Good day, and welcome to the Destination XL Group’s Third Quarter Earnings Call. Today’s conference is being recorded. All participants are currently in a listen-only mode. At this time, I would like to turn the conference over to Mr. Jeff Unger. Please go ahead, sir.

Thank you [Carla] [ph]. Good morning, everyone. On our call today is David Levin, our President and Chief Executive Officer; and Peter Stratton, our Senior Vice President and Chief Financial Officer. During today’s call, we will discuss some non-GAAP metrics to provide investors with useful information about our financial performance. Please refer to our earnings release, which was filed this morning and is available on our website at investor.destinationxl.com for an explanation and reconciliation of such measures. Today’s discussion also contains certain forward-looking statements concerning the company’s operations, performance and financial condition, including sales, expenses, gross margin, capital expenditures, sales per square foot, earnings per share, store openings and closings, and other matters. 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 are detailed in the company's filings with the Securities and Exchange Commission. Now I would like to turn the call over to our President and CEO, David Levin.

Thank you, Jeff, and good morning everyone. Our results for the third quarter of fiscal 2014 demonstrate that our plan is working and customers are becoming much more aware of the DXL brand. Our increase in revenues for the quarter was driven by 12.8% comparable sales growth at our 73 DXL stores that have been opened at least 13 months. This metric is particularly impressed us when you consider that it compares with an 11.3% third quarter comp from same-store sales growth in Q3 2013. This is our sixth consecutive quarter of double-digit DXL store comp, and we are pleased with this trend has continued in the month of November. Our decision to increase promotional efforts to drive customers into DXL stores and improve the conversion of existing Casual Male XL customers into DXL shoppers is paying off. We ran one promotional offer during the quarter, it was a coupon to save $25 when the customer spend $75 at DXL. With the assistance of the promotion traffic at DXL stores increased by 4.4%, conversion of traffic to sales was 8.4% and we saw substantial rise in the number of active DXL customers in Q3. We are also seeing traction from our efforts to attract the end-of-the-rack guy towards DXL stores. This younger, smaller waisted and more brand conscious customer can shop at department stores but his options of those stores are limited. The end-of--rack target group accounts for approximately 65% of the total big and tall market, intends to have a higher spend per transaction. The DXL model is ideal for the end-of-the-rack guy because we are giving him more brand and style selections. These customers generated 42.4% of our DXL sales compared with 33% at our Casual Male XL stores in Q3. We expect to see continued end-of- rack…

Thank you, David, and good morning, everyone. There are a few different topics that I’d like to talk about today. First I’ll start by highlighting the company’s results for the third quarter of fiscal 2014. I’ll then give you a quick update on our new death facilities that were signed in the third quarter. Finally I’ll provide a review of our full year guidance for fiscal 2014 which we reaffirmed in our news release today. In the third quarter we are reporting an increase in total company comparable sales of 5.5% or 4.1 million. Leading the way our 73 DXL stores have posted a comparable sales increase for the quarter of 12.8% or 2.8 million over third quarter last year. Our Casual Male stores, Rochester stores and U.S. Direct business had a combined comparable sales increase of 2.3% or 1.3 million for the quarter. Our store traffic, store conversion and number of transactions are all up over Q3 last year. Store traffic increased 4.4% over third quarter last year and DXL stores opened at least 13 months. Conversion which we define as the percentage of visits that resulted in a transaction increased 8.4% in DXL stores opened at least 13 months over the prior year’s third quarter. Transactions which are the product of traffic and conversion increased by 13.1% for the third quarter over prior year third quarter. Finally, the dollars per transaction metric for Q3 was flat to last year. Gross margin for the third quarter inclusive of occupancy cost was 43.3% compared with gross margin of 44.2% for the third quarter last year. The decrease was the result of a 90 basis point decrease in merchandise margin. Occupancy cost as a percentage of sales were flat with last year. The decrease in merchandise margin was due to the…

[Operator Instructions] And we’ll take our first question from Thomas Filandro with Susquehanna International Group.

Hi, thanks. Good job on the quarter guys and love the commercial. Couple of quick questions, David the comment you made about that incremental promotion, I think you said it was incremental to 25, 75 threshold, curious with the strong results that you achieved with that, are you planning to deliver more of those type of promotions other than the holiday season or next year. Peter, maybe can you address little bit what on the port comment I think you said, you made some adjustments, but did you guys experience any issues related to the ports, how should we think about that you see? And my other question was related to private label performance, any update for the quarter. Thank you.

Let me start with the promotions. No, next year we’re pretty much going to be anniversarying our existing promotions. We try and do one every quarter. I don’t see any need for us to put more emphasis on the promotions we had last year. We had not had a promotion that was very effective in that period. So that was a plus for us to do that. But outside of that anniversarying everything will be the norm. On the question on the ports, not an issue for us, we don’t take receipts out of the West Coast and we also had pulled up a lot of our receipts earlier before a lot of this happened, so we’re pretty well complete on our receipt flow. So I would say it really had no impact on our business with the port situation. And timely private label, we’re doing extremely well. It continues to perform against the brands. We haven’t seen a whole lot of shift going on but again as we open new DXL stores, the branded penetration goes up because again this is product that we never could have offered our customer in the past in these markets. So, our private label business continues to be very healthy and of course it drives much more profitability than the brands in the end.

Can you just remind us what the percentage mixes of private versus brand currently?

Yes, the DXL store it's about -- where it's about 70% to 75% private label and the rest being the brands and it does vary dramatically by stores. We have stores as low as 15% penetration in brands, in some stores it could be as high as 40% to 50% but we don’t dictate what it’s going to be, the customers in those demographics are telling us what percent of brands they want but we do see the brands growing year after year within the markets because a lot of that is where we’re getting these new customers, they’re hearing about the fact that we have a Polo shop, we have Lacoste, we have Brooks Brothers and 40 other great brands out there. One new note to offer, we did launch on our website and going into some stores Under Armour and we really like the result, that was a missing brand for us and our customers responding quite well.

Okay, and just the AUC question?

Sorry?

I was asking about average unit costing, how should we think about average unit costing currently and heading into ’15 with cotton prices being lower.

Yes, we feel pretty good about it. We’ve already established some nice savings for 2015 in our private label programs. One of the positives that we move towards is as we've grown our percent of global sourcing internally as opposed to using third parties within our own global sourcing process right now, we’re negotiating directly with the mills to supply the materials to the factory, which we’ve been finding cost savings there but our global sourcing team has done an outstanding job and they continue to take over programs that we’ve previously used outside vendors for.

We’ll take our next question from Laura Champine with Canaccord.

Good morning, the guidance implies a pretty big reversal in gross margin in Q4 and I know that you got easier comparisons but can you give us more color into how you expect to achieve better gross margins in Q4?

So Laura, where we’ve been in Q3 is we’re down about 90 basis points from last year. As we move into the fourth quarter our clearance inventories are actually in a much better shape than they have been in the past, one of the points that I mentioned was clearance inventory is about 9% of our total inventory compared to 12% where we were a year ago. So, we also see that in Q3 we had the big promotion with the October coupon where as in Q4 much of our traffic and sales that we’re expecting are going to be coming from the national ad campaign.

Now one think I would add to that is, if you look at -- the job we’ve done in getting these stores open on a timely basis is dramatically improved over last year. At this point last year we still have 25 stores that we open between now and the end of the year and that carried with it a lot of fall product that we did not have a good opportunity to liquidate so we had margin pressures in Q1 of last year liquating that inventory. Again, emphasizing the fact that our inventory is clean, the stores that open and operating, we should see margin improvement going into next spring.

We’ll take our next question from Liz Pierce with Brean Capital.

Thanks, good morning, nice to talk you guys. David, could you just go over some of the comments that you made in the very beginning on maybe 2% more customers -- I just didn’t quite follow it, you wouldn’t mind repeating that?

Well, yes, what I’m saying is that, when we compare a Casual Male store to a DXL store the database within that store we have 82% more customers in a DXL store than we had in a Casual Male store, which is great. The other part is that of any existing customer in DXL, what we look at in our databases to be active you have to shop within the last 12 months and in a DXL store we retain them at 30% greater than we did in a Casual Male store which is critical. So not only are we getting more customers, we are getting them back more often, there might be -- it’s got a lot more stickiness to it, but they are seeing they are coming back again. What’s exciting is, as we start to extract this out overtime we really see what’s going to happen is, our customer base is going to grow significantly over the next three years because again we are getting more customers and they stick around longer and they shop more often. So those are new metrics that we haven’t said publically before but we are very excited at the rate they are growing. So, again very promising numbers to look at.

And so that 82% more customers, those are people that have actually spent. Right?

Yes, it's not based on active, being in our active database.

And then question on what you said on the stores that you are keeping over -- open longer, I guess you call them clearance stores. If we look at the 40 -- I think you are going to be closing with 48 stores this year. Are there more that you would close? I guess I am trying to get my arms around how many more might close next year than the 40 that you talked about.

Yes, well let me give a little color on that. So we've now opened all the DXL stores this year. We currently have 20 of the Casual Male stores that would have been closed, because we used to close them five days prior to the new store opening, we've kept those 20 stores open as clearance stores till the end of the year, then they will close. One end the leases were probably up at the close of the end of the year, so it’s lowering our [indiscernible] cost, plus it’s allowing customers to go into those stores to be told where the new store is. So this is -- we try and give it like three months to keep that store open. Next year follow the same pattern, we are going to -- when we open 40 probably and close 40 as we get to the end of the year we'll probably keep 20 more stores -- 20 some -- it’s too early to say open as clearance stores for that three months process. It’s a good transition for us to cost to keep that existing store open, it’s not that meaningful.

Okay, so that’s why there is more in the back in the fourth quarter.

Yes, because most of our leases are do at the end of the year.

Right. And then question on these end-of-the-rack guy, so it’s 42.4 versus 33. Was that year-over-year I just wanted to make sure I have the right compare?

Yes, that’s comparing it to last year at the same quarter.

So, at Q3.

Let me add something to it, because that’s one way to look at, that’s comparing it to a Casual Male store but also compared to a DXL store, I think it was about 40.5. So it’s still going up, that’s a big lift for us because that’s pretty difficult number to move in total.

Okay. So that makes more sense. I didn’t have that 33 number, so that is Casual Male.

Right, I will just repeat it again. It’s 42.4% this year versus 40.5% a year-ago at the same quarter.

All right, DXL-to-DXL, quarter-to-quarter.

Yes.

Okay. And then on the advertising that you are doing or to reactivate the customers, the free Polo or the $50 coupon, what do you think is the most effective? Is it the $50, the free one?

Well that’s a good question. It’s kind of like a one-two punch. The $50 one is very strong, but again the free Polo is doing really well. So what we do is we start with the free Polo, if they redeem that promotion, then they would not get the free 50 in the experience book. But the combination of the two is what’s really driving that increase in conversion. It’s a compelling offer and what we track more is, okay, they came in for the free Polo, did they come back and shop and we haven’t given that number out but it’s more than exceeding our expectations. That customer who is getting that first time very aggressive offer is coming back, which is just telling he likes the experience.

I guess that was my question and I didn’t phrase it correctly, in terms of driving the customer back after they redeemed whatever one they do, which one is bit more effective or they about equal?

I think they have been fairly equal.

We will take our next question from Mark Montagna with Avondale Partners.

Hi, question about the advertising, how many of your weeks of advertising did you have here in the third quarter versus last year?

Three.

Okay, and then what is the total ad spend going to be for this year’s fall campaign versus last year’s fall campaign?

It’s actually down about 30% in dollars, it’s down about 18% in response to what customers are actually seeing. We got a much better rate on our investment this year, which is very positive. But the dollars are down about 30% from last year’s fall campaign.

And then looking at the smaller stores versus the larger stores, if you look to next year roughly how many smaller stores do you think you’re going to open? And then how many of the larger stores and what would be the average square footage of these larger stores?

So, I think we’ll have about 10 of the smaller stores and 30 of the larger stores. And the square footage of the larger stores now are coming in the range of 7,000 to 9,000, but averaging about under 8,000 square feet.

And then, what was it -- the smaller stores are 5,600?

They’re 5,000 to 6,000 generally, I think.

Then looking out to next year, do you think it’s possible to have a breakeven year?

Well Mark that’s a good question, you may recall we were asked this last quarter and we’re going to give you guys an update on guidance in Q4 on our next call. But right now we’re not going to talk about 2015.

And then just kind of a housekeeping question, did you say that the direct comp is now part of the Casual Male comp? Or, how are you accounting -- [indiscernible]?

So the direct comp has always been in our total comps. And it’s still in there now. The only thing that we’ve done differently this quarter is we’re not giving direct comp as a single standalone channel, so what we are talking about is we gave the total comps which were 5.5%, the DXL comps and then everything else.

But does the DXL comp include any direct any sales from direct?

The DXL comp of 12.8% is just at the stores.

We’ll take our next question from Jack Balos with Focus Research.

The order online, do you also pickup in stores as well as being able to distribute from the stores?

The order online and pickup in stores will be available approximately next March. We are in the design and development stage of that right now. And as I said we’re looking forward to that, because our customer often buys on need and wants something that day. So we think it’s going to be a good enhancement for us plus once we get them into the store to pick up that item, our sales people will be ready and to add on to that purchase.

The additional spending for advertising for the fourth quarter, how is that compared with the fourth quarter last year?

It’s about the same because of the shift in the dollars. As David said, we’re spending less overall, but because we’re moving some of those dollars into the fourth quarter, it comes out relatively the same.

Same, okay. And I was also wondering, do you have any plans to open the store in Manhattan?

Yes, we do. It should -- we’re opening a store actually at 23rd and 6th. It’s a great area for us, we’ve got a lot of big retailers on that block and we’ll be opening that store in spring.

In the spring, over the next year?

Yes. It’s already -- it’s under construction right now.

We’ll take our next question from Mike Richardson with Sidoti.

I just want to actually follow up on a couple of previous questions, the first is in regard to the smaller stores, I know it’s a pretty small sampling and it’s early. But can you talk a little bit about the sales performance there? And then longer term with adding this the smaller DXL boxes how are you thinking about the longer term footprint of DXL stores?

The smaller store markets in case, I know that you’re travelling, Saint Charles, Illinois, Lafayette, Louisiana, Toledo, Ohio, Temecula, California, Bakersfield, California, Topeka, Kansas and Franklin, Tennessee. But all these stores opened within the last 30 days to 45 days so it’s premature for us to give any numbers out on it, but I can tell you we’re very pleased with the early results on the sale so far. Going forward, we just keep tightening up these stores thus we can because it has a dramatic impact on our performance and profitability and return on investment and all those great things. So going forward, as we said, 7,500 square feet really gives justice to just about any market. A market like Manhattan will be different that that requires a larger box, but yes, we’ve made a dramatic shift. Currently our stores average 8,900 square feet and again we’ve whittled that down and again we’ve reengineered the fixtures and the display areas to really not have a sacrifice in having the number of units in the stores, it’s just creating an environment where we could have the same D&A of these fixed stores and do it in the smaller back. So it’s been going extremely well for us in getting these stores sized properly.

One thing that I just wanted to add was as David was saying, the real benefit for going with these 5K stores is that we can still achieve the same kinds of performance metrics that we can in the larger stores that we otherwise may not have been if we had built the larger store here. So for example sales per square foot which is a number we’ve been really happy with this year overall this year sales per square foot is going from a $147 up to a 165 at the end of this year, which is a great improvement. And in part of that reason is when we open these 5K stores, if we were building it out of 8500 square feet the sales per square foot which is not the at an acceptable level for us. So now that we put it in a 5500, 6000 square feet we can make the numbers work.

Okay that’s helpful. How about in terms of a number of DXL stores longer term? What’s the opportunity there? We’re still talking about 300?

Yes we are very comfortable in that 300 and then we have to look to fill in markets. The number could go higher and I think on our next quarter call we’ll have a better understanding of the exact store count for next year.

Okay great and then just a last one from me. What percentage of sales are fulfilled from the DC as compared to stores and is there any concern that doing some e-com from fulfillment from the stores will leave some of those stores under inventory with most popular merchandise.

That’s something that we think about all the time. But we have a very strong replenishment system where we replace one for one, so we don’t do a lot of pre-pack. So if the store sells a 3XL of a certain item, they are going to shift back that item within that week. So we don’t feel that's going to be a major issue. And what was the first part of the question?

What was on e-com?

It's less than 10%.

Okay so its small percent. Okay thanks guys very much and best of luck for holiday.

We’ll take our next question from Chris Krueger with Lake Street Capital Market.

Just one question. You talk about how your new technology is enabling 300 stores to fulfill the online orders that you can't fulfill from your distribution center and that omni-channel experience is evolving. I am just curious on the timing of this. Is this kind of a recent initiative or is this something that keeps building every quarter or did you flip a switch few months ago to really kick it in or how should I look at that?

Yes, well we did in a way flip a switch. We started it in a limited number of stores starting in April of this year and we're basically adding 20, 30 stores at a time and it just keeps building. And what’s fascinating about what’s taking place is 40% to 50% of our transactions in that category are clearance items which kind of makes sense because if the warehouse has it in stock it’s going to have the priority to ship it out of the warehouse. But what they’re finding is we’re turning on these 300 stores they have product that’s been sitting in their backroom or out of clearance rack for the last year or two and suddenly it’s visible to the whole buying community that they could buy that marked down item in a store that’s 300, 400 miles from their home. So it’s just been an excellent vehicle and that’s why our clearance inventory has dropped dramatically it’s an excellent to keep our stores clean.

We’ll take our next question from Liz Pierce with Brean Capital

Hi just a couple of follow up questions. David on the incremental promotion that you did this year, is the reason you didn’t do it last year was because you were running the ad campaign. I just wanted a clarification.

Well actually we ran it -- it was really not a strong event. We ran a points promotion a year ago where if you made purchases we gave you additional points to the loyalty program and with our customer he prefers to see the cash. So it's a much better improvement on what we did a year ago. it was a lesson to learn for us that the points driven promotions aren’t going to drive customer into our stores.

Okay he wanted you to show him the money. And then the seven stores, the small stores are all of them similar to the St. Charles store where it opened but fairly closed or did you have to move it a fair distance away?

It varies for instance Lafayette, Louisiana is probably seven miles they do vary. Looking at the list, they do move. There is no -- again it’s more likely to move because in the smaller markets where we’ve had a store for 25 years, the real estate is probably not very good, it's probably in a strip center that's got a lot of vacancies and we’re moving all of these stores. Even in the smaller markets they do have a new trade area where all the retail move to and we’re moving those stores to wherever that strong trade area is.

Okay. And then actually one other thing about promotions, was it sent strictly by email or was there any kind of direct mail from you?

No, it was direct mail.

It was both, that’s how you delivered, email and direct mail?

So it was -- there was really three ways to get that promotion, we had direct mail, we had emails and we also had the offer up on the site. So, any one of three ways that people could have gotten to it.

[Operator Instructions] We’ll take our next question from Mark Montagna with Avondale Partners.

Hi. Just follow up on the e-commerce with fulfilling from stores, is your intention -- if the computer system tells you that we have the product both in the fulfillment center and in the store, what is the computer going to default to as far as fulfillment?

So Mark, the way that that works is, if the product is in our centralized DC, that’s where we want to fulfill them. We get the best shipping efficiencies from there, but if the product is not in our DC and so for example if it’s sitting on a clearance rack out in a store, it will then default to the store, but we would ship from the DC first.

And once it goes, it defaults to the stores it’s based on location. We want to ship it from a store that close to where that customer is.

Right. So it sounds like this is more of an opportunity for selling through clearance as opposed to fuller price merchandise, is that true?

Yes. And it also allows a lot of the higher price goods that gets into limited distribution, there are certain price points are prohibited for us to put into some markets but now that customer can see that product because we don't keep a lot of that in the warehouse. So it goes a lot of ways, but again it is a real driver for that value customer who is looking for deals.

Okay. And then on just, you have your custom suits and those could be bought by anybody who is not really a big and tall customer, do you do anything to try to promote that to the general public to let them know what a great value these custom suits are?

No, it would be cost prohibitive for us to take that approach. We got our hands full really trying to build our database of our -- we can tell guys out there. So, and again it’s not a significant part of our business, it’s a great feature to have it gives credibility to our clothing department but there is nothing in our channel to go in that direction.

Okay. Thank you.

And we have no further questions in queue at this time. I’d now like to turn the call back over to David Levin for any additional or closing remarks.

Yes, I just like to thank everybody for being on this call and as always we always invite to visit one of or DXL stores. We know it’s a great experience especially compared to what we had in our Casual Male store. So gives the call if you like to enquire about a store location or like to tour. And finally we look forward to speaking with you on the next quarter. Thank you very much.

Happy holiday for everyone, enjoy your Thanksgiving as well.

And this does conclude today’s conference call. Thank you all for your participation. You may now disconnect.