Destination Maternity hurt by Kohl's, Sears severance

By

Obi Anyanwu

Published
Apr 18, 2017

Destination Maternity on Thursday released its fourth quarter and full year 2016 results, which marks as its first results since its merger with Orchestra-Prémaman in December.

The company's results were hindered by retail headwinds towards the end of the year, such as mall traffic declines and canceled orders due to the Hanjin bankruptcy (the company was declared bankrupt by South Korean courts on February 17, 2017).

 
The maternity apparel retailer closed the year with a GAAP net loss of $32.8 million, or $2.39 per share, which is an increase from a net loss of $4.5 million, or $0.33 per share, in the previous year, and adjusted net loss was $1.9 million, or $0.14 per share, compared to $0.2 million. The loss is attributed to store closure expenses of $2.8 million and management and organizational changes of $4.9 million.
 
In addition, total net sales fell to $433.7 million from $498.8 million, primarily driven by the wind down of Kohl’s, Sears and Gordmans relationships, and a 5.3% decrease in comparable sales.

Despite the headwinds, CEO Anthony Romano said that the company continued to advance its key strategies, which includes reducing markdowns and targeting its merchandising and marketing to millennial customers.
 
“We implemented our product allocation tool, which will assist us to increase sales productivity and reduce markdowns, and we introduced Demandware to support our new web platform that launched early in the first quarter of fiscal 2017,” he said. 
 
Romano is also confident in the company’s merger with Orchestra, which he believes will “enable us to deliver improved operating performance in fiscal 2017 and beyond."
 
Destination Maternity will have to bounce back from a weak fourth quarter that included a decrease in net sales to $100.2 million, a 7.8% decrease of comparable sales, and the end of its license agreement with Kohl’s, which ended in February 2017.