Destination Maternity Reports Second Quarter and First Six Months Fiscal 2018 Results
MOORESTOWN, N.J.--(BUSINESS WIRE)--Sep 10, 2018--Destination Maternity Corporation (NASDAQ:DEST), the world’s leading maternity apparel retailer, today announced financial results for the second quarter and first six months of fiscal 2018 ended August 4, 2018 compared to the second quarter and first six months of fiscal 2017 ended July 29, 2017.
“We continued to make progress in the second quarter executing against our strategic initiatives aimed at accelerating revenue growth, rationalizing expenses and improving profitability,” said Marla Ryan, Chief Executive Officer of Destination Maternity. “The hard work of our entire team drove an 18.4% year-over-year increase in ecommerce sales in the quarter, the 11 th consecutive quarter of online sales growth. Comparable sales also increased 1.2%, and our disciplined cost savings measures reduced SG&A costs by 5.1% year-over-year in the second quarter. On the ecommerce front, we are rolling out enhanced site capabilities and faster shipping solutions over the next 90 days to better serve the needs of the digital savvy, millennial mom. We have retained a leading marketing advisory firm to assist us in identifying ways to drive higher e-Commerce revenue growth, improve online conversion, and maximize our marketing spend. Our brick and mortar business is stabilizing as we are actively realigning our product offering and shifting inventory towards more evergreen styles to increase conversion and drive sales. We are confident the right steps are being taken to position the business for future success. With this momentum and our year to date results, we are reaffirming our full-year guidance of 30% to 45% growth in Adjusted EBITDA, before other charges. We expect Adjusted EBITDA, before other charges will more than double over last year’s second half. Destination Maternity has strong brand awareness with a vast potential for growth. We remain committed to and confident in the transformation of this company to a more dynamic and profitable organization.”
Second Quarter Fiscal 2018 Financial ResultsNet sales for the second quarter of fiscal 2018 decreased 1.9% to $96.4 million from $98.3 million for the second quarter of fiscal 2017. Sales were negatively impacted by the net closure of 27 retail stores, partially offset by an increase in comparable sales. Comparable sales for the second quarter of fiscal 2018 increased 1.2%, compared to a decrease of 3.4% in the second quarter of fiscal 2017. Gross margin for the second quarter of fiscal 2018 was 51.7%, a decrease of 123 basis points from the comparable prior year gross margin. Selling, general and administrative expenses (“SG&A”) for the second quarter of fiscal 2018 decreased 5.1% to $50.1 million. As a percentage of net sales, SG&A decreased 176 basis points to 52.0%. Adjusted EBITDA before other charges was $4.0 million for the second quarter of fiscal 2018, a decrease of 3.4% compared to $4.1 million for the second quarter of fiscal 2017. Adjusted net loss for the second quarter of fiscal 2018 was $1.6 million, or $0.11 per share (diluted), compared to the comparably adjusted net loss for the second quarter of fiscal 2017 of $1.8 million, or $0.13 per share (diluted).
First Six Months of Fiscal 2018 Financial Results (26 weeks ended August 4, 2018)Net sales for the first six months decreased 2.5% to $199.6 million from $204.7 million for the comparable period in fiscal 2017. Comparable sales for the first six months of fiscal 2018 increased 0.5%, compared to a decrease of 5.5% for the six months ended July 29, 2017. Gross margin for the first six months of fiscal 2018 was 52.7%, a decrease of 100 basis points from the comparable prior year gross margin. Selling, general and administrative expenses (“SG&A”) for the first six months of fiscal 2018 decreased 6.0% to $101.9 million. As a percentage of net sales, SG&A decreased 191 basis points to 51.1%. Adjusted EBITDA before other charges and change in accounting principle was $11.8 million for the first six months of fiscal 2018, an increase of 13.4% compared to $10.4 million for the first six months of fiscal 2017. Adjusted net loss for the first six months of fiscal 2018 was $0.5 million, or $0.04 per share (diluted), compared to the comparably adjusted net loss for the first six months of fiscal 2017 of $2.5 million, or $0.18 per share (diluted).
Adjusted EBITDA before other charges, and adjusted net income, are defined in the financial tables at the end of this press release.
Other Financial InformationCapital expenditures in the second quarter totaled $1.4 million primarily driven by minor investments in stores and investments to support key systems projects. At August 4, 2018, inventory was $67.8 million, a decrease of $2.0 million compared to $69.8 million at July 29, 2017.
Conference Call Information
As announced previously, the Company will host a conference call regarding second quarter Fiscal 2018 financial results that includes comments on the results from members of our senior management at 9:00 a.m. Eastern Time. Management will conduct a question and answer session with investors following its prepared remarks.
Interested parties can listen to this conference call by dialing (800) 219-6970 in the United States and Canada or (574) 990-1028 outside of the United States and Canada. The call will also be available on the investors section of the Company’s website at http://investor.destinationmaternity.com. Passcode for the conference call is 6396537.
In the event that you are unable to participate in the call, a replay will be available at 12:00 p.m. Eastern Time on Monday, September 10, 2018 through 12:00 p.m. Eastern Time on Monday, September 17, 2018 by calling (855) 859-2056 in the United States and Canada or (404) 537-3406 outside of the United States and Canada. Passcode for the replay is 6396537.
About Destination Maternity
Destination Maternity Corporation is the world’s largest designer and retailer of maternity apparel. As of August, 4, 2018, Destination Maternity operates 1,114 retail locations in the United States, Canada and Puerto Rico, including 480 stores, predominantly under the trade names Motherhood Maternity®, A Pea in the Pod® and Destination Maternity®, and 634 leased department locations. The Company also sells merchandise on the web primarily through its brand-specific websites, motherhood.com and apeainthepod.com, as well as through its destinationmaternity.com website. Destination Maternity has international store franchise and product supply relationships in the Middle East, South Korea, Mexico, Israel and India. As of August 4, 2018, Destination Maternity has 188 international franchised locations, including 11 standalone stores operated under one of the Company’s nameplates and 177 shop-in-shop locations.
Reconciliation of Non-GAAP Financial Measures
This press release and the accompanying financial tables contain non-GAAP financial measures within the meaning of the SEC’s Regulation G, including 1) adjusted net loss, 2) adjusted net loss per share - diluted, 3) Adjusted EBITDA, 4) Adjusted EBITDA before other charges, 5) Adjusted EBITDA margin, and 6) Adjusted EBITDA margin before other charges. In the accompanying financial tables, the Company has provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. The Company’s management believes that each of these non-GAAP financial measures provides useful information about the Company’s results of operations and/or financial position to both investors and management. Each non-GAAP financial measure is provided because management believes it is an important measure of financial performance used in the retail industry to measure operating results, to determine the value of companies within the industry and to define standards for borrowing from institutional lenders. The Company uses each of these non-GAAP financial measures as a measure of the performance of the Company. In addition, certain of the Company’s cash and equity incentive compensation plans are based on the Company’s level of achievement of Adjusted EBITDA before other charges. The Company provides these various non-GAAP financial measures to investors to assist them in performing their analysis of its historical operating results. Each of these non-GAAP financial measures reflects a measure of the Company’s operating results before consideration of certain charges and consequently, none of these measures should be construed as an alternative to net income (loss) or operating income (loss) as an indicator of the Company’s operating performance, as determined in accordance with generally accepted accounting principles. The Company may calculate each of these non-GAAP financial measures differently than other companies.
The Company cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this press release or made from time to time by management of the Company, including those regarding earnings, net sales, comparable sales, other results of operations, liquidity and financial condition, and various business initiatives, involve risks and uncertainties, and are subject to change based on various important factors. The following factors, among others, in some cases have affected and in the future could affect the Company’s financial performance and actual results and could cause actual results to differ materially from those expressed or implied in any such forward-looking statements: the strength or weakness of the retail industry in general and of apparel purchases in particular, our ability to successfully manage our various business initiatives, the success of our international business and its expansion, our ability to successfully manage and retain our leased department and international franchise relationships and marketing partnerships, future sales trends in our various sales channels, unusual weather patterns, changes in consumer spending patterns, raw material price increases, overall economic conditions and other factors affecting consumer confidence, demographics and other macroeconomic factors that may impact the level of spending for apparel (such as fluctuations in pregnancy rates and birth rates), expense savings initiatives, our ability to anticipate and respond to fashion trends and consumer preferences, unanticipated fluctuations in our operating results, the impact of competition and fluctuations in the price, availability and quality of raw materials and contracted products, availability of suitable store locations, continued availability of capital and financing, our ability to hire, develop and retain senior management and sales associates, our ability to develop and source merchandise, our ability to receive production from foreign sources on a timely basis, our compliance with applicable financial and other covenants under our financing arrangements, potential debt prepayments, the trading liquidity of our common stock, changes in market interest rates, our compliance with certain tax incentive and abatement programs, war or acts of terrorism and other factors set forth in the Company’s periodic filings with the SEC, or in materials incorporated therein by reference.
Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and persons reading this announcement are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this announcement. The Company assumes no obligation to update or revise the information contained in this announcement (whether as a result of new information, future events or otherwise), except as required by applicable law.
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