Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August~~May 15, ~~2017,~~2018, the registrant had ~~48,655,223~~49,010,087 shares of common stock, $0.01 par value per share, outstanding.

	July 29, 2017			January 28, 2017			May 5, 2018			February 3, 2018
	(Fiscal 2017)			(Fiscal 2016)			(Fiscal 2018)			(Fiscal 2017)

ASSETS
Current assets:
Cash and cash equivalents	$	6,547		$	5,572		$	6,994		$	5,362
Accounts receivable		5,547			7,114			2,673			3,046
Inventories		112,334			117,446			106,219			103,332
Prepaid expenses and other current assets		9,951			8,817			12,226			9,927
Total current assets		134,379			138,949			128,112			121,667

Property and equipment, net of accumulated depreciation and amortization		120,188			124,347			106,478			111,032

Other assets:
Intangible assets		2,015			2,228			1,720			1,821
Other assets		3,790			3,804			5,838			5,885
Total assets	$	260,372		$	269,328		$	242,148		$	240,405

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	3,758		$	6,941		$	963		$	1,392
Current portion of deferred gain on sale-leaseback		1,465			1,465			1,465			1,465
Accounts payable		31,767			31,258			28,699			33,987
Accrued expenses and other current liabilities		28,492			31,938			25,247			25,585
Borrowings under credit facility		53,447			44,097			58,877			47,385
Total current liabilities		118,929			115,699			115,251			109,814

Long-term liabilities:
Long-term debt, net of current portion		11,115			12,061			10,446			10,669
Deferred rent and lease incentives		36,805			35,421			34,954			35,718
Deferred gain on sale-leaseback, net of current portion		10,991			11,723			9,892			10,258
Deferred tax liability		222			222
Other long-term liabilities		5,584			5,682			3,798			3,960
Total long-term liabilities		64,717			65,109			59,090			60,605

Commitments and contingencies

Stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued		—			—			—			—
Common stock, $0.01 par value, 100,000,000 shares authorized, 61,337,634 and 61,637,164 shares issued at July 29, 2017 and January 28, 2017, respectively		613			616
Common stock, $0.01 par value, 100,000,000 shares authorized, 61,720,821 and 61,485,882 shares issued at May 5, 2018 and February 3, 2018, respectively								617			615
Additional paid-in capital		306,515			304,466			308,483			307,557
Treasury stock at cost, 12,755,873 and 10,877,439 shares at July 29, 2017 and January 28, 2017, respectively		(92,658	)		(87,977	)
Treasury stock at cost, 12,755,873 shares at May 5, 2018 and February 3, 2018								(92,658	)		(92,658	)
Accumulated deficit		(132,363	)		(122,567	)		(142,395	)		(139,285	)
Accumulated other comprehensive loss		(5,381	)		(6,018	)		(6,240	)		(6,243	)
Total stockholders' equity		76,726			88,520			67,807			69,986
Total liabilities and stockholders' equity	$	260,372		$	269,328		$	242,148		$	240,405

The accompanying notes are an integral part of the consolidated financial statements.

	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended
	July 29, 2017			July 30, 2016			July 29, 2017			July 30, 2016			May 5, 2018			April 29, 2017
	(Fiscal 2017)			(Fiscal 2016)			(Fiscal 2017)			(Fiscal 2016)			(Fiscal 2018)			(Fiscal 2017)

Sales	$	121,125		$	117,875		$	228,754		$	225,766		$	113,331		$	107,629
Cost of goods sold including occupancy costs		65,308			63,032			124,249			121,157			62,643			58,941
Gross profit		55,817			54,843			104,505			104,609			50,688			48,688

Expenses:
Selling, general and administrative		49,068			46,299			95,236			87,668			45,590			46,168
Depreciation and amortization		9,621			7,527			17,375			14,869			7,324			7,754
Total expenses		58,689			53,826			112,611			102,537			52,914			53,922

Operating income (loss)		(2,872	)		1,017			(8,106	)		2,072
Operating loss														(2,226	)		(5,234	)

Interest expense, net		(824	)		(783	)		(1,626	)		(1,567	)		(886	)		(802	)

Income (loss) before provision for income taxes		(3,696	)		234			(9,732	)		505
Provision for income taxes		35			35			64			92
Loss before provision (benefit) for income taxes														(3,112	)		(6,036	)
Provision (benefit) for income taxes														(2	)		29


Net income (loss)	$	(3,731	)	$	199		$	(9,796	)	$	413
Net loss													$	(3,110	)	$	(6,065	)


Net income (loss) per share - basic and diluted	$	(0.08	)	$	0.00		$	(0.20	)	$	0.01
Net loss per share - basic and diluted													$	(0.06	)	$	(0.12	)

Weighted-average number of common shares outstanding:
Basic		48,556			49,531			49,146			49,522			48,791			49,735
Diluted		48,556			49,953			49,146			49,902			48,791			49,735

The accompanying notes are an integral part of the consolidated financial statements.

	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended
	July 29, 2017			July 30, 2016			July 29, 2017			July 30, 2016			May 5, 2018			April 29, 2017
	(Fiscal 2017)			(Fiscal 2016)			(Fiscal 2017)			(Fiscal 2016)			(Fiscal 2018)			(Fiscal 2017)
Net income (loss)	$	(3,731	)	$	199		$	(9,796	)	$	413
Net loss													$	(3,110	)	$	(6,065	)

Other comprehensive income before taxes:
Foreign currency translation		177			(188	)		216			(143	)		(145	)		39
Pension plans		206			261			421			474			174			215
Other comprehensive income before taxes		383			73			637			331			29			254
Tax provision related to items of other comprehensive income		—			—			—			—			(26	)		—
Other comprehensive income, net of tax		383			73			637			331			3			254
Comprehensive income (loss)	$	(3,348	)	$	272		$	(9,159	)	$	744
Comprehensive loss													$	(3,107	)	$	(5,811	)

The accompanying notes are an integral part of the consolidated financial statements.

Accumulated

Additional

Other

Common Stock

Paid-in

Treasury Stock

Accumulated

Comprehensive

Shares

Amounts

Capital

Shares

Amounts

Deficit

Income (Loss)

Total

Balance at January 28, 2017

61,637

$
616

$
304,466

(10,877
)

$
(87,977
)

$
(122,567
)

$
(6,018
)

$
88,520

Board of Directors compensation

58

1

285

286

Stock compensation expense

840

840

Restricted Stock issued, reclass from liability to equity (Note 3)

425

4

916

920

Cancellations of restricted stock, net of issuances

(788
)

(8
)

8

—

Deferred stock vested

5

—

—

—

Repurchase of common stock

(1,878
)

(4,681
)

(4,681
)
Accumulated other comprehensive income (loss):

Pension plan

421

421

Foreign currency

216

216

Net loss

(9,796
)

(9,796
)
Balance at July 29, 2017

61,337

$
613

$
306,515

(12,755
)

$
(92,658
)

$
(132,363
)

$
(5,381
)

$
76,726

																	Accumulated
					Additional												Other
	Common Stock				Paid-in			Treasury Stock						Accumulated			Comprehensive
	Shares		Amounts		Capital			Shares			Amounts			Deficit			Income (Loss)			Total
Balance at February 3, 2018		61,486	$	615	$	307,557			(12,755	)	$	(92,658	)	$	(139,285	)	$	(6,243	)	$	69,986
Board of Directors compensation		37		—		140															140
Stock compensation expense						407															407
Restricted stock units granted for achievement of performance-based compensation, reclass from liability to equity (Note 4)						381															381
Restricted stock units exercised		165		2		(2	)														—
Issuances of restricted stock, net of cancellations		30		—		—															—
Deferred stock vested		3		—		—															—
Accumulated other comprehensive income (loss):
Pension plan, net of taxes																		129			129
Foreign currency, net of taxes																		(126	)		(126	)
Net loss															(3,110	)					(3,110	)
Balance at May 5, 2018		61,721	$	617	$	308,483			(12,755	)	$	(92,658	)	$	(142,395	)	$	(6,240	)	$	67,807

The accompanying notes are an integral part of the consolidated financial statements.

	For the Six Months Ended						For the three months ended
	July 29, 2017			July 30, 2016			May 5, 2018			April 29, 2017
	(Fiscal 2017)			(Fiscal 2016)			(Fiscal 2018)			(Fiscal 2017)
Cash flows from operating activities:
Net income (loss)	$	(9,796	)	$	413
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net loss							$	(3,110	)	$	(6,065	)
Adjustments to reconcile net loss to net cash used for operating activities:
Amortization of deferred gain on sale-leaseback		(732	)		(733	)		(366	)		(366	)
Amortization of deferred debt issuance costs		138			139			59			69
Depreciation and amortization		17,375			14,869			7,324			7,754
Deferred taxes, net of valuation allowance		—			26
Stock compensation expense		840			755			407			288
Board of Directors stock compensation		286			356			140			150

Changes in operating assets and liabilities:
Accounts receivable		1,567			(2,392	)		373			1,254
Inventories		5,112			3,707			(2,887	)		(3,978	)
Prepaid expenses and other current assets		(1,134	)		(402	)		(2,299	)		(1,947	)
Other assets		14			(114	)		47			(39	)
Accounts payable		509			5,368			(5,288	)		(1,004	)
Deferred rent and lease incentives		1,384			2,849			(764	)		1,438
Accrued expenses and other liabilities		(1,214	)		(5,696	)		523			(2,111	)
Net cash provided by operating activities		14,349			19,145
Net cash used for operating activities								(5,841	)		(4,557	)

Cash flows from investing activities:
Additions to property and equipment, net		(13,775	)		(13,841	)		(3,308	)		(6,934	)
Net cash used for investing activities		(13,775	)		(13,841	)		(3,308	)		(6,934	)

Cash flows from financing activities:
Repurchase of common stock		(4,681	)		—			—			(1,735	)
Principal payments on long-term debt		(4,208	)		(3,840	)		(680	)		(2,386	)
Net borrowings (repayments) under credit facility		9,290			(870	)
Net cash provided by (used for) financing activities		401			(4,710	)
Net borrowings under credit facility								11,461			17,968
Net cash provided by financing activities								10,781			13,847
Net increase in cash and cash equivalents		975			594			1,632			2,356
Cash and cash equivalents:
Beginning of period		5,572			5,170			5,362			5,572
End of period	$	6,547		$	5,764		$	6,994		$	7,928

The accompanying notes are an integral part of the consolidated financial statements.

In the opinion of management of Destination XL Group, Inc., a Delaware corporation (formerly known as Casual Male Retail Group, Inc. and, 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 28, 2017~~February 3, 2018 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March ~~20, 2017.~~23, 2018.

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 ~~2017~~2018 is ~~a 53-week period ending on February 3, 2018 and fiscal 2016 was~~ a 52-week period ending on ~~January 28, 2017.~~February 2, 2019 and fiscal 2017 was a 53-week period ended on February 3, 2018.

The Company reports its operations as one reportable segment, Big & Tall Men’s Apparel, which consists of two principal operating segments: its retail business and its direct business. The Company considers its operating segments to be similar in terms of economic characteristics, production processes and operations, and has therefore aggregated them into a single reporting segment, consistent with its omni-channel business approach. The direct operating segment includes the operating results and assets for LivingXL^® and ShoesXL^®.

At ~~July 29, 2017,~~May 5, 2018, the “Casual Male” trademark had a carrying value of ~~$0.4~~$0.2 million and is considered a definite-lived asset. The Company is amortizing the remaining carrying value on an accelerated basis, consistent with projected cash flows through fiscal 2018, its estimated remaining useful life.

The Company’s “Rochester” trademark is considered an indefinite-lived intangible asset and has a carrying value of $1.5 million. During the ~~six~~three months ended ~~July 29, 2017,~~May 5, 2018, no event or circumstance occurred which would cause a reduction in the fair value of the Company’s reporting units, requiring interim testing of the Company’s “Rochester” trademark.

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 fair value of long-term debt is classified within Level 2 of the valuation hierarchy. At ~~July 29, 2017,~~May 5, 2018, the fair value approximated the carrying amount based upon terms available to the Company for borrowings with similar arrangements and remaining maturities.

The fair value of indefinite-lived assets, which consists of the Company’s “Rochester” trademark, is measured on a non-recurring basis in connection with the Company’s annual impairment test. The fair value of the trademark is determined using a projected discounted cash flow analysis based on unobservable inputs and is classified within Level 3 of the valuation hierarchy. See Intangibles above.

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.

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 and reclassifications from AOCI for the three ~~and six~~ months ended ~~July~~May 5, 2018 and April 29, 2017, ~~and July 30, 2016,~~ respectively, were as follows:

July 29, 2017

July 30, 2016

For the three months ended:

(in thousands)

Pension
Plans

Foreign
Currency

Total

Pension
Plans

Foreign
Currency

Total

Balance at beginning of the quarter

$
(5,022
)

$
(742
)

$
(5,764
)

$
(5,900
)

$
(494
)

$
(6,394
)

Other comprehensive income (loss) before
reclassifications, net of taxes

25

177

202

61

(188
)

(127
)

Amounts reclassified from accumulated other
comprehensive income, net of taxes ⁽¹⁾

181

—

181

200

—

200

Other comprehensive income (loss) for the period

206

177

383

261

(188
)

73

Balance at end of quarter

$
(4,816
)

$
(565
)

$
(5,381
)

$
(5,639
)

$
(682
)

$
(6,321
)

	July 29, 2017									July 30, 2016									May 5, 2018									April 29, 2017
For the six months ended:	(in thousands)
For the three months ended:																			(in thousands)
	Pension Plans			Foreign Currency			Total			Pension Plans			Foreign Currency			Total			Pension Plans			Foreign Currency			Total			Pension Plans			Foreign Currency			Total
Balance at beginning of fiscal year	$	(5,237	)	$	(781	)	$	(6,018	)	$	(6,113	)	$	(539	)	$	(6,652	)
Balance at beginning of the quarter																			$	(5,840	)	$	(403	)	$	(6,243	)	$	(5,237	)	$	(781	)	$	(6,018	)

Other comprehensive income (loss) before reclassifications, net of taxes		85			216			301			122			(143	)		(21	)		57			(126	)		(69	)		60			39			99

Amounts reclassified from accumulated other comprehensive income, net of taxes ⁽¹⁾		336			—			336			352			—			352			72			—			72			155			—			155

Other comprehensive income (loss) for the period		421			216			637			474			(143	)		331			129			(126	)		3			215			39			254

Balance at end of quarter	$	(4,816	)	$	(565	)	$	(5,381	)	$	(5,639	)	$	(682	)	$	(6,321	)	$	(5,711	)	$	(529	)	$	(6,240	)	$	(5,022	)	$	(742	)	$	(5,764	)

Revenue from the Company’s retail business is recorded upon purchase of merchandise by customers, net of an allowance for sales returns. Revenue from the Company’s direct business is recognized at the time a customer order is delivered, net of an allowance for sales returns. Store sales are defined as sales that originate and are fulfilled directly at the store level. E-commerce sales are defined as sales that originate online, including those initiated online at the store level.

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 significant judgment. Actual results and future changes in estimates may differ from the Company’s current estimates.

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 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.

In the second quarter of fiscal 2017, the Company recorded an impairment charge of $1.7 million for the write-down of property and equipment. The impairment charge related to a store where the carrying value exceeded fair value. The fair value of these assets, based on Level 3 inputs, was determined using estimated discounted cash flows. The impairment charge was included in Depreciation and Amortization on the Consolidated Statement of Operations for the second quarter and first six months of fiscal 2017. There was no material impairment of long-lived assets in ~~the second quarter and first six months of fiscal 2016.~~

~~In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory,~~" which applies to inventory that is measured using first-in, first-out ("FIFO") or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Company ~~adopted this pronouncement as of January 29, 2017. The adoption of this standard did not have a material impact on the Company’s~~ ~~Consolidated Financial Statements~~.

~~In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting~~,” which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards, and classification on the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company adopted this standard during the first quarter of fiscal ~~2017. The adoption of this standard did not have a material impact on the Company’s provision for income taxes~~2018 or diluted earnings per share. The Company has elected to adopt the guidance related to the presentation of excess tax benefits in its Consolidated Statements of Cash Flows on a prospective transition method. ~~Since there were~~ ~~no excess tax benefits~~ ~~for the six months ended July 29, 2017 or July 30, 2016, this election did not result in a change in presentation on the Consolidated Statement of Cash Flows.~~ ~~In addition, the Company has elected to continue to estimate forfeitures at each grant.~~fiscal 2017.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which ~~supersedes~~amends the accounting guidance on revenue recognition. The amendments in this ASU are intended to provide a framework for addressing revenue issues, improve comparability of revenue recognition ~~requirements in ASC 605, “Revenue Recognition,” as well as various other sections of~~practices, and improve disclosure requirements. This ASU sets forth a five-step model for determining when and how revenue is recognized. Under the ~~ASC, such as, but not limited to, ASC 340-20, “Other Assets and Deferred Costs - Capitalized Advertising Costs”. The core principle of ASU 2014-09 is that~~model, an entity ~~should~~is required to recognize revenue ~~in a way that depicts~~to depict the transfer of ~~promised~~ goods or services to ~~customers in~~a customer at an amount ~~that reflects~~reflecting the consideration ~~to which the entity~~it expects to ~~be entitled~~receive in exchange for those goods or services. To assess the impact of ASU 2014-09, ~~will be effective for fiscal years,~~the Company reviewed its current accounting policies and ~~interim periods within those years, beginning after December 15, 2017,~~practices, identified all material revenue streams, assessed the impact of the ASU on its material revenue streams and ~~is to be applied either retrospectively to each prior reporting period presented or~~identified potential differences with ~~the cumulative effect recognized at the date of initial adoption as an adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets~~current policies and practices. The Company adopted this standard on February 4, 2018, with no material impact on the ~~balance sheet). Early adoption is permitted after December 15, 2016.~~ Company’s ~~The Company expects to adopt ASU 2014-09 in the first quarter of fiscal 2018 and will not adopt early. The Company expects it will use~~Consolidated Financial Statements, using the modified retrospective ~~approach as a transition method and is making progress towards completing its assessment~~approach. Further disclosures related to the adoption of ~~the effect that ASU 2014-09 will have on its Consolidated Financial Statements.~~

~~In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)~~,” which will require an entity to recognize lease assets and lease liabilities on its balance sheet and will increase disclosure requirements on its leasing arrangements. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods therein. Early adoption is permitted. ~~In the financial statements~~this standard are provided below in ~~which the ASU is first applied, leases shall be measured and recognized at the beginning of the earliest comparative period presented with an adjustment to equity. While the Company is still~~Note 2, ~~evaluating the impact this pronouncement will have on its~~ ~~Consolidated Financial Statements, the~~ Revenue Recognition~~Company expects a~~ ~~gross-up of its Consolidated Balance Sheets as a result of recognizing lease liabilities and right of use assets. The extent of such gross-up is under evaluation.~~ .

In March 2016, the FASB issued ASU 2016-04, “Liabilities—Extinguishments of Liabilities: Recognition of Breakage for Certain Prepaid Stored-Value Products,” which amends exempting gift cards and other prepaid stored-value products from the guidance on extinguishing financial liabilities. Rather, they will be subject to breakage accounting consistent with the new revenue guidance in Topic 606. However, the exemption only applies to breakage liabilities that are not subject to unclaimed property laws or that are attached to segregated bank accounts (e.g., consumer debit cards). ~~The ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted.~~ The Company ~~does not expect the~~adopted this pronouncement as of February 4, 2018. The adoption of this ~~pronouncement to~~standard did not have a material impact on ~~its~~the Company’s Consolidated Financial Statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which reduces the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230. The ~~ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.~~Company adopted this pronouncement as of February 4, 2018. The ~~Company does not expect the~~ adoption of this ~~pronouncement to~~standard did not have a material impact on ~~its~~the Company’s Consolidated Financial Statements.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other Than Inventory,” which reduces the existing diversity in practice in how income tax consequences of an intra-entity transfer of an asset other than inventory should be recognized. The amendments in ASU 2016-16 require an entity to recognize such income tax consequences when the intra-entity transfer occurs rather than waiting until such time as the asset has been sold to an outside party. The ~~ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.~~Company adopted this pronouncement as of February 4, 2018. The ~~Company does not expect the~~ adoption of this ~~pronouncement to~~standard did not have a material impact on ~~its~~the Company’s Consolidated Financial Statements.

In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718)”which provides clarity in order to reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The Company adopted this pronouncement as of February 4, 2018. The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This ASU is a comprehensive new leases standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It will require lessees to recognize lease assets and lease liabilities for most leases, including those leases previously classified as operating leases under current GAAP. The ASU retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The ASU is effective for annual periods beginning after December 15, 2018, including interim periods within those years; earlier adoption is permitted. While there is an exposure draft to amend Topic 842 to provide entities with an additional transition method, presently the Company would be required to adopt this ASU using the modified retrospective approach.

The Company has selected its leasing software solution and is in the process of identifying changes to its business processes, systems and controls to support adoption of the new standard in fiscal 2019. The Company is evaluating the impact that the new standard will have on the consolidated financial statements. While the Company is still in the process of quantifying the impact, it expects the adoption of the new standard to result in a material gross-up of its Consolidated Balance Sheets as a result of recognizing lease liabilities and right of use assets.

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. The amendments in this update allow a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this update also require certain disclosures about stranded tax effects. The amendments in this update are effective for fiscal years beginning after December 15, ~~2017,~~2018 and interim periods within those fiscal years. Early adoption is permitted. ~~The Company does not expect~~We are currently evaluating the ~~adoption of~~impact this pronouncement towill have ~~a material impact~~ on ~~its~~ ~~Consolidated Financial Statements~~.our consolidated financial statements.

No other new accounting pronouncements, issued or effective during the first ~~six~~three months of fiscal ~~2017,~~2018, have had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.

On February 4, 2018, the Company adopted Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective approach for all contracts not completed as of the date of adoption. Results for the reporting periods beginning on February 4, 2018 are presented under ASC 606, while prior period amounts continue to be reported in accordance with accounting under ASC 605, Revenue Recognition. There was no material impact to the Company’s Consolidated Financial Statements as a result of adopting ASC 606.

The Company operates as a retailer of men’s big and tall apparel, which includes both retail stores and a direct business. Revenue is recognized by the operating segment that initiates a customer’s order. Store sales are defined as sales that originate and are fulfilled directly at the store level. Direct sales are defined as sales that originate online, including those initiated online at the store level. Generally, all revenues are recognized when control of the promised goods is transferred to customers, in an amount that reflects the consideration in exchange for those goods. Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included as part of accrued expenses on the Company’s Consolidated Balance Sheets.

Unredeemed Loyalty Coupons. The Company offers a free loyalty program to its customers for which points accumulate based on the purchase of merchandise. Over 90% of the Company’s customers participate in the loyalty program. Under ASC 606, these loyalty points provide the customer with a material right and a distinct performance obligation with revenue deferred and recognized when the points are expected to redeem or expire. The cycle of earning and redeeming loyalty points is generally under one year in duration. The loyalty accrual, net of breakage, was $0.8 million and $0.6 million at May 5, 2018 and February 3, 2018, respectively.

Unredeemed Gift Cards, Gift Certificates, and Credit Vouchers. Upon issuance of a gift card, gift certificate, or credit voucher, a liability is established for its cash value. The liability is relieved and net sales are recorded upon redemption by the customer. Based on historical redemption patterns, the Company can reasonably estimate the amount of gift cards, gift certificates, and credit vouchers

for which redemption is remote, which is referred to as "breakage". Breakage is recognized over two years in proportion to historical redemption trends and is recorded as sales in the Consolidated Statements of Operations. The gift card liability, net of breakage, was $1.6 million and $2.2 million at May 5, 2018 and February 3, 2018, respectively.

Shipping. 2.Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales for all periods presented. Amounts related to shipping and handling that are billed to customers are recorded in sales, and the related costs are recorded in cost of goods sold, including occupancy costs, in the Consolidated Statements of Operations.

As noted above under Segment Information in Note 1, the Company’s business consists of one reportable segment. Substantially all of the Company’s revenue is generated from its retail store operations and its direct business. Accordingly, we have determined that the following sales channels depict the nature, amount, timing, and uncertainty of how revenue and cash flows are affected by economic factors:

On October 30, 2014, the Company ~~amended its credit facility~~executed the Second Amendment to the Sixth Amended and Restated Credit Agreement with Bank of America, N.A, effective October 29, 2014, ~~by executing the Second Amendment to the Sixth Amended and Restated Loan and Security Agreement~~ (as amended, the “Credit Facility”). The maturity date of this Credit Facility is October 29, 2019. Subsequent to the end of the first quarter of fiscal 2018, on May 24, 2018 this Credit Facility with Bank of America, N.A. was amended pursuant to the Seventh Amended and Restated Credit Agreement (“New Credit Facility”). See Note 8, Subsequent Events, for a full description of the New Credit Facility.

The Credit Facility ~~provides~~provided for maximum committed borrowings of $125 million. The Credit Facility ~~includes,~~included, pursuant to an accordion feature, the ability to increase the Credit Facility by an additional $50 million upon the request of the Company and the agreement of the lender(s) participating in the increase. The Credit Facility ~~includes~~included a sublimit of $20 million for commercial and standby letters of credit and a sublimit of up to $15 million for swingline loans. The Company’s ability to borrow under the Credit Facility iswas determined using an availability formula based on eligible assets. ~~The maturity date~~Through the end of the ~~Credit Facility is October 29, 2019. The Company’s~~first quarter of fiscal 2018, obligations under the Credit Facility ~~are~~were secured by a lien on substantially all of its assets, excluding (i) a first priority lien held by the lenders of the Term Loan Facility on certain equipment of the Company described below and (ii) intellectual property.

At ~~July 29, 2017,~~May 5, 2018, the Company had outstanding borrowings under the Credit Facility of ~~$53.7~~$59.1 million, before unamortized debt issuance costs of ~~$0.3~~$0.2 million. Outstanding standby letters of credit were ~~$3.3~~$3.6 million and outstanding documentary letters of credit were ~~$0.1~~$1.5 million. Unused excess availability at ~~July 29, 2017~~May 5, 2018 was ~~$43.7~~$32.7 million. Average monthly borrowings outstanding under the Credit Facility during the first ~~six~~three months of fiscal ~~2017~~2018 were ~~$58.6~~$60.8 million, resulting in an average unused excess availability of approximately ~~$46.0~~$30.4 million. The Company’s ability to borrow under the Credit Facility iswas determined using an availability formula based on eligible assets, with increased advance rates based on seasonality. Pursuant to the terms of the Credit Facility, if the Company’s excess availability under the Credit Facility ~~fails~~failed to be equal to or greater than the greater of (i) 10% of the Loan Cap (defined in the Credit Facility as the lesser of the revolving credit commitments at such time or the borrowing base at the relevant measurement time) and (ii) $7.5 million, the Company ~~will be~~would have been required to maintain a minimum consolidated fixed charge coverage ratio of 1.0:1.0 in order to pursue certain transactions, including but not limited to, stock repurchases, payment of dividends and business acquisitions.

Borrowings made pursuant to the Credit Facility ~~will~~ bear interest at a rate equal to the base rate (determined as the highest of (a) Bank of America N.A.’s prime rate, (b) the Federal Funds rate plus 0.50% or (c) the annual ICE-LIBOR rate (“LIBOR”) for the respective interest period) plus a varying percentage, based on the Company’s borrowing base, of 0.50%-0.75% for prime-based borrowings and 1.50%-1.75% for LIBOR-based borrowings. The Company iswas also subject to an unused line fee of 0.25%. At ~~July 29, 2017,~~May 5, 2018, the Company’s prime-based interest rate was ~~4.75%~~5.25%. At ~~July 29, 2017,~~May 5, 2018, the Company had approximately ~~$47.0~~$56.0 million of its outstanding borrowings in LIBOR-based contracts with an interest rate of ~~2.69%~~3.25%. The LIBOR-based contracts expired on ~~August 1, 2017.~~May 8, 2018. When a LIBOR-based borrowing expires, the borrowings ~~revert~~reverted back to prime-based borrowings unless the Company ~~enters~~entered into a new LIBOR-based borrowing arrangement.

The fair value of the amount outstanding under the Credit Facility at ~~July 29, 2017~~May 5, 2018 approximated the carrying value.

Pursuant to a Master Loan and Security Agreement with Banc of America Leasing & Capital, LLC, dated July 20, 2007 and amended on September 30, 2013 (the “Master Agreement”), the Company entered into twelve equipment security notes between September 2013 and June 2014 (in aggregate, the “Notes”), whereby the Company borrowed an aggregate of $26.4 million. The Notes are for a term of 48 months and accrue interest at fixed rates ranging from 3.07% to 3.50%. Principal and interest are paid monthly, in arrears.

The Company repaid, in full, the remaining outstanding balance on the Notes of $71,000 subsequent to the end of the first quarter of fiscal 2018. The Notes ~~are~~were secured by a security interest in all of the Company’s rights, title and interest in and to certain equipment. ~~The Company was subject to prepayment penalties through the second anniversary of each note. The Company is no longer subject to any~~

prepayment penalties. The Master Agreement includes default provisions that are customary for financings of this type and are similar and no more restrictive than the Company’s existing Credit Facility.

On October 30, 2014, the Company entered into a term loan agreement with respect to a new $15 million senior secured term loan facility with Wells Fargo Bank, National Association as administrative and collateral agent (the “Term Loan Facility”). The effective date of the Term Loan Facility is October 29, 2014 (the “Effective Date”). The proceeds from the Term Loan Facility were used to repay borrowings under the Credit Facility.

~~The~~ In connection with the New Credit Facility, discussed above, subsequent to the end of the first quarter of fiscal 2018, on May 24, 2018, this Term Loan Facility ~~bears interest~~was repaid in full, without penalty. See Note 8, Subsequent Events, for additional information regarding the New Credit Facility.

Interest on the Term Loan Facility was at a rate per annum equal to the greater of (a) 1.00% and (b) the one month LIBOR rate, plus 6.50%. Interest payments ~~are~~were payable on the first business day of each calendar month, and ~~increase~~increased by 2% following the occurrence and during the continuance of an “event of default,” as defined in the Term Loan Facility. The Term Loan Facility ~~provides~~provided for quarterly principal payments on the first business day of each calendar quarter, which commenced the first business day of January 2015, in an aggregate principal amount equal to $250,000, subject to adjustment, with the balance payable on the termination ~~date.~~date, which was October 29, 2019.

The Term Loan Facility ~~includes~~included usual and customary mandatory prepayment provisions for transactions of this type that ~~are~~were triggered by the occurrence of certain ~~events. In addition,~~events, and through the ~~amounts advanced under the Term Loan Facility can be optionally prepaid in whole or part. All prepayments are subject to an early termination fee in the amount of 1%~~end of the ~~amount prepaid through October 29, 2017.~~

~~The Term Loan Facility matures on October 29, 2019. It is~~first quarter of fiscal 2018, was secured by a first priority lien on certain equipment of the Company, and a second priority lien on substantially all of the remaining assets of the Company, excluding intellectual property.

The following is a summary of the Company’s ~~long-term incentive plans. Beginning on August 4, 2016, all~~Long-Term Incentive Plan. All equity awards granted under long-term incentive plans are issued from the Company’s stockholder-approved 2016 Incentive Compensation Plan. ~~All prior awards were issued from the Company’s 2006 Incentive Compensation Plan, which expired on July 31, 2016.~~ See Note 4, 5, Stock-Based ~~Compensation.~~

The 2016 Long-Term Incentive Wrap-Around Plan (the “Wrap-Around Plan”), which was approved in the fourth quarter of fiscal 2014, was a supplemental performance-based incentive plan that was only effective if there was no vesting of the performance-based awards under the 2013-2016 LTIP and, as a result, all performance-based awards under that plan are forfeited. The performance targets under the 2013-2016 LTIP were not achieved at the end of fiscal 2016 and accordingly, the Wrap-Around Plan became effective.

The performance target under the Wrap-Around Plan consisted of two metrics, Sales and EBITDA, with threshold (50%), target (80%) and maximum (100%) payout levels. Each metric was weighted as 50% of the total performance target. However, in order for there to be any payout under either metric, EBITDA for fiscal 2016 had to be equal to or greater than the minimum threshold.

The Wrap-Around Plan also provided for an opportunity to receive additional shares of restricted stock if the performance targets were achieved and the Company’s closing stock price was $6.75 or higher on the day earnings for fiscal 2016 were publicly released, which was March 20, 2017. The stock did not achieve a minimum of $6.75, therefore, no additional award was earned.

Based on the operating results for fiscal 2016, the Company achieved 50.6% of its EBITDA target. The minimum threshold for the Sales target was not achieved. Accordingly, subsequent to year-end, in the first quarter of fiscal 2017, the Compensation Committee of the Board of Directors approved awards totaling $2.3 million, with a grant date of March 20, 2017. On that date, the Company granted shares of restricted stock, with a fair value of approximately $1.0 million and cash awards totaling approximately $1.3 million. All awards vested on July 28, 2017.

~~On March 20, 2017, in conjunction with the grant of restricted stock awards, the Company reclassified $0.9 million of the liability accrual from “Accrued Expenses and Other Current Liabilities” to “Additional Paid-In Capital.” See the Consolidated Statement of Changes in Stockholders’ Equity.~~.

~~New Long-Term~~Under the Company’s First Amended and Restated Long Term Incentive Plan

With the 2013-2016 LTIP and Wrap-Around Plan expiring at the end of fiscal 2016, on March 15, 2016, the Compensation Committee approved the Destination XL Group, Inc. Long-Term Incentive Plan, as amended February 1, 2017 (the “new (“LTIP”).

~~Under the terms of the new LTIP,~~, each year the Compensation Committee ~~will establish~~establishes performance targets which ~~will~~ cover a two-year performance period (each a “Performance Period”), thereby creating overlapping Performance Periods. Each participant in the plan ~~will be~~is entitled to receive an award based on that participant’s “Target Cash Value” which is defined as the participant’s annual base salary (on the participant’s effective date) multiplied by his or her long-term incentive program percentage, which iswas 100% for the Company’s Chief Executive Officer, 70% for ~~its~~ senior executives and 25% for other participants in the plan. Because of the overlapping two-year Performance Periods, the Target Cash Value for any award is based on one year of annual salary, as opposed to two years, to avoid doubling an award payout in any given fiscal year. All awards granted under both the 2016-2017 LTIP and 2017-2018 LTIP were in restricted stock units (RSUs).

For each participant, 50% of the Target Cash Value is subject to time-based vesting and 50% is subject to performance-based vesting. The time-vested portion of the award ~~will vest~~vests in two installments with 50% of the time-vested portion vesting on April 1 following the fiscal year end which marks the end of the applicable Performance Period and 50% vesting on April 1 the succeeding year. The performance-based vesting is subject to the achievement of the performance target(s) for the applicable Performance Period. ~~Any~~Awards for any achievement of performance ~~award~~targets would not be granted ~~will vest on~~until the performance targets are achieved and would then be subject to additional vesting through August 31 following the end of the applicable Performance Period.

For the 2016-2017 Performance Period, the Compensation Committee established two performance targets under the LTIP (the “2016-2017 LTIP”), each weighted 50%. The first target is EBITDA for fiscal 2017, defined as earnings before interest, taxes, depreciation and amortization, and the second target isCompany achieved 54.4% of its “DXL Comparable Store Marginal Cash-Over-Cash Return”, target, defined as the aggregate of each comparable DXL store’s four-wall cash flow for fiscal 2017 divided by the aggregate capital investment, net of any tenant allowance, for each comparable DXL store. The minimum threshold for the EBITDA target was not achieved. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Accordingly, subsequent to the end of fiscal 2017, in the first quarter of fiscal 2018, the Compensation Committee of the Board of Directors approved a 27.2% payout resulting in awards totaling $0.5 million, with a grant date of April 2, 2018. On that date, the Company granted 265,749 RSUs, which are subject to vesting through August 31, 2018.

On April 2, 2018, in conjunction with the grant of the RSUs, the Company reclassified $0.4 million of the liability accrual from “Accrued expenses and other current liabilities” to “Additional paid-in capital.” See the Consolidated Statement of Changes in Stockholders’ Equity.

For the 2017-2018 Performance Period, the Compensation Committee established two performance targets under the LTIP (the “2017-2018 LTIP”), each weighted 50%. The first target is Total Company Comparable Sales and will be measured based on a two-year stack, which is the sum of the Total Company Comparable Sales for fiscal 2017 and fiscal 2018. The second target is a Modified ROIC, which is defined as Operating Income divided by Invested Capital (Total Debt plus Stockholders’ Equity).

~~All awards granted under both the 2016-2017 LTIP and 2017-2018 LTIP were in restricted stock units (RSUs).~~ Assuming that the Company achieves the performance target at target levels and all time-vested awards vest, the compensation expense associated with the ~~2016-2017 LTIP and~~ 2017-2018 LTIP is estimated to be approximately ~~$4.0 million and~~ $4.2 ~~million, respectively.~~million. Approximately half of the compensation expense ~~for each plan~~ relates to the time-vested RSUs, which are being expensed over thirty-six months, based on the respective vesting dates. With respect to the performance-based component, RSUs will be granted at the end of the performance period if the performance targets are achieved. Through the end of the ~~second~~first quarter of fiscal ~~2017, the Company had accrued approximately $0.3 million and $0.1 million in compensation expense related to the potential payout of~~2018, no accrual has been made for performance awards under the ~~2016-2017 LTIP and~~ 2017-2018 ~~LTIP, respectively.~~LTIP.

Through the end of the second quarter of fiscal 2016, the Company’s 2006 Incentive Compensation Plan (as amended and restated effective as of August 1, 2013, the “2006 Plan”) was the only stockholder-approved plan. The 2006 Plan expired on July 31, ~~2016. In the third quarter of fiscal~~ 2016, ~~at the Company’s 2016 Annual Meeting of Stockholders held~~and on August 4, 2016, the Company’s stockholders approved the adoption of the 2016 Incentive Compensation Plan (the “2016 Plan”).

The initial share reserve under the 2016 Plan, including the rollover of 525,538 available shares under our 2006 Plan, was 5,725,538 shares of our common stock. A grant of a stock option award or stock appreciation right will reduce the outstanding reserve on a one-for-one basis, meaning one share for every share granted. A grant of a full-value award, including, but not limited to, restricted stock, restricted stock units and deferred stock, will reduce the outstanding reserve by a fixed ratio of 1.9 shares for every share granted. In accordance with the terms of the 2016 Plan, any shares outstanding under the 2006 Plan at August 4, 2016 that subsequently terminate, expire or are canceled for any reason without having been exercised or paid are added back and become available for issuance under the 2016 Plan, with options and stock appreciation rights being added back on a one-for-one basis and full-value awards being added back on a 1 to 1.9 basis. At ~~July 29, 2017,~~May 5, 2018, the Company had ~~6,479,451~~5,763,710 shares available under the 2016 Plan.

The 2016 Plan is administered by the Compensation Committee. The Compensation Committee is authorized to make all determinations with respect to amounts and conditions covering awards. Options are not granted at a price less than fair value on the date of the grant. Except with respect to 5% of the shares available for awards under the 2016 Plan, no award will become exercisable unless such award has been outstanding for a minimum period of one year from its date of grant.

The following tables summarize the share activity and stock option activity for the Company’s 2006 Plan and 2016 Plan, on a combined basis, for the first ~~six~~three months of fiscal ~~2017:~~2018:

	Restricted shares			Restricted Stock Units ⁽¹⁾			Deferred shares ⁽²⁾			Fully-vested shares ⁽³⁾			Total number of shares			Weighted-average grant-date fair value ⁽⁴⁾		Restricted shares		Restricted Stock Units ⁽¹⁾			Deferred shares ⁽²⁾			Fully-vested shares ⁽³⁾			Total number of shares			Weighted-average grant-date fair value ⁽⁴⁾
Shares
Outstanding non-vested shares at beginning of year		856,332			369,828			64,876			—			1,291,036		$	5.09		36,666		1,048,552			115,457			—			1,200,675		$	3.43
Shares granted		484,558			782,357			43,467			40,109			1,350,491		$	2.72		30,000		305,161			21,494			26,080			382,735		$	1.97
Shares vested/issued		(430,336	)		(9,662	)		(5,308	)		(40,109	)		(485,415	)	$	2.53		—		(171,798	)		(2,613	)		(26,080	)		(200,491	)	$	4.60
Shares canceled		(857,221	)		(23,035	)		—			—			(880,256	)	$	4.98		—		—			—			—			—		$	-
Outstanding non-vested shares at end of quarter		53,333			1,119,488			103,035			—			1,275,856		$	3.60		66,666		1,181,915			134,338			—			1,382,919		$	2.85

For the first ~~six~~three months of fiscal 2018, the Company granted 138,888 stock options, 56,080 shares of restricted stock, 305,161 RSUs and 21,494 shares of deferred stock. For the first three months of fiscal 2017, the Company granted no stock options, 484,558 shares of restricted stock, ~~782,357~~734,268 RSUs and ~~43,467~~19,143 shares of deferred stock. For the first six months of fiscal 2016, the Company granted 23,323 shares of deferred stock and 427,874 RSUs. There were no grants of stock options during the first six months of fiscal 2017 and fiscal 2016.

Unless otherwise specified by the Compensation Committee, RSUs, restricted stock and deferred stock are valued using the closing price of the Company’s common stock on the day immediately preceding the date of grant.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. There were no stock options granted in the first quarter of fiscal 2017. The following assumptions were used for grants for the first quarter of fiscal 2018:

The Company granted ~~18,054~~11,140 shares of common stock, with a fair value of approximately ~~$49,428,~~$25,401, to certain of its non-employee directors as compensation in lieu of cash in the first ~~six~~three months of fiscal ~~2017.~~2018.

The Company recognized total stock-based compensation expense of ~~$0.8~~$0.4 million and $0.3 million for ~~both~~ the first ~~six~~three months of fiscal ~~2017~~2018 and fiscal ~~2016.~~2017, respectively. The total compensation cost related to time-vested stock options, restricted stock and RSU awards not yet recognized as of ~~July 29, 2017~~May 5, 2018 was approximately ~~$2.8~~$1.8 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 2425 months.

The following table provides a reconciliation of the number of shares outstanding for basic and diluted earnings per share:

The following potential common stock equivalents were excluded from the computation of diluted earnings per share in each period because the exercise price of such options was greater than the average market price per share of common stock for the respective periods or because of the unearned compensation associated with either stock options, restricted stock units, restricted or deferred stock had an anti-dilutive effect.

The above options, which were outstanding at ~~July 29, 2017,~~May 5, 2018, expire from ~~October 22, 2017~~June 8, 2018 to ~~January 18, 2027.~~

There were no performance-based awards outstanding at July 29, 2017. For the second quarter and first six months of fiscal 2016, 941,082 shares of unvested performance-based restricted stock and 1,181,168 performance-based stock options were excluded from the Company’s computation of basic and diluted earnings per share. All outstanding performance-based awards expired unvested in March ~~2017 as a result of the Company not achieving performance targets in fiscal 2016.~~ 14, 2028.

Shares of unvested time-based restricted stock of ~~53,333~~66,666 at ~~July 29, 2017~~May 5, 2018 and ~~374,062~~482,002 shares at ~~July 30, 2016~~April 29, 2017 were excluded from the computation of basic earnings per share and will continue to be excluded until such shares vest. ~~See Note 3, Long-Term Incentive Plans, for a discussion of the Company’s LTIP plans and equity awards.~~

All ~~53,333~~66,666 shares of restricted stock outstanding at ~~July 29, 2017~~May 5, 2018 are considered issued and outstanding. Each share of restricted stock has all of the rights of a holder of the Company’s common stock, including, but not limited to, the right to vote and the right to receive dividends, which rights are forfeited if the restricted stock is forfeited.

On March 17, 2017, the Company’s Board of Directors approved a stock repurchase plan. Under the stock repurchase plan, the Company may purchase up to $12.0 million of its common stock through open market and privately negotiated transactions during fiscal 2017. The timing and the amount of any repurchases of common stock will be determined based on the Company’s evaluation of market conditions and other factors. The stock repurchase program commenced in the first quarter of fiscal 2017 and will expire on February 3, 2018, but may be suspended, terminated or modified at any time for any reason. The Company expects to finance the repurchases from operating funds and/or periodic borrowings on its Credit Facility. Any repurchased common stock will be held as treasury stock and will be recorded on a trade-date basis.

~~Through July 29, 2017, the Company purchased 1,878,434 shares of common stock at an average price of $2.49 per share. Approximately $7.3 million remains available under the stock repurchase plan.~~

At ~~July 29, 2017,~~May 5, 2018, the Company had total deferred tax assets of approximately ~~$83.9~~$53.5 million, total deferred tax liabilities of ~~$13.5~~$5.4 million and a corresponding valuation allowance of ~~$70.6~~$48.1 million.

In the fourth quarter of fiscal 2013, the Company entered into a three-year cumulative loss position and based on forecasts at that time, the Company expected the cumulative three-year loss to increase as ofSince the end of fiscal ~~2014. Management determined that this represented significant negative evidence at February 1, 2014.~~2014, the Company has had a full valuation allowance against its net deferred tax assets. While the Company has projected it will return to profitability, generate taxable income and ultimately emerge from a three-year cumulative loss, based on ~~a consideration of all positive and negative evidence as of February 1, 2014, the Company established a full allowance against its net deferred tax assets. Based on~~ the Company’s forecast for fiscal ~~2017,~~2018, the Company believes that a full allowance remains appropriate at this time.

As of ~~July 29, 2017,~~May 5, 2018, for federal income tax purposes, the Company ~~had~~has net operating loss carryforwards of ~~$148.7~~$141.4 million, ~~for federal~~which will expire from 2022 through 2036 and net operating loss carryforwards of $19.4 million that are not subject to expiration. For state income tax purposes, ~~and $88.5~~the Company has $91.1 million ~~for state income tax purposes~~of net operating losses that are available to offset future taxable ~~income through fiscal year 2037.~~

income. Additionally, the Company has ~~alternative minimum tax credit carryforwards of $2.3 million, which are available to further reduce income taxes over an indefinite period. Additionally, the Company has $2.6~~$3.0 million of net operating loss ~~for tax purposes~~carryforwards related to the Company’s operations in Canada.

The utilization of net operating loss carryforwards and the realization of tax benefits in future years depends predominantly upon having taxable income. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may result in a limitation on the amount of net operating loss carryforwards and tax credit carryforwards which may be used in future years.

Beginning with the first quarter of fiscal 2018, the Company is calculating its tax provision based on the newly enacted U.S. statutory rate of 21%. The Company’s tax provision for the ~~second~~first quarter ~~and first six months~~ of fiscal ~~2017~~2018 and fiscal ~~2016~~2017 was primarily ~~represents~~due to current state margin tax. The first quarter of fiscal 2018 included a tax ~~and foreign~~expense of $26,000 in other comprehensive income ~~tax.~~(loss), which resulted in a tax benefit on the consolidated statement of operations related to the corresponding decrease in valuation allowance.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The charge for taxation is based on the results for the year as adjusted for items that are non-assessable or disallowed. The charge is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Pursuant to Topic 740, “Income Taxes”, the Company will recognize the benefit from a tax position only if it is more likely than not that the position would be sustained upon audit based solely on the technical merits of the tax position. The unrecognized tax benefit at ~~July 29, 2017~~May 5, 2018 was ~~$3.0~~$2.0 million. This amount is directly associated with a prior year tax position related to exiting the Company’s direct business in Europe. The amount of unrecognized tax benefit has been presented as a reduction in the reported amounts of its federal and state net operating loss carryforwards. It is the Company’s policy to record interest and penalties on unrecognized tax benefits as income taxes; however, no penalties or interest have been accrued on this liability because the carryforwards have not yet been utilized.

The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company has concluded all U.S. federal income tax matters for years through fiscal 2001, with remaining fiscal years subject to income tax examination by federal tax authorities.

On May 16, 2018, the Company committed to a ~~director at~~corporate restructuring plan (“Restructuring”) to accelerate the ~~Company’s Annual Meeting~~Company's path to profitability by aligning its expense structure with its revenues. The Company plans to eliminate approximately 56 positions, which represents 15% of ~~Stockholders~~its corporate work force, or 2% of its total work force, in connection with the Restructuring. Approximately 36 employees were notified of their termination on ~~August 3, 2017. Subsequent~~May 16, 2018 with the remaining 20 positions representing open positions that will not be filled. The Company has offered cash severance benefits to the ~~end~~eligible affected employees. Each affected employee’s eligibility for these severance benefits is contingent upon such employee’s execution (and no revocation) of a separation agreement, which includes a general release of claims against the Company.

The Company expects to incur aggregate charges in the second quarter of fiscal ~~2017, on August 17, 2017, Mr. Walsh~~2018 of approximately $1.7 million for employee severance and one-time termination benefits, as well as other employee-related costs associated with the Restructuring. Cash expenditures associated with the Restructuring are expected to be approximately $1.3 million.

On May 24, 2018, the Company entered into the Seventh Amended and Restated Credit Agreement with Bank of America, N.A., as agent, providing for a ~~temporary consulting agreement~~secured $140 million credit facility. (the “New Credit Facility”). The New Credit Facility replaces the Company’s existing Credit Facility with Bank of America. See Note 3, Debt.

The New Credit Facility continues to provide maximum committed borrowings of $125 million in revolver loans, with the ~~Company, agreeing~~ability, pursuant to ~~serve as~~an accordion feature, to increase the ~~Company’s Interim Chief Marketing Officer through~~New Credit Facility by an additional $50 million upon the ~~Fall and Holiday selling seasons, while~~request of the Company ~~searches~~and the agreement of the lender(s) participating in the increase (the “Revolving Facility”). There were no changes to the sublimit of $20 million for commercial and standby letter of credits or the sublimit of up to $15 million for swingline loans. The Company’s ability to borrow under the New Credit Facility (the “Loan Cap”) is determined using an availability formula based on eligible assets. The New Credit Facility requires the Company to maintain a minimum consolidated fixed charge coverage ratio of 1.0:1.0 if its excess availability under the New Credit Facility fails to be equal to or greater than the greater of 10% of the Loan Cap and $7.5 million.

The New Credit Facility includes a new ~~Chief Marketing Officer. Pursuant~~$15.0 million “first in, last out” (FILO) term facility (the “FILO Facility”). The total borrowing capacity under the FILO Facility is based on a borrowing base, generally defined as a specified percentage of the value of

eligible accounts, including certain trade names, that step down over time, plus a specified percentage of the value of eligible inventory that steps down over time. There can be no voluntary prepayments on the FILO Facility during the first year. After its one-year anniversary, the FILO Facility can be repaid, in whole or in part, subject to certain payment conditions.

Borrowings made pursuant to the ~~terms of~~Revolving Facility will bear interest, calculated under either the ~~temporary consulting agreement, Mr. Walsh is entitled to receive compensation~~Federal Funds rate or the LIBOR rate, at a rate equal to the following: (a) the Federal Funds rate plus a varying percentage based on the Company’s excess availability, of ~~$7,000 per~~either 0.25% or 0.50%, or (b) the LIBOR rate (the Company being able to select interest periods of 1 week, 1 month, 2 months, 3 months or 6 months) plus ~~reimbursement for all business and travel expenses. Because~~a varying percentage based on the Company’s excess availability, of either 1.25% or 1.50%. Borrowing made under the FILO Facility will bear interest, calculated under either the Federal Funds rate or the LIBOR rate, at a rate equal to the following: (a) the Federal Funds rate plus a varying percentage based on the Company’s excess availability, of either 1.75% or 2.00% or (b) the LIBOR rate (the Company being able to select interest periods of 1 week, 1 month, 2 months, 3 months or 6 months) plus a varying percentage based on the Company’s excess availability, of either 2.75% or 3.00% .

The maturity date of the ~~related party relationship,~~New Credit Facility was extended from October 29, 2019 to May 24, 2023. The Company’s obligations under the ~~temporary consulting agreement was approved~~New Credit Facility are secured by a lien on substantially all of its assets.

The Revolving Facility will be used for working capital, capital expenditures and other general corporate purposes of the Company. The FILO Facility will be used primarily to repay, in full and without penalty, the outstanding balance of $11.5 million under the Company’s ~~Audit Committee.~~existing Term Loan Facility.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “estimate,” “intend,” “plan,” “continue,” “believe,” “expect” or “anticipate” or the negatives thereof, variations thereon or similar terminology. The forward-looking statements contained in this Quarterly Report are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but may be found in other locations as well, and include statements regarding cash flows, gross profit margins, merchandise margins, marketing costs, restructuring charges, selling, general and administrative expenses, store counts, inventory levels, capital expenditures, borrowings, interest costs, sales and earnings expectations for fiscal ~~2017~~2018 and beyond, ~~the expected impact of inventory management improvements on inventory levels and working capital in fiscal 2017,~~ the expected impact of investments in marketing on ~~2017~~2018 sales and longer term impact on customer acquisition and brand awareness, and the anticipated ~~pace and~~ number of store openings and closings in fiscal ~~2017 and anticipated impact of expanding into Canada or future growth.~~2018. These forward-looking statements generally relate to plans and objectives for future operations and are based upon management’s reasonable estimates of future results or trends. The forward-looking statements in this Quarterly Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved. The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report and our audited consolidated financial statements for the year ended ~~January 28, 2017,~~February 3, 2018, included in our Annual Report on Form 10-K for the year ended ~~January 28, 2017,~~February 3, 2018, as filed with the Securities and Exchange Commission on March ~~20, 2017~~23, 2018 (our “Fiscal ~~2016~~2017 Annual Report”).

Numerous factors could cause our actual results to differ materially from such forward-looking statements. We encourage readers to refer to the “Risk Factors” section in Part I, Item 1A of our Fiscal ~~2016~~2017 Annual Report, that sets forth certain risks and uncertainties that may have an impact on future results and direction of our Company, including, without limitations, risks relating to the execution of our corporate strategy, and our ability to grow our market share, predict customer tastes and fashion trends, forecast sales growth trends, maintain and build our brand awareness and compete successfully in our market.

All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. These forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances in which the forward-looking statement is based.

Destination XL Group, Inc., together with our consolidated subsidiaries (the “Company”), is the largest specialty retailer of big & tall men’s apparel with retail and direct operations in the United States, Canada and London, England. We operate under the trade names of Destination XL^®, DXL^®, DXL Outlets, Casual Male XL^®, Casual Male XL Outlets, Rochester Clothing, ShoesXL^® and LivingXL^®. At ~~July 29, 2017,~~May 5, 2018, we operated ~~206~~216 Destination XL stores, 1415 DXL outlet stores, 8472 Casual Male XL retail stores, 3331 Casual Male XL outlet stores and 5 Rochester Clothing stores. Our e-commerce site, DestinationXL.com, supports our stores, brands and product extensions.

Unless the context indicates otherwise, all references to “we,” “our,” “us” and “the Company” refer to Destination XL Group, Inc. and our consolidated subsidiaries. We refer to our fiscal years which end on February 2, 2019 and February 3, 2018 ~~and January 28, 2017~~ as “fiscal ~~2017”~~2018” and “fiscal ~~2016,~~2017,” respectively. Fiscal ~~2017~~2018 is a ~~53-week~~52-week period and fiscal ~~2016~~2017 was a ~~52-week~~53-week period.

We report our operations as one reportable segment, Big & Tall Men’s Apparel. We consider our retail and direct (e-commerce) businesses, especially in our growing omni-channel environment, to be similar in terms of economic characteristics, production processes and operations, and have, therefore, aggregated them into a single reporting segment.

Total comparable sales include our retail stores that have been open for at least 13 months and our direct business. Stores that have been remodeled or re-located during the period are also included in our determination of comparable sales. Stores that have been expanded by more than 25% are considered non-comparable for the first 13 months. If a store becomes a clearance center, it is also removed from the calculation of comparable sales. The method of calculating comparable sales varies across the retail industry and, as a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other retailers.

As we disclosed at the end of fiscal 2016, with over 200 DXL stores open, we have transitioned to one comparable sales figure for the Company which includes stores and our e-commerce business. We no longer provide comparable store sales on a discrete basis for our DXL format stores.

In addition, our customer’s shopping experience continues to evolve across multiple channels and we are continually changing to meet his needs. As part of our omni-channel initiatives, the majority of our retail stores have the capability of fulfilling online orders if merchandise is not available in the warehouse. As a result, we continue to see more transactions that begin online but are ultimately completed at the store level. Similarly, if a customer visits a store and the item is out of stock, the associate can order the item through our website. A customer also has the ability to order online and pick-up in store. Because this omni-channel approach to retailing is changing the boundaries of where a sale originates and where a sale is ultimately settled, we do not report comparable sales separately for our retail and e-commerce businesses. However, as we invest in building our e-commerce platform, bringing a heightened digital focus to our Company, additional disclosure on our e-commerce growth as it relates to our current initiatives is important. ~~Beginning in the second quarter of fiscal 2017, we~~We define store sales as sales that originate and are fulfilled directly at the store level. E-commerce sales are defined as sales that originate online, including those initiated online at the store level. ~~This reclassification on how we define a store sale from an e-commerce sale had no effect on our previous disclosure or how we report total Company comparable sales.~~

The following is a summary of results for the ~~second quarter and~~ first ~~six~~three months of fiscal ~~2017~~2018 as compared to the prior year’s ~~second quarter and~~ first ~~six~~three months, including EBITDA, which is a non-GAAP measure. Please see “Non-GAAP Financial Measures” below for a reconciliation of Net ~~Income (Loss)~~Loss to EBITDA.

~~Although sales~~We were ~~below expectations for the second quarter, we did see sequential improvement from~~pleased with our ~~prior two consecutive quarters. Comparable sales for the second quarter grew 0.1%, which is an improvement from (2.4%) in the fourth quarter of fiscal 2016 and (2.1%)~~performance in the first quarter of fiscal ~~2017. For the second quarter, we continued to experience~~2018, with a decline in store traffic and an overall weakness across the retail apparel environment. However, despite this decrease in store traffic, we saw improvements in our sales productivity, with increases in conversion rates, units per transactions and dollars per transaction.

We remain focused on improving brand awareness, driving traffic to our stores and growing our e-commerce business through a robust investment in both traditional and digital marketing programs. With our store base transformation complete, our focus is on building the DXL brand and driving sales to the growing men’s big & tall market through an integrated bricks and mortar and e-commerce strategy. Through the end of the second quarter, we were ahead of our plan for new customer acquisition. Continuing to build brand awareness is key to driving customer acquisition and long-term sales growth. With only 4 out of 10 target customers identifying with our brand, customer acquisition is our top priority this year. As discussed below under our Fiscal 2017 Outlook, we are planning to increase our marketing spend for fiscal 2017 by approximately $4.0 million to $29.0 million to further enhance our digital marketing initiatives and television ad spend. We believe that this investment will benefit us in the long-term as we work to strengthen our customer base and build brand awareness.

Despite the difficult retail apparel environment, we are pleased that our merchandise margins remained strong, only decreasing by 10 basis points during the second quarter and remaining flat to fiscal 2016 for the first six months of fiscal 2017. As discussed below, our initiative to decrease inventory levels by improving timing of inventory receipts and in-stock positions resulted in a $9.0 million decrease in inventory levels as compared to last year’s second quarter and we achieved this with minimal impact to our merchandise margin.

~~Our~~ net loss ~~for the second quarter~~ of ~~fiscal 2017 was $(3.7) million, or $(0.08)~~$(0.06) per diluted share, as compared to a net ~~income~~loss of ~~$0.2 million, or $0.00~~$(0.12) per diluted share ~~for~~in the ~~second quarter of fiscal 2016. Included in net loss for the second~~first quarter of fiscal 2017 and a $2.6 million increase in EBITDA. This improvement in earnings was driven by an ~~impairment charge~~increase in sales of $5.7 million, which consisted of a comparable sales increase of 2.2% and non-comparable sales of $3.2 million, as well as reduced SG&A, primarily driven by a decrease in our marketing costs. As discussed in more detail below, subsequent to the end of the first quarter of fiscal 2018, we reduced our corporate workforce by approximately ~~$1.7 million, or $0.04~~15%, to accelerate further this path to profitability. Given that our transformation to the DXL concept is essentially complete and our current strategy includes growing our brands and building our customer base, this corporate restructuring better aligns us with those objectives.

For the first quarter of fiscal 2018, we saw positive results with store productivity and direct business growth. Store productivity improved with increases in dollar per ~~diluted share,~~transaction, conversion rate, and number of transactions all up in the first quarter of fiscal 2018 as compared to last year’s first quarter. For the first three months of fiscal 2018, sales from our direct business increased 60 basis points to 21.2% of total sales. On a trailing 12-month basis, our direct business represented 21.1% of our sales at end of the first quarter of fiscal 2018 as compared to 20.2% at the end of the first quarter of fiscal 2017. Furthermore, our sales performance in April did not have the benefit of our national advertising campaign, which did not launch until April 26. In the prior year, our national advertising campaign launched on April 2, providing a strong boost to awareness in April 2017. Despite the shift in advertising, our sales for the ~~write-down~~quarter were positive. Since our Spring campaign launched at the end of ~~certain store assets and an increase~~April, we have seen a reacceleration of the business, coinciding with the improvement in weather. Our merchandise margins for the first quarter of fiscal 2018 were down approximately ~~$1.1 million, or $0.02 per diluted share,~~120 basis points from the first quarter of fiscal 2017, primarily due to increased promotional activity in ~~advertising~~our direct business as well as increased shipping costs. For the full year, we are expecting our gross margin rate, which includes occupancy costs, to be approximately 50 basis points lower than fiscal 2017.

From a liquidity perspective, for fiscal 2018 we are focused on improving cash flow and reducing our debt levels. During the first quarter of fiscal 2018, our cash flow ~~from operations decreased~~improved over the prior year first quarter as a result of improved earnings and reduced capital spending, partially offset by ~~$4.8 million to $14.3 million. Free cash flow for~~ the ~~first six months~~timing of ~~fiscal 2017 decreased by approximately $4.7 million, as compared to the first six months of fiscal 2016, partly due to an~~

~~increase in marketing costs of $4.6 million.~~our working capital accounts. For the year, we expect to generate positive ~~free~~ cash flow, ~~of $13.0 to $18.0 million,~~ which we ~~plan to~~will use to reduce ~~our outstanding~~ debt ~~while also making opportunistic repurchases of our common stock, pursuant~~levels. In addition, subsequent to ~~our stock repurchase program discussed below. See “Non-GAAP Financial Measures” below for a reconciliation of free cash flow.~~

In the first six months of fiscal 2017, we opened a total of 15 stores as compared to 12 stores during the same period in fiscal 2016.We also opened two DXL retail stores in Ontario, Canada. These two stores, which are included in the 15 opened during the first six months, mark our first Company-operated DXL stores located outside of the United States. We believe that Canada provides a strategic growth opportunity for our DXL brand.

~~As discussed more fully below under “Liquidity and Capital Resources~~,” in March 2017 our Board of Directors approved a stock repurchase plan, pursuant to which we may purchase up to $12.0 million of our outstanding common stock during fiscal 2017. During the first six months of fiscal 2017, we repurchased approximately 1.9 million shares at a total cost of approximately $4.7 million.

In fiscal 2016, we began our inventory optimization project in an effort to improve inventory receipt flow and procurement, tightening controls over the number of weeks of supply and refining our in-stock positions by sku level. We expect these changes to result in a more optimized inventory structure and expect our inventory at the end of the first quarter of fiscal ~~2017~~2018, and as discussed below, we amended our credit facility with Bank of America, N.A., which extended our term from October 2019 to ~~be $10.0~~May 2023, reduced borrowing rates under the revolver and added a $15.0 million “first in last out” (FILO) facility. This facility will replace our existing term loan at substantially lower borrowing rates. On an annualized basis, we believe that this refinancing will enable us to ~~$14.0 million less than fiscal 2016. This reduction in inventory is expected to improve our working capital position in fiscal 2017.~~ reduce interest costs by approximately $0.7 million.

At the end of the ~~second~~first quarter of fiscal ~~2017,~~2018, we ~~were ahead~~launched our Spring media campaign “Built XL”, which will run up to Father’s Day. Our new advertising campaign emphasizes fit, expertise, clothing brands, in-store experience, and one-stop shopping. We are highlighting our key differentiators and working to make an emotional connection with our core consumer. As mentioned above, we

reduced the number of ~~plan having reduced inventory levels by $9.0 million, or a decrease of 7.4%,~~weeks for our Spring campaign as compared to fiscal 2017, but we saw a strong increase in store and web traffic once our Spring campaign launched. In addition to our Spring media campaign, during the first quarter of fiscal 2018, we also increased our investment in our loyalty program, to strengthen our connections to our existing customer base.

Subsequent to the end of the ~~second~~first quarter ~~last year. We do~~of fiscal 2018, we committed to a restructuring plan (“Restructuring”) to accelerate the Company's path to profitability by aligning its expense structure with its revenues. On May 16, 2018, we eliminated approximately 56 positions, which represented 15% of our corporate workforce, or 2% of our total work force. Approximately 36 employees were notified of their termination on May 16, 2018 with the remaining 20 positions representing open positions that will not ~~believe these changes have jeopardized sales from out-of-stock positions in either our retail stores or in our direct business.~~

Our primary objectives in fiscal 2017 are to grow our customer base, through a revitalized marketing program and digital enhancements, and to maintain a strong liquidity position by continuing to improve cash flow. We have reinvested in our marketing initiatives to help drive brand awareness, store traffic and our digital presence. We are increasing marketing expense for fiscal 2017 to approximately $29.0 million, an increase of approximately $4.0 million from previous guidance and an increase of approximately $10.8 million from last year. Whilebe filled. In connection with the Restructuring, we expect ~~this will benefit sales~~to incur aggregate charges in the second ~~half~~quarter of fiscal 2018 of approximately $1.7 million for employee severance and one-time termination benefits, as well as other employee-related costs associated with the Restructuring. Cash expenditures associated with the Restructuring are expected to be approximately $1.3 million.

As a result of this Restructuring, we expect to realize savings of approximately $5.6 million in SG&A (selling, general and administrative) expenses in fiscal 2018, of which $2.4 million was previously identified by the Company and factored into fiscal 2018 earnings expectations, resulting in incremental savings this year of $3.2 million. The savings primarily related to payroll, travel, benefits and non-essential project expenses, with expected annualized savings of approximately $10.3 million. Of the $10.3 million, we expect $6.6 million to come from corporate staffing changes, $2.0 million from changes to defined contribution plans and $1.7 million from other non-essential general and administrative costs.

Subsequent to the end of the first quarter of fiscal 2018, on May 24, 2018, we entered into a $140 million amended and restated credit agreement with Bank of America, N.A., as agent (“New Credit Facility”). This New Credit Facility amended our existing Credit Facility, and extended the term from October 2019 to May 2023. The revolving credit facility component under the New Credit Facility remains unchanged at $125.0 million, with a $50.0 million accordion feature, a sublimit of $20.0 million for commercial and standby letters of credit and a sublimit of up to $15.0 million for swingline loans (“Revolving Credit Facility”). Interest on borrowings under this Revolving Credit Facility are 25 basis points lower than our existing Credit Facility. In addition, the New Credit Facility also has a FILO term loan facility of $15.0 million (“FILO Facility”). The proceeds from the FILO Facility will be used to repay, without penalty, our outstanding Term Loan Facility. The interest rates on the FILO Facility are more favorable than the existing interest rates on the Term Loan Facility by approximately 350-450 basis points.

We are revising our earnings guidance for fiscal 2018 to reflect the $3.2 million expense savings that we expect from the Restructuring. We expect to incur approximately $1.7 million in the second quarter for severance and other restructuring charges, and we expect to incur approximately $4.2 million before the end of fiscal 2018 associated with CEO transition costs.

Our strategy for fiscal 2018 remains focused on customer acquisition, customer retention, and customer re-activation. Our marketing spend for the year is expected to be approximately $24.0 million, which is less than the fiscal 2017 spend of approximately $29.5 million, but greater than the fiscal 2016 spend of $18.0 million. Compared to fiscal 2017, we ~~strongly believe~~are projecting that ~~this investment in marketing and customer acquisition is important for~~ our long-term growth. Accordingly, we are updating our guidance as it relates to gross margin, SG&A, EBITDA, earnings and liquidity for fiscal 2017. We continue to expect to open 19 DXL retail stores and 1 DXL outlet store in fiscal 2017, while closing 16 Casual Male XL retail stores and 3 Casual Male XL outlet stores, the majority of which are in connection with the opening of the DXL retail and outlet stores in the same geographic markets. All DXL store growthtotal sales for the year will be ~~funded~~negatively impacted by ~~cash from operations.~~ one less week of sales and a net decrease in store count of nine stores, worth approximately $5.3 million in sales. Fiscal 2017 included a 53rd week, with sales of $6.9 million and operating income of $1.6 million.

~~For~~Our revised guidance for fiscal ~~2017, our outlook, based on a 53-week year,~~2018 is as follows:

Total sales for the ~~second~~first quarter of fiscal ~~2017~~2018 increased ~~2.8%~~5.3% to ~~$121.1~~$113.3 million from ~~$117.9~~$107.6 million from the ~~second~~first quarter of fiscal ~~2016.~~2017. The increase of ~~$3.3~~$5.7 million in total sales was primarily due to ~~non-comparable sales of $9.4 million and~~ a comparable sales increase of ~~$0.2~~$2.3 million, or ~~0.1%~~2.2%, and an increase in non-comparable sales of $3.2 million, partially offset by a decrease in other revenue of $(0.6) million. Comparable sales ~~from closed stores.~~

~~For~~for the first ~~six months~~quarter started out strong against the prior year, but due to a change in the Spring marketing campaign that included three less weeks, coupled with the unseasonably cold weather, we did see a temporary negative impact to April sales. However, once the Spring campaign launched and weather started to improve, sales rebounded with a 7.5% increase in comparable sales in the last week of ~~fiscal 2017, sales increased $3.0 million, or 1.3%, as compared to~~ the first ~~six months~~quarter.

Our focus in fiscal 2018 is on topline growth by growing our customer base through acquisition, retention and capturing a greater share of ~~fiscal 2017. The increase~~wallet by providing a great guest experience in ~~sales was primarily due to non-comparable sales of $17.2 million, partially offset by sales from closed~~our stores and ~~a decrease of 0.9%, or $2.0 million, in comparable store sales.~~

~~Our end-of-rack~~online, where ever and how ever the customer ~~grew~~decides to 46.1% of our bottoms business from 44.6% in the second quarter of fiscal 2016. Our end-of-rack customer, with a waist size of 46 inches or less, shops 52% more often than our customer with a waist size of 48 inches or more and, on an annual basis, spends twice as much.

~~As discussed above, with our transformation of our store base complete, we are focused on growing our e-commerce business through an integrated strategy.~~shop. We are ~~implementing several initiatives to enhance~~enhancing our digital presence and ~~provide~~providing our customers with improved functionality and increased touchpoints across all of our e-commerce platforms with the objective of growing and retaining our customer base. On a trailing twelve-month basis, ~~e-commerce~~direct sales as a percentage of ~~net~~total sales were ~~20.5%~~21.1% at the end of the ~~second~~first quarter of fiscal ~~2017~~2018 as compared to ~~19.4%~~20.2% at the end of the ~~second~~first quarter of the prior year. For the three months of fiscal 2018, our direct sales were 21.2%, up from 20.6% for the first three months of the prior year. We also saw increases in conversion, transactions and dollars per transactions during the first quarter, which contributed to top-line growth.

Our end-of-rack customer represented 45.2% of our bottoms business, up from 44.8% in the first quarter of fiscal 2017.

For the ~~second~~first quarter of fiscal ~~2017,~~2018, our gross margin rate, inclusive of occupancy costs, was ~~46.1%~~44.7% as compared to a gross margin rate of ~~46.5%~~45.2% for the ~~second~~first quarter of fiscal ~~2016. Our~~2017. The decrease of 50 basis points was due to a decrease in merchandise margins ~~decreased 10~~of 120 basis points ~~over the second quarter of last year and~~partially offset by a 70 basis point improvement in occupancy costs ~~increased 30 basis points.~~as a percent of sales. The decrease in merchandise margin was ~~primarily~~ related to an increase in promotional markdowns, ~~related to~~specifically in our ~~inventory productivity initiatives~~direct business, as compared to the prior year’s second quarter. The increase of 30 basis points in occupancy costs is due partly to the timing of store openings during the first six months and also to the deleveraging of occupancy costs to sales.

~~For the first six months of fiscal 2017, our gross margin rate, inclusive of occupancy costs, was 45.7%~~well as ~~compared to a gross margin rate of 46.3% for the first six months of fiscal 2016. The decrease of 70 basis points was due to a 70 basis point~~an increase in ~~occupancy~~shipping costs. Occupancy costs, ~~primarily due to~~as a percentage of sales, improved as a result of the ~~timing~~leveraging of ~~earlier store openings during~~ the ~~first six months of fiscal 2017 as compared to fiscal 2016.~~sales base. On a dollar basis, occupancy costs ~~for the first six months of fiscal 2017~~ increased ~~approximately 5.6% over the prior year’s first six months, primarily as a result of an increase of 3.3% in total square footage.~~$0.2 million.

Merchandise margins for the first six months of fiscal 2017 were flat with the prior year. As discussed above, our inventory initiatives have resulted in a 7.4% decrease in inventory levels from a year ago, however, we have been able to successfully maintain a consistent merchandise margin.

As a percentage of sales, SG&A expenses for the ~~second~~first quarter of fiscal ~~2017~~2018 were ~~40.5%~~40.2% as compared to ~~39.3%~~42.9% for the ~~second~~first quarter of fiscal ~~2016. For the first six months of fiscal 2017 SG&A expenses as a percentage of sales were 41.6% as compared to 38.8% for the first six months of fiscal 2016.~~2017. On a dollar basis, SG&A ~~increased~~decreased by ~~$2.8 million and $7.6~~$0.6 million for the ~~second~~first quarter ~~and first six months~~ of fiscal ~~2017, respectively.~~2018. The increase in the second quarter and first six months was principally due to an increase of $1.1 million and $4.6 million, respectively, in advertising expense. As discussed above, we are increasing our investment in our marketing initiatives to help drive brand awareness, store traffic and our digital presence. The remainder of the increasedecrease was due to ~~increases~~a decrease of $1.6 million in marketing costs during the first quarter as a result of a reduction in the number of weeks in the Spring campaign as compared to fiscal 2017. This reduction was partially offset by an increase in store payroll and other supporting costs associated with ~~a greater DXL~~our stores and e-commerce initiatives.

SG&A expenses are managed through two primary cost centers: Customer Facing Costs and Corporate Supporting Costs. Customer Facing Costs, which include store ~~base.~~ payroll, marketing, and other store operating costs, represented 22.9% of sales in the first quarter of fiscal 2018 as compared to 24.6% of sales in the first quarter of last year. On an annual basis, management targets marketing expenses to be at approximately 5% of sales. Corporate Supporting Costs, which include the distribution center, support, and other corporate overhead costs, represented 17.3% of sales in the first quarter of fiscal 2018 compared to 18.3% of sales in the first quarter of last year. The Company continues to examine and rationalize its entire SG&A cost structure to improve its EBITDA margins and overall profitability. See our discussion above under “Subsequent Event - Corporate Restructuring”.

Depreciation and amortization for the ~~second~~first quarter of fiscal ~~2017 increased $2.1~~2018 decreased $0.4 million to ~~$9.6~~$7.3 million as compared to $7.5 million for the second quarter of fiscal 2016. The increase primarily relates to an impairment charge of $1.7 million taken in the second quarter of fiscal 2017 to write-down certain store assets. The remainder of the increase was due to the continued store growth associated with our DXL retail and outlet stores.

~~For the first six months of fiscal 2017, depreciation and amortization was $17.4 million as compared to $14.9~~$7.7 million for the first ~~six months of fiscal 2016. The increase of $2.5 million includes the $1.7 million impairment charge taken in the second~~ quarter of fiscal 2017. With the DXL store growth substantially complete, we expect our depreciation costs will start to decrease.

Net interest expense for the ~~second~~first quarter ~~and first six months~~ of fiscal ~~2017~~2018 of $0.9 million increased slightly from $0.8 million for the first quarter of fiscal 2017. In connection with the New Credit Facility and ~~$1.6 million, respectively, was relatively flat as compared to~~ the ~~comparable periods of the prior year. As a result~~repayment of our ~~inventory initiatives undertaken to improve liquidity,~~existing Term Loan Facility, as discussed above, we expect to realize, on an annualized basis, savings of approximately $0.7 million due to more favorable interest ~~costs for fiscal 2017 will be similar to fiscal 2016 levels.~~rates.

At ~~July 29, 2017,~~May 5, 2018, we had total deferred tax assets of ~~$83.9~~$53.5 million, total deferred tax liabilities of ~~$13.5~~$5.4 million and a corresponding valuation allowance of ~~$70.6~~$48.1 million. The deferred tax assets included approximately ~~$56.8~~$39.7 million of net operating loss carryforwards and approximately ~~$4.9~~$2.9 million of deferred gain on our sale-leaseback and, to a lesser extent, other book/tax timing differences.

At the end of fiscal ~~2013,~~2014, we established a full valuation allowance against our deferred tax assets. Based on our earnings guidance for fiscal ~~2017,~~2018, we believe that a full valuation allowance continues to remain appropriate at this time.

Beginning with the first quarter of fiscal 2018, we are calculating our tax provision based on the newly enacted U.S. statutory rate of 21%. Our tax ~~provisions~~provision for the ~~second~~first quarter ~~and first six months~~ of fiscal ~~2017~~2018 and fiscal ~~2016~~2017 was primarily ~~represent~~due to current state margin tax. The first quarter of fiscal 2018 included a tax ~~and foreign~~expense of $26,000 in other comprehensive income ~~tax.~~(loss), which resulted in a tax benefit on the consolidated statement of operations related to the corresponding decrease in valuation allowance.

~~Results for the second quarter and first six months of fiscal 2017 include an impairment charge of $1.7 million, or $0.04 per diluted share, associated with write-down of store assets.~~Loss

For the ~~second~~first quarter of fiscal ~~2017,~~2018, we had a net loss of ~~$(3.7)~~$(3.1) million, or ~~$(0.08)~~$(0.06) per diluted share, compared with a net ~~income~~loss of ~~$0.2~~$(6.1) million, or ~~$0.00~~$(0.12) per diluted share, for the ~~second~~first quarter of fiscal ~~2016. For the first six months of fiscal 2017, we have a net loss of $(9.8) million, or $(0.20) per diluted share, compared with net income of $0.4 million, or $0.01 per diluted share.~~ 2018.

On a non-GAAP basis, assuming a normalized tax rate of 26% for both periods, adjusted net loss per share for the ~~second~~first quarter ~~and first six months~~ of fiscal ~~2017~~2018 was $(0.05) per diluted share, ~~and $(0.12) per diluted shares, respectively,~~ as compared to adjusted net ~~income~~loss of ~~$0.00 per diluted share and $0.01~~$(0.09) per diluted share for the ~~second~~first quarter ~~and first six months of fiscal 2016.~~2017.

At ~~July 29, 2017,~~May 5, 2018, total inventory was ~~$112.3~~$106.2 million compared to ~~$117.4~~$103.3 million at ~~January 28, 2017~~February 3, 2018 and ~~$121.3~~$121.4 million at ~~July 30, 2016.~~April 29, 2017. The ~~7.4%~~12.5% decrease of ~~$9.0~~$15.2 million from ~~July 30, 3016~~April 29, 2017 was due to inventory initiatives ~~implemented~~that began in fiscal 2016 to improve timing of receipts and reduce weeks of supply on hand. At ~~July 29, 2017,~~May 5, 2018, our clearance inventory represented ~~7.5%~~9.7% of our total inventory, as compared to ~~7.7%~~8.2% at ~~July 30, 2016.~~ April 29, 2017. This increased percentage of clearance is primarily due to the lower inventory base, as a result of the inventory productivity initiatives which has reduced total inventory by 12.5%.

Historically, and consistent with the retail industry, we have experienced seasonal fluctuations as it relates to our operating income and net income. Traditionally, a significant portion of our operating income and net income is generated in the fourth quarter, as a result of the “Holiday” season.

Our primary sources of liquidity are cash generated from operations and availability under our credit facility with Bank of America, N.A., (“Credit Facility”), which was most recently amended in ~~October 2014~~May 2018 (“New Credit Facility”). Our current cash needs are primarily for working capital (essentially inventory requirements), capital expenditures and growth initiatives. We plan to manage our working capital and it is expected that excess cash from operations will be directed toward our growth initiatives and ~~as discussed further below, our stock repurchase program, which was announced in March 2017.~~debt reductions.

Our capital expenditures ~~for fiscal 2017~~ are expected to be approximately ~~$22.0~~$11.4 million, ~~primarily related~~and while capital expenditures may have to be funded periodically during the ~~planned opening~~year from our Credit Facility, by the end of ~~approximately 19 new DXL retail and 1 outlet stores and information technology projects. However, we expect~~fiscal 2018 all capital expenditures are expected to ~~receive approximately $5.0 million in tenant allowances to offset these capital expenditures. We expect to fund this store growth and stock repurchase program in fiscal 2017 primarily through~~be funded from cash flow from ~~operations, with periodic borrowings from our Credit Facility.~~operations. We currently believe that our existing cash generated by operations together with our New Credit Facility will be sufficient within current forecasts for us to meet our foreseeable liquidity requirements.

For fiscal ~~2017,~~2018, we expect cash flow from operating activities of ~~$35.0~~$20.5 million to ~~$40.0~~$26.5 million (including tenant allowances), and positive free cash flow of ~~$13.0~~$9.1 to ~~$18.0~~$15.1 million that will be used to reduce outstanding ~~debt and purchase shares of the Company’s common stock as part of its stock repurchase program.~~debt.

For the first ~~six months~~quarter of fiscal ~~2017, free~~2018, cash flow from operations decreased by ~~$4.7~~approximately $1.3 million, primarily due to timing of working capital. Free cash flow, a non-GAAP measure, improved by $2.4 million to ~~$0.6~~$(9.1) million from ~~$5.3~~$(11.5) million for the first ~~six months~~quarter of fiscal ~~2016. This decrease~~2017. The improvement in free cash flow was ~~due to a decrease in earnings,~~ primarily due to the ~~$4.6 million increase in marketing expense as compared to the prior year.~~lower capital expenditures associated with fewer store openings.

The following is a summary of our total debt outstanding at ~~July 29, 2017~~May 5, 2018 with the associated unamortized debt issuance costs:

Our credit facility with Bank of America, N.A., effective October 29, 2014 (our “Credit Facility”) ~~provides~~provided for a maximum committed borrowing of $125.0 million, which, pursuant to an accordion feature, ~~may~~could be increased to $175.0 million upon our request and the agreement of the lender(s) participating in the increase. The Credit Facility ~~includes~~included a sublimit of $20.0 million for commercial and standby letters of credit and a sublimit of up to $15.0 million for swingline loans. The maturity date of the Credit Facility is October 29, 2019. Our Credit Facility is described in more detail in Note 2 of the Notes to the Consolidated Financial Statements included in this Quarterly Report.

Borrowings made pursuant to the Credit Facility ~~bear~~bore interest at a rate equal to the base rate (determined as the highest of (a) Bank of America N.A.’s prime rate, (b) the Federal Funds rate plus 0.50% and (c) the annual ICE-LIBOR (“LIBOR”) rate for the respective interest period) plus a varying percentage, based on our borrowing base, of 0.50%-0.75% for prime-based borrowings and 1.50%-1.75% for LIBOR-based borrowings.

We had outstanding borrowings of ~~$53.7~~$59.1 million under the Credit Facility at ~~July 29, 2017.~~May 5, 2018. At ~~July 29, 2017,~~May 5, 2018, outstanding standby letters of credit were ~~$3.3~~$3.6 million and outstanding documentary letters of credit were ~~$0.1~~$1.5 million. The average monthly borrowing outstanding under the Credit Facility during the first ~~six~~three months ended ~~July 29, 2017~~May 5, 2018 was approximately ~~$58.6~~$60.8 million, resulting in an average unused excess availability of approximately ~~$46.0~~$30.4 million. Unused excess availability at ~~July~~May 5, 2018 was $32.7 million.

As discussed above, subsequent to the end of the first quarter of fiscal 2018, we amended this Credit Facility. The New Credit Facility with Bank of America, N.A. will extend the maturity date from October 29, ~~2017 was $43.7 million. Our obligations~~2019 to May 24, 2023. In addition, as a result of adding a FILO facility for $15.0 million to the New Credit Facility, we were able to repay in full, without penalty our existing Term Loan. The interest rates under the New Credit Facility for the Revolver decreased by 25 basis points and interest rates under the FILO facility are ~~secured by a lien on substantially all of our assets, excluding (i) a first priority lien held by~~350-450 basis points less than the ~~lenders of the~~existing Term Loan ~~Facility on certain of our equipment described below and (ii) intellectual property.~~Facility.

We ~~have~~had entered into twelve Equipment Security Notes (the “Notes”), whereby we borrowed an aggregate of $26.4 million. The Notes, which were issued between September 2013 and June 2014, were issued pursuant to a Master Loan and Security Agreement with Banc of America Leasing & Capital, LLC, dated July 20, 2007 and most recently amended on September 30, 2013. The Notes ~~are~~were secured by a security interest in all of our rights, title and interest in and to certain equipment. The Notes ~~are for 48 months and accrue~~accrued interest at fixed rates ranging from 3.07% to 3.50%. ~~Principal and interest, are payable monthly,~~Subsequent to the end of first quarter of fiscal 2018, the Company repaid in ~~arrears. The Company was subject to prepayment penalties through~~full the ~~second anniversary~~remaining balance on these Notes of ~~each note. The Company is no longer subject to any prepayment penalties.~~$71,000, without penalty.

~~We have~~Through the end of the first quarter of fiscal 2018, we had a $15.0 million senior secured term loan facility with Wells Fargo Bank, National Association as administrative and collateral agent (the “Term Loan Facility”). The interest rate on the Term Loan Facility ~~bears interest at a rate per annum~~was equal to the greater of (a) 1.00% and (b) the one month LIBOR rate, plus 6.50%. Interest payments ~~are~~were payable on the first business day of each calendar ~~month, and increase by 2% following the occurrence and during the continuance of an “event of default,” as defined in the Term Loan Facility.~~month. The Term Loan Facility, ~~which matures on~~with a maturity date of October 29, 2019, ~~provides for quarterly principal payments on~~was repaid in full, without penalty, subsequent to the end of the first ~~business day~~quarter of ~~each calendar quarter, which commenced the first business day of January 2015,~~fiscal 2018 in ~~an aggregate principal amount equal to $250,000, subject to adjustment,~~connection with the ~~balance payable on the termination date.~~New Credit Facility.

The Term Loan Facility includes usual and customary mandatory prepayment provisions for transactions of this type that are triggered by the occurrence of certain events. In addition, the amounts advanced under the Term Loan Facility can be optionally prepaid in whole or part. All prepayments are subject to an early termination fee in the amount of 1% of the amount prepaid through October 29, 2017. 23

~~The Term Loan Facility is secured by a first priority lien on certain of our equipment, and a second priority lien on substantially all of our remaining assets, excluding intellectual property.~~

The following table sets forth the open stores and related square footage at ~~July~~May 5, 2018 and April 29, 2017, ~~and July 30, 2016,~~ respectively:

	July 29, 2017				July 30, 2016				May 5, 2018				April 29, 2017
Store Concept	Number of Stores		Square Footage		Number of Stores		Square Footage		Number of Stores		Square Footage		Number of Stores		Square Footage
(square footage in thousands)
DXL Retail		206		1,630		176		1,432		216		1,687		202		1,606
DXL Outlets		14		72		11		56		15		78		14		72
Casual Male XL Retail		84		291		117		416		72		248		90		314
Casual Male Outlets		33		104		39		123		31		95		33		103
Rochester Clothing		5		51		5		51		5		51		5		51
Total Stores		342		2,148		348		2,078		339		2,159		344		2,146

Below is a summary of store openings and closings from ~~January 28, 2017~~February 3, 2018 to ~~July 29, 2017:~~May 5, 2018:

Number of Stores:	DXL		DXL Outlets		Casual Male XL Retail			Casual Male XL Outlets			Rochester Clothing		Total Stores			DXL		DXL Outlets		Casual Male XL Retail			Casual Male XL Outlets			Rochester Clothing		Total Stores
At January 28, 2017		192		13		97			36			5		343
At February 3, 2018																	212		14		78			33			5		342
New stores⁽¹⁾		6		—		—			—			—		6			1												1
Replaced stores⁽²⁾		8		1		(10	)		(3	)		—		(4	)		3		1		(3	)		(1	)				-
Closed retail stores⁽³⁾		—		—		(3	)		—			—		(3	)						(3	)		(1	)				(4	)
At July 29, 2017		206		14		84			33			5		342
At May 5, 2018																	216		15		72			31			5		339

Our capital expenditures ~~were $13.8 million~~ for ~~both~~ the first ~~six~~three months of fiscal ~~2017 and~~2018 were $3.3 million as compared to $6.9 million for the first three months of fiscal ~~2016.~~2017. We have opened 144 DXL retail stores and 1 DXL ~~outlets~~outlet during the first ~~six~~three months of fiscal ~~2017~~2018 as compared to 10 DXL retail stores and 21 DXL outlets for the first ~~six~~three months of fiscal ~~2016.~~2017.

For fiscal ~~2017,~~2018, our capital expenditures are expected to be approximately ~~$22.0~~$11.4 million and we expect to receive approximately ~~$5.0~~$1.1 million in tenant allowances to offset these expenditures. Our budget includes approximately ~~$13.7~~$2.1 million, excluding any allowance, related to the opening of 192 new DXL retail stores, the remodeling of 2 Casual Male XL to DXL retail stores and 1 DXL outlet ~~stores,~~store, and approximately ~~$8.3~~$9.3 million for continued information technology projects and general overhead projects. In addition, we expect to close approximately 167 Casual Male XL stores and 34 Casual Male XL outlet stores ~~the majority~~(two of which ~~are~~will close in connection with the opening of ~~the~~two DXL ~~retail and outlet stores in the same geographic market.~~stores).

There have been no material changes to the critical accounting policies and estimates disclosed in our Fiscal ~~2016~~2017 Annual Report. See Note 1 to the Consolidated Financial Statements included in this report for information on recent accounting pronouncements and changes in accounting principles.

Adjusted net ~~income (loss),~~loss, adjusted net ~~income (loss)~~loss per diluted share, free cash flow, ~~free cash flow before DXL capital expenditures~~EBITDA and Adjusted EBITDA are non-GAAP measures. These non-GAAP measures are not presented in accordance with GAAP and should not be considered superior to or as a substitute for ~~income (loss)~~net loss or cash flows from operating activities or any other measure of performance derived in accordance with GAAP. In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, the non-GAAP measures presented in this Quarterly Report may not be comparable to similar measures used by other companies. We believe that inclusion of these non-GAAP measures helps investors gain a better understanding of our performance, especially when comparing such results to previous periods and that they are useful as an additional means for investors to evaluate our operating results, when reviewed in conjunction with our GAAP financial statements. Reconciliations of these non-GAAP measures are presented in the following tables (certain columns may not foot due to rounding):

Adjusted net ~~income (loss)~~loss and adjusted net ~~income (loss)~~loss per diluted share. The above discussion includes an adjusted net ~~income (loss)~~loss for the ~~second quarter and~~ first ~~six~~three months of fiscal ~~2017~~2018 and fiscal ~~2016~~2017 on a non-GAAP basis, which reflected an adjustment assuming a normal tax rate of ~~40%~~26%. We have fully reserved against our deferred tax assets and, therefore, net loss is not reflective of earnings assuming a “normal” tax position. Adjusted net income (loss) provides investors with a useful indication of the financial performance of the business, on a comparative basis, assuming a normalized effective tax rate of ~~40%~~26%.

The following is a reconciliation of the net ~~income (loss)~~loss to adjusted net ~~income (loss),~~loss, assuming a normal tax rate of ~~40%~~26% for the first ~~six~~three months of fiscal ~~2017~~2018 and fiscal ~~2016:~~2017:

For the three months ended

For the six months ended

July 29, 2017

July 30, 2016

July 29, 2017

July 30, 2016

$

Per diluted
share

$

Per diluted
share

$

Per diluted
share

$

Per diluted
share

(in thousands, except per share data)

Net income (loss) (GAAP basis)

$
(3,731
)

$
(0.08
)

$
199

$
0.00

$
(9,796
)

$
(0.20
)

$
413

$
0.01

Add back: Actual income tax provision

35

35

64

92

Income tax (provision) benefit, assuming

a normal tax rate of 40%

1,478

(94
)

3,893

(202
)

Adjusted net income (loss) (non-GAAP basis)

$
(2,218
)

$
(0.05
)

$
140

$
0.00

$
(5,839
)

$
(0.12
)

$
303

$
0.01

Weighted average number of common shares

outstanding on a diluted basis

48,556

49,953

49,146

49,902

	For the three months ended
	May 5, 2018						April 29, 2017
	$			Per diluted share			$			Per diluted share
(in thousands, except per share data)
Net loss (GAAP basis)	$	(3,110	)	$	(0.06	)	$	(6,065	)	$	(0.12	)
Adjust:
Add back actual income tax provision (benefit)		(2	)					29
Add income tax benefit, assuming a normal tax rate of 26%		809						1,569

Adjusted net loss (non-GAAP basis)	$	(2,303	)	$	(0.05	)	$	(4,467	)	$	(0.09	)

Weighted average number of common shares
outstanding on a diluted basis					48,791						49,735

Free Cash ~~Flow and Free Cash Flow Before DXL Capital Expenditures.~~Flow. We define free cash flow as cash flow from operating activities less capital expenditures. Free cash flow ~~before DXL capital expenditures is free cash flow with DXL capital expenditures added back. Free cash flow~~ excludes the mandatory and discretionary repayment of debt. Free cash flow ~~and free cash flow before DXL capital expenditures are metrics~~is a metric that management uses to monitor liquidity. We expect to fund our ongoing ~~DXL~~ capital expenditures with cash flow from operations. ~~We believe this metric is important to investors because it demonstrates our ability to strengthen liquidity while also contributing to the funding of the DXL store growth.~~

The following table reconciles free cash ~~flow and free cash flow before DXL capital expenditures:~~flow:

EBITDA and Adjusted EBITDA. EBITDA is calculated as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before Restructuring charges and CEO transition costs. We believe that EBITDA isand Adjusted EBITDA are useful to investors in evaluating our performance. With the significant capital investment ~~associated~~we have made over the past

several years in connection with ~~the~~ DXL ~~transformation and, therefore, increasing~~store openings, we have increased levels of depreciation and interest, and therefore, management uses EBITDA as a key metric to measure profitability and economic productivity.

The following table is a reconciliation of non-GAAP measures used in our Fiscal ~~2017~~2018 Outlook:

	~~Projected~~
	~~Fiscal 2017~~
~~(in millions, except per share data)~~				~~per diluted share~~
~~Net loss (GAAP basis)~~	~~$(11.7)-$(16.7)~~
~~Add back:~~
~~Provision for income taxes~~		~~0.1~~
~~Interest expense~~		~~3.0~~
~~Depreciation and amortization~~		~~33.7~~
~~EBITDA (non-GAAP basis)~~	~~$20.0-$25.0~~

~~Net loss (GAAP basis)~~	~~$(11.7)-$(16.7)~~			~~$(0.24)-$(0.34)~~
~~Income tax benefit, assuming 40% rate~~	~~$4.7-$6.7~~			~~$0.10-$0.13~~
~~Adjusted net loss (non-GAAP basis)~~	~~$(7.0)-$(10.0)~~			~~$(0.14)-$(0.21)~~
~~Weighted average common shares outstanding - diluted~~		~~48.5~~

~~Cash flow from operating activities (GAAP basis)~~	~~$35.0-$40.0~~
~~Capital expenditures, infrastructure projects~~		~~(8.3~~	)
~~Free Cash Flow, before DXL capital expenditures (non-GAAP basis)~~	~~$26.7-$31.7~~
~~Capital expenditures for DXL stores~~		~~(13.7~~	)
~~Free Cash Flow (non-GAAP basis)~~	~~$13.0-$18.0~~

	Projected
	Fiscal 2018
(in millions, except per share data)				per diluted share
Net loss (GAAP basis)	$(13.2)-$(18.2)
Add back:
Restructuring charge and CEO transition costs		5.9
Provision for income taxes		0.1
Interest expense		3.1
Depreciation and amortization		29.1
Adjusted EBITDA (non-GAAP basis)	$20.0-$25.0

Net loss (GAAP basis)	$(13.2)-$(18.2)			$(0.27)-$(0.37)
Add back restructuring charge and CEO transition costs		5.9		$0.12
Add back tax provision and record benefit assuming 26%	2.0 - 3.2			$0.04-$0.07
Adjusted net loss (non-GAAP basis)	$(5.3) -$(9.1)			$(0.11)-$(0.18)
Weighted average common shares outstanding - diluted		49.1

Cash flow from operating activities (GAAP basis)	$20.5 -$26.5
Capital expenditures, infrastructure projects		(9.3	)
Capital expenditures for DXL stores		(2.1	)
Free Cash Flow (non-GAAP basis)	$9.1-$15.1

In the normal course of business, our financial position and results of operations are routinely subject to a variety of risks, including market risk associated with interest rate movements on borrowings and foreign currency fluctuations. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of these and other potential exposures.

We utilize cash from operations and from our Credit Facility to fund our working capital needs. Our Credit Facility is not used for trading or speculative purposes. In addition, we have available letters of credit as sources of financing for our working capital requirements. Borrowings under the Credit Facility, which expires October 29, 2019, bear interest at variable rates based on Bank of America’s prime rate or LIBOR. At ~~July 29, 2017,~~May 5, 2018, the interest rate on our prime based borrowings was ~~4.75%~~5.25%. At ~~July 29, 2017,~~May 5, 2018, approximately ~~$47.0~~$56.0 million of our outstanding borrowings were in LIBOR contracts with an interest rate of ~~2.69%~~3.25%. At ~~July 29, 2017,~~May 5, 2018, we also had ~~$12.3~~$11.5 million outstanding under a term loan, which bears interest at a variable rate based on one-month LIBOR rates plus 6.5%.

Based upon a sensitivity analysis as of ~~July 29, 2017,~~May 5, 2018, assuming average outstanding borrowing during the first ~~six~~three months of fiscal ~~2017~~2018 of ~~$58.6~~$60.8 million under our Credit Facility and ~~$12.3~~$11.5 million outstanding under our term loan, a 50 basis point increase in interest rates would have resulted in a potential increase in interest expense of approximately ~~$354,500~~$360,000 on an annualized basis.

Our Rochester Clothing store located in London, England conducts business in British pounds and our two DXL stores located in Ontario, Canada conduct business in Canadian dollars. As of ~~July 29, 2017,~~May 5, 2018, sales from these stores were immaterial to consolidated sales. As such, we believe that movement in foreign currency exchange rates will not have a material adverse effect on our financial position or results of operations.

As required by Rule 13a-15 under the Exchange Act, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~July 29, 2017.~~May 5, 2018. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~July 29, 2017,~~May 5, 2018, our disclosure controls and procedures were effective.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended ~~July 29, 2017~~May 5, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We are subject to various legal proceedings and claims that arise in the ordinary course of business. Management currently believes that the resolution of these matters will not have a material adverse impact on our future results of operations or financial position.

There have been no material changes to the risk factors as previously disclosed in Part I, Item 1A of our Fiscal ~~2016~~2017 Annual Report.

~~Share repurchase activity during the three months ended July 29, 2017 was as follows:~~None.

~~All shares purchased during the second quarter of fiscal 2017 were open market transactions.~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware	04-2623104
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
555 Turnpike Street Canton, MA	02021
(Address of principal executive offices)	(Zip Code)

(in thousands)	July 29, 2017			January 28, 2017			May 5, 2018			February 3, 2018
Equipment financing notes	$	2,881		$	6,589		$	71		$	501
Term loan, due 2019		12,250			12,750			11,500			11,750
Less: unamortized debt issuance costs		(258	)		(337	)		(162	)		(190	)
Total long-term debt		14,873			19,002			11,409			12,061
Less: current portion of long-term debt		3,758			6,941			963			1,392
Long-term debt, net of current portion	$	11,115		$	12,061		$	10,446		$	10,669

	Number of shares			Weighted-average exercise price per option		Weighted-average remaining contractual term	Aggregate intrinsic value		Number of shares			Weighted-average exercise price per option		Weighted-average remaining contractual term	Aggregate intrinsic value
Stock Options
Outstanding options at beginning of year		2,524,546		$	4.98		$	11,286		1,195,910		$	4.80		$	21,750
Options granted		—			—					138,888		$	2.50
Options canceled		(1,147,398	)	$	4.96
Options expired and canceled										(93,244	)	$	5.08
Options exercised		—			—					—			—
Outstanding options at end of quarter		1,377,148		$	4.97	5.0 years	$	-		1,241,554		$	4.52	5.1 years	$	-
Options exercisable at end of quarter		1,377,148		$	4.97	5.0 years				1,082,666		$	4.83	4.5 years

	May 5, 2018
Expected volatility		48.9	%
Risk-free interest rate		2.55	%
Expected life	4.5 yrs
Dividend rate		—

	Second Quarter			First Six Months			First Quarter
	(in millions)						(in millions)
Sales for fiscal 2016	$	117.9		$	225.8
Less 2016 sales for stores that have closed /converted		(6.8	)		(12.8	)
Sales for fiscal 2017							$	107.6
Less 2017 sales for stores that have closed /converted								(2.5	)
Plus additional sales from change in weeks								3.3
	$	111.1		$	213.0		$	108.4

Increase (decrease) in comparable sales		0.2			(2.0	)
Increase in comparable sales								2.3
Non-comparable sales, primarily DXL stores open less than 13 months		9.4			17.2			3.2
Other, net		0.4			0.6			(0.6	)
Sales for fiscal 2017	$	121.1		$	228.8
Sales for fiscal 2018							$	113.3

(in thousands)	Gross Debt Outstanding		Less Debt Issuance Costs			Net Debt Outstanding		Gross Debt Outstanding		Less Debt Issuance Costs			Net Debt Outstanding
Credit facility	$	53,724	$	(277	)	$	53,447	$	59,063	$	(185	)	$	58,878
Equipment financing notes		2,881		(16	)		2,865		71		-			71
Term loan, due 2019		12,250		(242	)		12,008		11,500		(162	)		11,338
Total debt	$	68,855	$	(535	)	$	68,320	$	70,634	$	(347	)	$	70,287

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plan		Approximate dollar value of shares that may yet be purchased under the plan ⁽¹⁾

April 30, 2017 to May 27, 2017		492,157	$	2.31		492,157	$	9,039,264
May 28, 2017 to July 1, 2017		637,850	$	2.41		637,850	$	7,503,644
July 2, 2017 to July 29, 2017		79,080	$	2.33		79,080	$	7,319,343
Total		1,209,087	$	2.36		1,209,087	$	7,319,343


10.1		Transition Agreement, dated as of March 20, 2018, between the Company and David A. Levin (Included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 23, 2018, and incorporated herein by reference)
10.2		Employment Agreement between Jim Davey and the Company dated March 14, 2018.
31.1		Certification of the Chief Executive Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2		Certification of the Chief Financial Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~July 29, 2017,~~May 5, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

	DESTINATION XL GROUP, INC.

Date: ~~August 24, 2017~~May 30, 2018	By:	/S/ John F. Cooney
		John F. Cooney
		Vice President, Managing Director, Chief Accounting Officer and Corporate Controller (Duly Authorized Officer and Chief Accounting Officer)

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