• FY net income US$9.7m
  • Sales fell 5.9%
  • In the face of an "extremely difficult sales environment"

Destination Maternity has reported a strong set of full year, out-performing its prior earnings guidance and turning around a weak 2008. However, as trading continues to be tough, the company re-estimated its 2010 outlook downwards.

The world's leading maternity apparel retailer, said that its full year net income before goodwill impairment charges reached US$9.7m compared to a net loss for fiscal 2008 of $1.4m.

Including the charges, the net loss for fiscal 2009 was $40.7m. The figures includes $50.4m of non-cash goodwill impairment charges.

The charge was the result of a substantial decrease in the market price of the company's common stock subsequent to 30 September, 2008, reflecting the difficult equity market conditions.

Adjusted EBITDA was $38.8m for fiscal 2009, an increase of 52% on last year.

Net sales for the year fell 5.9% to $531.3m. The company said that the decrease in sales versus last year resulted primarily from a decrease in comparable store sales and a decrease in Sears 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. 

Comparable store sales decreased 4.3% during fiscal 2009 versus a comparable store sales increase of 0.2% during fiscal 2008.

Ed Krell, CEO said: "Our strong financial results for the fourth quarter and full year fiscal 2009 and our strong outlook for future earnings show the significant progress we are making in improving the core profitability of our business, even in the face of an extremely difficult sales environment.

"Our earnings for the fourth quarter significantly exceeded both the top end of our prior earnings guidance range and our last year fourth quarter earnings, as a result of our continued cost reduction initiatives and strong merchandise gross margin performance."

Krell continued: "We are in a very strong financial position, we have significantly reduced our financial leverage, and we are very focused on continuing to generate free cash flow and deleveraging our balance sheet.

"We recognise it is very difficult to project sales in this relatively volatile economic and retail environment. Given the continued weak economic environment and the uncertainty as to the timing of a recovery in consumer spending, we are planning our sales more conservatively than we did in July 2009 when we gave our preliminary financial guidance for fiscal 2010. Accompanying this decrease in our sales plan for fiscal 2010, we have also reduced our planned expenditures accordingly, as we continue to implement additional cost reduction initiatives. Thus, we plan to generate strong earnings and significant free cash flow during fiscal 2010."

The company said that its expectations for 2010 included net sales in the range of $535 to $548m range, representing an increase in sales of between 0.7% and 3.1% versus fiscal 2009. The figure is a reduction from its preliminary July 2009 guidance of $547 to $560m of sales. 

Comparable store sales are expected to decrease between 2% and 4.5%. This compares to a July 2009 guidance for fiscal 2010 comparable store sales of between flat and a decrease of 2.5%.

Diluted earnings per common share, on a reported basis, are estimated to come in between $1.58 and $2.11 per share for fiscal 2010, compared to earnings, before goodwill impairment charges, of $1.60 per share for fiscal  2009. Earnings per common share, on a reported basis, for fiscal 2009 were a loss of $6.79 per share, reflecting the goodwill impairment charges of $50.4m.