Anthony M. Romano
Chief Executive Officer,
President & Board Member

Dear Stockholders,

I am pleased with the progress we made in fiscal 2015 on our turnaround, although I know we have much more to do to get where we want to be from an operational and financial performance perspective.

Our most important achievement since I joined the Company about a year and a half ago is the successful execution of significant transformative actions that infrequently occur in any business.

First, we rebuilt our senior leadership team, complementing existing in-house operational talent with new and experienced talent, specifically in the following areas: sourcing, planning and allocation, stores, merchandising, e-commerce, and strategic partnerships. Our team will celebrate its first anniversary as a leadership group during the first quarter of fiscal 2016. As with any team, it takes time to achieve maximum performance. You may be familiar with the model for team development, “Forming, Storming, Norming, and Performing.” We are firmly in the “norming” phase and will enter the “performing” phase during fiscal 2016.

Second, we relocated our headquarters. Although our new home is only twelve miles away from our previous home, the move required a culture shift for many of our team members, since we were going from a headquarters facility located in the city of Philadelphia to our new suburban home in Moorestown, New Jersey.

Third, we relocated to our new distribution center, which also required the installation of new equipment and technology, resulting in re-training for each of our distribution center team members. Again, although our new distribution center is only twenty-three miles away from our previous distribution center, our team members experienced culture shock–they were in a new home, with a new work schedule, new technology and new processes.

Fourth, we made significant improvement in our inventory management disciplines, built a new allocation team, and developed new tools and processes that will be instrumental in improving inventory turn and investment by channel in fiscal 2016 and beyond.

Fifth, we redefined our real estate strategy, rationalizing our distribution footprint and focusing on our Motherhood and A Pea in the Pod brands, and de-emphasizing our Destination Maternity nameplate.

In sum, we accomplished a great deal in fiscal 2015. Nonetheless, I recognize that our progress and improvements are foundational and that it will take time for these efforts to help us achieve results in the form of improved financial performance, and I am confident that we will get there.

While hard at work to make these foundational improvements, we never lost sight of the fact that our overarching goal is to provide our customer with a unique and personalized shopping experience to help celebrate this wonderful time in her life. As an organization, we are committed to placing our customer in the center of every decision we make as it relates to operating, designing product, planning, and marketing.

In fiscal 2016, we will be equally focused on driving sales productivity and optimizing our omni-channel capabilities. In addition to implementing a new planning and allocation software system that will improve inventory management, we will be re-platforming our e-commerce channel, and implementing a new e-commerce focused order management system.

On March 25, 2016, we entered into a $32 million, five-year, collateralized term-loan agreement and extended our $70 million asset-based credit facility. By doing so, we increased our financial flexibility and liquidity, and consistent with that, have chosen to eliminate the dividend and invest our projected free cash flow into our key business initiatives.

Overall, I remain encouraged by the opportunities that lie ahead for Destination Maternity. The U.S. market we serve remains strong with approximately four million births per year and this rate is forecasted to continue through 2018. We are passionate about serving the millions of moms2be, providing them with fashion and comfort during this amazing stage in their lives, in the channel of their choice, and with unparalleled customer service.

As a team, we remain dedicated to providing a great customer experience, improving our business, and creating long-term value for you, our stockholders.

Here’s to a great fiscal 2016!

Anthony M. Romano
Chief Executive Officer,
President & Board Member

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