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Destination XL Group, Inc. Reports Third-Quarter 2013 Financial Results

   Destination XL Group, Inc. Reports Third-Quarter 2013 Financial Results

At DXL Stores Open for Greater Than One Year, Fall Marketing Campaign Drove
25.3% Increase in Comparable Sales for October and 11.3% Increase in
Comparable Sales for Q3

PR Newswire

CANTON, Mass., Nov. 22, 2013

CANTON, Mass., Nov. 22, 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 third
quarter of fiscal 2013.

Third-Quarter Fiscal 2013 Highlights

  oSales were $88.2 million compared with $88.7 million in the third quarter
    of fiscal 2012.
  oThe Company operated a total of 74 DXL stores as of November 2, 2013 with
    a combined comparable sales increase of 17.7% and an 11.3% comparable
    sales increase for the 36 DXL stores open longer than one year.
  oDXL dollars per transaction increased 17.4% from the prior year's third
    quarter.
  oE-commerce sales increased 7.9% compared with the third quarter of 2012.
  oOpened 9 DXL stores and closed 22 Casual Male XL stores.

Comparable Sales

The following is a summary of the breakdown of comparable sales for the third
quarter of fiscal 2013:

                                                            Comparable Sales %
                                                # of Stores
                                                            Change
Total Comparable
                                                            4.4%
Sales for Q3 2013
Retail Business   Total comparable retail       375         6.4%
                  stores
                  DXL comparable stores ^(1)    74          17.7%
                  Casual Male XL and Rochester  301         2.0%
                  Clothing stores
Direct Business                                             (4.5%)
                  E-commerce                                7.9%
                  Catalog                                   (73.3%)

    Of the 74 comparable DXL stores, 36 have been open more than one year and
(1) had a comparable sales increase of 11.3% for the third quarter of fiscal
    2013.

Management Comments

"We turned in a solid financial performance, and made excellent progress on
our DXL strategy in the third quarter," said President and CEO David Levin.
"For the first two months of the quarter, sales were negatively affected by
the soft overall retail market due to the government shutdown as well as
unseasonably warm fall weather. We then saw a very strong rebound in traffic
and sales in DXL stores during October as a direct result of the start of our
fall national marketing campaign at the end of September. In fact, we reported
a 30.2% increase in sales across all DXL stores in October, and a 25.3%
increase for those that have been open longer than a year. In addition,
average transaction size for our DXL stores increased by 18.7% during October,
traffic increased 11.0% and new customer penetration increased 34.6% over last
year.

"The second flight of our marketing campaign included advertising on two
national television networks to supplement our nationwide presence on cable,
as well as a mix of radio and digital marketing. The response to the campaign
has been enthusiastic and we believe it has been successful in building DXL
awareness. The DXL concept also has been successful in attracting the
"end-of-rack" customer. During October, the percentage of sales to customers
with a 46 inch and under waist increased to 43.5% compared with 36.3% of sales
for full year 2012 and 40.5% in the second quarter of 2013.

"We are encouraged by the progress we are making on our transition to DXL. We
continue to believe that the DXL concept will yield positive long-term results
and enhanced shareholder value," concluded Levin.

Third-Quarter Fiscal 2013 Results

Sales

For the third quarter of fiscal 2013, total sales were $88.2 million compared
with $88.7 million in the third quarter of fiscal 2012. The decrease of $0.5
million in total sales was principally due to a loss of sales of $3.5 million
from closed Casual Male stores related to lease termination or stores
unassociated with a new DXL store and a decrease of $0.4 million due to the
shift in comparable weeks. The decrease in sales was partially offset by a
comparable sales increase of 4.4%, or $3.7 million, compared with the third
quarter of fiscal 2012. 

The increase in retail business of $4.4 million was driven by the 74 DXL
stores that had a comparable store sales increase of $3.4 million, or 17.7%.
This increase was primarily due to the strength of the average dollars per
transaction for DXL stores, which increased 17.4% during the quarter. The
remaining retail stores had a comparable sales increase of $1.0 million, or
2.0%. The decrease in the direct business was primarily driven by a decline in
catalog sales of $1.5 million for the third quarter of fiscal 2013 compared
with the prior year's third quarter, which was partially offset by a $0.8
million increase in e-commerce sales. The Company eliminated its catalogs
completely in the second quarter of fiscal 2013 as part of its shift towards
its more profitable e-commerce business. Total circulation for the third
quarter, which includes mailers, decreased 89.4% over the prior year.

Gross Profit Margin

For the third quarter of fiscal 2013, gross margin, inclusive of occupancy
costs, was 44.5% compared with gross margin of 44.0% for the third quarter of
fiscal 2012. The increase of 50 basis points for the third quarter of fiscal
2013 was the result of an improvement in merchandise margins of 90 basis
points partially offset by an increase in occupancy costs of 40 basis points.

Selling, General & Administrative

SG&A expenses for the third quarter of fiscal 2013 were 46.6% of sales,
compared with 42.5% in the third quarter of fiscal 2012. On a dollar basis,
SG&A expenses increased 9.1% to $41.1 million for the third quarter of fiscal
2013 from $37.7 million for the prior-year quarter. The increase is primarily
due to incremental costs of approximately $3.0 million related to marketing
expenses associated with the launch of the national marketing program in
September 2013, increased payroll-related costs, such as pre-opening payroll,
training and store operations, of approximately $1.5 million to support the
new DXL stores.

Depreciation and Amortization

Depreciation and amortization for the third quarter of fiscal 2013 grew to
$4.9 million from $3.8 million for the third quarter of fiscal 2012, primarily
due to an increase in capital expenditures related to DXL store growth.

DXL Transition Costs and Marketing Costs

As previously disclosed, the Company is incurring transition costs as it moves
to its DXL format, which includes pre-opening rent and payroll, store
training, infrastructure costs, store closing costs and lease exit costs.
Transition expenses are primarily start-up costs associated withthe DXL
transformation that will not continue once a DXL store is open and the Company
has completed the transformation in 2015. During this three-year transition,
the Company expects to incur transition costs of approximately $10.0 million
per year in SG&A and occupancy costs. Additionally, the Company expects to
incur $1.6 million in amortization costs in fiscal 2013 related to its Casual
Male trademark, with the remaining $2.5 million amortized on an accelerated
basis through fiscal 2018.

The results for the third quarter of fiscal 2013 include DXL transition costs
of approximately $2.8 million, which includes $1.0 million of pre-opening
occupancy costs and lease exit costs, $1.5 million of SG&A expenses related to
pre-opening payroll, training and store operations and $0.3 million related to
trademark amortization. In addition, marketing costs increased $3.0 million
related to the Company's national marketing campaign, for a total of
approximately $5.8 million, or $0.07 per diluted share.

Tax Rate

On a continuing income basis, for the first nine months of fiscal 2013, the
effective tax rate was 40.1% compared with 40.5% for the first nine months of
fiscal 2012. The effective tax rate for fiscal 2013 is expected to be
approximately 42.5%.

Net Income (Loss)

The net loss for the third quarter of fiscal 2013 was $(4.1) million, or
$(0.08) per share, compared with a net loss of $(1.6) million, or $(0.03) per
share, for the third quarter of fiscal 2012. The increase in the loss was
primarily attributable to the $5.8 million, or $0.07 per diluted share, in DXL
transition and marketing costs included in the third quarter of fiscal 2013.

Cash Flow

Cash flow from operations was a net use of $(5.5) million for the first nine
months of fiscal 2013 compared with a net generation of $8.4 million for the
first nine months of fiscal 2012. Free cash flow from operations (as defined
under "Non-GAAP Measures" in this press release) decreased by $30.8 million to
$(43.7) million from $(12.9) million for the first nine months of fiscal 2012,
largely due to the decrease in operating income and partly due to increased
marketing costs as well as higher capital expenditures related to the DXL
store openings.

Balance Sheet & Liquidity

At November 2, 2013, the Company had cash and cash equivalents of $5.2
million, outstanding borrowings of $27.0 million, and $70.7 million available
under its credit facility. During the third quarter, the Company supplemented
its borrowing capacity under its $100 million credit facility by entering into
equipment financing loans totaling approximately $13.9 million.

Inventory was $119.6 million, compared with $104.2 million at the end of
fiscal 2012 and $116.1 million at October 27, 2012. At November 2, 2013,
compared with October 27, 2012,inventory dollars increased 3.0%, while units
increased by 1.2%. The 3.0% increase in inventory value is due primarily to
the increase in branded apparel. With a greater number of DXL stores open, the
Company has a greater mix of higher cost branded apparel.

Retail Store Information

The following is a summary of the store count, with respective square footage
by store concept:

                   Year End 2011  Year End 2012  First Nine     Year End 2013E
                                                 Months 2013
                   # of   Sq Ft.  # of   Sq Ft.  # of   Sq Ft.  # of   Sq Ft.
                   Stores (000's) Stores (000's) Stores (000's) Stores (000's)
Casual Male XL
                   420    1,496   352    1,241   290    1,020   252    890

Destination XL
                   16     159     48     475     74     714     101    933

Rochester Clothing 14     122     12     108     11     95      10     90
Total
                   450    1,777   412    1,824   375    1,829   363    1,913


Fiscal 2013 Outlook

  The Company experienced a sales shortfall in August and September and a
  delay in the opening of a small number of DXL stores; however, the Company
  expects that it will achieve sales and earnings for the full year at the low
  end of its previous guidance. Based on results for the first nine months of
  fiscal 2013, financial guidance for the fiscal year ending February 1, 2014
  is as follows:

  oComparable sales increase of approximately 5.0% and total sales of
    approximately $395.0 million.
  oOpen approximately 53 DXL stores (compared with prior guidance of between
    55-58 stores) while closing 102 Casual Male XL and Rochester Clothing
    stores. Certain DXL stores previously anticipated to open in 2013, will
    instead be opened in early 2014.
  oThe Company expects gross profit margin to change +/- 10 basis points from
    fiscal 2012 to approximately 46.5%.
  oSG&A costs are now expected to be approximately $166.0 million, or an
    increase of approximately $10.0 million from 2012, all related to
    increased marketing expenses as well as DXL transition costs.
  oEBITDA (non-GAAP) is expected to approximate $15.0 million with an
    operating margin at approximately (0.8%).
  oEarnings per diluted share is expected to be a net loss of approximately
    $(0.05).
  oCapital expenditures of approximately $57.0 million, partially offset by
    $11.9 million in tenant allowances in fiscal 2013.
  oThe Company expects borrowings at the end of fiscal 2013 will be $5.0 to
    $6.0 million under the credit facility, with equipment financings of
    approximately $17.0 million. With an expected cash balance at the end of
    fiscal 2013 of$5.0 million, the net debt position is expected to be
    approximately $17.0-$18.0 million (up from previous guidance of $10.0
    -$15.0 million).

Conference Call

The Company will hold a conference call to review its financial results and
business highlights today, Friday, November 22, 2013 at 9:00 a.m. ET. To
listen to the live webcast, visit the "Investor Relations" section of the
Company's website. The live call also can be accessed by dialing: (888)
337-8198. Please reference conference ID: 5205359. 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 free
cash flow and EBITDA (earnings before income taxes and depreciation and
amortization), which are 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.See table below for
reconciliation. The Company calculates forecasted EBITDA for fiscal 2013 of
$15.0 million as forecasted operating loss of $4.0 million plus the add-back
of depreciation and amortization of $19.0 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 and the increase in marketing costs of $5.8 million in the
aggregate, or $0.07 per diluted share, for the third quarter of fiscal 2013.
The $0.07 per diluted share was calculated, using the third quarter effective
tax rate of 41.7%, by taking the net of $5.8 million less $2.4 million of tax
divided by outstanding diluted shares of 48.6 million.

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 in London, England. The retailer operates under six brands: Destination
XL^®, Casual Male XL, Rochester Clothing, B&T Factory Direct, ShoesXL and
LivingXL. Several e-commerce sites, including www.destinationxl.com, and
brand mailers 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, costs, capital expenditures, borrowings,
EBITDA, revenue and earnings expectations for fiscal 2013, 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
15, 2013, 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 ended   For the nine months
                                                        ended
                           November 2,    October 27,   November 2,  October
                           2013           2012          2013         27, 2012
                           $        $        $         $   
Sales                       88,202                 279,444     284,782
                                          88,739
Cost of goods sold         48,924         49,732        150,190      153,535
including occupancy
Gross profit               39,278         39,007        129,254      131,247
Expenses:
 Selling, general and    41,099         37,689        122,752      113,074
administrative
 Depreciation and        4,867          3,844         13,550       11,278
amortization
Total expenses             45,966         41,533        136,302      124,352
Operating income (loss)   (6,688)        (2,526)       (7,048)      6,895
Interest expense, net      (280)          (151)         (699)        (438)
Income (loss) from
continuing operations      (6,968)        (2,677)       (7,747)      6,457
before income taxes
Provision (benefit) for    (2,905)        (1,073)       (3,108)      2,617
income taxes
Income (loss) from         (4,063)        (1,604)       (4,639)      3,840
continuing operations
Loss from discontinued     -              4             -            (1,933)
operations, net of taxes
                           $        $        $        $    
Net income (loss)           (4,063)               (4,639)      1,907
                                          (1,600)
Net income (loss) per
share - basic:
Income (loss) from         $        $        $       $    
continuing operations        (0.08)             (0.10)        0.08
                                          (0.03)
Loss from discontinued     $        $        $       $    
operations                       -              -     (0.04)
                                             -
Net income (loss) per      $        $        $       $    
share -basic                 (0.08)             (0.10)        0.04
                                          (0.03)
Net income (loss) per
share - diluted:
Income (loss) from         $        $        $       $    
continuing operations        (0.08)             (0.10)        0.08
                                          (0.03)
Loss from discontinued     $        $        $       $    
operations                       -              -     (0.04)
                                             -
Net income (loss) per      $        $        $       $    
share- diluted               (0.08)             (0.10)        0.04
                                          (0.03)
Weighted-average number
of common shares
outstanding:
 Basic                 48,553         48,053        48,441       47,887
 Diluted               48,553         48,053        48,441       48,336





DESTINATION XL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
November 2, 2013 and February 2, 2013
(In thousands)
                                    November 2,           February 2,
                                    2013                  2013
ASSETS
Cash and cash equivalents           $              $       
                                    5,232                 8,162
Inventories                         119,550               104,211
Other current assets                17,267                14,088
Property and equipment, net         97,805                65,942
Intangible assets                   4,792                 6,256
Deferred tax assets                 48,446                45,313
Other assets                        3,202                 1,973
 Total assets                   $      296,294   $      245,945
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable, accrued expenses
and other liabilities              $       78,658  $      
                                                          65,683
Borrowings under credit facility    27,001                -
Long-term debt                      13,845                -
Deferred gain on sale-leaseback     17,951                19,050
Stockholders' equity                158,839               161,212
 Total liabilities and          $      296,294   $      245,945
stockholders' equity





DESTINATION XL GROUP, INC.
GAAP TO NON-GAAP FREE CASH FLOW RECONCILIATION
                          For the nine months ended         Projected
(in millions)             November 2, 2013  October 27,     Fiscal 2013
                                            2012
Cash flow from operating  $         $         $       (1)
activities (GAAP)           (5.5)             8.4   27.0
Less: Capital             (38.2)            (21.3)          (57.0)
expenditures
Less: Store acquisitions, -                 -               -
if applicable
Free Cash Flow (non-GAAP) $         $         $     
                           (43.7)            (12.9)    (30.0)
(1) Projected cash flow from operating activities for fiscal 2013 includes an
estimated $11.9 million in lease incentives

SOURCE Destination XL Group, Inc.

Website: http://investor.destinationxl.com
Contact: Jeff Unger, Vice President Investor Relations, (561) 482-9715