Destination Maternity Reports First Quarter Fiscal 2018 Results
- 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
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
"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 atApril 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
In the event that you are unable to participate in the call, a replay will be available at
About
Reconciliation of Non-GAAP Financial Measures
This press release and the accompanying financial tables contain non-GAAP financial measures within the meaning of the
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
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/
Source:
Destination Maternity Corporation
Media:
Sloane & Company
Dan Zacchei, 212-486-9500
Dzacchei@sloanepr.com
or
Investors:
Erica Bartsch, 212-446-1875
Ebartsch@sloanepr.com