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Destination Maternity net loss widens in Q2

By Prachi Singh

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Destination Maternity Corporation, for the second quarter ended August 1, 2015 said that GAAP net loss stood at 2.7 million dollars or 0.20 dollar per share compared to GAAP net income of 0.3 million dollars, or 0.02 dollars per diluted share, for the three months ended August 2, 2014.

On an adjusted basis, the company reported a net loss of 1.7 million dollars, or 0.12 dollar per share. This compares to an adjusted loss of 0.3 million dollars, or 0.02 dollar per share for the three months ended August 2, 2014.

Elaborating on the performance, Anthony M. Romano, Chief Executive Officer of Destination Maternity Corporation said, “As expected, overall profitability trailed the prior year given we entered the quarter with elevated inventory levels resulting from purchases made under the previous methodology. This necessitated increased promotional activity resulting in lower average unit retail and a decline in gross margin as compared to last year.”

Q2 net sales decline but comparable sales improve

Net sales were 119.3 million dollars compared with 120.8 million dollars for the comparable three month period ended August 2, 2014. The slight decrease in total reported sales resulted primarily from decreased sales related to the company's continued efforts to close underperforming stores and decreased licensed sales, partially offset by an increase in comparable sales. Comparable sales increased 2 percent, which follows a 5.9 percent decrease for the three month period ended August 2, 2014.

Gross margin decreased to 46.4 percent from 49.8 percent for the three months ended August 2, 2014. Adjusted EBITDA before other charges was 2.5 million dollars compared to 4.2 million dollars for the same quarter, last year.

First half sales and profit in negative

Net sales were 260.9 million dollars compared with 264.3 million dollars for the six months ended August 2, 2014. The decrease in sales resulted primarily from decreased sales related to the company's continued efforts to close underperforming stores, partially offset by an increase in comparable sales. Comparable sales increased 0.2 percent, which follows a decrease of 4.8percent for the six months ended August 2, 2014.

Gross margin was 48.6 percent compared to 52.3 percent for the six months ended August 2, 2014. The year-over-year decrease in gross margin is consistent with the company's expectations and reflects promotional activity to liquidate excess inventory. Adjusted EBITDA before other charges was 14.5 million dollars compared to 22.3 million dollars for the six months ended August 2, 2014. GAAP net loss was 0.1 million dollars compared to net income of 8 million dollars for the six months ended August 2, 2014. Adjusted net income was 2 million dollars, or 0.15 dollar per diluted share, compared to adjusted net income of 7.7 million dollars, or 0.57 dollar per diluted share.

Announces dividend, FY15 outlook

On August 20, 2015 the Board of Directors approved a regular quarterly cash dividend in the amount of 0.20 dollar for each share of the company's outstanding common stock. The cash dividend will be payable October 22, 2015 to stockholders of record at the close of business on October 8, 2015.

For the full year fiscal 2015, the company’s comparable sales are expected to be essentially flat, with greater comparable sales increases in the fourth quarter. Gross margins are also expected to be flat to last year, increasing significantly in the fourth quarter, as the earlier comparable periods were affected by price promotional and markdown activity to drive sales and more aggressively manage aged inventory and exit current season merchandise.

Destination Maternity