Retail

Destination Maternity files for bankruptcy

Key Points
  • Destination Maternity, the worlds' largest retailer for maternity wear, has filed for bankruptcy.
  • The company is working with advisors at the law firm Kirkland & Ellis and Berkeley Research Group.
  • The retailer, which employs a little over 1,100 full-time and 2,300 part-time employees, owned 458 U.S. stores as of February, according to regulatory filings.
Destination Maternity store
Source: Destination Maternity

Destination Maternity, a leading retailer of maternity wear, filed for bankruptcy Monday, buckling under the weight of an onerous debt load and struggling to compete with better capitalized competition. 

Destination Maternity has a market capitalization of nearly $5 million, according to FactSet. It has $260 million in total assets and $244 million in total debt according, to its bankruptcy filing. For fiscal 2018, it reported a net loss of $14.3 million on sales of $383.8 million according to its most recent annual report. 

The retailer, which employs a little over 1,100 full-time and 2,300 part-time employees, owned 458 U.S. stores as of February, according to regulatory filings. The company has 362 Motherhood Maternity Stores, 26 Pea in the Pod stores and 70 Destination Maternity stores. It operates additional stores globally and through franchise deals.

Destination Maternity also runs maternity apparel departments in stores that include Macy's and Bed Bath & Beyond's buybuy Baby.

Destination Maternity, which is working with advisors at the law firm Kirkland & Ellis and Berkeley Research Group, will try to find a buyer in bankruptcy, a person familiar told CNBC, which was first to report the coming bankruptcy filing. If it is unable, it will likely be forced to liquidate, the person said. 

As the retailer has dealt with deteriorating finances and a heavy debt load, it has been facing fortified competition from larger retailers that have the resources to invest in their online businesses. Nationwide, that competition includes Gap and its Old Navy brand, H&M, Target and Walmart.

It also faces increased competition from internet brands, like Asos, Pink Blush, Zulily and Hatch. Subscription retailers like Le Tote and Rent the Runway have pushed into maternity-wear, taking advantage of their existing e-commerce infrastructure.

Meantime, its prime demographic is diminishing. The U.S. birthrate dropped to a 32-year low in 2018, according to the U.S. Department of Health and Human Services. That shift comes as millennials are having children later, or not at all. The drop has whacked companies from Huggies diaper-maker Kimberly-Clark to baby oil and bubble bath maker Johnson & Johnson.

Correction: An earlier version of this story misstated the company's market value. It is nearly $5 million.

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