- Operating income of $1.6 million versus $1.4
million in prior year period
- Adjusted EBITDA before other charges of $6.7
million versus $7.9 million in prior year period
- Gross Profit Margins Improve to 54.8% from
53.7% in prior year period
- Selling, General and Administrative expenses
decline 6.5% from prior year period
Destination Maternity Corporation (NASDAQ: DEST), the world's
leading maternity apparel retailer, today announced financial
results for the first quarter of fiscal 2019 ended May 4, 2019
compared to the first quarter of fiscal 2018 ended May 5, 2018.
Commentary
“We had a challenging start to the year with comparable store
sales down 7.2% in the first quarter,” said Dave Helkey, Chief
Financial Officer of Destination Maternity. “We were successful in
mitigating a significant portion of the impact on the bottom line
with a 110 basis point improvement in margins and a 6.5% reduction
in SG&A expenses, but know there is more work to be done.
As we look ahead, we are committed to strengthening the
underlying fundamentals of the business and driving long term,
profitable growth. Due to the recently announced leadership
transition, the Board of Directors is conducting a comprehensive
review of the Company’s strategic initiatives to ensure that the
Company is pursuing an aggressive strategy that will drive real and
sizeable change in the business.”
Leadership Changes
In a separate press release issued today, Destination Maternity
announced that Marla Ryan, by mutual agreement with the Board, will
step down as Chief Executive Officer, effective June 13, 2019. Ms.
Ryan will remain with the Company to assist with the transition and
will also assume a new role as President of product design,
sourcing and merchandising.
The Destination Maternity Board has created an Office of the CEO
on an interim basis, which will provide ongoing leadership and
oversight of the day-day operations of the Company while a search
is conducted for a new CEO. The interim Office of the CEO is
comprised of Lisa Gavales, a member of the Board of Directors,
Marla Ryan, now President of product design, sourcing and
merchandising and Dave Helkey, current CFO and COO. Ms. Gavales
will serve as Chair of the Office of the CEO.
First Quarter Fiscal 2019 Financial
Results
- Net income for the first quarter of
fiscal 2019 was $0.1 million, or $0.01 per share (diluted),
compared to net income of $0.2 million, or $0.02 per share
(diluted), for the first quarter of fiscal 2018.
- Operating income of $1.6 million for
the first quarter of fiscal 2019 compared to operating income of
$1.4 million in the first quarter of fiscal 2018.
- Adjusted net income for the first
quarter of fiscal 2019 was $0.6 million, or $0.04 per share
(diluted), compared to the comparably adjusted net income for the
first quarter of fiscal 2018 of $1.0 million, or $0.07 per
share (diluted).
- Adjusted EBITDA before other charges
and effect of change in accounting principle decreased to $6.7
million for the first quarter of fiscal 2019 from $7.9 million for
the first quarter of fiscal 2018.
- Net sales for the first quarter of
fiscal 2019 decreased 8.7% to $94.2 million from $103.2 million for
the first quarter of fiscal 2018. Sales were negatively impacted by
the net closure of 32 owned locations and 88 leased lease locations
as well as a decrease in comparable sales.
- Comparable sales for the first quarter
of fiscal 2019 decreased 7.2% from the first quarter of fiscal
2018.
- Gross margin rate for the first quarter
of fiscal 2019 was 54.8%, an increase of 110 basis points from the
comparable gross margin in the first quarter of fiscal 2018.
- Selling, general and administrative
expenses (“SG&A”) for the first quarter of fiscal 2019
decreased 6.5% to $48.5 million from $51.9 million for the first
quarter of fiscal 2018. As a percentage of net sales, SG&A
increased 130 basis points to 51.5% vs 50.2% for the first quarter
of fiscal 2018.
Other Financial
Information
- Capital expenditures for first quarter
fiscal 2019 totaled $2.5 million primarily driven by investments to
support key systems projects with minor investments in stores.
- At May 4, 2019, inventory was $72.1
million, an increase of $5.7 million compared to $66.4 million at
May 5, 2018.
Retail Locations
Three Months
Ended
May 4, 2019 May 5, 2018 Store Openings (1) 1 0
Store Closings (1) 7 3
Period End Retail Location
Count (1) Stores 452 484 Leased Department Locations 546 634
Total Retail Locations 998 1,118
1) Excludes international franchised locations.
Financial Outlook
With the recently announced leadership transition, the Board is
now conducting a comprehensive review of the Company’s strategic
initiatives to identify areas to improve and accelerate performance
going forward.
For FY 2019, the Company now expects annual Adjusted EBITDA
guidance to be in the $13 million to $17 million range.
Conference Call Information
The Company will host a conference call regarding first quarter
fiscal 2019 financial results that includes comments on the results
from members of our senior management on Thursday, June 13, 2019 at
9:00 a.m. Eastern Time. Management will conduct a question and
answer session following its prepared remarks.
Investors and analysts can participate in 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 1488698.
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 Thursday,
June 23, 2019 through 12:00 p.m. Eastern Time on Thursday, June 20,
2019 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 1488698.
About Destination Maternity
Destination Maternity is the leading designer and omni-channel
retailer of maternity apparel in the United States, with the only
nationwide chain of maternity apparel specialty stores, as well as
a deep and expansive assortment available through multiple online
distribution points, including our three brand-specific websites.
As of May 4, 2019, we operate 998 retail locations, including 452
stores in the United States, Canada and Puerto Rico, and 546 leased
departments located within department stores and baby specialty
stores throughout the United States and Canada. We also sell our
merchandise on the Internet, primarily through our Motherhood.com,
APeaInThePod.com and DestinationMaternity.com websites. We also
sell our merchandise through our Canadian website,
MotherhoodCanada.ca, through Amazon.com in the United States, and
through websites of certain of our retail partners, including
Macys.com. Our 452 stores operate under three retail nameplates:
Motherhood Maternity®, A Pea in the Pod® and Destination
Maternity®. We also operate 546 leased departments within leading
retailers such as Macy’s®, buybuy BABY® and Boscov’s®. Generally,
we are the exclusive maternity apparel provider in our leased
department 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 May 4, 2019 May 5,
2018 Net sales $ 94,213 $ 103,227 Cost of goods sold
42,616 47,824 Gross profit 51,597 55,403 Gross margin
54.8 % 53.7 % Selling, general and administrative expenses 48,490
51,857 Store closing, asset impairment and asset disposal expenses
869 969 Other charges 662 1,150 Operating income
1,576 1,427 Interest expense, net 1,415 1,157 Income
before income taxes 161 270 Income tax provision 31
56 Net income $ 130 $ 214 Net income
per share— Basic $ 0.01 $ 0.02 Average shares outstanding— Basic
13,825 13,839 Net income per share— Diluted $
0.01 $ 0.02 Average shares outstanding— Diluted 13,901
13,963
Reconciliation of Net Income to Adjusted
Net Income Net income, as reported $ 130 $ 214 Other
charges 662 1,150 Income tax effect of other charges (154 ) (273 )
Deferred tax valuation allowance related to cumulative losses
(30 ) (67 ) Adjusted net income $ 607 $ 1,024
Adjusted net income per share - diluted $ 0.04
$ 0.07
DESTINATION MATERNITY CORPORATION AND
SUBSIDIARIES Condensed Consolidated Balance Sheets (in
thousands) (unaudited)
May 4, 2019 February 2, 2019
ASSETS Current assets: Cash and cash equivalents $ 1,193 $
1,154 Trade receivables, net 8,807 7,945 Inventories 72,133 70,872
Prepaid expenses and other current assets 9,855 9,407
Total current assets 91,988 89,378 Property and equipment, net
50,510 51,483 Operating lease assets 128,065 — Deferred taxes and
other non-current assets 5,232 5,313 Total assets $
275,795 $ 146,174
LIABILITIES AND STOCKHOLDERS’
EQUITY Current liabilities: Line of credit borrowings $ 26,200
$ 20,400 Current portion of long-term debt 4,257 4,372 Accounts
payable 21,355 21,854 Operating lease liabilities 32,327 — Accrued
expenses and other current liabilities 24,608 31,056
Total current liabilities 108,747 77,682 Long-term debt 22,294
21,784
Operating lease and other non-current
liabilities
119,938 19,557 Total liabilities 250,979
119,023 Stockholders’ equity 24,816 27,151
Total liabilities and stockholders’ equity $ 275,795 $ 146,174
Selected Consolidated Balance Sheet Data (in
thousands) (unaudited) (unaudited)
May 4, 2019
February 2, 2019 May 5, 2018 Cash and cash
equivalents $ 1,193 $ 1,154 $ 2,005 Inventory 72,133 70,872 66,419
Property and equipment, net 50,510 51,483 62,481 Line of credit
borrowings 26,200 20,400 15,200 Total debt 52,751 46,556 42,701
Stockholders’ equity 24,816 27,151 41,192
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (in thousands)
(unaudited)
Three Months Ended
May 4, 2019 May 5, 2018 Operating
Activities Net income $ 130 $ 214 Adjustments to reconcile net
income to net cash used
in operating activities:
Depreciation and amortization 3,553 4,050 Stock-based compensation
expense 144 328 Loss on impairment of long-lived assets 562 887
Loss on disposal of assets 188 13 Grow NJ award benefit (643 ) (707
) Amortization of deferred financing costs 177 165 Changes in
assets and liabilities: Decrease (increase) in: Trade receivables
(862 ) (2,197 ) Inventories (1,261 ) 4,837 Prepaid expenses and
other current assets (448 ) (252 ) Other non-current assets 6,317
(14 ) Decrease in: Accounts payable, accrued expenses, operating
lease and other current liabilities (4,931 ) (9,031 ) Operating
lease and other non-current liabilities (7,522 ) (752
) Net cash used in operating activities (4,596 )
(2,459 )
Investing Activities Capital expenditures
(2,478 ) (1,141 ) Net cash used in investing activities
(2,478 ) (1,141 )
Financing Activities
Decrease in cash overdraft 1,106 (1,980 ) Decrease in line of
credit borrowings 5,800 7,200 Proceeds from long-term debt 1,802 —
Repayment of long-term debt (1,562 ) (1,151 ) Deferred financing
costs paid — (80 ) Withholding taxes on stock-based compensation
paid in connection
with repurchase of common stock
(33 ) (19 ) Net cash provided by financing activities
7,113 3,970 Effect of exchange rate changes on cash
and cash equivalents — — Net Increase in Cash and
Cash Equivalents 39 370 Cash and Cash Equivalents, Beginning of
Period 1,154 1,635 Cash and Cash Equivalents, End of
Period $ 1,193 $ 2,005
DESTINATION MATERNITY CORPORATION
AND SUBSIDIARIES Supplemental Financial Information
Reconciliation of Net Income to
Adjusted EBITDA(1) and Adjusted EBITDA Before Other
Charges, and Operating Income Margin to Adjusted EBITDA
Margin and Adjusted EBITDA Margin Before Other Charges
(in thousands, except percentages) (unaudited)
Three
Months Ended May 4, 2019 May 5, 2018 Net
income $ 130 $ 214 Income tax provision 31 56 Interest expense, net
1,415 1,157 Operating income 1,576 1,427 Depreciation
and amortization expense 3,553 4,050 Loss on impairment of
long-lived assets 562 887 Loss on disposal of assets 188 13
Stock-based compensation expense 144 328 Adjusted
EBITDA (1) 6,023 6,705 Other charges 662 1,150
Adjusted EBITDA before other charges $ 6,685 $ 7,855
Net Sales $ 94,213 $ 103,227 Operating income
margin (operating income as a percentage of net sales) 1.7 % 1.4 %
Adjusted EBITDA margin (adjusted EBITDA as a percentage of net
sales 6.4 % 6.5 % Adjusted EBITDA margin before other charges
(adjusted EBITDA before other charges as a percentage of net sales)
7.1 % 7.6 % (1) Adjusted EBITDA represents operating income
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.
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version on businesswire.com: https://www.businesswire.com/news/home/20190612005911/en/
Sloane & CompanyErica Bartsch,
212-446-1875Ebartsch@sloanepr.com
Alex Kovtun, 212-446-1896Akovtun@sloanepr.com
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