Destination Maternity

Destination Maternity Corporation, the world’s leading maternity apparel retailer, today announced results for the four month period ended January 31, 2015. The four month period from October 1, 2014 to January 31, 2015 represents the transition period related to the Company’s previously announced fiscal year-end change from September 30 to the Saturday nearest January 31 of each year. On February 25, 2015 the Company announced that its Board of Directors declared a regular quarterly cash dividend of $0.20 per share payable March 27, 2015.

For the four month period ended January 31, 2015, the Company reported a loss of $1.28 per diluted share on a GAAP basis, or $1.04 per diluted share excluding other charges associated with management and organizational changes, fiscal year reporting changes and relocation of the Company’s headquarters and distribution operations. This compares to adjusted earnings per diluted share (non-GAAP) of $0.24 for the four month period ended January 31, 2014. For a reconciliation of GAAP to non-GAAP financial information, refer to the financial tables at the end of this press release.

Anthony M. Romano, Chief Executive Officer of Destination Maternity Corporation, said, «Although our financial results for the transition period are challenging, it was successful and productive.  Although we are not satisfied with the total sales for the period, our 2.0% comparable sale decrease was incrementally better month by month and was positive in January. Our core operating results were about where we expected, and we took some difficult but necessary actions to correct foundational issues in our business to improve our prospects for long term success, including an inventory write-down of approximately $11 million«.

Net sales for the four months ended January 31, 2015 were $165.6 million compared with $170.6 million for the four months ended January 31, 2014. The decrease in total reported sales resulted primarily from decreased sales related to the Company’s continued efforts to close underperforming stores and a decrease in comparable sales, partially offset by increased international sales.

Comparable sales for the four months ended January 31, 2015 decreased 2.0%, compared to a 0.9% decrease for the four months ended January 31, 2014. Adjusting for the calendar shift, the Company’s calendar-adjusted comparable sales decreased 2.7% for the four months ended January 31, 2015 and decreased 0.7% for the four months ended January 31, 2014.

Gross margin for the four months ended January 31, 2015 decreased to 41.6% from 52.8% for the four months ended January 31, 2014. The decrease in gross margin reflects more price promotional and markdown activity than planned to spur sales and more aggressively manage inventory, including a $10.9 million inventory write-down at January 31, 2015 for the planned disposal of certain out-of-season merchandise.

Adjusted EBITDA was $(16.8) million for the four months ended January 31, 2015, compared to $11.2 million for the four months ended January 31, 2014. Adjusted EBITDA before other charges was $(11.7) million for the four months ended January 31, 2015, compared to $11.3 million for the four months ended January 31, 2014. Adjusted EBITDA is defined in the financial tables at the end of this press release.

Net loss for the four months ended January 31, 2015 was $17.4 million, compared to net income of $3.1 millionfor the four months ended January 31, 2014. Adjusted net loss for the four months ended January 31, 2015, which is presented in the financial tables at the end of this press release, was $14.1 million, and excludes total other charges of $3.3 million, net of tax, comprised of 1) $0.7 million, net of tax, or $0.05 per diluted share, related to the Company’s relocations of its headquarters and distribution operations, 2) $1.8 million, net of tax, or $0.14 per diluted share, related to management and organizational changes, and 3) $0.8 million, net of tax, or $0.06 per diluted share, related to the Company’s fiscal year reporting changes.

Financial guidance for the full year fiscal 2015 is as follows:

• Comparable sales in the low single digits with greater comparable sales increases in the second half of the fiscal year;
• Gross margins to increase slightly year over year, with greater year over year increases in the latter part of the fiscal year, as the Company annualizes the periods of aggressive inventory management of prior season merchandise;
• Other charges of approximately $4 million, primarily related to the relocation of the Company’s distribution facilities and other management and organizational changes; and
• Approximately $25 million in capital expenditures, including $9 million related to the relocation and $16 million of capital expenditures related to new stores, store relocations and remodels, as well as continued investment in information systems and technology, including inventory allocation technology.

Anthony M. Romano, Chief Executive Officer of Destination Maternity Corporation, said, «Although our financial results for the transition period are challenging, it was successful and productive.  Although we are not satisfied with the total sales for the period, our 2.0% comparable sale decrease was incrementally better month by month and was positive in January. Our core operating results were about where we expected, and we took some difficult but necessary actions to correct foundational issues in our business to improve our prospects for long term success, including an inventory write-down of approximately $11 million», the company reports.

Destination Maternity Corporation (NASDAQ: DEST).