Cash and short-term investments ended at $33.5 million, down from $63.2 million a year ago, with no debt and $70.1 million available on the revolving credit facility.
Comparable store sales declined 7.1%, while direct sales fell 14.4%, with sequential monthly improvement from May (-10.4%) to July (-7%).
EBITDA fell to $4.6 million from $6.5 million last year, impacted by lower sales but partially offset by expense reductions.
Gross margin rate decreased 300 basis points to 45.2%, mainly due to a 240 basis point increase in occupancy costs and higher markdown rates.
Inventory was $78.9 million, flat year-over-year, with clearance penetration steady at 10.2%. Inventory down 28.5% compared to 2019.
Merchandise margins declined by 60 basis points, partially offset by a favorable shift from national to private brands.
Net sales for Q2 2025 were $115.5 million, down from $124.8 million in Q2 2024, driven by a 9.2% decline in comparable sales.
SG&A expenses decreased by $6.1 million year-over-year, reducing SG&A as a percentage of sales to 41.2%.
Strategic Shift Toward Private Brands and Margin Impact
The company is shifting its product assortment to prioritize private brands, aiming to increase penetration from 56.5% to over 60% in 2026 and over 65% in 2027.
This strategic shift involves reducing investment in underperforming national brands to drive higher profitability and leverage promotional opportunities.
Private brands currently offer a higher initial IMU (upper sixties to mid-seventies) compared to national brands (low fifties), providing a significant margin advantage.
Management believes that private brands can deliver better quality and value, which is crucial as customers migrate from designer brands to private labels.
The company expects that this shift will not only improve margins but also enhance customer loyalty through better storytelling and strategic marketing.
This transition is a major strategic move that aims to differentiate DXL in a competitive market by controlling design, inventory, and profitability.
Dafinchi