Sales of US-based retailer specialising in apparel for big and tall men, Destination XL Group declined by10.9 per cent to $124.8 million in Q2, FY24 from $140 million in Q2 FY23. The company’s store sales fell by 10 per cent while its direct business decreased by 12.8 per cent.

Destination XL Group’s gross margin rate for Q2 FY24, including occupancy costs, also lowered by 48.2 per cent Y-o-Y during the quarter from 50.3 per cent in the same quarter last year. This 210-basis-point decrease in gross margin underscores the impact of reduced sales volume on the company's profitability.

The company’s Selling, general, and administrative (SG&A) expenses rose significantly as a percentage of sales, reaching 43 per cent in Q2 FY24, compared to 33.9 per cent in Q2 FY23. This increase was partly driven by higher marketing costs, which accounted for 8.8 per cent of sales in Q2 FY24, up from 5 per cent in the previous year.

Net income for the second quarter of FY24 declined to $2.4 million from $11.6 million from the same quarter last year. Adjusted EBITDA, a non-GAAP measure, also witnessed a significant drop at $6.5 million for Q2 FY24, compared to $22.9 million in Q2 FY23.

The company’s second-quarter results reflect the challenges of a tough retail apparel market, marked by a decline in foot traffic to its stores and lower conversion rates in direct business, says Harvey Kanter, President and CEO.

During the quarter, customers of the company continued to feel the effects of inflationary pressures and macroeconomic uncertainty on their discretionary spending. However, despite the disappointing sales performance, Destination XL Group maintained a stable merchandise margin, reduced inventory, and upheld a strong balance sheet, he adds.