Destination provides updated earnings guidance for Q1
Destination Maternity Corporation announced operating results for the first quarter of fiscal 2012, which ended December 31, 2011. The Company's diluted earnings per share for its first quarter of fiscal 2012 were at the low end of its November 17, 2011 earnings guidance. On January 25, 2012 the Company announced that its Board of Directors declared a regular quarterly cash dividend of $0.175 per share payable March 28, 2012.
Net sales for the first quarter of fiscal 2012 increased 0.7% to $136.4 million from $135.4 million for the first quarter of fiscal 2011.
The increase in sales for the first quarter of fiscal 2012 compared to fiscal 2011 resulted primarily from increased sales due to the expansion of the Company's maternity apparel leased department relationship with Macy's, partially offset by: (1) a decrease in comparable sales, (2) decreased sales related to the Company's continued efforts to close underperforming stores, and, to a much lesser extent, (3) a decrease in sales due to the closure of all of the Company's remaining leased departments within Kmart stores during the month of October 2011. The net sales of $136.4 million for the first quarter were below the Company's guidance range of $138 to $142 million provided in November 2011.
The Company estimates that the cannibalization impact of the leased department expansion with Macy's in February 2011 hurt its first quarter comparable sales by between 1 and 2 percentage points. The Company's Internet sales, which are included in the Company's reported comparable sales, increased 30% for the first quarter of fiscal 2012, on top of an 18% increase in the first quarter of fiscal 2011.
Gross margin for the first quarter of fiscal 2012 was 51.0%, a decrease versus last year's first quarter gross margin of 53.9%, due primarily to lower merchandise margin driven by higher promotional activity, higher markdowns and higher product costs. Gross margin for the first quarter was somewhat lower than planned, due to price promotional activity and additional markdowns taken to spur sales and manage inventory.
The Company made an optional $5.0 million prepayment on its Term Loan in the first quarter of fiscal 2012. On January 25, 2012 the Company announced that its Board of Directors declared a regular quarterly cash dividend of $0.175 per share, payable March 28, 2012 to stockholders of record at the close of business on March 7, 2012.
On March 1, 2011, the Company effected a two-for-one stock split in the form of a stock dividend. All share and per share amounts included in this first quarter fiscal 2012 earnings release give effect to the stock split and have been adjusted retroactively for all periods presented.
Ed Krell, Chief Executive Officer of Destination Maternity Corporation, noted, "For the first quarter of fiscal 2012, our earnings were at the low end of our prior guidance range, driven by: (1) sales being below our expected sales range; and (2) gross margin being lower than planned, due to price promotional activity and additional markdowns taken to spur sales and manage inventory; partially offset by (3) lower than planned expenses, driven by our continued tight management of expenses.