PHILADELPHIA, Nov. 5 /PRNewswire-FirstCall/ -- Destination Maternity Corporation (Nasdaq: DEST), the world's leading maternity apparel retailer, today reported sales for the month of October 2009. Net sales for the month of October 2009 decreased 1.8% to $44.3 million from $45.1 million reported for the month of October 2008. Comparable store sales for the month of October 2009 decreased 5.2% on a reported basis, and decreased approximately 8.2% after adjusting for the "days adjustment calendar timing shift." For October 2008, the Company's comparable store sales increased 6.0% on a reported basis, and increased approximately 5.0% after adjusting for the calendar shift. The decrease in total reported sales for October 2009 compared to October 2008 resulted primarily from the decrease in comparable store sales, partially offset by increased international sales and sales from the Company's leased department relationships, due to the re-launch of the exclusive Two Hearts® Maternity collection in Sears® and Kmart® stores in October 2009.
Ed Krell, Chief Executive Officer of Destination Maternity, noted, "Although we are not pleased with our comparable store sales results for October, we are pleased to have re-launched our exclusive Two Hearts Maternity collection in a total of 619 Sears and Kmart stores during the month, and we are pleased with our significantly higher merchandise gross margin than last year. We attribute our comparable store sales decrease to: (i) the continued extremely difficult overall retail environment; and (ii) our strong comparable store sales performance for October of last year, when our comparable store sales increased 5.0% after adjusting for the calendar shift. Given our very strong comparable store sales performance in October 2008, we had planned our comparable store sales to decrease in October 2009, although not quite to the extent which we actually realized. Our improved merchandise gross margin versus last year was driven by reduced product costs and reduced markdown levels enabled by continued tight inventory control, with inventory levels continuing to be lower than a year ago, as we continue to tightly manage our business in this difficult sales environment. As part of the continued tight management of our business, we are also continuing to manage our expenses very tightly."
During October 2009, the Company opened its 23(rd) Destination Maternity Superstore and closed three stores, including two store closings related to multi-brand store openings. As of the end of October 2009, the Company operates 722 stores, 976 leased department locations and 1,698 total retail locations, compared to 752 stores, 281 leased department locations and 1,033 total retail locations operated at the end of October 2008. The increase in leased department locations at the end of October 2009 versus the end of October 2008 predominantly reflects the opening of 619 Sears and Kmart leased department locations in October 2009.
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 October 2009, there was one more Saturday and one less Wednesday compared to October 2008. The Company estimates this calendar shift favorably impacted its reported comparable store sales for October 2009 by approximately 3 percentage points. The comparable store sales increase of 6.0% for October 2008 was favorably impacted by approximately 1 percentage point due to having one more Thursday and Friday and one less Monday and Tuesday in October 2008 compared to October 2007.
The Company will report results for the fourth quarter and hold an investor conference call on November 18, 2009, at which time it will provide additional information related to results for the fourth quarter and future financial guidance.
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 October 31, 2009, 1,698 retail locations, including 722 stores, predominantly under the tradenames Motherhood Maternity®, A Pea in the Pod®, and Destination Maternity®, and sells on the web through its DestinationMaternity.com and brand-specific websites. Destination Maternity also distributes its Oh Baby by Motherhood® collection through a licensed arrangement at Kohl's® stores throughout the United States and on Kohls.com, and, in October 2009, re-launched its Two Hearts Maternity® by Destination Maternity collection in Sears® stores and certain Kmart® stores through a leased department relationship with Sears. In addition, Destination Maternity is expanding internationally and has 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, expense savings initiatives, 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.
