Destination Maternity slashes jobs as it tries to contain costs

Dive Brief:

Destination Maternity plans to reduce its workforce in order to cut costs, the apparel retailer said Monday. A spokesperson declined to comment on how many workers the company would lay off or if it would close additional stores, though the press release noted that the layoffs will "primarily impact the Company's product pipeline teams."
The retailer expects the layoffs to save $4 million to $4.5 million a year, though they would come with a one-time severance charge of up to $1.5 million. As it reorganizes its workforce, the company said it plans to keep focusing on item-driven assortment and evergreen product.
Lisa Gavales, who chairs Destination Maternity's chief executive office while it searches for a permanent CEO, said in a statement the company was streamlining its teams. "While challenging, this is a critical step in helping to position the business as a more nimble and profitable organization in the future," she said.

Dive Insight:

Destination Maternity's job cuts follow the departure of Marla Ryan as CEO "by mutual agreement with the Board" earlier this month as well as a discouraging first quarter that saw comparable sales fall 7.2% and its income shrink.

Ryan's departure adds to the management turnover at the troubled retailer. In November, she had inked a three-year contract to stay with the company, and had previously joined the board as part of a dissident group of directors installed by activist investors. And the CEO Ryan replaced had lasted for just months as well.

It's yet another hiccup in a rocky turnaround effort, which has seen Destination Maternity wrestling with margin losses and inventory piles. The retailer has worked to reduce markdowns, but that resulted in a decline in sales, including a 12.5% drop in e-commerce sales, Gavales told analysts earlier this month.

Last fall, the retailer announced it would close 117 stores, with plans to close up to 67 in fiscal 2019. CFO David Helkey said in June the company closed seven store locations and eight leased departments during Q1. Without providing numbers, he said that "we need to be more aggressive in both pruning our fleet and then tightly managing expenses on leased locations where we'd like to continue operating."

As it tries to turn around its sales, the retailer is testing accessories and baby clothes "to some degree," Helkey told investors, but he did not provide details on results from those tests or if they would be rolled out across the chain.