A gain in gross margin helped Destination Maternity Corp. turn a profit in its fourth quarter despite a loss for the year.

In the three-month period ended Sept. 30, the Philadelphia-based maternity retailer recorded net income of $1.4 million, or 22 cents a diluted share, versus a loss of $4.8 million, or 80 cents a share, a year ago.

Sales in the quarter fell 5.1 percent to $123.8 million from $130.5 million, and comparable-store sales dropped 8.7 percent in the period.

Adjusted for restructuring and other charges, earnings per share was 32 cents in the quarter versus an adjusted loss per share of 44 cents a year ago.

The company told investors in July it expected a loss per share of between 8 cents and 22 cents in the fourth quarter. Destination Maternity beat its own estimates, partly because of a 610 basis point improvement in gross margin to 54.5 percent of sales from 48.4 percent.

“With our tight management of expenditures and inventory, we were able to continue to reduce expenses and were able to control markdown levels while operating the business with significantly lower inventory levels versus last year, resulting in better-than-planned gross margin performance and lower-than-planned expenses,” Ed Krell, chief executive officer, said on a conference call.

For the year, Destination Maternity posted a net loss of $40.7 million, or $6.79 a share, including a $50.4 million pretax expense for goodwill impairment and $1.6 million in restructuring charges. In 2008, the firm’s losses totaled $1.4 million, or 23 cents a share. Sales in the 12 months fell 5.9 percent to $531.3 million from $564.6 million.

Excluding goodwill impairment, full-year EPS was $1.60 a share.

The firm said fiscal 2010 revenues will be between $535 million to $548 million. Its previous outlook called for net sales of between $547 million and $560 million. Destination Maternity said it plans for a 2 percent to 4.5 percent falloff in comps but will see overall sales increases driven by the return of its Two Hearts Maternity brand at Sears and Kmart. It expects EPS between $1.58 and $2.11 in the current year.

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