Please standby, we are about to begin. Good day. And welcome to the DXLG First Quarter Fiscal 2015 Earnings Call. Today's conference is being recorded. At this time, I’d like to turn the conference over to Mr. Jeff Unger. Please go ahead.

Thank you, Jennifer. Good morning, everyone. Thank you for joining us today for DXL first quarter fiscal 2015 call. On our call today is David Levin, our President and Chief Executive Officer; and Peter Stratton, our Senior Vice President and Chief Financial Officer. During today’s call, we will discuss some non-GAAP metrics to provide investors with useful information about our financial performance. Please refer to our earnings release, which was filed this morning and is available on our website at investor.destinationxl.com for an explanation and reconciliation of such measures. Today’s discussion also contains certain forward-looking statements concerning the company’s operations, performance and financial conditions, including sales, profitability, EBITDA, expenses, gross margin, capital expenditures, sales per square foot, earnings per share, store openings and closings, and other such matters. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those assumptions mentioned today, due to a variety of factors that affect the company. Information regarding risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission. Now, I would like to turn the call over to our President and CEO, David Levin.

Thank you, Jeff, and good morning, everyone. Before I get into our first quarter performance, I want to take a moment to explain where we are in the evolution of the DXL concept. Fiscal 2015 is a pivotal year for us building on a highly successful finished to 2014. We expect great things throughout this fiscal year and our drive towards profitability in fiscal 2016. There are three key factors that differentiate DXL from our direct competitors in the big and tall men's apparel sector that are helping to drive our success. First, we dominate the big and tall industry. We are by far largest specialty retailer, both brick-and-mortar and online sales. We have 357,000 stores among our three brands. The next largest competitor has four stores. It’s a huge advantage for us. In online web traffic we now have a 58% traffic share and that figure has been growing steadily each month. We have all the major brands our customers want, including 22 exclusive brands for big and tall. Other chains with substantially greater resources have tried to enter this segment may have all left the space. We are playing offense now and our future is extremely bright. Second, between Casual Male and now Destination XL, we have spent years gathering a great deal of intelligence and proprietary knowledge about each individual market in each store within each market. This first-hand knowledge developed from our legacy stores continues to be a crucial success factor in the DXL store rollout. I can't tell you how much of an advantage this is. We have years of proprietary sales, sizing and customer database based on real experience. That's why when you look at our performance of our 150 DXL retail stores only one store has been identified to be shutdown due to…

Thank you, David and good morning everyone. As you can tell from David's introductory comments, we've never been more confident in our ability to execute on our strategy. Once again we're very pleased to report a very strong quarterly result to all of you today. During the first quarter, we reported a total comparable sales increase of 5.5% versus 3.4% in the prior year quarter. Driving this improvement were our 104 DXL stores that have been opened for at least 13 months. These stores delivered a comparable sales increase of 8.7%, spurred by a 6.6% increase in the number of transactions. We are very pleased to see that sales continued to be driven primarily through traffic and conversion, which we know is much more sustainable long-term than growth from average transaction value. Moving onto gross margin. For the first quarter, gross margin including occupancy costs, was 46.2% versus 45.5% for the first quarter of fiscal 2014. The 70 basis point improvement was largely due to a 70-basis-point reduction in occupancy costs as a percentage of total sales. Driving that reduction in occupancy costs was a $600,000 one-time reversal of lease exit reserve. The reserve was reversed because we decided to open a Casual Male outlet store in a previously closed location with the lease term that doesn't expire until fiscal year 2018. SG&A costs for the first quarter were 39.7% of sales, compared with 42.9% in the first quarter of the prior year. Part of the reason for this 320 basis point improvement is due to the fact that we started our spring advertising campaign much later in the season than last year. The shift in advertising costs is worth approximately $1.7 million quarter-to-quarter. As David mentioned earlier, we do expect that SG&A will continue to decrease as a percentage…

[Operator Instructions] We will go first to Liz Pierce with Brean Capital.

Good morning. Congratulations to you guys what a phenomenal quarter in light of the current environment. So David just thinking about the data that you have in terms of your customer base, what are you seeing in terms of some of the original what’s caught in the first two years, the first kind of 2010 or '11 stores in terms of average tickets? Like how often are these guys coming back, and what are they buying?

We haven’t changed the buying pattern very much. They still tend to shop 2.2, 2.3 times a year. But again we are always gravitating towards a higher percent of brands and that’s really coming from the new customers versus our existing customers. And we are just showing our new [Technical Difficulty] continues to grow as we open new stores. We get more new customers. I think it’s mostly because of the awareness to the marketing over the last few years. And what we can identify with the new customer he is clearly younger. He spends more money and he does shop more often. So this has always been the master plan was how do we attract this younger guy who didn’t want to really shop in the traditional big and tall environment and offering up the DXL concept. He is really -- he loves what he is seeing.

Okay. And then in terms of the advertising, could you just -- I was a little bit confused I guess you started later this year, is that what I just -- I didn’t have a chance to go back and look?

Yes, Liz. So we started the ad campaign on Thursday night last week of the quarter which was the NFL draft. So the campaign was only in this quarter for three days, whereas last year we started the campaign about a week earlier. So there was more expense in the first quarter last year than there was this year.

So how should we think about that for impacting SG&A in Q2 on the basis point kind of round number?

So the shift in SG&A, the amount was about $1.7 million. And as you think about the rest of the year, the majority of the decrease in SG&A from last year to this year is coming in the first quarter. So you should think about Q2, Q3 and Q4 similar to last year.

Got it. And that’s really helpful. And then one more and get back in the queue. What about the plans for advertising for Q4, how does that match up with last year?

It matches up the same. We are going to be running it at the same timeframe we ran it this year.

So rate around Black Friday and then extending through the break before holiday, the actual Christmas?

It will take us through mid-December.

Mid-December. And there is nothing then in between when this one ends on Father’s Day and Black Friday or…?

That’s correct. We have two flights a year, each one about six weeks long, the one that starts in May and then the one that really starts in November.

Okay. I will get back in. I have some more things. But you guys great job and best of luck.

Thank you.

We will go next to Bernard Sosnick with Gilford Securities.

Good morning. I’d like to just touch on the end of the rack customer, what percentage of sales does that represent in the first quarter versus a year ago?

Yes. It was fourth -- rounding about 42% this year versus 39% last year.

Okay. And what are your findings with regard to spring advertising campaign, which is much different, much more dynamic? What are your readings in terms of awareness and responsiveness?

Okay. So to clarify what you’re saying is what we did this year is we have three 15 second spots that rotate sometimes as 115, that can sometimes is 215 second back to back. And clearly what we’re noticing is the tremendous lift in web traffic. When this commercial run, Bernie, you are right it’s more dynamic, it’s more entertaining, and it’s driving a lot more web traffic than we have over last campaign. So we love what the commercial is doing for us and again we will be running that commercial in the back half of the year also. So it’s nothing positive. As far as awareness, we don’t know that at this point in time until after we finish the campaign.

Okay. Then a question on gross margin. If you take out the lease reversal, the gross margin, merchandise gross margin would seem to increase -- have increased only slightly and that’s against the quarter a year ago where the gross margin was pretty heavily depressed. What could you tell us a little bit more about the gross margin ex the lease reversal cost?

Sure. So Bernie, the gross margin is going to continue to improve over the course of the year. One thing to keep in mind is when you are looking at our guidance for the full year, gross margin is flat in the guidance to what we gave last year. But keep in mind we did have $2.5 million one-time lease exit gain that’s in that number last year to make sure you’re comparing against. So we are continuing to make strides on it with driving IMU and controlling markdowns and that’s going to continue to uptick throughout the year.

Could you give us a little bit of a picture on the top casual male stores that are going to be converted in terms of the average size and productivity?

Yes. The top 25 casual male stores that we have today are all basically $900,000 or higher. They range from $900,000 to $1.4 million. Now that’s compared to the average Casual Male of $650,000. So, again, if we just start looking and trying to get 40%, 50% increases on a one-for-one conversion, is going to have much more topline power force, because these stores that are doing $1 million should come out of the box at $1.4 million, $1.5 million. So it's very exciting to us that most of the big ones that we have left to convert are going to be happening in the next year. We've been trying to get these stores converted for few years. It just the way it's turned out that most of them will convert into -- by to -- at the end of 2016, so we got a great lineup for next year.

And what was the average footage?

The average footage of this Casual Male’s that we’re converting is probably 3,500 to 3,800 square feet. And they will be -- most of these will be bigger than the five cases, so most of these will average about 7,000, 7,500 square feet.

Okay. Thank you very much.

We’ll go next to Lee Giordano with Sterne, Agee.

Hi. Good morning, guys. It’s Michael Gunther on for Lee. Couple questions, first back to the end of rack customer, obviously that continues to grow as a percentage of overall sales? How high do you think that can go long-term?

Well, I think, like, we tend to move -- continue to move the needle, now based on [NPD] [ph] studies, 65% of the big and tall market is in what we call end of the rack. Now we’ll never achieve that simply because there’s certainly more competition in a 40-inch waist than a 50-inch waist. But we continue to see it grow at a nice clip. Every quarter seem to increase and I think that's the power of DXL. How high? I don't know. It is difficult to put a number on that.

And then turning back to marketing, obviously, that’s coming down as a percentage of sales from the 7% peak. I think you mentioned the target longer-term might be to bring it back to 4%? How long do you think it might take to get back to that point?

By the end of next year, we have got...

Okay. Great. And then one more, the New York City store that was recently opened, look great. How the performance has been so far?

We're very pleased. We've been trying to get put a store and we are glad how to put a store in Manhattan for many years and we found a right location at a very reasonable rent structure and its one of our flagship stores. And we’re getting a lot of awareness there now and they’ll continue to build overtime, but that’s definitely going to be one of our top stores in chain.

Great. Thank you.

We’ll go next to Chris Krueger with Lake Street Capital Markets.

Good morning. Nice quarter.

Thank you.

Thanks, Chris.

Yeah. In your press release, you mentioned that, you outperformed your sales plan, despite the severe winter weather and difficult economic climate. Just wonder if you can give us any more insight into that, whether it's certain regions that underperformed or months-to-months sales or anymore insight there?

I think we pretty followed what every other retailer went through in the first quarter. There were some very tough weeks with the weather. We do have -- we are weighted a little heavier in the Northeast and we have the same problem everybody else did. But just from what we saw out there with the results of other retailers, we feel very good the way we performed.

Okay. Then with your new smaller footprint that you’re, kind of, working towards, you talked about entering [Technical Difficulty] markets and that there is a potential for greater number of stores that maybe [indiscernible] plan. Have you begun to enter smaller markets with that footprint or you still sort of filling in current markets with that?

We’re entering smaller markets on Shreveport, Louisiana and I could go on. But now we’ve been doing that for couple of quarters now.

Okay. And then on the competition front, you mentioned there is really no other nationwide retailer targeting the big and tall market. I think you have mentioned that the largest one has four stores. Has there been a sign of any others like going away in the last year or so?

Well, in the last year, JCPenney’s concept the boundary. They had 10 stores and they closed all their stores by last year’s fourth quarter. And really it’s small, independent mom-and-pops that slowly over time have closed their stores. When we come, bring a DXL store into a market, it's very difficult to compete with it.

All right. That’s all I got. Thanks a lot.

We’ll go next to Jack Balos with Focus Research.

I have a question regarding borrowings under credit facility. That amount in January of 2014 was $9 million. Then it increased to January of 2015 to $18.8 million. And as of May of this year, it's up to $40 million. My question is why is that increasing so rapidly? Do you have a limit in terms of your capacity to borrow? And what do you expect it to get to by the end of this year?

Sure. So Jack, the number that the revolver balance at the end of this quarter was $40.7 million. And the reason that that's going up is our revolver is serving two purposes. One is the primary source of funding for our seasonal inventory purchases. So as we stock up on our inventory moving into the end of the spring season that’s going to put pressure on the revolver. The other component is the fact that we’re using the revolver to fund the CapEx on the new DXL stores. So that number is going to increase this year. I think it's going up total about $20 million from last year. And then next year in 2016, we should be relatively neutral. And then in 2017, we start paying that back down. The key to that equation is making sure that we have enough availability. And our availability at the end of Q1 is almost $70 million. So we do feel very confident that we’ve got an adequate liquidity structure in place to make sure that we can not only meet our inventory requirements but also to finish building out the DXL stores.

Okay. Thank you.

We’ll go next to Liz Pierce with Brean Capital.

Thanks for taking my follow-up question. So David and Peter, regarding those top 25 stores, Casual Male stores that are converting, given how productive those stores are, were you guys or have you been doing any additional kind of marketing around that to make sure that the customer is aware, like basically getting it a little bit more attention so you don’t lose the sale?

Yes. As soon as we identify that we have a lease working pretty well down the road, we start the ambassador program where we bring in the video of the new store, the shopping bags come in, the signage comes in. We are way ahead of the curve where we used to be a few years ago. And the other part of that is to the detriment short-term for the DXL store, we’re going to keep that Casual Male store open for -- could be two, three months to continue to drive the customers that come in the existing store over to the new store. And again, our conversion has improved about 24% this year over last year. So, we’re all over that. We know that's critical and as soon as we get -- assign that the stores are going to convert, we’ve put into an action plan.

Okay. So basically doing what you've done before. Nothing extra for these larger-volume stores, I guess that was my question

No. No. I think we've got a good program right now and it’s nothing different.

Okay. And they will stay open post the DXL opening, which I think is beneficial. And then what about on the international front? I think you’ve talked before that you have been approached by various operators. Any update on that and your thoughts about perhaps pursuing it on a franchise basis?

Yeah. We are under discussion right now. I think in the next quarterly call, we will have a little more color on that to talk about.

Okay. Okay. Perfect. That’s all I have. And again, I will add my congrats and best of luck.

Thank you.

And at this time, there are no further questions.

Okay. Well, thank you for joining us on our call today. As I always do, I’d like to end by inviting you to visit one of our DXL stores and experience what we’ve been, what we’ve built into this concept. We are pleased to see many of you at our tour of our Manhattan store recently. And if you like to visit that store, which is convenient to many of you or any of our stores, please let us know and we will be happy to give you a tour. Look forward to speaking with you next quarter and thank you very much for joining us today.

This does conclude today's conference. We thank you for your participation.