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What changed in DESTINATION XL GROUP, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of DESTINATION XL GROUP, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+278 added−295 removedSource: 10-K (2023-03-16) vs 10-K (2022-03-17)

Top changes in DESTINATION XL GROUP, INC.'s 2023 10-K

278 paragraphs added · 295 removed · 200 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

85 edited+30 added−26 removed30 unchanged
Biggest changeIn addition, we carry several value-priced private label lines: • Harbor Bay ® was our first proprietary brand and it is a traditional line that continues to represent a significant portion of our business, specifically in terms of our core basic merchandise. • Gold Series™ is our core performance offering of tailored-related separates, blazers, dress slacks, dress shirts and neckwear that blends comfort features such as stretch, stain resistance and wrinkle-free fabrics with basic wardrobe essentials. • Synrgy™ targets the customer looking for a contemporary/modern look. • Oak Hill ® is a premier line catering to those customers looking for slightly more style and quality than our Harbor Bay line but still in a traditional lifestyle. • True Nation ® is a denim-inspired line consisting of vintage-screen t-shirts and wovens and is geared towards our younger customers. • Society of One ® is an activewear brand that offers versatile styling options and is grounded by performance technology.
Biggest changeOak Hill ® is a premier line catering to those customers looking for slightly more style and quality than our Harbor Bay line but still in a traditional lifestyle. Synrgy™ targets the customer looking for a contemporary/modern look. True Nation ® is a denim-inspired line consisting of vintage-screen t-shirts and wovens and is geared towards our younger customers.
Regional Vice Presidents give us touch-points in the field in addition to our Regional Sales Managers and store management team to ensure consistency in executing our standards and all programs and processes we deem important to our success. Each new member of the store management team goes through extensive training with their Regional Sales Manager and a peer Store Manager.
Regional Vice Presidents give us touch-points in the field in addition to our Regional Sales Managers and store management team to ensure consistency in executing our standards and all programs and processes we deem important to our success. 7 Each new member of the store management team goes through extensive training with their Regional Sales Manager and a peer Store Manager.
Our merchandise is not just an extension of regular sizes. The fit is built from unique specifications for every size and style, with specific design features for the big and tall customer. Our stores are merchandised to showcase entire outfits by lifestyle, including traditional, active, modern and denim.
Our merchandise is not just an extension of regular sizes. The fit is built from unique specifications for every size and style, with specific design features for the big and tall customer. Our stores are merchandised to showcase entire outfits by lifestyle, including traditional, active, modern, tailored and denim.
Our Associate Engagement & Development Committee organizes “Lunch, Learn, Lead” and “Coffee Talk” sessions throughout the year to provide our associates an opportunity to gain insight on a variety of topics, such as, DXL’s social responsibility initiatives, TED talks, Global Sourcing, Normalizing the Brand and Technology.
Our Associate Engagement & Development Committee organizes “Lunch, Learn, Lead” and “Coffee Talk” sessions throughout the year to provide our associates an opportunity to gain insight on a variety of topics, such as, DXL’s social responsibility initiatives, 10 TED talks, Global Sourcing, Normalizing the Brand and Technology.
We adopted a stringent, analytical perspective to our marketing program, focusing on understanding incremental outcomes in addition to the “return on ad spend” throughout all of our programs. This data-driven philosophy extends across all of our marketing initiatives as we look at new ways to engage our customers.
We adopted a stringent, analytical perspective to our marketing program, focusing on understanding incremental outcomes in addition to the “return on ad spend” throughout all our programs. This data-driven philosophy extends across all our marketing initiatives as we look at new ways to engage our customers.
In 2020, we retained Elevate Ltd., a global leader in supply chain assessment, and instituted 4-Pillar audits of our manufacturing facilities. Our intent is to increase our social, environmental and ethical sustainability by utilizing Elevates audit tool, "ERSA", which stands for EL EVATE Responsible Sourcing Assessment. ERSA 2.0 covers social compliance, human rights, environmental business ethics, and worker’s sentiment surveys.
In 2020, we retained Elevate Ltd., a global leader in supply chain assessment, and instituted 4-Pillar audits of our manufacturing facilities. Our intent is to increase our social, environmental and ethical sustainability by utilizing Elevates audit tool, "ERSA", which stands for ELEVATE Responsible Sourcing Assessment. ERSA 2.0 covers social compliance, human rights, environmental business ethics, and worker’s sentiment surveys.
With a point-of-sale system that can access items online for the customer who is physically in the store, our associates are able to fulfill all of their customers’ needs. Our multi-unit, field management team receives extensive training on recruiting associates who are the correct fit for our stores.
With a point-of-sale system that can access items online for the guest who is physically in the store, our associates are able to fulfill all of their customers’ needs. Our multi-unit, field management team receives extensive training on recruiting associates who are the correct fit for our stores.
Our on-going work on enhancing our customer segmentation will ultimately drive our long-term marketing strategy, enabling us to create targeted and personalized content and messaging to our various customer segments. Our marketing programs includes email, direct mail, loyalty program, direct marketing, digital marketing, social media, and streaming media, among others.
Our on-going work on enhancing our customer segmentation will ultimately drive our long-term marketing strategy, enabling us to create targeted and personalized content and messaging to our various customer segments. Our marketing programs include email, direct mail, our loyalty program, direct marketing, digital marketing, social media, and streaming media, among others.
We also have partnered with Marist College to provide our DXL associates and their immediate adult family members a 25% discount toward on-line tuition costs. Compensation and Benefits Our compensation programs are designed to pay our associates competitively in the market, based on their skills, qualifications, role, and abilities.
We also joined with Marist College to provide our DXL associates and their immediate adult family members a 25% discount toward on-line tuition costs. Compensation and Benefits Our compensation programs are designed to pay our associates competitively in the market, based on their skills, qualifications, role, and abilities.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information for issuers that file electronically with the SEC at http://www.sec.gov . 12
The SEC maintains an internet site that contains reports, proxy and information statements, and other information for issuers that file electronically with the SEC at http://www.sec.gov . 11
TRADEMARKS/TRADEMARK LICENSE AGREEMENTS We own several service marks and trademarks relating to our businesses, including, among others, “Destination XL ® ”, “DXL ® ”, “DXL Mens Apparel ® ”, “Big on Being Better ® ”, “Casual Male ® ”, “Casual Male XL ® ”, “Harbor Bay ® ”, “Oak Hill ® ”, “Continuous Comfort ® ”, “Synrgy™”, “Society of One ® ” and “True Nation ® ”.
TRADEMARKS/TRADEMARK LICENSE AGREEMENTS We own several service marks and trademarks relating to our businesses, including, among others, “Destination XL ® ”, “DXL ® ”, “DXL Mens Apparel ® ”, “Big on Being Better ® ”, “Casual Male ® ”, “Casual Male XL ® ”, “Harbor Bay ® ”, “Oak Hill ® ”, “Continuous Comfort ® ”, “Synrgy™”, “Society of One ® ”, “True Nation ® ” and “Wear What You Want ℠” .
A key to being a successful omni-channel retailer is having the ability to showcase all of our store inventories online, resulting in additional transactions that are initiated online, but are ultimately completed in store. In addition, our stores are able to fulfill an order for an item that is out-of-stock in our warehouse.
A key to being a successful integrated commerce retailer is having the ability to showcase all of our store inventories online, resulting in additional transactions that are initiated online, but are ultimately completed in store. In addition, our stores are able to fulfill an order for an item that is out-of-stock in our warehouse.
We continue to see our consumers shift to online shopping helping to drive higher new customer acquisition for the website business. Digital Sales at Store Level In support of our omni-channel approach, our store associates use our website to help fulfill our in-store customers’ clothing needs.
We continue to see our consumers shift to online shopping helping to drive higher new customer acquisition for the website business. Digital Sales at Store Level In support of our integrated commerce approach, our store associates use our website to help fulfill our in-store customers’ clothing needs.
DXL Outlet /Casual Male XL Outlet Stores At January 29, 2022, we operated 16 DXL outlet stores and 19 Casual Male XL outlet stores designed to offer a wide range of casual clothing for the big & tall customer at prices that are generally 20-25% lower than our moderate-priced merchandise.
DXL Outlet /Casual Male XL Outlet Stores As of January 28, 2023, we operated 16 DXL outlet stores and 19 Casual Male XL outlet stores designed to offer a wide range of casual clothing for the big & tall customer at prices that are generally 20-25% lower than our moderate-priced merchandise.
In early 2021, we joined with CEO Action for Diversity & Inclusion, a coalition of nearly 2,000 CEOs, pledging to advance diversity and inclusion in the workplace.
In 2021, we joined with CEO Action for Diversity & Inclusion, a coalition of over 2,000 CEOs, pledging to advance diversity and inclusion in the workplace.
Casual Male XL Retail Stores At January 29, 2022, we operated 35 Casual Male XL full-price retail stores, located primarily in strip centers or stand-alone locations. The majority of the merchandise carried in our Casual Male XL stores is moderate-priced basic or fashion-neutral items, such as jeans, casual slacks, t-shirts, polo shirts, dress shirts and suit separates.
Casual Male XL Retail Stores As of January 28, 2023, we operated 28 Casual Male XL full-price retail stores, located primarily in strip centers or stand-alone locations. The majority of the merchandise carried in our Casual Male XL stores is moderate-priced basic or fashion-neutral items, such as jeans, casual slacks, t-shirts, polo shirts, dress shirts and suit separates.
This capability has not only resulted in incremental sales, but it has also helped us reduce clearance merchandise at the store level and manage margins. DXL Website and App Our DXL website and app have been instrumental in our growth over the past two years, with sales from our website and app together increasing 55.3% from fiscal 2019.
This capability has not only resulted in incremental sales, but it has also helped us reduce clearance merchandise at the store level and manage margins. 6 DXL Website and App Our DXL website and app have been instrumental in our growth over the past three years, with sales from our website and app together increasing 53.6% from fiscal 2019.
We have established strong relationships with many of the leading factories and mills across the globe. Our sourcing network consists of over 28 factories in nine countries which are experts in big & tall sizing and production. In fiscal 2021, approximately 52% of all our product needs were sourced directly.
We have established strong relationships with many of the leading factories and mills across the globe. Our sourcing network consists of over 34 factories in eight countries which are experts in big & tall sizing and production. In fiscal 2022, approximately 52% of all our product needs were sourced directly.
Through our multiple brands, which include both branded apparel and private-label, we provide a premium, personalized shopping experience, whether in-store or digitally, with a broad range of merchandise at varying price points, catering from the value-oriented customer to the luxury customer.
Through our multiple brands, which include both national brands and own brands, we provide a premium, personalized shopping experience, whether in-store or digitally, with a broad range of merchandise at varying price points, catering from the value-oriented customer to the luxury customer.
In addition, we also offer a selection of shoes in sizes 10W to 18W on our website at dxl.com. Our Casual Male XL retail stores primarily carry moderate-priced branded and private-label casual sportswear and dresswear. We also operate Casual Male XL outlets and DXL outlets for our value-oriented customers.
In addition, we also offer a selection of shoes in sizes 10W to 18W on our website at dxl.com. Our Casual Male XL retail stores primarily carry moderate-priced national brands and our own brands of casual sportswear and dresswear. We also operate Casual Male XL outlets and DXL outlets for our value-oriented customers.
These stores also carry a full complement of our “better” private label collections. The average Casual Male XL retail store is approximately 3,300 square feet.
These stores also carry a full complement of our “better” own brand collections. The average Casual Male XL retail store is approximately 3,300 square feet.
Inclusion and Diversity 11 We are committed to inclusivity, acceptance, and equality. Since 2017, we have had a diversity and inclusion initiative called “Normalizing the Brand.” The program brings awareness to unconscious bias and focuses on ensuring that the composition of our organization looks and feels like the communities where we live and serve.
Since 2017, we have had a diversity and inclusion initiative called “Normalizing the Brand.” The program brings awareness to unconscious bias and focuses on ensuring that the composition of our organization looks and feels like the communities where we live and serve.
Unless the context indicates otherwise, all references to “we,” “our,” “ours,” “us” and “the Company” refer to Destination XL Group, Inc. and our consolidated subsidiaries. We refer to our fiscal years ended January 29, 2022, January 30, 2021 and February 1, 2020 as “fiscal 2021,” “fiscal 2020” and “fiscal 2019,” respectively.
Unless the context indicates otherwise, all references to “we,” “our,” “ours,” “us” and “the Company” refer to Destination XL Group, Inc. and our consolidated subsidiaries. We refer to our fiscal years ended January 28, 2023, January 29, 2022 and January 30, 2021 as “fiscal 2022,” “fiscal 2021” and “fiscal 2020,” respectively.
Over the past several years, we have made, and we will continue to make, investments in implementing best practice tools and processes for our merchandise planning and allocation. Our core merchandise made up approximately 42% of our merchandise assortment in fiscal 2021.
Over the past several years, we have made, and we will continue to make, investments in implementing best practice tools and processes for our merchandise planning and allocation. Our evergreen merchandise made up approximately 43% of our merchandise assortment in fiscal 2022.
The second is that we believe our stores need to be clean, neat and organized in an effort to allow the "just-looking" customer to find what he needs with ease. The last component is our stores serving as mini-distribution centers.
The first is that we strive to build relationships with all of our guests. The second is that we believe our stores need to be clean, neat and organized in an effort to allow the "just-looking" customer to find what he needs with ease. The last component is our stores serving as mini-distribution centers.
The growth and effectiveness of our global direct sourcing program is a key component to the strength of merchandise margins. We have built a strong internal team with extensive experience that is responsible for managing an international network of vendors and suppliers across the globe.
We believe our current sourcing structure meets our operating requirements and provides capacity for growth. The growth and effectiveness of our global direct sourcing program is a key component to the strength of merchandise margins. We have built a strong internal team with extensive experience that is responsible for managing an international network of vendors and suppliers across the globe.
At January 29, 2022, we operated 220 DXL retail stores, 16 DXL outlet stores, 35 Casual Male XL retail stores, 19 Casual Male XL outlet stores, and a digital business, including an e-commerce site at www.dxl.com, a mobile site m.destinationXL.com and mobile app.
At January 28, 2023, we operated 218 DXL retail stores, 16 DXL outlet stores, 28 Casual Male XL retail stores, 19 Casual Male XL outlet stores, and a digital business, including an e-commerce site at www.dxl.com, a mobile site m.destinationXL.com and mobile app.
In addition to private-label and branded merchandise at our “good” price tier, our outlets also carry clearance product obtained from DXL and Casual Male XL stores, offering the outlet customer the ability to purchase branded and fashion product for a reduced price.
In addition to own brands and national brands at our “good” price tier, our outlets also carry clearance product obtained from DXL and Casual Male XL stores, offering the outlet customer the ability to purchase brand and fashion product for a reduced price.
While we have successfully competed on the basis of merchandise selection, comfort and fit, customer service and desirable store locations, there can be no assurances that other retailers, including e-commerce retailers, will not adopt purchasing and marketing concepts similar to ours. Discount retailers with significant buying power, such as Wal-Mart and J.C. Penney, represent a source of competition for us.
While we have successfully competed on the basis of merchandise assortment, comfort and fit, customer service and desirable store locations, there can be no assurances that other retailers, including e-commerce retailers, will not adopt purchasing and marketing concepts similar to ours. Discount retailers with significant buying power, such as Walmart, Kohl's and J.C.
We believe that having a centralized distribution facility maximizes the selling space and in-stock position of our stores and reduces the necessary levels of back-room stock. In addition, the distribution center provides order fulfillment services for our e-commerce business. In-bound calls for our e-commerce business are received at our Canton facility and are primarily fulfilled by our distribution center.
DISTRIBUTION All of our retail distribution operations are centralized at our headquarters located in Canton, Massachusetts. We believe that having a centralized distribution facility maximizes the selling space and in-stock position of our stores and reduces the necessary levels of back-room stock. In addition, the distribution center provides order fulfillment services for our e-commerce business.
We also hold a U.S. patent for an extendable collar system, which is marketed as “Neck-Relaxer ® ” and a U.S. copyright for a no-iron hang tag. ENVIRONMENTAL, SOCIAL AND GOVERNANCE At DXL, corporate social responsibility and sustainability has been a focus for many years and we recognize the importance of environmental, social and governance ("ESG") issues.
We also hold a U.S. patent for an extendable collar system, which is marketed as “Neck-Relaxer ® ” and a U.S. copyright for a no-iron hang tag. SUSTAINABILITY At DXL, we recognize the importance of addressing and prioritizing environmental, social and governance ("ESG") issues throughout our business.
Our customers also have the ability to shop-by-store and pick-up in store on the same day. Digital Marketplaces We continue to broaden our reach through digital, third-party marketplaces. A large portion of our assortment is available on Amazon.com and Target.com. Digital marketplaces provide us an opportunity to drive awareness, grow our customer base and introduce new customers to our brand.
Our customers also have the ability to shop-by-store and pick-up in store on the same day. Digital Marketplaces We continue to broaden our reach through digital, third-party marketplaces. A large portion of our assortment is available on Amazon.com, Target.com and Walmart.com.
We will continually work to make improvements and upgrades to our software. Since 2003, we have utilized United Parcel Services (“UPS”) for all of our store shipments as well as our domestic customer deliveries. By utilizing UPS, we are able to track all deliveries from the warehouse to our individual stores, including the status of in-transit shipments.
We will continually work to make improvements and upgrades to our software. For store shipments and domestic customer deliveries, we primarily use United Parcel Services and FedEx. We are able to track all deliveries from the warehouse to our individual stores, including the status of in-transit shipments.
We have policies and training in place with respect to anti-discrimination and anti-harassment, among others, and provide our associates with access to an anonymous hot-line for reporting any concerns. Throughout the year, we require our associates to participate in educational videos. In early 2022, we will be launching a survey to all associates, specifically focused on Inclusion and Diversity.
We have policies and training in place with respect to anti-discrimination and anti-harassment, among others, and provide our associates with access to an anonymous hot-line for reporting any concerns. Throughout the year, we require our associates to participate in educational videos.
With the “best” merchandise assortments featured most prominently in the DXL store, our customers are able to visualize current fashion trends and select their wardrobes within their desired price points in a convenient manner. Our website and select DXL stores also offer certain “luxury” brands.
With the “best” merchandise assortments featured most prominently in the DXL store, our customers can visualize current fashion trends and select their wardrobes within their desired price points in a convenient manner.
The majority of our stores are able to fulfill customer orders for product that we may not have in our distribution center. Our associates are well versed in not only the product selection carried in their specific store, but also the product selection carried online.
The majority of our stores are able to fulfill customer orders that were placed online in one of our digital channels. Our associates are well versed in not only the product selection carried in their specific store, but also the product selection carried online.
All new DXL store management team hires are trained extensively through senior peer trainers throughout the country. We believe having a mix of internal promotes (store manager to Regional Sales Manager) as well as external hires with extensive multi-unit background gives us an inclusive and diverse Regional Sales management team.
We believe having a mix of internal promotes (store manager to Regional Sales Manager) as well as external hires with extensive multi-unit background gives us an inclusive and diverse Regional Sales management team.
Moderate-Priced Apparel -“Better” Merchandise We offer our customer an extensive selection of quality sportswear and dress clothing at moderate prices carrying well-known brands such as: Cutter & Buck ® , Levi's ® , Columbia, Carhartt ® , and Jockey ® .
Society of One ® is an activewear brand that offers versatile styling options and is grounded by performance technology. Moderate-Priced Apparel -“Better” Merchandise We offer our customer an extensive selection of quality sportswear and dress clothing at moderate prices carrying well-known brands such as: Cutter & Buck ® , Levi's ® , Columbia, Carhartt ® , and Jockey ® .
With over 6,000 styles available, we carry tops in sizes up to 8XL and 8XLT, bottoms with waist sizes 38” to 70”, and shoes in sizes 10W to 18W. Big and tall is all we do. What sets us apart from our competitors is our proprietary fit. We are different because our fit is different.
With over 5,000 styles available, we carry an extensive selection of tops in sizes up to 7XL and 7XLT with additional assortments up to 8XL, bottoms with waist sizes 38” to 70”, and shoes in sizes 10W to 18W. What sets us apart from our competitors is our proprietary fit. We are different because our fit is different.
The direct business has many competitors, including the King Size catalog and website as well as online marketplaces, such as Amazon.
Penney, represent a source of competition for us. The direct business has many competitors, including the King Size catalog and website as well as online marketplaces, such as Amazon.
Within our product assortment for Callaway ® , Lacoste ® , Majestic and Tommy Bahama ® we also offer exclusive styles specially curated for our customers. 6 Higher-End Fashion Apparel -“Best” Merchandise Within this higher-end price range, we carry a broad selection of quality apparel from well-known branded manufacturers, such as The North Face ® , Polo Ralph Lauren ® , Jack Victor ® , Michael Kors ® , and Tallia ®.
Higher-End Fashion Apparel -“Best” Merchandise Within this higher-end price range, we carry a broad selection of quality apparel from well-known branded manufacturers, such as The North Face ® , Polo Ralph Lauren ® , Jack Victor ® , Michael Kors ® , and Tallia ®.
Our focus is to acquire new customers and achieve a greater lifetime value across our entire customer file. We have shifted our marketing strategy away from a broad-based shotgun advertising to a more targeted, personalized, data-driven model where we can segment and ultimately engage differently with each of our customers based on their shopping behaviors across all our buying channels.
Over the past few years, we have shifted our marketing strategy away from a broad-based mass advertising to a more targeted, personalized, data-driven model where we can segment and ultimately engage differently with each of our customers based on their shopping behaviors across all our buying channels.
STORE CHANNEL DXL Men’s Apparel Stores At January 29, 2022, we operated 220 DXL retail stores. Our DXL store concept brings all of our brands together in one format. Within this format, we cater to our diverse customer base, with merchandise representing all price points, from our higher-end brands to value-oriented brands, and all lifestyles, from business to denim.
Our DXL store concept brings all of our brands together in one format. Within this format, we cater to our diverse customer base, with merchandise representing all price points, from our higher-end brands to value-oriented brands, and all lifestyles, from business to denim. The size of our DXL stores averages 7,600 square feet.
These offerings are a subset of the larger merchandise offering that we carry for these respective brands. Value-Priced Apparel -“Good” Merchandise For our value-oriented customers, we carry Champion, Lee, Wrangler and Reebok. Within our product assortment for Champion, we offer exclusive styles specially curated for our customers.
Value-Priced Apparel -“Good” Merchandise For our value-oriented customers, we carry Champion, Lee, Wrangler and Reebok. Within our product assortment for Champion, we offer exclusive styles specially curated for our customers.
The DXL store concept offers our customers an extensive assortment of products, ranging from value-oriented to luxury-oriented with an increased presence of name brands, without having to shop multiple stores. In addition to offering our customers a wide assortment, we also wanted to provide them with a unique shopping experience.
In fiscal 2010, we launched a new store concept, Destination XL (“DXL”). The DXL store concept offers our customers an extensive assortment of products, ranging from value-oriented to luxury-oriented with an increased presence of name brands, without having to shop multiple stores.
In the past two years, our direct business grew 45.3% in fiscal 2021 as compared to fiscal 2019 and represented approximately 31.0% of our total retail sales in fiscal 2021, as compared to 23.1% of our retail sales in fiscal 2019. Through our digital efforts and marketplace presence, we are creating brand awareness and attracting a new customer to DXL.
Since fiscal 2019, comparable sales from our direct business in fiscal 2022 have grown 58.3%, with our total direct business representing 31.1% of our total retail sales in fiscal 2022, as compared to 23.1% of our retail sales in fiscal 2019. Through our digital efforts and marketplace presence, we are creating brand awareness and attracting a new customer to DXL.
The culture in our stores is to be guest centric in an effort to engage and build a relationship with our guests. Our overall goal is to accomplish three key initiatives in our stores. The first is that we strive to build relationships with all of our guests.
STORE OPERATIONS We believe that our store associates are critical to creating the highest quality experience for our guests. The culture in our stores is to be guest centric in an effort to engage and build a relationship with our customers. Our overall goal is to accomplish three key initiatives in our stores.
Besides retail competitors, we consider any casual apparel manufacturer operating in outlet malls throughout the United States to be a competitor in the casual apparel market. We believe that we are the only national operator of men’s apparel stores focused exclusively on the men’s big & tall market.
Besides retail competitors, we consider any casual apparel manufacturer operating in outlet malls throughout the United States to be a competitor in the casual apparel market.
Regardless of our customers’ age, socioeconomic status, or lifestyle preference, we are able to assemble a wardrobe to fit their apparel needs. We offer such assortments in both private-label product and a wide array of brand-name labels.
Regardless of our customers’ age, socioeconomic status, or lifestyle preference, we are able to assemble a wardrobe to fit their apparel needs.
We are confident that our inventory performance is optimized by having all members of the merchandise planning and allocation team follow a standardized set of processes with the use of standardized reporting tools. 8 STORE OPERATIONS We believe that our store associates are the key to creating the highest quality experience for our customers.
These reporting tools provide focused and actionable views of the business to optimize the overall assortment by category and by store. We are confident that our inventory performance is optimized by having all members of the merchandise planning and allocation team follow a standardized set of processes with the use of standardized reporting tools.
Depending on the customers in each respective market, we can adjust the appropriate mix of merchandise, with varying selections from each of our price points, to cater to each demographic market. Over the past few years, we have rebranded select Casual Male XL retail and outlet stores to the DXL retail and outlet store concept.
Depending on the customers in each respective market, we can adjust the appropriate mix of merchandise, with varying selections from each of our price points, to cater to each demographic market.
MERCHANDISE PLANNING AND ALLOCATION Our merchandise planning and allocation function is critical to the effective management of our inventory, store assortments, product sizes and overall gross margin profitability.
Digital marketplaces provide us an opportunity to drive awareness, grow our customer base and introduce new customers to our brand. MERCHANDISE PLANNING AND ALLOCATION Our merchandise planning and allocation function is critical to the effective management of our inventory, store assortments, product sizes and overall gross margin profitability.
Several of the national brands that we carry, in sizes 2XL and above, are sold exclusively by us in our stores and on our website and may be available on the brand’s website. In January 2022, we announced that we were adding Nautica and vineyard vines to our list of exclusive brands for Spring 2022.
Several of the national brands that we carry, in sizes 2XL and above, are sold exclusively by us in our stores and on our website and may otherwise only be available on the brand’s website, if at all.
Shoes Our DXL website offers an assortment of footwear, with a broad selection from casual to formal, in varying price points. We currently have a selection of more than 200 styles of shoes, ranging in sizes from 10W to 18W, including designer brands such as Cole Haan®, Timberland®, Sketchers, New Balance, Reebok and Deerstags.
We currently have a selection of more than 200 styles of shoes, ranging in sizes from 10W to 18W, including designer brands such as Cole Haan®, Timberland®, Sketchers®, New Balance®, Reebok® and Deerstags. STORE CHANNEL DXL Men’s Apparel Stores As of January 28, 2023, we operated 218 DXL retail stores.
The challenges created by the global pandemic brought mental health awareness to the forefront. We began a program with CALM, an app that provides our home office associates an opportunity to incorporate meditation and other mindfulness activities into their daily routines as well as BurnAlong, a free online health, wellness and fitness platform available to all associates.
Some of our current and past programs have included access to free apps such as CALM, an app that provides our home office associates an opportunity to incorporate meditation and other mindfulness activities into their daily routines as well as BurnAlong, a free online health, wellness and fitness platform available to all associates.
We believe that this new-to-file growth indicates that our investments in digital marketing and the optimization of our digital infrastructure are resonating with new customers. 7 We define our direct business as sales that originate online, whether through our website, our app, those initiated online at the store level, our Guest Engagement Center, or through a third-party marketplace.
Growing our new-to-file and retaining that customer remains one of our key priorities for fiscal 2023. We define our direct business as sales that originate online, whether through our website, our app, those initiated online at the store level, our Guest Engagement Center, or through a third-party marketplace.
Through digital marketplaces, we are able to extend our reach, by providing a select offering of our merchandise to new customers who may not be current DXL customers.
Through digital marketplaces, we are able to extend our reach, by providing a select offering of our merchandise to new customers who may not be current DXL customers. BUSINESS STRATEGY We aspire to be a haven for the Big + Tall man, striving to provide him superior fit, extensive assortment and a unique experience.
We manufacture a significant percentage of our private-label merchandise in Southeast Asian countries consisting of Vietnam, Bangladesh, Cambodia and India. We continue to reduce dependency on China, inclusive of our raw materials and trims, and have moved certain programs into the Western Hemisphere with duty-free opportunities such as Nicaragua and Mexico.
We continue to reduce dependency on China, with less than 10% of own brands sourced from China, inclusive of our raw materials and trims, and have moved certain programs into the Western Hemisphere with duty-free opportunities such as Nicaragua and Mexico.
MANAGEMENT INFORMATION SYSTEMS The infrastructure of our management information systems is a priority to us. We believe that the investments we have made in this regard have improved our overall efficiency and improved our access to information enabling timely, data-driven decisions.
We believe that the investments we have made in this regard have improved our overall efficiency and improved our access to information enabling timely, data-driven decisions. Our management information systems consist of a full range of retail merchandising and financial systems, which include merchandise planning and reporting, distribution center processing, inventory allocation, sales reporting, and financial processing and reporting.
We are diligently working to enhance and develop a platform that we can share with our stakeholders. During fiscal 2021, we formed the Corporate Social Responsibility Committee, comprising a cross-discipline of corporate management and engaged with a third-party firm to assist us in the development of the Company's ESG policies and initiatives.
During fiscal 2021, we formed the Sustainability Committee, consisting of a cross-disciplinary team from corporate management that engaged with a third-party firm to assist us in the development of the Company's initial ESG strategy and initiatives.
It started as a pilot program and quickly expanded to now include over 40 female leaders, both people and process managers, in the corporate office and field.
It started as a pilot program and quickly expanded to now include over 40 female leaders, both people and process managers, in the corporate office and field. In addition, for the past four years, we have presented Leadercast, a platform for leadership development content (held annually in May) as a host site at our corporate headquarters.
We believe our training system, together with monitoring sales metrics to help identify opportunities for further training, will improve sales productivity and strengthen our customer’s brand loyalty.
We believe our training system, together with monitoring sales metrics to help identify opportunities for further training, will improve sales productivity and strengthen our customer’s brand loyalty. Our field organization is overseen by our Chief Stores Officer, Regional Vice Presidents, Regional Sales Managers, and a Store Operations Team, who provide management development and guidance to individual store managers.
Through fiscal 2010, we catered to customers through our three store formats, from our value-oriented customer (Casual Male XL outlets) to our luxury-oriented customer (Rochester Clothing stores). In fiscal 2010, we launched a new store concept, Destination XL (“DXL”).
As a result of the acquisition, on August 8, 2002, we changed our name to “Casual Male Retail Group, Inc.” In fiscal 2004, we acquired the Rochester Clothing stores. Through fiscal 2010, we catered to customers through our three store formats, from our value-oriented customer (Casual Male XL outlets) to our luxury-oriented customer (Rochester Clothing stores).
For fiscal 2021, marketing costs were 4.7% of sales. 9 GLOBAL SOURCING Our global sourcing strategy is a balanced approach, which considers quality, cost and lead-time, depending on the requirements of the program. We believe our current sourcing structure meets our operating requirements and provide capacity for growth.
We expect our marketing costs in fiscal 2023 to be approximately 5.7% of sales as compared to 6.0% of sales in fiscal 2022. GLOBAL SOURCING Our global sourcing strategy is a balanced approach, which considers quality, cost and lead-time, depending on the requirements of the program.
In order to service our International customers, we have contracted with a global e-commerce company for payment and shipment services. Through this service, international customers view and pay for products in their local currency. Our vendor then ships directly to our customer, which we believe helps avoid potential fraud and currency exchange rate risks.
In addition, we are able to provide our direct customers with Authorized Return Service and Web labels, making returns more convenient for them. In order to service our International customers, we have contracted with a global e-commerce company for payment and shipment services. Through this service, international customers view and pay for products in their local currency.
We also provide an Employee Assistance Program (EAP) which provides 24/7 assistance to associates and their family members for a variety of issues such as stress, family, parenting, finances. AVAILABLE INFORMATION Our corporate website is www.dxl.com. Our investor relations site is http://investor.dxl.com.
We also highlight mental health awareness as part of our “Lunch, Learn, Lead” series and provide other relevant content within our learning management system. We also provide an Employee Assistance Program (EAP) which provides 24/7 assistance to associates and their family members for a variety of issues such as stress, family, parenting, and finances.
We carry over 100 well-known national brands (“branded apparel”) as well as a number of our own private-label lines within our “good,” “better” and “best” price points. The penetration of branded apparel in a specific DXL store can range from 39% to 80%, depending on several factors, but on average, approximately half of the assortment is branded apparel.
These offerings are a subset of the larger merchandise offering that we carry for these respective brands. The penetration of national brands in a specific DXL store can range from 39% to 80%, depending on several factors, but on average, approximately half of the assortment is branded apparel.
We are aiming to add even more brand exclusivity to our current merchandise selection, allowing us to differentiate ourselves within the big and 5 tall market.
Beginning in the spring of fiscal 2023, we will be adding merchandise from Life is Good® and Original Penguin® Golf to our existing list of exclusive brands. We are aiming to add even more brand exclusivity to our current merchandise selection, allowing us to differentiate ourselves within the men's big & tall market. • Customer experience.
MARKETING AND ADVERTISING We believe that our marketing initiatives are key to driving our sales growth by increasing traffic to our stores, website and app.
Our stores have an incentive-based commission plan for managers and selling staff to encourage associates to focus on our customer’s wardrobing needs and sales productivity. MARKETING AND ADVERTISING We believe that our marketing initiatives are critical to driving our sales growth by increasing traffic to our stores, website and app.
We are focused on providing outstanding customer service through our DXL stores, with larger fitting rooms and professional, trained associates providing personal attention. With the initial success of this store format, we made a similar change to our e-commerce business in fiscal 2011 when we launched our DestinationXL.com website (now dxl.com).
With the initial success of this store format, we made a similar change to our e-commerce business in fiscal 2011 when we launched our DestinationXL.com website (now dxl.com). In fiscal 2019, we closed our five remaining Rochester Clothing stores. 3 OUR BUSINESS We operate as an integrated commerce retailer of big & tall men’s clothing and shoes.
OUR INDUSTRY We define the big & tall men’s clothing market as starting at a waist size of 38” and greater, as well as tops sized 1XL and greater. Growth in this segment historically has been driven by rapidly changing market demographics.
OUR INDUSTRY We define the big & tall men’s clothing market as starting at a waist size of 38” and greater, as well as tops sized 1XL and greater. With the assistance of Coresight Research, we believe that the U.S. big & tall men's clothing market is approximately $23 billion in fiscal 2022 and is highly fragmented.
In an effort to minimize foreign currency risk, all payments to our direct sourced vendors and buying agents are made in U.S. dollars with payment on account. DISTRIBUTION All of our retail distribution operations are centralized at our headquarters located in Canton, Massachusetts.
Our intention is to increase our audit pillars to include all of our raw material suppliers that procure fabric, trims and inner components of our products. 8 In an effort to minimize foreign currency risk, all payments to our direct sourced vendors are made in U.S. dollars with payment on account.
SEASONALITY Historically, and consistent with the retail industry, we have experienced seasonal fluctuations as it relates to our operating income, net income, and free cash flow. Traditionally, a significant portion of our operating income, net income, and free cash flow is generated in the fourth quarter, because of the holiday season.
We believe that we are the only national operator of men’s apparel stores focused exclusively on the men’s big & tall market. 9 SEASONALITY Historically, and consistent with the retail industry, we have experienced seasonal fluctuations as it relates to our operating income, net income, and free cash flow.
Each associate is required to sign a set of policies that include, among other policies, the code of ethics, anti-harassment and procedures for raising a complaint. Our policies also contain protection of human rights and prohibit, among other things, the use of child labor or forced, bonded or indentured labor.
Our policies also contain protection of human rights and prohibit, among other things, the use of child labor or forced, bonded or indentured labor. Inclusion and Diversity We are committed to inclusivity, acceptance, and equality.
In addition, for the past four years, we have presented Leadercast, a platform for leadership development content (held annually in May) and Leadercast Women (held annually in October) as a host site at our corporate headquarters. For the past two years, the programs were made available via an online platform.
We also presented Leadercast Women, which was held annually in October until 2022. For the past three years, the programs were made available via an online platform.
If an order cannot be fulfilled by our distribution center, the order is completed at the store level. For our wholesale business, during fiscal 2021 we utilized three coastal third-party cross-dock facilities.
In-bound calls for our e-commerce business are primarily fulfilled by our distribution center and if an order cannot be fulfilled by our distribution center, the order is completed at the store level.
Over the past few years, we have continued to develop a custom Assortment Suite application. In an effort to improve our inventory management, we have created a standardized set of “best practices” for both our merchandise planning and allocation groups.
In an effort to improve our inventory management, we have created a standardized set of “best practices” for both our merchandise planning and allocation groups. Using a retail business intelligence solution, we are able to integrate data from several sources and provide enterprise-wide analytics reporting.
At the time of the acquisition, Casual Male was the largest specialty retailer of men’s clothing in the big & tall market in the United States. As a result of the acquisition, on August 8, 2002, we changed our name to “Casual Male Retail Group, Inc.” In fiscal 2004, we 4 acquired the Rochester Clothing stores.
In May 2002, we acquired the Casual Male business from Casual Male Corp. at a bankruptcy court-ordered auction. At the time of the acquisition, Casual Male was the largest specialty retailer of men’s clothing in the big & tall market in the United States.
" and subsequently did business under the name "Designs, Inc." Until fiscal 1995, we operated exclusively in Levi Strauss & Co. branded apparel mall and outlet stores. In May 2002, we acquired the Casual Male business from Casual Male Corp. at a bankruptcy court-ordered auction.
HISTORY Our Company was incorporated in the State of Delaware in 1976 under the name "Kara Enterprises, Inc." and subsequently operated under the name "Designs, Inc." Until fiscal 1995, we operated exclusively in Levi Strauss & Co. branded apparel mall and outlet stores.
All audits can be found on their EIQ tool which is a web-based analytical system on which we participate in their Ethical Trade Audit platform. Through collaboration with Elevate Ltd., we are currently pursuing a “5-Pillar Audit”, which includes traceability of both raw materials and the equipment used to produce finished goods.
All audits can be found on their EIQ tool which is a web-based analytical system on which we participate in their Ethical Trade Audit platform. For fiscal 2023, we have retained Elevate Ltd. to also perform environment assessment audits.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe have made significant investments in capital spending and labor to develop these channels and increased investments in digital marketing to attract new customers. The growth of our overall sales is dependent on customers’ continuing to expand their online purchases in addition to in-store purchases.
Biggest changeOur direct business is a significant component of our growth strategy, and the failure to develop our digital infrastructure could disrupt our business and negatively impact our sales. We have made significant investments in capital spending and labor to develop our direct channels and increased investments in digital marketing to attract new customers.
For us to be successful in the future and maintain growth, we must be able to continue increasing our share of the big & tall men’s apparel market. Our growth is dependent on our ability to continue to build upon our DXL brand, maintain our existing customers and continue to attract new customers.
For us to be successful in the future and maintain growth, we must be able to continue increasing our share of the big & tall men’s apparel market. Our growth is dependent on our ability to continue to build upon our DXL brand, maintain our existing customers and attract new customers.
In addition, in January 2021, the US Customs Border Protection (“CBP”) issued a Withhold Release Order on Products Made in Xinjiang region of China released. In response to the problems in Xinjiang, we developed a Compliance Certificate of Traceability for our cotton vendors.
In addition, in January 2021, the US Customs Border Protection (“CBP”) issued a Withhold Release Order on Products Made in Xinjiang region of China. In response to the problems in Xinjiang, we developed a Compliance Certificate of Traceability for our cotton vendors.
Our failure to execute our strategy successfully could prevent us from growing our market share, which could have a material adverse effect on our results of operations, cash flows and financial position, including if we were unable to: • grow our DXL e-commerce business; • develop an effective modern marketing program to build store and digital awareness as well as increase store and online traffic, attract customers across all channels, and grow sales; • predict and respond to fashion trends, while offering our customers a broad selection of merchandise in an extended selection of sizes; • grow our existing customer base; • attract and retain new customers across all channels; • hire qualified store management and store associates; • continue to grow and then sustain the number of transactions, units-per-transaction and share of wallet; and • operate at appropriate operating margins.
Our failure to execute our strategy successfully could prevent us from growing our market share, which could have a material adverse effect on our results of operations, cash flows and financial position, including if we were unable to: • grow our DXL digital business; • develop an effective modern marketing program to build store and digital awareness as well as increase store and online traffic, attract customers across all channels, and grow sales; • predict and respond to fashion trends, while offering our customers a broad selection of merchandise in an extended selection of sizes; • grow our existing customer base; • hire qualified store management and store associates; • continue to grow and then sustain the number of transactions, units-per-transaction and share of wallet; and • operate at appropriate operating margins.
We attempt 15 to limit exposures to security breaches and sensitive customer data through the use of “tokens” in connection with both in-store and online credit card transactions, which eliminates the storage of credit card numbers. Like many retailers, we have seen an increase in cyberattack attempts, predominantly through phishing and social engineering scams, and in particular, ransomware.
We attempt 14 to limit exposures to security breaches and sensitive customer data through the use of “tokens” in connection with both in-store and online credit card transactions, which eliminates the storage of credit card numbers. Like many retailers, we have seen an increase in cyberattack attempts, predominantly through phishing and social engineering scams, and in particular, ransomware.
Further, we may also incur incremental freight costs which could negatively harm our gross margin rates. Our business may be adversely affected if we are unable to manage our store portfolio successfully. We lease all of our store locations. Renewing and renegotiating these leases at acceptable lease terms is critical to the profitability of our stores.
Further, we may continue to incur incremental freight costs which could negatively harm our gross margin rates. Our business may be adversely affected if we are unable to manage our store portfolio successfully. We lease all of our store locations. Renewing and renegotiating these leases at acceptable lease terms is critical to the profitability of our stores.
This directly impacts our borrowing base and there can be no assurance that we can effectively manage the balance of maintaining inventory and sufficient availability, especially during peak selling periods. We cannot makes assurances that our cash flow from operations or cash available under our credit facility will be sufficient to meet our needs.
This directly impacts our borrowing base and there can be no assurance that we can effectively manage the balance of maintaining inventory and sufficient availability, especially during peak selling periods. We cannot make assurances that our cash flow from operations or cash available under our credit facility will be sufficient to meet our needs.
Our ability to increase our share of the big & tall men’s apparel market is largely dependent on effectively marketing our merchandise to all of our target customers in several diverse market segments so that they will become loyal shoppers who spend a greater portion of their wallets on our product offerings.
Our ability to increase our share of the big & tall men’s apparel market is largely dependent on effectively marketing our brand and merchandise to all of our target customers in several diverse market segments so that they will become loyal shoppers who spend a greater portion of their wallets on our product offerings.
Disruptions in the global supply chain in foreign ports and shortages of vessels and shipping containers may impact our ability to import inventory in a timely manner. The impact of COVID-19 and labor shortages on domestic ports has also created a similar disruption in the supply chain and may continue to cause delays in the receipt and shipment of inventory.
Disruptions in the global supply chain in foreign ports and shortages of vessels and shipping containers may impact our ability to import inventory in a timely manner. The impact of COVID-19 and labor shortages on domestic ports have also created a similar disruption in the supply chain and may continue to cause delays in the receipt and shipment of inventory.
The provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock. Item 1B. U nresolved Staff Comments None. 19
The provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock. Item 1B. U nresolved Staff Comments None. 18
Due to the uncertainty that remains regarding the duration of the pandemic and its impact on our store locations, we may need to take additional impairment charges. Any such impairment charges, if significant, could adversely affect our financial position and results of operations. Changes to LIBOR may negatively impact us.
Due to the uncertainty that remains regarding the duration of the pandemic and its impact on our store locations, we may need to take additional impairment charges. Any such impairment charges, if significant, could adversely affect our financial position and results of operations. General Risks That May Affect Our Business Changes to LIBOR may negatively impact us.
If, for any reason, we miscalculate the demand for our products during our fourth quarter, our sales in that quarter could decline, resulting in higher labor costs as a percentage of sales, lower margins and excess inventory, which could cause our annual operating results to suffer.
If, for any reason, we miscalculate the demand for our products during our these quarters, our sales in that quarter could decline, resulting in higher labor costs as a percentage of sales, lower margins and excess inventory, which could cause our annual operating results to suffer.
In order to grow our market share, we depend on the success of our marketing and advertising in a variety of ways, including streaming media advertising, advertising events, loyalty programs, direct mail, and digital marketing, including social media and customer prospecting. Our business is directly impacted by the success of these efforts and those of our vendors.
In order to grow our market share, we depend on the success of our marketing and advertising in a variety of ways, including streaming media advertising, advertising events, an updated loyalty program, direct mail, and digital marketing, including social media and customer prospecting. Our business is directly impacted by the success of these efforts and those of our vendors.
General Risks That May Affect Our Business If our long-lived assets become impaired, we may need to record significant non-cash impairment charges. Periodically, we review our long-lived assets for impairment whenever economic events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.
If our long-lived assets become impaired, we may need to record significant non-cash impairment charges. Periodically, we review our long-lived assets for impairment whenever economic events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.
In the absence of a favorable LIBOR or successor rate, our borrowings bear interest based on the Federal Funds rate. At January 29, 2022, there were no outstanding borrowings under our credit facility, however, we cannot provide assurance that future interest rate charges will not have a material negative impact on our business, financial position, or operating results.
In the absence of a favorable LIBOR or successor rate, our borrowings bear interest based on the Federal Funds rate. At January 28, 2023, there were no outstanding borrowings under our credit facility, however, we 16 cannot provide assurance that future interest rate charges will not have a material negative impact on our business, financial position, or operating results.
In addition, our operations may be negatively affected by local, regional or national economic conditions, such as levels of disposable consumer income, inflation, consumer debt, interest rates, consumer confidence and other 16 macro issues. Due to our seasonality, the possible adverse impact from such risks is potentially greater if any such risks occurs during our fourth quarter.
In addition, our operations may be negatively affected by local, regional or national economic conditions, such as levels of disposable consumer income, inflation, consumer debt, interest rates, consumer confidence and other macro issues. Due to our seasonality, the possible adverse impact from such risks is potentially greater if any such risks occur during our second and fourth quarters.
Because of the tight labor market, during fiscal 2021, we increased our starting hourly rate to attract candidates. If we are unable to pass on these higher costs through price increases or reduced workforce hours, our margins and profitability may be adversely impacted which could have a material adverse effect on our business, results of operations or financial condition.
Because of the tight labor market our hourly rates have increased to attract candidates. If we are unable to pass on these higher costs through price increases or reduced workforce hours, our margins and profitability may be adversely impacted which could have a material adverse effect on our business, results of operations or financial condition.
Although we believe that our receiving and distribution process is efficient and well-positioned to support our strategic plans, events beyond our control, such as disruptions in operations due to fire or other catastrophic events, employee matters or shipping problems, or disruptions in our distribution center, including potential restrictions due to the pandemic, could result in delays in the delivery of merchandise to our stores or directly to our customers.
Although we believe that our receiving and distribution process is efficient and well-positioned to support our strategic plans, events beyond our control, such as disruptions in operations due to fire or other catastrophic events, employee matters or shipping problems, labor shortages, or disruptions in our distribution center, could result in delays in the delivery of merchandise to our stores or directly to our customers.
In addition, our competitors are also investing in omni-channel initiatives, some of which may be more successful than our initiatives. If the investment in our omni-channel initiatives is not successful, our systems are unable to support such initiatives, or if our competitors are more successful, our financial results and our market penetration may be adversely affected.
In addition, our competitors are also investing in these initiatives, some of which may be more successful than our initiatives. If the investment in our integrated commerce initiatives is not successful, our systems are unable to support such initiatives, or if our competitors are more successful, our financial results and our market penetration may be adversely affected.
Omni-channel retailing is rapidly evolving and our success depends on our ability to anticipate and implement innovations in sales and marketing technology and logistics in order to appeal to existing and potential customers who increasingly rely on multiple channels to meet their shopping needs.
Integrated commerce is rapidly evolving and our success depends on our ability to anticipate and implement innovations in sales and marketing technology and logistics in order to appeal to existing and potential customers who increasingly rely on multiple channels to meet their shopping needs.
Our failure to respond to 13 these risks and uncertainties successfully could reduce our direct sales, increase our costs and diminish our growth prospects, which could negatively affect our operating results. If we are unable to develop and implement our omni-channel initiatives successfully, our market share and financial results could be adversely affected.
Our failure to respond to these risks and uncertainties appropriately could reduce our direct sales, increase our costs and diminish our growth prospects, which could negatively affect our operating results. 12 If we are unable to develop and implement our integrated commerce initiatives successfully, our market share and financial results could be adversely affected.
We consider ourselves a customer centric omni-channel retailer, and we continue to make ongoing investments in our information technology systems to support evolving omni-channel capabilities.
We consider ourselves a customer-centric integrated commerce retailer, and we continue to make ongoing investments in our information technology systems to support these evolving capabilities.
Due to the COVID-19 pandemic, during fiscal 2021 we continued to experience labor shortages primarily in our distribution facility and in our stores. If such labor shortages continue, especially during peak-selling periods, it may negatively impact our ability to process inventory in a timely manner and effectively staff our stores.
Since the end of the pandemic, we have continued to experience labor shortages primarily in our distribution facility and in our stores. If such labor shortages continue, especially during peak-selling periods, it may negatively impact our ability to process inventory in a timely manner and effectively staff our stores.
In addition, the recent 14 invasion by Russia of Ukraine may cause additional tariffs, sanctions, import/export restrictions and future actions that may have a negative impact on the supply chain and may limit the availability of certain raw materials and associated cost.
In addition, the ongoing war in Ukraine may cause additional tariffs, sanctions, import/export restrictions and future actions that may have a negative impact on the 13 supply chain and may limit the availability of certain raw materials and associated cost.
Due to the COVID-19 pandemic and the ban of Xinjiang cotton, we are seeing cost increases in labor and across raw materials. We have secured raw materials in key item programs to reduce the impact on our gross margin.
Fluctuations in the price, availability and quality of raw materials and finished goods could increase costs. Due to the COVID-19 pandemic and the ban of Xinjiang cotton, we are seeing cost increases in labor and across raw materials. We have secured raw materials in key item programs to reduce the impact on our gross margin.
Factors that could cause fluctuations in the market price of our common stock include the following: • the ongoing effect of the COVID pandemic and its variants on the retail industry and overall economy; • overall changes in the economy and general market volatility, including the effects of inflation; • news announcements regarding our quarterly or annual results of operations; • quarterly comparable sales; • acquisitions; • competitive developments; • governmental regulation (such as increased wage and paid benefits laws); • litigation affecting us; or • market views as to the prospects of the retail clothing industry generally.
Factors that could cause fluctuations in the market price of our common stock include the following: • the ongoing effect of the COVID pandemic and its variants on the retail industry and overall economy; • overall changes in the economy and general market volatility, including the effects of inflation and/or recession; • news announcements regarding our quarterly or annual results of operations; • quarterly comparable sales; • acquisitions; • competitive developments; • governmental regulation (such as increased wage and paid benefits laws); • litigation affecting us; or • market views as to the prospects of the retail clothing industry generally. 17 Our certificate of incorporation, as amended, limits transfers of our common stock and may, along with state law, inhibit potential acquisition bids that could be beneficial to our stockholders.
Our customer’s shopping behavior continues to evolve across multiple channels and we are working to meet his needs, with the real time store inventory visibility, our mobile app, the expansion of our BOPIS (buy online pick up in stores) and BOPAC (buy online pick up curbside) to help our customers continue to shop during the pandemic.
Our customer’s shopping behavior continues to evolve across multiple channels and we are working to meet his needs, with the real time store inventory visibility, our mobile app, and BOPIS (buy online pick up in stores).
For example, from September 8, 2021, when we relisted on the Nasdaq Global market through January 18 29, 2022, the reported price of our common stock has ranged from a low of $4.20 on January 28, 2022, to a high of $8.99 on November 17, 2021.
For example, from September 8, 2021, when we relisted on the Nasdaq Global market through January 27, 2023, the reported price of our common stock has ranged from a low of $3.27 on July 1, 2022, to a high of $8.99 on November 17, 2021.
We will also need sufficient cash flow to meet our future obligations under our existing credit facility. The amount that we are able to borrow and have outstanding under our credit facility at any given time is determined using an availability formula based on eligible assets.
The amount that we are able to borrow and have outstanding under our credit facility at any given time is determined using an availability formula based on eligible assets.
If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations and we cannot ensure we would be able to obtain refinancing or that such additional financing would be on favorable terms. Our business is seasonal and is affected by general economic conditions. Our business is seasonal.
If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations and we cannot ensure we would be able to obtain refinancing or that such additional financing would be on favorable terms. We may be unable to achieve our environmental, social and governance goals.
Since 2020, the COVID-19 pandemic and its variants have caused global uncertainty and disruption and has had a material impact on our business, predominately in fiscal 2020 and early 2021.
The global impact of the COVID-19 pandemic and its variants have had, and other global health pandemics may have, an adverse effect on our business, financial results, liquidity, supply chain and workforce. The COVID-19 pandemic and its variants caused global uncertainty and disruption and had a material impact on our business, predominately in fiscal 2020 and early 2021.
This type of disaster is mitigated by our offsite storage and disaster recovery plans, but we would still incur business interruption that may impact our business a significant period of time.
With all of our management information systems centralized in our corporate headquarters, any disruption or destruction of our system infrastructure could materially affect our business. This type of disaster is mitigated by our offsite storage and disaster recovery plans, but we would still incur business interruption that may impact our business a significant period of time.
We expect to continue to invest in stores over the next several years as we further strengthen the store portfolio, but if we are unable to find locations or obtain favorable lease terms, we may not be able to grow or maintain our current store base. We are dependent on third parties for the manufacture of the merchandise we sell.
If we are unable to find locations or obtain favorable lease terms, we may not be able to grow or maintain our current store base and the lack of store growth could negatively affect our ability to growth revenue and market share. We are dependent on third parties for the manufacture of the merchandise we sell.
During fiscal 2021, we formed the Corporate Social Responsibility Committee, comprising a cross-discipline of corporate management and engaged with a third-party firm to assist us in the development of the Company's ESG policies and initiatives. Achievement of our initiatives is subject to risks and uncertainties and we may fail to achieve our objectives.
We are committed to corporate social responsibility and sustainability and we recognize the importance of environmental, social and governance ("ESG") issues. Our Sustainability Committee, comprising a cross-discipline of corporate management, has engaged with a third-party firm to assist us in the development of the Company's ESG policies and initiatives.
In addition, an increasing number of our stakeholders are considering sustainability factors when making related decisions regarding employment, brand loyalty and investment.
We may also face pressure from our stockholders, customers and employees to make accelerated and material advancements in these ESG matters. 15 In addition, an increasing number of our stakeholders are considering sustainability factors when making related decisions regarding employment, brand loyalty and investment.
As part of that evaluation, we may choose not to renew certain lease locations. We are actively reviewing opportunities to relocate or convert Casual Male XL stores to DXL and we are reviewing white space opportunities in markets where our store footprint is underpenetrated.
As part of that evaluation, we may choose not to renew certain lease locations. Our plan is to grow our store portfolio over the next several years and we have identified multiple white space opportunities in new or underpenetrated markets.
In the absence of a LIBOR rate, our credit facility 17 with Citizens Bank, N.A. provides for a successor rate, based on the Secured Overnight Financing Rate. As such, while we do not expect that we will have to renegotiate our credit facility, we do not know whether it could result in increased interest costs.
As such, while we do not expect that we will have to renegotiate our credit facility, we may have to amend our credit facility to effect the change before June 2023 and we do not know whether it could result in increased interest costs.
Historically, a significant portion of our operating income has been generated during our fourth quarter (November-January).
Our business is seasonal and is affected by general economic conditions. Our business is seasonal. Historically, a significant portion of our operating income has been generated during our second and fourth quarters.
While sales from the majority of our stores returned to pre-pandemic levels in fiscal 2021, given the ongoing variants, supply chain issues and labor shortages, certain stores may not be profitable and we may not be able to renew existing agreements. We will continue to evaluate our store portfolio to optimize store profitability and omni-channel distribution.
While we worked closely with our landlords to renegotiate and restructure a majority of our lease portfolio from the onset of the pandemic, there still may be certain stores that may not be profitable and we may not be able to renew existing agreements. We will continue to evaluate our store portfolio to optimize store profitability.
Over the past two fiscal years, we have seen significant growth in our direct business, with revenue for fiscal 2021 increasing 45.3% from fiscal 2019. While it is our objective to continue to grow this business, there can be no assurance that this growth will continue or be sustainable.
The growth of our overall sales is dependent on customers’ continuing to expand their online purchases in addition to in-store purchases. Comparable sales from our direct business in fiscal 2022 increased 58.3% from fiscal 2019. While it is our objective to continue to grow this business, there can be no assurance that this growth will continue or be sustainable.
We may also incur additional costs and require additional resources to monitor, report, and comply with such ESG practices and regulations. We may also face pressure from our stockholders, customers and employees to make accelerated and material advancements in these ESG matters.
Achievement of our initiatives is subject to risks and uncertainties and we may fail to achieve our objectives. We may also incur additional costs and require additional resources to monitor, report, and comply with such ESG practices and regulations.
Even after the COVID-19 pandemic subsides, our business may be negatively impacted, specifically as it relates to the changes in consumer spending behaviors, the labor market, the global supply chain and inflation, resulting from the pandemic. Our business may be adversely affected due to disruptions in the global supply chain.
Our business may be negatively impacted as it relates to the risk and uncertainty of a potential COVID-19 resurgence, new variants or a new global health pandemic and could materially affect our financial results, access to sources of liquidity and inventory. Our business may be adversely affected due to disruptions in the global supply chain.
Removed
Our direct business is a significant component of our growth strategy, and the failure to develop our e-commerce and internet infrastructure could disrupt our business and negatively impact our sales. We continue to have increasing levels of sales made through online shopping and via mobile devices.
Added
In fiscal 2022, the pandemic continued to have a lingering negative effect on the global economy that directly impacted our business, specifically as it related to the economy, rising interest rates, labor shortages, increased material costs, global supply chain issues, inflationary pressures, and changes in consumer spending behaviors.
Removed
The COVID-19 pandemic has also resulted in labor shortages, which may affect our ability to process and ship inventory in a timely manner. With all of our management information systems centralized in our corporate headquarters, any disruption or destruction of our system infrastructure could materially affect our business.
Added
We are also actively reviewing opportunities to relocate or convert the majority of our remaining Casual Male XL stores to DXL.
Removed
The global impact of the COVID-19 pandemic and its variants have had and, based on the current status and uncertainty, may continue to have an adverse effect on our business, financial results, liquidity, supply chain and workforce .
Added
LIBOR will be phased out by June 2023. In the absence of a LIBOR rate, our credit facility with Citizens Bank, N.A. provides for a successor rate, based on the Secured Overnight Financing Rate ("SOFR").
Removed
While we saw significant recovery in our business during fiscal 2021, continued risk and uncertainty remain particularly related to the potential for new variants, current and future actions that may be taken by federal, state and local agencies to mitigate any resurgences, the disruption and recovery of the global supply chain, the long-term economic impact, inflationary pressures, and the continuing labor shortages.
Removed
Further, we also recognize that our business benefited from a certain level of pent-up demand and fiscal stimulus policy during fiscal 2021, which may have a negative impact our financial results in fiscal 2022 if we are not able to successfully manage the potential shifts in consumer spending.
Removed
Since the start of the pandemic in March 2020, we have worked closely with our landlords to renegotiate and restructure the majority of our lease portfolio.
Removed
We may be unable to achieve our environmental, social and governance goals. We are committed to corporate social responsibility and sustainability and we recognize the importance of environmental, social and governance ("ESG") issues.
Removed
Regulators in the United Kingdom that oversee LIBOR have stated that they cannot guarantee LIBOR's availability beyond the end of 2021 and expects that reliance on LIBOR will be phased out through June 2023.
Removed
We expect that the costs associated with ocean, rail and road transportation will continue to be higher than pre-pandemic levels and may increase further in fiscal 2022 as a result of continuing supply chain challenges and a tight labor market. Fluctuations in the price, availability and quality of raw materials and finished goods could increase costs.
Removed
Our certificate of incorporation, as amended, limits transfers of our common stock and may, along with state law, inhibit potential acquisition bids that could be beneficial to our stockholders.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also utilize financial models to project the profitability of each location using assumptions such as the center’s sales per square foot averages, estimated occupancy costs and return on investment requirements. 20 Store count by state at January 29, 2022 United States DXL retail and outlet stores Casual Male XL retail and outlet stores Alabama 2 1 Arizona 6 — Arkansas — 1 California 25 4 Colorado 3 — Connecticut 3 — Delaware 2 — Florida 10 6 Georgia 4 2 Idaho 1 — Illinois 11 2 Indiana 6 3 Iowa 2 1 Kansas 2 — Kentucky 3 — Louisiana 3 1 Maine 2 — Maryland 6 2 Massachusetts 5 2 Michigan 13 1 Minnesota 2 1 Mississippi — 2 Missouri 5 2 Montana 1 — Nebraska 2 — Nevada 3 — New Hampshire 3 — New Jersey 8 5 New Mexico 1 — New York 17 1 North Carolina 4 2 North Dakota — 1 Ohio 10 1 Oklahoma 2 — Oregon 2 1 Pennsylvania 11 6 Rhode Island 1 — South Carolina 4 — South Dakota 1 — Tennessee 7 — Texas 24 3 Utah 1 — Vermont 1 — Virginia 6 2 Washington 5 — West Virginia — 1 Wisconsin 5 — International Toronto, Canada 1 —
Biggest changeWe also utilize financial models to project the profitability of each location using assumptions such as the center’s sales per square foot averages, sales to invested capital ratio, and return on investment requirements. 19 Store count by state at January 28, 2023 United States DXL retail and outlet stores Casual Male XL retail and outlet stores Alabama 2 1 Arizona 5 — Arkansas — 1 California 25 4 Colorado 3 — Connecticut 3 — Delaware 2 — Florida 10 5 Georgia 4 2 Idaho 1 — Illinois 11 1 Indiana 6 2 Iowa 2 1 Kansas 2 — Kentucky 3 — Louisiana 3 1 Maine 2 — Maryland 6 2 Massachusetts 6 1 Michigan 13 1 Minnesota 2 1 Mississippi — 2 Missouri 5 2 Montana 1 — Nebraska 2 — Nevada 3 — New Hampshire 3 — New Jersey 8 3 New Mexico 1 — New York 17 1 North Carolina 4 1 North Dakota — 1 Ohio 10 1 Oklahoma 2 — Oregon 2 1 Pennsylvania 11 6 Rhode Island 1 — South Carolina 4 — South Dakota 1 — Tennessee 7 — Texas 24 3 Utah 1 — Virginia 6 2 Washington 5 — West Virginia — 1 Wisconsin 5 —
Sites for new stores are selected based on several factors, including the demographic profile of the area in which the site is located, the types of stores and other retailers in the area, the location of the store within the center and the attractiveness of the store layout.
Sites for new stores are selected based on several factors, including population and density levels, the demographic profile of the area in which the site is located, the types of stores and other retailers in the area, the location of the store within the center and the attractiveness of the store layout.
The store leases are generally 5 to 10 years in length and contain renewal options extending their terms by between 5 and 10 years. Following this discussion is a listing by state of all store locations open at January 29, 2022.
The store leases are generally 5 to 10 years in length and contain renewal options extending their terms by between 5 and 10 years. Following this discussion is a listing by state of all store locations open at January 28, 2023.
As of January 29, 2022, we operated 220 Destination XL retail stores, 16 Destination XL outlet stores, 35 Casual Male XL retail stores and 19 Casual Male XL outlet stores. We lease all of these stores directly from owners of several different types of centers, including life-style centers, shopping centers, freestanding buildings, outlet centers and downtown locations.
As of January 28, 2023, we operated 218 Destination XL retail stores, 16 Destination XL outlet stores, 28 Casual Male XL retail stores and 19 Casual Male XL outlet stores. We lease all of these stores directly from owners of several different types of centers, including life-style centers, shopping centers, freestanding buildings, outlet centers and downtown locations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeM ine Safety Disclosure Not applicable. 21 PART II.
Biggest changeM ine Safety Disclosures Not applicable. 20 PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeApparel Retailers 9.4 % 8.4 % 10.8 % 6.2 % 8.1 % Indexed Returns Base Period Jan 17 Jan 18 Jan 19 Jan 20 Jan 21 Jan 22 Company/Index DXLG $ 100 $ 78.18 $ 76.36 $ 33.64 $ 24.24 $ 131.21 S&P 500 $ 100 $ 120.37 $ 117.95 $ 140.56 $ 161.86 $ 193.13 Dow Jones U.S.
Biggest changeApparel Retailers 8.4 % 10.8 % 6.2 % 8.1 % 8.6 % Indexed Returns Base Period Jan 18 Jan 19 Jan 20 Jan 21 Jan 22 Jan 23 Company/Index DXLG $ 100 $ 97.67 $ 43.02 $ 31.01 $ 167.83 $ 285.27 S&P 500 $ 100 $ 97.99 $ 116.78 $ 134.47 $ 160.45 $ 147.37 Dow Jones U.S.
The cumulative stockholder return for shares of our common stock (“DXLG”) and each of the indices is calculated assuming that $100 was invested on January 31, 2017. We paid no cash dividends during the periods shown. The performance of the indices is shown on a total return (dividends reinvested) basis.
The cumulative stockholder return for shares of our common stock (“DXLG”) and each of the indices is calculated assuming that $100 was invested on January 31, 2018. We paid no cash dividends during the periods shown. The performance of the indices is shown on a total return (dividends reinvested) basis.
The graph lines merely connect January 31 of each year and do not reflect fluctuations between those dates. In addition, we have included a chart of the annual percentage return of our common stock, the S&P 500 and the Dow Jones U.S. Apparel Retailers.
The graph lines merely connect January 31 of each year and do not reflect fluctuations between those dates. In addition, we have included a chart of the annual percentage return of our common stock, the S&P 500 and the Dow Jones U.S.
This graph will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing. Item 6. Reserved. 23
This graph will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing. Item 6. Reserved. 22
Holders As of March 15, 2022, based upon data provided by the transfer agent for our common stock, there were approximately 78 holders of record of our common stock. The number of holders does not include individuals or entities who beneficially own shares but whose shares are held of record by a broker or clearing agent.
Holders As of March 15, 2023, based upon data provided by the transfer agent for our common stock, there were approximately 77 holders of record of our common stock. The number of holders does not include individuals or entities who beneficially own shares but whose shares are held of record by a broker or clearing agent.
Annual Return Percentage Year ended Company/Index Jan 18 Jan 19 Jan 20 Jan 21 Jan 22 DXLG (21.8 %) (2.3 %) (56.0 %) (27.9 %) 441.3 % S&P 500 20.4 % (2.0 %) 19.2 % 15.2 % 19.3 % Dow Jones U.S.
Apparel Retailers. 21 Annual Return Percentage Year ended Company/Index Jan 19 Jan 20 Jan 21 Jan 22 Jan 23 DXLG (2.3 %) (56.0 %) (27.9 %) 441.3 % 70.0 % S&P 500 (2.0 %) 19.2 % 15.2 % 19.3 % (8.2 %) Dow Jones U.S.
Issuer Purchases of Equity Securities There were no stock repurchases during fiscal 2021. 22 Stock Performance Graph The following Performance Graph compares our cumulative stockholder return with a broad market index (Standard & Poor’s 500) and one published industry index (Dow Jones U.S. Apparel Retailers) for each of the most recent five years ended January 31.
Stock Performance Graph The following Performance Graph compares our cumulative stockholder return with a broad market index (Standard & Poor’s 500) and one published industry index (Dow Jones U.S. Apparel Retailers) for each of the most recent five years ended January 31.
Apparel Retailers $ 100 $ 109.41 $ 118.60 $ 131.47 $ 139.65 $ 150.90 The performance graph above shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section.
Apparel Retailers $ 100 $ 108.40 $ 120.16 $ 127.64 $ 137.92 $ 149.71 The performance graph above shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section.
Added
Issuer Purchases of Equity Securities On March 15, 2022, the Company’s Board of Directors approved a stock repurchase program. Under the stock repurchase program, the Company was authorized to repurchase up to $15.0 million of its common stock through open market and privately negotiated transactions.
Added
The timing and the amount of any repurchases of common stock was determined based on the Company’s evaluation of market conditions and other factors. The stock repurchase program commenced in the first quarter of fiscal 2022 and expired on March 15, 2023. There were no stock repurchases during the fourth quarter of fiscal 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table is a reconciliation of net income (loss) on a GAAP basis to EBITDA and Adjusted EBITDA, on a non-GAAP basis, for each fiscal year: (in millions, except percentages) Fiscal 2021 Fiscal 2020 Fiscal 2019 Net income (loss), on a GAAP basis $ 56.7 $ (64.5 ) $ (7.8 ) Add back: Provision for income taxes 0.9 0.1 0.1 Interest expense 4.4 3.9 3.3 Depreciation and amortization 17.2 21.5 24.6 EBITDA, on a non-GAAP basis $ 79.2 $ (39.0 ) $ 20.2 Add back: Exit costs associated with London operations $ — $ — $ 1.7 CEO transition costs — — 0.7 Impairment of assets (2.3 ) 14.8 0.9 Adjusted EBITDA, on a non-GAAP basis $ 76.9 $ (24.2 ) $ 23.5 The following table is a reconciliation of operating margin, on a GAAP basis, to EBITDA margin and Adjusted EBITDA margin, on a non-GAAP basis, for each fiscal year: (as a percentage of sales) Fiscal 2021 Fiscal 2020 Fiscal 2019 Operating margin, on a GAAP basis 12.3 % (19.0 %) (0.9 %) Add back: Depreciation and amortization 3.4 % 6.7 % 5.2 % EBITDA margin 15.7 % (12.2 %) 4.3 % Add back: Exit costs associated with London operations — — 0.4 % CEO transition costs — — 0.2 % Impairment of assets (0.5 %) 4.7 % 0.2 % Adjusted EBITDA margin, on a non-GAAP basis 15.2 % (7.6 %) 5.0 % CRITICAL ACCOUNTING POLICIES; USE OF ESTIMATES Our financial statements are based on the application of significant accounting policies, many of which require our management to make significant estimates and assumptions (see Note A to the Notes to the Consolidated Financial Statements).
Biggest changeThe following table is a reconciliation of net income on a GAAP basis to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin, on a non-GAAP basis, for each fiscal year: (in millions, except percentages) Fiscal 2022 Fiscal 2021 Net income, on a GAAP basis $ 89.1 $ 56.7 Add back: Provision (benefit) for income taxes (30.8 ) 0.9 Interest expense, net 0.3 4.4 Depreciation and amortization 15.4 17.2 EBITDA, on a non-GAAP basis $ 74.0 $ 79.2 Add back: Impairment (gain) of assets (0.2 ) (2.3 ) Adjusted EBITDA, on a non-GAAP basis $ 73.8 $ 76.9 Adjusted EBITDA margin, on a non-GAAP basis: Adjusted EBITDA, on a non-GAAP basis $ 73.8 $ 76.9 Sales $ 545.8 $ 505.0 Adjusted EBITDA margin, on a non-GAAP basis: 13.5 % 15.2 % CRITICAL ACCOUNTING POLICIES; USE OF ESTIMATES Our financial statements are based on the application of significant accounting policies, many of which require our management to make significant estimates and assumptions (see Note A to the Notes to the Consolidated Financial Statements).
Base Rate loans will bear interest, at a rate equal to (i) the greater of: (a) the Prime Rate, (b) the Federal Funds effective rate plus 0.50% per annum and (c) the daily LIBOR rate plus 1.00% per annum, plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25% or 0.50%.
Base Rate loans bear interest, at a rate equal to (i) the greater of: (a) the Prime Rate, (b) the Federal Funds effective rate plus 0.50% per annum and (c) the daily LIBOR rate plus 1.00% per annum, plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25% or 0.50%.
Comparable Sales and E-Commerce (Direct) Sales Definition Our customer’s shopping experience continues to evolve across multiple channels and we are continually adapting to meet the guest’s needs. The majority of our stores have the capability of fulfilling online orders if merchandise is not available in the warehouse.
Comparable Sales and E-Commerce (Direct) Sales Definition Our customer’s shopping experience continues to evolve across multiple channels and we are continually adapting to meet the customer's needs. The majority of our stores have the capability of fulfilling online orders if merchandise is not available in the warehouse.
However, these measures may not be comparable to similar measures used by other companies and should not be considered superior to or as a substitute for operating net income (loss), net income (loss) per diluted share or cash flows from operating activities in accordance with GAAP.
However, these measures may not be comparable to similar measures used by other companies and should not be considered superior to or as a substitute for operating net income, net income per diluted share or cash flows from operating activities in accordance with GAAP.
The amounts shown are also not necessarily indicative of actual trends, because such amounts also reflect the addition of new stores and the remodeling and closing of other stores during these periods. Consistent with the retail apparel industry, our business is seasonal.
The amounts shown are also not necessarily indicative of actual trends, because such amounts also reflect the addition of new stores and the remodeling and closing of other stores 26 during these periods. Consistent with the retail apparel industry, our business is seasonal.
IMPAIRMENT OF ASSETS Asset impairment charges primarily represent the write-down of operating lease right-of-use assets, where the carrying value exceeds fair value, and the write-down of store property and equipment.
IMPAIRMENT (GAIN) OF ASSETS Asset impairment charges primarily represent the write-down of operating lease right-of-use assets and the write-down of store property and equipment, where the carrying value exceeds fair value.
However, these measures may not be comparable to 24 similar measures used by other companies and should not be considered superior to or as a substitute for net income (loss), net income (loss) per diluted share or cash flow from operating activities in accordance with GAAP.
However, these measures may not be comparable to similar measures used by other companies and should not be considered superior to or as a substitute for net income, net income per diluted share or cash flow from operating activities in accordance with GAAP.
These measures include free cash flow, EBITDA, adjusted EBITDA and adjusted EBITDA margin. We believe these measures provide helpful information with respect to the Company’s operating performance and that the inclusion of these non-GAAP measures is important to assist investors in comparing our performance in fiscal 2021 to fiscal 2020 and fiscal 2019.
These measures include free cash flow, EBITDA, adjusted EBITDA and adjusted EBITDA margin. We believe these measures provide helpful information with respect to the Company’s operating performance and that the inclusion of these non-GAAP measures is important to assist investors in comparing our performance in fiscal 2022 to fiscal 2021.
We believe these measures provide helpful information with respect to the Company’s operating performance to shareholders, investors and analysts, and that the inclusion of these non-GAAP measures is important to assist investors in comparing our performance in fiscal 2021 to fiscal 2020 and fiscal 2019, on a comparable basis.
We believe these measures provide helpful information with respect to the Company’s operating performance to shareholders, investors and analysts, and that the inclusion of these non-GAAP measures is important to assist investors in comparing our performance in fiscal 2022 to fiscal 2021, on a comparable basis.
The interest expense for fiscal 2021 includes a prepayment penalty of $1.1 million in connection with the Company's early prepayment of its $17.5 million FILO loan as well as $0.9 million for the write-off unamortized debt issuance costs associated with both the FILO loan and our prior credit facility.
The interest expense for fiscal 2021 included a prepayment penalty of $1.1 million in connection with the Company's early prepayment of its $17.5 million FILO loan in the third quarter of fiscal 2021 as well as $0.9 million for the write-off unamortized debt issuance costs associated with both the FILO loan and our prior credit facility.
During fiscal 2021, we had three active LTIPs: the 2019-2021 LTIP, the 2020-2022 LTIP and the 2021-2023 LTIP. See Note H to the Notes to the Consolidated Financial Statements for additional discussion of our LTIPs. Awards under each LTIP consist of 50% time-based awards and 50% performance-based awards. A ll time-based awards are amortized over each LTIP’s respective vesting periods.
During fiscal 2022, we had three active LTIPs: the 2020-2022 LTIP, the 2021-2023 LTIP and the 2022-2024 LTIP. See Note H to the Notes to the Consolidated Financial Statements for additional discussion of our LTIPs. Awards under each LTIP consist of 50% time-based awards and 50% performance-based awards. All time-based awards are amortized over each LTIP’s respective vesting periods.
If performance targets are achieved and equity awards are granted, the related cost of those awards will be reclassified from the accrual to stock-based compensation on grant date. The performance targets under the 2019-2021 LTIP were achieved at the end of fiscal 2021.
If performance targets are achieved and equity awards are granted, the related cost of those awards will be reclassified from the accrual to stock-based compensation on grant date. The performance targets under the 2020-2022 LTIP were achieved at the end of fiscal 2022.
Through the end of fiscal 2021, we have accrued approximately $1.5 million and $0.8 million for performance under the 2020-2022 LTIP and the 2021-2023 LTIP, respectively. Impairment of Long-Lived Assets We evaluate property and equipment and operating lease right-of-use assets for impairment when facts and circumstances indicate that the carrying values of such assets may not be recoverable.
Through the end of fiscal 2022, we accrued approximately $1.6 million and $0.8 million for performance under the 2021-2023 LTIP and the 2022-2024 LTIP, respectively. 30 Impairment of Long-Lived Assets We evaluate property and equipment and operating lease right-of-use assets for impairment when facts and circumstances indicate that the carrying values of such assets may not be recoverable.
See “Non-GAAP Reconciliations” below for additional information on these non-GAAP financial measures and reconciliations to comparable GAAP measures. RESULTS OF OPERATIONS Our fiscal year is a 52- or 53-week period ending on the Saturday closest to January 31. Fiscal 2021, fiscal 2020 and fiscal 2019 were all 52-week periods.
See “Non-GAAP Reconciliations” below for additional information on these non-GAAP financial measures and reconciliations to comparable GAAP measures. RESULTS OF OPERATIONS Our fiscal year is a 52- or 53-week period ending on the Saturday closest to January 31.
At January 29, 2022, our material contractual obligations primarily consisted of our operating lease obligations, as disclosed in Note E, Leases , to the Notes to the Consolidated Financial Statements.
At January 28, 2023, our material contractual obligations primarily consisted of our operating lease obligations, as disclosed in Note E, Leases , to the Notes to the Consolidated Financial Statements.
Based on that achievement, subsequent to the end of fiscal 2021, on March 15, 2022, the Compensation Committee approved a total performance award of $2.6 million, to be awarded in a combination of 50% cash and 50% RSUs. All awards are subject to further vesting through August 31, 2022.
Based on that achievement, subsequent to the end of fiscal 2022, on March 6, 2023, the Compensation Committee approved a total performance award of $2.8 million to be granted on March 26, 2023 in a combination of 50% cash and 50% RSUs. All awards are subject to further vesting through August 31, 2023.
The performance-based component of each LTIP is a dollar-denominated award. Equity awards will only be granted if such performance targets are achieved. Accordingly, each quarter the Company reviews its expected achievement against such performance targets to assess whether an accrual is necessary.
The performance-based component of each LTIP is a dollar-denominated award, settled in a variable number of equity awards and/or cash awards. Any award will only be granted if such performance targets are achieved. Accordingly, each quarter the Company reviews its expected achievement against such performance targets to assess whether an accrual is necessary.
In addition to our lease obligations, at January 29, 2022, we were also contractually committed pursuant to a merchandise purchase obligation to meet minimum purchases of $10.0 million in each fiscal year through fiscal 2023.
In addition to our lease obligations, at January 28, 2023, we were also contractually committed pursuant to a merchandise purchase obligation to meet minimum purchases of $10.0 million in fiscal 2023.
In addition, any subsequent gains recognized in connection with a store closure related to a previously recorded operating lease right-of-use asset impairment will be included as an offset to impairment charges, with the remainder of the gain included as a reduction in store occupancy costs. For fiscal 2021, we recognized a gain against previously recorded impairment charges of $2.3 million.
In addition, any subsequent gains recognized in connection with a store closure related to a previously recorded operating lease right-of-use asset impairment will be included as an offset to impairment charges, with the remainder of the gain included as a reduction in store occupancy costs.
LIBOR Rate loans, which may be either for 1 month or 3 months, will bear interest at (i) the LIBOR rate, or the Benchmark Rate as defined in the credit agreement plus (ii) a varying percentage based on the Company’s average excess availability, of either 1.25% or 1.50%.
LIBOR Rate loans, which may be either for 1 month or 3 months, bear interest at (i) the LIBOR rate, or the Benchmark Rate as defined in the credit agreement plus (ii) a varying percentage based on the Company’s average excess availability, of either 1.25% or 1.50%. We had no outstanding borrowings under the Credit Facility at January 28, 2023.
The following table provides a reconciliation of free cash flow: (in millions) Fiscal 2021 Fiscal 2020 Fiscal 2019 Cash flow from operating activities (GAAP) $ 75.5 $ (1.2 ) $ 15.8 Capital expenditures (5.3 ) (4.2 ) (13.4 ) Free cash flow (non-GAAP) $ 70.3 $ (5.5 ) $ 2.4 30 EBITDA, Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA Margin EBITDA, Adjusted EBITDA, EBITDA margin and adjusted EBITDA margin are presented because we believe that these measures are useful to investors in evaluating our performance.
The following table provides a reconciliation of free cash flow: (in millions) Fiscal 2022 Fiscal 2021 Cash flow from operating activities (GAAP) $ 59.9 $ 75.5 Capital expenditures (9.6 ) (5.3 ) Free cash flow (non-GAAP) $ 50.3 $ 70.3 29 EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin EBITDA, Adjusted EBITDA and adjusted EBITDA margin are presented because we believe that these measures are useful to investors in evaluating our performance.
Stores that have been remodeled or re-located during the period are also included in our determination of comparable stores sales. Stores that have been expanded by more than 25% are considered non-comparable for the first 13 months. If a store becomes a clearance center, it is also removed from the calculation of comparable sales.
Stores that have been remodeled or re-located during the period are also included in our determination of comparable stores sales. Stores that have been expanded by more than 25% are considered non-comparable for the first 13 months.
Accordingly, at January 29, 2022, the Company has accrued $2.3 million of the $2.6 million award. With respect to the performance-based component of the 2020-2022 LTIP and the 2021-2023 LTIP, which each approximate $1.9 million, at target, awards will be granted at the end of the respective performance period if the performance targets are achieved.
Accordingly, at January 28, 2023, $2.3 million of the $2.8 million award was accrued. With respect to the performance-based component of the 2021-2023 LTIP and the 2022-2024 LTIP, which approximate $2.1 million and $2.5 million, respectively, at target, awards will be granted at the end of the respective performance period if the performance targets are achieved.
We have taken selective price increases on our merchandise assortment to mitigate the pressure on gross margin. If such inflationary pressures increase, the effects may have an increased impact on our financial results in fiscal 2022. LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity are cash generated from operations and availability under our credit facility, which is discussed below.
If such inflationary pressures increase, the effects may have an increased impact on our financial results in fiscal 2023. LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity are our cash and cash equivalents, cash generated from operations and availability under our credit facility, which is discussed below.
Segment Reporting We have three principal operating segments: our stores, direct business and our wholesale business. We consider our stores and direct business segments to be similar in terms of economic characteristics, production processes and operations, and have therefore aggregated them into one reportable segment, retail segment, consistent with our omni-channel business approach.
Certain figures discussed below may not foot due to rounding. Segment Reporting We have two principal operating segments: our stores and direct business. We consider our stores and direct business segments to be similar in terms of economic characteristics, production processes and operations, and have therefore aggregated them into one reportable segment, retail segment, consistent with our integrated commerce approach.
(Certain amounts in the following tables may not foot due to rounding.) Free Cash Flow We calculate free cash flow as cash flow provided by operating activities less capital expenditures. Free cash flow excludes the mandatory and discretionary repayment of debt.
We calculate free cash flow as cash flow provided by operating activities less capital expenditures. Free cash flow excludes the mandatory and discretionary repayment of debt.
(Certain columns may not foot due to rounding) (in millions, except percentages) Fiscal 2021 Fiscal 2020 Fiscal 2019 First quarter $ 111.5 22.1 % $ 57.2 17.9 % $ 113.0 23.8 % Second quarter 138.6 27.4 % 76.4 24.0 % 123.2 26.0 % Third quarter 121.5 24.1 % 85.2 26.7 % 106.6 22.1 % Fourth quarter 133.5 26.4 % 100.1 31.4 % 131.2 27.7 % $ 505.0 100.0 % $ 318.9 100.0 % $ 474.0 100.0 % EFFECTS OF INFLATION During fiscal 2021, we began to be impacted by the effects of the inflationary pressures on freight, raw materials, and labor.
(Certain columns may not foot due to rounding) (in millions, except percentages) Fiscal 2022 Fiscal 2021 First quarter $ 127.7 23.4 % $ 111.5 22.1 % Second quarter 144.6 26.5 % 138.6 27.4 % Third quarter 129.7 23.8 % 121.5 24.1 % Fourth quarter 143.9 26.4 % 133.5 26.4 % $ 545.8 100.0 % $ 505.0 100.0 % EFFECTS OF INFLATION We continued to see the effect of inflationary pressures on raw materials, freight, shipping and labor during fiscal 2022.
We believe that our store portfolio is a vital asset to our business strategy and we expect to continue to invest in stores over the next several years as we further strengthen the store portfolio.
We believe that our store portfolio is a vital asset to our business strategy and we expect to invest in stores over the next several years as we further strengthen the store portfolio. Over the next three to five years, based on our preliminary store development plan, we believe that we could potentially open up to 50 new stores.
In fiscal 2020 and fiscal 2019, we recorded net asset impairment charges of $14.8 million and $0.9 million, respectively. Leases In accordance with ASU 2016-02, “Leases (Topic 842)” our operating leases are reported as right-of-use assets with corresponding lease liabilities on our Consolidated Balance Sheet.
For fiscal 2022 and 2021, we recognized a net gain of $0.2 million and $2.3 million, respectively, within Impairment (Gain) of Assets on the Consolidated Statements of Operations. . Leases In accordance with ASU 2016-02, “Leases (Topic 842)” our operating leases are reported as right-of-use assets with corresponding lease liabilities on our Consolidated Balance Sheet.
The performance metrics are for three-year performance periods and 31 may include metrics such as total shareholder return against peers, 3-year stacked comparable sales or Adjusted EBITDA. As such, the accruals are based on projections that may extend beyond a year and are subject to change quarter to quarter based on actual performance. All accruals are recorded as a liability.
The performance metric for each of these LTIPs is a three-year total shareholder return against peers. As such, the accruals are based on projections that extend beyond a year and are subject to change quarter to quarter based on actual performance. All accruals are recorded as a liability.
However, we remain cautious regarding the effect that the pandemic could have on consumer sentiment and the geopolitical impact of Russia's invasion of Ukraine on our business and the global economy.
However, we remain cautious regarding the effect that the current macroeconomic conditions, including inflation and rising interest costs, may have on consumer spending as well as the continuing geopolitical impact of Russia's invasion of Ukraine on our business and the global economy.
NET INCOME (LOSS ) Net income for fiscal 2021 was $56.7 million, or $0.83 per diluted share, as compared to a net loss of $(64.5) million, or $(1.26) per diluted share, in fiscal 2020 and a net loss of $(7.8) million, or $(0.16) per diluted share, in fiscal 2019.
For fiscal 2022, we reported net income of $89.1 million, or $1.33 per diluted share, as compared to net income of $56.7 million, or $0.83 per diluted share, in fiscal 2021.
The following table sets forth financial data regarding our liquidity position at the end of the past three fiscal years: (in millions) Fiscal 2021 Fiscal 2020 Fiscal 2019 Cash flow from operating activities $ 75.5 $ (1.2 ) $ 15.8 Capital expenditures (5.3 ) (4.2 ) (13.4 ) Free Cash Flow (Non-GAAP) $ 70.3 $ (5.5 ) $ 2.4 Cash on hand, at year end $ 15.5 $ 19.0 $ 4.3 Total debt, net of unamortized debt issuance costs $ - $ 74.4 $ 54.1 Unused excess availability under Credit Facility $ 68.9 $ 11.5 $ 48.5 28 Credit Facility On October 28, 2021, we entered into a new $125.0 million revolving credit agreement, which replaced our prior credit facility that was due to expire in May 2023 (the "New Credit Facility").
The following table sets forth financial data regarding our liquidity position at the end of the past two fiscal years: (in millions) Fiscal 2022 Fiscal 2021 Cash flow from operating activities $ 59.9 $ 75.5 Capital expenditures (9.6 ) (5.3 ) Free Cash Flow (Non-GAAP) $ 50.3 $ 70.3 Cash and cash equivalents on hand, at year end $ 52.1 $ 15.5 Total debt, net of unamortized debt issuance costs $ - $ - Unused excess availability under Credit Facility $ 78.4 $ 68.9 For fiscal 2022, cash flow from operations decreased to $59.9 million as compared to $75.5 million for fiscal 2021.
Management uses EBITDA as a key metric to measure profitability and economic productivity. EBITDA is calculated as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before asset impairment charges, exit costs associated with London operations, CEO transition costs and corporate restructuring.
Management uses EBITDA as a key metric to measure profitability and economic productivity. EBITDA is calculated as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before impairment (gain) of assets. Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by sales.
Borrowings made pursuant to the New Credit Facility will be made pursuant to either a Base Rate loan or LIBOR Rate loan, at the Company's option.
The Credit Facility includes a sublimit of $20.0 million for commercial and standby letters of credit and a sublimit of up to $15.0 million for swingline loans. Borrowings made pursuant to the Credit Facility will be made pursuant to either a Base Rate loan or LIBOR Rate loan, at the Company's option.
Management views SG&A expenses through two primary cost centers: Customer Facing Costs and Corporate Support Costs. Customer Facing Costs, which include store payroll, marketing and other store operating costs, represented 19.1% of sales for fiscal 2021, compared to 20.2% of sales for fiscal 2020 and 22.6% of sales for fiscal 2019.
Customer Facing Costs, which include store payroll, marketing and other store operating costs, represented 20.8% of sales for fiscal 2022 as compared to 19.1% of sales for fiscal 2021. Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 15.6% of sales, compared to 15.1% of sales for fiscal 2021.
As discussed more fully below under “ Liquidity and Capital Resources ” subsequent to the end of fiscal 2021, our Board of Directors approved a stock repurchase plan, pursuant to which we can purchase up to $15.0 million of our outstanding common stock through March 15, 2023. 25 SALES For fiscal 2021, total sales increased 58.3% to $505.0 million from $318.9 million for fiscal 2020 and increased 6.5% from $474.0 million in fiscal 2019.
As discussed below under "Liquidity and Capital Resources", subsequent to the end of fiscal 2022, on March 14, 2023, our Board of Directors approved a stock repurchase plan, effective March 16, 2023, pursuant to which we are authorized to repurchase up to $15.0 million of outstanding common stock through March 16, 2024.
Over the next three to five years, based on our preliminary store development plan, we believe that we could potentially open up to 50 new and relocated stores. Non-GAAP Reconciliations We monitor certain non-GAAP financial measures on a regular basis in order to track the progress of our business, including the measures below.
Non-GAAP Reconciliations We monitor certain non-GAAP financial measures on a regular basis in order to track the progress of our business, including the measures below.
The following discussion and analysis of our financial condition and results of operations should be read in light of those risks and uncertainties and in conjunction with our accompanying Consolidated Financial Statements and Notes thereto.
Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this report, particularly in “Risk Factors” and “Forward-Looking Statements.” The following discussion and analysis of our financial condition and results of operations should be read in light of those risks and uncertainties and in conjunction with our accompanying Consolidated Financial Statements and Notes thereto.
OFF-BALANCE SHEET ARRANGEMENTS We have no off-balance sheet arrangements as defined by 303(a)(4) of Regulation S-K. 29 CAPITAL EXPENDITURES The following table sets forth the open stores and related square footage at January 29, 2022 and January 30, 2021 respectively: At January 29, 2022 At January 30, 2021 Store Concept Number of Stores Square Footage Number of Stores Square Footage (square footage in thousands) DXL Retail 220 1,678 226 1,718 DXL Outlet 16 80 17 82 Casual Male XL Retail 35 115 46 152 Casual Male XL Outlet 19 57 22 66 Total Stores 290 1,930 311 2,018 We did not rebrand any of our Casual Male XL stores or open any new DXL locations during fiscal 2021.
CAPITAL EXPENDITURES The following table sets forth the open stores and related square footage at January 28, 2023 and January 29, 2022 respectively: At January 28, 2023 At January 29, 2022 Store Concept Number of Stores Square Footage Number of Stores Square Footage (square footage in thousands) DXL Retail 218 1,663 220 1,678 DXL Outlet 16 80 16 80 Casual Male XL Retail 28 92 35 115 Casual Male XL Outlet 19 57 19 57 Total Stores 281 1,892 290 1,930 28 During fiscal 2022, we rebranded one of our Casual Male XL stores to a DXL and remodeled two DXL stores.
The method of calculating comparable sales varies across the retail industry and, as a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other retailers. The Company has not carved-out prior year sales for periods where the stores were temporarily closed in fiscal 2020 due to the pandemic.
The method of calculating comparable sales varies across the retail industry and, as a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other retailers. Non-GAAP Measures We monitor certain non-GAAP financial measures on a regular basis in order to track the progress of our business.
Stock Repurchase Program Subsequent to the end of fiscal 2022, our Board of Directors approved a stock repurchase plan. Under the stock repurchase plan, we may purchase up to $15.0 million of our common stock through open market and privately negotiated transactions during fiscal 2022.
Stock Repurchase Program In March 2022, the Company’s Board of Directors approved a stock repurchase program whereby we were authorized to repurchase up to $15.0 million of our common stock through open market and privately negotiated transactions. During fiscal 2022, we repurchased 2.9 million shares at an aggregate cost, including fees, of $12.7 million from available cash on hand.
The capital expenditures for fiscal 2021 primarily related to management information projects to support our distribution center, marketing, stores and website. In response to the pandemic, capital expenditures for the past two years have been limited. For fiscal 2022, our capital expenditures are expected to be approximately $10.0-$12.0 million.
Our capital expenditures for fiscal 2022 were $9.6 million, as compared to $5.3 million in fiscal 2021. The capital expenditures for fiscal 2022 primarily related to information technology projects to support our distribution center, marketing, stores and website.
Due to the immateriality of the wholesale segment’s revenues, profits and assets, its operating results have been aggregated with the retail segment for all periods. COVID-19 Impact on our Business in Fiscal 2021 The COVID-19 pandemic and its variants continued to impact our business and results of operations in fiscal 2021.
The Company’s wholesale business was a third operating segment until in the first quarter of fiscal 2022, when the Company ended its relationship with its primary wholesale customer. Due to the immateriality of the wholesale segment’s revenues, profits and assets, its operating results were aggregated with the retail segment for all periods presented.
INCOME TAXES Realization of our deferred tax assets, which relate principally to federal net operating loss carryforwards, of which approximately $100.7 million will expire from fiscal 2028 through fiscal 2037, is dependent on generating sufficient taxable income. In addition, there are $43.1 million of federal net operating loss carryforwards that do not expire.
At January 28, 2023, we continued to provide a valuation allowance of $2.4 million, primarily against certain state and foreign net operating losses ("NOLs"). Realization of our deferred tax assets, which relate principally to federal net operating loss carryforwards, of which approximately $39.3 million will expire from fiscal 2034 through fiscal 2037, is dependent on generating sufficient taxable income.
Our Annual Report on Form 10-K for the year ended January 30, 2021 (fiscal 2020) includes a discussion and analysis of our financial condition and results of operations comparing fiscal 2020 to fiscal 2019 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” EXECUTIVE OVERVIEW Fiscal 2021 Fiscal 2020 Fiscal 2019 (in millions, except for percentage of sales and per share data) Sales $ 505.0 $ 318.9 $ 474.0 Net income (loss) $ 56.7 $ (64.5 ) $ (7.8 ) Adjusted EBITDA (Non-GAAP) $ 76.9 $ (24.2 ) $ 23.5 As a percentage of sales: Gross margin 49.5 % 32.9 % 43.1 % SG&A expenses 34.2 % 40.5 % 38.1 % Operating margin 12.3 % (19.0 %) (0.9 %) Adjusted EBITDA margin (Non-GAAP) 15.2 % (7.6 %) 5.0 % Per diluted share: Net income (loss) $ 0.83 $ (1.26 ) $ (0.16 ) Liquidity: Cash flow from operating activities $ 75.5 $ (1.2 ) $ 15.8 Free cash flow (Non-GAAP) $ 70.3 $ (5.5 ) $ 2.4 For the first time in the Company's history, we exceeded $500.0 million in sales, with growth across all retail channels during fiscal 2021.
Fiscal 2022 and fiscal 2021 were both 52-week periods. 23 EXECUTIVE OVERVIEW Fiscal 2022 Fiscal 2021 (in millions, except for percentage of sales and per share data) Sales $ 545.8 $ 505.0 Net income $ 89.1 (1) $ 56.7 Adjusted EBITDA (Non-GAAP) $ 73.8 $ 76.9 As a percentage of sales: Gross margin 49.9 % 49.5 % SG&A expenses 36.4 % 34.2 % Operating margin 10.7 % 12.3 % Adjusted EBITDA margin (Non-GAAP) 13.5 % 15.2 % Per diluted share: Net income $ 1.33 (1) $ 0.83 Liquidity: Cash flow from operating activities $ 59.9 $ 75.5 Free cash flow (Non-GAAP) $ 50.3 $ 70.3 (1) Includes an income tax benefit of $31.6 million, $0.47 per diluted share attributable to the release of the valuation allowance against the Company's deferred tax assets.
For fiscal 2020, the asset impairment charge was $14.8 million, which included $13.3 for the write-down of operating lease right-of-use assets and $4.1 million for the write-down of store assets, partially offset by a non-cash gain of $2.6 million.
The impairment gain of $0.4 million was partially offset by a $0.2 million impairment charge for the write-down of store property and equipment. The net gain of $0.2 million is included as Impairment (Gain) of Assets on the Consolidated Statement of Operations for fiscal 2022.
Below is a summary of those store closings from January 30, 2021 to January 29, 2022: Number of Stores: DXL Retail DXL Outlet Casual Male XL Retail Casual Male XL Outlet Total Stores At January 30, 2021 226 17 46 22 311 Closed retail stores (6 ) (1 ) (11 ) (3 ) (21 ) At January 29, 2022 220 16 35 19 290 Our capital expenditures for fiscal 2021 were $5.3 million, as compared to $4.2 million in fiscal 2020.
Below is a summary of the store activity from January 29, 2022 to January 28, 2023: Number of Stores: DXL Retail DXL Outlet Casual Male XL Retail Casual Male XL Outlet Total Stores At January 29, 2022 220 16 35 19 290 Conversion in place (1) 1 — (1 ) — — Closed retail stores (3 ) — (6 ) — (9 ) At January 28, 2023 218 16 28 19 281 (1) Represents a Casual Male XL store that was remodeled and rebranded to a DXL store.
The timing and the amount of any repurchases of common stock will be determined based on the Company’s evaluation of market conditions and other factors. The stock repurchase program is expected to commence in the first quarter of fiscal 2022 and will expire on March 15, 2023 but may be suspended, terminated or modified at any time for any reason.
Under the program, we are authorized to repurchase up to $15.0 million of our common stock through open market and privately negotiated transactions. The timing and the amount of any repurchases of common stock will be determined based on the Company’s evaluation of market conditions and other factors.
As compared to fiscal 2020, our gross margin rate improved by 1660 basis points, driven by an increase in merchandise margin of 860 basis points and an improvement in occupancy of 800 basis points due to the leveraging of sales.
GROSS MARGIN The gross margin rate for fiscal 2022, inclusive of occupancy costs, was 49.9% compared to 49.5% in fiscal 2021. Our gross margin rate improved by 40 basis points, driven by a 90 basis point improvement in occupancy costs due to increased leverage from sales partially offset by a 50 basis point decrease in merchandise margins.
We had no outstanding borrowings under the New Credit Facility at January 29, 2022. At January 29, 2022, outstanding standby letters of credit were $2.7 million and outstanding documentary letters of credit of $1.4 million.
At January 28, 2023, outstanding standby letters of credit were $3.8 million and outstanding documentary letters of credit of $1.8 million. The Credit Facility was not utilized during the year, resulting in average unused excess availability during fiscal 2022 of $84.2 million. Unused excess availability at January 28, 2023 was $78.4 million.
As a result of our earnings, we generated $75.5 million in cash flows from operations during fiscal 2021, resulting in $70.3 million of free cash flow, which we used to retire our long-term debt, pay off our revolver and renegotiate our credit facility on more favorable terms.
As a result of our earnings, we generated $59.9 million in cash flow from operations during fiscal 2022, resulting in $50.3 million of free cash flow. We used $12.7 million of that free cash flow to repurchase shares of common stock pursuant to our stock repurchase program during fiscal 2022.
Our depreciation expense has been decreasing over the past few years, due to our reduced capital expenditures. INTEREST EXPENSE, NET Net interest expense for fiscal 2021 was $4.4 million, as compared to $3.9 million for fiscal 2020 and $3.3 million for fiscal 2019.
DEPRECIATION AND AMORTIZATION Depreciation and amortization expense for fiscal 2022 was $15.4 million, as compared to $17.2 million in fiscal 2021. Our depreciation expense decreased over the past few years, as many of our assets have become fully depreciated and we have had modest capital spending over the past several years.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES SG&A expenses as a percentage of sales were 34.2% for fiscal 2021, as compared to 40.5% in fiscal 2020 and 38.1% in fiscal 2019.
We continue to optimize our pricing and promotional cadence to mitigate cost increases for raw materials and shipping and preserve our margin rates. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES SG&A expenses as a percentage of sales were 36.4% for fiscal 2022, as compared to 34.2% in fiscal 2021. On a dollar basis, SG&A expense for fiscal 2022 increased $25.8 million.
Item 7. M anagement’s Discussion and Analysis of Financial Condition and Results of Operations FORWARD LOOKING STATEMENTS As noted above in Part 1, this Annual Report, including, without limitation, this Item 7, contains “forward-looking statements,” including forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Our Annual Report on Form 10-K for the year ended January 29, 2022 (fiscal 2021) includes a discussion and analysis of our financial condition and results of operations comparing fiscal 2021 to fiscal 2020 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As noted above in Part 1, this section also contains forward-looking statements that reflect the Company’s plans, estimates and beliefs.
As compared to fiscal 2019, our comparable sales increased 14.2% driven by a comparable sales increase in the direct business of 44.0% and an increase in stores of 4.8%. This growth was the result of new customer acquisition, which was up 27% over fiscal 2019, as well as increases in conversion rate and dollars per transaction.
Comparable sales increased 10.9%, with stores up 11.3% and the direct business up 9.9%. All regions of the country performed well in fiscal 2022 with southeast, south central and northeast stores our strongest performers. The increase in sales was driven primarily by increases in dollars per transaction and conversion.
Removed
Actual results or developments could differ materially from those projected in such statements because of numerous factors, including, without limitation those risks and uncertainties set forth in Item 1A, Risk Factors, which you are encouraged to read.
Added
Item 7. M anagement’s Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion and analysis of our financial condition and results of operations for fiscal 2022 as compared to fiscal 2021.
Removed
These forward-looking statements generally relate to plans and objectives for future operations and are based upon management’s reasonable estimates of future results or trends.
Added
The Company's actual results could materially differ from those discussed in these forward-looking statements.
Removed
Such statements include the potential impact on results in fiscal 2022 as it relates to the ongoing global supply chain disruptions, the geopolitical instability from Russia's invasion of Ukraine, the increase in freight costs, the increase in certain raw materials and labor shortages as well as overall changes in consumer spending and demand due to the continued risk of new variants and inflation.
Added
We are pleased with the financial results we achieved in fiscal 2022, with our second record-breaking year of sales, eight consecutive quarters of positive comparable sales growth and second year of double-digit adjusted EBITDA margins.
Removed
All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. These forward-looking statements speak only as of the date of the document in which they are made.
Added
Our sales growth in fiscal 2022 exceeded plan, with total comparable sales growth of 10.9% compared to fiscal 2021, on top of a comparable sales increase of 14.1% in fiscal 2021, as compared against fiscal 2019, pre-pandemic. We believe that our brand repositioning resonated with our customer and enabled us to grow sales while maintaining a strong margin.
Removed
We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances in which the forward-looking statement is based. Certain figures discussed below may not foot due to rounding.
Added
From a cost perspective, SG&A costs increased in fiscal 2022 to support this sales growth, primarily payroll-related costs and marketing costs. Our marketing spend in fiscal 2022 increased to 6.0% of sales as compared to 4.7% in fiscal 2021 to help drive customer acquisition.
Removed
While we saw significant improvement in our business from fiscal 2020, s ubstantial uncertainty remains regarding the impact of the pandemic, including the potential impact of new variants, continued disruptions in the supply chain, labor shortages and the long-term effect on the global economy, and overall consumer demand and spending.
Added
These increases in SG&A expenses resulted in a slight decrease in adjusted EBITDA for fiscal 2022 as compared to fiscal 2021 as we made deliberate investments in our business to drive our digital transformation and brand repositioning to support sales growth.
Removed
However, because the Company’s store in Canada was closed by government edict for a significant portion of fiscal 2021, we have removed it from the current calculation of comparable sales. Non-GAAP Measures We monitor certain non-GAAP financial measures on a regular basis in order to track the progress of our business.
Added
Net income for fiscal 2022 included the release of substantially all of the valuation allowance on deferred tax assets expected to be realized in future periods, which resulted in a non-recurring tax benefit of $31.6 million, or $0.47 per diluted share.
Removed
We also provide certain forward-looking information with respect to certain of these non-GAAP financial measures.
Added
At January 28, 2023, we were debt-free and had cash and cash equivalents of $52.1 million and full availability under our credit facility of $78.4 million. We also were in a healthy inventory position at year-end, with clearance levels well below historical levels.
Removed
The following review of our results for fiscal 2021 includes certain comparisons against fiscal 2019 in addition to fiscal 2020. Due to the COVID-19 pandemic and its impact on our results, particularly during fiscal 2020, we believe that the additional discussion against fiscal 2019 provides a more meaningful comparison of our business results in fiscal 2021.
Added
We expect that our strong liquidity position at the end of fiscal 2022 will help support our growth initiatives, including store development projects of which we are expecting to open 3 new DXL stores in fiscal 2023, while also remodeling 5 existing DXL stores and converting 10 of our existing Casual Male XL stores to DXL stores.
Removed
We achieved this top-line growth while maintaining a low promotional posture, resulting in a 300 basis point improvement in merchandise margins as compared to fiscal 2019.
Added
Heading into fiscal 2023, we remain focused on our primary objective of serving the underserved Big + Tall consumer by providing to him the opportunity to wear what he wants. In early March, we launched our new brand initiative Wear What You Want ℠, further supporting this positioning.
Removed
As a result of this margin improvement, coupled with our restructured lease portfolio and lower operating cost base, we reported net income for fiscal 2021 of $56.7 million, or $0.83 per diluted share, and adjusted EBITDA of $76.9 million. We ended fiscal 2021 in a substantially stronger liquidity position than a year ago.
Added
By increasing brand awareness and introducing our customer to the breadth of exclusivity in our assortment, we will give him the freedom to choose his own style and we believe this will result in market share gains for us.
Removed
At January 29, 2022, we are debt-free and have cash on hand of $15.5 million and excess availability under our credit facility of $68.9 million.
Added
We also recognize that there are many macro-economic pressures, including inflation, raising interest costs, raising fuel costs, material costs, 24 and labor shortages that could impact us and our growth strategy as we head into fiscal 2023 and could impact consumer spending but we are optimistic that we can continue to build upon the growth of the past two years.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign Currency Our DXL store located in Toronto, Canada, which closed subsequent to the end of fiscal 2021 on February 28, 2022, conducted business in Canadian dollars. As of January 29, 2022, sales from this store were immaterial to consolidated sales.
Biggest changeForeign Currency Our DXL store located in Toronto, Canada, which closed on February 28, 2022, conducted business in Canadian dollars. For the year ended January 28, 2023, sales from this store were immaterial to consolidated sales.
We regularly assess these risks and have established policies and business practices to protect against the adverse effects of these and other potential exposures. 32 Interest Rates We utilize cash from operations and from our Credit Facility to fund our working capital needs. Our Credit Facility is not used for trading or speculative purposes.
We regularly assess these risks and have established policies and business practices to protect against the adverse effects of these and other potential exposures. Interest Rates We utilize cash from operations and from our Credit Facility to fund our working capital needs. Our Credit Facility is not used for trading or speculative purposes.
In addition, under our Credit Facility we have available letters of credit as sources of financing for our working capital requirements. Borrowings under the Credit Facility, which expires October 28, 2026, bear interest at variable rates based on the prime rate or LIBOR. At January 29, 2022, we had no outstanding borrowings under the Credit Facility and no long-term debt.
In addition, under our Credit Facility we have available letters of credit as sources of financing for our working capital requirements. Borrowings under the Credit Facility, which expires October 28, 2026, bear interest at variable rates based on the prime rate or LIBOR. At January 28, 2023, we had no outstanding borrowings under the Credit Facility and no long-term debt.
As such, we believe that movement in foreign currency exchange rates did not have a material adverse effect on our financial position or results of operations. 33
As such, we believe that movement in foreign currency exchange rates did not have a material adverse effect on our financial position or results of operations. 31
Removed
Based upon a sensitivity analysis as of January 29, 2022, assuming average outstanding borrowings during fiscal 2021 of $16.4 million under our Credit Facility and an average outstanding balance for the FILO loan of approximately $10.8 million, a 50 basis point increase in interest rates would have increased interest expense by approximately $0.1 million on an annualized basis.
Added
At January 28, 2023, approximately $29.1 million of our cash equivalents were invested in U.S. treasury bills and $18.6 million in money market accounts. Based upon a sensitivity analysis as of January 28, 2023, assuming a hypothetical 10% change in interest rates, there would have been no material impact on our consolidated financial statements.

Other DXLG 10-K year-over-year comparisons