By  on July 31, 2009

Reductions in inventories, expenses and markdowns helped Destination Maternity Corp. boost third-quarter profits by 64 percent.

The Philadelphia-based retailer said net income grew to $6.8 million, or $1.12 a diluted share, for the quarter ended June 30, compared with $4.1 million, or 68 cents a share, in the year-ago period. The company said July 9 that it would exceed the high end of its earlier guidance for earnings per share of between 74 and 91 cents.

Sales fell 6.4 percent to $142.5 million from $152.2 million in the prior-year quarter and were down 5.5 percent on a same-store basis.

Shares of the company soared 5.5 percent to $21.18 on Wednesday, following the earnings announcement, and added 98 cents, or 4.6 percent, on Thursday to close at $22.16.

“We have taken aggressive actions to manage our business in this tough environment, and with our tight management of expenditures and inventory, we were able to continue to reduce expenses and were able to control markdown levels versus last year, resulting in better-than-planned gross margin performance and lower-than-planned expenses,” said chief executive officer Ed Krell.

To protect profitability in the third quarter, the company reduced selling, general and administrative expenses 5.6 percent to $64.7 million. June 30 inventory stood at $72.8 million, 23.5 percent below the year-ago level. Quarterly gross margin improved to 54.4 percent of sales from 51.4 percent a year earlier.

For the nine months, the company, which earlier in the year took a charge of $50.4 million for goodwill impairment, swung to a loss of $42 million, or $7.02 a share, versus a profit of $3.4 million, or 56 cents a share, a year ago. Sales for the period shrank 6.1 percent to $407.4 million and slid 3 percent on a same-store basis.

Krell described July sales as weak and projected a same-store sales decrease of 7 to 9 percent for the month. In the fourth quarter, the company expects a loss of between 8 and 22 cents on sales of $122.6 million to $126.5 million. Comps are expected to be down 5.5 to 8.5 percent. In initial guidance for next year, the retailer projected EPS of $1.90 to $2.40 on sales of between $547 million and $560 million.

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