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What changed in DESTINATION XL GROUP, INC.'s 10-K — 2025 vs 2026

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Paragraph-level year-over-year comparison of DESTINATION XL GROUP, INC.'s 2025 and 2026 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 2026 report.

+326 added−316 removedSource: 10-K (2025-03-20) vs 10-K (2024-03-21)

Top changes in DESTINATION XL GROUP, INC.'s 2026 10-K

326 paragraphs added · 316 removed · 244 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

87 edited+43 added−33 removed35 unchanged
Biggest changeCasual 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.
Biggest changeThe majority of the merchandise carried in our Casual Male XL stores consists of moderate-priced basic or fashion-neutral items, such as jeans, casual pants, t-shirts, polo shirts, dress shirts and suit separates. These stores also carry a full complement of our own brand collections. The average Casual Male XL retail store is approximately 3,100 square feet.
HISTORY Our Company was incorporated in the State of Delaware in 1976 under the name "Kara Enterprises, Inc." and subsequently operated under the name "Designs, Inc." Until fiscal 1995, we operated exclusively in Levi Strauss & Co. branded apparel mall and outlet stores.
OUR HISTORY Our Company was incorporated in the State of Delaware in 1976 under the name "Kara Enterprises, Inc." and subsequently operated under the name "Designs, Inc." Until fiscal 1995, we operated exclusively in Levi Strauss & Co. branded apparel mall and outlet stores.
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 exclusive brands in this price range include O’Neill ®, 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.
In addition to own brands and national brands at our “good” price tier, our outlets also carry clearance product obtained from DXL and Casual Male XL stores, offering the outlet customer the ability to purchase brand and fashion product for a reduced price.
In addition to our own brands and national brands at our “good” price tier, our outlets also carry clearance product obtained from DXL and Casual Male XL stores, offering the outlet customer the ability to purchase brand and fashion product for a reduced price.
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.
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 + tall men.
We make available through our website, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to such reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we have electronically filed such material with, or furnished such materials to, the Securities and Exchange Commission.
We make available through our website, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to such reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") as soon as reasonably practicable after we have electronically filed such material with, or furnished such materials to, the Securities and Exchange Commission (the "SEC").
We believe that our current infrastructure provides us the ability and capacity to process transactions more efficiently and provides our management team with comprehensive tools with which to manage our business. Our direct and retail channels maintain a shared inventory system and we operate a single-system platform for our DXL and Casual Male XL stores to deliver improved efficiencies.
We believe that our current infrastructure provides us the ability and capacity to process transactions more efficiently and provides our management team with comprehensive tools to manage our business. Our direct and retail channels maintain a shared inventory system and we operate a single-system platform for our DXL and Casual Male XL stores to deliver improved efficiencies.
The merchandise planning and allocation team has an array of planning and replenishment tools available to assist in maintaining an appropriate level of inventory, in-stock positions at the stores and for the direct channel, and pre-season planning for product assortments for each store and the direct channel. Additionally, in-season reporting identifies opportunities and challenges in inventory performance.
The merchandise planning and allocation team has an array of planning and replenishment tools available to assist in maintaining an appropriate level of inventory, in-stock positions at each store and the direct channel, and pre-season planning for product assortments for each store and the direct channel. Additionally, in-season reporting identifies opportunities and challenges in inventory performance.
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.
The Sustainability and Governance Committee reports to the senior management team of the Company and to the Nominating and Corporate Governance Committee of our Board of Directors (the "Board"), which is responsible for the oversight of our initiatives. We are working to develop short-term and long-term ESG goals, as well as an action plan.
In addition to our exclusive brands, we also work with several other national brands to offer a unique, curated merchandise assortment, in sizes 2XL and above, that are exclusively sold in our stores and on our website and are not available from the brand’s own website.
In addition to our exclusive brands, we also work with several other national brands to offer a unique, curated merchandise assortment in sizes 2XL and above that are sold exclusively in our stores and on our website and are not available on the brand’s own website.
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.
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 9 managers.
While we have successfully competed on the basis of merchandise assortment, comfort and fit, customer service and desirable store locations, there can be no assurances that other retailers, including e-commerce retailers, will not adopt purchasing and marketing concepts similar to ours. Discount retailers with significant buying power, such as Walmart, Kohl's and J.C.
While we have successfully competed on the basis of merchandise assortment, comfort and fit, customer service and desirable store locations, there can be no assurance that other retailers, including e-commerce retailers, will not adopt purchasing and marketing concepts similar to ours. Discount retailers with significant buying power, such as Walmart, Kohl's and J.C.
TRADEMARKS/TRADEMARK LICENSE AGREEMENTS We own several service marks and trademarks relating to our businesses, including, among others, “Destination XL ® ”, “DXL ® ”, “DXL Mens Apparel ® ”, “Big on Being Better ® ”, “Casual Male ® ”, “Casual Male XL ® ”, “Harbor Bay ® ”, “Oak Hill ® ”, “Continuous Comfort ® ”, “Synrgy™”, “Society of One ® ”, “True Nation ® ” and “Wear What You Want ℠” .
TRADEMARKS/TRADEMARK LICENSE AGREEMENTS We own several service marks and trademarks relating to our businesses, including, among others, “Destination XL ® ”, “DXL ® ”, “DXL Men's Apparel ® ”, “Big on Being Better ® ”, “Casual Male ® ”, “Casual Male XL ® ”, “Harbor Bay ® ”, “Oak Hill ® ”, “Continuous Comfort ® ”, “Synrgy™”, “Society of One ® ”, “True Nation ® ” and “Wear What You Want ℠” .
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.
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 several years, we have transformed our business, investing in our customer relationship capabilities, our data infrastructure and our data analytics capabilities.
Since 2019, we have been a member of a leading ethical trade service provider to increase our social, environmental and ethical sustainability, and we participate in their Ethical Trade Audit platform. Since fiscal 2020, we have retained LRQA, formerly Elevate, a global leader in supply chain assessment, and instituted 4-Pillar audits of our supply chain factories.
Since 2019, we have been a member of a leading ethical trade service provider to increase our social, environmental and ethical sustainability, and we participate in their Ethical Trade Audit platform. Since fiscal 2020, we have retained LRQA (formerly Elevate) which is a global leader in supply chain assessment, and we have instituted 4-Pillar audits of our supply chain factories.
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.
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 footwear.
During fiscal 2021, we formed the Sustainability Committee, consisting of a cross-disciplinary team from corporate management that engaged with a third-party firm to assist us in the development of the Company's initial ESG strategy and initiatives.
During fiscal 2021, we formed the Sustainability and Governance Committee, consisting of a cross-disciplinary team from corporate management and engaged with a third-party firm to assist us in the development of the Company's initial ESG strategy and initiatives.
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.
Polo Ralph Lauren builds one collection each quarter for our customers that is exclusive to DXL. Footwear Our DXL website offers an assortment of footwear, with a broad selection from casual to formal, in varying price points.
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.
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. 11 SUSTAINABILITY AND GOVERNANCE 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.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information for issuers that file electronically with the SEC at http://www.sec.gov . 12
The SEC maintains an internet site that contains reports, proxy and information statements, and other information for issuers that file electronically with the SEC at http://www.sec.gov. 13
In addition, we also offer a selection of shoes in sizes 10W to 18W on our website at dxl.com. Our Casual Male XL retail stores primarily carry moderate-priced national brands and our own brands of casual sportswear and dresswear. We also operate Casual Male XL outlets and DXL outlets for our value-oriented customers.
In addition, we offer a selection of footwear in sizes 10W to 17W on our website at dxl.com. Our Casual Male XL retail stores primarily carry moderate-priced national brands and our own brands of casual sportswear and dresswear. We also operate Casual Male XL outlets and DXL outlets for our value-oriented customers.
Our best-selling pant has 58 size combinations and a unique specification as compared to an average retailer who may only have 15 different size combinations. We maintain a consolidated inventory across all channels that enables us to manage our in-stock position of all sizes effectively, ultimately improving customer service.
Our best-selling pant has 58 size combinations and a unique fit specification as compared to an average retailer who may have as few as 15 to 20 different size combinations. We maintain a consolidated inventory assortment across all channels that enables us to manage our in-stock position of all sizes effectively, ultimately improving customer service.
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.
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.
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.
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.
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.
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 2024.
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.
SEASONALITY Historically, and consistent with the retail industry, we have experienced seasonal fluctuations in 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 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 continue to reduce dependency on China, with less than 5% of our own brands sourced from China, inclusive of our raw materials and trims, and have moved certain programs into countries in the Western Hemisphere that have duty-free opportunities such as Nicaragua and Mexico.
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.
Our sourcing network consists of over 30 factories in nine countries that are experts in big + tall sizing and production. In fiscal 2024, approximately 52% of all our product needs were sourced directly. We manufacture a significant percentage of our own brand merchandise in Bangladesh, India, and Southeast Asian countries, including Vietnam and Cambodia.
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.
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 1, 2025, February 3, 2024 and January 28, 2023 as “fiscal 2024,” “fiscal 2023” and “fiscal 2022,” respectively.
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.
None of our associates are represented by a 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 includes, among others, the code of ethics, anti-harassment policy, and procedures for raising a complaint.
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.
We have developed 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.
Our inventory is typically at peak levels by the end of the third quarter, which represents a significant use of cash, which is then relieved in the fourth quarter as we sell-down our inventory through the holiday shopping season.
Our inventory is typically at peak levels by the end of the first and third quarters, which represents a significant use of cash, which is then relieved in the second and fourth quarter as we sell-down our inventory through the spring and holiday shopping seasons.
The 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.
The DXL Leadership Group was formed in fiscal 2016 with a mission of "Associates supporting, educating, and empowering each other @ DXLG." It started as a pilot program and quickly expanded to include over 40 leaders, including both people and process managers, located in the corporate office and the field.
The first is that we strive to build relationships with all of our guests. The second is that we believe our stores need to be clean, neat and organized in an effort to allow the "just-looking" customer to find what he needs with ease. The last component is our stores serving as mini-distribution centers.
The first is that we strive to build relationships with all of our guests. The second is that we believe our stores need to be clean, neat and organized in an effort to allow the “just-looking” customer to find what he needs with ease. The third is that our stores serve as mini-distribution centers.
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.
All audits can be found on LRQA's EIQ tool which is a web-based analytical system on which we participate in their Ethical Trade Audit platform. In fiscal 2023, we added environment assessment audits to LRQA’s services.
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.
At February 1, 2025, we operated 247 DXL retail stores, 15 DXL outlet stores, 7 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.
Moreover, our planning and allocation methodologies, with respect to store assortment planning, help to optimize each location’s market potential without excessive inventory levels.
Moreover, our planning and allocation methodologies help to optimize each location’s market potential without carrying excessive inventory levels.
Our merchandise is not just an extension of regular sizes. The fit is built from unique specifications for every size and style, with specific design features for the big and tall customer. Our stores are merchandised to showcase entire outfits by lifestyle, including traditional, active, modern, tailored and denim.
The fit is constructed from unique specifications for every size and style, with specific design features for the big + tall customer. Our stores are merchandised to showcase entire outfits by lifestyle, including traditional, active, modern, tailored and denim.
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.
Since fiscal 2019, comparable sales from our direct business in fiscal 2024 have grown 33%, with our total direct business representing 30.3% of our total retail sales in fiscal 2024, as compared to 23.1% of our total retail sales in fiscal 2019.
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.
DXL Outlet /Casual Male XL Outlet Stores As of February 1, 2025, 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.
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.
Our brand initiatives invite our customer to experience not only the depth of our assortment, but also the breadth of exclusivity across our brands by offering brands and styles that are not available elsewhere. We are providing him with the freedom to choose his own style and wear what he wants.
Through collaboration with LRQA and Bureau Veritas, we are pursuing what we call a “5-Pillar Audit”, which includes traceability of both raw materials and the equipment used to produce finished goods. HUMAN CAPITAL MANAGEMENT As of February 3, 2024, we had 1,439 employees. We hire additional temporary employees during the peak holiday season.
Through collaboration with LRQA and Bureau Veritas, we are pursuing what we call a "5-Pillar Audit", which includes traceability of both raw materials and the equipment used to produce finished goods. HUMAN CAPITAL MANAGEMENT As of February 1, 2025, we employed 1,447 people. We hire additional temporary associates during the peak holiday season.
In addition, we carry several value-priced private label lines: Harbor Bay ® was our first proprietary brand and it is a traditional line that continues to represent a significant portion of our business, specifically in terms of our core basic merchandise.
Value-Priced Apparel - “Good” Merchandise For our value-oriented customers, we carry Champion, Lee, Wrangler and Reebok. In addition, we carry the following value-priced private label lines: Harbor Bay ® was our first proprietary brand and it is a traditional line that continues to represent a significant portion of our business, specifically in terms of our core basic merchandise.
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.
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 a Regional Sales management team that reflects our customer base.
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 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.
Item 1. B usiness Destination XL Group, Inc., together with its subsidiaries (the “Company”), is the leading specialty retailer of big & tall men’s apparel with retail locations throughout the United States. We operate under the trade names of Destination XL ® , DXL ® , DXL Men’s Apparel, DXL outlets, Casual Male XL ® and Casual Male XL outlets.
Item 1. B usiness Destination XL Group, Inc., together with its subsidiaries (the “Company”), is the leading specialty retailer of big + tall men’s apparel with retail locations throughout the United States.
Big + Tall is all we do, and we trade on the belief that we offer superior fit, assortment, and experience to him and through this initiative we are eager to develop relationships with our customers that are built on respect, trust, and belonging.
Big + Tall is all we do, and we trade on the belief that we offer superior fit, assortment, and experience to him and through these initiatives we are eager to develop relationships with our customers that are built on respect, trust, and belonging. Building brand awareness remains our greatest opportunity for the long term.
During fiscal 2023, we opened three new DXL stores, with plans to open eight new stores in fiscal 2024. These new DXL stores offer an updated look and feel both inside and outside, with the store layout focusing on improving our customer engagement and their overall shopping experience.
These new DXL stores offer an updated look and feel both inside and outside, with the store layout focusing on improving our customer engagement and their overall shopping experience.
We continue to see our consumers shift to online shopping helping to drive higher new customer acquisition for the website business.
DXL Website and App Our DXL website and app have been instrumental in our growth as we continue to see our consumers shift to online shopping helping to drive higher new customer acquisition for the website business.
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.
Since 2014, we have offered our associates the opportunity to participate in our DXLG Mentor Program, which pairs mentees with mentors for one-year periods.
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.
We currently have a selection of more than 200 styles of footwear, ranging in sizes from 10W to 17W, including designer brands such as Cole Haan®, Timberland®, Sketchers®, New Balance®, Reebok® and Deerstags.
Workplace, Culture and Career Development We are committed to providing our associates an environment where they have an opportunity to provide input on issues affecting the Company’s workforce and the employer-associate relationship. Periodically through the year, we encourage feedback and ideas from our associates through our annual engagement surveys and periodic pulse surveys.
Workplace, Culture, and Career Development We are committed to providing our associates with an environment where they have the opportunity to offer input on issues affecting the Company’s workforce and the employer-associate relationship.
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.
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.
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.
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.
The new platform is engineered by a leading eCommerce technology provider and will position us to respond faster and more effectively to make changes in the future. • Alliances/Collaborations : We strongly believe that our "fit authority" is one of our greatest assets and that we can develop successful collaborations with other brands, who are interested in finding a cost-effective way to expand their offering to include big + tall men's apparel.
We strongly believe that our "fit authority" is one of our greatest assets and that we can develop successful collaborations with other brands that are interested in finding a cost-effective way to expand their offering to include big + tall men's apparel.
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.
Our customers also have the ability to shop online by store and pick-up the item in store on the same day. 8 Digital Marketplaces We continue to extend our reach through digital, third-party marketplaces. A portion of our assortment remains available on Amazon.com and Walmart.com.
With over 5,000 styles available, we carry an extensive selection of tops in sizes up to 7XL and 7XLT with additional assortments up to 8XL, bottoms with waist sizes 38” to 70”, and shoes in sizes 10W to 18W. What sets us apart from our competitors is our proprietary fit. We are different because our fit is different.
With over 5,000 styles available, we carry an extensive selection of tops in sizes up to 8XL and 8XLT, bottoms with waist sizes 38” to 66”, and footwear in sizes 10W to 17W. Our proprietary fit sets us apart from our competitors. Our merchandise is not just an extension of regular sizes.
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.
STORE CHANNEL DXL Men’s Apparel Stores As of February 1, 2025, we operated 247 DXL retail stores that 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 7,300 square feet.
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 INDUSTRY We define the big + tall men’s clothing market as starting at a waist size for pants of 38” and greater, as well as tops sized 1XL and greater.
The key item strategy is also fully integrated by lifestyle, allowing us to focus on merchandise presentation and offer our customers a compelling value proposition. Merchandise assortments in our DXL stores are organized not only by lifestyle but, within each lifestyle, the assortments are shown in a “good,” “better” and “best” visual presentation.
Merchandise assortments in our DXL stores are organized not only by lifestyle, but within each lifestyle, the assortments are shown in a “good,” “better” and “best” visual presentation.
Our Associate Engagement & Development Committee organizes “Lunch, Learn, Lead” and “Coffee Talk” sessions throughout the year to provide our associates an opportunity to gain insight on a variety of topics, such as, DXL’s social responsibility initiatives, TED talks, Global Sourcing, Normalizing the Brand and Technology.
Our Associate Engagement & Development Committee organizes a series of "Lunch, Learn, Lead" and "Coffee Talk" sessions throughout the year to provide our associates with opportunities to learn as a group and gain insight on a variety of topics, such as leadership, DXL’s social responsibility initiatives, financial well-being, TED Talks, department-specific learning, Normalizing the Brand, technology, and more.
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, online at the store level, our Guest Engagement Center, or a third-party marketplace. We want to serve our customers wherever and however they want to shop, whether in-person at a store, over the telephone, or online via a computer, smartphone or tablet.
We believe that the investments we have made in this regard have improved our overall efficiency and improved our access to information enabling timely, data-driven decisions. Our management information systems consist of a full range of retail merchandising and financial systems, which include merchandise planning and reporting, distribution center processing, inventory allocation, sales reporting, and financial processing and reporting.
MANAGEMENT INFORMATION SYSTEMS The infrastructure of our management information systems is a priority to us. We believe that the investments we have made in this regard have improved our overall efficiency and improved our access to information, enabling timely, data-driven decisions.
Our benefits are designed to help employees and their families stay healthy and help them balance their work and personal lives. These benefits include health and wellness, paid time off, employee assistance, competitive pay, career growth opportunities, paid volunteer time, product discounts, and a culture of recognition.
These benefits include health and wellness programs, paid time off, employee assistance, competitive pay, career growth opportunities, paid volunteer time, product discounts, and a culture of recognition. We are continually looking for programs and opportunities to offer our associates to ensure their physical and mental wellness.
With the “best” merchandise assortments featured most prominently in the DXL store, our customers can visualize current fashion trends and select their wardrobes within their desired price points in a convenient manner.
With the “best” merchandise assortments featured most prominently in the DXL store, our customers can visualize current fashion trends and select their wardrobes within their desired price points in a convenient manner. 6 Big + tall is all we do, and through our own brands and exclusivity with national brands, we estimate that more than 80% of our inventory assortment, in units, is not available elsewhere.
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.
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.
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.
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.
In 2021, we joined with CEO Action for Diversity & Inclusion, a coalition of over 2,000 CEOs, pledging to advance diversity and inclusion in the workplace.
Our associates also have access to an anonymous hotline for reporting concerns. In 2021, we joined the SHRM CEO Action for Inclusion & Diversity, which is a coalition of over 2,500 CEOs pledging to promote inclusion and diversity in the workplace.
While we have stores in every major metro market across the United States, there are voids in certain markets where big + tall consumers are not being served by a DXL.
Our marketing spend plan for fiscal 2025, which we expect to be approximately 6% of sales, does not include any brand awareness advertising. Store Development. While we have stores in every major metropolitan market across the United States, there are geographic voids in certain markets where big + tall consumers are not being served by a DXL store.
In addition, we are able to provide our direct customers with Authorized Return Service and Web labels, making returns more convenient for them. In order to service our International customers, we have contracted with a global e-commerce company for payment and shipment services. Through this service, international customers view and pay for products in their local currency.
In order to service our international customers, we have contracted with a global e-commerce company for payment and shipment services. Through this service, international customers view and pay for products in their local currency. Our vendor then ships directly to our customer, which we believe helps avoid potential fraud and currency exchange rate risks.
In our most recent research across 2,500 big + tall men, 44% self-reported that they do not shop with us because a store is not near them, and 35% self-reported that they do not shop with us because a store location is not convenient. This year we opened three DXL stores, our first store openings since 2019.
Our consumer research has indicated that 44% of big + tall men self-reported that they do not shop with us because a store is not located near them, while 35% self-reported that they do not shop with us because a store location is not convenient.
In-bound calls for our e-commerce business are primarily fulfilled by our distribution center and if an order cannot be fulfilled by our distribution center, the order is completed at the store level.
In-bound calls for our e-commerce business are primarily fulfilled by our distribution center and, if an order cannot be fulfilled by our distribution center, the order is completed at the store level. 10 Our supply chain technology provides visibility for imports and domestic deliveries giving our buyers accurate shipping information and allowing the distribution center to plan staffing for arriving freight, resulting in reduced costs and improved receipt efficiency.
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 highlight mental health awareness as part of our "Lunch, Learn, Lead" series and provide relevant content within our learning management system. Additionally, we offer an Employee Assistance Program, which provides 24/7 assistance to associates and their family members for a variety of issues such as stress, family, grief, parenting, and finances. AVAILABLE INFORMATION Our corporate website is www.dxl.com.
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.
However, until consumer spending in the men’s apparel sector begins to improve, our marketing efforts will remain more targeted and personalized, enabling us to engage differently with each of our customers based on their shopping behaviors across all our buying channels.
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.
We believe this collaboration will allow us to bring the DXL experience beyond our four walls and directly to the Nordstrom customer, thereby further extending our relationship with the female consumer. 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.
All new store and conversion investments are subject to rigorous ROIC hurdles that are informed by our prior experience. 5 • New Website : We are upgrading our website from our legacy infrastructure to a new, modern commerce platform, with various features and functionality launching in the second half of fiscal 2024.
All new store and conversion investments are subject to rigorous ROIC hurdles that are informed by our prior experience. New Website Platform. During fiscal 2024, we started the transition to a new and improved e-commerce platform, with 100% of the site traffic now diverted to our new platform. This project will be completed by April 2025.
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.
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 "Item 1A. Risk Factors, Operational Risks That May Affect Our Business" for a discussion of the risks associated with the imposition of pending tariffs.
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.
Our warehousing application and labor management system enable us to streamline our distribution processes, enhance our in-transit times, and reduce our distribution costs. We will continually work to make improvements and upgrades to our software. For store shipments and domestic customer deliveries, we use large national carriers.
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.
Our ongoing 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. We maintain a stringent, analytical perspective to our marketing program, focusing on understanding incremental outcomes in addition to the “return on ad spend” throughout all our programs.
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.
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. 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 backroom stock.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThere 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.
Biggest changeIf our marketing campaigns and strategies are unable to drive traffic to our stores and website, the marketing costs incurred will have a negative impact on the Company's profitability. Our direct business is a component of our growth strategy and the failure to develop our digital infrastructure could disrupt our business and negatively impact our sales.
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.
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 grow revenue and market share.
We may also be subject to investigations or audits by governmental authorities and regulatory agencies, which can occur in the ordinary course of business or which can result from increased scrutiny from a particular agency towards an industry, country or practice.
We may also be subject to investigations or audits by governmental authorities and regulatory agencies, which can occur in the ordinary course of business or result from increased scrutiny from a particular agency towards an industry, country or practice.
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.
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 the retail clothing industry generally.
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.
In addition, in October 2023, California enacted the Climate Corporate Data Accountability Act and the Climate Related Financial Risk Act that 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.
Furthermore, in the event that commercial transportation is curtailed or substantially delayed, we may not be able to maintain adequate inventory levels of important merchandise on a consistent basis, which would negatively impact our sales and potentially erode the confidence of our customer base, leading to loss of sales and an adverse impact on our results of operations.
In the event that commercial transportation is curtailed or substantially delayed, we may not be able to maintain adequate inventory levels of important merchandise on a consistent basis, which would negatively impact our sales and potentially erode the confidence of our customer base, leading to loss of sales and an adverse impact on our results of operations.
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.
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.
Our certificate of incorporation, as amended, contains provisions that restrict any person or entity from attempting to purchase our stock, without prior permission from the Board of Directors, to the extent that such transfer would (i) create or result in an individual or entity becoming a five-percent stockholder of our stock, or (ii) increase the stock ownership percentage of any existing five-percent stockholder.
Our certificate of incorporation, as amended, contains provisions that restrict any person or entity from attempting to purchase our stock, without prior permission from the Board, to the extent that such transfer would (i) create or result in an individual or entity becoming a five-percent stockholder of our stock, or (ii) increase the stock ownership percentage of any existing five-percent stockholder.
Item 1A. R isk Factors The following risk factors are the important factors of which we are aware that could cause actual results, performance or achievements to differ materially from those expressed in any of our forward-looking statements. We operate in a continually changing business environment and new risk factors emerge from time-to-time.
Item 1A. R isk Factors The following risk factors are the important factors that we are aware could cause actual results, performance or achievements to differ materially from those expressed in any of our forward-looking statements. We operate in a continually changing business environment and new risk factors emerge from time-to-time.
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.
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 and how it manages those risks.
If we are unable to predict or respond to changing styles or trends successfully and misjudge the market for products or any new product lines, our sales will be impacted and we may be faced with a substantial amount of unsold inventory or missed opportunities.
If we are unable to predict or respond to changing styles or trends successfully and misjudge the market for 17 products or any new product lines, our sales will be impacted and we may be faced with a substantial amount of unsold inventory or missed opportunities.
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.
If we incur additional indebtedness, that indebtedness may contain financial and other covenants that may significantly restrict our operations, and we cannot ensure that 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.
In addition, our competitors are also investing in these initiatives, some of which may be more successful than our initiatives. If the investment in our integrated commerce initiatives is not successful, our systems are unable to support such initiatives, or if our competitors are more successful, our financial results and our market penetration may be adversely affected.
Our competitors are also investing in these initiatives, some of which may be more successful than our initiatives. If the investment in our integrated commerce initiatives is not successful, if our systems are unable to support such initiatives, or if our competitors are more successful, our financial results and our market penetration may be adversely affected.
These provisions would make the acquisition of our Company more expensive to the acquirer and could significantly delay, discourage, or prevent third parties from acquiring our Company without the approval of our Board of Directors.
These provisions would make the acquisition of our Company more expensive to the acquirer and could significantly delay, discourage, or prevent third parties from acquiring our Company without the approval of our Board.
If we fail to comply with laws, rules and regulations or the manner in which they are interpreted or applied, we may be subject to government enforcement action, class action litigation or other litigation, damage to our reputation, civil and criminal liability, damages, fines and penalties, and increased cost of regulatory compliance, any of which could adversely affect our results of operations and financial performance.
If we fail to comply with laws, rules and regulations or the manner in which they are interpreted or applied, we may be subject to government enforcement action, class action or other litigation, damage to our reputation, civil and criminal liability, damages, fines and penalties, and increased costs of regulatory compliance, any of which could adversely affect our results of operations and financial performance.
Besides retail competitors, we consider any manufacturer of big & tall men’s merchandise operating in outlet malls throughout the United States to be a competitor.
Besides retail competitors, we consider any manufacturer of big + tall men’s merchandise operating in outlet 16 malls throughout the United States to be a competitor.
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 .
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. The failure to comply with laws, rules and regulations could negatively affect our business operations and financial performance .
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 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.
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.
Some of these laws and regulations may increase the cost of doing business and 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.
If we were forced to rely on manufacturers who produce products of inferior quality, then our brand and customer satisfaction would likely suffer which would negatively impact our business. These manufacturers may also increase the cost to us of the products we purchase from them.
If we are forced to rely on manufacturers who produce products of inferior quality, then our brand and customer satisfaction would likely suffer which would negatively impact our business. These manufacturers may also increase the cost to us of the products we purchase from them.
For us to be successful in the future and maintain growth, we must be able to continue increasing our share of the big & tall men’s apparel market. Our growth is dependent on our ability to continue to build upon our DXL brand, maintain our existing customers and attract new customers.
For us to be successful in the future and maintain growth, we must be able to grow our share of the big + tall men’s apparel market. Our growth is dependent on our ability to continue to build upon our DXL brand, maintain our existing customers and attract new customers.
In addition, certain provisions of Delaware law could have the effect of delaying, deferring or preventing a change in control of us, including, without limitation, discouraging a proxy contest or making more difficult the acquisition of a substantial block of our common stock.
In addition, certain provisions of Delaware law could have the effect of delaying, deferring or preventing a change in control of our Company, including, without limitation, discouraging a proxy contest or making more difficult the acquisition of a substantial block of our common stock.
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.
Fluctuations in the price, the imposition of tariffs, the 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.
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.
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 cyber-attack attempts, predominantly through phishing and social engineering scams, and in particular, ransomware.
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.
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 depends on the availability of adequate capital.
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.
Several factors may affect our costs for raw materials including, among other things, demand, currency fluctuations, political instability, inflationary pressures, tariffs, fuel prices and weather, including the impact of global climate change. To the extent that we cannot offset cost increases with other cost reductions or efficiencies, such increased costs will need to be passed on to our customers.
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.
We may be unable to achieve our environmental, social and governance objectives. We are committed to corporate social responsibility and sustainability, and we recognize the importance of environmental, social and governance ("ESG") issues.
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.
In addition, the failure to satisfy consumer demand, specifically in our DXL stores and from our website, could have serious long-term consequences on our business, 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.
These liabilities could include claims for unauthorized purchases with credit card information, impersonation or other similar fraud claims, or claims for other misuses of personal information, including unauthorized marketing purposes, and could ultimately result in litigation. Liability for misappropriation of this information could be significant.
Such liability could include claims for unauthorized purchases with credit card information, impersonation or other similar fraud claims, or claims for other misuses of personal information, including unauthorized marketing purposes, and could ultimately result in litigation. Liability for misappropriation of this information could be significant.
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
Such provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock. 20 Item 1B. U nresolved Staff Comments None.
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.
Our business is subject to federal, state, and increasing local rules and regulations, such as state and local wage and hour laws, the Employee Retirement Income Security Act (“ERISA”), securities laws, import and export laws (including customs regulations), state privacy and information security regulations, unclaimed property laws, and many others.
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.
Our Sustainability and Governance Committee, comprising a cross-discipline of corporate management, has engaged a third-party firm to assist us in the development of the Company's policies and initiatives. The ability to achieve our objectives is subject to risks and uncertainties, and we may fail to achieve our objectives.
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.
This appears to be resulting 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, disrupting the supply chain and our ability to secure merchandise.
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.
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. In addition, in January 2021, the U.S. Customs and Border Protection issued a Withhold Release Order on products made in Xinjiang.
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.
We may also incur additional costs and require additional resources to implement such policies and initiatives. 18 Our business is subject to evolving regulations and expectations with respect to environmental, social and governance matters that may expose us to increased risks.
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 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.
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.
For example, from September 8, 2021, when we relisted on the Nasdaq Global market, through February 1, 2025, the reported price of our common stock has ranged from a low of $2.15 on December 19, 2024, 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 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.
Our failure to execute our long-term strategy successfully could prevent or delay 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 are unable to: • grow our store portfolio; • build brand awareness to drive increased store and online traffic; • build successful collaborations and alliances, similar to our alliances with UNTUCKit and Nordstrom; • grow our DXL digital business; • maintain a 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.
In addition, significant negative industry or general economic trends, disruptions to our business and unexpected significant changes or planned changes in our use of the assets (such as store relocations or closures) may also result in impairment charges.
In addition, significant negative industry or general economic trends, disruptions to our business and unexpected significant changes or planned changes in our use of the assets (such as store relocations or closures) may also result in impairment charges. If any such impairment charges are significant, it could adversely affect our financial position and results of operations.
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.
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 that we face in connection with our electronic processing and transmission of confidential customer information.
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.
Fluctuations in the price, availability and quality of raw materials and finished goods could increase costs. Due to the inflationary pressures, we are seeing cost increases in labor, occupancy and raw materials. We have secured raw materials in key item programs to reduce the impact on our gross margin.
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.
Any disclosures that 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.
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.
In addition, statements from the current administration regarding potential tariffs, sanctions, import/export restrictions and future actions 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.
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.
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 that our distribution center is shut down for any reason or we incur higher costs and longer lead times in connection with a disruption relating to our distribution center.
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.
If we are unable to renegotiate terms to optimize a store's profitability, we may choose not to renew certain locations when the opportunity arises. 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.
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.
The COVID-19 pandemic and its variants caused global uncertainty and disruption and had a material impact on our business, predominately in fiscal 2020 and early fiscal 2021, but had 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 beyond the initial COVID-19 pandemic.
While our Board of Directors has a Cybersecurity and Data Privacy Committee to oversee the monitoring and management of cyber risk and data privacy for our Company, and we have not had any security breaches to date, any breach could expose us to risks of loss, litigation, and liability and could adversely affect our operations as well as cause our shoppers to stop shopping with us as a result of their lack of confidence in the security of their personally identifiable information, which could have a negative impact on our sales and profitability.
While our Board has a Cybersecurity and Data Privacy Committee (the “Cyber Committee”) to oversee the monitoring and management of cyber risk and data privacy for our Company, and we have not had any security breaches to date, any breach could expose us to risks of loss, litigation, and liability and could adversely affect our operations.
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.
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. 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.
The global impact of the COVID-19 pandemic and its variants have had, and other global health pandemics may have, an adverse effect on our business, financial results, liquidity, supply chain and workforce. The COVID-19 pandemic and its variants caused global uncertainty and disruption and had a material impact on our business, predominately in fiscal 2020 and early 2021.
The global impact of a health pandemic, similar to the COVID-19 pandemic, may have an adverse effect on our business, financial results, liquidity, supply chain and workforce.
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.
The concern that a gradual rise in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases ("GHG") in the atmosphere is very real and the belief that this will cause significant changes in weather patterns is widely held.
Our direct business is a significant component of our growth strategy, and the failure to develop our digital infrastructure could disrupt our business and negatively impact our sales. We have made significant investments in capital spending and labor to develop our direct channels and increased investments in digital marketing to attract new customers.
We have made significant investments in capital spending and labor to develop our direct channels and increased investments in digital marketing to attract new customers. The growth of our overall sales is dependent on customers’ continuing to expand their online purchases in addition to in-store purchases.
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.
We are dependent on third parties to manufacture the merchandise that 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.
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.
The volatile political environment 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. In addition, global economies, conflicts, trade negotiations and policies may directly or indirectly affect our business.
Our 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.
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. Instability in the Middle East has made accessing the Suez Canal a risk, thereby prompting vessels to avoid this route, which adds time and cost.
We have developed and are implementing long-term strategic initiatives to grow our business.
We have developed and are implementing long-term strategic initiatives to grow our business, but the timeline of these initiatives is dependent, to a degree, on overall market conditions.
We continually update our website features, but we cannot predict future trends and required functionality or our adoption rate for customer preferences. In addition, we are vulnerable to additional risks and uncertainties associated with e-commerce sales, including security breaches, cyber-attacks, consumer privacy concerns, changes in state tax regimes and government regulation of internet activities.
There can be no assurance that this change will drive additional traffic and conversion or that our customers will respond positively to the changes. In addition, we are vulnerable to additional risks and uncertainties associated with e-commerce sales, including security breaches, cyber-attacks, consumer privacy concerns, changes in state tax regimes and government regulation of internet activities.
Our success in growing our direct business will depend in part upon our development of an increasingly sophisticated e-commerce experience and infrastructure. Increasing sophistication requires that we provide additional website features, functionality and messaging in order to be competitive in the marketplace and maintain market share.
Increasing sophistication requires that we provide additional website features, functionality and messaging in order to be competitive in the marketplace and maintain market share. By the end of fiscal 2024, we were in the final stages of launching our new updated e-commerce platform.
Since the end of the pandemic, we have continued to experience labor shortages primarily in our distribution facility and in our stores. If such labor shortages continue, especially during peak-selling periods, it may negatively impact our ability to process inventory in a timely manner and effectively staff our stores.
Any labor shortage, particularly those of which occur in our distribution facility and our stores or during peak-selling periods, may negatively impact our ability to process inventory in a timely manner and effectively staff our stores. Because of the tight labor 19 market, our hourly rates have increased to attract candidates.
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.
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 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.
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.
With concerns about RSV, influenza, the measles, and avian flu in the news, another health pandemic 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.
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.
While it is our objective to continue to grow this business, there can be no assurance that this growth will continue or be sustainable. 14 Our success in growing our direct business will depend in part upon our development of an increasingly sophisticated e-commerce experience and infrastructure.
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.
Historically, a significant portion of our operating income has been generated during our second and fourth quarters.
While we worked closely with our landlords to renegotiate and restructure a majority of our lease portfolio from the onset of the pandemic, there still may be certain stores that may not be profitable and we may not be able to renew existing agreements. We will continue to evaluate our store portfolio to optimize store profitability.
We worked closely with our landlords to renegotiate and restructure a majority of our lease portfolio from the onset of the COVID-19 pandemic; however, many of these renegotiated lease terms have renewed or are due to renew at higher rates than we had during the COVID-19 pandemic.
Removed
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.
Added
Depending on market conditions and our Company's performance, the pace at which we open store locations may have to be slowed or paused. Operational Risks That May Affect Our Business Our business may be adversely affected due to disruptions in the global supply chain.
Removed
Operational Risks That May Affect Our Business The loss of, or disruption in, our centralized distribution center could negatively impact our business and operations.
Added
Furthermore, we may continue to incur incremental freight costs, which could negatively harm our gross margin rates. The recent discussion of tariffs on various products by the United States and other countries may create greater uncertainty with respect to trade policies and government regulations affecting trade between the United States and other countries.
Removed
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.
Added
Furthermore, it is possible that other forms of trade restriction, including tariffs, quotas and customs restrictions, will be put into place in the United 15 States or in countries from which we source our products.
Removed
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.
Added
We cannot predict whether any of the countries in which our merchandise currently is manufactured or may be manufactured in the future will be subject to additional trade restrictions imposed by the United States or other foreign governments, including the likelihood, type, or effect of any such restrictions.
Removed
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 of these actions, if ultimately enacted, could adversely affect our results of operations or profitability. Further, any emerging nationalist trends in specific countries could alter the trade environment and consumer purchasing behavior which, in turn, could have a material effect on our financial condition and results of operations.
Removed
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
The majority of our retail sales are settled through credit and debit card transactions.
Removed
Because of the tight labor market our hourly rates have increased to attract candidates.
Added
Any breach could also cause our shoppers to stop shopping with us as a result of their lack of confidence in the security of their personally identifiable information, which could have a negative impact on our sales and profitability.
Added
Risks Related to Environmental, Social and Governance Issues The effects of climate change may adversely impact our business.
Added
It is possible that stakeholders may not be satisfied with our environmental, social and governance practices or the speed of their adoption. General Risks That May Affect Our Business Our business is seasonal and is affected by general political and economic conditions. Our business is seasonal.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur current CTO has over 35 years of industry experience, including serving as CIO/CTO for over 6 years and having extensive experience in developing and leading technology risk management programs. Additionally, our technology staff holds multiple industry standard security certifications, including Cisco Certified Network Associate ("CCNA"), PCI Internal Security Assessor ("PCI ISA") and Certified Ethical Hacker ("CEH"). 21
Biggest changeAdditionally, our technology staff holds multiple industry-standard security certifications, including Cisco Certified Network Associate, PCI Internal Security Assessor, and Certified Ethical Hacker. 22
Our collaboration with these third-parties includes regular threat assessments and consultation on security enhancements. In order to mitigate data or security incidents that may originate from third party vendors or suppliers, we conduct both privacy and security assessments to properly identify, prioritize, assess and remediate any third-party risks, and require security and privacy addenda to our contracts where applicable.
Our collaboration with these third parties includes regular threat assessments and consultation on security enhancements. In order to mitigate data or security incidents that may originate from third-party vendors or suppliers, we conduct both privacy and security assessments to properly identify, prioritize, assess and remediate any third-party risks, and we require security and privacy addenda to our contracts where applicable.
Item 1C. Cybersecurity Risk Management and Strategy We recognize the critical importance of maintaining the trust and confidence of our customers and employees. Consequently, we maintain a comprehensive security incident response plan (“SIRP”) and we assess, identify, and manage material risks associated with cybersecurity threats.
Item 1C. Cybersecurity Risk Management and Strategy We recognize the critical importance of maintaining the trust and confidence of our customers and employees. Consequently, we maintain a comprehensive security incident response plan ("SIRP") and we assess, identify, and manage material risks associated with cybersecurity threats.
The Company trains employees to understand their role in attempting to protect the Company from cybersecurity attacks. Our information security training program for employees includes acknowledgement of our information security policies, regular internal communications, and testing to measure the effectiveness of our information security program.
We train employees to understand their role in attempting to protect the Company from cybersecurity attacks. Our information security training program for employees includes acknowledgement of our information security policies, regular internal communications, and testing to measure the effectiveness of our information security program.
For example, we conduct regular phishing awareness campaigns designed to emulate current threats and provide immediate feedback and, as necessary, additional training or remedial action. In addition, the Company engages third parties to assist in assessing, identifying, and remediating material risks from cybersecurity threats.
For example, we conduct regular phishing awareness campaigns designed to emulate current threats and provide immediate feedback and, as necessary, additional training or remedial action. In addition, we engage third parties to assist in assessing, identifying, and remediating material risks from cybersecurity threats.
To date, risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected the Company, including our business strategy, results of operations, or financial condition. Also see Part 1, Item 1A, Risk Factors , in this Annual Report on Form 10-K for a discussion of cybersecurity risks.
To date, risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected the Company, including our business strategy, results of operations, or financial condition. Also see Part I, Item 1A, Risk Factors , in this Annual Report for a discussion of cybersecurity risks.
We have integrated cybersecurity risk management into our broader risk management framework through various mechanisms, including (i) our updates to the Cybersecurity and Data Privacy Committee (the “Cyber Committee”, created by our Board of Directors (the “Board”) in 2016), which meets at least quarterly; (ii) our annual enterprise risk management update to the Board, and (iii) our information technology and security related internal controls, including vulnerability management programs.
We have integrated cybersecurity risk management into our broader risk management framework through various mechanisms, including (i) our updates to the Cyber Committee, which was created by the Board in 2016 and meets at least quarterly, (ii) our annual enterprise risk management update to the Board, and (iii) our information technology and security related internal controls, including vulnerability management programs.
Pursuant to its charter, our Cyber Committee: • assists our Board in fulfilling its risk oversight responsibilities with respect to the protection of the Company’s assets, including confidential, proprietary and personal information, reputation and goodwill in all forms; • supervises and monitors the soundness of our cybersecurity and data protection strategies and practices; 20 • oversees and monitors our material compliance with applicable information security, privacy and data protection laws, industry standards and contractual requirements; • promotes and furthers the integrity, adoption and coordination of our data security processes across the Company to help ensure that data and system security is a Company-wide business objective and priority; and • oversees our cybersecurity and data protection performance and the overall implementation of our cybersecurity and data protection strategy.
The Cyber Committee is composed of members of our Board who have diverse expertise, including risk management, technology, and finance, equipping them to oversee cybersecurity risks effectively. 21 Pursuant to its charter, our Cyber Committee: • assists our Board in fulfilling its risk oversight responsibilities with respect to the protection of the Company’s assets, including confidential, proprietary and personal information, reputation and goodwill in all forms; • supervises and monitors the soundness of our cybersecurity and data protection strategies and practices; • oversees and monitors our material compliance with applicable information security, privacy and data protection laws, industry standards and contractual requirements; • promotes and furthers the integrity, adoption and coordination of our data security processes across the Company to help ensure that data and system security is a Company-wide business objective and priority; and • oversees our cybersecurity and data protection performance and the overall implementation of our cybersecurity and data protection strategy.
At the management level, our Chief Technology Officer (“CTO”), SVP, Technology and Information as well as our cybersecurity personnel are primarily responsible for identifying, assessing, monitoring and managing our cybersecurity. Our CTO reports directly to our President and Chief Executive Officer and at least quarterly meets with the Cyber Committee.
At the management level, our Chief Technology Officer and our Senior Vice President, Technology and Innovation, as well as our technology staff, are primarily responsible for identifying, assessing, monitoring and managing our cybersecurity. Our Chief Technology Officer reports directly to our President and Chief Executive Officer and meets at least quarterly with the Cyber Committee.
Governance Our Board is ultimately responsible for the risk oversight of the Company, including cybersecurity and privacy risks. Our Board has delegated day-to-day responsibility for oversight of cybersecurity risks to the Cyber Committee. The Cyber Committee is composed of board members with diverse expertise including risk management, technology, and finance, equipping them to oversee cybersecurity risks effectively.
Governance Our Board is ultimately responsible for the risk oversight of the Company, including cybersecurity and privacy risks. Our Board has delegated day-to-day responsibility for oversight of cybersecurity risks to the Cyber Committee.
Added
We currently maintain a cyber insurance policy that provides coverage for security breaches; however, such insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyber-attacks, or other related breaches.
Added
Our current Chief Technology Officer has over 35 years of industry experience, including service as a Chief Technology Officer/Chief Information Officer for over seven years and extensive experience in developing and leading technology risk management programs.
Added
Our Senior Vice President, Technology and Innovation reports directly to the Chief Technology Officer and has over 32 years of industry experience with the Company. He has led the Company’s cybersecurity team and overseen PCI certification for the past seven years, ensuring compliance with industry standards and strengthening the organization's security posture.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also utilize financial models to project the profitability of each location using assumptions such as the center’s sales per square foot averages, 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 —
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. 23 Store count by state at February 1, 2025 United States DXL retail and outlet stores Casual Male XL retail and outlet stores Alabama 2 1 Arizona 6 — Arkansas — 1 California 27 3 Colorado 4 — Connecticut 3 — Delaware 2 — Florida 12 3 Georgia 5 1 Idaho 1 — Illinois 11 1 Indiana 6 2 Iowa 3 — Kansas 2 — Kentucky 3 — Louisiana 3 1 Maine 2 — Maryland 7 1 Massachusetts 7 — Michigan 13 1 Minnesota 4 — Mississippi 1 1 Missouri 6 1 Montana 1 — Nebraska 2 — Nevada 3 — New Hampshire 3 — New Jersey 10 1 New Mexico 1 — New York 18 1 North Carolina 4 1 North Dakota 1 — Ohio 12 — Oklahoma 2 — Oregon 3 — Pennsylvania 14 3 Rhode Island 1 — South Carolina 4 — South Dakota 1 — Tennessee 7 — Texas 25 2 Utah 1 — Virginia 7 1 Washington 6 — West Virginia 1 0 Wisconsin 5 —
We owned the property until January 30, 2006, at which time we entered into a sale-leaseback transaction, whereby we entered into a twenty-year lease agreement for an initial annual rent payment of $4.6 million, with periodic increases every fifth anniversary of the lease.
We owned the property until January 30, 2006, at which time we entered into a sale-leaseback transaction, whereby we entered into a 20-year lease agreement for an initial annual rent payment of $4.6 million, with periodic increases every fifth anniversary of the lease.
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.
As of February 1, 2025, we operated 247 Destination XL retail stores, 15 Destination XL outlet stores, 7 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 lifestyle centers, shopping centers, freestanding buildings, outlet centers and downtown locations.
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.
The store leases generally have an initial term of 5 to 10 years and typically contain renewal options that permit extending the initial term by 5 to 10 years. Following this discussion is a listing by state of all store locations open as of February 1, 2025.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeM ine Safety Disclosures Not applicable. 23 PART II.
Biggest changeM ine Safety Disclosures Not applicable. 24 PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock 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.
Biggest changeStock repurchase activity during the three months ended February 1, 2025 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) November 3, 2024 to November 30, 2024 1,008,595 $ 2.72 1,008,595 $ 1,895,404 December 1, 2024 to January 4, 2025 218,004 $ 2.59 218,004 $ 1,331,122 January 5, 2025 to February 1, 2025 — — — — Total 1,226,599 $ 2.70 1,226,599 $ — (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 $0.1 million as of February 1, 2025.
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.
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, 2020. 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 . 25
This performance 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 26
Stock Performance Graph The following Performance Graph compares our cumulative stockholder return with a broad market index (Standard & Poor’s 500) and one published industry index (Dow Jones U.S. Apparel Retailers) for each of the most recent five years ended January 31.
Stock Performance Graph The following performance graph compares our cumulative stockholder return with a broad market index (S&P 500) and one published industry index (Dow Jones U.S. Apparel Retailers) for each of the most recent five years ended January 31.
The graph lines merely connect January 31 of each year and do not reflect fluctuations between those dates. In addition, we have included a chart of the annual percentage return of our common stock, the S&P 500 and the Dow Jones U.S.
The graph lines merely connect January 31 of each year and do not reflect fluctuations between those dates. In addition, we have provided below a chart of the annual percentage return of our common stock, the S&P 500 and the Dow Jones U.S.
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.
Holders As of March 15, 2025, based upon data provided by the transfer agent for our common stock, there were approximately 68 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. 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.
Apparel Retailers. 25 Annual Return Percentage Year ended Company/Index Jan 21 Jan 22 Jan 23 Jan 24 Jan 25 DXLG (27.9 %) 441.3 % 70.0 % (43.5 %) (34.6 %) S&P 500 15.2 % 19.3 % (8.2 %) 21.8 % 21.8 % Dow Jones U.S.
Issuer 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.
Issuer Purchases of Equity Securities On September 3, 2024, our Board approved a stock repurchase program pursuant to which the Company was authorized to repurchase up to $15.0 million of its common stock through open market and privately negotiated transactions.
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 $ 100 $ 106.22 $ 114.78 $ 124.59 $ 141.23 $ 173.20 The performance graph above shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section.
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.
Apparel Retailers 6.2 % 8.1 % 8.6 % 13.4 % 22.6 % Indexed Returns Base Period Jan 20 Jan 21 Jan 22 Jan 23 Jan 24 Jan 25 Company/Index DXLG $ 100 $ 72.07 $ 390.09 $ 663.06 $ 374.77 $ 245.05 S&P 500 $ 100 $ 115.15 $ 137.40 $ 126.20 $ 153.73 $ 187.27 Dow Jones U.S.
Removed
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
The timing and the amount of any repurchases of common stock were determined based on the Company’s evaluation of market conditions and other factors. The stock repurchase program expired on February 1, 2025.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe following table is a reconciliation of net income on a GAAP basis to adjusted net income, on a non-GAAP basis, for each fiscal year: Fiscal 2023 Fiscal 2022 $ Per diluted share $ Per diluted share (in thousands, except per share data) Net income (GAAP basis) $ 27.9 $ 0.43 $ 89.1 $ 1.33 Adjust: Loss from termination of retirement plans 5.7 — Impairment (gain) of assets 0.1 (0.2 ) Add back actual income tax provision (benefit) 10.5 (30.8 ) Income tax provision, assuming normal tax rate of 27% (11.9 ) (15.7 ) Adjusted net income, non-GAAP basis $ 32.3 $ 0.50 $ 42.5 $ 0.63 Weighted average number of common shares outstanding on a diluted basis 64.3 66.9 Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA and adjusted EBITDA margin are presented because we believe that these measures are useful to investors in evaluating our performance.
Biggest changeThe following table is a reconciliation of net income on a GAAP basis to adjusted net income, on a non-GAAP basis, for each fiscal year: Fiscal 2024 Fiscal 2023 $ Per diluted share $ Per diluted share (in thousands, except per share data) Net income (GAAP basis) $ 3.1 $ 0.05 $ 27.9 $ 0.43 Adjust: Impairment of assets 1.3 0.1 Accrual for estimated non-recurring legal settlement costs 1.0 — Loss from termination of retirement plans — 5.7 Income tax effect of adjustments (1) (1.1 ) (1.6 ) Adjusted net income (non-GAAP basis) $ 4.3 $ 0.07 $ 32.1 $ 0.50 Weighted average number of common shares outstanding on a diluted basis 59.6 64.3 (1) The income tax effect of pre-tax adjustments to net income was calculated using the applicable effective tax rate for each respective year. 33 Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA and adjusted EBITDA margin are presented because we believe that these measures are useful to investors in evaluating our performance.
(Certain amounts in the following tables may not foot due to rounding.) Free Cash Flow Free cash flow is a metric that management uses to monitor liquidity. Management believes this metric is important to investors, because it demonstrates the Company’s ability to maintain liquidity while supporting its capital projects and new store growth.
(Certain amounts in the following tables may not foot due to rounding.) Free Cash Flow Free cash flow is a metric that management uses to monitor liquidity. Management believes that this metric is important to investors, because it demonstrates the Company’s ability to maintain liquidity while supporting its capital projects and new store growth.
Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this report, particularly in “Risk Factors” and “Forward-Looking Statements.” The following discussion and analysis of our financial condition and results of operations should be read in light of those risks and uncertainties and in conjunction with our accompanying Consolidated Financial Statements and Notes thereto.
Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this Annual Report, particularly in “Risk Factors” and “Forward-Looking Statements.” The following discussion and analysis of our financial condition and results of operations should be read in light of those risks and uncertainties and in conjunction with our accompanying Consolidated Financial Statements and Notes thereto.
Certain figures discussed below may not foot due to rounding. Segment Reporting We have two principal operating segments: our stores and direct business. We consider our stores and direct business segments to be similar in terms of economic characteristics, production processes and operations, and have therefore aggregated them into one reportable segment, retail segment, consistent with our integrated commerce approach.
Certain figures discussed below may not foot due to rounding. Segment Reporting We have two principal operating segments: our stores and direct business. We consider our stores and direct business segments to be similar in terms of economic characteristics, production processes and operations, and we have therefore aggregated them into one reportable segment consistent with our integrated commerce approach.
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.
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.
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.
While there seems to be improvement, we cannot be certain of the effect that 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.
See “Non-GAAP Reconciliations” below for additional information on these non-GAAP financial measures and reconciliations to comparable GAAP measures. RESULTS OF OPERATIONS Our fiscal year is a 52- or 53-week period ending on the Saturday closest to January 31.
See “Non-GAAP Reconciliations” below for additional information regarding these non-GAAP financial measures and reconciliations to comparable GAAP financial measures. RESULTS OF OPERATIONS Our fiscal year is a 52-week or 53-week period ending on the Saturday closest to January 31.
The Company believes that this comparability is useful in comparing the actual results period to period. Adjusted net income per diluted share is then calculated by dividing the adjusted net income by the weighted average shares outstanding for the respective 32 period, on a diluted basis.
The Company believes that this comparability is useful in comparing the actual results period to period. Adjusted net income per diluted share is then calculated by dividing the adjusted net income by the weighted average shares outstanding for the respective period, on a diluted basis.
Stores that have been remodeled or re-located during the period are also included in our determination of comparable stores sales. Stores that have been expanded by more than 25% are considered non-comparable for the first 13 months.
Stores that have been remodeled or re-located during the period are also included in our determination of comparable stores' sales. Stores that have been expanded by more than 25% are considered non-comparable for the first 13 months.
Factors considered by us that could result in an impairment triggering event include significant changes in the use of assets, a current period operating or cash flow loss, underperformance of a store relative to historical or expected operating results, and an accumulation of costs significantly in excess of the amount originally expected for the construction of the long-lived store assets.
Factors considered by the Company that could result in an impairment triggering event include significant changes in the use of assets, a current period operating or cash flow loss, the underperformance of a store relative to historical or expected operating results, and an accumulation of costs significantly in excess of the amount originally expected for the construction of the long-lived store assets.
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.
During fiscal 2024, we had three active LTIPs: the 2022-2024 LTIP, the 2023-2025 LTIP and the 2024-2026 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.
For fiscal 2023 and fiscal 2022, we recorded an impairment charge (gain) of $0.1 million and $(0.2) million, respectively, within Impairment (Gain) of Assets on the Consolidated Statements of Operations. RECENT ACCOUNTING PRONOUNCEMENTS We have reviewed accounting pronouncements and interpretations thereof that have effective dates during the periods reported and in future periods.
For fiscal 2024, fiscal 2023 and fiscal 2022, we recorded an impairment charge (gain) of $1.3 million, $0.1 million and $(0.2) million, respectively, within Impairment (Gain) of Assets on the Consolidated Statements of Operations. RECENT ACCOUNTING PRONOUNCEMENTS We have reviewed accounting pronouncements and interpretations thereof that have effective dates during the periods reported and in future periods.
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.
The majority of our stores have the capability to fulfill 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.
We also believe that cash flows from operating activities and cash on hand will be sufficient to satisfy our capital requirements in the longer-term, however, to the extent future capital requirements exceed cash on hand plus cash flows from operating activities, we anticipate that working capital will be financed by our credit facility.
We also believe that cash flows from operating activities and cash on hand will be sufficient to satisfy our capital requirements in the long term; however, to the extent future capital requirements exceed cash on hand plus cash flows from operating activities, we anticipate that working capital will be financed by our credit facility.
The model for undiscounted future cash flows includes assumptions, at the individual store level, with respect to expectations for future sales and gross margin rates as well as an estimate for occupancy costs used to estimate the fair value of the respective store’s operating lease right-of-use asset.
The model for undiscounted future cash flows in step one includes assumptions, at the individual store level, with respect to expectations for future sales and gross margin rates as well as an estimate for occupancy costs used to estimate the fair value of the respective store’s operating lease right-of-use asset.
We believe these sources of liquidity will be sufficient to fund our working capital requirements, commitments, capital expenditures and our stock repurchase program. Cash that is in excess of our forecasted needs may be invested in money market accounts and U.S. government-backed securities.
We believe that these sources of liquidity will be sufficient to fund our working capital requirements, commitments and capital expenditures. Cash that is in excess of our forecasted needs may be invested in money market accounts and U.S. government-backed securities.
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.
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 2024 as compared to 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.
At February 1, 2025 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 1, 2025, we were also contractually committed pursuant to a merchandise purchase obligation to meet minimum purchases of $10.0 million annually through fiscal 2028.
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.
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 2022-2024 LTIP were achieved at the end of fiscal 2024. Awards granted pursuant to this achievement will be subject to further vesting through August 31, 2025.
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
See Note A to the Consolidated Financial Statements included in this Annual Report for information on recent accounting pronouncements and the impact of impending standards on our future filings. 35
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.
We believe that these measures provide helpful information with respect to the Company’s operating performance to stockholders, investors and analysts, and that the inclusion of these non-GAAP measures is important to assist investors in comparing our performance in fiscal 2024 to fiscal 2023, on a comparable basis.
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.
Through the end of fiscal 2024, we accrued approximately $0.3 million for performance under the 2024-2026 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.
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.
Cash flow used for financing activities for fiscal 2024 and fiscal 2023 of $13.9 million and $24.9 million, respectively, was primarily for the repurchase of our common stock. Credit Facility On October 28, 2021, the Company entered into a $125.0 million revolving credit agreement with Citizens Bank, N.A., with a maturity date of October 28, 2026.
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.
Our Annual Report on Form 10-K for the year ended February 3, 2024 (fiscal 2023) includes a discussion and analysis of our financial condition and results of operations comparing fiscal 2023 to fiscal 2022 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As noted above in Part I, this section also contains forward-looking statements that reflect the Company’s plans, estimates and beliefs.
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.
Accordingly, at February 1, 2025, $2.0 million of the expected $2.4 million award was accrued. With respect to the performance-based component of the 2023-2025 LTIP and the 2024-2026 LTIP, which approximate $2.6 million and $2.7 million, respectively, at target, awards will be granted at the end of the respective performance period if the performance targets are achieved.
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.
Free cash flow, a non-GAAP measure, decreased to $1.9 million for fiscal 2024 as compared to $32.2 million for fiscal 2023. The decrease in free cash flow was due primarily to a decrease in operating income and an increase in capital expenditures.
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.
Comparable Sales and E-Commerce (Direct) Sales Definition Fiscal 2024 included 52 weeks as compared to fiscal 2023, which included 53 weeks. 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.
Any swingline loan will continue to bear interest at a rate equal to the Base Rate plus the Applicable Margin. We had no outstanding borrowings under the Credit Facility at February 3, 2024. At February 3, 2024, outstanding standby letters of credit were $4.3 million and outstanding documentary letters were credit of $1.0 million.
Any swingline loan will continue to bear interest at a rate equal to the Base Rate plus the Applicable Margin. 31 We had no outstanding borrowings under the Credit Facility at February 1, 2025. At February 1, 2025, outstanding standby letters of credit were $4.2 million. There were no outstanding documentary letters of credit at February 1, 2025.
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.
However, for comparable sales, the Company is reporting on a comparable weeks basis (i.e., the 13 and 52 weeks ended February 1, 2025 compared with the 13 and 52 weeks ended February 3, 2024). Our customer’s shopping experience continues to evolve across multiple channels, and we are continually adapting to meet the customer's needs.
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).
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 2024 Fiscal 2023 Net income, on a GAAP basis $ 3.1 $ 27.9 Add back: Impairment of assets 1.3 0.1 Accrual for estimated non-recurring legal settlement costs 1.0 - Loss on termination of retirement plans - 5.7 Provision for income taxes 2.8 10.5 Interest income, net (2.1 ) (2.1 ) Depreciation and amortization 13.9 13.8 Adjusted EBITDA, on a non-GAAP basis $ 19.9 $ 55.9 Sales $ 467.0 $ 521.8 Adjusted EBITDA margin, on a non-GAAP basis: 4.3 % 10.7 % 34 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).
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.
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.
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.
The following table sets forth financial data regarding our liquidity position at the end of the past two fiscal years: (in millions) Fiscal 2024 Fiscal 2023 Cash flow from operating activities (GAAP basis) $ 29.6 $ 49.6 Capital expenditures, excluding store development $ (14.5 ) $ (8.1 ) Free Cash Flow before capital expenditures for store development (non-GAAP basis) $ 15.1 $ 41.5 Capital expenditures for store development (13.2 ) (9.3 ) Free Cash Flow (non-GAAP basis) $ 1.9 $ 32.2 Cash, cash equivalents and short-term investments, at year end $ 48.4 $ 60.0 Total debt, net of unamortized debt issuance costs $ - $ - Unused excess availability under Credit Facility $ 64.7 $ 69.8 For fiscal 2024, cash flow from operations decreased to $29.6 million as compared to $49.6 million for fiscal 2023.
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.
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, accrual for estimated non-recurring legal settlement costs and the loss on termination of retirement plans.
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.
SEASONALITY A comparison of sales in each quarter of the past two fiscal years is presented below. The amounts shown are not necessarily indicative of actual trends because such amounts also reflect the addition of new stores and the remodeling and closing of other stores during these periods. Consistent with the retail apparel industry, our business is seasonal.
The 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.
The Credit Facility was not utilized during fiscal 2024, resulting in average unused excess availability during fiscal 2024 of $73.6 million. Unused excess availability at February 1, 2025 was $64.7 million. Our obligations under the Credit Facility are secured by a lien on substantially all of our assets.
For fiscal 2023, the Company recorded a total asset impairment charge of $0.1 million, which included a write-down for certain store property and equipment and operating lease right-of-use assets.
For fiscal 2023, the Company recorded a total asset impairment charge of $0.1 million, which included a write-down for certain store property and equipment and operating lease right-of-use assets. 29 DEPRECIATION AND AMORTIZATION Depreciation and amortization expense for fiscal 2024 was $13.9 million, as compared to $13.8 million in fiscal 2023.
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.
Below is a summary of the store activity from February 3, 2024 to February 1, 2025: Number of Stores: DXL Retail DXL Outlet Casual Male XL Retail Casual Male XL Outlet Total Stores At February 3, 2024 232 15 17 19 283 New stores 7 — — — 7 Conversions to DXL format 8 — (8 ) — — Closed retail stores — — (2 ) — (2 ) At February 1, 2025 247 15 7 19 288 Our capital expenditures for fiscal 2024 were $27.7 million, as compared to $17.4 million in fiscal 2023.
Over the next three to five years, we believe we could potentially open approximately 50 net new DXL stores across the country, which could average 6,000 square feet or 300,000 sq. ft. in total, a 15% increase over our current square footage.
We could potentially open approximately 50 net new DXL stores across the country, which could average 5,000 square feet or 250,000 square feet in total, which would be a 15% increase over our current square footage.
The method of calculating comparable sales varies across the retail industry and, as a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other retailers. Non-GAAP Measures We monitor certain non-GAAP financial measures on a regular basis in order to track the progress of our business.
The method of calculating comparable sales varies across the retail industry and, as a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other retailers.
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 believe that these measures provide helpful information with respect to the Company’s operating performance and that the inclusion of these measures is important to assist investors in comparing our performance in fiscal 2024 to fiscal 2023.
(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.
(Certain columns may not foot due to rounding.) (in millions, except percentages) Fiscal 2024 Fiscal 2023 First quarter $ 115.5 24.7 % $ 125.4 24.0 % Second quarter $ 124.8 26.7 % 140.0 26.8 % Third quarter $ 107.5 23.0 % 119.2 22.8 % Fourth quarter $ 119.2 25.5 % 137.1 (1) 26.3 % $ 467.0 100.0 % $ 521.8 100.0 % (1) Fiscal 2023 was a 53-week year as compared to fiscal 2024, which was a 52-week year and, as such, the fourth quarter of fiscal 2023 included an additional week of sales of $7.1 million. 30 EFFECTS OF INFLATION During fiscal 2024, we continued to see the effect of inflationary pressures on raw materials, services and labor and consumer spending.
Fiscal 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.
Fiscal 2024 was a 52-week period and fiscal 2023 was a 53-week period. 27 EXECUTIVE OVERVIEW Fiscal 2024 Fiscal 2023 (in millions, except for percentage of sales and per share data) Sales $ 467.0 $ 521.8 Net income 3.1 27.9 Adjusted net income (Non-GAAP) 4.3 32.1 Adjusted EBITDA (Non-GAAP) 19.9 55.9 Per diluted share: Net income $ 0.05 $ 0.43 Adjusted net income (Non-GAAP) $ 0.07 $ 0.50 As a percentage of sales: Gross margin 46.5 % 48.4 % SG&A expenses 42.5 % 37.7 % Operating margin 0.8 % 8.0 % Adjusted EBITDA margin (Non-GAAP) 4.3 % 10.7 % Liquidity: Cash flow from operating activities $ 29.6 $ 49.6 Free cash flow (Non-GAAP) $ 1.9 $ 32.2 Our financial results for fiscal 2024 were below expectations given a difficult men’s apparel sector that negatively impacted traffic levels to our stores and online conversion.
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.
CAPITAL EXPENDITURES The following table sets forth the open stores and related square footage at February 1, 2025 and February 3, 2024, respectively: At February 1, 2025 At February 3, 2024 Store Concept Number of Stores Square Footage Number of Stores Square Footage (square footage in thousands) DXL Retail 247 1,795 232 1,725 DXL Outlet 15 76 15 76 Casual Male XL Retail 7 22 17 55 Casual Male XL Outlet 19 57 19 57 Total Stores 288 1,950 283 1,913 During fiscal 2024, we opened seven new DXL stores, re-located two DXL stores, converted eight Casual Male XL stores to the DXL format, completed five DXL remodels, and closed two Casual Male XL stores.
The following table provides a reconciliation of free cash flow: (in millions) Fiscal 2023 Fiscal 2022 Cash flow from operating activities (GAAP) $ 49.6 $ 59.9 Capital expenditures (17.4 ) (9.6 ) Free cash flow (non-GAAP) $ 32.2 $ 50.3 Adjusted Net Income and Adjusted Net Income Per Diluted Share Adjusted net income and adjusted net income per diluted share is calculated by excluding any asset impairment charge (gain) and the loss from the termination of retirement plans, subtracting the actual income tax provision (benefit) and applying an effective tax rate of 27%.
The following table provides a reconciliation of free cash flow: (in millions) Fiscal 2024 Fiscal 2023 Cash flow from operating activities (GAAP basis) $ 29.6 $ 49.6 Capital expenditures, excluding store development (14.5 ) (8.1 ) Free Cash Flow before capital expenditures for store development (non-GAAP basis) $ 15.1 $ 41.5 Capital expenditures for store development (13.2 ) (9.3 ) Free cash flow (non-GAAP basis) $ 1.9 $ 32.2 Adjusted Net Income and Adjusted Net Income Per Diluted Share Adjusted net income and adjusted net income per diluted share is calculated by excluding any asset impairment charge (gain), accrual for estimated non-recurring legal settlement costs and the loss from the termination of retirement plans.
We calculate free cash flow as cash flow provided by operating activities less capital expenditures. Free cash flow excludes the mandatory and discretionary repayment of debt.
Free cash flow is calculated as cash flow from operating activities, less capital expenditures and excludes the mandatory and discretionary repayment of debt. Free cash flow before capital expenditures for store development is calculated as cash flow from operating activities less capital expenditures other than capital expenditures for store development.
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.
Realization of our deferred tax assets, which relate principally to federal net operating loss carryforwards, of which approximately $3.4 million will expire in fiscal 2037 and $39.9 million that do not expire, is dependent on generating sufficient taxable income.
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.
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 the termination of our frozen retirement plans and an impairment charge of $0.1 million.
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.
Customer Facing Costs, which include store payroll, marketing and other store operating costs, represented 24.1% of sales for fiscal 2024 as compared to 21.3% of sales for fiscal 2023. Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 18.4% of sales for fiscal 2024 as compared to 16.4% of sales for fiscal 2023.
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.
NET INCOME Net income for fiscal 2024 was $3.1 million, or $0.05 per diluted share, as compared to a net income for fiscal 2023 of $27.9 million, or $0.43 per diluted share. Net income for fiscal 2023 included net income for the 53rd week, which was approximately $1.2 million.
Cash flow used for investing activities increased by $39.5 million for fiscal 2023 as compared fiscal 2022, primarily due to the purchase of short-term investments, net of maturities, of $31.9 million and an increase in capital expenditures of $7.8 million.
Cash flow used for investing activities was $31.3 million for fiscal 2024 as compared to $49.1 million for fiscal 2023. The decrease in cash flow used for investing activities was primarily due to a reduction in purchases of short-term investments, net of maturities, of $28.2 million, partially offset by an increase in capital expenditures of $10.3 million.
During fiscal 2023, we repurchased 5.4 million shares at a total cost, including fees, of $24.5 million. Shares of repurchased common stock are held as treasury stock. The stock repurchase program was completed subsequent to the end of the fiscal year. INVENTORY At February 3, 2024, total inventories decreased to $81.0 million from $93.0 million at January 28, 2023.
During fiscal 2024, the Company repurchased 4.8 million shares at a total cost, including fees, of $13.5 million under this stock repurchase program. INVENTORY At February 1, 2025, total inventories decreased to $75.5 million from $81.0 million at February 3, 2024, which was a 6.8% decrease.
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.
For state income tax purposes, we have $38.3 million of net operating losses that are available to offset future taxable income, the majority of which will expire from fiscal 2025 through fiscal 2045. The utilization of our NOLs reduces our taxable income and, as a result, we have minimal cash taxes.
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.
SALES (in thousands) Fiscal 2024 Fiscal 2023 Store sales $ 325,713 69.7% $ 358,710 68.7% Direct sales 141,302 30.3% 163,105 31.3% Total sales $ 467,015 100.0% $ 521,815 100.0% For fiscal 2024, total sales decreased 10.5% to $467.0 million from $521.8 million for fiscal 2023.
On a non-GAAP basis, assuming a normalized tax rate of 27% and adjusting for the loss from the termination of the retirement plans, actual income tax provision (benefit) and asset impairment (gain), if any, adjusted net income for fiscal year 2023 was $32.3 million, or $0.50 per diluted share, as compared to adjusted net income of $42.5 million, or $0.63 per diluted share for fiscal 2022. 29 SEASONALITY A comparison of sales in each quarter of the past two fiscal years is presented below.
On a non-GAAP basis, adjusting for any asset impairment (gain), accrual for estimated non-recurring legal settlement costs and the loss from the termination of the retirement plans, adjusted net income for fiscal 2024 was $4.3 million, or $0.07 per diluted share, as compared to adjusted net income of $32.1 million, or $0.50 per diluted share for fiscal 2023.
Through the purchase of nonparticipating annuities, we completed a final settlement of the SERP in the third quarter and a final settlement of the pension plan in the fourth quarter. For fiscal 2023, we recognized a charge of $5.7 million representing the recognition of the unrealized loss that was part of Accumulated Other Comprehensive Loss on the Consolidated Balance Sheet.
For fiscal 2023, we recognized a charge of $5.7 million representing the recognition of the unrealized loss that was part of Accumulated Other Comprehensive Loss on the Consolidated Balance Sheet. INTEREST INCOME, NET Net interest income for fiscal 2024 and fiscal 2023 was $2.1 million for each period. We invest excess cash in short-term, US government-backed investments.
Interest costs for both fiscal years were immaterial because we had no outstanding debt and no borrowings under our credit facility during any period. INCOME TAXES As a result of releasing substantially all of the valuation allowance against our deferred tax assets during fiscal 2022, we have returned to a normal tax provision for fiscal 2023.
Interest costs for both fiscal years were immaterial because we had no outstanding debt and no borrowings under our credit facility during either period. INCOME TAXES For fiscal 2024 and fiscal 2023, the Company’s effective tax rate was 47.5% and 27.4%, respectively.
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.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative (“SG&A”) expenses were $198.3 million, or 42.5% of sales, for fiscal 2024 as compared to $196.5 million, or 37.7% of sales, for fiscal 2023.
We will recognize an impairment when the undiscounted cash flow estimated to be generated by those assets is less than the assets’ carrying amount. If actual market conditions are less favorable than management’s projections, future write-offs may be necessary.
If actual market conditions are less favorable than management’s projections, future write-offs may be necessary.
Management views SG&A expenses through two primary cost centers: Customer Facing Costs and Corporate Support Costs. Customer Facing Costs, which include store payroll, marketing and other store operating costs, represented 21.3% of sales for fiscal 2023 as compared to 20.8% of sales for fiscal 2022.
For fiscal 2024, marketing costs were 6.8% of sales as compared to 5.9% in fiscal 2023. For fiscal 2025, we expect our marketing costs to be approximately 6.0% of sales, and we do not plan to pursue our brand awareness campaign at this time. Management views SG&A expenses through two primary cost centers: Customer Facing Costs and Corporate Support Costs.
The 80 basis point increase in occupancy costs was due to a combination of the deleveraging of sales and increased rents as a result of lease extensions.
GROSS MARGIN For fiscal 2024, gross margin, inclusive of occupancy costs, was 46.5% compared to 48.4% for fiscal 2023. The decrease of 190 basis points was due to an increase of 230 basis points in occupancy costs, as a percentage of sales, primarily due to the deleveraging from lower sales and increased rents from lease extensions.
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.
Our inventory has decreased by over 26% and our inventory turnover rate has improved by over 30% from fiscal 2019. OFF-BALANCE SHEET ARRANGEMENTS We have no off-balance sheet arrangements as defined by 303(a)(4) of Regulation S-K.
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.
On September 3, 2024, the Board approved a new stock repurchase program pursuant to which the Company was authorized to repurchase up to $15.0 million of its common stock, including excise tax, through open market and privately negotiated transactions. The stock repurchase program expired on February 1, 2025.
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.
The decrease was primarily due to a decrease in comparable sales of 10.6%, with stores down 9.6% and the direct business down 12.8% and the impact of the 53rd week in fiscal 2023, partially offset by an increase in non-comparable store sales and reduced loyalty program costs. Sales for the 53rd week of fiscal 2023 were $7.1 million.
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.
The capital expenditures for fiscal 2024 primarily related to stores, information technology projects, distribution center and facilities. For fiscal 2025, we expect our capital expenditures to range from $19.0 million to $21.0 million, net of tenant incentives.
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%.
We continue to take proactive measures to manage our inventory and adjust our receipt plan given the ongoing macroeconomic factors affecting consumer retail spending. At February 1, 2025, our clearance inventory was 8.6% of our inventory, as compared to 9.5% at February 3, 2024, and below our historical benchmark of approximately 10.0%.
Removed
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.
Added
Non-GAAP Financial Measures We monitor certain financial measures other than those that are in accordance with U.S. generally accepted accounting principles (“GAAP”) on a regular basis in order to track the progress of our business.
Removed
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.
Added
These non-GAAP financial measures include free cash flow, free cash flow before capital expenditures for store development, adjusted net income, adjusted net income per share, adjusted EBITDA and adjusted EBITDA margin.
Removed
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%.
Added
We believe that our customers have pulled back from shopping for apparel and when they do shop, they have been very price conscious, gravitating toward our more moderate and entry-level price points. Our comparable sales for fiscal 2024 decreased 10.6%, with comparable sales from our stores down 9.6% and our direct business down 12.8%.
Removed
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.
Added
Despite the disappointing sales performance, we have maintained our disciplined operating regimen and improved our merchandise margin, thereby enabling us to maintain profitability and positive free cash flow. Despite our diligence to manage operating expenses, certain elements of our cost structure, including occupancy expense, were deleveraged by the sales shortfall.
Removed
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.
Added
Net income for fiscal 2024 of $0.05 per diluted share included an impairment charge of $1.3 million and a non-recurring accrual for estimated legal settlement costs of $1.0 million.
Removed
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.
Added
Adjusting for these non-recurring charges and impairment charges, adjusted net income for fiscal 2024 was $0.07 per diluted share as compared to $0.50 per diluted share for fiscal 2023. We have maintained a strong balance sheet with cash and investments of $48.4 million and a healthy inventory position, which was down 6.8% to fiscal 2023.
Removed
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.
Added
We had no borrowings under our credit facility during fiscal 2024, and at February 1, 2025 our availability under our credit facility was $64.7 million. We generated cash flow from operations of $29.6 million and utilized $27.7 million for capital expenditures, resulting in free cash flow for fiscal 2024 of $1.9 million.
Removed
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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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAt 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.
Biggest changeDuring fiscal 2024, 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. In addition, under our Credit Facility, we have available letters of credit as sources of financing for our working capital requirements.
We regularly assess these risks and have established policies and business practices to protect against the adverse effects of these and other potential exposures. Interest Rates 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.
We regularly assess these risks and have established policies and business practices to protect against the adverse effects of these and other potential exposures. Interest Rates Our exposure to market risk for changes in interest rates relates primarily to our investments, which consisted of cash equivalents and short-term investments at February 1, 2025.
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.
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 1, 2025, we had $36.5 million in short-term investments, which were invested in U.S. treasury bills, and $8.2 million invested in money market accounts.
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.
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. At February 1, 2025, we had no outstanding borrowings under the Credit Facility. 36
Removed
At February 3, 2024, we had no outstanding borrowings under the Credit Facility. 35

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