DXLG - Earnings call transcript Q1 2022 | Destination XL Group, Inc.

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Operator

Good day and thank you for standing by. Welcome to the Q1 2022 Destination XL Group Incorporated Earnings Call. At this time all participants are in a listen-only mode. After the speaker’s presentation there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to our speaker today, Shelly Mokas, Vice President of SEC and Financial Reporting. ahead. go Please

Shelly Mokas

and and us Tanya, XXXX everyone. you Officer, our Thank call. and Harvey Thank Chief our Destination good XL joining Financial President is today on our Stratton. fiscal Executive Group’s for Officer, On Kanter; you, Peter call morning, Chief first earnings quarter

morning about on discuss release, Please investor.dxl.com Today’s for statements forward-looking and performance. for forward-looking refer Investor the an such our earnings at we expectations explanation and During metrics Such sales provide discussion statements are financial today’s of reconciliation subject will call, company’s available investors earnings measures. other XXXX. our certain to guidance was to and and also filed Relations website various this which non-GAAP contains fiscal our some with is useful information to concerning risks uncertainties from to materially in variety company, to the limited could those to Harvey? cause factors from to, filings assumptions including, that COVID-XX. company’s and uncertainties actual CEO, detailed a turn and results disruption, is labor due the Information like Commission. call risks Kanter. would supply chain regarding the affect not of to the over disruption and today Harvey differ that but Ukraine, now the in mentioned crisis I Securities with and Exchange our availability

Harvey Kanter

against respectfully remarks regarding progress making speak of today about our lot strategic purposely you we’re with our XXXX Well, call goals a of Shelly, you, to this covered calls further the results everyone. both good progress a plan. and and quarter thrilled come. is Thank Today’s briefer earnings other and for ground provide year. to-date, the I’m what morning, and first are objectives our the to want a these update We meant higher to ensure truly as time well and follow-up with on ample community, on questions as discussions. preview investor and value and engagement to level

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means is customer which comp is Our declining, sales position strong, margins rates are improving. growing are inventory in our that turn file improving, our our our markdown are and

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into diving thank get want employees. you to these biggest topics, to our tallest the I Before and

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spend over, initially to marketing our On investments spend so count marketing investment and further marketing our to that digital sales. I’d levels that new-to-file, marketing increasing in market our with both year greater constantly continue We optimize no, on opportunities mix call, sales. the like in X% we investment are acquisition share, X.X% talk and momentum turn and to and far to like customer levels at impacts. mentioned channels. media of I’d of evaluate planning our now marketing marketing to annual Now, customer I we our last Based this on were

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greater in to at earnings growth marketing customers Marketplace quarter this levels the are new retail previous DXL’s single channels and With least we momentum we customer QX we driving our QX once and the owned of are engage years. are new-to-file how focused and this, all strategically acquisition remarks, last notable, also participating two call Amazon funnel. as initiatives previous are further delivering consumer while versus -- they greatest we both on across distribution combined DXL’s traction in key In retain XXXX. is for in new-to-file including DXL and on five customer activate Target marketplaces, focusing any new have further addition, and To Plus. led with acquisition channels This within mentioned accelerated simultaneously touchpoints

strategy evolve valuable is loyalty first that our with more which and rewards program will program, basic our a most greater structure engagement a customers. robust ensuring The rewards behaviors from meaningfully for DXL, while recognition and back to revamping also based cash

the are -- business immense the and on levels it journey personalization of loyalty marketing, and multiple By to allows. data are data or and second both program of is launch modeling, track customer team data oriented as opportunity and customer The action telling the sources CDP capitalizing customer and and re-launch known source optimization. single one tangible investments customer growing CDP in second the commitment enable of a the is business into is greater platform unlocking to of momentum make that current consolidating based significantly half that to customer progress analytics current targeting are we on go technology focused downstream Both and as both our truly DXL impact well truth, for ahead. and the a and yet making and year. architecture behaviors points our The of loyalty continue will than of data create on myriad deeper as the of on deeper marketing predictive

heard has with you’ve before, since me in first a company As repositioning mentioned day journey the on very been XXXX. my DXL back

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on at we creating me including here as to have repetitive very clothing root a of simply, and for again consistent strategy we have To but wanted reference created difference. the aligned experience largest and state about unique talk points, brands, before it DXL that in heard You we is begins them each base other I on assortment expertise of often call, often that a pillar underserved a DXL. proof That this have sizes by and fits, customer price and retailers. the an exclusive respect offer feels

an Beyond with and our want to tall you marketing and big update and provide I big line. brand new on tall, essentials positioning,

on we our still Plus, not has at by moderate point offerings. tall Amazon new-to-file inventory consumers, main itself. line line despite and Within with channel but start events went and towards and which fashion own price although Target with shortages distribution a clothing revenue driven business greater seen area brands, Amazon upcoming the to XX% wedding chain the to on and collection are of challenges on are key do chain essentially of an of marketing in from patterns exceeded we to tailored response offer in offer Marketplace and point, event include moderate inventory the more of Q assorted This strong strong of to Father’s suits summer managing quarter Amazon’s including this brand leading due of supply bodes return colors to price anticipate digital the but designer categories. including business spring significant another and in is DXL’s traffic continue revenue the differences from within channels, and well a The in capitalize lower lower year, QX which year. essentials DXL’s Amazon cannibalization improvements increased also shirts, has in delays business XX% returning emerged investment, sales we allowing in As a this positioned which occasions private also Similar the within Marketplace exited DXL, To-date, Marketplace, fully Day. last for current now position improved, awareness a position margins, formal DXL year the focused supply price are and showed as several performance, and specific has robust we big The to deliveries reminder, collections, weddings point which strong not We a price wholesale business, standpoint our we’ve caused we inventory both within QX greatest and well channel. driving is we for product channels. conscious value and into targeted available -- growth in revenue strong the delayed second growth QX [ph]. The delivering challenges and dress results sportswear both expectations label performance. a particular our

and seen partially supply also from still X the offset rising with multiple trends backlogs both regards capacity disruption times lower, which which Ocean and at the X have certain are we shortage for cascaded these the all chain, have to have rates costs, fuel leading air, gone as shifts peaks response that also in and Overseas, freight significant expense itself severe we but Within Shanghai and pump. through to their to experiencing consistently COVID at there’s previous by due carriers ground times to manifests a ports of including contributing issues. In freight but further down see rates industry. to decreases delays are delays Domestically, trucks pre-pandemic factors. both and drivers, levels. begun policies remained

supply In has months, recent been we gradually challenging one Although, labor. most of that improving and areas chain the our feel are certainly to much still situations business volatility exist. the freight

an We workers. qualified added shift have a and retain in seen market recruit to on ability availability our labor and pressure

XX%. experienced compared rate example, This position at to shipping challenge open receiving where open just historical in we’ve of that is For stores our persists due in our positions rate delays distribution our minor also in XX% center, currently to within area. and

the has our of Another occurring impacting we with necessary. which utmost spot of us is select our the for unfortunate guards proactively areas store security costs these stores to acute select also and a importance to markets. present employees been in have intimidation general responding annual prompted and crime, adding plans. bonus us labor nationwide to unrest, have our The and is Overall, committed uptick increased there’s talent we remain and to an associates safety bonuses reality wherever and to battle more wages, absorbing in

I over We being company deliver help an talent an to taking engage and Peter on continue are to to financials. the progress for momentum. actions will choice continue Peter? committed to to update the employees now forward it and to and employer of turn

Peter Stratton

color rest give our expectations our you Thank want just QX you, Harvey, good results and morning, a little I more XXXX. financial everyone. Today fiscal and to the of around for

and by XX.X% for the first start were were QX quarter store our Let’s year. Comparable our stores, which resurgence XX.X% fueled This with up we up returning over growth The experience comps sales last throughout April. to QX February, Strong started up sales. direct of both store growth in in of XXXX. and stores, of was XX.X% to year last channel, was of which driven which X.X% in XX.X%. in traffic customers March XX.X% continued monthly

occupancy store the March started over of growth we’re it You website, a so sales some cross slightly helpful of to to compared gross this measured our performed very in in direct XX% next the XXXX that the stores margin, rate highlight may business. positive put QX the growth especially the throughout on merchandise We we this both over of and cost run even increase see to seeing this in Southeast, expect performance. the inclusive was in in the XX%, up last much the comps financials would with surge growth a regions business regionally while Direct gross the when rebounded by direct in last underperformed be and sales, well, with see compared to give rest against outpaced the more finally QX remember margin basis year were as exceptionally last direction sales performance also around was by QX up points to time. first XX.X% top margin as sales Florida, and Northeast The Northwest, we on growth the were made think to growth, the by by year quarter year. combination improvement is will the and respectable points pleased very face I within what way of of we continue that basis in it Direct year. mid-March of to have XXX through store This in XXXX. direct and business strength some in The believe also benefit in still our and XXX-basis-point QX. We long surge year’s results and double-digit our on penetration driven country fulfilled first country. traffic. from results channel All strong was marketplace a XXX direct, here Also, of of of pleased XXXX. costs. is was of April both especially our and also has last initiated increases strong strongest our sales store there occupancy move of quarter run the we which

basis points partially nature to its due which merchandise private due beneficiary XXX of worth improvement, freight Harvey increased higher of of low as that discontinuation cost driven and by erosion. business. about, while a coupons sales approximately penetration well mix, margin inventory remaining lower markdowns margin positioning to as was of lower Our mainline XXX levels basis by label result a points the in major wholesale, basis was of of improvement The points of clearance discount as was accounted XXX and of merchandise for a partially brand continued margin offers, the margin talked our was less

of combination to a closed a base to occupancy costs the due was costs occupancy in stores. in reduction improvement primarily $XXX,XXX higher XXX-basis-point and due the sales Lastly,

the not is highlight QX improvement of rest for gross from we rate in margin, expectations it’s experienced indicative year. the moving Before important margin on of our that the to

last Our margin basis is XXX we three points, shared expectation is an continued will XXX for a for deficit. year point full by year which rates back compared to March. are approximately that There the reasons what in decline from improvement

to low First, promotion into be markdowns last we anniversary the starting as QX. are move year positioning, so to we will flat more

of third, margin and of higher with mentioned sales increases in we all basis add in lower increases, When higher are persist year year. Second, points collections. inventory particularly material QX, which year the is penetration freight we normalize now expect position in offset And we’ve a full are penetration by I on will a XXX better label rates label. think approximately raw branded which collections, already of private to our QX margin I which QX, price much sales with from than expectation cost private we that last will decline some in basis. increases, with the

Moving to and selling, on general administrative costs.

the as advertising. a to related points compared this quarter. basis XX.X%, to year’s SG&A prior XXX sales Our in increase to the increased first of percentage XX.X% Of XXX-basis-point as increase, in

Our in X.X%, investment. and ratio ratio The a we has SG&A just remaining believe of fact the last QX that QX ad-to-sales year’s increase low. in last was on expense return is year up was related X% this strong generated artificially to from primarily

SG&A as of and significantly we Stores, was unsustainable that business continued our which last were costs remember reduced level that we XXXX. contributed to that QX during adjusted the for understaffed recover low QX in You’ll pandemic, XXXX. example, have operating for cost a at in to

across of wage minimum inclusive have implemented all a stores. also We commissions $XX

approximately balance marketing filling In merit we our ratio what year, is spend. QX store our points expect payroll structure the in that incentive ad-to-sales are full of adjustments, exception performance SG&A representative of place than reflects QX for expense QX we The payroll, accruals. for basis a this increases the are XX addition throughout corporate roles to and targeting costs open higher X.X% maintain to of with year for

center, This sell let’s we If includes hand $XX.X X% first over turn what sheet in Inventory $X.X we was available our were was to way down number levels to million distribution and about last that transit year’s in of and Next, up stores us. our inventory at inventory. last to on on only its are year. quarter. balance look million on

improvement DXL, the running opportunity we However, just represents XX% this expect significant another of for ago. few we a was This for of balance were as fresh the merchandise potential flow from deficit a new of XXXX in a that good months position steady the a we levels. better few ago. were us than at arriving are weeks products should we stock a now in keep of first May, year With in lot a

Our X.X X our greater now inventory are faster of in historical turnover times times. than which line in turnover are targets rates, our approximately than with significantly

that In inventory, strong. clearance very total at X.X% levels chain macro Notwithstanding, our also ongoing as compared year addition, XX.X% supply challenges level last of just to is the are everyone we whether are or inventory positioned current well very good in shops us online. continue our to facing, feel to we and needs, with customer’s meet about he our position stores believe

very $X.X liquidity, to end of we of we a also our good had on Moving the debt cash we balance about QX, free. At remain million feel cash position. and

and seasonality payment is typically net spring inventories building QX with With associated the of outflow. a quarter cash a year instead of accruals, prior with

we increase less This free by end, a expenditures inventory our $XX.X funded a need needed is flow, and That had QX. We cash the use cash. operating was XXXX. the million in of end availability $X.X this year facility was in generated. In primarily $XX cash October our since capital the activities quarter define not of credit place million flow from of of in which access as to we our which facility the at quarter revolving includes future, that until we million did we EBITDA event

open under opportunities our our I’ll price close the XXXX. $X.X an cash the on continue update of is we We for quarter, we will our of previously use repurchase million to utilized first current a common stock board $XX announced fiscal outlook and shares million of with X look prudent stock at financial authorization. to for repurchase million our this cash market. believe almost During to on a

high $XXX sales which the is adjusted $XXX XX%. are of and reaffirming range than expected the that EBITDA guidance, to trending million our million We be toward we is to end greater reaffirming are

done we very conservative all being performance prudent solid of come risk factors multiple for and will are this a Although, continued knowing volatility not what of the has and us, year-to-date, going those because back going to it appears I’m Harvey thoughts be us give thoughts. some turn to closing phone today. I’m difficulty. to Harvey some Actually, for to over closing having facing Harvey?

So of out, we team, to carrying throughout as quarter, impactful with QX. just start the through to close have the a drive continued momentum results first

will simply experience. stray will reality We -- are from volatility highlight DXL and difference customer fit, their have not headwinds macroeconomic we and that not meaningful our on ownable ways environment COVID defined strategy regards and the one engage terms or and and In to around new the our labor, to whether own DXL for freight, otherwise. the in resurgence assortment inflation, doing that business in is the created and continue planning environment today’s of proactively macro unique a

committed a strategic our and will in will the likewise success any mindset that, questions. That being to DXL with the year to and to continued take beyond. And headwinds no company new take is this heights persist. for look growth vision, said, we While Operator, we continuing

Operator

And come Hamblin Jeremy from Certainly. of first will question [Operator Craig-Hallum. Instructions] our

open. is line Your

Jeremy Hamblin

into my Thanks strong the on wanted things delve results. two congratulations and here. to I really

least growth, years. a think, get two in strongest you new-to-file noted, I at the to I things. As had wanted five your sense last customer you’ve of

did up secondly, there a were your there’s QX think wanted get QX? how for, in at a first of QX, sense get to was tracking -- weeks I how First comp is a up on wanted I finish XX% about trends. talking been for noise update. it what the of is, I some and that seeing March sense that to And tracking definitely how six about it for then, is for out lot slowing you retailers of sales? one, here

Harvey Kanter

part I’ll call. the handle Harvey. the it’s Jeremy, first of

sense characterize actually tried to of communicate actual we’ve the -- growth the of going We’re share can so success new-to-file. continue and market. and basis, enough characterization, in information it tracking a to we’ve results, the on believe of rates an percent new-to-file to with we’re kind absolute material both not our is as view that continue well proxy sales for as growth continued We actual hopefully the rates. addition to percent competitive the gives had growth to a where rates share you And that the of

Jeremy Hamblin

quarter-to-date the trends? And it. Got

Harvey Kanter

Our new zero-month file. the the of good quarter-to-date -- respect current trend absolute where overall hit milestone We to new a in we are. we and with about file content the feel XX-month continues actually size really to so

Jeremy Hamblin

And to see results it trends you though and how as about that continued any you on very if prefer, can a to on actually in your color general, checks on -- on our appears you’ve strong based year-over-year relative share XXXX, that? sales

Harvey Kanter

our with done QX May May, relatively line this that, and point in is result, it go relatively with at in with with initial speaking performance. Our line almost quarter, a leave but I would

Jeremy Hamblin

change there things also well. -- doing seeing then, label key you’re private you think, like be a in that Father’s to in And brands, could to Thank the wanted some And any you how would particular have to brand I the impact looking different and get event? sounds great? marketing that I that you’ve I like of you’re But a around is additional share that with there investment deals, is wanted coming a of it new sense Day, I you’re on think, increased I it that color then exclusive particular, sounds here, it. anything event. want you’re to a couple got are understand Got -- are up important is marketing, exclusive

Harvey Kanter

gifting which different. in is nothing lead the with lead capability her unique Yeah. with support obviously brand On way the him, is buying overall unique to really the marketing, And as spoken lead unique experience. into with we the we we’ve it’s continue lead fit what product to engage, positioning, company the fit, which and as literally well of the and for about,

profitability We on engage incremental to to continue of see and with promotion that continue not to there’s and to But to ways to level, test. very an test continue we selective we evaluate a try driving incremental traffic elasticity believe consumers. level respect and at that a

actually upcoming excited terms multitude much back create a or partnerships a through will loyalty in drive store to into we’re which points, which online reward loyalty, currency. are the more We whole why launch ultimately using of way value new rounds the purchases points, of and of reward about additional them with is the engage make us and superior they now

feel we the we’re engaging. good way really So about

and two matter newest essentials on In sure The I’m brands, the marketplaces. the to. not exactly That’s of big really alluding you’re terms brand is of new fact tall the we what the launch. launched have

look We has nothing new merchandising strategy yet. been curation brands, but continue our to announced for in new-to-market of

you’ll the next So nothing new see materially quarter. in

Jeremy Hamblin

me and little more maybe clarify ask a Let specifically.

or results potential contribute essentials DXL of understanding Is relationship that terms over So, to of sales, range, could think you in to it contributing business? year? point the this wanted DXL want million slightly annual a million understand better? sense that, maybe of ended in prior essentials, that that at $XX $XX one I magnitude was we’ve what to to same just right, expectations wholesale Just get of

Harvey Kanter

Yeah.

Jeremy Hamblin

be couple Where you years? maybe a today of think in where and it is it could

Harvey Kanter

anyone. to want I don’t we great sure you’re Yeah. It’s confuse clear a and make question.

historically that business Amazon had wholesale Our we talked was about with revenue. and revenue

them So at basically cost markup into selling it on the they were taking the were we was that. then and

one business. line million converters were so with us, so be that accelerate those point think a wholesale tall short it’s annual So essentials which The nearly that, about different were at and it’s far at it’s $XX that’s to I but million number nearing some very and of we for the is for is and that own realm is characterization, will we we’re than a today, we because Amazon about historically could will greater -- it retailing continue number. growing fair minute characterization. to the we the and peak and the today it in business, road ways would look were and are at talking down your -- business XX our a big it then be we an a -- it’s story your million and XX and materially I months in a Amazon characterization think in the product numbers reality. XX $XX retail growing where conversations talking And of But is different on a basis at

Jeremy Hamblin

And basis? on go-forward Great. direct that the correct, will -- folded be sales, a your that into

Harvey Kanter

business. Yes. launched in, in be continue that and annualized it business full assortment in December and as a a really on way wasn’t line fall. really will XX-month And enter to we launched the website meaningful until it grow but February, February And the only we would remember, say, to into get that January, started let’s

Jeremy Hamblin

wishes. best and questions my taking for Thanks Great.

Harvey Kanter

so Thanks much.

Operator

from question Savitz our of comes And RYS Advisors. next Raphi

is line Your open.

Raphi Savitz

great or love and hear. you’ve Harvey. comments execution just to-date taken actions certainly maybe to driving to continues The you kind what to future take in? and you’ll be say, hear I’d what the kind where, selling that the of personalization were that improving Hey, actions awesome. about Could of price talk full certainly fits your in are about, let’s really

Harvey Kanter

in that we better strategy. believe that not a for we is repetitive a DXL, larger often know that that lack of and price not and outfit, unfortunately, becomes very of and consistent just I where how you is I our unique will we’ve the potentially fit in We is proprietary that. that it’s It mission, you larger vision, every becomes we about about and part since what clothing he get our and question. Yeah. a, it talked on with have a go, and value wears. believe great somewhat low really really It’s it’s can historical, about arrived talked be our the a great very

as And really exclusive to so so a of actually interacts value conversations DXL yeoman’s in a job Bob confidence the his want around with in has relationship are all life a why And or we lean looking you that life, and it’s the get then, other, inclusivity and Mike experience we to male or belonging. them they products for brand, bringing of wants really to daily he that about sell the that an Sue, else price, then that the And such have have with, is tall is what us creating is male -- us as team whether it and relationship like a the merchant him, we in aspiration and I engaging go call, empowered talk he a want not and respect actually associates, but interacting brands those and with go things transaction, can the done recognizes increasing he that anywhere and and allows but just not the store market creating whereas his every at and that it’s is just big looks, he can’t experience. anywhere having and believe do consumer. powerful really go to that continue to has to the obviously, And which the else, into fit we’re anywhere him we’re a what experience, to creates daily for big whoever then trusting around shop and can’t was ultimately we’re a value that him how can his DXL levels sense create is product, feels the feel often much greater the success in just have and customer with the if their America, community difference, tall. to confident, different. we it’s he has average market sales sized he a our successfully, it’s around we’re experience that they underserved community with about positioning, and way unique way of basically the with in And

Raphi Savitz

note, are? the And years up CapEx makes what of next needs frame could buckets kind few the major on your different a Totally you and over sense.

Peter Stratton

Sure.

So that I’ll take one.

CapEx $XX expecting we’re million we somewhere going that the that on. to going in year $XX infrastructure this to projects to be have million that’s So our IT improvements, due primarily is and range

ready are are we as expecting which next to to definitely we’re that, the some looking at store and don’t years, we going look I I stores, think together, think be put that that that we’ll over could as stores. yet. a come upwards we years continues about degree. But the footprint carefully opening get quarters. three CapEx XX like to increase is to number few in five speak we future very But our strategy to that years, Beyond more we what into on think to more will be opening of next

Raphi Savitz

it. Got Thanks, guys.

Harvey Kanter

you. Thank

Operator

[Operator Instructions]

Harvey Kanter

to no again I like happiest gathering we and like at sounds we new summer with and questions for all days season. you out is look period the it their and and everyone the Days XX to and there interest today everyone wish just Memorial thank forward Operator, would safest the

Operator

Ladies a concludes and today’s have and gentlemen, your that wonderful conference. you participation day. for Thank

Destination XL (DXLG) 26 May 222022 Q1 Earnings call transcript