Destination Maternity Corporation announced results for the first quarter ended May 2, 2015. Net sales were $141.6 million compared with $143.5 million for the comparable three month period ended May 3, 2014.
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The slight decrease in total reported sales resulted primarily from decreased sales related to the company's continued efforts to close underperforming stores and a decrease in comparable sales, substantially offset by increased international sales.
The primary driver of the comparable sales decrease was adverse weather conditions across much of the United States during February, which suppressed store traffic and adversely impacted sales, particularly sales of Spring merchandise, which represent a significantly larger percentage of the company's total sales for the first fiscal quarter than do sales of Fall merchandise.
Comparable sales for the first quarter of fiscal 2015 decreased 1.1%, compared to a 4.0% decrease for the three months ended May 3, 2014.
Gross margin for the first quarter of fiscal 2015 decreased to 50.4% from 54.4% for the three months ended May 3, 2014. The year-over-year decrease in gross margin is consistent with the company's previous estimates and reflects price promotional and markdown activity to spur sales and more aggressively manage inventory, including the company's continued efforts to dispose of out-of-season merchandise.
Selling, general and administrative expenses ("SG&A") for the first quarter of fiscal 2015 decreased 0.7% to $64.0 million from $64.5 million for the three months ended May 3, 2014. As a percentage of net sales, SG&A increased to 45.2% for the first quarter of fiscal 2015 compared to 45.0% for the three months ended May 3, 2014.
The slight decrease in expense reflects a non-recurring reduction of $1.2 million from settlement of certain unclaimed property matters, cost reductions resulting from the company's continued closure of underperforming stores, and lower marketing and advertising expense, substantially offset by higher expenses for self-insured employee healthcare benefits and variable incentive compensation based on pro-rata financial projections.
Store closing, asset impairment and asset disposal expenses for the first quarter of fiscal 2015 increased to $1 million from $0.3 million for the three months ended May 3, 2014 primarily due to increased store asset impairments.
Adjusted EBITDA was $10.4 million for the first quarter of fiscal 2015, compared to $17.8 million for the three months ended May 3, 2014. Adjusted EBITDA before other charges was $12 million for the first quarter of fiscal 2015, compared to $18.1 million for the three months ended May 3, 2014. Adjusted EBITDA is defined in the financial tables at the end of this press release.
Net income for the first quarter of fiscal 2015 was $2.5 million, compared to net income of $7.7 million for the three months ended May 3, 2014.
Adjusted net income for the first quarter of fiscal 2015, which is presented in the financial tables at the end of this press release, was $3.7 million, and excludes total other charges of $1.1 million, net of tax, comprised of $0.6 million, net of tax, or $0.05 per diluted share, related to the company's relocations of its headquarters and distribution operations and $0.5 million, net of tax, or $0.04 per diluted share, related to management and organizational changes.
Adjusted net income for the three months ended May 3, 2014 was $8.0 million, and excludes total other charges of $0.3 million, net of tax, or $0.02 per diluted share, related to the company's relocations of its headquarters and distribution operations.
In accordance with the terms of its credit facility, effective June 3, 2015 the company's permitted borrowings under Tranche A of the credit facility were increased by $15 million at the company's request to provide additional financial flexibility.
After the increase, total permitted borrowings under the credit facility are $76 million, subject to the company's Borrowing Base formula. ■