DESTINATION XL GROUP, INC. 10-Q

Item 1. Financial Statements. DESTINATION XL GROUP, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) August 2, 2025 February 1, 2025 (Fiscal 2025) (Fiscal 2024) ASSETS Current assets: Cash and cash equivalents $ 14,015 $ 11,901 Short-term investments 19,529 36,516 Accounts receivable 1,202 1,629 Inventories 78,891 75,486 Prepaid expenses and other current assets 9,008 6,355 Total current assets 122,645 131,887 Non-current assets: Property and equipment, net of accumulated depreciation and amortization 60,046 56,982 Operating lease right-of-use assets 205,012 171,084 Deferred income taxes, net of valuation allowance 19,496 19,343 Intangible assets 1,150 1,150 Other assets 494 509 Total assets $ 408,843 $ 380,955 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 24,423 $ 24,344 Accrued expenses and other current liabilities 24,007 30,432 Operating leases, current 33,192 35,920 Total current liabilities 81,622 90,696 Long-term liabilities: Operating leases, non-current 185,942 148,695 Other long-term liabilities 351 341 Total long-term liabilities 186,293 149,036 Commitments and contingencies Stockholders' equity: Preferred stock, $ 0.01 par value, 1,000,000 shares authorized, none issued — — Common stock, $ 0.01 par value, 125,000,000 shares authorized, 79,725,568 and 79,403,349 shares issued at August 2, 2025 and February 1, 2025, respectively 797 794 Additional paid-in capital 330,167 328,261 Treasury stock at cost, 25,908,533 shares at August 2, 2025 and February 1, 2025 ( 143,985 ) ( 143,985 ) Accumulated deficit ( 46,051 ) ( 43,847 ) Total stockholders' equity 140,928 141,223 Total liabilities and stockholders' equity $ 408,843 $ 380,955 The accompanying notes are an integral part of the consolidated financial statements. 2 DESTINATION XL GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) For the Three Months Ended For the Six Months Ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 (Fiscal 2025) (Fiscal 2024) (Fiscal 2025) (Fiscal 2024) Sales $ 115,505 $ 124,820 $ 221,038 $ 240,309 Cost of goods sold including occupancy costs 63,322 64,649 121,273 124,456 Gross profit 52,183 60,171 99,765 115,853 Expenses: Selling, general and administrative 47,604 53,662 95,047 101,185 Depreciation and amortization 3,876 3,385 7,512 6,663 Total expenses 51,480 57,047 102,559 107,848 Operating income (loss) 703 3,124 ( 2,794 ) 8,005 Interest income, net 200 551 484 1,121 Income (loss) before provision (benefit) for income taxes 903 3,675 ( 2,310 ) 9,126 Provision (benefit) for income taxes 1,168 1,292 ( 106 ) 2,950 Net income (loss) $ ( 265 ) $ 2,383 $ ( 2,204 ) $ 6,176 Net income (loss) per share - basic $ 0.00 $ 0.04 $ ( 0.04 ) $ 0.11 Net income (loss) per share - diluted $ 0.00 $ 0.04 $ ( 0.04 ) $ 0.10 Weighted-average number of common shares outstanding: Basic 53,816 58,233 53,708 58,135 Diluted 53,816 61,117 53,708 61,035 The accompanying notes are an integral part of the consolidated financial statements. 3 DESTINATION XL GROUP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (In thousands) (Unaudited) Additional Common Stock Paid-in Treasury Stock Accumulated Shares Amounts Capital Shares Amounts Deficit Total Balance at February 1, 2025 79,403 $ 794 $ 328,261 ( 25,909 ) $ ( 143,985 ) $ ( 43,847 ) $ 141,223 Board of directors' compensation 30 — 116 — — — 116 Stock compensation expense — — 340 — — — 340 Restricted stock units (RSUs) granted for achievement of performance-based compensation, reclassified from liability to equity — — 1,016 — — — 1,016 Issuance of common stock, upon RSUs release 230 2 ( 2 ) — — — — Shares withheld for taxes related to net share settlement ( 31 ) — ( 49 ) — — — ( 49 ) Exercise of stock options 3 — 2 — — — 2 Net loss — — — — — ( 1,939 ) ( 1,939 ) Balance at May 3, 2025 79,635 $ 796 $ 329,684 ( 25,909 ) $ ( 143,985 ) $ ( 45,786 ) $ 140,709 Board of directors' compensation 89 1 139 — — — 140 Stock compensation expense — — 344 — — — 344 Issuance of common stock, upon RSUs release 2 — — — — — — Net loss — — — — — ( 265 ) ( 265 ) Balance at August 2, 2025 79,726 $ 797 $ 330,167 ( 25,909 ) $ ( 143,985 ) $ ( 46,051 ) $ 140,928 The accompanying notes are an integral part of the consolidated financial statements. 4 DESTINATION XL GROUP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (In thousands) (Unaudited) Additional Common Stock Paid-in Treasury Stock Accumulated Shares Amounts Capital Shares Amounts Deficit Total Balance at February 3, 2024 79,033 $ 790 $ 325,202 ( 21,041 ) $ ( 130,137 ) $ ( 46,902 ) $ 148,953 Board of directors' compensation 18 1 111 — — — 112 Stock compensation expense — — 875 — — — 875 Issuance of common stock, upon RSUs release 129 1 ( 1 ) — — — — Shares withheld for taxes related to net share settlement ( 14 ) — ( 48 ) — — — ( 48 ) Exercise of stock options 132 1 75 — — — 76 Repurchase of common stock — — — ( 53 ) ( 211 ) — ( 211 ) Net income — — — — — 3,793 3,793 Balance at May 4, 2024 79,298 $ 793 $ 326,214 ( 21,094 ) $ ( 130,348 ) $ ( 43,109 ) $ 153,550 Board of directors' compensation 23 — 112 — — — 112 Stock compensation expense — — 905 — — — 905 Exercise of stock options 8 — 4 — — — 4 Net income — — — — — 2,383 2,383 Balance at August 3, 2024 79,329 $ 793 $ 327,235 ( 21,094 ) $ ( 130,348 ) $ ( 40,726 ) $ 156,954 The accompanying notes are an integral part of the consolidated financial statements. 5 DESTINATION XL GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) August 2, 2025 August 3, 2024 (Fiscal 2025) (Fiscal 2024) Cash flows from operating activities: Net income (loss) $ ( 2,204 ) $ 6,176 Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Amortization of deferred debt issuance costs 39 38 Gain from the sale of equipment — ( 9 ) Depreciation and amortization 7,512 6,663 Deferred taxes, net of valuation allowance ( 153 ) 2,130 Stock compensation expense 684 1,780 Board of directors' stock compensation 256 224 Changes in operating assets and liabilities: Accounts receivable 917 2,887 Inventories ( 3,405 ) 2,356 Prepaid expenses and other current assets ( 2,653 ) ( 669 ) Other assets ( 24 ) ( 65 ) Accounts payable 79 5,223 Operating leases, net 591 ( 3,031 ) Accrued expenses and other liabilities ( 3,753 ) ( 7,731 ) Net cash provided by (used for) operating activities ( 2,114 ) 15,972 Cash flows from investing activities: Additions to property and equipment, net ( 12,099 ) ( 12,779 ) Proceeds from sale of equipment — 9 Purchase of short-term investments ( 5,005 ) ( 34,011 ) Maturity of short-term investments 21,502 24,873 Net cash provided by (used for) investing activities 4,398 ( 21,908 ) Cash flows from financing activities: Repurchase of common stock, excluding excise taxes — ( 211 ) Excise taxes paid on repurchase of common stock ( 123 ) — Tax withholdings paid related to net share settlements ( 49 ) ( 48 ) Proceeds from the exercise of stock options 2 80 Net cash used for financing activities ( 170 ) ( 179 ) Net increase (decrease) in cash and cash equivalents 2,114 ( 6,115 ) Cash and cash equivalents: Beginning of period 11,901 27,590 End of period $ 14,015 $ 21,475 Supplemental Disclosures of Cash Flow Information: Cash paid during the period for income taxes $ 147 $ 811 Cash paid during the period for interest $ 181 $ 182 Non-cash activity during the period: Capital expenditures incurred but not yet paid $ 2,018 $ 776 The accompanying notes are an integral part of the consolidated financial statements. 6 DESTINATION XL GROUP, INC. Notes to Consolidated Financial Statements (Unaudited) 1. Basis of Presentation In the opinion of management of Destination XL Group, Inc., a Delaware corporation (collectively with its subsidiaries, referred to as the “Company”), the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary for a fair presentation of the interim financial statements. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with the notes to the Company’s audited Consolidated Financial Statements for the fiscal year ended February 1, 2025 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission ("SEC") on March 20, 2025. The information set forth in these statements may be subject to normal year-end adjustments. The information reflects all adjustments that, in the opinion of management, are necessary to present fairly the Company’s results of operations, financial position and cash flows for the periods indicated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s business historically has been seasonal in nature, and the results of the interim periods presented are not necessarily indicative of the results to be expected for the full year. The Company’s fiscal year is a 52- or 53- week period ending on the Saturday closest to January 31. Fiscal 2025 and fiscal 2024 are both 52-week periods ending on January 31, 2026 and February 1, 2025, respectively. Segment Information The Company has two operating segments: its stores and its direct business. The Company considers its stores and direct business operating segments to be similar in terms of economic characteristics, production processes and operations, and has therefore aggregated them into one reportable segment consistent with its integrated commerce business approach. See Note 10, Segment Disclosures. Cash and Cash Equivalents Cash and cash equivalents consist of cash in banks and short-term investments, which have a maturity of 90 days or less when acquired. Included in cash equivalents are credit card and debit card receivables from banks, which generally settle within two to four business days. Short-Term Investments Short-term investments consist of those investments that have a maturity date, when acquired, that is greater than three months and twelve months or less. These investments are classified as held-to-maturity and are carried at amortized cost, which approximates fair value due to the short period between purchase and maturity. Concentration of Credit Risk Cash and cash equivalents include amounts due from third party financial institutions, which from time to time, may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company is potentially exposed to a concentration of credit risk when cash and cash equivalent deposits in these financial institutions are in excess of FDIC insurance limits. The Company considers the credit risk associated with these financial instruments to be minimal as cash and cash equivalents are held by financial institutions with high credit ratings and it has not historically sustained any credit losses associated with its cash and cash equivalents balances. In addition, the Company's cash and cash equivalents include money market accounts with Citizens Bank, N.A. and investments in U.S. government-backed securities held with Fidelity Investments. Fair Value of Financial Instruments ASC Topic 825, Financial Instruments , requires disclosure of the fair value of certain financial instruments. ASC Topic 820, Fair Value Measurements and Disclosures , defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. 7 The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities. The Company utilizes observable market inputs (quoted market prices) when measuring fair value whenever possible. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of these instruments. See Note 9, Fair Value Measurement for information regarding the fair value of certain financial assets. Stock-Based Compensation All share-based payments, including grants of employee stock options and restricted stock, are recognized as an expense in the Consolidated Statements of Operations based on their fair values and vesting periods. The fair value of stock options is determined using the Black-Scholes valuation model and requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (the “expected term”), the estimated volatility of the Company’s common stock price over the expected term and the number of options that will ultimately not complete their vesting requirements (“forfeitures”). The Company reviews its valuation assumptions at each grant date and, as a result, is likely to change its valuation assumptions used to value employee stock-based awards granted in future periods. The values derived from using the Black-Scholes model are recognized as an expense over the vesting period, net of estimated forfeitures. The estimation of stock-based awards that will ultimately vest requires judgment. Actual results and future changes in estimates may differ from the Company’s current estimates. There were no grants of stock options in the first six months of fiscal 2025 and fiscal 2024. Impairment of Long-Lived Assets The Company reviews its long-lived assets for events or changes in circumstances that might indicate the carrying amount of the assets may not be recoverable. The Company’s judgment regarding the identification of impairment indicators is based on operational performance at the store level. Factors considered by the Company that could result in an impairment triggering event include significant changes in the use of assets, a current period operating or cash flow loss, underperformance of a store relative to historical or expected operating results, and an accumulation of costs significantly in excess of the amount originally expected for the construction of the long-lived store assets. The Company assesses the recoverability of the assets by determining whether the carrying value of such assets over their respective remaining lives can be recovered through projected undiscounted future cash flows. The model for undiscounted future cash flows includes assumptions, at the individual store level, with respect to expectations for future sales and gross margin rates as well as an estimate for occupancy costs used to estimate the fair value of the respective store’s operating lease right-of-use ("ROU") asset. 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 first six months of fiscal 2025 and fiscal 2024. Advertising Costs The Company expenses in-store advertising costs as incurred. Creative production costs, if any, are expensed in the period in which the advertising is first aired, and media costs are expensed as incurred. Direct response advertising costs, if any, are expensed in the period in which the mailing occurs. Advertising expense, which is included in selling, general and administrative expenses, was $ 7.0 million and $ 11.0 million for second quarter of fiscal 2025 and fiscal 2024, respectively, and was $ 13.5 million and $ 18.3 million for the first six months of fiscal 2025 and fiscal 2024, respectively. Leases The Company determines if an arrangement contains a lease at the inception of a contract. ROU 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. ROU assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments and initial direct costs. Lease incentives are included in the value of the ROU assets. As the interest 8 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 August 2, 2025 , 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 ROU 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. As discussed in Note 4, Leases , during the second quarter of fiscal 2025 the Company amended its lease agreement for the Company's corporate headquarters and distribution center to extend the lease term from February 1, 2026 to January 31, 2033 . At the end of the first extension term, the Company will have the opportunity to extend this lease for three additional successive periods of five years. The renewal options were not considered reasonably certain at the time of the lease remeasurement. For store leases, the Company accounts for lease components and non-lease components as a single lease component. Certain store leases may require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, and are expensed as incurred as variable lease costs. 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 ROU assets and lease liabilities. Tenant allowances are included as an offset to the ROU asset and amortized as reductions to rent expense over the associated lease term. See Note 4, Leases for additional information. Recently Issued Accounting Pronouncements - Not Yet Adopted In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-06, Disclosure Improvements: Codification Amendment in Response to the SEC ’ s Disclosure Update and Simplification Initiative . ASU-2023-06 incorporates several disclosure and presentation requirements currently residing in SEC Regulations S-X and S-K. The amendments will be applied prospectively and will be effective when the SEC removes the related requirements from Regulations S-X or S-K. Any amendments the SEC does not remove by June 30, 2027 will not be effective. The ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements or related disclosures because the Company is currently subject to the reporting requirements of Regulations S-X and S-K. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) , which enhances transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid and to improve the effectiveness of income tax disclosu res. This ASU will be effective with the Company's annual disclosures for fiscal 2025. The ASU allows for adoption on a prospective basis, with a retrospective option. The Company is currently evaluating the impact of adopting this accounting standard on its financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 2 20-40) ("ASU 2024-03"), which will require disclosure, in the notes to financial statements, of specified information about certain costs and expenses, including disclosure of amounts for (a) purchases of inventory, (b) employee compensation, (c) depreciation and (d) intangible asset amortization, included in each relevant expense caption. I n January 2025, the FASB issued ASU 2025-01 , Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03, as clarified by ASU 2025-01, will be effective for the Company's annual financial statements beginning in fiscal 2027 and interim periods beginning in fiscal 2028. The Company is currently evaluating the impact of this accounting standard on its financial statement presentation and related disclosures. There were no other new accounting pronouncements, issued or effective during the first six months of fiscal 2025, which had or are expected to have a significant impact on the Company’s Consolidated Financial Statements. 9 2. Revenue Recognition The Company operates as a retailer of big and tall men’s clothing, which includes stores and direct. Revenue is recognized by the operating segment that initiates a customer’s order. Store sales are defined as sales that originate and are fulfilled directly at the store level. Direct sales are defined as sales that originate online, including those initiated online at the store level, on its website or on third-party marketplaces. Generally, all revenues are recognized when control of the promised goods is transferred to customers, in an amount that reflects the consideration in exchange for those goods. Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included as part of accrued expenses on the Consolidated Balance Sheets. Unredeemed Gift Cards, Gift Certificates, and Credit Vouchers. Upon issuance of a gift card, gift certificate, or credit voucher, a liability is established for its cash value. The liability is relieved and net sales are recorded upon redemption by the customer. Based o n historical redemption patterns, the Company can reasonably estimate the amount of gift cards, gift certificates, and credit vouchers for which redemption is remote, which is referred to as “breakage.” 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 $ 2.2 million and $ 3.3 million at August 2, 2025 and February 1, 2025, respectively. Unredeemed Loyalty Coupons. The Company offers a free loyalty program to its customers for which points accumulate based on the purchase of merchandise. Under ASC 606, Revenue from Contracts with Customers , these loyalty points provide the customer with a material rig ht and a distinct performance obligation with revenue deferred and recognized when the points are expected to be redeemed or expire. The cycle of earning and redeeming loyalty points is generally under one year in duration. The Company's legacy loyalty program ended at th e end of fiscal 2024, and all unused loyalty points and certificates were expired. The Company's new loyalty program launched at the start of fiscal 2025. As such, at February 1, 2025 there was no outstanding loyalty accrual. The loyalty accrual, net of breakage, was $ 0.5 million at August 2, 2025. Shipping. Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales for all periods presented. Amounts related to shipping and handling that are billed to customers are recorded in sales, and the related costs are recorded in cost of goods sold, including occupancy costs, in the Consolidated Statements of Operations. Disaggregation of Revenue As noted above under Segment Information in Note 1, Basis of Presentation , the Company’s business consists of one reportable segment. Substantially all of the Company’s revenue is generated from its stores and direct businesses. 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 (in thousands) August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 Store sales $ 83,695 72.5 % $ 87,845 70.4 % $ 160,166 72.5 % $ 168,693 70.2 % Direct sales 31,810 27.5 % 36,975 29.6 % 60,872 27.5 % 71,616 29.8 % Total sales $ 115,505 $ 124,820 $ 221,038 $ 240,309 3. Debt Credit Agreement with Citizens Bank, N.A. The Company has a credit facility with Citizens Bank, N.A (the "Credit Facility"). Through the end of the second quarter of fiscal 2024, the borrowing commitment under the Credit Facility was $ 125.0 million and was to expire on October 28, 2026 . Subsequent to the end of the second quarter of fiscal 2025, the Credit Facility was amended to extend the maturity date of the Credit Facility to August 13, 2030 and reduce the borrowing commitment under the Credit Facility from $ 125.0 million to $ 100.0 million, see Note 11 - Subsequent Event for a further description of the amendment. 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 swing line loans, which was reduced to $10.0 million as part of the amendment on August 13, 2025. The Company’s ability to borrow under the Credit Facility is determined using an availability formula based on eligible assets . B orrowings under the Credit Facility bear interest at either a Base Rate or Daily Simple SOFR rate, at the Company's option. Base Rate loans will bear interest at a rate equal to (i) the greater of: (a) the Prime Rate, (b) the Federal Funds effective rate plus 0.50 % per annum and (c) the Daily Simple SOFR rate plus 1.00 % per annum (provided the Base Rate shall never be less than the Floor (as defined in the Credit Facility)), plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25 % or 0.50 % (the “Applicable Margin”). Daily Simple SOFR loans will bear interest at a rate equal to (i) the Daily Simple SOFR rate plus an adjustment of 0.10 % (provided the Daily Simple SOFR rate shall never be less than the Floor), plus (ii) the Applicable Margin. 10 Any swingline loan will continue to bear interest at a rate equal to the Base Rate plus the Applicable Margin. The Company is subject to an unused line fee of 0.25 %. The Company’s obligations under the Credit Facility are secured by a lien on substantially all of its assets. If the Company’s availability under the Credit Facility at any time is less than the greater of (i) 10 % of the Revolving Loan Cap (the lesser of the aggregate revolving commitments or the borrowing base) and (ii) $ 7.5 million, then the Company is required to maintain a minimum consolidated fixed charge coverage ratio of 1.0 :1.0 until such time as availability has exceeded the greater of (1) 10 % of the Revolving Loan Cap and (2) $ 7.5 million for 30 consecutive days. At August 2, 2025 , the Company had no borrowings outstanding under the Credit Facility and unused availability was $ 70.1 million. The Company had no borrowings during the first six months of fiscal 2025, resulting in an average unused excess availability of approximately $ 71.8 million. Outstanding standby letters of credit were $ 4.2 million at August 2, 2025. At August 2, 2025, the Company’s prime-based interest rate was 7.75 % . 4. Leases 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. In the second quarter of fiscal 2025, the Company extended the term of its corporate lease from February 1, 2026 to January 31, 2033 , with the opportunity to extend for three additional consecutive periods of five years . In connection with the lease amendment to extend the term of the lease, the landlord provided the Company with an improvement allowance in an amount up to $ 4.7 million, which has been included as an offset to the ROU asset and will be amortized as a reduction to rent expense over the lease term. The Company also leases certain equipment and other assets under operating leases, typically with initial terms of 3 to 5 years . The Company is generally obligated for the cost of property taxes, insurance and common area maintenance fees relating to its leases, which are considered variable lease costs and are expensed as incurred. ASC 842 requires the assessment of any lease modification to determine if the modification should be treated as a separate lease and if not, modification accounting would be applied. Lease modification accounting requires the recalculation of the ROU asset, lease liability and lease expense over the respective lease term. As of August 2, 2025, 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 August 2, 2025 and August 3, 2024, respectively: For the three months ended For the six months ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 (in thousands) Operating lease cost $ 13,277 $ 12,222 $ 26,258 $ 23,699 Variable lease costs (1) 3,878 3,151 7,503 6,544 Total lease costs $ 17,155 $ 15,373 $ 33,761 $ 30,243 (1) Variable lease costs include the cost of property taxes, insurance and common area maintenance fees related to leases. 11 Supplemental cash flow and balance sheet information related to leases as of and for the first six months ended August 2, 2025 and August 3, 2024 was as follows: (dollars in thousands) For the six months ended Cash paid for amounts included in the measurement of lease liabilities: August 2, 2025 August 3, 2024 Operating cash flows for operating leases (1) $ 27,747 $ 25,750 Non-cash operating activities: Right-of-use assets obtained in exchange for operating lease liabilities $ 53,413 $ 43,087 As of August 2, 2025 August 3, 2024 Weighted average remaining lease term 5.9 yrs. 5.4 yrs. Weighted average discount rate 6.50 % 6.38 % (1) The cash paid for the first six months of fiscal 2025 and fiscal 2024 included prepaid rent of $ 4.6 million and $ 4.3 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 August 2, 2025: (in thousands) 2025 (remaining) $ 15,561 2026 54,810 2027 49,374 2028 41,089 2029 33,499 Thereafter 73,929 Total minimum lease payments $ 268,262 Less: amount of lease payments representing interest 49,128 Present value of future minimum lease payments $ 219,134 Less: current obligations under leases 33,192 Long-term lease obligations $ 185,942 5. Long-Term Incentive Plans The following is a summary of the Company’s Long-Term Incentive Plan (“LTIP”). All equity awards granted under long-term incentive plans are issued from the Company’s stockholder-approved 2016 Plan. See Note 6, Stock-Based Compensation . The LTIPs are granted annually, and each LTIP covers a three-year performance period. Each participant in the LTIP participates based on that participant’s “Target Cash Value” which is defined as the participant’s annual base salary (on the participant’s effective date) multiplied by his or her LTIP percentage. Under each LTIP, 50 % of each participant’s Target Cash Value is subject to time-based vesting and 50 % is subject to performance-based vesting. Awards for any achievement of performance targets are not granted until the performance targets are achieved and then are subject to additional vesting through August 31 following the end of the applicable performance period. 2022-2024 LTIP The performance target for the Company’s 2022-2024 LTIP was approved by the Compensation Committee of the Board of Directors (the "Compensation Committee”) on April 9, 2022, and covered a three-year period performance period, which ended on February 1, 2025. The time-vested portion of the 2022-2024 LTIP vests in four annual installments, with the remaining installment vesting on April 1, 2026. On March 19, 2025, the Compensation Committee approved a grant of awards, effective April 1, 2025, equal to $ 2.4 million for the achievement of the performance target for the 2022-2024 LTIP. The award was granted in a combination of 50 % cash and 50 % restricted stock units ("RSUs"). All awards are subject to further vesting through August 31, 2025. In connection with the grant of 799,349 RSUs, the Company reclassified $ 1.0 million of its liability accrual from “Accrued expenses and other current liabilities” to “Additional paid-in capital” in the first quarter of fiscal 2025. See the Consolidated Statement of Changes in Stockholders’ Equity. 12 Active LTIPs At August 2, 2025 , the Company had three active LTIPs: the 2023-2025 LTIP, the 2024-2026 LTIP and the 2025-2027 LTIP. The time-based awards under each LTIP were granted in a combination of 50 % RSUs and 50 % cash. Performance targets for the 2023-2025 LTIP, the 2024-2026 LTIP and the 2025-2027 LTIP were established and approved by the Compensation Committee with an effective date of May 1, 2023, April 1, 2024, and April 1, 2025, respectively. The performance period for each LTIP is three years . Awards for any achievement of performance targets will not be granted until the performance targets are achieved and then will be subject to an additional service requirement through August 31, 2026, August 31, 2027 and August 31, 2028, respectively. The time-based awards under the 2023-2025 LTIP, the 2024-2026 LTIP, and the 2025-2027 LTIP vest in four equal installments through April 1, 2027, April 1, 2028 and April 1, 2029, respectively. Assuming that the Company achieves the performance targets at target levels and all time-based awards vest, the compensation expense associated with the 2023-2025 LTIP, 2024-2026 LTIP and 2025-2027 LTIP is estimated to be approximately $ 4.8 million, $ 4.9 million and $ 4.9 million, respectively. Approximately half of the compensation expense for each LTIP relates to the time-based awards, which are being expensed straight-line over 48 months, 49 months and 49 months, respectively. At August 2, 2025 , the Company had accrued $ 0.2 million under the 2024-2026 LTIP and $ 0.1 million under the 2025-2027 LTIP for performance-based awards. There was no accrual for performance-based awards under the 2023-2025 LTIP. 6. Stock-Based Compensation The Company has one active stock-based compensation plan: the Second Amended and Restated 2016 Incentive Compensation Plan (the “2016 Plan”). 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. At the Company's Annual Meeting of Stockholders held on August 8, 2024, the Company's stockholders approved an increase of 6,150,000 shares authorized for future grant under the 2016 Plan. At August 2, 2025 , 21,270,538 shares were authorized under the 2016 Plan, of which 4,405,907 shares remained available for grant. The 2016 Plan is administered by the Compensation Committee. The Compensation Committee is authorized to make all determinations with respect to amounts and conditions covering awards. Options are not granted at a price less than fair value on the date of the grant. 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 2025: RSUs (1) Deferred Shares (2) Performance Share Units (3) Fully-Vested Shares (4) Total Number of Shares Weighted- Average Grant-Date Fair Value Shares Outstanding non-vested shares at beginning of year 761,081 479,700 573,000 — 1,813,781 $ 3.41 Shares granted 1,714,473 44,609 — 84,452 1,843,534 $ 1.48 Shares vested and/or issued ( 232,132 ) — — ( 84,452 ) ( 316,584 ) $ 3.45 Shares expired — — — — — — Shares forfeited ( 235,735 ) — — — ( 235,735 ) $ 2.46 Outstanding non-vested shares at end of quarter 2,007,687 524,309 573,000 — 3,104,996 $ 2.34 (1) During the first six months of fiscal 2025, grants primarily related to the grant of time-based RSUs under its 2025-2027 LTIP and the grants of awards under the 2022-2024 LTIP in connection with the achievement of the performance target. See Note 5, Long-Term Incentive Plans . As a result of net share settlements, of the 232,132 RSUs that vested, 200,634 shares of common stock were issued. (2) The 44,609 shares of deferred stock, with a fair value of $ 72,497 , represent director compensation in lieu of cash in accordance with the director's irrevocable election. The shares of deferred stock will be issued upon the director's separation from service. (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 increments with the ninth tranche vesting when such price is equal to or greater than $ 8.50 per share. Any unvested PSUs will expire on August 11, 2026. The $ 2.4 million grant-date fair value was expensed over the respective derived service periods of each tranche which ranged 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 13 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 $ 121,493 , 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. Voluntary shares received, in lieu of cash, are reported below under Non-Employee Director Compensation Plan . Number of Shares Weighted- Average Exercise Price Per Option Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value (000's) Stock Options Outstanding options at beginning of year 2,971,460 $ 0.65 — $ 6,207 Options granted — — — — Options exercised ( 3,025 ) $ 0.69 — 3 Options expired — — — — Options forfeited — — — — Outstanding options at end of quarter 2,968,435 $ 0.65 5.1 years $ 1,921 Options exercisable at end of quarter 2,968,435 $ 0.65 5.1 years $ 1,921 Non-Employee Director Compensation Plan The Company granted 34,107 shares of common stock, with a fair value of approximately $ 61,993 , to certain of its non-employee directors as compensation in lieu of cash in the first six months of fiscal 2025. 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 $ 0.7 million and $ 1.8 million for the first six months of fiscal 2025 and fiscal 2024, respectively. The total compensation cost related to awards not yet recognized as of August 2, 2025 was approximately $ 2.5 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 34 months. 7. Equity and Earnings per Share The following table provides a reconciliation of the number of shares outstanding for basic and diluted earnings per share: For the three months ended For the six months ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 (in thousands ) Common stock outstanding: Basic weighted average common shares outstanding 53,816 58,233 53,708 58,135 Common stock equivalents – stock options, restricted stock units and deferred stock (1) — 2,884 — 2,900 Diluted weighted average common shares outstanding 53,816 61,117 53,708 61,035 (1) Common stock equivalents of 2.2 million and 2.4 million for the second quarter and first six months of fiscal 2025, respectively, were excluded from the determination of diluted weighted average common shares outstanding due to the net loss reported in each period. The following potential common stock equivalents were excluded from the computation of diluted earnings per share in each period, because the exercise price of such options was greater than the average market price per share of common stock for the respective periods or because the unearned compensation associated with stock options and restricted stock units had an anti-dilutive effect. For the three months ended For the six months ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 (in thousands, except exercise prices) Stock options 51 36 51 36 Restricted stock units and deferred stock 1,265 350 444 363 Range of exercise prices of such options $ 1.85 -$ 6.59 $ 4.48 - $ 6.59 $ 1.85 - $ 6.59 $ 4.48 - $ 6.59 The above options, which were outstanding at August 2, 2025 , expire from September 11, 2026 to March 20, 2033 . 14 Excluded from the computation of basic and diluted earnings per share for the second quarter and first six months of fiscal 2025 and fiscal 2024 were 573,000 performance stock units. These performance-based awards will be included in the computation of basic and diluted earnings per share if, and when, the respective performance targets are achieved. In addition, 524,309 shares and 455,469 shares of deferred stock at August 2, 2025 and August 3, 2024 , respectively, 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. 8. Income Taxes The Company's income tax provision 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 first six months of fiscal 2025 and 2024, the Company’s effective tax rate was 4.6 % and 32.3 % , respec tively. The effective tax rate for the first six months of fiscal 2025 reflects an annual effective tax rate estimate of 6.9 %, net of discrete items and the impact of permanent book-to-tax differences. On an annual basis, while in dollars these permanent book-to-tax differences are down, the impact as a percentage of our estimated annual pretax earnings is greater. On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted in the U.S. The legislation permanentl y extends certain expiring provisions of the Tax Cuts and Jobs Act, alters aspects of the U.S. international tax regime, and reinstates certain business tax provisions, among other changes. The OBBBA has multiple effective dates, with provisions becoming effective in 2025 through 2027. There was no impact to the consolidated financial statements for the second quarter and first six months of fiscal 2025. The Company is currently assessing the OBBBA’s expected impact on its consolidated financial statements going forward. 9 . Fair Value Measurement At August 2, 2025 and February 1, 2025, the Company held U.S. treasury bills, which were classified as held-to maturity and carried at amortized cost. Fair Value (in thousands) Carrying value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Short-term investments: At August 2, 2025 19,529 19,529 — — At February 1, 2025 36,516 36,560 — — 10. Segment Disclosures The Company sells clothing, footwear and accessories to big + tall men through its stores and direct business, which includes its website, mobile app and certain marketplaces. The Company has identified its stores and its direct business as two separate operating segments. Resources are allocated and performance is assessed by our President and Chief Executive Officer , whom we have determined to be our Chief Operating Decision Maker (the "CODM"). The CODM evaluates the performance of the Company's operating segments and allocates resources based on sales performance, merchandise margins and 4-wall contribution, a non-GAAP measure. The accounting policies are the same as those described in the Note A, Summary of Significant Accounting Policies included in the Company's consolidated financial statements for the year ended February 1, 2025. The Company defines 4-wall contribution, which the CODM considers the performance measure for segment profitability, as segment revenues less cost of goods sold, occupancy costs and selling expenses. We aggregate our two operating segments because they are economically similar. Both segments sell the same merchandise, at the same pricing, and share the same customer base, production, advertising spend and distribution. Our distribution channels are available to our customers regardless of how they initiate their transaction. Through our mobile app or website, a customer can initiate a purchase online and that purchase could be filled either by the distribution center or one of our stores. Similarly, a customer also has the option to pick up in store or have the merchandise shipped directly to them. The 4-wall contribution margin for each segment is materially similar, further supporting the economic similarity of these two operating segments and that no additional value would be provided by reporting the segments separately. 15 The following table is a summary of our segment disclosures and a reconciliation of 4-wall contribution to net income: For the three months ended For the six months ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 (in thousands) Sales $ 115,505 $ 124,820 $ 221,038 $ 240,309 Cost of goods sold ( 45,841 ) ( 48,744 ) ( 87,115 ) ( 93,548 ) Occupancy costs ( 17,481 ) ( 15,905 ) ( 34,158 ) ( 30,908 ) Store compensation ( 14,175 ) ( 13,611 ) ( 27,824 ) ( 26,520 ) Other selling expenses ( 6,581 ) ( 6,889 ) ( 13,144 ) ( 13,329 ) 4-wall contribution 31,427 39,671 58,797 76,004 Advertising ( 7,047 ) ( 10,977 ) ( 13,465 ) ( 18,291 ) Corporate G&A ( 12,475 ) ( 14,360 ) ( 26,019 ) ( 27,342 ) Distributing and supporting G&A ( 7,326 ) ( 7,825 ) ( 14,595 ) ( 15,703 ) Depreciation and amortization ( 3,876 ) ( 3,385 ) ( 7,512 ) ( 6,663 ) Interest income, net 200 551 484 1,121 Income (loss) before provision (benefit) for income taxes $ 903 $ 3,675 $ ( 2,310 ) $ 9,126 Provision (benefit) for income taxes 1,168 1,292 ( 106 ) 2,950 Net income (loss) $ ( 265 ) $ 2,383 $ ( 2,204 ) $ 6,176 The CODM does not receive information about assets at the segment level because the Company's assets are managed at a consolidated level by department as opposed to by segment. 11. Subsequent Event Subsequent to the end of the second quarter of fiscal 2025, on August 13, 2025, the Company entered into the Second Amendment to Credit Facility ("Second Amendment"), which amended the Credit Facility. The Second Amendment amended the Credit Facility to: (i) reduce the size of the revolving commitments from $ 125.0 million to $ 100.0 million, to more closely align the Credit Facility with the Company's lower inventory levels, which the Company has proactively reduced since fiscal 2020; (ii) extend the maturity of the Credit Facility from October 28, 2026 to August 13, 2030 ; (iii) reduce the sublimit for swing-line loans from $15.0 million to $10.0 million and (iv) amend the definition of a "Cash Dominion Event" from its previous definition which required the Company to maintain Availability (as defined in the Credit Facility) at all times greater than 12.5 % of the loan cap to requiring the Company to maintain Availability at all times equal to or greater than the greater of (x) 12.5 % of the revolving loan cap and (y) $ 10.0 million. 16