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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act.
Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 10, 2022, the registrant had
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
DESTINATION XL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
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April 30, 2022 |
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January 29, 2022 |
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(Fiscal 2022) |
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(Fiscal 2021) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Non-current assets: |
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Property and equipment, net of accumulated depreciation and amortization |
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Operating lease right-of-use assets |
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Intangible assets |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating leases, current |
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Total current liabilities |
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Long-term liabilities: |
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Operating leases, non-current |
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Other long-term liabilities |
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Total long-term liabilities |
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Stockholders' equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Treasury stock at cost, |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of the consolidated financial statements.
2
DESTINATION XL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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For the Three Months Ended |
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April 30, 2022 |
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May 1, 2021 |
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(Fiscal 2022) |
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(Fiscal 2021) |
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Sales |
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$ |
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$ |
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Cost of goods sold including occupancy costs |
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Gross profit |
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Expenses: |
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Selling, general and administrative |
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Impairment (gain) of assets |
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Depreciation and amortization |
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Total expenses |
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Operating income |
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Interest expense, net |
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Income before provision for income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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Net income per share - basic |
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$ |
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$ |
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Net income per share - diluted |
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$ |
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$ |
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Weighted-average number of common shares outstanding: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of the consolidated financial statements.
3
DESTINATION XL GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
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For the Three Months Ended |
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April 30, 2022 |
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May 1, 2021 |
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(Fiscal 2022) |
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(Fiscal 2021) |
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Net income |
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$ |
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$ |
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Other comprehensive income before taxes: |
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Foreign currency translation |
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Pension plans |
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Other comprehensive income before taxes |
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Tax provision related to items of other comprehensive income |
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— |
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Other comprehensive income, net of tax |
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Comprehensive income |
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$ |
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$ |
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The accompanying notes are an integral part of the consolidated financial statements.
4
DESTINATION XL GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
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Accumulated |
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Additional |
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Other |
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Common Stock |
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Paid-in |
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Treasury Stock |
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Accumulated |
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Comprehensive |
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Shares |
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Amounts |
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Capital |
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Shares |
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Amounts |
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Deficit |
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Loss |
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Total |
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Balance at January 29, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Board of directors compensation |
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— |
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Stock compensation expense |
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Restricted stock units (RSUs) granted for achievement of performance-based |
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Issuance of common stock, upon RSUs release |
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— |
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Shares withheld for taxes related to net share settlement |
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Exercise of stock options |
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Repurchase of common stock |
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Accumulated other comprehensive income (loss): |
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Pension plan, net of taxes |
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Foreign currency, net of taxes |
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Net income |
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Balance at April 30, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of the consolidated financial statements.
5
DESTINATION XL GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands)
(Unaudited)
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Accumulated |
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Additional |
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Other |
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Common Stock |
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Paid-in |
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Treasury Stock |
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Accumulated |
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Comprehensive |
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Shares |
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Amounts |
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Capital |
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Shares |
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Amounts |
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Deficit |
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Loss |
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Total |
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Balance at January 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock through private direct offering, net of offering costs |
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Board of directors compensation |
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Stock compensation expense |
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Issuance of common stock, upon RSUs release |
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— |
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Accumulated other comprehensive income (loss): |
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Pension plan, net of taxes |
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Foreign currency, net of taxes |
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Net income |
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Balance at May 1, 2021 |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of the consolidated financial statements.
6
DESTINATION XL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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April 30, 2022 |
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May 1, 2021 |
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(Fiscal 2022) |
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(Fiscal 2021) |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by (used for) operating activities: |
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Amortization and write-off of deferred debt issuance costs |
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Impairment (gain) of assets |
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Depreciation and amortization |
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Stock compensation expense |
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Board of directors stock compensation |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventories |
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( |
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Prepaid expenses and other current assets |
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( |
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( |
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Other assets |
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( |
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Accounts payable |
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Operating leases, net |
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( |
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( |
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Accrued expenses and other liabilities |
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( |
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Net cash provided by (used for) operating activities |
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Cash flows from investing activities: |
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Additions to property and equipment, net |
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( |
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Net cash used for investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Repurchase of common stock |
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Proceeds from issuance of common stock from private direct offering, net of offering costs |
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— |
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Repayment of FILO loan |
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— |
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Proceeds from new FILO loan |
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— |
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Net repayments under credit facility |
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— |
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( |
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Debt issuance costs |
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— |
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Tax withholdings paid related to net share settlements |
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( |
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Proceeds from the exercise of stock options |
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— |
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Net cash used for financing activities |
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( |
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Net decrease in cash and cash equivalents |
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( |
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Cash and cash equivalents: |
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Beginning of period |
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End of period |
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$ |
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$ |
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The accompanying notes are an integral part of the consolidated financial statements.
7
DESTINATION XL GROUP, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
In the opinion of management of Destination XL Group, Inc., a Delaware corporation (collectively with its subsidiaries, referred to as the “Company”), the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary for a fair presentation of the interim financial statements. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with the notes to the Company’s audited Consolidated Financial Statements for the fiscal year ended January 29, 2022 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 17, 2022.
The information set forth in these statements may be subject to normal year-end adjustments. The information reflects all adjustments that, in the opinion of management, are necessary to present fairly the Company’s results of operations, financial position and cash flows for the periods indicated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s business historically has been seasonal in nature, and the results of the interim periods presented are not necessarily indicative of the results to be expected for the full year.
The Company’s fiscal year is a 52- or 53- week period ending on the Saturday closest to January 31. Fiscal 2022 and fiscal 2021 are 52-week periods ending on January 28, 2023 and January 29, 2022, respectively.
Segment Information
The Company has
Fair Value of Financial Instruments
ASC Topic 825, Financial Instruments, requires disclosure of the fair value of certain financial instruments. ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements.
The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities.
The Company utilizes observable market inputs (quoted market prices) when measuring fair value whenever possible.
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of these instruments.
8
Accumulated Other Comprehensive Income (Loss) - (“AOCI”)
Other comprehensive income (loss) includes amounts related to foreign currency and pension plans and is reported in the Consolidated Statements of Comprehensive Income (Loss). Other comprehensive income (loss) and reclassifications from AOCI for the three months ended April 30, 2022 and May 1, 2021, respectively, were as follows:
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April 30, 2022 |
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May 1, 2021 |
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For the three months ended: |
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Pension |
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Foreign |
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Total |
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Pension |
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Foreign |
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Total |
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Balance at beginning of the quarter |
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Other comprehensive income (loss) before |
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Amounts reclassified from accumulated other |
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— |
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Other comprehensive income (loss) for the period |
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Balance at end of quarter |
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$ |
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$ |
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$ |
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Stock-based Compensation
All share-based payments, including grants of employee stock options and restricted stock, are recognized as an expense in the Consolidated Statements of Operations based on their fair values and vesting periods. The fair value of stock options is determined using the Black-Scholes valuation model and requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (the “expected term”), the estimated volatility of the Company’s common stock price over the expected term and the number of options that will ultimately not complete their vesting requirements (“forfeitures”). The Company reviews its valuation assumptions at each grant date and, as a result, is likely to change its valuation assumptions used to value employee stock-based awards granted in future periods. The values derived from using the Black-Scholes model are recognized as an expense over the vesting period, net of estimated forfeitures. The estimation of stock-based awards that will ultimately vest requires judgment. Actual results and future changes in estimates may differ from the Company’s current estimates.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model based on the assumptions in the table below as it relates to stock options granted during the first three months of fiscal 2022 and fiscal 2021.
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April 30, 2022 |
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May 1, 2021 |
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Expected volatility |
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Risk-free interest rate |
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Expected life |
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Dividend rate |
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— |
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— |
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Weighted average fair value of options granted |
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$ |
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$ |
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The Company has outstanding performance stock units (PSUs) with a market condition. The respective grant-date fair value and derived service periods assigned to the PSUs were determined using a Monte Carlo model. The valuation included assumptions with respect to the Company’s historical volatility, risk-free rate and cost of equity and the related stock compensation expense was fully expensed by the end of fiscal 2021.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for events or changes in circumstances that might indicate the carrying amount of the assets may not be recoverable. The Company’s judgment regarding the identification of impairment indicators is based on operational performance at the store level. Factors considered by the Company that could result in an impairment triggering event include significant changes in the use of assets, a current period operating or cash flow loss, underperformance of a store relative to historical or expected operating results, and an accumulation of costs significantly in excess of the amount originally expected for the construction of the
9
long-lived store assets. The Company assesses the recoverability of the assets by determining whether the carrying value of such assets over their respective remaining lives can be recovered through projected undiscounted future cash flows. The model for undiscounted future cash flows includes assumptions, at the individual store level, with respect to expectations for future sales and gross margin rates as well as an estimate for occupancy costs used to estimate the fair value of the respective store’s operating lease right-of-use asset. The amount of impairment, if any, is measured based on projected discounted future cash flows using a discount rate reflecting the Company’s average cost of funds.
For the first quarter of fiscal 2022 and fiscal 2021, the Company recognized non-cash gains of $
Leases
The Company adopted ASU 2016-02, “Leases (Topic 842)” in fiscal 2019. Under ASC 842, the Company determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments, initial direct costs and any lease incentives are included in the value of those right-of use assets. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, based on information available at the lease measurement date, to determine the present value of future payments. The Company elected the lessee non-lease component separation practical expedient, which permits the Company to not separate non-lease components from the lease components to which they relate. The Company also made an accounting policy election that the recognition requirement of ASC 842 will not be applied to certain, if any, non-store leases, with a term of 12 months or less, recognizing those lease payments on a straight-line basis over the lease term. At April 30, 2022, the Company had
For store leases, the Company accounts for lease components and non-lease components as a single lease component. Certain store leases may require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, and are expensed as incurred as variable lease costs. Other store leases contain one periodic fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the right-of-use assets and lease liabilities. Tenant allowances are included as an offset to the right-of-use asset and amortized as reductions to rent expense over the associated lease term.
See Note 4 ‘‘Leases’’ for additional information.
Recently Issued Accounting Pronouncements
No new accounting pronouncements, issued or effective during the first three months of fiscal 2022, have had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.
2. Revenue Recognition
The Company operates as a retailer of big and tall men’s clothing, which includes stores, direct and wholesale. Revenue is recognized by the operating segment that initiates a customer’s order. Store sales are defined as sales that originate and are fulfilled directly at the store level. Direct sales are defined as sales that originate online, including those initiated online at the store level, on its website or on third-party marketplaces. Wholesale sales are defined as sales made to wholesale customers pursuant to the terms of each customer’s contract with the Company. Generally, all revenues are recognized when control of the promised goods is transferred to customers, in an amount that reflects the consideration in exchange for those goods. Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included as part of accrued expenses on the Consolidated Balance Sheets.
10
Unredeemed Gift Cards, Gift Certificates, and Credit Vouchers. Upon issuance of a gift card, gift certificate, or credit voucher, a liability is established for its cash value. The liability is relieved and net sales are recorded upon redemption by the customer. Based on historical redemption patterns, the Company can reasonably estimate the amount of gift cards, gift certificates, and credit vouchers for which redemption is remote, which is referred to as “breakage”. Breakage is recognized over two years in proportion to historical redemption trends and is recorded as sales in the Consolidated Statements of Operations. The gift card liability, net of breakage, was $
Unredeemed Loyalty Coupons. The Company offers a free loyalty program to its customers for which points accumulate based on the purchase of merchandise. Approximately
Shipping. Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales for all periods presented. Amounts related to shipping and handling that are billed to customers are recorded in sales, and the related costs are recorded in cost of goods sold, including occupancy costs, in the Consolidated Statements of Operations.
Disaggregation of Revenue
As noted above under Segment Information in Note 1, the Company’s business consists of
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For the three months ended |
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(in thousands) |
April 30, 2022 |
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May 1, 2021 |
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Store sales |
$ |
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% |
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% |
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Direct sales |
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% |
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% |
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Retail segment |
$ |
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$ |
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Wholesale segment |
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Total sales |
$ |
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$ |
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3. Debt
Credit Agreement with Citizens Bank, N.A.
On October 28, 2021, the Company entered into a credit facility with Citizens Bank, N.A. (the "Credit Facility”).
The Credit Facility is a $
11
The Company’s obligations under the Credit Facility are secured by a lien on substantially all of its assets. If the Company’s availability under the Credit Facility at any time is less than the greater of
At April 30, 2022, the Company had
Borrowings and repayments for the first three months ended May 1, 2021 were as follows:
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For the three months ended |
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(in thousands) |
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May 1, 2021 |
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Borrowings |
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$ |
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Repayments |
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Net borrowings (repayments) |
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$ |
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Long-Term Debt
The Company has no outstanding long-term debt as of April 30, 2022.
During the first quarter of fiscal 2021, the Company refinanced its then existing $
The Company paid interest and fees totaling $
4. Leases
The Company leases all of its store locations and its corporate headquarters, which also includes its distribution center, under operating leases. The store leases typically have initial terms of
ASC 842 requires the assessment of any lease modification to determine if the modification should be treated as a separate lease and if not, modification accounting would be applied. Lease modification accounting requires the recalculation of the ROU asset, lease liability and lease expense over the respective lease term. In April 2020, the FASB issued guidance allowing entities to make a policy election to account for lease concessions related to the COVID-19 pandemic as though enforceable rights and obligations for those concessions existed. The election applies to any lessor-provided lease concession related to the impact of the COVID-19 pandemic, provided the concession does not result in a substantial increase in the rights of the lessor or in the obligations of the lessee. The Company opted not to elect this practical expedient and instead accounted for these rent concessions as lease modifications in accordance with ASC 842. As of April 30, 2022, the Company’s operating leases liabilities represent the present value of the remaining future minimum lease payments updated based on concessions and lease modifications.
Lease costs related to store locations are included in cost of goods sold including occupancy costs on the Consolidated Statements of Operations, and expenses and lease costs related to the corporate headquarters and equipment leases are included in selling, general and administrative expenses on the Consolidated Statement of Operations.
The following table is a summary of the Company’s components of net lease cost for the three months ended April 30, 2022 and May 1, 2021:
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For the three months ended |
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April 30, 2022 |
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May 1, 2021 |
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(in thousands) |
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Operating lease cost |
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$ |
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$ |
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Variable lease costs(1) |
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Total lease costs |
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$ |
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$ |
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12
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Supplemental cash flow and balance sheet information related to leases for the first three months ended April 30, 2022 and May 1, 2021 is as follows:
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(dollars in thousands) |
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For the three months ended |
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Cash paid for amounts included in the measurement of lease liabilities: |
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April 30, 2022 |
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May 1, 2021 |
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Operating cash flows for operating leases (1) |
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$ |
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$ |
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Non-cash operating activities: |
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Right-of-use assets obtained in exchange for operating lease liabilities |
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$ |
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$ |
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Weighted average remaining lease term |
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Weighted average discount rate |
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The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the Consolidated Balance Sheet as of April 30, 2022:
(in thousands) |
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2022 (remaining) |
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$ |
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2023 |
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2024 |
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2025 |
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2026 |
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Thereafter |
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Total minimum lease payments |
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$ |
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Less: amount of lease payments representing interest |
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Present value of future minimum lease payments |
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$ |
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Less: current obligations under leases |
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Long-term lease obligations |
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$ |
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5. Long-Term Incentive Plans
The following is a summary of the Company’s Long-Term Incentive Plan (“LTIP”). All equity awards granted under long-term incentive plans are issued from the Company’s stockholder-approved 2016 Incentive Compensation Plan. See Note 6, Stock-Based Compensation.
The LTIPs are granted annually and each LTIP covers a three-year performance period. Each participant in the LTIP participates based on that participant’s “Target Cash Value” which is defined as the participant’s annual base salary (on the participant’s effective date) multiplied by his or her LTIP percentage. Under each LTIP,
2019-2021 LTIP
The performance targets for the Company’s 2019-2021 LTIP were approved by the Compensation Committee of the Board of Directors (the” Compensation Committee”) on August 7, 2019 and covered a three-year period performance period, which ended on January 29, 2022. The time-vested portion of the 2019-2021 LTIP vests in four annual installments, with the remaining installment vesting on April 1, 2023.
In the first quarter of fiscal 2022, on March 21, 2022, the Compensation Committee approved a
13
Active LTIPs
At April 30, 2022, the Company had three active LTIPs: the 2020-2022 LTIP, the 2021-2023 LTIP and the 2022-2024 LTIP. The time-based awards under the 2020-2022 LTIP were granted in a combination of
Performance targets for the 2020-2022 LTIP, 2021-2023 LTIP and 2022-2024 LTIP were established and approved by the Compensation Committee on June 11, 2020, March 8, 2021 and April 9, 2022, respectively.
At April 30, 2022, the Company had accrued $
6. Stock-Based Compensation
The Company has one active stock-based compensation plan: the 2016 Incentive Compensation Plan (the “2016 Plan”). The initial share reserve under the 2016 Plan was
The 2016 Plan is administered by the Compensation Committee. The Compensation Committee is authorized to make all determinations with respect to amounts and conditions covering awards. Options are not granted at a price less than fair value on the date of the grant.
The following tables summarize the share activity and stock option activity for the first three months of fiscal 2022:
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RSUs (1) |
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Performance |
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Outstanding non-vested shares at beginning of year |
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Shares granted |
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— |
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$ |
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Shares vested and/or issued |
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$ |
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Outstanding non-vested shares at end of quarter |
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— |
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$ |
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14
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Number of |
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Weighted- |
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Weighted- |
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Aggregate |
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Stock Options |
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Outstanding options at beginning of year |
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$ |
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$ |
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Options granted |
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$ |
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— |
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— |
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Options exercised |
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$ |
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Options expired and canceled |
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— |
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— |
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— |
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— |
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Outstanding options at end of quarter |
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$ |
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$ |
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Options exercisable at end of quarter |
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$ |
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$ |
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For the first three months of fiscal 2022, the Company granted stock options to purchase an aggregate of
Non-Employee Director Compensation Plan
The Company granted
Stock Compensation Expense
The Company recognized total stock-based compensation expense of $
7. Equity and Earnings per Share
The following table provides a reconciliation of the number of shares outstanding for basic and diluted earnings per share:
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For the three months ended |
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April 30, 2022 |
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May 1, 2021 |
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(in thousands) |
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Common stock outstanding: |
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Basic weighted average common shares outstanding |
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Common stock equivalents – stock options, restricted stock units and deferred stock |
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Diluted weighted average common shares outstanding |
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The following potential common stock equivalents were excluded from the computation of diluted earnings per share in each period because the exercise price of such options was greater than the average market price per share of common stock for the respective periods or because the unearned compensation associated with stock options, restricted stock units, or deferred stock had an anti-dilutive effect.
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For the three months ended |
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April 30, 2022 |
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May 1, 2021 |
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(in thousands, except exercise prices) |
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Stock options |
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Restricted stock units |
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Deferred stock |
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— |
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Range of exercise prices of such options |
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$ |
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$ |
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15
The above options, which were outstanding at April 30, 2022, expire from
Excluded from the computation of basic and diluted earnings per share were
8. Stock Repurchase Program
On March 15, 2022, the Company’s Board of Directors approved a stock repurchase program. Under the stock repurchase program, the Company may repurchase up to $
The timing and the amount of any repurchases of common stock will be determined based on the Company’s evaluation of market conditions and other factors. The stock repurchase program commenced in the first quarter of fiscal 2022 and will expire on
For the first quarter of fiscal 2022, the Company repurchased
9. Income Taxes
During the first quarter of fiscal 2022 and fiscal 2021, the Company recorded income tax expense of $
Since the end of fiscal 2013, the Company has maintained a full valuation allowance against its deferred tax assets. While the Company returned to profitability in fiscal 2021 and is projecting it will generate taxable income in fiscal 2022, given the limited history of profitability and uncertainty in future forecasts, at this time the Company believes that a full valuation allowance remains appropriate.
For federal income tax purposes, at the end of fiscal 2021, the Company had net operating loss carryforwards of approximately $
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “estimate,” “intend,” “plan,” “continue,” “believe,” “expect” or “anticipate” or the negatives thereof, variations thereon or similar terminology. The forward-looking statements contained in this Quarterly Report are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but may be found in other locations as well, and include statements regarding our expectations with respect to sales trends, marketing costs, gross margin rate, improved inventory levels and our ability to secure sufficient inventory to meet customer demand, increased freight costs, increases in certain raw materials cost, our long-term outlook, expected capital expenditures in 2022, our ability to attract new customers, and our plans with respect to our store portfolio, including anticipated closures, re-brandings, and new and relocated stores. These forward-looking statements generally relate to plans and objectives for future operations and are based upon management’s reasonable estimates of future results or trends. The forward-looking statements in this Quarterly Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved. The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited Consolidated Financial Statements and notes to those statements included elsewhere in this Quarterly Report and our audited Consolidated Financial Statements for the year ended January 29, 2022, included in our Annual Report on Form 10-K for the year ended January 29, 2022, as filed with the Securities and Exchange Commission on March 17, 2022 (our “Fiscal 2021 Annual Report”).
Numerous factors could cause our actual results to differ materially from such forward-looking statements. This discussion sets forth certain risks and uncertainties that may have an impact on future results and direction of our Company, including, without limitation, risks related to the ongoing effects of the COVID-19 pandemic, our ability to navigate supply chain uncertainties, our ability to maintain sufficient inventory levels, our ability to successfully execute on our corporate strategy, our ability to predict customer tastes and fashion trends, our ability to grow market share, labor shortages or increased labor costs, and the other risks and uncertainties set forth in the “Risk Factors” section in Part I, Item 1A of our Fiscal 2021 Annual Report.
All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. These forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances in which the forward-looking statement is based.
BUSINESS SUMMARY
Destination XL Group, Inc., together with our consolidated subsidiaries (the “Company”), is the largest specialty retailer of big and tall men’s clothing with retail and direct operations in the United States. We operate under the trade names of Destination XL®, DXL®, DXL Outlets, Casual Male XL® and Casual Male XL Outlets. At April 30, 2022, we operated 219 Destination XL stores, 16 DXL outlet stores, 32 Casual Male XL retail stores, 19 Casual Male XL outlet stores and a digital business, including an e-commerce site at dxl.com and a mobile site, m.destinationXL.com and mobile app.
Unless the context indicates otherwise, all references to “we,” “our,” “us” and “the Company” refer to Destination XL Group, Inc. and our consolidated subsidiaries. We refer to our fiscal years, which end on January 28, 2023, January 29, 2022 and January 30, 2021 as “fiscal 2022,” “fiscal 2021” and “fiscal 2020,” respectively. All three fiscal years are 52-week periods.
SEGMENT REPORTING
We currently have two principal operating segments: our stores and direct business. We consider our stores and direct business segments to be similar in terms of economic characteristics, production processes and operations, and have therefore aggregated them into one reportable segment, retail segment, consistent with our omni-channel business approach. Our wholesale segment was a third operating segment. In the first quarter of fiscal 2022, we ended the relationship with our primary wholesale customer. Due to the immateriality of the wholesale segment’s revenues, profits and assets, its operating results have been aggregated with the retail segment for both periods.
COMPARABLE SALES
Our customer’s shopping experience continues to evolve across multiple channels and we are continually adapting to meet the guest’s needs. The majority of our stores have the capability of fulfilling online orders if merchandise is not available in the warehouse. As a result, we continue to see more transactions that begin online but are ultimately completed at the store level. Similarly, if a customer
17
visits a store and the item is out of stock, the associate can order the item through our website. A customer also has the ability to order online and pick-up in a store and at curbside. We define store sales as sales that originate and are fulfilled directly at the store level. E-commerce sales, which we also refer to as direct sales, are defined as sales that originate online, whether through our website, at the store level or through a third-party marketplace.
Stores that have been open for 13 months are included in comparable sales. Stores that have been remodeled or re-located during the period are also included in our determination of comparable stores sales. Stores that have been expanded by more than 25% are considered non-comparable for the first 13 months. If a store becomes a clearance center, it is also removed from the calculation of comparable sales. The method of calculating comparable sales varies across the retail industry and, as a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other retailers.
RESULTS OF OPERATIONS
Executive Summary
|
|
For the three months ended |
|
|||||
|
|
April 30, 2022 |
|
|
May 1, 2021 |
|
||
(in millions, except percentage of sales and per share data) |
|
|
|
|
|
|
||
Sales |
|
$ |
127.7 |
|
|
$ |
111.5 |
|
Net income |
|
$ |
13.4 |
|
|
$ |
8.7 |
|
Adjusted EBITDA (Non-GAAP basis) |
|
$ |
17.3 |
|
|
$ |
13.7 |
|
|
|
|
|
|
|
|
||
Gross Margin. as a percentage of sales |
|
|
50.0 |
% |
|
|
45.6 |
% |
SG&A expenses, as a percentage of sales |
|
|
36.5 |
% |
|
|
33.3 |
% |
|
|
|
|
|
|
|
||
Per diluted share: |
|
|
|
|
|
|
||
Net income |
|
$ |
0.20 |
|
|
$ |
0.14 |
|
We are pleased to report our fifth consecutive quarter of sales and earnings growth. Comparable sales increased 19.5% for the quarter, with increases across all of our customer channels. Improvements in store traffic and conversion contributed to growth across all of our geographic regions. Our digital marketing efforts and our presence on third-party marketplaces drove growth in both our direct business and in our stores during the first quarter of fiscal 2022. Our gross margin rate for the first quarter of fiscal 2022 improved by 440 basis points driven by our brand repositioning that resulted in fewer and less frequent merchandise promotions, less penetration in lower margin wholesale revenues, and improved leverage on occupancy costs. As expected, our selling, general and administrative expenses (SG&A) increased by 320 basis points primarily due to increased payroll costs to support sales, marketing costs, and accruals for performance-based incentive plans. Our marketing costs for the first quarter of fiscal 2022 represented 5.3% of sales as compared to 3.0% in the first quarter of fiscal 2021. As a result of our sales growth and margin improvement, we exceeded our first quarter financial performance expectations with net income of $13.4 million, or $0.20 per diluted share for the first quarter of fiscal 2022, as compared to net income of $8.7 million, or $0.14 per diluted share, for the first quarter of fiscal 2021.
At April 30, 2022, we had no debt outstanding and we did not make any borrowings under our credit facility during the first quarter. Our unused excess availability at April 30, 2022 was $85.0 million. We also are pleased with our improved inventory position at the end of the first quarter. While we are still not at our ideal inventory level for certain categories, we have been able to secure inventory to support customer demand as we continue to manage supply chain challenges. As we head into the second quarter, we are encouraged by the fact that our inventory position continues to improve.
As we previously disclosed, the Company's Board of Directors approved a $15.0 million stock repurchase program in March 2022 and, during the first quarter, we repurchased 0.9 million shares of our common stock, at an aggregate cost of $4.8 million, including fees.
While we believe our long-term outlook is strong, the current environment remains highly volatile, with inflation, rising interest rates, supply chain, labor and staffing challenges, the ongoing global pandemic, as well as the war in Ukraine.
18
Financial Summary
Sales
The following table presents sales by segment for the three months ended April 30, 2022 and May 1, 2021:
|
|
For the three months ended |
|||||||||||||
(in thousands, except percentages) |
|
April 30, 2022 |
|
|
May 1, 2021 |
|
|
||||||||
Store sales |
|
$ |
88,279 |
|
|
69.4 |
% |
|
$ |
74,880 |
|
|
69.1 |
% |
|
Direct sales |
|
|
38,994 |
|
|
30.6 |
% |
|
|
33,542 |
|
|
30.9 |
% |
|
Retail segment |
|
$ |
127,273 |
|
|
|
|
$ |
108,422 |
|
|
|
|
||
Wholesale segment |
|
|
382 |
|
|
|
|
|
3,072 |
|
|
|
|
||
Total Sales |
|
$ |
127,655 |
|
|
|
|
$ |
111,494 |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total sales for the first quarter of fiscal 2022 were $127.7 million, as compared to $111.5 million in the first quarter of fiscal 2021. Comparable sales for the first quarter were up 19.5% with comparable sales from our stores up 20.8% and our direct business were up 16.7%.
The strength of our stores during the first quarter was driven by an increase in store traffic and dollars spent per transaction. All regions reported a comparable sales increase for the first quarter, with our Northeast, Florida and West Coast stores showing the strongest performance, resulting in a 20.8% comparable sales increase from our stores. As store traffic improved during the first quarter, sales growth in our direct business, which grew over 40% since fiscal 2019, started to normalize. The 16.7% increase in comparable sales from our direct business was driven by double-digit growth from our website, an increase in our universe sales (online orders that originate in a store) and continued growth from online marketplaces. Through our digital efforts and marketplace presence, we are continuing to attract a new customer to DXL.
As we previously disclosed, during the first quarter of fiscal 2022, we ended our relationship with our primary wholesale customer. As a result, our wholesale revenues decreased to $0.4 million as compared to $3.1 million for the first quarter of fiscal 2021.
Gross Margin Rate
For the first quarter of fiscal 2022, our gross margin rate, inclusive of occupancy costs, was 50.0% as compared to a gross margin rate of 45.6% for first quarter of fiscal 2021.
Our gross margin rate improved by 440 basis points, driven by a 200 basis point improvement in merchandise margins and a 240 basis point improvement in occupancy costs as compared to the first quarter of fiscal 2021. The 240 basis point improvement in occupancy costs was due to the increased leverage from sales as well as a decrease of approximately $0.9 million in occupancy costs from closed stores. The 200 basis point improvement in merchandise margin was driven by our brand repositioning which has resulted in lower promotional markdowns. Merchandise margin also improved as a result of the decrease in wholesale revenues, which by its nature has a lower margin. These improvements were partially offset by higher freight costs. We expect that we will continue to experience an increase in freight costs and in the cost of certain raw materials, particularly cotton. As compared to fiscal 2021, we expect that our gross margin rate for fiscal 2022 will decrease by approximately 100 basis points due to expected ongoing increased freight costs and raw material costs, as well as inventory mix with lower margin, branded collection apparel.
Selling, General and Administrative Expenses
As a percentage of sales, SG&A (selling, general and administrative) expenses for the first quarter of fiscal 2022 were 36.5% as compared to 33.3% for the first quarter of fiscal 2021.
On a dollar basis, SG&A expenses increased by $9.5 million as compared to the first quarter of fiscal 2021. The increase was primarily due to an increase in marketing costs to drive customer acquisition and engagement, payroll costs to support sales growth, including merit adjustments and filling open positions, and an increase in performance-based incentive accruals. Our marketing costs for the first quarter of fiscal 2022 represented 5.3% of sales as compared to 3.0% in the first quarter of fiscal 2021. For the fiscal 2022, the Company is expecting marketing costs to be approximately 6.2% of sales.
Management views SG&A expenses through two primary cost centers: Customer Facing Costs and Corporate Support Costs. Customer Facing Costs, which include store payroll, marketing and other store and direct operating costs, represented 20.2% of sales in the first quarter of fiscal 2022 as compared to 17.9% of sales in the first quarter of fiscal 2021. Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 16.3% of sales in the first quarter of fiscal 2022 compared to 15.4% of sales in the first quarter of fiscal 2021.
Impairment of Assets
19
During the first quarter of fiscal 2022 and fiscal 2021, the Company recorded non-cash gains of $0.5 million and $0.8 million, respectively, on the reduction of its operating lease liability in connection with its decision to close certain retail stores, which resulted in a revaluation of the lease liability. Of the total non-cash gains, $0.4 million and $0.7 million for the first quarter of fiscal 2022 and fiscal 2021, respectively, related to leases where the right-of-use assets had previously been impaired, and therefore, were recorded as a reduction of the previously-recorded impairment and were included in the Impairment of Assets line of the Consolidated Statement of Operations for the three months ended April 30, 2022 and May 1, 2021. The remaining gain of $0.1 million in each the first quarter of fiscal 2022 and fiscal 2021 was recorded as a reduction to occupancy costs in each period.
Depreciation and Amortization
Depreciation and amortization for the first quarter of fiscal 2022 decreased to $4.0 million as compared to $4.5 million for the first quarter of fiscal 2021. The decrease was due to a lower depreciable cost base, especially from our store assets, due to our limited capital spending since fiscal 2020.
Interest Expense, Net
Interest expense for first quarter of fiscal 2022 was $0.1 million, as compared to $1.1 million for the first quarter of fiscal 2021. The Company had no outstanding debt and no borrowings under its credit facility during the first quarter of fiscal 2022 resulting in a decrease in interest expense as compared to the first quarter of fiscal 2021.
Income Taxes
We established a full valuation allowance against our deferred tax assets at the end of fiscal 2013. While we returned to profitability in fiscal 2021 and are projecting that we will generate taxable income in fiscal 2022, given our limited history of profitability and uncertainty in future forecast, at this time we believe that a full valuation allowance remains appropriate.
Our tax provision for the first quarter of fiscal 2022 and fiscal 2021 was primarily due to income tax in states where NOL usage is statutorily limited.
Net Income
For the first quarter of fiscal 2022, we recorded net income of $13.4 million, or $0.20 per diluted share, compared with net income of $8.7 million, or $0.14 per diluted share, for the first quarter of fiscal 2021. The improvement in earnings was driven by sales growth and improved margins.
Inventory
As of April 30, 2022, our inventory increased approximately $8.5 million to $96.9 million, as compared to $88.4 million at May 1, 2021. We are in a stronger inventory position at April 30, 2022 than at the end of the first quarter last year and are continuing to manage inventory closely given the ongoing issues with the global supply chain. We believe that we will be able to secure sufficient inventory to support our sales forecasts. At April 30, 2022, our clearance inventory was 6.9% of our total inventory, as compared to 10.1% at May 1, 2021.
SEASONALITY
Historically, and consistent with the retail industry, we have experienced seasonal fluctuations as it relates to our operating income and net income. Traditionally, a significant portion of our operating income and net income is generated in the fourth quarter, as a result of the “Holiday” season.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash generated from operations and availability under our credit facility. At April 30, 2022, we had no outstanding debt, including no borrowings during the quarter under our credit facility. We believe our cash on hand, availability under our credit facility, and ongoing cash generated from our operations will be sufficient to fund our working capital requirements, our stock repurchase program and capital expenditures for the next 12 months. We believe that cash flows from operating activities and cash on hand will also be sufficient to satisfy our capital requirements in the longer-term, however, to the extent future capital requirements exceed cash on hand plus cash flows from operating activities, we anticipate that working capital will be financed by our credit facility, as discussed below.
For the first three months of fiscal 2022, cash flow from operations decreased to $(1.5) million as compared to $7.8 million for the first three months of fiscal 2021. Free cash flow, a non-GAAP measure, decreased to $(2.7) million for the first three months of fiscal
20
2022 as compared to $7.0 million for the first three months of fiscal 2021. The decrease in free cash flow was due to our seasonal inventory build in advance of Father's Day, the payout of incentive-based awards, and an increase in capital expenditures, which were partially offset by our increased earnings.
Cash flow used from financing activities for the first three months of fiscal 2022 improved by $14.9 million as compared to the first three months of fiscal 2021, primarily due to the repayment in the prior year of amounts outstanding under our revolver. This was partially offset by the stock offering in the first quarter of fiscal 2021 and the repurchase of our common stock, as discussed below, in the first quarter of fiscal 2022.
Stock Repurchase Program
In March 2022, the Company’s Board of Directors approved a stock repurchase program. Under the stock repurchase program, the Company may repurchase up to $15.0 million of its common stock through open market and privately negotiated transactions. For the first quarter of fiscal 2022, the Company repurchased 946,101 shares at an aggregate cost, including fees, of $4.8 million. Shares of repurchased common stock are held as treasury stock. The stock repurchase program will expire in March 2023.
Credit Facility
On October 28, 2021, we entered into a $125.0 million revolving credit agreement, which replaced our prior credit facility that was due to expire in May 2023 (the "Credit Facility"). The Credit Facility has a five-year term and provides more favorable terms than the previous credit facility. The Credit Facility includes a sublimit of $20.0 million for commercial and standby letters of credit and a sublimit of up to $15.0 million for swingline loans. Borrowings made pursuant to the Credit Facility will be made pursuant to either a Base Rate loan or LIBOR Rate loan, at the Company's option. Base Rate loans bear interest, at a rate equal to (i) the greater of: (a) the Prime Rate, (b) the Federal Funds effective rate plus 0.50% per annum and (c) the daily LIBOR rate plus 1.00% per annum, plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25% or 0.50%. LIBOR Rate loans, which may be either for 1 month or 3 months, bear interest at (i) the LIBOR rate, or the Benchmark Rate as defined in the credit agreement plus (ii) a varying percentage based on the Company’s average excess availability, of either 1.25% or 1.50%.
We had no outstanding borrowings under the New Credit Facility at April 30, 2022 and no borrowings during the first quarter of fiscal 2022. At April 30, 2022, outstanding standby letters of credit were $2.7 million and outstanding documentary letters of credit were $1.4 million. The average unused excess availability during the first quarter of fiscal 2022 was approximately $75.0 million and the unused excess availability at April 30, 2022 was $85.0 million.
Capital Expenditures
The following table sets forth the open stores and related square footage at April 30, 2022 and May 1, 2021, respectively:
|
|
April 30, 2022 |
|
|
May 1, 2021 |
|
|
||||||||||
Store Concept |
|
Number of |
|
|
Square |
|
|
Number of |
|
|
Square |
|
|
||||
(square footage in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
DXL Retail |
|
|
219 |
|
|
|
1,671 |
|
|
|
222 |
|
|
|
1,691 |
|
|
DXL Outlets |
|
|
16 |
|
|
|
80 |
|
|
|
17 |
|
|
|
82 |
|
|
Casual Male XL Retail |
|
|
32 |
|
|
|
106 |
|
|
|
42 |
|
|
|
137 |
|
|
Casual Male Outlets |
|
|
19 |
|
|
|
57 |
|
|
|
20 |
|
|
|
60 |
|
|
Total Stores |
|
|
286 |
|
|
|
1,914 |
|
|
|
301 |
|
|
|
1,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Our capital expenditures for the past two years have been very limited due to the pandemic. For fiscal 2022, we expect our capital expenditures will be approximately $10.0-$12.0 million as we make investments in technology related to our marketing and merchandising initiatives and actively pursue opportunities to relocate or convert our remaining Casual Male XL stores to DXL stores. During fiscal 2022, we are planning on rebranding up to 4 of our Casual Male XL retail stores to DXL retail stores. During the first quarter of fiscal 2022, we closed 3 Casual Male XL retail stores and 1 DXL retail store.
We are also reviewing white space opportunities in markets where our store footprint is underpenetrated. We believe that our store portfolio is a vital asset to our business strategy and we expect to continue to invest in stores over the next several years as we further strengthen the store portfolio. Over the next three to five years, based on our preliminary store development plan, we believe that we could potentially open up to a net of 50 new and relocated stores.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
21
There have been no material changes to the critical accounting policies and estimates disclosed in our Fiscal 2021 Annual Report. See Note 1 to the Consolidated Financial Statements included in this report for information on recent accounting pronouncements and changes in accounting principles.
Non-GAAP Financial Measures
Free cash flow and Adjusted EBITDA are non-GAAP measures. These non-GAAP measures are not presented in accordance with GAAP and should not be considered superior to or as a substitute for net income or cash flows from operating activities or any other measure of performance derived in accordance with GAAP. In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, the non-GAAP measures presented in this Quarterly Report may not be comparable to similar measures used by other companies. We believe that inclusion of these non-GAAP measures helps investors gain a better understanding of our performance, especially when comparing such results to previous periods and that they are useful as an additional means for investors to evaluate our operating results, when reviewed in conjunction with our GAAP financial statements.
Reconciliations of these non-GAAP measures are presented in the following tables (certain columns may not foot due to rounding):
Free Cash Flow. We define free cash flow as cash flow from operating activities less capital expenditures. Free cash flow excludes the mandatory and discretionary repayment of debt. Free cash flow is a metric that management uses to monitor liquidity. We expect to fund our ongoing capital expenditures with cash flow from operations.
The following table reconciles free cash flow:
|
|
For the three months ended |
|
|||||
(in millions) |
|
April 30, 2022 |
|
|
May 1, 2021 |
|
||
Cash flow from operating activities (GAAP basis) |
|
$ |
(1.5 |
) |
|
$ |
7.8 |
|
Capital expenditures |
|
|
(1.2 |
) |
|
|
(0.8 |
) |
Free Cash Flow (non-GAAP basis) |
|
$ |
(2.7 |
) |
|
$ |
7.0 |
|
Adjusted EBITDA. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and is before any impairment of assets, if any. We believe that adjusted EBITDA is useful to investors in evaluating our performance and is a key metric to measure profitability and economic productivity. The following table reconciles adjusted EBITDA from net income:
|
|
For the three months ended |
|
|||||
|
|
April 30, 2022 |
|
|
May 1, 2021 |
|
||
(in millions) |
|
|
|
|
|
|
||
Net income (GAAP basis) |
|
$ |
13.4 |
|
|
$ |
8.7 |
|
Add back: |
|
|
|
|
|
|
||
Impairment (gain) of assets |
|
|
(0.4 |
) |
|
|
(0.7 |
) |
Provision for income taxes |
|
|
0.1 |
|
|
|
- |
|
Interest expense |
|
|
0.1 |
|
|
|
1.1 |
|
Depreciation and amortization |
|
|
4.0 |
|
|
|
4.5 |
|
Adjusted EBITDA (non-GAAP basis) |
|
$ |
17.3 |
|
|
$ |
13.7 |
|
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
In the normal course of business, our financial position and results of operations are routinely subject to a variety of risks, including market risk associated with interest rate movements on borrowings and foreign currency fluctuations. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of these and other potential exposures.
There have not been any material changes to our interest rate or foreign currency risks previously disclosed in Part II, Item 7A of our Fiscal 2021 Annual Report.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of April 30, 2022. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible
22
controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of April 30, 2022, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
While the majority of our home office employees are working remotely during the COVID-19 pandemic, we have not experienced any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended April 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are subject to various legal proceedings and claims that arise in the ordinary course of business. Management currently believes that the resolution of these matters will not have a material adverse impact on our future results of operations or financial position.
Item 1A. Risk Factors.
There have been no material changes to the risk factors as previously disclosed in Part I, Item 1A of our Fiscal 2021 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(c)
On March 15, 2022, the Company’s Board of Directors approved a stock repurchase program that allows for the repurchase of up to $15.0 million of our common stock through open market and privately negotiated transactions. The timing and the amount of any repurchases of common stock will be determined based on the Company’s evaluation of market conditions and other factors. The stock repurchase program will expire on March 15, 2023, but may be suspended, terminated or modified at any time for any reason. At April 30, 2022, the remaining authorization under the stock repurchase program was approximately $10.2 million.
Stock repurchase activity during the three months ended April 30, 2022 was as follows:
Period |
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
(d) |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
January 30, 2022 to February 26, 2022 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
February 27, 2022 to April 2, 2022 |
|
|
493,156 |
|
|
$ |
5.05 |
|
|
|
493,156 |
|
|
$ |
12,458,203 |
|
April 3, 2022 to April 30, 2022 |
|
|
452,945 |
|
|
$ |
5.09 |
|
|
|
452,945 |
|
|
$ |
10,153,020 |
|
Total |
|
|
946,101 |
|
|
$ |
5.07 |
|
|
|
946,101 |
|
|
$ |
10,153,020 |
|
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
24
Item 6. Exhibits.
10.1 |
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10.2 |
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10.3 |
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10.4 |
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10.5 |
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10.6 |
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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101.INS |
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Inline XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 |
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Cover Page Interactive Data File – The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. |
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* Filed herewith. |
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
DESTINATION XL GROUP, INC. |
||
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|
Date: May 26, 2022 |
|
By: |
|
/s/ John F. Cooney |
|
|
|
|
John F. Cooney |
|
|
|
|
Senior Vice President, Chief Accounting Officer and Corporate Controller (Duly Authorized Officer and Chief Accounting Officer)
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26
