company background image
DXLG

Destination XL Group NasdaqGM:DXLG Stock Report

Last Price

US$6.09

Market Cap

US$376.1m

7D

12.2%

1Y

0%

Updated

06 Oct, 2022

Data

Company Financials +
DXLG fundamental analysis
Snowflake Score
Valuation5/6
Future Growth0/6
Past Performance5/6
Financial Health6/6
Dividends0/6

DXLG Stock Overview

Destination XL Group, Inc., together with its subsidiaries, operates as a specialty retailer of big and tall men’s clothing and shoes in the United States and Canada.

Destination XL Group, Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Destination XL Group
Historical stock prices
Current Share PriceUS$6.09
52 Week HighUS$9.00
52 Week LowUS$3.27
Beta1.52
1 Month Change6.84%
3 Month Change66.85%
1 Year Change0%
3 Year Change290.39%
5 Year Change193.49%
Change since IPO242.56%

Recent News & Updates

Sep 20

Destination XL CMO Ujjwal Dhoot to depart, James Reath to succeed

Destination XL Group (NASDAQ:DXLG) has announced that James Reath will join its team as Chief Marketing Officer on Sept. 26, 2022. Prior to joining DXL, Mr. Reath served as SVP, Marketing, Bed Bath & Beyond, and SVP, Marketing, Macy’s. Mr. Reath will replace Ujjwal Dhoot, the Co.’s current Chief Marketing Officer, who has informed the Co. that he will be leaving the Co. effective Oct. 11, 2022.

Sep 14

Destination XL Group: Another Solid Quarter

Summary Destination XL Group released its Q2 results last month, reporting quarterly revenue of $144.6 million, a 4% increase from the year-ago period and above management's expectations. This prompted the company to raise sales guidance to $530 million at the mid-point (2% increase), and combined with share buybacks, DXLG should grow annual EPS year-over-year despite tough comps. With the stock trading at less than 8x FY2022 earnings estimates with a net cash position and room for further buybacks, there's no question the stock is reasonably valued. That said, I see the stock as getting a little bit extended short term, so I don't see any way to justify chasing the stock above $6.35. Just over eight months ago, I wrote on Destination XL Group (NASDAQ:DXLG), noting that while it was reasonably valued at $5.60, the stock was not without risk, especially with a riskier market backdrop. This was because the stock was up 1500% from its lows and running into resistance when the S&P 500 (SPY) was trading in nosebleed territory from a valuation standpoint. Often, in periods of market weakness, the first names to get sold are the best performers, given that they offer an area to raise cash without realizing losses. DXLG Chart (TC2000.com) While I didn't expect a 25% correction in less than three months, taking profits on DXLG was the right move, with the stock sliding more than 40% over the following six months to a low near $3.30. Since then, the stock has put together an incredible rally following a stronger-than-expected Q2 report. With DXLG trading at less than 8x earnings with its turnaround making solid progress, paying up for the stock here might be tempting. However, with DXLG nearly 100% above its 200-week moving average and short-term extended, I don't see any way to justify chasing the stock above $6.35. Sales Performance Destination XL Group ("Destination XL") released its Q2 results last month, reporting revenue of $144.6 million, a 4% increase from the year-ago period. This was driven by comp sales of 6.1% vs. Q2 2021 levels, with a 3.6% increase in retail sales and a 12.7% increase in direct sales. While these figures may not seem that impressive, this was during a period where several retailers struggled immensely due to the pullback in demand, especially as rising gas prices further dented disposable income. Given this solid sales performance, management raised guidance by $10 million at the mid-point to $530 million, translating to sales growth in a recessionary environment despite lapping difficult re-opening comps last year. Destination XL Group - Quarterly Revenue (Company Filings, Author's Chart) According to management, the robust sales performance was helped by higher average order values, with a deeper penetration in higher ticket items and fewer markdowns. While the former could be an unusual boost with a return to weddings and formal events after an unusual two years due to lockdowns and social distancing, Destination XL's brand repositioning has contributed to less promotional pricing and clearance inventory sitting at multi-year lows. This was evidenced by the clearance inventory being 400 basis points lower than 2019 levels at just 6.9%. Notably, its level of clearance discounting has also increased from a maximum of 40% vs. up to 75%, a meaningful improvement. Finally, given the strong digital sales performance (~30% of sales were digital vs. 28% in Q2 2021), management reiterated its belief that it has the potential to see 35-40% digital sales long-term, which would be a very positive development. The company also noted that it's rolling out a revamped loyalty program in Q3, potentially providing better customer insights and visits to help the company better weather the difficult macro backdrop of declining personal savings rates. Let's look at margins and earnings: Margins & Earnings Trend Moving over to margin performance, Destination XL reported flat margins despite the impact of higher freight and materials costs, with margins coming in at 52.1%. On a full-year basis, the company now expects margins to be flat or better than last year, setting the company up for annual EPS growth when combined with higher sales and share buybacks. Notably, the company did a great job with its share buybacks year-to-date, repurchasing 2.9 million shares at ~$4.38/share, well below current levels. It currently has authorization for another $2.3 million in share buybacks as of quarter-end, representing just ~0.50% of its float. Destination XL Group - Gross Margins (Company Filings, Author's Chart) Given the solid margin performance due to better-than-expected sales in H1, Destination XL is on track to grow annual EPS year-over-year despite a blockbuster year in FY2021. Even using the lower end of earnings estimates, annual EPS should increase year-over-year to $0.85, with the potential for further earnings growth in FY2023, assuming we see some moderation in freight costs. A single-digit annual EPS growth rate may not seem like a big deal, but when we compare this to retailers like American Eagle (AEO) and Abercrombie (ANF), which were also up against tough comps and have seen earnings fall off a cliff, this performance is very commendable. DXLG Earnings Trend (YCharts.com, Author's Chart) One potential reason for the outperformance is that Destination XL is in a league of its own, being one of the only companies serving its category in its capacity. Combined with its digital transformation and brand repositioning that is driving higher order values, this allows it to grow sales with higher orders, offsetting the difficult comps from a traffic standpoint. So, while there's no such thing as recession-resistant in a discretionary segment of Retail like clothing, Destination XL could be more immune than its peers, given that it's not fighting for peers with a shrinking pool of discretionary dollars from consumers given its unique market position. Valuation Based on ~62 million shares and a share price of US$6.35, Destination XL Group trades at a market cap of ~$394 million, an estimated free cash flow yield of ~10%, and approximately 7.5x FY2022 earnings estimates. This is a very reasonable valuation for a company in a successful turnaround and is certainly the case if the company can deliver on its goal of double-digit unit growth over the next few years and 35%+ digital sales. That said, small-cap stocks typically trade at a much lower valuation than their mid-cap and large-cap peers due to more inferior liquidity, meaning that larger funds cannot own these stocks in most cases. Given what I believe to be a fair earnings multiple of 9.0, I see a fair value for DXLG of $7.65. While this points to more than a 20% upside to fair value, assuming the company meets or beats earnings estimates, there are several other value names in the Retail/Apparel space thanks to the recent market turbulence. Some examples include Crocs (CROX) at just 7x FY2022 earnings estimates and Capri Holdings (CPRI) at less than 7x FY2022 earnings estimates. CROX Historical Earnings Multiple (FASTGraphs.com) In summary, although DXLG is cheap, I see these names as a little more attractive, given that they have historically traded at double-digit earnings multiples but have fallen out of favor. Having said that, Destination XL is unique in that it benefits from a lack of competition, potentially making it more recession-resistant given that it isn't fighting with peers over slowing traffic in its category. Let's look at the technical picture:

Sep 04

Volume Breakout Report: September 3, 2022 (Technical Analysis)

Summary Performance numbers on past VBR selections are discussed. 2 new buy signals are explained. Destination XL is highlighted and analyzed in more detail. It was a rough week for the U.S. stock market. A mass rethinking of the future of inflation and interest rates took place, with bearish assumptions gaining the upper hand. Fed Chairman Powell’s more hawkish Jackson Hole speech over a week ago has set the tone for skittish selling by hedge funds and regular investors. And, a trickle of business guidance warnings has become more pronounced over time since the beginning of the summer. At this point, Wall Street is preparing for a recession in the overall economy going into 2023. Adding to the negativity, real and reasonable doubts about whether the Fed will come to the rescue on further market weakness are now mainstream sentiment. My personal market musings and forecast has fluctuated from very bearish to start the year, to more constructive (even optimistic) at the stock market lows in May-June, to wondering out loud in late July and August if another round of serious liquidations is coming this fall. I have written several articles over the past few weeks discussing the probability of a developing liquidity crisis here, and the likelihood the Russell 2000 index would rollover here and lead the market lower again into September-October. However, I am very much a right and left-brain thinker, simultaneously. I can be very bullish on a list of stocks, while I am bearishly-positioned overall in portfolio design, with hedges and positions that increase in value as index values decline. Plus, my purpose on Seeking Alpha is to provide simple buy ideas for readers who may disagree with my macroeconomic calls, but love my stock picking performance. For sure, each individual will have their own view of market direction and future potential. I encourage all investors to go their own way deciding risks and rewards for themselves on individual company names and weightings in portfolio construction. (Note: I am admittedly wrong about immediate market direction half of the time.) VBR Performance I am not happy with losing money, as stock market prices declined sharply last week. Yet, I am thankful our Volume Breakout Report picks had a decent week in relation to the big declines in the S&P 500 and Russell 2000 averages. Slight relative gains (actually losing less money) were achieved over the past five trading days. Pictured below are graphs of 27 VBR picks over the previous six weeks for price performance (excluding dividends and trading costs), in comparison to the mainstream blue-chip SPDR S&P 500 ETF (SPY) and the iShares Russell 2000 ETF (IWM), the closest peer index for the majority of individual selections in this article. The latest six weeks of choices have "outperformed" the various index changes by +5.15% for a mean average against the IWM and +4.47% vs. the SPY, measured from Friday closing prices and explained in each weekend VBR article. Again, these impressive returns have occurred over six weeks or less. VBR Picks from August 26th Closing Price VBR Picks from August 19th Closing Price VBR Picks from August 12th Closing Price VBR Picks from August 5th Closing Price VBR Picks from July 29th Closing Price VBR Picks from July 22nd Closing Price New VBR Buy Signals Thursday and Friday witnessed the lowest number of search results in my quant-focused momentum formulas to date, at least the specific ones I am using to find VBR ideas during 2022. Since rising price and momentum trends are important, steep drops in the market automatically and mechanically generate fewer buy candidates. This situation could be signaling a vacuum of buyers in the U.S. equity market is developing, a harbinger of far lower prices in the weeks ahead. Anyway, I have two interesting picks from earlier in the week to explore. Destination XL Group The first buy idea is Destination XL Group (DXLG), operating as a specialty retailer of big and tall men’s clothing and shoes in the United States and Canada. While the company came close to bankruptcy in 2020 on pandemic store closures and weak financials, a major restructuring and right-sizing of the company (including share issuance to raise liquidity) appears to have put Destination XL on a better path for investors. A leaner cost structure and an improved online/digital presence have delivered record profitability in 2021-22, as sales have bounced back strongly. In fact, DXLG has now paid off all debt and is using free cash flow to buy back shares. At the end of July, the company held $129 million in current assets like cash and inventory vs. $102 in total liabilities outside of long-term store lease agreements. Earnings are projected to settle back into a more normal range next year, as sales grow at a slower +6% rate in future years (close to inflation gains). The upside argument is Wall Street analysts have continually underestimated Destination XL’s recovery, and a trend of earnings/sales beats could support further price gains in the stock. Despite an industrywide slowdown in apparel sales from a drop in consumer discretionary spending, management raised guidance for the rest of the year last week. Seeking Alpha Table, Destination XL - Analyst Estimates, September 2nd, 2022 Seeking Alpha Graph, Destination XL - Results vs. Analyst Estimates, September 2nd, 2022 15x trailing free cash flow and 6x normalized EPS (DXLG took a large tax change gain last quarter) are noteworthy in a retail industry suddenly struggling, with the spike in inflation/interest rates hurting consumer confidence and disposable income. In terms of investing momentum, Seeking Alpha’s Quant Ranking is now exceptionally positive, in the Top 2% of its equity universe of 4,665 names. Another subtle clue on the potential for even bigger gains is contributors on this website have been caught flatfooted by the strong operating performance. On the table below I have circled the Hold rating from previous author efforts going into next week. I have noticed over many years, when SA Author Ratings are a far distance from the Quant rating, it is usually a profitable course of action to follow the computer-generated forecast. In essence, plenty of new investor interest on top of changes in existing analyst/owner enthusiasm could push price for DXLG considerably higher. Seeking Alpha Quant Rating vs. Author Ratings, Destination XL - September 2nd, 2022 The striking and exciting part of the Destination XL chart is most retailers have been crumbling in price during the summer. So, a wicked high-volume breakout pattern really stands out. Whether this outperformance trend continues is open to question, and may depend on how severe a developing recession becomes. If I knew consumer spending would be strong in 2023, I would be uber-bullish on DXLG currently. StockCharts.com, DXLG - 12 Months Daily Values PrimeEnergy Resources I have found another small oil/gas play with hundreds of producing wells in Texas and Oklahoma. The company has a history of strong management, efficient operations and above-average investor returns over the last decade vs. the Big Oil names investors have overweighted in 2022. Proof positive of the quality of its business assets and investment setup, PrimeEnergy Resources (PNRG) has solidly outperformed the oil/gas industry for price change since early summer. During the first six months of 2022, revenue grew 127% as production jumped and energy selling prices skyrocketed. EPS went from a loss to $11, with half of the year left to play out. On a prorated basis for the second half, the current P/E is closer to 5x. The balance sheet is getting stronger with $25 billion in cash and current assets vs. ZERO debt and $85 million in total liabilities. Today’s $180 million market cap is quite the steal vs $118 million in tangible book value, holding $568 million in oil/gas wells at cost, depreciated to $173 million in net property. Using first-half results as a proxy, operating cash flow is running at $55 million annualized, for a cash flow multiple just above 3x.

Shareholder Returns

DXLGUS Specialty RetailUS Market
7D12.2%3.8%3.3%
1Y0%-32.9%-20.4%

Return vs Industry: DXLG exceeded the US Specialty Retail industry which returned -31.3% over the past year.

Return vs Market: DXLG exceeded the US Market which returned -18.8% over the past year.

Price Volatility

Is DXLG's price volatile compared to industry and market?
DXLG volatility
DXLG Average Weekly Movement9.1%
Specialty Retail Industry Average Movement8.0%
Market Average Movement6.9%
10% most volatile stocks in US Market15.6%
10% least volatile stocks in US Market2.9%

Stable Share Price: DXLG is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 9% a week.

Volatility Over Time: DXLG's weekly volatility (9%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
19761,353Harvey Kanterhttps://www.dxl.com

Destination XL Group, Inc., together with its subsidiaries, operates as a specialty retailer of big and tall men’s clothing and shoes in the United States and Canada. Its stores offer sportswear and dresswear; fashion-neutral items, including jeans, casual slacks, T-shirts, polo shirts, dress shirts, and suit separates; and casual clothing. It also provides tailored-related separates, blazers, dress slacks, dress shirts, and neckwear; and vintage-screen T-shirts and wovens under various private labels.

Destination XL Group, Inc. Fundamentals Summary

How do Destination XL Group's earnings and revenue compare to its market cap?
DXLG fundamental statistics
Market CapUS$376.10m
Earnings (TTM)US$93.90m
Revenue (TTM)US$527.23m

4.0x

P/E Ratio

0.7x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
DXLG income statement (TTM)
RevenueUS$527.23m
Cost of RevenueUS$261.05m
Gross ProfitUS$266.17m
Other ExpensesUS$172.28m
EarningsUS$93.90m

Last Reported Earnings

Jul 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)1.52
Gross Margin50.49%
Net Profit Margin17.81%
Debt/Equity Ratio0%

How did DXLG perform over the long term?

See historical performance and comparison