Report: Destination XL gets takeover bid
Destination XL has received an offer to go private.
The specialty retailer of big and tall men's clothing and shoes has received a non-binding proposal from Fund 1 Investments to be taken at the price of $3 a share, reported WWD. The offer represents a 34% premium to Destination XL’s closing price on Thursday, Dec.19.
Fund 1 currently owns a 10.6% stake in the Massachusetts-based retailer. It was part of Blackstone’s takeover of L’Occitane earlier this year.
“We believe DXLG, similar to L’Occitane, would be far better served outside of the public markets, with the ability to focus on free cash flow generation without the overwhelming pressure of reporting quarterly results and satisfying the needs of short-term public market investors,” Fund 1 said in a letter to Destination XL chairman Lionel Conacher as reported by WWD. “DXLG stands to benefit even more because as a micro-cap stock, it lacks trading liquidity and is unable to attract a quality institutional investor base.”
For its third quarter, ended Nov. 22, DXL reported a net loss of $1.8 million, compared to net income of $4 million in the year-ago period. Total sales fell 9.8% to $107.5 million. Comparable sales were down 11.3%.
“DXL’s business continued to be challenged in the third quarter by consumer spending headwinds which resulted in lower traffic to our stores and lower conversion online, said Harvey Kanter, president CEO in the company’s third-quarter earnings release. “The consumer has been very price conscious, and our customers are gravitating toward our more moderate and entry-level price points. Despite these challenges, we have maintained our disciplined operating regimen, and we have avoided a material erosion in merchandise margin, while keeping our inventory position healthy and controlling our operating expenses.”
During the third quarter, DXL opened two new stores, for a total of 285 locations.
In its letter, Fund 1 said it would work to retain existing management through “competitive compensation, strong benefits package and an equity or equity-like incentive plan,” and work to assist the company in its go-forward strategy. For the full WWD report, click here.
