Destination XL Group (NASDAQ:DXLG) reported a narrower decline in comparable sales for the first quarter of fiscal 2026, while management said the big-and-tall apparel retailer is still facing pressure from store traffic, tariffs, fuel costs and changing customer behavior tied in part to GLP-1 weight-loss medications.
President and Chief Executive Officer Harvey Kanter said the company’s first-quarter comparable sales decline of 3.8% was its strongest quarterly comparable sales performance since the second quarter of 2023. Comparable sales declined 1.3% in February, 2.7% in March and 6.8% in April. Kanter said the shift in the Easter calendar affected the March-April comparison, but he also cited “broader macroeconomic pressure on consumer confidence and discretionary spending,” including global conflict, higher fuel costs and inflation.
Sales Decline Moderates, but Store Traffic Remains a Challenge
Chief Financial Officer Peter Stratton said net sales for the quarter were $103.3 million, compared with $105.5 million in the first quarter of fiscal 2025. Store comparable sales fell 4.6%, while direct comparable sales declined 1.6%.
Stratton said the decline was driven primarily by continued traffic pressure, particularly in stores, partially offset by improvements in conversion and dollars per transaction. Kanter said store traffic remains the company’s “most significant challenge,” though conversion and transaction values have been relatively stable.
The direct business showed improvement during the quarter, supported by paid search, paid social and programmatic marketing, as well as enhancements to the website and app. Kanter said those improvements helped support better conversion. He added that new customers are responding well to DXL’s assortment, proprietary fit and value proposition, while many existing customers appear to be shopping more on a needs-based basis rather than for discretionary purchases.
In response to an analyst question, Stratton said May comparable sales were roughly down 5% to 6%. He said that level was still an improvement from trends over the past couple of years and that the company remains “optimistic for the second half of the year,” while noting uncertainty tied to macro events.
Margins Pressured by Tariffs, Shipping and Markdowns
Gross margin, including occupancy costs, was 44.3%, down from 45.1% a year earlier. Stratton said the 80-basis-point decline reflected a 100-basis-point decrease in merchandise margin, partially offset by a 20-basis-point improvement in occupancy costs.
The merchandise margin decline was attributed to tariffs, higher shipping costs tied to fuel surcharges and increased markdown activity related to clearance sales. These pressures were partially offset by a shift toward private brand merchandise and favorable loyalty costs. Kanter said private brands accounted for 65.9% of first-quarter sales, up from 65% in the prior-year period, with the company leaning further into Harbor Bay as an opening-price and value driver.
DXL said it submitted a tariff refund claim of approximately $4 million through a U.S. Customs and Border Protection portal launched in April. Kanter said the timing and amount of any recovery remain uncertain. If currently enacted tariff rates remain in effect through fiscal 2026 and no additional tariffs are imposed, the company estimates a gross margin impact of about 100 basis points, excluding any refunds, an improvement from its previous estimate of 150 basis points.
Loss Widens as Company Reviews Costs
SG&A expenses were 45% of sales, compared with 44.9% a year earlier. On a dollar basis, SG&A decreased by $0.9 million due primarily to lower support payroll costs and incentive-based compensation, partially offset by higher marketing expense. Marketing costs were 6.5% of sales in the quarter, compared with 6.1% last year. For fiscal 2026, the company expects marketing costs of approximately 5.8% of sales.
DXL reported a net loss of $5.9 million, or $0.11 per diluted share, compared with a net loss of $1.9 million, or $0.04 per diluted share, in the prior-year quarter. Adjusted net loss was $0.06 per diluted share, compared with an adjusted loss of $0.04 per diluted share last year. Adjusted EBITDA was a loss of $0.7 million, compared with positive adjusted EBITDA of $0.2 million in the prior-year period.
The company also incurred $1.2 million of merger-related transaction costs, primarily professional service fees associated with the pending merger with FullBeauty.
Kanter said DXL is reviewing corporate overhead and its store portfolio as it seeks to align its cost structure with its revenue structure. He said the company is working to finalize and implement cost-saving actions in the coming months.
FitMap, AI and GLP-1 Behavior Seen as Strategic Priorities
Kanter highlighted three strategic growth initiatives: FitMap, artificial intelligence and work to better understand customer behavior related to GLP-1 medications.
DXL completed the rollout of FitMap across all 188 stores during the quarter. Kanter said more than 100,000 customers have engaged with the platform since launch, and users have shown stronger conversion, higher average order values, greater purchase frequency and lower return rates. In response to an analyst question, Kanter said conversion among FitMap users was about 100 basis points higher, and that baskets were “meaningfully” up double digits.
The company said it launched new AI initiatives during the quarter aimed at improving product quality, enriching item-level attributes and strengthening connections between product, pricing and inventory information across AI-enabled platforms.
Kanter also said DXL’s internal research indicates a meaningful portion of its customer base is using GLP-1 medications, contributing to more dynamic sizing needs. The company is responding by broadening select assortments in smaller sizes and using customer insights to guide merchandising, marketing and re-engagement strategies.
CEO Retirement and FullBeauty Merger Update
Kanter said he has informed the board of his intention to retire effective Aug. 11, 2026, when his employment contract expires. He said the board has been discussing succession planning and “will ensure we have the right leadership in place.”
DXL also said its board has reevaluated the pending merger with FullBeauty and believes the existing terms of the merger agreement are not in the best interest of DXL stockholders. Kanter said the company is in “constructive discussions” with FullBeauty to determine the best path forward, but declined to comment further on the transaction.
As of May 2, 2026, DXL had cash and investments of $16.2 million, no outstanding debt and $70 million of availability under its credit facility. Inventory was $81.4 million, down $4.1 million from a year earlier. The company continues to expect fiscal 2026 capital expenditures of $8 million to $12 million, net of tenant incentives.
About Destination XL Group (NASDAQ:DXLG)
Destination XL Group, Inc (NASDAQ: DXLG) is a specialty retailer focused on big and tall men’s apparel and accessories. Operating under its flagship DXL and Casual Male XL banners, the company offers an assortment of men’s clothing in larger sizes, including suits, dress shirts, casual wear, outerwear, activewear and underwear. In addition to its brick-and-mortar stores, Destination XL maintains a significant omnichannel presence through its e-commerce platform and direct mail catalog, enabling customers to shop for extended-size apparel across North America.
Founded in 1976 and headquartered in Canton, Massachusetts, the company began its operations as Casual Male XL and over time evolved its retail concept to the Destination XL format, which emphasizes an elevated, destination-style shopping experience.
