What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-29 compared with 2024-05-30 · 133 added, 92 removed, 125 unchanged (64% of the section changed)

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In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “estimate,” “intend,” “plan,” “continue,” “believe,” “expect” or “anticipate” or the negatives thereof, variations thereon or similar terminology.

The forward-looking statements contained in this Quarterly Report are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but may be found in other locations as well, and include statements regarding our long-range strategic plan and the expected impact of our strategic initiatives on future growth, including with respect to raising brand awareness, store development, website replatform and future alliances and collaborations;

The forward-looking statements contained in this Quarterly Report are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but may be found in other locations as well, and include statements regarding our long-range strategic plan and the expected impact of our strategic initiatives on future growth, including with respect to our marketing efforts and raising brand awareness, store development, website replatform and future alliances and collaborations;

expected marketing costs, gross margin rates and expected capital expenditures in 2024;

and expected changes in our store portfolio and long-term plans for new or relocated stores.

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

expected store openings and store conversions for the remainder of fiscal 2024 and fiscal 2025;

expected long-term plans for new stores;

the expected completion and impact of our rollout of our improved eCommerce platform;

and our expectations regarding liquidity needs for the next 12 months.These forward-looking statements generally relate to plans and objectives for future operations and are based upon management’s reasonable estimates of future results or trends.

The forward-looking statements in this Quarterly Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved.

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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 changes in consumer spending in response to economic factors;

The Company encourages readers to refer to its filings with the SEC that set forth certain risks and uncertainties that may have an impact on future results and direction of our Company, including risks related to changes in consumer spending in response to economic factors;

the impact of inflation with rising costs and high interest rates;

the Israel-Hamas conflict and the ongoing Russian invasion of Ukraine on the global economy;

the impact of ongoing worldwide conflicts, including the Israel-Hamas conflict and the ongoing Russian invasion of Ukraine, on the global economy;

potential labor shortages;

and the Company’s ability to execute on its marketing, digital, store and collaboration strategies, ability to grow its market share, predict customer tastes and fashion trends, forecast sales growth trends and compete successfully in the United States men’s big and tall apparel market, and the other risks and uncertainties set forth in the “Risk Factors” section in Part I, Item 1A of our Fiscal 2023 Annual Report.

and the Company’s ability to execute on its marketing, digital, store and collaboration strategies, ability to grow its market share, predict customer tastes and fashion trends, forecast sales growth trends and compete successfully in the United States men’s big and tall apparel market, and the other risks and uncertainties as set forth in the “Risk Factors” section in Part I, Item 1A of our Fiscal 2023 Annual Report.

All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing.

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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 May 4, 2024, we operated 233 Destination XL stores, 15 DXL outlet stores, 17 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 August 3, 2024, we operated 233 Destination XL stores, 15 DXL outlet stores, 17 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,” “our,” “us” and “the Company” refer to Destination XL Group, Inc.

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We refer to our fiscal years, which end on February 1, 2025, February 3, 2024 and January 28, 2023 as "fiscal 2024", “fiscal 2023,” and “fiscal 2022” respectively.

Fiscal 2024 is a 52-week period, fiscal 2023 was a 53-week period and fiscal 2022 a was a 52-week period.

Fiscal 2024 is a 52-week period, fiscal 2023 was a 53-week period and fiscal 2022 was a 52-week period.

SEGMENT REPORTING

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

As a result, certain transactions that begin online but are ultimately completed at the store level.

result, certain transactions that begin online 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.

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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For the three months ended

April 29, 2023

For the six months ended

August 3, 2024

July 29, 2023

August 3, 2024

July 29, 2023

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

Adjusted EBITDA (Non-GAAP basis)

Gross margin.

as a percentage of sales

Gross margin, as a percentage of sales

SG&A expenses, as a percentage of sales

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Per diluted share:

Our sales for the first quarter of fiscal 2024 were below our expectations.

We believe that many of our customers are still feeling the economic impacts of high inflation and have chosen to moderate their discretionary spending on apparel.

This behavior resulted in lower than expected traffic levels to our stores and lower conversion rates in our direct business, both of which were the primary contributors to our comparable sales decrease of 11.3% in the first quarter.

Our second quarter results reflect a challenging men's apparel market that was punctuated by a lack of foot traffic to our stores and lower conversion rates in our direct business.

Customers gravitated towards promotions and lower price point goods, which signals a consumer who is carefully choosing where and how he spends his money.

This was evident with the double-digit decrease we saw in store traffic and the lower conversion rates in our direct business, both of which were the primary contributors to our comparable sales decrease for the second quarter of 10.9%.

Comparable sales for our stores were down 10.0% and our direct business was down 12.8%.

Despite these economic impacts on our top line, we are still maintaining our low promotional stance and proactively managing our inventory levels and receipts.

This enabled us to end the quarter in a strong margin position, with our merchandise margin improvement nearly mitigating the deleveraging of occupancy costs.

This gross margin performance, coupled with our lower SG&A expenses, enabled us to end the first quarter of fiscal 2024 with net income of $0.06 per diluted share and an adjusted EBITDA margin (a non-GAAP measure) of 7.1%.

We continued to maintain our strong financial position, successfully managing our liquidity and our inventory levels, which are down 9.0% to last year's first quarter.

Our inventory turn has improved by almost 30% from fiscal 2019 and our clearance inventory remains below our 10% benchmark.

As of May 4, 2024, we had cash and investments of $53.2 million as compared to $46.0 million at April 29, 2023 with no debt outstanding and unused excess availability of $79.2 million.

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.

Despite a disappointing sales performance, we maintained a flat merchandise margin, with meaningfully less inventory, and a strong balance sheet.

Our occupancy costs and selling, general and administrative (SG&A) expenses for the second quarter of fiscal 2024 were in line with our expectations and included an increase in marketing costs, specifically related to our brand awareness campaign that launched mid-May.

While we continued to diligently manage our operating expenses, given the pressure on sales, some of our cost structure was negatively deleveraged by the sales shortfall.

As of August 3, 2024, we had cash and investments of $63.2 million as compared to $62.8 million at July 29, 2023 with no debt outstanding and unused excess availability of $69.9 million.

We continued to maintain our strong financial position, successfully managing our liquidity and our inventory levels, which were down 10.2% to last year's second quarter.

Progress on Our Long-Range Plan and Future Growth Strategy

We continue to make progress on our long-term strategic growth initiatives and believe that these initiatives will lead to greater brand awareness, enabling us to take a greater share of the addressable market, and grow our top line:

We have made substantial progress on our long-term strategic growth initiatives and continue to believe that these initiatives will lead to greater brand awareness, enabling us to take a greater share of the addressable market, and grow our top line.

However, given the current environment and the concern that this continued pressure on sales will continue, our near-term priority is to focus on our balance sheet, achieving profitable sales, and generating free cash flow.

For this reason, we have made the difficult decision to pivot from the next wave of our planned brand campaign in the Fall, in favor of other advertising spend that we believe will stimulate traffic in the short term.

We have also decided to slow our store roll out to lower our capital expenditure burden.

It is important to emphasize, we remain very enthusiastic about the brand campaign and store development, and we are not abandoning our growth ambitions.

We will stay focused on executing our fundamentals and controlling what we can control as we cycle through the current environment.

Marketing & Brand Building :

Working with our newly retained creative and media agencies, we have developed a campaign that we believe will drive an emotional connection to the DXL brand and drive brand awareness.

Subsequent to the end of the first quarter of fiscal 2024, on May 13th, we launched our new multichannel marketing campaign in three test markets.

This is our first advertising campaign since 2017.

Media includes broadcast television, connected TV, streaming video, audio, paid digital channels, and out-of-home, as well as all-owned marketing.

We are prepared to invest cautiously in this initiative, with total marketing costs increasing to approximately 7.0%-7.5% of sales in fiscal 2024.

If we experience favorable results, we plan to fund our marketing and brand building initiative at greater levels over time.

We launched our new brand advertising campaign on May 13 th to build awareness of our brand.

The campaign ran in a three-matched-market test in Boston, Detroit, and St.

Louis and the results were positive in all three markets, with increased traffic, sessions, and customer acquisition.

Our initial plan was to run a second similar campaign in the second half of the year, however, given current market conditions, we believe pivoting the brand marketing dollars back into our traditional marketing channels will be more productive.

Store Development :

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

Our consumer research has indicated that 44% of big + tall men self-reported they do not shop with us because a store is not near them, while 35% self-reported that they do not shop with us because a store location is not convenient.

During the first quarter of fiscal 2024, we opened our first of eight stores that we plan to open in fiscal 2024, with 15 new stores per year planned in fiscal 2025 through 2027.

Our consumer research has indicated that 44% of big

+ tall men self-reported they do not shop with us because a store is not near them, while 35% self-reported that they do not shop with us because a store location is not convenient.

During the first six months of fiscal 2024, we opened two new stores and subsequent to the end of the quarter, on August 17th, we opened our third store, with five more expected later this year.

We are evaluating our current rollout schedule and will likely reduce the number of expected stores, opening in fiscal 2025, from 15 to 10.

New Website Platform :

We are transitioning our website from our legacy infrastructure to a new, modern commerce platform, with various features and functionality launching in a phased approach with the first phase launching the last week of May 2024.

A second phase is scheduled to launch in late summer with the final phase occurring after the holiday season.

We are transitioning to a new and improved eCommerce platform.

The platform addresses friction online and will drive a richer and simpler consumer experience, as well as drive measurably greater speed and agility.

We completed our first phase of this project in the first quarter, our second phase is expected to be released by the end of September, and the last phase is on schedule to be completed in January 2025.

We believe this upgrade will provide immediate performance improvements and customer experience benefits by eliminating friction points, optimizing search capability, and enhancing speed and response times.

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Alliances & Collaborations :

Collaborating with other retailers allows us to overcome the challenge of reaching consumers who may never be exposed to the DXL brand through our organic channels.

On April 29th, we announced our latest collaboration with Nordstrom which will allow us to bring the DXL experience beyond our four walls and directly to the Nordstrom customer.

We are very excited to be launching DXL on Nordstrom's digital marketplace platform.

Last quarter we announced our alliance with Nordstrom to launch DXL's Big & Tall assortment on their digital marketplace platform.

Our merchandise offering launched on the marketplace on May 28 th .

To date, we have been pleased with the results and we are currently looking to expand our current product offering.

We believe this collaboration will allow us to bring the DXL experience beyond our four walls and directly to the Nordstrom customer, thereby further extending DXL’s relationship with the female consumer.

We are currently in discovery mode for collaborative offers with several other brands and we are optimistic that some of these brands could play a role in our assortment, similar to the collaboration with UNTUCKIT.

RESULTS OF OPERATIONS

The following table presents sales by segment for the three months ended May 4, 2024 and April 29, 2023:

The following table presents sales by segment for the three and six months ended August 3, 2024 and July 29, 2023:

For the Three Months Ended

For the Six Months Ended

(in thousands)

April 29, 2023

Total sales for the first quarter of fiscal 2024 were $115.5 million, as compared to $125.4 million in the first quarter of fiscal 2023.

Comparable sales for the first quarter decreased 11.3% with comparable sales from our stores down 11.4% and our direct business down 11.0%.

The decrease in comparable store sales was slightly offset by an increase in non-comparable sales of $1.8 million and a $3.0 million shift in calendar weeks due to the 53rd week in fiscal 2023.

The decrease in comparable sales during the first quarter was primarily driven by a decrease in traffic in our stores.

While traffic was down, our three new stores that opened in fiscal 2023 in Queens, New York, Cincinnati, Ohio, and Pasadena, California all drove strong dollars per transaction and new-to-file rates that were approximately three times the chain average during the first quarter of 2024.

The eleven Casual Male stores that were converted to DXL in fiscal 2023 also performed stronger than the chain average, with comparable sales approximately flat.

The decrease in our direct business was primarily driven by a decrease in conversion rates.

August 3, 2024

July 29, 2023

August 3, 2024

July 29, 2023

Total sales for the second quarter of fiscal 2024 were $124.8 million, as compared to $140.0 million in the second quarter of fiscal 2023.

The decrease in total sales was primarily attributable to a decrease in comparable sales for the second quarter of 10.9%.

The remainder of the decrease was due to a $1.9 million decrease due to the shift in calendar weeks due to the 53rd week in fiscal 2023 which was partially offset by an increase in non-comparable sales of $1.7 million.

The comparable sales decrease of 10.9% consisted of comparable sales from our stores down 10.0% and our direct business down 12.8%.

Similar to our first quarter results, the decrease in comparable sales during the second quarter of fiscal 2024 was principally driven by a decrease in traffic in our stores and decreased conversion in our direct business.

For the first six months of fiscal 2024, total sales of $240.3 million decreased 9.5% as compared to $265.5 million for the first six months of fiscal 2023.

The decrease was primarily driven by a decrease in comparable sales of 11.1%, with stores down 10.7% and our direct business down 12.0%.

This decrease in comparable sales was slightly offset by an increase in non-comparable sales of $3.4 million and a $1.0 million shift in calendar weeks due to the 53rd week in fiscal 2023.

Gross Margin Rate

For the first quarter of fiscal 2024, our gross margin rate, inclusive of occupancy costs, was 48.2% as compared to a gross margin rate of 48.6% for the first quarter of fiscal 2023.

Our gross margin rate decreased by 40-basis points, with an increase of 175-basis points in occupancy costs primarily due to the deleveraging of sales and increased rents as a result of lease extensions, which was partially offset by an increase in merchandise margin of 135-basis points.

The improvement in merchandise margin of 135-basis points was due to a shift in merchandise mix, favorable shipping costs and a reduction in loyalty expense and marketplace commissions.

For the second quarter of fiscal 2024, our gross margin rate, inclusive of occupancy costs, was 48.2% as compared to a gross margin rate of 50.3% for the second quarter of fiscal 2023.

Our gross margin rate decreased by 210-basis points, which was driven by an increase in occupancy costs, as a percentage of sales, primarily due to the deleveraging of sales and increased rents as a result of lease extensions.

Our merchandise margin, which was flat to the second quarter of fiscal 2023, was achieved despite an increase in markdowns associated with selected price matching for some of our national brands, as well as markdowns on seasonal merchandise to ensure inventory levels remain healthy as we head into the fall season.

These increases were offset by favorable shipping costs and a reduction in loyalty expense.

For the first six months of fiscal 2024, our gross margin rate, inclusive of occupancy costs, was 48.2% as compared to a gross margin rate of 49.5% for the first six months of fiscal 2023.

The decrease of 130-basis points was due to an increase of 190-basis points in occupancy costs due to the deleveraging of sales and increased rents.

This increased cost was partially offset by an increase in merchandise margin of 60-basis points, driven by favorable shipping costs and a reduction in loyalty expense and marketplace commissions.

For 2024, we expect gross margin rates to be approximately 60 to 110-basis points lower than fiscal 2023 and reflect some occupancy deleveraging due to lower sales expectations.

Selling, General and Administrative Expenses

As a percentage of sales, SG&A (selling, general and administrative) expenses for the first quarter of fiscal 2024 were 41.1% as compared to 38.5% for the first quarter of fiscal 2023.

On a dollar basis, SG&A expenses decreased by $0.8 million for the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.

The decrease was primarily due to a decrease in store payroll and performance-based incentive accruals, partially offset by an increase in advertising costs and operating costs to support our long-range growth initiatives.

Marketing costs were 6.3% of sales for the first quarter of fiscal 2024 as compared to 5.5% of sales for the first quarter of fiscal 2023.

As a percentage of sales, SG&A (selling, general and administrative) expenses for the second quarter of fiscal 2024 were 43.0% as compared to 33.9% for the second quarter of fiscal 2023.

For the first six months of fiscal 2024, SG&A expenses, as a percentage of sales, were 42.1% as compared to 36.1% for the first six months of fiscal 2023.

On a dollar basis, SG&A expenses increased by $6.2 million and $5.5 million for the second quarter and first six months of fiscal 2024 as compared to the second quarter and first six months of fiscal 2023.

The increase was principally due to an increase in marketing costs, which included our brand campaign that launched in the second quarter, of $3.9 million and $4.3 million for the second quarter and first six months of fiscal 2024, as compared to the respective prior year periods.

The remainder of the increase was due to an increase in operating costs to support our long-range growth initiatives and increased healthcare costs.

Marketing costs were 8.8% of sales for the second quarter of fiscal 2024 as compared to 5.0% of sales for the second quarter of fiscal 2023.

For the first six months of fiscal 2024, marketing costs were 7.6% as compared to 5.3% for the first six months of fiscal 2023.

For fiscal 2024, marketing costs are expected to be approximately 7.0% of sales.

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Customer Facing Costs and Corporate Support Costs.

Customer Facing Costs, which include store payroll, marketing and other store and direct operating costs, represented 23.0% of sales in the first quarter of fiscal 2024 as compared to 21.1% of sales in the first quarter of fiscal 2023.

Corporate Support Costs,

which include the distribution center and corporate overhead costs, represented 18.1% of sales in the first quarter of fiscal 2024 as compared to 17.4% of sales in the first quarter of fiscal 2023.

Customer Facing Costs, which include store payroll, marketing and other store and direct operating costs, represented 24.2% of sales in the first six months of fiscal 2024 as compared to 20.3% of sales in the first six months of fiscal 2023.

Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 17.9% of sales in the first six months of fiscal 2024 as compared to 15.8% of sales in the first six months of fiscal 2023.

Depreciation and Amortization

Depreciation and amortization for the first quarter of fiscal 2024 decreased to $3.3 million as compared to $3.5 million for the first quarter of fiscal 2023.

Depreciation and amortization for the second quarter of fiscal 2024 decreased to $3.4 million as compared to $3.5 million for the second quarter of fiscal 2023.

For the first six months of fiscal 2024 depreciation and amortization was $6.7 million as compared to $6.9 million for the first six months of fiscal 2023.

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

Our capital expenditures have increased as we have started to open new store locations and are investing in certain other infrastructure and technology projects.

Our capital expenditures have increased in fiscal 2024 as we have started to open new store locations and are investing in certain other infrastructure and technology projects.

Loss from Termination of Retirement Plan

Results for the second quarter and first six months of fiscal 2023 included a charge of $4.2 million related to a partial settlement of our pension obligation.

The termination and final settlement of the remaining pension obligation was completed in the fourth quarter of fiscal 2023.

Interest Income, Net

Net interest income for the first quarter of fiscal 2024 was $0.6 million, as compared to $0.3 million for the first quarter of fiscal 2023.

Net interest income for the second quarter of fiscal 2024 was $0.6 million, as compared to $0.5 million for the second quarter of fiscal 2023.

Net interest income for the first six months of fiscal 2024 was $1.1 million, as compared to $0.8 million for the first six 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 immaterial because we had no outstanding debt and no borrowings under our credit facility during either period.

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.

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

Our 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.

For the first quarter of fiscal 2024 and fiscal 2023, our effective tax rate was 30.4% and 26.6%, respectively.

The increase in the effective tax rate was primarily due to permanent book to tax differences combined with a lower pretax income as compared to the first quarter of fiscal 2023.

For the first quarter of fiscal 2024, we recorded net income of $3.8 million, or $0.06 per diluted share, as compared to net income of $7.0 million, or $0.11 per diluted share, for the first quarter of fiscal 2023.

The decrease in earnings was driven by the decrease in sales, which was partially offset by improvement in merchandise margin and lower selling, general and administrative expenses.

As of May 4, 2024, our inventory decreased by approximately $9.0 million to $91.2 million, as compared to $100.3 million at April 29, 2023.

For the second quarter of fiscal 2024 and fiscal 2023, our effective tax rate was 35.2% and 26.4%, respectively, and for the first six months of fiscal 2024 and fiscal 2023, our effective tax rate was 32.3% and 26.5%, respectively.

The increase in the effective tax rate was primarily due to permanent book to tax differences combined with a lower pretax income as compared to the second quarter and first six months of fiscal 2023.

For the second quarter of fiscal 2024, we recorded net income of $2.4 million, or $0.04 per diluted share, as compared to net income of $11.6 million, or $0.18 per diluted share, for the second quarter of fiscal 2023.

For the first six months of fiscal 2024, net income was $6.2 million, or $0.10 per diluted share, as compared to $18.6 million, or $0.28 per diluted share, for the first six months of fiscal 2023.

The decrease in earnings was driven primarily by a decrease in sales and to a lesser extent an increase in marketing costs associated with our brand campaign.

Results for the second quarter and first six months of fiscal 2023 included a charge of $4.2 million related to the partial settlement of the pension plan .

As of August 3, 2024, our inventory decreased by approximately $8.9 million to $78.6 million, as compared to $87.5 million at July 29, 2023.

We continue to take proactive measures to manage our inventory and adjust our receipt plan given the ongoing macroeconomic factors affecting consumer spending.

At May 4, 2024, our clearance inventory was 9.7% of our total inventory, as compared to 7.8% at April 29, 2023 and still below our historical benchmark of approximately 10.0%.

At August 3, 2024, our clearance inventory was 10.4% of our total inventory, as compared to 9.3% at July 29, 2023.

Our inventory position is very strong and our clearance levels, while slightly above our benchmark of 10%, are in line with expectations given our 10% decrease in total inventory.

Our inventory turnover rate has improved by almost 30% from fiscal 2019.

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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 May 4, 2024, we had no outstanding debt, including no borrowings under our credit facility during the first three months of fiscal 2024.

At August 3, 2024, we had no outstanding debt, including no borrowings under our credit facility during the first six months of fiscal 2024.

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

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In the longer term, 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.

For the first three months of fiscal 2024, cash flow from operations was $(1.1) million as compared to $(4.2) million for the first three months of fiscal 2023.

Free cash flow, a non-GAAP measure, was $(7.0) million for the first three months of fiscal 2024 as compared to $(5.9) million for the first three months of fiscal 2023.

The decrease in free cash flow was primarily due to an increase in capital expenditures primarily related to the store openings as well as due to a decrease in operating income.

Cash flow used for investing activities decreased by $7.7 million for the first three months of fiscal 2024 as compared to the first three months of fiscal 2023, primarily due to a net decrease in short-term investment activity, partially offset by an increase in capital expenditures.

For the first six months of fiscal 2024, cash flow from operations was $16.0 million as compared to $26.2 million for the first six months of fiscal 2023.

Free cash flow, a non-GAAP measure, was $3.2 million for the first six months of fiscal 2024 as compared to $21.6 million for the first six months of fiscal 2023.

The decrease in free cash flow was primarily due to a decrease in operating income, driven by our sales decrease, and increases in capital expenditures of $4.4 million for store development and $3.7 million for other capital projects.

Cash flow used for investing activities was $21.9 million for the first six months of fiscal 2024 as compared to $48.1 million for the first six months of fiscal 2023.

This decrease of $26.2 million was primarily due to a decrease in net purchases of short-term investments, partially offset by an increase in capital expenditures.

Stock Repurchase Program

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Under the stock repurchase program, as amended, the Company was authorized to repurchase up to $25.0 million of its common stock through open market and privately negotiated transactions.

During the first quarter of fiscal 2024, we repurchased 52,802 shares at a total cost, including fees, of $211,182, completing the stock repurchase program.

The stock repurchase program was completed in the first quarter of fiscal 2024, with the repurchase of 52,802 shares at a total cost, including fees, of $211,182.

Credit Facility

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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 May 4, 2024 and no borrowings during the first three months of fiscal 2024.

At May 4, 2024, outstanding standby letters of credit were $4.3 million and outstanding documentary letters of credit were $1.5 million.

The average unused excess availability during the first three months of fiscal 2024 was approximately $71.8 million and the unused excess availability at May 4, 2024 was $79.2 million.

We had no outstanding borrowings under the Credit Facility at August 3, 2024 and no borrowings during the first six months of fiscal 2024.

At August 3, 2024, outstanding standby letters of credit were $4.2 million and outstanding documentary letters of credit were $0.9 million.

The average unused excess availability during the first six months of fiscal 2024 was approximately $73.4 million and the unused excess availability at August 3, 2024 was $69.9 million.

Capital Expenditures

The following table sets forth the open stores and related square footage at May 4, 2024 and April 29, 2023, respectively:

April 29, 2023

The following table sets forth the open stores and related square footage at August 3, 2024 and July 29, 2023, respectively:

August 3, 2024

July 29, 2023

Store Concept

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Casual Male Outlets

During the first quarter of fiscal 2024, we opened a new DXL store in Coon Rapids, Minnesota.

Subsequent to the end of the first quarter, we opened our second store in Thousand Oaks, California and expect to open six additional DXL stores by end of fiscal 2024.

During fiscal 2024, we also plan to convert five Casual Male stores to the DXL store format and remodel five of our existing DXL stores.

We expect our capital expenditures to range from $22.0 million to $25.0 million in fiscal 2024.

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

During the first six months of fiscal 2024, we opened two new DXL stores, located in Coon Rapids, Minnesota and Thousand Oaks, California, completed a DXL remodel and closed one of our DXL stores.

During the second half of fiscal 2024, we expect to open six additional DXL stores, convert five Casual Male stores to the DXL store format and remodel four more of our existing DXL stores.

We expect our capital expenditures to range from $22.0 million to $25.0 million, net of tenant incentives, in fiscal 2024.

Over the next five years, we believe we could potentially open approximately 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.

In an effort to better manage our capital expenditures, we expect to open 10 stores in 2025 which is down from our previous estimate of 15 new stores in 2025.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Non-GAAP Financial Measures

Free cash flow, adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures.

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

Free cash flow, free cash flow before capital expenditures for store development, adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures.

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

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

3 unchanged sentences

We define free cash flow as cash flow from operating activities less capital expenditures.

We define free cash flow before capital expenditures for store development as cash flow from operations activities less all capital expenditures except capital expenditures for store development.

Capital expenditures for store development includes capital expenditures for new stores, conversions of Casual Male XL stores to DXL and remodels.

Capital expenditures related to store relocations and maintenance are not included in store development.

Free cash flow excludes the mandatory and discretionary repayment of debt.

Free cash flow is a metric that management uses to monitor liquidity.

Management believes this metric is important to investors because it demonstrates the Company's ability to strengthen liquidity while supporting its capital projects and new store growth.

Management believes this metric is important to investors because it demonstrates the Company's ability to strengthen liquidity while supporting its capital projects and new store development.

We expect to fund our ongoing capital expenditures with cash flow from operations.

The following table reconciles free cash flow:

For the three months ended

For the six months ended

(in millions)

April 29, 2023

August 3, 2024

July 29, 2023

Cash flow from operating activities (GAAP basis)

Capital expenditures

Capital expenditures, excluding store development

Free Cash Flow before capital expenditures for store development (non-GAAP basis)

Capital expenditures for store development

Free Cash Flow (non-GAAP basis)

Adjusted EBITDA and Adjusted EBITDA Margin .

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

Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and adding back impairment (gain) of assets, if any, and loss on termination of retirement plans.

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

2 unchanged sentences

For the three months ended

April 29, 2023

For the six months ended

August 3, 2024

July 29, 2023

August 3, 2024

July 29, 2023

(in millions)

Net income (GAAP basis)

Loss on termination of retirement plans

Provision 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 2. Management’s Discussion and Analysis