Destination Maternity Corp. recently announced a double dose of not overly great news. But there's a bright spot:
The Philadelphia apparel retailer, which is moving its corporate headquarters to South Jersey, said Wednesday that the sale of its headquarters at Fifth and Spring Garden Streets is expected to close by Sept. 30 and that the proceeds would amount to a gain. The buyer was not disclosed.
The company said interior renovations had begun on an office building in Moorestown for the new corporate headquarters. Ground was broken in March for a distribution facility in Florence.
On July 25, the company said it withdrew its bid to acquire Mothercare, a British retailer of maternity and children's products, after Mothercare's board rebuffed two offers.
Then Wednesday, Destination Maternity, which operates A Pea in the Pod and Motherhood Maternity stores, reported disappointing fiscal third-quarter earnings that it said "were considerably weaker than planned."
Management cited a persistently tough economic environment and the popularity of looser-fitting non-maternity fashions that had eaten into sales.
The late arrival of warm weather shortened the full-price spring and summer selling season, which led to price cuts and steeper markdowns, chief executive Edward Krell told investors.
In recent years, the global recession and weak economic recovery, plus an 8.3 percent drop in annual U.S. births since 2007, have taken their toll on Destination Maternity.
On July 2, the retailer, founded in 1982 under the name Mothers Work, announced its interest in acquiring Mothercare and said it had submitted two nonbinding proposals.
Mothercare's board said that "only a very significant increase" in the offer would be acceptable.
Said Krell: "We believe that there was a strong strategic rationale for a combination, which would have created a global leader in maternity, baby, and children's apparel and products, capable of accelerating the growth and long-term development of both businesses across channels and in markets around the world."
Destination Maternity's revenue in the latest quarter, which ended June 30, was $134 million, down 5.5 percent from a year earlier. Net income was $5.5 million, or 40 cents a share, compared with $8.6 million, or 64 cents a share, for the same period last year.
"We have seen improvement in our sales trend in July," Krell said.
In the latest quarter, the Destination Maternity brand was "too fashion-focused at the expense of more depth in key items in bottoms and knit tops," said Christopher Daniel, the company's president. "Our assortments are more balanced as we head into the fall."
The company noted "continued growth" of the Jessica Simpson maternity collection. Next month it will launch a maternity-wear collection from designer Wendy Bellissimo.
As of June 30, the company had $16.4 million in cash and no debt. It operates 575 retail stores and 1,326 leased department locations.