Dive Brief:
- Posting record sales and profit numbers for fiscal 2021, Destination XL came roaring out of its pandemic hole last year. The company’s net income of $56.7 million was its first positive annual profit since 2012.
- For the year, the men’s apparel retailer’s net sales topped half a billion dollars for the first time in its history while comparable sales rose 68.5% from last year, and were up 14.2% from 2019 levels.
- The company also retired its long-term debt, paid off its revolver and renegotiated its credit facility after generating more than $70 million in free cash flow during the year, CEO Harvey Kanter said in a press release.
Dive Insight:
As of late January, Destination XL is without long-term debt or borrowings under its credit facility, thanks to the best sales year in the life of the big-and-tall specialist.
That alone is a huge win for a company that has posted a net loss every year for nearly a decade, was disproportionately affected by the pandemic’s impact on consumers, and, in recent years, has made regular appearances on default and bankruptcy watchlists.
“At the onset of the pandemic in 2020, DXL was in survival mode, and we took both meaningful and sometimes difficult actions to ensure that we would live to fight another day,” Kanter told analysts last week, according to a Seeking Alpha transcript. “During that time, we also began to set the table, so to speak, to build towards long-term success.”
The cancellation of wedding and other events, as well as the work-from-home movement prompted by the pandemic, took its toll on Destination XL’s sales and finances in 2020. With revenue constrained, the company cut costs out of the business and negotiated leases.
Kanter said on the conference call that “signs of hope emerged” in the first quarter last year, as traffic and demand ticked up, and consumers showed “a willingness to reengage with apparel and life outside of the home.”
Destination XL responded to those positive signals in the market with deeper consumer research and “a transformative digital strategy to create deeper, more meaningful engagements with DXL supported through marketing, technology and merchandising initiatives,” Kanter added.
One of the retailer’s primary focuses has been on fit. “We consistently hear from big and tall customers that fit is the single most important factor in their purchase journey, and we believe our proprietary fit and fit expertise is a strategic asset,” Kanter said, noting also that the company has dedicated teams focused on development of precise specifications.
Kanter also said on the call that the retailer has ended its wholesale relationship with Amazon, partly due to supply chain volatility — which weighed on Destination XL’s inventories over the year — lower margins and “the shifting dynamics of the business.”
The company noted in its 10-K that the relationship with Amazon primarily drove its wholesale business, which amounted to $5.4 million in 2021, down from $16.6 million in 2020, with much of that revenue coming from masks Destination XL sold to fill pandemic demand. On the call, Kanter left open the possibility of being a wholesale partner to others down the road.
Looking ahead, Kanter said in the release that the retailer is focused in 2022 on customer acquisition, greater retention and new distribution channels to grow sales.
