XML 19 R8.htm IDEA: XBRL DOCUMENT
v3.21.2

Basis of Presentation | 9 Months Ended
--- | ---
Oct. 30, 2021
Accounting Policies [Abstract] |
Basis of Presentation | 1. Basis of Presentation In the opinion of management of Destination XL Group, Inc., a Delaware corporation (collectively with its subsidiaries, referred to as the “Company”), the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary for a fair presentation of the interim financial statements. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with the notes to the Company’s audited Consolidated Financial Statements for the fiscal year ended January 30, 2021 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 19, 2021. The information set forth in these statements may be subject to normal year-end adjustments. The information reflects all adjustments that, in the opinion of management, are necessary to present fairly the Company’s results of operations, financial position and cash flows for the periods indicated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s business historically has been seasonal in nature, and the results of the interim periods presented are not necessarily indicative of the results to be expected for the full year. The Company’s fiscal year is a 52- or 53- week period ending on the Saturday closest to January 31. Fiscal 2021 and fiscal 2020 are 52-week periods ending on January 29, 2022 and January 30, 2021, respectively. COVID-19 Pandemic and its impact on results and comparability of financial statements On March 11, 2020, the World Health Organization declared the current outbreak of a novel coronavirus disease (“COVID-19”) as a global pandemic. The COVID-19 pandemic had an adverse effect on the Company’s operations during fiscal 2020. All of the Company’s store locations were closed temporarily on March 17, 2020 and the majority of the Company’s workforce was furloughed in March 2020. The Company began reopening stores in late April and by the end of June 2020 all retail stores had been reopened, but the majority with reduced operating hours. As a result of the impact of the pandemic on our business in fiscal 2020, including the temporary closure of all of our stores in fiscal 2020, results for the third quarter and first nine months of fiscal 2021 may not be comparable to the results for the third quarter and first nine months of fiscal 2020. While vaccines are being widely distributed and many areas where our stores are located currently have limited or no restrictions, the duration of the COVID-19 pandemic and its variants remain uncertain and could continue to have a material adverse impact on the Company’s results of operations, financial condition and cash flows. Segment Information The Company has three principal operating segments: its stores, direct and wholesale businesses. The Company considers its stores and direct operating segments to be similar in terms of economic characteristics, production processes and operations, and has therefore aggregated them into one reportable segment, retail segment, consistent with its omni-channel business approach. Due to the immateriality of the wholesale segment’s revenues, profits and assets, its operating results are aggregated with the retail segment for all periods presented. Fair Value of Financial Instruments ASC Topic 825, Financial Instruments, requires disclosure of the fair value of certain financial instruments. ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities. The Company utilizes observable market inputs (quoted market prices) when measuring fair value whenever possible. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and short-term borrowings approximate fair value because of the short maturity of these instruments. Accumulated Other Comprehensive Income (Loss) - (“AOCI”) Other comprehensive income (loss) includes amounts related to foreign currency and pension plans and is reported in the Consolidated Statements of Comprehensive Income (Loss). Other comprehensive income (loss) and reclassifications from AOCI for the three and nine months ended October 30, 2021 and October 31, 2020, respectively, were as follows:
|  | October 30, 2021 |  |  | October 31, 2020 |
For the three months ended: |  | (in thousands) |
|  | Pension Plans |  |  | Foreign Currency |  |  | Total |  |  | Pension Plans |  |  | Foreign Currency |  |  | Total |
Balance at beginning of the quarter |  | $ | (6,068 | ) |  | $ | (39 | ) |  | $ | (6,107 | ) |  | $ | (5,983 | ) |  | $ | 8 |  |  | $ | (5,975 | )
Other comprehensive income (loss) before reclassifications, net of taxes |  |  | 90 |  |  |  | 2 |  |  |  | 92 |  |  |  | 77 |  |  |  | — |  |  |  | 77 |
Amounts reclassified from accumulated other comprehensive income, net of taxes (1) |  |  | (13 | ) |  |  | — |  |  |  | (13 | ) |  |  | 170 |  |  |  | — |  |  |  | 170 |
Other comprehensive income (loss) for the period |  |  | 77 |  |  |  | 2 |  |  |  | 79 |  |  |  | 247 |  |  |  | — |  |  |  | 247 |
Balance at end of quarter |  | $ | (5,991 | ) |  | $ | (37 | ) |  | $ | (6,028 | ) |  | $ | (5,736 | ) |  | $ | 8 |  |  | $ | (5,728 | )
|  | October 30, 2021 |  |  | October 31, 2020 |
For the nine months ended: |  | (in thousands) |
|  | Pension Plans |  |  | Foreign Currency |  |  | Total |  |  | Pension Plans |  |  | Foreign Currency |  |  | Total |
Balance at beginning of fiscal year |  | $ | (6,224 | ) |  | $ | 3 |  |  | $ | (6,221 | ) |  | $ | (6,478 | ) |  | $ | 47 |  |  | $ | (6,431 | )
Other comprehensive income (loss) before reclassifications, net of taxes |  |  | 270 |  |  |  | (40 | ) |  |  | 230 |  |  |  | 231 |  |  |  | (39 | ) |  |  | 192 |
Amounts reclassified from accumulated other comprehensive income, net of taxes (1) |  |  | (37 | ) |  |  | — |  |  |  | (37 | ) |  |  | 511 |  |  |  | — |  |  |  | 511 |
Other comprehensive income (loss) for the period |  |  | 233 |  |  |  | (40 | ) |  |  | 193 |  |  |  | 742 |  |  |  | (39 | ) |  |  | 703 |
Balance at end of quarter |  | $ | (5,991 | ) |  | $ | (37 | ) |  | $ | (6,028 | ) |  | $ | (5,736 | ) |  | $ | 8 |  |  | $ | (5,728 | )
(1) Includes the amortization of the unrecognized loss on pension plans, which was charged to “Selling, General and Administrative” Expense on the Consolidated Statements of Operations for all periods presented. The amortization of the unrecognized loss, before tax, was $170,000 and $511,000 for the three and nine months ended October 31, 2020, respectively. For the three and nine months ended October 30, 2021, the Company recognized income of $13,000 and $37,000, respectively, as a result of a change in amortization from average remaining future service to average remaining lifetime. There was no related tax effect for either period. Stock-based Compensation All share-based payments, including grants of employee stock options and restricted stock, are recognized as an expense in the Consolidated Statements of Operations based on their fair values and vesting periods. The fair value of stock options is determined using the Black-Scholes valuation model and requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (the “expected term”), the estimated volatility of the Company’s common stock price over the expected term and the number of options that will ultimately not complete their vesting requirements (“forfeitures”). The Company reviews its valuation assumptions at each grant date and, as a result, is likely to change its valuation assumptions used to value employee stock-based awards granted in future periods. The values derived from using the Black-Scholes model are recognized as an expense over the vesting period, net of estimated forfeitures. The estimation of stock-based awards that will ultimately vest requires judgment. Actual results and future changes in estimates may differ from the Company’s current estimates. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model based on the assumptions in the table below as it relates to stock options granted during the first nine months of fiscal 2021 and fiscal 2020.
|  | October 30, 2021 |  |  | October 31, 2020 |
Expected volatility |  | 97.4% - 104.9% |  |  | 82.3% - 87.8% |
Risk-free interest rate |  | 0.31% - 0.60% |  |  | 0.22% - 0.27% |
Expected life |  | 3.0 - 4.0 yrs. |  |  | 3.0 - 4.0 yrs. |
Dividend rate |  |  | — |  |  |  | — |
Weighted average fair value of options granted |  | $0.47 |  |  | $0.32 |
The Company has outstanding performance stock units (PSUs) with a market condition. The respective grant-date fair value and derived service periods assigned to the PSUs were determined using a Monte Carlo model. The valuation included assumptions with respect to the Company’s historical volatility, risk-free rate and cost of equity. Impairment of Long-Lived Assets The Company reviews its long-lived assets for events or changes in circumstances that might indicate the carrying amount of the assets may not be recoverable. The Company assesses the recoverability of the assets by determining whether the carrying value of such assets over their respective remaining lives can be recovered through projected undiscounted future cash flows. The model for undiscounted future cash flows includes assumptions, at the individual store level, with respect to expectations for future sales and gross margin rates as well as an estimate for occupancy costs used to estimate the fair value of the respective store’s operating lease right-of-use asset. The amount of impairment, if any, is measured based on projected discounted future cash flows using a discount rate reflecting the Company’s average cost of funds. For the third quarter and first nine months of fiscal 2021, the Company recognized non-cash gains of $1.2 million and $2.3 million, related to the Company’s decision to close certain retail stores, which resulted in a revaluation of the existing lease liabilities. The portion of the gains that related to previously recorded impairment charges against the operating lease right-of-use asset were included as an offset to previously recorded asset impairment charges. Accordingly, for the third quarter and first nine months of fiscal 2021, $1.1 million and $2.1 million were included as an offset to asset impairment charges, respectively. The remaining $0.1 million and $0.2 million of the gains for the third quarter and first nine months of fiscal 2021, respectively, was included as a reduction of store occupancy costs. For the third quarter of fiscal 2020, the Company recognized a non-cash gain of $1.2 million related to the closure of certain stores, which had previously been impaired. Accordingly, $1.1 million of the $1.2 million, related to previously recorded impairment charges was included as an offset to asset impairment charges, with the remaining $0.1 million included as a reduction of store occupancy costs. The results for the first nine months of fiscal 2020, include an impairment charge of $16.3 million, recorded in the first quarter of fiscal 2020 as a result of the significant impact that the COVID-19 pandemic was having on the Company’s business and the continued uncertainty at that time. The impairment charge included approximately $12.5 million for the write-down of certain right-of-use assets and $3.8 million for the write-down of property and equipment, related to stores where the carrying value exceeded fair value. Leases The Company adopted ASU 2016-02, “Leases (Topic 842)” in fiscal 2019. Under ASC 842, the Company determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments, initial direct costs and any lease incentives are included in the value of those right-of use assets. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, based on information available at the lease measurement date to determine the present value of future payments. The Company elected the lessee non-lease component separation practical expedient, which permits the Company to not separate non-lease components from the lease components to which they relate. The Company also made an accounting policy election that the recognition requirement of ASC 842 will not be applied to certain, if any, non-store leases, with a term of 12 months or less, recognizing those lease payments on a straight-line basis over the lease term. At October 30, 2021, the Company had no short-term leases. The Company’s store leases typically contain options that permit renewals for additional periods of up to five years each. In general, for store leases with an initial term of 10 years or more, the options to extend are not considered reasonably certain at lease commencement. For stores leases with an initial term of 5 years, the Company evaluates each lease independently and, only when the Company considers it reasonably certain that it will exercise an option to extend, will the associated payment of that option be included in the measurement of the right-of-use asset and lease liability. Renewal options are not included in the lease term for automobile and equipment leases because they are not considered reasonably certain of being exercised at lease commencement. Renewal options were not considered for the Company’s corporate headquarters and distribution center lease, which was entered into in 2006 and was for an initial 20-year term. At the end of the initial term, the Company will have the opportunity to extend this lease for six additional successive periods of five years. For store leases, the Company accounts for lease components and non-lease components as a single lease component. Certain store leases may require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, and are expensed as incurred as variable lease costs. Other store leases contain one periodic fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the right-of-use assets and lease liabilities. Tenant allowances are included as an offset to the right-of-use asset and amortized as reductions to rent expense over the associated lease term. See Note 4 ‘‘Leases’’ for additional information. Recently Issued Accounting Pronouncements No new accounting pronouncements, issued or effective during the first nine months of fiscal 2021, have had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.

X
- References No definition available. + Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the basis of accounting, or basis of presentation, used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_BasisOfAccounting
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration