Destination XL Group, Inc. Reports First-Quarter 2016 Financial Results

+5.8% DXL Comparable Store Sales Increase, Building On +8.7% Comp
Increase in First Quarter 2015;

Company Affirms Sales and Earnings Guidance for Fiscal 2016

CANTON, Mass.–(BUSINESS WIRE)–Destination
XL Group, Inc. (NASDAQ: DXLG), the largest omni-channel specialty
retailer of big and tall men’s apparel, today reported operating results
for the first quarter of fiscal 2016.

First-Quarter Fiscal 2016 Highlights

• Total comparable sales increased +2.0% versus +5.5% in prior-year
  quarter
• 144 DXL retail stores, open at least 13 months, had a +5.8% comparable
  sales increase on top of +8.7% in the prior-year quarter
• Net income of $0.2 million versus net loss of $(0.6) million in the
  prior-year quarter
• EBITDA of $8.4 million versus $6.8 million in the prior-year quarter
• Sales per square foot for the DXL retail stores, on a rolling 12-month
  basis, were $179, compared with $168 for the prior-year quarter

Management Comments

“Our first-quarter results demonstrate the continued strength of the DXL
concept, which drove solid growth in sales and profitability even as
persistent cooler weather affected much of the retail apparel industry,”
said President and CEO David Levin. “Our DXL retail stores delivered a
sales comp of 5.8% on top of 8.7% in the first quarter last year. These
results prove, once again, that the DXL operating model delivers stable
and consistent increases in both sales and profitability.

“Our marketing campaign for the spring season kicked off with the NFL
draft on April 28 and will run through Father’s Day in June,” Levin
added. “We continue to realize efficiencies in our marketing spend,
which has allowed us to reduce advertising and promotion gradually, both
in real dollars and as a percentage of sales. Our overall higher level
of awareness has led to a 6.9% increase in our Casual Male customer
conversion rate to DXL, while also raising the end-of-rack customer’s
share of our bottoms business to 43.2%.

“Despite a slow start in certain warm weather categories, we remain
upbeat in our outlook for 2016. Our customer is a need-based shopper
whose behavior is directly influenced by the changing seasons. We are
confident in our merchandise assortments, and we expect sales growth to
improve in the second quarter with the arrival of a consistent, warmer
weather pattern, which will drive traffic to both our stores and
website,” Levin concluded.

First-Quarter 2016 Results

Sales

For the first quarter of fiscal 2016, total sales rose 3.3% to $107.9
million from $104.4 million in the first quarter of fiscal 2015. The
increase of $3.5 million in total sales was primarily driven by a
comparable sales increase of $2.9 million, or 5.8%, from our DXL stores.
On a comparable basis, total transactions in the Company’s DXL stores
were up 3.4% over the prior-year first quarter.

Gross Margin

For the first quarter of fiscal 2016, gross margin, inclusive of
occupancy costs, was 46.1%, compared with gross margin of 46.2% for the
first quarter of fiscal 2015. The decrease of 10 basis points was the
result of a 10-basis-point increase in occupancy costs as a percentage
of total sales. Merchandise margins remained flat with last year’s first
quarter.

Selling, General & Administrative

SG&A expenses for the first quarter of fiscal 2016 were 38.3% of sales,
compared with 39.7% in the first quarter of fiscal 2015. On a dollar
basis, SG&A expense declined $100,000 from the same quarter a year ago.
Increased store payroll expenses were more than offset by declines in
store opening expenses and advertising expense.

EBITDA

Earnings before interest, taxes, depreciation and amortization (EBITDA),
a non-GAAP measure, for the first quarter of fiscal 2016 were $8.4
million, compared with $6.8 million for the first quarter of fiscal
2015. The improvement was primarily driven by an increase in sales from
the same quarter of the prior year.

Net Income

Net income for the first quarter of fiscal 2016 was $0.2 million, or
$0.00 per diluted share, compared with a net loss of $(0.6) million, or
$(0.01) per diluted share, for the first quarter of fiscal 2015. On a
non-GAAP basis, assuming a normalized tax rate of 40%, adjusted net
income (loss) for the first quarter of fiscal 2016 and fiscal 2015 was
$0.00 per diluted share and $(0.01) per diluted share, respectively.

Cash Flow

Cash Flow used for operations for the first quarter of fiscal 2016 was
$(5.0) million, compared with cash flow used for operations of $(8.0)
million for the first quarter of fiscal 2015. Capital expenditures for
the first three months of fiscal 2016 of $6.1 million consisted of $4.6
million for new DXL stores and $1.5 million for infrastructure projects.
Capital expenditures for the first quarter of fiscal 2015 of $9.6
million consisted of $7.3 million for new DXL stores and $2.3 million
for infrastructure projects. Free cash flow, before DXL capital
expenditures, a non-GAAP measure, improved $3.7 million from the first
quarter of fiscal 2015. Certain amounts in the following table may not
foot due to rounding:

We believe it is important to distinguish between capital expenditures
for DXL stores, which is a discretionary investment, and capital
expenditures for infrastructure projects. Capital expenditures on all
new DXL stores are subject to demanding ROIC (“Return on Invested
Capital”) hurdles, and the achievement of these hurdles has been a
significant contributor to our continued improvement in EBITDA. We
believe free cash flow before DXL capital expenditures is an important
metric, because it demonstrates our ability to strengthen liquidity
while also contributing to the funding of DXL store growth.

Non-GAAP Measures

EBITDA, adjusted net income (loss) per share, free cash flow and free
cash flow before DXL capital expenditures are non-GAAP financial
measures. Please see “Non-GAAP Measures” below and a reconciliation of
these non-GAAP measures to the comparable GAAP measures that follows the
table below.

Balance Sheet & Liquidity

At April 30, 2016, the Company had cash and cash equivalents of $5.9
million. Total debt at April 30, 2016 was $79.9 million. Total debt
consisted of $55.7 million outstanding under the Company’s credit
facility, net of unamortized debt issuance costs, and approximately
$24.2 million outstanding under its term loan and equipment financing
notes, net of unamortized debt issuance costs. At April 30, 2016, the
Company had $55.0 million of excess availability under its credit
facility.

Inventory was $125.8 million at April 30, 2016, compared with $125.0
million at January 30, 2016 and $123.8 million at May 2, 2015. The
increase in inventory compared with both year end and last year’s first
quarter is due to an increase in total store square footage and the
higher mix of branded product, as a result of having more DXL stores
open. Clearance inventory represented 8.7% of total inventory in the
first quarter of fiscal 2016, compared with 8.2% of total inventory in
the first quarter of fiscal 2015.

The Company is reviewing its inventory management procedures and is
making several changes to streamline operations at its distribution
center, including tighter controls over the number of merchandise weeks
of supply and improvements in inventory receipt flow. The Company
believes an optimized inventory structure will improve its working
capital position by at least $5.0 million in fiscal 2016 without
jeopardizing sales from out-of-stock positions.

Retail Store Information

For the first quarter of fiscal 2016, the Company opened 5 new DXL
stores, which included 1 outlet:

Fiscal 2016 Outlook

The Company’s current sales and earnings guidance for fiscal 2016 is
still within the original guidance previously provided. In addition, as
a result of its plan to actively increase inventory turnover, the
Company has raised its cash flow guidance. The Company now expects:

• Total sales in the range of $465.0 to $472.0 million (unchanged).
• A total comparable sales increase in the range of 4.8% to 5.5%
  (unchanged).
• Gross profit margin in the range of 46.2% to 46.5% (unchanged).
• EBITDA in the range of $31.0 to $35.0 million (unchanged).
• A net loss of $(0.09) per diluted share to breakeven (unchanged). On a
  non-GAAP basis, an adjusted net loss of $(0.05) per diluted share to
  breakeven (unchanged). This guidance is presented on a non-GAAP basis
  for comparative purposes to fiscal 2015 earnings, assuming a normal
  tax benefit of approximately 40%. The Company expects to continue to
  provide a full valuation allowance against its deferred tax assets in
  fiscal 2016 and will not recognize any income tax benefit on its
  operating loss in fiscal 2016.
• To open approximately 28 DXL retail and 3 DXL outlet stores and close
  approximately 26 Casual Male XL retail stores and 3 Casual Male XL
  outlet stores (unchanged).
• Capital expenditures of approximately $30.0 million in fiscal 2016,
  with approximately $20.6 million invested in new DXL stores
  (unchanged).
• Borrowings at the end of fiscal 2016 in the range of $59.0 million to
  $64.0 million (a decrease from the Company’s original guidance of
  $64.0 million to $69.0 million).
• Free cash flow before DXL capital expenditures of approximately $25.6
  million to $30.6 million (an increase from the Company’s original
  guidance of $20.6 million to $25.6 million), resulting in total free
  cash flow in the range of $5.0 million to $10.0 million (an increase
  from the Company’s previous guidance of breakeven to $5.0 million).

Conference Call

The Company will hold a conference call to review its financial results
today, Friday, May 20, 2016 at 9:00 a.m. ET. To listen to the live
webcast, visit the “Investor
Relations” section of the Company’s website. The live call also can
be accessed by dialing: (888) 430-8694. Please reference conference ID:
1866427. An archived version of the webcast may be accessed by visiting
the “Events“
section of the Company’s website for up to one year.

During the conference call, the Company may discuss and answer questions
concerning business and financial developments and trends. The Company’s
responses to questions, as well as other matters discussed during the
conference call, may contain or constitute information that has not been
disclosed previously.

Non-GAAP Measures

In addition to financial measures prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”), this press release
refers to free cash flow, free cash flow before DXL capital
expenditures, EBITDA and adjusted net income (loss) per diluted share.
The presentation of these non-GAAP measures is not in accordance with
GAAP, and should not be considered superior to or as a substitute for
net income (loss), earnings (loss) per diluted share or cash flows from
operating activities or any other measure of performance derived in
accordance with GAAP. In addition, all companies do not calculate
non-GAAP financial measures in the same manner and, accordingly, the
non-GAAP measures presented in this release may not be comparable to
similar measures used by other companies. The Company believes the
inclusion of these non-GAAP measures helps investors gain a better
understanding of the Company’s performance, especially when comparing
such results to previous periods, and that they are useful as an
additional means for investors to evaluate the Company’s operating
results, when reviewed in conjunction with the Company’s GAAP financial
statements.

The Company calculates free cash flow as cash flow from operating
activities less capital expenditures. The free cash flow presentation
separates DXL capital expenditures from its other infrastructure
projects. EBITDA is calculated as earnings before interest, taxes,
depreciation and amortization. Adjusted net income (loss) per diluted
share has been adjusted for a normal tax rate, assuming 40%.
Reconciliations of these non-GAAP measures to their comparable GAAP
measures are provided in the tables below.

About Destination XL Group, Inc.

Destination XL Group, Inc. is the largest omni-channel specialty
retailer of big & tall men’s apparel with store locations throughout the
United States and London, England. The retailer operates under five
brands: Destination XL®, Casual Male XL, Rochester Clothing, ShoesXL and
LivingXL. The Company also operates e-commerce sites at www.destinationxl.com
and www.bigandtall.com.
With more than 2,000 private label and name brand styles to choose from,
big and tall customers are provided with a unique blend of wardrobe
solutions not available at traditional retailers. The Company is
headquartered in Canton, Massachusetts. For more information, please
visit the Company’s investor relations website: http://investor.destinationxl.com.

Forward-Looking Statements

Certain statements and information contained in this press release
constitute forward-looking statements under the federal securities laws,
including statements regarding the Company’s expectations with respect
to cash flows, gross profit margins, store counts, capital expenditures,
debt levels, sales, EBITDA, and earnings for fiscal 2016, the expected
impact of inventory management improvements on working capital in fiscal
2016, the Company’s ability to execute on its strategic plan and the
effectiveness of the Destination XL concept. The discussion of
forward-looking information requires management of the Company to make
certain estimates and assumptions regarding the Company’s strategic
direction and the effect of such plans on the Company’s financial
results. The Company’s actual results and the implementation of its
plans and operations may differ materially from forward-looking
statements made by the Company. The Company encourages readers of
forward-looking information concerning the Company to refer to its
filings with the Securities and Exchange Commission, including without
limitation, its Annual Report on Form 10-K filed on March 18, 2016, that
set forth certain risks and uncertainties that may have an impact on
future results and direction of the Company, including risks relating to
the Company’s execution of its DXL strategy and ability to grow its
market share, its ability to predict customer tastes and fashion trends,
its ability to forecast sales growth trends and its ability to
compete successfully in the United States men’s big and tall apparel
market.

Forward-looking statements contained in this press release speak only
as of the date of this release. Subsequent events or circumstances
occurring after such date may render these statements incomplete or out
of date. The Company undertakes no obligation and expressly disclaims
any duty to update such statements.

Certain columns in the following tables may not foot due to rounding

Contacts

Destination XL Group, Inc.
Jeff Unger, 561-482-9715
Vice
President Investor Relations