What changed in this filing

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Item 1. Financial Statements

2026-09-09 compared with 2026-06-03 · 138 added, 83 removed, 393 unchanged (36% of the section changed)

3 unchanged sentences

(In thousands, except share data)

August 1, 2026

January 31, 2026

25 unchanged sentences

Preferred stock, $ 0.01 par value, 1,000,000 shares authorized, none issued

Common stock, $ 0.01 par value, 125,000,000 shares authorized, 81,012,145 and 80,564,948 shares issued at May 2, 2026 and January 31, 2026, respectively

Common stock, $ 0.01 par value, 125,000,000 shares authorized, 81,181,625 and 80,564,948 shares issued at August 1, 2026 and January 31, 2026, respectively

Additional paid-in capital

Treasury stock at cost, 25,908,533 shares at May 2, 2026 and January 31, 2026

Treasury stock at cost, 25,908,533 shares at August 1, 2026 and January 31, 2026

Accumulated deficit

6 unchanged sentences

For the Three Months Ended

For the Six Months Ended

August 1, 2026

August 2, 2025

August 1, 2026

August 2, 2025

(Fiscal 2026)

(Fiscal 2025)

(Fiscal 2026)

(Fiscal 2025)

Cost of goods sold including occupancy costs

3 unchanged sentences

Total expenses

Operating loss

Operating income (loss)

Interest income, net

Loss before provision (benefit) for income taxes

Income (loss) before provision (benefit) for income taxes

Provision (benefit) for income taxes

Net loss per share - basic and diluted

Net income (loss)

Net income (loss) per share - basic

Net income (loss) per share - diluted

Weighted-average number of common shares outstanding:

Basic and diluted

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

9 unchanged sentences

Balance at May 2, 2026

Board of directors' compensation

Stock compensation expense (forfeitures)

Balance at August 1, 2026

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

12 unchanged sentences

Balance at May 3, 2025

Board of directors' compensation

Stock compensation expense

Issuance of common stock, upon RSUs release

Balance at August 2, 2025

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

2 unchanged sentences

(In thousands)

For the Six Months Ended

August 1, 2026

August 2, 2025

(Fiscal 2026)

5 unchanged sentences

Deferred taxes, net of valuation allowance

Stock compensation expense

Stock compensation expense, net of forfeitures

Board of directors' stock compensation

13 unchanged sentences

Proceeds from the exercise of stock options

Excise taxes paid on repurchase of common stock

Tax withholdings paid related to net share settlements

Net cash used for financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents:

11 unchanged sentences

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.

Securities and Exchange Commission (the “SEC”) on March 19, 2026.

The information set forth in these statements may be subject to normal year-end adjustments.

5 unchanged sentences

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.

For comparability with the presentation of current periods, certain costs in the Consolidated Statements of Operations for the three and six months ended August 2, 2025 were reclassified from selling, general and administrative expenses to transaction-related costs.

Segment Information

37 unchanged sentences

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.

There were no grants of stock options in the first six months of fiscal 2026 and fiscal 2025.

Impairment of Long-Lived Assets

8 unchanged sentences

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.

There were no impairments or non-cash gains recognized in the first six months of fiscal 2026 and fiscal 2025.

Advertising Costs

2 unchanged sentences

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.

Advertising expense, which is included in selling, general and administrative expenses, was $ 6.8 million and $ 7.0 million for the second quarter of fiscal 2026 and fiscal 2025, respectively, and $ 13.5 million and $ 13.5 million for the first six months of fiscal 2026 and fiscal 2025, respectively.

The Company determines if an arrangement contains a lease at the inception of a contract.

5 unchanged sentences

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.

At August 1, 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.

17 unchanged sentences

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.

ASU 2023-06 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.

3 unchanged sentences

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.

There were no other new accounting pronouncements, issued or effective during the first six months of fiscal 2026 , which had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.

Revenue Recognition

9 unchanged sentences

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.

The gift card liability, net of breakage, was $ 2.1 million and $ 3.1 million at August 1, 2026 and January 31, 2026, respectively.

Unredeemed Loyalty Coupons.

2 unchanged sentences

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

The loyalty accrual, net of breakage, was $ 0.4 million at May 2, 2026 and $ 0.4 million at January 31, 2026.

The loyalty accrual, net of breakage, was $ 0.5 million at August 1, 2026 and $ 0.4 million at January 31, 2026.

Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales for all periods presented.

5 unchanged sentences

For the Three Months Ended

For the Six Months Ended

(in thousands)

August 1, 2026

August 2, 2025

August 1, 2026

August 2, 2025

Credit Agreement with Citizens Bank, N.A.

6 unchanged sentences

(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.

1 unchanged sentence

The Company’s obligations under the Credit Facility are secured by a lien on substantially all of its assets.

If the Company’s availability under the Credit Facility at any time is less than the greater of (i) 10 % of the Revolving Loan Cap (the lesser of the

aggregate revolving commitments or the borrowing base) and (ii) $ 7.5 million, then the Company is required to maintain a minimum consolidated fixed charge coverage ratio of 1.0 :1.0 until such time as availability has exceeded the greater of (1) 10 % of the Revolving Loan Cap and (2) $ 7.5 million for 30 consecutive days.

At 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 % .

If the Company’s availability under the Credit Facility at any time is less than the greater of (i) 10 % of the Revolving Loan Cap (the lesser of the aggregate revolving commitments or the borrowing base) and (ii) $ 7.5 million, then the Company is required to maintain a minimum consolidated fixed charge coverage ratio of 1.0 :1.0 until such time as availability has exceeded the greater of (1) 10 % of the Revolving Loan Cap and (2) $ 7.5 million for 30 consecutive days.

At August 1, 2026 , the Company had no borrowings outstanding under the Credit Facility and unused availability was $ 61.7 million.

The Company had no borrowings during the first six months of fiscal 2026, resulting in an average unused excess availability of approximately $ 64.7 million.

Outstanding standby letters of credit were $ 3.7 million at August 1, 2026.

At August 1, 2026, the Company’s prime-based interest rate was 7.00 % .

The Company leases all of its store locations and its corporate headquarters, which also includes its distribution center, under operating leases.

6 unchanged sentences

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.

As of August 1, 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:

The following table is a summary of the Company’s components of net lease cost for the three and six months ended August 1, 2026 and August 2, 2025, respectively:

For the Three Months Ended

For the Six Months Ended

August 1, 2026

August 2, 2025

August 1, 2026

August 2, 2025

(in thousands)

2 unchanged sentences

Total lease costs

(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.

(1) In March 2026, the l andlord for one of the Company's store locations exercised their right to terminate the lease agreement .

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

Supplemental cash flow and balance sheet information related to leases as of and for the first three months ended May 2, 2026 and May 3, 2025 was as follows:

Supplemental cash flow and balance sheet information related to leases as of and for the six months ended August 1, 2026 and August 2, 2025 was as follows:

(dollars in thousands)

For the Three Months Ended

For the Six Months Ended

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

August 1, 2026

August 2, 2025

Operating cash flows for operating leases (1)

1 unchanged sentence

Right-of-use assets obtained in exchange for operating lease liabilities

August 1, 2026

August 2, 2025

Weighted average remaining lease term

Weighted average discount rate

(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:

(1) The cash paid for the first six months of fiscal 2026 and fiscal 2025 included prepaid rent of $ 4.7 million and $ 4.6 million, respectively.

The cash paid for the first six months of fiscal 2026 does not include the cash received of $ 1.4 million for the early lease termination, as discussed above.

(in thousands)

13 unchanged sentences

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:

At August 1, 2026 , the Company had two LTIPs with active performance periods:

the 2024-2026 LTIP and the 2025-2027 LTIP.

4 unchanged sentences

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.

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, pro-rated through the date of closing, would be made to eligible participants.

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.

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 at August 1, 2026 is estimated to be approximately $ 3.7 million and $ 3.6 million, respectively.

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.

At August 1, 2026 , there was no accrual for performance-based awards under either LTIP.

Stock-Based Compensation

3 unchanged sentences

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.

At August 1, 2026 , 21,270,538 shares were authorized under the 2016 Plan, of which 3,279,712 shares remained available for grant.

The 2016 Plan is administered by the Compensation Committee.

2 unchanged sentences

Except with respect to 5 % of the shares available for awards under the 2016 Plan, no award will become exercisable unless such award has been outstanding for a minimum period of one year from its date of grant.

The following tables summarize the share activity and stock option activity for the first three months of fiscal 2026:

The following tables summarize the share activity and stock option activity for the first six months of fiscal 2026:

Share Units (3)

9 unchanged sentences

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.

(3) On August 11, 2023, the Company granted 573,000 performance stock units (“PSUs”) in con nection 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 %.

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

Each subsequent tranche would 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 was equal to or greater than $ 8.50 per share.

On August 11, 2026, all 573,000 PSUs expired, unvested .

(4) Represented compensation, with a fair value of $ 202,496 , 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.

12 unchanged sentences

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.

The Company granted 12,297 shares of common stock, with a fair value of approximately $ 8,000 , to certain of its non-employee directors as compensation in lieu of cash in the first six 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.

Total stock-based compensation expense, net of any reversal of stock compensation expense associated with forfeitures, was $ 0.1 million and $ 0.7 million for the first six months of fiscal 2026 and fiscal 2025, respectively.

The total compensation cost related to awards not yet recognized as of August 1, 2026 was approximately $ 1.1 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 26 months.

Equity and Earnings per Share

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

August 1, 2026

August 2, 2025

August 1, 2026

August 2, 2025

(in thousands )

1 unchanged sentence

Basic weighted average common shares outstanding

Common stock equivalents – stock options, restricted stock units and deferred stock (1)

Common stock equivalents – stock options and deferred stock (1)

Diluted weighted average common shares outstanding

(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.

(1) Common stock equivalents of 2.2 million for the second quarter of fiscal 2025 and 0.9 million and 2.4 million for the first six 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

For the Six Months Ended

August 1, 2026

August 2, 2025

August 1, 2026

August 2, 2025

(in thousands, except exercise prices)

4 unchanged sentences

$ 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

2, 2026 and May 3, 2025 , respectively, were excluded from the computation of basic earnings per share.

$ 0.64 - $ 6.59

$ 1.85 - $ 6.59

The above options, which were outstanding at August 1, 2026, expire from September 11, 2026 to February 20, 2033 .

Excluded from the computation of basic and diluted earnings per share for all periods were 573,000 PSUs.

On August 11, 2026, subsequent to the end of the second quarter of fiscal 2026, all 573,000 PSUs expired.

In addition, 700,804 shares and 524,309 shares

of deferred stock at August 1, 2026 and August 2, 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.

5 unchanged sentences

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.

At August 1, 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 six months of fiscal 2026, the Comp any’s effective tax rate was ( 0.8 )% as compared to an effective tax rate of 4.6 % for the first six months of fiscal 2025.

Because of the full valuation allowance against the net deferred tax assets, the effective tax rate for the first six months 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 six months of fiscal 2025 reflected the impact of permanent book-to-tax differences and discrete items.

Fair Value Measurement

At May 2, 2026 and January 31, 2026, the Company held U.S.

At August 1, 2026 and January 31, 2026, the Company held U.S.

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

5 unchanged sentences

Inputs (Level 3)

At May 2, 2026:

At August 1, 2026:

Short-term investments

2 unchanged sentences

Short-term investments

Commitments and Contingencies

On February 20, 2026, the U.S.

4 unchanged sentences

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.

During the second quarter of fiscal 2026, the Company received refunds totaling approximately $ 4.6 million related to tariffs previously paid.

The $ 4.6 million was recognized as a reduction in cost of goods sold for the three and six months ended August 1, 2026.

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.

4 unchanged sentences

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").

Through the end of the second quarter of fiscal 2026, resources were allocated and performance was assessed by our former

President and Chief Executive Officer , who was with the Company until August 11, 2026 and whom we had 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.

7 unchanged sentences

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:

The following table is a summary of our segment disclosures and a reconciliation of 4-wall contribution to net income (loss):

For the Three Months Ended

For the Six Months Ended

August 1, 2026

August 2, 2025

August 1, 2026

August 2, 2025

(in thousands)

9 unchanged sentences

Interest income, net

Loss before provision (benefit) for income taxes

Income (loss) before provision (benefit) for income taxes

Provision (benefit) for income taxes

Net income (loss)

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.

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.

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.

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”), entered into an Agreement and Plan of Merger (as subsequently amended, the “Merger Agreement”).

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

On August 19, 2026, the Company, Merger Sub and FullBeauty amended the Merger Agreement to extend the end date from September 11, 2026 to October 30, 2026.

If the Merger is consummated, at the effective time of the Merger, each share of common stock, par value $ 0.01 per share, of FBB (“FBB Common Stock”) would 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 would have such fractional share rounded up to one whole share of DXL Common Stock.

If the Merger is

consummated, holders of FBB Common Stock would own 55 % of the combined company and holders of DXL Common Stock would own 45 % of the combined company.

The Company filed an Amendment No.

1 to Preliminary Proxy Statement (as amended, the “Preliminary Proxy Statement”) with the U.S.

Securities and Exchange Commission (the “SEC”) on September 2, 2026.

Upon clearance from the SEC, the Company intends to file a definitive proxy statement, which will be distributed to its stockholders in connection with their vote on the proposal to approve the issuance of shares of the Company’s common stock as consideration in the Merger (the “Issuance Proposal”).

As described more fully in the Preliminary Proxy Statement, the Company’s Board of Directors (the “Board”) has continued to evaluate the Merger, including in light of developments since the execution of the Merger Agreement.

As part of that evaluation, the Board has considered, among other things, (i) the increasingly challenging consumer environment since the execution of the Merger Agreement in December 2025, (ii) FullBeauty’s continuing decline in operating performance and financial results, including lower-than-expected net sales, net income (loss), adjusted EBITDA and cash flow from operations as compared to both prior-year performance and prior projections (and the corresponding heightened risk that FullBeauty will not achieve its projections for the current fiscal year), (iii) FullBeauty’s increased level of indebtedness, (iv) concerns regarding FullBeauty’s potential negative equity value, and (v) the substantial economic dilution that DXL stockholders would experience if the Merger were consummated on its current terms.

Based on this evaluation, including these considerations, the Board has determined that the Merger and the transactions contemplated by the Merger Agreement, including the Issuance Proposal, are no longer advisable and are not in the best interests of the Company and its stockholders .

Accordingly, the Board recommends that its stockholders vote “against” the Issuance Proposal that will be included in the definitive proxy statement, when it becomes available.

Under the terms of the Merger Agreement, this change in recommendation by the Board does not permit the Company to terminate the Merger Agreement and, accordingly, the Company remains obligated to submit the Issuance Proposal to its stockholders for a vote.

By contrast, as a result of the Board's change in recommendation, FullBeauty ha s the right to terminate the Merger Agreement under specified circumstances, in which case the Company would be required to pay a termination fee of $ 2.5 million and/or out-of-pocket fees and expense reimbursement of up to $ 950,000 .

Pursuant to the Merger Agreement, if the Merger is not consummated by October 30, 2026 , either party could terminate the Merger Agreement without penalty.

Costs incurred in connection with this Merger, primarily related to professional service fees, of $ 3.0 million and $ 0.2 million, were included in “Transaction-related costs” on the Consolidated Statements of Operations for the first six months of fiscal 2026 and fiscal 2025, respectively.

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

What changed 10-Q

Item 1. Financial Statements