Form DEFA14A Destination Maternity

Form DEFA14A Destination Maternity

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April 19, 2018 11:39 AM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 19, 2018

DESTINATION MATERNITY CORPORATION

(Exact name of Registrant as specified in Charter)

Delaware

0-21196

13-3045573

(State or Other Jurisdiction of

Incorporation or Organization)

Commission

File number

(I.R.S. Employer

Identification Number)

232 Strawbridge Drive

Moorestown, NJ 08057

(Address of Principal Executive Offices)

(856) 291-9700

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐

Written communications pursuant to Rule 425 under the Securities Act

☒

Soliciting material pursuant to Rule 14a-12 under the Exchange Act

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule l2b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02.

Results of Operations and Financial Condition

On April 19, 2018, Destination Maternity Corporation (the “Company”) issued a press release and held a broadly accessible conference call to discuss its financial results for the fiscal year ended February 3, 2018. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. A copy of the script read by management during the conference call is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

The press release contained non-GAAP financial measures within the meaning of the Securities and Exchange Commission’s Regulation G, including: (a) Adjusted net income (loss) together with the per share – diluted amount represented by this measure; (b) Adjusted EBITDA (operating income (loss) before deduction for the following non-cash charges: (i) depreciation and amortization expense; (ii) loss on impairment of tangible and intangible assets; (iii) (gain) loss on disposal of assets; and (iv) stock-based compensation expense), together with the percentage of net sales represented by this measure; and (c) Adjusted EBITDA before other charges and effect of change in accounting principle, together with the percentage of net sales represented by this measure.

The Company believes that each of these non-GAAP financial measures provides useful information about the Company’s results of operations and/or financial position to both investors and management. Each non-GAAP financial measure is provided because management believes it is an important measure of financial performance used in the retail industry to measure operating results, to determine the value of companies within the industry and to define standards for borrowing from institutional lenders. The Company uses each of these non-GAAP financial measures as a measure of the performance of the Company. In addition, certain of the Company’s cash and equity incentive compensation plans are based on the Company’s level of achievement of Adjusted EBITDA before other charges and effect of change in accounting principle.

The Company provides these measures to investors to assist them in performing their analysis of its historical operating results. Each of these non-GAAP financial measures reflects a measure of the Company’s operating results before consideration of certain charges or credits and consequently, none of these measures should be construed as an alternative to net income (loss) or operating income (loss) as an indicator of the Company’s operating performance, as determined in accordance with generally accepted accounting principles. The Company may calculate each of these non-GAAP financial measures differently than other companies.

With respect to the non-GAAP financial measures discussed in the press release, the Company has provided, as an attachment to such press release, a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

The disclosure in this Current Report, including in the Exhibits attached hereto, of any financial information shall not constitute an admission that such information is material.

Item 8.01.

Other Events

On April 19, 2018, the Company issued a press release regarding its financial results for the fiscal year ended February 3, 2018. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Important Additional Information

The Company, its directors and certain of its executive officers are participants in the solicitation of proxies from the Company’s stockholders in connection with the Company’s 2018 Annual Meeting of Stockholders. The Company has filed a preliminary proxy statement (the “Preliminary Proxy Statement”) and form of white proxy card with the Securities and Exchange Commission (the “SEC”) in connection with such solicitation of proxies from the Company’s stockholders. STOCKHOLDERS OF THE COMPANY ARE STRONGLY ENCOURAGED TO READ THE COMPANY’S DEFINITIVE PROXY STATEMENT AND ANY SUPPLEMENTS THERETO AND ACCOMPANYING WHITE PROXY CARD AND ALL OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. The Preliminary Proxy Statement contains information regarding the direct and indirect interests, by security holdings or otherwise, of the Company’s directors and executive officers in the Company’s securities. In the event that holdings of the Company’s securities change from the amounts disclosed in the Preliminary Proxy Statement, such changes will be set forth in SEC filings on Forms 3, 4 and 5, which can be found through the Company’s website at www.destinationmaternity.com in the section “Investors” or through the SEC’s website at www.sec.gov. Updated information regarding the identity of potential participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in the Company’s definitive proxy statement and other materials to be filed with the SEC in connection with the 2018 Annual Meeting of Stockholders.

Stockholders will be able to obtain any proxy statement, any amendments or supplements to the proxy statement and other documents filed by the Company with the SEC at no charge at the SEC’s website at www.sec.gov. Copies will also be available at no charge at the Company’s website at www.destinationmaternity.com in the section “Investors” and by writing the Company’s Corporate Secretary at the following address: Destination Maternity Corporation, Attention: Secretary, 232 Strawbridge Drive, Moorestown, New Jersey 08057.

Item 9.01.

Financial Statements and Exhibits

The following exhibits are filed or furnished with this Form 8-K:


Exhibit No.		Description

99.1		Press Release of the Company issued April 19, 2018.

99.2		Script for April 19, 2018 Earnings Release Conference Call.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.

Exhibit 99.1

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DESTINATION MATERNITY REPORTS FOURTH QUARTER AND

FISCAL 2017 RESULTS

•

E-commerce sales rise 60% from prior year fourth quarter

•

Comparable retail sales rise 5.2% from prior year fourth quarter

•

Gross margin expands 20 basis points in fiscal 2017 from fiscal 2016

•

Selling, General and Administrative expenses decline $5.2 million in fiscal 2017 – on track to exceed the Company’s expectation to generate $10 million in annualized savings

Moorestown, NJ, April 19, 2018 – Destination Maternity Corporation (NASDAQ: DEST), the world’s leading maternity apparel retailer, today announced financial results for the fourth quarter and full fiscal year. Fiscal 2017 ended February 3, 2018 and includes a 14-week fourth quarter and 53-week year, compared to fiscal 2016 ended January 28, 2017, which is based on a 13-week fourth quarter and 52-week year. Comparable sales exclude the impact of the additional week.

Melissa Payner-Gregor, interim Chief Executive Officer commented “Fiscal 2017 was a year of transition for the Company. Since I stepped into the interim CEO role in early January, I have been more than impressed with how our team members have managed to maintain their focus in the face of so much change. And, while there is much work to be done, our Company has made meaningful strides in the past year. We relaunched our four ecommerce websites in early 2017 with an increase in comparable sales in the channel of over 40%, with much of that improvement driven by major conversion improvements on all devices, particularly mobile. The strength of the digital platform helped us deliver a 5.2% total retail comp improvement in the fourth quarter of fiscal 2017. In addition, we implemented an internal reorganization and cost cutting initiative late in fiscal 2017 which contributed a $5.2 million reduction in SG&A for the year with an expectation that the annualized savings will exceed $10 million in fiscal 2018. We also completed a refinancing of our outstanding term loan to provide greater liquidity.”

Fourth Quarter Fiscal 2017 Financial Results (14 weeks ended February 3, 2018)

•

Net sales were $105.1 million compared to $100.2 million for the prior year quarter. This increase was primarily driven by an increase in comparable retail sales as well as additional sales generated in the 53rd week.

•

Comparable sales increased 5.2%

•

Gross margin for the fourth quarter of fiscal 2017 was 50.4%, down 60 basis points over the comparable prior year quarter gross margin of 51.0%.

•

Selling, general and administrative expenses (“SG&A”) for the fourth quarter of fiscal 2017 increased 5.7% to $57.0 million, compared to $53.9 million for the fourth quarter of fiscal 2016. As a percentage of net sales, SG&A increased to 54.2% for the fourth quarter of fiscal 2017 compared to 53.8% for the fourth quarter of fiscal 2016. Fiscal 2017 included an additional week of expense related to the 53^rd week.

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•

The Company incurred store closing, asset impairment and asset disposal expenses of $2.6 million for the fourth quarter of fiscal 2017, compared to $1.0 million for the fourth quarter of fiscal 2016.

•

Other charges during the fourth quarter of fiscal 2017 were $1.2 million, related to management and organizational changes, compared to $2.9 million in the fourth quarter of fiscal 2016.

•

Adjusted EBITDA before other charges was $0.6 million for the fourth quarter of fiscal 2017, compared to $2.1 million for the fourth quarter of fiscal 2016. Adjusted EBITDA before other charges is defined in the financial tables at the end of this press release.

•

Income tax benefit was $0.3 million for the fourth quarter of fiscal 2017 compared to an income tax provision of $25.0 million in fiscal 2016.

•

GAAP net loss was $10.2 million, or $0.73 per share. This compared to a GAAP net loss of $32.8 million, or $2.39 per share, for the fourth quarter of fiscal 2016, which included the $27.8 million non-cash income tax charge, or $2.02 per share, related to the valuation allowance against net deferred tax assets.

•

Adjusted net loss was $5.0 million, or $0.36 per share, compared to adjusted net loss of $3.2 million, or $0.23 per share for the fourth quarter of fiscal 2016. For a reconciliation of GAAP to non-GAAP financial information refer to the financial tables at the end of this press release.

Full Year Fiscal 2017 Financial Results (53 weeks ended February 3, 2018)

•

Net sales were $406.2 million compared with $433.7 million for the fiscal year ended January 28, 2017. This decrease was primarily driven by the wind down of the Kohl’s relationship, the net closure of 28 retail stores, and a decline in comparable sales.

•

Comparable sales decreased 1.5%;

•

Gross margin increased 20 basis points to 52.6% compared to 52.4% for the fiscal year ended January 28, 2017. The year-over-year increase in gross margin was driven by reduced product costs and the exit from the leased department and licensed relationships, which generated lower than average gross margins.

•

SG&A declined $5.2 million to $218.7 million, or 53.8% of net sales, compared to $223.9 million, or 51.6% of net sales for the fiscal year ended January 28, 2017. Fiscal 2017 includes SG&A expenses incurred in the 53^rd week.

•

Store closing, asset impairment and asset disposal expenses were $6.3 million, compared to $2.8 million for the fiscal year ended January 28, 2017.

•

Other charges during fiscal 2017 were $4.9 million, related to the proposed business combination, as well as management and organizational changes, compared to $4.9 million for fiscal 2016.

•

Adjusted EBITDA before other charges was $13.0 million for the fiscal year ended February 3, 2018 compared to $23.3 million for the fiscal year ended January 28, 2017.

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•

Income tax provision was $0.0 million for fiscal 2017 compared to $25.0 million in fiscal 2016.

•

GAAP net loss was $21.6 million, or $1.57 per share. This compared to a GAAP net loss of $32.8 million, or $2.39 per share, for the fourth quarter of fiscal 2016, which included the $27.8 million non-cash income tax charge, or $2.02 per share, related to the valuation allowance against net deferred tax assets.

•

Adjusted net loss of $10.2 million, or $0.74 per share, compared to adjusted net loss of $1.9 million, or $0.14 per share, for the fiscal year ended January 28, 2017.

Other Fiscal Year 2017 Financial Information

•

Capital expenditures totaled $6.7 million primarily driven by investments in stores and investments to support key systems projects.

•

At February 3, 2018, inventory was $71.3 million, an increase of $2.3 million compared to $69.0 million at January 28, 2017.

Commentary on Go-Forward Strategy

Melissa Payner-Gregor, commented further:

“As we move forward, we have put into place and expect to execute the following strategies:

•

Supplying the very best product to our customers. At our core, we are a fashion company. We believe a new mom doesn’t have to change her style when she is expecting. We believe that we offer highly differentiated product and on-trend style that is technically designed to fit her changing body. We feel so lucky to share a part of the most exciting time in her life.

•

Creating a more seamless and relevant omni-channel experience. We expect to bring our strengths in each respective channel to all channels. For example, while our digital experience is highly efficient we do not currently provide the level of customer service and emotional connection that is driven by our excellent in-store sales associates. We are exploring creating a more interactive and informative experience online through initiatives such as live chat, increased content and online community. As to the stores, although our level of customer service is a strength, we are seeking to identify ways to increase traffic to our stores. We are working to use our strong traffic online to drive footsteps to the stores with our buy online pickup from store initiatives as well as future initiatives, such as in-store appointment scheduling.

•

Improving our product sourcing, planning, buying and allocation. Over the past few years we have made investments in our inventory management systems, processes and personnel to drive better results from conception through replenishment. We have gained insights on which we intend to capitalize.

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•

Expanding our distribution points and product category offerings. There are opportunities for us to reinvigorate our distribution network, particularly in the digital space, where we believe incremental expansion can be accomplished. This year we expect to begin offering our product in at least one more online marketplace (in addition to Macys.com) with more to come. We are also working to deepen our relationship with Amazon by transferring onto the Amazon Retail platform which will give our Amazon customers full access to Prime fulfillment. This is a meaningful growth opportunity given the majority of our sales decline from our peak in fiscal 2013 can be attributed to our declining distribution network. Furthermore, we believe positioning gives us the unique opportunity to offer our customers products that extend beyond her pregnancy to her life as a new-mom, including baby apparel, hard goods and other products of interest to the growing family. We will be diligently exploring opportunities to expand our product offering to include next stage products, initially through our digital platform utilizing a marketplace model.

•

Protecting and expanding the revenue we receive from our marketing partnerships business. We believe we have access to highly valuable customers, and we have been able to leverage this access with our third-party partners to offer customers great savings and services beyond her maternity needs. We believe we can drive incremental revenue through this channel with additional assets.

•

Working diligently every day to improve our profitability. As mentioned above, we believe that our recent reorganization and cost cutting initiatives will deliver over $10 million in run-rate savings. However, we will continue to adopt and maintain a stringent profit focused philosophy. This includes continued, rigorous review of our real estate portfolio (which has a high degree of liquidity over the next several years) as well as opportunistically cutting or investing in our operation when return-on-investment appropriate.”

Commentary on Governance Matters

Barry Erdos, Chairman of the Board, commented:

“As announced previously, our Board has been actively considering its composition including pursuing the addition of new members to expand the skills and experience on the Board to accelerate Destination Maternity’s path to profitable growth. In keeping with this objective, earlier this year, Peter Longo, formerly of Macy’s, joined our Board, and, in early April, the Board added Pierre Mestre, the Chairman and founder of Orchestra-Prémaman, our largest stockholder. These additions show our Board’s willingness to invite new opinions into the boardroom for the benefit of all stockholders, and that willingness continues. As to our CEO search, the newly constituted Board is working diligently to identify and vet candidates for the permanent CEO role and expects to continue that work into this fiscal year.”

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Mr. Mestre, our newest Board member, commented:

“Both before and after I became a director, the current Board and the current management team have shown real enthusiasm for a sustained focus on making Destination Maternity more profitable. The Company has aggressively revised its strategy, including seeking to expand its distribution points as well as its product offerings, each of which has the potential to strengthen and diversify Destination Maternity’s positioning in the market.

“I am also encouraged to see the willingness with which the Board has approached refreshing its members. As the Chairman of the Company’s largest stockholder, at over 13%, I support our current Board and management team and will be voting all the shares I and my companies beneficially own in favor of the Company’s slate at the upcoming annual meeting of stockholders.”

Retail Locations

The table below summarizes store opening and closing activity for the fourth quarter and full year fiscal 2017 and fiscal 2016, as well as the Company’s total store, leased department and retail location count at the end of each fiscal period.


	Fourth Quarter Ended				Year Ended
	February 3, 2018		January 28, 2017		February 3, 2018		January 28, 2017
Store Openings (1)		0		2		7		11
Store Closings (1)		14		13		35		32

Period End Retail Location Count (1)
Stores		487		515		487		515
Leased Department Locations		637		705		637		705

Total Retail Locations		1,124		1,220		1,124		1,220

1)	Excludes international franchised locations. As of February 3, 2018 Destination Maternity has 188 international franchised locations, including 15 standalone stores operated under one of the Company’s nameplates and 173 shop-in-shop locations.

Conference Call Information

As announced previously, members of its senior management will hold a conference call at 9:00 a.m. Eastern Time, to discuss its results. Investors and analysts can participate in this conference call by dialing (800) 219-6970 in the United States and Canada or (574) 990-1028 outside of the United States and Canada. Please call ten (10) minutes prior to 9:00 a.m. Eastern Time. The call will also be available on the investor section of the Company’s website at

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http://investor.destinationmaternity.com. Passcode for the conference call is 6098766. In the event that you are unable to participate in the call, a replay will be available at 12:00 p.m. Eastern Time on Thursday, April 19, 2018, through 12:00 p.m. Eastern Time Thursday, April 26, 2018, by calling (855) 859-2056 in the United States and Canada or (404) 537-3406 outside of the United States and Canada. Passcode for the replay is 6098766.

About Destination Maternity

Destination Maternity Corporation is the world’s largest designer and retailer of maternity apparel. As of February 3, 2018 Destination Maternity operates 1,124 retail locations in the United States, Canada and Puerto Rico, including 487 stores, predominantly under the trade names Motherhood Maternity^®, A Pea in the Pod^® and Destination Maternity^®, and 637 leased department locations. The Company also sells merchandise on the web primarily through its brand-specific websites, motherhood.com and apeainthepod.com, as well as through its destinationmaternity.com website. Destination Maternity has international store franchise and product supply relationships in the Middle East, South Korea, Mexico, Israel and India. As of February 3, 2018 Destination Maternity has 188 international franchised locations, including 15 standalone stores operated under one of the Company’s nameplates and 173 shop-in-shop locations.

Reconciliation of Non-GAAP Financial Measures

This press release and the accompanying financial tables contain non-GAAP financial measures within the meaning of the SEC’s Regulation G, including 1) adjusted net loss, 2) adjusted net loss per share - diluted, 3) Adjusted EBITDA, 4) Adjusted EBITDA before other charges, 5) Adjusted EBITDA margin, and 6) Adjusted EBITDA margin before other charges. In the accompanying financial tables, the Company has provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. The Company’s management believes that each of these non-GAAP financial measures provides useful information about the Company’s results of operations and/or financial position to both investors and management. Each non-GAAP financial measure is provided because management believes it is an important measure of financial performance used in the retail industry to measure operating results, to determine the value of companies within the industry and to define standards for borrowing from institutional lenders. The Company uses each of these non-GAAP financial measures as a measure of the performance of the Company. In addition, certain of the Company’s cash and equity incentive compensation plans are based on the Company’s level of achievement of Adjusted EBITDA before other charges. The Company provides these various non-GAAP financial measures to investors to assist them in performing their analysis of its historical operating results. Each of these non-GAAP financial measures reflects a measure of the Company’s operating results before consideration of certain charges and consequently, none of these measures should be construed as an alternative to net income (loss) or operating income (loss) as an indicator of the Company’s operating performance, as determined in accordance with generally accepted accounting principles. The Company may calculate each of these non-GAAP financial measures differently than other companies.

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Important Additional Information

Forward-Looking Statements

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 earnings, net sales, comparable 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 strength or weakness of the retail industry in general and of apparel purchases in particular, our

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ability to successfully manage our various business initiatives, the success of our international business and its expansion, our ability to successfully manage and retain our leased department and international franchise relationships and marketing partnerships, future sales trends in our various sales channels, unusual weather patterns, changes in consumer spending patterns, raw material price increases, overall economic conditions and other factors affecting consumer confidence, demographics and other macroeconomic factors that may impact the level of spending for apparel (such as fluctuations in pregnancy rates and birth rates), expense savings initiatives, our ability to anticipate and respond to fashion trends and consumer preferences, unanticipated fluctuations in our operating results, 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, our ability to hire, develop and retain senior management and sales associates, our ability to develop and source merchandise, our ability to receive production from foreign sources on a timely basis, our compliance with applicable financial and other covenants under our financing arrangements, potential debt prepayments, the trading liquidity of our common stock, changes in market interest rates, our compliance with certain tax incentive and abatement programs, war or acts of terrorism and other factors set forth in the Company’s periodic filings with the SEC, or in materials incorporated therein by reference.

Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and persons reading this announcement are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this announcement. The Company assumes no obligation to update or revise the information contained in this announcement (whether as a result of new information, future events or otherwise), except as required by applicable law.

– Financial Tables to Follow –

CONTACT: Allison

Malkin

Caitlin Morahan

ICR, Inc.

(203) 682-8200

DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except percentages and per share data)

(unaudited)


	Three Months Ended						Twelve Months Ended
	February 3,			January 28,			February 3,			January 28,
	2018			2017			2018			2017
Net sales	$	105,147		$	100,158		$	406,207		$	433,699
Cost of goods sold		52,188			49,120			192,355			206,271

Gross profit		52,959			51,038			213,852			227,428
Gross margin		50.4	%		51.0	%		52.6	%		52.4	%
Selling, general and administrative expenses (SG&A)		56,967			53,914			218,656			223,881
SG&A as a percentage of net sales		54.2	%		53.8	%		53.8	%		51.6	%
Store closing, asset impairment and asset disposal expenses (income)		2,643			996			6,292			2,768
Other charges		1,166			2,911			4,912			4,914

Operating loss		(7,817	)		(6,783	)		(16,008	)		(4,135	)
Interest expense, net		1.056			969			4,045			3,575
Loss on extinguishment of debt		1,542			—			1,542			—

Loss before income taxes		(10,415	)		(7,752	)		(21,595	)		(7,710	)
Income tax provision (benefit)		(257	)		25,034			2			25,050

Net loss	$	(10,158	)	$	(32,786	)	$	(21,597	)	$	(32,760	)

Net loss per share – Basic and Diluted	$	(0.73	)	$	(2.39	)	$	(1.57	)	$	(2.39	)

Average shares outstanding – Basic and Diluted		13,824			13,723			13,788			13,702

Reconciliation of Net Loss to Adjusted Net Loss:
Net loss, as reported	$	(10,158	)	$	(32,786	)	$	(21,597	)	$	(32,760	)
Add: other charges for proposed business combination		85			1,858			1,198			3,154
Add: other charges for management and organizational changes		1,081			1,053			3,714			1,760
Add: loss on extinguishment of debt		1,542			—			1,542			—
Less: effect of change in accounting principle		—			—			(764	)		—
Less: income tax effect of other charges		(923	)		(1,092	)		(2,044	)		(1,858	)
Add: deferred tax valuation allowance related to cumulative losses		3,406			27,758			7,758			27,758

Adjusted net loss	$	(4,967	)	$	(3,209	)	$	(10,193	)	$	(1,946	)

Adjusted net loss per share – diluted	$	(0.36	)	$	(0.23	)	$	(0.74	)	$	(0.14	)

DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)


	February 3, 2018		January 28, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	1,635	$	2,859
Trade receivables, net		6,692		5,683
Inventories		71,256		69,040
Prepaid expenses and other current assets		11,522		9,464

Total current assets		91,105		87,046
Property and equipment, net		66,146		83,029
Other assets		5,331		5,912

Total assets	$	162,582	$	175,987

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit borrowings	$	8,000	$	4,600
Current portion of long-term debt		4,780		6,948
Accounts payable		30,949		17,656
Accrued expenses and other current liabilities		31,661		31,359

Total current liabilities		75,390		60,563
Long-term debt		23,809		31,485
Deferred rent and other non-current liabilities		22,715		22,789

Total liabilities		121,914		114,837
Stockholders’ equity		40,668		61,150

Total liabilities and stockholders’ equity	$	162,582	$	175,987

Selected Consolidated Balance Sheet Data

(in thousands)

(unaudited)


	February 3,		January 28,
	2018		2017
Cash and cash equivalents	$	1,635	$	2,859
Inventories		71,256		69,040
Property and equipment, net		66,146		83,029
Line of credit borrowings		8,000		4,600
Total debt		36,589		43,033
Stockholders’ equity		40,668		61,150

DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Twelve Months Ended
	February 3,			January 28,
	2018			2017
Operating Activities
Net loss	$	(21,597	)	$	(32,760	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		17,592			18,032
Stock-based compensation expense		1,154			1,801
Loss on impairment of long-lived assets		5,775			2,388
Loss on disposal of assets		349			272
Loss on extinguishment of debt		1,542			—
Grow NJ award benefit		422			349
Deferred income tax provision		—			24,614
Amortization of deferred financing costs		487			328
Changes in assets and liabilities:
Decrease (increase) in:
Trade receivables		(1,009	)		4,471
Inventories		(2,216	)		3,469
Prepaid expenses and other current assets		(1,990	)		328
Other non-current assets		14			37
Decrease in:
Accounts payable, accrued expenses and other current liabilities		8,565			(11,593	)
Deferred rent and other non-current liabilities		(219	)		(1,025	)

Net cash provided by operating activities		8,869			10,711

Investing Activities
Capital expenditures		(6,649	)		(12,690	)
Proceeds from sale of property and equipment		—			2
Additions to intangible assets		(18	)		(97	)

Net cash used in investing activities		(6,667	)		(12,785	)

Financing Activities
Increase (decrease) in cash overdraft		5,116			681
(Decrease) increase in line of credit borrowings		3,400			(23,800	)
Proceeds from long-term debt		25,901			32,000
Repayment of long-term debt		(34,382	)		(4,498	)
Deferred financing costs paid		(3,406	)		(1,519	)
Withholding taxes on stock-based compensation paid in connection with repurchase of common stock		(57	)		(54	)
Cash dividends paid		—			—
Proceeds from exercise of stock options		—			6

Net cash provided by financing activities		(3,428	)		2,816

Effect of exchange rate changes on cash and cash equivalents		2			1

Net Increase in Cash and Cash Equivalents		(1,224	)		743
Cash and Cash Equivalents, Beginning of Period		2,859			2,116

Cash and Cash Equivalents, End of Period	$	1,635		$	2,859

DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES

Supplemental Financial Information

Reconciliation of Net Loss to Adjusted EBITDA⁽¹⁾

and Adjusted EBITDA Before Other Charges,

and Operating Loss Margin to Adjusted EBITDA Margin

and Adjusted EBITDA Margin Before Other Charges

(in thousands, except percentages)

(unaudited)


	Three Months Ended						Twelve Months Ended
	February 3,			January 28,			February 3,			January 28,
	2018			2017			2018			2017
Net loss	$	(10,158	)	$	(32,786	)	$	(21,597	)	$	(32,760	)
Add: income tax provision (benefit)		(257	)		25,034			2			25,050
Add: interest expense, net		1,056			969			4,045			3,575
Add: loss on extinguishment of debt		1,542			—			1,542			—

Operating loss		(7,817	)		(6,783	)		(16,008	)		(4,135	)
Add: depreciation and amortization expense		4,333			4,449			17,592			18,032
Add: loss on impairment of long-lived assets		2,508			982			5,775			2,388
Add: (gain) loss on disposal of assets		66			(17	)		349			272
Add: stock-based compensation expense		296			528			1,154			1,801

Adjusted EBITDA (1)		(614	)		(841	)		8,862			18,358
Add: other charges for proposed business combination		1,081			1,858			1,198			3,154
Add: other charges for management and organizational changes		85			1,053			3,714			1,760
Less: change in accounting principle		—			—			(764	)		—
Add: other charges for fiscal year change		—			—			—			—

Adjusted EBITDA before other charges	$	552		$	2,070		$	13,010		$	23,272

Net sales	$	105,147		$	100,158		$	406,207		$	433,699

Operating loss margin (operating loss as a percentage of net sales)		(7.4	)%		(6.8	)%		(3.9	)%		(1.0	)%
Adjusted EBITDA margin (adjusted EBITDA as a percentage of net sales)		(0.6	)%		(0.8	)%		2.2	%		4.2	%
Adjusted EBITDA margin before other charges (adjusted EBITDA as a percentage of net sales)		0.5	%		2.1	%		3.2	%		5.4	%

(1)	Adjusted EBITDA represents operating loss before deduction for the following non-cash charges: (i) depreciation and amortization expense; (ii) loss on impairment of tangible and intangible assets; (iii) (gain) loss on disposal of assets; and (iv) stock-based compensation expense.

# # #

Exhibit 99.2

Destination Maternity

Fourth Quarter Fiscal 2017

Results Conference Call

4/19/18

Thomas McCracken, Senior Vice President, Finance:

Thank you, operator. Good morning everyone, and welcome to Destination Maternity’s fourth quarter fiscal 2017 earnings call. The earnings release that was disseminated this morning is available on the investor section of our website.

The earnings release contains definitions of various financial terms, as well as reconciliations of certain non-GAAP financial measures, we will be discussing in today’s call. If non-GAAP financial information is provided on this call, a reconciliation of the non-GAAP information to the most comparable GAAP financial measure is available in our press release.

This call will include certain forward-looking statements within the meanings of the federal securities laws. These statements relate to expectations, beliefs, projections, trends, and other matters that are not historical facts, and are subject to risks and uncertainties that might affect future events or results. Descriptions of these risks are set forth in the Company’s SEC filings.

Also, I would like to remind you that today’s call cannot be reproduced in any form without the expressed written consent of Destination Maternity.

Joining me on the call today are Melissa Payner-Gregor, our interim Chief Executive Officer, Ron Masciantonio, our Executive Vice President & Chief Administrative Officer, and David Stern, our Executive Vice President & Chief Financial Officer. Melissa will open with some remarks followed by additional commentary by Dave on our financial results. Afterward, Melissa, Dave and Ron will be available to take your questions. It is now my pleasure to turn the call over to Melissa.

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Melissa Payner-Gregor, Interim Chief Executive Officer:

Thank you, Tom. Good morning everyone. I am happy to speak to you today to update you on our progress as well as our go forward strategy.

Fiscal 2017 was a year of transition for the Company. Since I stepped into the interim CEO role in early January I have been more than impressed with how our team members have managed to maintain their focus in the face of so much change. And, while there is much work to be done, our Company has made meaningful strides in the past year which are worth noting:

(1)

We relaunched our four ecommerce websites in early 2017 with an increase in comparable sales in the channel of over 40%, with much of that improvement driven by major conversion improvements on all devices, particularly mobile. The strength of the digital platform helped us deliver a 5.2% total comp increase in the fourth quarter.

(2)

Consistent with our strategy to better integrate our brick-and-mortar and ecommerce sales channels, we enabled both fulfill from store and pickup from store from select store locations in the later part of the year.

(3)

We realized a 20-basis point increase in gross margin from fiscal 2016 driven partially by reduced product costs.

(4)

We implemented an internal reorganization and cost cutting initiative late in fiscal 2017 which contributed to an over $5.2 million reduction in SG&A for the partial year with an expectation that the annualized savings will exceed $10 million in fiscal 2018; and

(5)

We completed a refinancing of our outstanding term loan to provide greater liquidity.

In my brief time inside the Company as interim CEO we have identified many areas for improvement and are working on the following:

(1)

Comparable sales in our stores channel were down over 9% for the year. This channel is integral to our success and is an important differentiator. We believe a store presence is very important for the maternity customer, particularly the first-time mom, who may be uncertain of her sizing while pregnant and can benefit from the expert guidance of our knowledgeable

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team members. We believe we can improve performance through operational changes as well as developing greater connectivity between the stores and e-commerce allowing a renewed focus on the customer. Improving in this channel is a big opportunity and is key for our future.

(2)

Our digital channel is driving sales but as we grow the business we need to be very focused on balancing sales and profit. Initiatives such as fulfill from store and buy online and pick up from store are important in terms of connecting the brick and mortar and digital experience, but the costs of such initiatives must be properly balanced to ensure profit. The same goes with marketing spend as it relates to the digital channel – it must be well balanced and ROI focused.

(3)

The Company’s strategy over the last few years of reducing distribution points with an expectation that sales would transfer into the remaining locations has not been successful. We need to move smartly to reverse that strategy.

(4)

The Company needs to regain its entrepreneurial spirit by moving swiftly to try new ideas and learn from them quickly, which will inform better go forward decisions.

As we move forward, we have put into place and expect to execute the following strategies:

(1)

We must continue to offer the very best product to our customers. At our core, we are a fashion company. A new mom doesn’t have to change her style when she is expecting. We have highly differentiated product and on-trend style that is technically designed to fit her changing body. Examples of early successes in spring to date are: printed Maxi dresses with a comp increase of 40%; Graphic Tees with a 25% increase; Denim is really important this season. We are seeing increases of 13% in our black denim, but as the season progresses, we will see sales shift to new details like destruction and hem interest, let down hems, exaggerated fray, step hem, and raw cuffed hem. There is also newness in light/white denim with early reads showing increases of 22%. And we are very excited about our renewed focus on Nursing, approaching this from a fashion perspective. We now have trend right nursing tops and dresses with hidden zippers and openings so that the customer can go to a special dinner, brunch, a black-tie affair and be completely at ease. Spring-to-date, we are seeing 21% increases before

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we’ve even starting our marketing. And through our knowledgeable sales team, she can get a unique experience helping her through each trimester. She can’t get this anywhere else. We feel so lucky to share a part of the most exciting time in her life.

(2)

We must create a more seamless and relevant omni-channel experience. We expect to bring our strengths in each respective channel to all channels. For example, while our digital experience is highly efficient we do not currently provide the level of customer service and emotional connection that is driven by our excellent in-store sales associates. We are exploring creating a more interactive and informative experience online through initiatives such as live chat, increased content and online community. As for the stores, although our level of customer service is a strength, we are seeking to identify ways to increase traffic to our stores. We are working to use our strong traffic online to drive footsteps to the stores with our “buy online pickup from store” initiative as well as future initiatives, such as in-store appointment scheduling.

(3)

We must also continue to improve our product sourcing, planning, buying and allocation. Over the past few years we have made investments in our inventory management systems, processes and personnel to drive better results from conception through replenishment. We have gained insights on which we intend to capitalize. For instance, we believe our size profiling is causing us to miss sales in all channels. We are focused on gaining insight and capitalizing on this opportunity as we go forward, and,

(4)

We have an opportunity to expand our distribution points and product category offerings. As we move forward we believe there are opportunities for us to reinvigorate our distribution network, particularly in the digital space, where we believe incremental expansion can be accomplished. This year we expect to begin offering our product in at least one more online marketplace (in addition to Macys.com) with more to come. We are also working to deepen our relationship with Amazon by transferring onto the Amazon Retail platform which will give our Amazon customers full access to Prime fulfillment. We believe this is a meaningful growth opportunity given the majority of our sales decline from our peak in fiscal 2013 can be attributed to our declining distribution network. Furthermore, we believe our positioning gives us the unique opportunity to offer our customers products that extend beyond her pregnancy to her life as a new-mom, including baby apparel, hard goods and other products of interest to the

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growing family. We will be actively exploring opportunities to expand our product offering to include next stage products, initially through our digital platform utilizing a marketplace model,

(5)

We must both protect and expand the revenue we receive from our marketing partnerships business. We believe we have access to highly valuable customers and we have been able to leverage this access with our third-party partners to offer customers great savings and services beyond her maternity needs. We believe we can drive incremental revenue through this channel, and,

(6)

Finally, in all that we do, we need to work diligently ever day to improve our profitability. As mentioned previously our recent reorganization and cost cutting initiatives will deliver over $10 million in run-rate savings as we move forward. However, we will continue to adopt and maintain a stringent profit focused philosophy. This includes rigorous review of our real estate portfolio (which has a high degree of liquidity over the next several years) as well as opportunistically cutting or investing in our operation when ROI appropriate.

Before I pass the call to David to review our operating results, I wanted to provide a brief update on a couple key governance items:

As announced previously, our Board has been actively considering its composition including pursuing the addition of new members to expand the skills and experience on the Board to accelerate Destination Maternity’s path to profitable growth. In keeping with this objective, earlier this year, Peter Longo, formerly of Macy’s, joined our Board, and, in early April, the Board added Pierre Mestre, the Chairman and founder of Orchestra-Prémaman, our largest stockholder. These additions show our Board’s willingness to invite new opinions into the boardroom for the benefit of all stockholders, and that willingness continues.

As for our CEO search, the newly constituted Board is working diligently to identify and vet candidates for the permanent CEO role and expects to continue that work into this fiscal year.

I would now like to turn the call over to our CFO, David Stern, for the financial update.

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David Stern, Executive Vice President & Chief Financial Officer:

Thank you Melissa, and good morning to everyone on the call.

This morning I will review our fiscal 2017 fourth quarter and full year performance and key items on our balance sheet and cash flow.

As a reminder, we follow the standard retail calendar, so 2017 was a 53 week year.

Sales for the fourth quarter were $105.1 million, an increase of $5.0 million, or 5.0%, from the comparable quarter last year. This increase was primarily driven by an increase in comparable retail sales of 5.2%, which reflects the net effect of a 59.9% increase in ecommerce sales and a 6.9% decrease in comparable brick and mortar sales, as well as the additional sales generated in the 53rd week. These increases were partially offset by the wind down of the Kohl’s relationship and the net closure of 28 retail stores.

Gross margin for the fourth quarter was 50.4%, a decrease of 60 basis points from the same quarter last year. This decrease was primarily driven by the growth of our ecommerce business as a percent of our total sales, partially offset by improved product margins, due to lower costs, and lower levels of excess merchandise.

Gross profit for the fourth quarter was $53.0 million, an increase of $1.9 million, or of 3.8%, from the comparable quarter last year.

Selling, general & administrative expenses for the fourth quarter were $57.0 million, an increase of $3.1 million, or 5.7%, from the comparable quarter last year. This increase was driven by expenses incurred during the 53^rd week and increased marketing spend, partially offset by decreased employee costs and occupancy expense. As a percent of sales, SG&A increased 40 basis points to 54.2%.

Adjusted EBITDA before other charges for the fourth quarter was $0.6 million, a decrease of $1.5 million from the comparable quarter last year.

The net loss for the fourth quarter was $10.2 million, or $0.73 per share, compared to a net loss of $32.8 million, or $2.39 per share, for the prior year, which included a $27.8 million non-cash income tax charge, or $2.02 per share, due to a valuation allowance related to the net deferred tax asset.

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Adjusted net loss was $5.0 million, or $0.36 per share, compared to adjusted net loss of $3.2 million, or $0.23 per share, for the fourth quarter of fiscal 2016;

I will now turn to our full year results.

Sales for the fiscal year ended February 3, 2018 were $406.2 million, a decrease of $27.5 million, or 6.3%, from last year. This decline was primarily driven by the previously referenced wind down of the Kohl’s relationship, the net closure of 28 retail stores, and a decline in comparable sales of 1.5%, which reflects the net result of a decrease in brick and mortar comparable sales of 9.2% and an increase in ecommerce sales of 40.7%. These impacts were partially offset by sales during the 53^rd week of the retail calendar.

Gross margin in fiscal 2017 was 52.6%, an increase of 20 basis points from fiscal 2016. The year-over-year increase in gross margin was driven by reduced product costs and the exit from the leased department and licensed relationships, which generated lower than average gross margins.

Gross profit for the year was $213.9 million, a decrease of 6.0%, or $13.6 million from last year.

Selling, general & administrative expenses for fiscal 2017 were $218.7 million, a decrease of $5.2 million, or 2.3%, from last year. The decline in SG&A was primarily driven by reduced employee costs and lower occupancy expense, partially offset by increased marketing spend and expenses related to the 53^rd week of the retail calendar. As a percentage of sales, SG&A increased 220 basis points to 53.8%.

Adjusted EBITDA before other charges for the full year was $13.0 million, a decrease of $10.3 million from last year.

Net loss for fiscal 2017 was $21.6 million, or $1.57 per share. This compared to a net loss of $32.8 million, or $2.39 per share, for the prior year, which included a $27.8 million non-cash income tax charge, or $2.02 per share, related to a valuation allowance against the net deferred tax asset.

Adjusted net loss was $10.2 million, or $0.74 per diluted share, compared to an adjusted net loss of $1.9 million, or $0.14 per diluted share, for the twelve months ended January 28, 2017.

-7-

Turning now to the balance sheet:

At year end, Inventory was $71.3 million, an increase of $2.3 million, or 3.2%, from last year and Debt, net of cash, was $35.0 million, a decrease of $5.2 million from last year.

During fiscal 2017 we opened 7 stores and closed 35 stores for a net reduction of 28. We ended the year with 487 retail stores.

Capital Expenditures for 2017 were $6.7 million, a reduction of $6.0 million from last year. 2017 capital outlays were primarily the result of modest store investments, as we optimize our real estate portfolio, and investments in systems, primarily in our ecommerce platform. These investments represent a measured and revenue-focused approach on capital expenditures that we will continue as we move forward.

Turning to our outlook for the first quarter of fiscal 2018, we currently expect:

•

Comparable retail sales for the first quarter to be up in the low-single digits, driven by our e-commerce channel being up over 40% quarter to date.

•

And, SG&A expense to decline, and be lower than last year as a % of sales, reflecting the continued benefit of the internal reorganization and cost cutting initiatives that we put in place in fiscal 2017.

Turning to our outlook for full-year fiscal 2018, we currently expect:

•

Comparable retail sales for the full year to be up in the low-single digits;

•

Gross margin to be flat to down approximately 100 basis points year-over-year, driven by the continued growth of our e-commerce channel, which historically generated lower gross margin;

•

Selling, general & administrative expenses to decline, and be approximately 200 basis points lower than 2017 as a percent of sales;

•

Adjusted EBITDA before other charges to increase by 30% to 45%.

•

Capital expenditures are projected to be in the $5 million to $7 million range, compared to $6.7 million for fiscal 2017;

-8-

•

And, we plan to open 3 new stores and close 20 to 25 stores during the year.

Finally, before we open up the call to questions, I would like to point out that last Friday, we filed a preliminary proxy statement relating to our Annual Meeting of Stockholders scheduled for May 23^rd, which we expect will involve a contested election of directors. Since we are in a proxy solicitation period, we will not be taking questions regarding the preliminary proxy statement or the annual meeting today, but plan to provide additional information as that process proceeds.

I would now like to turn the call over to the operator to initiate the question and answer portion of the call.

Following Questions:

Melissa Payner-Gregor, Interim Chief Executive Officer:

Thank you for joining us today and we will talk with you again when we report our first quarter results.

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Date: April 19, 2018

DESTINATION MATERNITY CORPORATION

/s/ David Stern

David Stern

Executive Vice President & Chief Financial Officer