Good day and thank you for standing by. Welcome to the Q1 2022 Destination XL Group Incorporated Earnings Call. At this time all participants are in a listen-only mode. After the speaker’s presentation there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to our speaker today, Shelly Mokas, Vice President of SEC and Financial Reporting. Please go ahead.

Thank you, Tanya, and good morning, everyone. Thank you for joining us on Destination XL Group’s first quarter fiscal 2022 earnings call. On our call today is our President and Chief Executive Officer, Harvey Kanter; and our Chief Financial Officer, Peter Stratton. 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 website at investor.dxl.com for an explanation and reconciliation of such measures. Today’s discussion also contains certain forward-looking statements concerning the company’s sales and earnings guidance and other expectations for fiscal 2022. 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, including, but not limited to, the crisis in Ukraine, supply chain disruption, labor availability and disruption from COVID-19. Information regarding risks and uncertainties is detailed in the company’s filings with the Securities and Exchange Commission. I would now like to turn the call over to our CEO, Harvey Kanter. Harvey?

Thank you, Shelly, and good morning, everyone. I’m thrilled to speak with you today about our first quarter results and the progress we’re making against our goals and objectives this year. Well, our earnings call covered a lot of ground regarding 2022 strategic plan. Today’s remarks are purposely briefer and meant to provide a higher level update on progress to-date, as well as a preview of what is to come. We truly value the engagement both on these calls and with the investor community, and respectfully want to ensure ample time for follow-up questions and other further discussions. If you recall, during our last call in March, I spoke about DXL’s transitioning from playing defense to playing offense and we have continued that disciplined attack, with the business results thus far exceeding our expectations in topline sales and bottomline earnings. DXL’s Q1 results speak to the growth of mindset in action. We grew at the higher end of our expectations. And we believe that our message is resonating with consumers all without having to rely on the coupon crutch or discounting. Our comp sales are strong, our inventory position is improving, our customer file is growing and our markdown rates are declining, which in turn means that our margins are improving. We’re messaging once focused on discounting. It continues to be replaced by the DXL difference, with new customers drawn to the combination of fit, assortment and an experience that is unique to DXL and finding that we fit his body, fit his life and fit his style, rather than just purely selling at, we haven’t evolved to engaging with, elevating our extensive and often exclusive assortment with an experience that empowers the big and tall customer to look and feel his best. Big and tall is all we do…

Thank you, Harvey, and good morning, everyone. Today I want to give you just a little more color around our Q1 financial results and our expectations for the rest of fiscal 2022. Let’s start with sales. Comparable sales for the first quarter were up 19.5% over Q1 of last year. This growth was driven by both our stores, which were up 20.8% and our direct channel, which was up 16.7%. The resurgence of customers returning to stores, which we started to experience last year continued throughout Q1 of 2022. Strong growth in store traffic fueled monthly store comps of 59.5% in February, 9.1% in March and 14.4% in April. You may remember that it was around mid-March last year when we first started to see the surge in store sales, so we were especially pleased to see a very respectable growth in March and April on top of last year’s strong performance. We were also pleased by the strength of the direct business even in the face of this surge in store traffic. Direct growth was driven by double-digit increases on the website, cross channel sales initiated by stores and fulfilled by a direct, and also our marketplace business. Direct made up over 30% of our Q1 sales and while store growth this quarter slightly outpaced direct growth, in the long run we still expect the penetration of the direct business to increase over time. I also think it would be helpful to give some direction on what we’re seeing with sales regionally throughout the country. The Northeast and Northwest, both of which underperformed the rest of the country much of last year have finally rebounded and put up some very strong results in Q1. We believe there is more run way here that will continue to benefit our sales…

Certainly. [Operator Instructions] And our first question will come from Jeremy Hamblin of Craig-Hallum. Your line is open.

Thanks and my congratulations on the really strong results. I wanted to delve into two things here. As you noted, you’ve had your strongest new-to-file customer growth, I think, at least in the last five years. I wanted to get a sense of two things. First is, one, how is that tracking -- how did that finish up for Q1, how is it tracking for Q2? I think it was up about 43% at your March update. And then, secondly, I wanted to get a sense for, there’s been a lot of noise out there and definitely some retailers talking about slowing of trends. I wanted to get a sense for what you were seeing here in the first six weeks of Q2 on comp sales?

Jeremy, it’s Harvey. I’ll handle the first part of the call. We’re actually not going to continue to share the percent -- the actual percent of growth rates. We believe it can continue to communicate material competitive information and so we’ve tried to characterize kind of the success we’ve had with the growth rates both on an absolute basis, as well as new-to-file. And hopefully that characterization, in addition to the actual sales results, gives you enough of a sense of where we’re tracking and our continued view that the new-to-file growth rates is a proxy for share market.

Got it. And the quarter-to-date trends?

Our quarter-to-date content -- trend continues with respect to the overall new file. We actually hit a new milestone in the absolute size of the current zero-month to 12-month file and so we feel really good about where we are.

And how about on your sales trends in general, it -- based on our checks that appears as though you’ve actually continued to see very strong results on a year-over-year and relative to 2019, if you prefer, any color you can share on that?

Our initial May result, with May, almost at this point done is in line relatively speaking with a quarter, and I would leave it go with that, but relatively in line with our Q1 performance.

Got it. And then I wanted to -- you’ve got a couple of important things coming up here, Father’s Day, I think, is a key event. I want to understand with the increased investment in marketing, are there is -- are there anything different that you’re looking to change and how you’re marketing around that particular event? And then, I also wanted to get a sense of the impact that you’re seeing you have some new exclusive brand deals, it sounds like you’re exclusive brands, in particular, I think, it sounds like a private label is doing well. But any additional color that you could share on that would be great? Thank

Yeah. On overall marketing, we continue to literally lead into what we’ve spoken about, which is lead with the brand positioning, lead with the fit, lead with the gifting capability of the company to support her in buying for him, as well as the unique way we engage, which is unique product and unique fit and obviously the experience. And it’s really nothing different. We continue to test a level of promotion at a very selective level, and we continue to believe and see that there’s not an elasticity with respect to driving incremental traffic and incremental profitability on that test. But we continue to try to evaluate ways to engage consumers. We are much more excited about the upcoming loyalty launch and the way we’re create superior value through a whole multitude of new rounds of loyalty, partnerships in terms of why they engage with us and reward points, which will ultimately drive them back into the store or online to make additional purchases using reward points, which is actually now a currency. So we feel really good about the way we’re engaging. In terms of the new brands, I’m not exactly sure what you’re alluding to. The fact of the matter is we have launched the big and tall essentials on two marketplaces. That’s really the newest brand launch. We continue to look for new-to-market curation in our merchandising strategy of new brands, but nothing has been announced yet. So you’ll see nothing materially new in the next quarter.

Let me clarify and ask maybe a little more specifically. So, DXL essentials, just understanding that, right, we’ve ended the prior wholesale relationship that at one point was contributing over $10 million to annual sales, I want to understand in terms of expectations of what you think DXL essentials could contribute to results this year? Is it in that same range, $10 million or maybe slightly better? Just wanted to get a sense of potential magnitude of that business?

Yeah.

Where it is today and where you think it could be maybe in a couple of years?

Yeah. It’s a great question. I want to make sure you’re clear and we don’t confuse anyone. Our business with Amazon and revenue that we had historically talked about was wholesale revenue. So it was basically the cost we were selling into them at and they were taking then the markup on that. So it’s a materially different conversations because the business we’re talking about today is one where we own the product and we are retailing it and so it’s -- your $10 million characterization, we were nearing 20 -- nearly 20 minute million at wholesale with Amazon and those were the numbers that we were talking about historically in a peak and that number then would be converters for Amazon and so it’s a very different number. The short story is for us, our big and tall essentials line is a growing business. And I think your characterization of $10 million at retail on an annual basis in 12 months is in the realm of reality. But it’s a growing business, which will -- and we will continue to look at ways to accelerate it and it could be at some point down the road far greater than that, but I think today, that’s a fair characterization.

Great. And that the -- that will be folded into your direct sales, correct, on a go-forward basis?

Yes. And that would be a 12-month annualized business. And remember, we only launched that business really in a meaningful way in, let’s say, February, it started to get on the website in December and January, but it really wasn’t launched until February and the full assortment line will continue to grow as we enter into fall.

Great. Thanks for taking my questions and best wishes.

Thanks so much.

And our next question comes from Raphi Savitz of RYS Advisors. Your line is open.

Hey, Harvey. The execution continues to be just awesome. I’d love to hear and certainly your comments about kind of improving the full price selling were certainly great to hear. Could you maybe talk about, what actions you’ve taken to-date or what actions you’ll take in the future that are really driving that and kind of where, let’s say, personalization fits in?

Yeah. It’s a great question. I will unfortunately, potentially be somewhat repetitive in that. It is very consistent what we’ve really talked about since I arrived and we talked about our mission, our vision, our strategy. We believe that price is really about value and it’s not the historical, how low can you go, and we believe and know that we have a proprietary fit that is unique and it’s not a, for lack of a better with a great outfit, where very often you get in DXL, that just becomes larger and it becomes larger on every part of the clothing that he wears. And so our unique fit is a way to really lean into why DXL is different. And then the merchant team has just done a yeoman’s job at really bringing to market exclusive products that you just can’t get anywhere else, and as the market recognizes the success we have in engaging him and the way we’re positioning, which is not around price, but around the value of the product, creating aspiration for how he looks, feels and his confidence to go around his daily life, they continue to want to sell us and we’re having increasing conversations with brands that are looking to create greater levels of inclusivity in their brand, with the -- basically the male customer that is big and tall. And then, obviously, the DXL difference, the experience that we talk about so often want to value and respect for him, such that he can feel confident, empowered and trusting in the relationship he has with us and the sales associates, whether it’s Bob or Mike or Sue, whoever in the store he interacts with, he actually has a relationship with them and it’s not a transaction, but it’s a powerful experience. And then ultimately creates a sense of community and belonging. And if we do all those things successfully, we believe that what we’re really creating is an experience that just can’t have anywhere else and it allows him to go about his daily life like every other, what I was call, average sized male in America, they can go shop anywhere he wants and have that experience, whereas it’s a much underserved community that we’re actually interacting with as a big and tall consumer.

Totally makes sense. And on a different note, could you frame up your CapEx needs over the next few years and kind of what the major buckets are?

Sure. So I’ll take that one. So this year we’re expecting that our CapEx is going to be somewhere in the $10 million to $12 million range and that’s primarily due to infrastructure improvements, IT projects that we have going on. Beyond that, as we get into the next few years, we are looking very carefully at what our store footprint is going to look like and we are definitely expecting to be opening more stores, which will increase CapEx to some degree. I don’t think we’re ready to put a number on that yet. But over the next three years to five years, we think that we could be opening upwards of 50 stores. But I think as that strategy continues to come together, we’ll speak more about that in future quarters.

Got it. Thanks, guys.

Thank you.

[Operator Instructions]

Operator, it sounds like there is no new questions and we would like to just thank everyone for their interest today and we look forward to gathering with everyone again at the 90 days period out and I wish you all the safest and happiest Memorial Days and the summer season.

Ladies and gentlemen, that concludes today’s conference. Thank you for your participation and have a wonderful day.