- Reports net income for first quarter compared
to net loss in prior year first quarter
- Adjusted EBITDA Before Other Charges
increases 24% from prior year first quarter
- E-commerce sales rise 43% from prior year
first quarter
- Continued cost savings improvements with
Selling, General and Administrative expenses declining 6.8% from
prior year first quarter
Destination Maternity Corporation (NASDAQ:DEST), the world's
leading maternity apparel retailer, today announced financial
results for the first quarter of fiscal 2018 ended May 5, 2018
compared to the first quarter of fiscal 2017 ended April 29,
2017.
Commentary
“Our financial performance in the first quarter was in line with
expectations, highlighted by reductions in SG&A, double digit
growth in our e-commerce channel and increases in operating
income,” said Marla Ryan, Chief Executive Officer of Destination
Maternity. “While I am encouraged by our progress, there is more
work to be done to unlock the company’s full potential and improve
our overall operating performance.”
“Since taking the helm as CEO, I have been working closely with
our employees to implement a comprehensive and attainable business
plan geared toward accelerating revenue growth, rationalizing
expenses and improving profitability. This includes identifying
opportunities to expand our ecommerce sales platform, prioritizing
inventory optimization and developing new partnerships and
innovations that will help us better engage with our customers and
drive strengthened brand loyalty.”
“While it is still early days for me, I am excited for the
opportunities ahead. With the support of a highly talented team of
employees, combined with Destination Maternity’s strong brand
equity, I am confident we can transform this company into a more
nimble and profitable organization that generates long term
shareholder value.”
First Quarter Fiscal 2018 Financial
Results
- Net sales for the first quarter of
fiscal 2018 decreased 3.0% to $103.2 million from $106.4 million
for the first quarter of fiscal 2017, which included $0.8 million
related to a change in the method of accounting for gift card
breakage.
- Comparable sales for the first quarter
of fiscal 2018 decreased 0.1%.
- Gross margin for the first quarter of
fiscal 2018 was 53.7%, a decrease of 70 basis points from the
comparable prior year gross margin.
- Selling, general and administrative
expenses (“SG&A”) for the first quarter of fiscal 2018
decreased 6.8% to $51.9 million. As a percentage of net sales,
SG&A decreased 210 basis points to 50.2%.
- Adjusted EBITDA before other charges
was $7.9 million for the first quarter of fiscal 2018, an increase
of 24.2% compared to $6.3 million for the first quarter of fiscal
2017.
- Net income for the first quarter of
fiscal 2018 was $0.2 million, or $0.02 per share (diluted),
compared to a net loss of $1.1 million, or $0.08 per share
(diluted), for the first quarter of fiscal 2017.
- Adjusted net income for the first
quarter of fiscal 2018 was $1.0 million, or $0.07 per share
(diluted), compared to the comparably adjusted net loss for the
first quarter of fiscal 2017 of $0.7 million, or $0.05 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 First Quarter Fiscal 2018
Financial Information
- Capital expenditures totaled $1.1
million primarily driven by investments in stores and investments
to support key systems projects.
- At May 5, 2018, inventory was $66.4
million, a decrease of $7.3 million compared to $73.7 million at
April 29, 2017.
Retail
Locations
Three Months Ended May 5, 2018
April 29, 2017 Store Openings (1) 0 4 Store Closings (1) (2)
3 8
Period End Retail
Location Count (1)
Stores 484 511 Leased Department Locations 634 646 Total Retail
Locations 1,118 1,157 1) Excludes international franchised
locations. 2) During the three months ended April 29, 2017 Macy’s
completed closure of 59 stores where we had a leased department
within the store.
Conference Call Information
As announced previously, a pre-recorded conference call
regarding the Company's first quarter Fiscal 2018 financial results
that includes comments on the results from members of our senior
management, will be available today at 9:00 a.m. Eastern Time.
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 conference call will
also be available on the investor section of the Company's website
at http://investor.destinationmaternity.com. The passcode for the
conference call is 1561749.
In the event that you are unable to participate in the call, a
replay will be available at 12:00 pm Eastern Time on Thursday, June
14, 2018, through 12:00 p.m. Eastern Time June 21, 2018, by calling
(855) 859-2056 in the United States and Canada or (404) 537-3406
outside of the United States and Canada. The passcode for the
replay is 1561749.
About Destination Maternity
Destination Maternity Corporation is the world's largest
designer and retailer of maternity apparel. As of May 5, 2018
Destination Maternity operates 1,118 retail locations in the United
States, Canada and Puerto Rico, including 484 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 May 5, 2018 Destination Maternity has 186
international franchised locations, including 13 standalone stores
operated under one of the Company's nameplates and 173 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 May 5, April 29,
2018 2017 Net sales $ 103,227 $ 106,426 Cost of goods sold
47,824 48,487 Gross profit 55,403 57,939 Gross
margin 53.7 % 54.4 % Selling, general and administrative expenses
(SG&A) 51,857 55,649 SG&A as a percentage of net sales 50.2
% 52.3 % Store closing, asset impairment and asset disposal
expenses 969 1,518 Other charges 1,150 817
Operating income (loss) 1,427 (45) Interest expense, net
1,157 1,004 Income (loss) before income taxes 270
(1,049) Income tax provision 56 93 Net income
(loss) $ 214 $ (1,142) Net income (loss) per share –
Basic $ 0.02 $ (0.08) Average shares outstanding – Basic
13,839 13,748 Net income (loss) per share – Diluted $
0.02 $ (0.08) Average shares outstanding – Diluted 13,963
13,748
Reconciliation of Net Income (Loss) to
Adjusted Net Income (Loss)(1): Net income (loss), as reported $
214 $ (1,142) Add: other charges 1,150 817 Less: income tax effect
of other charges (273 ) (306 ) Less: effect of change in accounting
principle — (764 ) Add: income tax effect of change in accounting
principle — 284 Add: deferred tax valuation allowance related to
cumulative losses (67 ) 424 Adjusted net income
(loss) (1) $ 1,024 $ (687) Adjusted net income (loss) per
share – Diluted $ 0.07 $ (0.05) (1) Adjusted Net Income
(Loss) represents net income adjusted for the after tax effect of
(i) other charges; and (ii) the effect of a change in accounting
principle and (iii) the change in deferred tax valuation allowance
related to cumulative losses.
DESTINATION MATERNITY CORPORATION AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(in thousands)
(unaudited)
May 5,
February 3,
2018
2018
ASSETS Current assets: Cash and cash equivalents $ 2,005 $ 1,635
Trade receivables, net 8,889 6,692 Inventories 66,419 71,256
Prepaid expenses and other current assets 11,774
11,522 Total current assets 89,087 91,105 Property and equipment,
net 62,481 66,146 Other assets 6,001 5,331 Total
assets $ 157,569 $ 162,582 LIABILITIES AND STOCKHOLDERS’
EQUITY Current liabilities: Line of credit borrowings $ 15,200 $
8,000 Current portion of long-term debt 5,045 4,780 Accounts
payable 20,383 30,949 Accrued expenses and other current
liabilities 31,102 31,661 Total current liabilities
71,730 75,390 Long-term debt 22,456 23,809 Deferred rent and other
non-current liabilities 22,191 22,715 Total
liabilities 116,377 121,914 Stockholders’ equity 41,192
40,668 Total liabilities and stockholders’ equity $ 157,569
$ 162,582
Selected Consolidated Balance Sheet
Data
(in thousands)
(unaudited)
May 5,
February 3, April 29, 2018 2018 2017 Cash and cash
equivalents $ 2,005 $1,635 $ 2,328 Inventories 66,419 71,256 73,681
Property and equipment, net 62,481 66,146 79,738 Line of credit
borrowings 15,200 8,000 2,100 Total debt 42,701 36,589 39,063
Stockholders’ equity 41,192 40,668 60,393
DESTINATION MATERNITY CORPORATION AND
SUBSIDIARIES
Consolidated Statements of Cash
Flows
(in thousands)
(unaudited)
Three Months Ended May 5,
April 29, 2018 2017
Operating Activities Net income
(loss) $ 214 $ (1,142 ) Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 4,050 4,461 Stock-based compensation
expense 328 414 Loss on impairment of long-lived assets 887 1,346
Loss on disposal of assets 13 94 Grow NJ award benefit (707 ) 2,533
Amortization of deferred financing costs 165 103 Changes in assets
and liabilities: Decrease (increase) in: Trade receivables (2,197 )
(1,489 ) Inventories 4,837 (4,641 ) Prepaid expenses and other
current assets (252 ) 3,705 Other non-current assets (14 ) (15 )
Increase (decrease) in: Accounts payable, accrued expenses and
other current liabilities (9,031 ) 1,474 Deferred rent and other
non-current liabilities (752 ) (253 ) Net cash
provided by (used in) operating activities (2,459 )
6,590
Investing Activities Capital expenditures
(1,141 ) (2,027 ) Additions to intangible assets —
(10 ) Net cash used in investing activities (1,141 )
(2,037 )
Financing Activities (Decrease) in cash
overdraft (1,980 ) (1,004 ) Increase (decrease) in line of credit
borrowings 7,200 (2,500 ) Repayment of long-term debt (1,151 )
(1,540 ) Deferred financing costs paid (80 ) (6 ) Withholding taxes
on stock-based compensation paid in connection with repurchase of
common stock (19 ) (35 ) Net cash provided by (used
in) financing activities 3,970 (5,085 ) Effect of
exchange rate changes on cash and cash equivalents —
1
Net Increase (Decrease) in Cash and Cash Equivalents 370
(531 )
Cash and Cash Equivalents, Beginning of Period
1,635 2,859
Cash and Cash Equivalents, End of Period
$ 2,005 $ 2,328
DESTINATION MATERNITY CORPORATION AND
SUBSIDIARIES
Supplemental Financial
Information
Reconciliation of Net Income (Loss) to
Adjusted EBITDA(2)
and Adjusted EBITDA Before Other
Charges and Change in Accounting Principle,
and Operating Income (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
May 5, April 29, 2018 2017 Net
income (loss) $ 214 $ (1,141 ) Add: income tax provision 56 93 Add:
interest expense, net 1,157 1,004 Operating
income (loss) 1,427 (45 ) Add: depreciation and amortization
expense 4,050 4,461 Add: loss on impairment of long-lived assets
887 1,346 Add: loss on disposal of assets 13 94 Add: stock-based
compensation expense 328 414 Adjusted EBITDA
(2) 6,705 6,270 Add: other charges for proxy contest and proposed
merger 886 814 Add: other charges for management and organizational
changes 264 3 Less: effect of change in accounting principle
— (764 )
Adjusted EBITDA before other charges and change in accounting
principle $ 7,855 $ 6,323 Net sales $ 103,227 $ 106,426
Operating income (loss) margin (operating income as a
percentage of net sales) 1.4% (0.1)% Adjusted EBITDA margin
(adjusted EBITDA as a percentage of net sales) 6.5% 5.9% 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)
7.6%
5.9%
(2) 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180614005324/en/
Destination Maternity CorporationMedia:Sloane & CompanyDan
Zacchei, 212-486-9500Dzacchei@sloanepr.comorInvestors:Erica
Bartsch, 212-446-1875Ebartsch@sloanepr.com
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