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DX

DESTINATION XL GROUP, INC. (DXLG)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 2026 revenue was $115.5M, down 7.5% year over year, with diluted EPS at $0.00; EPS beat consensus (-$0.03*) while revenue missed ($117.2M*), and adjusted EBITDA of $4.6M materially beat ($1.9M*) .
  • Comparable sales declined 9.2% (stores -7.1%, direct -14.4%), but sequential monthly comps improved: May (-10.4%), June (-9.6%), July (-7.0%); August comps to date trended slightly better than July .
  • Gross margin contracted 300 bps to 45.2% on occupancy deleverage and incremental freight/promotions; SG&A fell $6.1M year over year and declined to 41.2% of sales, reflecting lower marketing and incentives .
  • Strategic catalysts: credit facility extended to August 2030 (sized to $100M), continued pivot to private brands (target >60% in 2026, >65% in 2027), and FiTMAP® scaling (86 stores heading into fall, plan up to 200 by end of 2027) .

Values retrieved from S&P Global*

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA of $4.6M beat consensus (~$1.9M*) as disciplined SG&A and higher-margin private brand mix helped offset top-line softness; EBITDA margin reached 4.0% vs 0.1% in Q1 .
  • Management is executing a more disciplined promotional framework to drive “incremental sales and margin dollars,” with AB-testing, sales per markdown dollar instrumentation, and targeted offers (e.g., Heroes Discount, Fit Exchange) .
    • “We have started to reframe our promotional strategy around a more disciplined strategic framework that prioritizes relevance, competitiveness and a stronger perception of value.” — CEO Harvey Kanter .
  • Acceleration to private brands (56.5% penetration today) to control margins and value, targeting >60% in 2026 and >65% in 2027; initial margin (IMU) for private brands runs “upper 60s to mid 70s” vs national brands “low 50s” .

What Went Wrong

  • Revenue missed consensus and fell 7.5% YoY; comparable sales -9.2% with direct (-14.4%) pressured by traffic and average order value, plus new e-commerce platform issues that impacted performance .
  • Gross margin contracted 300 bps to 45.2% on occupancy deleverage (+240 bps) and higher freight/markdowns; tariff impact expected to intensify in H2, with FY25 receipts cost impact “just under $4.0M” if current rates persist .
  • New stores collectively underperformed initial expectations amid sector softness; store development paused beyond 2025 to prioritize free cash flow and lower-capital strategic initiatives .

Financial Results

Quarterly Summary (older → newer)

MetricQ4 2025Q1 2026Q2 2026
Revenue ($USD)$119.203M $105.533M $115.505M
Net Income ($USD)$(1.316)M $(1.939)M $(0.265)M
Diluted EPS ($USD)$(0.02) $(0.04) $0.00
Gross Margin %44.4% 45.1% 45.2%
SG&A % of Sales41.7% 45.0% 41.2%
Adjusted EBITDA ($USD)$4.2M $0.1M $4.6M
Adjusted EBITDA Margin %3.5% 0.1% 4.0%
Cash + Investments ($USD)$48.4M $29.1M $33.5M

YoY Comparison – Q2

MetricQ2 2024 (prior year)Q2 2026
Revenue ($USD)$124.820M $115.505M
Net Income ($USD)$2.383M $(0.265)M
Diluted EPS ($USD)$0.04 $0.00
Gross Margin %48.2% 45.2%
Adjusted EBITDA ($USD)$6.5M $4.6M

Results vs Consensus

MetricQ4 2025Q1 2026Q2 2026
Revenue Estimate ($USD)$120.933M*$103.503M*$117.231M*
Revenue Actual ($USD)$119.203M $105.533M $115.505M
EPS Estimate ($USD)$0.025*$(0.06)*$(0.03)*
EPS Actual ($USD)$0.02 $(0.04) $0.00
EBITDA Estimate ($USD)$5.264M*$(0.977)M*$1.876M*
EBITDA Actual ($USD)$3.215M $0.139M $4.579M

Values retrieved from S&P Global*

KPIs and Operating Metrics

KPIQ1 2026Q2 2026
Comparable Sales (Total)-9.4% -9.2%
Comparable Sales – Stores-6.6% -7.1%
Comparable Sales – Direct-16.2% -14.4%
Direct Sales ($) and Mix$29.1M; 27.5% $31.8M; 27.5%
Monthly Comps TrendFeb -13.9%, Mar -8.2%, Apr -7.2% May -10.4%, Jun -9.6%, Jul -7.0%
Inventory ($)$85.5M $78.9M
Clearance % of Inventory9.5% 10.2%
Store Count (Total)290 294
FiTMAP Locations52 (plan 85 by FY25 end) 86 entering fall
Private Brand Penetration56.5% (current target path) 56.5% (target >60% 2026)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sales/Earnings GuidanceFY 2025Not providing sales/EPS guidance No formal sales/EPS guidance reiterated Maintained
Marketing Cost (% Sales)FY 2025~6.0% ~5.9% Lowered
Capex (net of tenant incentives)FY 2025$19–$21M $17–$19M Lowered
Store Openings (new)FY 20258 new DXL + 2 CMXL conversions (plan) Expect 2 additional DXL stores in FY25 Reduced pace (progression)
FY 2026 Store DevelopmentFY 2026Pause openings (pending macro recovery) Pause reiterated Maintained
Credit FacilityThrough 2030Prior maturity Oct 2026 Extended to Aug 13, 2030; facility sized to $100M Extended
Private Brand Mix2026/2027N/A (baseline 56.5%) >60% in 2026; >65% in 2027 New targets
FiTMAP DeploymentFY 2025/2027Plan 85 by FY25 end; up to 200 by FY27 86 entering fall; up to 200 by FY27 Maintained/achieved interim
Tariff Impact (cost)FY 2025< $2.0M, ~40 bps (early-year view) Just under $4.0M (full-year receipts if rates persist) Higher expected impact

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2025)Previous Mentions (Q1 2026)Current Period (Q2 2026)Trend
Private Brands Mix & MarginEmphasized margin control, value orientation Customers trading down; private label benefits Target >60% in 2026; IMU advantage vs national brands Increasing focus
Promotional Strategy DisciplinePause brand campaign; prioritize efficiency Price Match, Fit Exchange, loyalty enhancements AB testing, sales per markdown dollar instrumentation Maturing execution
Tariffs/Macro HeadwindsMinimal exposure expected (<10 bps GM) < $2M impact estimate (early-year) “Just under $4M” receipts impact if rates persist; H2 margin pressure Worsening pressure
Digital Platform & DirectUpgraded eCom platform (expected CX improvements) Identified/corrected site issues; direct 27.5% mix Ongoing site stability workstreams; direct AOV/traffic pressure Gradual remediation
Store DevelopmentAdded stores in FY24; plan pause in FY26 Opening 6+ stores in FY25 2 more stores in FY25; pause beyond FY25 Slowing pace
FiTMAP RolloutPlan to 85 stores by FY25, up to 200 by FY27 20K scans; scaling plan 86 stores entering fall; 23K scans; VP role created Scaling up

Management Commentary

  • “Our second quarter results continue to reflect Big & Tall sector softness, plus the macroeconomic challenges… Over the past year, our customer has been gravitating more towards lower priced goods and select promotions” — Harvey Kanter, CEO .
  • “We are extending our core assortment to provide breadth and depth to our private brand mix… which enables us to better control the margins than with our national designer brands” .
  • On promotions: “We have started to reframe our promotional strategy… using sales per markdown dollar, unit velocity and customer engagement metrics” .
  • On tariffs: “If currently enacted rates remain in effect… impact on fiscal 2025 receipts will be just under $4.0M” .
  • On FiTMAP: “We believe this technology will enhance customer engagement… establish DXL as a technology leader… 23,000 customers scanned” .

Q&A Highlights

  • Private brands strategy and margin: CEO reiterated current 56.5% mix and targets (>60% in 2026; >65% in 2027); outlined IMU differential (private brands upper 60s–mid 70s vs national brands low 50s) and strategic promotional use to sustain merch margin advantage .
  • Tariff sensitivity: Management declined to provide a 2026 range given fluidity; FY25 range moved between ~$1M–$6M, now “just under $4M,” highlighting daily policy variability .
  • Capex outlook: With store development paused beyond FY25, maintenance/infrastructure Capex typically runs ~$5–$12M per year; 2026 plans TBD pending H2 business trajectory .
  • In-store media: DXL uses in-store audio and digital screens to reinforce fit/brand experience rather than overt promotions, supporting high NPS in the 80s .

Estimates Context

  • Q2 2026 vs consensus: EPS beat ($0.00 vs -$0.03*), revenue miss ($115.5M vs $117.2M*), and EBITDA beat ($4.58M vs $1.88M*) — reflecting SG&A discipline and private brand margin offsets amid occupancy deleverage and direct channel pressure .
  • Prior quarters context: Q1 2026 EPS modestly beat the more negative consensus, revenue exceeded estimates; Q4 2025 EPS slightly below and revenue slightly below estimates, highlighting ongoing volatility and promotional cadence effects .
  • Implications: Street may lift H2 EBITDA/EPS assumptions on promotional efficacy and mix, while trimming revenue on sustained traffic/AOV pressure and higher expected tariff impact in H2; occupancy deleverage remains a headwind until comps improve .

Values retrieved from S&P Global*

Key Takeaways for Investors

  • Near-term setup: Mixed print with revenue miss but EPS/EBITDA beats; sequential comp improvement and August trend offer early signs of stabilization .
  • Margin defense: Private brands push and promotional discipline are effectively cushioning merchandise margins; watch H2 tariff impact and occupancy deleverage .
  • Cash/liquidity: No debt, $33.5M cash/investments, and extended $100M facility through 2030 provide flexibility despite lower free cash flow YTD .
  • Strategic levers: FiTMAP scaling and Nordstrom collaboration augment customer acquisition; execution consistency will be key to converting engagement into sales .
  • Digital remediation: Stabilizing the new e-commerce platform and improving site speed/conversion remain critical to reversing direct channel declines .
  • 2026 focus: Store development pause shifts capital to lower-risk initiatives; maintenance/infrastructure Capex likely ~$5–$12M pending H2 performance .
  • Monitoring points: Monthly comps trajectory, direct traffic/AOV, tariff developments, promotional ROI, and private brand penetration progression will drive estimate revisions and stock narrative .

Citations: Press release and 8-K Q2 2026 ; 8-K Q2 2026 ; Earnings call transcript Q2 2026 ; 8-K Q1 2026 ; Q4 2025 press release .