common stock is equal to or greater than $ 6.50 per share.

Each subsequent tranche will vest in $0.25 increments with the ninth tranche vesting when the 30-day volume-weighted closing price of the Company common stock is equal to or greater than $ 8.50 per share.

The PSUs are subject to a one-year minimum vesting period, and any unvested PSUs will expire on August 11, 2026.

For the first nine months of fiscal 2023, the Company granted stock options to purchase an aggregate of 1,317 shares of common stock, 547,294 restricted stock units and 19,772 fully-vested shares.

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.

Non-Employee Director Compensation Plan

The Company granted 28,349 shares of common stock, with a fair value of approximately $ 159,357 , to certain of its non-employee directors as compensation in lieu of cash in the first six months of fiscal 2023.

The Company granted 42,156 shares of common stock, with a fair value of approximately $ 230,601 , to certain of its non-employee directors as compensation in lieu of cash in the first nine 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 $ 0.8 million for the first six months of both fiscal 2023 and fiscal 2022.

The total compensation cost related to time-vested stock options and RSU awards not yet recognized as of July 29, 2023 was approximately $ 2.5 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 34 months.

The Company recognized total stock-based compensation expense of $ 1.6 million and $ 1.1 million for the first nine months of fiscal 2023 and fiscal 2022, respectively.

The total compensation cost related to time-vested stock options, RSU awards, and PSU awards not yet recognized as of October 28, 2023 was approximately $ 4.1 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 22 months.

Equity and Earnings per Share

1 unchanged sentence

For the three months ended

For the six months ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

For the nine months ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

(in thousands )

6 unchanged sentences

For the three months ended

For the six months ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

For the nine months ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

(in thousands, except exercise prices)

6 unchanged sentences

$ 4.48 - $ 6.59

The above options, which were outstanding at July 29, 2023 , expire from January 29, 2024 to March 20, 2033 .

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

The above options, which were outstanding at October 28, 2023 , expire from January 29, 2024 to March 20, 2033 .

Excluded from the computation of basic and diluted earnings per share were 573,000 shares for the third quarter and first nine months of fiscal 2023 and 240,000 shares for the third quarter and first nine months of fiscal 2022 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 28, 2023 and at October 29, 2022 were

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 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, including excise tax, 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 will expire on March 16, 2024 , but may be suspended, terminated or modified at any time for any reason.

The Company expects to finance the repurchases from cash generated from operations.

During the second quarter of fiscal 2023, the Company repurchased 2.2 million shares at an aggregate cost of $ 10.8 million, excluding excise taxes.

The Inflation Reduction Act of 2022 imposed a nondeductible 1 % excise tax on the net value of certain share repurchases made after December 31, 2022.

Beginning in fiscal year 2023, the applicable excise tax is being charged to additional paid-in capital in the Company's Consolidated Balance Sheet as part of the cost basis of the shares repurchased, with the corresponding liability for the excise tax payable recorded in accrued expenses and other current liabilities.

This liability is partially offset by a 1 % credit permitted under the rules for the fair value of shares issued by the Company.

For the six months ended July 29, 2023, the Company has accrued $ 0.1 million for the payment of excise taxes.

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.

1 unchanged sentence

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

For the second quarter and first six months of fiscal 2023, the Company’s effective tax rate was 26.4 % and 26.5 % , respectively.

During the second quarter and first six months of fiscal 2022, the Company recorded an income tax benefit of $ 35.1 million and $ 35.0 million, respectively.

Excluding the release of $ 35.5 million in valuation allowance, the Company recorded income tax expense of $ 408,000 and $ 511,000 , respectively, primarily related to income tax in states where NOL usage was statutorily limited.

The Company made tax payments of $ 0.3 million for the first six months of fiscal 2023, and no tax payments for the first six months of fiscal 2022.

Termination of Noncontributory Pension Plan

The Company's tax provision for income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any.

Each quarter, the Company updates its estimate of the annual effective tax rate and makes a year-to-date adjustment to the provision.

For the third quarter and first nine months of fiscal 2023, the Company’s effective tax rate was 30.2 % and 27.2 % , respectively.

For the third quarter of fiscal 2022, the effective tax rate was 16.6 % and primarily reflected a $ 2.0 million discrete tax expense to adjust the release of valuation allowance.

For the first nine months of fiscal 2022, the Company recognized 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.

The Company made tax payments of $ 0.7 million and $ 0.3 million for the first nine months of fiscal 2023 and fiscal 2022, respectively.

Termination of Retirement Plans

Noncontributory Pension Plan

In connection with the acquisition of Casual Male Corp.

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On July 1, 2023, the Company completed a partial settlement through the purchase of nonparticipating annuities.

The Company made a cash contribution during the first six months of fiscal 2023 of $ 1.6 million.

The remaining pension liability, net of plan assets, at July 29, 2023 is approximately $ 0.2 million.

The Company made a cash contribution during the first nine months of fiscal 2023 of $ 1.7 million.

The remaining pension liability, net of plan assets, at October 28, 2023 was approximately $ 0.1 million.

The remaining plan assets are invested in short-term investments and cash equivalents.

In the second quarter of fiscal 2023, the Company recognized a charge of $ 4.2 million, representing a pro-rata portion of the unrealized loss in "Accumulated Other Comprehensive Loss" on the Consolidated Balance Sheet.

The Company expects to settle the remaining obligation and terminate the Pension Plan by the end of fiscal 2023, at which time the Company will recognize the remaining unrealized loss that is part of "Accumulated Other Comprehensive Loss."

Net periodic pension cost for the three and six months ended July 29, 2023 and July 30, 2022 was as follows:

Results for the nine months ended October 28, 2023 , included a charge of $ 4.2 million recorded in the second quarter, representing a pro-rata portion of the unrealized loss in "Accumulated Other Comprehensive Loss" on the Consolidated Balance Sheet.

The Company expects to settle the remaining obligation under the Pension Plan by the end of fiscal 2023, at which time the Company will recognize the remaining unrealized loss, including any remaining tax effects, that is part of "Accumulated Other Comprehensive Loss."

Net periodic pension cost for the three and nine months ended October 28, 2023 and October 29, 2022 was as follows:

For the three months ended

For the six months ended

July 29, 2023

For the nine months ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Net periodic pension cost:

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Assumptions used were as follows:

For the six months ended

July 29, 2023

For the three and nine months ended

October 28, 2023

October 29, 2022

Discount rate

Expected return on plan assets

Supplemental Executive Retirement Plan ("SERP")

In connection with the acquisition of Casual Male Corp.

in May 2002, the Company also assumed the liability of the Casual Male Supplemental Executive Retirement Plan.

On May 3, 2023, the Audit Committee approved the termination of the SERP, which was then approved and ratified by the Board of Directors on May 4, 2023 .

During the third quarter of fiscal 2023, the Company completed the termination of the SERP though the purchase of a nonparticipating annuity.

In connection with that termination, during the third quarter of fiscal 2023, the Company made a cash contribution of $ 0.4 million and recognized a loss on the termination of the plan of $ 57,000 , which included the recognition of the unrealized loss of $ 31,000 in Accumulated Other Comprehensive Loss .

Fair Value Measurement

At July 29, 2023 and January 28, 2023, the Company held U.S.

At October 28, 2023 and January 28, 2023, the Company held U.S.

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

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Inputs (Level 3)

At July 29, 2023:

Cash equivalents:

Treasury Bills

At October 28, 2023:

Short-term investments:

3 unchanged sentences

Treasury Bills

Stock Repurchase Program and Subsequent Event

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

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

The Company completed the initial authorization during the third quarter of fiscal 2023.

Subsequent to the end of the third quarter, on November 15, 2023, the Board approved an amendment to the stock repurchase program to increase the amount authorized under the program from $ 15.0 million to $ 25.0 million, effective November 17, 2023.

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

The Company expects to finance any repurchases from cash generated from operations.

During the first nine months of fiscal 2023, the Company repurchased 3.1 million shares at an aggregate cost of $ 14.9 million, excluding excise taxes.

The Inflation Reduction Act of 2022 imposed a nondeductible 1 % excise tax on the net value of certain share repurchases made after December 31, 2022.

This liability is partially offset by a 1 % credit permitted under the rules for the fair value of shares issued by the Company.

For the nine months ended October 28, 2023, the Company has accrued $ 0.1 million for the payment of excise taxes.

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

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but may be found in other locations as well, and include statements regarding our long-range strategic growth plan and our ability to achieve accelerated growth in the future;

the expected impact of our strategic initiatives, including with respect to raising brand awareness, store development and future alliances and collaborations;

the expected impact of our strategic initiatives, including with respect to raising brand awareness, store development, website replatform and future alliances and collaborations;

expected marketing costs, gross margin rates and expected capital expenditures in 2023;

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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 inflationary pressures, changes in consumer spending in response to economic factors, increased labor costs and potential labor shortages, the continuing economic impact of the Russian invasion of Ukraine, our ability to manage appropriate inventory levels, our ability to successfully execute on our strategic initiatives, our ability to predict customer tastes and fashion trends, our ability to grow market share, our ability to forecast sales growth trends and compete in the market, and the other risks and uncertainties set forth in the “Risk Factors”

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 inflationary pressures, changes in consumer spending in response to economic factors, increased labor costs and potential labor shortages, the continuing economic impact of the Russian invasion of Ukraine and the war in the Middle East, our ability to manage appropriate inventory levels, our ability to successfully execute on our strategic initiatives, our ability to predict customer tastes and fashion trends, our ability to grow market share, our ability to forecast sales growth trends and compete in the market, 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 July 29, 2023, we operated 219 Destination XL stores, 16 DXL outlet stores, 27 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 October 28, 2023, we operated 226 Destination XL stores, 16 DXL outlet stores, 21 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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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.

A customer also has the ability to order

online and pick-up in a store and at curbside.

Similarly, if a customer

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

A customer also has the ability to order online and pick-up in a store and at curbside.

We define store sales as sales that originate and are fulfilled directly at the store level.

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Stores that have been open for at least 13 months are included in comparable sales.

Stores that have been remodeled or re-located during the period are also included in our determination of comparable stores sales.

Stores that have been remodeled or relocated during the period are also included in our determination of comparable stores sales.

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

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For the three months ended

For the six months ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

For the nine months ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

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

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Adjusted net income (Non-GAAP basis)

Our comparable sales for the second quarter of fiscal 2023 decreased 1.4%, our first decrease since the fourth quarter of fiscal 2020, as we compared against a strong prior year second quarter.

During the second quarter, we saw a decrease in dollars per transaction, a reflection of the continuing economic headwinds.

However, traffic improved as the quarter progressed, resulting in a positive comp of 1.0% in July.

Despite the pressure on top-line growth, we continue to proactively manage our inventory and operating costs, which has resulted in a strong adjusted EBITDA margin (a non-GAAP measure) for the quarter of 16.4%.

While we saw improvement at the end of the second quarter, traffic has slowed during the first few weeks of the third quarter, up against a strong prior year, with comparable sales trending down in the mid-single digits.

In the second quarter of fiscal 2023, our Board approved the termination of our frozen, noncontributory pension plan.

Given the current high interest rates, we saw this as an opportunistic use of excess cash to eliminate this variable liability.

In connection with that decision, during the second quarter, we completed a partial settlement of our pension obligations through the purchase of nonparticipating annuities.

As a result, during the second quarter of fiscal 2023, we recognized a loss of $4.2 million, representing a pro-rata portion of the unrealized loss in Accumulated Other Comprehensive Loss.

We expect to complete the termination of the pension plan by the end of fiscal 2023.

Net income for the second quarter of fiscal 2023 was $11.6 million, or $0.18 per diluted share, as compared to net income of $56.9 million, or $0.85 per diluted share, for the second quarter of fiscal 2022.

Net income for the second quarter of fiscal 2022 included the release of substantially all of the valuation allowance against our deferred tax assets.

Assuming a normalized tax rate and adjusting for the loss from the pension plan termination and asset impairments (gains), if any, on a non-GAAP basis, net income for the second quarter of fiscal 2023 was $14.8 million, or $0.23 per diluted share, as compared to adjusted net income of $16.1 million, or $0.24 per diluted share, for the second quarter of fiscal 2022.

For the first six months of fiscal 2023, net income was $18.6 million, or $0.28 per diluted share, as compared to net income of $70.3 million, or $1.04 per diluted share, for the first six months of fiscal 2022.

Adjusted net income for the first six months of fiscal 2023, was $21.8 million, or $0.33 per diluted share, as compared to net income of $25.8 million, or $0.38 per diluted share, for the first six months of fiscal 2022.

As of July 29, 2023, we had cash and investments of $62.8 million as compared to $22.2 million at July 30, 2022.

As of July 29, 2023, we had no debt outstanding, unused excess availability of $81.8 million, and no borrowings during the quarter.

Our inventory was in a healthy position at quarter-end, down 9.5% as compared to July 30, 2022.

Inventory turnover, as of July 29, 2023, has improved over 28% from fiscal 2019 levels.

Our comparable sales for the third quarter decreased 6.7% with comparable sales from our stores down 8.1% and our direct business down 3.2%.

The decrease was primarily driven by a slowdown in traffic.

Despite this pressure on our top line results, we maintained a solid gross margin, managed our operating expenses, and generated net income of $0.06 per diluted share and an adjusted EBITDA margin (a non-GAAP measure) of 7.3%.

Further, we continued to strengthen our financial position, successfully managing our inventory levels, which are down 6.5% to last year, and we generated $22.7 million in free cash flow year to date.

Net income for the third quarter of fiscal 2023 was $4.0 million, or $0.06 per diluted share, as compared to net income of $10.5 million, or $0.16 per diluted share, for the third quarter of fiscal 2022.

For the first nine months of fiscal 2023, net income was $22.6 million, or $0.35 per diluted share, as compared to net income of $80.8 million, or $1.20 per diluted share, for the first nine months of fiscal 2022.

Net income for the first nine months of fiscal 2022 included the release of substantially all of the valuation allowance against our deferred tax assets.

Assuming a normalized tax rate and adjusting for the loss from retirement plan terminations and asset impairments (gains), if any, adjusted net income for the first nine months of fiscal 2023, was $25.8 million, or $0.40 per diluted share, as compared to net income of $34.6 million, or $0.52 per diluted share, for the first nine months of fiscal 2022.

As of October 28, 2023, we had cash and investments of $60.4 million as compared to $23.5 million at October 29, 2022.

As of October 28, 2023, we had no debt outstanding, unused excess availability of $87.6 million, and no borrowings during the first nine months.

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 grow our business.

As discussed below, during the second quarter of fiscal 2023, we repurchased 2.2 million shares at a total cost, including fees of $10.8 million, within the Board's authorized $15.0 million share repurchase.

Through the nine months ended October 28, 2023, we repurchased 3.1 million shares at a total cost, including fees, of $14.9 million.

Subsequent to the end of the third quarter of fiscal 2023, effective November 17, 2023 the Board of Directors amended the stock repurchase program to increase the number of shares authorized to be repurchased from $15.0 million to $25.0 million.

In May 2023, we also made the decision to terminate our frozen, noncontributory pension plan and the frozen supplemental executive retirement plan ("SERP").

Given the current high interest rates, we saw this as an opportunistic use of excess cash to eliminate these variable liabilities.

In connection with that decision, during the second quarter, we completed a partial settlement of our pension obligations through the purchase of nonparticipating annuities.

Our results for the nine months ended October 28, 2023 include a loss of $4.2 million, representing a pro-rata portion of the unrealized loss in Accumulated Other Comprehensive Loss.

We expect to complete the final settlement of the terminated pension plan by the end of fiscal 2023.

In the third quarter, we completed the termination of the SERP plan, recognizing a loss for the three and nine months ended October 28, 2023 of $0.1 million.

Our Future Growth Strategy

Last quarter, we shared our long-term strategic plan to meaningfully accelerate the growth trajectory of the Company.

We are actively working on these initiatives and continue to believe there is a substantial opportunity to take a greater share of market and grow our top line.

Despite this more challenging quarter, we remain relentlessly disciplined and committed to our strategy and initiatives.

Our Company is in a fundamentally different position today than it was pre-pandemic.

We have achieved a heightened level of operational excellence, recapitalized our balance sheet to provide a greater level of financial flexibility, made investments in our technical capabilities, and upgraded our leadership team.

Since we repositioned DXL in fiscal 2019, we have grown comparable sales by more than 25% and more than doubled our adjusted EBITDA margin rate.

This trajectory supports our strong belief in the longer-term opportunity for DXL in the men’s big & tall apparel category.

As we look beyond fiscal 2023, we are excited about our long-term growth plan.

Our goal is to meaningfully accelerate the trajectory of the Company over the next three to five years, by focusing on three specific growth initiatives:

brand-building, store development, and alliances/collaborations.

Our goal is to accelerate the trajectory of the Company meaningfully over the next three to five years, by focusing on four specific growth initiatives:

store development, website replatform, brand building and alliances/collaborations.

Store Development :

As we have stated before, we believe there are at least 50 net new store opportunities.

New store development addresses another factor critical to our growth.

While we have stores in every major metro market across the United States, there are voids in certain markets where big + tall consumers are not being serviced by a DXL.

In our most recent research across 2,500 big + tall men, both customers and non-customers, 49% self-reported that they do not shop with us because a store is not near them, while 37% self-reported that they do not shop with us because a store location is not convenient.

This quarter, we opened our first new DXL store since 2018 in Queens, NY.

We expect to open two more new stores before year-end and plan to open another 10 new stores in fiscal 2024 and 15 to 20 new stores in fiscal 2025.

We have also converted seven Casual Male stores to DXL this year and expect to convert three more by the end of 2023.

Website Replatform :

We are upgrading our website from legacy infrastructure to a modern commerce platform, with features and functionality launching throughout 2024.

We believe this modernization will offer immediate performance improvements and customer experience benefits, while positioning us to deliver a greater pace of change in the future.

Marketing and Brand-Building :

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Our plan is to increase our advertising-to-sales ratio over the next few years.

We expect over the next few years to invest more in brand building and top-of-funnel marketing to grow our customer file.

Store Development :

As we have stated before, we believe there are at least 50 net new store opportunities.

New store development addresses another factor critical to our growth.

While we have stores in every major metro market across the United States, there are voids in certain markets where big & tall consumers are not being serviced by a DXL.

This year, we expect to open our first three new stores since fiscal 2018, with plans to open another 10 new stores in fiscal 2024 and 15 to 20 new stores in fiscal 2025.

We expect to invest more in brand building and top-of-funnel marketing to grow our customer file.

We have begun a search for a creative agency to develop, build and execute a campaign that will drive an emotional connection to the brand and drive brand awareness.

We are targeting a campaign launch for late Spring 2024 and we are prepared to conservatively spend another 1.0% to 2.0% of sales to initially fund that initiative and, with results, fund our marketing and brand building initiatives at greater levels over time.

Alliances/Collaborations :

We strongly believe that our "fit authority" is one of our biggest assets and that we can develop successful collaborations with other brands, who are interested in finding a cost-effective way to expand their offering to include big + tall men's apparel.

In September, we will be launching Untuckit, Fit by DXL in partnership with Untuckit to be sold exclusively by DXL.

In addition, we also are adding Hugo Boss and Faherty to our list of national brands this Fall, each with a level of merchandise exclusivity that cannot be found elsewhere.

During the third quarter, we launched UNTUCKit, Fit by DXL in partnership with UNTUCKit which is being sold exclusively by DXL.

In addition, we also added Hugo Boss and Faherty to our list of national brands this quarter, each with a level of merchandise exclusivity that cannot be found elsewhere.

All three programs have exceeded our initial expectations and we will look for door expansions in all three for fiscal 2024.

We believe these examples are only the beginning, and we are working in real-time on additional retail brand alliances.

Lastly, we also launched our new fit technology and size mapping in two of our stores, with plans to expand to an additional 10 stores by the end of the month.

Lastly, we also launched our new fit technology and size mapping in twelve of our stores.

RESULTS OF OPERATIONS

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

The following table presents sales by segment for the three and nine months ended October 28, 2023 and October 29, 2022:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

(in thousands)

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Retail segment

Wholesale segment

Total sales for the second quarter of fiscal 2023 were $140.0 million, as compared to $144.6 million in the second quarter of fiscal 2022.

Comparable sales for the second quarter decreased 1.4% with comparable sales from our stores down 1.4% and our direct business down 1.3%.

Total sales for the third quarter of fiscal 2023 were $119.2 million, as compared to $129.7 million in the third quarter of fiscal 2022.

Comparable sales for the third quarter decreased 6.7% with comparable sales from our stores down 8.1% and our direct business down 3.2%.

The remainder of the decrease was due to sales from closed stores and a decrease in non-comparable sales.

During the quarter, we saw a decrease in dollars per transaction, which we believe was the result of inflationary pressures impacting customer spending.

These decreases were partially offset by an increase in conversion.

Despite these headwinds, during the quarter we saw comparable sales improve each month, with May down 2.8%, June down 1.7% and July up 1.0%.

Both stores and our direct business improved throughout the quarter, driven largely by improvement in traffic to our stores and growth in our mobile app and email marketing.

Sales for the first six months of fiscal 2023 were $265.5 million as compared to $272.3 million for the first six months of fiscal 2022.

Comparable sales for the first six months of fiscal 2023 decreased 0.5%, with comparable sales from our stores flat to the prior year period and direct down 1.5%.

Comparable sales in August decreased 6.5%, slightly improved in September to a decrease of 5.4%, but in October comparable sales decreased to 8.3%.

Through the third quarter, we saw a further slowdown in store traffic as consumer spending continues to be negatively impacted by the economy and inflationary pressures.

Store traffic was down 5.9% while dollars per transaction and conversion combined were down approximately 2.0%, with dollars per transaction down more than conversion.

Sales were particularly softer in categories that outperformed last year due to a resurgence of back-to-work and social events.

The decrease of 3.2% in the direct business was primarily due to a decrease in marketplace sales.

The DXL website, which was down 1.5%, performed better as a result of improvements in email marketing and growth from our mobile app.

Sales for the first nine months of fiscal 2023 were $384.7 million as compared to $402.0 million for the first nine months of fiscal 2022.

Comparable sales for the first nine months of fiscal 2023 decreased 2.5%, with comparable sales from our stores down 2.7% and direct down 2.0%.

Gross Margin Rate

For the second quarter of fiscal 2023, our gross margin rate, inclusive of occupancy costs, was 50.3% as compared to a gross margin rate of 52.1% for the second quarter of fiscal 2022.

For the third quarter of fiscal 2023, our gross margin rate, inclusive of occupancy costs, was 47.5% as compared to a gross margin rate of 50.0% for the third quarter of fiscal 2022.

Our gross margin rate decreased by 250-basis points, with a decrease in merchandise margin of 110-basis points and an increase of 140-basis points in occupancy costs primarily due to the deleveraging of sales and increased rents as a result of lease extensions.

decrease in merchandise margin of 110-basis points was due to continued cost pressures on certain private-label merchandise, much of which we continued to absorb 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 second quarter of fiscal 2022.

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

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.

For the first six months of fiscal 2023, our gross margin rate, inclusive of occupancy costs, was 49.5% as compared to a gross margin rate of 51.1% for the first six months of fiscal 2022.

The decrease of 160-basis points was due to a decrease in merchandise margins of 110-basis points and a 50-basis point increase in occupancy costs.

Similar to the second quarter merchandise margin, the decrease was due to cost pressures on certain private-label merchandise, increased direct-to-consumer shipping costs and costs related to our loyalty program.

For the first nine months of fiscal 2023, our gross margin rate, inclusive of occupancy costs, was 48.8% as compared to a gross margin rate of 50.8% for the first nine months of fiscal 2022.

The decrease of 200-basis points was due to a decrease in merchandise margins of 120-basis points and an 80-basis point increase in occupancy costs.

Similar to the third quarter merchandise margin, the decrease was due to cost pressures on certain private-label merchandise, increased direct-to-consumer shipping costs and costs related to our loyalty program.

The 80-basis point increase in occupancy costs was due to a combination of the deleveraging of sales and increased rents as a result of lease extensions.

For fiscal 2023, we expect gross margin rates to be approximately 180-basis points lower than fiscal 2022, of which approximately half of this decrease being attributable to the expected deleveraging of occupancy costs on the lower sales base.

Selling, General and Administrative Expenses

As a percentage of sales, SG&A (selling, general and administrative) expenses for the second quarter of fiscal 2023 were 33.9% as compared to 34.2% for the second quarter of fiscal 2022.

For the first six months of fiscal 2023, SG&A expenses, as a percentage of sales, were 36.1% as compared to 35.3% for the first six months of fiscal 2022.

On a dollar basis, SG&A expenses decreased by $2.0 million and $0.3 million for the second quarter and first six months of fiscal 2023, respectively as compared to the second quarter and first six months of fiscal 2022.

The decreases were primarily due to a decrease in performance-based incentive accruals and marketing costs, partially offset by an increase in payroll-related costs from new positions added in the past year to support our long-range growth initiatives.

As a percentage of sales, SG&A (selling, general and administrative) expenses for the third quarter of fiscal 2023 were 40.2% as compared to 37.3% for the third quarter of fiscal 2022.

For the first nine months of fiscal 2023, SG&A expenses, as a percentage of sales, were 37.4% as compared to 35.9% for the first nine months of fiscal 2022.

On a dollar basis, SG&A expenses decreased by $0.4 million and $0.8 million for the third quarter and first nine months of fiscal 2023, respectively as compared to the third quarter and first nine months of fiscal 2022.

The decreases were primarily due to a decrease in performance-based incentive accruals, partially offset by an increase in payroll-related costs from new positions added in the past year to support our long-range 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 20.3% of sales in the first six months of fiscal 2023 as compared to 19.8% of sales in the first six months of fiscal 2022.

Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 15.8% of sales in the first six months of fiscal 2023 as compared to 15.5% of sales in the first six months of fiscal 2022.

Marketing costs for the first six months were 5.3% of sales for both fiscal 2023 and fiscal 2022.

Customer Facing Costs, which include store payroll, marketing and other store and direct operating costs, represented 21.0% of sales in the first nine months of fiscal 2023 as compared to 20.4% of sales in the first nine months of fiscal 2022.

Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 16.4% of sales in the first nine months of fiscal 2023 as compared to 15.5% of sales in the first nine months of fiscal 2022.

Marketing costs for the first nine months of fiscal 2023 were 5.6% of sales as compared to 5.5% of sales for the first nine months 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 first six months of fiscal 2023.

During the second quarter and first six months of fiscal 2022, we recorded non-cash gains of $0.1 million and $0.6 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, $0.1 million and $0.4 million were included in the Impairment (Gain) of Assets line of the Consolidated Statement of Operations for the second quarter and first six months of fiscal 2022.

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

For the nine months ended October 29, 2022, we recognized a non-cash gain of $0.6 million.

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

Accordingly, for the nine months ended October 29, 2022, $0.4 million was included in the Impairment (Gain) of Assets line of the Consolidated Statement of Operations for the first nine months of fiscal 2022.

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

Depreciation and Amortization

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

For the first six months of fiscal 2023, depreciation and amortization decreased to $6.9 million as compared to $8.0 million for the first six months of fiscal 2022.

Depreciation and amortization for the third quarter of fiscal 2023 decreased to $3.4 million as compared to $3.8 million for the third quarter of fiscal 2022.

For the first nine months of fiscal 2023, depreciation and amortization decreased to $10.3 million as compared to $11.7 million for the first nine months 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.

Loss from Termination of Pension Plan

During the second quarter of fiscal 2023, we identified an opportunity to eliminate a variable liability by taking advantage of the current high-interest rate environment and terminating the frozen pension plan.

We completed a partial settlement of the pension obligation in the second quarter through the purchase of nonparticipating annuities.

We made a cash contribution to the plan during the first six months of fiscal 2023 of $1.6 million.

The remaining pension liability as of July 29, 2023, was approximately $0.2 million.

In the second quarter of fiscal 2023, we recognized a charge of $4.2 million, representing a pro-rata portion of the unrealized loss that is part of accumulated other comprehensive loss on the balance sheet.

We expect to settle the remaining obligation, recognize the remaining unrealized loss and terminate the plan by the end of fiscal 2023.

Loss from Termination of Retirement Plans

In the second quarter of fiscal 2023, we completed a partial settlement of the pension obligation through the purchase of nonparticipating annuities.

We made a cash contribution to the plan during the first nine months of fiscal 2023 of $1.7 million.

The remaining pension liability as of October 28, 2023, was approximately $0.1 million.

For the nine months ended October 28, 2023, we recognized a charge of $4.2 million, representing a pro-rata portion of the unrealized loss that is part of accumulated other comprehensive loss on the balance sheet.

We expect to settle the remaining obligation and recognize the remaining unrealized loss from the terminated pension plan by the end of fiscal 2023.

In the third quarter of fiscal 2023, we completed the termination of the SERP through the purchase of a nonparticipating annuity.

We made a cash contribution to the SERP during the first nine months of fiscal 2023 of $0.4 million and recognized a loss on the termination of $0.1 million, which is included in the Consolidated Statement of Operations for the three and nine months ended October 28, 2023.

Interest Income/Expense, Net

Net interest income for the second quarter of fiscal 2023 was $0.5 million, as compared to net interest expense of $0.1 million for the second quarter of fiscal 2022.

For the first six months of fiscal 2023, net interest income was $0.8 million as compared to net interest expense of $0.2 million for the first six months of fiscal 2022.

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

Net interest income for the third quarter of fiscal 2023 was $0.6 million, as compared to net interest expense of $0.1 million for the third quarter of fiscal 2022.

For the first nine months of fiscal 2023, net interest income was $1.4 million as compared to net interest expense of $0.4 million for the first nine months of fiscal 2022.

For the third quarter and first nine months 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.

Interest costs for all periods were immaterial because we had no outstanding debt and no borrowings under our credit facility during any period.

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

Accordingly, for the second quarter and first six months of fiscal 2023, the effective tax rate was 26.4% and 26.5%, respectively.

For the second quarter and first six months of fiscal 2022, we recognized a tax benefit of $35.1 million and $35.0 million, respectively, which reflects the release of approximately $35.5 million, or $0.53 per diluted share, in valuation allowance against our deferred tax assets, partially offset by income tax expense of $0.4 million and $0.5 million, respectively, in states where our usage of net operating losses ("NOL") is limited.

Our tax provision for income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any.

Each quarter, we update our estimate of the annual effective tax rate and make a year-to-date adjustment to the provision.

Accordingly, for the third quarter and first nine months of fiscal 2023, the Company’s effective tax rate was 30.2% and 27.2%, respectively.

For the third quarter of fiscal 2022, the effective tax rate was 16.6% and primarily reflected a $2.0 million discrete tax expense to adjust the release of valuation allowance.

For the first nine months of fiscal 2022, the Company recognized 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.

We are able to utilize our remaining NOL carryforwards to reduce our cash federal and state income taxes.

We began the year with $78.9 million in federal NOL carryforwards.

For the second quarter of fiscal 2023, we recorded net income of $11.6 million, or $0.18 per diluted share, as compared to net income of $56.9 million, or $0.85 per diluted share, for the second quarter of fiscal 2022.

Net income for the first six months of fiscal 2023 was $18.6 million, or $0.28 per diluted share, as compared to net income of $70.3 million, or $1.04 per diluted share for the first six months of fiscal 2022.

On a non-GAAP basis, assuming a normalized tax rate of 26% and adjusting for asset impairments (gains), if any, and for the loss on the termination of the pension plan, adjusted net income for the second quarter of fiscal 2023 was $14.8 million, or $0.23 per diluted share, as compared to adjusted net income of $16.1 million, or $0.24 per diluted share for the second quarter of fiscal 2022.

For the first six months of fiscal 2023, adjusted net income was $21.8 million, or $0.33 per diluted share, as compared to adjusted net income of $25.8 million, or $0.38 per diluted share.

As of July 29, 2023, our inventory decreased by approximately $9.2 million to $87.5 million, as compared to $96.7 million at July 30, 2022.

Managing our inventory remains a primary focus for us given the impact that inflation appears to have had on consumer spending.

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

At July 29, 2023, our clearance inventory was 9.3% of our total inventory, as compared to 6.9% at July 30, 2022 and still below our historical benchmark of approximately 10.0%.

For the third quarter of fiscal 2023, we recorded net income of $4.0 million, or $0.06 per diluted share, as compared to net income of $10.5 million, or $0.16 per diluted share, for the third quarter of fiscal 2022.

Net income for the first nine months of fiscal 2023 was $22.6 million, or $0.35 per diluted share, as compared to net income of $80.8 million, or $1.20 per diluted share for the first nine months of fiscal 2022.

On a non-GAAP basis, assuming a normalized tax rate of 27% and adjusting for asset impairments (gains), if any, and for the loss on the termination of the retirement plans, adjusted net income for the third quarter of fiscal 2023 was $4.2 million, or $0.07 per diluted share, as compared to adjusted net income of $9.2 million, or $0.14 per diluted share for the third quarter of fiscal 2022.

For the first nine months of fiscal 2023, adjusted net income was $25.8 million, or $0.40 per diluted share, as compared to adjusted net income of $34.6 million, or $0.52 per diluted share for the first nine months of fiscal 2022.

As of October 28, 2023, our inventory decreased by approximately $7.0 million to $99.9 million, as compared to $106.8 million at October 29, 2022.

Managing our inventory remains a primary focus for us given the impact that inflation appears to have had on

consumer discretionary spending for clothing.

Based on the sales trends we started to see in March 2023, we began taking proactive measures to manage our inventory and adjust our receipt plan.

At October 28, 2023, our clearance inventory was 9.7% of our total inventory, as compared to 6.7% at October 29, 2022 and still 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.

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

At October 28, 2023, we had no outstanding debt, including no borrowings under our credit facility during the first nine months of fiscal 2023.

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

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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.

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

We also believe that cash flows from operating activities and cash on hand will 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 six months of fiscal 2023, cash flow from operations increased to $26.2 million as compared to $23.8 million for the first six months of fiscal 2022.

Free cash flow, a non-GAAP measure, increased to $21.6 million for the first six months of fiscal 2023 as compared to $19.8 million for the first six months of fiscal 2022.

The increase in free cash flow was primarily due to a decrease in merchandise purchases as we continue to proactively manage inventory levels.

Cash flow used for investing activities increased by $44.0 million for the first six months of fiscal 2023 as compared to the first six months of fiscal 2022, primarily due to the purchase of $43.5 million of short-term investments.

Cash flow used for financing activities for the first six months of fiscal 2023 decreased by $2.1 million as compared to the first six months of fiscal 2022, primarily due to a decrease in shares repurchased as compared to the second quarter of fiscal 2022.

For the first nine months of fiscal 2023, cash flow from operations increased to $33.1 million as compared to $30.2 million for the first nine months of fiscal 2022.

Free cash flow, a non-GAAP measure, increased to $22.7 million for the first nine months of fiscal 2023 as compared to $22.3 million for the first nine months of fiscal 2022.

The increase in free cash flow was primarily due to a decrease in merchandise purchases as we continue to drive more productive inventory utilization, partially offset by a decrease in operating income.

Cash flow used for investing activities increased by $51.3 million for the first nine months of fiscal 2023 as compared to the first nine months of fiscal 2022, primarily due to the purchase of short-term investments, net of maturities, of $48.9 million and an increase in capital expenditures of $2.4 million.

Cash flow used for financing activities for the first nine months of fiscal 2023 increased by $1.0 million as compared to the first nine months of fiscal 2022, primarily due to an increase in shares repurchased.

Stock Repurchase Program

In March 2023, 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.

During the second quarter of fiscal 2023, we repurchased 2.2 million shares at a total cost, including fees of $10.8 million.

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

Subsequent to the end of the third quarter, the Board of Directors approved an amendment to the stock repurchase program to increase the amount authorized for repurchase from $15.0 million to $25.0 million, effective November 17, 2023.

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

The Company expects to finance any repurchases from cash generated from operations.

During the first nine months of fiscal 2023, we repurchased 3.1 million shares at a total cost, including fees, of $14.9 million.

Shares of repurchased common stock are held as treasury stock.

The timing and the amount of any remaining 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.

Credit Facility

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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.

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

Effective April 20, 2023, borrowings under the Credit Facility 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:

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

We had no outstanding borrowings under the Credit Facility at July 29, 2023 and no borrowings during the first six months of fiscal 2023.

At July 29, 2023, outstanding standby letters of credit were $4.0 million and outstanding documentary letters of credit were $1.2 million.

The average unused excess availability during the first six months of fiscal 2023 was approximately $85.6 million and the unused excess availability at July 29, 2023 was $81.8 million.

We had no outstanding borrowings under the Credit Facility at October 28, 2023 and no borrowings during the first nine months of fiscal 2023.

At October 28, 2023, outstanding standby letters of credit were $4.3 million and outstanding documentary letters of credit were $0.4 million.

The average unused excess availability during the first nine months of fiscal 2023 was approximately $84.3 million and the unused excess availability at October 28, 2023 was $87.6 million.

Capital Expenditures

For fiscal 2023, we expect our capital expenditures to range from $15.5 million to $17.5 million, of which approximately $7.8 million is discretionary spending for new or improved stores with the remaining for non-discretionary, infrastructure improvements.

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

July 29, 2023

July 30, 2022

The following table sets forth the open stores and related square footage at October 28, 2023 and October 29, 2022, respectively:

October 28, 2023

October 29, 2022

Store Concept

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Casual Male Outlets

We have executed lease agreements for three new stores, one in each of the Los Angeles, New York and Cincinnati markets.

We expect these stores to open by the end of 2023.

During the second quarter, we completed the conversion of one Casual Male store to the DXL store format.

By the end of fiscal 2023, we expect to open 3 new DXL stores and 10 Casual Male-to-DXL conversion stores and to have begun construction on at least 5 DXL remodels.

Over the next three to five years, we believe we could potentially open 50 net new DXL stores across the United States.

During the third quarter of fiscal 2023, we opened a new DXL store in Queens, New York and expect to open two additional new stores with one in the Cincinnati market and one in the Los Angeles market by the end of fiscal 2023.

During the first nine months, we completed the conversion of seven Casual Male stores to the DXL store format and completed the remodel of one existing DXL store.

By the end of fiscal 2023, we expect to have opened a total of 3 new DXL stores and 10 Casual Male-to-DXL conversion stores and to have begun construction on at least 5 DXL remodels.

Over the next three to five years, we believe we could potentially open 50 net new DXL stores across the country which could average 6,000 square feet or 300,000 sq.

in total, a 15% increase over our current square footage.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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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) :

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The following table reconciles free cash flow:

For the six months ended

For the nine months ended

(in millions)

July 29, 2023

July 30, 2022

October 28, 2023

October 29, 2022

Cash flow from operating activities (GAAP basis)

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Adjusted Net Income and Adjusted Net Income Per Diluted Share:

Adjusted net income and adjusted net income per diluted share is calculated by excluding any asset impairment charge (gain) and the loss from the termination of the pension plan, subtracting the actual income tax provision (benefit) and applying an effective tax rate of 26%.

Adjusted net income and adjusted net income per diluted share is calculated by excluding any asset impairment charge (gain) and the loss from the termination of retirement plans, subtracting the actual income tax provision (benefit) and applying an effective tax rate of 27%.

The Company believes that this comparability is useful in comparing the actual results period to period.

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For the three months ended

For the six months ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

For the nine months ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

(in millions, except per share data)

1 unchanged sentence

Adjust for impairment (gain) of assets

Add back loss on termination of pension plan

Add back actual income tax provision

Add back loss on termination of retirement plans

Add back actual income tax provision (benefit)

Add income tax provision, assuming a normal tax rate of 27%

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Adjusted EBITDA and Adjusted EBITDA Margin .

Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and is before any impairment of assets, if any.

Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and is before any loss from the termination of retirement plans or impairment of assets.

Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by Sales.

We believe that providing adjusted EBITDA and adjusted EBITDA margin is useful to investors in evaluating our performance

and are key metrics to measure profitability and economic productivity.

We believe that providing adjusted EBITDA and adjusted EBITDA margin is useful to investors in evaluating our performance and are key metrics to measure profitability and economic productivity.

The following table reconciles adjusted EBITDA from net income and calculates adjusted EBITDA margin:

For the three months ended

For the six months ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

For the nine months ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

(in millions)

1 unchanged sentence

Impairment (gain) of assets

Loss on termination of pension plan

Loss on termination of retirement plans

Provision (benefit) for income taxes

4 unchanged sentences

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