A restructuring at Destination Maternity could see the chain shutter a quarter of its stores and scale back its sourcing team.
In a statement Wednesday, the world’s largest maternity apparel retailer announced a restructuring of its corporate product and sourcing teams as part of a plan to cut costs as it looks to improve its product mix and inventory efficiency.
The moves, according to Destination Maternity, are expected to save the company between $1.2 and $1.4 million in fiscal 2019.
“Recognizing the need to focus our product assortment, rationalize costs and improve inventory efficiency, we completed an in-depth review of our product offer, overall inventory levels and distribution channels,” said Destination Maternity CEO Marla Ryan, who was appointed to the position earlier this year. “Through this effort, we identified profitable solutions to improve our product mix and reduce inventory as we begin 2019. We also made the difficult decision to reduce headcount in our product and sourcing divisions to better rationalize resources and costs across the organization.”
At the end of May, Destination Maternity brought on Ryan as its new CEO, who has spent 25 years in apparel and retail, including stints at Land’s End, Sears and J.Crew. Part of Ryan’s role as the company’s leader, is to implement a comprehensive new business plan aimed at improving profitability and rationalizing expenses.
In its second quarter and first half report released in September, Destination Maternity said net sales in the first six months of the year fell 2.5 percent to $199.6 million. Comparable sales increased 0.5 percent compared to a 5.5 percent decrease in the first half of 2017. The company lost $3.8 million in the first half of 2018, which followed a $10.2 million net loss last year.
Destination Maternity closed 27 stores in the last year, and more are now on the chopping block as the retailer looks to “right-size its ship,” according to Ryan.
“We completed a full assessment of our retail fleet, both stores and leased shops,” Ryan said on the company’s most recent investor conference call. “We are projecting store and lease shop closings of 117 by the end of fiscal 2018 and throughout the year we have been working on our occupancy savings from rent negotiations and estimate $2.3 million to $2.5 million in savings for all of 2018.”
By 2022, Destination Maternity projects closing between 240 and 280 of its current 480 stores and 634 leased shops, according to the Philadelphia Business Journal. That’s as much as 25 percent of its store fleet.
Part of the retailer’s restructuring and profitability improvement plan includes right-sizing inventory, too.
“2019 is the year we stop overbuying inventory and buy to our planned sales,” Ryan said on the call, adding that Destination Maternity is “putting in levers with our sourcing teams and vendors that allow us to chase product when it outperforms planned sales targets versus setting up front what will and won’t work.”
The efforts are expected to better position the retailer for success with a changing shopper.
“While these actions are never easy, the changes we are implementing will enable us to become a leaner and more nimble organization. They will also allow us to reallocate more of our resources on becoming a digital flagship serving the needs of today’s millennial moms and moms2be,” Ryan said.