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Destination Maternity considers sale option after tough Q2

by Prachi Singh
18 Sep 2019

Destination Maternity Corporation for its second quarter reported net sales decrease of 11.9 percent to 84.9 million dollars, negatively impacted by the net closure of 6 owned locations and 55 leased locations as well as a 10.5 percent decrease in comparable sales, which included an 11.9 percent decrease in comparable store sales and a 6.4 percent decrease in ecommerce sales. The company added that Destination Maternity is reviewing various potential strategic and financial alternatives including a sale or merger of the company.

“Our results this quarter illustrate the ongoing headwinds facing our business. While cost savings initiatives drove reductions in SG&A expense and a pullback in promotional cadence helped to hold margins in line with the prior year, sales declines of 11.9 percent year-over-year more than offset the benefits to our bottom line,” said Dave Helkey, Chief Financial Officer of Destination Maternity in a statement, adding, “As part of our ongoing review of the company’s strategic initiatives, the board has engaged Greenhill & Co to commence a comprehensive review of strategic alternatives.”

Review of Destination Maternity’s financial performance Net loss for the quarter was 3.5 million dollars or 25 cents per diluted share compared to 4 million dollars or 29 cents per diluted share, for the second quarter of fiscal 2018. Operating loss for the quarter was 2.2 million dollars compared to 2.8 million in the second quarter of fiscal 2018, while adjusted net loss was 2.8 million dollars or 20 cents per diluted share compared to 1.6 million dollars or 11 cents per diluted share. Adjusted EBITDA decreased to 2 million dollars from 4 million dollars for the second quarter of fiscal 2018, while gross margin rate of 51.4 percent, decreased 30 basis points.

Net sales for the first six months decreased 10.3 percent to 179.1 million dollars, while comparable sales decreased 8.7 percent, compared to an increase of 0.5 percent for the six months of fiscal 2018.

Gross margin was 53.2 percent, an increase of 50 basis points from the comparable prior year gross margin, while adjusted EBITDA decreased 26.6 percent to 8.7 million dollars. Adjusted net loss was 2.2 million dollars or 16 cents per diluted share compared to 0.6 million dollars or 4 cents per diluted share.

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