Mar 21 2024: Destination XL Group, Inc. (NASDAQ: DXLG), a prominent retailer specializing in Big + Tall men’s apparel, experienced a sharp decline in its stock price following the announcement of its fourth-quarter earnings. While the company exceeded analyst expectations for adjusted earnings per share (EPS), it fell short of revenue forecasts, leading to a negative market reaction.
The fourth-quarter adjusted EPS of $0.10 surpassed the analyst consensus of $0.07 by $0.03. However, total revenue for the quarter came in at $137.1 million, missing the consensus estimate of $138.45 million.
Investors responded strongly to the revenue miss, causing the stock to plummet by 13.09% after the earnings release. This reaction highlights concerns among investors regarding the company’s performance, particularly in a challenging retail landscape.
During the quarter, Destination XL Group reported a 4.7% decrease in total sales to $137.1 million compared to $143.9 million in the same period last year. Additionally, comparable sales declined by 10.1% year-over-year. The company noted that the decline in sales was partly offset by an additional week of sales in fiscal year 2023, contributing $7.1 million.
Despite the challenging retail environment in 2023, Harvey Kanter, President and CEO of Destination XL Group, mentioned that the company achieved its second-highest sales and third-highest adjusted EBITDA results in its history. He attributed this success to a more than doubled adjusted EBITDA margin and a net sales increase of 10% since 2019. However, Kanter acknowledged that reduced customer traffic in stores and online, influenced by the challenging retail market, contributed to the full-year comparable sales decrease of 4.6%.
Looking ahead, Kanter expressed optimism about the company’s strategic growth initiatives, including marketing efforts, store expansion, digital experience enhancements, and collaborations. These initiatives are expected to drive sales growth for the remainder of the year. Despite this optimism, the company remains cautious, anticipating a mid-to-high single-digit decrease in comparable sales for the first half of fiscal 2024, with a gradual improvement to a low to mid-single-digit increase in the second half.
Destination XL Group provided guidance for fiscal 2024, with sales projected between $500.0 million and $530.0 million and net income estimated at approximately $17.0 million, assuming a sales midpoint. Adjusted EBITDA is expected to be around $36.0 million, based on the midpoint of the sales guidance.