Destination Maternity Corp. has initiated job cuts the retailer said should generate cost savings of $4 million to $4.5 million on a projected annualized basis.
The company, which operates the Motherhood, A Pea In The Pod and Destination Maternity retail chains and e-commerce sites, said the reduction is part of its effort to become a more efficient and profitable organization.
“This reduction in force is a very difficult, but necessary step for the company,” Lisa Gavales, chair of the office of the CEO, said. “We are streamlining our teams and sharpening our product offering to focus on the key items that are most important and relevant to our new moms and moms2be. While challenging, this is a critical step in helping to position the business as a more nimble and profitable organization in the future.”
The company, based in Moorestown, N.J., did not say how many employees would be affected by the downsizing of its workforce, but that customary transition assistance will be provided to affected employees.
The workforce cut back is expected to result in a one-time severance charge of approximately $1.3 million to $1.5 million during the second quarter of 2019, with severance benefits paid out ratably.
As of May 4, Destination Maternity operates 998 maternity apparel and accessories retail locations, including 452 stores in the U.S., Canada and Puerto Rico, and 546 leased departments located within department stores and baby specialty stores in the U.S. and Canada. It also sells merchandise online, primarily through the Motherhood.com, APeaInThePod.com and DestinationMaternity.com websites, and through websites of certain of retail partners, including Macys.com.
In the first quarter of fiscal 2019 ended May 4, the company reported that net sales decreased 8.7 percent to $94.2 million, with sales negatively impacted by the net closure of 32 owned locations and 88 leased lease locations, as well as a 7.2 percent decrease in comparable sales.
Net income in the first quarter fell 50 percent to $100,000 from $200,000 in the prior-year period.
When the numbers were reported last month, Dave Helkey, chief financial officer of Destination Maternity, said, “As we look ahead, we are committed to strengthening the underlying fundamentals of the business and driving long term, profitable growth…The board of directors is conducting a comprehensive review of the company’s strategic initiatives to ensure that the company is pursuing an aggressive strategy that will drive real and sizeable change in the business.”