Executive Summary

Q4 FY2024 sales were $119.2M (13 weeks) with comps down 8.7%; GAAP diluted EPS was $(0.02), and adjusted EPS $0.02 as merchandise margin improved but occupancy deleveraged on lower sales .
Gross margin fell 260 bps YoY to 44.4% (occupancy +310 bps as % of sales), while adjusted EBITDA was $4.2M (3.5% margin) vs $11.7M (8.5%) last year’s 14‑week quarter .
Management withdrew formal FY25 sales/EPS guidance; early 1Q25 comps were down 12.5%, but they expect comps to improve to single‑digit negative in Q2 and turn positive in 2H on initiatives (loyalty relaunch, targeted promotions, e‑commerce replatform, FitMap rollout) and easier compares; tariff impact seen as <10 bps to GM in 2025 given limited exposure .
Balance sheet remains a support: $48.4M cash & investments, no debt; inventory down 6.8% YoY with clearance at 8.6% (below ~10% benchmark), supporting disciplined promo strategy without excess markdown risk .
S&P Global consensus estimates were unavailable at time of analysis; we benchmark results vs company guidance and prior periods instead. Consensus comparison not included (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well
- Merchandise margin expanded +50 bps in Q4 and +40 bps for FY24 despite promotional activity, helped by mix shift to private label, lower outbound shipping, and reduced loyalty expense .
- Strong inventory discipline: inventory down 6.8% YoY to $75.5M with clearance at 8.6%, enabling selective promotions without bloating clearance; free cash flow positive for FY24 at $1.9M .
- Strategic building blocks: new e‑commerce platform near completion (with plans to add GenAI for search/personalization), FitMap body‑scanning moving from 25 to 50 stores in 2025, and loyalty program re‑launched with sign‑ups running roughly 2x plan .
What Went Wrong
- Traffic and conversion headwinds persisted: store traffic remained the primary pressure point; direct conversion lagged, driving comps to −8.7% in Q4 (stores −6.7%, direct −12.7%) and sequential volatility across months (Nov −11.8%, Dec −4.4%, Jan −13.3%) .
- Occupancy deleverage on lower sales and higher rents drove a 260 bps Q4 gross margin rate decline YoY, overwhelming the better merchandise margin; SG&A rose to 41.7% of sales in Q4 despite absolute dollar cuts .
- New stores underperformed initial expectations (11 of 11 below plan), with traffic as the key drag; average capex per 2024 store “upwards of $1M,” prompting a 2026 pause in new openings absent a demand rebound and brand advertising support .

Financial Results

Metric	Q2 FY2024	Q3 FY2024	Q4 FY2024
Revenue ($M)	$124.820	$107.503	$119.203
Diluted EPS (GAAP)	$0.04	$(0.03)	$(0.02)
Adjusted EPS (Non-GAAP)	N/A	N/A	$0.02
Gross Margin % (incl. occupancy)	48.2%	45.1%	44.4%
SG&A % of Sales	43.0%	44.1%	41.7%
Adjusted EBITDA ($M)	$6.5	$1.0	$4.2
Adjusted EBITDA Margin %	5.2%	1.0%	3.5%

Q4 YoY (vs FY2023 Q4, 14 weeks)

Metric	Q4 FY2023	Q4 FY2024	YoY
Revenue ($M)	$137.142	$119.203	−13.1% (14w vs 13w)
Diluted EPS (GAAP)	$0.08	$(0.02)	Down $0.10
Gross Margin %	47.0%	44.4%	−260 bps
Adjusted EBITDA ($M)	$11.7	$4.2	−$7.5

Channel/Comps

KPI	Q2 FY2024	Q3 FY2024	Q4 FY2024
Comparable Sales	−10.9%	−11.3%	−8.7%
Store Comps	−10.0%	−9.9%	−6.7%
Direct Comps	−12.8%	−14.7%	−12.7%
Q4 Monthly Comps	—	—	Nov −11.8%; Dec −4.4%; Jan −13.3%

KPIs and Balance Sheet

KPI	Q2 FY2024	Q3 FY2024	Q4 FY2024
Cash & Investments ($M)	$63.2	$43.0	$48.4
Debt	None	None	None
Inventory ($M)	$78.6	$89.1	$75.5
Clearance % of Inventory	10.4%	9.2%	8.6%
Stores (Total)	284	285	288
Direct Sales Mix	29.6% (Q2)	29.1% (Q3)	30.3% (FY24)

Non-GAAP and notable items

Q4 included $1.3M store asset impairment and $1.0M accrual for non‑recurring legal settlement costs; FY24 adjusted EBITDA $19.9M (4.3% margin) and free cash flow $1.9M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Sales ($M)	FY2024	$470–$490 (8/29/24) → “~$470 low-end” (11/22/24)	$467.0–$470.0 (1/13/25)	Lowered range narrowing near low end
Adjusted EBITDA Margin	FY2024	~6.0% (8/29/24) → 4.5% (11/22/24)	4.2%–4.5% (1/13/25)	Lowered
Sales/Earnings Guidance	FY2025	N/A	No FY25 sales/EPS guidance (3/20/25)	Withdrew / none provided
Comparable Sales Trajectory	FY2025	N/A	1Q: low double‑digit negative; 2Q: single‑digit negative; 2H: positive	Qualitative cadence provided
Gross Margin Tariffs Impact	FY2025	N/A	<10 bps impact expected; minimal exposure to China/Mexico/Canada	Informational
Marketing Cost	FY2025	N/A	~6.0% of sales; pause brand awareness campaign	Cost guide
Capex	FY2025	N/A	$19–$21M, net of TI	New
Store Development	FY2025–26	8 new stores in 2025 (prior plan)	2025: open 8 new DXL + 2 CMXL conversions; pause new openings in 2026	Reaffirm/slow in 2026

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q3)	Current Period (Q4)	Trend
Demand/Traffic	Persistent traffic headwinds; price-conscious consumer; shift to entry-level price points	Stores: traffic main issue; direct: conversion down; Dec promos helped	Stabilizing with promo responsiveness but still weak
Merchandise Margin	Flat in Q2; slight pressure in Q3 from markdowns	+50 bps Q4 (mix, shipping, loyalty); occupancy deleverage drove GM down	Mix/ship offsets working; occupancy drag persists
Promotions/Loyalty	Pivot spend to productive channels; pause brand campaign	Two‑pillar promo strategy; price‑match improved value perception +12 pts; new DXL Rewards relaunch with strong sign-ups	Tactical promos driving engagement; loyalty refresh traction
E‑commerce/Tech	New platform rollout phases; faster site/search	Nearing completion; plans for GenAI personalization; better site‑to‑store	Platform upgrade nearing finish; AI next
Fit/Body Tech	—	FitMap in 25 stores; going to 50 in 2025; exclusive sizing; 3D configurator	Expanding rollout; differentiation
Alliances/Channels	Nordstrom marketplace launched; expanding styles	<1% sales currently; broader co‑marketing planned in 2025	Early stage; potential incremental
Stores/Expansion	Openings reduced; target 8 in 2025	11/11 below plan; capex/store upwards of ~$1M; pause new in 2026	Cautious; await demand/awareness
Tariffs	—	Minimal exposure to CN/MX/CA; <10 bps GM impact expected	Monitored risk; low near-term impact
GLP‑1 Impact	—	Mixed: some size exits; fit more important; Fit Exchange donation program boosts AOV by >30%	New programs aligned to trend

Management Commentary

“Men’s retail remains volatile... we maintained a strong operating regimen... to drive positive net earnings, positive free cash flow, and an adjusted EBITDA margin of 4.3%” .
“Through the first six weeks for the year, our comps are down 12.5%... we believe... improve... to a return to positive comp results in the second half” .
“Merchandise margins increased by 50 basis points for the fourth quarter... offset higher markdown rate... occupancy costs increased by 310 basis points... gross margin... down 260 basis points” .
“We are nearing completion of our e‑commerce conversion... plans... using Gen AI to enable... product search and discovery with increased personalization” .
“FitMap... capture 242 points... provide recommended sizes... we plan to add it to 25 additional stores in 2025” .

Q&A Highlights

GLP‑1: Some customers drop out of big & tall sizes; programmatic response is Fit Exchange (20% discount for donations), with >1,000 participants in ~3.5 weeks and AOV >30% above average .
Tariffs: Minimal exposure for owned brands (estimated 7–10 bps GM); national brands not yet taking broad action; monitoring volatile policy landscape .
Promotions vs Margin: Expect modest (<100 bps) merchandise margin erosion in 2025 from more promotions; occupancy deleverage remains the bigger margin headwind .
Loyalty Migration: Only best customers auto‑migrated; broader sign‑ups tracking ~2x initial forecasts, targeting a more engaged base .
New Stores: 11/11 below plan; traffic is the lone failing metric (conversion, UPT, ticket hold); capex/store “upwards of $1M”; opening cadence tied to improved awareness and demand .

Estimates Context

S&P Global consensus for Q4 FY2024 revenue/EPS/EBITDA and next‑quarter estimates were unavailable at the time of analysis; we therefore do not present beat/miss vs consensus. The company also did not provide FY2025 sales/EPS guidance, limiting forward comparisons to qualitative cadence and internal cost/Capex targets (S&P Global data unavailable; management withdrew formal FY25 guidance) .

Key Takeaways for Investors

Mix and cost actions cushioned margin pressure: merchandise margin rose despite promotions, but occupancy deleverage on lower sales remains a material headwind until comps turn positive .
Near‑term strategy is demand capture, not price: targeted promos + loyalty relaunch are resonating (Dec comps improved, value perception +12 pts), with controlled markdown discipline and healthy inventory/clearance .
Differentiated fit/tech moat is expanding: FitMap rollout and upcoming GenAI personalization on a new e‑commerce stack should support conversion and LTV as traffic recovers .
New store ROI on hold until awareness/demand improve: 2026 store openings paused; 2025 limited to 8 new DXL + 2 conversions; capital prudence intact .
Balance sheet a safety net: $48.4M cash & investments, no debt, positive FY24 FCF, giving flexibility to sustain initiatives through the cycle .
Watch the comp cadence: 1Q comps started down ~12.5%, but management targets sequential improvement to 2H positive; tactical promo efficacy and loyalty engagement are near‑term proof points .
Tariffs a monitored risk but modest near‑term impact (<10 bps GM) given sourcing mix; broader Asia exposure via vendors bears watching .

Appendix: Additional Q4/FY24 Data Points

Q4 non‑GAAP items: $1.3M impairment; $1.0M accrual for non‑recurring legal settlement costs .
FY24: sales $467.0M; adjusted EBITDA $19.9M (4.3%); operating cash flow $29.6M; FCF $1.9M; share repurchase 4.9M shares at $13.7M .
Digital/Direct: FY24 direct sales $141.3M (30.3% of retail segment) vs $163.1M (31.3%) in FY23 .
Holiday color: 9‑week holiday sales $94.7M; comps −7.4% (stores −6.2%, direct −10.0%); Q4 December promos improved comps to −4.4% .

Sources: DXLG Q4 FY2024 press release and 8‑K (Mar 20, 2025) ; Q4 FY2024 earnings call transcript (Mar 20, 2025) ; Q3 FY2024 press release (Nov 22, 2024) ; Q2 FY2024 press release (Aug 29, 2024) ; Holiday 8‑K (Jan 13, 2025) .

DESTINATION XL GROUP, INC. (DXLG)·Q4 2025 Earnings Summary