Company is Streamlining Merchandise Brands and Store Nameplates and
Implementing Cost Reductions
PHILADELPHIA, July 1 /PRNewswire-FirstCall/ -- Mothers Work, Inc.
(Nasdaq: MWRK), the world's leading maternity apparel retailer, today
announced a strategic restructuring and streamlining of its merchandise
brands and store nameplates and the implementation of cost reduction
initiatives to improve the long-term profitability of its business. The
Company has also announced today that it remains comfortable with its
previously announced earnings per share guidance range for the third
quarter of fiscal 2008 and the full fiscal year 2008 as detailed in its
April 23, 2008 press release.
The Company will expand its A Pea in the Pod(R) brand, which is the
leading luxury maternity apparel brand in the United States, to include the
Company's distinctive and stylish mid-market Mimi Maternity(R) merchandise
assortments. The Mimi Maternity product line will be re-branded under the A
Pea in the Pod brand beginning with the Spring 2009 collection, which will
debut beginning in November 2008. Also beginning with the debut of the
Spring 2009 collection, the Company's current luxurious A Pea in the Pod
brand merchandise assortment will be re-branded as A Pea in the Pod
Collection(TM), to emphasize its exclusive designer brand positioning.
The Company will also restructure and streamline its store nameplates
beginning in January 2009. The Company plans to rename its single-brand
Mimi Maternity stores (consisting of 48 stores as of June 30, 2008) as A
Pea in the Pod, in order to align with the re-branding of the Mimi
Maternity product line under the A Pea in the Pod brand. In addition, the
Company plans to rename its multi-brand Mimi Maternity stores as
Destination Maternity(R), in order to better communicate to its customers
the multi-brand nature of these store formats. As of June 30, 2008, the
Company's multi-brand Mimi Maternity stores consist of 41 two-brand Mimi
combo stores, which currently carry merchandise under both the Mimi
Maternity and Motherhood Maternity(R) brands, and 3 three- brand Mimi
triplex stores, which currently carry merchandise under the Mimi Maternity,
Motherhood Maternity and A Pea in the Pod brands.
The Company's Motherhood Maternity merchandise brand and store
nameplate, which serves the value-priced portion of the maternity apparel
industry with a broad assortment of quality fashion at everyday low prices,
will not be affected by this merchandise brand and store nameplate
restructuring.
The following table sets forth the Company's store count by nameplate as
of June 30, 2008, both on an actual basis (before giving effect to the January
2009 store nameplate restructuring), and on a pro forma basis after giving
effect to the planned January 2009 store nameplate restructuring and
streamlining.
Store Count as of June 30, 2008
---------------------------------
Actual Pro Forma
---------------- ---------------
(before giving (after giving
effect to store effect to store
nameplate nameplate
Store Nameplate restructuring) restructuring)
----------------------------------- ---------------- ---------------
Motherhood Maternity 620 620
A Pea in the Pod 31 79
Destination Maternity 18 62
Mimi Maternity
- single-brand Mimi stores 48 -
- two-brand Mimi combo stores 41 -
- three-brand Mimi triplex stores 3 -
-------------- -------------
- Total Mimi Maternity stores 92 -
-------------- -------------
Total Stores 761 761
-------------- -------------
Partially as a result of the strategic restructuring and streamlining
of its merchandise brands and store nameplates, as well as from the
Company's initiatives to reduce overall SKU counts and to improve business
profitability through a general reduction of its cost structure, Mothers
Work announced that it is reducing its corporate headcount. The Company
expects to incur pre-tax expense of approximately $0.9 million from its
restructuring and headcount reduction actions, consisting of approximately
$0.5 million for cash severance expense and severance-related benefits, and
approximately $0.4 million of non- cash expense for accelerated
depreciation expense of existing store signs resulting from planned store
signage changes. Of the $0.9 million expense associated with these actions,
the Company expects approximately $0.7 million to be recorded in the fourth
quarter (ending September 30, 2008) of fiscal 2008, and approximately $0.2
million to be recorded in the first quarter of fiscal 2009. The Company
expects to realize approximately $5 million of annualized expense savings
from these actions, primarily consisting of reductions in employee payroll
and benefits expenses, beginning in the fourth quarter of fiscal 2008.
Rebecca Matthias, President and Chief Creative Officer of the Company,
commented "We are simplifying our business model, cutting overhead costs
and streamlining our merchandise assortments to drive the best possible
results both during this difficult economic period and for the long term.
We feel strongly that the strategic restructuring and streamlining of our
merchandise brands and store nameplates will help improve our long-term
profitability by simplifying our brand structure and leveraging both our
renowned A Pea in the Pod luxury brand and our growing multi-brand
Destination Maternity store brand. Our A Pea in the Pod brand is far and
away the leading luxury maternity apparel brand in the United States, and
we believe that our distinctive and stylish mid-market Mimi Maternity
merchandise assortments will be enhanced by the expertise and creative
focus of our restructured A Pea in the Pod merchandising and design team.
Our restructured A Pea in the Pod merchandising and design team will
leverage the skills of our most talented merchants and designers from both
our current A Pea in the Pod and Mimi Maternity product teams, which we
believe will lead to improved merchandise assortments for our customers,
with lower SKU count and overall inventory level, providing a more
shoppable store environment for our customers and a reduced cost structure
for these brands.
"Also, we believe our current multi-brand store nameplate structure is
somewhat confusing to our customers, since some Mimi Maternity stores carry
only Mimi Maternity product, others carry both Mimi and Motherhood
Maternity product, and others carry Mimi Maternity, Motherhood Maternity
and A Pea in the Pod product. We believe that the renaming of all of these
multi-brand stores as Destination Maternity will better communicate to our
customers the multi-brand nature of these store formats, and will help
increase the awareness and market presence of our already very successful
Destination Maternity store nameplate.
"We are also taking actions to streamline the merchandise assortments
in all of our brands, including in our Motherhood Maternity brand, with
planned SKU reductions, in order to present a more shoppable store
experience for our customers, while helping the Company achieve a planned
reduction of inventory level, increase in inventory turn, and reduction of
Company cost structure.
"We recognize the need to reduce the overall cost structure of our
business in order to strengthen our organization for the long term and to
improve our profitability. Thus, partially as a result of the restructuring
of our merchandise brands and store nameplates, but also as a result of our
SKU reduction initiatives and our efforts to identify general corporate
expense savings, we have made the difficult decision to reduce our
corporate staffing levels. We believe this staff reduction action is a
necessary element of our strategic actions to help make us a stronger
company with a more competitive cost structure and improved profitability
outlook, both in the near term and in the long term.
"We realize that we are faced with a weak overall economic and retail
environment and, thus, we are managing our inventory and all of our
expenditures very tightly. We believe these actions we have announced today
are important additional steps to help us reduce our inventory levels and
our cost structure and to increase our generation of free cash flow. Since
March 19, 2008, we have prepaid $13 million of our Term Loan and, even with
this prepayment, we had no outstanding borrowings under our credit facility
at June 30, 2008 and we expect to have none at the end of fiscal 2008.
"We remain comfortable with our previously announced earnings per share
guidance range for the third quarter of fiscal 2008 and the full fiscal
year 2008 as detailed in our April 23, 2008 press release. Looking forward
to fiscal 2009, we expect to generate higher earnings than fiscal 2008,
while generating significant positive free cash flow which would enable
further potential debt prepayments. We will report results for our third
quarter and hold an investor conference call on Tuesday, July 29, 2008."
Mothers Work is the world's largest designer and retailer of maternity
apparel, using its custom TrendTrack(TM) merchandise analysis and planning
system as well as its quick response replenishment process to "give the
customer what she wants, when she wants it." As of June 30, 2008, Mothers
Work operates 1,055 maternity locations, including 761 stores,
predominantly under the tradenames Motherhood Maternity(R), A Pea in the
Pod(R), Mimi Maternity(R), and Destination Maternity(R), and sells on the
web through its DestinationMaternity.com and brand-specific websites. In
addition, Mothers Work distributes its Oh Baby by Motherhood(TM) collection
through a licensed arrangement at Kohl's(R) stores throughout the United
States and on Kohls.com.
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 expected expense savings, results of
operations, liquidity and financial condition, free cash flow, potential
debt prepayments, 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: our
ability to successfully manage our various business initiatives, our
ability to successfully manage and retain our leased department and
licensed relationships and marketing partnerships, future sales trends in
our existing store base, weather, changes in consumer spending patterns,
raw material price increases, consumer preferences and overall economic
conditions, the impact of competition and pricing, availability of suitable
store locations, continued availability of capital and financing, 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.
SOURCE Mothers Work, Inc.
 back to top
Related links:
http://www.motherswork.com/
http://www.prnewswire.com/comp/581877.html/
CONTACT:
Edward M. Krell, Chief Operating Officer &
Chief Financial Officer of Mothers Work, Inc., +1-215-873-2220
|
