DXLG US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion and analysis of our financial condition and results of operations for fiscal 2024 as compared to fiscal 2023. Our Annual Report on Form 10-K for the year ended February 3, 2024 (fiscal 2023) includes a discussion and analysis of our financial condition and results of operations comparing fiscal 2023 to fiscal 2022 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

As noted above in Part I, this section also contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’s actual results could materially differ from those discussed in these forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this Annual Report, particularly in “Risk Factors” and “Forward-Looking Statements.” The following discussion and analysis of our financial condition and results of operations should be read in light of those risks and uncertainties and in conjunction with our accompanying Consolidated Financial Statements and Notes thereto.

Certain figures discussed below may not foot due to rounding.

Segment Reporting

We have two principal operating segments: our stores and direct business. We consider our stores and direct business segments to be similar in terms of economic characteristics, production processes and operations, and we have therefore aggregated them into one reportable segment consistent with our integrated commerce approach.

Comparable Sales and E-Commerce (Direct) Sales Definition

Fiscal 2024 included 52 weeks as compared to fiscal 2023, which included 53 weeks. Accordingly, year-over-year comparisons of total sales for the fourth quarter and full year are affected by an extra week of sales in fiscal 2023. However, for comparable sales, the Company is reporting on a comparable weeks basis (i.e., the 13 and 52 weeks ended February 1, 2025 compared with the 13 and 52 weeks ended February 3, 2024).

Our customer’s shopping experience continues to evolve across multiple channels, and we are continually adapting to meet the customer's needs. The majority of our stores have the capability to fulfill online orders if merchandise is not available in the warehouse. As a result, we continue to see more transactions that begin online but are ultimately completed at the store level. Similarly, if a customer visits a store and the item is out of stock, the associate can order the item through our website. A customer also has the ability to order online and pick up in a store or at curbside. We define store sales as sales that originate and are fulfilled directly at the store level. E-commerce sales, which we also refer to as direct sales, are defined as sales that originate online, whether through our website, at the store level, our Guest Engagement Center, or through a third-party marketplace.

Stores that have been open for 13 months are included in comparable sales. Stores that have been remodeled or re-located during the period are also included in our determination of comparable stores' sales. Stores that have been expanded by more than 25% are considered non-comparable for the first 13 months. The method of calculating comparable sales varies across the retail industry and, as a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other retailers.

Non-GAAP Financial Measures

We monitor certain financial measures other than those that are in accordance with U.S. generally accepted accounting principles (“GAAP”) on a regular basis in order to track the progress of our business. These non-GAAP financial measures include free cash flow, free cash flow before capital expenditures for store development, adjusted net income, adjusted net income per share, adjusted EBITDA and adjusted EBITDA margin. We believe that these measures provide helpful information with respect to the Company’s operating performance and that the inclusion of these measures is important to assist investors in comparing our performance in fiscal 2024 to fiscal 2023. However, these measures may not be comparable to similar measures used by other companies and should not be considered superior to or as a substitute for net income, net income per diluted share or cash flow from operating activities in accordance with GAAP. See “Non-GAAP Reconciliations” below for additional information regarding these non-GAAP financial measures and reconciliations to comparable GAAP financial measures.

RESULTS OF OPERATIONS

Our fiscal year is a 52-week or 53-week period ending on the Saturday closest to January 31. Fiscal 2024 was a 52-week period and fiscal 2023 was a 53-week period.

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EXECUTIVE OVERVIEW

(in millions, except for percentage of sales and per share data)

Adjusted net income (Non-GAAP) 4.3 32.1

Adjusted EBITDA (Non-GAAP) 19.9 55.9

Per diluted share:

Adjusted net income (Non-GAAP) $ 0.07 $ 0.50

As a percentage of sales:

Operating margin 0.8 % 8.0 %

Adjusted EBITDA margin (Non-GAAP) 4.3 % 10.7 %

Liquidity:

Cash flow from operating activities $ 29.6 $ 49.6

Free cash flow (Non-GAAP) $ 1.9 $ 32.2

Our financial results for fiscal 2024 were below expectations given a difficult men’s apparel sector that negatively impacted traffic levels to our stores and online conversion. We believe that our customers have pulled back from shopping for apparel and when they do shop, they have been very price conscious, gravitating toward our more moderate and entry-level price points. Our comparable sales for fiscal 2024 decreased 10.6%, with comparable sales from our stores down 9.6% and our direct business down 12.8%. Despite the disappointing sales performance, we have maintained our disciplined operating regimen and improved our merchandise margin, thereby enabling us to maintain profitability and positive free cash flow. Despite our diligence to manage operating expenses, certain elements of our cost structure, including occupancy expense, were deleveraged by the sales shortfall.

Net income for fiscal 2024 of $0.05 per diluted share included an impairment charge of $1.3 million and a non-recurring accrual for estimated legal settlement costs of $1.0 million. Net income for fiscal 2023 of $0.43 per diluted share included a non-recurring pretax charge of $5.7 million recognized in connection with the termination of our frozen retirement plans and an impairment charge of $0.1 million. Adjusting for these non-recurring charges and impairment charges, adjusted net income for fiscal 2024 was $0.07 per diluted share as compared to $0.50 per diluted share for fiscal 2023.

We have maintained a strong balance sheet with cash and investments of $48.4 million and a healthy inventory position, which was down 6.8% to fiscal 2023. We had no borrowings under our credit facility during fiscal 2024, and at February 1, 2025 our availability under our credit facility was $64.7 million. We generated cash flow from operations of $29.6 million and utilized $27.7 million for capital expenditures, resulting in free cash flow for fiscal 2024 of $1.9 million. Approximately $13.7 million of our $27.7 million in capital expenditures was spent on store development with the balance used primarily for technology projects, including our new e-commerce site. During fiscal 2024, we used our free cash flow, together with available cash on hand, to repurchase approximately $13.7 million, or 4.9 million shares of our common stock.

We have not observed any improvement in the men's apparel market, and as we head into fiscal 2025 we believe that we will likely remain in a down sales cycle through at least the early half of fiscal 2025. As such, we are taking a measured and balanced approach to our business in fiscal 2025. Although we have a responsibility to grow the business, we are seeking to find the right balance between growth and a minimum level of profitability. While this orientation in balancing growth levels against profit is critical, it does force us to further prioritize our strategic objectives appropriately and with rigor. We believe that consumer sentiment among Big + Tall consumers will recover over time and protecting the foundational infrastructure of the operations we have built will benefit top-line and bottom-line performance in the future.

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We are monitoring the emerging situation with tariffs, and we have minimal exposure in China, Mexico and Canada. Collectively, these three countries represent less than 5% of our own-sourced product and we expect that the impact on gross margin in fiscal 2025 would be less than 10 basis points. However, our exposure could grow if tariffs become more widespread.

SALES

For fiscal 2024, total sales decreased 10.5% to $467.0 million from $521.8 million for fiscal 2023. The decrease was primarily due to a decrease in comparable sales of 10.6%, with stores down 9.6% and the direct business down 12.8% and the impact of the 53rd week in fiscal 2023, partially offset by an increase in non-comparable store sales and reduced loyalty program costs. Sales for the 53rd week of fiscal 2023 were $7.1 million.

GROSS MARGIN

For fiscal 2024, gross margin, inclusive of occupancy costs, was 46.5% compared to 48.4% for fiscal 2023. The decrease of 190 basis points was due to an increase of 230 basis points in occupancy costs, as a percentage of sales, primarily due to the deleveraging from lower sales and increased rents from lease extensions. Merchandise margin for fiscal 2024 increased 40 basis points due to favorable outbound shipping costs, a shift in product mix, and a decrease in loyalty expense partially offset by an increase in markdown activity.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative (“SG&A”) expenses were $198.3 million, or 42.5% of sales, for fiscal 2024 as compared to $196.5 million, or 37.7% of sales, for fiscal 2023. Despite a modest increase of $1.8 million, or 0.9%, SG&A expenses, as a percentage of sales, were deleveraged by 480 basis point due to the lower sales base. The increase of $1.8 million was due to an increase in marketing costs, which included our brand campaign in the second quarter, an increase in healthcare costs and technology costs as well as a $1.0 million accrual for estimated non-recurring legal settlement costs. SG&A expenses for fiscal 2023 also included costs for the 53rd week of approximately $2.7 million.

For fiscal 2024, marketing costs were 6.8% of sales as compared to 5.9% in fiscal 2023. For fiscal 2025, we expect our marketing costs to be approximately 6.0% of sales, and we do not plan to pursue our brand awareness campaign at this time.

Management views SG&A expenses through two primary cost centers: Customer Facing Costs and Corporate Support Costs. Customer Facing Costs, which include store payroll, marketing and other store operating costs, represented 24.1% of sales for fiscal 2024 as compared to 21.3% of sales for fiscal 2023. Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 18.4% of sales for fiscal 2024 as compared to 16.4% of sales for fiscal 2023.

IMPAIRMENT (GAIN) OF ASSETS

Asset impairment charges primarily represent the write-down of operating lease right-of-use assets and the write-down of store property and equipment, where the carrying value exceeds fair value. In addition, any subsequent gains recognized in connection with a store closure related to a previously recorded operating lease right-of-use asset impairment will be included as an offset to impairment charges, with the remainder of the gain included as a reduction in store occupancy costs.

For fiscal 2024, the Company recorded a total asset impairment charge of $1.3 million for certain store property. For fiscal 2023, the Company recorded a total asset impairment charge of $0.1 million, which included a write-down for certain store property and equipment and operating lease right-of-use assets.

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DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense for fiscal 2024 was $13.9 million, as compared to $13.8 million in fiscal 2023. The slight increase in depreciation and amortization expense reflects the increase in capital expenditures over the past few years as we invest in our stores, e-commerce and other technology projects.

LOSS FROM TERMINATION OF RETIREMENT PLANS

During fiscal 2023, we terminated the frozen Casual Male Noncontributory Pension Plan “Casual Male Corp. Retirement Plan,” which was previously known as the J. Baker, Inc. Qualified Plan (the “Pension Plan”) and the frozen Casual Male Supplemental Executive Retirement Plan (the “SERP”). Through the purchase of nonparticipating annuities, we completed a final settlement of the SERP in the third quarter and a final settlement of the Pension Plan in the fourth quarter.

For fiscal 2023, we recognized a charge of $5.7 million representing the recognition of the unrealized loss that was part of Accumulated Other Comprehensive Loss on the Consolidated Balance Sheet.

INTEREST INCOME, NET

Net interest income for fiscal 2024 and fiscal 2023 was $2.1 million for each period. We invest excess cash in short-term, US government-backed investments. Interest costs for both fiscal years were immaterial because we had no outstanding debt and no borrowings under our credit facility during either period.

INCOME TAXES

For fiscal 2024 and fiscal 2023, the Company’s effective tax rate was 47.5% and 27.4%, respectively. The increase in the effective tax rate in fiscal 2024 was primarily due to permanent book-to-tax differences combined with a lower pretax income as compared to fiscal 2023. See Note F to the Consolidated Financial Statements.

At February 1, 2025, we have a valuation allowance of $1.5 million, primarily against certain state and foreign net operating losses ("NOLs").

Realization of our deferred tax assets, which relate principally to federal net operating loss carryforwards, of which approximately $3.4 million will expire in fiscal 2037 and $39.9 million that do not expire, is dependent on generating sufficient taxable income. For state income tax purposes, we have $38.3 million of net operating losses that are available to offset future taxable income, the majority of which will expire from fiscal 2025 through fiscal 2045. The utilization of our NOLs reduces our taxable income and, as a result, we have minimal cash taxes.

NET INCOME

Net income for fiscal 2024 was $3.1 million, or $0.05 per diluted share, as compared to a net income for fiscal 2023 of $27.9 million, or $0.43 per diluted share. Net income for fiscal 2023 included net income for the 53rd week, which was approximately $1.2 million.

On a non-GAAP basis, adjusting for any asset impairment (gain), accrual for estimated non-recurring legal settlement costs and the loss from the termination of the retirement plans, adjusted net income for fiscal 2024 was $4.3 million, or $0.07 per diluted share, as compared to adjusted net income of $32.1 million, or $0.50 per diluted share for fiscal 2023.

SEASONALITY

A comparison of sales in each quarter of the past two fiscal years is presented below. The amounts shown are not necessarily indicative of actual trends because such amounts also reflect the addition of new stores and the remodeling and closing of other stores during these periods. Consistent with the retail apparel industry, our business is seasonal. (Certain columns may not foot due to rounding.)

(in millions, except percentages) Fiscal 2024 Fiscal 2023

(1) Fiscal 2023 was a 53-week year as compared to fiscal 2024, which was a 52-week year and, as such, the fourth quarter of fiscal 2023 included an additional week of sales of $7.1 million.

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EFFECTS OF INFLATION

During fiscal 2024, we continued to see the effect of inflationary pressures on raw materials, services and labor and consumer spending. While there seems to be improvement, we cannot be certain of the effect that inflation (or deflation) may have on our results of operations in the future.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are our cash and cash equivalents, cash generated from operations and availability under our credit facility, which is discussed below. We believe that these sources of liquidity will be sufficient to fund our working capital requirements, commitments and capital expenditures. Cash that is in excess of our forecasted needs may be invested in money market accounts and U.S. government-backed securities.

We believe that our cash, investments, cash generated from operations, and borrowings available to us under our credit facility will be adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months. We also believe that cash flows from operating activities and cash on hand will be sufficient to satisfy our capital requirements in the long term; however, to the extent future capital requirements exceed cash on hand plus cash flows from operating activities, we anticipate that working capital will be financed by our credit facility.

At February 1, 2025 our material contractual obligations primarily consisted of our operating lease obligations, as disclosed in Note E, Leases, to the Consolidated Financial Statements. In addition to our lease obligations, at February 1, 2025, we were also contractually committed pursuant to a merchandise purchase obligation to meet minimum purchases of $10.0 million annually through fiscal 2028.

The following table sets forth financial data regarding our liquidity position at the end of the past two fiscal years:

Cash flow from operating activities (GAAP basis) $ 29.6 $ 49.6

Capital expenditures, excluding store development $ (14.5 ) $ (8.1 )

Capital expenditures for store development (13.2 ) (9.3 )

Free Cash Flow (non-GAAP basis) $ 1.9 $ 32.2

Cash, cash equivalents and short-term investments, at year end $ 48.4 $ 60.0

Total debt, net of unamortized debt issuance costs $ - $ -

Unused excess availability under Credit Facility $ 64.7 $ 69.8

For fiscal 2024, cash flow from operations decreased to $29.6 million as compared to $49.6 million for fiscal 2023. Free cash flow, a non-GAAP measure, decreased to $1.9 million for fiscal 2024 as compared to $32.2 million for fiscal 2023. The decrease in free cash flow was due primarily to a decrease in operating income and an increase in capital expenditures.

Cash flow used for investing activities was $31.3 million for fiscal 2024 as compared to $49.1 million for fiscal 2023. The decrease in cash flow used for investing activities was primarily due to a reduction in purchases of short-term investments, net of maturities, of $28.2 million, partially offset by an increase in capital expenditures of $10.3 million.

Cash flow used for financing activities for fiscal 2024 and fiscal 2023 of $13.9 million and $24.9 million, respectively, was primarily for the repurchase of our common stock.

Credit Facility

On October 28, 2021, the Company entered into a $125.0 million revolving credit agreement with Citizens Bank, N.A., with a maturity date of October 28, 2026. On April 20, 2023, the Company entered into the First Amendment to Credit Agreement which provided for the replacement of the London Interbank Offering Rate (“LIBOR”) interest rate options with the secured overnight financing rate ("SOFR") based options (as amended, the "Credit Facility"). The Credit Facility includes a sublimit of $20.0 million for commercial and standby letters of credit and a sublimit of up to $15.0 million for swingline loans. Effective April 20, 2023, borrowings under the Credit Facility bear interest at either a Base Rate or Daily Simple SOFR rate, at the Company's option. Base Rate loans will bear interest at a rate equal to (i) the greater of: (a) the Prime Rate, (b) the Federal Funds effective rate plus 0.50% per annum and (c) the Daily Simple SOFR rate plus 1.00% per annum (provided the Base Rate shall never be less than the Floor (as defined in the Credit Facility)), plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25% or 0.50% (the “Applicable Margin”). Daily Simple SOFR loans will bear interest at a rate equal to (i) the Daily Simple SOFR rate plus an adjustment of 0.10% (provided the Daily Simple SOFR rate shall never be less than the Floor), plus (ii) the Applicable Margin. Any swingline loan will continue to bear interest at a rate equal to the Base Rate plus the Applicable Margin.

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We had no outstanding borrowings under the Credit Facility at February 1, 2025. At February 1, 2025, outstanding standby letters of credit were $4.2 million. There were no outstanding documentary letters of credit at February 1, 2025. The Credit Facility was not utilized during fiscal 2024, resulting in average unused excess availability during fiscal 2024 of $73.6 million. Unused excess availability at February 1, 2025 was $64.7 million. Our obligations under the Credit Facility are secured by a lien on substantially all of our assets. The Company was subject to an unused line fee of 0.25% of the total commitment less average outstanding letters of credit.

Our Credit Facility is described in more detail in Note D to the Consolidated Financial Statements.

Stock Repurchase Program

During the first quarter of fiscal 2024, the Company repurchased 52,802 shares at a total cost, including fees, of $0.2 million, completing its stock repurchase program that was approved by the Board in March 2023.

On September 3, 2024, the Board approved a new stock repurchase program pursuant to which the Company was authorized to repurchase up to $15.0 million of its common stock, including excise tax, through open market and privately negotiated transactions. The stock repurchase program expired on February 1, 2025. During fiscal 2024, the Company repurchased 4.8 million shares at a total cost, including fees, of $13.5 million under this stock repurchase program.

INVENTORY

At February 1, 2025, total inventories decreased to $75.5 million from $81.0 million at February 3, 2024, which was a 6.8% decrease. We continue to take proactive measures to manage our inventory and adjust our receipt plan given the ongoing macroeconomic factors affecting consumer retail spending. At February 1, 2025, our clearance inventory was 8.6% of our inventory, as compared to 9.5% at February 3, 2024, and below our historical benchmark of approximately 10.0%. Our inventory has decreased by over 26% and our inventory turnover rate has improved by over 30% from fiscal 2019.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements as defined by 303(a)(4) of Regulation S-K.

CAPITAL EXPENDITURES

The following table sets forth the open stores and related square footage at February 1, 2025 and February 3, 2024, respectively:

Store Concept Number ofStores SquareFootage Number ofStores SquareFootage

(square footage in thousands)

During fiscal 2024, we opened seven new DXL stores, re-located two DXL stores, converted eight Casual Male XL stores to the DXL format, completed five DXL remodels, and closed two Casual Male XL stores. Below is a summary of the store activity from February 3, 2024 to February 1, 2025:

New stores 7 — — — 7

Conversions to DXL format 8 — (8 ) — —

Closed retail stores — — (2 ) — (2 )

Our capital expenditures for fiscal 2024 were $27.7 million, as compared to $17.4 million in fiscal 2023. The capital expenditures for fiscal 2024 primarily related to stores, information technology projects, distribution center and facilities.

For fiscal 2025, we expect our capital expenditures to range from $19.0 million to $21.0 million, net of tenant incentives. Our store development plans for fiscal 2025 include opening eight new DXL stores and converting two Casual Male XL stores to the DXL

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format. We could potentially open approximately 50 net new DXL stores across the country, which could average 5,000 square feet or 250,000 square feet in total, which would be a 15% increase over our current square footage. Store expansion continues to be a key component of our long-term growth strategy; however, until the men's retail apparel business improves and consumer demand increases, we plan to pause the opening of new stores in fiscal 2026.

Non-GAAP Reconciliations

We monitor certain non-GAAP financial measures on a regular basis in order to track the progress of our business, including the measures below. We believe that these measures provide helpful information with respect to the Company’s operating performance to stockholders, investors and analysts, and that the inclusion of these non-GAAP measures is important to assist investors in comparing our performance in fiscal 2024 to fiscal 2023, on a comparable basis. However, these measures may not be comparable to similar measures used by other companies and should not be considered superior to or as a substitute for operating net income, net income per diluted share or cash flows from operating activities in accordance with GAAP. (Certain amounts in the following tables may not foot due to rounding.)

Free Cash Flow

Free cash flow is a metric that management uses to monitor liquidity. Management believes that this metric is important to investors, because it demonstrates the Company’s ability to maintain liquidity while supporting its capital projects and new store growth. Free cash flow is calculated as cash flow from operating activities, less capital expenditures and excludes the mandatory and discretionary repayment of debt. Free cash flow before capital expenditures for store development is calculated as cash flow from operating activities less capital expenditures other than capital expenditures for store development. Capital expenditures for store development includes capital expenditures for new stores, conversions of Casual Male XL stores to DXL and remodels. Capital expenditures related to store relocations and maintenance are not included in store development. The following table provides a reconciliation of free cash flow:

Cash flow from operating activities (GAAP basis) $ 29.6 $ 49.6

Capital expenditures, excluding store development (14.5 ) (8.1 )

Capital expenditures for store development (13.2 ) (9.3 )

Free cash flow (non-GAAP basis) $ 1.9 $ 32.2

Adjusted Net Income and Adjusted Net Income Per Diluted Share

Adjusted net income and adjusted net income per diluted share is calculated by excluding any asset impairment charge (gain), accrual for estimated non-recurring legal settlement costs and the loss from the termination of retirement plans. The Company believes that this comparability is useful in comparing the actual results period to period. Adjusted net income per diluted share is then calculated by dividing the adjusted net income by the weighted average shares outstanding for the respective period, on a diluted basis. The following table is a reconciliation of net income on a GAAP basis to adjusted net income, on a non-GAAP basis, for each fiscal year:

$ Per dilutedshare $ Per dilutedshare

(in thousands, except per share data)

Adjust:

Impairment of assets 1.3 0.1

Accrual for estimated non-recurring legal settlement costs 1.0 —

Loss from termination of retirement plans — 5.7

Income tax effect of adjustments (1) (1.1 ) (1.6 )

Adjusted net income (non-GAAP basis) $ 4.3 $ 0.07 $ 32.1 $ 0.50

(1) The income tax effect of pre-tax adjustments to net income was calculated using the applicable effective tax rate for each respective year.

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Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA and adjusted EBITDA margin are presented because we believe that these measures are useful to investors in evaluating our performance. Management uses adjusted EBITDA as a key metric to measure profitability and economic productivity. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and before any impairment (gain) of assets, accrual for estimated non-recurring legal settlement costs and the loss on termination of retirement plans. The accrual for estimated non-recurring legal settlement costs is excluded from adjusted EBITDA due to its unusual and non-recurring nature. Adjusted EBITDA margin is calculated as adjusted EBITDA divided by sales.

The following table is a reconciliation of net income on a GAAP basis to adjusted EBITDA and adjusted EBITDA margin, on a non-GAAP basis, for each fiscal year:

(in thousands, except percentages) Fiscal 2024 Fiscal 2023

Net income, on a GAAP basis $ 3.1 $ 27.9

Add back:

Impairment of assets 1.3 0.1

Accrual for estimated non-recurring legal settlement costs 1.0 -

Loss on termination of retirement plans - 5.7

Provision for income taxes 2.8 10.5

Interest income, net (2.1 ) (2.1 )

Depreciation and amortization 13.9 13.8

Adjusted EBITDA, on a non-GAAP basis $ 19.9 $ 55.9

Adjusted EBITDA margin, on a non-GAAP basis: 4.3 % 10.7 %

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CRITICAL ACCOUNTING POLICIES; USE OF ESTIMATES

Our financial statements are based on the application of significant accounting policies, many of which require our management to make significant estimates and assumptions (see Note A to the Consolidated Financial Statements). We believe that the following items involve some of the more critical judgments in the application of accounting policies that currently affect our financial condition and results of operations:

Long-Term Incentive Plans

Stock awards are primarily granted pursuant to our Long-Term Incentive Plans (“LTIPs”). During fiscal 2024, we had three active LTIPs: the 2022-2024 LTIP, the 2023-2025 LTIP and the 2024-2026 LTIP. See Note H to the Consolidated Financial Statements for additional discussion of our LTIPs. Awards under each LTIP consist of 50% time-based awards and 50% performance-based awards. All time-based awards are amortized over each LTIP’s respective vesting periods.

The performance-based component of each LTIP is a dollar-denominated award, settled in a variable number of equity awards and/or cash awards. Any award will only be granted if such performance targets are achieved. Accordingly, each quarter the Company reviews its expected achievement against such performance targets to assess whether an accrual is necessary. The performance metric for each of these LTIPs is a three-year total shareholder return against peers. As such, the accruals are based on projections that extend beyond a year and are subject to change quarter to quarter based on actual performance. All accruals are recorded as a liability. If performance targets are achieved and equity awards are granted, the related cost of those awards will be reclassified from the accrual to stock-based compensation on grant date.

The performance targets under the 2022-2024 LTIP were achieved at the end of fiscal 2024. Awards granted pursuant to this achievement will be subject to further vesting through August 31, 2025. Accordingly, at February 1, 2025, $2.0 million of the expected $2.4 million award was accrued. With respect to the performance-based component of the 2023-2025 LTIP and the 2024-2026 LTIP, which approximate $2.6 million and $2.7 million, respectively, at target, awards will be granted at the end of the respective performance period if the performance targets are achieved. Through the end of fiscal 2024, we accrued approximately $0.3 million for performance under the 2024-2026 LTIP, and there was no accrual for performance under the 2023-2025 LTIP.

Impairment of Long-Lived Assets

We evaluate property and equipment and operating lease right-of-use assets for impairment when facts and circumstances indicate that the carrying values of such assets may not be recoverable. Our judgment regarding the identification of impairment indicators is based on operational performance at the store level. Factors considered by the Company that could result in an impairment triggering event include significant changes in the use of assets, a current period operating or cash flow loss, the underperformance of a store relative to historical or expected operating results, and an accumulation of costs significantly in excess of the amount originally expected for the construction of the long-lived store assets. If the first step of the long-lived asset impairment test concludes that the carrying amount of the asset is not recoverable, we perform the second step of the long-lived asset impairment test by comparing the fair value of the asset to its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the fair value. To estimate the fair value of an asset, we rely on a discounted cash flow approach estimated to be generated by those assets. The fair value of a right-of-use ("ROU") asset is estimated using an income approach based on management’s forecast of future cash flows that could be derived based on the sublease market rent. If actual market conditions are less favorable than management’s projections, future write-offs may be necessary. The model for undiscounted future cash flows in step one includes assumptions, at the individual store level, with respect to expectations for future sales and gross margin rates as well as an estimate for occupancy costs used to estimate the fair value of the respective store’s operating lease right-of-use asset. The amount of impairment, if any, is measured based on projected discounted future cash flows using a discount rate reflecting the Company’s average cost of funds.

In addition, any subsequent gains recognized in connection with a store closure related to a previously recorded operating lease right-of-use asset impairment will be included as an offset to impairment charges, with the remainder of the gain included as a reduction in store occupancy costs. See Note A to the Consolidated Financial Statements.

For fiscal 2024, fiscal 2023 and fiscal 2022, we recorded an impairment charge (gain) of $1.3 million, $0.1 million and $(0.2) million, respectively, within Impairment (Gain) of Assets on the Consolidated Statements of Operations.

RECENT ACCOUNTING PRONOUNCEMENTS

We have reviewed accounting pronouncements and interpretations thereof that have effective dates during the periods reported and in future periods. See Note A to the Consolidated Financial Statements included in this Annual Report for information on recent accounting pronouncements and the impact of impending standards on our future filings.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, our financial position and results of operations are routinely subject to a variety of risks, including market risk associated with interest rate movements on borrowings. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of these and other potential exposures.

Interest Rates

Our exposure to market risk for changes in interest rates relates primarily to our investments, which consisted of cash equivalents and short-term investments at February 1, 2025. The primary objective of our investment activities is to preserve principal. This is accomplished by investing in money market accounts and U.S. treasury bills. We do not use derivative financial instruments. Due to the nature of our investments, we do not expect our operating results or cash flows to be affected to any significant degree by any change in market interest rates.

At February 1, 2025, we had $36.5 million in short-term investments, which were invested in U.S. treasury bills, and $8.2 million invested in money market accounts.

During fiscal 2024, we utilized cash from operations to fund our working capital needs. We have a Credit Facility that can also be used, if needed. The Credit Facility is not used for trading or speculative purposes. In addition, under our Credit Facility, we have available letters of credit as sources of financing for our working capital requirements. Borrowings under the Credit Facility, which expires October 28, 2026, bear interest at variable rates based on the prime rate or Daily Simple SOFR rate, as defined in the Credit Agreement. At February 1, 2025, we had no outstanding borrowings under the Credit Facility.

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Item 8. Financial Statements and Supplementary Data

Destination XL Group, Inc.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Consolidated Financial Statements:

Consolidated Balance Sheets at February 1, 2025 and February 3, 2024 40

Notes to Consolidated Financial Statements 45

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Destination XL Group, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Destination XL Group, Inc. and subsidiaries (the Company) as of February 1, 2025 and February 3, 2024, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended February 1, 2025, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 1, 2025 and February 3, 2024, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended February 1, 2025, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of February 1, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 20, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment of long-lived store assets

As discussed in Note A to the consolidated financial statements, the Company reviews its long-lived assets for events or changes in circumstances that might indicate the carrying amount of the assets may not be recoverable. The Company’s judgment regarding the identification of impairment indicators is based on operational performance at the store level. Factors considered by the Company that could result in an impairment triggering event include significant changes in the use of assets, a current period operating or cash flow loss, underperformance of a store relative to historical or expected operating results, and an accumulation of costs significantly in excess of the amount originally expected for the construction of the long-lived store assets. At February 1, 2025, the Company had property and equipment and operating lease right-of-use assets of $57.0 million and $171.1 million, respectively.

We identified the assessment of impairment triggering events related to long-lived store assets, specifically property and equipment and operating lease right-of-use assets, as a critical audit matter. A high degree of auditor judgment was required to evaluate the Company’s assessment of (1) stores with current period operating or cash flow losses, and (2) underperforming stores based on current period operating or cash flow results relative to their respective historical results.

The following are the primary procedures we performed to address the critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process of identifying and evaluating potential

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impairment triggering events. This included a control related to the Company’s assessment of (1) stores with current period operating or cash flow losses, and (2) underperforming stores relative to historical operating results. For certain stores, we evaluated the Company’s analysis of potential impairment triggering events by comparing actual operating and cash flow results to the remaining net book value of store assets. We also inspected Board of Directors' meeting minutes and available analyst information to assess the Company’s identification and evaluation of potential triggering events.

/s/ KPMG LLP

We have served as the Company’s auditor since2013.

Minneapolis, Minnesota

March 20, 2025

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DESTINATION XL GROUP, INC.

CONSOLIDATED BALANCE SHEETS

February 1, 2025 and February 3, 2024

(In thousands, except share data)

ASSETS

Current assets:

Prepaid expenses and other current assets 6,355 8,308

Noncurrent assets:

Deferred income taxes, net of valuation allowance 19,343 21,533

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accrued expenses and other current liabilities 30,432 35,302

Long-term liabilities:

Other long-term liabilities 341 1,596

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued — —

Accumulated other comprehensive loss — —

Total liabilities and stockholders' equity $ 380,955 $ 357,741

The accompanying notes are an integral part of the consolidated financial statements.

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DESTINATION XL GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023

(In thousands, except per share data)

Expenses:

Loss from termination of retirement plans — (5,690 ) —

Net income per share - basic $ 0.05 $ 0.46 $ 1.42

Net income per share - diluted $ 0.05 $ 0.43 $ 1.33

Weighted-average number of common shares outstanding:

The accompanying notes are an integral part of the consolidated financial statements.

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DESTINATION XL GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023

(In thousands)

Other comprehensive income (loss) before taxes:

Recognition of accumulated foreign currency translation adjustment — — 66

Foreign currency translation — — (7 )

Recognized loss from termination of retirement plans — 5,690 —

Other comprehensive income before taxes — 5,523 763

Tax provision related to items of other comprehensive income — (595 ) (166 )

Other comprehensive income, net of tax — 4,928 597

The accompanying notes are an integral part of the consolidated financial statements.

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DESTINATION XL GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023

(In thousands)

Accumulated

Additional Other

Common Stock Paid-in Treasury Stock Accumulated Comprehensive

Shares Amounts Capital Shares Amounts Deficit Income (Loss) Total

Stock compensation expense — — 1,384 — — — — 1,384

Issuance of common stock, upon RSUs release 584 6 (6 ) — — — — —

Board of directors' compensation 104 1 500 — — — — 501

Accumulated other comprehensive income (loss):

Unrecognized gain associated with Pension Plan, net of taxes — — — — — — 538 538

Foreign currency, net of taxes — — — — — — (7 ) (7 )

Stock compensation expense — — 2,496 — — — — 2,496

Issuance of common stock, upon RSUs release 538 5 (5 ) — — — — —

Excise taxes accrued on repurchase of common stock (210 ) (210 )

Board of directors' compensation 89 1 442 — — — — 443

Other comprehensive income — — — — — — 4,928 4,928

Stock compensation expense — — 2,614 — — — — 2,614

Issuance of common stock, upon RSUs release 164 2 (2 ) — — — — —

Exercise of stock options 140 1 79 — — — — 80

Excise taxes accrued on repurchase of common stock — — — — (118 ) — — (118 )

Board of directors' compensation 92 1 446 — — — — 447

The accompanying notes are an integral part of the consolidated financial statements.

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DESTINATION XL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023

(In thousands)

Cash flows from operating activities:

Loss from retirement plan terminations — 5,690 —

Recognition of accumulated foreign currency translation adjustment — — 66

Amortization and write-off of deferred debt issuance costs 77 77 76

Gain on sale of equipment (12 ) (107 ) -

Board of directors' stock compensation 447 443 501

Changes in operating assets and liabilities:

Prepaid expenses and other current assets 1,953 (1,094 ) (599 )

Accrued expenses and other liabilities (7,240 ) (4,564 ) 1,852

Cash flows from investing activities:

Proceeds from sale of equipment 12 145 —

Purchase of short-term investments (48,011 ) (79,883 ) —

Cash flows from financing activities:

Payment of excise tax on repurchased shares of common stock (205 ) —

Proceeds from the exercise of stock options 80 368 839

Tax withholdings paid related to net share settlements (78 ) (759 ) (1,845 )

Net increase (decrease) in cash and cash equivalents (15,689 ) (24,484 ) 36,568

Cash and cash equivalents:

The accompanying notes are an integral part of the consolidated financial statements.

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DESTINATION XL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 1, 2025

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Destination XL Group, Inc. (collectively with its subsidiaries referred to as the “Company”) is the largest specialty retailer in the United States of big + tall men’s clothing and footwear. The Company operates under the trade names of Destination XL®, DXL®, DXL® Big + Tall, DXL Men’s Apparel, DXL Outlets®, Casual Male XL® and Casual Male XL Outlets. At February 1, 2025, the Company operated 247 DXL stores, 7 Casual Male XL stores, 19 Casual Male XL outlets and 15 DXL outlets located throughout the United States, including an e-commerce site, www.dxl.com, and a mobile app.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts, transactions and profits are eliminated.

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from estimates.

Segment Reporting

The Company has two principal operating segments: its stores and its direct business. The Company considers its stores and direct operating segments to be similar in terms of economic characteristics, production processes and operations, and has therefore aggregated them into one reportable segment consistent with its integrated commerce business approach. See Note M, Segment Disclosures.

Fiscal Year

The Company’s fiscal year is a 52-week or 53-week period ending on the Saturday closest to January 31. Fiscal 2024 and fiscal 2022 were each 52-week periods, which ended on February 1, 2025 and January 28, 2023, respectively. Fiscal 2023 was a 53-week period, which ended on February 3, 2024.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash in banks and short-term investments, which have a maturity of ninety days or less when acquired. Included in cash equivalents are credit card and debit card receivables from banks, which generally settle within two to four business days.

Short-Term Investments

Short-term investments consist of those investments that have a maturity date, when acquired, that is greater than three months and twelve months or less. These investments are classified as held-to-maturity and are carried at amortized cost, which approximates fair value due to the short period between purchase and maturity.

Concentration of Credit Risk

Cash and cash equivalents include amounts due from third party financial institutions, which from time to time, may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company is potentially exposed to a concentration of credit risk when cash and cash equivalent deposits in these financial institutions are in excess of FDIC limits. The Company considers the credit risk associated with these financial instruments to be minimal as cash and cash equivalents are held by financial institutions with high credit ratings and it has not historically sustained any credit losses associated with our cash and cash equivalents balances. In addition, its cash and cash equivalents and short-term investments include money market accounts with Citizens Bank, N.A. and investments in U.S. government-backed securities.

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Accounts Receivable

Accounts receivable primarily include amounts due for rebates from certain vendors. For fiscal 2024, fiscal 2023 and fiscal 2022, the Company did not incur any losses on its accounts receivable.

Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) Topic 825, Financial Instruments requires disclosure of the fair value of certain financial instruments. The carrying amounts of cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of these instruments. See Note K, Fair Value Measurement for information regarding the fair value of certain financial assets.

ASC Topic 820, Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements.

The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related asset or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities.

The Company utilizes observable market inputs (quoted market prices) when measuring fair value whenever possible.

Stores that have indicators of impairment and fail the recoverability test (based on undiscounted cash flows) are measured for impairment by comparing the fair value of the assets against their carrying value. Fair value of the assets is estimated using a projected discounted cash flow analysis and is classified within Level 3 of the fair value hierarchy. See Impairment of Long-Lived Assets below.

Inventories

All inventories are valued at the lower of cost or market, using a weighted-average cost method.

Property and Equipment

Property and equipment are stated at cost. Major additions and improvements are capitalized while repairs and maintenance are charged to expense as incurred. Upon retirement or other disposition, the cost and related accumulated depreciation of the assets are removed from the accounts and the resulting gain or loss, if any, is reflected in the results of operations. Depreciation is computed on the straight-line method over the assets’ estimated useful lives as follows:

Furniture and fixtures Five to ten years

Equipment Five to ten years

Leasehold improvements Lesser of useful lives or related lease term

Hardware and software Three to seven years

Intangibles

Domain Name

In fiscal 2018, the Company purchased the rights to the domain name “dxl.com.” The domain name has a carrying value of $1.2 million and is considered an indefinite-lived asset. At each reporting period, management analyzes current events and circumstances to determine whether the indefinite life classification continues to be valid.

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Advertising Costs

The Company expenses in-store advertising costs as incurred. Creative production costs, if any, are expensed in the period in which the advertising is first aired and media costs are expensed as incurred. Direct response advertising costs, if any, are expensed in the period in which the mailing occurs. There were no deferred direct response costs at February 1, 2025 and February 3, 2024. Advertising expense, which is included in selling, general and administrative expenses, was $31.8 million, $30.9 million and $32.5 million for fiscal 2024, fiscal 2023 and fiscal 2022, respectively.

Revenue Recognition

The Company’s accounting policies with respect to revenue recognition are discussed in Note B, Revenue Recognition.

Foreign Currency Translation

During fiscal 2022, the Company closed its store located in Toronto, Canada. Assets and liabilities for this store were translated into U.S. dollars at the exchange rates in effect at each balance sheet date. Stockholders’ equity was translated at applicable historical exchange rates. Income, expense and cash flow items were translated at average exchange rates during the period. Resulting translation adjustments were reported as a separate component of stockholders’ equity. Accordingly, in the fourth quarter of fiscal 2022, the Company recognized $66,000 related to the accumulated foreign currency transaction adjustment. See “Accumulated Other Comprehensive Income (Loss) – (“AOCI”)” below.

Accumulated Other Comprehensive Income (Loss) – (“AOCI”)

Other comprehensive income (loss) includes amounts related to foreign currency and pension plans and is reported in the Consolidated Statements of Comprehensive Income (Loss). In the fourth quarter of fiscal 2023, the Company terminated its frozen retirement plans, which was the only AOCI activity. As a result, there was no remaining AOCI as of February 3, 2024.

Other comprehensive income (loss) and reclassifications from AOCI for fiscal 2023 and fiscal 2022 were as follows:

(in thousands)

Retirement Plans Retirement Plans Foreign Currency Total

Balance at beginning of fiscal year $ (4,928 ) $ (5,466 ) $ (59 ) $ (5,525 )

Recognition of accumulated foreign currency translation adjustment (2) — — 66 66

Other comprehensive income (loss) for the period 4,928 538 59 597

Balance at end of fiscal year $ — $ (4,928 ) $ — $ (4,928 )

(1)

In fiscal 2023, the Company terminated its pension plan and SERP and all obligations were settled through the purchase of nonparticipating annuities. Accordingly, the Company recognized the unrealized loss of its pension plans of $5.7 million, which is reflected in the "Loss from Termination of Retirement Plans" on the Consolidated Statement of Operations. The corresponding tax effect of $0.6 million was recognized and is reflected as part of the income tax provision.

(2)

In connection with the Company’s closing of its remaining store in Toronto, Canada, in fiscal 2022, the Company recognized the accumulated foreign currency translation adjustment as an expense.

(3)

Includes the amortization through the date of settlement of the unrecognized (gain)/loss on retirement plans, which was charged to selling, general and administrative expense on the Consolidated Statements of Operations for all periods presented. The amortization of the unrecognized loss was $102,000, with a corresponding tax benefit of $27,000 for fiscal 2023. For fiscal 2022,

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the Company recognized income of $39,000, with a corresponding tax provision of $9,000, as a result of a change in amortization from average remaining future service to average remaining lifetime.

Income Taxes

Deferred income taxes are provided to recognize the effect of temporary differences between tax and financial statement reporting. Such taxes are provided for using enacted tax rates expected to be in place when such temporary differences are realized. A valuation allowance is recorded to reduce deferred tax assets if it is determined that it is more likely than not that the full deferred tax asset would not be realized. If it is subsequently determined that a deferred tax asset will more likely than not be realized, a credit to earnings is recorded to reduce the allowance. See Note F, Income Taxes.

ASC Topic 740, Income Taxes (“ASC 740”) clarifies a company’s accounting for uncertain income tax positions that are recognized in its financial statements and also provides guidance on a company’s de-recognition of uncertain positions, financial statement classification, accounting for interest and penalties, accounting for interim periods, and disclosure requirements. In accordance with ASC 740, the Company will recognize the benefit from a tax position only if it is more likely than not that the position would be sustained upon audit based solely on the technical merits of the tax position. The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits as income tax expense in its Consolidated Statement of Operations. The Company has not accrued or paid interest or penalties in amounts that were material to its results of operations for fiscal 2024, fiscal 2023 and fiscal 2022.

The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company has concluded all U.S. federal income tax matters for years through fiscal 2001, with remaining fiscal years subject to income tax examination by federal tax authorities.

Net Income Per Share

Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the respective period. Diluted earnings per share is determined by giving effect to unvested shares of deferred stock and restricted stock units ("RSUs") and the exercise of stock options using the treasury stock method. The following table provides a reconciliation of the number of shares outstanding for basic and diluted earnings per share:

FISCAL YEARS ENDED

(in thousands)

Common stock outstanding:

The following potential common stock equivalents were excluded from the computation of diluted earnings per share in each year because the exercise price of such options was greater than the average market price per share of common stock for the respective periods or because the unearned compensation associated with stock options, RSUs, or deferred stock had an anti-dilutive effect.

FISCAL YEARS ENDED

(in thousands, except exercise prices)

Stock options (time-vested) 21 85 102

Excluded from the computation of basic and diluted earnings per share were 573,000 shares of unvested performance stock units for fiscal 2024 and fiscal 2023 and 240,000 shares in fiscal 2022. Performance-based awards are included in the computation of basic and diluted earnings per share if, and when, the respective performance targets are achieved. In addition, deferred stock of 479,700 shares in fiscal 2024 and 435,568 shares in fiscal 2023 and fiscal 2022 were excluded from basic earnings per share. Outstanding shares of

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deferred stock are not considered issued and outstanding until the vesting date of the deferral period and are excluded from basic earnings per share until such shares are issued.

Stock-based Compensation

ASC Topic 718, Compensation – Stock Compensation requires measurement of compensation cost for all stock awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes valuation model and requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (the “expected term”), the estimated volatility of the Company’s common stock price over the expected term and the number of options that will ultimately not complete their vesting requirements (“forfeitures”). As required under the accounting rules, the Company reviews its valuation assumptions at each grant date and, as a result, is likely to change its valuation assumptions used to value employee stock-based awards granted in future periods. The value derived from using the Black-Scholes model is recognized as expense over the vesting period, net of estimated forfeitures. The estimation of stock awards that will ultimately vest requires judgment. Actual results, and future changes in estimates, may differ from the Company’s current estimates.

The Company has outstanding performance stock units. The fair value and derived service periods of the performance stock units were calculated using the Monte Carlo model. See Note I, Stock Compensation Plans for more discussion regarding the performance metrics and the valuation assumptions used to calculate the fair value and derived service periods.

The Company recognized total stock-based compensation expense of $2.6 million, $2.5 million and $1.4 million for fiscal 2024, fiscal 2023 and fiscal 2022, respectively. The increase in stock-based compensation in fiscal 2024 and fiscal 2023 was primarily due to the grant of performance stock units in August 2023 that were expensed over the derived service period, which was determined to be an average of 12.5 months.

The total stock-based compensation cost related to time-vested awards not yet recognized as of February 1, 2025 was approximately $2.2 million and will be expensed over a weighted average remaining life of approximately 30 months.

The total grant-date fair value of awards vested was $1.3 million, $1.2 million and $2.5 million for fiscal 2024, fiscal 2023 and fiscal 2022, respectively.

Any excess tax benefits resulting from the exercise of stock options or the release of restricted shares were recognized as a component of income tax expense in the period in which they occurred.

Valuation Assumptions - Stock Compensation

The fair value of each non-vested share is equal to the closing price of the Company’s stock on the date of grant.

There were no grants of stock options in fiscal 2024. For fiscal 2023 and fiscal 2022, the fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model based on the assumptions in the table below. The weighted-average fair value of options granted and non-vested shares granted shown below does not include shares granted to directors in lieu of compensation.

Expected life (in years) - 2.5 2.0 - 3.5

Dividend rate - - -

Weighted average fair value of options granted - $3.24 $3.58

Weighted average fair value of non-vested shares granted $3.48 $4.47 $5.28

Expected volatilities are based on historical volatilities of the Company’s common stock; the expected life represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and historical exercise patterns; and the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option.

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Impairment of Long-Lived Assets

The Company recorded an impairment charge of $1.3 million and $0.1 million in fiscal 2024 and fiscal 2023, respectively, and recorded a net gain of $0.2 million in fiscal 2022.

The Company reviews its long-lived assets for events or changes in circumstances that might indicate the carrying amount of the assets may not be recoverable. The Company’s judgment regarding the identification of impairment indicators is based on operational performance at the store level. Factors considered by the Company that could result in an impairment triggering event include significant changes in the use of assets, a current period operating or cash flow loss, the underperformance of a store relative to historical or expected operating results, and an accumulation of costs significantly in excess of the amount originally expected for the construction of the long-lived store assets. The Company assesses the recoverability of the assets by determining whether the carrying value of such assets over their respective remaining lives can be recovered through projected undiscounted future cash flows. The model for undiscounted future cash flows includes assumptions, at the individual store level, with respect to expectations for future sales and gross margin rates as well as an estimate for occupancy costs used to estimate the fair value of the respective store’s operating lease right-of-use ("ROU") asset. If the first step of the long-lived asset impairment test concludes that the carrying amount of the asset is not recoverable, we perform the second step of the long-lived asset impairment test by comparing the fair value of the asset to its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the fair value. The fair value of ROU asset is estimated using an income approach based on management’s forecast of future cash flows that could be derived based on the sublease market rent. The amount of impairment, if any, is measured based on projected discounted future cash flows using a discount rate reflecting the Company’s average cost of funds. With respect to the impairment charges taken on operating lease ROU assets, if the Company subsequently makes a decision to close previously impaired stores and a gain is realized as a result of the reevaluation of the existing lease liabilities, to the extent the gain related to previously recorded impairment charges against the ROU assets, the gain will be included as an offset to asset impairment charges with the remainder included as a reduction in store occupancy costs.

For fiscal 2024, the Company recorded a total impairment charge of $1.3 million related to the write-down of certain store assets and a total asset impairment charge of $0.1 million in fiscal 2023, which included a write-down for certain store and operating lease ROU assets. For fiscal 2022, the Company recognized a non-cash gain of $0.6 million, related to the Company's decision to close certain retail stores, with $0.4 million of the gain included as an offset to asset impairment charges and the remaining $0.2 million of the gain included as a reduction of store occupancy costs. Partially offsetting the gain of $0.4 million for fiscal 2022, was an impairment charge of $0.2 million related to the write-down of store assets.

Leases

The Company determines if an arrangement contains a lease at the inception of a contract. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments, initial direct costs and any lease incentives are included in the value of those ROU assets. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, based on information available at the lease measurement date, to determine the present value of future payments. The Company elected the lessee non-lease component separation practical expedient, which permits the Company to not separate non-lease components from the lease components to which they relate. The Company also made an accounting policy election that the recognition requirement of ASC Topic 842, Lessors – Certain Leases with Variable Lease Payments will not be applied to certain, if any, non-store leases, with a term of 12 months or less, recognizing those lease payments on a straight-line basis over the lease term. At February 1, 2025, the Company had no short-term leases.

The Company’s store leases typically contain options that permit renewals for additional periods of up to five years each. In general, for store leases with an initial term of 10 years or more, the options to extend are not considered reasonably certain at lease commencement. For store leases with an initial term of 5 years, the Company evaluates each lease independently and, when the Company considers it reasonably certain that it will exercise an option to extend, the associated payment of that option will be included in the measurement of the ROU asset and lease liability.Renewal options are not included in the lease term for automobile and equipment leases because they are not considered reasonably certain of being exercised at lease commencement. Renewal options were not considered for the Company’s corporate headquarters and distribution center lease, which was entered into in 2006 and was for an initial 20-year term. At the end of the initial term, the Company will have the opportunity to extend this lease for six additional successive periods of five years.

For store leases, the Company accounts for lease components and non-lease components as a single lease component. Certain store leases may require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, and are expensed as incurred as variable lease costs. Other store leases contain one periodic fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the ROU assets and lease liabilities. Tenant allowances are included as an offset to the ROU asset and amortized as reductions to rent expense over the associated lease term.

See Note E, Leases for additional information.

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Recently Issued Accounting Pronouncements – Adopted

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU 2023-07, Segment Reporting (Topic 280) (“ASU 2023-07”), which requires all public entities to provide enhanced disclosures about significant segment expenses. The amendments in ASU 2023-07 are to be applied retrospectively and are effective for our annual financial statements starting in fiscal 2024 and interim periods starting in fiscal 2025, with early adoption permitted. Accordingly, the Company has adoptedASU 2023-07 for the year ended February 1, 2025, retrospectively, and has expanded its segment reporting disclosures in accordance with this new standard. See Note M, Segment Disclosures.

Recently Issued Accounting Pronouncements – Not Yet Adopted

In July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock ("ASU 2023-03"), which amends or supersedes various SEC paragraphs within the Accounting Standards Codification to conform to past SEC announcements and guidance issued by the SEC. The ASU does not provide any new guidance, and as such, there is no transition effective date. ASU 2023-03 is not expected to have a material impact on the Company's Consolidated Financial Statements.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative ("ASU 2023-06"). ASU-2023-06 incorporates several disclosure and presentation requirements currently residing in Regulations S-X and S-K. The amendments will be applied prospectively and are effective when the SEC removes the related requirements from Regulations S-X or S-K. Any amendments that the SEC does not remove by June 30, 2027 will not be effective. The ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements or related disclosures because the Company is currently subjected to the reporting requirements of Regulations S-X and S-K.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), which enhances transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid and to improve the effectiveness of income tax disclosures. This ASU will be effective in fiscal 2025, and allows for adoption on a prospective basis, with a retrospective option. Early adoption is permitted. We are currently evaluating the impact of adopting this accounting standard on our financial statements or related disclosures.

In March 2024, the SEC issued its final rule that requires registrants to provide climate disclosures in their annual reports and registration statements. The new rule requires that registrants provide information about specified financial statement effects of severe weather events and other natural conditions, certain carbon offsets and renewable energy certificates, and material impacts on financial estimates and assumptions in the footnotes to financial statements. The rule also requires additional disclosures outside of the financial statements including governance and oversight of material climate-related risks, the material impact of climate risks on the company's strategy, business model and outlook, risk management processes for material climate-related risks and material climate targets and goals. The Company is currently evaluating the new rule and determining the impact of the additional disclosure requirements, as well as the data needed and the source of that data to comply with required disclosures. The new rule is currently effective for fiscal years beginning in 2026 for accelerated filers, with certain disclosures for greenhouse gas emissions beginning in fiscal years beginning in 2028. The rule was scheduled to become effective May 28, 2024; however, the SEC has voluntarily stayed the rule's effective date pending judicial review. Depending on when the legal challenges are resolved, the mandatory compliance date may be retained, delayed or completely vacated.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which will require disclosure, in the notes to financial statements, of specified information about certain costs and expenses, including disclosure of amounts for (a) purchases of inventory, (b) employee compensation, (c) depreciation and (d) intangible asset amortization, included in each relevant expense caption. This ASU will be effective for our annual financial statements starting in fiscal 2027 and interim periods starting in fiscal 2028. We are currently evaluating the impact of this accounting standard on our financial statement presentation and its related disclosures.

No other new accounting pronouncements issued or effective during fiscal 2024 have had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.

B. REVENUE RECOGNITION

Revenue is recognized in accordance with ASC 606, Revenue from Contracts with Customers. The Company operates as a retailer of big + tall men’s clothing, which includes sales through its stores and direct channels. Revenue is recognized by the operating segment

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that initiates a customer’s order. Store sales are defined as sales that originate and are fulfilled directly at the store level. Direct sales are defined as sales that originate online, including those initiated online at the store level, on the Company's website or on third-party marketplaces. Sales from the wholesale business, which the Company operated until the first quarter of fiscal 2022, were defined as sales made to wholesale customers pursuant to the terms of each customer’s contract with the Company. Generally, all revenues are recognized when control of the promised goods is transferred to customers, in an amount that reflects the consideration in exchange for those goods. Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included as part of accrued expenses on the Consolidated Balance Sheets.

Unredeemed Loyalty Coupons. The Company offers a free loyalty program to its customers for which points accumulate based on the purchase of merchandise. Under ASC 606, these loyalty points provide the customer with a material right and a distinct performance obligation with revenue deferred and recognized when the points are redeemed. The cycle of earning and redeeming loyalty points is generally under one year in duration. The Company's legacy loyalty program ended at the end of fiscal 2024 and all unused loyalty points and certificates were expired. The Company's new loyalty program launched at the start of fiscal 2025. As such, at February 1, 2025 there was no outstanding loyalty accrual. The loyalty accrual, net of breakage, at February 3, 2024 was $1.7 million.

Unredeemed Gift Cards, Gift Certificates, and Credit Vouchers. Upon issuance of a gift card, gift certificate or credit voucher, a liability is established for its cash value. The liability is relieved and net sales are recorded upon redemption by the customer. Based on historical redemption patterns, the Company can reasonably estimate the amount of gift cards, gift certificates and credit vouchers for which redemption is remote, which is referred to as "breakage". Breakage is recognized over two years in proportion to historical redemption trends and is recorded as sales in the Consolidated Statements of Operations. The gift card liability, net of breakage, was $3.3 million and $3.2 million at February 1, 2025 and February 3, 2024, respectively.

Shipping. Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales for all periods presented. Amounts related to shipping and handling that are billed to customers are recorded in sales, and the related costs are recorded in cost of goods sold including occupancy costs, in the Consolidated Statements of Operations.

Disaggregation of Revenue

As noted above under Segment Information in Note A, the Company’s business at February 1, 2025 consists of one reportable segment. Substantially all of the Company’s revenue is generated from its stores and direct businesses. In the first quarter of fiscal 2022, the Company ended its relationship with its primary wholesale customer. Accordingly, the Company has determined that the following sales channels depict the nature, amount, timing and uncertainty of how revenue and cash flows are affected by economic factors for each of the following fiscal years:

Wholesale segment — — 399

C. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at the dates indicated:

Total property and equipment, net $ 56,982 $ 43,238

Depreciation expense was $13.9 million, $13.8 million and $15.4 million for fiscal 2024, fiscal 2023, and fiscal 2022, respectively.

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Additions to property and equipment that were included in accounts payable and accrued expenses at February 1, 2025, February 3, 2024 and January 28, 2023 were $3.5 million, $2.3 million, and $1.7 million, respectively.

D. DEBT OBLIGATIONS

Credit Agreement with Citizens Bank, N.A.

On October 28, 2021, the Company entered into a credit facility with Citizens Bank, N.A. On April 20, 2023, the Company entered into the First Amendment to Credit Agreement, which provided for the replacement of the London Interbank Offering Rate (“LIBOR”) interest rate options with the secured overnight financing rate ("SOFR") based options (as amended, the "Credit Facility").

The Credit Facility provides for a $125.0 million secured, asset-based credit facility with a maturity date of October 28, 2026. The maximum committed borrowing of $125.0 million includes a sublimit of $20.0 million for commercial and standby letters of credit and a sublimit of up to $15.0 million for swing line loans. The Company’s ability to borrow under the Credit Facility is determined using an availability formula based on eligible assets.

Effective April 20, 2023, borrowings under the Credit Facility bear interest at either a Base Rate or Daily Simple SOFR rate, at the Company's option. Base Rate loans will bear interest at a rate equal to (i) the greater of: (a) the Prime Rate, (b) the Federal Funds effective rate plus 0.50% per annum and (c) the Daily Simple SOFR rate plus 1.00% per annum (provided the Base Rate shall never be less than the Floor (as defined in the Credit Facility)), plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25% or 0.50% (the “Applicable Margin”). Daily Simple SOFR loans will bear interest at a rate equal to (i) the Daily Simple SOFR rate plus an adjustment of 0.10% (provided the Daily Simple SOFR rate shall never be less than the Floor), plus (ii) the Applicable Margin. Any swingline loan will continue to bear interest at a rate equal to the Base Rate plus the Applicable Margin. The Company is subject to an unused line fee of 0.25%.

The Company’s obligations under the Credit Facility are secured by a lien on substantially all of its assets. If the Company’s availability under the Credit Facility at any time is less than the greater of (i) 10% of the Revolving Loan Cap (the lesser of the aggregate revolving commitments or the borrowing base) and (ii) $7.5 million, then the Company is required to maintain a minimum consolidated fixed charge coverage ratio of 1.0:1.0 until such time as availability has exceeded the greater of (1) 10% of the Revolving Loan Cap and (2) $7.5 million for 30 consecutive days.

At February 1, 2025, the Company had no outstanding borrowings and availability of $64.7 million under the Credit Facility. There were no borrowings under the Credit Facility during fiscal 2024, resulting in an average unused excess availability of approximately $73.6 million. Outstanding standby letters of credit were $4.2 million at February 1, 2025. At February 1, 2025, the Company's prime interest rate was 7.75%.

Interest and Fees

The Company paid interest and fees totaling $0.4 million, $0.3 million and $0.4 million for fiscal 2024, fiscal 2023 and fiscal 2022, respectively.

E. LEASES

The Company leases all of its store locations and its corporate headquarters, which also includes its distribution center, under operating leases. The store leases typically have initial terms of 10 years, with options that usually permit renewal for additional five-year periods. The initial term of the lease for the corporate headquarters is 20 years, with the opportunity to extend for six additional consecutive periods of five years, beginning in fiscal 2026. The Company also leases certain equipment and other assets under operating leases, typically with initial terms of 3 to 5 years. The Company is generally obligated for the cost of property taxes, insurance and common area maintenance fees relating to its leases, which are considered variable lease costs and are expensed as incurred.

ASC 842 requires the assessment of any lease modification to determine if the modification should be treated as a separate lease and if not, modification accounting would be applied. Lease modification accounting requires the recalculation of the ROU asset, lease liability and lease expense over the respective lease term. As of February 1, 2025, the Company’s operating leases liabilities represent the present value of the remaining future minimum lease payments updated based on concessions and lease modifications, as applicable.

Lease costs related to store locations are included in cost of goods sold including occupancy costs on the Consolidated Statements of Operations, and expenses and lease costs related to the corporate headquarters and equipment leases are included in selling, general and administrative expenses on the Consolidated Statements of Operations.

The following table is a summary of the Company’s components of lease costs for fiscal 2024, fiscal 2023 and fiscal 2022:

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(in thousands)

(1)

Variable lease costs include the cost of property taxes, insurance and common area maintenance fees related to its leases.

Supplemental cash flow and balance sheet information related to leases for fiscal 2024, fiscal 2023 and fiscal 2022 are as follows:

Cash paid for amounts included in the measurement of lease liabilities:

Non-cash operating activities:

Weighted average remaining lease term 5.4 yrs. 4.9 yrs. 4.3 yrs.

Weighted average discount rate 6.33 % 6.52 % 6.39 %

The table below reconciles the undiscounted cash flows for each of the next five years and thereafter to the operating lease liabilities recorded on the Consolidated Balance Sheet as of February 1, 2025:

(in thousands)

Total minimum lease payments $ 219,982

Less: amount of lease payments representing interest 35,367

Present value of future minimum lease payments $ 184,615

Less: current obligations under leases 35,920

Noncurrent lease obligations $ 148,695

As of February 1, 2025, the Company had entered into eight10-year store leases that have not yet commenced with aggregated estimated future lease payments of approximately $10.2 million, which are not included in the above table. The leases are expected to commence in the first half of fiscal 2025.

F. INCOME TAXES

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Under ASC Topic 740, deferred tax assets and liabilities are recognized based on temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The accounting standards require current recognition of net deferred tax assets to the extent it is more likely than not such net assets will be realized. To the extent that the Company believes its net deferred tax assets will not be realized, a valuation allowance must be recorded against those assets.

Until the second quarter of fiscal 2022, the Company had maintained a full valuation allowance against its deferred tax assets since fiscal 2013. During the second quarter of fiscal 2022, the Company determined that it was more likely than not that it would be able to realize the benefit of substantially all of its deferred tax assets in the United States. In reaching this determination, the Company considered the cumulative three years of profitability, its six consecutive quarters of sales growth and profitability at the time of the assessment, its expectations regarding the generation of future taxable income and the ability to utilize the Company’s net operating loss (“NOLs”) carryforwards as well as the overall improvement in the Company's business, brand repositioning and current market position. As a result, for fiscal 2022, the valuation allowance against the Company's deferred tax assets decreased by $47.6 million, of which $31.6 million was recorded as a non-recurring tax benefit in fiscal 2022 related to the release of the valuation allowance on deferred tax assets expected to be realized in future periods. As a result of releasing substantially all of the valuation allowance against its deferred tax assets during fiscal 2022, the Company returned to a normal tax provision for fiscal 2023. At February 1, 2025 and

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February 3, 2024, the Company continued to provide a valuation allowance of $1.5 million and $2.2 million, respectively, primarily against certain state and foreign NOLs.

As of February 1, 2025, for federal income tax purposes, the Company had net operating loss carryforwards of $3.4 million, which will expire in fiscal 2037, and net operating loss carryforwards of $39.9 million that are not subject to expiration. For state income tax purposes, the Company had $38.3 million of net operating loss carryforwards that are available to offset future taxable income, the majority of which will expire from fiscal 2025 through fiscal 2045. Additionally, the Company has $5.3 million of net operating loss carryforwards related to the Company’s operations in Canada, which will expire from fiscal 2025 through fiscal 2041.

The utilization of net operating loss carryforwards and the realization of tax benefits in future years depends predominantly upon having taxable income. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may result in a limitation on the amount of net operating loss carryforwards and tax credit carryforwards, which may be used in future years. As of February 1, 2025, there has been no such ownership change.

The components of the net deferred tax assets as of February 1, 2025 and February 3, 2024 were as follows (in thousands):

Deferred tax assets, net:

Goodwill and intangibles (122 ) (103 )

Foreign tax credit carryforward 102 486

Federal wage tax credit carryforward 861 824

Operating lease right-of-use assets (44,212 ) (35,937 )

Property and equipment (1,804 ) (985 )

For fiscal 2024, the Company had total deferred tax assets of $67.0 million, total deferred tax liabilities of $46.1 million and a valuation allowance of $1.5 million.

The provision (benefit) for income taxes consisted of the following:

FISCAL YEARS ENDED

(in thousands)

Current:

Federal $ 182 $ — $ —

Deferred:

Foreign — — —

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The following is a reconciliation between the statutory and effective income tax rates in dollars for the provision (benefit) for income tax:

FISCAL YEARS ENDED

(in thousands)

State taxes, net of federal tax benefit 264 1,000 656

State deferred taxes, net of federal benefit 353 1,418 1,558

Taxes stranded in OCI released with termination of retirement plans — 890 —

Change in valuation allowance (1) 8 (179 ) (47,594 )

(1)

The change in the valuation allowance during the fiscal year ended February 1, 2025 excludes the portion of the change in the valuation allowance that related to expired NOLs that were previously fully reserved. The change in the valuation allowance during the fiscal year ended January 28, 2023 included a non-recurring income tax benefit of $31.6 million in connection with the Company’s substantial release of the valuation allowance in fiscal 2022 related to the deferred tax assets expected to be realized in future periods.

As discussed in Note A, the Company’s financial statements reflect the expected future tax consequences of uncertain tax positions that the Company has taken or expects to take on a tax return, based solely on the technical merits of the tax position.

In fiscal 2022, the Company had a liability for unrecognized tax benefits of $2.0 million that was associated with a prior tax position related to exiting the Company’s direct business in Europe during fiscal 2013. The amount of unrecognized tax benefits was presented as a reduction in the reported amounts of the Company’s federal and state net operating losses carryforwards. No penalties or interest were accrued on this liability. In fiscal 2023, the Company changed this position in its tax return and determined that the liability was no longer necessary.

The Company made tax payments of $1.1 million, $1.6 million, and $0.5 million for fiscal 2024, fiscal 2023, and fiscal 2022, respectively.

G. COMMITMENTS AND CONTINGENCIES

At February 1, 2025 the Company was obligated under operating leases covering store and office space, and certain equipment for future minimum rentals. See Note E, Leases for the schedule of future remaining lease obligations. In addition to its lease obligations, the Company is also contractually committed pursuant to a merchandise purchase obligation to meet minimum purchases of $10.0 million annually through fiscal 2028.

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. When a loss is considered probable, the Company records an accrual based on the reasonably estimable loss or range of loss. Costs related to such legal proceedings are expensed and reported in selling, general and administrative expenses in the Consolidated Statements of Operations. The Company believes its accruals at February 1, 2025 are adequate in light of the probable and estimable liabilities. The Company does not believe that any identified claims or litigation will be material to its results of operations, cash flows, or financial condition.

H. LONG-TERM INCENTIVE PLANS

The following is a summary of the Company’s Long-Term Incentive Plan (“LTIP”). All equity awards granted under these long-term incentive plans were issued from the Company’s stockholder-approved 2016 Incentive Compensation Plan. See Note I, Stock Compensation Plans.

At February 1, 2025, the Company has three active LTIPs: 2022-2024 LTIP, 2023-2025 LTIP and 2024-2026 LTIP. Each participant in the plan participates based on that participant’s “Target Cash Value,” which is defined as the participant’s annual base salary (on the participant’s effective date) multiplied by his or her LTIP percentage. Under each LTIP, 50% of each participant’s Target Cash Value is subject to time-based vesting and 50% is subject to performance-based vesting. The time-based awards under each of the LTIPs were granted in a combination of 50% RSUs and 50% cash.

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Performance targets for the 2022-2024 LTIP, 2023-2025 LTIP and the 2024-2026 LTIP were established and approved by the Compensation Committee on April 9, 2022, May 1, 2023, and April 1, 2024 respectively. The performance period for each LTIP is three years. Awards for any achievement of performance targets will not be granted until the performance targets are achieved and then will be subject to additional vesting through August 31, 2025, August 31, 2026 and August 31, 2027, respectively. The time-based awards under the 2022-2024 LTIP, 2023-2025 LTIP and 2024-2026 LTIP vest in four equal installments through April 1, 2026, April 1, 2027, and April 1, 2028, respectively.

Assuming that the Company achieves the performance targets at target levels and all time-based awards vest, the compensation expense associated with the 2022-2024 LTIP, 2023-2025 LTIP and 2024-2026 LTIP is estimated to be approximately $4.8 million, $5.1 million and $5.3 million, respectively. Approximately half of the targeted compensation expense for each LTIP relates to the time-based awards, which are being expensed straight-line over 49 months.

The performance target under the 2022-2024 LTIP was achieved at the end of fiscal 2024. Awards granted pursuant to this achievement will be subject to further vesting through August 31, 2025. Accordingly, at February 1, 2025, $2.0 million of the expected $2.4 million for the performance award has been accrued.

At February 1, 2025, the Company accrued $0.3 million for the performance-based awards under the 2024-2026 LTIP. There is no accrual for performance-based awards under the 2023-2025 LTIP.

I. STOCK COMPENSATION PLANS

The Company has one active stock-based compensation plan, which is the Second Amended and Restated 2016 Incentive Compensation Plan (the “2016 Plan”). A grant of a stock option award or stock appreciation right will reduce the outstanding reserve on a one-for-one basis, meaning one share for every share granted. A grant of a full-value award, including, but not limited to, restricted stock, restricted stock units and deferred stock, will reduce the outstanding reserve by a fixed ratio of 1.9 shares for every share granted. At the Company's Annual Meeting of Stockholders held on August 8, 2024, the Company's stockholders approved an increase of 6,150,000 shares authorized for future grant under the 2016 Plan. At February 1, 2025, 21,270,538 shares were authorized under the 2016 Plan, of which 7,481,525 shares remain available for grant.

The 2016 Plan is administered by the Compensation Committee. The Compensation Committee is authorized to make all determinations with respect to amounts and conditions covering awards. Options are not granted at a price less than fair value on the date of the grant. Except with respect to 5% of the shares available for awards under the 2016 Plan, no award will become exercisable or otherwise forfeitable unless such award has been outstanding for a minimum period of one year from its date of grant.

Stock Option Activity

The following tables summarize the stock option activity under the Company’s 2006 Incentive Compensation Plan ("2006 Plan") and 2016 Plan, on an aggregate basis, for fiscal 2024:

Stock Options

Options granted — —

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Non-Vested Share Activity

The following table summarizes activity for non-vested shares under the Company’s 2006 Plan, 2016 Plan and Inducement Awards, on an aggregate basis, for fiscal 2024:

Shares

Shares forfeited — — — — — —

Shares expired — — — — — —

(1)

During fiscal 2024, grants primarily related to the grant of time-based RSUs under its 2024-2026 LTIP. See Note H, Long-Term Incentive Plans. As a result of net share settlements, of the 163,854 RSUs that vested, 138,390 shares of common stock were issued.

(2)

The 44,132 shares of deferred stock, with a fair value of $144,991 represent director compensation in lieu of cash, in accordance with the director's irrevocable election. The shares of deferred stock will be issued upon the director's separation from service.

(3)

On August 11, 2023, the Company granted 573,000 performance share units ("PSUs") in connection with the extension of Mr. Kanter's employment agreement. The award consists of nine tranches, with the first tranche vesting if and when the 30-day volume-weighted closing price of the Company's common stock is equal to or greater than $6.50 per share. Each subsequent tranche will vest upon achievement of the 30-day volume-weighted closing price of the Company's common stock in $0.25 increments with the ninth tranche vesting when such price is equal to or greater than $8.50 per share. Any unvested PSUs will expire on August 11, 2026.The $2.4 million fair value was expensed over the respective derived service periods of each tranche which ranged from 12 to 13 months. The respective fair value and derived service periods assigned to the PSUs were determined using a Monte Carlo model based on a weighted historical volatility of 57.8%, a term of 3 years, stock price on the date of grant of $4.98 per share, a risk-free rate of 4.6% and a cost of equity of 11.0%.

(4)

Represented compensation, with a fair value of $161,983, to certain directors, who are required to receive shares, in lieu of cash, in order to satisfy their minimum equity ownership under the Non-Employee Director Compensation Plan. Voluntary shares received, in lieu of cash, are reported below under Non-Employee Director Compensation Plan

Non-Employee Director Compensation Plan

The Company's Seventh Amended and Restated Non-Employee Director Compensation Plan, as amended, the "Non-Employee Director Compensation Plan," provides a convenient method for its non-employee directors to acquire shares of the Company’s common stock at fair market value by voluntarily electing to receive shares of common stock in lieu of cash for service as a director.

The Non-Employee Director Compensation Plan requires a minimum equity ownership requirement which requires each director to receive at least 60% of their annual retainers in shares of common stock until the value of their equity ownership is equal to at least three times the annual retainer. Any shares issued to satisfy the minimum equity ownership were granted from the 2016 Plan. All other shares were granted under the Non-Employee Director Compensation Plan.

The following shares of common stock, with the respective fair value, were issued from the Non-Employee Director Compensation Plan to its non-employee directors as compensation for fiscal 2024, fiscal 2023 and fiscal 2022:

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Number of shares ofcommon stock issued Fair value ofcommon stock issued

At February 1, 2025, 591,925 shares remained available for grant under the Non-Employee Director Compensation Plan.

J. EMPLOYEE BENEFIT PLANS

Termination of Retirement Plans

In connection with the acquisition of Casual Male Corp. in May 2002, the Company assumed the assets and liabilities of the frozen Casual Male Noncontributory Pension Plan “Casual Male Corp. Retirement Plan,” which was previously known as the J. Baker, Inc. Qualified Plan (the “Pension Plan”) and the frozen Casual Male Supplemental Executive Retirement Plan ("SERP"). In the second quarter of fiscal 2023, the Company's Board of Directors (the "Board") approved the termination of these frozen plans.

Pension Plan

On May 3, 2023, the Audit Committee approved the termination of the Pension Plan, which was then approved and ratified by the Board on May 4, 2023 with a final termination approval on June 8, 2023. By the end of fiscal 2023, the Company completed the settlement of all plan assets. Results for fiscal 2023 included a charge of $5.6 million, representing recognition of the unrealized loss in "Accumulated Other Comprehensive Loss" on the Consolidated Balance Sheet.

SERP

On May 3, 2023, the Audit Committee approved the termination of the SERP, which was then approved and ratified by the Board on May 4, 2023. During fiscal 2023, the Company completed the termination of the SERP through the purchase of a nonparticipating annuity. In connection with that termination, the Company made a cash contribution of $0.4 million and recognized a loss on the termination of the plan of $57,000, which included the recognition of the unrealized loss of $31,000 in Accumulated Other Comprehensive Loss.

Defined Contribution Plan

The Company has one defined contribution plan, the Destination XL Group, Inc. 401(k) Savings Plan (the “401(k) Plan”). Under the 401(k) Plan, the Company offers a qualified automatic contribution arrangement with the Company matching 100% of the first 1% of deferred compensation and 50% of the next 5% (with a maximum contribution of 3.5% of eligible compensation). Employees who are 21 years of age or older are eligible to make deferrals after 6 months of employment and are eligible to receive a Company match after one year of employment and 1,000 hours.

The Company recognized $2.3 million, $2.4 million and $2.1 million of expense under the 401(k) Plan in fiscal 2024, 2023 and 2022, respectively.

K. FAIR VALUE MEASUREMENT

At February 1, 2025 and February 3, 2024, the Company held U.S. treasury bills, which were classified as held-to maturity and carried at amortized cost as follows:

Fair Value

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L. STOCK REPURCHASE PROGRAM

During the first quarter of fiscal 2024, the Company repurchased 52,802 shares at a total cost, including fees, of $211,182, completing its stock repurchase program that was approved by the Board in March 2023.

On September 3, 2024, the Board approved a new stock repurchase program pursuant to which the Company was authorized to repurchase up to $15.0 million of its common stock, including excise tax, through open market and privately negotiated transactions. The stock repurchase program expired on February 1, 2025. During fiscal 2024, the Company repurchased 4.8 million shares at a total cost, including fees, of $13.5 million under this stock repurchase program.

The Inflation Reduction Act of 2022 imposed a nondeductible 1% excise tax on the net value of certain share repurchases made after December 31, 2022. The applicable excise tax is charged to additional paid-in capital in the Company's Consolidated Balance Sheet as part of the cost basis of the shares repurchased, with the corresponding liability for the excise tax payable recorded in accrued expenses and other current liabilities until paid. This liability is partially offset by a 1% credit permitted under the rules for the fair value of shares issued by the Company. At February 1, 2025, the Company had accrued $0.1 million for the payment of excise taxes.

M. SEGMENT DISCLOSURES

The Company sells clothing, footwear and accessories to big + tall men through its 288 store locations and its direct business, which includes its website, mobile app and certain marketplaces. The Company has identified its stores and its direct business as two separate operating segments. Resources are allocated and performance is assessed by our President and Chief Executive Officer, whom we have determined to be our Chief Operating Decision Maker (the "CODM").

The CODM evaluates the performance of its operating segments and allocates resources based on sales performance, merchandise margins and 4-wall contribution (a Non-GAAP measure). The accounting policies are the same as those described in the “Summary of Significant Accounting Policies” for the Company. The Company defines 4-wall contribution, which the CODM considers the performance measure for segment profitability, as segment revenues less cost of goods sold, occupancy costs and selling expenses.

We aggregate our two operating segments because they are economically similar. Both segments sell the same merchandise, at the same pricing, and share the same customer base, production, advertising spend and distribution. Our distribution channels are available to our customers regardless of how they initiate their transaction. Through our mobile app or website, a customer can initiate a purchase online and that purchase could be filled either by the distribution center or one of our stores. Similarly, a customer also has the option to pick up in store or have the merchandise shipped directly to them. The 4-wall contribution margin for each segment is materially similar, further supporting the economic similarity of these two operating segments and that no additional value would be provided by reporting the segments separately.

The following table is a summary of our segment disclosures and a reconciliation of 4-wall contribution (a Non-GAAP measure) to net income (a GAAP measure):

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(in thousands)

Loss from termination of retirement plans - (5,690 ) -

Income before provision (benefit) for income taxes $ 5,816 $ 38,391 $ 58,335

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Management’s Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of February 1, 2025. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of February 1, 2025, our disclosure controls and procedures were effective.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.

There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the design and effectiveness of our internal control over financial reporting as of February 1, 2025. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).

Based on management’s assessment and the above mentioned criteria, management determined that we maintained effective internal control over financial reporting as of February 1, 2025.

KPMG LLP, our independent registered public accounting firm, has issued an audit report on our internal control over financial reporting as of February 1, 2025, which appears below.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Destination XL Group, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Destination XL Group, Inc. and subsidiaries' (the Company) internal control over financial reporting as of February 1, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 1, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of February 1, 2025 and February 3, 2024, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended February 1, 2025, and the related notes (collectively, the consolidated financial statements), and our report dated March 20, 2025 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Minneapolis, Minnesota

March 20, 2025

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Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of fiscal 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

(b) Rule 10b5-1 Trading Plans

During the three months ended February 1, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

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PART III.

Pursuant to Paragraph G(3) of the General Instructions to Form 10-K, the information required by Part III (Items 10, 11, 12, 13 and 14) is being incorporated by reference herein from our definitive proxy statement (or an amendment to this Annual Report on Form 10-K) to be filed with the Securities and Exchange Commission within 120 days of the end of the fiscal year ended February 1, 2025 in connection with our 2025 Annual Meeting of Stockholders.

Item 10. Directors, Executive Officers and Corporate Governance

Information with respect to this item is incorporated by reference from our definitive proxy statement (or amendment to this Annual Report on Form 10-K) to be filed with the SEC within 120 days of the end of the fiscal year ended February 1, 2025.

We have adopted a Securities Trading Policy, which is our insider trading policy governing the purchase, sale and/or other dispositions of our securities by our directors, officers and employees. A copy of the Securities Trading Policy is filed as an exhibit to this Annual Report on Form 10-K.

Item 11. Executive Compensation

Information with respect to this item is incorporated by reference from our definitive proxy statement (or amendment to this Annual Report on Form 10-K) to be filed with the SEC within 120 days of the end of the fiscal year ended February 1, 2025.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information with respect to this item is incorporated by reference from our definitive proxy statement (or amendment to this Annual Report on Form 10-K) to be filed with the SEC within 120 days of the end of the fiscal year ended February 1, 2025.

Item 13. Certain Relationships and Related Transactions, and Director Independence