Good day, ladies and gentlemen and welcome to the Fourth Quarter 2018 Destination XL Group Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call maybe recorded. I would now like to introduce your host for today’s conference Ms. Lisa McKee. Ma’am you may begin.

Thank you, Ryan, and good morning, everyone. Thank you for joining us on Destination XL Group’s fourth quarter fiscal 2018 earnings call. On our call today is David Levin, our Acting Chief Executive Officer and Peter Stratton, our Executive 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 Investor Relations 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 core business, comparable sales growth, the wholesale segment, free cash flow, store openings and closings, the impact of its corporate restructuring on future profitability and expected annualized savings form the corporate restructuring, expected future CEO transition cost and the company’s objective to reach 10% EBITDA over time. 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 is detailed in the company’s filings with the Securities and Exchange Commission. Now, I would like to turn the call over to our Acting CEO, David Levin. David?

Thank you, Lisa and good morning everyone. I am pleased to report that our fiscal fourth quarter financial results represented another solid quarter of sales growth and improvement in adjusted EBITDA. This was our fifth consecutive quarter of positive comp sales growth. Our performance has been consistent and broad-based since the fourth quarter of last year and we entered the new fiscal year confident that our momentum will continue as we remain focused on executing against our strategic initiatives. Before I speak to our strategic initiatives and related performance in greater detail, I wanted to first provide an update on our CEO transition. On February 19, we announced that Harvey Kanter joined the company as an advisor and will officially take over as President and CEO on April 1. He will also be appointed as director of the company. At that time, I will resign was Acting CEO. Harvey brings a proven track record in leading executive teams, driving strategy, growing profitability and creating shareholder value for consumer-centric brands. Most recently, Harvey was the President, Chief Executive Officer and Chairman of the Board of Blue Nile. It will be a bittersweet transition for me. While I am looking forward to retirement, I have spent the last 19 years of my life working alongside many great individuals who helped to transform Casual Male into the DXL brand that we all know today. With over 230 DXL stores, a strong ecommerce business and now a new wholesale segment, the time is right for a new leader to set the course for the future growth of DXL. Let me turn to the fourth quarter and full year sales items. We ended the year on a strong note with a fourth quarter positive comp sales result of 3.1%. On a 2-year stack basis, our…

Thank you, David, and good morning, everyone. I’d like to start this morning with a brief summary of our fourth quarter and full-year fiscal 2018 results. For the fourth quarter, which was a 13-week period, total sales decreased 3.2% to $131.2 million from last year’s 14-week fourth quarter. One less selling week in this year’s fourth quarter combined with lost sales from closed stores accounted for a $10.5 million sales swing year-over-year. Excluding these impacts, total fourth quarter sales increased 5% over the prior year inclusive of a positive comp sales increase of 3.1%. Our wholesale segment registered fourth quarter revenue of $2.4 million, and our direct business increased to 24.4% of retail sales compared to 23.1% last year. For the fiscal year 2018, total sales increased 1.2% to $473.8 million inclusive of a positive comp of 3%. Gross margin for the fourth quarter inclusive of occupancy costs was 43.5% compared to 45% last year. The contraction of 150 basis points was the result of a decrease in merchandise margin of 160 basis points partially offset by 10 basis points of leverage in occupancy costs. Our fiscal year 2018 gross margin was down slightly to 44.6% compared to 45% in 2017. Let me spend a few moments to explain why. There are two primary reasons for the contraction in margin. First, the mix of our assortment has been evolving all year from less core and basics to more fashion and designer brands. Even in our private label business, we have been adding more fashion in detailing to our assortment and that is having an impact on our merchandise margins. Second, our merchandise margin is impacted by our new wholesale segment. As you would expect, the gross margin on wholesale is lower than the margins in our store and direct channels.…

Thank you. [Operator Instructions] Our first question comes from Bernard Sosnick with Madison Global Partners. Your line is open.

Yes. Good morning.

Good morning.

Good morning.

I would just like to ask you to describe what features of the interview process with Harvey Kanter drew the most attention to you. I know he’s going to want to speak for himself, but you do have impressions that you can share with us with respect to how he might differentiate running the business from what has been done in the past given his experience?

Yes, well, I got to meet Harvey and we had lot of conversations with him. I think he’s a true merchant and Harvey came up as a merchant. And I think the additive value is his experience on – in multi-channel coming from Blue Nile, where he had a very successful 8-year career. I think that brings an element that will – certainly has the ability to enhance our multi-channel sales. I think that’s the – I think that’s going to be the biggest win.

Just to give us a little bit more insight in the multi-channel, which is where I expected you to go, what aspects of his experience, which is much deeper than most retailers might he bring to bear, I’m sure he must have discussed some of that with you?

Yes, I think he – he’s got to come in here and make his own assessments where he thinks those opportunities are. He’s going to come in with a lot of questions and talking to the people here and looking for the opportunities. I can’t speak for him, where he sees those opportunities yet, I think he’s going to take his time evaluate and then make judgments on what direction to take it to. But again, I think he – that is a strong play for us. We really try and grow that multi-channel business and get our [debt percent] [ph] up. And I think he’s going to give us a lot of guidance on how to get there.

No, I’m encouraged on that. Let me ask when do you believe that the wholesale business will begin to ramp up and record its sales?

I think that’s we’re really going to see it in the fourth quarter. Right now – it’s something that we don’t control on our end. It’s obviously when the retailers want to see the receipts coming in. We’re having lots of conversations, potential great opportunities, but we see a pretty significant ramp-up coming by the fourth quarter of this year.

In that case, why our inventories ramping up for wholesale now?

Well, inventories are up because we are – we are having orders placed and we are fulfilling orders. I think the reason that we saw a little bit of an increase in inventory at year-end, it was just the difference in timing of when we had brought the inventory in and when we shipped it off to the wholesale partners. So, I think that, that will continue to increase, but that’s really just the timing difference more than anything else.

I still don’t fully understand. The gross margin was down in the fourth quarter and the release mentioned the wholesale business is one of the causes?

Sure, that was absolutely one of the causes. So, I mean, let me just clarify. There’s a couple of reasons for what’s happening with the gross margin in the fourth quarter. And the biggest reason is that, we’re seeing the customer and this is in our core business, is gravitating towards fashion and national brands, which have a lower gross margin. We also as I mentioned, we had a lower sell-through of clearance product this year and more full-price product compared to last year. So, more of it is just that our guys are looking for more fashion product, which has lower IMU and then part of it is also that the wholesale sales that we recorded, which was $2.4 million, obviously that’s going to have a lower margin structure than what we have in our stores and direct.

Okay, thank you. I’ll listen into the remainder of the call. Thank you.

Thank you. [Operator Instructions] And with no further questions in the queue, this does conclude our question-and-answer session. Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program, and you may all disconnect. Everyone have a wonderful day.