Destination Maternity Reports Second Quarter and First Six Months Fiscal 2018 Results
- Comparable sales increase 1.2% from prior year second quarter
- E-commerce sales rise 18.4% from prior year second quarter
- Selling, General and Administrative expenses decline 5.1% from prior year second quarter
-
Adjusted EBITDA before other charges and change in accounting
principle for the first six months of fiscal 2018 increases 13.4% to
$11.8 million - Management reaffirms full-year guidance and expects Adjusted EBITDA before other charges will more than double over last year’s second half
Commentary
“We continued to make progress in the second quarter executing against
our strategic initiatives aimed at accelerating revenue growth,
rationalizing expenses and improving profitability,” said
Second Quarter Fiscal 2018 Financial Results
-
Net sales for the second quarter of fiscal 2018 decreased 1.9% to
$96.4 million from$98.3 million for the second quarter of fiscal 2017. Sales were negatively impacted by the net closure of 27 retail stores, partially offset by an increase in comparable sales. - Comparable sales for the second quarter of fiscal 2018 increased 1.2%, compared to a decrease of 3.4% in the second quarter of fiscal 2017.
- Gross margin for the second quarter of fiscal 2018 was 51.7%, a decrease of 123 basis points from the comparable prior year gross margin.
-
Selling, general and administrative expenses (“SG&A”) for the second
quarter of fiscal 2018 decreased 5.1% to
$50.1 million . As a percentage of net sales, SG&A decreased 176 basis points to 52.0%. -
Adjusted EBITDA before other charges was
$4.0 million for the second quarter of fiscal 2018, a decrease of 3.4% compared to$4.1 million for the second quarter of fiscal 2017. -
Adjusted net loss for the second quarter of fiscal 2018 was
$1.6 million , or$0.11 per share (diluted), compared to the comparably adjusted net loss for the second quarter of fiscal 2017 of$1.8 million , or$0.13 per share (diluted).
First Six Months of Fiscal 2018 Financial
Results (26 weeks ended
-
Net sales for the first six months decreased 2.5% to
$199.6 million from$204.7 million for the comparable period in fiscal 2017. -
Comparable sales for the first six months of fiscal 2018 increased
0.5%, compared to a decrease of 5.5% for the six months ended
July 29, 2017 . - Gross margin for the first six months of fiscal 2018 was 52.7%, a decrease of 100 basis points from the comparable prior year gross margin.
-
Selling, general and administrative expenses (“SG&A”) for the first
six months of fiscal 2018 decreased 6.0% to
$101.9 million . As a percentage of net sales, SG&A decreased 191 basis points to 51.1%. -
Adjusted EBITDA before other charges and change in accounting
principle was
$11.8 million for the first six months of fiscal 2018, an increase of 13.4% compared to$10.4 million for the first six months of fiscal 2017. -
Adjusted net loss for the first six months of fiscal 2018 was
$0.5 million , or$0.04 per share (diluted), compared to the comparably adjusted net loss for the first six months of fiscal 2017 of$2.5 million , or$0.18 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 Financial Information
-
Capital expenditures in the second quarter totaled
$1.4 million primarily driven by minor investments in stores and investments to support key systems projects. -
At
August 4, 2018 , inventory was$67.8 million , a decrease of$2.0 million compared to$69.8 million atJuly 29, 2017 .
Retail Locations
Three Months Ended | Six Months Ended | |||||||||
August 4, |
July 29, |
August 4, |
July 29, |
|||||||
Store Openings (1) | 2 | 1 | 2 | 5 | ||||||
Store Closings (1) (2) | 6 | 5 | 9 | 13 | ||||||
Period End Retail Location Count (1) | ||||||||||
Stores | 480 | 507 | 480 | 507 | ||||||
Leased Department Locations | 634 | 643 | 634 | 643 | ||||||
Total Retail Locations | 1,114 | 1,150 | 1,114 | 1,150 | ||||||
1) | Excludes international franchised locations. | |||
2) | During the six months ended July 29, 2017 Macy’s completed closure of 59 stores where we had a leased department within the store. | |||
Conference Call Information
As announced previously, the Company will host a conference call
regarding second quarter Fiscal 2018 financial results that includes
comments on the results from members of our senior management at
Interested parties can listen to this conference call by dialing (800)
219-6970 in
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 | Six Months Ended | |||||||||||||||||
August 4, 2018 | July 29, 2017 | August 4, 2018 | July 29, 2017 | |||||||||||||||
Net sales | $ | 96,395 | $ | 98,280 | $ | 199,622 | $ | 204,706 | ||||||||||
Cost of goods sold | 46,530 | 46,227 | 94,354 | 94,714 | ||||||||||||||
Gross profit | 49,865 | 52,053 | 105,268 | 109,992 | ||||||||||||||
Gross margin | 51.7 | % | 53.0 | % | 52.7 | % | 53.7 | % | ||||||||||
Selling, general and administrative expenses | 50,095 | 52,806 | 101,952 | 108,455 | ||||||||||||||
Store closing, asset impairment and asset disposal expenses | 672 | 1,120 | 1,641 | 2,638 | ||||||||||||||
Other charges, net | 1,923 | (171 | ) | 3,073 | 646 | |||||||||||||
Operating loss | (2,825 | ) | (1,702 | ) | (1,398 | ) | (1,747 | ) | ||||||||||
Interest expense, net | 1,144 | 979 | 2,301 | 1,983 | ||||||||||||||
Loss before income taxes | (3,969 | ) | (2,681 | ) | (3,699 | ) | (3,730 | ) | ||||||||||
Income tax provision | 56 | 93 | 112 | 186 | ||||||||||||||
Net loss | $ | (4,025 | ) | $ | (2,774 | ) | $ | (3,811 | ) | $ | (3,916 | ) | ||||||
Net loss per share— Basic | $ | (0.29 | ) | $ | (0.20 | ) | $ | (0.28 | ) | $ | (0.28 | ) | ||||||
Average shares outstanding— Basic | 13,823 | 13,793 | 13,831 | 13,771 | ||||||||||||||
Net loss per share— Diluted | $ | (0.29 | ) | $ | (0.20 | ) | $ | (0.28 | ) | $ | (0.28 | ) | ||||||
Average shares outstanding— Diluted | 13,823 | 13,793 | 13,831 | 13,771 | ||||||||||||||
Reconciliation of Net Loss to Adjusted Net Loss | ||||||||||||||||||
Net loss, as reported | $ | (4,025 | ) | $ | (2,774 | ) | $ | (3,811 | ) | $ | (3,916 | ) | ||||||
Add: other charges for proxy solicitation | 1,256 | — | 2,141 | — | ||||||||||||||
Add: other charges for proposed merger | — | (165 | ) | — | 649 | |||||||||||||
Add: other charges for management and organizational changes | 667 | (6 | ) | 932 | (3 | ) | ||||||||||||
Less: effect of change in accounting principle | — | — | — | (764 | ) | |||||||||||||
Less: income tax effect of adjustments to net loss | (474 | ) | 64 | (746 | ) | 42 | ||||||||||||
Add deferred tax valuation allowance related to cumulative losses | 991 | 1,073 | 924 | 1,497 | ||||||||||||||
Adjusted net loss | $ | (1,584 | ) | $ | (1,808 | ) | $ | (560 | ) | $ | (2,495 | ) | ||||||
Adjusted net loss per share - diluted | $ | (0.11 | ) | $ | (0.13 | ) | $ | (0.04 | ) | $ | (0.18 | ) | ||||||
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES | |||||||||
Condensed Consolidated Balance Sheets | |||||||||
(in thousands) | |||||||||
(unaudited) | |||||||||
August 4, 2018 | February 3, 2018 | ||||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 1,317 | $ | 1,635 | |||||
Trade receivables, net | 6,837 | 6,692 | |||||||
Inventories | 67,753 | 71,256 | |||||||
Prepaid expenses and other current assets | 11,043 | 11,522 | |||||||
Total current assets | 86,950 | 91,105 | |||||||
Property and equipment, net | 59,177 | 66,146 | |||||||
Other assets | 6,612 | 5,331 | |||||||
Total assets | $ | 152,739 | $ | 162,582 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
Current liabilities: | |||||||||
Line of credit borrowings | $ | 7,300 | $ | 8,000 | |||||
Current portion of long-term debt | 4,881 | 4,780 | |||||||
Accounts payable | 24,497 | 30,949 | |||||||
Accrued expenses and other current liabilities | 33,402 | 31,661 | |||||||
Total current liabilities | 70,080 | 75,390 | |||||||
Long-term debt | 23,802 | 23,809 | |||||||
Deferred rent and other non-current liabilities | 21,442 | 22,715 | |||||||
Total liabilities | 115,324 | 121,914 | |||||||
Stockholders’ equity | 37,415 | 40,668 | |||||||
Total liabilities and stockholders’ equity | $ | 152,739 | $ | 162,582 | |||||
Selected Consolidated Balance Sheet Data | |||||||||||
(in thousands) | |||||||||||
(unaudited) | |||||||||||
August 4, 2018 | February 3, 2018 | July 29, 2017 | |||||||||
Cash and cash equivalents | $ | 1,317 | $ | 1,635 | $ | 2,161 | |||||
Inventory | 67,753 | 71,256 | 69,759 | ||||||||
Property and equipment, net | 59,177 | 66,146 | 76,128 | ||||||||
Line of credit borrowings | 7,300 | 8,000 | 4,200 | ||||||||
Total debt | 35,983 | 36,589 | 39,280 | ||||||||
Stockholders’ equity | 37,415 | 40,668 | 58,033 | ||||||||
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES | ||||||||||
Consolidated Statements of Operations | ||||||||||
(in thousands, except percentages and per share data) | ||||||||||
(unaudited) | ||||||||||
Six Months Ended | ||||||||||
August 4, 2018 | July 29, 2017 | |||||||||
Operating Activities | ||||||||||
Net loss | $ | (3,811 | ) | $ | (3,916 | ) | ||||
Adjustments to reconcile net loss to net cash provided
by operating activities: |
||||||||||
Depreciation and amortization | 7,961 | 8,888 | ||||||||
Stock-based compensation expense | 584 | 830 | ||||||||
Loss on impairment of long-lived assets | 1,519 | 2,446 | ||||||||
Loss on disposal of assets | 68 | 116 | ||||||||
Grow NJ award benefit | (1,412 | ) | 1,815 | |||||||
Amortization of deferred financing costs | 336 | 235 | ||||||||
Changes in assets and liabilities: | ||||||||||
Decrease (increase) in: | ||||||||||
Trade receivables | (145 | ) | (221 | ) | ||||||
Inventories | 3,503 | (719 | ) | |||||||
Prepaid expenses and other current assets | 479 | 1,962 | ||||||||
Other non-current assets | 12 | (44 | ) | |||||||
Increase (decrease) in: | ||||||||||
Accounts payable, accrued expenses and other current liabilities | (1,831 | ) | (2,965 | ) | ||||||
Deferred rent and other non-current liabilities | (1,417 | ) | (179 | ) | ||||||
Net cash provided by operating activities | 5,846 | 8,248 | ||||||||
Investing Activities | ||||||||||
Capital expenditures | (2,579 | ) | (3,611 | ) | ||||||
Additions to intangible assets | — | (18 | ) | |||||||
Net cash used in investing activities | (2,579 | ) | (3,629 | ) | ||||||
Financing Activities | ||||||||||
Decrease in cash overdraft | (2,657 | ) | (1,342 | ) | ||||||
Decrease in line of credit borrowings | (700 | ) | (400 | ) | ||||||
Proceeds from long-term debt | 2,500 | 3,401 | ||||||||
Repayment of long-term debt | (2,537 | ) | (6,673 | ) | ||||||
Deferred financing costs paid | (160 | ) | (268 | ) | ||||||
Withholding taxes on stock-based compensation paid in connection
with repurchase of common stock |
(29 | ) | (37 | ) | ||||||
Proceeds from exercise of stock options | — | — | ||||||||
Net cash used in financing activities | (3,583 | ) | (5,319 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (2 | ) | 2 | |||||||
Net Decrease in Cash and Cash Equivalents | (318 | ) | (698 | ) | ||||||
Cash and Cash Equivalents, Beginning of Period | 1,635 | 2,859 | ||||||||
Cash and Cash Equivalents, End of Period | $ | 1,317 | $ | 2,161 | ||||||
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES | ||||||||||||||||||
Supplemental Financial Information | ||||||||||||||||||
Reconciliation of Net Loss to Adjusted EBITDA(1) | ||||||||||||||||||
and Adjusted EBITDA Before Other Charges and Change in Accounting Principle, | ||||||||||||||||||
and Operating 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 | Six Months Ended | |||||||||||||||||
August 4, |
July 29, |
August 4, |
July 29, |
|||||||||||||||
Net loss | $ | (4,025 | ) | $ | (2,774 | ) | $ | (3,811 | ) | $ | (3,916 | ) | ||||||
Add: income tax provision | 56 | 93 | 112 | 186 | ||||||||||||||
Add: interest expense, net | 1,144 | 979 | 2,301 | 1,983 | ||||||||||||||
Operating loss | (2,825 | ) | (1,702 | ) | (1,398 | ) | (1,747 | ) | ||||||||||
Add: depreciation and amortization expense | 3,910 | 4,427 | 7,960 | 8,888 | ||||||||||||||
Add: loss on impairment of long-lived assets | 632 | 1,100 | 1,519 | 2,446 | ||||||||||||||
Add: loss on disposal of assets | 55 | 22 | 68 | 116 | ||||||||||||||
Add: stock-based compensation expense | 256 | 416 | 584 | 830 | ||||||||||||||
Adjusted EBITDA (1) | 2,028 | 4,263 | 8,733 | 10,533 | ||||||||||||||
Add: other charges for proxy solicitation | 1,256 | — | 2,141 | — | ||||||||||||||
Add: other charges for proposed business combination | — | (165 | ) | — | 649 | |||||||||||||
Add: other charges for management and organizational
changes |
667 | (6 | ) | 932 | (3 | ) | ||||||||||||
Less: effect of change in accounting principle | — | — | — |
(764 |
) | |||||||||||||
Adjusted EBITDA before other charges and effect of
change in accounting principle |
$ | 3,951 | $ | 4,092 | $ | 11,806 | $ | 10,415 | ||||||||||
Net Sales | $ | 96,395 | $ | 98,280 | $ | 199,622 | $ | 204,706 | ||||||||||
Operating loss margin (operating loss as a percentage of net sales) | (2.9 | %) | (1.7 | %) | (0.7 | %) | (0.9 | %) | ||||||||||
Adjusted EBITDA margin (adjusted EBITDA as a percentage of net sales | 2.1 | % | 4.3 | % | 4.4 | % | 6.5 | % | ||||||||||
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) | 4.1 | % | 4.2 | % | 5.9 | % | 7.1 | % | ||||||||||
(1) Adjusted EBITDA represents operating income (loss) 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/20180910005246/en/
Source:
Sloane & Company
Erica Bartsch, 212-446-1875
Ebartsch@sloanepr.com
or
Alex
Kovtun, 212-446-1896
Akovtun@sloanepr.com