Rimmy Malhotra of Nicoya Capital presented his thesis on Destination XL Group (US: DXLG) at Best Ideas 2026.
Thesis summary:
DXL Group is a largely brick-and-mortar retailer for the big and tall male customer, a fragmented and underserved market of about $23bn, up from $6bn in 2007. Rimmy notes that mainline retailers stock few items in these sizes, while DXL offers major-label designs tailored to this customer in one place. The shares fell from about $3 when Rimmy last presented DXL to about $0.90, a $49m market cap against $440m of trailing sales and $30m to $40m of cash.
Rimmy recounts the turnaround: after an activist slate arrived in 2019, a new CEO retired all of the company’s $54m of debt and built $50m to $60m of cash. By 2021 DXL did more than $500m of sales at 10% EBITDA margins, and cash flow went into buybacks, including $25m in fiscal 2023. High fixed costs then took EBITDA from $50m to about break-even. A $3 per share bid from 20% holder Fund 1 prompted a sale process.
Instead of a cash takeout, the process produced an all-stock merger of equals with Full Beauty Brands, a larger, largely online retailer focused on plus-size women with $600m to $700m of sales. The combination has $1.2bn of LTM net sales and about $45m of EBITDA, nearly all from Full Beauty. Management targets $25m of run-rate cost synergies within 18 to 24 months from sourcing, shipping, distribution centers, websites and executive teams, lifting pro forma EBITDA to $70m.
Full Beauty CEO Jim Fogarty will lead the combined company. Rimmy values his mix of restructuring experience at Alvarez & Marsal and apparel roles at Orchard Brands, Charming Shoppes and Levi Strauss, where he was CFO. He will own 1-2% of the equity, and each side names four directors. Closing is expected by June 30, 2026. With the proxy pending, tax-loss sellers and event-driven holders are exiting, leaving an information vacuum for fundamental investors.
DXL holders will own about 45% of roughly 120 million combined shares, so at $0.90 the equity is worth about $110m; with $140m of net debt, pro forma EV is about $250m. At 6-10x EBITDA, Rimmy’s matrix gives $1.2 to $2.7 per share with no synergies, $2.4 to $4.8 at $70m, and $4.9 to $8.9 if 10% margins return ($120m). Risks are leverage above 3x EBITDA, culture clash and execution, though Rimmy expects debt to fall quickly toward 2x.
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