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Flagged for High Default Risk, DXL Fights to Regain Financial Footing

After landing several times on S&P’s watch list of retailers at risk of default, Destination XL seems to be getting its financial house in order.

On Sept. 3, the specialty retailer of big and tall men’s clothing and footwear repaid in full and in cash its first-in, last-in (FILO) loan facility ahead of a March 2026 maturity date. The $18.6 million payment included $17.5 million in principal and $1.1 million in accrued interest other related expenses.

“With respect to the prepayment of the FILO loan, we are grateful to Pathlight Capital for providing us with additional liquidity under the FILO during a very difficult time and for working with us to be able to retire that debt early,” said Harvey Kanter, DXL’s president and CEO.

The company landed on S&P’s Market Intelligence watchlist of retailers at risk of default in December, March and May, signaling a high probability of failing to meet its financial obligations within a year. Christopher & Banks, for example, filed a Chapter 11 petition earlier this year after warning in 2020 that it could go bankrupt. J.Jill and Express, retailers that S&P has previously flagged, have fared better as consumers resumed in-store shopping.

In the case of DXL, prepaying the loan leaves the company in a better financial position since it no longer has any outstanding long-term debt. In addition, its sales trends improved for the second quarter ended July 31.

The chain’s second quarter earnings results put the retailer back in the black with net income of $24.5 million, or 36 cents a diluted share, against a net loss of $10.7 million, or 21 cents in the year-ago quarter. Net sales rose 81 percent to $138.6 million from $76.4 million. The company said comparable store sales rose 6.9 percent in May, 14.7 percent in June and 18.2 percent in July. Stores in the Southeast, Midwest and South Central parts of the U.S. did better than doors in the Pacific Northwest, Northeast and Mid-Atlantic regions. Kanter said last month that the retailer’s 12-month active customer file is “almost back to pre-pandemic levels and our second quarter new-to-file rate increased 29 percent, as compared to the second quarter of 2019.”

On Wednesday, DXL shares are set to begin trading again on the Nasdaq Global Market, which in December suspended the firm and led to the men’s wear chain briefly transitioning to the OTCQX market, the over-the-counter market for stocks not listed on the traditional exchanges.

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DXL had received notices from the Nasdaq that it was not in compliance with listing requirements. The first notice came in April 2020 when DXL shares failed to maintain the minimum listing of $1.00 a share. Subsequently, shareholders of the men’s big and tall retailer in August last year approved a reverse stock split, and in November, DXL received another notice from Nasdaq that it was no longer in compliance with a rule requiring the company to maintain a minimum of $2.5 million in stockholders’ equity for continued listing on the Nasdaq Capital Market.

Last December, the Canton, Mass.-based firm attributed the non-compliance to lease accounting rules under GAAP, which saw DXL take an impairment charge as a result of Covid-19 store closures.

“We are very excited to be back trading on Nasdaq and to do so with no outstanding long-term debt,” Kanter said. “The company’s shares had traded for over 30 years on Nasdaq, but last December we voluntarily transitioned to OTCQX as a result of the impact of the global pandemic on our operations. Our operating results for the first six months of fiscal 2021 and the improvement in our stock price have enabled us to relist with Nasdaq.”

Subsidiaries of DXL operate DXL Big + Tall retail and outlet stores across the U.S. and Toronto, Canada. It also operates Casual Male XL retail and outlet stores in the U.S., and an e-commerce site