Destination XL Group, Inc. Reports Fourth-Quarter and Fiscal 2012 Financial Results

 Destination XL Group, Inc. Reports Fourth-Quarter and Fiscal 2012 Financial
                                   Results

Destination XL Retail Store and E-commerce Platform Drive Sales Growth; New
DXL Marketing Campaign Expected to Increase Market Awareness Significantly;
Expects 2013 to be Year of Accelerated Progress in DXL Transformation

PR Newswire

CANTON, Mass., March 15, 2013

CANTON, Mass., March 15, 2013 /PRNewswire/ --Destination XL Group, Inc.
(NASDAQ: DXLG), the largest multi-channel specialty retailer of big & tall
men's apparel and accessories, today reported operating results for the fourth
quarter and fiscal year ended February 2, 2013 ("fiscal 2012").

Highlights

  oComparable fourth-quarter sales increased 0.5% and total fourth quarter
    sales increased to $114.9 million compared with $111.1 million in the
    fourth quarter of fiscal 2011. Full year comparable sales increased 1.5%
    and 2012 total sales were $399.6 million compared with $395.9 million in
    2011.
  oComparable fourth quarter sales for Destination XL^® (DXL^®) stores were
    up 15.0%, while comparable fourth quarter sales for Casual Male XL retail
    and outlet stores decreased 2.3%. In the quarter, the DXL stores
    represented 18.0% of the Company's comparable retail store sales.
    Comparable fourth quarter sales from the e-commerce platform increased
    approximately 13.0%.
  oIncome from continuing operations, on a diluted basis, for the fourth
    quarter was $0.09 per share, as compared to $0.71 per share for the fourth
    quarter of fiscal 2011. Adjusted income from continuing operations for the
    fourth quarter of fiscal 2011, before the reversal of the Company's
    valuation allowance and trademark impairment, was $0.08 per share. (See
    below for non-GAAP reconciliation.)
  oFor the full year, income from continuing operations, on a diluted basis,
    was $0.17 per share compared with $0.93 per share for fiscal 2011. Before
    the reversal of the Company's valuation allowance and trademark
    impairment, adjusted income from continuing operations was $0.22 per share
    in 2011. (See below for non-GAAP reconciliation.)
  oOpened 14 Destination XL stores and closed 34 Casual Male XL stores in the
    fourth quarter of 2012, reaching 48 DXL stores at the end of the year
    towards its goal to transform its business with 215 to 230 DXL stores by
    2016.

Management Comments

"Our fourth quarter results were consistent with those that we announced in
our preliminary fourth-quarter news release on February 27," said President
and CEO David Levin. "We are at a critical juncture in our transformation to
Destination XL. This year we are accelerating the opening of DXL stores and
the closing of Casual Male XL locations in order to begin realizing the
benefit of this strategy much earlier than we initially anticipated. We
expect to have between 105 and 112 DXL stores open by the end of the fiscal
year. While our SG&A costs will increase by approximately $15.0 to $17.1
million in 2013 over 2012 due to the accelerated store openings and closings,
enhancements to certain aspects of our infrastructure and the implementation
of our new marketing campaign, we expect these investments to result in
significant financial improvement beginning in 2014."

"To leverage the increased presence of our DXL stores, we will be rolling out
a comprehensive national marketing campaign this spring that will define the
DXL brand more clearly, expand market awareness and grow our active customer
base," said Levin. "The new national marketing campaign is based on the most
successful mix of TV, radio and digital marketing in the five regions where we
conducted test marketing this past fall. Using the same marketing mix that we
plan to roll out nationally in the spring, the test results demonstrated a 15%
increase in sales, 24% growth in traffic, 64% new customer purchases, an 84%
increase in web traffic and 7% higher web sales. Overall, the test results
determined that awareness of the DXL brand increased by 100% in new DXL
markets and 38% in established DXL markets, and our "end-of-rack" customer
base grew by 38%."

"Fiscal 2013 will be a year of significant investment in the DXL strategy,"
said Levin. "We anticipate that our capital expenditures to support our
aggressive transformation will peak this year at approximately $45 million,
net of anticipated lease incentives. Buoyed by the success of our test
marketing and the customer response to DXL thus far, we expect that the
combination of the new marketing campaign and the acceleration of the DXL
strategy will have a significant and positive effect on our performance in
2014 and beyond. Through the successful execution of our DXL strategy, in
2016 we expect to report sales of more than $600 million, operating margins
greater than 10% and cash flow generation in the range of $60 to $70
million."

Fourth-Quarter Fiscal 2012 Results

Sales

For the fourth quarter of fiscal 2012, total sales were $114.9 million
compared with $111.1 million in the fourth quarter of fiscal 2011. Comparable
sales for the fourth quarter increased 0.5% compared with the same period of
the prior year. On a comparable basis, sales from the retail stores increased
0.5% while the direct business increased 0.6%. The increase in the retail
stores of 0.5% was primarily driven by the DXL stores which had a comparable
increase of 15.0%, which represented 18.0% of the Company's comparable retail
store sales. Excluding the DXL stores, sales from the retail storesdecreased
2.3%. Sales for the 53^rd week of fiscal 2013 were $5.1 million.

The 0.6% increase in comparable direct sales during the fourth quarter was
primarily related to a 13.0% increase in e-commerce sales, which was partially
offset by a 49.0% decline from catalogs. In response to lower catalog sales,
the Company has intensified its digital marketing efforts, which include
emails, web searches, Internet banners, and affiliate sites. During the fourth
quarter the Company reduced the number of catalogs distributed by 76.0% with
70.0% fewer impressions.

For full year fiscal 2012, total sales were $399.6 million compared with
$395.9 million for full year fiscal 2011. Comparable sales for full year
fiscal 2012 increased approximately 1.5%, or $5.7 million, compared with full
year fiscal 2011. This increase consisted of an increase in retail store
sales of 2.0%, or $6.4 million, partially offset by a decrease in our direct
business of 1.0%, or $0.7 million.

Gross Profit Margin

For the fourth quarter of fiscal 2012, gross margin, inclusive of occupancy
costs, was 47.5% compared with gross margin of 44.7% for the fourth quarter of
fiscal 2011. The increase of 280 basis points was the result of an increase
in merchandise margins of 290 basis points offset slightly by an increase of
10 basis points related to higher occupancy costs. The improvement in
merchandise margin was the result of lower markdowns as compared to the fourth
quarter of the prior year. On a dollar basis, occupancy costs for the fourth
quarter of fiscal 2012 increased 5.0% over the prior year. This increase is
partially due to higher costs related to pre-opening rents for DXL stores and
the timing of store openings and closings.

For fiscal 2012, gross margin increased 20 basis points to 46.5% compared to
fiscal 2011.

Selling, General & Administrative

SG&A expenses for the fourth quarter of fiscal 2012 were 37.7% of sales,
compared with 36.0% in the fourth quarter of fiscal 2011. On a dollar basis,
SG&A expenses increased to $43.3 million for the fourth quarter of fiscal 2012
from $40.0 million for the prior-year quarter. The increase is primarily
related to an increase in the corporate bonus accrual of $1.4 million and
expenses for the additional 53^rd week of approximately $2.7 million.

For full year fiscal 2012, SG&A expenses as a percentage of sales were 39.1%,
compared with 38.4% for full year fiscal 2011. SG&A expenses increased to
$156.4 million for full year fiscal 2012 from $152.0 million for full year
fiscal 2011.

Depreciation and Amortization

Depreciation and amortization for the fourth quarter of fiscal 2012 grew to
$4.2 million from $3.5 million for the fourth quarter of fiscal 2011,
primarily due to amortization of the Company's "Casual Male" trademark. For
fiscal 2012 depreciation and amortization grew to $15.5 million from $12.5
million for fiscal 2011, primarily due to $2.0 million in amortization related
to the trademark.

DXL Transition Costs

The Company is incurring transition costs as it moves to its DXL format, which
include pre-opening rent and payroll, store training, infrastructure costs and
increased marketing. These costs are incremental to last year and are start-up
costs associated with store openings that will not continue once a DXL store
is open.

The Company's results for the fourth quarter and full year fiscal 2012 include
total incremental costs of $2.4 million, or $0.03 per diluted share after-tax,
and $9.0 million, or $0.11 per diluted share after-tax, respectively. (See
"Non-GAAP Measures" below.) These incremental costs include $0.8 million in
pre-opening occupancy costs, $6.2 million in SG&A costs and the $2.0 million
in trademark impairment.

Income Taxes

As a result of its valuation allowance being substantially reversed in the
fourth quarter of fiscal 2011, the Company has returned to a normal tax
provision for fiscal 2012. Accordingly, for full year fiscal 2012, the
effective tax rate was 39.4% compared with 10.0% for full year fiscal 2011.
The effective tax rate for the full year fiscal 2011 was reduced from the
statutory rate due to the utilization of fully reserved NOL carryforwards.

Income from Continuing Operations

Income from continuing operations for the fourth quarter of fiscal 2012 was
$4.2 million, or $0.09 per diluted share, compared with $34.1 million, or
$0.71 per diluted share, a year earlier. Income from continuing operations
increased $0.01 per diluted share as compared to an adjusted income from
continuing operations of $0.08 per diluted share for the fourth quarter of
fiscal 2011. 

Income from continuing operations for full year fiscal 2012 was $8.1 million,
or $0.17 per diluted share, compared with income from continuing operations of
$44.8 million, or $0.93 per diluted share, for fiscal 2011. Assuming a normal
tax rate of 40.0% for fiscal 2011, and excluding the tax benefit and
impairment charge, adjusted income from continuing operations for fiscal 2011
was $10.7 million, or $0.22 per diluted share. (See below for a reconciliation
of adjusted income from continuing operations, a non-GAAP measure.)

Net Income

Net income for the fourth quarter of fiscal 2012 was $4.2 million, or $0.09
per diluted share, compared with $33.5 million, or $0.70 per diluted share,
for the fourth quarter of fiscal 2011. The results for the fourth quarter of
fiscal 2012 include costs of $2.4 million, or $0.03 per diluted share, related
to the DXL store growth initiative. The fourth quarter of 2011 included a
non-recurring income tax benefit of $42.5 million and a partial, non-cash
impairment charge of $23.1 million against the "Casual Male" trademark.
Excluding these items from the fourth quarter of 2011 and assuming a normal
tax rate of 40.0%, adjusted net income was $3.1 million, or $0.06 per diluted
share.

Net income for full year fiscal 2012 was $6.1 million, or $0.13 per diluted
share, compared with $42.7 million, or $0.89 per diluted share, for full year
fiscal 2011. Assuming a normal tax rate of 40.0% for fiscal 2011, and
excluding the tax benefit and impairment charge, adjusted net income for full
year fiscal 2011 was $8.6 million, or $0.18 per diluted share. The lower
earnings, on a comparable non-GAAP tax basis, is primarily due to the
investment in the DXL strategy. (See below for a reconciliation of adjusted
net income, a non-GAAP measure.)

Cash Flow

Cash flow from operations was $29.9 million for fiscal 2012 compared with
$23.4 million for fiscal 2011. Free cash flow from operations (as defined
below under "Non-GAAP Measures") decreased by $7.9 million to $(2.5) million
from $5.4 million for fiscal 2011, largely due to the increase in capital
expenditures associated with the new DXL store openings. 

Balance Sheet & Liquidity

At February 2, 2013, the Company had cash and cash equivalents of $8.2
million, no outstanding borrowings, and $71.0 million available under its
credit facility.

Inventory was $104.2 million, flat with year end fiscal 2011. On a unit
basis, inventory decreased 4.0% compared to fiscal 2011.

Retail Store Information

The Company is in the process of significantly transforming its business as it
accelerates the DXL store openings and the closure of Casual Male XL stores.
The DXL stores outperform the Casual Male XL stores and, as the chain is
converted, the Company believes that the sales growth will improve. However,
during the transition, the Company is experiencing some sales erosion among
its Casual Male XL stores located near its DXL stores. On a comparable sales
basis, sales from the DXL stores represented 18.0% of the Company's retail
store sales for the fourth quarter and 13.0% for fiscal 2012.

                   Year End 2011  Year End 2012  Year End 2013E
                   # of   Sq Ft.  # of   Sq Ft.  # of   Sq Ft.
                   Stores (000's) Stores (000's) Stores (000's)
Casual Male XL     420    1,496   352    1,241   238    829
Destination XL     16     159     48     475     112    1,018
Rochester Clothing 14     122     12     108     10     75
Total              450    1,777   412    1,824   360    1,922

Fiscal 2013 Outlook

Management's guidance for the fiscal year ending February 1, 2014 is as
follows:

  oComparable sales increase of 8.5% to 10.0% and total sales of $415.0
    million to $420.0 million, driven by the continued DXL expansion and
    growth in the direct business both benefitting from the national media
    campaigns planned for the Spring and Fall seasons.
  oGross profit margin is expected to change +/- 20 basis points from fiscal
    2012 to a range of 46.3% to 46.7%.
  oSG&A costs are expected to increase by approximately $15.0 to $17.1
    million to approximately $171.4 to $173.5 million. SG&A costs are planned
    to increase primarily related to preopening costs, payroll (both store and
    support) as well as increased marketing costs associated with two major
    flights of a national media campaign to raise DXL brand awareness with the
    Company's target market.
  oOperating margin in the range of breakeven to 0.5%.
  oEBITDA (non-GAAP) in the range of $20.0 to $23.0 million.
  oDiluted earnings per share of approximately breakeven.
  oNegative free cash flow, such that expected borrowings at the end of
    fiscal 2013 will be $10.0 to $15.0 million with estimated deferred tax
    assets of approximately $45.3 million which can be utilized to offset
    future tax liabilities.

Conference Call
The Company will hold a conference call to review its financial results and
business highlights today, Friday, March 15, 2013 at 9:00 a.m. ET. Those who
wish to listen to the live webcast should visit the "Investors" section of the
Company's website. The live call also can be accessed by dialing: (888)
503-8169. Please reference conference ID: 9284432. For interested parties
unable to participate live, an archived version of the webcast may be accessed
by visiting the "Events" section of the Company's website for up to one year.

During the conference call, the Company may discuss and answer questions
concerning business and financial developments and trends. The Company's
responses to questions, as well as other matters discussed during the
conference call, may contain or constitute information that has not been
disclosed previously.

Non-GAAP Measures

In addition to financial measures prepared in accordance with generally
accepted accounting principles (GAAP), the above discussion refers to non-GAAP
adjusted income from continuing operations and adjusted net income, with the
corresponding per diluted share amounts ("non-GAAP" or "adjusted"). These
measures should not be considered superior to or as a substitute for income
from continuing operations or net income derived in accordance with GAAP.
The Company believes that these non-GAAP measures are useful as an additional
means for investors to evaluate the Company's operating results, when reviewed
in conjunction with the Company's GAAP financial statements. The Company
believes the inclusion of these non-GAAP measures enhances an investor's
understanding of the underlying trends in the Company's business and provide
for better comparability between different periods in different years.

The above discussion refers to free cash flow and EBITDA (earnings before
income taxes and depreciation and amortization), which are also non-GAAP
measures. The presentation of these non-GAAP measures are not measures
determined by 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
measures "free cash flows" and "EBITDA" presented in this release may not be
comparable to similar measures used by other companies. The Company calculates
free cash flows as cash flow from operating activities less capital
expenditures and less discretionary store asset acquisitions, if applicable.
The Company calculates forecasted EBITDA for fiscal 2013 of $20.0-$23.0
million as forecasted operating income of breakeven to $3.0 million plus the
add-back of depreciation and amortization of $20.0 million.

The above discussion also includes the earnings per share impact of
incremental costs that have been incurred in connection with the Company's DXL
growth initiative of $2.4 million, or $0.03 per diluted share, and $9.0
million, or $0.11 per diluted share, for the fourth quarter and full year
2012, respectively. The $0.03 per diluted share was calculated, using the
fourth quarter effective tax rate of 38.4%, by taking the net of $2.4 million
less $0.9 million of tax divided by outstanding diluted shares of 48.5
million. The $0.11 per diluted share was calculated, using full year 2012
effective tax rate of 39.4%, by taking the net of $9.0 million less $3.5
million of tax divided by outstanding diluted shares of 48.4 million.

Below are tables showing the reconciliation of all GAAP measures to non-GAAP
measures.

About Destination XL Group, Inc.

Destination XL Group, Inc. is the largest multi-channel specialty retailer of
big & tall men's apparel with operations throughout the United States, Canada
and Europe. The retailer operates under six brands: Destination XL^®, Casual
Male XL, Rochester Clothing, B&T Factory Direct, ShoesXL and LivingXL.
Several catalogs and e-commerce sites, including www.destinationxl.com, make
up the Company's direct-to-consumer business. With more than 2,000 private
label and name-brand styles to choose from, customers are provided with a
unique blend of wardrobe solutions not available at traditional retailers. The
Company is headquartered in Canton, Massachusetts. For more information,
please visit the Company's investor relations website:
http://investor.destinationxl.com/.

Forward-Looking Statements
Certain information contained in this press release, including cash flows,
operating margins, store counts, revenue and earnings expectations for fiscal
2013 and fiscal 2016, constitute forward-looking statements under the federal
securities laws. The discussion of forward-looking information requires
management of the Company to make certain estimates and assumptions regarding
the Company's strategic direction and the effect of such plans on the
Company's financial results. The Company's actual results and the
implementation of its plans and operations may differ materially from
forward-looking statements made by the Company. The Company encourages readers
of forward-looking information concerning the Company to refer to its prior
filings with the Securities and Exchange Commission, including without
limitation, its Annual Report on Form 10-K filed on March 16, 2012, that set
forth certain risks and uncertainties that may have an impact on future
results and direction of the Company.

Forward-looking statements contained in this press release speak only as of
the date of this release. Subsequent events or circumstances occurring after
such date may render these statements incomplete or out of date. The Company
undertakes no obligation and expressly disclaims any duty to update such
statements.

DESTINATION XL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
                               For the three months     For the year ended
                               ended
                               February 2,   January    February 2,  January
                               2013          28,        2013         28,
                                             2012                    2012
Sales                          $ 114,858     $         $           $ 
                                             111,074    399,640     395,867
Cost of goods sold including   60,346        61,369     213,881      212,691
occupancy
Gross profit                   54,512        49,705     185,759      183,176
Expenses:
 Selling, general and        43,292        39,952     156,366      151,999
administrative
 Provision for trademark     -             23,110     -            23,110
impairment
 Depreciation and            4,191         3,505      15,469       12,533
amortization
Total expenses                 47,483        66,567     171,835      187,642
Operating income              7,029         (16,862)   13,924       (4,466)
Other income (expense), net   -             -          -            (252)
Interest expense, net          (183)         (172)      (621)        (556)
Income from continuing        6,846         (17,034)   13,303       (5,274)
operations before income taxes
Provision (benefit) for income 2,627         (51,112)   5,244        (50,078)
taxes
Income from continuing         4,219         34,078     8,059        44,804
operations
Loss from discontinued         -             (586)      (1,933)      (2,141)
operations, net of taxes
Net income                     $   4,219   $        $         $  
                                             33,492     6,126       42,663
Net income per share - basic:
Income from continuing         $    0.09  $      $        $    
operations                                   0.72       0.17        0.94
Loss from discontinued         $        $       $         $   
operations                      -           (0.01)     (0.04)      (0.05)
Net income per share - basic   $    0.09  $      $        $    
                                             0.70       0.13        0.90
Net income per share
-diluted:
Income from continuing         $    0.09  $      $        $    
operations                                   0.71       0.17        0.93
Loss from discontinued         $        $       $         $   
operations                      -           (0.01)     (0.04)      (0.04)
Net income per share - diluted $    0.09  $      $        $    
                                             0.70       0.13        0.89
Weighted-average number of
common shares outstanding:
 Basic                     48,115        47,543     47,947       47,424
 Diluted                   48,504        48,131     48,385       48,044

DESTINATION XL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
February 2, 2013 and January 28, 2012
(In thousands)
                                              February 2,      January 28,
                                              2013             2012
ASSETS
Cash and cash equivalents                     $     8,162  $    10,353
Inventories                                   104,211          104,167
Other current assets                          14,088           18,887
Property and equipment, net                   65,942           45,933
Intangible assets                             6,256            8,654
Deferred tax assets                           45,313           43,935
Other assets                                  1,973            1,792
 Total assets                             $   245,945   $    233,721
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses
and other liabilities                        $    65,683  $    58,847
Deferred gain on sale-leaseback               19,050           20,516
Stockholders' equity                          161,212          154,358
 Total liabilities and stockholders'      $   245,945   $    233,721
equity

DESTINATION XL GROUP, INC.

GAAP TO NON-GAAP TABLES
Reconciliation of income from continuing operations and net income for the
fourth quarter
                            For the fourth quarter ended:
                            February 2, 2013          January 28, 2012
                                         Per diluted               Per diluted
                                         Share                     share
(in thousands, except per
share data)
Net income, GAAP basis      $ 4,219     $  0.09     $  33,492   $  0.70
Add back: loss from
discontinued operations,    $     - $     -  $    586 $  0.01
GAAP basis
Income from continuing      $ 4,219     $  0.09     $  34,078   $  0.71
operations, GAAP basis
Reverse actual income tax   $ 2,627     $  0.05     $ (51,112)   $ (1.06)
provision (benefit)
Income (loss) from
continuing operations       $ 6,846     $  0.14     $ (17,034)   $ (0.35)
before taxes
Add back: Provision for
trademark impairment,       $     - $     -  $ 23,110    $  0.48
tax-effected
Adjusted income from
continuing operations       $ 6,846     $  0.14     $  6,076   $  0.13
before income taxes,
non-GAAP for fiscal 2011
Less Income tax provision,
assume 40% tax rate for     $ (2,627)    $ (0.05)    $ (2,430)   $ (0.05)
fiscal 2011
Adjusted income from
continuing operations,      $ 4,219     $  0.09     $  3,646    $  0.08
non-GAAP for fiscal 2011
Loss from discontinued      $     - $     -  $  (586)   $ (0.01)
operations, GAAP basis
Adjusted net income,        $ 4,219     $  0.09     $  3,060    $  0.06
non-GAAP for fiscal 2011
Weighted average number of
common shares
 outstanding on a diluted              48,504                    48,131
basis
Reconciliation of income from continuing operations and net income for the
fiscal year
                            For the fiscal year ended:
                            February 2, 2013          January 28, 2012
                                         Per diluted               Per diluted
                                         Share                     share
(in thousands, except per
share data)
Net income, GAAP basis      $  6,126   $  0.13     $ 42,663    $  0.89
Add back: loss from
discontinued operations,    $  1,933   $  0.04     $  2,141   $  0.04
GAAP basis
Income from continuing      $  8,059   $  0.17     $ 44,804    $  0.93
operations, GAAP basis
Reverse actual income tax   $  5,244   $  0.11     $ (50,078)   $ (1.04)
provision (benefit)
Income (loss) from
continuing operations       $  3,303   $  0.27     $  (5,274)  $ (0.11)
before taxes
Add back: Provision for     $     
trademark impairment,       -           $     -  $ 23,110    $ 0.48
tax-effected
Adjusted income from
continuing operations       $ 13,303    $  0.27     $ 17,836    $  0.37
before income taxes,
non-GAAP for fiscal 2011
Less Income tax provision,
assume 40% tax rate for     $ (5,244)   $ (0.11)    $ (7,134)   $ (0.15)
fiscal 2011
Adjusted income from
continuing operations,      $  8,059    $  0.17     $ 10,702    $  0.22
non-GAAP for fiscal 2011
Loss from discontinued      $ (1,933)    $ (0.04)     $ (2,141)   $ (0.04)
operations, GAAP basis
Adjusted net income,        $  6,126    $  0.13     $  8,561    $  0.18
non-GAAP for fiscal 2011
Weighted average number of
common shares
 outstanding on a diluted              48,385                    48,044
basis
Reconciliation of Free Cash Flow
(in millions)               Fiscal       Fiscal
                            2012         2011
Cash flow provided by       $  29.9     $  23.4
operating activities
Less: capital expenditures  (32.4)       (18.0)
Free cash flow              $  (2.5)   $   5.4



SOURCE Destination XL Group, Inc.

Website: http://www.destinationxl.com
Contact: Jeff Unger, Vice President Investor Relations, +1-561-482-9715
 
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