Non-Identical Twins for Mothers Work

Mothers Work Inc. (Philadelphia) announced that net income fell 16 percent for its third quarter of fiscal 2004 ended June 30. But net sales gained 5.4 percent.

Same-store sales fell 5 percent.

For the quarter, the company opened 23 new stores, including four new multi-brand stores, and closed 17 stores (with eight of these store closings related to openings of the multi-brand stores). In addition, the company opened 71 new leased department locations in the quarter with the exclusive introduction of its new Two Hearts Maternity collection in 71 Sears stores to replace the existing maternity lines in these stores. The company ended the quarter with 1109 total retail locations compared to 972 locations on June 30, 2003.

Net sales for the first nine months of fiscal 2004 are up 7.3 percent, though same-store sales have decreased 3.6 percent.

“The improved sales trend that we had experienced in the second quarter reversed in the third quarter,” noted president and coo Rebecca Matthias, “with sales particularly weak in June as we saw deep and widespread markdowns taken by our competitors to clear spring inventories. As we have previously discussed, competitive pressures in the maternity apparel market have increased over the past year. We currently face maternity competition in over 1000 more competitor locations than a year ago. We believe that this increased competition caused an oversupply of spring maternity apparel in the market and led to an increasingly severe clearance environment as the spring selling season progressed. With our comparable store sales down 5 percent for the third quarter, our earnings for the quarter were materially below last year and below our original expectations.

“We are cautiously encouraged by our improved sales results thus far in July compared to June,” she continued. “We currently expect our comparable store sales for the month of July to decrease approximately 1-2 percent, with July’s comparable store sales being favorably affected by 4 to 5 percentage points by having five Fridays and five Saturdays in July 2004 compared to four Fridays and four Saturdays in July 2003. This favorable ‘days adjustment’ effect for July will be offset by an equal unfavorable days adjustment effect for August.”

Matthias said she expects the retailer’s capital expenditures to be approximately $15 to $16 million for the year, primarily for new store openings, expanding and relocating selected stores and store remodelings. This is based on the company’s plan to open approximately 93 new stores, including approximately 23 new multi-brand stores, and close approximately 59 stores, with approximately 35 of these planned store closings related to the openings of multi-brand stores, including the new maternity “superstores.”

“Beginning last year, we have tested several combination store concepts under our Mimi Maternity brand, carrying a wide selection of both Mimi Maternity and Motherhood Maternity product and, in certain cases, A Pea in the Pod product,” she said. “We have been very encouraged by the initial results of our ‘combo’ stores in terms of their ability to drive increased sales and their potential to reduce store operating expense percentages. Based on our success with our initial combo stores, we opened additional two-brand combo stores, and also developed the concepts of a ‘triplex’ store, carrying all three of our brands, and a maternity ‘superstore’ which includes elements beyond apparel. As of June 30, 2004, we have 21 two-brand combo stores, 3 triplex stores, and one maternity superstore.”

In March, Mothers Maternity opened its first Maternitymall Superstore, in Danbury, Conn., a nearly 4000-square-foot test store carrying all three of its brands plus a greatly expanded line of nursing accessories, fertility-related products and maternity-related exercise gear, books, and body and nutritional products. This store also has a dedicated “learning center” area for maternity-related classes, as well as a “relax area” for husbands and shoppers alike and an inside play area for the pregnant mom’s toddlers and young children.

The company’s targeted sales for fiscal 2005 reflect its plan to open approximately 50 new stores, including 30 new multi-brand stores, and close approximately 80 stores, with approximately 65 of these planned store closings related to openings of new multi-brand stores.