Destination XL Group, Inc. (NASDAQ:DXLG) Q3 2022 Earnings Call Transcript

Peter Stratton: Yes. I mean the only thing that I would add is I think we’ve reached a point with our gross margins where we’re really happy with the promotional cadence that we’re on. We’ve still got some headwinds that we’re dealing with, with elevated freight costs and certainly inflation in production costs. But we feel pretty good about where those are and believe that those are sustainable. But I think to Harvey’s point, it’s where do we continue to invest in the business. So we’ve said that marketing expenses are going to be — we’re targeting 6.2% this year. We haven’t said anything about where that’s going to be next year. But I think first and foremost, we consider ourselves a growth company. So all of our actions and decisions are grounded in what can we do to grow the top line because we believe that’s going to deliver the best result for shareholders and for our customer long term.

Mike Baker: Yes. Okay. That makes sense. And so at least to me, it sounds a little different than a year ago when the answer to a similar question may have been the 15% EBITDA margin from 2021 is just not sustainable. This sounds a little bit different than that.

Harvey Kanter: Yes. I would not say that our expectations, just to be very clear, that we’ll generate 15% EBITDA margins. That is not our expectation. We continue to think about being north of 10%, and we will continue to balance the level of investment, SG&A, things like — of that nature that could affect EBITDA. But I think 15% we would not today author that we would expect to be there.

Operator: And our next question will come from Jeremy Hamblin of Craig Hallum. Your line is open.

Jeremy Hamblin: Congratulations on some really impressive performance, especially in light of what we’re seeing from some other retailers. So, I just wanted to make sure to clarify — come back to the kind of — it sounds like quarter-to-date trends have continued to be actually pretty strong. But I wanted to just also clarify, Peter, I think if our notes are right, the compares get actually substantially easier throughout the quarter. I believe that November is the toughest comparison followed by December and then January, but I wanted to just start by clarifying that.

Peter Stratton: Yes. So compared to last year, fourth quarter was the most difficult quarter that we had. So, the comparisons Q4 are a little easier than Q2 and Q3. But I think as Harvey was mentioning, when you look at our guidance of $535 million to $545 million, that would imply a 2.5% to 10% comp for Q4. So, I think that wide range is still — it just takes into consideration that there is still so much uncertainty out there. And while we do believe that we can push water uphill, as Harvey was saying, it’s still — it’s difficult to predict what’s going to happen, but we feel really confident that we will be able to deliver a single-digit increase somewhere between, call it, 2% and 10% for the fourth quarter.

Jeremy Hamblin: Understood. Okay. I want to come back to the capital allocation and it’s — you guys are in kind of an exciting point here where you have multiple pathways to growth, with store growth now part of the equation rather than storage shrinking like it’s been the last four years, remodels, relocating. And then obviously, your marketplace, your DXL big and tall essentials, sounds like that is doing really well. I wanted to come to that — the cost. You highlighted the Warwick, Rhode Island, remodel, and see if you could share a little bit more color around as you do that remodel, what’s the potential range of costs for a remodel? And what’s kind of the type of return that you get on that or sales lift as compared to, let’s say, the costs associated with relocating a Casual — or converting a Casual Male into a DXL versus the cost for opening just a new white space location?