Destination XL Group, Inc. (DXLG) reported its third‑quarter fiscal 2025 results on December 11, 2025, after market close. Total sales fell to $101.9 million, a 5.2% year‑over‑year decline, while the company posted a net loss of $0.08 per diluted share, missing the consensus estimate of a $0.05 loss. The decline in revenue reflects a broader slowdown in discretionary apparel demand and a shift toward lower‑margin private‑brand merchandise.
Gross margin contracted to 42.7% from 45.1% a year earlier, a 2.4‑percentage‑point drop driven by a 2.1‑percentage‑point increase in occupancy costs and a 0.3‑percentage‑point decline in merchandise margins. Higher rent expenses on new store leases and intensified promotional activity to support private‑brand sales contributed to the margin squeeze. Inventory remained healthy, with clearance inventory at 10% of total and an inventory turnover rate that improved 30% since 2019.
Comparable sales declined 7.4% for the quarter, with August down 6.7%, September down 9.3% and October down 5.8%. The decline was largely driven by weaker traffic in flagship stores and a slowdown in the direct‑to‑consumer channel, where online sales fell 4% year‑over‑year. Management noted that the shift toward value‑driven private brands has increased promotional spend, further compressing margins.
Cash and investments stood at $27.0 million, down from $43.0 million a year earlier, reflecting capital outlays for new store development and share repurchases. The company’s credit facility was amended to extend maturity to August 13, 2030, with a reduced capacity of $100 million, underscoring a focus on liquidity management amid earnings uncertainty.
Management emphasized that the company is pursuing three strategic initiatives—assortment optimization, FiTMAP technology, and targeted promotions—to counteract the current headwinds. President and CEO Harvey Kanter said the firm remains focused on “enhancing value for our customers while driving operational efficiency.” He added that the company’s private‑brand strategy is expected to deliver higher margins once the promotional cycle subsides.
The earnings release coincided with the announcement of a merger of equals with FullBeauty Brands, a move that is expected to create a leading inclusive‑apparel retailer with combined annual net sales of approximately $1.2 billion. Analysts noted that the merger is likely to generate $25 million in annual run‑rate cost synergies by 2027, providing a tailwind that offsets the current earnings miss. The market reacted positively, with analysts upgrading their outlooks and highlighting the strategic value of the combined entity.
The company did not provide specific guidance for the next quarter or the full fiscal year, leaving investors to interpret the earnings miss in the context of the merger and ongoing operational challenges. The lack of quantitative guidance suggests management is maintaining a cautious stance amid macro uncertainty and competitive pressure in the apparel sector.
The content on BeyondSPX is for informational purposes only and should not be construed as financial or investment advice. We are not financial advisors. Consult with a qualified professional before making any investment decisions. Any actions you take based on information from this site are solely at your own risk.