10 Best Clothing Stocks To Invest In Now

5. Destination XL Group, Inc. (NASDAQ:DXLG)

Analyst Upside: 27.66%

Number of Hedge Fund Holders: 13

Destination XL Group, Inc. is a specialty apparel retailer that offers clothing options for big and tall men. It operates under several trade names in the US, including Destination XL, DXL, DXL Men’s Apparel, Casual Male XL, DXL outlets, and more. The company operates around 232 DXL retail stores, 15 DXL outlet stores, 17 Casual Male XL retail stores, 19 Casual Male XL stores, and a digital business.

These trade names offer an elaborate array of merchandise to fit a variety of men’s lifestyles, from casual to business and young to mature. The retail offerings carry moderate-priced national brands and the company’s own brands of dress wear and casual sportswear.

Destination XL Group’s business was affected in fiscal Q3 2024 due to consumer spending headwinds, resulting in lower online conversion and lower traffic to the company’s stores. The trends showed that buying clothing was not a priority for the big and tall consumer in fiscal Q3 2024, with consumers gravitating towards select promotions and lower-priced goods. The company’s fiscal Q3 2024 results thus reflect a continued shift towards value-driven and affordable options.

Despite the weak sales demand, Destination XL Group’s clearance penetration stands at 9.2%, which is in line with its long-term target of 10% and slightly lower than 9.7% of fiscal Q3 2023. Since the company has struggled to compete with some national brands, it has introduced a new price match guarantee program to ensure its prices remain competitive with the richer promotions and discounts its competitors offer.

The company is also focusing on its store expansion strategy, opening two more stores in fiscal Q3 2024 in Arizona and Texas. These openings brought the company up to seven new stores since the beginning of last year, with four more set to be opened by the end of fiscal 2024.

The primary objective of this store expansion strategy is to address the ease of access to Destination XL stores for consumers. 44% of the company’s polled consumers don’t shop there regularly because Destination XL stores do not exist near them, while 35% do not shop because of a lack of a company store conveniently close by. Destination XL Group, Inc. is thus endeavoring to remedy this problem through its strategic new store openings.