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Up to 642 layoffs threatened at Destination Maternity office, warehouse as bankruptcy advances (update)

Destination Maternity seeks bankruptcy protection. Chain is up for sale. Some stores will likely close before the December auction.

A new display at Destination Maternity in Cherry Hill, New Jersey, Monday, February 4, 2019 shows business professional maternity clothes.
A new display at Destination Maternity in Cherry Hill, New Jersey, Monday, February 4, 2019 shows business professional maternity clothes.Read moreMARGO REED / Staff Photographer

Oct. 24: Destination Maternity Corp. is preparing to lay off up to 430 workers at its Moorestown, Burlington County headquarters, plus 212 at its Florence, Burlington County warehouse, the company has told the New Jersey Department of Labor in a federal WARN Act notice.

That’s a worst-case scenario, according to what managers are telling employees in meetings and memos: If the company is reorganized or sold, many or most employees may keep their jobs.

Oct. 21: Destination Maternity Corp., the Moorestown-based store chain, filed Monday for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code in Wilmington as it seeks a buyer to avoid shutting down its Florence, N.J., warehouse and more than 400 stores.

The company, which has more than 3,000 part-time and full-time workers, has been for sale since September, four months after chief executive Marla Ryan stepped down under pressure from disappointed shareholders.

The company said it will be able to pay its workers and other costs as it reorganizes in advance of an auction scheduled for Dec 9. Neil Augustine and Peter Johns of investment bank Greenhill & Co. will run the sale.

But in the meantime, Destination Maternity plans to use bankruptcy protection to close some of its stores. “This decision is a difficult, but necessary, one,” Lisa Gavales, acting chief executive, said in a statement. She blamed the “very tough choices” on the “challenging retail market.” She added that the company has attracted interest from possible buyers.

Destination Maternity, founded in the 1980s as Mothers Work, had been based in Philadelphia but moved to New Jersey with aid from that state’s tax incentive programs in 2013.

The company sells pregnancy clothes under the Destination Maternity, A Pea in the Pod, and Motherhood brands. Read case documents at https://cases.primeclerk.com/DestinationMaternity/.

Robert J. Duffy of Berkeley Research Group is serving as the company’s chief restructuring officer, advised by lawyers from the Washington firm Kirkland & Ellis LP.