DESTINATION XL GROUP, INC. 10-Q

Item 1. Financial Statements. DESTINATION XL GROUP, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) May 2, 2026 January 31, 2026 (Fiscal 2026) (Fiscal 2025) ASSETS Current assets: Cash and cash equivalents $ 11,098 $ 23,807 Short-term investments 5,078 5,029 Accounts receivable 1,774 1,861 Inventories 81,394 73,522 Prepaid expenses and other current assets 9,503 6,747 Total current assets 108,847 110,966 Non-current assets: Property and equipment, net of accumulated depreciation and amortization 58,301 60,010 Operating lease right-of-use assets 197,078 194,068 Deferred income taxes, net of valuation allowance — — Intangible assets 1,150 1,150 Other assets 744 753 Total assets $ 366,120 $ 366,947 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 30,064 $ 22,941 Accrued expenses and other current liabilities 20,237 26,628 Operating leases, current 36,273 35,881 Total current liabilities 86,574 85,450 Long-term liabilities: Operating leases, non-current 176,810 173,346 Other long-term liabilities 166 57 Total long-term liabilities 176,976 173,403 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, 81,012,145 and 80,564,948 shares issued at May 2, 2026 and January 31, 2026, respectively 810 806 Additional paid-in capital 331,439 331,028 Treasury stock at cost, 25,908,533 shares at May 2, 2026 and January 31, 2026 ( 143,985 ) ( 143,985 ) Accumulated deficit ( 85,694 ) ( 79,755 ) Total stockholders' equity 102,570 108,094 Total liabilities and stockholders' equity $ 366,120 $ 366,947 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 May 2, 2026 May 3, 2025 (Fiscal 2026) (Fiscal 2025) Sales $ 103,335 $ 105,533 Cost of goods sold including occupancy costs 57,583 57,951 Gross profit 45,752 47,582 Expenses: Selling, general and administrative 46,482 47,380 Transaction-related costs 1,241 63 Depreciation and amortization 3,968 3,636 Total expenses 51,691 51,079 Operating loss ( 5,939 ) ( 3,497 ) Interest income, net 62 284 Loss before provision (benefit) for income taxes ( 5,877 ) ( 3,213 ) Provision (benefit) for income taxes 62 ( 1,274 ) Net loss $ ( 5,939 ) $ ( 1,939 ) Net loss per share - basic and diluted $ ( 0.11 ) $ ( 0.04 ) Weighted-average number of common shares outstanding: Basic and diluted 54,916 53,601 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 January 31, 2026 80,564 $ 806 $ 331,028 ( 25,909 ) $ ( 143,985 ) $ ( 79,755 ) $ 108,094 Board of directors' compensation 154 1 140 — — — 141 Stock compensation expense — 332 — — — 332 Issuance of common stock, upon RSUs release 407 4 ( 4 ) — — — - Shares withheld for taxes related to net share settlement ( 113 ) ( 1 ) ( 57 ) — — — ( 58 ) Net loss — — — ( 5,939 ) ( 5,939 ) Balance at May 2, 2026 81,012 $ 810 $ 331,439 ( 25,909 ) $ ( 143,985 ) $ ( 85,694 ) $ 102,570 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 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 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) May 2, 2026 May 3, 2025 (Fiscal 2026) (Fiscal 2025) Cash flows from operating activities: Net loss $ ( 5,939 ) $ ( 1,939 ) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Amortization and writeoff of deferred debt issuance costs 19 19 Depreciation and amortization 3,968 3,636 Deferred taxes, net of valuation allowance — ( 1,162 ) Stock compensation expense 332 340 Board of directors' stock compensation 141 116 Changes in operating assets and liabilities: Accounts receivable 38 805 Inventories ( 7,872 ) ( 9,976 ) Prepaid expenses and other current assets ( 2,756 ) ( 2,644 ) Other assets ( 10 ) 2 Accounts payable 7,123 6,473 Operating leases, net 846 ( 297 ) Accrued expenses and other liabilities ( 4,711 ) ( 7,403 ) Net cash used for operating activities ( 8,821 ) ( 12,030 ) Cash flows from investing activities: Additions to property and equipment, net ( 3,830 ) ( 6,740 ) Purchase of short-term investments — ( 3,003 ) Maturity of short-term investments — 18,001 Net cash provided by (used for) investing activities ( 3,830 ) 8,258 Cash flows from financing activities: Proceeds from the exercise of stock options — 2 Tax withholdings paid related to net share settlements ( 58 ) ( 49 ) Net cash used for financing activities ( 58 ) ( 47 ) Net decrease in cash and cash equivalents ( 12,709 ) ( 3,819 ) Cash and cash equivalents: Beginning of period 23,807 11,901 End of period $ 11,098 $ 8,082 Supplemental Disclosures of Cash Flow Information: Cash paid (refunded) during the period for income taxes, net $ ( 272 ) $ 30 Cash paid during the period for interest $ 73 $ 90 Non-cash activity during the period: Capital expenditures incurred but not yet paid $ 472 $ 2,401 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 January 31, 2026 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission ("SEC") on March 19, 2026. 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 2026 and fiscal 2025 are both 52-week periods ending on January 30, 2027 and January 31, 2026, respectively. Reclassifications For comparability with the current period presentation, certain costs in the Consolidated Statement of Operations for the three months ended May 3, 2025 were reclassified from selling, general and administrative expenses to transaction-related costs. 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 11, 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 7 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. 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 three months of fiscal 2026 and fiscal 2025. 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, the 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, excluding rental payments related to the respective store’s operating lease right-of-use ("ROU") asset. If the first step of the long-lived asset impairment test concludes that the carrying amount of the asset group, which includes any ROU asset, is not recoverable, the Company performs the second step of the long-lived asset impairment test by comparing the fair value of the asset group to its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the fair value. 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 and is limited to the amount by which the asset group’s carrying value exceeds the fair value of its individual assets. The fair value of ROU assets is estimated using an income approach based on management’s forecast of future cash flows that could be derived based on the sublease market rent. With respect to the impairment charges taken on operating lease ROU assets, if the Company subsequently makes a decision to close previously impaired stores and a gain is realized as a result of the reevaluation of the existing lease liabilities, to the extent the gain related to previously recorded impairment charges against the ROU assets, the gain will be included as an offset to asset impairment charges originally recorded on that ROU asset, with the remainder included as a reduction in store occupancy costs. There were no impairments or non-cash gains recognized in the first three months of fiscal 2026 and fiscal 2025. 8 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 $ 6.7 million and $ 6.4 million for the first quarter of fiscal 2026 and fiscal 2025, 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; initial direct costs and any lease incentives are included in the value of those ROU assets. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, based on information available at the lease measurement date, to determine the present value of future payments. The Company elected the lessee non-lease component separation practical expedient, which permits the Company to not separate non-lease components from the lease components to which they relate. The Company also made an accounting policy election that the recognition requirement of ASC Topic 842, Lessors – Certain Leases with Variable Lease Payments 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 May 2, 2026 , 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. In the second quarter of fiscal 2025, the Company amended the lease agreement for its corporate headquarters and distribution center to extend the initial term for an additional period of seven years commencing on February 1, 2026 and ending on January 31, 2033 . At the end of the extension term, the Company will have the option to further extend the term for three additional successive periods of five years each. The extension 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”) . 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 November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40 ) ("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 three months of fiscal 2026 , 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 + 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 $ 2.3 million and $ 3.1 million at May 2, 2026 and January 31, 2026, 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 Topic 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 loyalty accrual, net of breakage, was $ 0.4 million at May 2, 2026 and $ 0.4 million at January 31, 2026. 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 (in thousands) May 2, 2026 May 3, 2025 Store sales $ 74,669 72.3 % $ 76,471 72.5 % Direct sales 28,666 27.7 % 29,062 27.5 % Total sales $ 103,335 $ 105,533 3. Debt Credit Agreement with Citizens Bank, N.A. The Company has 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. The Credit Facility includes a sublimit of $ 20.0 million for commercial and standby letters of credit and a sublimit of up to $ 10.0 million for swing line loans. The Company’s ability to borrow under the Credit Facility is determined using an availability formula based on eligible assets . Borrowings 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 the Company's option. Base Rate loans will bear interest at a rate equal to (i) the greater of: (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 the Company’s average excess availability, of either 0.25 % or 0.50 % (the “Applicab le Margin”). Daily Simple SOFR loans will bear interest at a rate equal to (i) the Daily Simple SOFR rate plus an adjustment of 0.10 % (provided the Daily Simple SOFR rate shall never be less than the Floor), plus (ii) the Applicable Margin. Any swingline loan will continue to bear interest at a rate equal to the Base Rate plus the Applicable Margin. The Company is subject to an unused line fee of 0.25 %. The Company’s obligations under the Credit Facility are secured by a lien on substantially all of its assets. If the Company’s availability under the Credit Facility at any time is less than the greater of (i) 10 % of the Revolving Loan Cap (the lesser of the 10 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 May 2, 2026 , the Company had no borrowings outstanding under the Credit Facility and unused availability was $ 70.0 million. The Company had no borrowings during the first three months of fiscal 2026, resulting in an average unused excess availability of approximately $ 73.6 million. Outstanding standby letters of credit were $ 3.6 million at May 2, 2026. At May 2, 2026, the Company’s prime-based interest rate was 7.00 % . 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 assets 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 May 2, 2026, 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 months ended May 2, 2026 and May 3, 2025, respectively: For the Three Months Ended May 2, 2026 May 3, 2025 (in thousands) Operating lease cost (1) $ 13,363 $ 12,981 Variable lease costs (2) 3,849 3,625 Total lease costs $ 17,212 $ 16,606 (1) During the first quarter of fiscal 2026, the l andlord for one of the Company's store locations exercised their right to terminate the lease agreement . As consideration for the landlord's right to terminate prior to the end of the lease term, the landlord paid the Company a termination fee of $ 1.4 million, which was recognized as a gain in accordance with ASC 842 and not included in the above operating lease cost for the first quarter of fiscal 2026. The gain from the early termination of the lease was recognized as an offset to cost of goods sold, including occupancy costs, on the Consolidated Statements of Operations for the first three months of fiscal 2026. (2) 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 three months ended May 2, 2026 and May 3, 2025 was as follows: (dollars in thousands) For the Three Months Ended Cash paid for amounts included in the measurement of lease liabilities: May 2, 2026 May 3, 2025 Operating cash flows for operating leases (1) $ 14,123 $ 13,894 Non-cash operating activities: Right-of-use assets obtained in exchange for operating lease liabilities $ 12,744 $ 12,688 As of May 2, 2026 May 3, 2025 Weighted average remaining lease term 5.6 years 5.4 years Weighted average discount rate 6.55 % 6.35 % (1) The cash paid for the first three months of fiscal 2026 and fiscal 2025 included prepaid rent of $ 4.7 million and $ 4.5 million, respectively. The cash paid for the three months of fiscal 2026 does not include the cash received of $ 1.4 million for the early lease termination, as discussed above. 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 May 2, 2026: (in thousands) 2026 (remaining) $ 34,829 2027 52,993 2028 45,702 2029 37,726 2030 29,614 Thereafter 56,787 Total minimum lease payments $ 257,651 Less: amount of lease payments representing interest 44,568 Present value of future minimum lease payments $ 213,083 Less: current obligations under leases 36,273 Long-term lease obligations $ 176,810 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. At May 2, 2026 , the Company had two LTIPs with active performance periods: the 2024-2026 LTIP and the 2025-2027 LTIP. While the performance period under the 2023-2025 LTIP was completed at the end of fiscal 2025, the remaining tranche of the time-based awards will not vest until April 1, 2027. The time-based awards under each LTIP were granted in a combination of 50 % RSUs and 50 % cash. Performance targets for the 2024-2026 LTIP and the 2025-2027 LTIP were established and approved by the Compensation Committee with an effective date of 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, 2027 and August 31, 2028, respectively. If the Company completes the Merger, as discussed in Note 12, Agreement and Plan of Merger , the performance-based awards would be cancelled and a payout equal to actual achievement, on a pro-rated basis, on the date of closing would be made to eligible participants. 12 The time-based awards under the 2024-2026 LTIP and the 2025-2027 LTIP vest in four equal installments through 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 2024-2026 LTIP and 2025-2027 LTIP is estimated to be approximately $ 4.9 million for each LTIP. Approximately half of the compensation expense for each LTIP relates to the time-based awards and is being expensed straight-line over 49 months. At May 2, 2026 , there was no accrual for performance-based awards under either 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 lim ited 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 May 2, 2026 , 21,270,538 shares were authorized under the 2016 Plan, of which 3,700,396 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 three months of fiscal 2026: 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 1,245,002 589,357 573,000 — 2,407,359 $ 2.56 Shares granted — 53,074 — 148,240 201,314 $ 0.68 Shares vested and/or issued ( 406,963 ) — — ( 148,240 ) ( 555,203 ) $ 2.27 Shares expired — — — — — — Shares forfeited ( 7,574 ) — — — ( 7,574 ) $ 1.80 Outstanding non-vested shares at end of quarter 830,465 642,431 573,000 — 2,045,896 $ 2.46 Vested and expected to vest at end of year 830,465 642,431 — — 1,472,896 $ 1.79 (1) As a result of net share settlements, of the 406,963 RSUs that vested, 293,100 shares of common stock were issued. (2) The 53,074 shares of deferred stock, with a fair value of $ 36,250 , 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 earlier of the director's separation from service or a change in control. (3) On August 11, 2023, the Company granted 573,000 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, or earlier if there is a separation of service in accordance with the terms of the agreement. The $ 2.4 million 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 57.8 %, a term of 3 years, stock price on the date of grant of $ 4.98 per share, a risk-free rate of 4.6 % and a cost of equity of 11.0 %. (4) Represented compensation, with a fair value of $ 101,248 , 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 . 13 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 2,961,292 $ 0.64 — $ 263 Options granted — — — — Options exercised — — — — Options expired — — — — Options forfeited — — — — Outstanding options at end of quarter 2,961,292 $ 0.64 4.4 years $ 152 Options exercisable at end of quarter 2,961,292 $ 0.64 4.4 years $ 152 Non-Employee Director Compensation Plan The Company granted 5,856 shares of common stock, with a fair value of approximately $ 4,000 , to certain of its non-employee directors as compensation in lieu of cash in the first three months of fiscal 2026. 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 $ 0.3 million and $ 0.3 million for the first three months of fiscal 2026 and fiscal 2025, respectively. The total compensation cost related to awards not yet recognized as of May 2, 2026 was approximately $ 1.4 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 28 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 May 2, 2026 May 3, 2025 (in thousands ) Common stock outstanding: Basic weighted average common shares outstanding 54,916 53,601 Common stock equivalents – stock options, restricted stock units and deferred stock (1) — — Diluted weighted average common shares outstanding 54,916 53,601 (1) Common stock equivalents of 0.7 million and 2.5 million for the first three months of fiscal 2026 and 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 May 2, 2026 May 3, 2025 (in thousands, except exercise prices) Stock options 1,288 51 Restricted stock units 830 483 Range of exercise prices of such options $ 0.64 - $ 6.59 $ 1.85 - $ 6.59 The above options, which were outstanding at May 2, 2026, expire from September 11, 2026 to March 20, 2033 . Excluded from the computation of basic and diluted earnings per share for the first quarter of fiscal 2026 and fiscal 2025 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, 642,431 shares and 493,327 shares of deferred stock at May 14 2, 2026 and May 3, 2025 , 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. The Company’s deferred tax assets primarily relate to federal and state net operating loss carryforwards. Realization of these assets depends on the generation of future taxable income. During the fourth quarter of fiscal 2025, the Company recorded a full valuation reserve against its net deferred assets. While the Company believed that profitability would return over the long term, the Company was forecasting operating losses in the near term. At May 2, 2026, management continues to conclude 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. For the first quarter of fiscal 2026, the Comp any’s effective tax rate was ( 1.1 )% as compared to an effective tax rate of 39.7 % , for the first quarter of fiscal 2025. Because of the full valuation allowance against the net deferred tax assets, 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 three months of fiscal 2025 reflected the impact of permanent book-to-tax differences. 9 . Fair Value Measurement At May 2, 2026 and January 31, 2026, 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) At May 2, 2026: Short-term investments 5,078 5,078 — — At January 31, 2026: Cash and cash equivalents: 11,052 11,056 — — Short-term investments 5,029 5,039 — — 10. Commitments and Contingencies On February 20, 2026, the U.S. Supreme Court ruled that certain tariffs imposed by the current administration under the International Emergency Economic Powers Act were unlawful. Following this ruling, the U.S. Court of International Trade directed U.S. Customs and Border Protection ("CBP") to establish a process for the submission and review of refund claims related to affected tariffs. In April 2026, 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 claim is subject to review and validation by CBP, and the approval, timing, and amount of any potential refund and recovery remain uncertain. The Company expects to recognize any recovery when receipt is considered realizable. Tariffs subject to the refund claim were previously recorded as a component of cost of goods sold or capitalized into inventory, as applicable. Upon recognition of any approved refund, the portion attributable to inventory previously sold will be recognized as a reduction of cost of goods sold, with any remaining amount recognized as a reduction of inventory. The scope, duration, and rates of existing and proposed tariff measures, as well as the potential for modifications, suspensions, or retaliatory trade actions, remain uncertain. These actions could impact the Company’s operations, supply chain, and cost structure. The Company is continuing to monitor these developments and assessing the potential impact on its business, financial condition, and results of operations. 11. Segment Disclosures 15 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 Note A, Summary of Significant Accounting Policies included in the Company's consolidated financial statements for the year ended January 31, 2026. 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. The following table is a summary of our segment disclosures and a reconciliation of 4-wall contribution to net loss: For the Three Months Ended May 2, 2026 May 3, 2025 (in thousands) Sales $ 103,335 $ 105,533 Cost of goods sold ( 41,438 ) ( 41,274 ) Occupancy costs ( 16,145 ) ( 16,677 ) Store payroll and benefits ( 13,702 ) ( 13,649 ) Other selling expenses ( 6,569 ) ( 6,563 ) 4-wall contribution 25,481 27,370 Advertising ( 6,723 ) ( 6,418 ) Corporate G&A ( 12,604 ) ( 13,481 ) Distributing and supporting G&A ( 6,884 ) ( 7,269 ) Transaction-related costs ( 1,241 ) ( 63 ) Depreciation and amortization ( 3,968 ) ( 3,636 ) Interest income, net 62 284 Loss before provision (benefit) for income taxes $ ( 5,877 ) $ ( 3,213 ) Provision (benefit) for income taxes 62 ( 1,274 ) Net loss $ ( 5,939 ) $ ( 1,939 ) 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. 12. 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. 16 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 Company's Board of Directors (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. Costs incurred in connection with this Merger, primarily related to professional service fees, of $ 1.2 million and $ 0.1 million, were included in "Transaction-related costs" on the Consolidated Statement of Operations for the first quarter of fiscal 2026 and fiscal 2025, respectively. 17