August 19, 2010 / 7:54 PM / 7 years ago

Casual Male CEO sees "big man's heaven" in new store

LAS VEGAS (Reuters) - Casual Male Retail Group Inc says its new store concept, Destination XL, is seeing higher average transactions at its first outlets in a key test for the big and tall men’s apparel chain.

Destination XL will eventually supplant the company’s two chains currently serving shoppers at different price ranges: Casual Male XL and the higher-priced Rochester Big & Tall.

The company recently opened the first two Destination XL stores, one outside Chicago and a second in Memphis. Its third location, in Las Vegas, opened last week. The store is bigger and offers a greater variety than either individual chain.

“Now we have a vehicle that we can take anywhere,” Chief Executive David Levin told Reuters in an interview. “It’s like a Casual Male store on steroids.”

Early reads on sales at the two newly opened stores show that average transactions are higher and that customers drove longer distances to shop at the store, said Levin. He cautioned that the data had not yet been quantified.

“We’re very pleased with the higher transactions,” said Levin. “We’re very pleased with the early results.”

The company reports second-quarter earnings on Thursday.

Investors question how many stores will open under the new Destination XL concept, and how soon, after the company decided to stop opening individual Casual Male and Rochester stores.

The company currently operates 454 Casual Male stores and 19 Rochester stores.

Destination XL’s format is closer to a department store, offering both casual and formal wear at multiple price points. Its Vegas outlet covers 13,000 square feet compared with an average of about 3,500 square feet per store for the individual retail chains.

The company’s more well-heeled Rochester shoppers will find $248 Robert Graham shirts, for example, or Polo shirts for $80. At the other end of the spectrum, Casual Male customers will find $25 private label T-shirts, $250 suits or $59 khaki pants.

While the Destination XL strategy is a departure from a current trend in retail, where department stores are opening more off-price outlets and smaller spaces are sought, Levin hopes the variety will inspire shoppers to spend more.

“We don’t expect our Casual Male customer to spend $248 from $50,” he said. “But he will spend $100 from $50.”

A fourth Destination XL store will open in Houston in early September, but Levin would not project the further roll-out.

Some analysts see Destination XL as a catalyst to long-term market-share gains and a more successful second half. But Stifel Nicolaus’s Richard Jaffe questioned whether the concept would appeal to male shoppers, who in general do not enjoy browsing through big stores.

“It’s about having a compelling model,” Jaffe said. “I‘m not sure a business that is ‘Build it and they will come’ attitude is the right one.”

Casual Male plans to tinker with the concept through December and provide investors more detail on sales in November when it discloses its third-quarter results.

Still, Levin said exit surveys given to shoppers at the Chicago and Memphis stores revealed satisfied customers, who felt their needs had not been met at other retail outlets.

“One guy said ‘I‘m in a big man’s heaven,'” said Levin.

Shares of Casual Male are up 22 percent since a year ago, but down 40 percent from a 2010 high of $4.49 in April.

In May, Casual Male raised its 2010 earnings outlook to a range of 26 cents to 29 cents per share from an earlier range of 23 cents to 26 cents. Levin would not comment on that outlook for the second half of the year, but said that sales had been “fairly consistent.”

Reporting by Alexandria Sage; Editing by Gary Hill

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