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What changed in DESTINATION XL GROUP, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of DESTINATION XL GROUP, INC.'s 2023 and 2024 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 2024 report.

+284 added−258 removedSource: 10-K (2024-03-21) vs 10-K (2023-03-16)

Top changes in DESTINATION XL GROUP, INC.'s 2024 10-K

284 paragraphs added · 258 removed · 185 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

70 edited+35 added−25 removed50 unchanged
Biggest changeIt 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.
Biggest changeThe DXL Women’s Leadership Group was formed in fiscal 2016 with a mission of “Women supporting, educating and empowering each other @ DXLG”. 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.
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.
Through our multiple brands, which include both national brands and our 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.
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.
We continue to reduce dependency on China, with less than 10% of our 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.
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.
We also joined with Marist College to provide our DXL associates and their immediate adult family members with 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.
None of our employees is represented by any collective bargaining agreement. Our associates are our greatest asset and we are committed to providing them a safe and healthy work environment. 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.
None of our employees is represented by any collective bargaining agreement. Our associates are our greatest asset and we are committed to providing them with a safe and healthy work environment. 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.
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.
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 10 provide enterprise-wide analytics reporting.
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.
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.
The average DXL outlet is approximately 5,000 square feet and the average Casual Male XL outlet store is approximately 3,000 square feet. DIRECT CHANNEL Our direct business is a critical channel for growing sales and market share through new customer acquisition and digital engagement of the active file.
The average DXL outlet is approximately 5,100 square feet and the average Casual Male XL outlet store is approximately 3,000 square feet. DIRECT CHANNEL Our direct business is a critical channel for growing sales and market share through new customer acquisition and digital engagement of the active file.
Polo Ralph Lauren builds one collection a quarter for our customers that is exclusive to DXL. 5 Shoes Our DXL website offers an assortment of footwear, with a broad selection from casual to formal, in varying price points.
Polo Ralph Lauren builds one collection a quarter for our customers that is exclusive to DXL. Shoes Our DXL website offers an assortment of footwear, with a broad selection from casual to formal, in varying price points.
Our exclusive brands in this price range include O’Neill ® and Nautica ® , Adidas Golf ® and vineyard vines ® . Within our product assortment for Callaway ® , Lacoste ® , Majestic and Tommy Bahama ® we also offer exclusive styles specially curated for our customers.
Our exclusive brands in this price range include O’Neill ® and Nautica ® , Adidas Golf ® and vineyard vines ® . Within our product assortment for Callaway ® , Majestic and Tommy Bahama ® we also offer exclusive styles specially curated for our customers.
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.
Our policies also contain protection of human rights and prohibit, among other things, the use of child labor or forced, bonded or indentured labor. 11 Inclusion and Diversity We are committed to inclusivity, acceptance, and equality.
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. 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.
Oak Hill ® is a premium 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.
Our objective is to appeal to all of our customers by providing a good, better, best array of product assortments in all primary lifestyles with multiple and convenient ways to shop. What is unique about our business is our proprietary fit, our ability to manage an array of sizes, and optimizing our in-stock position throughout each season.
Our objective is to appeal to all of our customers by providing a good, better, best array of product assortments in all primary lifestyles with multiple and convenient ways to shop. What is unique about our business is our proprietary fit, our ability to manage an array of sizes and optimize our in-stock position throughout each season.
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.
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 7,400 square feet.
Big + Tall is all we do. With our proprietary fit and extensive selection of exclusive brands, we believe that we will continue to grow market share as an integrated commerce retailer able to target a broad market, attracting customers from various income, age and lifestyle segments, offering the underserved consumer the widest selection of sizes and styles.
Big + Tall is all we do. With our proprietary fit and extensive selection of exclusive brands, we believe that we can grow market share as an integrated commerce retailer able to target a broad market, attracting customers from various income, age and lifestyle segments, offering the underserved consumer the widest selection of sizes and styles.
We have been working to transform our brand positioning by focusing on a key customer insight and leveraging our distinct advantages of superior fit, depth of assortment, great styles and largely exclusive brands and an experience like no other. Our focus is to acquire new customers and achieve a greater lifetime value across our entire customer file.
We have been working to transform our brand 9 positioning by focusing on key customer insights and leveraging our distinct advantages of superior fit, depth of assortment, great styles and largely exclusive brands and an experience like no other. Our focus is to acquire new customers and achieve a greater lifetime value across our entire customer file.
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 promotions (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.
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.
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 and is highly fragmented.
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.
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 have included email, direct mail, our loyalty program, direct marketing, digital marketing, social media, and streaming media, among others.
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
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
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 ® .
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 customers an extensive selection of quality sportswear and dress clothing at moderate prices carrying well-known brands such as: Levi's ® , Columbia, Carhartt ® , and Jockey ® .
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.
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 three years, with sales from our website and app together increasing 47.4% from fiscal 2019.
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.
Regional Vice Presidents give us touchpoints 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.
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.
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 - to engage and build a relationship with each of our customers. Our overall goal is to accomplish three key initiatives in our stores.
The committee reports to the senior management team of the Company and the Nominating and Corporate Governance Committee of our Board of Directors is responsible for the oversight of our initiatives. Our senior management team is working with the committee to develop short- and long-term ESG goals, as well as an action plan.
The committee reports to the senior management team of the Company and to the Nominating and Corporate Governance Committee of our Board of Directors, which is responsible for the oversight of our initiatives. We are working to develop short- and long-term ESG goals, as well as an action plan.
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.
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 42% of our merchandise assortment in fiscal 2023.
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 ® , Boss ® , Faherty ® , Original Penguin Golf ® , Michael Kors ® , and Tallia ®.
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.
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, including recognizing and addressing specific climate-related risks.
Our exclusive brands in this price range include Brooks Brothers ® , JOE’S ® Jeans, 7 for all Mankind ®, and Robert Barakett ® . Within our product assortment for Psycho Bunny ® , Lucky and Robert Graham ® we also offer exclusive styles specially curated for our customers.
Our exclusive brands in this price range include Brooks Brothers ® , JOE’S ® Jeans, 7 for all Mankind ®, Boss ® , Faherty ® , Original Penguin Golf ® and Robert Barakett ® . Within our product assortment for Psycho Bunny ® , Lucky and Robert Graham ® we also offer exclusive styles specially curated for our customers.
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.
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. In fiscal 2023, we retained LRQA to also perform environment assessment audits.
At season end, we analyze the overall performance of product categories, overall assortments and specific styles by store to focus on the opportunities and challenges for the next season’s planning cycle. Utilizing a set of specific universal reporting tools, the merchandise planning and allocation team is able to fulfill their daily, weekly and monthly roles and responsibilities.
At season end, we analyze the overall performance of product categories, overall assortments and specific styles by store to focus on the opportunities and challenges for the next season’s planning cycle. The merchandise planning and allocation team utilizes a set of specific universal reporting tools in fulfilling their daily, weekly and monthly roles and responsibilities.
In March 2023, we launched our new brand initiative “ Wear What You Want ” ℠ inviting our customer to not only experience the depth of our assortment but also the breadth of exclusivity across our brands, offering brands and styles not available elsewhere. We are providing him the freedom to choose his own style and wear what he wants.
Last year, we launched our brand initiative “ Wear What You Want ” ℠ inviting our customer to not only experience the depth of our assortment but also the breadth of exclusivity across our brands, offering brands and styles not available elsewhere. We are providing him with the freedom to choose his own style and wear what he wants.
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.
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 February 3, 2024, January 28, 2023 and January 29, 2022 as “fiscal 2023,” “fiscal 2022” and “fiscal 2021,” respectively.
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.
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 February 3, 2024, we operated 232 DXL retail stores.
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.
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). 4 OUR BUSINESS We operate as an integrated commerce retailer of big & tall men’s clothing and shoes.
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.
Casual Male XL Retail Stores As of February 3, 2024, we operated 17 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 pants, t-shirts, polo shirts, dress shirts and suit separates.
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 will continually work to make improvements and upgrades to our software. For store shipments and domestic customer deliveries, we use large national carriers. We are able to track all deliveries from the warehouse to our individual stores, including the status of in-transit shipments.
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 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 many markets, rebranding a Casual Male XL store to a DXL store provides a viable alternative to the more costly endeavor of relocating a Casual Male XL store to new DXL real estate. In addition, the converted stores benefit from DXL advertising.
In many markets, rebranding a Casual Male XL store to a DXL store provides a viable alternative to the more costly endeavor of relocating a Casual Male XL store to new DXL real estate. In addition, the converted stores benefit from DXL advertising. We are actively reviewing opportunities to relocate or convert Casual Male XL stores to DXL stores.
The United States big & tall men’s clothing market is highly competitive with many national and regional department stores, specialty apparel retailers, single market operators and discount stores offering a broad range of apparel products similar to ours, the similarity being that the clothes they sell are intended for big and tall men.
The United States big & tall men’s clothing market is highly competitive with many national and regional department stores, specialty apparel retailers, single market operators and discount stores offering a broad range of apparel products intended for big and tall men.
Our merchandising data warehouse provides the merchandising team with standardized reporting for monitoring assortment performance by product category and by store, identifying in-stock positions by size and generally monitoring overall inventory levels relative to selling.
We develop customized assortment strategies by store that accentuate lifestyle preferences for each particular store. 8 Our merchandising data warehouse provides the merchandising team with standardized reporting for monitoring assortment performance by product category and by store, identifying in-stock positions by size and generally monitoring overall inventory levels relative to selling.
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.
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 Walmart.com. Digital marketplaces provide us an opportunity to drive awareness, grow our customer base and introduce new customers to our brand.
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.
At February 3, 2024, we operated 232 DXL retail stores, 15 DXL outlet stores, 17 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.
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.
The average Casual Male XL retail store is approximately 3,200 square feet. 7 DXL Outlet /Casual Male XL Outlet Stores As of February 3, 2024, we operated 15 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.
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.
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.
Our planning and allocation team estimates quantity and demand several months in advance to optimize gross margin and minimize end-of-season merchandise for all seasonal merchandise. We develop customized assortment strategies by store that accentuate lifestyle preferences for each particular store.
Our planning and allocation team estimates quantity and demand several months in advance to optimize gross margin and minimize end-of-season merchandise for all seasonal merchandise.
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.
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.
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.
Over the past few years, our marketing strategy has been a more targeted, personalized, data-driven model, enabling us to engage differently with each of our customers based on their shopping behaviors across all our buying channels.
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 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.
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.
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.
The challenges created by the global pandemic brought mental health awareness to the forefront. We are continually looking for programs and opportunities to offer our associates to ensure physical and mental wellness.
The challenges created by the global pandemic brought mental health awareness to the forefront. We are continually looking for programs and opportunities to offer our associates to ensure physical and mental wellness. We also highlight mental health awareness as part of our “Lunch, Learn, Lead” series and provide other relevant content within our learning management system.
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.
Our intent is to increase our social, environmental and ethical sustainability by utilizing LRQA’s audit tool, "ERSA", which stands for ELEVATE Responsible Sourcing Assessment. ERSA 3.0 covers social compliance, human rights, environmental business ethics, and worker’s sentiment surveys.
In addition to offering our customers a wide assortment, we also wanted to provide them with a unique shopping experience. We are focused on providing outstanding customer service through our DXL stores, with larger fitting rooms and professional, trained associates providing personal attention.
We are focused on providing outstanding customer service through our DXL stores, with larger fitting rooms and professional, trained associates providing personal attention.
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.
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.
Traditionally, a significant portion of our operating income, net income, and free cash flow is generated in the second and fourth quarters.
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 second and fourth quarters.
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.
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.
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.
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. Our DXL stores are located on real estate that is highly visible, often adjacent to high-performing regional malls or other high-traffic shopping areas.
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).
As a result of the acquisition, on August 8, 2002, we changed our name to “Casual Male Retail Group, Inc.” In fiscal 2010, we launched a new store concept, Destination XL (“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.
Since fiscal 2019, comparable sales from our direct business in fiscal 2023 have grown 50.9%, with our total direct business representing 31.3% of our total retail sales in fiscal 2023, as compared to 23.1% of our retail sales in fiscal 2019.
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.
Our field organization is overseen by our Chief Stores and Real Estate Officer, VP Store Operations, Regional Vice Presidents, Regional Sales Managers, and a Store Operations Team, who provide management development and guidance to individual store managers.
Perhaps most importantly, we promote professional and career development and mentorship programs. In 2014, our Associate Engagement & Development Committee implemented the DXLG Mentor Program, which pairs up to 20 mentees with mentors for one-year periods. In April 2016, the DXL Women’s Leadership Group was formed with a mission of “Women supporting, educating and empowering each other @ DXLG”.
Perhaps most importantly, we promote professional and career development and mentorship programs. Since 2014, we have offered our associates the opportunity to participate in our DXLG Mentor Program, which pairs up to 20 mentees with mentors for one-year periods.
COMPETITION Our business faces competition from a variety of sources, including department stores, mass merchandisers, other specialty stores and discount and off-price retailers that sell big & tall men’s clothing.
Over the past few years, we have continued to develop a custom Assortment Suite application to leverage business intelligence and predictive analytics to provide high-impact insights into core merchandising tasks. COMPETITION Our business faces competition from a variety of sources, including department stores, mass merchandisers, other specialty stores and discount and off-price retailers that sell big & tall men’s clothing.
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.
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 Over the past five years, we have transformed our business, investing in our customer relationship capabilities, our data infrastructure and our data analytics capabilities.
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.
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 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 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.
Our sourcing network consists of over 30 factories in eight countries which are experts in big & tall sizing and production. In fiscal 2023, approximately 52% of all our product needs were sourced directly. We manufacture a significant percentage of our own brand merchandise in Southeast Asian countries including Vietnam, Bangladesh, Cambodia and India.
The information included in, referenced to, or otherwise accessible through our website, is not incorporated by reference in, or considered to be part of, this document or any document unless expressly incorporated by reference therein. HUMAN CAPITAL MANAGEMENT As of January 28, 2023, we had 1,480 employees. We hire additional temporary employees during the peak Holiday season.
The information included in, referenced to, or otherwise accessible through, our website is not incorporated by reference in, or considered to be part of, this document or any document unless expressly incorporated by reference therein. AVAILABLE INFORMATION Our corporate website is www.dxl.com. Our investor relations site is http://investor.dxl.com.
Regardless of our customers’ age, socioeconomic status, or lifestyle preference, we are able to assemble a wardrobe to fit their apparel needs.
MERCHANDISE We offer our customers an extensive assortment of apparel consisting of both our own brands and over 100 well-known national brands, within our “good,” “better” and “best” price points. Regardless of our customers’ age, socioeconomic status, or lifestyle preference, we are able to assemble a wardrobe to fit their apparel needs.
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.
These stores also carry a full complement of our own brand collections.
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.
We will continue to explore other strategic collaborations with other brands that are widely recognized and that could complement our curated assortment. 6 Value-Priced Apparel -“Good” Merchandise For our value-oriented customers, we carry Champion, Lee, Wrangler and Reebok.
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.
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. See "Sustainability" below for a discussion of our environmental, ethical and social audits. DISTRIBUTION All of our retail distribution operations are centralized at our headquarters located in Canton, Massachusetts.
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We are excited about the growth that we have seen over the past few years from our brand repositioning and digital transformation efforts and we are eager to maintain this momentum moving forward into fiscal 2023. In fiscal 2023, keys areas that we will be focused on as we continue to grow our business are: • Brand positioning .
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We have achieved a heightened level of operational excellence, recapitalized our balance sheet to provide a greater level of financial flexibility, made investments in our technical capabilities, and upgraded our leadership team. Since fiscal 2019, we have grown net sales by 10% and more than doubled our adjusted EBITDA margin rate.
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Our marketing strategy in fiscal 2023 will focus on brand awareness and storytelling, what sets us apart from our competitors, or as we call it the " DXL Factor.
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In addition, we believe strongly that there is a great opportunity for us to grow our market share. We believe that our addressable market is approximately $23 billion, yet based on our research our unaided brand awareness is 9% and our aided brand awareness is 28%.
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" As part of this initiative in March 2023, we launched our " Wear What You Want " ℠ campaign, inviting our customers to experience the breadth of exclusivity in our assortment that will enable him to have the freedom to choose his own style. Our message is not only do we have your size, we have your style.
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If we are to grow our revenue base and market share, our addressable market needs to know who we are, what we offer, how we are different from our competition and why they should shop with us.
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No other retailer carries the breadth and depth of assortment and sizes. We believe there are opportunities for market share and revenue growth by engaging new customers through this initiative. • Store growth . Our stores are critical to our business strategy.
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We believe that we can change the growth trajectory of the Company through investments in brand marketing, new store development, a new and efficient eCommerce platform, and alliances/collaborations with other brands. We have spent the past year developing a deeper understanding of the big + tall consumer and we are now ready to execute on our long-range plan.
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While we are excited with the digital growth we have been able to achieve since fiscal 2019, our stores continue to be the backbone of our Company. Our digital growth has highlighted for us areas of "white space" opportunity in markets that are not currently being served by a DXL store.
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We expect to fund these strategic initiatives with cash on hand. Accordingly, in fiscal 2024, our primary focus will be on the following four initiatives: • Marketing and Brand-Building: We believe one of our greatest opportunities is to address our overall brand awareness levels.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeDisruptions 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.
Biggest changeOur business may be adversely affected due to disruptions in the global supply chain. Disruptions in the global supply chain in foreign ports, the impact of climate change and shortages of vessels and shipping containers may impact our ability to import inventory in a timely manner.
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.
If, for any reason, we miscalculate the demand for our products during 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 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.
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. In addition, our operations may be negatively affected by local, regional or national political and economic conditions, such as levels of disposable consumer income, inflation, consumer debt, interest rates, consumer confidence and other macro issues.
Many of our competitors and potential competitors may have substantially greater financial, manufacturing and marketing resources than we do. The presence in the marketplace of various fashion trends and the limited availability of shelf space also can affect competition. We may not be able to compete successfully with our competitors in the future and could lose market share.
Many of our competitors and potential competitors may have substantially greater financial, manufacturing and marketing resources than we do. 15 The presence in the marketplace of various fashion trends and the limited availability of shelf space also can affect competition. We may not be able to compete successfully with our competitors in the future and could lose market share.
In addition, the failure to satisfy consumer demand, specifically in our DXL stores and from our website, could have serious longer-term consequences, such as an adverse impact on our brand value and the loss of market share to our competitors. The loss of any of our key trademarks or licenses could adversely affect demand for our products.
In addition, the failure to satisfy consumer demand, specifically in our DXL stores and from our website, could have serious longer-term consequences, such as an adverse impact on our brand value and the loss of market share to our competitors. 16 The loss of any of our key trademarks or licenses could adversely affect demand for our products.
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.
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. If we are unable to develop and implement our integrated commerce initiatives successfully, our market share and financial results could be adversely affected.
The operation of our business, the rate of our expansion and our ability to respond to changing business and economic conditions, depend on the availability of adequate capital, which in turn depends on cash flow generated by our business and, if necessary, the availability of equity or debt capital.
The operation of our business, the rate of our expansion and our ability to respond to changing business and economic conditions, all depend on the availability of adequate capital, which in turn depends on cash flow generated by our business and, if necessary, the availability of equity or debt capital.
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.
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, our 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.
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.
We attempt to limit exposures to security breaches and sensitive customer data through the use of “tokenization” 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.
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
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
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.
Through fiscal 2023, 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.
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.
Fluctuations in the price, availability and quality of raw materials and finished goods could increase costs. Due to the aftermath of the COVID-19 pandemic, as well as 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.
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.
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, severe weather, the impact of climate change 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, 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.
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 supply chain and may limit the availability of certain raw materials and result in an increase of associated cost.
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.
For example, from September 8, 2021, when we relisted on the Nasdaq Global market, through February 2, 2024, 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.
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.
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 store portfolio; • develop an effective modern marketing program to build brand awareness as well as increase store and online traffic, attract customers across all channels, and grow sales; • build successful collaborations and alliances, similar to our alliance with UNTUCKit; • grow our DXL digital business; • launch an upgraded, state-of-the-art website; • 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; • grow and then sustain the number of transactions, units-per-transaction and share of wallet; and • operate at appropriate operating margins.
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.
As part of that evaluation, we may choose not to renew certain lease locations. One of our long-term strategic initiatives is to grow our store portfolio over the next several years and we have identified multiple white space opportunities in new or underpenetrated markets.
The loss of, or disruption in, our centralized distribution center could negatively impact our business and operations. The majority of our merchandise for our stores and e-commerce operations is received into our centralized distribution center in Canton, Massachusetts, where it is then processed, sorted and shipped to our stores or directly to our customers.
The majority of our merchandise for our stores and e-commerce operations is received into our centralized distribution center in Canton, Massachusetts, where it is then processed, sorted and shipped to our stores or directly to our customers.
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.
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.
Fluctuations in the price, availability and quality of fabrics or other raw materials used in the manufacturing of our merchandise could have a material adverse effect on our gross margin or on our ability to meet our customers’ demands. The prices for fabrics depend on demand and market prices for the raw materials used to produce them.
Fluctuations in the price, availability and quality of fabrics or other raw materials used in the manufacturing of our merchandise could have a material adverse effect on our gross margin or on our ability to meet our customers’ demands.
Other unknown or unpredictable factors also could have material adverse effects on our future results, performance or achievements. We cannot assure you that our projected results or events will be achieved or will occur. Risks Related to Our Company and Our Industry We may not be successful in executing our strategy and growing our market share.
Other unknown or unpredictable factors also could have material adverse effects on our future results, performance or achievements. We cannot assure you that our projected results or events will be achieved or will occur. Strategic Risks That May Affect Our Business We may not be successful in executing our long-term strategy and growing our market share.
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.
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.
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.
The growth of our overall sales is dependent on customers’ continuing to expand their 13 online purchases in addition to in-store purchases. While it is our objective to continue to grow this business, there can be no assurance that this growth will continue or be sustainable.
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.
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 predict fashion trends and customer preferences successfully.
Our success depends significantly on our key personnel and our ability to attract and retain additional personnel. Our future success is dependent on the personal efforts, performance and abilities of our key management, which includes our executive officers as well as members of our senior management.
Our future success is dependent on the personal efforts, performance and abilities of our key management, which includes our executive officers as well as members of our senior management.
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.
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.
We are dependent on these third parties’ ability to fulfill our merchandise orders and meet our delivery terms. In the event that manufacturers are unable or unwilling to ship products to us in a timely manner or continue to manufacture products for us, we would have to rely on other current manufacturing sources or identify and qualify new manufacturers.
In the event that manufacturers are unable or unwilling to ship products to us in a timely manner or continue to manufacture products for us, we would have to rely on other current manufacturing sources or identify and qualify new manufacturers.
We may be harmed by security risks we face in connection with our electronic processing and transmission of confidential customer information. The majority of our retail sales are settled through credit and debit card transactions.
Our business may be negatively impacted and we may be liable if third parties misappropriate proprietary information of our customers and breach our security systems. We may be harmed by security risks we face in connection with our electronic processing and transmission of confidential customer information. The majority of our retail sales are settled through credit and debit card transactions.
Although we maintain business interruption and property insurance, we cannot be sure that our insurance will be sufficient, or that insurance proceeds will be timely paid to us, in the event our distribution center is shut down for any reason or if we incur higher costs and longer lead times in connection with a disruption relating to our distribution center.
This type of disaster would be mitigated by our offsite storage and disaster recovery plans, but we would still incur business interruption that may impact our business for a significant period of time. 14 Although we maintain business interruption and property insurance, we cannot be sure that our insurance will be sufficient, or that insurance proceeds will be timely paid to us, in the event our distribution center is shut down for any reason or if we incur higher costs and longer lead times in connection with a disruption relating to our distribution center.
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.
Our business may be adversely affected if we are unable to manage and grow 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.
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.
Factors that could cause fluctuations in the market price of our common stock include the following: • 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 Company or retail clothing industry generally.
We work with a third-party audit vendor to ensure a responsible and ethical supply chain. We are and will continue to pursue our corporate responsibilities and create a positive effect on human rights as well as the environment.
We work with a third-party audit vendor to ensure a responsible and ethical supply chain. We are and will continue to pursue our corporate responsibilities and create a positive effect on human rights as well as the environment. The Company publishes a Vendor Code of Conduct, which is a part of every agreement requiring compliance by the manufacturing facilities.
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.
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 which could materially affect our financial results, access to sources of liquidity and inventory. Our success depends significantly on our key personnel and our ability to attract and retain additional personnel.
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.
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. 18 Failure to comply with laws, rules and regulations could negatively affect our business operations and financial performance .
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).
Our customer’s shopping behavior continues to evolve across multiple channels and we are working to meet his needs, with real time store inventory visibility, our mobile app, and BOPIS (buy online pick-up in stores). 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.
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.
We could also incur additional costs and require additional resources to monitor, General Risks That May Affect Our Business Our business is seasonal and is affected by general political and economic conditions. Our business is seasonal. Historically, a significant portion of our operating income has been generated during our second and fourth quarters.
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.
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. Achievement of our initiatives is subject to risks and uncertainties and we may fail to achieve our objectives.
We do not own or operate any manufacturing facilities and are therefore entirely dependent on third parties to manufacture the merchandise we sell. Without adequate supplies of merchandise to sell to our customers in the merchandise styles and fashions demanded by our particular customer base, sales would decrease materially and our business would suffer.
Without adequate supplies of merchandise to sell to our customers in the merchandise styles and fashions demanded by our particular customer base, sales would decrease materially and our business would suffer. We are dependent on these third parties’ ability to fulfill our merchandise orders and meet our delivery terms.
If, despite third-party audits, the manufacturing facilities engage in workplace or human rights violations and we are unable to identify or correct it, it may negatively affect our business and harm our brand. Our business may be negatively impacted and we may be liable if third parties misappropriate proprietary information of our customers and breach our security systems.
If, despite third-party audits, the manufacturing facilities engage in workplace or human rights violations and we are unable to identify or correct it, it may negatively affect our business and harm our brand. Our business is highly competitive, and competitive factors may reduce our revenues and profit margins.
In addition, the complexity of the regulatory environment in which we operate and the related cost of compliance are both increasing due to legal and regulatory requirements and increased enforcement.
The effect of some of these laws and regulations may be to increase the cost of doing business and may have a material impact on our earnings. In addition, the complexity of the regulatory environment in which we operate and the related cost of compliance are both increasing due to legal and regulatory requirements and increased enforcement.
Further, if a third party were to use this proprietary customer information in order to compete with us, it could have a material adverse impact on our business and could result in litigation. Our business is highly competitive, and competitive factors may reduce our revenues and profit margins.
Further, if a third party were to use this proprietary customer information in order to compete with us, it could have a material adverse impact on our business and could result in litigation. Our ability to operate and expand our business and to respond to changing business and economic conditions will depend on the availability of adequate capital.
The Company publishes a Code of Conduct, which is a part of every agreement requiring compliance by the manufacturing facilities. The United States Treasury Department has placed sanctions on China’s Xinjiang Production and Construction Corporation ("XPCC") for serious human rights abuses against ethnic minorities in China’s Xinjiang Uyghur Autonomous Region ("XUAR").
The United States Treasury Department has placed sanctions on China’s Xinjiang Production and Construction Corporation ("XPCC") for serious human rights abuses against ethnic minorities in China’s Xinjiang Uyghur Autonomous Region ("XUAR"). 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 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.
In response to the problems in Xinjiang, we developed a Compliance Certificate of Traceability for our cotton vendors.
Foreign Corrupt Practices Act, the Employee Retirement Income Security Act (“ERISA”), securities laws, import and export laws (including customs regulations), privacy and information security regulations, unclaimed property laws, and many others. The effect of some of these laws and regulations may be to increase the cost of doing business and may have a material impact on our earnings.
Our business is subject to federal, state, and increasing local rules and regulations, such as state and local wage and hour laws, the U.S. Foreign Corrupt Practices Act, the Employee Retirement Income Security Act (“ERISA”), securities laws, import and export laws (including customs regulations), privacy and information security regulations, unclaimed property laws, and many others.
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.
We may also incur additional costs and require additional resources to implement such policies and initiatives. Our business is subject to evolving regulations and expectations with respect to ESG matters that may expose us to increased risks.
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.
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.
To the extent that we cannot offset these cost increases with other cost reductions or efficiencies, such higher costs will need to be passed on to our customers. Such increased costs could lead to reduced customer demand, which could have a material adverse effect on our results of operations and cash flow.
Such increased costs could lead to reduced customer demand, which could have a material adverse effect on our results of operations and cash flow. If our long-lived assets become impaired, we may need to record significant non-cash impairment charges.
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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.
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We have developed and are implementing long-term strategic initiatives to grow our business.
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Our ability to operate and expand our business and to respond to changing business and economic conditions will depend on the availability of adequate capital.
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As part of our long-term strategy, we are planning to increase the amount that we expect to spend annually on our marketing efforts over the next few fiscal years, with marketing costs for fiscal 2024 expected to increase to 7.0%-7.5% of sales.
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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.
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There can be no assurance that our long-term strategy and the increased investment in marketing will grow our business or build brand awareness. If our marketing campaigns are unable to drive traffic to our stores and website, the marketing costs incurred will have a negative impact on the Company's profitability.
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Failure to establish effective policies, procedures and metrics may negatively affect our reputation, and it may be more difficult for us to compete effectively, all of which would have an adverse effect on our business, operating results, and financial condition. We may be unable to predict fashion trends and customer preferences successfully.
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Operational Risks That May Affect Our Business The loss of, or disruption in, our centralized distribution center could negatively impact our business and operations.
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The London interbank offered rate (“LIBOR”) is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally. Our current credit facility provides us an option to convert some of our prime-based borrowings into short-term LIBOR contracts.
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Recent events in the Middle East have made accessing the Suez Canal a risk, thereby prompting vessels to avoid this route, which adds time and cost. Drought has left water levels lower than ever forcing Panama to reduce the volume of ships passing through the Panama Canal, leading to delays and increased shipping costs.
Removed
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").
Added
Furthermore, we may continue to incur incremental freight costs which could negatively harm our gross margin rates. We are dependent on third parties for the manufacture of the merchandise we sell. We do not own or operate any manufacturing facilities and are therefore entirely dependent on third parties to manufacture the merchandise we sell.
Removed
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.
Added
Several factors may affect our costs for raw materials including, among other things, demand, currency fluctuations, political instability, inflationary pressures, fuel prices and weather, including the impact of global climate change. To the extent that we cannot offset these cost increases with other cost reductions or efficiencies, such higher costs will need to be passed on to our customers.
Removed
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.
Added
Risks Related To Environmental, Social And Governance Issues The effects of climate change may adversely impact our business. There is increasing concern that a gradual rise in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases ("GHG") in the atmosphere will cause significant changes in weather patterns.
Removed
Failure to comply with laws, rules and regulations could negatively affect our business operations and financial performance . Our business is subject to federal, state, and increasing local rules and regulations, such as state and local wage and hour laws, the U.S.
Added
This could result in an increase in the frequency, severity, and duration of extreme weather conditions and natural disasters, as well as water scarcity and poor water quality. These events could adversely impact the availability and price of cotton and other raw materials, disrupt the supply chain and our ability to secure merchandise.
Added
Further, extreme weather conditions caused by climate change could negatively impact our financial results if our retail locations are unable to open, customers are unable to travel or our distribution center is unable to fulfill orders or delivery inventory. These events could also create adverse economic conditions and impact consumer confidence and discretionary spending.
Added
As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations. We are working to develop policies, standards and goals to help mitigate these risks, including working closely with our vendors and business partners to help identify such risks, develop standards and improve processes.
Added
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.
Added
An increased focus by local, state, regional, national, and international regulatory bodies on GHG emissions and climate change issues increases the risk to our business if we are unable to comply with the multiple and evolving policy changes.
Added
For example, in March 2024, the SEC adopted rules to enhance and standardize climate-related disclosures by public companies so that there is more consistent, comparable, and reliable information about the financial effects of climate-related risks on a public company’s operations 17 and how it manages those risks.
Added
In addition, in October 2023, California enacted the Climate Corporate Data Accountability Act and the Climate Related Financial Risk Act that will require large public and private companies that do business within the state to disclose their Scopes 1, 2, and 3 GHG emissions, with third-party assurance of GHG emissions information for certain entities, and issue public reports on their climate-related financial risk and related mitigation measures.
Added
Investor advocacy groups, certain institutional investors, investment funds, other market participants, stockholders, and customers have focused increasingly on the ESG or sustainability practices of companies, including those associated with climate change.
Added
If our ESG practices do not meet investor or other industry stakeholder expectations and standards, which continue to evolve, our brand, reputation and employee retention may be negatively impacted based on an assessment of our ESG practices.
Added
Any disclosures we make may include our policies and practices on a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management, product quality, supply chain management, and workforce inclusion and diversity. It is possible that stakeholders may not be satisfied with our ESG practices or the speed of their adoption.
Added
The volatile political environment, including the upcoming U.S. presidential and congressional election in November 2024, increases the chance of other legislative and regulatory changes at both the federal and state level that could affect us in ways we cannot predict.
Added
In addition, about 46% of the world's population will be holding elections in 2024, the outcome of those elections may have long-term implications on global economies, conflicts, trade negotiations and policies that may directly or indirectly affect our business.
Added
Because of the tight labor market our hourly rates have increased to attract candidates.
Added
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

3 edited+0 added−0 removed3 unchanged
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 —
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. 22 Store count by state at February 3, 2024 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 11 4 Georgia 4 2 Idaho 1 — Illinois 11 1 Indiana 6 2 Iowa 3 — Kansas 2 — Kentucky 3 — Louisiana 3 1 Maine 2 — Maryland 6 2 Massachusetts 7 — Michigan 13 1 Minnesota 3 — Mississippi 1 1 Missouri 6 1 Montana 1 — Nebraska 2 — Nevada 3 — New Hampshire 3 — New Jersey 9 2 New Mexico 1 — New York 18 1 North Carolina 4 1 North Dakota 1 — Ohio 11 1 Oklahoma 2 — Oregon 2 1 Pennsylvania 13 4 Rhode Island 1 — South Carolina 4 — South Dakota 1 — Tennessee 7 — Texas 24 3 Utah 1 — Virginia 6 2 Washington 5 — West Virginia 1 0 Wisconsin 5 —
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.
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 February 3, 2024.
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.
As of February 3, 2024, we operated 232 Destination XL retail stores, 15 Destination XL outlet stores, 17 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

1 edited+0 added−0 removed1 unchanged
Biggest changeM ine Safety Disclosures Not applicable. 20 PART II.
Biggest changeM ine Safety Disclosures Not applicable. 23 PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+2 added−1 removed3 unchanged
Biggest changeIssuer 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.
Biggest changeIssuer Purchases of Equity Securities On March 14, 2023, the Company’s Board of Directors approved a stock repurchase program pursuant to which the Company was initially authorized to repurchase up to $15.0 million of its common stock through open market and privately-negotiated transactions. The initial authorization was completed during the third quarter of fiscal 2023.
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 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, 2019. We paid no cash dividends during the periods shown. The performance of the indices is shown on a total return (dividends reinvested) basis.
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
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 . 25
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.
Apparel Retailers. 24 Annual Return Percentage Year ended Company/Index Jan 20 Jan 21 Jan 22 Jan 23 Jan 24 DXLG (56.0 %) (27.9 %) 441.3 % 70.0 % (43.5 %) S&P 500 19.2 % 15.2 % 19.3 % (8.2 %) 21.8 % Dow Jones U.S.
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.
Holders As of March 15, 2024, based upon data provided by the transfer agent for our common stock, there were approximately 75 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.
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.
Apparel Retailers $ 100 $ 110.85 $ 117.75 $ 127.23 $ 138.11 $ 156.55 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 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.
Apparel Retailers 10.8 % 6.2 % 8.1 % 8.6 % 13.4 % Indexed Returns Base Period Jan 19 Jan 20 Jan 21 Jan 22 Jan 23 Jan 24 Company/Index DXLG $ 100 $ 44.05 $ 31.75 $ 171.83 $ 292.06 $ 165.08 S&P 500 $ 100 $ 119.18 $ 137.23 $ 163.75 $ 150.40 $ 183.21 Dow Jones U.S.
Removed
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.
Added
On November 15, 2023, the Board of Directors approved an amendment to the stock repurchase program to increase the amount authorized under the program from $15.0 million to $25.0 million, effective November 17, 2023. Subsequent to the end of fiscal 2023, the stock repurchase program was completed.
Added
Stock repurchase activity during the three months ended February 3, 2024 was as follows: Period (a) Total number of shares purchased (b) Average price paid per share (1) (c) Total number of shares purchased as part of publicly announced plan (d) Approximate dollar value of shares that may yet be purchased under the plan (1) October 29, 2023 to November 25,2023 — $ — — $ 10,150,003 November 26, 2023 to December 30, 2023 1,207,271 $ 4.12 1,207,271 $ 5,172,641 December 31, 2023 to February 3, 2024 1,121,923 $ 4.20 1,121,923 $ 461,187 Total 2,329,194 $ 4.16 2,329,194 $ 461,187 (1) Average price paid per share and the approximate dollar value of shares that may yet be purchased under the plan excludes the accrual of excise tax of $0.2 million as of February 3, 2024.

Item 7. Management's Discussion & Analysis

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

54 edited+36 added−35 removed23 unchanged
Biggest changeFiscal 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.
Biggest changeFiscal 2023 was a 53-week period and fiscal 2022 was a 52-week period. 26 EXECUTIVE OVERVIEW Fiscal 2023 Fiscal 2022 (in millions, except for percentage of sales and per share data) Sales $ 521.8 $ 545.8 Net income 27.9 89.1 Adjusted net income (Non-GAAP) 32.3 42.5 Adjusted EBITDA (Non-GAAP) 55.9 73.8 Per diluted share: Net income $ 0.43 $ 1.33 Adjusted net income (Non-GAAP) $ 0.50 $ 0.63 As a percentage of sales: Gross margin 48.4 % 49.9 % SG&A expenses 37.7 % 36.4 % Operating margin 8.0 % 10.7 % Adjusted EBITDA margin (Non-GAAP) 10.7 % 13.5 % Liquidity: Cash flow from operating activities $ 49.6 $ 59.9 Free cash flow (Non-GAAP) $ 32.2 $ 50.3 Fiscal 2023 proved to be a challenging year and our results fell short of our expectations.
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.
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 33 reviews its expected achievement against such performance targets to assess whether an accrual is necessary.
As a result, for fiscal 2022, the valuation allowance against the Company's deferred tax assets decreased by $47.6 million, of which $31.6 million was recorded as a non-recurring tax benefit related to the release of the valuation allowance on deferred tax assets expected to be realized in future periods.
As a result, in fiscal 2022, the valuation allowance against the Company's deferred tax assets decreased by $47.6 million, of which $31.6 million was recorded as a non-recurring tax benefit related to the release of the valuation allowance on deferred tax assets expected to be realized in future periods.
Of the total non-cash gain of $0.6 25 million, $0.4 million related to leases where the right-of-use assets had previously been impaired, and therefore was recorded as a reduction of the previously recorded impairment charge with the remaining $0.2 million recorded as a reduction to occupancy costs.
Of the total non-cash gain of $0.6 million, $0.4 million related to leases where the right-of-use assets had previously been impaired, and therefore was recorded as a reduction of the previously recorded impairment charge with the remaining $0.2 million recorded as a reduction to occupancy costs.
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.
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.
INCOME TAXES Since the end of fiscal 2013, we had maintained a full valuation allowance against our deferred tax assets. During the second quarter of fiscal 2022, we determined that it was more likely than not that we would be able to realize the benefit of substantially all of our deferred tax assets in the United States.
Since the end of fiscal 2013, we had maintained a full valuation allowance against our deferred tax assets. During the second quarter of fiscal 2022, we determined that it was more likely than not that we would be able to realize the benefit of substantially all of our deferred tax assets in the United States.
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.
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 2023 to fiscal 2022, on a comparable basis.
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.
During fiscal 2023, we had three active LTIPs: the 2021-2023 LTIP, the 2022-2024 LTIP and the 2023-2025 LTIP. See Note H 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.
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.
Our Annual Report on Form 10-K for the year ended January 28, 2023 (fiscal 2022) includes a discussion and analysis of our financial condition and results of operations comparing fiscal 2022 to fiscal 2021 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.
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.
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 2023 as compared to fiscal 2022.
We believe that our cash and cash equivalent balances, cash generated from operations, and borrowings available to us under our credit facility will be adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months.
We believe that our cash, investments, cash generated from operations, and borrowings available to us under our credit facility will be adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months.
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.
The Company’s wholesale business was a third operating segment until 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 in fiscal 2022.
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.
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. See Note A to the Consolidated Financial Statements.
In addition, there are $39.6 million of federal net operating loss carryforwards that do not expire. For state income tax purposes, we have $65.0 million of net operating losses that are available to offset future taxable income, the majority of which will expire from fiscal 2024 through fiscal 2045.
In addition, there are $39.9 million of federal net operating loss carryforwards that do not expire. For state income tax purposes, we have $51.8 million of net operating losses that are available to offset future taxable income, the majority of which will expire from fiscal 2024 through fiscal 2045.
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.
These measures include free cash flow, adjusted net income, adjusted net income per share, 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 2023 to fiscal 2022.
We define store sales as sales that originate and are fulfilled directly at the store level. E-commerce sales, which we also refer to as direct sales, are defined as sales that originate online, whether through our website, at the store level or through a third-party marketplace. Stores that have been open for 13 months are included in comparable sales.
E-commerce sales, which we also refer to as direct sales, are defined as sales that originate online, whether through our website, at the store level, our Guest Engagement Center, or through a third-party marketplace. Stores that have been open for 13 months are included in comparable sales.
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.
Management uses adjusted EBITDA as a key metric to measure profitability and economic productivity. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and before any impairment (gain) of assets and the loss on termination of retirement plans. Adjusted EBITDA margin is calculated as adjusted EBITDA divided by sales.
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.
Through the end of fiscal 2023, we accrued approximately $1.6 million for performance under the 2022-2024 LTIP, and there was no accrual for performance under the 2023-2025 LTIP. 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.
The 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).
The following table is a reconciliation of net income on a GAAP basis to adjusted EBITDA and adjusted EBITDA margin, on a non-GAAP basis, for each fiscal year: (in thousands, except percentages) Fiscal 2023 Fiscal 2022 Net income, on a GAAP basis $ 27.9 $ 89.1 Add back: Impairment (gain) of assets 0.1 (0.2 ) Loss on termination of retirement plans 5.7 — Provision (benefit) for income taxes 10.5 (30.8 ) Interest (income) expense, net (2.1 ) 0.3 Depreciation and amortization 13.8 15.4 Adjusted EBITDA, on a non-GAAP basis $ 55.9 $ 73.8 Sales $ 521.8 $ 545.8 Adjusted EBITDA margin, on a non-GAAP basis: 10.7 % 13.5 % 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 Consolidated Financial Statements).
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.
At February 3, 2024, we continued to provide a valuation allowance of $2.2 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 $3.6 million will expire in fiscal 2037, is dependent on generating sufficient taxable income.
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.
Accordingly, at February 3, 2024, $2.5 million of the expected $3.0 million award was accrued. With respect to the performance-based component of the 2022-2024 LTIP and the 2023-2025 LTIP, which approximate $2.4 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.
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.
The following table sets forth financial data regarding our liquidity position at the end of the past two fiscal years: (in millions) Fiscal 2023 Fiscal 2022 Cash flow from operating activities $ 49.6 $ 59.9 Capital expenditures (17.4 ) (9.6 ) Free Cash Flow (Non-GAAP) $ 32.2 $ 50.3 Cash, cash equivalents and short-term investments, at year end $ 60.0 $ 52.1 Total debt, net of unamortized debt issuance costs $ - $ - Unused excess availability under Credit Facility $ 69.8 $ 78.4 For fiscal 2023, cash flow from operations decreased to $49.6 million as compared to $59.9 million for fiscal 2022.
(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.
(Certain columns may not foot due to rounding.) (in millions, except percentages) Fiscal 2023 Fiscal 2022 First quarter $ 125.4 24.0 % $ 127.7 23.4 % Second quarter $ 140.0 26.8 % 144.6 26.5 % Third quarter $ 119.2 22.8 % 129.7 23.8 % Fourth quarter $ 137.1 26.3 % 143.9 26.4 % $ 521.8 100.0 % $ 545.8 100.0 % EFFECTS OF INFLATION During fiscal 2023, we continued to see the effect of inflationary pressures on raw materials, services and labor.
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.
The fiscal 2022 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.
As a result, we continue to see more transactions that begin online but are ultimately completed at the store level. Similarly, if a customer visits a store and the item is out of stock, the associate can order the item through our website. A customer also has the ability to order online and pick-up in a store or at curbside.
Similarly, if a customer visits a store and the item is out of stock, the associate can order the item through our website. A customer also has the ability to order online and pick-up in a store or at curbside. We define store sales as sales that originate and are fulfilled directly at the store level.
For fiscal 2022, we recorded an income tax benefit of $30.8 million, which included a non-recurring tax benefit of $31.6 million related to the release of the valuation allowance against the deferred tax assets. For fiscal 2021, we recorded an income tax provision of $0.9 million, primarily related to income tax in states where NOL usage was statutorily limited.
For fiscal 2022, we recorded an income tax benefit of $30.8 million, which included a current income tax provision of $0.8 million, primarily related to income tax in states with statutory limitations on the usage of NOLs, and a non-recurring tax benefit of $31.6 million related to the release of the valuation allowance against the deferred tax assets.
See Note F of the Notes to the Consolidated Financial Statements. NET INCOME Net income for fiscal 2022 was $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.
See Note F to the Consolidated Financial Statements. NET INCOME Net income for fiscal 2023 was $27.9 million, or $0.43 per diluted share, as compared to a net income for fiscal 2022 of $89.1 million, or $1.33 per diluted share.
For fiscal 2023, our plan is to convert 10 of our existing Casual Male XL store to DXL stores, remodel 5 of our existing DXL stores, close 5 stores and open 3 new DXL stores. We expect our capital expenditures to range from $19.0 million to $21.0 million in fiscal 2023.
For fiscal 2024, our plan is to open 8 new stores, convert 5 of our remaining Casual Male XL stores to DXL stores and remodel 5 of our existing DXL stores. We expect our capital expenditures to range from $22.0 million to $25.0 million in fiscal 2024.
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.
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 2021-2023 LTIP were achieved at the end of fiscal 2023. Awards granted pursuant to this achievement will be subject to further vesting through August 31, 2024.
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%.
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 Simple SOFR rate plus 1.00% per annum (provided the Base Rate shall never be less than the Floor (as defined in the Credit Facility)), plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25% or 0.50% (the “Applicable Margin”).
Net income for fiscal 2022 includes an income tax benefit of $31.6 million, or $0.47 per diluted share, related to the release of the valuation allowance against its deferred tax assets.
Net income for fiscal 2022 included a tax benefit of $31.6 million, or $0.47 per diluted shares, attributable to the release of substantially all of the valuation allowance against our deferred tax assets.
RECENT ACCOUNTING PRONOUNCEMENTS We have reviewed accounting pronouncements and interpretations thereof that have effective dates during the periods reported and in future periods. See Note A to the Notes to the Consolidated Financial Statements included in this report for information on recent accounting pronouncements and the impact of impending standards on our future filings.
See Note A to the Consolidated Financial Statements included in this report for information on recent accounting pronouncements and the impact of impending standards on our future filings. 34
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.
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. Effective April 20, 2023, borrowings under the Credit Facility bear interest at either a Base Rate or Daily Simple SOFR rate, at the Company's option.
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.
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.
Free cash flow, a non-GAAP measure, decreased to $50.3 million for fiscal 2022 as compared to $70.3 million for fiscal 2021. The decrease in free cash flow was due to our replenishment of inventory, the payout of incentive-based awards, and an increase in capital expenditures.
Free cash flow, a non-GAAP measure, decreased to $32.2 million for fiscal 2023 as compared to $50.3 million for fiscal 2022. The decrease in free cash flow was due primarily to a decrease in operating income and an increase in capital expenditures.
Our obligations under the Credit Facility are secured by a lien on substantially all of our assets. The Company was subject to an unused line fee of 0.25% of the total commitment less average outstanding letters of credit. Our Credit Facility is described in more detail in Note D to the Notes to the Consolidated Financial Statements.
The Company was subject to an unused line fee of 0.25% of the total commitment less average outstanding letters of credit. Our Credit Facility is described in more detail in Note D to the Consolidated Financial Statements. Stock Repurchase Program In March 2023, our Board of Directors approved a stock repurchase program.
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.
CAPITAL EXPENDITURES The following table sets forth the open stores and related square footage at February 3, 2024 and January 28, 2023 respectively: At February 3, 2024 At January 28, 2023 Store Concept Number of Stores Square Footage Number of Stores Square Footage (square footage in thousands) DXL Retail 232 1,725 218 1,663 DXL Outlet 15 76 16 80 Casual Male XL Retail 17 55 28 92 Casual Male XL Outlet 19 57 19 57 Total Stores 283 1,913 281 1,892 31 During fiscal 2023, we opened three new DXL stores, we completed the conversion of 11 Casual Male stores to the DXL store format, completed the remodel of one existing DXL store and closed one DXL outlet.
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.
Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 16.4% of sales for fiscal 2023 as compared to 15.6% of sales for fiscal 2022. Marketing costs for fiscal 2023 were 5.9% of sales.
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.
Below is a summary of the store activity from January 28, 2023 to February 3, 2024: Number of Stores: DXL Retail DXL Outlet Casual Male XL Retail Casual Male XL Outlet Total Stores At January 28, 2023 218 16 28 19 281 New stores 3 — — — 3 Conversion in place 11 — (11 ) — — Closed retail stores — (1 ) — — (1 ) At February 3, 2024 232 15 17 19 283 Our capital expenditures for fiscal 2023 were $17.4 million, as compared to $9.6 million in fiscal 2022.
SALES (in thousands) Fiscal 2022 Fiscal 2021 Store sales $ 375,618 68.9% $ 344,761 69.0% Direct sales 169,821 31.1% 154,891 31.0% Retail segment 545,439 100.0% 499,652 100.0% Wholesale segment 399 5,369 Total sales $ 545,838 $ 505,021 For fiscal 2022, total sales increased 8.1% to $545.8 million from $505.0 million for fiscal 2021.
SALES (in thousands) Fiscal 2023 Fiscal 2022 Store sales $ 358,710 68.7% $ 375,618 68.9% Direct sales 163,105 31.3% 169,821 31.1% Retail segment 521,815 100.0% 545,439 100.0% Wholesale segment — 399 Total sales $ 521,815 $ 545,838 For fiscal 2023, total sales decreased 4.4% to $521.8 million from $545.8 million for fiscal 2022.
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.
At February 3, 2024 our material contractual obligations primarily consisted of our operating lease obligations, as disclosed in Note E, Leases , to the Consolidated Financial Statements. In addition to our lease obligations, at February 3, 2024, we were also contractually committed pursuant to a merchandise purchase obligation to meet minimum purchases of $10.0 million annually through fiscal 2028.
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.
While there seems to be improvement, we cannot be certain of the effect inflation (or deflation) may have on our results of operations in the future. 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.
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.
The capital expenditures for fiscal 2023 primarily related to stores, information technology projects, distribution center and facilities. 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 strengthen the store portfolio.
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.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES SG&A expenses as a percentage of sales were 37.7% for fiscal 2023, as compared to 36.4% in fiscal 2022. On a dollar basis, SG&A expenses decreased by $2.3 million for fiscal 2023 as compared to 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.
Under the stock repurchase program, we were initially authorized to repurchase up to $15.0 million of its common stock through open market and privately negotiated transactions. In November 2023, the Board of Directors approved an amendment to the stock repurchase program to increase the amount authorized for repurchase from $15.0 million to $25.0 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.
The Credit Facility was not utilized during the year, resulting in average unused excess availability during fiscal 2022 of $84.5 million. Unused excess availability at February 3, 2024 was $69.8 million. Our obligations under the Credit Facility are secured by a lien on substantially all of our assets.
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.
We continued to strengthen our financial position in fiscal 2023, as we generated cash flow from operations of $49.6 million and free cash flow of $32.2 million. We used $24.5 million of that free cash flow to repurchase 5.4 million shares of our common stock.
OFF-BALANCE SHEET ARRANGEMENTS We have no off-balance sheet arrangements as defined by 303(a)(4) of Regulation S-K.
Given the ongoing macro-economic concerns around inflation and consumer spending, managing our inventory will remain a primary focus for us in fiscal 2024. OFF-BALANCE SHEET ARRANGEMENTS We have no off-balance sheet arrangements as defined by 303(a)(4) of Regulation S-K.
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.
The decrease in comparable sales was partially offset by sales for the 53rd week of $7.1 million. GROSS MARGIN For fiscal 2023, gross margin, inclusive of occupancy costs, was 48.4% compared to 49.9% for fiscal 2022.
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.
Net income for fiscal year 2023 included net income for the 53rd week, which was approximately $1.2 million, and also included a loss from the termination of retirement plans of $5.7 million. Net income for fiscal 2022 included the reversal of $31.6 million, or $0.47 per diluted share, of our deferred tax asset valuation allowance.
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, for comparable sales, the Company is reporting on a comparable weeks basis (i.e. the 14 and 53 weeks ended February 3, 2024 compared with the 14 and 53 weeks ended February 4, 2023, respectively). Our customer’s shopping experience continues to evolve across multiple channels and we are continually adapting to meet the customer's needs.
Inventory at January 28, 2023 is approximately 13.7% higher than the prior year but we were in a better inventory position than we were at the end of 2021. As compared to fiscal 2019, or pre-pandemic levels, we reduced our inventory by 9.2%, and our inventory turnover was up over 30%.
At February 3, 2024, our clearance inventory was 9.5% of our inventory, as compared to 7.9% at January 28, 2023, and below our historical benchmark of approximately 10.0%. Since 2019, we have reduced our inventory by 21% and improved our inventory turnover rate by over 30%.
This was partially offset by funds raised from the stock offering in February 2021 and funds used during fiscal 2022 to repurchase shares of our common stock, as discussed below. Credit Facility 27 We have a $125.0 million revolving credit agreement with a five-year term, which will expire on October 28, 2026 (the "Credit Facility").
Cash flow used for financing activities for fiscal 2023 and fiscal 2022 of $24.9 million and $13.7 million, respectively, was primarily for the repurchase of our common stock. 30 Credit Facility On October 28, 2021, we entered into a $125.0 million revolving credit agreement with Citizens Bank, N.A., with a maturity date of October 28, 2026.
The increase was primarily due to an increase in marketing costs from 4.7% to 6.0% of sales to drive customer acquisition and engagement, payroll costs to support sales growth and fill open positions, and an increase in performance-based incentive accruals. Management views SG&A expenses through two primary cost centers: Customer Facing Costs and Corporate Support Costs.
The decrease was primarily due to a decrease in marketing costs and a decrease in performance-based incentive accruals, partially offset by an increase in payroll-related costs from new positions added in the past year to support our long-range growth initiatives and costs for the 53rd week of approximately $2.7 million.
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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.
Added
Comparable Sales and E-Commerce (Direct) Sales Definition Our 2023 fiscal year included 53 weeks compared with 52 weeks in fiscal 2022. Accordingly, year-over-year comparisons of total sales for the fourth quarter and full year are affected by an extra week of sales in fiscal 2023.
Removed
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.
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The majority of our stores have the capability of fulfilling online orders if merchandise is not available in the warehouse. As a result, we continue to see more transactions that begin online but are ultimately completed at the store level.
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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.
Added
Our comparable sales for fiscal year 2023 decreased 4.6%, with comparable sales from our stores down 4.5% and our direct business down 4.8%. Despite the year-over-year decline in sales, fiscal 2023 proved to be the second highest year of sales in the history of our Company, only behind fiscal 2022.
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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.
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We were pleased with our operational discipline which allowed us to maintain a solid gross margin, manage our operating expenses, and generate net income of $0.43 per diluted share and an adjusted EBITDA margin (a non-GAAP measure) of 10.7%.
Removed
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.
Added
Net income for fiscal 2023 of $0.43 per diluted share included a non-recurring pretax charge of $5.7 million recognized in connection with our decision to terminate our frozen retirement plans during fiscal 2023. Given the high interest rates, we saw this as an opportunistic use of excess cash to eliminate these variable liabilities.
Removed
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.
Added
Assuming a normalized tax rate of 27% for both fiscal years and adjusting for the loss from the retirement plan terminations, asset impairments (gains) and tax benefits or gains, if any, adjusted net income for fiscal 2023, was $0.50 per diluted share as compared to adjusted net income of $0.63 per diluted share for fiscal 2022.
Removed
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.
Added
We successfully managed our inventory levels, which were down 12.9% as compared to the end of fiscal 2022. We ended fiscal 2023 with cash and investments totaling $60.0 million as compared to $52.1 million at January 28, 2023.
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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.
Added
We had no borrowings under our credit facility during fiscal 2023 and at February 3, 2024 our availability under our credit facility was $69.8 million. As we transition into fiscal 2024, we are focused on our long-term growth initiatives that we announced earlier in the year and are discussed above in Part I, Item 1, Business Strategy .
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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.
Added
Fiscal 2024 will be a year of investment and learning, but we feel strongly that the investments we are making in marketing, store expansion and digital are necessary to change the growth trajectory of our company and gain greater market share.
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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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We have selected creative and media agencies to help us curate and execute our vision and are planning a multi-channel campaign, with a multi-market test launch expected in early summer of 2024. We have also identified lease locations for another 8 27 DXL stores in addition to the three new stores we opened this year.
Removed
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.
Added
Building stronger brand awareness is our overarching goal and we believe we need to invest in these initiatives to achieve that goal.
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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.
Added
Comparable sales decreased 4.6%, with stores down 4.5% and the direct business down 4.8%. During fiscal 2023, we saw a gradual slowdown in store traffic across all regions of the country as consumer spending continued to be negatively impacted by the economic uncertainty and inflationary pressures.
Removed
The increase in dollars per transaction was attributable to fewer promotions driving lower markdowns and deeper penetration in high-ticket categories such as tailored clothing. Our website and app continue to represent the majority of our direct sales and were the primary drivers of the growth in our direct business in fiscal 2022.
Added
The decrease of 150 basis points was due to a decrease in merchandise margins of 70 basis points and an 80 basis point increase in occupancy costs. The decrease in merchandise margin was due to cost pressures on certain private-label merchandise, increased direct-to-consumer shipping costs and costs related to our loyalty program.

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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 changeWe 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.
Biggest changeWe 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 Our exposure to market risk for changes in interest rates relates primarily to our investments, which consists of cash equivalents and short-term investments at February 3, 2024.
Item 7A. Q uantitative and Qualitative Disclosures About Market Risk In the normal course of business, our financial position and results of operations are routinely subject to a variety of risks, including market risk associated with interest rate movements on borrowings and foreign currency fluctuations.
Item 7A. Q uantitative and Qualitative Disclosures About Market Risk In the normal course of business, our financial position and results of operations are routinely subject to a variety of risks, including market risk associated with interest rate movements on borrowings.
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.
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 Daily Simple SOFR rate, as defined in the Credit Agreement.
Removed
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.
Added
The primary objective of our investment activities is to preserve principal. This is accomplished by investing in money market accounts and U.S. treasury bills. We do not use derivative financial instruments.
Removed
Foreign 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.
Added
Due to the nature of our investments, we do not expect our operating results or cash flows to be affected to any significant degree by any change in market interest rates. At February 3, 2024, approximately $6.0 million of our cash equivalents were invested in U.S. treasury bills and $17.2 million in money market accounts.
Removed
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
Added
At February 3, 2024, we also had $32.5 million in short-term investments, invested in U.S. treasury bills. During fiscal 2023, we utilized cash from operations to fund our working capital needs. We have a Credit Facility that can also be used, if needed. The Credit Facility is not used for trading or speculative purposes.
Added
At February 3, 2024, we had no outstanding borrowings under the Credit Facility. 35

Other DXLG 10-K year-over-year comparisons