Destination XL Group, Inc.

Net sales were $103 million, down from $106 million in the first quarter of last year. Comparable sales fell 3.8%, with store comps down 4.6% and direct comps down 1.6%. Gross margin, inclusive of occupancy costs, was 44.3% versus 45.1% a year ago, down 80 basis points. Net loss was $5.9 million, or $0.11 per diluted share, versus a net loss of $1.9 million, or $0.04 per diluted share, last year; adjusted net loss was $0.06 per diluted share versus $0.04. Adjusted EBITDA was a loss of $700 thousand versus positive $200 thousand a year ago. For the balance of fiscal 26, the company expects marketing costs to be approximately 5.8% of sales, capital expenditures to range from $8 million to $12 million net of tenant incentives, and tariff impact on gross margin to be about 100 basis points if current rates remain in place and no additional tariffs are imposed.

Harvey Kanter struck an optimistic but realistic tone, saying DXL is positioned for growth and value creation even though the market remains challenged. He emphasized that assortment, promotional, and customer-experience changes are starting to work, and pointed to cleaner inventory, stable turnover, and FitMap adoption as evidence of traction. He also framed FitMap, AI, and GLP-1-related behavior as the company’s main long-term strategic priorities.

Peter Stratton focused on the quarter’s financial pressure and the actions being taken to manage it. He said gross margin fell to 44.3% from 45.1% because of a 100 basis point decline in merchandise margin, partly offset by a 20 basis point occupancy benefit, and that SG&A was 45.0% of sales versus 44.9% last year. He also highlighted liquidity of $200 thousand in cash and investments, no debt, $70 million of availability under the credit facility, inventory of $81.4 million, free cash flow use of $12.7 million for the first three months, and the pending $1.2 million of merger-related transaction costs.

Analysts pressed on comp trends, merchandise margin pressure, and whether FitMap is materially improving customer economics. Management said May comps were roughly in the -5% to -6% range, still better than prior periods, and expressed optimism that second-half trends can improve absent further macro shocks. On margin, Peter said tariffs account for about 100 basis points of exposure this year, that the company has filed for approximately $4 million of tariff refunds, and that promotional activity has been generally in line with expectations. Harvey said FitMap users are seeing about 100 basis points higher conversion, meaningfully higher basket size, and lower return rates after being scanned.