Q1 2025 Destination XL Group Inc Earnings Call
Operator: Good day, everyone, and welcome to the Destination XL Group Inc. First Quarter Fiscal 2025 Financial Results Conference Call. Today's call is being recorded.
Good day ever.
Speaker Change: Everyone and welcome to the destination XL Group, Inc. First quarter fiscal 2025 financial results Conference call. Today's call is being recorded at this time I would like to turn the call over to Ms. Shelby lockers.
Shelly Mokas: At this time, I would like to turn the call over to Ms. Shelby Mokas, Vice President of Financial Reporting and SEC Compliance at DXL. Please go ahead. Thank you and good morning everyone.
Speaker Change: Rice President of financial reporting and FCC compliance at the XL. Please go ahead Shelly.
Speaker Change: Thank you and good morning, everyone. Thank you for joining us on destination XL group's first quarter fiscal 2025 earnings call on our call today are president and Chief Executive Officer, Harvey Kanter, and our Chief Financial Officer, Peter Stratton.
Shelly Mokas: Thank you for joining us on Destination XL Group's first quarter fiscal 2025 earnings.
Shelly Mokas: On our call today are 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 useful information about our financial performance.
During today's call, we will discuss some non-GAAP metrics to provide investors with useful information about our financial performance.
Shelly Mokas: Please refer to our earnings release which was filed this morning and is available on our investor relations website at investor.dxl.com for an explanation and reconciliation of such Today's discussion also contains certain forward-looking statements concerning the company's strategic initiatives and marketing strategies, expectations for comparable sales, potential impact of current tariffs, and other expectations for fiscal 2025. 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. Information regarding risks and uncertainties is detailed in the company's filings with the securities and exchange.
Speaker Change: Refer to our earnings release, which was filed this morning, and it's available on our Investor Relations website at Investor <unk> Dx L. Dot com for an explanation and reconciliation of such measures.
Speaker Change: Today's discussion also contains certain forward looking statements concerning the company's strategic initiatives and marketing strategies expectations for comparable sales potential impact of current tariffs and other expectations for fiscal 2025, such forward looking statements are subject to various risks and uncertainties that could cause actual results to differ materially.
Speaker Change: And those assumptions mentioned today due to a variety of factors that affect the company.
Speaker Change: Information regarding risks and uncertainties are detailed in the company's filings with Securities and Exchange Commission I would now like to turn the call over to our CEO Harvey Kanter Harvey.
Harvey Kanter: I would now like to turn the call over to our CEO, Harvey Kanter. Thank you, Shelly, and good morning, everyone. As always, we appreciate all of you joining us today for an update on our business. specifically about how we are navigating in this challenging environment and hearing about our performance in the first quarter. On our last earnings call in mid-March, I shared how through the first six weeks of the quarter, our comp sales were down 12.5%, and projected that quarter would likely end down in a low double-digit comp decline. I am pleased to report that sales performance in the first quarter improved, and we ended up with a comp sales decline of 9.4%.
Harvey Kanter: Thank you Shirley and good morning, everyone.
Harvey Kanter: As always we appreciate all of you joining us today for an update on our business specifically about how we are navigating this challenging environment.
Speaker Change: And you're hearing about our performance in the first quarter.
Speaker Change: On our last earnings call in mid March.
Speaker Change: Shared how through the first six weeks of the quarter.
Speaker Change: Comp sales were down 12, 5% and projected that quarter would likely end down and a low double digit comp decline.
Speaker Change: I am pleased to report that sales performance in the first quarter improved.
Speaker Change: We ended up with a comp sales decline of nine 4%.
Harvey Kanter: This is a small improvement from our thinking in mid-March, but we are encouraged by the implications, which we believe, at least partially, stem from the initiatives designed for greater consumer engagement, with the focus on creating greater value, and in all cases, this is meaningful. We are beginning to see a small improvement in sales from a combination of these strategic initiatives designed to drive value and capture a greater share of demand.
Speaker Change: This is a small improvement from our thinking in mid March but we are encouraged by the implications, which we believe at least partially stem from the initiatives designed for greater consumer engagement.
Speaker Change: With a focus on creating greater value and in all cases this is meaningful.
Speaker Change: We're beginning to see a small improvement in sales from a combination of these strategic initiatives designed to drive value and capture a greater share of demand in.
Harvey Kanter: In addition. We expect to benefit from easier comp comparisons later as we move through 2025. We expect comparable sales to continue to gradually improve over the year, delivering a single digit negative in the second quarter and a return to a positive comp result in the second half of the year.
Speaker Change: In addition.
Speaker Change: We expect to benefit from easier comp comparisons later as we move through 2025.
Speaker Change: We expect comparable sales to continue to gradually improve over the year delivering a single digit negative in the second quarter and a return to a positive comp results in the second half of the year.
Harvey Kanter: There are several topics which I want to update you all on today, but I thought it was important starting with our comp sales performance as we work feverishly to regain our trajectory. and ultimately, sales growth.
There are several topics, which I want to update you on today, but I thought it was important starting with our comp sales performance as we worked feverishly to regain our trajectory.
Speaker Change: <unk> sales growth.
Harvey Kanter: A second topic that I expect is at the top of everyone's mind these days is the impact of reciprocal tariffs on our business. As we know, the situation with terrorists is incredibly fluid, volatile, and something we continue to monitor in terms of policy change. However, right now, assuming the current global tariff rate policies and applications do not change for the balance of the year and no new tariffs are added, we estimate the impact to add less than $2 million, or approximately 40 basis points, to our costs this year. We are leaning into our relationships with our vendors and suppliers around the world, and we are working hard to mitigate the impact of those tariffs.
The second topic that I expect is that the top of everyone's mind. These days is the impact of reciprocal tariffs on our business.
Speaker Change: As we know the situation with tariffs is incredibly fluid volatile and something we continue to monitor in terms of policy changes.
Speaker Change: However, right now assuming the current global tariff rate policies and applications do not change for the balance of the year and no new tariffs are added we estimate the impact you had less than $2 million or approximately 40 basis points to our costs. This year.
Speaker Change: We are leaning into our relationships with our vendors and suppliers around the world and we are working hard to mitigate the impact of those tariffs so far our discussions with our private label vendors have been very productive.
Harvey Kanter: So far, our discussions with our private label vendors have been very productive. On the national brand front, we are also having dialogues with our national brands, but unfortunately, we are still in a holding pattern. Approximately 80% of our private label imports are sourced from Vietnam, Bangladesh, and India. Less than 5% of our imports are sourced in China, and we continue to examine our country of origin sourcing strategy and what changes can be made to secure the best quality product and at the lowest possible cost. At this point, we have not yet taken any price increases, but that is still possible.
Speaker Change: On the National brand front, we are also having dialogues with our national brands, but Unfortunately, we are still in a holding pattern.
Speaker Change: Approximately 80% of our private label imports are sourced from Vietnam, Bangladesh, and India less than 5% of our imports are sourced in China, and we continue to examine our country of origin sourcing strategy and what changes can be made to secure the best quality product and at the lowest cost.
Speaker Change: Capital cost.
Speaker Change: At this point, we have not yet taken any price increases, but that is still possible.
Harvey Kanter: We are continuing to assess whether there is enough price elasticity of demand to take market share by keeping constant prices at lower margin versus passing on the impact of those tariffs to the end consumer to maintain our margins but risk losing share. We know there's a sensitivity to price and we are trying to be smart about how we strike the right balance. As I said, the situation is very fluid, and we will continue to update you as policy develops. But as of this moment, we have not yet made any changes to retail prices.
Speaker Change: Continuing to assess whether there is enough price elasticity of demand to take market share by keeping constant prices at lower margin versus passing on the impact of those tariffs to the end consumer to maintain our margins, but risk losing share.
Speaker Change: We know there is a sensitivity to price and we are trying to be smart about how we strike the right balance.
Speaker Change: As I said the situation is very fluid and we will continue to update you as policy develops.
Speaker Change: As of this moment, we have not yet made any changes to retail pricing.
Harvey Kanter: For the agenda today, there are two major topics that I want to talk about. First, I want to cover our first quarter results. As I noted earlier, our first quarter sales performance, while softer than we would have liked, surpassed our expectations from the beginning of the year.
For the agenda today, there are two major topics that I want to talk about first I wanted to cover our first quarter results.
Speaker Change: Noted earlier, our first quarter sales performance, while softer than we would've liked surpassed our expectations from the beginning of the year.
Harvey Kanter: Our comp sale decrease for the first quarter of 9.4% was driven primarily by lower traffic levels to our stores. in the direct business, traffic became more of a challenge this quarter, while conversion was relatively flat. More broadly, average order value was pressured in both sales channels. As we've said before, we believe our customer continues to be pressured and he is just not prioritizing spending on big and tall apparel. With that said, I will get into more of the details behind our first quarter performance in a few.
Speaker Change: Our comp sales decrease for the first quarter of nine 4% was driven primarily by lower traffic levels to our stores.
Speaker Change: The direct business traffic became more of a challenge this quarter, while conversion was relatively flat.
More broadly average order value was pressured in both sales channels.
Speaker Change: As we've said before we believe our customer continues to be pressured and he is just not prioritizing spending on big and tall apparel with that said I will get into more of the details behind our first quarter performance in a few moments.
Harvey Kanter: Second, I want to update you on the initiatives and tactics we are chasing to address the consumer's focus in making purchases and likewise, our attempt to improve traffic.
Speaker Change: Second I want to update you on the initiatives and tactics, we are changing to address the consumers focus and making purchases and likewise our attempt to improve traffic.
Harvey Kanter: As I mentioned on our Q4 earnings call back in March, our strategic focus in 2025 is to stabilize our business and drive the path back to growth. That means focusing on our customers, carefully controlling our costs, and being very prudent with how, where, and when we invest our capital. More than anything else, we are trying to remain flexible and agile. We have a proven process, structure and discipline in our execution across all our operating channels, which has led to improvements to inventory turnover, careful consideration of promotions and our Fortress balance sheet that gives us the confidence to weather the difficult environment.
Speaker Change: As I mentioned on our Q4 earnings call back in March our strategic focus in 2025 is to stabilize our business and drive the path back to growth.
Speaker Change: That means focusing on our customers.
Speaker Change: Carefully controlling our cost and being very prudent with how where and when we invest our capital.
Speaker Change: More than anything else, we're trying to remain flexible and agile.
Speaker Change: We have a proven process structure and disciplined in our execution across all our operating channels, which has led to improvements to inventory turnover careful consideration of promotions and our fortress balance sheet that gives us the confidence to weather the difficult environment.
Harvey Kanter: So let me start by getting right into our first quarter results. Comp store sales for stores were down 6.6%, while direct was down 16.2%. Comp sales by month improved each month, with February down 13.9%, March down 8.2%, and April down 7.2%. An element of the March-April results was clearly being the Easter ship. For the first three weeks of May, comparable sales are down just under 10% and consistent with our first quarter results. We believe we are currently managing our business through an economic down cycle. The imperiled environment continues to be challenging and our performance does not reflect the opportunity in our total addressable market or the longer term potential for our brand.
Speaker Change: So let me start by getting right into our first quarter results comp store sales for stores were down six 6%, while direct was down 16, 2% comp sales by month improved each month with February down 13, 9% March down eight 2% in April down <unk>.
Speaker Change: Seven 2%.
Speaker Change: An element of the March April results was clearly being the Easter shift.
Speaker Change: For the first three weeks of May comparable sales are down just under 10% and consistent with our first quarter results.
Speaker Change: We believe we are currently managing our business through an economic down cycle. The apparel, a vitamin continues to be challenging and our performance does not reflect the opportunity in our total addressable market or the longer term potential for our brand.
Harvey Kanter: We believe the broader macroeconomic challenges and consumer sentiment is pushing our customer to hold very tight to his wallet. We have observed many guests who come into our stores being more careful with what they are buying, but they still hold a strong affinity for our brands, our fit, and the DXL experience. The arrival of Fit Exchange by DXL and Hero's Discount have been a valuable help in building greater affinity for DXL and amongst more price sensitive shoppers. We are seeing less price resistance than we have in the past and are offering our guests even greater value with these initiatives.
Speaker Change: We believe the broader macroeconomic challenges and consumer sentiment is pushing our customer to hold very tight to his wallet.
Speaker Change: We have observed many guests who come into our stores being more careful with what they are buying but they still hold a strong affinity for our brands our fit and the <unk> experience.
Speaker Change: The arrival of bit exchange by Excel and heroes discount has been a valuable help in building greater affinity for DSL and amongst more price sensitive shoppers.
Speaker Change: We are seeing less price resistance that we have in the past that our offering our guests even greater value with these initiatives.
Harvey Kanter: We continue to hear from customers that they value our quality, fit, and services in our stores compared to other big box and off-price retailers. Our net promoter score continues to shine and is touching just over 80 in our stores. While he may be trading down from national designer brands, he is pushing more of his spending into essentials, which means a lower average price.
Speaker Change: We continue to hear from customers that they value our quality fit and services in our stores compared to other big box and off price retailers. Our net promoter score continues to shine and is touching just over 80 in our stores.
Speaker Change: He may be trading down from national designer brands is pushing more of its spending into essentials, which means a lower average price points.
Harvey Kanter: We still have a lot of work to do, but our customer surveys and their reactions to our marketing initiatives have been positive.
Speaker Change: We still have a lot of work to do but our customer surveys and the reactions to our marketing initiatives have been positive.
Harvey Kanter: I'm going to come back to marketing in a few minutes. In merchandising, the overall sales penetration between designer collections and private label brands has shifted as we've seen the customer trading down across both categories. Historically, our sales penetration into private label ranges on average between 50 and 55%. Last year in Q1, private brands accounted for 55% and this year that rate moved further to 57%. We have more control over our private brand label pricing and supply chain and typically earn higher margins on private brands and national brands. and that shift in mix has helped to offset an increase in markdown rates from select promotions and our marketing initiatives.
Speaker Change: I'm going to come back to marketing in a few minutes and merchandising. The overall sales penetration between designer collections and private label brands has shifted as we've seen the customer trading down across both categories.
Speaker Change: Historically, our sales penetration into private label ranges on average between 50 and 55%.
Speaker Change: Last year in Q1 private brands accounts for 55% and this year that rate moved further to 57%.
Speaker Change: We have more control over our private brand label pricing and supply chain and typically earn higher margins on private brands and national brands.
Speaker Change: And that shift in mix has helped to offset an increase in markdown rates from select promotions and our marketing initiatives.
Harvey Kanter: We experienced a slight uptick in markdowns as more customers gravitated to our twofer pricing offer. We also utilize new markdowns as a result of driving new traffic initiatives, such as FedExchange and Heroes Dispatch. And lastly, clearance markdowns came in higher as a result of shifting the March clearance event into April to align with the Easter calendar shift.
Speaker Change: We experienced a slight uptick in markdowns as more customers gravitated to our tubular pricing offers.
Speaker Change: We also utilize new markdowns as a result of driving new traffic initiatives, such as Finn exchange Antiheroes discount.
Speaker Change: And lastly clearance markdowns came in higher as a result of shifting the March clearance event into April to align with the Easter calendar shift.
Harvey Kanter: We have some bright spots in the assortment, most notably in our Oak Hill and Oak Hill Premium, and specifically in the Oak Hill Tech Pant and Tech Shorts, as well as our five pocket cargo pants. This and casual shirts had a tougher start to the first quarter, but have recovered well as we start the second. Our inventory is in great shape, fresh spring receipts have been flowing into the stores and are available on our website, which is setting us up for great experience with our customers as we approach Father's Day.
Speaker Change: We have some bright spots in the assortment.
Speaker Change: Notably in our Oak Hill and <unk>.
Speaker Change: He'll premium and specifically in the Oak Hill, Pant and tech shorts as well as our five pocket cargo pants.
Speaker Change: And casual shirts had a tougher start to the first quarter, but have recovered well as we start the second quarter.
Speaker Change: Our inventory is in great shape fresh spring receipts have been flowing into the stores and are available on our web site, which is setting us up for a great experience with our customers as we approached father's day.
Harvey Kanter: Inventory management continues to be a shining star and highlight and is evidence of our operating Compared to last year, our quarter and inventory was down 5.8 million dollars or approximately 6.4 percent, while our inventory turnover rate has improved by over 30 percent since emerging from the pandemic. Clearance levels of 9.5% at the end of the first quarter are in line with our long-term expectations of 10%.
Speaker Change: Inventory management continues to be a shining star and highlight and as evidence of our operating discipline compared to last year, our quarter end inventory was down $5 8 million or approximately six 4%.
Speaker Change: Our inventory turnover rate has improved by over 30% since emerging from the pandemic.
Speaker Change: Clearance levels up nine 5% at the end of the first quarter are in line with our long term expectations of 10%.
Harvey Kanter: Last quarter, I also talked about our updates on opening price point strategy. We have developed a more comprehensive opening price point assortment, driven by the strategic intent to lower barriers of entry, rooted in our consumer research, brand tracking, and real-time shifts in buying behavior. Our goal is to enhance value with our offering and the perceived overall value of DXL for consumers. lower prices, address the entry barrier by expanding our range of merchandise and opening price points across items relative to our store.
Speaker Change: Last quarter I also talked about our updates on the opening price point strategy.
Speaker Change: We have developed a more comprehensive opening price point assortment driven by the strategic intent to lower barriers of entry rooted in our consumer research and brand tracking and real time shifts in buying behavior.
Speaker Change: Our goal is to enhance value with our offering and the perceived overall value of GSL for consumers lower prices address the entry barrier by expanding our range of merchandise at opening price points across items relative to our assortment.
Harvey Kanter: Last month, we launched Dickies and Hager. So far, results for Dickies have been in line with our expectations, and Hager has exceeded our expectations. We are supporting both brands with targeted marketing messages, including homepage, email, and social content. And we have also expanded our Big and Tall Essentials offering online, as well as just launched Perry Ellis last year.
Speaker Change: Last month, we launched sticky even hager silver results for <unk> have been in line with our expectations and Hagar has exceeded our expectations.
Speaker Change: We are supporting both brands with targeted marketing messages, including homepage email and social content.
Speaker Change: And we have also expanded our big and tall essentials offering online as well as just launched Perry Ellis last week.
Harvey Kanter: stores, the narrative from fiscal 2024 has continued into the start of 2025. Traffic to stores accounts for approximately 90% of the comp sales decline.
Speaker Change: And stores that narrative from fiscal 2024 has continued into the start of 2025.
Speaker Change: Traffic in stores accounts for approximately 90% of the comp sales decline I'm.
Harvey Kanter: I'm happy to report that we opened two more white space stores in the past quarter with new stores in Roseville, California and Salt Lake City. Our third and fourth store opened in May in Syracuse, New York, and Hanover, New Jersey, and this brings the total number of new DXL stores that have opened in the past three years to 14 new markets.
Speaker Change: I am happy to report that we opened two more white space stories in the past quarter with new stores in Roseville, California, and Salt Lake Utah.
Speaker Change: Our third and fourth store opened in May in Syracuse, New York and have an over New Jersey and this brings the total number of new <unk> stores that have opened in the past three years to 14 new markets.
Harvey Kanter: Finally, we expect to open four more stores later this year, bringing our total to 18 before we pause new store openings to focus on stabilizing our core business and preserving cash flow.
Speaker Change: Finally, we expect to open four more stores later this year, bringing our total to 18 before we pause of new store openings to focus on stabilizing our core business and preserving cash flow.
Harvey Kanter: Performance in our new stores has been challenged. Similar to what we are seeing in our existing store business, we believe the low awareness of our brand is creating greater short-term challenges in successfully ramping traffic to the newly open stores. New stores have not seen the level of traffic we initially expected, but we believe there is still much room to grow.
Speaker Change: Performance in our new stores has been challenging similar to what we are seeing in our existing store business. We believe the low awareness of our brand is creating greater short term challenges and successfully ramping traffic to the newly opened stores.
Speaker Change: New stores have not seen the level of traffic. We initially expected, but we believe there is still much room to grow.
Harvey Kanter: We believe it is more appropriate to resume store development when we can support it with a brand awareness campaign.
Speaker Change: We believe it is more appropriate to resume store development when we can support it with a brand awareness campaign.
Harvey Kanter: While opening the new stores in a down cycle has been difficult, in time, and with more brand awareness, we still expect these stores will be able to achieve their and now I want to touch on marketing strategies, initiatives and tactics that we're chasing to correct the traffic decline.
Speaker Change: Opening the new stores that are down cycle has been difficult in time and with more brand awareness, we still expect new stores will be able to achieve their potential.
Speaker Change: Now I want to touch on marketing strategies initiatives and tactics that we are chasing to correct the traffic decline.
Harvey Kanter: Three initiatives and projects are aimed at enhancing our market position and delivering exceptional value to our customers, and I will talk you through each, and they include the role of strategic promotion, our new loyalty program, and the early results, and the replatforming of our commerce operations. First up is our use of strategic promotion. Given the sector softness that persists, we believe that to garner a greater share of the big and small market, we must continue to leverage promotion to entice new customers, incentivize current customers to shop more often, and finally reactivate those who have not shopped with us for some time.
Speaker Change: Three initiatives and projects are aimed at enhancing our market position and delivering exceptional value to our customers and I will talk you through each and they include the role of strategic promotion.
Speaker Change: Our new loyalty program and the early results and the re platforming of our commerce operation.
Speaker Change: First up is our use of strategic promotion.
Speaker Change: Given the sector softness that persists, we believe that to garner a greater share of the big and tall market. We must continue to leverage from Austin to entice new customers incentivize current customers to shop, more often and finally reactivate those who have not shopped with us for some time.
Harvey Kanter: We are deploying a two-pronged approach that we believe addresses these objectives. The first pillar in our strategy is always on value. This includes everyday value driving initiatives targeted at specific customer cohorts that can be used when they are ready to shop. We are purposely trying to avoid store-wide and site-wide promotion and instead are deploying strategic offers intended to increase customer acquisition, drive frequency of visits, and provide customers with a higher degree of assurance they're getting a great value when they shop at DXL. In March, we introduced our Heroes Discount, an active military first responder, teachers, and veterans program that celebrates their service to our country and our communities and rewards them with a special offer.
Speaker Change: We are deploying a two pronged approach that we believe addresses these objectives.
Speaker Change: The first pillar in our strategy is always on value. This.
Speaker Change: This includes everyday value driving initiatives targeted at specific customer cohorts that can be used when they are ready to shop.
Speaker Change: We're purposely trying to avoid storewide and Sitewide promotion and instead are deploying strategic offers intended to increase customer acquisition drive frequency of visits and provide customers with a higher degree of assurance, they're getting a great value when they shop at EXL.
Speaker Change: In March we induce start heroes discount and active military first responders teachers and veterans program.
Speaker Change: Celebrates their service to our country and our communities and rewards them with a special offer.
Harvey Kanter: The Hero's Discount is attracting new customers and reactivating last customers at a greater rate than transactions without the offer. Additionally, customers using the offer are spending almost 10% more than average AOV in the company.
Speaker Change: The heroes discount is attracting new customers and reactivating lapsed customers at a greater rate than transactions without the offer Additionally customers using the offer of spending almost 10% more than average.
Harvey Kanter: Second, in response to research we conducted on GLP-1 usage and insights around the challenges the big and tall man faces both on and off his weight loss journey, we introduced the FIT Exchange by DXL in early Q1. Fit Exchange facilitates the in-store charitable donation by our customers of clothing which no longer fits to help others in need. In return, the customer receives a 20% discount on his in-store purchases on that visit. Our own primary research showed us that 50% of men using GLT-1 drugs prefer to donate their old clothes which no longer fit. The results to date have been very strong, and we are excited to see the response.
Speaker Change: And the company.
Speaker Change: Second in our response to research, we conducted on <unk> usage and insights around the challenges the big and tall man faces both on and off his weight loss journey, we introduced the Fedex change by Excel in early Q1.
Speaker Change: In exchange facilitates the in store charitable donation by our customers of clothing, which no longer fit to help others in need and return the customer receives a 20% discount on as in store purchases on that visit.
Speaker Change: Our own primary research showed us that 50% have been using <unk>, one drugs preferred to donate their old grows which no longer fit.
Speaker Change: The results to date have been very strong and we are excited to see the response customer utilizing that fifth exchange program, our shopping 51% more often and delivering in the.
Harvey Kanter: Customers utilizing the FIT Exchange program are shopping 51% more often and delivering an AOV at 39% higher, along with a 29% higher UPT versus the company average. Additionally, these customers are spending more year over year than they did in the previous 12 months. And finally, 26% of the customers in this program were new to FILE and reactivated.
Speaker Change: At 39% higher along with a 29% higher U P T versus the company average.
Speaker Change: Surely these customers are spending more year over year than they did in the previous 12 months and finally, 26% of the customers. In this program were new to file and reactivated customers.
Harvey Kanter: Finally, we introduced the Price Match Guarantee Program late last year, providing our customers with peace of mind that they will always get the best price at DXL, leading to a 12-point improvement in value perception that was confirmed in the latest Brand Tracking Study Survey.
Speaker Change: Finally, we introduced the price match guarantee program late last year, providing our customers with peace of mind that they will always get the best price at <unk>.
Speaker Change: Leading to a 12 point improvement and value perception that was confirmed in the latest brand tracking study survey.
Harvey Kanter: The second pillar involves the surgical use of targeted promotions by leveraging our customer segmentation data. We continue to mine actionable insights from our DXL database regarding the customer segments, helping to further define shopping behavior and how to further craft unique, tactical elements of promotion. This will enable us to deliver more personalized communication focused on specific brands and categories to those customers who want them.
Speaker Change: The second pillar involves the surgical use of targeted promotions by leveraging our customer segmentation data.
Speaker Change: We continue to mind actionable insights from our DSL database regarding the customer segments, helping to further define shopping behavior and how to further craft unique tactical elements of promotion.
Speaker Change: This will enable us to deliver more personalized communication focus on specific brands and categories to those customers who want them.
Harvey Kanter: To better engage our best customers and drive greater spending and repeat traffic, we launched our new loyalty program in Q1. We believe this program can deliver meaningful impact leveraging insights by customer type, while also incentivizing greater acquisition for the program. Early returns have surpassed expectations with membership acquisition ahead of our Q1 forecast by 46%. Sales per member are impacting our old program and outpacing it, and we are seeing strong sales per certificate dollar redeemed at 88% on a year-over-year basis. This metric gives us much to be excited about as the program continues to ramp with new members.
Speaker Change: To better engage our best customers and drive greater spending and repeat traffic, we launched our new loyalty program in Q1, we.
Speaker Change: We believe this program can deliver a meaningful impact leveraging insights by customer type, while also incentivising greater acquisition for the program.
Speaker Change: Early returns have surpassed expectations with membership acquisition ahead of our Q1 forecast by 46%.
Speaker Change: Sales per member are impacting our old program and outpacing it and we are seeing strong sales per certificate dollar green deemed at 88% on a year over year basis.
Speaker Change: This metric gives us much to be excited about as the program continues to ramp with new members.
Harvey Kanter: And finally, as you may recall, one of the drivers of the new program was to have healthier distribution of customers across the different tiers to balance spend. We are achieving this with our best customers in the top tiers and most of the membership in the base.
Speaker Change: And finally as you may recall, what are the drivers under the new program was to have healthier distribution of customers across the different tiers to balance spend.
Speaker Change: We are achieving this with our best customers are the top tiers and most of the membership in the biggest year.
Harvey Kanter: Next, I would like to provide an update on our WebSoy replatform project. If you recall, for the better part of the past year, we have been migrating our site from ATG to Commerce Tools.
Speaker Change: Next I would like to provide an update on our web site re platform project if you recall.
Speaker Change: The better part of the past year, we have been migrating our site from atg to commerce tools.
Harvey Kanter: This migration was completed at the end of March, and we remain focused on enhancing the site experience during the balance of 2025. Initiatives will include easier shopping enabled by AI, easier payment with additional buy now, pay now later options, as well as evolved product search and discovery with increased personalization. We believe all this work, coupled with greater agility and capability of the new platform, will benefit our customers and improve the site experience and conversion.
Speaker Change: This migration was completed at the end of March and we remain focused on enhancing the site experience during the balance of 2025.
Speaker Change: Initiatives will include easier shopping enabled by AI.
Speaker Change: Easier payment with additional buy now pay now later auctions as well as evolve product search and discovery with increased personalization.
Speaker Change: We believe all of this work coupled with greater agility and capability of the new platform will benefit our customers and improve the site experience and conversion.
Harvey Kanter: Before I turn it over to Peter, let me give you a quick update on the Nordstrom's market. We first went live on Nordstrom's online marketplace back in June of 2024. We now offer 37 brands and over 2,200 styles to choose from, and our assortment continues to expand with new arrivals added frequently as fresh inventory flows.
Speaker Change: Before I turn it over to Peter Let me give you a quick update on nordstroms marketplace.
Speaker Change: We first went live on Nordstrom's online marketplace back in June 2024, we now offer 37 brands in over 2200 styles to choose from and our assortment continues to expand with new arrivals added frequently as fresh inventory flows in.
Harvey Kanter: We are excited for Q2 as we finalize our marketing plans in collaboration with North We are optimistic that this marketing boost will help customers discover our big and tallest assortment and added exposure will be key to driving demand. The plan supported by Nordstrom's includes personalized content, email campaigns and in-store training to direct customers to our online presence of the Big and Tallest Store. Key merchandise drivers of the business include Polo, as well as private brands such as Harbor Bay and Oak Hill. But we have also started to see some traction with Vineyard Vines, Brooks Brothers, and Reebok.
Speaker Change: We are excited for Q2 as we have finalized our marketing plans in collaboration with Nordstrom.
Speaker Change: We're optimistic that this marketing booths were help customers discover our big and tall assortment and has added exposure will be key to driving demand.
Speaker Change: The plan supported by Nordstroms includes personalized content.
Speaker Change: Our campaigns and in store training to direct customers to our online presence of the big and tall assortment.
Speaker Change: Key merchandise drivers of the business include polo as well as private brands, such as Harvard and Oak Hill, but we are also starting to see some traction within your bind Brooks brothers and Reebok <unk>.
Harvey Kanter: DXL will also participate in the Nordstrom Anniversary Sale, which will be a key event for exposing more Nordstrom customers to the DXL big and tall brand.
Speaker Change: <unk> will also participate in the Nordstrom anniversary sale, which will be a key event for exposing more nordstrom customers to the <unk> big and tall brand.
Harvey Kanter: I also want to mention the collaboration we recently launched with Travis Matthew, like what we did with Untuckit and Fit by DXL. Travis Matthew is a brand and collection that is inspired by Southern California's laid-back yet active lifestyle. And with each design driven to achieve the perfect balance between innovative design and superior style, and now, DXO offers this exclusively for the big and tall consumers. The offer will maintain our Fit by DxL unique sizing to provide superior comfort and sportswear capable of fitting in while standing out.
Speaker Change: I also want to mention the collaboration we recently launched with Travis Matthew like what we did with on target and fit <unk>.
Speaker Change: Travis Matthew as a brand and collection that is inspired by southern California's laid back yet active lifestyle and with each design driven to achieve the perfect balance between innovative design and superior style and now DSL offers is exclusively for the big and tall consumer.
Speaker Change: The offer will maintain our fit baidu cell unique styling to provide superior comfort and sportswear cable fitting in while standing out and that is what we're all about fit.
Harvey Kanter: And that is what we're all about. Fit.
Harvey Kanter: I'll close out my comments with a few words about a topic that is creating a lot of buzz in our organization. We have licensed proprietary and exclusive technology, which we named FIT. We believe FITMAP has the potential to redefine our retail economy. Guests at DXL can scan their body, measurements come off using an iPad in the dress room, and then use those measurements to secure a better Our ambition. An ambitious vision for FITMAP is to elevate the Big & Small Shopping experience by enabling our guests to use their DXL digital body scan across various platforms. We are committed to integrating FITMAP technology into our everyday practices, both in-store and online, while forging new strategic alliances with other leading retailers, allowing the guests to easily access and shop for DXL products and obtain perfect sizing.
Speaker Change: I'll close out my comments with a few words about a topic that is creating a lot of buzz in our organization.
Speaker Change: We have licensed proprietary and exclusive technology, which we named fit map.
Speaker Change: We believe fit that has the potential to redefine our retail experience.
Speaker Change: <unk> can scan their body measurements are come off using an iPad in the dressing room, and then use those measurements to secure a better fit.
Speaker Change: Our ambition.
Speaker Change: An ambitious vision for fit map is to elevate the big and tall shopping experience by enabling our guests to use their <unk> digital body scan across various platforms.
Speaker Change: We are committed to integrating <unk> technology into our everyday practices, both in store and online while forging new strategic alliances with other leading retailers, allowing the guest to easily access and shop for EXL products obtained perfect sizing.
Harvey Kanter: Our FITMAP customers also have the capability to order custom suits and sports coats specifically designed for our big and tall customers. So far, we've scanned over 20,000 guests and implemented FitMap technology in 52 stores with a plan to end 2025 with 85 stores and to further expand this to as many as 200 stores by the end of 2027. Our exclusive rights to this technology last until 2030, which is a big win for DXL. Our store associates have adopted this technology to size guests accurately and fit them into our ready-to-wear apparel. Our data shows that scanned guests tend to have a higher average order value, greater customer value, and shop more frequently.
Speaker Change: Fitbit customers also have the capability to order custom suits and sport coats, specifically designed for our big and tall customers. So far we have scanned over 20000 deaths.
Speaker Change: Until then and fit that technology 52 stores with a plan to end 2025, with 85 stores and do further expands to as many as 200 stores by the end of 2027.
Speaker Change: Our exclusive rights to this technology last until 2030, which is a big win for <unk>.
Speaker Change: Our store associates have adopted this technology to size gets to accurately and fit that into our ready wear apparel.
Speaker Change: This shows that scan guests.
Speaker Change: Do you have a higher average order value greater customer value and shop more frequently I will talk more about fit that on future calls, but safe to say this is something we truly are very excited about.
Harvey Kanter: I will talk more about FitMap on future calls, but safe to say this is something we truly are very excited about.
Peter Stratton: And with that, I'm now going to turn it over to Peter for a review of our financials. Peter. Thank you, Harvey. And good morning, everyone. I'll start with some additional color around our first quarter financial performance. Net sales for the first quarter were $105.5 million as compared to $115.5 million in the first quarter of last year. The decrease in net sales was primarily due to a decrease in comparable sales for the first quarter of 9.4%, partially offset by an increase in non-comparable sales from new stores. As Harvey noted, sales trends improved month over month with comparable sales down 13.9% in February, down 8.2% in March and down 7.2% in April.
Speaker Change: And with that I'm now going to turn it over to Peter for a review of our financials Peter.
Peter Stratton: Thank you Harvey and good morning, everyone I'll start with some additional color around our first quarter financial performance.
Speaker Change: Net sales for the first quarter were $105 5 million as compared to $115 5 million in the first quarter of last year.
Speaker Change: The decrease in net sales was primarily due to a decrease in comparable sales for the first quarter of nine 4% partially.
Speaker Change: <unk> offset by an increase in non comparable sales from new stores.
Speaker Change: As Harvey noted sales trends improved month over month with comparable sales down 13, 9% in February down eight 2% in March and down seven 2% in April.
Peter Stratton: Overall, the first quarter decline was consistent with the sales trend in fiscal 2024, as customers continued to pull back on discretionary spending and shifted toward our private label merchandise and value driven brands, which sell at lower average unit retails, but generate higher margins. Our gross margin rate, inclusive of occupancy costs, was 45.1% as compared to 48.2% in the first quarter of last year. The 310 basis point decrease was primarily due to a 280 basis point increase in occupancy costs as a percentage of sales due to the deleveraging from lower sales and increased rents from new stores and lease extension.
Speaker Change: Overall, the first quarter decline was consistent with the sales trend in fiscal 2024 as customers continued to pull back on discretionary spending and shifted toward our private label merchandise and value driven brands, which sell at lower average unit retails, but generate higher margins.
Speaker Change: Our gross margin rate inclusive of occupancy costs was 45, 1% as compared to 48, 2% in the first quarter of last year.
Speaker Change: The 310 basis point decrease was primarily due to a 280 basis point increase in occupancy costs as a percentage of sales due to the deleveraging from lower sales and increased rents from new stores and lease extensions.
Peter Stratton: Merchandise margins decreased by 30 basis points as compared to the first quarter of last year, primarily due to an increased markdown rate from the promotional authors and marketing initiatives that Harvey spoke about, partially offset by the benefit from the shift in product mix towards private label. In response to the tariff situation, we accelerated some of our inventory receipts to get them on the water before the tariffs took effect. We feel very good about our inventory position, both in terms of total inventory balance at the end of the quarter, and in relation to our turnover rates, as well as our clearance We continue to prioritize inventory management, which is a critical element of providing the best big and tall shopping experience possible.
Speaker Change: Merchandize margins decreased by 30 basis points as compared to the first quarter of last year, primarily due to an increased markdown rate from the promotional offers and marketing initiatives at Harvey spoke about partially offset by the benefit from the shift in product mix towards private label.
Speaker Change: In response to the tariff situation, we accelerated some of our inventory receipts to get them on the water before the tariffs took effect we.
Speaker Change: We feel very good about our inventory position both in terms of total inventory balance at the end of the quarter and in relation to our turnover rates as well as our clearance levels.
Speaker Change: We continue to prioritize inventory management, which is a critical element of providing the best big and tall shopping experience possible.
Peter Stratton: Moving on to selling general and administrative expenses, our SG&A as a percentage of sales increased to 45.0% as compared to 41.1% in the first quarter of 2024. Deleveraging rate was based entirely on our lower sales levels as on a dollar basis. SG&A expenses decreased by $100,000 as compared to the first quarter last The dollar decrease was primarily due to a decrease in marketing and incentive-based compensation partially offset by an increase in store payroll in health care. are at the sales ratio for Q1 decreased to 6.1% from 6.3% in Q1 of last For the full year, we expect to spend 5.9% of our sales on marketing costs.
Speaker Change: Moving on to selling general and administrative expenses or SG&A as a percentage of sales increased to 45 zero percent as compared to 41, 1% in the first quarter of 2024.
Speaker Change: The deleveraging rate was based entirely on our lower sales levels on a dollar basis.
Speaker Change: SG&A expenses decreased by $100000 as compared to the first quarter last year.
Speaker Change: The dollar decrease was primarily due to a decrease in marketing and incentive based compensation, partially offset by an increase in store payroll and health care costs.
Speaker Change: Our AD to sales ratio for Q1 decreased to six 1% from six 3% in Q1 of last year.
Speaker Change: For the full year, we expect to spend five 9% of our sales on marketing costs.
Peter Stratton: As a result of the foregoing discussion, the decrease in sales had a significant impact on our EBITDA for the quarter, which came in at $100,000 as compared to $8.2 million for the first quarter of last year.
Speaker Change: As a result of the foregoing discussion the decrease in sales had a significant impact on our EBITDA for the quarter, which came in at $100000 as compared to $8 2 million for the first quarter of last year.
Peter Stratton: I'll finish up with a few notes on liquidity. We continue to feel very good about the overall strength of our balance sheet. We finished the quarter with cash and short-term investments of $29.1 million as compared to $53.2 million a year ago, with no outstanding debt in either period and availability of $77.1 million under our revolving credit facility. The decrease in cash from a year ago includes the repurchase of 13.6 million shares of stock over the past 12 months. With the seasonal build of inventory and payment of prior year incentive accruals, Q1 is typically a quarter with a net cash output.
Speaker Change: I'll finish up with a few notes on liquidity.
Speaker Change: We continue to feel very good about the overall strength of our balance sheet. We finished the quarter with cash and short term investments of $29 1 million as compared to $53 2 million a year ago with no outstanding debt and either period and availability of $77 1 million under our revolving credit facility.
Speaker Change: The decrease in cash from a year ago includes the repurchase of $13 6 million shares of stock over the past 12 months.
Speaker Change: With the seasonal build of inventory and payment of prior year incentive accruals Q1 is typically a quarter with a net cash outflow.
Peter Stratton: This quarter, our free cash flow, which we define as cash flow from operating activities, less capital expenditures, was a use of $18.8 million of cash as compared to a use of $7 million in last year's funding. Most of that decrease was driven by our lower earnings and the timing of payables associated with the acceleration of inventory receipts in the first quarter. We continue to keep our excess cash invested in short-term U.S. government Treasury bills to earn interest while preserving liquidity.
Speaker Change: This quarter, our free cash flow, which we define as cash flow from operating activities less capital expenditures was a use of $18 8 million of cash as compared to a use of $7 million in last year's first quarter.
Speaker Change: Most of that decrease was driven by our lower earnings and the timing of payables associated with the acceleration of inventory receipts in the first quarter.
Speaker Change: We continue to keep our excess cash invested in short term U S government treasury bills to earn interest while preserving liquidity.
Peter Stratton: Our Fortress Balance Sheet gives us the ability to weather the short-term economic challenges we are facing. We remain focused on executing our growth strategies and executing our business with a high level of operating discipline.
Speaker Change: Our fortress balance sheet gives us the ability to weather the short term economic challenges we are facing.
Speaker Change: Remain focused on executing our growth strategies and executing our business with a high level of operating discipline.
Harvey Kanter: I'm now going to turn it back over to Harvey for some closing thoughts. Harvey? Thanks, Peter.
Harvey Kanter: Now going to turn it back over to Harvey for some closing thoughts Harvey.
Harvey Kanter: I'll close with this statement. And while it may seem like a broken record, our team and the people of DXL are part of our secret sauce. Given this, as always, I remain energized by the dedication and the passion of the entire DXL team to serve the underserved Big and Tall Community. None of this would be possible without the hard work and dedication of all of our people in the stores, in the distribution center, in the corporate office, and the guest It is because of this talented team and the culture we've created that I want to get up every morning and keep moving on this journey.
Harvey Kanter: Thanks, Peter I'll close with this statement and while it may seem like a broken record our team and the people of <unk> are part of our secret sauce.
Harvey Kanter: Given this as always I remain energized by the dedication and passion of the entire <unk> team to serve the underserved big and tall consumer.
Harvey Kanter: None of this would be possible without the hard work and dedication of all of our people in the stores and the distribution center in the corporate office and the guest engagement center and it's because of this talented team and the cultural and created that I wanted to get up every morning, and keep moving on this journey.
Harvey Kanter: Thank you for all your hard work and commitment in pursuit of serving big and tall men and making DXL the place where they can choose their own style and wear what they want.
Speaker Change: Thank you for all your hard work and commitment in pursuit of certainly in big and tall men and making <unk> the place where they can choose their own style and where what they want.
Operator: And with that, operator, we will now take Thank you. If you would like to ask a question, please press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised.
Speaker Change: And with that operator, we will now take questions.
Speaker Change: Thank you if you would like to ask a question. Please press star one on your telephone.
Speaker Change: We'll then hear an automated message advising your hand just raised.
Operator: To remove yourself from the queue, please press star 11 again. We also ask that you please wait for your name and company to be announced before proceeding with your call.
Speaker Change: To remove yourself from the queue. Please press star one again.
Speaker Change: We also ask you. Please wait for your name of the company to be announced before proceeding with your question one moment, while we compile the Q&A roster.
Operator: One moment while we compile the Q&A raw.
Operator: Operator, if there's no questions, we will wish everyone on the call a good summer and look forward to regrouping with everyone in August, late August, when we have our next quarterly earnings call.
Speaker Change: Operator, if there's no questions, we will wish everyone on the call.
Speaker Change: Summer and look forward to regrouping with everyone in August.
Speaker Change: Late August when we have our next quarterly earnings call.
Operator: We do have one question.
Speaker Change: We do have one question is coming from the line of.
Will Forsberg: It is coming from the line of Will Forsberg of Craighalion. One moment.
Speaker Change: Well <unk> Berg of Craig helium one moment.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Pete.
Speaker Change: Yes.
Speaker Change: Yes.
Operator: And thank you, and now there are no more questions in the queue.
Speaker Change: And thank you and now there are no more questions in the queue.
Harvey Kanter: I would like to turn the call back over for closing remarks. We appreciate everyone's interest in DXL and look forward to a wonderful summer and continuing our move to back to growth and look forward to talking to you all in August. Thank you so much. Have a wonderful summer.
Speaker Change: I'd like to turn the call back over for closing remarks.
Speaker Change: We appreciate everyone's interest in DSL and look forward to a wonderful summer and continuing our move back to growth and look forward to talking to you. All in August. Thank you. So much have a wonderful summer.
Operator: Thank you all for participating in today's conference call. You may now disconnect.
Speaker Change: Thank you all for participating in today's conference call you may now disconnect.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].