Tom Filandro - Managing Director, ICR, Inc. David Levin - President and CEO Peter Stratton - SVP and CFO.

Eric Beder - Wunderlich Securities Greg Pendy - Sidoti & Company Chris Krueger - Lake Street Capital Markets Glenn Krevlin - GHC Capital Bernard Sosnick - Madison Global Partners Peter Rabover - Artko Capital.

Good day everyone and welcome to the Destination XL Group’s Fourth Quarter and Fiscal 2016 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Tom Filandro, Managing Director at ICR. Please go ahead..

Thank you, Laurie, and good morning, everyone. Thank you for joining us today on Destination XL Group’s fourth quarter fiscal 2016 earnings call. On our call today is David Levin, our President and Chief Executive Officer, as well as Peter Stratton, our Senior Vice President and Chief Financial Officer.

During today’ call we will discuss some non-GAAP metrics to provide investors with useful information about our financial performance. Please refer to our earnings release, which was filed this morning and is available on our Investor Relations Web site at investor.destinationxl.com for an explanation and reconciliation of such measures.

Today’s discussion also contains certain forward-looking statements concerning the Company’s operations, performance and financial condition including sales, profitability, EBITDA, gross margin, capital expenditures, earnings per share, free cash flow, store openings and closings and the Company’s ability to execute on strategic plan and the effectiveness of the Destination XL concept.

Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those assumptions as mentioned today due to a variety of factors that affect the Company.

Information regarding risks and uncertainties is detailed in the Company’s filings with the Securities and Exchange Commission. Now, I'd like to turn the call over to our President and CEO, David Levin..

Thank you, Tom, and good morning, everyone. No surprise for this audience that 2016 retail environment was one of the most challenging we’ve faced in the recent memory. For the fourth quarter, traffic trends were erratic, and we experienced more pronounced weakness in the middle of the country which resulted in a comp decline of 2.4%.

Despite the negative fourth quarter comp, we generated a positive comp of 0.6% for the year and reported EBITDA of $31.6 million, achieving the midpoint of our most recent guidance.

Importantly, after five years of borrowing to fund the DXL build out in fiscal 2016 we were able to pay for our 30 new stores with free cash flow and we reduced our debt to $63.1 million, which is approximately 2x EBITDA. We expect to continue to generate strong free cash flow again in 2017.

Now that we've largely achieved our DXL men's apparel transformation with over 200 DXL stores in the most attractive markets, a robust destinationxl.com Web site and an integrated omni-channel operation, we entered 2017 enthusiastic that our strategic initiatives set the stage for accelerated performance in our business, notwithstanding the challenging retail environment.

Our greatest opportunity is the fact that 6 out of 10 big guys still do not know who we are. And therefore our top priority in 2017 is to increase brand awareness, acquire new customers, and retain existing customers. We intend to tap that opportunity through two key strategic initiatives in 2017.

The first is recommitting to an aggressive advertising and marketing vision. The second is to redefine and improve our digital in e-commerce experience. We gain valuable insights following our decision in 2016 to pullback on our marketing spend, including eliminating a fall television advertising campaign.

We had assumed that our previous television advertising campaigns coupled with an increased store base would maintain and continue to increase our brand awareness. However, while the elimination of the television advertising benefited our expense structure, we experienced a slight decline in our brand awareness scores in our end-of-rack penetration.

Our first strategic initiative is anchored on increasing our 2017 marketing budget by approximately 40%. The higher spend will include reinstituting television advertising beginning April 2. Utilizing creative content that we know works, our TV advertising will run for 10 weeks for the spring summer season compared to six weeks last year.

We’ve a high degree of confidence that this campaign will play a key role in reinvigorating top line growth in extending our brand reach. We are also committed to a fall television advertising campaign, which we expect will increase brand awareness during the critical holiday selling season.

Our second key initiative is built on an unparalleled digital experience for the big and tall guy. That initiative will be led by our recently hired Chief Digital and Information Officer, Sahal Laher. Sahal has over 20 years of senior operational experience with a focus on digital and omni-channel strategies.

He joined us from Brooks Brothers, were he was most recently Executive Vice President of Digital Innovation and Technology and Global CIO and supported a significant increase in sales to Brooks Brothers Digital Channel. Sahal's mission is to build digital experiences that transform the way customers engage with DXL men's apparel.

Sahal is focused on four key areas. First, acquisition. Leveraging digital marketing to attract new customers to the DXL men's apparel brand. Second, retention. Driving customer loyalty through targeted engagement and one-on-one offerings. Third, fit and comfort.

Curating unique experiences to future personalized fit as a competitive advantage, and fourth, marketplaces. Expanding the DXL men's apparel brand reach by leveraging strategic business relationships such as with Amazon.

We're also excited to announce that we will launch our first mobile app during the second quarter, which represents a key priority in driving customer engagement.

The Mobile app will provide a platform to engage with shoppers in a personalized manner, while offering ease and convenience to shop our entire selection of brands and private-label merchandise. Our e-commerce sales penetration in fiscal 2016 was approximately 15% of total sales.

We expect to experience solid growth in our digital channel in 2017 benefiting from Sahal's strategic action plan, while leveraging our already robust omni-channel capabilities and new mobile app.

With our return to television advertising and a heightened focus on elevating our digital experience, we are well-positioned to retain our existing customers and drive new customer acquisition. It remains clear that digital commerce is increasingly important to today's consumers and we must continually and quickly adapt to changes in the landscape.

As I noted in our holiday sales update at the ICR Conference, we experienced a notable migration to online shopping over the holiday season, in particular with our gift-giver.

to that end in 2017, we plan to leverage the scale of our existing store base by elevating our marketing efforts and accelerating our digital engagement and slowing new store growth. We currently operate 205 DXL men's apparel stores, which now affords us to scale and reach to service our customers across every major market in the U.S.

We’ve decided to slower 2017 store growth to 20 stores compared to our 30 stores opened in 2016, and will continue to slow the growth of new stores for the foreseeable future. Our decision is strategically and financially in line with our goal of continuing to expand the DXL men's apparel brand reach, while targeting strong free cash flow growth.

At the same time, we plan to close approximately 19 Casual Male locations in 2017, resulting in square footage growth for the year of approximately 2.6%. Our DXL men's apparel stores now represents 76% of the total Company store footprint and are expected to reach 80% by the end of fiscal 2017.

Importantly, I’d like to highlight that our legacy Casual Male stores are still performing well. Out of the 130 Casual Male stores in operation today, 128 are generating positive free cash flow. As such, given the current environment, we're taking a more conservative approach to Casual Male conversions.

As you may also be aware on March 13, we opened the DXL men's apparel store in the Toronto area, which is operated by us not a franchisee. This store represents our first of two Canadian store openings this year. We believe the Canadian market represents a potential growth region for our brand.

Canada is our number one export country of DXL men's apparel product and we have extensive experience serving the Canadian customers from our border stores. The Toronto opening went smoothly and we're excited to bring the DXL men's apparel experience to that region.

We're viewing the two Canadian stores as a test market and an important platform for increased digital distribution and e-commerce in Canada. We will certainly keep you up-to-date on our progress in the region. Our cash flow is also being enhanced through better inventory management.

In 2016, we embarked an inventory productivity initiative, which resulted in a year end decrease of 6% or approximately $7.6 million in our inventory balances. This was a great effort to realize these improvements, but we know we have much more opportunity in this area.

As we enter 2017, we remain committed to improving our inventory productivity with a heightened focus on logistics in areas including purchasing, allocation, and replenishment. Bottom-line, we believe we're positioned to further optimize our inventory in fiscal 2017.

Given the strong free cash flow generated by our store operations, reduced CapEx requirements for new stores and comfortable debt levels, our Board of Directors has authorized a $12 million share repurchase program for fiscal 2017.

We take a balanced approach to capital allocation, and this authorization provides us with the flexibility to reallocate free cash flow to the opportunistic repurchase of our shares.

To summarize, 2016 was a challenging year, but we're pleased to deliver a positive comp of 0.6%, EBITDA growth of 35.6%, and a milestone with the opening of our 200 DXL men's apparel store.

As we look ahead to this year, we're focused on our strategic initiatives to drive customer attention and acquisition through increased brand awareness and improved digital and e-commerce experience. With that, I will now pass the call over to our CFO, Peter Stratton, who will review our financial performance.

Peter?.

Thank you, David, and good morning, everyone. As you all know, we announced our fourth quarter and full-year fiscal 2016 earnings this morning. And I’d like to start with a brief summary of those results.

In the fourth quarter, net sales were $122.6 million, inclusive of total company comparable sales decline of 2.4% on top of a 3.1% increase in the prior year quarter. Our top line results were negatively impacted by overall weakness in the retail sector and we believe our decision to eliminate a fall television marketing campaign.

In the fourth quarter, gross margin including occupancy costs was 44.9% compared with 45.8% for the fourth quarter of fiscal 2015. The decrease of 90 basis points was the result of a 40 basis point decrease in merchandise margin and a 50 basis point deleveraging in occupancy cost as a percentage of total sales.

The decrease in merchandise margin was primarily due to an increase in promotional strategies over the peak December selling weeks. At the end of Q3, we were expecting fourth quarter improvement in merchandise margins due to some year-over-year timing differences associated with our clearance merchandise.

The increase in fourth quarter promotional activity more than offset the anticipated improvement in the timing differences on clearance merchandise, which caused our gross margin to come in below our expectations. Moving on to SG&A costs, we continue to be disciplined with managing expenses.

Our SG&A expenses for the fourth quarter were 36.1% of sales compared with 40% a year ago or an improvement of 390 basis points. On a dollar basis, SG&A expenses declined $5.3 million from Q4 2015, which primarily resulted from reductions in advertising costs and lower performance incentive accruals.

As David mentioned, we are planning to increase our marketing and digital expenses by $6.8 million in fiscal 2017. And we also expect our performance incentive accruals to return to a more normal level, which will contribute to a higher SG&A rate in 2017.

GAAP net income for the quarter was $1.8 million or $0.04 per share compared with a net loss of $1.4 million or $0.03 per share a year-ago. Net income on a non-GAAP basis assuming a normalized tax rate of 40%, improved to $0.02 per share from a net loss of $0.02 per share in Q4 of fiscal 2015.

We are pleased to report fourth quarter EBITDA growth of 48% to $10.8 million from $7.3 million in the year-ago quarter. The increase was a direct result of lower SG&A expenses for the period, much of which can be attributed to not having the fall television advertising campaign. For the full-year, we registered EBITDA growth of 36% to $31.6 million.

Capital expenditures for 2016 of $29.2 million were down 13% from $33.4 million in 2015. The lower CapEx was due to a decrease in infrastructure projects, as well as the opening of five fewer DXL stores in 2016 versus 2015. Now I’d like to turn to our balance sheet.

Inventory at the end of the fourth quarter was down $7.6 million or 6% from the fourth quarter of fiscal 2015. This substantial inventory reduction is a direct result of continued inventory initiatives we’ve been pursuing throughout 2016 to improve timing of receipts and weeks of supply on hand.

We have also identified several opportunities within our merchandise planning and allocation functions that we believe will drive an additional $8 million to $12 million of further inventory improvements in fiscal 2017. We entered the new fiscal year with a clean and current inventory composition.

Clearance merchandise was 8% of our total inventory at the end of fiscal 2016, which was in line with our 2015 level. Total debt at quarter end was $63.1 million, which includes borrowings under the revolving credit facility of $44.1 million with excess availability of $57.1 million. This compares to $68.1 million of total debt a year-ago.

Before I turn to our 2017 guidance, I wanted to layout a change to our reporting practices. Now that our DXL men's apparel store fleet represents 76% of our Company store footprint and we are accelerating our efforts to drive digital sales, we will be reporting go-forward comparable sales only on a total company basis.

Our intent is to maintain transparency and we believe this approach aligns our execution of the business to our customers shopping preferences, in which the barriers no longer exists between brick-and-mortar in e-commerce. It was important in the midst of the DXL transformation to report DXL store performance separately, as we tracked progress.

But now that the store transition is substantially complete and the majority of our store base is DXL, we believe that the total company comparable sales will be a more important metric as we move forward. Now let me turn to our 2017 guidance.

As David descried, we’ve adopted clear offensive strategies for 2017 in marketing and digital engagement, which were squarely focused on driving new customer acquisition, as well as retention of existing customers.

Included in these initiatives is an increase in our marketing spend by approximately $6.8 million combined with digital strategies that we believe will drive accelerated top line growth. To this end, we are providing the following guidance for 2017.

Total sales of $470 million to $480 million, a total comparable sales increase of approximately 1% to 4%, gross profit margin of approximately 46%, and adjusted net loss on a non-GAAP basis of minus $0.06 to minus $0.14 per diluted share assuming a normal tax benefit of approximately 40%. EBITDA in the range of $24 million to $30 million.

Capital expenditures of approximately $22 million before tenant allowances of $5 million with approximately $13.7 million invested in new DXL stores. Free cash flow in the range of $15 million to $20 million. We expect to open approximately 19 DXL men's apparel retail stores and one outlet location.

We also plan to close approximately 16 Casual Male XL retail stores and three Casual Male outlet stores. Now for modeling purposes, I'd like to offer the following directional comments. With the reinstitution of our television advertising to start on April 2, we are not anticipating a meaningful improvement in the business until Q2.

We do anticipate there will be a continual build as the year progresses. As a result of this factor, we would expect adjusted non-GAAP EPS losses in Q1 and Q3 and positive EPS results in Q2 and Q4. Lastly, before we open the call for questions, I’d like to comment on our capital allocation strategy.

The Company is forecasting free cash flow of $15 million to $20 million for fiscal 2017. And I think it's important for our investors to know what we intend to do with that cash. Earlier today we announced that our Board of Directors authorized a stock buyback program for up to $12 million in fiscal 2017.

This authorization provides the Company with additional flexibility to balance debt pay down and shareholder returns. Maintaining adequate excess availability under our credit facility remains our top priority and we believe a combination of debt pay down and stock buyback represents the best use of free cash flow in fiscal 2017.

In closing, we have a clear strategic plan of action in place to accelerate our performance in 2017, and we are confident our efforts will continue to strengthen the DXL men's apparel brand setting the stage for future growth. And with that, operator, we will open the call for questions..

Thank you. [Operator Instructions] We will go first to Eric Beder with Wunderlich Securities..

Good morning..

Good morning..

Hi.

Could you talk -- so how does these changes in terms of slowing down the store growth a little bit affect your overall long-term strategy with stores and what is -- just remind us what is the long-term goal in terms of the store counts?.

Yes, it's interesting, because right now we're over 200 stores and we have 140 Casual Male's left out there, but those 140 really only represent 20% of our business today. So, really the bulk, the major markets where we wanted to plant all these stores are done, so we will be slowing down those transfers over time.

But again, in total having that number of 350 stores is still intact, but we will be monitoring it through as leases come due, whether we want to make the conversion -- we’ve IRR requirements that we have to meet. But even if some stay, its Casual Male. They continue to perform well and kick out cash flow for us.

So, I think over the next few years we’re just going to be very prudent and thoughtful about what we want to convert..

Great. And when you look at the online business, obviously it has done well.

Could you talk a little bit about how the difference in the economics there? Is it a better business in terms of overall margins, and kind of where longer-term do you think the number should be in terms of penetration?.

Sure. So I'll take that one. So the penetration is about 15% right now and you know we do expect that to grow over time. I think that over the last seven years we've been spending an awful lot of focus on building out the DXL store footprint.

And now that we've gotten to a scale that allows us to reach the entire U.S., the focus is obviously going to be more on digital this year.

In terms of the profitability of each channel -- if we were going to earn an additional dollar, we would certainly want that additional dollar going to stores, because we’ve got so much of our fixed costs and payroll in occupancy.

But overall, we would incur a little bit more cost in the direct channel with the shipping, I would like to remind everyone that we do not take free returns for shipping, so that helps our model a bit..

Also just to add to that to remind everybody where a lot of apparel companies have 20% to 30% return rates, which really bust the model in terms of profitability. Our return rate is about 8%. So we have strong margins coming out of digital which will allow us to really accelerate that as best we can without having a real impact on our margins..

And where do you think it can go? I mean, is it a 25% of total sales potential here?.

You know we're not there yet to say where it can grow to. Obviously, we’ve a fairly big base of stores that will make that growth slower. But aspirationally, yes, we could -- we will take it as high as it could go and if its 25% that will be great, but too early for us to predict.

But it will be growing and driving as a percent of sales over the next several years for sure..

Congratulations on getting to free cash flow.

What is your goal for either debt levels or ratios? Where do you want liquidity to be?.

So, I think we're very comfortable with where we are right now at two times EBITDA. I think with announcing the stock buyback today, it is something that we're very excited about, because it gives us more flexibility to balance shareholder return with liquidity management.

We think that we are going to generate a significant amount of cash flow this year. The guidance is $15 million to $20 million, and it's important that we're able to balance those two priorities, and do it in the best interest of the Company..

Okay, guys. Good luck for the year. Thank you..

Thanks, Eric..

We will go next to Greg Pendy with Sidoti..

Hey, guys. Thanks for taking my call. Just, I guess, a couple of questions on the outlook on 2017.

First of all, did I catch that right that the SG&A, we should think about it going up $6.8 million or was that just the advertising side?.

No. So, Greg, it's going to go up more than that. The $6.8 million is just the advertising side. We also are going to see -- we see general increases in SG&A every year in areas such as store payroll, with more DXL stores. We also made a comment earlier about increases in performance incentive accruals.

Those accruals were very modest this past year and we expect that next year those numbers will get back to a more normal level that we trended to back in 2014 and '15..

Okay. That’s helpful.

And then just another one, I guess, can you kind of remind us where you guys stand? I know you’ve talked about it in the past, but where strategically you guys stand in the online world in the big and tall space? I believe in the past given some metrics on the competitive environment and how much of the -- how much you guys represent of that business?.

Yes, that’s difficult to answer, but one of the things that we do monitor is we ask our customers where else they have shopped in the last six months. Have they shopped anywhere else in big and tall.

And there's been absolutely no growth by any of our competitors in terms of cutting into our market share and we think our market share continues to grow. But in terms of the total business what percent we’ve, there's nothing out there that really guides us to what that number could be, but I believe our market share is going to grow more.

We are, I guess, I’ve said one of our initiatives is to go into more marketplaces. We are on Amazon, a couple programs with Amazon. We are on eBay, we have Bon-Ton. We’ve a lot of more potential growth in doing digital sales outside of our own Web site.

So, again very focused on it with a lot of potential, on a lot of programs that we're going to be initiating in the next year..

And then just one more, it seems like just the next you guys are planning on only adding one DXL outlet.

Is that primarily a function of the online growth? Are you finding that to be sort of a channel that you can offset some of the inventory if need be?.

No, no. It was just coincidental. Our DXL outlet stores are doing fine. It's just what leases came due, where we saw the opportunity, and it just happen to shake out that way, but there is no agenda that says we're not going to convert DXL outlets in the future as we would our regular price stores..

Okay. Thank you..

Thank you..

Our next question comes from Chris Krueger with Lake Street Capital Markets..

Good morning..

Good morning..

Just a quick question on -- just on the sales during the fourth quarter, and so far into the first quarter.

Any, like regional trends versus -- like the coasts versus the central part of the country or also any -- just anything as far as pre-presidential election versus post-presidential election, just wondering how the patterns were there?.

Yes, interesting. On the demographics side, we were experience about a 500, 600 point spread between the middle the country and the East and West coast. In February that narrow down to about 140 basis points. So that does seem to be neutralizing itself, so I think we're pretty good about that.

Pre-election, postelection we're not sure, but the business that we experience in the fourth quarter as you’ve heard most retailers speak about the current business, it's bumpy out there and not very predictable yet.

And again, we’re really focusing on our TV campaign, which actually is going to break a month earlier than last year, so we should start to see improvements in our comps as we get into the second quarter..

All right. Thanks. That’s all I got..

We will go next to Glenn Krevlin with GHC Capital..

Hey, good morning. Peter, I was wondering if you would give a little bit more clarity on or detail on CapEx. So, last year in your release you said there was $33 million, 20 stores, $13 million infrastructure.

Can you tell me the $13 million infrastructure, what were the major programs, what do you expect to get out of them? And then for this year can you break it down into similar buckets in terms of stores gross and net and then infrastructure?.

Sure. So, the programs that we spent on infrastructure it's really in two major buckets. The first is IT projects. So improvements to our e-commerce Web site, improvements to different systems that we have -- within our -- the Company whether it's planning and allocation or distribution, that's really the first bucket. The second bucket is.

it's really infrastructure improvements to our facilities. So things like, it could be fixing parts of a roof, it could be resurfacing a parking lot, but it's all of the maintenance CapEx costs that we have to incur to keep the business moving. You know where we think it's going to be next year is the CapEx for stores next year is about $22 million.

Now that’s before tenant allowances. I’m sorry, $17 million and then tenant allowances. So we’ve -- we are spending roughly $400,000 to $500,000 per store on the DXL store build out still..

And then in terms of infrastructure for this year, what’s the number and what are the projects?.

So the infrastructure projects this year, I believe is about $8 million and it's ….

And then in terms of the buyback, I mean has the Company sort of had a -- or created a policy here as to sort of what debt-to-EBITDA or what debt-to-EBITDAR ratio the Company is comfortable managing the business at? Are there some metrics you can share with us that the Board has adopted in creating this repurchase authorization?.

So one of the big things that we're watching very closely is our availability. We want to make sure that our availability does not fall below a certain level, and we're looking to buy back shares opportunistically. So, we’ve set a number. I’m not sure we're going to give that out on this call, but we're managing that conservatively.

The first priority is to make sure that we got plenty of flexibility and availability to run the Company..

Okay. I will let somebody else jump in..

We will go next to Bernard Sosnick with Madison Global Partners..

Thank you. You did a very nice job controlling inventories during a difficult situation, but you say that there is more to come.

Could you outline a little bit your plans for inventories?.

Yes, Bernie. We have a very slow turning business, it's been our heritage forever, we barely turn two times a year, really reflective of the size management that we have to deal with certain styles, 55 different size combinations, And we have to learn how to rationalize that as we move forward. So we’ve -- we brought in a consultant.

We’ve met that out. They’ve been in here for three months and it's just streamlining the inventory that we have in our warehouse more than we have in the stores.

We are not going to really lower -- we don't need to lower the inventory that’s in the stores, it's the transitional inventory, how we bring it in, the amount we bring in at one given time and there's just tremendous opportunities as we focus on that to drive it down.

As we’ve said, we drove -- we made one big dramatic drop in inventory in one year and that was just things we were able to accomplish on our own. And now bringing in the experts, they’ve identified a lot of programs that just -- we could improve dramatically by streamlining it and changing the way we do it.

So we're very excited about it's been a top priority in the Company for the last year and we're confident that the numbers that Peter gave on driving that inventory down are going to happen by the end of this year..

With regard to your investments in marketing, certainly understandable and I agree with it, but the Company has come to the point of having enough stores so that, while you’re not mature, you’ve reached a level of maturity that should produce profitability some time soon.

So, 2017 is going to be another investment year in that respect given your guidance.

What are your thoughts looking a little bit beyond that? I know it is a very difficult market environment, but could you stretch your thinking a little bit, please?.

Honestly we are feeling very good about our business right now. Taking that marketing out, had an impact and putting it back in is going to have a positive impact. We are going to be going to in the back half of this year with marketing against no TV a year-ago and that should give us a substantial improvement in the back half of the year.

But the key thing is, for these guys to pay attention to who we are isn't on their -- top of their priority. Every customer that we get to walk in the store it's a win. They come in, they enjoy the experience and we own them.

The cost of acquisition of that customer is expensive, but the good news is that the money we're investing today has long-term positive profitability to it, because we have a good stickiness to this marketing. We get him in this year and we spend the money, we’re going to own that guy for the next four or five years. So it pays itself over time.

So, putting that money back into marketing is going to be great. We got -- we’re bringing back our top commercial that only ran for 12 weeks in 2014, it scored extremely high. We’re very excited about bringing that back. It resonated with our customers very well. It was the year we’ve the biggest comps in DXL.

So, we spent a lot of time trying to figure out how we are going to get that customers back in the store. We feel very good about our strategy..

Thank you..

Thank you, Bernie..

[Operator Instructions] We will go next to Peter Rabover from Artko Capital..

Hey, guys. I got a -- I’ve a couple of questions.

So first on the SG&A and the marketing spend, should we consider this more of a run rate going forward or is that is a one-time increase that you might pull back on in 2018?.

No, I would consider it a run rate going forward. Over time as we grow sales, the rate as a percentage of sales will come down, but we’re committed to the advertising and customer acquisition and retention is absolutely the highest priority this year..

Okay.

And then on the same-store sales guidance, is that coming mostly from traffic that you think will come as a result of advertising?.

Yes, and the growth of digital. That digital -- our digital plan this year is aggressive and we're already seeing a run rate where digital is outperforming our stores. So that's going to be a big part of the comp too..

Do you guys have any idea how much of your digital comes from people who have visited your stores like from your, I guess, in person customers?.

There is different metrics out there. One that we saw over the holiday period, 60% of the customers in our stores were on a mobile device prior to coming into the store. So it's interesting. Even though he could have easily clicked on to buy our customer still like to come in the store, try things on. They’re more challenging to get the right fit.

So, our omni-channel strategy is really melding these businesses as close as we can together, because they do work hand-in-hand. We like them to go on digital and then we like them to follow-up in the store where we could build on that customer's purchase through enhanced wardrobing..

Okay. And then I’m just kind of curious if you can give any color on how you guys went about deciding on the stock buyback. Was it from the Board level or was that from you guys? Was there a higher number or a lower number from each side? I would appreciate any color..

Sure. I'd be happy to. So, this really stemmed from the fact that we're giving guidance for $15 million to $20 million in free cash this year.

And it's really a capital allocation question where we can invest that money in more stores, we can invest that money in paying back debt, we felt that given where the price is today, authorizing the stock buyback gave us more flexibility to manage the business better. So now we can balance shareholder return with debt pay down..

Okay.

But did that come from the top or did that come from you guys?.

I think it was -- this was a joint decision.

We go in with an agenda and we said okay, we’ve got free cash flow, something we haven't seen in many, many years and what's our best strategy and there was consensus between the Board and management that with the stock price where it is, we think it's a good return on investments as its going to be at a -- at this price range.

So, the alignment was there between the Board and management..

Great. And then just one more. You said it on the call, maybe I missed it.

How many of your Casual Male stores you said were generating positive free cash flow today?.

All, but two of them..

All but two of them and you -- I assume you plan on closing those two this year?.

Yes, we will have to check when the leases are, but we’d be closing those when we can get out of the leases..

Great, thanks. That’s all I have..

Thank you..

That concludes our question-and-answer session. I will turn the conference over to David Levin for any additional or closing remarks..

Thank you all for joining us today and we look forward to speaking with you next quarter. Have a great day..

That does conclude today's conference. Thank you for your participation..