Destination XL (US:DXLG)2020-11-20 19:51Financial Data and Key Metrics Changes - Comparable sales for Q3 2020 were down 20.5% year-over-year, an improvement from a 38.6% decline in Q2 2020 [12] - Store sales decreased by 31.5%, while DXL.com sales increased by 28.4%, with total direct sales up 18.2% [12] - Gross margin rate was 36.5%, down from 41.1% in Q3 2019, reflecting a 460-basis point decrease [37] - SG&A expenses were $32.8 million, or 38.5% of sales, compared to $42.1 million, or 39.5% of sales, in the prior year [38] - Adjusted EBITDA was negative $1.7 million, compared to positive $1.7 million in Q3 2019 [40] Business Line Data and Key Metrics Changes - Direct sales accounted for 33.4% of total retail revenue, with stores fulfilling $10.6 million worth of e-commerce demand, an increase of 87.3% from last year [12][16] - Casual sportswear and loungewear drove business, while tailored clothing remained challenging [22] - Inventory levels decreased by over 21% from last year's Q3, with a focus on conservative inventory management [26] Market Data and Key Metrics Changes - October sales momentum slowed by 600 basis points due to COVID-19 flare-ups and other distractions [12] - The company experienced a good September but faced a decline in October, attributed to external factors like wildfires and the election [56] Company Strategy and Development Direction - The company is focused on cash management and has implemented a corporate restructuring to align costs with lower sales levels, estimating annualized savings of $9.7 million [19][20] - DXL aims to enhance its omnichannel capabilities, with a significant focus on e-commerce and direct fulfillment from stores [17][28] - The company is committed to diversity and inclusion initiatives, including a CEO Advisory Council and ongoing training programs [10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for recovery, emphasizing the importance of maintaining liquidity and financial flexibility [45] - The company anticipates a slow improvement in sales trends and continued growth in its direct business [45] - Management acknowledged the challenges posed by the pandemic but remains hopeful for a return to normalcy with the potential availability of a vaccine [47] Other Important Information - The company has eliminated 101 corporate positions, representing 29% of its corporate workforce, and reduced field personnel by 1,078 positions, or 54% [20] - The company is actively negotiating with landlords to reduce occupancy costs and has successfully secured rent abatements and deferrals [21][41] Q&A Session Summary Question: How is the company responding to the changing dynamics of Black Friday and customer traffic? - The company has started promotions earlier and segmented offers to drive traffic while being cautious about over-promotion [49][50] Question: Can you provide insights on sales performance in October and November? - October sales trailed off unexpectedly, but there has been a recent material change in customer behavior as Thanksgiving approaches [56][57] Question: What is the composition of the increase in accrued expenses? - The increase is attributed to restructuring accruals and long-term incentive accruals [58] Question: How does the company view its inventory structure moving forward? - The company aims to maintain lower inventory levels while balancing the need to drive revenue [53][67] Question: Can you elaborate on the relationship with Amazon? - The relationship with Amazon is seen as having significant potential, with the company expanding its offerings within Amazon's private brand program [68][69]