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Destination Maternity Outperforms in 2nd Qtr.

Stock surges as Destination Maternity firm exceeds expectations and lifts guidance.

Shares of Destination Maternity Corp. rose almost 55 percent in the two days after the maternity apparel retailer reported a second-quarter loss that was far lower than expected and raised its full-year guidance.

This story first appeared in the April 24, 2009 issue of WWD.  Subscribe Today.

For the period ended March 31, the Philadelphia-based firm recorded a net loss of $1.9 million, or 32 cents a diluted share, compared with a net loss of $390,000, or 7 cents a share, in the year-ago quarter. Stripping out a goodwill charge of $3.4 million, the company’s net income totaled $1.5 million, or 25 cents a share. In January, the retailer forecasted a loss of between 22 and 35 cents a share, excluding charges.

The closure of its remaining leased departments in Sears stores in June contributed to a 6.4 percent drop in sales, to $130.1 million from more than $139 million in last year’s quarter. Comparable-store sales shrank 2.8 percent, while gross margin rose to 53.7 percent of sales, up from 50.1 percent a year ago.

“Looking forward, we feel very good about our product line and the actions we are taking to streamline our business and to position us to improve our profitability both in the near term and the long term,” said chief executive officer Ed Krell in the company earnings call.

In the half, the firm registered a net loss of $48.8 million, or $8.17 a share, versus a loss of $742,000, or 13 cents a share, a year earlier. Sales slid 6 percent to $264.9 million from $281.9 million and comps fell 1.5 percent.

Next quarter, the company said it expects earnings per share of between 74 and 91 cents, with comps declining 2.5 percent. For the year, Destination Maternity anticipates earnings, excluding goodwill charges, of between 80 cents and $1.10, versus earlier projections of EPS of 20 to 60 cents with comps down between 2 and 3.5 percent.

On Thursday, shares closed at $10.74, up 7.1 percent, following a 44.7 percent ascent from an opening price of $6.93 on Wednesday.