By  on July 25, 2007

NEW YORK — Mothers Work Inc. posted mixed third-quarter results due to an overall weak retail environment and forgiving fashions in women's apparel that allow mothers-to-be to skip maternity stores.

For its third quarter ended June 30, Mothers Work posted net income of $1 million, or 17 cents a diluted share, down from $8.8 million, or $1.54 a diluted share, in the same year-ago period. Excluding charges in connection with the repurchase of debt, income in the current quarter would have been $5.5 million, or 90 cents a diluted share. Sales fell by 6.5 percent to $153.2 million from $163.9 million.

For the first nine months, Mothers Work posted net income of $5 million, or 81 cents a diluted share, compared with $9.7 million, or $1.77, in the year-ago period. Excluding charges, income for the nine months would have been $10.7 million, or $1.74 a diluted share. Sales declined by 3.1 percent to $445.6 million, down from $459.9 million.

President and chief creative officer Rebecca Matthias said in a statement that third-quarter sales suffered from trends "such as trapeze and baby-doll dresses and tops, which can more readily fit a pregnant woman early in her pregnancy than typical nonmaternity fashions."

First Albany Capital analyst Paula Kalandiak, who rates Mothers Work shares at "buy," wrote in a research note the retailer has kept tight control on "relatively clean" inventory, and expects the company's fundamentals to improve in 2008 due to easier year-over-year comparisons and a shift in trends away from voluminous tops toward body-conscious looks that cannot double as maternity wear.

"We believe that trendsetting women's apparel retailers across the country have begun to move away from these styles, and that it will only be a matter of time before the more mainstream retailers catch on," Kalandiak wrote in a research note. "While the company's own stores posted a decline in sales, its other sources of revenue showed increases."

Mothers Work now sees fiscal 2007 diluted earnings per share, including the debt repurchase charges, of between 56 cents and 81 cents.

Philadelphia-based Mothers Work operates under the Motherhood Maternity, A Pea in the Pod, Mimi Maternity and Destination Maternity names in roughly 1,600 locations, including retail stores and leased departments in chains such as Babies ‘R' Us, Sears and Macy's.

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