Destination Maternity Q2 comparable sales down 2.7 percent

Destination Maternity Corporation’s comparable sales decreased 2.7 percent for the second quarter, compared to a 2 percent increase for the second quarter of fiscal 2015. Gross margin improved 510 basis points to 51.5 percent, up from 46.4 percent in the prior year quarter. Operating loss improved 22.7 percent to 3.1 million dollars compared to operating loss of four million dollars for the second quarter of fiscal 2015.

"Our second quarter results reflect solid strides toward positioning our brands, business and operating platform for long term success and is encouraging to see as we continue executing on our focused strategy on improving our retail fundamentals. From the basic operational issues such as switching to a retail fiscal calendar, to the more wide-sweeping changes such as the complete re-work of how we plan, allocate and distribute our product to our retail outlets, we are building a strong foundation to enable us to deliver significant and sustainable growth in fiscal 2017 and beyond,” stated Anthony M. Romano, CEO & President of the company.

GAAP net loss improved in the second quarter

GAAP net loss improved 6.5 percent to 2.5 million dollars, or 0.18 dollar per diluted share, compared to net loss of 2.7 million dollars, or 0.20 dollar per diluted share, for the second quarter of fiscal 2015. Adjusted net loss was two million dollars, or 0.14 dollar per diluted share, compared to adjusted net loss of 1.7 million dollars, or 0.12 dollar per share for the second quarter of fiscal 2015. Adjusted EBITDA before other charges was 3.3 million dollars compared to 2.5 million dollars in the prior year quarter.

Net sales were 106.5 million dollars compared with 119.3 million dollars for the comparable prior year quarter. The decrease was primarily driven by closure of Sears and Gordmans leased department locations, as well as reductions in Kohl's sales given the planned exit in 2017, and by a decline in comparable sales.

H1 net sales and comparable sales decline

Net sales were 231 million dollars compared with 260.9 million dollars for the six months ended August 1, 2015. The decrease in sales was primarily driven by closure of 575 Sears and Gordmans leased departments, a reduction in licensed brand sales and by a decline in comparable sales. Comparable sales decreased 4.2 percent, which follows an increase of 0.2 percent for the six months ended August 1, 2015.

Gross margin increased 430 basis points to 52.9 percent compared to 48.6 percent for the six months ended August 1, 2015. The year-over-year increase in gross margin is driven by the company's tightened inventory management and a shift in business mix to higher margin sales.

Adjusted EBITDA before other charges was 16.5 million dollars compared to 14.5 million dollars for the first half of fiscal 2015. GAAP net income was 1.5 million dollars or 0.11 dollar per diluted share, compared to net loss of 0.1 million dollars, or 0.01 dollar per diluted share, for the six months ended August 1, 2015. Adjusted net income was 2.5 million dollars, or 0.18 dollar per diluted share, compared to adjusted net income of two million dollars, or 0.15 dollar per diluted share, for the six months ended August 1, 2015.

Updates FY16 outlook

The company updated its financial guidance for fiscal 2016 and expects continued sequential improvement in comparable sales through the year, resulting in slightly negative comparable sales for the full fiscal year and gross margin to increase approximately 250 to 350 basis points year-over-year, as inventory productivity initiatives continue to generate more profitable sales. The company plans to open 10 new stores and close 30 to 35 stores during the fiscal year.

Picture:Destination Maternity