NEW YORK — Mothers Work Inc.’s bottom and top lines continued to bulge in the third quarter with help from sourcing improvements and acquired stores.
The firm’s third-quarter net income all but doubled to $7.6 million, or $1.45 a diluted share, from $3.8 million, or 95 cents, a year ago. Wall Street was projecting significantly slimmer earnings of $1.19 a share.
A change in accounting principle inflated the comparison, allowing for no goodwill amortization to be recognized in the just-ended quarter and $600,000, or 16 cents a diluted share, of the expense in the year-ago period. Excluding the expense last year, EPS still grew by 34 cents.
Sales for the period ended June 30 strengthened by 17.9 percent to $122.6 million from $104 million a year ago. Comparable-store sales were up 4.1 percent.
President and chief operating officer Rebecca Matthias in a statement attributed the sales results to “strong reception of our spring product lines by our customers, the contribution of our quick response merchandise replenishment process and the successful integration of our October 2001 iMaternity acquisition.”
Since purchasing the 170-door iMaternity operation, 91 of its stores have been closed and Mothers Work has reaped sales benefits in markets where the businesses had previously gone toe-to-toe.
Overall, inventories at the end of June were up only 1 percent, despite the net addition of 133 new stores and double-digit sales gains.
Gross margins strengthened by 330 basis points and were “the single biggest factor driving our improved profitability,” according to chief financial officer Ed Krell, who spoke on a conference call. Much of the improvement was a product of reduced costs reaped through global sourcing initiatives.
Mothers Work also reduced borrowings under its line of credit to $1.5 million at the end of the quarter, from $32.2 million at the beginning of the fiscal year on Oct. 1 and $14.9 million a year ago. At the close of the quarter, the firm carried $98.3 million in long-term debt, up 2.4 percent from a year ago.
For the nine months, earnings leapt more than 233 percent to $10.9 million, or $2.18 a share, from year-ago profits of $3.3 million, or 60 cents. The year-ago period included goodwill amortization expense of $1.6 million, or 45 cents a diluted share.
Revenues ascended 15.6 percent to $341.8 million from $295.7 million a year ago. Comps inched up 1 percent.
The firm’s fourth-quarter earnings will be reduced by $3 million, or 70 cents a share, by one-time charges related to the early repayment of debt and the planned purchase of its Series C preferred stock.
For the three years beginning with fiscal 2003, Mothers Work is looking to increase earnings per share 18 to 20 percent annually. Sales for the three years should climb by an average of 10 percent a year — though it expects to fall short of that goal next year — aided by 1 to 2 percent comp-store sales growth and new stores. By the end of the period, the company also wants to strengthen its gross margin by 250 basis points.
Philadelphia-based Mothers Work operates 898 retail doors, including 145 leased departments, under the Motherhood Maternity, A Pea in the Pod and Mimi Maternity nameplates.