Investor Presentation December 2012 1 Exhibit 99.1 Generating Value on the Road to Destination XL ® |
2 Safe Harbor Certain information contained in this presentation, including, but not limited to, cash flows, operating margins, store counts, earnings expectations for fiscal 2012 and estimates through fiscal 2016, constitute forward-looking statements under the federal securities laws. The discussion of forward- looking information requires management of the Company to make certain estimates and assumptions regarding the Company's strategic direction and the effect of such plans on the Company's financial results. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those indicated. Such risks and uncertainties may include, but are not limited to: the failure to implement the Company's business plan for increased profitability and growth in the Company's retail stores sales and direct-to-consumer business, the failure to achieve improvement in the Company's competitive position, changes in or miscalculation of fashion trends, extreme or unseasonable weather conditions, economic downturns, a weakness in overall consumer demand, trade and security restrictions and political or financial instability in countries where goods are manufactured, increases in raw material costs from inflation and other factors, the interruption of merchandise flow from the Company's distribution facility, competitive pressures, and the adverse effects of natural disasters, war, acts of terrorism or threats of either, or other armed conflict, on the United States and international economies. These, and other risks and uncertainties, are detailed in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended January 28, 2012 filed on March 16, 2012 and other Company filings with the Securities and Exchange Commission. Casual Male assumes no duty to update or revise its forward- looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. |
Who is Casual Male Retail Group? 3 Largest multi-channel specialty retailer in niche men’s big and tall (B&T) market Offering unique blend of wardrobe solutions Private label & leading apparel name brands |
CMRG by the Numbers 4 Active customers Enrolled in loyalty program Highest rated retailer in 2011 CSI Customer Survey Retail Direct Retail Stores Brands Customer Satisfaction |
Who is Our Customer? 5 Males with a waist size 42” and greater (35M men in US). Determined by physical characteristic, not demographic. Not dependent on age, income, race or nationality Seeking greater selection in size. Values convenience, selection and fit over price. |
6 Attractive Big & Tall Segment Men’s B&T market annual sales approximately Current CMRG market share of ~ 11% B&T men account for approximately 11% in U.S. Growing at nearly twice the rate of the regular size men’s apparel market B&T consumers shop 50% more for apparel on the Internet than regular size consumers New CMRG marketing strategy focuses on direct sales through digital platforms Highly fragmented market Opportunity to take share by offering one-stop shop solution $3.5 - $4B |
7 Why Invest in CMRG? Accelerated conversion to DXL concept creates compelling investment opportunity Leader in large and growing B&T market Strong gross margins; Ability to greatly improve operating margins Three-year $150M investment in DXL rollout to be funded by free cash flow, including use of $47 million in tax benefits Significant market share/sales growth opportunity Strong, debt-free balance sheet |
8 Our Current Casual Male XL Stores |
9 What Our Customer Wants Large changing rooms More brand selections Suggested wardrobe solutions Wide aisles One-stop shopping Bright atmosphere On-site tailoring |
10 Opened 4 DXL concept stores Opened 31 DXL stores Opened 12 DXL stores Opportunity for accelerated growth and profitability Responding with DestinationXL ® |
DXL Schaumburg, IL 0.9 miles 9451 Schaumburg, IL 9183 Niles, IL 11.4 miles 9512 Bloomingdale, IL 11.2 miles 11 Market Consolidation to DXL Chicago Metro Chicago Metro Customers are willing to drive up to 20 miles |
12 Average Store size 3,400 sq. ft. 8,000 sq. ft. Sales per sq. ft. $166 $175 ($229 by 2016) Build out costs $50 $70 Occupancy costs $30 $30 Dollars per transaction $101 $142 Style choices 600 2,000 Private label brands 10 15 Name brands 8 30 Casual Male XL vs. DestinationXL ® |
13 Large Selection of Name Brands |
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20 DXL Comps Reflect Growth Opportunity *Total CMRG Comparables include all stores and direct channel 10 stores 14.5% 14 stores 9.0% 14 stores 12.8% 20 stores 16.3% 29 stores 17.1% 31 stores 13.8% 0.7% 0.8% 2.1% 2.0% 2.0% 1.5% 0.0% 5.0% 10.0% 15.0% 20.0% Q3 2011 Q4 2011 FY 2011 Q1 2012 Q2 2012 Q3 2012 DXL Comparables Total CMRG Comparables* |
Comparable Sales Definition • Comparable sales for all periods include retail stores that have been open for at least one full fiscal year. • Stores that have been remodeled, expanded or re-located during the period also are included in determination of comparable sales. • Most DXL stores are considered relocations and comparable to all closed stores in each respective market area. • Direct businesses are included in the calculation since CMRG is a multi-channel retailer. 21 |
22 Compelling DXL Returns Better leveraging of expenses -- occupancy, labor productivity and local/district management Projecting higher 4-wall profits than combined profits of individual stores Targeting between 25%-30% store operating margin Potential to capture additional market share Opportunity to improve operating margins Expect to significantly increase margins after the transition to DXL is complete Attract new customers Better cross-selling environment to capture greater share of apparel wallet from existing customers Expect greater store productivity and profitability |
23 Accelerated DXL Openings 2015 Store Count Target DestinationXL ® 225-250 Casual Male XL Outlet ~50 Rochester Clothing 5 Accelerated rollout based on success of DXL stores in 2011 0 50 100 150 200 250 300 350 400 450 500 2010 2011 2012 2013 2014 2015 Total Stores: (460) (450) (413) (350) (309) (280-305) |
24 DXL Sales Increase as % of Total Revenue * DXL sales include direct sales via the DXL website. |
25 2012 Commence new marketing strategy Open 32 DXL stores / Close 69 CMXL stores Operating margins in the range of 4% - 5% CapEx expected to be $35M 2013 Open 60 DXL stores / Close 120 CMXL stores Operating margins in the range of 4%-5% Lease exit and asset impairment charges in the the range of $8-$12M CapEx expected to peak at $45M 2014 Open 60 DXL stores / Close 100 CMXL stores Operating margins in the range of 5% - 6% Lease exit and asset impairment charges in the range of $5-$7M CapEx expected to be $40M Accelerated Rollout of DXL * Net of subleases * * 2012 2012 - - 2014 2014 |
26 Accelerated Rollout of DXL * Net of subleases 2015 Complete rollout with 225 - 250 opened DXL stores and Closure of remaining 60 Casual Male XL anchor stores Operating margins gain traction and increase to 8% - 9% (from 4.2% in ‘11) CapEx expected to be approximately $35M Lease exit and asset impairment charges in the range of $2-$4M* 2012 2012 - - 2014 2014 2015 2015 |
27 2016 Full benefit of DXL concept drives revenue >$600M Open average of 10 DXL stores per year Approximately 50 CMXL outlet stores and 5 Rochester Clothing stores remain open Operating margins >10% Accelerated Rollout of DXL Generating free cash flow in the range of $55 2016 2016 2015 2015 2012 - 2012 - 2014 2014 -$65M |
28 DXL Customer Purchase Funnel* Addressable Population Aware of DXL Visiting DXL Purchasing from DXL Repeat DXL’s addressable market is primarily men with over 40” waist Awareness of DXL is low across its markets, directly impacting ability to attract new customers Of those aware of DXL, only 8% are visiting the store 73% of those that visit the store make a purchase 89% of those that make a purchase intend to return *Based on consumers’ stated responses per L.E.K’s survey within DXL markets Source: L.E.K analysis Increased Awareness = Opportunity |
29 Launched DestinationXL rebranding initiative Engaged advertising firm Hired Chief Marketing Officer in June 2012 Identified target customers Began developing marketing strategy Developed balanced marketing budget Raising DestinationXL ® Awareness |
Opportunity to Grow Market Share • Capture greater wallet share with DXL concept – Expansive selection blending private label/name brand apparel – Appealing shopping environment – Opportunity to grow clothing business with more complete solution • Attract a broader customer audience with one-stop-shop • Target “end-of-rack” customers – 42”-46” waist size – Younger than traditional Casual Male customer – 65% of B&T market / 20% of current sales – Adding regular XL/XLT size in 2013 • Paradigm shift in marketing improves awareness • Improve direct business with new website 30 |
Financial Performance 31 |
32 Sales and Gross Margin Strong gross margins provide opportunity for significant sales leverage $465.4 $464.1 $444.2 $395.2 $390.0 $397.7 $284.8 44.5% 44.4% 42.7% 44.2% 44.9% 47.0% 46.1% 38% 40% 42% 44% 46% 48% 50% $0 $100 $200 $300 $400 $500 2006 2007 2008 2009 2010 2011 2012 YTD Revenue ($ mm) |
33 * Before impairment charge of $23.1m Operating Margin & Comparable Sales Focus on improving operating margins through greater DXL sales 2.2% 4.2% 5.5% 2.3% (1.3)% 2.0% 4.1% 4.2% 2.4% (15%) (10%) (5%) 0% 5% 10% 15% 2004 2005 2006 2007 2008 2009 2010 2011* 2012 YTD CMRG Annual Historic Operating Margin 4.4% 4.5% 9.0% 2.0% (1.3)% (10.8)% 1.5% 2.1% 1.5% (15%) (10%) (5%) 0% 5% 10% 15% 2004 2005 2006 2007 2008 2009 2010 2011 2012 YTD CMRG Historical Annual Comp Sales |
34 Strict Expense Management $28.6 $30.9 $34.4 $34.1 $19.1 $19.0 $19.6 $13.6 $151.9 $168.8 $178.1 $178.1 $151.0 $150.9 $154.8 $113.1 36.0% 36.7% 38.4% 42.7% 38.2% 38.3% 38.9% 39.7% 30.0% 33.0% 36.0% 39.0% 42.0% 45.0% $0 $50 $100 $150 $200 2005 2006 2007 2008 2009 2010 2011 2012 YTD ($ mm) Marketing Expense Total SG&A SG&A as a Percentage of Sales |
2007 2008 2009 2010 2011 Q3 2012 $117.8M $98.6M $90.0M $92.9M $104.2M $116.1M $41.0M $38.7M $3.5M - - $7.6M - - - $4.1M $10.4M $5.2M $17.3M $12.5M $7.6M - - - 35 Strong Debt-Free Balance Sheet Inventory Borrowing under revolver Cash on hand Fixed term loan |
*Free cash flow is defined as cash flow from operating activities, less capital expenditures and discretionary store asset acquisitions. 36 $(13.6) $(9.7) $7.6 $26.2 $10.0 $5.4 $(12.9) $22.7 $21.4 $12.6 $4.6 $9.0 $18.0 $21.3 ($20) ($10) $0 $10 $20 $30 ($20) ($10) $0 $10 $20 $30 2006 2007 2008 2009 2010 2011 2012 YTD ($ mm) Free Cash Flow CAPEX Free Cash Flow * and CapEx |
Why Invest in CMRG? • Accelerated conversion to DXL concept creates compelling investment opportunity – Investment to be funded by operating cash flow • Leader in large and growing B&T market • Strong gross margins • Ability to greatly improve operating margins • Three-year $150M investment in DXL rollout to be funded by free cash flow, including use of $47 million in tax benefits • Significant market share/sales growth opportunity – Goal of increasing share from 11% to 17.5%-20% by 2015 – Increasing DXL brand awareness – Expanding customers to include “end-of-rack” – Improving direct sales business • Strong, debt-free balance sheet 37 |
For additional information: Jeffrey Unger Casual Male Retail Group, Inc. V. P. Investor Relations 561-482-9715 Office 561-543-9806 Cell jeffunger@usa.net www.destinationxl.com 38 |