Destination Maternity, the American retailer pursuing a takeover of Mothercare, has issued a profit warning after reporting a fall in sales.
Destination Maternity, which in the past two weeks has made two unsuccessful approaches for Mothercare, said “as a result of the weakness in sales results reported herein, as well as weakness in gross margin due to higher than planned price promotional and markdown activity”, it expects operating income, adjusted EBITDA and diluted and adjusted diluted earnings per share for the full fiscal year 2014 to be “below the guidance ranges provided previously”.
The retailer, which has over 500 stores in the US and is listed on the Nasdaq, said sales dipped 5.5% to $134m (£78m) for the third quarter of the year to June 30.
Destination Maternity chief executive Ed Krell blamed the drop in sales on a combination of factors, including a continued difficult economic and retail environment, leading to a drop in footfall, and women choosing non-maternity clothes such as maxi dresses and active bottoms with elastic waists rather than traditional maternitywear, and the later arrival of summer.
Mothercare has been the subject of two takeover bids from American maternity specialist Destination Maternity in the past week. Mothercare has so far rejected its offers, stating that it believed they undervalued the business.