Good day, everyone, and welcome to the Destination XL Group, Inc. Fourth Quarter Fiscal 2025 Financial Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Ms. Shelly Mokas, Vice President of Financial Reporting and SEC Compliance at Destination XL Group, Inc. Please go ahead, Shelly.

Thank you, and good morning, everyone. Thank you for joining us on Destination XL Group, Inc.'s Fourth Quarter Fiscal 2025 Earnings Call. On our call today are 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 useful information about our financial performance. Please refer to our earnings release, which was filed this morning and is 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 long-range strategic plan and expectations for comparable sales and other expectations for fiscal 2026. 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 will now turn the call over to our CEO, Harvey Kanter. Harvey?

Thank you, Shelly, and good morning, everyone. I appreciate all of you joining us today for our fourth quarter 2025 earnings call. To begin, I want to provide a quick update on the merger agreement with FullBeauty Brands that we entered into on 12/11/2025. Since that date, we have been diligently working with our advisers, our attorneys, and the FullBeauty team to work through key deliverables required between signing and closing. A proxy statement will outline the combined company pro forma financials, the background, and rationale for this merger, and other information useful to investors will be one of the most critical elements to present to our shareholders as we seek their support for this merger. One key gating element to completing the proxy is the filing for our fiscal 2025 Form 10-K, which we expect to be completed later today. We are hopeful that the preliminary proxy statement will be completed and filed within the next 30 days, and we expect the transaction to close in 2026, subject to customary closing conditions and shareholder approval. As we move through this process, we will continue to provide updates as appropriate. I want to thank all of our employees for their hard work and dedication to our company as we work through this transaction. Now the second topic that I wanted to talk about is our operating results for year-end 2025 and early fiscal 2026. I expect many of you saw our press release from earlier this morning where we reported for 2025 that our comparable sales decreased 7.3% and our full-year comparable sales decreased 8.4% as compared to fiscal 2024. Prior to the severe arctic weather event in mid-January, which disrupted much of our nearly 300-store fleet, our Q4 quarter-to-date comp sales were down 5.8%. As we moved into 2026, we are optimistic. Our optimism is driven by the improved sales momentum that continued into February and improved to a negative 1.3%, and March is following a similar trend. Our expectations for 2026 are for continued comp sales improvement over the first two quarters, moving to breakeven before summer's end, and turning positive later this year. We have seen improvements in traffic to stores and average order value, which are both contributing to our recent trends. While we are only halfway through the first quarter, we are encouraged by the trends we have observed quarter-to-date. The positive shift in sales is a welcome departure from the major storylines in fiscal 2025, which reflected the ongoing challenges facing the big and tall retail sector. Given the directionally improving sales shift, we are continuing to focus our efforts on our strategic initiatives: FitMap, assortment, and strategic promotions, which are the elements we believe will provide a reason for the more discerning consumer to shop and purchase at greater levels. At the same time, we are and will remain highly oriented around our regimen and the discipline we have as the core pillars for running Destination XL Group, Inc. Our discipline to regimen revolves around tightly managing our expenses, proactively driving very structured inventory receipt flow and investment, and our work to protect margins in response to tariffs and promotions. The fruits of this as we exited fiscal 2025 were a clean inventory position, no debt, and $28.8 million in cash and investments, which provides flexibility and resilience as we navigate the year ahead. As I noted earlier, we are continuing to focus our efforts on our strategic initiatives: FitMap, assortment, and marketing, which we believe are the elements that matter most to our customer and our future. We have rolled out FitMap more broadly across the chain, expanded our private brand offerings, and sharpened our promotional cadence. We have enhanced the launch of our customer loyalty program and deepened our strategic relationship with Nordstrom. We believe the actions taken throughout 2025 have positioned us to capture a larger share of big and tall demand over time as we move forward. In 2026, at the highest level, our strategic focus remains to stabilize the business and continue to drive back to profitable growth. That means staying close to our customers, carefully controlling costs, leveraging our inventory, and being prudent with how, where, and when we invest cash and our capital. We know we must drive top-line revenue in the short term to deliver greater value while continuing to build the long-term growth drivers: brand building, improved access and convenience, and a continuously better digital and loyalty experience. With that high-level voice-over now complete, I plan to focus on just two areas for the remainder of the call. First, I will provide a more detailed update about our performance in Q4 and highlight a few specific areas where we have made progress against our strategic plan. Second, I will outline in greater detail our plans, priorities, and the catalysts that we either have launched or are in the process of launching in fiscal 2026. We are not providing specific forward-looking financial guidance for fiscal 2026 at this time, but we will revisit this after the completion of the merger. To start with a quick review of the fourth quarter, our comparable sales declined 7.3%, with stores down 8.6% and direct down 4.3%. The progression in comp sales across the quarter was mixed, with November down 5.3%, December down 6.1%, and January down 12.9%. As I have already noted, our sales results in January were impacted by severe arctic weather, but we have rebounded nicely in 2026. The sales story in Q4 was driven largely by traffic pressure in stores, with conversion holding up better than traffic and the average transaction value relatively steady but with a small uptick. In the digital business, performance was most impacted by a slight decline in conversion, reflecting both demand softness and a highly competitive promotional environment. During the holiday period, we again used targeted loyalty and strategic promotion events to provide customers with incremental value, and we saw periods where those offers helped improve engagement and sales efficiency. These results reinforce our view that to drive the top-line improvement in the near term, we need a disciplined, surgical promotional approach in 2026, focused on the cohorts and categories where the returns are strongest, while continuing to protect the long-term health of the brand. Another element that we managed well despite the challenging environment is inventory. Our inventory balance at the end of Q4 was $73.5 million, down 2.6% from $75.5 million last year and down approximately 28% from 2019. Our clearance penetration was 9.9% compared to 8.6% a year ago and remains below our historical benchmark of approximately 10%. Our buying strategy has remained deliberately cautious to mitigate risk while staying agile enough to flex up if demand improves. The team's discipline in receipt management and using selective markdowns to avoid any buildup of excess inventory, while working to protect merchandise margin, continues to be an important strength for Destination XL Group, Inc. When we look at our quarterly results through our merchandising lens, once again we saw our private brands outperform our national collection brands. Casual pants, denim, and tailored clothing were strong performers this quarter, and our Oak Hill tech pant continues to stand out. As we move from Q1 into Q2, we are excited about the bigger launch of ThermoChill, which incorporates technical fabrics more broadly than just the pants and shorts from the initial launch. Conversely, sport shirts and knit shirts were more challenging as classifications. National collections did improve over the prior quarter driven by more strategic use of promotion, with a more focused and disciplined framework that emphasizes relevance and value. We must continue to evolve our promotional strategy to drive stronger engagement with those customers who are more influenced by pricing. The next area I want to cover is new store openings. Our consumer research has consistently reinforced that better access to stores remains one of our more meaningful opportunities. Big and tall consumers tell us they do not shop with Destination XL Group, Inc. because there is no store near them or no store conveniently near them. Those insights continue to support a long-term opportunity to expand our footprint, which we have done over the last 24 months and opened 18 new stores in attractive white space and more highly penetrated markets across the U.S. This past year, we continued to improve access by opening eight new Destination XL Group, Inc. stores, converting two Casual Male retail stores and one Casual Male outlet to Destination XL Group, Inc. retail stores, and converting two Casual Male outlets to Destination XL Group, Inc. outlets. As we have shared in the last few earnings calls, given current economic headwinds, we paused further new store openings for this year. Our short-term store development plans will be more focused on converting a few remaining Casual Male stores to the Destination XL Group, Inc. format, store relocations, and other capital projects needed to maintain our existing store portfolio and distribution center, along with technology-related projects that support our business. For fiscal 2026, we expect capital expenditures to range from $8 million to $12 million, net of tenant incentives and primarily for technology and other infrastructure-related projects. Another strategic initiative that we continue to be excited about is our alliance with Nordstrom. We remain active on Nordstrom's online marketplace and continue to refine our assortment, onboarding initial brands and styles as we learn what resonates with the Nordstrom consumer. Customers primarily discover our products through nordstrom.com search and browse, and we continue to collaborate with Nordstrom on a more robust go-to-market plan that includes personalized content and email support. While this channel remains a relatively small percentage of total sales, we remain very optimistic about its long-term growth potential. I would now like to provide some color on the key strategic initiatives we are advancing in 2026 to strengthen our market position, improve the customer experience, and drive more profitable growth over time. These initiatives are grounded in the work we have done across FitMap, assortment, marketing, and technology, and they are designed to address both the opportunities of the big and tall category and the realities of today's environment, including heightened promotional pressure, tariffs, pricing headwinds, and demand shifts tied to GLP-1 usage. I will walk through each initiative now at a high level. First is scaling FitMap as a fleet-wide differentiator and activating marketing to increase adoption. Second, continuing to evolve our assortment, rebalancing our brand portfolio, expanding private brands, and strengthening opening price points to enhance value perception. Third, marketing: a more disciplined promotional framework and an evolved CRM and loyalty approach. Lastly, a dedicated effort around the digital experience, driving improvements informed by a comprehensive UX audit across discovery, product, and checkout. Now let me turn to FitMap, which we believe is one of the most differentiated assets in the big and tall space. FitMap is our proprietary contactless digital sizing technology for which we hold an exclusive license for Big and Tall Men until 2030. It captures 243 unique measurements and provides personalized size recommendations across 29 brands, helping remove one of the biggest friction points in apparel shopping: uncertainty around fit. Over the past three years, we have developed and tested FitMap, and to date, we have scanned more than 63,000 customers. We have now completed our initial rollout, and FitMap is live in 188 stores, and the mobile application is live as well, with our latest size recommendation engine allowing the in-store scan experience to align with the online fit recommendation tool. The result is a more seamless, consistent guest journey across channels. In 2026, the focus shifts from rollout to activation, and we are approaching that through a few concrete strategies. First, we are working to increase guest-level scanning penetration, both in stores and online, so more customers enter the FitMap ecosystem. Higher penetration supports better conversion, lower returns, and increased multichannel engagement. That will require operational reinforcement, associated coaching, and the right incentives to make scanning a natural part of the selling process. Second, we are using some of our marketing dollars to launch a marketing campaign to build awareness of FitMap, highlighting the benefits of scanning and reinforcing Destination XL Group, Inc.'s leadership in fit innovation. We began with an email program to generate early learnings and refine our messaging, and those insights now will inform the broader campaign. Third, we plan to test FitMap-enabled promotions, using scanning insights for personalized offers, loyalty-driven incentives, and targeted outreach to scanned guests, so we better understand how FitMap can drive incremental revenue and strengthen loyalty. We are already seeing promising signals in the data. Using lookalike modeling, we continue to observe that scanned guests deliver higher customer value and higher average order value than their control groups. Importantly, a meaningful driver of lift is what happens on the day of the scan, where associates are able to convert the fit moment into a broader outfitting moment, increasing units per transaction and average unit retail. We are also beginning to see a greater share of the incremental lift occur online after the scan experience, which is exactly the omnichannel behavior FitMap is designed to unlock. The next initiative I want to cover is assortment, specifically how we are rebalancing our brand portfolio, expanding private brands, and sharpening our opening price points to strengthen value perception. Over the next two years, we are strategically evolving the assortment to further prioritize private brands. Private brands deliver consistent fit, give us greater flexibility to balance trend with core essentials, and enhance value for the customer while generating higher margins, from 57% at the start of fiscal 2025 to more than 60% in fiscal 2026 and over 65% in fiscal 2027. To support that shift, we are reducing investment in underperforming national brands and redeploying that inventory and marketing capacity towards higher-return opportunities. We are doing this in a more disciplined way, aligning sales and inventory, driving productivity and faster turns, and leaning into the categories where we see momentum, such as casual bottoms, denim, and activewear across key private brands. This portfolio rebalance improves inventory efficiency, supports stronger GMROI, and gives us more control over storytelling and fit innovation both in store and online. Within that assortment work, opening price points remain an important part of the strategy. We will continue to broaden a more comprehensive opening price point offer to lower barriers to entry, respond to shifts in buying behavior, and further improve overall price-value perception. Combined with more intentional brand and product marketing, along with clear in-store presentation that reinforces each private brand's role, these actions are designed to build loyalty, drive customer acquisition, and position Destination XL Group, Inc. as the destination for big and tall men who want great style, great fit, and great value. Now let me provide you a little greater color on marketing, starting with promotions, then CRM and loyalty. Our view is to win a greater share of the big and tall market we must show up with value in a way that is relevant and targeted without undermining the brand. Over the past year, we have been refining our promotional approach with a more strategic framework where promotions are managed as a distinct category with clear objectives around timing, product focus, and customer targeting. The goal is to maximize the return on every markdown while supporting our broader strategic priorities. Within that framework, you should expect three complementary motions. First, what we call always-on value: everyday value-driving initiatives aimed at specific cohorts, available when the customer is ready to shop. We have intentionally moved away from broad storewide and sitewide discounting and toward offers that improve acquisition, increase shopping frequency, and reinforce confidence that Destination XL Group, Inc. is competitively priced. Second is the surgical use of targeted promotions by leveraging customer segmentation and behavioral insights. In 2026, our CRM approach is focused on improving performance in key lifecycle and behavioral segments where we see potential to change FOP behavior in a meaningful way. The intent is to deliver more personalized communications by brand, category, and shopping mission so that customers get offers that they feel are relevant and not generic. Third is loyalty. We see loyalty as an important lever to increase repeat revenue and reward our best customers. While our top tiers are performing and we continue to test incremental benefits, we also recognize that engagement in our classic tier has been limited. Addressing this challenge is part of the broader CRM work I just described, improving how we activate customers earlier in their lifecycle and giving them clear reasons to come back. Furthermore, we continue to build on enhancements to Destination XL Group, Inc. Rewards, including capabilities to make it easier for customers to earn and redeem benefits, and exploring additional tiering options over time. The key is to execute the vision while driving discipline in markdowns and responsibly deploying promotion where the returns are greatest. We do expect some margin pressure from the incremental promotions, but we continue to view a portion of these markdowns as a form of marketing investment to acquire and retain customers. Finally, let me shift to the digital experience. In 2026, our focus is to drive higher conversion and customer confidence through a simpler, more intuitive shopping journey. We are leveraging a comprehensive UX site audit to prioritize the highest-impact improvements and to further inform a focused roadmap across discovery, product detail, and checkout. This is practical work, reducing friction, clarifying navigation, and making it easier for customers to find the right product and the right size quickly. A few specifics: we are elevating our visual presentation with updated photography standards that create a more aspirational and less clinical experience across key parts of the site. We are also prioritizing improvements that reduce checkout friction and support more seamless site-to-store behaviors. Over time, personalization and shopping assist capabilities, including thoughtful use of GenAI, can help customers discover products faster and shop with greater confidence, especially in categories where fit drives decision making. We are also reshaping our demand generation mix. We transitioned to an affiliate agency at the end of the third quarter, and our new agency is helping overhaul the program from one that leans heavily on coupons and rewards to a more balanced approach that prioritizes reach and new customer acquisition. In parallel, we are building new affiliate and influencer programs designed to broaden awareness and introduce Destination XL Group, Inc. to more big and tall men who may not yet be in our ecosystem. I will now turn the call over to Peter Stratton for the financial results.

Thank you, Harvey, and good morning, everyone. I appreciate all of you joining us on the call today. I am going to take a few minutes to provide you with some additional color on our fourth quarter and full-year financial performance. Let us start with sales for the fourth quarter, which came in at $112.1 million as compared to $119.2 million in 2024. Comparable sales decreased 7.3% for the quarter, with stores down 8.6% and the direct business down 4.3%. For the full year, total sales were $435.0 million compared to $467.0 million last year, and comparable sales decreased 8.4%, with stores down 6.9% and direct down 11.8%. Moving past sales, our financial statements include some wins and some challenges, which I will highlight for you next. Starting with gross margin, for 2025, gross margin inclusive of occupancy costs was 40.8% compared to 44.4% in 2024. The rate declined primarily due to lower merchandise margin and occupancy deleverage on lower sales. For the full year, gross margin inclusive of occupancy was 43.4% compared to 46.5% last year, again reflecting occupancy deleverage and the impact of tariffs and promotional markdown activity partially offset by a favorable mix shift toward private brand merchandise. The impact of tariffs on merchandise margins was 110 basis points in the fourth quarter and 50 basis points for the full year. As we enter 2026, we are continuing to monitor the situation with tariffs. Our sourcing exposure to any single country remains limited, as we have always had a broad and diversified supplier network. We believe the direct impact from tariffs under currently understood scenarios is manageable. We are also staying close to our national brand partners to understand how they are navigating tariffs and what, if any, impact that could have on pricing. We have taken selective price increases on certain programs this year, we have renegotiated cost sharing with our suppliers, and we have remained agile to opportunistically relocate programs across the globe. Our sourcing and merchandising teams are actively tracking developments and preparing mitigating actions as needed. Moving on to SG&A, SG&A expense for the fourth quarter was 42.4% of sales compared with 41.7% in 2024. For the full year, SG&A expense was $187.4 million, down from $198.3 million, or 5.5%, as compared to fiscal 2024. As a percentage of sales, SG&A expenses were 43.1% of sales compared with 42.5% last year. Marketing costs were 6.3% of sales for the fourth quarter, compared to 6.2% a year ago, and 6.1% of sales for the full year compared to 6.8% last year. On a dollar basis, marketing costs were down $5.2 million for the year. Adjusted EBITDA for the full year was $1.6 million compared to $19.9 million last year. We ended the year with $28.8 million of total cash and investments and no outstanding debt, with excess availability under our credit facility of $55.1 million. I also want to call to your attention an important judgment that we made in Q4 regarding our deferred tax assets. As we have discussed, the challenges we have faced in the big and tall sector over the past two years have weighed heavily on our operating results and contributed to our net operating loss in fiscal 2025. Realization of our deferred tax assets, which primarily relate to net operating loss carryforwards, depends on the generation of future taxable income. While we believe that profitability will return over the longer term, our current year net operating loss coupled with our near-term forecast presents sufficient negative evidence, which outweighs available positive evidence regarding the realizability of our deferred tax assets. Accordingly, we took a noncash charge of $20.4 million in the fourth quarter to establish a full valuation allowance against our deferred tax assets. The valuation allowance has no impact on our tax returns, cash taxes paid, or our ability to utilize our NOLs. I am now going to turn it back over to Harvey for some closing thoughts.

Hopefully it is clear, and as I noted at the end of our prior earnings call, our team is working hard to navigate the cycle with discipline. We expect that the operating rigor we have in place and the foundational work we completed will position us to benefit meaningfully when demand improves. We remain excited and optimistic about the FullBeauty merger, the growth opportunities in the broader inclusive apparel sectors, and what we believe it will return to our shareholders. Lastly, as I wrap up and before we take questions, I want to thank the Destination XL Group, Inc. team that I work with every day. Their hard work and dedication in the stores, in the distribution center, in the corporate office, and in the guest engagement center provide the level of optimism for the opportunity ahead. The passion and commitment our team has for our underserved consumers is our reason for being, our purpose, and why we do what we do. Thank you for all your hard work and your commitment in our pursuit of serving big and tall men and making Destination XL Group, Inc. the place where they can choose their style and wear what they want. We will now open for questions.

If you would like to ask a question at this time, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from Jeremy Hamblin with Craig-Hallum.

Thanks for taking the questions. I wanted to ask a bit more about the FitMap technology, for which I think you have a license for the next five years. To give us a sense for the momentum that is building in that particular technology, I think you said you have scanned 63,000 customers to date. The rollout is live in 188 stores. Can you give us a sense for the incremental velocity? Of the 63,000, how many were scanned in 2025, and what type of training needs to be offered for your sales associates managing stores to maximize the opportunity behind that?

Jeremy, it is Harvey Kanter. I will attempt to walk you through that, and then Peter will supply any greater level of insight beyond what I remember to share. We have had FitMap moving forward in the most demonstrative way since September or October. I do not recall the exact specific cadence, but I will remind you that generally it was 25, 50, 62, 88 stores. That is how it went down in terms of the stores. Then the 88 up to 188, which was the 100 more stores, was really February and March completion. I think we literally just finished the last eight stores in the last 10 days, and we are now at 188 stores, and that is what we expect to be maturity, at least for the time being. The elements that we have been encouraged by as we have moved through this process: first is to get more people scanned, then from scanning to look at incremental revenue, the value of that consumer in the prior 12 months and in the post 12 months, which obviously is literally 24 months of time. For lack of a better way to say it, we have gone slow to go fast. When I say that, we did not get overly aggressive with respect to what we thought would happen. We were thoughtful. It is not overly intense in its capital or cash requirements to roll out to more stores, but what is more intense is the training and the process of engagement. Equally important is bringing the technology forward in more meaningful ways, which we have now done, inclusive of any mobile device. Initially it was the iPhone, which is the majority of how consumers engage with us in a mobile setting, and then Android in the last 30 days has been finalized. The reason I walk you through some of these elements is there are a lot of moving parts, and the thing that is probably the most challenging is getting trained and up to speed to ensure that our measurements, which are literally 243 digital measurements, standing there in your bike shorts, which takes less than 90 seconds, are right. If those measurements are not right, whether it is the custom-made clothing, which is something that we are delivering typically in three to four weeks to consumers based on ordering, which they have the capacity to order with different models and buttons and cuts and trim, or the application being used via the app at home, and then in both cases, the 29 brands we are mapping to, which is basically if you are buying something that might be Brooks Brothers, which is a more traditional block in terms of the way the style executes, you might be 2X, but if you are buying Hugo Boss, which is more European-inspired in its fit, you might be a 3X. The need to have each one of those independent sizes across all 243 measurements accurate and then apply that to the mapping or the custom is a process which we have just begun in earnest to train our team about. Our hope and expectation is incrementally we see double-digit incremental revenue from each customer in the 12-month post-scanning period. The customer value, post-scanning is measurably improved. The average transaction value for that scan and each purchase is greater. The frequency of shopping with us is greater. The units per transaction are greater, and the repeat rate of that customer coming back is greater. Directionally, the customer that has been scanned in the aggregate has done all of those things I just referred to. They are shopping with us more frequently. They are spending more money. They are buying more things. They are spending more money on the day of the visit. They are converting, and they are being scanned, in many cases, for custom-made clothing, which is delivered in three to four weeks. Those all add up over time, in our view over the next 12 to 24 months, to be a tremendous opportunity to grow the comp in those stores and to determine whether or not in smaller stores with less traffic, we can still bring forward an incremental T&L outcome. That would be the goal. I think I have covered pretty much all of it. Peter, if there is something else that I missed, feel free. There is a lot of ground there. Jeremy, why we are most excited is the proprietary element through the period of time we talked about into 2030 gives us an ability, which actually the provider has discussed on a podcast. I remember him saying they think they are so far ahead in the technology that by the time people catch up to where they are, they will be even farther down the road. That was in response to a question in that podcast where the interviewer asked the founder of the company we partnered with. That founder said, we think we are so far ahead that we are happy to share this because it was built around a belief that people buy clothes and then throw them away and fill landfills, and that is not great. His view was we are providing a way to get people to buy the clothes they want in the styles and sizes that fit in a way that no one else can, and we are happy to share that with others because by the time they catch up to us, our technology platform will be that much farther down the road. It represents a great opportunity for Destination XL Group, Inc., and the exclusivity of what it provides to engage customers is powerful.

That is intriguing. It has been tough out there in the big and tall market overall, not just for Destination XL Group, Inc. I wanted to get a sense for, as we enter 2026, the promotional environment that you are seeing. You noted that your customers have been gravitating a bit more towards private brands and away from the national brands. Can you give a sense for the competitive responses that you are seeing from other retailers in the big and tall category at the store level, but also in what you are seeing in the online channel of business?

It is Harvey Kanter again. I will talk you through this, and then Peter can backfill at a level that makes sense. What we believe is that our customer, who is in the sea of all apparel—women’s, kids, men’s, men’s big and tall—is one of the categories that is probably most impacted by customer malaise and a reduced desire to spend money on clothing. He does not shop as frequently as a normal men’s customer, and not as frequently as a women’s customer. When you think about the multiple elements we are all living through and the volatility—whether it is tariffs, the impact of GLP-1 drugs, which we believe is having an impact in terms of the customer’s weight and how they are thinking about clothing, or the price of gas, food, groceries, going out to eat—all those variables are affecting the sector. A belief we have shared before is at some point he has to come back. He needs clothes. He has shopped for need, not want. He may still be shopping for need, not want for a period of time, but at some point, he needs clothes. He is wearing them out. We see certain elements like that. It may be remarkable, but our underwear business is strong right now. That is one of the markers that we look at to see he needs clothes and he has not bought them, and he will come back. There is a belief that he will come back in a period of time. Government subsidy and then lack thereof, inflation, interest rates, GLP-1 drug impact—there are a lot of moving components, including tariffs and what we have had to do to try to navigate and offset at some level. Looking backwards 12 months, who knows what will transpire in the next 12 months. When you put all that together, it is having an impact on a customer who does not love to shop. Our view, and we can see it, is the reason we called out the arctic challenge in January. We just reported November and December; we were basically minus six-ish. January became minus 12.9%. That impacted a quarter that was looking more like minus five and change to become minus seven and change. We did see, as we reported this morning, negative 1.3% in February, which is encouraging. That is a 600-basis point improvement from the quarter or even a 400-basis point improvement from the impact of the weather. Although you have not asked the question, I will lead you here. We are seeing some of the same challenge right now, literally a 1,000-basis point difference in regionality in the Northeast and Southeast and Midwest at moments in time as the storms pass through, and they have been significant. There are a lot of moving parts, and I cannot give you a black-and-white answer. We expect to move to breakeven before the summer, and then throughout the summer improve to the point we are driving comps in the back half of the year. Six weeks in, our business is better than six months ago and even four or five weeks ago in January.

And then a question on the private label or the private brand initiative. Going from 57% of inventory mix private brand to 65% in 2027, what would you expect the gross margin impact of that initiative to be over the course of those two years?

I will talk about it at a high level, and then Peter will circle back. The reality is our national brands on an IMU basis hover in the mid-50s. Our private brands on an IMU basis are in the mid-70s. There is a distinct starting point differential. The consumer is buying private brands mostly because they represent higher quality and a better fit, and that is because we are defining that very specific fit, whereas the national brands work with us, but they all have their own view of what that fit looks like. The value we are bringing to market is a demonstrably lower absolute price point. When you compare the quality and the fit, those values are enhanced. Ultimately, that gives us the ability to assort more deeply. We are bringing in more inventory, and we have the capacity to promote that product at some greater level in a profitable situation versus national brands. The flip side is national brands are at a higher price point. That is not to say we are getting out of national brands, but generally we are trying to navigate a different view of national brands. If we cannot get them to sell through prior to a markdown or liquidation, then that margin that is already initially short becomes that much shorter when you have to accelerate markdowns to manage that inventory. Peter might have more specifics, but net-net, it starts out higher and it ends higher, and the mix you have alluded to moves from 57% to hopefully 67% or greater. That 10-point differential on what literally is a 15- to 20-point differential on IMU does mean something to us.

Harvey, I think you more or less answered it. Going from the mid-50s up to the mid-70s is how I would think about it, Jeremy. That will vary depending on what the product is, but at a very high level, I think that is a fair way to represent it.

So just to clarify, from a gross margin perspective, you would say maybe it could be 100 to maybe even 200 basis points to gross margin?

It could be. I do not want to put a number out there so discretely because, as we have been talking about earlier, we have definitely been more promotional this year. You have seen that in the merchandise margins. There are different puts and takes, but overall, we should end up in a net positive the more that we shift to private label.

Understood. Alright, last one for me. In terms of looking at the store fleet today and the pausing of opening new units, which makes sense, how should we be thinking about the fleet? Obviously, economics have been impacted negatively by the comps and the lower margins. What are we thinking in terms of rightsizing the store fleet in 2026?

In 2026, we are not moving anywhere. We will look and hopefully reengage in 2027 with consideration of more stores. The answer to the question is based on the customer. We have direct shipments, and we can look at our direct business, which is roughly 30% of our revenue, and look at whether we are shipping to places we do not have store representation. In other markets like Houston, which we have used before as an example, Sugar Land in the southwest corner of Houston was not a geography within the Houston area that we were covering well. We clearly did, through our CRM analysis, see customers coming from there and how far they were traveling. That will drive what we would call white space opportunities in markets that we exist already, or potentially markets that we do not exist in vis-à-vis the direct business. What we have articulated before is we do not believe we are a 600- to 700-store chain. We do believe that we could be 325 to 350, maybe 400 stores, but we have not defined that specifically as much as generally saying that based on our research—which was fact-driven—customers have told us literally nearly 50% of the reason they do not shop with us is there is no store near them, or one-third of customers who do not shop with us said not conveniently near them. That is direct feedback that says if we open a store near you, we should see the market improve, and we do see that. You mentioned our stores initially did not open at the level that we expected. We think that is part and parcel of the overall sector challenges, but we can tell you with confidence and data that our stores continue to move towards maturity. The maturity curve is probably longer than we had hoped for and believed, but they are not standing still. They are continuing to move based on awareness, customer trial, and repeat rates, and improve as a performance of units overall with the 18 stores we have opened.

Got it. Thanks for taking my questions.

You bet. I think we are up to Keegan.

Hey, it is Michael Baker. Can you hear me?

Hey, Mike. How are you?

First, before I ask a question, are you willing to talk about anything around the FullBeauty transaction? Sometimes management teams say we are not talking about it until it is closed. If you are, I would ask a couple of questions on that. Mike, we have talked about the proxy coming out hopefully in a not too distant period of time in the future. At the moment, that is the extent of what we are going to talk about relative to that. There is a lot of information in there, which I think will be informative, but nothing beyond that on today's call.

Okay, just wanted to clarify that. Then a couple other quick ones here. When you have these storm events like you saw in January, you are a Northeast retailer and you see these types of things a lot. What is the recapture rate, or do you see a rebound, or does that typically end up being lost sales?

We see a rebound. I do not know that we can tell you it is one-for-one, but when you literally do not open 124 stores on a day—and in January, I know that number—it was 124. The next day was 84. Two days in a row, nearly a third of the chain. We can see the customer rebound. We can see a little bit of movement online, but we can definitely see a rebound. Is it one-for-one and we get it all back instantaneously? No, but we do see a rebound. Weather has been so drastic. Literally yesterday versus the day prior in the Southeast and the Northeast had just terrible winds and snow. We literally see thousands of basis point movement because of the stores not opening or not pulling.

I am in Boston. You are right. I felt that yesterday. One other one I wanted to ask you. You had mentioned in the answer to one of the previous questions an impact from GLP-1. I remember at one point the idea was customers would change sizes but still be within the big and tall ecosystem, so it might actually be a positive. I am not sure it is playing out like that. Can you talk about the impact of GLP-1, what you are seeing, and how that compares to your original thesis?

It has definitely evolved. I was in the stores last week traveling with our Chief Stores Officer and spent a lot of time in the California market. My commentary is anecdotal because we are unable yet to document some of the things we believe. We have done primary research, we have bought secondary research, and we have consumer research, and none of it is demonstrative at the greatest level that we feel has a very high correlation. Anecdotally, we did not think it was going to be impacting the business as much as we think it is today. I cannot characterize what that means in basis points. It is not like a 20% decline. What we see is that our consumer coming in is more needs-driven. He is on a weight-loss journey. In some cases, he may have bought Polo and Psycho Bunny, and now he is buying Harbor Bay. When asked, he says he is losing weight on GLP-1 drugs, and he is not uncomfortable telling us that. He says when he is done, he will come back to Polo, but right now he is going to buy Harbor Bay because it is great quality and a great shirt. It is literally $20-some versus Ralph Lauren might be $120. He is not done with his journey. We are seeing some customers size out of our size range or at least, competitively, they can shop at Nordstrom, which is a partner of ours, or Macy’s or other retailers because they are now a 1X as opposed to a 3X or 4X. We are also seeing a lot of customers that might be a 6X that are now at 3X. They are moving around. We have been told and see customers that are moving down in size, but also for whatever reason decide to get off the drugs, and they are moving back up. There is a lot of volatility. I do not know that we are going to see stabilization of the consumer relative to GLP-1 drugs for some period of time. We think it might be as much as 25% of our customers using them. Typically, weight loss of any kind, up or down, is a friend of ours. Right now, we are in a pattern where they are losing weight and they are trying not to buy clothes until they are done with that journey. We do think it will come back. We think it is a sector issue as opposed to doing something materially wrong or it being materially more competitive than it has been. There are benefits for our guests and customers in general losing weight and being healthy. We are navigating through that. Hopefully I have answered your question. It is a moving target, and there is not a black-and-white answer yet.

Thanks. That is clear. Appreciate the color.

Thank you all for joining our call today. We will talk with you next quarter, and I wish you the very best for spring. Stay warm.

Take care. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.