Destination XL Group 2026 Q3 Earnings Widening Net Loss and Revenue Decline

Destination XL Group (DXLG) reported fiscal 2026 Q3 earnings on Dec 11th, 2025, missing revenue and earnings expectations. The company announced a strategic merger with FullBeauty to create a scaled inclusive apparel retailer, aiming to drive cost synergies and operational efficiencies.

Revenue

The total revenue of Destination XL Group fell by 5.2% to $101.88 million in 2026 Q3, down from $107.50 million in 2025 Q3. The Retail segment accounted for the entire revenue, with Store sales contributing $74.54 million and Direct sales adding $27.34 million. This decline reflects challenges in the retail sector and competitive pressures.

Earnings/Net Income

Destination XL Group's losses widened significantly, with a net loss of $-4.12 million in 2026 Q3, representing a 128.3% increase from the $-1.80 million loss in 2025 Q3. The earnings per share (EPS) deteriorated to $-0.08, a 166.7% wider loss compared to $-0.03 in the prior year. The results underscore ongoing profitability challenges.

Post-Earnings Price Action Review

The strategy of buying DXLG shares after a revenue raise quarter-over-quarter on the financial report released date and holding for 30 days resulted in a significant underperformance. Over the past three years, this strategy yielded a return of -85.62%, vastly underperforming the benchmark return of 67.12%. The strategy's Sharpe ratio was -0.80, indicating substantial risk aversion, while the maximum drawdown was 0%, suggesting that the strategy avoided further losses but also failed to capture gains.

CEO Commentary

Harvey Kanter, President and CEO, emphasized the merger with FullBeauty as a pivotal step to create a category-defining retailer for inclusive apparel. He highlighted synergies in data science, digital scale, and store expertise, framing the combined entity as "greater than the sum of its parts." Kanter expressed confidence in scaling innovation and profitability while addressing fragmented markets.

Guidance

The merger is expected to close in fiscal 2026’s first half, with $25 million in annual cost synergies by 2027. The combined company aims to leverage 34 million households of data for personalized marketing and expand private-label credit programs. Commercial synergies, including store expansion and DTC capabilities, are highlighted as growth drivers.

Additional News

Destination XL Group announced a merger with FullBeauty Brands, creating a $1.2 billion pro forma entity with combined LTM Adjusted EBITDA of $70 million. The deal, structured as an all-stock transaction, allocates 55% ownership to FullBeauty shareholders and 45% to DXL shareholders. Jim Fogarty, FullBeauty’s CEO, will lead the combined company, while Peter Stratton remains CFO. The merger aims to strengthen market position through operational efficiencies and an expanded customer base.

Key Highlights:

• Merger of Equals:

  DXLG and FullBeauty combine to form a leading inclusive apparel retailer, leveraging complementary strengths in Big + Tall men’s and plus-size women’s markets.

• Cost Synergies:

  Projected $25 million in annual cost savings by 2027 through supply chain optimization and workforce consolidation.

• Strategic Leadership:

  Jim Fogarty (FullBeauty CEO) and Peter Stratton (DXL CFO) will lead the merged entity, focusing on operational integration and growth.

• Debt Structure:

  Post-merger debt of $172 million, with a term loan maturing in August 2029, underpins the combined company’s financial flexibility.