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Destination Maternity to close 117 stores amid turnaround

Destination Maternity to close 117 stores amid turnaround

Dive Brief:

Destination Maternity last week said it will close 117 store and leased shops by the end of this year, with plans to shutter between 42 to 67 stores in fiscal 2019. The closures are part of a multiyear strategic plan, according to a press release. 

The company expects to save between $2.3 million and $2.5 million from lease renewal negotiations this year, plus another $1 million from a new performance-based executive compensation scheme, CEO Marla Ryan said on a conference call. The company is also boosting its evergreen offerings to between 70% and 80% of its assortment by the first quarter of 2019, and is working to boost international sales to between $7 million and $9 million by 2022.

By 2022, the company aims for online sales to make up 42% of total sales, or between $190 million to $200 million in revenue. In October, the retailer moved to support digital sales with same-day delivery in New York City, which Ryan said has had a “positive” reception, and through a new storefront on Amazon’s Marketplace.

Dive Insight:

Ryan recently inked a new three-year contract to stay on as the CEO of the troubled maternity business. That leaves her to pick up the pieces at a retailer that has experienced significant turmoil in its C-suite and on its board in recent months. 

She was first appointed CEO five months ago after she and three other “dissident” nominees, put forward by activist investors, were elected to the board. Shareholders also then swept the board, replacing members with, in addition to Ryan, Skullcandy Co-Founder Holly Alden, equity analyst Christopher Morgan and retail consultant Anne-Charlotte Windal. It was the “first time in recent corporate history that a majority of women dissident directors have won a proxy contest,” Reuters reported at the time.

The retailer has dubbed its turnaroundDestination Forward,” according to its presentation, forged in hopes of updating its inventory and sales channels, as it shutters unprofitable stores. The company plans to offer Apple Pay and Venmo as payment options and drastically reduce inventory to make way for its new merchandising approach, which Ryan said has entailed a “robust markdown strategy.” That will leave room for more evergreen products, which she said will drive $12 million in sales by 2019, along with $1.5 million in new category revenue. The company said its wholesale revenue will reach between $20 million and $25 million by 2022. 

Destination Maternity is also updating its store fleet, testing smaller store formats and catching up in e-commerce as the market segment faces tempered demand. Maternity apparel sales were down by 12% in fast-fashion private label (like ASOS Maternity) and by 35% in the luxury market, according to a report from retail and fashion technology firm Edited. There was also a reduction in new arrivals from brands like Mamalicious, Destination Maternity, A Pea in the Pod and Motherhood Maternity, according to that report.

Maternity is different to other shop by fit categories [like petite, tall or plus], in that pregnancy (bar the most active breeders) is a temporary state,” Katie Smith, Edited retail analysis and insights director, said in a blog post. “Perhaps consumers about to take on the expense of an extra human in their lives are more cautious to shop new trends than the market had hoped they’d be? We’ll keep an eye on this one.”