Dive Brief:
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Destination XL Group is reconsidering its planned merger with FullBeauty and is in “constructive discussions to determine the best path forward,” according to a Wednesday press release.
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DXL’s board of directors attributed the unexpected decision to “the increasingly challenging consumer environment since the execution of the merger agreement in December 2025 and FullBeauty’s indebtedness,” per the release, and added that the merger’s existing terms were not in the best interests of DXL stockholders.
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The news comes on the same day DXL reported a 2.1% sales decrease to $103.3 million for the first quarter of fiscal 2026. That earnings report was delayed by a week after DXL told shareholders to reject a $46 million unsolicited take-private offer from Zodiac Partners.
Dive Insight:
On an earnings call Wednesday, executives did not discuss the rejected Zodiac offer, but CEO Harvey Kanter briefly addressed the news regarding FullBeauty, saying that the board “conducted a comprehensive reevaluation of the merger” and is currently “engaging with FullBeauty in very constructive discussions to determine the best path forward.”
Kanter also reiterated his intent to retire effective Aug. 11, after more than seven years as CEO.
“What began as a 3-year commitment evolved because of the significant opportunity I believe which exists in serving the big-and-tall consumer,” Kanter said. “While the path over the years has included both progress and volatility, our belief in the underserved addressable market, and in DXL's long-term opportunity remains unchanged. It still drives me today and will continue to do so through the very end of my journey here.”
He added that he’s been discussing his retirement and succession plans with the board.
“This is something our board takes very seriously, and the board will ensure we have the right leadership in place to lead DXL beyond Aug. 11,” Kanter said. “In the meantime, I am committed to leading the company as we continue to make a meaningful difference in our customer's life.”
Per the terms of the December FullBeauty merger, FullBeauty CEO Jim Fogarty was set to become CEO of the combined company. DXL did not provide further details on the call regarding those arrangements.
As to the company’s financial results, Kanter told analysts that first quarter comps, which were down 4.6% from stores and down 1.6% from direct business, had been impacted by a combination of factors, including a “shift in the Easter calendar” and many of the same widespread challenges denting overall consumer confidence.
“We also believe softer April demand reflected broader macroeconomic pressure on consumer confidence and discretionary spending, including the current global conflict, higher fuel costs and inflation,” Kanter said. “We also believe the growing impact of GLP-1 medications is contributing to structural change in demand within the big-and-tall category.”
Chief Financial Officer Peter Stratton added that the decline in comparable sales was mainly caused by decreased store traffic. In addition, Stratton said the company’s gross margin declined 80 basis points, due to a 100-basis-point decrease in merchandise margin and offset by a 20-basis-point drop in occupancy costs.
“The decline in merchandise margin was primarily due to the impact of tariffs, higher shipping costs resulting from fuel surcharges, and increased markdown activity associated with clearance sales,” Stratton said on the call. “These pressures were partially offset by a shift in product mix toward private brand merchandise and favorable loyalty costs.”
