CANTON, Mass. (AP) -- Men's clothing store chain Destination XL said Friday that its fourth-quarter net income shrank because of a tax benefit from a year ago. But shares rose in morning trading as its adjusted profit and revenue increased and the company predicted that this year would be its strongest sales growth in seven years.
The company, formerly known as Casual Male Retail Group, is shifting away from its Casual Male XL stores and focusing on its more profitable Destination XL brand. The transition will increase general, marketing and sales expenses this year. For now, it's also hurting sales at Casual Male stores near Destination XL stores. But the company expects the change will bring "significant financial improvement" starting in 2014. Sales have declined or been stagnant for years.
For the quarter ended Feb. 2, Destination XL Group Inc. earned $4.2 million, or 9 cents per share, down from $33.5 million, or 70 cents per share, in the same quarter the year before. Adjusted for one-time items, such as the tax benefit, per-share earnings rose to 9 cents from 6 cents.
Revenue grew 3 percent, to $114.9 million from $111.1 million, as revenue at stores open at least a year increased 0.5 percent. The metric rose 15 percent at Destination XL stores but fell 2.3 percent at Casual Male XL retail and outlet stores. The measure is a key measure of retailer's health because it excludes sales at stores the recently opened or closed.
Destination XL earned $6.1 million, or 13 cents per share, on revenue of $399.6 million in fiscal 2012. For this year, the Canton, Mass., company expects to be less profitable as it spends more to close Casual Male XL stores and open Destination XL locations. It forecast breaking even on its earnings, while increasing revenue to $415 million to $420 million. That implies sales growth of 4 to 5 percent, the most since 2006.
Shares added 13 cents, or 2.8 percent, to $4.70.