Destination XL Group, Inc. Investor Presentation December 2013 Exhibit 99.1 |
Destination XL Group, Inc. SAFE HARBOR 2 Certain information contained in this presentation, including, but not limited to, sales, cash flows, operating margins and store counts for fiscal 2013 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 February 2, 2013 filed on March 15, 2013 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. |
Destination XL Group, Inc. 3 WHO IS DESTINATION XL GROUP? Largest multi-channel specialty retailer in niche men’s big and tall (B&T) market Offers unique blend of wardrobe solutions – Private label & leading apparel name brands |
Destination XL Group, Inc. DXLG BY THE NUMBERS 5 6 BRANDS 375 RETAIL STORES 1.4M ACTIVE CUSTOMERS 90% 90% ENROLLED IN LOYALTY PROGRAM ENROLLED IN LOYALTY PROGRAM 80% RETAIL 20% DIRECT SALES 85% HIGHEST RATED RETAILER IN 2011 CSI SURVEY 1 Customer Satisfaction # |
6 WHO IS OUR CUSTOMER? Males with a waist size 40” and greater (40M men) Determined by physical characteristic, not demographic Seeking greater selection in size Not dependent on age, income, race or nationality Values convenience, selection and fit over price |
CURRENT CASUAL MALE XL STORES |
Destination XL Group, Inc. WHAT OUR CUSTOMERS WANT 8 More brands Bright Atmosphere Wide aisles One-stop shopping Onsite tailoring Large changing rooms |
Destination XL Group, Inc. RESPONDING WITH DESTINATION XL 9 2010 Opened 4 DXL concept stores 2012 Opened 32 DXL stores 2011 Opened 12 DXL stores Opportunity for accelerated growth and profitability 2013 Expect to open 53 stores |
Schaumburg, IL |
Traditional Section, POLO |
Studio Section, Runway |
Club Department |
Studio Department |
Destination XL Group, Inc. LARGE SELECTION OF NAME BRANDS 15 |
Destination XL Group, Inc. 16 CASUAL MALE XL vs. DESTINATION XL Store size 3,600 sq. ft. 8,400 sq. ft. Sales per sq. ft. $172 $147 (maturing to $230) Build out costs $50 $70 Occupancy costs $30 $30 Dollars per transaction $102 $150 Style choices 600 2,000 Private label brands 10 15 Name brands 8 30 *Average store |
Destination XL Group, Inc. 17 Chicago Metro *Customers are willing to drive up to 20 miles Schaumburg, IL 0.9 miles 9451 Schaumburg, IL 9183 Niles, IL 11.4 Miles 9512 Bloomingdale, IL 11.2 miles MARKET CONSOLIDATION TO DXL Customers are willing to drive up to 20 miles |
Destination XL Group, Inc. 18 DXL COMPS REFLECT GROWTH OPPORTUNITY *Total DXLG Comparables consist of all stores, including DXL stores and direct channel 14.5% 9.0% 12.8% 16 .3% 17.1% 13 .8% 15 .0% 15.6% 17.7% 28.8% 17.7% 0.7% 0.8% 2.1% 2.0% 2.0% 1.5% 0.5% 1.5% -0.5% 3.8% 4.4% Q3 2011 Q4 2011 FY 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 FY 2012 Q1 2013 Q2 2013 Q3 2013 DXL Comparables Total DXLG Comparables* |
COMPARABLE SALES FOR DXL OPEN > 1 YEAR 19 (11 stores) (16 stores) (23 stores) (29 stores) (36 stores) 1 Spring market campaign ran from 5/5/13 to 6/14/13 2 Fall marketing campaign ran from 9/28/13 to 11/23/13 Reported 25.3% increase at DXLs open >1 year in October 2013 1 2 (2.7)% 5.9% 4.7% 16.5% 11.3% -5% 0% 5% 10% 15% 20% Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Destination XL Group, Inc. |
Destination XL Group, Inc. 20 COMPELLING DXL RETURNS Expect greater store productivity and profitability 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 Attract new customers Better cross-selling environment to capture greater share of apparel wallet from existing customers Opportunity to improve operating margins Expect to increase margins significantly after the transition to DXL is complete |
Destination XL Group, Inc. ACCELERATED DXL OPENINGS 21 2015 Store Count Target Destination XL 215-230 Casual Male XL Outlet 55-60 Rochester Clothing 5 Accelerated rollout based on success of DXL stores in 2011 Destination XL Group, Inc. Total Stores: (460) 0 50 100 150 200 250 300 350 400 450 500 2010 2011 2012 2013 2014 2015 (275-295) (315-330) (~363) (412) (450) |
Destination XL Group, Inc. DXL SALES INCREASE AS % OF TOTAL REVENUE 22 * DXL sales include direct sales via the DestinationXL.com website. 1% 5% 28% 44% 65% 80% 88% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2010 2011 2012 2013 2014 2015 2016 |
Destination XL Group, Inc. 23 INCREASED AWARENESS = OPPORTUNITY DXL Customer Purchase Funnel* Source: L.E.K analysis prior to launch of marketing campaign (November 2012) *Based on consumers’ stated responses per L.E.K’s survey within DXL markets Repeat 73% of those that visit the store make a purchase 89% of those that make a purchase intend to return Of those aware of DXL, only 8% are visiting the store Awareness of DXL is low across its markets, directly impacting ability to attract new customers DXL’s addressable market is primarily men with over 40” waist Addressable Population Aware of DXL Visiting DXL Purchasing from DXL 17% 8% 73% 89% |
Destination XL Group, Inc. 24 OPPORTUNITY TO GROW MARKET SHARE Capture greater wallet share with DXL concept Attract broader customer audience with one-stop-shop Target “end-of-rack” customers Paradigm shift in marketing improves awareness Grow direct business with new website Addressable Market = 40M Customers 1.4M Currently Active Customers |
25 DXL ADVERTISING CAMPAIGN • Combination of TV, radio & digital support • Built stronger brand to attract and serve customers • Results demonstrate ability to grow market share Fall Flight (Sept 28 – Nov 23) • Spring Flight (May 5 to June 14) • • Transaction size increased 23% • New customers grew by 26.1% • Traffic increased 7.5% • “End-of-rack” customer base grew to 40.5% • Web traffic increased 80% Increased market awareness from 13% to 18% Broadening to include network television ad-buy to supplement national cable presence Eliminating catalog distribution; introducing smaller 16-page brand mailers to announce seasonal offerings Reallocating $2 million of marketing dollars to fall advertising campaign Added additional week to duration of campaign • • • |
Destination XL Group, Inc. DXL ADVERTISING CAMPAIGN 26 Marketing to Customers in “No Man’s Land” |
Destination XL Group, Inc. 2013 MARKETING SPEND 27 • Strategically increase marketing spend as percent of sales from 4.5% to 7.0% • Rebalance spend to focus on prospecting and reduce direct marketing • Increase budget by $10M to support DXL media and digital acquisition 2013 $27.1M (7.0%) 2012 $18.5M (4.6%) +$10M Direct Marketing Digital Other Visual Loyalty Media |
Destination XL Group, Inc. FINANCIAL PERFORMANCE 28 |
Destination XL Group, Inc. YTD 2013 RESULTS THROUGH Q3 • DXL stores comparable sales increased 21.4% and represented 26.5% of total comparable retail sales • 36 DXL stores opened 1 year comparable sales increased 11.5% • Dollars per transaction have increased 17.5% over the prior year • Comp sales for Casual Male XL and Rochester Clothing stores decreased (0.3)% • Overall comparable retail sales increased 2.5% and total sales were $279.4M • U.S. direct e-commerce sales increased 3.3% • Loss from continuing operations was ($4.6) million, or ($0.10) per diluted share, which included $9.1 million (after tax), or $0.19 per share, of Transition Costs and incremental marketing expenses to support the DXL rollout 29 |
Destination XL Group, Inc. 30 SALES & GROSS MARGIN Strong gross margins provide opportunity for significant sales leverage $443.9 $393.9 $392.0 $395.9 $399.6 $279.4 42.7% 44.2% 45.9% 46.3% 46.5% 46.3% 38% 40% 42% 44% 46% 48% 50% $0 $100 $200 $300 $400 $500 2008 2009 2010 2011 2012 YTD 2013 Revenue ($MM) Revenue Gross Margin Destination XL Group, Inc. |
Destination XL Group, Inc. 31 * Before impairment charge of $23.1M OPERATING MARGIN & COMPARABLE SALES Focus on improving operating margins through greater DXL sales (continuing operations) (1.1)% 2.4% 4.6% 4.7% 3.5% (2.5)% (10%) (5%) 0% 5% 10% 2008 2009 2010 2011* 2012 YTD 2013 DXLG Operating Margin (4.3)% (10.8)% 1.5% 2.1% 1.5% 2.5% (15%) (10%) (5%) 0% 5% 2008 2009 2010 2011 2012 YTD 2013 DXLG Comp Sales |
Destination XL Group, Inc. 32 STRICT EXPENSE MANAGEMENT $34.1 $19.1 $19.0 $19.6 $18.5 $21.0 $177.3 $149.2 $148.4 $152.0 $156.4 $122.8 39.9% 37.9% 37.9% 38.4% 39.1% 43.9% 30% 33% 36% 39% 42% 45% $0 $50 $100 $150 $200 2008 2009 2010 2011 2012 YTD 2013 ($ mm) Marketing Expense Total SG&A SG&A as a Percentage of Sales |
Destination XL Group, Inc. 33 STRONG BALANCE SHEET 2008 2009 2010 2011 2012 FY 2013 Forecast Inventory $98.6M $90.0M $92.9M $104.2M $104.2M $102M Net borrowings under revolver $38.7M $3.5M $0 $0 $0 $0 1 Cash on hand $5.0 $4.3 $4.1M $10.4M $8.2M $0 Fixed term loan $12.5M $7.6M $0 $0 $0 $18M 1 FY 2013 Net borrowings estimate includes $5.0 million in debt and $5.0 million in cash |
Destination XL Group, Inc. 34 CASH FLOW & CAPITAL EXPENDITURES $23.2 $30.8 $18.7 $23.4 $29.9 $(5.5) $12.6 $4.6 $9.0 $18.0 $32.4 $38.2 -$10 $0 $10 $20 $30 $40 -$10 $0 $10 $20 $30 $40 2008 2009 2010 2011 2012 YTD 2013 ($ mm) Cash Flow CAPEX |
Destination XL Group, Inc. 35 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 primarily by free cash flow and deferred tax benefits Significant market share/sales growth opportunity Strong balance sheet with borrowing capacity WHY INVEST IN DXLG? |
Destination XL Group, Inc. FOR ADDITIONAL INFORMATION: Jeffrey Unger V. P. Investor Relations Destination XL Group, Inc. jeffunger@usa.net 561-482-9715 (o) 561-543-9806 (c) www.DestinationXL.com 36 |