Destination Maternity Reports Fourth Quarter And Fiscal 2017 Results
Fourth Quarter Fiscal 2017 Financial Results (14 weeks ended
- Net sales were $105.1 million compared to $100.2 million for the prior year quarter. This increase was primarily driven by an increase in comparable retail sales as well as additional sales generated in the 53rd week.
- Comparable sales increased 5.2%
- Gross margin for the fourth quarter of fiscal 2017 was 50.4%, down 60 basis points over the comparable prior year quarter gross margin of 51.0%.
- Selling, general and administrative expenses ("SG&A") for the fourth quarter of fiscal 2017 increased 5.7% to $57.0 million, compared to $53.9 million for the fourth quarter of fiscal 2016. As a percentage of net sales, SG&A increased to 54.2% for the fourth quarter of fiscal 2017 compared to 53.8% for the fourth quarter of fiscal 2016. Fiscal 2017 included an additional week of expense related to the 53rd week.
- The Company incurred store closing, asset impairment and asset disposal expenses of $2.6 million for the fourth quarter of fiscal 2017, compared to $1.0 million for the fourth quarter of fiscal 2016.
- Other charges during the fourth quarter of fiscal 2017 were $1.2 million, related to management and organizational changes, compared to $2.9 million in the fourth quarter of fiscal 2016.
- Adjusted EBITDA before other charges was $0.6 million for the fourth quarter of fiscal 2017, compared to $2.1 million for the fourth quarter of fiscal 2016. Adjusted EBITDA before other charges is defined in the financial tables at the end of this press release.
- Income tax benefit was $0.3 million for the fourth quarter of fiscal 2017 compared to an income tax provision of
$25.0 million in fiscal 2016. - GAAP net loss was $10.2 million, or $0.73 per share. This compared to a GAAP net loss of $32.8 million, or $2.39 per share, for the fourth quarter of fiscal 2016, which included the $27.8 million non-cash income tax charge, or $2.02 per share, related to the valuation allowance against net deferred tax assets.
- Adjusted net loss was
$5.0 million , or$0.36 per share, compared to adjusted net loss of$3.2 million , or$0.23 per share for the fourth quarter of fiscal 2016. For a reconciliation of GAAP to non-GAAP financial information refer to the financial tables at the end of this press release.
Full Year Fiscal 2017 Financial Results (53 weeks ended
- Net sales were $406.2 million compared with $433.7 million for the fiscal year ended January 28, 2017. This decrease was primarily driven by the wind down of the
Kohl's relationship, the net closure of 28 retail stores, and a decline in comparable sales. - Comparable sales decreased 1.5%;
- Gross margin increased 20 basis points to 52.6% compared to 52.4% for the fiscal year ended January 28, 2017. The year-over-year increase in gross margin was driven by reduced product costs and the exit from the leased department and licensed relationships, which generated lower than average gross margins.
- SG&A declined $5.2 million to
$218.7 million , or 53.8% of net sales, compared to $223.9 million, or 51.6% of net sales for the fiscal year ended January 28, 2017. Fiscal 2017 includes SG&A expenses incurred in the 53rd week. - Store closing, asset impairment and asset disposal expenses were $6.3 million, compared to
$2.8 million for the fiscal year ended January 28, 2017. - Other charges during fiscal 2017 were $4.9 million, related to the proposed business combination, as well as management and organizational changes, compared to $4.9 million for fiscal 2016.
- Adjusted EBITDA before other charges was $13.0 million for the fiscal year ended February 3, 2018 compared to $23.3 million for the fiscal year ended January 28, 2017.
- Income tax provision was $0.0 million for fiscal 2017 compared to
$25.0 million in fiscal 2016. - GAAP net loss was
$21.6 million , or$1.57 per share. This compared to a GAAP net loss of$32.8 million , or$2.39 per share, for the fourth quarter of fiscal 2016, which included the$27.8 million non-cash income tax charge, or$2.02 per share, related to the valuation allowance against net deferred tax assets. - Adjusted net loss of
$10.2 million , or$0.74 per share, compared to adjusted net loss of$1.9 million , or$0.14 per share, for the fiscal year endedJanuary 28, 2017 .
Other Fiscal Year 2017 Financial Information
- Capital expenditures totaled
$6.7 million primarily driven by investments in stores and investments to support key systems projects. - At
February 3, 2018 , inventory was$71.3 million , an increase of$2.3 million compared to$69.0 million atJanuary 28, 2017 .
Commentary on Go-Forward Strategy
"As we move forward, we have put into place and expect to execute the following strategies:
- Supplying the very best product to our customers. At our core, we are a fashion company. We believe a new mom doesn't have to change her style when she is expecting. We believe that we offer highly differentiated product and on-trend style that is technically designed to fit her changing body. We feel so lucky to share a part of the most exciting time in her life.
- Creating a more seamless and relevant omni-channel experience. We expect to bring our strengths in each respective channel to all channels. For example, while our digital experience is highly efficient we do not currently provide the level of customer service and emotional connection that is driven by our excellent in-store sales associates. We are exploring creating a more interactive and informative experience online through initiatives such as live chat, increased content and online community. As to the stores, although our level of customer service is a strength, we are seeking to identify ways to increase traffic to our stores. We are working to use our strong traffic online to drive footsteps to the stores with our buy online pickup from store initiatives as well as future initiatives, such as in-store appointment scheduling.
- Improving our product sourcing, planning, buying and allocation. Over the past few years we have made investments in our inventory management systems, processes and personnel to drive better results from conception through replenishment. We have gained insights on which we intend to capitalize.
- Expanding our distribution points and product category offerings. There are opportunities for us to reinvigorate our distribution network, particularly in the digital space, where we believe incremental expansion can be accomplished. This year we expect to begin offering our product in at least one more online marketplace (in addition to Macys.com) with more to come. We are also working to deepen our relationship with
Amazon by transferring onto the Amazon Retail platform which will give ourAmazon customers full access to Prime fulfillment. This is a meaningful growth opportunity given the majority of our sales decline from our peak in fiscal 2013 can be attributed to our declining distribution network. Furthermore, we believe positioning gives us the unique opportunity to offer our customers products that extend beyond her pregnancy to her life as a new-mom, including baby apparel, hard goods and other products of interest to the growing family. We will be diligently exploring opportunities to expand our product offering to include next stage products, initially through our digital platform utilizing a marketplace model. - Protecting and expanding the revenue we receive from our marketing partnerships business. We believe we have access to highly valuable customers, and we have been able to leverage this access with our third-party partners to offer customers great savings and services beyond her maternity needs. We believe we can drive incremental revenue through this channel with additional assets.
- Working diligently every day to improve our profitability. As mentioned above, we believe that our recent reorganization and cost cutting initiatives will deliver over
$10 million in run-rate savings. However, we will continue to adopt and maintain a stringent profit focused philosophy. This includes continued, rigorous review of our real estate portfolio (which has a high degree of liquidity over the next several years) as well as opportunistically cutting or investing in our operation when return-on-investment appropriate."
Commentary on Governance Matters
"As announced previously, our Board has been actively considering its composition including pursuing the addition of new members to expand the skills and experience on the Board to accelerate
Mr. Mestre, our newest Board member, commented:
"Both before and after I became a director, the current Board and the current management team have shown real enthusiasm for a sustained focus on making
"I am also encouraged to see the willingness with which the Board has approached refreshing its members. As the Chairman of the Company's largest stockholder, at over 13%, I support our current Board and management team and will be voting all the shares I and my companies beneficially own in favor of the Company's slate at the upcoming annual meeting of stockholders."
Retail Locations
The table below summarizes store opening and closing activity for the fourth quarter and full year fiscal 2017 and fiscal 2016, as well as the Company's total store, leased department and retail location count at the end of each fiscal period.
Fourth Quarter Ended |
Year Ended |
|||||||||||
February 3, |
January 28, |
February 3, |
January 28, |
|||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||
Store Openings (1) |
0 |
2 |
7 |
11 |
||||||||
Store Closings (1) |
14 |
13 |
35 |
32 |
||||||||
Period End Retail Location Count (1) |
||||||||||||
Stores |
487 |
515 |
487 |
515 |
||||||||
Leased Department Locations |
637 |
705 |
637 |
705 |
||||||||
Total Retail Locations |
1,124 |
1,220 |
1,124 |
1,220 |
||||||||
1) |
Excludes international franchised locations. As of February 3, 2018 Destination Maternity has 188 international franchised locations, including 15 standalone stores operated under one of the Company's nameplates and 173 shop-in-shop locations. |
Conference Call Information
As announced previously, members of its senior management will hold a conference call 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
Important Additional Information
The Company, its directors and certain of its executive officers are participants in the solicitation of proxies from the Company's stockholders in connection with the Company's 2018 Annual Meeting of Stockholders. The Company has filed a preliminary proxy statement (the "Preliminary Proxy Statement") and form of white proxy card with 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.
– Financial Tables to Follow –
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES |
||||||||||||
Consolidated Statements of Operations |
||||||||||||
(in thousands, except percentages and per share data) |
||||||||||||
(unaudited) |
||||||||||||
Three Months Ended |
Twelve Months Ended |
|||||||||||
February 3, |
January 28, |
February 3, |
January 28, |
|||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||
Net sales |
$ |
105,147 |
$ |
100,158 |
$ |
406,207 |
$ |
433,699 |
||||
Cost of goods sold |
52,188 |
49,120 |
192,355 |
206,271 |
||||||||
Gross profit |
52,959 |
51,038 |
213,852 |
227,428 |
||||||||
Gross margin |
50.4 |
% |
51.0 |
% |
52.6 |
% |
52.4 |
% |
||||
Selling, general and administrative |
||||||||||||
expenses (SG&A) |
56,967 |
53,914 |
218,656 |
223,881 |
||||||||
SG&A as a percentage of net sales |
54.2 |
% |
53.8 |
% |
53.8 |
% |
51.6 |
% |
||||
Store closing, asset impairment and asset disposal |
2,643 |
996 |
6,292 |
2,768 |
||||||||
Other charges |
1,166 |
2,911 |
4,912 |
4,914 |
||||||||
Operating loss |
(7,817) |
(6,783) |
(16,008) |
(4,135) |
||||||||
Interest expense, net |
1.056 |
969 |
4,045 |
3,575 |
||||||||
Loss on extinguishment of debt |
1,542 |
— |
1,542 |
— |
||||||||
Loss before income taxes |
(10,415) |
(7,752) |
(21,595) |
(7,710) |
||||||||
Income tax provision (benefit) |
(257) |
25,034 |
2 |
25,050 |
||||||||
Net loss |
$ |
(10,158) |
$ |
(32,786) |
$ |
(21,597) |
$ |
(32,760) |
||||
Net loss per share – Basic and Diluted |
$ |
(0.73) |
$ |
(2.39) |
$ |
(1.57) |
$ |
(2.39) |
||||
Average shares outstanding – Basic and Diluted |
13,824 |
13,723 |
13,788 |
13,702 |
||||||||
Reconciliation of Net Loss to Adjusted Net Loss: |
||||||||||||
Net loss, as reported |
$ |
(10,158) |
$ |
(32,786) |
$ |
(21,597) |
$ |
(32,760) |
||||
Add: other charges for proposed business combination |
85 |
1,858 |
1,198 |
3,154 |
||||||||
Add: other charges for management and organizational changes |
1,081 |
1,053 |
3,714 |
1,760 |
||||||||
Add: loss on extinguishment of debt |
1,542 |
— |
1,542 |
— |
||||||||
Less: effect of change in accounting principle |
— |
— |
(764) |
— |
||||||||
Less: income tax effect of other charges |
(923) |
(1,092) |
(2,044) |
(1,858) |
||||||||
Add: deferred tax valuation allowance related to cumulative losses |
3,406 |
27,758 |
7,758 |
27,758 |
||||||||
Adjusted net loss |
$ |
(4,967) |
$ |
(3,209) |
$ |
(10,193) |
$ |
(1,946) |
||||
Adjusted net loss per share – diluted |
$ |
(0.36) |
$ |
(0.23) |
$ |
(0.74) |
$ |
(0.14) |
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES |
||||||||
Condensed Consolidated Balance Sheets |
||||||||
(in thousands) |
||||||||
(unaudited) |
||||||||
February 3, 2018 |
January 28, 2017 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ |
1,635 |
$ |
2,859 |
||||
Trade receivables, net |
6,692 |
5,683 |
||||||
Inventories |
71,256 |
69,040 |
||||||
Prepaid expenses and other current assets |
11,522 |
9,464 |
||||||
Total current assets |
91,105 |
87,046 |
||||||
Property and equipment, net |
66,146 |
83,029 |
||||||
Other assets |
5,331 |
5,912 |
||||||
Total assets |
$ |
162,582 |
$ |
175,987 |
||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
Current liabilities: |
||||||||
Line of credit borrowings |
$ |
8,000 |
$ |
4,600 |
||||
Current portion of long-term debt |
4,780 |
6,948 |
||||||
Accounts payable |
30,949 |
17,656 |
||||||
Accrued expenses and other current liabilities |
31,661 |
31,359 |
||||||
Total current liabilities |
75,390 |
60,563 |
||||||
Long-term debt |
23,809 |
31,485 |
||||||
Deferred rent and other non-current liabilities |
22,715 |
22,789 |
||||||
Total liabilities |
121,914 |
114,837 |
||||||
Stockholders' equity |
40,668 |
61,150 |
||||||
Total liabilities and stockholders' equity |
$ |
162,582 |
$ |
175,987 |
Selected Consolidated Balance Sheet Data |
||||||
(in thousands) |
||||||
(unaudited) |
||||||
February 3, |
January 28, |
|||||
2018 |
2017 |
|||||
Cash and cash equivalents |
$ 1,635 |
$ 2,859 |
||||
Inventories |
71,256 |
69,040 |
||||
Property and equipment, net |
66,146 |
83,029 |
||||
Line of credit borrowings |
8,000 |
4,600 |
||||
Total debt |
36,589 |
43,033 |
||||
Stockholders' equity |
40,668 |
61,150 |
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES |
||||||||
Consolidated Statements of Cash Flows |
||||||||
(in thousands) |
||||||||
(unaudited) |
||||||||
Twelve Months Ended |
||||||||
February 3, |
January 28, |
|||||||
2018 |
2017 |
|||||||
Operating Activities |
||||||||
Net loss |
$ |
(21,597) |
$ |
(32,760) |
||||
Adjustments to reconcile net loss to net cash provided by operating |
||||||||
Depreciation and amortization |
17,592 |
18,032 |
||||||
Stock-based compensation expense |
1,154 |
1,801 |
||||||
Loss on impairment of long-lived assets |
5,775 |
2,388 |
||||||
Loss on disposal of assets |
349 |
272 |
||||||
Loss on extinguishment of debt |
1,542 |
— |
||||||
Grow NJ award benefit |
422 |
349 |
||||||
Deferred income tax provision |
— |
24,614 |
||||||
Amortization of deferred financing costs |
487 |
328 |
||||||
Changes in assets and liabilities: |
||||||||
Decrease (increase) in: |
||||||||
Trade receivables |
(1,009) |
4,471 |
||||||
Inventories |
(2,216) |
3,469 |
||||||
Prepaid expenses and other current assets |
(1,990) |
328 |
||||||
Other non-current assets |
14 |
37 |
||||||
Decrease in: |
||||||||
Accounts payable, accrued expenses and other current liabilities |
8,565 |
(11,593) |
||||||
Deferred rent and other non-current liabilities |
(219) |
(1,025) |
||||||
Net cash provided by operating activities |
8,869 |
10,711 |
||||||
Investing Activities |
||||||||
Capital expenditures |
(6,649) |
(12,690) |
||||||
Proceeds from sale of property and equipment |
— |
2 |
||||||
Additions to intangible assets |
(18) |
(97) |
||||||
Net cash used in investing activities |
(6,667) |
(12,785) |
||||||
Financing Activities |
||||||||
Increase (decrease) in cash overdraft |
5,116 |
681 |
||||||
(Decrease) increase in line of credit borrowings |
3,400 |
(23,800) |
||||||
Proceeds from long-term debt |
25,901 |
32,000 |
||||||
Repayment of long-term debt |
(34,382) |
(4,498) |
||||||
Deferred financing costs paid |
(3,406) |
(1,519) |
||||||
Withholding taxes on stock-based compensation paid in connection |
(57) |
(54) |
||||||
Cash dividends paid |
— |
— |
||||||
Proceeds from exercise of stock options |
— |
6 |
||||||
Net cash provided by financing activities |
(3,428) |
2,816 |
||||||
Effect of exchange rate changes on cash and cash equivalents |
2 |
1 |
||||||
Net Increase in Cash and Cash Equivalents |
(1,224) |
743 |
||||||
Cash and Cash Equivalents, Beginning of Period |
2,859 |
2,116 |
||||||
Cash and Cash Equivalents, End of Period |
$ |
1,635 |
$ |
2,859 |
||||
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES |
||||||||||||
Supplemental Financial Information |
||||||||||||
Reconciliation of Net Loss to Adjusted EBITDA(1) |
||||||||||||
and Adjusted EBITDA Before Other Charges, |
||||||||||||
and Operating Loss Margin to Adjusted EBITDA Margin |
||||||||||||
and Adjusted EBITDA Margin Before Other Charges |
||||||||||||
(in thousands, except percentages) |
||||||||||||
(unaudited) |
||||||||||||
Three Months Ended |
Twelve Months Ended |
|||||||||||
February 3, |
January 28, |
February 3, |
January 28, |
|||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||
Net loss |
$ |
(10,158) |
$ |
(32,786) |
$ |
(21,597) |
$ |
(32,760) |
||||
Add: income tax provision (benefit) |
(257) |
25,034 |
2 |
25,050 |
||||||||
Add: interest expense, net |
1,056 |
969 |
4,045 |
3,575 |
||||||||
Add: loss on extinguishment of debt |
1,542 |
— |
1,542 |
— |
||||||||
Operating loss |
(7,817) |
(6,783) |
(16,008) |
(4,135) |
||||||||
Add: depreciation and amortization expense |
4,333 |
4,449 |
17,592 |
18,032 |
||||||||
Add: loss on impairment of long-lived assets |
2,508 |
982 |
5,775 |
2,388 |
||||||||
Add: (gain) loss on disposal of assets |
66 |
(17) |
349 |
272 |
||||||||
Add: stock-based compensation expense |
296 |
528 |
1,154 |
1,801 |
||||||||
Adjusted EBITDA (1) |
(614) |
(841) |
8,862 |
18,358 |
||||||||
Add: other charges for proposed business |
1,081 |
1,858 |
1,198 |
3,154 |
||||||||
Add: other charges for management and |
85 |
1,053 |
3,714 |
1,760 |
||||||||
Less: change in accounting principle |
— |
— |
(764) |
— |
||||||||
Add: other charges for fiscal year change |
— |
— |
— |
— |
||||||||
Adjusted EBITDA before other charges |
$ |
552 |
$ |
2,070 |
$ |
13,010 |
$ |
23,272 |
||||
Net sales |
$ |
105,147 |
$ |
100,158 |
$ |
406,207 |
$ |
433,699 |
||||
Operating loss margin (operating loss as a |
(7.4)% |
(6.8)% |
(3.9)% |
(1.0)% |
||||||||
Adjusted EBITDA margin (adjusted |
(0.6)% |
(0.8)% |
2.2% |
4.2% |
||||||||
Adjusted EBITDA margin before other |
0.5% |
2.1% |
3.2% |
5.4% |
(1) |
Adjusted EBITDA represents operating loss before deduction for the following non-cash charges: (i) depreciation and amortization expense; (ii) loss on impairment of tangible and intangible assets; (iii) (gain) loss on disposal of assets; and (iv) stock-based compensation expense. |
View original content:http://www.prnewswire.com/news-releases/destination-maternity-reports-fourth-quarter-and-fiscal-2017-results-300632703.html
SOURCE
Allison Malkin , Caitlin Morahan, ICR, Inc., (203) 682-8200