What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-06-03 compared with 2025-12-11 · 167 added, 183 removed, 113 unchanged (76% 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 belief that the Merger with FullBeauty Brands will bring together complementary brands, channels and capabilities to better serve plus-size women and big + tall men;

our belief that the combined company will have a more diverse and broader portfolio with one of the most comprehensive range of plus-size and big + tall options and will be well positioned for future growth opportunities;

our expectation that the Merger with FullBeauty Brands will close in the first half of 2026;

our belief that lack of traffic to our stores and direct business remains the primary reason for our sales shortfall;

our belief that the overall weakness in the economy and consumer sentiment has resulted in a decrease in consumer spending and that decrease is affecting our business;

our belief that our FiTMAP® technology uniquely positions us to help consumers respond to the positive effects of GLP-1 medications;

our belief that our big and tall customer is not shopping as frequently or spending as much money with DXL as in prior years;

our belief that there has been a discernable shift in our customers' preference towards entry level price points and private brands;

our belief that our strategic initiatives will better position the Company’s return to growth;

our belief that we can bring product to market that offers higher quality, lower price points and greater value;

our belief that we can expand the core assortment in our private brands and refine our promotional strategy to prioritize relevance, competitiveness, and a stronger perception of value;

our belief that reducing investment in underperforming national brands will drive higher profitability and enabling more strategic promotions;

our belief that we can grow our private brand sales penetration from 57% at the start of fiscal 2025 to greater than 60% in 2026 and to greater than 65% in 2027;

our expected expansion of FiTMAP® to an additional 100 stores by the end of the first half of fiscal 2026;

our belief that we have reframed our promotional approach around a disciplined, strategic framework that prioritizes relevance, competitiveness, and a compelling value proposition;

our belief that our promotions, that are now managed with clearer intent regarding timing, product focus, and customer targeting, will maximize the return on every markdown dollar and strengthen brand equity;

our belief that the impact of current tariffs on our gross margin for fiscal 2025 is expected to be approximately $2.0 million;

expected marketing costs and expected capital expenditures in fiscal 2025;

our ability to manage inventory;

and our expectations regarding liquidity needs for the next 12 months.

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 engagement with FullBeauty Brands in constructive discussions to determine the best path forward;

the Board’s belief in the industrial logic of the combination;

the Board’s belief that given the increasingly challenging consumer environment since the execution of the Merger Agreement in December 2025 and FullBeauty Brands’ indebtedness, the existing terms of the Merger Agreement are not in the best interests of the Company's stockholders;

our belief that profitability would return over the long term, while forecasting operating losses in the near term;

our conclusion that the negative evidence outweighs available positive evidence regarding realizability of its deferred tax assets and that the full valuation allowance should remain against its net deferred tax assets;

our belief that the macro and sector headwinds are influencing the core DXL big + tall consumer and are materially affecting traffic, which remains very challenged, particularly in stores;

despite the shortfall in absolute traffic, guests that do visit DXL are buying, with conversion and average order value up in both stores and online, which we believe reinforces that the adjustments we are making to our assortment, promotional strategy, and customer experience are aligning better with today’s value-conscious consumer;

our advancement of several strategic initiatives designed to strengthen our market leadership in the big + tall sector while enhancing the customer experience across channels;

our belief that the adjustments we are making to our merchandise assortment, promotional strategy, and customer experience to align better with today’s value-conscious consumer;

our belief that AI-powered search and discovery tools are becoming increasingly important in ecommerce;

our belief that the new AI initiatives that were launched will improve product data quality, enrich item-level attributes and strengthen our ability to connect product, pricing and inventory information across AI-enabled platforms;

our intention that our AI initiatives will improve discoverability, support future commerce applications and position us to compete effectively as digital shopping journeys become more conversational and agent-driven;

our belief that GLP-1 medications provide both a near-term challenge and a long-term opportunity:

our belief that the impact of GLP-1 medications and similar weight-loss medications are contributing to structural changes in customer demand within the big + tall category;

our belief based on our research that while some customers may pause apparel purchases during periods of rapid size change, we expect them to return once they reach a more stable size profile;

our belief that we can strengthen retention, reactivation and lifetime value over time by staying closely aligned with evolving customer needs;

our belief that the slowdown in April reflects a combination of macroeconomic pressures impacting consumer confidence and discretionary spending, including global conflict, rising fuel costs, and inflation;

our expectation that the impact of tariffs on gross margin, exclusive of any refunds realized, will be approximately 100 basis points, a decrease from the previous estimate of 150 basis points;

our expectation that for fiscal 2026, marketing costs will be approximately 5.8% of sales;

our belief 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;

our belief that cash flows from operating activities and cash on hand will be sufficient to satisfy our current capital requirements.

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;

our expectation that capital expenditures for fiscal 2026 will range from $8.0 million to $12.0 million, net of tenant incentives;

our belief that store development plans for fiscal 2026 will be limited to conversions of a few remaining Casual Male XL stores to the DXL format, store relocations and other capital projects will be necessary to maintain our existing store portfolio and distribution center;

our expectation that the remainder of our capital spend for fiscal 2026 will primarily be for technology-related projects to support our business initiatives;

our belief that inclusion of the 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;

our belief that the comparability of adjusted net loss is useful in comparing the actual results period to period;

our expectation that we will be able to take proactive measures to manage our inventory and adjust our receipt plan given the ongoing macroeconomic factors affecting consumer spending, while at the same time, accelerating certain receipts to avoid potential delays caused by the recent conflict with Iran.

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.

The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited Consolidated Financial Statements and notes to those statements included elsewhere in this Quarterly Report and our audited Consolidated Financial Statements for the year ended February 1, 2025, included in our Annual Report on Form 10-K for the year ended February 1, 2025, as filed with the Securities and Exchange Commission ("SEC") on March 20, 2025 (our “Fiscal 2024 Annual Report”).

The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited Consolidated Financial Statements and notes to those statements included elsewhere in this Quarterly Report and our audited Consolidated Financial Statements for the year ended January 31, 2026, included in our Annual Report on Form 10-K for the year ended January 31, 2026, as filed with the Securities and Exchange Commission ("SEC") on March 19, 2026 (our “Fiscal 2025 Annual Report”).

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

We encourage readers to refer to our 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 the Merger and combining our business with FullBeauty Brands, changes in consumer spending in response to economic factors, the impact of the government shutdown, the impact of current tariffs, the impact of any further increases in tariffs, our ability to proactively react to the current and further potential changes in tariffs to minimize risk, our ability to grow our private brand;

rising costs, high interest rates;

spending in response to economic factors, the impact of current tariffs, the impact of any further increases in tariffs, our ability to proactively react to the current and further potential changes in tariffs to minimize risk;

rising fuel costs, high interest rates;

the impact of ongoing worldwide conflicts on the global economy;

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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 November 1, 2025, we operated 258 Destination XL stores, 17 DXL outlet stores, 6 Casual Male XL retail stores, 15 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 May 2, 2026, we operated 257 Destination XL stores, 17 DXL outlet stores, 5 Casual Male XL retail stores, 14 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 January 31, 2026 and February 1, 2025 as "fiscal 2026" and “fiscal 2025,” respectively.

Both fiscal years were 52-week periods.

Both fiscal years are 52-week periods.

SEGMENT REPORTING

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

RECENT DEVELOPMENTS - TARIFFS

economy continues to encounter considerable disruptions that have directly affected the retail sector and increased uncertainty as it relates to consumer spending.

In light of the implications of new tariffs, many companies, including ours, have had to reassess their global sourcing strategy in an effort to minimize the impact of these tariffs.

The frequent changes and unpredictability surrounding tariffs and trade policies has resulted in substantial uncertainty for companies’ operational management and their ability to forecast with confidence.

This unpredictability has disrupted strategic planning cycles and added complexity to supply chain and cost management efforts.

See “Risk Factors” section in Part I, Item 1A of our Fiscal 2024 Annual Report for further disclosure of the risks associated with the imposition of existing and new tariffs.

SUBSEQUENT EVENT - AGREEMENT AND PLAN OF MERGER

On December 11, 2025, the Company, Divine Merger Sub I, Inc., a Delaware corporation and wholly owned direct subsidiary of the Company (“Merger Sub”), and FBB Holdings I, Inc., a Delaware corporation (“FBB” or “FullBeauty Brands”), entered into an Agreement and Plan of Merger (the “Merger Agreement”).

The Merger Agreement provides that, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into FBB, with FBB continuing as the surviving corporation as a wholly owned subsidiary of the Company (the “Merger”).

At the effective time of the Merger, each share of common stock, par value $0.01 per share, of FBB (“FBB Common Stock”) will be converted into the right to receive that number of fully paid and nonassessable shares of the common stock, par value $0.01 per share, of the Company (the “DXL Common Stock”) equal to the Exchange Ratio, as defined in the Merger Agreement.

A holder of FBB Common Stock who would otherwise be entitled to receive a fraction of a share of DXL Common Stock will have such fractional share rounded up to one whole share of DXL Common Stock.

Following the consummation of the Merger, holders of FBB Common Stock will own 55% of the combined company and holders of DXL Common Stock will own 45% of the combined company.

FullBeauty Brands, a private company with last twelve months sales as of October 2025 of approximately $0.7 billion, is a leading direct to consumer retailer specializing in size inclusive fashions for plus-size women and big + tall men, with brands that include KingSize®, Catherines®, WomanWithin®, Jessica London®, and Roaman's®, among others.

We believe that this Merger will bring together complementary brands, channels and capabilities to better serve plus-size women and big + tall men.

The combined company will have a more diverse and broader portfolio with one of the most comprehensive ranges of plus-size and big + tall options and will be well positioned for future growth opportunities.

The consummation of the Merger is subject to DXL and FBB stockholder approval and other customary closing conditions and is expected to close in the first half of 2026.

Update on Merger with FullBeauty Brands

In December 2025, DXL and FullBeauty Brands announced a Merger of equals to create a scaled, category-defining retailer for size-inclusive apparel.

On June 3, 2026, subsequent to the end of the first quarter of fiscal 2026, the Company issued a press release to provide an update on the status of its Merger with FullBeauty Brands.

The Board has reevaluated the previously announced Merger and is engaging with FullBeauty Brands in constructive discussions to determine the best path forward.

As part of its ongoing fiduciary duties to the Company's stockholders, the Board, with the assistance of external financial and legal advisors, has conducted a comprehensive reevaluation of the Merger.

The Board continues to believe in the industrial logic of the combination.

However, given the increasingly challenging consumer environment since the execution of the Merger Agreement on December 11, 2025 and FullBeauty Brands' indebtedness, the Board believes that the existing terms of the Merger Agreement are not in the best interests of the Company's stockholders.

EXECUTIVE SUMMARY

For the Three Months Ended

For the Nine Months Ended

November 1, 2025

November 2, 2024

November 1, 2025

November 2, 2024

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

Net income (loss)

Adjusted EBITDA (non-GAAP basis)

Gross margin, as a percentage of sales

SG&A expenses, as a percentage of sales

Adjusted EBITDA margin (non-GAAP basis)

Net loss (GAAP)

Adjusted net loss (non-GAAP)

Adjusted EBITDA (non-GAAP ) (1)

Per diluted share:

Net income (loss)

Our sales for the third quarter of fiscal 2025 were down 5.2% as compared to the prior year's third quarter, primarily driven by a decrease of 7.4% in comparable store sales.

While the third quarter sales performance was a slight improvement from the first two quarters of fiscal 2025, traffic to our stores and direct business remains the primary reason for our sales shortfall.

The overall weakness in the economy and consumer sentiment has resulted in a decrease in consumer spending that we believe is directly affecting our business.

With the increasing availability of GLP-1 medications ,we believe that our FiTMAP technology, which is discussed below, uniquely positions us to help consumers respond to the positive effects of these medications.

As our customers' weight loss journeys accelerate, their needs are shifting, as sizes change, confidence grows, and shopping habits evolve.

We are embracing that journey using tools like FiTMAP.

Our big and tall customer is not shopping as frequently or spending as much money with DXL as in prior years.

There has also been a discernable shift in his preference towards entry level price points and private brands.

In response to these challenges, and given our customers' shift to our private brands, we recognize and are focused on bringing product to market that offers higher quality, lower price points and greater value.

As discussed below under Strategic Priorities, we are working to expand the core assortment in our private brands and refining our promotional strategy to prioritize relevance, competitiveness, and a stronger perception of value.

Despite the dynamic consumer environment, we have proactively managed our inventory and controlled our markdowns, which has enabled us to maintain a solid merchandise margin and a healthy inventory position as we head into the holiday season.

In addition, we have meaningfully reduced the impact of tariffs on our merchandise margin by aggressively pivoting our sourcing strategy to diversify away from high tariff countries, negotiating better cost sharing with vendors, and value engineering product cost savings.

Given the volatility that currently exists around these trade discussions, it is difficult to determine the potential impact that these tariffs may have on our financial results.

However, if currently enacted rates remain in effect throughout the remainder of the fiscal year, and no new tariffs are added, we estimate that the impact of tariffs on gross margin for fiscal 2025 will be approximately $2.0 million.

During the third quarter of fiscal 2025, we amended our credit facility to extend the maturity of the facility from October 28, 2026 to August 13, 2030.

In connection with the amendment, we also reduced the size of the credit facility from $125.0 million to $100.0 million to more closely align the credit facility with the Company's lower inventory levels.

As of November 1, 2025, we had cash and investments of $27.0 million as compared to $43.0 million at November 2, 2024 with no debt outstanding and unused excess availability under our credit facility of $73.6 million.

The decrease in cash and investments at November 1, 2025 as compared to November 2, 2024 included $13.1 million of capital spent over the past 12 months for new store development and $3.3 million of shares repurchased during the fourth quarter of fiscal 2024.

Since the beginning of fiscal 2023, we have opened 18 new DXL stores and converted 24 Casual Male XL retail and outlet stores to the DXL format, which we have been able to completely fund from our cash availability.

Net loss (GAAP)

Adjusted net loss (non-GAAP)

As a percentage of sales:

SG&A expenses (1)

Operating margin

Adjusted EBITDA margin (non-GAAP) (1)

(1) The amounts and percentages for the three months ended May 3, 2025 reflect the reclassification of certain costs from SG&A expenses to Transaction-related costs for comparability with the amounts and percentages for the three months ended May 2, 2026.

We were encouraged by our first quarter results which reflected sales performance improving and continued progress against our strategic priorities.

Although comparable sales were down (3.8)% for the first quarter of fiscal 2026, this represents our best quarterly comparable sales result since the second quarter of fiscal 2023.

We believe macro and sector headwinds are influencing the core DXL big + tall consumer and are materially affecting traffic, which remains very challenged, particularly in stores.

Despite the shortfall in absolute traffic, guests that do visit DXL are buying, with improvements in conversion and average order value in both stores and online.

These trends reinforce that the adjustments we are making to our assortment, promotional strategy and customer experience are aligning better with today’s value-conscious consumer.

Strategic Priorities :

Since the start of the fiscal year, we have pursued three critically important initiatives to address ongoing volatility, evolving consumer dynamics, and challenges specific to the Big +Tall retail sector:

Assortment, FitMAP Technology expansion and Promotional Strategy.

We believe these initiatives will better position the Company’s return to growth.

Over the course of the next two years, we are strategically shifting our assortment to prioritize private brands, which deliver consistent fit, the flexibility to balance trend-right fashion with core essentials and stronger margins.

To support this focus, we are reducing investment in underperforming national brands, which will drive higher profitability and enable us to leverage strategic promotions to fuel customer acquisition and sales growth.

Our intent is to grow private brand sales penetration from 57% at the start of fiscal 2025 to greater than 60% in 2026 and to greater than 65% in 2027.

We are confident that with the strength of our assortment, enhanced storytelling, and strategic marketing efforts, we can drive greater customer loyalty and position our private brands as a primary reason customers choose DXL.

Over the past three years, we have been working with and testing a proprietary FiTMAP® Sizing Technology for which we have an exclusive license for Big + Tall men until 2030.

This innovative, contactless, digital scanning technology captures 243 unique measurements and offers custom clothing options and a great fit for all our customers.

FiTMAP offers a unique experience for our customers, whether selecting from our Ready-to-Wear clothing or opting for custom garments.

We are able to provide recommended sizes in all of our private brands, as well as 28 of our national brands.

We believe this technology will enhance customer engagement, attract new customers and further establish DXL as a technology leader in men's big + tall apparel.

To date, we have scanned over 30,000 customers.

At the end of the third quarter of fiscal 2025, FiTMAP was in 88 DXL retail locations and as of the end of September 2025 the technology is available on our mobile app, providing our customers with the ability to self-scan.

We plan to expand to another 100 stores in the first half of fiscal 2026.

Promotional Strategy:

We have continued to reframe our promotional strategy around a more disciplined, strategic framework that prioritizes relevance, competitiveness, and a stronger perception of value.

Our customer has been telling us that we need to create greater levels of value, and our go-forward approach treats promotions like a managed category, with a clear and deliberate intent around timing, product focus, and purpose to drive sales, engagement, and brand equity.

We continue to drive our positioning to maximize the return on every markdown dollar, better align with strategic imperatives, and precisely target specific customer cohorts.

We continue to advance several strategic initiatives designed to strengthen our market leadership in the big + tall sector while enhancing the customer experience across channels.

We have exclusive rights to our fit technology platform until 2030.

FiTMAP® remains one of the Company’s most important long-term growth drivers.

During the quarter, we completed the rollout of FiTMAP technology in 188 stores to enhance the customer journey.

Since launch, over 100,000 customers have engaged with the platform, and early results continue to reinforce its value.

Customers who use FiTMAP have demonstrated stronger conversion, higher average order values, greater purchase frequency and lower return rates, underscoring the role personalized fit can play in driving both customer satisfaction and profitable growth.

We are sharpening our focus on artificial intelligence ("AI") as consumer shopping behavior evolves.

As AI-powered search and discovery tools become increasingly important in ecommerce, the Company is investing to ensure that its products and content are more visible, relevant and accessible in these emerging environments.

During the quarter, DXL launched new AI initiatives to improve product data quality, enrich item-level attributes and strengthen its ability to connect product, pricing and inventory information across AI-enabled platforms.

These efforts are intended to improve discoverability, support future commerce applications and position the Company to compete effectively as digital shopping journeys become more conversational and agent-driven.

GLP-1s and Similar Weight-Loss Medications

We continue to deepen our understanding of how the use of glucagon-like peptide-1 (“GLP-1”) medications and similar weight-loss medications may be influencing customer behavior and category demand.

Our research indicates that a meaningful portion of our customer base is currently using GLP-1 medications, contributing to more dynamic sizing needs over time.

We are responding thoughtfully by broadening select assortments in smaller sizes and using customer insights to inform future merchandising, marketing and re-engagement strategies.

Importantly, the Company sees this as both a near-term challenge and a long-term opportunity:

while some customers may pause apparel purchases during periods of rapid size change, many express an intention to return once they reach a more stable size profile.

By staying closely aligned with these evolving customer needs, we believe we can strengthen retention, reactivation and lifetime value over time.

RESULTS OF OPERATIONS

The following table presents sales by segment for the three and nine months ended November 1, 2025 and November 2, 2024:

The following table presents sales by segment for the three months ended May 2, 2026 and May 3, 2025:

For the Three Months Ended

For the Nine Months Ended

(in thousands)

November 1, 2025

November 2, 2024

November 1, 2025

November 2, 2024

Total sales for the third quarter of fiscal 2025 were $101.9 million, as compared to $107.5 million in the third quarter of fiscal 2024.

The decrease in total sales was primarily attributable to a decrease in comparable sales for the third quarter of 7.4%, partially offset by an increase in non-comparable sales from new stores.

Comparable sales were down 6.7% in August, down 9.3% in September, and down 5.8% in October, which was a slight improvement from the first half of fiscal 2025.

The third quarter comparable sales decrease of 7.4% consisted of a comparable sales decrease of 5.2% from stores and a comparable sales decrease of 13.1% from our direct business.

A decrease in traffic continued to be the primary driver for the decrease in comparable sales.

While conversion rate was up slightly, our dollars per transaction were down, partly due to the shift in product mix toward more value-driven merchandise, as our customers continue to be price sensitive due to reduced discretionary spending.

While we have seen positive results from our loyalty program, Price Match Guarantee, FiTMAP, and our Heroes discounts, our total active customer file has continued to be under pressure as customers are spending less and shopping less frequently in the current environment.

For the first nine months of fiscal 2025, total sales of $322.9 million decreased 7.2% as compared to $347.8 million for the first nine months of fiscal 2024.

The decrease was primarily driven by a decrease in comparable sales of 8.7%, with stores down 6.3% and our direct business down 14.6%.

Comparable sales through the first five weeks of the fourth quarter of fiscal 2025 were down 5.7%, which is an improvement in trend over the third quarter of fiscal 2025.

Total sales for the first quarter of fiscal 2026 were $103.3 million, as compared to $105.5 million in the first quarter of fiscal 2025.

The decrease in total sales was primarily attributable to a decrease in comparable sales for the first quarter of 3.8%, partially offset by an increase in non-comparable store sales.

Sales improved at the start of fiscal 2026 with comparable sales down 1.3% in February and down 2.7% in March and, in April, sales were down 6.8%.

While the performance between March and April was impacted at some level by the earlier Easter holiday, we believe the slowdown in sales in April was primarily the result of a combination of macroeconomic pressures impacting consumer confidence and discretionary spending, including global conflict, rising fuel costs, and inflation.

We also believe the impact of GLP-1 medications and similar weight-loss medications are contributing to structural changes in customer demand within the big + tall category.

The comparable sales decrease of 3.8% for the first quarter consisted of a comparable sales decrease of 4.6% from stores and a comparable sales decrease of 1.6% from our direct business.

A decrease in traffic continued to be the primary driver, particularly in stores, partially offset by improvements in conversion and dollars per transaction.

The direct business showed improvement during the first quarter, with increased demand being generated from our paid search, paid social and program marketing efforts.

In addition, improvements to the website and app have helped to improve conversion during the first quarter of fiscal 2026.

Contributing to this improvement were strong sales of clearance merchandise on the website.

Gross Margin Rate

For the third quarter of fiscal 2025, our gross margin rate, inclusive of occupancy costs, was 42.7% as compared to a gross margin rate of 45.1% for the third quarter of fiscal 2024.

The decrease of 240 basis points for the third quarter of fiscal 2025 was primarily driven by an increase of 210 basis points in occupancy costs, as a percentage of sales, due to the deleveraging from lower sales and increased rents from new stores and lease extensions.

Merchandise margin for the third quarter decreased by 30 basis points, as compared to the third quarter of fiscal 2024, primarily due to the impact of tariffs and increased markdown activity and promotional offers associated with our marketing initiatives.

These increased costs were partially offset by an improvement in merchandise margins as a result of a shift in product mix toward our private brand merchandise.

For the first nine months of fiscal 2025, our gross margin rate, inclusive of occupancy costs, was 44.4% as compared to a gross margin rate of 47.2% for the first nine months of fiscal 2024.

The decrease of 280-basis points was due to an increase of 240-basis points in occupancy costs due to the deleveraging of sales and increased rents and a 40 basis point decrease in merchandise margin.

Similar to the third quarter, the decrease in merchandise margin was due to the impact of tariffs and increased markdown activity and promotional offers associated with our new marketing initiatives, partially offset by an improvement in merchandise margins as a result of a shift in product mix toward our private brand merchandise.

As discussed above, there remains significant uncertainty with respect to evolving trade policies and the enactment of additional tariffs globally.

For the third quarter and first nine months of fiscal 2025, the impact of tariffs on merchandise margins was estimated to be approximately 60 basis points and 25 basis points, as a percentage of sales, respectively.

Assuming the currently enacted rates remain in effect throughout the remainder of the fiscal year and no new tariffs are added, we estimate that the impact of tariffs on gross margin for fiscal 2025 will be approximately $2.0 million.

For the first quarter of fiscal 2026, our gross margin rate, inclusive of occupancy costs, was 44.3% as compared to a gross margin rate of 45.1% for the first quarter of fiscal 2025.

Our gross margin rate decreased by 80 basis points, driven by a decrease of 100 basis points in merchandise margin, partially offset by a 20-basis point decrease in occupancy costs.

The decrease in merchandise margin as compared to the first quarter of fiscal 2025 is primarily due to the impact of tariffs, increased shipping costs as a result of fuel surcharges and increased markdown activity associated with clearance sales.

These increased costs were partially offset by an improvement in merchandise margins as a result of a shift in product mix toward our private brand merchandise and favorable loyalty costs.

The decrease in occupancy costs of 20 basis points, or $0.5 million, was primarily due to $1.4 million received from a landlord as a result of an early lease termination, partially offset by increased rents from lease extensions and new stores.

In April 2026, U.S.

Customs and Border Protection ("CBP") launched an online portal through which companies may submit refund requests.

During the first quarter of fiscal 2026, the Company submitted a claim seeking a refund of approximately $4.0 million related to tariffs previously paid.

The timing and amount of any potential refund and recovery remain uncertain, and the Company expects to recognize any recovery when receipt is considered realizable.

Given the volatility that currently exists around trade discussions, it is difficult to determine the potential impact that tariffs may have on our financial results for fiscal 2026.

However, if currently enacted rates remain in effect throughout fiscal 2026, and no additional tariffs, including those under U.S.

trade laws, are added, we estimate that the impact of tariffs on pre-tariff gross margin, in fiscal 2026, exclusive of any refunds realized, will be approximately 100 basis points, a decrease from the previous estimate of 150 basis points.

Selling, General and Administrative Expenses

As a percentage of sales, selling, general and administrative ("SG&A") expenses for the third quarter of fiscal 2025 were 44.7% as compared to 44.1% for the third quarter of fiscal 2024.

For the first nine months of fiscal 2025, SG&A expenses, as a percentage of sales, were 43.5% as compared to 42.7% for the first nine months of fiscal 2024.

On a dollar basis, SG&A expenses decreased by $1.9 million for the third quarter of fiscal 2025 as compared to the third quarter of fiscal 2024.

The decrease was primarily due to a decrease in supporting payroll costs and incentive-based compensation.

For the first nine months of fiscal 2025, SG&A expenses decreased $8.1 million as compared to the first nine months of fiscal 2024 primarily due to a decrease in marketing, supporting payroll and incentive-based compensation.

Marketing costs were 6.0% of sales for the third quarter of fiscal 2025 as compared to 5.7% of sales for the third quarter of fiscal 2024.

For the first nine months of fiscal 2025, marketing costs were 6.1% of sales as compared to 7.0% of sales for the first nine months of fiscal 2024.

As a percentage of sales, selling, general and administrative ("SG&A") expenses for the first quarter of fiscal 2026 were 45.0% as compared to 44.9% for the first quarter of fiscal 2025.

On a dollar basis, SG&A expenses decreased by $0.9 million for the first quarter of fiscal 2026 as compared to the first quarter of fiscal 2025.

The decrease was primarily due to a decrease in supporting payroll costs and incentive-based compensation partially offset by an increase in marketing costs.

Marketing costs were 6.5% of sales for the first quarter of fiscal 2026 as compared to 6.1% of sales for the first quarter of fiscal 2025.

For fiscal 2026, marketing costs are expected to be approximately 5.8% 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 24.8% of sales for the first nine months of fiscal 2025 as compared to 24.2% of sales for the first nine months of fiscal 2024.

Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 18.7% of sales for the first nine months of fiscal 2025 as compared to 18.5% of sales for the first nine months of fiscal 2024.

Customer Facing Costs, which include store payroll, marketing and other store and direct operating costs, represented 26.1% of sales for the first quarter of fiscal 2026 as compared to 25.2% of sales for the first quarter of fiscal 2025.

Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 18.9% of sales for the first quarter of fiscal 2026 as compared to 19.7% of sales for the first quarter of fiscal 2025.

Transaction-Related Costs

Transaction-related costs for the first quarter of fiscal 2026 and fiscal 2025 were $1.2 million and $0.1 million, respectively, and primarily related to fees paid for professional services in connection with costs related to the Merger.

Depreciation and Amortization

Depreciation and amortization for the third quarter of fiscal 2025 increased to $3.8 million as compared to $3.6 million for the third quarter of fiscal 2024.

For the first nine months of fiscal 2025, depreciation and amortization was $11.3 million as compared to $10.2 million for the first nine months of fiscal 2024.

The increase in depreciation and amortization in fiscal 2025 is due to the opening of new store locations and investments in certain other infrastructure and technology projects.

Depreciation and amortization for the first quarter of fiscal 2026 increased to $4.0 million as compared to $3.6 million for the first quarter of fiscal 2025.

The increase in depreciation and amortization in fiscal 2026 is due to capital projects, including new stores, completed in fiscal 2025.

Interest Income, Net

Net interest income for the third quarter of fiscal 2025 was $0.1 million as compared to $0.6 million for the third quarter of fiscal 2024.

For the first nine months of fiscal 2025, net interest income was $0.6 million as compared to $1.7 million for the first nine

months of fiscal 2024.

The decrease in interest income for the third quarter and first nine months of fiscal 2025 was primarily due to the decrease in the average balance of investments as compared to the third quarter and first nine months of fiscal 2024.

For both years, interest income was earned from investments in U.S.

Net interest income for the first quarter of fiscal 2026 was $0.1 million as compared to $0.3 million for the first quarter of fiscal 2025.

The decrease in interest income for the first quarter of fiscal 2026 was primarily due to the decrease in the average balance of investments as compared to the first quarter of fiscal 2025.

For both periods, interest income was earned from investments in U.S.

government-backed investments and money market accounts.

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

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

Our income tax provision 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 nine months of fiscal 2025 and 2024, the Company’s effective tax rate was 19.8% and 38.8%, respectively.

The effective tax rate for the first nine months of fiscal 2025 reflects an annual effective tax rate estimate of 18.3% net of discrete items and the impact of permanent book-to-tax differences as well as the impact of adjustments to our net operating losses reflected in our recently filed tax returns.

Net Income (Loss)

For the third quarter of fiscal 2025, we recorded a net loss of $(4.1) million, or $(0.08) per diluted share, as compared to a net loss of $(1.8) million, or $(0.03) per diluted share, for the third quarter of fiscal 2024.

For the first nine months of fiscal 2025, the net loss was $(6.3) million, or $(0.12) per diluted share, as compared to net income of $4.4 million, or $0.07 per diluted share, for the first nine months of fiscal 2024.

The decrease in earnings for the third quarter and first nine months of fiscal 2025 was driven primarily by the decrease in sales.

As of November 1, 2025, our inventory decreased by $4.1 million to $85.0 million, as compared to $89.1 million at November 2, 2024.

We continue to take proactive measures to manage our inventory and adjust our receipt plan given the ongoing macroeconomic factors affecting consumer spending, while at the same time, accelerating certain receipts to minimize the impact of tariffs.

At November 1, 2025, our clearance inventory was 10.0% of our total inventory, as compared to 9.2% at November 2, 2024.

For the first quarter of fiscal 2026 and 2025, the Company’s effective tax rate was (1.1)% and 39.7%, respectively.

In the fourth quarter of fiscal 2025, a full valuation allowance was established against the net deferred tax assets.

As a result, the effective tax rate for the first quarter of fiscal 2026 primarily reflects a provision for state margin tax, based on gross receipts less certain deductions.

The effective tax rate for the first quarter of fiscal 2025 reflected the impact of permanent book-to-tax differences.

For the first quarter of fiscal 2026, we recorded a net loss of $(5.9) million, or $(0.11) per diluted share, as compared to a net loss of $(1.9) million, or $(0.04) per diluted share, for the first quarter of fiscal 2025.

The decrease in earnings for the first quarter of fiscal 2026 as compared to first quarter of fiscal 2025 was driven primarily by a decrease in sales, an increase in transaction-related expenses and a decrease in the effective tax rate.

We have fully reserved against our deferred tax assets and, therefore, the net loss in the first quarter of fiscal 2026 is not reflective of earnings assuming a normal tax position for the Company.

On a non-GAAP basis, adjusting for a normal tax rate of 26% and the add back of transaction-related costs, adjusted net loss for the first quarter of fiscal 2026 was $(0.06) per diluted share as compared to adjusted net loss for the first quarter of fiscal 2025 of $(0.04) per diluted share.

As of May 2, 2026, our inventory decreased by $4.1 million to $81.4 million, as compared to $85.5 million at May 3, 2025.

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

At the same time, we may accelerate certain receipts to avoid potential delays caused by the recent conflict with Iran.

At May 2, 2026, our clearance inventory was 9.9% of our total inventory, as compared to 9.5% at May 3, 2025.

Our inventory position is very strong and our clearance levels are in line with our benchmark of 10%.

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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 November 1, 2025, we had no outstanding debt, including no borrowings under our credit facility during the first nine months of fiscal 2025.

At May 2, 2026, we had no outstanding debt, including no borrowings under our credit facility during the first quarter of fiscal 2026.

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 may have on consumer spending, including geopolitical conflicts around the world, the imposition of tariffs, inflation and high interest costs.

We also believe that cash flows from operating activities and cash on hand will be sufficient to satisfy our current capital requirements.

We believe that cash flows from operating activities and cash on hand will be sufficient to satisfy our current capital requirements.

For the first nine months of fiscal 2025, cash flow from operations was $(3.2) million as compared to $12.5 million for the first nine months of fiscal 2024.

The decrease in cash flow from operations was primarily due to a decrease in earnings as well as the timing of working capital.

Free cash flow, before capital expenditures for store development, a non-GAAP measure, was $(10.9) million for the first nine months of fiscal 2025 as compared to $2.5 million for the first nine months of fiscal 2024.

Free cash flow, a non-GAAP measure, was $(20.2) million for the first nine months of fiscal 2025 as compared to $(7.0) million for the first nine months of fiscal 2024.

For the Nine Months Ended

For the first three months of fiscal 2026, cash flow from operations was $(8.8) million as compared to $(12.0) million for the first three months of fiscal 2025.

The improvement in cash flow from operations was primarily due to the timing of other working capital partially offset by a decrease in earnings.

Free cash flow, before capital expenditures for store development, a non-GAAP measure, was $(12.3) million for the first three months of fiscal 2026 as compared to $(14.5) million for the first three months of fiscal 2025.

Free cash flow, a non-GAAP measure, was $(12.7) million for the first three months of fiscal 2026 as compared to $(18.8) million for the first three months of fiscal 2025.

For the Three Months Ended

(in millions)

November 1, 2025

November 2, 2024

Cash flow from operating activities (GAAP basis)

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Free Cash Flow (non-GAAP basis)

Cash flow provided by investing activities was $6.5 million as compared to cash flow used for investing activities of $(22.5) million for the first nine months of fiscal 2024.

The increase in cash flow provided by investing activities of $29.0 million was primarily due to the maturity of short-term investments and a decrease in the amount of short-term investments purchased.

Cash flow used for investing activities was $(3.8) million as compared to cash flow provided by investing activities of $8.3 million for the first three months of fiscal 2025.

The decrease in cash flow from investing activities of $(12.1) million was primarily due to a decrease in proceeds from short-term investments partially offset by a decrease in capital expenditures in fiscal 2026 as compared to fiscal 2025.

Credit Facility

During the third quarter of fiscal 2025, we amended our revolving credit agreement with Citizens Bank, N.A., by entering into the Second Amendment to Credit Facility (as amended, the "Credit Facility").

As a result of the amendment, the maturity date of the Credit Facility was extended from October 28, 2026 to August 13, 2030 and the revolving commitments under the facility were reduced from $125.0 million to $100.0 million, to more closely align with our average inventory levels, which serve as the primary borrowing base for the Credit Facility.

In addition, the sublimit for swing-line loans was reduced from $15.0 million to $10.0 million.

The Credit Facility continues to include a sublimit of $20.0 million for commercial and standby letters of credit.

Our availability under the Credit Facility did not materially change as a result of the amendment.

Borrowings under the Credit Facility bear interest at either a Base Rate or Daily Simple SOFR rate, at our option.

We have a revolving credit agreement with Citizens Bank, N.A., which was most recently amended in the third quarter of fiscal 2025 (as amended, the "Credit Facility").

The Credit Facility, which expires August 13, 2030, provides a revolving commitment of $100.0 million, a sublimit for swing-line loans of $10.0 million and a sublimit of $20.0 million for commercial and standby letters of credit.

Borrowings under the Credit Facility bear interest at either a Base Rate (as defined in the Credit Facility) or Daily Simple Secured Overnight Financing Rate (“SOFR”) rate, at our 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 our average excess availability, of either 0.25% or 0.50% (the “Applicable Margin”).

(a) the Prime Rate (as defined in the Credit Facility), (b) the Federal Funds (as defined in the Credit Facility) 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 our 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.

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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 November 1, 2025 and no borrowings during the first nine months of fiscal 2025.

At November 1, 2025, outstanding standby letters of credit were $3.6 million.

The average unused excess availability during the first nine months of fiscal 2025 was approximately $71.1 million and the unused excess availability at November 1, 2025 was $73.6 million.

We had no outstanding borrowings under the Credit Facility at May 2, 2026 and no borrowings during the first three months of fiscal 2026.

At May 2, 2026, outstanding standby letters of credit were $3.6 million.

The average unused excess availability during the first three months of fiscal 2026 was approximately $73.6 million and the unused excess availability at May 2, 2026 was $70.0 million.

Capital Expenditures

The following table sets forth the open stores and related square footage at November 1, 2025 and November 2, 2024, respectively:

November 1, 2025

November 2, 2024

The following table sets forth the open stores and related square footage at May 2, 2026 and May 3, 2025, respectively:

Store Concept

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Casual Male Outlets

During the first nine months of fiscal 2025, we opened eight new DXL stores, converted two Casual Male XL retail stores and one Casual Male XL outlet to DXL retail stores and two Casual Male XL outlets to DXL outlets.

We expect our capital expenditures to range from $17.0 million to $19.0 million, net of tenant incentives.

During the first three months of fiscal 2026, we closed one DXL retail store and one Casual Male XL outlet store.

We expect our capital expenditures for fiscal 2026 to range from $8.0 million to $12.0 million, net of tenant incentives.

Our store development plans for fiscal 2026 will be limited to conversions of a few remaining Casual Male XL stores to the DXL format, store relocations and other capital projects necessary to maintain our existing store portfolio and distribution center.

The remainder of our expected capital spend for fiscal 2026 will primarily be for technology-related projects to support our business initiatives.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Non-GAAP Financial Measures

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

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

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

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

Adjusted Net Loss and Adjusted Net Loss Per Diluted Share

Adjusted net loss and adjusted net loss per diluted share reflect an adjustment assuming a normal tax rate of 26% and the add back of transaction-related costs.

We have fully reserved against our net deferred tax assets and, therefore, the net loss in the first quarter of fiscal 2026 is not reflective of earnings assuming a “normal” tax position.

Adjusted net loss provides investors with a useful indication of the financial performance of the business, on a comparative basis, assuming a normalized tax rate of 26%.

The estimated normal tax rate of 26% includes a blended state income tax rate.

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

Adjusted net loss per diluted share is then calculated by dividing the adjusted net loss by the weighted average shares outstanding for the respective period, on a diluted basis.

The following table is a reconciliation of net loss on a GAAP basis to adjusted net loss, on a non-GAAP basis, for each period:

For the Three Months Ended

(in thousands, except per share data)

Net loss (GAAP)

Transaction-related costs

Actual provision (benefit) for income taxes

Income tax benefit, assuming a normalized tax rate of 26%

Adjusted net loss (non-GAAP)

Weighted average number of common

shares outstanding on a diluted basis

Free Cash Flow.

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The following table reconciles free cash flow:

For the Nine Months Ended

For the Three Months Ended

(in millions)

November 1, 2025

November 2, 2024

Cash flow from operating activities (GAAP basis)

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Adjusted EBITDA and Adjusted EBITDA Margin .

Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and adding back impairment (gain) of assets and accrual for estimated non-recurring legal settlement costs, if any.

Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and adding back transaction-related expenses.

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

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For the Three Months Ended

For the Nine Months Ended

November 1, 2025

November 2, 2024

November 1, 2025

November 2, 2024

(in millions)

Net income (loss) (GAAP basis)

Net loss (GAAP)

Transaction-related expenses

Provision (benefit) for income taxes

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Depreciation and amortization

Adjusted EBITDA (non-GAAP basis)

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

Adjusted EBITDA (non-GAAP)

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis