DXLG - Destination XL Group: Solid Development But Patience Needed
2024-02-23 07:21:14 ET
Summary
- DXLG’s recent performance has been better than the last decade, as commercial development by Management has improved its competitiveness.
- The company operates in a solid niche that has room to outperform in the coming years, particularly in the online segment. DXLG’s business model underpins this.
- The company’s margins have noticeably improved, although there is material uncertainty as to whether this can be maintained, primarily due to economic conditions.
- DXLG is closing the gap to its peers, currently lacking primarily in growth. We believe its development now will bear fruit in the years to come.
- DXLG is currently undervalued, although with near-term pain and uncertainty, we suggest investors await greater visibility of its new normalized level.
Investment thesis
Our current investment thesis is:
- Destination XL Group (DXLG) is a solid business that is developing well, however, we see uncertainty about where its margins will land once revenue growth returns. For this reason, we suggest investors monitor the coming quarters to get better visibility.
- DXLG operates within an attractive niche that is growing, while its business model development has contributed to increased customer acquisition and brand awareness. We see this trajectory continuing.