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Destination Maternity posts marginal hike in Q1 FY12 sales

06
Jan '12
Destination Maternity Corporation, the world's leading maternity apparel retailer, reported sales and provided updated earnings guidance for the first quarter of fiscal 2012 ended December 31, 2011.

Net sales for the first quarter of fiscal 2012 increased 0.7% to $136.4 million from $135.4 million reported for the first quarter of fiscal 2011. Comparable sales (which include Internet sales) decreased 4.1% versus a comparable sales increase of 2.1% for the first quarter of fiscal 2011.

The increase in total reported sales for the first quarter of fiscal 2012 compared to the first quarter of 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) the 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.

Ed Krell, Chief Executive Officer of Destination Maternity, noted, "In the first quarter of fiscal 2012, our sales were weaker than planned, and we continued to need price promotional activity and additional markdowns to spur sales and manage inventory. Thus, for the quarter, our sales were slightly below the low end of our expected sales range and our gross margin was somewhat lower than planned.

With this lower than planned sales and gross margin, partially offset by our continued tight management of expenses, we expect our earnings for the first quarter to be at the low end or slightly lower than the low end of our prior earnings guidance range. Our prior earnings guidance range for first quarter GAAP diluted earnings per share, as provided in our November 17, 2011 press release, was $0.17 to $0.26 per share.

"Our total sales of $136.4 million for the first quarter was slightly below the lower end of our sales guidance range of $138 to $142 million provided in our November 17 press release, and our comparable sales decrease of 4.1% was below our guidance range of down 0.5% to 3.5% for the quarter.

It is important to note that our comparable sales results are negatively impacted by the cannibalization impact of our Macy's leased department expansion, which had its first full month of operation in March 2011.

We estimate that this cannibalization impact hurt our first quarter comparable store sales by between 1 and 2 percentage points. We also believe our sales for the quarter were somewhat negatively impacted by unseasonably warm weather in December throughout much of the United States, which hurts sales of seasonal Fall and Winter apparel.

We continue to be pleased with the growth of our Internet sales, which increased 30% for the first quarter of fiscal 2012, on top of an 18% increase in the first quarter of fiscal 2011.


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