Q3 2021 Destination XL Group Inc Earnings Call

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Good day, and thank you for standing by and welcome to the destination XL groups third quarter 2021 earnings call.

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I'd now like to hand, the conference over to your speaker today.

Director of SEC financial reporting. Please go ahead.

Thank you Shannon and good morning, everyone. Thank you for joining us on destination XL group's third quarter fiscal 2021 earnings call on our call today is our president and Chief Executive Officer, Harvey Kanter, and our Chief Financial Officer, Peter Stratton.

During today's call, we will discuss some non-GAAP metrics to provide investors with some useful information about our financial performance.

These refer to our earnings release, which was filed Wednesday afternoon and is available on our Investor Relations website at Investor Dot Dx L. Dot com for an explanation and reconciliation of such measures.

Today's discussion also contains certain forward looking statements concerning the company's updated sales and earnings guidance and other expectations for fiscal 2021.

Such forward looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those assumptions mentioned today due to a variety of factors that affect the company, including but not limited to supply chain disruption labor availability and disruption from COVID-19 information regarding risks and uncertainties as detailed in the.

Company's filings with the Securities and Exchange Commission I would now like to turn the call over to our CEO Harvey Kanter Harvey.

Thank you Shelly and good morning to everyone.

Forward to speaking with you today about the progress we're making in our business this year.

Third quarter results, which we announced on Wednesday, and the greater opportunities as we close out this year and the holiday season.

My Hope is you hear repetition.

Assistance and reminders in our messaging and our tone and in our optimism for the work at hand.

The same goes repetition is the mother of all learning and my hope is from a repetition you better understand the results from our ongoing transformation as well as the range of possible growth of your head, but also the risk given the volatility this holiday season.

In just four short months from now marks three years since we began this transformation journey and we still the same vision the same vision and the same strategy.

Team is executing well and with a perseverance and tenacity that is inspiring to me and producing meaningful results.

Given the pandemic 20 months detour, but year to date performance is all that puts more energizing.

Approximately eight months ago in March when we first started to see signs of a recovery in our business.

It is exciting to see how quickly the results have begun to leverage the top line sales the operating platform reset and that dropped to the bottom line.

In the second quarter the acceleration in sales continues to build and we began to see that our business was not only recovery, but accelerating.

I'm pleased to report that once again, our quarterly results have exceeded our expectations and that the consensus as well.

We are incredibly happy with our performance in the third quarter and we see this performance is somewhat remarkable given the ongoing challenges in the supply chain and with labor shortages.

Despite these challenges that we're grappling with daily the consumer is responding to our initiatives and at a level that continues to demonstrate the traction and the brand's repositioning.

While we remain very optimistic for a strong quarter fourth quarter, specifically the brands highly promotional historical set in the fourth quarter will now undergo its greatest test.

Without sharing broadly and publicly our promotional plans it should be clear from our actions that we intend to continue to engage the consumer in a very different way.

I will cover this in more detail later in my comments, but our change in promotional plans.

Combination with the risk and volatility in the supply chain implicitly caused us to be conservative in our outlook. Despite the success of this year's performance to date.

This abundance of caution should not really surprise anyone.

Since I've been here as CEO, our intent has always been to be confident in our guidance, we've been transparent detailed and thorough in what we believe and why given the challenges that our philosophical orientation and acknowledging the variables we control versus those that we do not control we are doing as we always do.

Done and authoring our outlook and expect.

Expectations now before I talk about the business results and our outlook I want to cover two other points first Wednesday's release, we published our third quarter earnings press release on Wednesday. After the market close which is earlier than we normally would as we knew this was an important quarter and wanted to make sure everyone.

That's enough time with this information.

We're also curious to see if we may see greater attendance on todays earnings call. If we issued the release.

And second I wanted to extend my gratitude to all of our employees for being a critical part of our mission and serving our big and tall customers, who grow more in dear to us every quarter.

Here again, it's not a secret that the workload mental stress and just never ending push has certainly been challenging for all of our associates.

It is literally each and every one of them that you, we and most importantly, our customers are indebted to.

Like many companies we are managing through a very lean lean lean labor market daily challenges never before experienced.

At times, we've struggled with maintaining appropriate staffing levels filling open positions and balancing the workload on our people.

Despite all this I couldn't be more proud of the team of associates for their passion and their commitment they have for our customer and to Dx L.

It's inspiring truly like the Energizer Bunny, they just keep going and going and going given more of themselves every day.

Despite working from home and for many in the labor challenges in our stores and the resultant stress that this creates we look to and are continuing to build a culture of trust culture of transparency empowerment and empathy because these continue to be the most challenging times in most every way.

To all of our associates in the stores and the distribution center and the guest engagement center and in the corporate office. Thank you. Thank.

Thank you for all your hard work. Thank you for the support and your dedication to Dx LS consumer from the very bottom of my heart. Thank you.

Now on to the details in three different topics I want to cover with you today.

First I want to review our third quarter results.

High level, we saw quite strong sales growth in the third quarter across stores online and on our App.

In addition, our promotional cadence was very light and tight which means more product going out the door at full price. This translates to a higher a L D.

Markdowns and higher gross margins.

We are controlling our operating costs and driving operating leverage.

Second.

Good to talk to you about how we are managing short term challenges across the entire supply chain for inventory to labor.

While we are pleased with our results through Q2 Q3, our inventory levels are down about 32% to Q3 2019.

We need to land inventory received in Q4 to maintain momentum and achieve our minimum presentation levels through.

Post holiday season.

And finally I want to talk to you about marketing our number one long term priority.

Which is customer acquisition trial and repeat and in that order.

Ultimately, we know the outcome of this will be driving revenue growth and taking market share, but those are outcomes, which will happen because new customers try us and we achieve greater lifetime value across our entire customer file.

Our strategies also continue to look at product offerings as well as technology to simplify the shopping experience and engage the consumer in a more profoundly deeper richer and more meaningful relationship with EXL.

Making appropriate investments in marketing and in digital customer engagement is the leading edge to customer acquisition trial and repeat what follows is even greater demonstration of this due to the continued building of the boat as we've explained on previous calls.

My elevator pitch remains the same in regards to our ongoing brands repositioning our vision and mission at EXL is to be the market leader to deliver a big and tall shopping experience that fits his body.

His style and fit just life, bringing a breadth and depth and level of exclusivity and an assortment of curated clothing that cannot be found anywhere else period.

And to create an experience rooted in the values of place in the consumer.

And the respect we have for him and in our desire to build a trusted relationship creating a level of satisfaction and happiness that just still there's few any other retailers have a community of belonging.

And driven by our culture and employees, who interact with our guests every single day.

So now let me start by reviewing our Q3 results I'm very pleased to announce that our overall comp sales rate for the third quarter as compared to 2019 accelerated to 22, 9%, which is up from 21, 6% in the second quarter.

As 2019 was our last normalized year from a financial comparison standpoint, we will be making most of our year over year reference comparisons to our Q through Q3 2019 results.

Comp sales growth in stores was 12, 9% and comp sales growth and direct was 56, 5% as compared to 2019.

In total third quarter sales were $121 5 million compared to $106 6 million and our adjusted EBITDA for the quarter was $19 million compared to $1 7 million in the third quarter of 2019.

Year to date. This brings our adjusted EBITDA to $62 5 million as compared to $13 6 million two to three quarters in 2019.

It is truly a remarkable how far we've come.

These results are a direct outcome of the increased leverage we achieved on sales that exceeded expectations any of us likely had given the known challenges we have been facing.

In stores, our comp sales remained in double digits similar to Q2.

August our store comp rate was 15, 5% in September it was 15, 1% in October a drip to eight 3%.

We continue to see a very purposeful shop in our stores evidenced by growth in both our conversation rates and dollars per transaction.

Our new to file growth rate increased 34% in the third quarter as compared to the third quarter of 2019.

This is an improvement from the second quarter, when our new to file customer growth rate increased 28, 5% and just off first quarters, new to file customer growth rate of 35, 7%.

Consistent with our performance in the second quarter as our store sales increased our direct business not only maintained its momentum in the third quarter, but slightly accelerated.

Our direct comp for Q3 were up 56, 5%, which compares to a growth rate of 52, 2% in the second quarter by.

By month, our comp growth rate was 63, 6% in August.

Two 7% in September.

54, 9% in October again, these comps are all against 2019.

Our direct growth shows the sustainability of our digital transformation and we believe is a testament to our ability to stand out as a digital first branch.

Correct. It was just under 30% of total retail sales in Q3 as compared to 21, 9% in Q3 2019, and we expect our direct penetration for the full year to be approximately 30%.

Compared to annual penetration in 2019 of 23, 1%.

Our direct growth was driven by a combination of improvements in web traffic.

Conversion and basket size.

We believe that our new to file growth indicate our digital marketing investments.

<unk> of our digital infrastructure are driving significant inflection in new <unk> customers.

Although October results sequentially slowed we believe this is almost exclusively a function of inventory challenges and we do believe that if we can achieve better inventory positioning this slowing down will reverse itself.

We will talk about supply chain challenges in just a moment, but needless to say it feels like hand to hand daily combat.

Finally, with respect to off site sales originating on third party marketplaces predominantly driven by Amazon results were exceptionally strong.

We also just launched on target Dot com marketplace in October and we expect it will take a few months to ramp up to a meaningful assortment.

Now, let me shift gears, a bit and talk about merchandise assortment and our inventory.

We continue to see a strong sales performance across all product categories. Our merchandise assortment is 55% private label and 45% on our collections and our sales penetration for the third quarter was relatively consistent with inventory composition.

Tailored clothing started to build in the second quarter and that trend has continued through the third quarter actually even accelerated despite the growing inventory challenges tailored.

Tailored clothing drove the 18, 4% of the Q3 business as compared to 13, 1% in the second quarter with the biggest gains coming from suits and dress shirts.

Pairing casual with tailored clothing continues to be a trend as customers returned to work will remain oriented to looking relaxed and casual.

In sportswear, the top selling brands in our assortment contingency higher selling velocity and these include polo.

Not incur vineyard vines and Reebok among others.

The one constant challenge throughout the quarter was the disruption that seems to be impacting each phase of the supply chain.

Ocean and air freight continued to be problematic, causing delays and sharp price increases at <unk>, we bring in all of our private label overseas shipments through the Port of New York New Jersey.

We don't have any private label coming through long beach, but we know some of the delays from our domestic vendors is being impacted at long beach as well.

Port congestion is a major problem, which has motivated us to fly in goods, but even then reductions in international flights have caused capacity constraints and price increases.

And companies are facing a shortage of drivers and dock workers staffing issues, which further back up the network.

Think sharing one example will help you better understand the reality of the situation, which is dynamic ever moving and anything but transparent derives day as opaque as anything could be.

We recently aired in private label goods.

Had an E T. A 10 18 for arriving into JFK Airport.

As of 11, one the goods having arrived the JFK.

<unk> had not been located despite daily calls asking where are my good on.

11, two two weeks later, we finally received word the airline has located the product in a lot.

The trucking company has been able to pick up the shipment and good arrived in our D. C on 11 five.

Air Freighted product, we did not know where this product was for nearly two weeks at once located it took three days to load and travel 200 miles.

Incredibly difficult as you might imagine.

The challenges in getting goods to the port and ultimately to the sales force. This thing turn and burn comes to mind, we are stocking shelves and we are selling what we stock.

Inventory turnover is up 33% from our historical performance.

Our global sourcing team.

Global sourcing team has been successful in mitigating risk all year and procuring fabrics to support our production needs today.

Today that global sourcing team has diversified at the factory level, but still we are heavily penetrated in southeast Asia, including Vietnam, Cambodia, Bangladesh and to a lesser extent China.

Our sourcing team is platform to over 3 million yards of fabric and yard on key item programs with our vendors to secure greater availability to allude.

Offset price and speed to market, which should allow us to fulfill our orders through fall of 2022 into 2023.

This will also allow us to shorten our lead times and protect gross margins with cotton prices up over 40% in every country. We source from experiencing inflation. We are trying to navigate what is clearly not normal.

Part of the way we were battling these challenges is by diversifying our supply chain to incorporate greater speed and flexibility we have initiated incorrectly <unk> manufacturing at our producing now with Jordan, India, and Mexico, and we expect to shift some production to Central America.

With regard to labor we.

We're certainly seeing challenges, but we believe we have fared well enough in the current environment.

In the stores, we are seeing an elevated level open or unfulfilled positions traditionally arent fulfilled position rate has been about 10%.

For the third quarter, it was closer to 20%.

We believe we have been more than competitive with compensation, where our store workers receive a base wage and a commission as well as the sale of the bonus eligibility with so many of our stores exceeding their plans by cheating their incentive compensation and materially impacting their overall compensation.

In the distribution center, we have a strong group of year round associates, and we've been able to recruit and bring in seasonal associates for the pending holiday season.

Finally, let's talk about marketing.

Our enthusiasm for what we've already accomplished this year, it's incredibly energizing.

We are continuing to lean into our brands positioning built around our proprietary fit.

Curated with largely exclusive assortment of private label and National brands and an experience built around the respect and the value for the big and tall consumers who trust us.

This strategy has allowed us to shift away from a value proposition that is driven by price highly promotional and discount driven too.

A proposition that is grounded in comfort grounded and fit a uniquely curated offer and an experience that can't be replicated by other retailers period.

Our confidence in our long term view is building with the knowledge that we don't need to be hyper promotional.

Just like we were in the second quarter, we were essentially non promotional in the third quarter. The only limited promotions targeted for unique consumer segments.

What this reduced promotional posture has done for us is to further enhance the brand's positioning of EXL not as a discounter not as a coupon store.

Brand that understand and honors big and tall, guys better than anyone else in the market.

And that brings me to what really is our number one long term priority taking market share.

Today that means somewhat of a transition.

Lifetime value is critical it starts with customer acquisition and trial, and then shifts to repeat and repeat again.

In that order.

As we battled through the pandemic our focus was predominantly fixated on our existing customer base, it's a lot easier and more efficient to focus on consumers you have already.

Customer retention has always been a goal for us but today, we are striving to achieve a better balance between retention and acquisition.

We're working hard to evolve our singular mindset.

Attributable rollout driven working spend to a comprehensive brand building spend that drives upper funnel messaging and greater awareness.

And as I've said many times in the past, we believe that our fit our assortment and our experiences are the differentiators that separate <unk> from any other men's store selling big and tall.

Today, we spend a significant amount of our marketing dollars on ROE as attributable channels, such as paid digital at Sierra.

We're also at a point, where we have defined and aligned on our brand's repositioning and we now must seize the opportunities to socialize the material led materialize across multiple other channel and I'm happy to say we've identified another a number of other opportunities.

Hopefully today, you should have already been seeing our increased investment in connected TV and streaming more important brand messaging and content and as we move forward. We are slowly starting to partner with Influencers and testing Influencer outreach, we are becoming more active in public relations outreach and <unk>.

This regard you will there.

You have seen US featured concerted industry trade lifecycle lifecycle life style magazines and publication.

Over the past 20 months, we have worked to create a significantly greater understanding of the customer driven mostly by quantitative understanding of behaviors segments and demographics.

We're using third party vendors, which allow us to walk in the shoes of our customer. This helps us to engage with customers in ways that are more personalized to his style to its persona and two its aspirations, but there is much more work to do in this area and in Q4 and into 2022.

We are acquiring a deeper and more complete understanding of our customer by investing further in qualitative research and analysis.

We will be conducting interviews focus groups surveys and other interactive research to refine our thoughts about what makes big and tall guys. <expletive> what are his needs.

His wants and what are its pinpoint why he shops, where he shops or her weird.

Also doing a better job at gathering 360 degree feedback from our guest engagement center from our stores and our web teams what are its perceptions of DSL or his shopping experience and how can we improve.

We have conceptualized as a team and clearly articulated our vision for the business, bringing this to life now and we'll continue to do so through 2022 and beyond to further strengthen our defendable position our moat as we've referred to it.

We lead with our positioning in everything we do today and believe it is dispositions competitive stance that makes us the leading big and tall men's apparel retailer with the greatest potential for growth in the consumers' mind share. My hope is in my comments today, you have heard the repetition that consistency.

And then reminded in our messaging that as I have said before the work were talking about was laid back in Q2 2019.

And finally, let me give you an update on wholesale just as we discussed in our mainline business, we have experienced supply chain challenges in wholesale to in total our wholesale business, which is primarily with Amazon generated sales of $900000 for the quarter compared with $2 9 million in the third quarter of 19, we.

Continue to work through the challenges like supply chain issues that are highly publicized towards improving on hand, and building a business together and Germany ways to move forward the.

The impact of the supply chain issues on our wholesale business in forecasting and then procuring has been a major force in the business has slowed down and the impact we have felt here in wholesale is greater than with respect to our core sales and inventory.

And now I would like to turn the call over to Peter for an update on the financials Peter.

Thank you Harvey and good morning, everyone.

Harvey I'm excited by this quarter's performance and our ability to string together multiple quarters of sequential growth.

With the seasonality of sales Q3 has historically been a more challenging quarter for us financially, but this year, we've delivered earnings that we're proud of.

Just on the strength of our third quarter performance, we are again, increasing our full year sales and earnings guidance, which I will review with you after I discuss the quarters results.

I'll also focus my comparisons against Q3 of 2019 for better comparability.

I think Harvey has covered the sales discussion in detail already so I'm going to jump right into gross margin.

Our gross margin rate inclusive of occupancy costs was 52% as compared to a gross margin rate of 36, 5% for the third quarter of fiscal 2020, and 41, 1% for the third quarter of fiscal 2019.

The 910 basis point improvement over 2019 was a combination of 430 basis points of improved merchandise margins and 480 basis points of occupancy leverage.

The improvement in merchandise margin was the result of more full price selling and very low markdown rates.

Mark Downs for US are primarily comprised of two factors promotions and clearance.

We maintained a very low promotional posture throughout the quarter using coupons only in targeting specific customer segments.

Our clearance inventory penetration was also very low this quarter and be even reduced our normal discount tiers to capture a greater share of margin.

We expect the adjustment to our clearance pricing levels to be temporary, but a lower level of promotion as part of our ongoing strategy.

Partially offsetting the benefits from lower markdowns were higher freight costs as we sought to limit delays in product shipments by paying more for containers, leaving airing in goods.

We estimate the impact of these rate increases to be approximately 100 basis points in Q3, and expect great cost to remain elevated in future periods before things get better.

Store occupancy costs decreased by $3 2 million as compared to 2019 as a result of closing unproductive stores and rent reductions we have negotiated since the beginning of the pandemic.

Although the pace of new lease restructures has slowed we continue to benefit from the reductions we secured in those stores where are rents had been over market.

Since 2020, we have restructured 155 individuals store leases more than half the chain, which are expected to deliver over $18 1 million of savings over the life of the leases, including $6 2 million of expected savings in fiscal 2021.

Now, let me move on to selling general and administrative expenses.

As a percentage of sales SG&A expenses for the third quarter of fiscal 2021, with 34, 5% as compared to 38, 5% for the second quarter of fiscal 2020.

And 39, 5% for the second quarter of fiscal 2019.

On a dollar basis SG&A costs were approximately flat to 2019 levels, but our late improved due to leverage on higher sales results.

Increases in advertising expense incentive based accruals and merit adjustments were offset by savings from last year's store and corporate head count reductions.

We are being very diligent about preserving as many fixed cost reductions as possible. Despite the fact that certain variable costs will increase as our business accelerates.

The two areas, where we made the greatest investment where advertising designed to drive greater new to file customers and merit adjustments to retain our workforce in this challenging labor market.

Customer facing costs were 19, 6% of sales in Q3 as compared to 22% in third quarter of 2019.

Corporate support costs, which include the distribution center and corporate overhead costs represented 14, 9% of sales in the third quarter compared to 17, 5% of sales in the third quarter of fiscal 2019.

Adjusted EBITDA was $19 million for the third quarter compared to a negative $1 7 million in the third quarter of 2020, and a positive $1 7 million for the third quarter of fiscal 2019.

Net income for the third quarter was $13 7 million or <unk> 20 per diluted share compared with a net loss of $7 million or a 14 loss per diluted share for the third quarter of fiscal 2020, and a net loss of $7 2 million or a <unk> 14 cents loss per diluted share for the third quarter of fiscal 2019.

Next I'll turn to cash flow and the balance sheet.

I'm very pleased to report that we are debt free for the first time in almost nine years.

In connection with this accomplishment we had two significant transactions this quarter that I'd like to talk about.

First in September we prepaid our $17 $5 million <unk> term loan in full.

Although we had over four years of term left on this loan it was at a significantly higher interest rate of eight 5% as compared to our revolving credit facility.

The second transaction, which closed at the end of October was a new $125 million revolving credit facility, which replaced our old credit facility that was set to expire in may of 2023.

The new credit facility has a five year term, bringing us to October 2026.

And provides terms that are far more favorable than the old credit facility.

Like the old credit facility. It is secured primarily by our inventory and can be used in the future to support seasonal inventory purchases and other business needs.

As of the end of the third quarter, we had no borrowings under the new credit facility and had $74 million of excess availability.

Our interest expense for Q3.

Reflect a prepayment penalty of $1 $1 million in connection with the early termination of the pilot alone as well as $800000 for the write off unamortized financing costs. However, future periods will benefit from the retirement of the high interest by low loan and the new credit facilities lower interest rates.

Our free cash flow, which we define as cash flow from operations less capital expenditures for the first nine months of fiscal 2021 was proceeds of $61 3 million as compared to a use of $11 6 million for the same period in fiscal 2020 and are you.

A $25 4 million in fiscal 2019.

The improvement is primarily due to our improved earnings.

This free cash flow is what enabled us to end the third quarter debt free and with a cash balance of $6 9 million.

By comparison, our debt balance net of cash was 61 $5 million at the end of Q3, 2020, and $77 5 million at the end of Q3 2019.

With positive cash flows no debt and access to capital at low interest rates, we feel very good about our liquidity position.

After years of low capital expenditures focused primarily on maintenance. We are now looking for ROI based opportunities to reinvest cash back into the business that will further grow our customer counts and improve our customer experience.

We are currently focused on three areas of investment.

<unk> technology and stores.

Harvey has talked pretty extensively about marketing and technology, but let me just add a few thoughts on stores.

First of all we are going to be selective on where to invest with stores. We are not planning a broad based campaign to resurrect the rollout of Dx sell stores, but we do believe there are some gaps in our store portfolio, which we may choose to address.

Ultimately, we are looking at how stores complement and dovetail with our direct business and whether there are select opportunities to grow market share for them.

As Harvey talked about before it has been a constant battle to secure enough inventory this year with customer demand stronger than we had expected and the ongoing global supply chain disruptions.

Our inventory balance at October 32021 was $82 3 million as compared to $94 9 million at October 31, 2020, and $120 2 million at November 2019 were down 30% to 2019 levels.

Consequently inventory turnover is up to over two times as compared to our historical levels of around one five times.

Clearance levels are also at record lows and represented just six 4% of our inventory at October 30 of 2021 as compared to 11, 8% at October 31, 2020, and 10% at November <unk> 2019.

The flow of product from our vendors in the third quarter has certainly been slower than expected.

However, our check.

<unk> shipments in the pipeline today has given us confidence in our revised outlook, which is what I'd like to share with you next.

Our results for the third quarter exceeded our internal expectations and as a result, we have raised our full year guidance. While we are optimistic for a strong fourth quarter. We are taking a cautious and conservative approach in light of the supply chain issues and inventory situations.

For the full year, we expect sales to range from 500 million to $510 million with ecommerce penetration of approximately 30%.

We expect adjusted EBITDA to range from 70 million to $75 million and net income for the full year is expected to be 72 to <unk> 80 per share.

Finally free cash flow is expected to be in excess of $55 million.

The high end of our sales guidance of 510 million would imply a fourth quarter comp sales rate to 2019 in the low double digits in the gross margin rate in the high 40% range.

At the end at the high end $75 million of adjusted EBITDA on $510 million of sales is nearly a 15% adjusted EBITDA margin.

We believe this is a unique year and long term, we are working to sustain an EBITA margin of 10% or greater.

There is still much work to be done and we will continue to drive shareholder value growing DSL into the premier shopping experience for all big and tall man.

And with that I would like to turn it back over to Harvey for some closing thoughts.

Yeah.

Thanks, Peter as you hopefully are now we are truly pleased with what we have accomplished and we recognize a far greater potential that lies ahead, we remain conservative in our projections and cautiously optimistic that our actions to navigate the supply chain and labor issues will allow us to have the product in staffing levels, we need to execute our strategic.

T J plan.

In the most solid financial position in our company's history and most of all we believe we have a strategy to give me engage consumers and what we do best creating memorable experiences for big and tall guys to look and feel their best we do that by offering the most extensive and uniquely curated assortment from value priced essentials to luxury brands exclusive designs.

Online on our App and in our stores, giving an underserved consumer the be all end all place to browse shop and interact and finally, we know we have an incredibly incredible employee base that is passionate and committed to our customers and our purpose and this gives us the confidence that we will continue to make inroads into gaining.

<unk> share of market and with that operator, we'll take questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone.

Draw your question press the pound key please stand by while we compile the Q&A roster.

Our first question comes from anchor with D. A Davidson your line is open.

Okay.

Thanks, guys.

So you know I think we will get the idea of conservative, but cautiously optimistic but I just wanted to.

Hate to be Myopically focused on really short term stuff, but.

Harvey you said something along the lines of you think.

November can rebound until your guidance is low double digits for the fourth quarter that would be a rebound I think from what you saw in October you said November can rebound if you get product and I guess the question is when do you know if you can get the product and when does it become too late and I guess square that with Peter's comments that recent checks give you give.

You confidence what one does that.

Yeah, we actually got the stuff.

It's a great question and I'll tell you two things one at a high level. Our first two five weeks of November are very much aligned to Q3. So we feel like that that's a good reference point for us to believe that we can get back to where we are and we're receiving goods, but the reason I highlighted that one very specific example, and <unk>.

It didn't pass over People's understanding it's day to day. When you are afraid. Good then you are expecting that they will come in on a playing one day and move through the pipeline. The next day that the reality of the two weeks to get goods, we air Freighted and so every single day, we're chasing goods given the.

We're at 32% behind inventory, our turn is up over 33%. We are in fact, selling what we bring in it's almost like cross docking at and so the answer. The question is every single day that that happens well. We continue to believe that there is even greater and greater likelihood will outperform but at any given day that doesn't happen.

And the way it's supposed to.

Once they start stacking up and we cant catch up then we fall back to a more conservative outcome. So I'm not trying to be pollyanna. It's just the reality of the situation.

I believe we will get this done but there is risk and that's what we wanted to be clear and confident with what we gave the group as our end of year guidance.

Yes.

That's fair and then just to clarify November back to third quarter third quarter levels or inline with third quarter not absolutely better than October.

My reference point was that yes in fact, our stores have accelerated back to overall in the first two and a half weeks what was the quarter's performance as Octobers and our total company comp is about where Q3 ended.

But unfortunately, there is a lot of water that is going to have to passed under the bridge. So we're just trying not to get ahead of our skis understood makes sense. One more question. If I could just on all of that marketing you talked about the top of funnel.

I guess, there's a quantitative and qualitative question here from a qualitative standpoint.

I think one of the changes you've made in the past I think there was a lot of sort of.

What do you call like buckshot marketing rather than shock shock on a lot of you know just just just that the bigger brand builder national broadcast yeah exactly. Thank you for helping me articulate that you moved away from that now it sounds like are you moving or it gives us confidence that youre not moving towards what you were doing in the past that wasn't working and then and then can you quantify.

Do we expect marketing dollars to go up by X percent over the next couple of years or whats the spend that we're looking out there yeah. The two specific things I will tell you and I gave you a couple of examples but when Europe on streaming TV.

<unk> Hulu and Youtube as example, our ability to target our customer is in.

Exponentially greater than when Youre doing blood level TV marketing on a national broadcast basis. So that is creating an efficiency to get to our consumer that being said, we're also pushing streaming among other venues more broadly and to answer. Your question. We expect we will push up the percentage of.

Add to sales so from four upper 4% and change to somewhere north of five and south of six and we'll continue to talk about how much we should spend but if we're going after a larger share of market. The most important way to accomplish that is first be part of the mind share of consumers, great, creating greater awareness for the <unk>.

Brand in your target consumer group and then as I said acquisition terms to trial trial turns to purchase and then we're going to go after repeat repeat repeat and so there is a top of funnel shift, but its shifted into targeted bolt marketing spend that should be more productive than as you said shotgun approach.

Yep, Okay makes sense I'll turn it over to someone else for now thank you.

Thank you. Our next question comes from Jeremy Hamblin with Craig Hallum Capital Group you may begin.

Thanks, and congrats guys on really strong execution.

I wanted to just get into the inventory a little bit deeper.

Can you call out are there particular categories, where you are struggling more to acquire inventory.

Men suits.

Other.

It sounds like it's been very strong.

Other pieces of your tailored clothing.

Any insight you can share that.

And then kind of a follow up question is how does the seasonal.

Mix look typically in Q4.

And kind of your current trend rates.

<unk> product margin versus what you have in other quarters is there any kind of seasonality on product mix.

Yeah.

Harvey I'll take that so first of all.

Less about inventory in terms of what we own and more about revenue and when I say that our tailored clothing suits and dress shirts. Two prime examples have just exceeded our expectations and so now we are chasing goods at a heightened level, our inventories actually we're pretty well positioned but the biz.

<unk> has just continued to accelerate now that said one of the greatest things about our global sourcing team and just their capabilities that I find rather remarkable they have been able to shift.

Raw materials from I think it was Ethiopia I think it was Epo, but don't quote me on that into Mexico, and the Mexican producer that we work with.

Passage of produce if they could get the fabric.

<unk> been able to produce goods and goods that were literally headed into the distributions that are at the end of December are now shipping Tuesday, so when I talk about agility speed to market and the dynamics, we're doing and even answering the question for Mike before D. A Davidson. These are just perfect examples of how fluid.

The movement of inventory is that our actions are chasing goods, but.

Back to the core question I would say tailored clothing overall is not as strongly positioned as we would hope for and Conversely.

For Red Nautica vineyard, vines, which I called out had been remarkable and their ability to get us Etfs. In addition to our typical on order and what our expectation is that the weather.

Whether moves and we're seeing that very much right now where it's getting a little colder our outerwear businesses kicked in but things like Colombia, our north face our sweater businesses kicked in and so we feel relatively speaking well positioned and we just have to keep receiving goods normally I wouldn't say that but when you're down 32% of inventory and year.

Turning 33, 33% faster.

Pretty much like a grocery store.

Use that as an analogy more than anything else, but we just have to keep good slowing.

That's great color.

Okay, turning to another kind of Q4 question.

So store hours have continued at this.

10, 10 am to seven PM reduced hours from a couple of years ago is.

As we get really into the thickest part of the holiday season.

Given the inventory position.

Are you going to maintain that 10 seven P. M are you going to go to holiday hours in December.

And then kind of as a follow up question.

Totally understand.

The marketing investment.

But what type of ability to have.

To your point about risk and unpredictability.

What type of ability do you have to pull back on marketing if it doesn't make sense because you don't have adequate inventories or has that money kind of thing.

Spent and invested already.

Thanks.

Yes, it's two different questions one.

Store hours, we are not extending store hours, we have had incredibly robust conversations multiple times about this and when the day is done we actually went out to the stores at the store managers at the RSM and our regional Vps and really engage them and we all believe in totality literally across every part of the business.

That our customers get online as we've always talked about and they Google Big and tall, and specifically, they're already a customer of ours. They Google DSL. They look at our store hours and they decide when to shop based on that information and that is part of digital transformation, but I always talk about digital that's the impact even on stores.

Digital marketing and we believe that customers have grown used to our hours. We know that there are a lot of challenges for families and for People's shopping and we're equally concerned and have empathy about our associates with lighter levels of folks in the stores, we're very much cognizant of not pushing them even half.

<unk> and extending them in terms of the hours. So the long and the short of it is we do not intend to open more hours. We are comfortable that the hours were doing and the customer's recognition of that will allow us to do our business and then the second question. You asked was marketing and in terms of marketing I would actually go the other way.

Ask the question what is our agility to spend even more and lean in even harder to those things that work I. Certainly appreciate that the question about inventory and inventories were bad we would certainly potentially pull in marketing, but I would tell you that we're looking at ways, especially in Q4, especially given our competitiveness.

That which we believe is better in stocks and better positioning and if you Havent walk the store I think what you'd see is that our stores look relatively full we are lighter in the back rooms, but not on the selling floor and I think the question really is where can we lean into marketing when we're getting investments and how fast can we do that.

The stores look good on our stores work for sure.

Last one for me and then I can turn it over in terms of one thing you didn't talk about a ton here as you've been pretty excited about our new exclusive brand relationship for 'twenty. Two I think the term you viewed as a top five brand.

Is.

Is there any more color you can provide around that not necessarily the brand itself, but is it for double XL and above when will you expect product for that to be in the stores and.

Do you have to make room.

On the floors, you have to take other brands out.

You know, what what kind of percent of the mix could it be yes, Jeremy on empowering but.

I think you've actually might have misunderstood what we've said.

The top five brand is a top five brand of ours today, it's one of our top five selling brands what I'm really excited about is based on the success of the brand's repositioning really as a regular priced company engaging ways with engaging consumers in what I would call brand centric ways as.

Opposed to couponing and discounting this brand nationally and actually globally distributed is pulling the brand out of other retail distribution and we along with Dell will be the only retailers selling it and so it just to be very clear we sell it today its revenue.

<unk> is one of the top five revenue brands and we expect it will sell tremendously more as consumers have only two outlets to buy it from and big and tall, which is us and the brand itself and I'm, specifically only referring to big and tall in normal sizes or non big and tall sizes. It will continue to be distributed.

Across other retail entities.

That's helpful. So double Exxon above where the EPS if he comes in.

And that we will announce that in next year honestly.

Done, but it's just not something until next year, we want to announce with in partnership with the brand.

Understood. Thanks, so much for taking our questions. Thank you. Thanks for your support.

Thank you. Our next question comes from Mike Baker with D. A Davidson your line is open.

Yeah.

Yeah that was different figured I'll come back with one more why not it's a Friday.

The store count comments, Peter that you made an interesting we get asked a lot about what's the right store count I think at one point and correct me if I'm wrong about this I I have my notes that you had said $2 75 for year end.

That seems a little low because I don't think you'll get there. So I guess can you talk about what's the right long term store count now it sounds like he might even opened some stores, which I guess is yourselves a really strong it does make some sense, but but I think that's an interesting comment and then is there any opportunity for rebranding of remodeling. It you still have some of these older casual male stores.

What are you doing with those so those eventually become T X L. G stores. Thanks.

Self storage.

Great Great question, Mike. Thank you. So the 275 store count no that we will not be a 275 at the end of this year.

But it's possible we could be there at the end of next year. This is actually something that we're looking at very very carefully because as I said, there's a couple of different parts of the store equation that where we're trying to figure out and where to prioritize.

As I alluded to is gaps in the portfolio, where we could be in a market.

That's highly populated highly dense and we don't have enough stores and maybe we want to go from one store to two stores.

I think those those opportunities are modest I don't think it's it's across the country, but there are some opportunities there and then you also talked about.

The casual male stores and what ultimately happens with the casual male stores as I mentioned, we've got an awful lot of those stores that come up for lease expiration and renewal over the next couple of years. So we will be looking looking at them on a case by case basis in some cases.

They will be getting remodeled in other cases, we'll we'll be looking at do we want to relocate.

I think overall the message is the store count is going to come down, but not at the precipitous rate.

Where we eventually end up I could see us at about $2 75, but its a very fluid and dynamic question that as I said, we will continue to evaluate each store on its own merit and make choices as to what we do with each store.

As those come up for renewal.

One thing I wanted to just double down on that is as I've often talked pretty publicly.

When I joined we have digital muscle so to speak I always say that it didnt atrophy, we just didn't have one.

And I've talked a lot about data and analytics and the digital practice that we have brought to market via our CMO, who as you all do and one of the things. We're really working hard at is looking at our Internet base metrics distribution of customers by geography.

Revenue per capita against geography, and looking for either white space or fill in opportunities so to Peter's point a lot of our.

Potential for store openings will be driven by the recognition that the consumer is in the driver's seat and if they're shopping online and we have opportunities in markets there will be greater opportunities to consider store openings, where those are now as Peter said I don't think it will be a rolex store counts, but it does alluded to the opportunity to both.

<unk> markets and stores with stores that are not fully penetrated yet.

Makes sense very clear one.

More than maybe 60 seconds or less if you're willing to give this data maybe not but you gave us the comps by month by direct in stores. We can do some math based on the percentages to come up with an estimate of total comp by month, but if you had it.

Make everyones life easier.

Peter.

Yeah, So so sorry, Mike.

I'm not quite sure what comp are you looking for so so.

Total total company, where the numbers.

The number you gave out as I understood, it where store comp and direct comp, but don't don't you also have a total company comp you know the sort of wait it out for sure.

We did mention that in there somewhere for Q3. The total comp was 22.9 sure sure no I meant I meant the month lease you gave the monthly is by each.

Each segment, but I don't recall, if he is I don't I don't I didn't hear you give the monthly total maybe you did and I've got got it okay. So for August it was 25 nine.

For September it was 23 eight.

And for October It was 19 two.

That's one two per cent understood very helpful.

Just I would caution you that we absolutely as I've said before we believe that the trailing level was inventory didn't grow enough. They maintained where they were they grew some but they just didn't grow enough and our expectation is we are now seeing an acceleration in receipts and if that continues that creates the expectation will be that.

To where we are.

We have time for one last.

So I was just going to say you know going from 25% to 19 that there's no shame in that like that that's a pretty strong throughout the quarter, but we appreciate that.

I think we have time for one last question and then we have to wrap up.

Our last question comes from Jeremy Hamblin with Craig Hallum Capital Group. Your line is open.

Thanks for taking the follow up you guys have done a remarkable job of reshaping the balance sheet.

You also have a huge NOL about $300 million.

And given your relatively low capex needs.

By our projections youre going to have like almost $200 million in cash.

Bye.

2023.

That's like 40% of your market cap, what do you do on a on a go forward basis.

I know, it's probably it's not a problem. The company has been used to but with all that cash how do you think about capital allocation.

Our thought that some of that can go back to.

To shareholders via buybacks or special dividends et cetera, or are there other investment opportunities and obviously, you're not going to build out a ton of stores, even if you add some new ones.

And that you would look at Harvey.

Jeremy colleague Harvey.

I'm going to handle that really quickly.

High level first and foremost there's no question, it's technology, driven and its customer facing technology. The example, I give often is that we continue to look at digital sizing and digital showrooms in digital in terms of a showroom in terms of not a storefront, but how do we interact with consumers technology.

Allows them to make a decision about what size the need or even made a measure that still is not at a point, where it's in our view commercial enough, but it's an example of digital technology to enhance the consumers' relationship with US the second big investment would be technology driven around tech.

Infrastructure.

And the third one would be in extending our business, so things like infrastructure to get speed to market and delivery. We have one distribution center on the east coast, we're evaluating as their needs of that after that we would look at other elements that would potentially be more direct return to shareholders, which any great board or any great company will continue to look at.

But those are all good decisions that are forthcoming and by no means are they at a point, where we're able to articulate it in detail what were planning to do.

And with that Unfortunately, we are a couple of minutes over and I. Thank everyone for their interest I wish everyone, a safe healthy and happy Thanksgiving hopefully an opportunity to be with your family and the same for Christmas and the holiday season in front of us be well stay safe and we look forward to talking to you at the end of Q4.

This concludes today's conference call. Thank you participating you may now disconnect.

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Good day, and thank you for standing by welcome to the destination XL groups third quarter 2021 earnings call.

All participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

So ask a question during the session you will need to press star one telephone. Please be advised that today's conference is being recorded if you have quite a further assistance. Please press star zero I would now like to hand, the conference over to your speaker today.

<unk> director of SEC financial reporting. Please go ahead.

Thank you Shannon and good morning, everyone. Thank you for joining us on destination XL group's third quarter fiscal 2021 earnings call on our call today is our president and Chief Executive Officer, Harvey Kanter, and our Chief Financial Officer, Peter Stratton.

During today's call, we will discuss some non-GAAP metrics to provide investors with some useful information about our financial performance. Please refer to our earnings release, which was filed Wednesday afternoon, and it's available on our Investor Relations website at Investor Dot Dx L. Dot com for an explanation and reconciliation of such measures.

Today's discussion also contains certain forward looking statements concerning the company's updated sales and earnings guidance and other expectations for fiscal 2021.

Such forward looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those assumptions mentioned today due to a variety of factors that affect the company, including but not limited to supply chain disruption labor availability and disruption from COVID-19 information regarding risks and uncertainties as detailed in the.

Company's filings with the Securities and Exchange Commission I would now like to turn the call over to our CEO Harvey Kanter Harvey.

Thank you Shelly and good morning to everyone.

Forward to speaking with you today about the progress we're making in our business this year.

Third quarter results, which we announced on Wednesday, and the greater opportunities as we close out this year and the holiday season.

My Hope is you hear repetition.

Assistance and reminders in our messaging and our tone and in our optimism for the work at hand.

And the same goes repetition is the mother of all learning and my hope is from a repetition you better understand the results from our ongoing transformation as well as the range of possible growth yet ahead, but also the risk given the volatility this holiday season.

In just four short months from now it will mark three years. Since we began this transformation journey and we still the same vision the same mission and the same strategy.

Team is executing well and with a perseverance and tenacity that is inspiring to me and producing meaningful results.

Given the pandemic 20 months of detour, but year to date performance is all that much more energizing.

Approximately eight months ago in March when we first started to see signs of a recovery in our business.

It is exciting to see how quickly the results have begun to leverage the top line sales the operating platform reset and that dropped to the bottom line.

In the second quarter the acceleration in sales continued to build and we began to see that our business was not only recovering but accelerating.

I'm pleased to report that once again, our quarterly results have exceeded our expectations and that the consensus as well.

We are incredibly happy with our performance in the third quarter and we see this performance is somewhat remarkable given the ongoing challenges in the supply chain and with labor shortages.

Despite these challenges that we're grappling with daily the consumer is responding to our initiatives and at a level that continues to demonstrate the traction and the brand's repositioning.

While we remain very optimistic for a strong quarter fourth quarter, specifically the brands highly promotional historical debt in the fourth quarter will now undergo its greatest test without.

Without sharing broadly and publicly our promotional plans it should be clear from our actions that we intend to continue to engage the consumer in a very different way.

I will cover this in more detail later in my comments that our change in promotional plans in combination with the risk and volatility in the supply chain implicitly caused us to be conservative in our outlook. Despite the success of this year's performance to date.

This abundance of caution should not really surprise anyone.

Since I've been here as CEO, our intent has always been to be confident in our guidance we have been transparent.

Detailed and thorough in what we believe and why given.

Given the challenges that our philosophical orientation and acknowledging the variables we control versus those that we do not control. We are doing as we have always done and authoring our outlook and expect big expectations.

Now before I talk about the business results and our outlook I want to cover two other points first Wednesday's release, we published our third quarter earnings press release on Wednesday. After the market close which is earlier than we normally would as we knew this was an important quarter and wanted to make sure everyone had enough time with this information.

We're also curious to see if we may see greater attendance on todays earnings call. If we issue the release.

And second I wanted to extend my gratitude to all of our employees for being a critical part of our mission and serving our big and tall customers.

Grow more in dear to us every quarter.

Here again, it's not a secret that the workload mental stress and just never ending push has certainly been challenging for all of our associates.

It is literally each and every one of them that you, we and most importantly, our customers are indebted to.

Like many companies we are managing through a very lean lean lean labor market and daily challenges never before experienced.

At times, we've struggled with maintaining appropriate staffing levels filling open positions and balancing the workload on our people.

Despite all this I couldn't be more proud of the team of associates for their passion and their commitment they have for our customer and to Dx L.

It's inspiring truly like the energizer body, they just keep going and going and going giving more of themselves every day.

Despite working from home and for many in the labor challenges in our stores and the resultant stress that this creates we look to and are continuing to build a culture of trust culture of transparency empowerment and empathy because these continuing to be the most challenging times in most every way.

To all of our associates in the stores and the distribution center and the guest engagement center and in the corporate office. Thank you. Thank.

Thank you for all your hard work. Thank you for the support and your dedication to Dx LS consumer from the very bottom of my heart. Thank you.

Now on to the details in three different topics I want to cover with you today.

First I want to review our third quarter results at a high level, we saw quite strong sales growth in the third quarter across stores online and on our App.

In addition, our promotional cadence was very light and tight which means more product going out the door at full price. This translates to a higher <unk> lower markdowns and higher gross margins were.

We are controlling our operating costs and driving operating leverage second I wanted to talk to you about how we are managing short term challenges across the entire supply chain inventory to labor.

While we are pleased with our results through Q2 Q3, our inventory levels are down about 32% to Q3 2019.

We need to land inventory received in Q4 to maintain momentum and achieve our minimum presentation levels through the post holiday season.

And finally I want to talk to you about marketing our number one long term priority.

Which is customer acquisition trial and repeat and in that order.

Ultimately, we know the outcome of this will be driving revenue growth and taking market share, but those are outcomes, which will happen because new customers try us and we achieve greater lifetime value across our entire customer file.

Our strategies also continue to look at product offerings as well as technology to simplify the shopping experience and engage the consumer in a more profoundly deeper richer and more meaningful relationship with EXL.

Making appropriate investments in marketing and in digital customer engagement is the leading edge to customer acquisition trial and repeat what follows is even greater demonstration of this due to the continued building of the moat as we've explained on previous calls.

My elevator pitch remains the same in regards to our ongoing brands repositioning our vision and mission at EXL is to be the market leader to deliver a big and tall shopping experience that fits his body.

His style and fit just life, bringing a breadth and depth and level of exclusivity and an assortment of curated clothing that cannot be found anywhere else period.

And to create an experience.

Rooted in the values of the place in the consumer.

And the respect we have for him and in our desire to build a trusted relationship creating a level of satisfaction and happiness that there's still there's few any other retailers have a community of belonging.

And driven by our culture and employees, who interact with our guests every single day.

So now let me start by reviewing our Q3 results.

Very pleased to announce that our overall comp sales rate for the third quarter as compared to 2019 accelerated to 22, 9%, which is up from 21, 6% in the second quarter.

2019 was our last normalized year from a financial comparison standpoint, we will be making most of our year over year referenced comparisons are Q through Q3 2019 results.

Comp sales growth in stores was 12, 9% and comp sales growth and direct was 56, 5% as compared to 2019.

In total third quarter sales were $121 5 million compared to $106 6 million and our adjusted EBITDA for the quarter was $19 million compared to $1 7 million in the third quarter of 2019.

Year to date. This brings our adjusted EBITDA to $62 5 million as compared to $13 6 million two to three quarters in 2019.

It is truly a remarkable how far we've come.

These results are a direct outcome of the increased leverage we achieved on sales that exceeded expectations any of us likely had given the known challenges we have been facing.

In stores, our comp sales remained in double digits similar to Q2 in August our store comp rate was 15, 5% in September It was 15, 1% in October a trip to eight 3%.

We continue to see a very purposeful shop in our stores evidenced by growth in both our conversation rates and dollars per transaction.

Our new to file growth rate increased 34% in the third quarter as compared to the third quarter of 2019.

This is an improvement from the second quarter, when our new to file customer gradually increased 28, 5% and just off first quarters, new to file customer growth rate of 35, 7%.

Consistent with our performance in the second quarter as our store sales increased our direct business not only maintained its momentum in the third quarter, but slightly accelerated.

Our direct to comps for Q3 were up 56, 5%, which compares to a growth rate of 52, 2% in the second quarter by.

By month, our comp growth rate was 63, 6% in August.

Two 7% in September.

<unk> 54, 9% in October again, these comps are all against 2019.

Our direct growth shows the sustainability of our digital transformation and we believe it is a testament to our ability to stand out as a digital first brand <unk>.

Direct was just under 30% of total retail sales in Q3 as compared to 21, 9% in Q3 2019, and we expect our direct penetration for the full year to be approximately 30%.

As compared to annual penetration in 2019 of 23, 1%.

Our direct growth was driven by a combination of improvements in web traffic and conversion and basket size.

We believe that our new to file growth indicates that our digital marketing investments and the optimization of our digital infrastructure are driving significant inflection in new <unk> customers.

Although October results sequentially slowed we believe this is almost exclusively a function of inventory challenges and we do believe that if we can achieve better inventory positioning this slowing down will reverse itself.

We will talk about supply chain challenges in just a moment, but needless to say it feels like hand to hand daily combat.

Finally, with respect to off site sales originating on third party marketplaces predominantly driven by Amazon results were exceptionally strong.

We also just launched on target Dot com marketplace in October and we expect it will take a few months to ramp up to a meaningful assortment.

Now, let me shift gears, a bit and talk about merchandise assortment and our inventory.

We continue to see a strong sales performance across all product categories. Our merchandise assortment is 55% private label and 45% on our collections and our sales penetration for the third quarter was relatively consistent with inventory composition.

Tailored clothing started to build in the second quarter and that trend has continued through the third quarter actually even accelerated despite the growing inventory challenges tailored.

Tailored clothing drove 18, 4% of the Q3 business as compared to 13, 1% in the second quarter with the biggest gains coming from suits and dress shirts.

Pairing casual with tailored clothing continues to be a trend as customers returned to work will remain oriented to looking relaxed and casual.

In sportswear, the top selling brands in our assortment contingency higher selling velocity and these include polo.

Not ago vineyard vines and Reebok among others.

The one constant challenge throughout the quarter was the disruption that seem to be impacting each phase of the supply chain.

Ocean and air freight continued to be problematic, causing delays and sharp price increases at EXL, we bring in all of our private label overseas shipments through the Port of New York New Jersey.

Don't have any private label coming through long beach, but we know some of the delays from our domestic vendors is being impacted at long beach as well.

Port congestion is a major problem, which has motivated us to fly in goods, but even then reductions in international flights have caused capacity constraints and price increases.

Trucking companies are facing a shortage of drivers and inbound worker staffing issues, which further backs up the network.

I think sharing one example will help you better understand the reality of the situation, which is dynamic ever moving in anything but transparent derives day as opaque as anything could be.

We recently aired in private label goods that it had an E. T. A of 10 18 for arriving into JFK Airport.

As of 11, one the goods having arrived the JFK still had not been located despite daily calls asking where are my goods.

On 11, two two weeks later, we finally received word the airline had located the product in the lot.

The trucking company, we've been able to pick up the shipment and good arrived in our D. C on 11 five.

We are creative product, we did not know where this product was for nearly two weeks at once located it took three days to load and travel 200 miles.

Incredibly difficult as you might imagine.

The challenges in getting goods to the port and ultimately to the sales. We'll have this thing turn and burn comes to mind, we are stocking shelves and we are selling what we stock inventory turnover is up 33% from our historical performance.

Our global sourcing team.

Global sourcing team has been successful mitigating risk all year and procuring fabrics to support our production needs today.

Today that global sourcing team has diversified at the factory level, but still we are heavily penetrated in southeast Asia, including Vietnam, Cambodia, Bangladesh and to a lesser extent China.

Our sourcing team is platform to over 3 million yards of fabric and yard on key item programs with our vendors to secure greater availability to allude offset price and speed to market, which should allow us to fulfill our orders through fall of 2022 and into 2023.

This will also allow us to shorten our lead times and protect gross margins with cotton prices up over 40% in every country. We source from experiencing inflation. We are trying to navigate what is clearly not normal.

Part of the way we were battling these challenges is by diversifying our supply chain to incorporate greater speed and flexibility we have initiated incorrectly Myrtle Grove manufacturing at our producing now with Jordan.

India, and Mexico, and we expect to shift some production to Central America.

With regard to labor we.

We're certainly seeing challenges, but we believe we have fared well enough in the current environment.

In the stores, we are seeing an elevated level open or unfulfilled positions traditionally our infield position rate has been about 10%.

But for the third quarter it was closer to 20%.

We believe we have been more competitive with compensation, where our store occurs receive a base wage and a commission as well as the sale of the bonus eligibility with so many of our stores exceeding their plans by achieving their incentive compensation and materially impacting their overall compensation.

In the distribution center, we have a strong group of year round associates, and we've been able to recruit and bring in seasonal associates for the pending holiday season.

Finally, let's talk about marketing.

Our enthusiasm for what we've already accomplished this year, it's incredibly energizing.

We are continuing to lean into our brands positioning built around our proprietary fit it.

Curated with largely exclusive assortment of private label and National brands and an experience built around the respect and the value for the big and tall consumers who trust us.

This strategy has allowed us to shift away from a value proposition that is driven by price highly promotional and discount driven too.

A proposition that is grounded in comfort grounded and fit a uniquely curated offer and an experience that can't be replicated by other retailers period.

Our confidence in our long term view is building with the knowledge that we don't need to be hyper promotional.

Just like we were in the second quarter, we were essentially non promotional in the third quarter with the only limited promotions targeted for unique consumer segments.

What this reduced promotional posture has done for us is to further enhance the brand positioning of EXL not as a discounter not as a coupon store, but it is a brand that understand and honors big and tall guys better than anyone else in the market.

And that brings me to what really is our number one long term priority taking market share and today that means somewhat of a transition.

Lifetime value is critical it starts with customer acquisition and trial, and then shifts to repeat and repeat again.

In that order.

We battled through the pandemic, our focus was predominantly fixated on our existing customer base, it's a lot easier and more efficient to focus on consumers you have already.

Customer retention has always been a goal for us but today, we are striving to achieve a better balance between retention and acquisition.

We're working hard to evolve our singular mindset of having an attributable rollout driven working spend to a comprehensive brand building spend that drives upper funnel messaging and greater awareness.

And as I said many times in the past, we believe that our fit our assortment and our experiences are the differentiators that separate <unk> from any other men's store selling big and tall.

Today, we spend a significant amount of our marketing dollars on ROE as attributable channels such as paid digital at Sierra We are also at a point, where we have defined and aligned on our brand's repositioning and we now must seize the opportunities to socialize the material led crop materialize across multiple other channel.

And I'm happy to say, we've identified another a number of other opportunities.

Hopefully today, you should have already been seeing our increased investment in connected TV and streaming more important brand messaging and content and as we move forward. We are slowly starting to partner with Influencers and testing Influencer outreach, we are becoming more active in public relations outreach and and this.

Regard you what Mary has seen US featured concerted industry trade and lifestyle lifecycle life style magazines and publication.

Over the past 20 months, we have worked to create a significantly greater understanding of the customer driven mostly by quantitative understanding of behaviors statements and demographics.

Using third party vendors, which allow us to walk in the shoes of our customer. This helps us to engage with customers in ways that are more personalized to his style to its persona and two its aspirations.

But there is much more work to do in this area and in Q4 and into 2022, we are acquiring a deeper and more complete understanding of our customer by investing further in qualitative research and analysis.

We will be conducting interviews focus groups surveys and other interactive research to refine our thoughts about what makes big and tall guys. <expletive> what are his needs. What are his wants and what are its pinpoint why he shops, where he shops or her.

We're also doing a better job at gathering 360 degree feedback from our guest engagement center from our stores and our web teams what are its perceptions of DSL or his shopping experience and how can we improve.

We have conceptualized as a team and clearly articulated our vision for the business, bringing this to life now and we'll continue to do so through 2022 and beyond.

Further strengthen our defendable position our moat as we've referred to it we lead with our positioning in everything we do today and believe it is dispositions competitive stance that makes us the leading big and tall men's apparel retailer with the greatest potential for growth in the consumers' mind share my.

Hope is in my comments today, you have heard the repetition that.

Distances, and then reminded in our messaging that as I have said before the work were talking about was laid back in Q2 2019.

And finally, let me give you an update on wholesale.

Just as we discussed in our mainline business, we have experienced supply chain challenges in wholesale too.

In total our wholesale business, which is primarily with Amazon generated sales of $900000 for the quarter compared with $2 9 million in the third quarter of 19.

We continue to work through the challenges like supply chain issues that are highly publicized towards improving on hand, and building a business together and Germany ways to move forward.

The impact of the supply chain issues on our wholesale business in forecasting and then procuring has been a major force in the business has slowed down and the impact we have felt here in wholesale is greater than with respect to our core sales and inventory.

And now I would like to turn the call over to Peter for an update on our financials Peter.

Yes.

Thank you Harvey and good morning, everyone.

Like Harvey I'm excited by this quarter's performance and our ability to string together multiple quarters of sequential growth.

With the seasonality of sales Q3 has historically been a more challenging quarter for us financially, but this year, we've delivered earnings that we're proud of.

Based on the strength of our third quarter performance, we are again, increasing our full year sales and earnings guidance, which I will review with you after I discuss the quarters results.

I'll also focus my comparisons against Q3 of 2019 for better comparability.

I think Harvey has covered the sales discussion in detail already so I'm going to jump right into gross margin.

Our gross margin rate inclusive of occupancy costs was 52% as compared to a gross margin rate of 36, 5% for the third quarter of fiscal 2020, and 41, 1% for the third quarter of fiscal 2019.

The 910 basis point improvement over 2019 was a combination of 430 basis points of improved merchandize margins in 480 basis points of occupancy leverage.

The improvement in merchandize margin was the result of more full price selling and very low markdown rates.

Mark Downs for US are primarily comprised of two factors promotions and clearance.

We maintained a very low promotional posture throughout the quarter using coupons only in targeting specific customer segments.

Our clearance inventory penetration was also very low this quarter and be even reduced our normal discount tiers to capture a greater share of margin.

We expect the adjustment to our clearance pricing levels to be temporary, but a lower level of promotion as part of our ongoing strategy.

Partially offsetting the benefits from lower markdowns were higher freight costs as we sought to limit delays in product shipments by paying more for containers, leaving airing in goods.

We estimate the impact of these rate increases to be approximately 100 basis points in Q3, and expect freight cost to remain elevated in future periods before things get better.

Store occupancy costs decreased by $3 2 million as compared to 2019 as a result of closing unproductive stores and rent reductions we have negotiated since the beginning of the pandemic.

Although the pace of new lease restructures has slowed we continue to benefit from the reductions we secured in those stores where are rents had been over market.

Since 2020, we have restructured 155 individuals store leases more than half the chain, which are expected to deliver over $18 1 million of savings over the life of the leases, including $6 2 million of expected savings in fiscal 2021.

Now, let me move on to selling general and administrative expenses.

As a percentage of sales SG&A expenses for the third quarter of fiscal 2021, with 34, 5% as compared to 38, 5% for the second quarter of fiscal 2020.

And 39, 5% for the second quarter of fiscal 2019.

On a dollar basis SG&A costs were approximately flat to 2019 levels, but our rate improved due to leverage on higher sales results.

Increases in advertising expense incentive based accruals and merit adjustments were offset by savings from last year's store and corporate head count reductions.

We are being very diligent about preserving as many fixed cost reductions as possible. Despite the fact that certain variable costs will increase as our business accelerates.

The two areas, where we made the greatest investment where advertising designed to drive greater new to file customers and merit adjustments to retain our workforce in this challenging labor market.

Customer facing costs were 19, 6% of sales in Q3 as compared to 22% in third quarter of 2019.

Corporate support costs, which include the distribution center and corporate overhead costs represented 14, 9% of sales in the third quarter compared to 17, 5% of sales in the third quarter of fiscal 2019.

Adjusted EBITDA was $19 million for the third quarter compared to a negative $1 7 million in the third quarter of 2020, and a positive $1 7 million for the third quarter of fiscal 2019.

Net income for the third quarter was $13 7 million or <unk> 20 per diluted share compared with a net loss of $7 million or a 14 loss per diluted share for the third quarter of fiscal 2020, and a net loss of $7 2 million or a <unk> 14 cents loss per diluted share for the third quarter of fiscal 2019.

Next I'll turn to cash flow and the balance sheet.

I'm very pleased to report that we are debt free for the first time in almost nine years.

In connection with this accomplishment we had two significant transactions this quarter that I'd like to talk about.

First in September we prepaid our $17 $5 million phyllo term loan in full.

Although we had over four years of term left on this loan it was at a significantly higher interest rate of eight 5% as compared to our revolving credit facility.

The second transaction, which closed at the end of October was a new $125 million revolving credit facility, which replaced our old credit facility that was set to expire in may of 2023.

The new credit facility has a five year term, bringing us to October 2026.

And provides terms that are far more favorable than the old credit facility.

Like the old credit facility. It is secured primarily by our inventory and can be used in the future to support seasonal inventory purchases and other business needs.

As of the end of the third quarter, we had no borrowings under the new credit facility and had $74 million of excess availability.

Our interest expense for Q3.

Reflects a prepayment penalty of $1 $1 million in connection with the early termination of the FILO loan as well as $800000 for the write off of unamortized financing costs. However, future periods will benefit from the retirement of the high interest FILO loan and the new credit facilities lower interest rates.

Our free cash flow, which we define as cash flow from operations less capital expenditures for the first nine months of fiscal 2021 was proceeds of $61 3 million as compared to a use of $11 6 million for the same period in fiscal 2020 and are you.

A $25 4 million in fiscal 2019.

The improvement is primarily due to our improved earnings.

This free cash flow is what enabled us to end the third quarter debt free and with a cash balance of $6 9 million.

By comparison, our debt balance net of cash was 61 $5 million at the end of Q3, 2020, and $77 5 million at the end of Q3 2019.

With positive cash flows no debt and access to capital at low interest rates, we feel very good about our liquidity position.

After years of low capital expenditures focused primarily on maintenance. We are now looking for ROI based opportunities to reinvest cash back into the business that will further grow our customer counts and improve our customer experience.

We are currently focused on three areas of investment.

<unk> technology and stores.

Harvey just talked pretty extensively about marketing and technology, but let me just add a few thoughts on stores.

First of all we are going to be selective on where to invest with stores. We are not planning a broad based campaign to resurrect the rollout of <unk> stores, but we do believe there are some gaps in our store portfolio, which we may choose to address.

Ultimately, we are looking at how stores complement and dovetail with our direct business and whether there are select opportunities to grow market share further.

As Harvey talked about before it has been a constant battle to secure enough inventory this year with customer demand stronger than we had expected and the ongoing global supply chain disruptions.

Our inventory balance at October 32021 was $82 3 million as compared to $94 9 million at October 31, 2020, and $120 2 million at November 2019 were down 30% to 2019 levels.

Consequently inventory turnover is up to over two times as compared to our historical levels of around one five times.

Clearance levels are also at record lows and represented just six 4% of our inventory at October 32021, as compared to 11, 8% at October 31, 2020, and 10% at November <unk> 2019.

The flow of product from our vendors in the third quarter has certainly been slower than expected.

However, our check some specific shipments in the pipeline today has given us confidence in our revised outlook, which is what I'd like to share with you next.

Our results for the third quarter exceeded our internal expectations and as a result, we have raised our full year guidance. While we are optimistic for a strong fourth quarter. We are taking a cautious and conservative approach in light of the supply chain issues and inventory situations.

For the full year, we expect sales to range from 500 million to $510 million with e-commerce penetration of approximately 30%.

We expect adjusted EBITDA to range from 70 million to $75 million and net income for the full year is expected to be 72 to <unk> 80 per share.

Finally free cash flow is expected to be in excess of $55 million.

The high end of our sales guidance of 510 million would imply a fourth quarter comp sales rate to 2019 in the low double digits in the gross margin rate in the high 40% range.

At the end at the high end $75 million of adjusted EBITDA on $510 million of sales is nearly a 15% adjusted EBITDA margin.

We believe this is a unique year and long term, we are working to sustain an EBITA margin of 10% or greater.

There is still much work to be done and we will continue to drive shareholder value growing the XL into the premier shopping experience for all big and tall man.

And with that I would like to turn it back over to Harvey for some closing thoughts.

Yes.

Thanks, Peter as you hopefully are now we are truly pleased with what we have accomplished and we recognize a far greater potential that lies ahead, we remain conservative in our projections and cautiously optimistic that our actions to navigate the supply chain and labor issues will allow us to have the product in staffing levels, we need to execute our strategy.

T J plan.

In the most solid financial position in our company's history and most of all we believe we have a strategy.

Engage consumers and what we do best.

Memorable experiences for big and tall Guy has to look and feel their best we do that by offering the most extensive and uniquely curated assortment from value priced essentials to luxury brands.

The designers online on our App and in our stores, giving an underserved consumer the be all end all plays to browse shop and interact and finally, we know we have an incredibly incredible employee base that is passionate and committed to our customers and our purpose and this gives us the confidence that we will continue to make inroads.

And you're gaining share of market and with that operator, we'll take questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please stand by while we compile the Q&A roster.

Our first question comes from <unk> with D. A Davidson your line is open.

Okay, Hey, thanks, guys.

So you know I think we will get the idea of conservative, but cautiously optimistic but I just wanted to you know them.

Hate to be Myopically focused on really short term stuff, but yeah. Harvey you said something along the lines of you think November can rebound until your guidance is low double digits for the fourth quarter that would be rebound I think from what you saw in October you said November can rebound if you've got product and I guess the question is when do.

You know if you can get the product and when does it become too late and I guess square that with Peter's comments that recent checks give you give you confidence what one does that.

Yeah, we actually got the stuff.

It's a great question and I'll tell you two things one at a high level, our first two and a half weeks of November are very much aligned to Q3. So we feel like that that's a good reference point for us to believe that we can get back to where we are and we're receiving goods, but the reason I highlighted that one very specific example in whole.

It didn't pass over People's understanding it's day to day. When you are afraid. Good then you are expecting that they will come in on a playing one day and move through the pipeline. The next day that the reality is it's two weeks to get goods, we air Freighted and so every single day, we're chasing goods given the fab.

We're at 32% behind inventory, our turn is up over 33%. We are in fact, selling what we bring in it's almost like cross docking at and so the answer. The question is every single day that that happens well. We continue to believe that there is even greater and greater likelihood will outperform but at any given day that doesn't happen.

And the way it's supposed to.

Once they start stacking up and we cant catch up then we fall back to a more conservative outcome.

I'm not trying to be pollyanna, it's just the reality of the situation.

I believe we will get this done but there is risk and that's what we wanted to be clear and confident with what we gave the group as our end of year guidance.

Yes.

That's fair and then just to clarify November back to third quarter third quarter levels or inline with third quarter not absolutely better than October My reference point was that yes. In fact, our stores have accelerated back to overall in the first two and a half weeks what was the quarter's performance below october's at our total company comp.

Is that about where Q3 ended.

But unfortunately, there is a lot of water that is going to have to passed under the bridge. So we're just trying not to get ahead of our skis understood makes sense. One more question. If I could just on all of that marketing you talked about the top of funnel.

I guess, there's a quantitative and qualitative question here from a qualitative standpoint.

I think one of the changes you've made as in the past I think there was a lot of sort of what are called like buckshot marketing rather than shocking shock on a lot of you know just just just that the bigger brand build a national broadcast yeah exactly. Thank you for helping me articulate that you moved away from that now it sounds like are you moving or give us confidence that youre not.

Moving toward what you were doing in the past that wasn't working and then and then can you quantify you know do we expect marketing dollars to go up by X percent over the next couple of years or you know what's the spend that we're looking out there yeah. The two specific things I will tell you and I gave you a couple of examples but when Europe on streaming TV.

Cross Hulu and Youtube as example, our ability to target our customer is in.

Exponentially greater than when Youre doing blood level TV marketing on a national broadcast basis. So that is creating an efficiency to get to our consumer that being said, we're also pushing streaming among other venues.

Broadly and to answer your question, we expect we will push up the percentage of AD to sales so from Ford upper 4% and change to somewhere north of five and south of six and we'll continue to talk about how much we should spend but if we're going after a larger share of market. The most important way to accomplish that is first.

The part of the mind share of consumers, great, creating greater awareness for the brand in your target consumer group and then as I said acquisition turns to trial trial turns to purchase and then we're going to go after repeat repeat repeat and so there is a top of funnel shift, but its shifted into target a bull market.

<unk> spend that should be more productive than as you said shotgun approach.

Yep, Okay makes sense I'll turn it over to someone else for now thank you.

Thank you. Our next question comes from Jeremy Hamblin with Craig Hallum Capital Group you may begin.

Thanks, and congrats guys on a really strong execution.

I wanted to just get into the inventory a little bit deeper.

Can you call out are there particular categories, where you are struggling more to acquire inventory.

Men suits other you know, which it sounds like it's been a very strong or other pieces of your tailored clothing.

Any insight you can share on that.

And then kind of a follow up question is how does the seasonal mix.

Mix look typically in Q4.

And kind of your current trend rates.

On product margin versus what you have in other quarters is there any kind of seasonality on product mix.

Yeah, It's Harvey I'll I'll take that so first of all it is.

Less about inventory in terms of what we own and more about revenue and when I say that our tailored clothing suits and dress shirts. Two prime examples have just exceeded our expectations and so now we are chasing goods at a heightened level, our inventories actually we're pretty well positioned but the business.

It just continues to accelerate now that said one of the greatest things about our global sourcing team and just their capabilities that I find rather remarkable they have been able to shift really raw materials from I think it was Ethiopia I think it was Epo, but don't quote me on that into Mexico, and the Mexican producer that we.

We work with has capacity to produce if they could get the fabric.

<unk> been able to produce goods and goods that were literally headed into the distributions that are at the end of December are now shipping Tuesday, so when I talk about agility speed to market and the dynamics, we're doing and even answering the question for Mike before D. A Davidson. These are just perfect example of how fluid.

The movement of inventory is that our actions are chasing goods, but certainly back to the core question I would say tailored clothing overall is not as strongly positioned as we would hope for and Conversely, Ralph a red Nautica vineyard vines, which I called out has been remarkable and their ability.

<unk> to get US Etfs in addition to our typical on order and what our expectation is that the.

Whether moves and we're seeing that very much right now where it's getting a little colder our outerwear businesses kicked in with things like Colombia, our north face our sweater businesses kicked in and so we feel relatively speaking well positioned and we just have to keep receiving goods normally I wouldn't say that but when you're down 32% in inventory.

Turning to 333% faster.

It's pretty much like a grocery store and use that as an analogy more than anything else, but we just have to keep good slowing.

That's great color.

Okay, turning to another kind of Q4 question.

So store hours have continued at this you know.

10, 10 am to seven PM reduced hours from a couple of years ago.

As we get really into the thickest part of the holiday season.

Given the inventory position.

Are you going to maintain that 10 seven P. M are you going to go to holiday hours.

In December.

And then kind of as a follow up question.

Totally understand the.

The marketing investment.

But what type of ability to have it.

To your point about risk and unpredictability.

What type of ability do you have.

Pull back on marketing if it doesn't make sense because you don't have adequate inventories or has that money kind of been spent and invested already.

Yeah.

Yes, it's two different questions one.

Store hours, we are not extending store hours, we have had incredibly robust conversations multiple times about this and when the day is done we actually went out to the stores at the store managers at the RSM and the regional Vps and really engage them and we all believe in totality literally across every part of the business.

When our customers get online as we've always talked about and they Google Big and tall, and specifically if they're already a customer of ours. They Google DSL. They look at our store hours and they decide when the shop based on that information and that is part of digital transformation, but I always talk about digital that's the impact even on stores of <unk>.

Digital marketing and we believe that customers have grown used to our hours. We know that there are a lot of challenges for families and for People's shopping and we're equally concerned and have empathy about our associates with lighter levels of folks in the stores, we're very much cognizant of not pushing them even a harsh.

Order and extending them in terms of the hours. So the long and the short of it is we do not intend to open more hours. We are comfortable that the hours were doing and the customer's recognition of that will allow us to do our business and then the second question. You asked was marketing and in terms of marketing I would actually go the other way.

Ask the question what is our agility to spend even more and lean in even harder to those things that work.

I certainly appreciate that the question about inventory and inventories were bad we would certainly potentially Poland marketing, but I would tell you that we're looking at ways, especially in Q4, especially given our competitive set which we believe is better in stocks and better positioning and if you Havent walk the store I think what you'd see is that our stores look relative.

LIFO were lighter in the back rooms, but not on the selling floor and I think the question really is where can we lean into marketing when we're getting investments and how fast can we do that.

The stores look good on our stores work for sure.

Last one for me and then I can turn it over in terms of you know one thing you didn't talk about a ton here as you've been pretty excited about.

Our new exclusive brand relationship for 'twenty, two I think the term you viewed as a top five brand.

Is there any more color you can provide around that not necessarily the brand itself, but is it for double Exxon above when will you expect product for that to be in stores and you have to make room.

On the floors, you have to take other brands out.

What kind of percent of the mix could it be yes, Jeremy I'll empowered but.

I think you've actually might have misunderstood what we've said.

The top five brand is a top five brand of ours today, it's one of our top five selling brands what I'm really excited about is based on the success of the brand's repositioning really as a regular priced company engaging ways with engaging consumers in what I would call brand centric ways as.

Opposed to couponing and discounting this brand nationally and actually globally distributed is pulling the brand out of other retail distribution and we along with them will be the only retailers selling it and so just to be very clear we sell it today its revenue.

<unk> is one of the top five revenue brands and we expect it will sell tremendously more as consumers have only two outlets, the biopharm and big and tall, which is us and the brand itself and I'm, specifically only referring to big and tall in normal sizes or non big and tall sizes. It will continue to be distributed.

Across other retail entities.

That's helpful. So double Exxon above its worthy yes, if it comes in.

Yes, and that we will announce that in next year honestly.

Done, but it's just not something until next year, we want to announce with in partnership with the brand.

Understood. Thanks, so much for taking our questions.

Thanks for your support.

Thank you. Our next question comes from Mike Baker with D. A Davidson your line is open.

That's exactly right.

Yeah that was definitely figured I'll come back with one more why not it's a Friday.

The store count comments, Peter that you made an interesting we get asked a lot about you know what's the right store count I think at one point and correct me if I'm wrong about this I I have my notes that you had said $2 75 for a year and.

That seems a little low because I don't think you'll get there. So I guess can you talk about what's the right long term store count now it sounds like you might even opened some stores, which I guess those yourselves a really strong it does make some sense, but but I think that's an interesting comment and then is there any opportunity for rebranding of remodeling. It you still have some of these older casual male stores what are you.

You're doing with those so those eventually become T X L. G stores. Thanks.

Self storage.

Great Great question, Mike. Thank you. So the 275 store count no that we will not be a 275 at the end of this year.

But it's possible we could be there at the end of next year. This is actually something that we're looking at very very carefully because as I said, there's a couple of different parts of the store equation that where we're trying to figure out and where to prioritize one as I alluded to is gaps in the portfolio, where we could be in a market.

That's highly populated highly dense and we don't have enough stores and maybe we want to go from one store to two stores.

I think those those opportunities are modest I don't think it's it's across the country, but there are some opportunities there and then you also talked about.

The casual male stores and what ultimately happens with the casual male stores.

As I mentioned, we've got an awful lot of those stores that come up for lease expiration and renewal over the next couple of years. So we will be looking looking at them on a case by case basis in some cases.

They will be getting remodeled in other cases, we'll we'll be looking at do we want to relocate.

So I think overall the messages the store count is going to come down, but not at a precipitous rates were.

Where we eventually end up I could see us at about $2 75, but its a very fluid and dynamic question that as I said, we will continue to evaluate each store on its own merit and make choices as to what we do with each store.

As those come up for renewal.

One thing I wanted to just double down on that is as I've, often talked pretty publicly that we when I joined we didn't have a digital muscle so to speak I always say that it didnt atrophy. We just didn't have one and I've talked a lot about data and analytics and the digital practice that we have brought to market via our.

As the CMO, who as you all do and one of the things we're really working hard at is looking at our Internet base metrics.

Distribution of customers by geography.

Revenue per capita against geography, and looking for either white space or fill in opportunities so to Peter's point a lot of our.

Potential for store openings will be driven by the recognition that the consumer is in the driver's seat and if they're shopping online and we have opportunities in markets there will be greater opportunities to consider store openings, where those are now as Peter said I don't think it will be heroic store counts, but it does alluded to the opportunity to both.

<unk> markets and stores with stores that are not fully penetrated yet.

Makes sense very clear one more in maybe 60 seconds or less if you're willing to give this data maybe not but you gave us the comps by month by direct in stores. We can do some math based on the percentages to come up with an estimate of total comp by month, but if you had it it might make everyones life easier.

Peter.

Yeah, So so sorry, Mike.

I'm not quite sure what comp are you looking for so so.

Total total company, where the numbers the monthly number you gave out as I understood, It where store comp and direct comp, but don't don't you also have a total company comp you know the sort of wait it out for sure I think we did mention that in there somewhere for Q3. The total comp was $22 nine sure sure no I meant I meant the month lease.

You gave the monthly is by each.

Each segment, but I don't recall, if again I don't I don't I didn't hear you give the monthly is in total maybe you did and I've got got it. Okay. So for August It was 25 nine for September It was 23 eight and.

For October it was 19 two.

2%.

Understood very helpful.

I just I would caution you that we absolutely as I said before we believe that the trailing level was as inventories didn't grow enough. They maintained where they were they grew some but they just didn't grow enough and our expectation is we are now seeing an acceleration in receipts and if that continues that creates the.

We'll be back to where we are.

I for one last.

So I was just going to say you know going from 25 to 19 net there's no shame in that like that that's a pretty sharp trend throughout the quarter, but we appreciate that.

I think we have time for one last question and then we have to wrap up.

Our last question comes from Jeremy Hamblin with Craig Hallum Capital Group. Your line is open.

Thanks for taking the follow up you guys have done a remarkable job of reshaping the balance sheet.

You also have a huge NOL about the $300 million.

And given your relatively low capex needs.

By our projections youre going to have like almost $200 million in cash.

By 2023.

You know.

That's like 40% of your market cap, what do you do on a on a go forward basis.

I know, it's probably it's not a problem the company has been used to but.

With all that cash how do you think about capital allocation.

They're thought that some of that can go back.

To shareholders via buybacks or special dividends et cetera, or are there other investment opportunities and obviously, you're not going to build out a ton of stores, even if you add some new ones.

That you would look at.

Harvey to Jeremy cardiac tissue Harvey.

I'm going to handle that really quickly.

High level first and foremost there's no question, it's technology, driven and its customer facing technology. The example, I give often is that we continue to look at digital sizing and digital showrooms in digital in terms of a showroom in terms of not a storefront, but how do we interact with consumers technology that will allow them.

To make a decision about what size the need or even made a measure that still is not at a point, where it's in our view commercial enough, but it's an example of digital technology to enhance the consumers' relationship with US the second big investment would be technology driven around.

Infrastructure and.

And the third one would be in extending our business, so things like infrastructure to get speed to market and delivery. We have one distribution center on the east coast, we're evaluating as their need for that after that we would look at other elements that would potentially be more direct return to shareholders, which any great board or any great company will continue to look at.

But those are all good decisions that are forthcoming and by no means are they at a point, where we're able to articulate it in detail what were planning to do.

And with that Unfortunately, we are a couple of minutes over and I. Thank everyone for their interest I wish everyone, a safe healthy and happy Thanksgiving hopefully an opportunity to be with your family and the same for Christmas and the holiday season in front of us be well stay safe and we look forward to talking to you at the end of Q4.

This concludes today's conference call. Thank you participating you may now disconnect.