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DX

DESTINATION XL GROUP, INC. (DXLG)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 2026 revenue was $105.5M, down 8.6% YoY, with diluted EPS of -$0.04 vs +$0.06 last year; gross margin fell 310 bps to 45.1% on occupancy deleverage and promotional activity .
  • Results modestly beat Wall Street consensus: revenue $105.5M vs $103.5M estimate*, EPS -$0.04 vs -$0.06 estimate*, and EBITDA $0.1M vs -$1.0M estimate*; sequentially, sales declined vs Q4 but were above Q3 .
  • Comparable sales were -9.4% (stores -6.6%, direct -16.2%); management expects comps to improve: Q2 single‑digit decline and a return to positive comps in H2 .
  • Strategic catalysts: value-focused initiatives (Price Match, Fit Exchange, Heroes Discount), loyalty relaunch, Nordstrom marketplace, and FiTMAP sizing tech rollout (20K scans, 52 stores, targeting 85 in 2025) .
  • Tariffs seen adding <$2M of cost (~40 bps of sales); continued inventory discipline (clearance 9.5%, inventory down $5.8M YoY) stabilizes working capital but Q1 free cash flow was -$18.8M due to seasonal build and payables timing .

What Went Well and What Went Wrong

What Went Well

  • Private label mix shift and value orientation improved merchandise margin resilience despite promotions; private brands reached ~57% penetration (vs 55% last year) and carry higher margins .
  • Value initiatives drove engagement: Fit Exchange lifted AOV +39%, shopping frequency +51%, UPT +29%; Heroes Discount users spent ~10% more than average AOV .
  • FiTMAP tech scaling (exclusive to Big + Tall until 2030): 20K+ scans, 52 stores live, plan for 85 in 2025 and up to 200 by 2027; scanned customers exhibit higher AOV and frequency .

What Went Wrong

  • Direct business lagged: comp -16.2% on lower traffic and AOV; site migration introduced early-quarter functionality issues that were corrected .
  • Gross margin fell 310 bps to 45.1% on occupancy deleverage (+280 bps from lower sales/increased rents) and markdowns (+30 bps impact) .
  • Q1 free cash flow was -$18.8M, driven by lower earnings and accelerated inventory receipts/payables timing; cash/investments fell to $29.1M (no debt) .

Financial Results

Year-over-Year (Q1 2025 vs Q1 2026)

MetricQ1 2025 (FY 2024)Q1 2026 (FY 2025)
Revenue ($USD Millions)$115.5 $105.5
Diluted EPS ($)$0.06 -$0.04
Gross Margin (%)48.2% 45.1%
Adjusted EBITDA ($USD Millions)$8.2 $0.1
Adjusted EBITDA Margin (%)7.1% 0.1%

Sequential Trend (oldest → newest)

MetricQ3 2025 (Nov 2, 2024)Q4 2025 (Feb 1, 2025)Q1 2026 (May 3, 2025)
Revenue ($USD Millions)$107.5 $119.2 $105.5
Diluted EPS ($)-$0.03 $0.02 -$0.04
Gross Margin (%)45.1% 44.4% 45.1%
Adjusted EBITDA ($USD Millions)$1.0 $4.2 $0.1
Adjusted EBITDA Margin (%)1.0% 3.5% 0.1%

Estimates vs Actuals

MetricQ4 2025 EstimateQ4 2025 ActualQ1 2026 EstimateQ1 2026 Actual
Revenue ($USD Millions)120.9*119.2 103.5*105.5
Primary EPS ($)0.03*0.02 -0.06*-0.04
EBITDA ($USD Millions)5.3*3.1 -1.0*0.14

Values with asterisks (*) retrieved from S&P Global.

Channel and KPI Breakdown (Q1 2026)

KPIValue
Comparable Sales-9.4%
Store Comp-6.6%
Direct Comp-16.2%
Direct Sales ($)$29.1M (27.5% of sales)
Gross Margin (%)45.1%
SG&A (% of Sales)45.0%
Inventory ($)$85.5M; Clearance 9.5%
Cash & Investments ($)$29.1M; no debt
Free Cash Flow ($)-$18.8M (Q1)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Comparable Sales TrajectoryFY 2025Q1: low double-digit negative; Q2: single-digit negative; H2: positive Q2 single-digit negative; H2 return to positive comps Maintained (narrowed to near-term specifics)
Tariff ImpactFY 2025Gross margin impact <10 bps from China/Mexico/Canada exposure Cost increase <$2.0M (~40 bps of sales) if current rates persist Raised (greater impact)
Marketing Cost (% of Sales)FY 2025~6.0% ~5.9% Lowered
Capital Expenditures ($)FY 2025$19–$21M (net of tenant incentives) $19–$21M (net of tenant incentives) Maintained
Store OpeningsFY 20258 new stores; pause openings in FY 2026 2 opened YTD; plan 6 additional in FY 2025 Maintained (consistent total)
FiTMAP RolloutFY 2025 & FY 2027–85 stores by end FY 2025; up to 200 by FY 2027 New specific targets
Full-Year Sales/Earnings GuidanceFY 2025Not provided; indicated trajectory only Not providing sales/earnings guidance (volatility, tariffs) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2025, Q4 2025)Current Period (Q1 2026)Trend
Macro/Consumer SentimentPersistent headwinds; price-sensitive consumer; shift to lower price points Managing through downcycle; discerning customer; improvement in monthly sales cadence Stabilizing (early signs)
Promotions & ValueStrategic/tactical tests; Price Match launched; mixed promo results “Always-on” value (Heroes, Fit Exchange, Price Match); clear AOV/frequency uplifts More structured, targeted
Private Label MixShift up modestly; mitigates markdowns 57% private label penetration vs 55% LY Increasing
Digital Platform & AIReplatform underway; Phase 2 live; AI-enabled search/personalization planned Migration completed end-March; site enhancements planned (AI, payments, personalization) Advancing execution
Nordstrom Marketplace37 brands; 1,400+ styles; ramping; marketing plan 37 brands; 2,200+ styles; joint marketing finalized; Anniversary Sale participation Expanding assortment/marketing
Tariffs & SourcingMinimal gross margin impact (<10 bps) expected Cost impact <$2M (~40 bps sales); 80% PL sourced ex‑China; pricing strategy under review Greater impact; mitigation ongoing
Store DevelopmentNew stores opened but traffic challenging; lower awareness; selective FY25 plan 2 opened; 6 planned; pause after FY25; need brand awareness support Prudently paced
Inventory DisciplineClearance ~10%; turnover improving Clearance 9.5%; inventory down $5.8M YoY Maintained strength
GLP‑1 DynamicsMonitoring; no material migration observed Fit Exchange leverages wardrobe changes along weight loss; strong program engagement Leveraging opportunity

Management Commentary

  • “We are currently managing our business through an economic downcycle… our assortment is well positioned to serve those value-oriented customers… trading down from national designer brands to our private label brands” — Harvey Kanter, CEO .
  • “Assuming current global tariff rate policies… we estimate the impact to add less than $2 million or ~40 bps to our costs this year” .
  • “Customers utilizing the Fit Exchange program are shopping 51% more often and delivering an AOV 39% higher… along with a 29% higher UPT versus the company average” .
  • “We have licensed proprietary and exclusive technology… Fit Map… 52 stores live; plan to end 2025 with 85 stores… as many as 200 by the end of 2027” .

Q&A Highlights

  • Limited Q&A; the call closed after minimal questions, with plans to regroup in late August and reiteration of focus on returning to growth .
  • Management emphasized near-term comps trajectory (Q2 single-digit decline; H2 positive), tariff impact mitigation, and tightening promotional tactics; broader guidance remains withheld given volatility .

Estimates Context

  • Q1 2026 beat consensus on revenue ($105.5M vs $103.5M*) and EPS (-$0.04 vs -$0.06*); EBITDA positive vs negative consensus (actual $0.14M vs -$1.0M*) .
  • Sequentially, Q4 2025 modestly missed on EBITDA and revenue vs consensus but remained profitable (EPS $0.02 vs $0.03*) .
  • Near-term estimate revisions likely to reflect: higher tariff cost assumption (~40 bps of sales) and continued occupancy deleverage; however, management’s Q2/H2 comp trajectory may temper EPS cuts if value initiatives continue to lift engagement .
    Values with asterisks (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Value initiatives are working: measurable AOV/frequency gains from Fit Exchange/Heroes programs and targeted promotions; expect continued traction as comps ease .
  • Channel mix is a watchpoint: direct remains under pressure post-replatform; execution on AI/personalization, payments, and discovery should be a near-term catalyst .
  • Margin outlook: occupancy deleverage is the primary headwind; store openings paused after FY25 and landlord negotiations could stabilize rents over time .
  • Tariffs: impact now quantified (~$2M); sourcing diversification and private label margin help mitigate; monitor for pricing moves and elasticity .
  • Inventory discipline intact: clearance ~10%, inventory down YoY, turnover improved; positions DXLG for better cash conversion as sales velocity recovers .
  • External partnerships (Nordstrom marketplace) and FiTMAP rollout broaden reach and improve conversion; execution on joint marketing should lift discovery .
  • Near-term setup: modestly improving comps trajectory (Q2 single-digit decline; H2 positive) with low bar on estimates; stock reaction likely driven by signs of direct channel recovery and tariff clarity .