Destination Maternity Q3 comparable sales drop 5.2 percent

Destination Maternity Corporation third quarter comparable sales decreased 5.2 percent compared to a 3.6 percent decline for the third quarter of fiscal 2015. Gross margin improved 240 basis points to 52.9 percent, up from 50.5 percent in the prior year quarter.

Commenting on the trading, Anthony M. Romano, CEO & President said in the company release, "While we continue to make progress on many of our initiatives, the third quarter was challenging as both our sales and earnings did not meet our expectations. Overall, sales and adjusted EBITDA trailed the year ago period reflecting reductions in leased department and licensed brand sales and were adversely impacted by sales disruption from both the Hanjin shipping bankruptcy and Hurricane Matthew.”

Third quarter results review

Net sales were 102.6 million dollars compared with 119.5 million dollars for the comparable prior year quarter. The decrease, the company said, was primarily driven by closure of Sears and Gordmans leased department locations, as well as reductions in Kohl's sales given the planned exit in 2017, and by a decline in comparable sales.

Operating loss improved 13.5 percent to 1.5 million dollars compared to operating loss of 1.7 million dollars for the third quarter of fiscal 2015. GAAP net loss was 1.5 million dollars or 0.11 dollar per diluted share, compared to net loss of 1.3 million dollars or 0.09 dollar per diluted share, for the third quarter of fiscal 2015, while adjusted net loss was 1.2 million dollars or 0.09 dollar per diluted share, compared to adjusted net loss of 0.6 million dollars or 0.05 dollars for the third quarter of fiscal 2015. Adjusted EBITDA before other charges was 4.7 million dollars compared to 5.1 million dollars in the prior year quarter.

First nine months result highlights

Net sales were 333.5 million dollars compared with 380.5 million dollars for the nine months ended October 31, 2015. The decrease in sales, the company said, was primarily driven by closure of 575 Sears and Gordmans leased departments, a reduction in licensed brand sales and by a decline in comparable sales. Comparable sales decreased 4.5 percent, which follows a decrease of 1 percent for the nine months ended October 31, 2015.

Gross margin increased 370 basis points to 52.9 percent, while adjusted EBITDA before other charges was 21.2 million dollars compared to 19.6 million dollars for the first nine months of fiscal 2015. GAAP net income was 26 thousand dollars or 0.00 dollar per diluted share, compared to net loss of 1.4 million dollars or 0.10 dollar, for the nine months ended October 31, 2015. Adjusted net income was 1.3 million dollars or 0.09 dollar per diluted share, compared to 1.4 million dollars or 0.10 dollar per diluted share, for the nine months ended October 31, 2015.

Updates guidance for fiscal 2016

The company updated its financial guidance for fiscal 2016 and now expects comparable retail sales to be down in the mid-single digit range, gross margin to increase approximately 280 to 320 basis points year-over-year, as inventory productivity initiatives continue to generate more profitable sales. Capital expenditure is projected to be in the 14 million dollars to 16 million dollars range, a reduction of 13 million dollars to 15 million dollars compared to last year.

The company said, excluding the prior year capital expenditures related to the relocation of corporate headquarters and distribution centre, current year projected capital expenditures are 4 million dollars to 6 million dollars below last year, primarily the result of modest store investments. The company plans to open 10 new stores and close 32 stores during the fiscal year.

Picture:Motherhood Maternity