Good day ladies and gentlemen, and welcome to the DXLG Fiscal First Quarter Year 2020 Financial Results Conference Call. Today’s call is being recorded. At this time, I would like to turn the call over to Nitza McKee, Senior Associate at ICR. Please go ahead, Nitza.

Thank you, operator, and good morning, everyone. Thank you for joining us on Destination XL Group's first quarter fiscal 2020 earnings call. On our call today is our President and Chief Executive Officer, Harvey Kanter; and our Chief Financial Officer, Peter Stratton. During today's call, we will discuss some non-GAAP metrics to provide investors with useful information about our financial performance. Please refer to our earnings release, which was filed this morning and is now available on our Investor Relations website at investor.dxl.com for an explanation and reconciliation of such measures. Today's discussion also contains certain forward-looking statements concerning the company's ability to withstand the impact of the COVID-19 pandemic on its business and results in fiscal 2020 and to manage through the pandemic, including its efforts to restructure and reduce costs, manage inventory, negotiate rent concessions or rent releases from its landlords, market to its customers to encourage shopping online and maintain sufficient liquidity, the expected pace of store reopenings and expected liquidity for the next 12 months. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those assumptions mentioned today due to a variety of factors that affect the company. Information regarding risks and uncertainties is detailed in the company's filings with the Securities and Exchange Commission. I would now like to turn the call over to our CEO, Harvey Kanter. Harvey?

Thank you, Nitza, and good morning, everyone. There are several topics that I would like to cover, including the current state of our business, our response to the COVID-19 crisis, our progress in reopening stores and our plan to reopen all stores by the end of June. But before I do, I want to wish everyone continued progress in this recovery, good health and offer our condolences and prayers. These have certainly been the most trying of times for us as a nation and across the globe. I also want to give a heartfelt thank you to all our associates and extend a few quick shout outs for the team's perseverance during the pandemic, and most importantly, to those on the team who kept us actively engaged in commerce and supporting our consumer base. For the past 12 weeks or so, our guest engagement center, which includes chat, email and the call center, which we refer to as our GEC, our warehouse team, our store operations team and our management team have all shown incredible resilience. And we've adjusted to a new working environment while keeping our focus on what we need to do differently to keep serving big and tall guys across the country. This includes everything from how we have engaged consumers to the GEC and the continued fulfillment of e-commerce orders for both the distribution center and over 30 stores to the safety precautions we are taking as we reopen stores and how we are reengaging with our customers. So let me get right into it and start with an update on our business operations. Before our stores closed, we began responding to a significant perceived impact expected from the pandemic. We triangulated on consumer data from Asia, from retailers doing business in Asia and from our wholesale partners. We made relatively big moves early. In mid to late February, we canceled all travel and all our store management national conferences, put on hold all open positions, and began canceling planned receipts of on-order merchandise. In mid-March, we began to evaluate closing stores and on March 17, we closed all 321 stores across the chain. We began to prepare for a more stringent and demonstrative level of actions that would enable us to withstand the inevitable loss of revenue that comes with a prolonged store closure. As noted, we were fortunate to keep our distribution center operational and fulfilled e-commerce orders uninterrupted throughout the first quarter. A huge shout out goes to the GEC and the D.C. teams. Thank you for staying engaged with our customers. Thank you for keeping the lights on and for shipping. Our online business, and to a lesser degree, wholesale, became our only source of revenue while stores were closed, which was critical to keeping a minimal level of cash flowing into the business during the first quarter. However, as you might expect, the online business will only mitigate a fraction of the revenue loss we would experience from closed stores. Accordingly, we acted quickly and decisively. We took additional steps and measures to preserve liquidity and keep our business intact while we waited for stores to reopen and resume some sense of normal operations. We have made significant progress this quarter by strengthening our financial flexibility, realigning our inventory receipt plan and reducing our overhead costs. Let me give you a quick rundown of some of the more significant steps we took to preserve liquidity. On March 20th, we initiated a defensive draw on our credit facility of $30 million. That cash is being held and used for working capital needs as we slowly rebuild our spring sales momentum. At the end of the quarter, our cash balance was $26.1 million, compared to $6.8 million a year ago. We took this step to reserve our financial flexibility. On April 15th, we amended our credit facility to expand our borrowing capacity, which Peter will cover in detail in a moment. We were pleased that our bank group was quick to work with us and to find creative ways to generate additional liquidity. Next, we took several steps from a cost management perspective to reduce our cash outflow. Upon closing our entire store portfolio on March 17, we began the unpleasant process of initiating furloughs. Within days of closing stores, we furloughed almost our entire store operations team, and the company's non-employee directors temporarily suspended their compensation for the second quarter of fiscal 2020. Effective April 2, we began furloughs in our corporate office. In total, 264 corporate associates, representing about 60% of our corporate roster, were placed on furlough. Effective April 5, we instituted a temporary reduction in the salaries of our named executive officers by 20%. Other members of our management team have taken temporary reductions in the range of 10% to 20%. On May 1, we further restructured parts of our corporate workforce, resulting in a permanent reduction of 34 corporate positions. We've also worked very hard to partner and work through payables to merchandise suppliers, vendors and landlords. There's an old saying that the strongest partnerships are forged during the most difficult of times, and we've certainly seen our business partners step up to the plate to work with us on the merchandise side, the vendor side and the leasing front. We have aggressively canceled merchandise receipts for fiscal 2020, which we estimate to be worth nearly $150 million at retail. To give you a sense of the scale, $150 million in cancellations is approximately 28% of our total fiscal 2020 receipt plan. We have had productive conversations with our vendor base to extend payment terms, and in some cases we've entered into short-term promissory notes to extend payment terms with some of our largest merchandise suppliers. We did not make our April or May rent payment on our leases for stores, our home office, and the distribution center. We are currently in private negotiations with our landlords for rent relief, which includes rental abatements and rental deferments for April, May, June and July. Lastly, we have eliminated most of our capital improvement programs, all discretionary spending on store improvement projects and nonessential IT infrastructure. Overall, we have reacted quickly and decisively to do everything we could to avoid a liquidity crisis. We are not out of the woods yet, but we are cautiously optimistic about the course we have charted to get us through the next 12 months without any additional cash infusion. To achieve the plan, we need to see a gradual reopening of stores and an increase in customer traffic and conversion. To that end, let me share some details about how our stores have performed as we have slowly begun the reopening process. One of the most critical and quite honestly, delicate actions that we've undertaken like other retailers is the reopening of our store base. Our first hurdles were to clear and adhere to state and local guidelines for each reopening. Once that had been achieved, our attention turned to making our employees and customers feel safe before we opened any doors. This has been a thoughtful and pragmatic process with associate and customer safety being our highest priority. We've also worked with numerous retail cohorts, sharing our plans, comparing notes, and leveraging their plans to ensure the very best thinking was in place for all our associates and guests. Before opening, all stores received a safety kit, including face masks, disposable gloves, cleanup and disinfecting wipes, and hand sanitizers. Our store managers have been trained on safety and cleanliness procedures and will perform regular maintenance and system checks, order necessary supplies for shipping products, and fully clean and sanitize stores before opening each day, as well as on an ongoing basis throughout the day and at store closing. We can maintain appropriate social distancing throughout the stores and develop procedures for the fitting rooms and checkout to limit contact or exposure to others. Overall, we've been very pleased with how things are going in the stores. I want to give a special shout out to our store managers, assistant managers, key holders, senior leadership management and the store operations team who are making this happen. Now let me give you a little more color on how it's going in the stores. As of June 2, we have reopened 201 stores across the country that are fully open and operational. Most of the stores open today are throughout the middle and southern regions of the country. Some states have just reopened or have yet to reopen and they account for some of our biggest markets, which are primarily located along the coast. On April 28, we began our reopening with three stores in Murray, Utah; Columbia, South Carolina, and Sioux Falls, South Dakota, along with three stores that opened for curbside pickup only in Texas. That is how we ended the first quarter. We followed up with 14 stores on May 5, another 33, 58, and 39 over the next three weeks, and just this Tuesday, we opened another 54. We expect to have 100% of our stores open for business by the end of June, and we are well on the way. The important question you'll want to know is how our stores are performing. We are making great progress. At a high level, initial openings performed at -70% to -80% comp, then -50% to -60%, and today we are tracking at approximately -40%. But we'll continue to see progress as more consumers enter the public space. Our best day thus far has been a comp for stores at -31%. However, pockets, such as our outlets have had days of positive comp performance compared to last year. For DXL, the good news is that the majority of our stores are freestanding and no store is in a traditional mall setting. We are adapting and evolving our customer service and store operational practices to thrive in this new environment. The environment I refer to at this time includes limited store hours of 12 to 6 Monday through Saturday and 12 to 5 on Sunday. Direct fulfillment by stores is materially higher than it has ever been in our history, and where BOPUS has turned to BOPAC, buy online, pickup at curbside. We expect this will become a significant part of our business. Like many other retailers, our business in direct, specifically our dxl.com business, has been strong and has performed well over the past several months. Traffic to our website has been volatile, but consistently growing and conversion has been very strong and exponentially greater than ever in our history. It will be interesting to see where it settles in as we begin to navigate toward what is the new normal. We've been encouraged as our sales trends have accelerated with the warmer weather settling in across the country. While the web business could not substitute for 221 stores closed, the growth rate on the dxl.com website initially tripled from what it was in the low double-digit growth year-to-date and is now over 30%, and for the quarter-to-date Q2 period, we are experiencing accelerated year-over-year growth of over 70%. Now let me shift gears a bit and give you a few comments on inventory status and our merchandising strategy during the pandemic. As I mentioned, we took an early and aggressive stance on inventories through a combination of order cancellations and significantly reduced receipt plans. We instituted a heightened promotional pace to convert inventory to sales, particularly around our spring seasonal goods. We have created more value and rationale for shopping with us by driving deep discounts. The good news is we have experienced meaningful new customer growth in our direct channel, providing an opportunity to expand our loyal customer base. In terms of our assortment highlights, we experienced a considerable shift in buying behavior, with strength in our core and basic categories such as active and loungewear. We expect this current shift in buying behaviors, including what consumers are buying, will last a long time, possibly even forever as the concept of working from home is likely here to stay. Our clearance inventory represented 11.5% of our total inventory compared to 10.6% a year ago. As we look beyond COVID-19, our forward long-term merchandising view is evolving, and we see an opportunity to narrow our assortment and increase product depth, which will result in a greater level of brand pruning across categories. We are taking a test-and-learn approach to ensure we can offer a compelling assortment with enough depth and sizes to meet our broad customer base. I will provide more on this topic as the year progresses. I also want to specifically cover marketing; however, it's not so much marketing as it is acknowledging that the consumer has evolved overnight and how we engage with them as well. We believe the pandemic has, in many ways, shifted consumer behavior meaningfully and perhaps permanently. What previously took years in terms of evolution has now become months in terms of change and revolution. The digital landscape and the ensuing growth have accelerated in ways we couldn't have imagined, and marketing to consumers will forever be different. For the long term, our thesis remains the same: speak to consumers in more personalized ways and win by being more relevant and more efficient. In a post-COVID world, understanding customer preferences and marketing in a way that is pertinent to them will be more important than ever, and we will continue to build the infrastructure necessary to achieve this. As customer buying preferences change due to COVID-19, we've already evolved some of our approaches to ensure we remain not only relevant in the moment but also build a long-term relationship with our customer base. Let me give you a few specifics on how we have adapted marketing and are driving productivity. During this time, we have marketed to our customers differently and tested many new ideas. We have prioritized marketing merchandise that customers are more likely to buy while working remotely, focusing on active and loungewear over tailored clothing. We have rapidly adjusted our website functionality to support curbside pickup fulfillment for customer orders and created engaging events. We've enhanced our app with exclusive promotions, redesigned the web experience, and leveraged the highest clickstream and conversion opportunities to efficiently meet customer needs. In terms of the productivity of marketing and expense, we have shifted our spend even further away from mass media toward more targeted digital channels, leveraging our customer file to grow our web business. In terms of expenses, we have renegotiated many agreements with media partners and vendors, adjusting both costs and service levels. In the short term, we remain focused on fulfilling our customers' needs through the mechanisms and platforms they are gravitating toward while balancing financial outcomes for the business. Lastly, I want to give you an update on our wholesale business. The growth of our wholesale business continues to be a key initiative in fiscal 2020, led by our business with Amazon Essentials, which contributed $2 million of sales in the first quarter. This business was not immune to the impact of the virus; Amazon shifted to essential supplies, and so did customer purchasing. However, the business has seen a strong comeback in the past couple of weeks, with demand peaking at the highest levels of the year, even prior to COVID. With our sourcing expertise and factory relations in place, we've also launched a new wholesale line of business in the design and sourcing of protective masks, with sales beginning in the fiscal second quarter. As of now, we have received commitments to the sourcing and selling of masks to Fortune 100 companies, with nearly 2.5 million masks ordered so far. I will now turn it over to Peter for an update on the financials.

Thank you, Harvey, and good morning, everyone. I'd like to provide you all with a summary of our first quarter financial results and then discuss our financial position going into the second quarter. As Harvey mentioned, our primary focus this quarter has revolved around the preservation of liquidity and developing a path to the other side of the pandemic. The actions that we've taken have been decisive and effective, and we feel confident that we will emerge from this crisis well-positioned to continue serving big and tall individuals all across the country. With that said, let's start with sales and margin. Total sales for the first quarter decreased 49.3% to $57.2 million, down from $113 million in the first quarter of last year. Obviously, store closures contributed to the majority of the decline, but we were pleased that our direct business performed well and made up for some of the loss in store sales. The gross margin rate, inclusive of occupancy costs, was 23.1% as compared to a gross margin rate of 43.7% for the first quarter of fiscal 2019. Our gross margin rate declined 13.3% due to the deleveraging and occupancy costs against a much lower sales base and a decrease of 7.3% in merchandise margins. We were more promotional this quarter to encourage customers to shop online and mitigate a buildup of seasonal inventory. This increased promotional posture is the primary reason for the decline in merchandise margins. We also took a $700,000 charge this quarter to increase our inventory reserves as a result of more aggressive clearance strategies. Our intention is to move through as much of our spring product as possible to be in a clean position at the end of Q2 to start receiving fall products. Now let me move on to selling, general and administrative expenses. For the first quarter of fiscal 2020, SG&A expense was $32.1 million versus the prior year first quarter at $44.6 million. This represents a 28% decline year-over-year, primarily driven by furloughs of both our store associates and certain corporate associates, as well as several measures taken to reduce operating expenses, including marketing, corporate payroll and other discretionary spending. On a percent to sales basis, SG&A costs were 56.1% compared to 39.5% for the first quarter of fiscal 2019. We are continuing to assess and rationalize our entire SG&A cost structure as we start to reopen our stores. Across both our corporate office and stores, we plan to bring back staff as we reopen and business comes back. However, we'll look to optimize store hours and staffing models based on customer demand. We expect overall store payroll costs to trend lower than historical levels. The disruption to our store business model caused by COVID-19 and the uncertainty surrounding its ongoing impact triggered an asset impairment analysis on our long-lived assets as of quarter end. Our recoverability analysis used projections based on multiple probability-weighted discounted cash flow scenarios, assuming that our stores will gradually reopen throughout the second quarter of fiscal 2020, but that consumer retail demand will remain substantially curtailed for a period of time. As a result, we recorded a non-cash impairment charge of $16.3 million for the first quarter of fiscal 2020. The impairment charge included $12.5 million for the write down of certain right-of-use assets related to leases where carrying values exceeded fair values, and $3.8 million for the write down of property and equipment related to stores where carrying values exceeded fair values. Adjusted EBITDA, which excludes CEO transition costs and impairment of assets, was negative $18.9 million for the first quarter compared to $4.8 million in the first quarter of fiscal 2019. The net loss for the quarter was $41.7 million or $0.82 per diluted share, compared with a net loss of $3.1 million or $0.06 per diluted share for the first quarter of fiscal 2019. On a non-GAAP basis, adjusted net loss for the first quarter was $0.37 per diluted share as compared to an adjusted net loss of $0.04 per diluted share for the first quarter of fiscal 2019. Now I'd like to move on to cash flow and the balance sheet. As mentioned, we took a number of steps this quarter to preserve and maximize our liquidity. Our free cash flow for the quarter actually improved to a use of $18.4 million compared to a use of $20.2 million for the first quarter of fiscal 2019. We also improved our excess availability under our credit facility by amending the facility in April 2020. Among other things, we increased our borrowing base by delaying the step down in the FILO advance rate until December 2020. We also lowered the loan cap on our revolver from 12.5% to 10%, and we modified the agreement to allow the company the ability to enter into promissory notes with merchandise vendors up to an aggregate of $15 million. Interest rates under the revolving facility and the FILO loan were increased by 150 basis points. At the end of the first quarter of fiscal 2020, we had a cash balance of $26.1 million, total debt of $96.5 million and remaining availability under our credit facility of $16.8 million. Our inventory balance decreased approximately $4 million in the first quarter to $108.3 million, compared to $112.3 million at May 4, 2019. With respect to the remainder of fiscal 2020, we expect to be responsive to business changes but anticipate that our fall inventory purchases will be below fiscal 2019 levels. Our objective is to maintain a healthy inventory position, which will include narrowing our assortment while also continuing to manage clearance levels. At May 2, 2020, our clearance inventory represented 11.5% of our total inventory compared to 10.6% at May 4, 2019. As we continue to navigate through this pandemic, we are taking a conservative approach to financial planning, expecting modest improvements in sales trends as stores reopen and consumers become more comfortable with returning to our stores. We believe that the actions we've taken this past quarter to preserve liquidity and maintain financial flexibility represent the first steps on our way to a recovery. We feel confident that we have a path to navigate through the next 12 months and as we move further along in fiscal 2020, we will have a clearer picture of what to expect in fiscal 2021 and beyond. With that, I would like to turn it back over to Harvey for some closing thoughts.

As I close out the call today, I want to quickly thank the Board, our partners and our investors, who have provided support and insight along the way as we navigate these business challenges. Secondly, and more importantly, although I've already discussed the pandemic, I also want to address the disturbing issue of social injustice that we are facing as a nation and which we have been reminded of in recent days. The extent of how volatile these times have become is hard to believe. The issue of racial equality and social injustice, which has become more prominent in the nation's consciousness, underlines the seriousness of this issue which impacts us all as a nation. At DXL, we are committed to inclusion, acceptance and support in our business. As a company, we have a diversity and inclusion initiative oriented around unconscious bias. We need to continue to ask ourselves as a company, are we doing enough? Are we committed enough? We are determined to address the challenges of bias and injustice, and together we need to overcome these issues. Inside DXL, we will ask those questions again and commit to push harder in our diversity and inclusion programs for our associates and our guests. And now we will take questions.

Thank you. Our first question comes from Eric Beder with SCC Research. Please go ahead.

Good morning.

Good morning.

Thank you for the color. Going forward, what would you be thinking about in terms of the mix between kind of private label and branded product? And how do you kind of look upon that as a marketing asset or non-asset here?

Yes, it's a great question. This is Harvey. We believe the private label product is still critically important, and the penetration in our mix will not materially change. That being said, we clearly have continued to see an escalation in the penetration of branded goods and the collections we're offering, along with customers' desire to buy more of those. So the reality is we will continue to shift and most appropriately respond to the trends of the business. But what we've seen in our recent, let's say, 18 months is that the shifts are small, and the magnitude has ebbed and flowed. Our private label has really elevated in some respects in certain key categories during COVID, particularly during the first quarter issues we've experienced, which makes obvious sense for products like underwear, basic loungewear, active wear, and the like. Conversely, some of our non-branded items have continued to decline, particularly tailored clothing and similar lines. These same trends are evident in the branded part of our mix, but the branded part of our mix has less penetration regarding the shoulder garments and similar categories.

When you consider the current landscape, it's clear that online has always been significant for you, but it has become even more crucial now. How will the number of stores you need and the role of the store evolve going forward?

The reality is we continue to believe that it's not for us to determine how consumers shop. Consumers want to have experiences in stores. I think it’s interesting to understand the varied experiences retailers are having right now as consumers demonstrate a desire to return to stores and seek out experiences. Our belief remains that our store experience is critically important to our overall mix. However, the question you are really asking is how the store experience will change, not just for customers but in terms of the actual mix. What we've seen—and we've discussed it openly—is that our stores have the capacity to create fulfillment. Our BOPAC program has shifted from the BOPUS model, and while we don’t know if it will ultimately become the most significant aspect of our business, it’s clear the demand for buy online and pick up curbside is growing. Keeping approximately 30 stores open during the pandemic served as crucial fulfillment centers until we began reopening all stores. These stores act like mini warehouses, allowing us to offer a broader assortment and ensuring fast delivery for our customers, with a last-mile store in every market rather than just relying on one warehouse. In essence, the store function is critical, providing an experience for customers and facilitating fulfillment. We have ramped up fulfillment significantly during this period.

Right. And last question, I see now you are also selling masks retail-wise. Do you plan on selling those in the stores? And how is that business doing?

Initially, we pivoted our alterations and tailoring department to make masks for the community, and our initial intent was to provide them as a service to the community, giving them out for free since we had the capability to do so. Throughout this process, it's impressive how we developed a triple-layer mask capable of blocking micron particles with its inner lining to provide a level of protection. We've also sold masks to governmental entities and Fortune 100 companies, and we're bringing them online. We will also place them in our stores and allow customers to assess how significant this product is to them. Although we initially viewed this mainly as a service to the community, the situation has evolved into a new revenue stream. We haven't sought to maximize margins; rather, we aim to serve our customers and businesses effectively. Currently, our largest delivery is still ahead as we ramp up unit availability in stores by the end of June, and we will observe how it performs. We've sold over 2.5 million masks to date, and additional orders are pending for another 2.5 million. Customers will ultimately determine how important this offering is to our business. We never anticipated it would be a game-changer, but it should be more than just a minor addition to our revenue stream.

Great. Good luck for the rest of the year.

Thanks a lot for the question.

Thank you. Our next question will come from Glenn Krevlin. Please go ahead.

Good morning. A couple of different questions. The first is coming into the year, Harvey, you had a lot of initiatives on the direct-to-consumer side, implementing new software and different tests. Where are we on that—just in terms of whether that project has continued? Perhaps you could provide an update there. That's my first question. My second one is about the Amazon wholesale program; has it expanded in any way in terms of item numbers, SKUs or inventory? Lastly, I'd like some sense of lease liabilities that expire over the next year or two and how you're viewing the real estate portfolio in relation to those expirations.

Yes, I can address all three of those and then turn it over to Peter for any additional comments. Regarding marketing initiatives, there's no question that the direction we’ve taken throughout 2019 and which we gained traction on in the fourth quarter of last year has remained a priority. Whether it’s with the CRM system itself or the platform for personalization to communicate with customers based on their unique preferences—this extends to our digital marketing elements and moving away from traditional TV advertising. We didn’t participate in this year’s NFL Draft; despite it being an interesting media opportunity, we pulled back on TV to dramatically reallocate marketing expenses towards digital platforms that drive the most productive engagement and are most relevant to consumers. The shift in consumer demand during the pandemic has emphasized our focus on marketing specific products. However, some progress has been delayed due to workforce limitations and partnerships. On the Amazon program, the developments have been remarkable. Previously published data indicated Amazon had a need to shift its business focus to essential services such as masks and sanitizers. Due to our partnership and agility in managing business, we are closely observing real-time consumer demands. Our business slowed significantly at one point, but interestingly, it has rebounded strongly over the past three weeks, now exceeding demand for Amazon Essentials products compared to earlier this spring. We anticipate further expansion of our partnership and adding new items to the program. That said, we are close to finalizing another significant retail account, which encountered delays amid current dynamics; whether that can be revived is yet to be determined. Lastly, in terms of our leases and store count, we are re-evaluating every store to assess performance. While the majority of our stores are profitable, we grapple with smaller, less strategically located stores that don’t fit our future model. Reducing our footprint is a logical conclusion as we adapt to more online demand, but a decisive plan on how much to decrease is still to be determined.

Just one follow-up: are you fully operational on the new CRM platform, Harvey, the one you discussed last year?

No, we are not fully operational yet. We are utilizing the platform, but the biggest challenge has been marketing based on our newly identified segments and product relevancy. For instance, it might seem odd, but our Ralph Lauren product lines aren’t performing as strongly as basic activewear—our marketing efforts have had to adjust accordingly. Therefore, we haven’t accumulated the learnings we aimed for after Q1, which we discussed at the end of Q4.

Right. Thank you.

Ladies and gentlemen, that does conclude today's question-and-answer session, as well as today's conference call. Thank you for your participation. You may now disconnect and have a wonderful day.