Destination Maternity: Store closures negatively impact Q3 net sales

Destination Maternity Corporation, for its third quarter reported net sales decrease of 3.7 percent to 92.8 million dollars due to net closure of 27 company-owned locations and 12 leased lease locations in addition to a decrease in comparable sales. Comparable sales for the quarter decreased 2.6 percent compared to an increase of 1.1 percent in the third quarter of fiscal 2017. Gross margin reduced 40 basis points to 52.4 percent.

“Our third quarter results illustrate our continued discipline in right-sizing the organization, rationalizing expenses and improving profitability as part of our multi-year strategic plan, Destination -> Forward,” said Marla Ryan, Chief Executive Officer of Destination Maternity in a statement, adding, “Our brick and mortar sales remain sluggish as we continue to shutter unprofitable stores and aggressively manage our long-term inventory position through increased markdowns and promotional activity.”

Highlights of Destination Maternity’s Q3 and nine months results

The company said, adjusted EBITDA before other charges and effect of change in accounting principle increased 95 percent to 3.9 million dollars for the quarter. Net loss was 4.1 million dollars or 30 cents per share compared to 7.5 million dollars or 55 cents per diluted share, for the third quarter of fiscal 2017. Adjusted net loss was 1.7 million dollars or 12 cents per share compared to 2.7 million dollars or 20 cents per share last year.

Net sales for the first nine months decreased 2.9 percent to 292.5 million dollars, while comparable sales decreased 0.5 percent compared to a decrease of 3.5 percent for the nine months ended October 28, 2017. Gross margin was 52.6 percent, a decrease of 80 basis points from the comparable prior year gross margin.

Adjusted EBITDA before other charges and effect of change in accounting principle increased 26 percent to 15.7 million dollars for the first nine months from 12.5 million dollars for the first nine months of fiscal 2017. Net loss was 7.9 million dollars or 57 cents per diluted share compared to 11.4 million dollars or 83 cents per diluted share, for the comparable period in fiscal 2017. Adjusted net loss was 2.3 million dollars or 17 cents per diluted share compared to 5.2 million dollars or 38 cents per diluted share.

Destination Maternity is adjusting its FY 2018 revenue guidance lower by 100bps to reflect expected softness in brick and mortar sales as the company continues efforts to optimize inventory and manage expenses. The company is also reducing SG&A guidance by an incremental 4 million dollars or 100bps, which offsets the bottom-line impact. Additionally, FY 2019 comparable sales expectations remain unchanged at 0.0 percent - 1.4 percent.

Picture:Destination Maternity website