PHILADELPHIA, July 9 /PRNewswire-FirstCall/ -- Destination Maternity Corporation (Nasdaq: DEST), the world's leading maternity apparel retailer, today reported sales for the month of June 2009 and announced that it expects its third quarter earnings to exceed the top end of its prior earnings guidance range. Net sales for the month of June 2009 decreased 10.0% to $41.3 million from $45.9 million reported for the month of June 2008. Comparable store sales for the month of June 2009 decreased 10.7% on a reported basis, and decreased approximately 10.1% after adjusting for the "days adjustment calendar timing shift." For June 2008, the Company's comparable store sales increased 0.8% on a reported basis, and increased approximately 4.8% after adjusting for the calendar shift. The decrease in total reported sales for June 2009 compared to June 2008 resulted primarily from the decrease in comparable store sales.
Net sales for the third quarter of fiscal 2009 decreased 6.4% to $142.5 million from $152.2 million reported for the third quarter of fiscal 2008. Comparable store sales for the third quarter of fiscal 2009 decreased 5.5% versus a comparable store sales increase of 2.4% for the third quarter of fiscal 2008. The decrease in total reported sales for the third quarter of fiscal 2009 compared to fiscal 2008 resulted primarily from the decrease in comparable store sales and the decrease in Sears(R) leased department sales resulting from the closure of all of the Company's remaining leased departments within Sears stores during the month of June 2008. On June 10, 2009, the Company announced that in October 2009 it will re-launch its Two Hearts(R) Maternity leased departments at over 500 Sears locations and will introduce Two Hearts Maternity leased departments at 100 Kmart(R) locations.
Ed Krell, Chief Executive Officer of Destination Maternity, noted, "We are very pleased that we expect our earnings for the third quarter to exceed the top end of our prior earnings guidance range and to be significantly higher than last year, as a result of our strong merchandise gross margin performance and continued tight management of expenses. Our sales for the month of June were weaker than planned, which we attribute to: (i) the continued extremely difficult overall retail environment; (ii) unfavorable weather, with much cooler and wetter weather in many regions of the country, dampening demand for summer apparel; (iii) our relatively strong comparable store sales last June; and (iv) our ability to be much less price promotional this June versus a year ago, due to our strong inventory control and much lower inventory level than a year ago. Despite our weaker than planned sales for June, our sales performance for the third quarter was within our expectations, with our comparable store sales decrease of 5.5% for the quarter at the bottom end of our guidance range of down 2.5% to 5.5% for the quarter, and our total sales of $142.5 million falling within our sales guidance range of $141 to $146 million provided in our April 22, 2009 press release. Although we are not at all satisfied with our comparable store sales performance for the quarter, we believe it reflects the extremely difficult overall retail environment and is consistent with the significant comparable store sales declines experienced by many retailers in recent months.
"As we have noted previously, we have taken aggressive actions to manage our business in this tough environment, and with our tight management of expenditures and inventory, we were able to continue to reduce expenses and were able to control markdown levels while operating the business with significantly lower inventory levels versus last year, resulting in better than planned gross margin performance and lower than planned expenses. Thus, we expect our third quarter diluted earnings per share to exceed the $0.91 per share top end of our prior guidance range of between $0.74 and $0.91 per share that we provided in our April 22, 2009 press release, and to significantly exceed our last year's third quarter earnings of $0.68 per share."
During June 2009, the Company opened one new store and closed one store. As of the end of June 2009, the Company operates 730 stores, 357 leased department locations and 1,087 total retail locations, compared to 764 stores, 291 leased department locations and 1,055 total retail locations operated at the end of June 2008. The increase in leased department locations at the end of June 2009 versus the end of June 2008 predominantly reflects the opening of an additional 69 Babies"R"Us(R) leased department locations in January 2009 and February 2009. For the quarter ended June 30, 2009, the Company opened two stores, including one multi-brand store opening, and closed six stores, including two store closings related to a multi-brand store opening.
Days Adjustment Calendar Shift
Destination Maternity reports sales on a calendar month basis, rather than on a "4-5-4 retail fiscal calendar" where each fiscal week and fiscal month starts on a Sunday and ends on a Saturday. Thus, for each calendar month, there is a "days adjustment calendar shift" which may help or hurt reported calendar month sales and comparable store sales due to different days of the week typically contributing more sales than other days of the week. For June 2009, there was one more Tuesday and one less Sunday compared to June 2008, which the Company estimates unfavorably impacted its reported comparable store sales for June 2009 by approximately 0.6 percentage points. The comparable store sales increase of 0.8% for June 2008 was unfavorably impacted by approximately 4 percentage points due to having four Fridays and four Saturdays in June 2008 compared to five Fridays and five Saturdays in June 2007.
Destination Maternity Corporation is the world's largest designer and retailer of maternity apparel, using its quick response replenishment system to "give the customer what she wants, when she wants it." In the United States and Canada, Destination Maternity operates, as of June 30, 2009, 1,087 retail locations, including 730 stores, predominantly under the tradenames Motherhood Maternity(R), A Pea in the Pod(R), and Destination Maternity(R), and sells on the web through its DestinationMaternity.com and brand-specific websites. Destination Maternity also distributes its Oh Baby by Motherhood(TM) collection through a licensed arrangement at Kohl's(R) stores throughout the United States and on Kohls.com, and, beginning in October 2009, will also offer its Two Hearts Maternity(R) by Destination Maternity collection in Sears(R) stores and certain Kmart(R) stores through a leased department relationship with Sears. In addition, Destination Maternity is expanding internationally and has recently entered into exclusive store franchise and product supply relationships in India and the Middle East.
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 net sales, comparable store 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 impact of the current global economic slowdown on the retail industry in general and on apparel purchases in particular, our ability to successfully manage our various business initiatives, our ability to successfully implement our merchandise brand and retail nameplate restructuring, the success of our international expansion, our ability to successfully manage and retain our leased department and licensed relationships and marketing partnerships, future sales trends in our existing store base, unusual weather patterns, changes in consumer preferences and spending patterns, demographics and other macroeconomic factors that may impact the level of spending for maternity apparel, overall economic conditions and other factors affecting consumer confidence, 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, goodwill impairment charges, ability to hire and develop senior management and sales associates, ability to develop and source merchandise, ability to receive production from foreign sources on a timely basis, potential stock repurchases, potential debt prepayments, changes in market interest rates, war or acts of terrorism and other factors set forth in the Company's periodic filings with the Securities and Exchange Commission, or in materials incorporated therein by reference.
SOURCE Destination Maternity Corporation
