Destination XL Group reported operating results for the first quarter of fiscal 2017.
Article continues below
Total sales for the first quarter declined slightly to $107.7 million from $107.9 million in the prior year's first quarter.
The decrease of $0.2 million in total sales was due to a comparable sales decrease of $2.1 million, or 2.1% compared to a comparable sales increase of 2.0% last year. In the month of April, comparable sales increased to 6.4% which coincided with the start of company's spring television marketing campaign.
Gross margin, inclusive of occupancy costs, was 45.2%, compared with gross margin of 46.1% for the prior year's first quarter.
Company's merchandise margins improved 10 basis points over first quarter of last year primarily due to fewer promotional markdowns, but we also had a 100 basis point increase in occupancy costs as a percentage of total sales.
The Company opened 11 new DXL stores in the first quarter, compared to just 5 in the first quarter last year. The increase in occupancy expense as a percent of sales was due to higher rent expense on new DXL stores plus pre-opening rent expense on the elevated number of new store openings.
SG&A expenses for the first quarter were 42.9% of sales, compared with 38.3% in the prior year's first quarter. On a dollar basis, SG&A expense increased $4.8 million from the prior year quarter, primarily due to an increase in advertising costs of approximately $3.5 million.
The balance of the increase was due to increases in stores payroll and other supporting costs associated with a greater DXL store base.
Net Loss for the first quarter was $6.1 million, or $(0.12) per diluted share, compared with net income of $0.2 million, or $0.00 per diluted share, for the prior year's first quarter.
On a non-GAAP basis, assuming a normalized tax rate of 40%, adjusted net loss for the first quarter was $(0.07) per diluted share compared with net income of $0.00 per diluted share for the prior year's first quarter.
The decline in earnings was driven primarily by a combination of higher planned marketing costs related to company's television advertising campaign as well as lower gross margin dollar contribution due to occupancy de-leverage.
Earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measure, for the first quarter were $2.5 million, compared with $8.4 million for the first quarter of fiscal 2016. ■