- Comparable sales increase 1.2% from
prior year second quarter
- E-commerce sales rise 18.4% from prior
year second quarter
- Selling, General and Administrative
expenses decline 5.1% from prior year second quarter
- Adjusted EBITDA before other charges
and change in accounting principle for the first six months of
fiscal 2018 increases 13.4% to $11.8 million
- Management reaffirms full-year guidance
and expects Adjusted EBITDA before other charges will more than
double over last year’s second half
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.
Commentary
“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 11th 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
Results
- Net 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
Information
- Capital 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.
Retail Locations
Three Months Ended
Six Months Ended
August 4, 2018
July 29, 2017
August 4, 2018
July 29, 2017
Store Openings (1) 2 1 2 5 Store Closings (1) (2) 6 5 9 13
Period End Retail Location Count (1) Stores 480 507
480 507 Leased Department Locations 634 643 634 643 Total Retail
Locations 1,114 1,150 1,114 1,150 1)
Excludes international franchised locations. 2) During the six
months ended July 29, 2017 Macy’s completed closure of 59 stores
where we had a leased department within the store.
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.
Forward-Looking Statements
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.
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (in thousands, except
percentages and per share data) (unaudited)
Three Months Ended Six Months
Ended August 4, 2018 July 29, 2017 August 4,
2018 July 29, 2017 Net sales $ 96,395 $ 98,280 $
199,622 $ 204,706 Cost of goods sold 46,530 46,227
94,354 94,714 Gross profit 49,865 52,053 105,268
109,992 Gross margin 51.7 % 53.0 % 52.7 % 53.7 % Selling, general
and administrative expenses 50,095 52,806 101,952 108,455 Store
closing, asset impairment and asset disposal expenses 672 1,120
1,641 2,638 Other charges, net 1,923 (171 )
3,073 646 Operating loss (2,825 ) (1,702 ) (1,398 ) (1,747 )
Interest expense, net 1,144 979 2,301
1,983 Loss before income taxes (3,969 ) (2,681 ) (3,699 ) (3,730 )
Income tax provision 56 93 112 186 Net
loss $ (4,025 ) $ (2,774 ) $ (3,811 ) $ (3,916 )
Net loss per share— Basic
$ (0.29 ) $ (0.20 ) $ (0.28 ) $ (0.28 ) Average shares outstanding—
Basic 13,823 13,793 13,831 13,771
Net loss per share— Diluted $ (0.29 ) $ (0.20 ) $ (0.28 ) $
(0.28 ) Average shares outstanding— Diluted 13,823
13,793 13,831 13,771
Reconciliation of Net
Loss to Adjusted Net Loss Net loss, as reported $ (4,025
) $ (2,774 ) $ (3,811 ) $ (3,916 ) Add: other charges for proxy
solicitation 1,256 — 2,141 — Add: other charges for proposed merger
— (165 ) — 649 Add: other charges for management and organizational
changes 667 (6 ) 932 (3 ) Less: effect of change in accounting
principle — — — (764 ) Less: income tax effect of adjustments to
net loss (474 ) 64 (746 ) 42 Add deferred tax valuation allowance
related to cumulative losses 991 1,073 924
1,497 Adjusted net loss $ (1,584 ) $ (1,808 ) $ (560 ) $
(2,495 )
Adjusted net loss per share - diluted $ (0.11 ) $ (0.13 ) $ (0.04 )
$ (0.18 )
DESTINATION MATERNITY CORPORATION AND
SUBSIDIARIES Condensed Consolidated Balance Sheets (in
thousands) (unaudited)
August
4, 2018 February 3, 2018 ASSETS Current
assets: Cash and cash equivalents $ 1,317 $ 1,635 Trade
receivables, net 6,837 6,692 Inventories 67,753 71,256 Prepaid
expenses and other current assets 11,043 11,522 Total
current assets 86,950 91,105 Property and equipment, net 59,177
66,146 Other assets 6,612 5,331 Total assets $
152,739 $ 162,582
LIABILITIES AND STOCKHOLDERS’
EQUITY Current liabilities: Line of credit borrowings $ 7,300 $
8,000 Current portion of long-term debt 4,881 4,780 Accounts
payable 24,497 30,949 Accrued expenses and other current
liabilities 33,402 31,661 Total current liabilities
70,080 75,390 Long-term debt 23,802 23,809 Deferred rent and other
non-current liabilities 21,442 22,715 Total
liabilities 115,324 121,914 Stockholders’ equity
37,415 40,668 Total liabilities and stockholders’
equity $ 152,739 $ 162,582
Selected Consolidated
Balance Sheet Data (in thousands) (unaudited)
August 4, 2018 February 3, 2018
July 29, 2017 Cash and cash equivalents $ 1,317 $
1,635 $ 2,161 Inventory 67,753 71,256 69,759 Property and
equipment, net 59,177 66,146 76,128 Line of credit borrowings 7,300
8,000 4,200 Total debt 35,983 36,589 39,280 Stockholders’ equity
37,415 40,668 58,033
DESTINATION MATERNITY
CORPORATION AND SUBSIDIARIES Consolidated Statements of
Operations (in thousands, except percentages and per share
data) (unaudited)
Six Months
Ended August 4, 2018 July 29, 2017
Operating Activities Net loss $ (3,811 ) $ (3,916 )
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 7,961 8,888 Stock-based compensation
expense 584 830 Loss on impairment of long-lived assets 1,519 2,446
Loss on disposal of assets 68 116 Grow NJ award benefit (1,412 )
1,815 Amortization of deferred financing costs 336 235 Changes in
assets and liabilities: Decrease (increase) in: Trade receivables
(145 ) (221 ) Inventories 3,503 (719 ) Prepaid expenses and other
current assets 479 1,962 Other non-current assets 12 (44 ) Increase
(decrease) in: Accounts payable, accrued expenses and other current
liabilities (1,831 ) (2,965 ) Deferred rent and other non-current
liabilities (1,417 ) (179 ) Net cash provided by
operating activities 5,846 8,248
Investing
Activities Capital expenditures (2,579 ) (3,611 ) Additions to
intangible assets — (18 ) Net cash used in investing
activities (2,579 ) (3,629 )
Financing
Activities Decrease in cash overdraft (2,657 ) (1,342 )
Decrease in line of credit borrowings (700 ) (400 ) Proceeds from
long-term debt 2,500 3,401 Repayment of long-term debt (2,537 )
(6,673 ) Deferred financing costs paid (160 ) (268 ) Withholding
taxes on stock-based compensation paid in connection
with repurchase of common stock
(29 ) (37 ) Proceeds from exercise of stock options —
— Net cash used in financing activities (3,583 )
(5,319 ) Effect of exchange rate changes on cash and cash
equivalents (2 ) 2
Net Decrease in Cash and Cash
Equivalents (318 ) (698 )
Cash and Cash Equivalents,
Beginning of Period 1,635 2,859
Cash and Cash
Equivalents, End of Period $ 1,317 $ 2,161
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
Supplemental Financial Information Reconciliation
of Net Loss to Adjusted EBITDA(1) and Adjusted EBITDA
Before Other Charges and Change in Accounting Principle, and
Operating Loss Margin to Adjusted EBITDA Margin and Adjusted
EBITDA Margin Before Other Charges and Change in Accounting
Principle (in thousands, except percentages) (unaudited)
Three Months Ended Six Months
Ended
August 4, 2018
July 29, 2017
August 4, 2018
July 29, 2017
Net loss $ (4,025 ) $ (2,774 ) $ (3,811 ) $ (3,916 ) Add:
income tax provision 56 93 112 186 Add: interest expense, net
1,144 979 2,301 1,983 Operating loss
(2,825 ) (1,702 ) (1,398 ) (1,747 ) Add: depreciation and
amortization expense 3,910 4,427 7,960 8,888 Add: loss on
impairment of long-lived assets 632 1,100 1,519 2,446 Add: loss on
disposal of assets 55 22 68 116 Add: stock-based compensation
expense 256 416 584 830 Adjusted EBITDA
(1) 2,028 4,263 8,733 10,533 Add: other charges for proxy
solicitation 1,256 — 2,141 — Add: other charges for proposed
business combination — (165 ) — 649 Add: other charges for
management and organizational
changes
667 (6 ) 932 (3 ) Less: effect of change in accounting principle
— — —
(764
) Adjusted EBITDA before other charges and effect of
change in accounting principle
$ 3,951 $ 4,092 $ 11,806 $ 10,415
Net Sales $ 96,395 $ 98,280 $ 199,622 $
204,706 Operating loss margin (operating loss as a
percentage of net sales) (2.9 %) (1.7 %) (0.7 %) (0.9 %) Adjusted
EBITDA margin (adjusted EBITDA as a percentage of net sales 2.1 %
4.3 % 4.4 % 6.5 % Adjusted EBITDA margin before other charges and
effect of change in accounting principle (adjusted EBITDA before
other charges and change in accounting principle as a percentage of
net sales) 4.1 % 4.2 % 5.9 % 7.1 % (1) Adjusted EBITDA
represents operating income (loss) before deduction for the
following non-cash charges: (i) depreciation and amortization
expense; (ii) loss on impairment of tangible and intangible assets;
(iii) loss on disposal of assets; and (iv) stock based compensation
expense.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180910005246/en/
Sloane & CompanyErica Bartsch,
212-446-1875Ebartsch@sloanepr.comorAlex Kovtun,
212-446-1896Akovtun@sloanepr.com
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