Destination Maternity Q3 comparable sales down 6.9 percent

Destination Maternity Corporation net sales were 119.5 million dollars compared with 125.1 million dollars for the comparable three month period ended November 1, 2014. The decrease in total reported sales resulted primarily from a decline in comparable sales and decreased sales related to closure of underperforming stores, partially offset by an increase in sales from the company's licensed relationship. Comparable sales decreased 3.6 percent, which follows a 6.9 percent decrease for the three month period ended November 1, 2014.

Commenting on the financial results, Anthony M. Romano, the Company's Chief Executive Officer, said, “For the third quarter we reported adjusted EBITDA before other charges of 5.1 million dollars, representing modest improvement from 4.1 million dollars in the prior year, as our gross margin held steady and we managed expenses well. However, both internal and external factors negatively impacted our reported comparable sales, which were down 3.6 percent. The headwind is now behind us and we are on track to benefit in fiscal 2016 from increased efficiencies from our new distribution centre.”

Third quarter highlights

The company reported a GAAP net loss of 1.3 million dollars, or 0.09 dollar per diluted share in the third quarter, which included other charges of approximately 0.4 million dollars, net of tax, related to the relocations of its headquarters and distribution facilities, and 0.3 million dollars, net of tax, related to management and organizational changes. This compares to a GAAP net loss of 1.2 million dollars, or 0.09 dollar per diluted share, for the three months ended November 1, 2014.

On an adjusted basis, for the third quarter of fiscal 2015, the company reported a net loss of 0.6 million dollars, or 0.05 dollar per diluted share compared to an adjusted loss of 0.6 million dollars, or 0.05 dollar per diluted share for the three months ended November 1, 2014.

Net sales were 380.5 million dollars compared with 389.4 million dollars for the nine months ended November 1, 2014. Comparable sales decreased 1 percent, which follows a decrease of 5.5 percent for the nine months ended November 1, 2014. The company estimates the disruption from its distribution centre move negatively impacted its reported comparable sales by approximately 0.7 percent for the first nine months of fiscal 2015.

Strategic organisational changes to boost growth

The company has relocated its corporate headquarters and distribution operations to southern New Jersey from Philadelphia, Pennsylvania. It also announced that, in a further effort to streamline operations and its reporting structure, the separate President function is eliminated and as a result Christopher Daniel, previously President, will be leaving the company. Anthony M. Romano, the Company's Chief Executive Officer, will assume the additional title of President.

Commenting on the management change, Romano stated, "While I am sorry to see Chris leave, the opportunity to flatten our organization and streamline the merchandising decisions is an important step in our ongoing efforts to simplify our business model, improve efficiencies and make quicker decisions. I will assume the additional role of President and work directly with our brands in pursuit of our goal to consistently provide our customers with compelling product and exceptional customer service.”

On December 1, 2015 the company declared a regular quarterly cash dividend in the amount of 0.20 dollar for each share of the company's outstanding common stock.

Guidance for Q4 and fiscal 2016

For the fourth quarter of fiscal 2015 comparable sales are expected to be down slightly, slightly better but still negative comparable sales in the fourth quarter; Gross margin is expected to be flat to last year, increasing significantly in the fourth quarter.

Financial guidance for fiscal 2016 expects comparable sales increase in the low, single digits, primarily driven by the implementation of the company's new allocation system, which will begin to have positive impact in second quarter and gross margin is expected to increase at least 100 basis points, with essentially flat gross margin in the first quarter, and improving throughout the year.