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Share Name | Share Symbol | Market | Type |
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Destination Maternity Corp | NASDAQ:DEST | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.11 | 0.113 | 0.1149 | 0 | 01:00:00 |
Destination Maternity Corporation (NASDAQ:DEST), the world's leading maternity apparel retailer, today announced financial results for the second quarter and first six months of fiscal 2018 ended August 4, 2018 compared to the second quarter and first six months of fiscal 2017 ended July 29, 2017.
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 Marla Ryan, Chief Executive Officer of Destination Maternity. “The hard work of our entire team drove an 18.4% year-over-year increase in ecommerce sales in the quarter, the 11th consecutive quarter of online sales growth. Comparable sales also increased 1.2%, and our disciplined cost savings measures reduced SG&A costs by 5.1% year-over-year in the second quarter. On the ecommerce front, we are rolling out enhanced site capabilities and faster shipping solutions over the next 90 days to better serve the needs of the digital savvy, millennial mom. We have retained a leading marketing advisory firm to assist us in identifying ways to drive higher e-Commerce revenue growth, improve online conversion, and maximize our marketing spend. Our brick and mortar business is stabilizing as we are actively realigning our product offering and shifting inventory towards more evergreen styles to increase conversion and drive sales. We are confident the right steps are being taken to position the business for future success. With this momentum and our year to date results, we are reaffirming our full-year guidance of 30% to 45% growth in Adjusted EBITDA, before other charges. We expect Adjusted EBITDA, before other charges will more than double over last year’s second half. Destination Maternity has strong brand awareness with a vast potential for growth. We remain committed to and confident in the transformation of this company to a more dynamic and profitable organization.”
Second Quarter Fiscal 2018 Financial Results
First Six Months of Fiscal 2018 Financial Results (26 weeks ended August 4, 2018)
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
Retail Locations
Three Months Ended Six Months EndedAugust 4, 2018
July 29, 2017
August 4, 2018
July 29, 2017
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 9:00 a.m. Eastern Time. Management will conduct a question and answer session with investors following its prepared remarks.
Interested parties can listen to this conference call by dialing (800) 219-6970 in the United States and Canada or (574) 990-1028 outside of the United States and Canada. The call will also be available on the investors section of the Company's website at http://investor.destinationmaternity.com. Passcode for the conference call is 6396537.
In the event that you are unable to participate in the call, a replay will be available at 12:00 p.m. Eastern Time on Monday, September 10, 2018 through 12:00 p.m. Eastern Time on Monday, September 17, 2018 by calling (855) 859-2056 in the United States and Canada or (404) 537-3406 outside of the United States and Canada. Passcode for the replay is 6396537.
About Destination Maternity
Destination Maternity Corporation is the world's largest designer and retailer of maternity apparel. As of August, 4, 2018, Destination Maternity operates 1,114 retail locations in the United States, Canada and Puerto Rico, including 480 stores, predominantly under the trade names Motherhood Maternity®, A Pea in the Pod® and Destination Maternity®, and 634 leased department locations. The Company also sells merchandise on the web primarily through its brand-specific websites, motherhood.com and apeainthepod.com, as well as through its destinationmaternity.com website. Destination Maternity has international store franchise and product supply relationships in the Middle East, South Korea, Mexico, Israel and India. As of August 4, 2018, Destination Maternity has 188 international franchised locations, including 11 standalone stores operated under one of the Company's nameplates and 177 shop-in-shop locations.
Reconciliation of Non-GAAP Financial Measures
This press release and the accompanying financial tables contain non-GAAP financial measures within the meaning of the SEC's Regulation G, including 1) adjusted net loss, 2) adjusted net loss per share - diluted, 3) Adjusted EBITDA, 4) Adjusted EBITDA before other charges, 5) Adjusted EBITDA margin, and 6) Adjusted EBITDA margin before other charges. In the accompanying financial tables, the Company has provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. The Company's management believes that each of these non-GAAP financial measures provides useful information about the Company's results of operations and/or financial position to both investors and management. Each non-GAAP financial measure is provided because management believes it is an important measure of financial performance used in the retail industry to measure operating results, to determine the value of companies within the industry and to define standards for borrowing from institutional lenders. The Company uses each of these non-GAAP financial measures as a measure of the performance of the Company. In addition, certain of the Company's cash and equity incentive compensation plans are based on the Company's level of achievement of Adjusted EBITDA before other charges. The Company provides these various non-GAAP financial measures to investors to assist them in performing their analysis of its historical operating results. Each of these non-GAAP financial measures reflects a measure of the Company's operating results before consideration of certain charges and consequently, none of these measures should be construed as an alternative to net income (loss) or operating income (loss) as an indicator of the Company's operating performance, as determined in accordance with generally accepted accounting principles. The Company may calculate each of these non-GAAP financial measures differently than other companies.
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 SEC, or in materials incorporated therein by reference.
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 providedby 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 connectionwith 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 EndedAugust 4, 2018
July 29, 2017
August 4, 2018
July 29, 2017
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 organizationalchanges
667 (6 ) 932 (3 ) Less: effect of change in accounting principle — — —(764
) Adjusted EBITDA before other charges and effect ofchange 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/
Sloane & CompanyErica Bartsch, 212-446-1875Ebartsch@sloanepr.comorAlex Kovtun, 212-446-1896Akovtun@sloanepr.com
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