Destination Maternity exploring possible sale after dismal second quarter

By

Robin Driver

Published
Sep 18, 2019

American maternity apparel retailer Destination Maternity Corporation has announced that it is considering strategic alternatives for its business, including a potential sale or merger, following a rough second quarter that saw a significant dip in the company’s revenues.

 
On Tuesday, the retail group announced an 11.9% decrease in sales for the second quarter ended August 3, 2019, when they totaled $84.9 million, down from $96.4 million in the same period in the previous year.
 
Comparable sales were down 10.5%, with comparable-store sales dropping 11.9% and e-commerce sales falling 6.4%. The company’s revenues were further impacted by the closure of six owned stores and 55 leased locations.

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Taking into account the first quarter, the retail group posted sales of $179.1 million in the first half of fiscal 2019, a 10.3% decrease from $199.6 million in the prior-year period.
 
Despite these setbacks, Destination Maternity was actually able to trim its quarterly net loss to $3.5 million ($0.25 per diluted share), compared to the loss of $4.0 million ($0.29 per diluted share) reported by the company in the second quarter of fiscal 2018.
 
“Our results this quarter illustrate the ongoing headwinds facing our business,” explained Destination Maternity Corporation CFO Dave Helkey in a release. “While cost savings initiatives drove reductions in SG&A expense and a pullback in promotional cadence helped to hold margins in line with the prior year, sales declines of 11.9% year-over-year more than offset the benefits to our bottom line.”
 
The executive went on to explain that, in light of the company’s most recent quarterly results, its board has engaged Greenhill & Co in order to conduct a “comprehensive review of strategic alternatives.”
 
According to the retailer, along with a possible sale or merger of the business, other options being investigated include continuing to pursue value-enhancing initiatives as a standalone company and optimizing the group’s capital structure through either financings or the sale of specific businesses or assets.
 
Destination Maternity Corporation, which operates the Motherhood Maternity, A Pea in the Pod and Destination Maternity retail banners, does not intend to disclose further details concerning the review of its strategic alternatives until doing so is deemed to be necessary.
 
On Tuesday the company also announced that it is opening a new 1,400-square-foot store at the Scottsdale Quarter Mall in Scottsdale Arizona.
 
The new location features maternity apparel from both Destination Maternity and A Pea in the Pod, including denim, leggings, tops and t-shirts, along with intimates, such as the brands’ famous seamless nursing bras.
 
The store will hold a grand opening on Saturday, September 21, when it will offer complimentary bra fittings, style advice and exclusive promotions, as well as swag bags for the first 25 arrivals.
 
The event will also welcome the Pumpspotting tourbus which will make a stop at the new store on its nationwide tour in support of breastfeeding. The campaign, of which Destination Maternity is the official apparel sponsor, seeks to provide resources and create communities through which nursing mothers can share support.
 
Destination Maternity at the Scottsdale Quarter Mall’s grand opening event will run from 10AM through 2PM.