Comparable Store Sales Decrease 1.3% on Reported Basis, and Increase
Approximately 2.7% after Adjusting for Calendar Shift
PHILADELPHIA, Oct. 8 /PRNewswire-FirstCall/ -- Mothers Work, Inc.
(Nasdaq: MWRK), the world's leading maternity apparel retailer, today
announced that net sales for the month of September 2008 decreased 5.8% to
$43.7 million from $46.4 million reported for the month of September 2007.
The Company also announced that its comparable store sales decreased 1.3%
on a reported basis and increased approximately 2.7% after adjusting for
the "days adjustment" calendar shift, which boosted August's reported
comparable store sales and hurt September's reported comparable store sales
due to the shift in the number of Saturdays and Sundays compared to last
year. The decrease in sales versus last year for the month of September
2008 resulted primarily from a decrease in Sears(R) leased department
sales, due to the closure of all of the Company's remaining leased
departments within Sears stores during the month of June 2008 and, to a
much lesser extent, decreased comparable store sales, including those sales
related to store closings resulting from Hurricanes Ike and Gustav.
Comparable store sales for September 2008 decreased 1.3% (based on 964
locations, which excludes three locations that remained closed as of
September 30, 2008 due to Hurricanes Ike and Gustav) versus a comparable
store sales decrease of 7.0% (based on 1,377 locations) for the September
2007 period. The comparable store sales decrease of 1.3% for September 2008
was unfavorably impacted by approximately 4 percentage points due to having
four Saturdays and four Sundays in September 2008 compared to five
Saturdays and five Sundays in September 2007 and due to the earlier timing
of Labor Day compared to last year. Thus, excluding the impact of the
unfavorable "days adjustment"/calendar shift, the Company estimates that
its adjusted comparable store sales for September 2008 increased
approximately 2.7%. The Company stated in its September 4, 2008 press
release that its comparable store sales increase of 7.2% for August 2008
was favorably impacted by approximately 4 percentage points due to having
one more Saturday and Sunday in August 2008 compared to August 2007. Thus,
the Company believes that its comparable store sales for the months of
August and September 2008 combined, which increased approximately 2.8%,
gives a more meaningful view of the Company's sales performance than
reported sales results for either month alone.
During September 2008, the Company opened its 19th Destination
Maternity(R) Superstore and closed 3 stores, with one of the store closings
representing a store that remained closed as of September 30, 2008 due to
Hurricane Gustav. As of the end of September 2008, the Company operates 754
stores, 278 leased department locations and 1,032 total retail locations
(which excludes one store and three total retail locations that remained
closed as of September 30, 2008 due to Hurricanes Ike and Gustav), compared
to 781 stores, 795 leased department locations and 1,576 total retail
locations operated at the end of September 2007. The Company was forced to
temporarily close as many as 46 locations because of Hurricane Ike and 14
locations because of Hurricane Gustav. As of September 30, 2008, all of
these affected locations have reopened, other than three locations that
remain closed. The decrease in leased department locations at the end of
September 2008 versus the end of September 2007 predominantly reflects the
closure of the leased departments within Sears stores as compared to the
501 Sears leased departments operated by the Company at the end of
September 2007.
Net sales decreased 3.9% to $130.5 million for the fourth quarter of
fiscal 2008 ended September 30, 2008, from $135.8 million for the same
period of the preceding year. The decrease in sales versus last year
resulted primarily from a decrease in sales from our leased department and
licensed relationships, largely due to a decrease in Sears leased
department sales, partially offset by an increase in comparable store
sales. Comparable store sales increased 2.8% during the fourth quarter of
fiscal 2008 (based on 960 locations, which excludes one store and three
total retail locations that remained closed as of September 30, 2008 due to
Hurricanes Ike and Gustav) versus a comparable store sales decrease of 6.8%
during the fourth quarter of fiscal 2007 (based on 1,365 locations). For
the quarter ended September 30, 2008, the Company opened four stores,
including two multi-brand stores, and closed 11 stores, including three
store closings related to multi-brand store openings.
Net sales decreased 2.9% to $564.6 million for the fiscal year ended
September 30, 2008, from $581.4 million for the same period of the
preceding year. The decrease in sales versus last year resulted primarily
from a decrease in sales from our leased department and licensed
relationships, largely due to a decrease in Sears leased department sales,
as well as reduced sales volume from the ongoing closure of certain
underperforming stores, partially offset by increased internet sales and a
slight increase in comparable store sales. Comparable store sales increased
0.2% during fiscal 2008 (based on 820 locations) versus a comparable store
sales decrease of 4.8% during fiscal 2007 (based on 1,330 locations). For
the year ended September 30, 2008, the Company opened 28 stores, including
seven multi-brand stores, and closed 55 stores, with 19 of these store
closings related to multi-brand store openings. During the year ended
September 30, 2008, the Company opened seven leased department locations
and closed 524 leased department locations, including the 501 Sears leased
departments operated by the Company at the end of September 2007.
Ed Krell, Chief Executive Officer of Mothers Work, noted, "We are
pleased with our continued strong sales performance, despite the continued
weak overall economic and retail environment and the adverse impact on
September sales from the hurricanes affecting the Gulf Coast region. For
the months of August and September combined, which eliminates the calendar
shift impact, our comparable store sales increased approximately 2.8%,
which we are very proud of given the weak macro environment. Our sales for
the fourth quarter of $130.5 million were at the low end of our guidance
range of $130.5 million to $134.4 million provided in our July 29, 2008
press release, and our gross margin in the quarter was somewhat lower than
planned, reflecting a greater than planned portion of our sales coming from
marked down Spring and Summer merchandise and our aggressive efforts to
manage our inventory levels. In addition, our gross margin was also hurt
due to spreading fixed product overhead costs over our lower production
volume, reflecting our tight management of inventory. With our aggressive
actions to manage our inventory level, our overall inventory level is
meaningfully lower than last year, and we believe we can continue to manage
our inventory levels without resorting to excessive markdown levels. Also,
we are happy to report that towards the end of September and into the first
several days of October, we have seen a nice pickup in our Fall product
sales, as we have seen favorable Fall-like weather in many regions of the
United States.
"As we announced in our July 1, 2008 strategic restructuring press
release, we are streamlining our merchandise brands and store nameplates
and have implemented cost reductions in order to simplify our business
model, reduce our overhead costs and improve and tighten our merchandise
assortments to drive the best possible results during this difficult
economic period and for the long term. We expect to realize approximately
$5 million of annualized expense savings from these actions, beginning in
the fourth quarter of fiscal 2008, and we incurred pre-tax expense of
approximately $0.9 million from these actions in the fourth quarter of
fiscal 2008. Also as previously announced in our September 29, 2008 press
release, in connection with the retirement of Dan Matthias as our CEO, we
incurred a pre-tax charge of approximately $2.5 million in the fourth
quarter of fiscal 2008 related to Mr. Matthias' supplemental pension
benefits.
"With sales at the low end of our guidance range and our lower than
planned gross margin for the quarter, as well as our restructuring and
management transition charges, we project that our fourth quarter diluted
earnings per share will be between a loss of $(0.77) and $(0.83) per share,
below our July guidance for diluted earnings per common share of between a
loss of $(0.30) and $(0.46) per share, which did not include the management
transition charge of approximately $(0.26) per share after tax. Before
restructuring and management transition charges, we are projecting fourth
quarter adjusted earnings per share (diluted) of between a loss of $(0.42)
and $(0.48) per share, which is lower than our July guidance for adjusted
diluted earnings per common share of between a loss of $(0.23) and $(0.39)
per share, but a significant improvement from our last year fourth quarter
net loss of $(0.92) per share.
"Looking forward, we feel very good about our product lines and we are
cautiously optimistic about seeing continued improvement in our sales
trend. However, we recognize that we are faced with a very weak overall
economic and retail environment and, thus, we are managing our inventory
and expenditures very tightly. Also, we feel strongly that the strategic
restructuring and streamlining of our merchandise brands and store
nameplates that we announced on July 1, 2008, will help improve our
long-term profitability by simplifying our brand structure, reducing our
cost structure, and leveraging both our renowned A Pea in the Pod luxury
brand and our growing multi-brand Destination Maternity store brand. We are
focused on developing great maternity product under each of our brands and
on improving our sales and profitability performance, while maintaining our
keen focus on generating cash flow."
"We will report results for our fourth quarter and hold an investor
conference call on November 18, 2008, at which time we will provide
additional information related to our results for the fourth quarter and
our future financial guidance."
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 September 30, 2008,
Mothers Work operates 1,032 maternity locations, including 754 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 net sales, comparable store
sales, other results of operations, liquidity and financial condition,
expense savings, 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, unusual weather patterns, changes in consumer
preferences and spending patterns, demographics and other macroeconomic
factors that may impact the level of spending for maternity apparel,
overall economic conditions and other factors affecting consumer
confidence, 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, 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.
Mothers Work press releases available through Company News On-Call at
http://www.prnewswire.com/comp/581877.html
SOURCE Mothers Work, Inc.
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Related links:
http://www.motherswork.com
http://www.prnewswire.com/comp/581877.html /
CONTACT:
Judd P. Tirnauer, Senior Vice President &
Chief Financial Officer of Mothers Work, Inc., +1-215-873-2278
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