Good day. And welcome to the Destination XL Group Q4 2017 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the call over to Tom Filandro. Please go ahead.

Thank you, Alicia and good morning, everyone. Thank you for joining us on Destination XL Group's fourth quarter fiscal 2017 earnings call. On our call today is David Levin, our President and Chief Executive Officer and Peter Stratton, our Executive 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 Investor Relations Web site 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, adjusted EBITDA, gross margin, marketing costs, capital expenditures, earnings per share, free cash flow, store openings and closings, and the Company's ability to execute on its strategic plan. 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 is 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. David?

Thank you, Tom and good morning, everyone. Earlier today, we made three announcements at DXL. First and foremost, we announced our fourth quarter and full year 2017 financial results. Second, we announced that we have just hired a new Chief Marketing Officer, who will be guiding the future growth of our brand. With Jim Davey, we believe we have found an outstanding individual who will play a major role in growing the top-line. And finally, after very careful consideration and discussion with our Board of Directors, today I am announcing that I’ve decided to retire as President and CEO of the Company by the end of 2018, and I will address that more in detail later in the call. First, I would like to highlight our fourth quarter results and talk to you about our strategy for 2018. We were pleased to end the year with a strong fourth quarter total company comp of 4.3%. This is the highest quarterly comp that we have delivered in the past nine quarters and we believe it is a strong indication that our business is headed in the right direction. Our store associates continue to deliver an outstanding in-store experience that is grounded and exceptional service, selection and fit. Our store productivity metrics, including dollars per transaction and conversion, were both up for the quarter on flat traffic, which drove the nice increase in transactions for the quarter. Our e-commerce business is also growing as we continue to enhance and refine our Web site experience and our digital marketing initiatives. Recognizing that we are only seven weeks into new fiscal year, I think it’s worth noting that today our total company comparable sales are trending positive low single-digits and we are encouraged about our prospects for 2018. A primary reason for the optimism…

Thank you, David and good morning everyone. I'd like start this morning with the brief summary of our fourth quarter and full year fiscal 2017 results. For the fourth quarter, net sales increased 10.5% to $135.5 million. This increase was primarily driven by an extra week of sales for fiscal 2017. The 53rd week accounted for approximately $6.9 million of additional sales this quarter. However, we also saw a strong 4.3% lift in comparable sales for the quarter. This quarter was the strongest comparable sales increase that we’ve experienced in the last nine quarters. Gross margin for the fourth quarter, including occupancy costs, was in line with our expectations at 45% compared to 44.9% for the fourth quarter of fiscal 2016. Occupancy cost as a percentage of sales leveraged 90 basis points and were largely offset by merchandise margin contraction of 80 basis points. The reduction in merchandise margin was primarily due to increased promotional strategies over the peak December selling weeks. Our SG&A expense for the quarter increased by approximately 27% or $11.8 million over Q4 of fiscal 2016. As we’ve discussed on previous calls, the increase was driven primarily by $7.1 million increase in marketing costs related to our holiday advertising campaign and our digital marketing initiatives. In addition, we recorded approximately $2.5 million of expenses associated with the 53rd week. Our adjusted EBITDA for the fourth quarter adjusted for impairment charges was $5 million compared to $10.8 million in the prior year quarter. The primary driver to the decline in adjusted EBITDA compared to last year was $7.1 million increase in marketing costs. GAAP net loss for the quarter was $3.3 million or $0.07 per share compared to a net income of $1.8 million or $0.04 per share a year ago. The net loss on a non-GAAP…

Now today, we announced that I plan to retire as CEO by the end of 2018. It has truly been an amazing journey. Over the past 18 years, under my leadership, the company has transformed itself from a dated brick and mortar and catalog business to DXL, a fresh and dynamic omni-channel retailer serving XL guides around the world with their preferred brands. I believe that now is the right time for a new CEO to take the helm and lead DXLG in its next exciting phase or growth. I want to thank our Board of Directors for supporting me and my management team throughout this transformation and having the vision to invest in our dream. The board will be initiating a search to identify my successor from both internal and external candidates. And I will be working closely with the board to ensure a smooth transition. I am so proud of all that our team has accomplished both at corporate and in the field. We've created a new brand, built an optimal fleet of new stores and developed the wining e-commerce strategy that now accounts for over 20% of our sales. With our platform, we are confident that DXL will continue to gain brand awareness and market share and will be a dominant player in the big and tall men's apparel market. I've been so fortunate to have work side-by-side with so many talented people inside our organization and the 25,000 field employees who execute our vision every day. I also want to thank the vendors community who supported our goal to offer 100 national brands in big and tall sizes. We have succeeded with our core vision to make a life of an XL guy easier by providing and replace where he can satisfy all of his wardrobe needs. And with that operator, we will open the call for questions.

[Operator Instructions] We'll go first to Peter Rabover of Artko Capital.

So I have a question, and if I'm wrong please correct me. But it looks like you spent $7.1 million in extra marketing in SG&A this quarter and another $1 million in occupancy or merchandising discounts like you said promotionals are 8.1. And looks like you only got $5.3 million in same store sale. So am I missing something, it seems like a very bad return on invested capital. So can you maybe elaborate on that?

Well as we said, we were disappointed in the end and how the marketing campaign came through. Even though -- we had a nice comp for the quarter with at 4.3 but the commercial we ran, again we think it was a stretch, it was a high level commercial and we missed a lot of the key elements that have historically driven our customers into the store, which is brands, brand assortment, the power of the store. And again, we tried something different and did not give the payback. But I do want to reiterate that we’ve come back with a new commercial which was actually filmed this week and the testing scores were the highest we’ve had. So we feel very good about that. And we go forward from there. But yes, we were disappointed, but I think we’re back on track with a very strong message for the next commercial.

And then maybe you guys can talk about your free cash flow usage going forward. I hope I assume it’s to pay down debt.

So I think last year, our Board of Directors had authorized a share buyback program and we repurchased about 1.9 million shares of stock in Q1 and Q2. We executed about 40% of that program for a little less than $5 million at a time when I think we were expecting our free cash flow to be higher than it ended up. As the year progressed, the business wasn’t responding the way that we’d anticipated. And once we saw that the business wasn’t responding, we stopped buying back stock and focused on protecting the business and protecting our access to capital. So I think we’re in a similar position today. We’re not announcing a share buyback program today, which means that any excess cash we generate would be used to pay down debt.

And then I guess I will make a comment you guys don’t need to answer this, per se. But it sounds like you’ve tightened up SG&A costs and obviously things are not going as well as had hoped. So I would only comment that we keep the retirement cost pretty low that you had mentioned, because I don’t know if that deserve that. So thank you I appreciate it.

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

Your direct business continues to perk up as a percent of total sales, I think it was 99 a year ago to 21 this year. Is there an ultimate goal as far as where that percentage can go?

We talked about that a lot and it gets more challenging as we get to bigger base. But there’s nothing to say that our direct business can’t be 25%, 30% overtime. I mean all the reports that we’re reading that seems to be in line with where the omni-channel will start to mature. But we’re pushing it forward. Our plans for this year are significantly higher comp on direct than in our stores. And we’re allocating a lot of our resources and capital to that endeavor and as you heard me through the speech. We have some technology that we’ve been waiting for years that we believe is going to really vault our sales on direct based on the ease of shopping, all that we’re putting into the mobile experience, customization, segmentation. These are all big drivers for us. And if could improve that customer experience, speed it up, make it more efficient and simplify the check out process, we anticipate seeing a nice lift in our business I would say really third quarter of this year. Second quarter things being implemented give us a couple months to get it running smoothly, but I think in the back half year, we should be in very good shape and look for another bump in our direct sales as a percent of total sales.

And then in your comments, you talked about the Time to XL ad not working as maybe as well as you hoped. How about the -- now let's separate from the celebrity ads of David Ortiz and DJ Khaled and all that, right?

No, that was the same -- that’s the same commercial.

It’s the same campaign, okay. Was there some evidence that it drove new customers into the stores?

Not to our expectations. It did create awareness, because we did get up to 42%, which is the highest we’ve ever had. But it did not drive the traffic into the stores as we had anticipated. Yet, we still had a very strong comp, we came back, we called an audible, did some special promotion for our loyalty members, which covered a lot of the shortfall of traffic. That promotion did drive a lot of traffic to our stores. So again, I think we reached a little too high for who our customer is, really focusing on the messaging we have great looking stores, we have brands, we have broad assortments, and great customer service. And you’ll see the next commercial, which is breaking with the NFL draft, identifies each one of those points. And again our copy testing that we do before we run a commercial, comparing this to not only Time to XL, but another one of our strong promotions, the results exceeded every commercial we've ever run. So I think we learned a lot and have a high degree of confidence that this new commercial breaking is going to be driving traffic to the stores.

Will the new commercial, does that still have some of the same celebrities or is it not a celebrity thing?

It’s not a celebrity driven thing. It's talking about who we are. Again there's customers out there that just still don't understand what DXL is all about. We win once they step in the door. We’ve accomplished what we need to do. Once they’re in the door, they love what they see. And again, it’s still that driving that awareness. Again, when we started this several years ago, our awareness was 12%. We're at 42% and it continues to grow. And as that grows, our traffic grows, our comp sales grows and we're very driven on that imitative.

You stated that your brand awareness is 42%, up from 38%. Is that a year-over-year improvement or what's the timeframe on that?

That was from the previous quarter.

From the beginning, right, so before we launched the Time to XL campaign, it was 38% after the time to XL campaign, it was 42%.

Last question, if you guys were -- if you performed at the midpoint of your guidance range, is that you just provided today. Where do you think you debt would be in one year?

So if we performed at the midpoint of the guidance range, I would look to the midpoint of the free cash flow range, which is $19 million to $15 million. So take $12 million as the midpoint, debt would be about $12 million less than it is at the end of 2017.

We have no further questions. I would like to turn the call back over to David Levin for any additional or closing comments.

Well, thank you all for being on the call. We are excited about 2018. A lot of initiatives that we've been looking for to over the last several years are going to come to fruition this year. And again, we think we're going to have a stellar year. So thank you all for listening and look forward to talking to you on the next call?

That does conclude our conference for today. We thank you for your participation.