Destination XL Group Q2 Loss Widens, But Reiterates 2014 Outlook

(RTTNews) - Destination XL Group, Inc. (DXLG), a specialty retailer of big & tall men's apparel, on Thursday reported a loss for the second quarter that widened from last year as higher sales were more than offset by an increase in expenses and lower margins.

Adjusted loss per share for the quarter was wider than analysts' expectations. However, the company reiterated its financial outlook for fiscal 2014.

The Canton, Massachusetts-based company's net loss for the second-quarter was $4.03 million or $0.08 per share, wider than loss of $1.59 million or $0.03 per share in the year-ago period.

The latest quarter's results also include a charge for inventory reserves and sales allowances of $0.02 per share, relating to the company's exit of the Sears Canada Direct business.

Excluding certain items, assuming a normalized tax rate of 40 percent, adjusted net loss for the quarter was $2.38 million or $0.05 per share, compared to adjusted loss of $1.59 million or $0.03 per share in the same period last year.

On average, six analysts polled by Thomson Reuters expected the company to report loss of $0.04 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 6 percent to $103.71 million from $98.05 million in the same period last year. Analysts had a consensus revenue estimate of $104.43 million.

The increase in net sales was primarily due to an increase in comparable sales of $5.6 million and an increase in non-comparable store sales of $5.0 million. These were partially offset by $3.9 million in closed stores and a decrease of $1.0 million relating to the Direct business with Sears Canada.

Total comparable sales for the quarter increased 7.0 percent. 61 DXL stores, opened at least 13 months, reported comparable sales increase of 11.3 percent, reflecting increased traffic and higher conversion rates.

Casual Male XL and Rochester Clothing stores recorded a 7.1 percent comparable sales increase for the quarter, after the company returned to standardized operating hours for all Casual Male XL retail stores.

The company's gross margin, inclusive of occupancy costs, declined 40 basis points from last year to 45.7 percent. This was primarily the result of a decrease in merchandise margins of 120 basis points, offset by a decrease in occupancy costs of 80 basis points.

The latest quarter's results include DXL transition costs of about $1.7 million or $0.03 per share. The prior-year quarter's results included DXL transition costs of about $3.1 million or $0.04 per share, tax-effected.

The prior-year quarter's results include an income tax benefit of $995 thousand.

Looking ahead to fiscal 2014, Destination XL reaffirmed its forecast for loss per share in a range of $0.21 to $0.27 and adjusted loss per share in a range $0.12 to $0.16. The company also reiterated its outlook for total sales for the year between $413.0 million and $418.0 million. Analysts expect the company to report loss of $0.14 per share for the year on revenues of $414.66 million.

DXLG is trading at $5.13, down $0.17 or 3.21 percent on a volume of 80,162 shares.