Destination XL net loss grows in Q3 amid costs

Canton, Mass. – Men’s big-and-tall apparel retailer Destination XL reported a loss of $4.1 million in the third quarter of fiscal 2013, up from $1.6 million a year earlier.



Net sales dropped fractionally to $88.2 million from $88.7 million, partially offset by a 4.4% increase in same-store sales.



Destination XL cited $5.8 million in transition costs as it moves to its DXL format, as a primary driver of its increased net loss. Transition costs, which include pre-opening rent and payroll, store training, infrastructure costs, store closing costs and lease exit costs, are primarily start-up costs associated with the DXL transformation that the company says will not continue once a DXL store is open and the company has completed the transformation in 2015. During this three-year transition, the company expects to incur transition costs of approximately $10 million per year.



Looking ahead, Destination XL expects full-year fiscal results to come in at the low end of previously issued guidance, including a same-store sales increase of approximately 5% and total sales of approximately $395 million. The company expects to open approximately 53 DXL stores (compared with prior guidance of between 55-58 stores) while closing 102 Casual Male XL and Rochester Clothing stores. Certain DXL stores previously anticipated to open in 2013, will instead be opened in early 2014.



"We turned in a solid financial performance, and made excellent progress on our DXL strategy in the third quarter," said president and CEO David Levin. "For the first two months of the quarter, sales were negatively affected by the soft overall retail market due to the government shutdown as well as unseasonably warm fall weather. We then saw a very strong rebound in traffic and sales in DXL stores during October as a direct result of the start of our fall national marketing campaign at the end of September. In fact, we reported a 30.2% increase in sales across all DXL stores in October, and a 25.3% increase for those that have been open longer than a year. In addition, average transaction size for our DXL stores increased by 18.7% during October, traffic increased 11.0% and new customer penetration increased 34.6% over last year.”