DXLG - Earnings call transcript Q2 2024 | Destination XL Group, Inc.

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Operator

Good day, and thank you, for standing by. Welcome to the Second Quarter 2023 Destination XL Group Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Shelly Mokas, Vice President of SEC Financial Reporting. proceed. Please

Shelly Mokas

are and XL Thank XXXX and Group's On call Catherine, us for Earnings our morning, Chief our Destination and Peter on Second today Chief good Financial you, Harvey Stratton. you everyone. joining Call. Executive Officer, Thank Officer, President Kanter; our Quarter Fiscal

is useful our call, financial and performance. our we non-GAAP on earnings During this about which available discuss today's filed metrics to such Relations investor.dxl.com refer to Investor information some will provide release, was and measures. investors website with an for our Please reconciliation morning at of explanation

in discussion Today's are differ various to due results uncertainties risks affect company. plan certain mentioned Information materially strategic regarding and factors the concerning the Commission. a other variety detailed could company's assumptions from and expectations uncertainties subject and company's to that that XXXX. to statements cause risks and statements sales Securities also and for the actual the earnings forward-looking today long-range contains risks Exchange and filings with guidance, those fiscal of forward-looking Such is

Harvey? call I CEO, Kanter. our turn would the over Harvey now to like to

Harvey Kanter

with to for good have today. you our you, practice. is than It's historical prepared Thank to a speak Shelly, remarks morning, agenda everyone. all our this and great of opportunity Today's little different

for on our chapter is expectations to to some our and and But results in where today with quarterly of DXL want important, year. going some next and vision of heading story. I with about start I'm the talk share always, DXL you our the thoughts equally second the perspectives the As you sharing for half then

of and what XXXX progress underserved have position back that the foundation the had structure to potential When discipline, in the building to most an incredible rates late an the for pandemic, and in attracted joined the made to I scale. customer tremendous business which model, despite serving provides growth. company we company me the process, was greater Since company XXXX,

achieved results XXXX fiscal XXXX and that progress. The we in illustrate

challenges, prepared about are macroeconomic us, been We accelerate on at this. XXXX's be of plan a pursuits, the we believe the greater but to the Today, announcing in sense you growth sustained let and give thinking distinct clear years. growth DXL has Given is through But double-digit to greater we meaningfully road the comments it our how in clear, I'll goal define me is we come. growth our our X-plus map which horizon. about growth remarks, to believe discuss latter X eluding beginning the still do call. part of for My will of are next later

of a review But -- the we talk started let quarter's future, last about On we to before expect we call with sales earnings me comp quick our approximately flat. low In negative as we single-digit trajectory second to. fact, we quarter guided we comp negative quarter, the in second expected the a a progressed. for of slightly quarter, improved as did, for year get be the about in comp. post our single-digit how our results And X.X% full our performance comp May, minus current results. the low of the The talked

July, we X%. a comp to X.X%. May, plus X.X%. were sales decline negative In comp improved at saw comp June, positive In sales sales in And

flat. down consumer due into in per stores, per slightly minus dollars comp units up tepid X.X%, and decrease and of a to our traffic private fewer from This slightly dollars and down some second transaction the the digital primarily of in and sales down conversion trading a stores level app per our transaction for brands. while roughly was brands national the were was X.X% minus of slightly, traffic resulted decrease In with transaction were to comp quarter space, website and

areas is very second the one for this of quarter quarter, inventory. the in Continuing brightest

last We down and versus our is are XX.X% XXXX. turning goods faster. versus down QX inventory our year And balance X.X%

lows. allocation execute increase global levels are we with worked have and last receipt very did manage to our sourcing that in proactively teams prevent near a position slight we are merchandising, fall a inventory inventory Our to as bloating markdown and still flow programs but balances. our markdown to into to lead and planning, levels of This year, compared head in very any favorable historical strategically

the fiscal X.X% at clearance Our as is end in inventory QX XXXX to QX of compared 'XX. at X.X% of end the

total comfortable are formal such sportswear which shirts, casual categories, our a We our and with From perspective, performed than less of as well QX. swim clothing XX% levels, are very shorts clothing and sport sales last to still tailored and coats, compared in Sales merchandising to categories sport increased our year year. in target our tailored bottoms clearance expectations. XX%. Seasonal such the inventory made up as product penetration and underperformed XX% last of X%

balance a XX% a national private brands by we into national our our As shift current in is brands. private our assortment sales driven our driven by brands, own I -- as brand And of brands. approximately merchandise earlier, QX, of reminder, with XX% a noted and and XX% experience did

product I'm Faherty big both examples, selected anywhere this that quarterly are delivering iconic in to brands DXL and last Faherty find Boss else. with available be to exclusive tall will in fall. call, Boss is we sizes, brands of to pleased Hugo brands cannot this our tall joining on product in and you both mentioned and DXL. online. are two meaning launch and report our more is I portfolio Both very As big Hugo capsules, set have stores exclusive while that

third man. and believe Untuckit, this Untuckit DXL we our Untuckit. Driven we but both are another and by is fit Untuckit's with by in by launching will product launching be Also, be to addition retailer. be following, and a In going alliance sold for by exclusively the iconic This we and DXL, wonderful September, strategic as marketed tall partnership and jointly DXL. effort a a collaborative will brand a win big Fit brand with for big reputation brand

are brand collaborations us with It growing time These DXL brands is great great a to oriented be consumers. confidence DXL, this exciting us if brand the big we at retail brand business. give reputation to want place an make as additions other available around for and and that building tall your and really XXX% is you to

and worthy a One of touch have past to we right. get deployment is improvements which foundational highlighting few Let now a me is number bit been marketing a e-mail also are of today. and on that this are year advertising. There on critical working

sophisticated make to our ways long-term approach personalized our continue goal communication with developing to platforms of our on including We more segmentation customers as using CDP. modern and good progress such software

individual marketing launched upgraded in to look real on personalized behavior. personalize, more that likewise deliver uniquely additional in customer drive areas forward been capabilities an excellent based e-mail engagement and behavior-based personal we an customers to quarter, these to our revenue. in to is extending We to near relevant shopping improvement more of one journey step need. and communication relevant capability our actual further This the During communication time. Consumer has

conversion we've experience largely on to developed both specifically defined foundational have our our in and online improvements for our customer site, and platforms Another actual Enhancements points specific content. by app example, drop-off. improved user our of to executed our product website. is app, example have on of increases drive and and valuable we've design most on pages And consumers' our engagement. the with the navigation increase browser-based to been made of In been engagement detail catalog product on to our customer address updates

revamped our onset. continues to to which we from engagement, The program, was which what evolve building introduced upon and last November. loyalty envision loyalty the is Next increase affinity, active is program

loyalty, and in second communicating was do and auto be engaging really messaging consumer framing The focused down they ways. part doubled stopped the this, why want on To should enrollment loyalty better to DXL's on program. meaningful of we more quarter

membership. we very customers differences something we customers and meaningful the different treat levels provide loyalty We our of to about tier how in best is something not engaging utilization program is customers, absolute of loyalty the mean special the program our want did cohorts we about the Because program, ultimately, to and this because in it save. saw program ways, and unique and than our shop just loyalty

believe creates self-enrollment, through auto it The improve we then elimination enrollment affinity greater leads but which greater time, acquisition, to in brand a ultimately slowdown engagement, so or of advocacy. and in loyalty will,

on me which touch second tough the a Now to start. is off half, let

weeks through So far, third of three the quarter. first the

already, my traffic, and business Our down X.X%. combined the are The comp tough, identified is rate same been conversion. we has themes have of sales ticket

to focused areas: Despite traffic, awareness tall the big and remain file, relevant quarter, consumer. slow customer and third critical we start relentlessly experience serve X engage personalization, the to brand on and

deploying avoid are to in each visits lapse. of tactics We and encourage customer areas greater these specific

Some media And upper of rebalancing triggers, funnel holiday print rollout greater the e-mail our path a media initiatives paid purchase include behavior-based the the of to season. in investment of mix.

better success and levels and retention. grounded customer Our path traffic acquisition is in ultimately, improved to

begin can. tall to position to the DXL's We like else serve on awareness are no refocusing and brand's differentiated one unique the poised big consumer and

to my of are time But with to do before remainder we how about what the And I'm thinking for of going guidance run and want I today. second the ask about the Peter year. through to quarter really that's that, I spend the to you talk financials remainder

to back and that Peter? After come talk update, about next I'll on the you steps.

Peter Stratton

and Harvey rehash press available release Harvey, filed and won't morning. this the Thank good I spoke everyone. that the are in to you, we morning, comps already

compared were note will quarter in of second the I that million to sales million last net $XXX.X year. $XXX for as second the quarter However,

believe and cases, down were a of in discretionary inflationary dollars impacting impacted lower the which some pressures spending. sales because second Our fewer lower-priced options, units per result in to quarter customers by is we purchased transaction traded

traffic growth to The results stores in core our pursue KPIs mobile and the are in sequential the of drive Traffic, as to to we look as half and progressed, in improvement the result quarter will a our improved ticket year. conversion marketing. was e-mail of continue we app sales second in

to gross on margin. Moving

combination This costs, to second XX cost. point of The XXX compared lease from in last line decrease rents in to was basis expectations. rate, sales and in due as high quarter merchandise XX.X% margin was a Our inclusive of levels in record occupancy extensions. decline was of rate margin points year's year. Primarily basis XX.X% the de-leveraging our gross of from increased and basis last occupancy margin XXX points the with

emphasize remains and our historical superior than prices rather discount low our remained rate choosing We quality, our have margin than higher promotional, to experience and fit significantly rate.

of combination costs areas, consistent a on a in to higher year-over-year margins However, quarter. basis, decreased due with last three

the our these merchandise decided through private increases we at certain point price to on First, cost an than customer absorb price level increases. to on opening label passing especially rather those

fulfillment the to related of direct-to-consumer costs to orders Second, be continue elevated.

loyalty on their more discount And loyalty from new third, inbound of that lower purchase. the offset were costs These program there overseas. success certificates partially on customers by redeeming our a freight factors receipts are for means three

of the these them of rest at will the year point rates margin last each elements Although persist varying to points expect year, lower year. approximately be the through should to XXX where the basis gross moderate we for than levels

and general selling, to next expenses. Turning administrative

decreased a long-term as lower dollar to improve the the in added XX.X% XX of prior the sales accruals The decreased primarily $X including to basis and basis, XX.X% performance-based past offset year as costs, Our On us expense initiatives, from lower second compared a new decrease year in our store new SG&A million, growth allowing by incentive SG&A to by percentage to was despite quarter. development. by partially sales. support positions points expense marketing

in ratio QX X% year. ad-to-sales decreased slightly Our X.X% from last to of

gross judicious and to and we year, as necessary XX.X%. sales margin we the technology to support about future investing to plans. of on XX.X% growth in expect advertising. expense remain still we the at people you at are X.X% spend being committed might expect, expense With with SG&A And For our very but management,

EBITDA adjusted $XX.X or our at in brings quarter. This million for the XX.X% second

this to to Although a for some transaction deliver than this able year's year that environment. I adjusted being want we mid-double-digit impact are occurred on rate last XX.X%, pleased this current unusual EBITDA quarter margin sales and this one later lower with well. in will a the QX spend as minute limited have result of --

balance We are of unique opportunity advantage P&L strengthen taking volatility. reduce the to sheet our and

quite and is rate ago, termination XX We pension radar environment, at level between at liability its was legacy are lowest some current our on plan, terminating and interest last for our our years time. pension XX Due the which assets in has frozen our the gap the pension least years. been over to

the P&L. we QX, recognized charge $X.X cash made we $X.X million of previously unrealized contribution of a the nonoperating through the flow a plan, to During million to loss and

XX, has obligation July remaining paid XXXX, of been approximately As of paid fourth XX% expected be quarter. the the in pension with XX% the to

At of $X.X of with at environment variable our our benefit books finalizing shareholders. some prudent that approximately interest are a which we on from use and Capitalizing excess plan. will is estimating time, we'll opportunistic recognize which current proceed liability of cash, charge the the million this rate termination the the to eliminate our remaining and

in to year grew under our of debt Speaking as $XX.X cash a period the and ago, million balance $XX.X short-term with revolving facility. compared million investments our to outstanding million of either availability credit no $XX.X cash, of and

improvement This months flow which of expenditures, less free on date. define our which to for as the we capital operating million from was strength activities flow, the was X cash $XX.X cash

which U.S. continue invested government interest treasury bills, X%. our in to We at are excess approximately keep earning cash short-term

free We flow to market. our cash some of on the also stock repurchase this use open

we quarter, to the of average per an cost repurchase $X.XX course million the at X.X $XX.X share. Over spent of million shares

we At of fund plans have At end those authorization Board's do with quarter, us repurchase growth $X.X growth the the which original and very going cash quarter. $XX talk to to the this the the X our minute Harvey that is first not fully we activity for about already plans, weeks plans. happy in this and in to we and moment, left third million further have year, approximately are our utilized a have financial the of execute available of million flexibility

our half, just adjustment conclude is included reserves. $XX.X tax a release require purposes. allowance a per area to Last with for comparative $X.XX second an valuation our on want $XX.X year-over-year I share the of second Before in quarter outlook spend which the reflected moment or benefit where income million this I since for million, taxes our of year, results results

valuation to allowances approximately those removed, that Now returned rate been normal more have of have a XX%. tax we

as cash reduce in federal However, to our we still we'll taxes, cash able a XXXX. very loss fiscal result, to are our utilize pay in remaining operating tax net little and income state carryforwards or

reminder, we $XX.X a with federal began loss carryforwards. the million in As operating year net

the we Finally, I'll close with [indiscernible] response an update on our financial the outlook year. and for are today fiscal are to the XXXX of half we ongoing macro in second environment which difficult volatility in expecting

million approximately is of Our XX% a for an XX% million to to adjusted and of updated sales basis. $XXX XX-week $XXX EBITDA margin net on guidance

the and at quarter a fourth year a implies Through guidance negative single-digit comp flat. and of negative the sales comp rate. sales negative full back close will [indiscernible] months, Our X to we're low growth claw be we mid-single-digit quarter year-to-date a third believe could

to the will and into sales for of this -- causes momentum not will is begin show stabilize a our guidance environment initiatives improvement us consumer-driven sequential which the macro slight to marketing built pause one progress. deteriorating and assumes QX There that that curve

We of vision back, at all long-term are future prospects DXL. certainly dampened the but pulling feeling our our for that or hasn't our customer

over back turn to to a that Harvey like bit the call would elaborate more on I vision. to

Harvey Kanter

I as want we get X of let you a goes want been actively where with I to all to the over for here. What's to know now ahead. next in we and in that were To next And where X business different the a headed as set from road to for have Peter. table years, fundamentally Board define X DXL we working team DXL leadership the to company Thanks, the the topic our store need position into that where we to is X compared fact see pre-pandemic. to today start the the in the years? with

sheet, past investments no of of the the is in excess X $XX speak much inventory we At heavy too shareholder on over balance debt, years, million height cash cash $XXX with company. of the million. equity shareholder recapitalized and the pandemic, were equity. balance we and Over essentially have to sheet over no our Today, and on the the debt negative we've

strong level profitable operational a with and cash flow, achieved store turnover have We of experience. margins muscles free more and to faster excellence, inventory match developed digital our newly expertise

brands want every can to private designer We brand a major merchandise world-class carrying national brands. from guy assortment have a

what our and understand We recruited increase before and support developed foundational improvements belief believe board needs, this challenges the company we understands the that years, that take rate, him his now to during to to unanimous level. were next have can understand the consumer, work tick. We X big our over and understand was there next leadership that create And and to most complete the is that DXL. makes first-class a X all the team opportunity in recent necessary meeting, the his this can growth tall we

And for goes so we here me, That too. are.

may little as week the agreed Some of over a XXXX. contract that announcement I President CEO seen of to August a have extend my into you and ago have

will I initiatives another years through. see ensures to be our commitment That growth here X

opportunity for the next that one we this most something company me about DXL the opportunities opportunities. significantly right of I distinct address the in awareness able overall a believe isn't of been consumer is is us outlined, research, the our brand's X it. can all and Awareness priorities opportunity into trajectory have for front So to and in According are we we greatest that growth greatest Perhaps our recent awareness get years. represents challenge to let to a brand X level is we has different levels. that time. raise now revelation recently which This X just our pursuing What's do to the of new discovered. some that reasons the

The our experience customers offer. who know us and the love

However, positioning share coupled and provides compelling of us we struggled differentiated engaging is couldn't our we many who This, with customers the the new the rooted Historically, like haven't in a messaging the do with in sector story, relationship. a with never DXL into is. and ownable not know position our spend. reasons connect justify differentiated and invite one to that awareness opportunity simply them customers an brand have before

and on This level. absolute spending consistent an

several our ratio ad-to-sales to we pushed past the sub-X% years, from For sub-X%.

While to ready and need fast for number done ratio steady commit we years, to X build file. are a exercise to not hard and in a ad yet We brand to the we more to know top-of-funnel awareness. and one be invest consistent, message a increase. our marketing know marketplace. We sales cannot next it need the is to going for customer in building grow This to we

already not is but confident As noted, brand the I strategy in we we the part we were sooner now. place, doing not confident right reason this are for that of that just have

reason out has And by over defined financial our will getting campaigns as harsh our not that over seasons in house him marketing go a a own DXL pull the by tried that building in relevant, we reality war funding We will historically is driven never and to in marketing with now appropriate invest multiple financial are still Today, DXL's that growth. brand our and and the years. consistent order positioning by change. awareness But and position campaign. us. and Another multiple time over marketing invest that DXL had are resources and that back future is we can expertise both chest,

and to than less today? Officer, the effectively a different added in suite. Chief our Chief little we Digital doubling in ago, Analytics addition What's expertise our Officer, a year Marketing marketing First, a

clearly a market call that studies it. to team We us want began supporting action members in path [ you and to our led as customer what trademark refer to we with also brought research ] or in often augment our fortify some stellar to that We've capabilities. inception and where #WWYW have invested

$XX motivates have are different the important Perhaps our And footing now all, most properly on long-term different something of in the will share. and pursuit. big that kind and invest lack addressable is of a our about we men financial to us customers believe better We firm this have market financial what brand allow in billion, we segments. now market and of understanding that tall do now of total flexibility we the to

best While That market, trade-offs. we slice greater hold meaningful currently decision without a of far have better and the we be won't opportunity.

that We We margins. going level is in we over we but X but EBITDA unlikely have growth is margins have over years, double already that X% X market share few to the marketing, past In low are we attainable. years. still out top a line of XX% in we more adjusted brand-building than EBITDA we the the invest achieved sales EBITDA profitably, past. were be we X% can adjusted the that enjoyed X next XX% the targeted not and believe If to that growing will last come scale believe it to milestone adjusted to take in at the years, have the grow and greater digits to

to EBITDA with significantly or emerging to with now at to are a years million the greater higher faced line next scale over with being XX.X% $XXX leverage and X of aiming operating and We -- $XXX the million greater model. then for top company prospect a X our

we building scale. in all and to This far DXL, watershed greater is are moment business create a for the a on

One will opportunity that report store to line push happy later top that since opening year, X is be new be of we'll development. this stores our second The I'm going first store is to XXXX. we Angeles our going XXXX least to to York, to DXL Los in the in store new believe of stores XXXX. in one XX at XX Cincinnati. is one and number in XX grow New We and in stores believe

drive our limiting development another look of factor new to store XX to critical store plans, more. upwards and as we net believe even our Overall, we addresses are hone growth. we new The there will opportunities

metro noncustomers, voids by and not recent across are major have every we across and most big stores While in our consumers there the X,XXX U.S., customers In are research where tall DXL. not market is consumer located self-reported, a certainly being because them shop serviced with us shop they they while not is XX% near store them. self-reported, store conveniently do near because us not XX% to not do a with

As open we have shared is strong to per path with previously, square return a a to there strong we new invested sufficient and on investment. stores believe capital foot, sales sales

addition X In of to to complete and expect new conversions we male more stores, the XL we are casual X completing close by to XXXX. to DXL, stores end

in we've the least And Chicago at one remodeling, our end finally, shortly X additional DXL while begun of customer to of XXXX. before lab work work expect stores we in the on working evolve to begin market, experience existing our concept, DXL on and stores the

working opportunity brand time third in retail beginning is examples like a we real through we retail least more see at The couple are collaborations are only and alliances. and the alliances. Untuckit and of We believe

great We pursuing are authority our and initiatives of fifth, execute as and tall offer, consumer and and our to brands. realize difficulty core bull's needs and in products eye other many our will the brands being even confident that more their be for inclusion -- leading reason greater that serve his their in more diversity brands develop big for the is the a capabilities and and

X accuracy use by both and in big experience for an initiative and to an compelling consumer. footprint the of We a is and platform across of this to our means, and time execution in-store technology will feature a the capable create as better and in something rolling we stores to the regard of XX forward technology concept of the are that physical online around fit I same time, in-store, specifically fit and end in alternative size that referred digital mapping. solving the stores this additional and have to well. with body home be out is of often month scanning a from as needs shopping for In tall look Currently pursuing the in

And in the distribution how achieved center, I work close as engagement keep DXL because the this in get of have dedication up hard we we've and for the finally, built would team culture want journey. of be team given done, the center. I and X acknowledging work consistent past what our the the corporate is without day possible we I this in and and defined years. consistently not every could family a created None with morning of office remain is without guest over It moving and on to people the stores, that the is great every and that inspired

own in And Thank that, wear we men team operator, the now DXL serving tall for of what will your their with questions. commitment they DXL, entire hard you take want. to pursuit to work and the and choose where style making and big our only place they ever would

Operator

first Our Davidson. Baker Michael from with question Instructions] [Operator D.A. comes

Michael Baker

Okay.

So stock. have the plenty new do or continue you million, to love but you I left than XX, $X even think, of you we of Seems a to buyback like the if cash growth, less XX buybacks. also store It new open costs to store.

the So but here the levels? this another buyback stock for wondering, maybe just or Board's at the to question appetite keep is redo Board, authorization current buying a -- and back

Peter Stratton

Sure. Mike. question, take I'll that. Thanks for that

back past was something completed. the just to the yesterday, of was with authorization. year. And feel buying We doing stock you're beginning that get $XX remainder I Actually, million committed we to quarter. we that this at the the pretty glad finished aggressive that up think were So like the We right. of

the together is Harvey moment we're just what plan. the doing about year, rest longer-term for on buybacks talked putting pretty the extensively work to of we regard about plans, to with think starting I for growth which are our

chest focused deploy cash war I really figure out building way And of that we're then is what's said, can grow as the to best what customer. Harvey we think to on that, that the

the said, we're right think story growth times on the But we those great, buybacks, see I continue getting to and do I now, mostly opportunistic. we'll As for are going. when focused

Michael Baker

out Okay. it But doesn't I'm is what rule I hearing. -- necessarily guess so buybacks

could I another If question. Okay. ask

change guidance, think, Just I didn't versus And margin, the gross so half. I on gross margin my in a math about your first half the guidance. second better implies second much with down you think, half basis points the XX

not sort So that, not a with in there the do think don't Just But talk a half weakening with gross than bit presumably think markdown you about inventory business need little excess about be margin if we maybe you mark could why bit, promotional. down? we risk, is not lower you back how to markdown inventory? there you Do little thought, is sales levels, want you get, coming to risk? of that in

Peter Stratton

two things I'll improve that to half in second with start I point we will there's first to half, gross a to margin regard the bit rate. the So guess which in

some the last The lap fall. we first will is start programs to of loyalty that started

has should our bit. better brands. also, help more rate that national seen especially been, a margin as talked a we And is than private customer which about, definitely So migrating the label, we've recently into

to mind those the reasons do going the come expect that second of half to So a in are yes, as two to is improve margin we bit that why. year. immediately And

Harvey Kanter

inventory. thing other is talk I'll The about

pre-pandemic, about, comfortable incredibly it's and talked under managing are we're goods turning we inventory. with XX% as year We under XX% last and our over nearly we're inventories fast,

the As uptick markdowns in we're surprise. we inventory not managing It's slight had season. mentioned, because in a a we

a difficult. little like shorts heard swim You and probably elsewhere were things

even those is seasonal was at we with what rate low. nearly historical a difficult But markdown our said businesses,

comfortable confident with we inventory. So our are and

a job chasing last global the said the at a really rather concerns. and just You allocation with and may our is are recall the sourcing truly of doing we we quarter, goods be It least cancellations that chasing managing inventory. phenomenal team partners would and merchandising

Michael Baker

changes on not you of Okay. want If program thought? return well loyalty sort if investment Just it's I about did program Are How could Are of you could November? making as the getting success talk about that out that? expected as on you since that? because working now, changes. you you're one year-end, or characterize months into I more. it, making I ask but not some would guess, the XX ask X to you the at quite

Harvey Kanter

than are in than It's honestly, the that the customer. and to would file, two for. buying their in expect. make penetration almost customer when environment might a want the during bit than and and Yes. best they're groups is engaged not which better that probably one it's of customer on program. their It's would terms -- of living of bifurcated And are we utilization the of we're really the working greater honestly, penetration penetration of on of would revenue that, is based we bronze case And I conversely, the as our more is terms a program say need well hope least gold loyalty that in platinum And really a the revenue we based silver outcome. Harvey. Quite out the in hope tiers, little their as participating

use of I typically what and ways when to, And engage to are in would points what is trying how you more and and is as gain engage you we're doing in to on us. say, cannot from and is reality, tier find better points points product really, uniquely lower bronze customer discount lack a level program and to Peter but day some that for the that to back silver buy way the referred remixing relevant you call something done, small we're come to how of

they greater $XX $XX whether the use the but $XXX. an excess a -- is worth of And they program of average the still well point ticket our us, and it or certificates, so with of advocacy spend is or relationship in and come affinity and $XX creates whole a in

clothes -- challenge face, to how So or better they're I that's spend guess, choosing discretionary whether in want, dollars, us more our they with actively buying it's their the actively their where and just customers more they engaged are engaged. that's need

it a to trying So customer mix way it of to that lower-tier hopefully, we're and reengage understanding. higher level better some the you And have leverage customer. a at in helps

Michael Baker

Yes, does. it really

Operator

Hamblin with Craig-Hallum Jeremy [Operator Group. Instructions] Capital question We a from have

Jeremy Hamblin

the results. strong QX on Congrats

a First, the question just I on to wanted gross with start clarifying margin.

in year. of the the gross you first a XX.X% -- So did margin half

your back I average that's guide implied of half suggest the XX.X%. Peter, is about suggestion think, would year and like

I that year-over-year XX.X% what want on the correct? saw But Is to half, just on better half sure basis, in range. I about that's of second basis, So in first you know that's the absolute year. make a an the than projected relative

Peter Stratton

right, we year, that's so think XXX last mean from XX.X should I year. it basis down last were Overall, Jeremy. I about be Yes. points which

So for the in some of yes. the the on previous improvement -- those reasons of half year, I highlighted some for do question, we second expect

Jeremy Hamblin

kind things future strategy. Because heard some that, developed. sounded correct. FY XX%. wanted invest I sure still But is least here, to should maybe EBITDA at make X% 'XX that for the I correctly? of through planning a 'XX, I and were know of hear and certainly that things like be few brand that margins that being that just Okay. And you let's then maybe Did improving sales on plan you It we the about under to went to growth focus thinking X% awareness and in FY are I of

Harvey Kanter

hope that envision we in leveraged be short the the P&L term. marketing. clearly, investment of marketing part on the And Yes. SG&A onset, that in to least sales. Conceptually, Part P&L will and of affect and will will what we at increases is through invest be that greater

him get that's a and business, terms, on little company, need invest to we may When what's hard but we message based public think in to clearly understand to as We a need have and this, consumer. about this clearly that it important reality, to be really important the out. his we we positioning in a

share way share voice. to sales to of grow is only share of other and is of market to way the And grow grow market the

correctly. heard Jeremy, we top you yes, leverage in absolutely, grow greater. time, expect line it and But to the meaningfully So

Peter Stratton

only thing to a the go would any we -- question margin. yes, incremental that EBITDA is add X% in if And on XX% that's more investment, to Jeremy, marketing, so Harvey's and investment I from X%, X%

see not hope I Certainly, be some that down to real hope But the is certainly growth. think of investment, go that's think doing we growing investment. that start some but I longer will base making small that expectation start there's out. that going come math, sales is to X% You're it you're the And all. sale, rates our and once we'll assuming that simple at there you to return that from

Jeremy Hamblin

always takes some How -- sure. For terms in time. that of stuff

year think million your is I million range. $XX this to budget in the for that advertising $XX

So think, again, I just a quick math here.

to time, increase You're XX least the presumably year. is months. obviously, give this -- maybe million initiative you a an next looking at for million like $XX at there which Is need next to $XX

a sense in? say, over, you at or you is $XXX -- think where a incremental X-year like target be that let's a Is there of give x what kind of can result million here period us x and can sales you think investment that can

Harvey Kanter

it, on the still of in connect period it's " expect and to time "Going low communication. And previously marketing. SEM going for communicated give be it's because but time communicated to can double-digit were call to some should is kind Harvey. characterized way want we are and a not more hopefully, be and that and that advertising that growth media we specific brand, And and up queued to that advertising now broad-based, see some it, consumer. our we've I would out to around to very I'm targeted will expectation, yet heightened of the which comments the this but Yes, digital for competitive of when more expect you sustainable engaging say The don't better way in ways the you cautious insights see positioning lack oriented take

you, your typically a comps about to be quite Remember, good north X average. without to new We stacked business for and that from time, we between, of growth than plus business better double-digit comp points. of performance, million base in the XX% $XXX would giving a specifically north barring say, we that. consumer on $XXX will or openings would volatility, of think pandemic store a has let's which operated a change previously we've up And number historically expect run and So expect retail the multiple growth plus some challenges million the reference that. years being talked I'll X of XX% remind rates be digital

in plus significant, online, you and it plus of and pretty then is So new to a share base that market X% XX% add get double growth that are voice rates have digit. stores, would ultimately you comp and you new to

low We've characterize digit. company a company believe double characterized you differently digit, the be meaningful and as characterized but growth growth than as growth would it we've may us, double low we but that

Jeremy Hamblin

low in color. company a that's And double-digit That's And retail. growth helpful super I sure, think... growth certainly, for

Harvey Kanter

lack I years the make to fully other back. double-digit see certainly And sharing low back to time, X intelligence Jeremy, to we're of last year. over double-digit say up. a as be we is only said, The I growth The that those to just question to caution thing, competitive you, when way this back for expect at without that to better given want not will it, queued -- of that really investment going months

and expect then sales double-digit performance. low hopefully see over would one ramp increased investment So in XXXX that of XXXX, you'll and continue XXXX greater to level maintain

Jeremy Hamblin

get unit like. bit year the for next the doesn't on additional outlining thank overnight. color just what Harvey little on color, you to a look wanted No, and of happen growth, it understood. Clearly, I Peter, that would for

the team real the in be this on I'm year likely cadence XX loaded? about to for what your time, you in kind the not more half lease XXXX? a in color at point next that provide back commitments of that on, your your -- little sure might thinking how of of terms In and year, can openings projecting terms is play of are estate out

Peter Stratton

Sure.

color little on a that. just So

which excited we've really opening mentioned, fall, about. the we're got we first X As are this

we've year, identified. next but we X XX we the have don't good signed that that yet, have feel We leases For we X about. have

will the the half, into fourth be open but be all expect be of there. will Some and half, quarter. open they that don't those loaded we back third second will -- in some first some all will not like it's There'll in they

in the I X something expect first would half, X half, the that. But maybe like in second

Jeremy Hamblin

Got it. and hop of wishes. out That helpful congrats is I'll color. queue, the best but

Operator

from RYS. Savitz will question next Our come with Raphi

Raphi Savitz

and the questions financial more loss you of of from a over drugs, and of maybe cost question kind form for Harvey, Harvey they about quick pill a lower bigger on available, class Peter. especially how the the for couple in weight kind of impact business picture become new think of Maybe longer-term time? then do as one kind

Harvey Kanter

if you're but unfortunate it's great I been L, question. not say I investor not, for move helping last and have our going large. days. drugs We an Yes, you're you #X XX heard Xx catalyst on It's that for about business. Xx call we've question, are actually a you Xx, although the from potentially kid stories, unfortunate, become is a those and because to Raphi, to great to absolutely the potential think it a the It's every actually

If a you're move at Xx, maybe you're to going to Xx.

lose So need there diet first you catalyst weight, is, and of all, clothes. new as you for a

The it other what it's unfortunate, part lifestyle is, requires just that sure not it and really I'm it change. is interesting,

already. and your And that drug lifestyle, unfortunately we've a so I forever. it don't you be on think that anyone intends to yo-yo, change if don't And heard creates

And to investors chat to down. a It you're before because and and of X.X a doctor with their to refill We've to tall going if and get unlikely that. and It's XXX. tall get is our X heard them they've their prescription a X.X go doctor, not XXX, I go up it, pounds size. took weeks back. the unfortunate big and couple that's more going them catalyst gave tell all, you And for they literally big and on say that and under first our they ever -- all of you're reality and consumer, needed to X you'll back been of wanted below

and back. And changes, get weight your you change it gain lifestyle don't if have then size. might just on you and potentially could it unfortunate you off equally, you're potentially You

of not going all So a is a want. reality, for course, catalyst, which, loses you most of in things, weight those He's of clothes as potentially clothes business, of we as for would some consumer move becomes might that. in new it our tall practical But we're cases. weight see really that us, a he going the new require hopeful reality, require and in for to gain out to back loss just big a and and healthier,

haven't you business understand thinking in. because it. and this, just baked helps of do changing a opportunity we So we're We how sizes. But hopefully, greater for think it's about as really we talk explore anything catalyst that

Raphi Savitz

other And context. from these the just helpful investments brand a rates And a about whether the then, questions. various in you a I Peter, Very couple hurdle on you're of simple allocation financial of kind standpoint, one investments any it's like investments, capital or for just guess are then thinking kind quick business? hopefully whether how stores, of it's cash making taxes.

cash You but talked taxes about think years? next do year, this about how we cash for few out taxes the

Peter Stratton

Sure.

I'll So last take the first. one

the for think in out couple low taxes be I will net income. taxes. year it's just cash come So very cash next years, But do with where of to going this we depend on

end once low. NOL we will through we But very be usage. year, would to get XXXX, of the the start reaching be Next we

get would of you more once we'll sort be into 'XX, cash say, out tax normalized 'XX, back I cycles. So to

consider quartile it, wait our to would in have that when pretty expectation. opening that open not, new do we're our we actually levels I square got going to we investments, that a at we ourselves portfolio, we're I store of example, think we'll we -- do when until get it sales make least -- job we're an per square comes sure a believe to we've into pretty stores them opening to foot for basis, they think, standard, top high -- looking whether but foot or want holding at we of stores, can per achieve a on sales that good that the

We at to sales carefully real also invested capital. look

IRR, at something that we're -- a that good as $X in for return say, And $X.X, rate doing. return. be as in in And investment. XX, we getting think internal able we in XX-plus to I of look a typically to long consider for us invest let's capital, is capital finally, a sales then interested we're

work can we that it top make -- all the the can we that want line it money how back to putting responsibly. grow again, to to But it's can and grow but sure we're grow comes top line

Raphi Savitz

do I that a year note, that, stores the maybe committing a of of of seeing XX to of about, thinking cohort you as does I few term more new out sign on of guess, guess next how program? and new stores, guess, before to I these how this going And you're in beyond kind at versus and stores stores year kind terms many then this larger kind leases kind and new development near expect least of waiting and of

Peter Stratton

Yes.

new that and the number and we've X of been as open about those year. cadence year is this talking So the XX stores getting XX next

stores time, the by should the start So By next year, it's and that's that read maybe on to XX up these of opening the we then XX. decent XX are how of end year. getting a following XX

in us them customers be often there's just think that actual their good to location the I inconvenient the a be pursuing is. how on before hearing store weren't it if we But we're a their read whatever them drive and our solid will with store we shopping performance real is biggest obstacle year the to wouldn't not or market have a that it's nearest from is or but encouraged, to in we

Harvey Kanter

excited to well bigger of broad-based articulated, to we'll ahead. double-digit these to continuing the the customer. We DXL, we're now. about attending everyone the interest and through well And as opportunity with times Raphi. really meaningful your and today. engagement we've off call greatly Thanks, and Harvey thank appreciate Listen, enough want and it's a navigate Peter hopefully, we'll in We growth challenging for opportunities get sign and

much. thanks So so

will early Have fall, and days. great a XX in we you talk short to

Operator

call. conference for today's concludes This participating. Thank you

now disconnect. may You

Destination XL (DXLG) 24 Aug 232024 Q2 Earnings call transcript