Destination Maternity’s cost-cutting measures pay off as company edges into profit

By

Robin Driver

Published
Jun 15, 2018

Following a complete Board rehaul and the appointment of a new CEO, the Moorestown, New Jersey-based Destination Maternity Corporation reported a return to profitability in Q1 2018 as cost-saving measures take hold and strong progress in e-commerce helps minimize sales declines.

 
Net income for the first quarter ended May 5, 2018 totaled $0.2 million, compared to a loss of $1.1 million in the prior-year period. This follows successive losses in previous quarters which led to a total net loss of $21.6 million in fiscal 2017.
 
This return to profitability was no doubt facilitated by the fact that the company managed to reduce selling, general and administrative expenses by 6.8% to $51.9 million during the period.

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Net sales in Q1 actually decreased 3% to $103.2 million, compared to $106.4 million in Q1 2017, while comparable sales fell 0.1%. E-commerce sales, however, were a bright spot, increasing 43%, even if the pace of this progress has slowed somewhat, having previously shot up 60% in Q4 2017 and 54% in Q3.
 
“Our financial performance in the first quarter was in line with expectations, highlighted by reductions in SG&A, double digit growth in our e-commerce channel and increases in operating income,” said recently appointed Destination Maternity CEO Marla Ryan in a release.
 
“Since taking the helm as CEO, I have been working closely with our employees to implement a comprehensive and attainable business plan geared toward accelerating revenue growth, rationalizing expenses and improving profitability,” she added, going on to outline the main points of the company’s upcoming projects, namely e-commerce expansion, inventory optimization and innovative partnerships.
 
Ryan was named as Destination Maternity’s CEO at the end of May, shortly after she was elected to the company’s Board of Directors when it underwent a complete rehaul replacing all four of its members with a new female-majority slate.
 
The vote came after weeks of tense exchanges between the Board’s then chairman Barry Erdos and a group of dissident stockholders led by Nathan G. Miller and Peter O’Malley, who, dissatisfied with the company’s performance and the Board’s lack of diversity, put forward the slate of Directors that would be elected on May 24.
 
Alongside Ryan, the company’s current Board features Stance Inc. co-founder Holly N. Alden, Kingdon Capital Management senior analyst Christopher B. Morgan and ACW Consulting founder Anne-Charlotte Windal.

The transition occurred after the end of Q1 so the pressure is now on Destination Maternity’s new leadership to prove their mettle and deliver noticeable improvements in the second quarter.

Destination Maternity operates under the Motherhood Maternity, A Pea in the Pod and Destination Maternity banners, through a total of 1,118 retail locations in the US, Canada and Puerto Rico, as well as three brand-specific e-commerce platforms. 

It is also present via 186 franchise locations in the Middle East, South Korea, Mexico, Israel and India.