Destination XL merges with FullBeauty as quarterly losses widen

Destination XL Group (DXL) has announced its intention to merge with FBB Holdings I, Inc. (FullBeauty) to create a “scaled, category-defining retailer for inclusive apparel”. The news comes as the US commerce retailer of Big + Tall men’s clothing reported widening losses in the third quarter, with consumers said to be shopping less frequently.

DXL said that by merging with FullBeauty, a retailer for size-inclusive clothing for men and women, the resulting “combined company will be positioned to accelerate growth, improve operational efficiency and deliver an enhanced customer experience”.

Newly formed subsidiary to be helmed by FullBeauty CEO

As part of the agreement, FullBeauty will merge with a newly formed subsidiary of DXL, with DXL to then remain a publicly traded entity. At closing, it is anticipated that a term loan of 172 million dollars, with a maturity of August 2029, will be formed following a subscription process by certain FullBeauty equity and debt holders.

Jim Fogarty, the current chief executive officer of FullBeauty, will take up the helm position of the combined company following the transaction’s closure. DXL’s chief financial officer, Peter Stratton, will take on the overarching CFO role. The board will comprise nine directors: four appointed by each party and one independent director. The company’s headquarters will remain in Canton, Massachusetts, while retaining a presence in New York City, Indianapolis and El Paso.

Through the merger, direct-to-consumer operations will reflect 73 percent total sales, with brick-and-mortar contributing the rest. Combined net sales amounted to approximately 1.2 billion dollars for the last 12 months ending October 2025, while adjusted EBITDA came to 45 million dollars.

The all-stock transaction, which has already been unanimously approved by the board of directors for both companies, is expected to close in the first half of FY26, customary to closing conditions and approval by DXL shareholders. FullBeauty shareholders have consented to the merger. Following the transaction’s completion, FullBeauty and DXL shareholders will own 55 and 45 percent of the combined company, respectively.

DXL’s Q3 net sales drop as demand wanes

The news of the merger coincides with DXL’s third quarter report, in which the company reported a drop in total sales of 5.2 percent, from 107.5 million dollars in the same period of the year prior to 101.9 million dollars. Comparable sales fell 7.4 percent.

Net loss widened, increasing from a loss of 1.8 million dollars to 4.1 million dollars. Adjusted EBITDA, meanwhile, swung to a loss of two million dollars, compared to a profit of one million dollars in 2024. Gross margin, inclusive of occupancy costs, rose from 45.1 percent to 42.7 percent.

For factors impacting performance, DXL cited significant volatility among evolving trade policies, the enactment of additional tariffs, and waning demand from a customer who is seeking out entry level price points and private brands. With the latter in mind, the company reaffirmed its ongoing commitment to evolving its core assortment and expanding its collection of private brands.

In a statement, Harvey Kanter, president and CEO of DXL, said: “Despite the dynamic consumer environment, we are confident in our regimented process, structure and discipline that sets us up for greater success when we return to growth.”