UNITED STATES
`
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`
`FORM 10-K
`
`(Mark One)
`
`ANNUAL REPORT PURSUANT TO SECTION l3 OR l5(d) OF THE SECURITIES EXCHANGE ACT OF I934
`For the fiscal year ended September 30, 2013
`01‘
`
`El
`
`TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
`1934
`
`For the transition period from _ to _
`Commission file number 0-21196
`
`Destination Maternity Corporation
`(Exact name of Registrant as specified in its charter)
`
`Delaware
`(State or other ]UI1SCl1CIZ10]'l
`of incorporation or organization)
`456 North Fifth Street,
`Philadelphia, PA
`(Address ofprincipal executive offices)
`
`133045573
`(IRS Ernployel
`Identification No )
`
`19123
`(Zip Code)
`
`(215) 873-2200
`(Registranfs telephone number, including area code)
`
`Securities registered pursuant to Section l2(b) of the Act:
`Name of each exchange on which registered
`Title of each class
`The NASDAQ Stock Market LLC
`Common Stock, par value $.01 per share
`Securities registered pursuant to Section lZ(g) of the Act:
`Series B Junior Participating Preferred Stock Purchase Rights
`(Title of class)
`
`Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes El No
`Indicate by check mark if the Registrant is not required to file reports pursuantto Section 13 or Section 1 5(d) of the Act. Yes El No
`Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or l5(d) of the Securities Exchange Act of 1934
`during the preceding 12 months (or for s11ch shorter period that the Registrant was required to file such reports), and (2) has been subject to s11ch filing
`requirements for the past 90 days. Yes
`No El
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
`to be submitted and posted pursuant to Rule 405 of Regulation S-'1' during the preceding 12 months (or for such shorter period that the registrant was required to
`submit and post such files).Yes
`No El
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best
`of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
`10—K.
`
`Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
`definitions of “large accelerated filer,” “accelerated filer” and "smaller reporting company” in Rule 12b-2 of the Exchange Act.
`
`Large accelerated filer
`Non-accelerated liler
`
`El
`El (Do not check ifa smaller reporting company)
`
`Accelerated filer
`Smaller reporting company
`
`El
`
`Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12h-2 of the Act). Yes El No
`
`Source: Destination Maternity Corp, 10—K, 12/13/2013 | Powered by Intelligize
`
`
`
`DMC Exhibit 2042_OO1
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`The aggregate market value of the voting and non-Voting common equity held by non-affiliates computed using $23.40, the price at which the
`common equity was last sold as ofMarch 28, 2013 (the last trading day of the Rcgistrant’s most recently completed sccond fiscal quarter), was
`approximately $305,000,000.
`
`On December 4, 2013, there were 13,679,228 shares of the Registrant’s common stock, $.01 par value, outstanding.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`
`Portions of the Registranfs Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting
`of Stockholders, expected to be held in the second quarter of fiscal 2014, are incorporated by reference into Part III of this Form l0—K.
`
`Source: Destination Maternity Corp, 10—K, 12/13/2013 | Powered by Intelligize
`
`DMC Exhibit 2042_002
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`PART I.
`
`Our/"iscalyear ends on September 30. All references in this report to ourfiscalyears refer to thefiscalyear ended on September 30 in the
`year mentioned. For example, our "fiscal 2013 ” ended on September 30, 2013. Unless otherwise indicated, operating data referred to in this
`report is as ofSeptember 30, 2013. As used in this report, the term “retail locations" includes our stores and leased departments and excludes
`locations where Kohl’s® sells our products under an exclusive product and license agreement, and also excludes internationalfranchised
`locations. As used in this report, “stores" means our stand-alone stores in the UnitedStates, Puerio Rico and Canada, which we operate.
`
`Item 1.
`
`Business
`
`Overview
`
`4:
`7:
`LE
`77
`Destination Maternity Corporation (the “Company”, “we , us , our”) is the leading designer and retailer of maternity apparel in the Ifnited
`States and is the only nationwide chain of maternity apparel specialty stores. As of September 30, 2013, we operate 1,907 retail locations, including
`596 stores in all 50 states, Pucrto Rico and Canada, and 1,311 leased departments located within department stores and baby specialty stores
`throughout the United States and Puerto Rico. We are also the exclusive provider of maternity apparel to Kohl’s, which operates approximately
`l,l58 stores throughout the United States and offers our maternity apparel in a significant number of its stores. We operate our 596 stores under
`three retail nameplates: Motherhood Materr1ity®, A Pea in the Pod® ar1d Destination Materr1ity®. In addition to o11r 596 stores, we operate l,3ll
`maternity apparel departments, which we refer to as leased departments, within leading retailers such as Macy’s®, Sears®, Gordmans®, buybuy
`P>ARY®, F3oscov’s® and Century 2l . We are the exclusive maternity apparel provider in each of our leased department locations. We also sell
`merchandise on the Internet, primarily through DestinationMatemity.com and our various bra11d-specific websites.
`
`V\7e have international store franchise and product supply relationships in the Middle East, South Korea, Mexico and India. As of September
`30, 2013, we have 143 international franchised locations, comprised of 20 stand—alo11e stores in the Middle East, South Korea and India operated
`under the Destination Maternity retail nameplate, and l23 shop-in-shop locations in South Korea and India, in which we have a Company-branded
`department operated by our franchise partners within other retail stores. In November 2013, we announced our expansion into Mexico through a
`franchise agreement with tl1c largest department store company in Mexico. Also in November 2013, we announced that we were unable to reach
`mutual agreement o11 acceptable renewal terms with our franchisee for India and, thus, this franchise relationship, which began in April 2009 and
`which covers ll0 maternity shop—in—shops and one franchise store. will end in March 2014.
`
`We maintain our leading position across all major price points of maternity apparel through our four distinct merchandise brands, which
`enable us to reach a broad range of maternity customers. Through our 596 stores and certain of our leased departments, we offer maternity apparel
`under one or both of our two primary merchandise brands, Motherhood Maternity (“Motherh0od" or “Motherhood Maternity”) at value prices and
`A Pea in the Pod (“Pea” or “A Pea in the Pod”) at both contemporary and luxury prices. Our A Pea in the Pod Collection® (“Pea Collection”) is the
`distinctive premier maternity apparel line witl1ir1 the A Pea i11 the Pod brand, featuring exclusive designer label product at luxury prices. V\7e also
`have two additional value—priced maternity apparel brands, our Oh Baby by Motherhood® collection, which we sell exclusively through Kohl’s, and
`our Two Hearts® Maternity by Destination Maternity® collection, available exclusively at Sears stores. Our brands are the exclusive matemity
`apparel offering in each of these chains.
`
`V\7e believe that one of our key competitive advantages is o11r ability to fulfill, in a higli-service store environment, all of an expectant or
`nursing mother’s clothing needs, including casual and career wear, formal attire, lingerie, sportswear a11d outerwear, in sizes that cover all trimesters
`of the maternity cycle. We believe that our vertically-integrated business model enables us to offer the broadest assortment of in-stock, fashionable
`maternity apparel. We design and contract manufacture over 90% of the merchandise we sell using sewing factories located throughout the world,
`predominantly outside of the United States.
`
`We have developed and introduced multi—brand store concepts to offer merchandise from our various brands in a single location, in order to
`provide a broader product assortment at multiple price ranges to our customers and to increase average store sales and profitability. We believe the
`continued rollout of our multi—brand store initiative provides the opportunity for us to improve store operating profit margins over time by reducing
`store operating expense percentages through economies of scale, and may increase overall sales in the geographical markets they serve. Our 1nulti-
`brand stores are operated under our Destination Maternity nameplate, which includes Destination Maternity combo stores (carrying Motherhood
`Maternity and A Pea in the Pod merchandise) and Destination Maternity superstores, which also carry both our Motherhood and Pea merchandise
`brands, as well as a significant array of maternity-related products and customer service features. These Destination Maternity stores are larger and
`have historically had higher average sales than our average store. Opening these Destination Maternity stores will often involve closing two or
`more smaller stores and may result in one-tirne store closing costs resulting primarily from early lease terminations.
`
`Source: Destination Maternity Corp, 10—K, 12/13/2013 | Powered by Intelligize
`
`
`
`DMC Exhibit 2042_003
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`In recent years, in addition to having closed some stores ir1 connection with tl1e opening of Destination Maternity r1a111eplate stores, we have
`also evaluated our retail store base to identify and, in many cases, close underperforming stores (referred to as “prunings”) where we can do so
`without disproportionate exit cost. These prunings typically add to our profitability by eliminating the operating expense of an underperfonning
`store while also typically transferring some of the sales from the closed store to other stores and/or leased departments we operate in that
`geographical area.
`
`In fiscal 2013 we closed 44 stores, 14 of which were closed i11 connection with the opening of Destination Maternity nameplate stores, with
`the remaining 30 store closings primarily consisting of prunings of underperforming stores. I11 fiscal 2013, we opened 15 stores, including nine
`Destination Maternity nameplate store openings. From fiscal 2005 through fiscal 2013, we closed 436 stores, 143 of which were closed in connection
`with the opening of Destination Maternity nameplate stores, with the remaining 293 store closings primarily consisting of prunings of
`underperforming stores. From fiscal 2005 through fiscal 2013, we opened 149 stores, including 67 Destination Maternity nameplate store openings.
`
`V\7e plan to open approximately 19 to 21 new retail stores d11ri11g fiscal 2014, of which we expect approximately 5 to 6 will be new Destination
`Maternitynameplate stores. We estimate that we will close approximately 47 to 53 stores in fiscal 2014, with approximately 12 to 14 of these store
`closings related to the opening ofnew Destination Maternity nameplate stores, and the remainder of these store closings primarily related to
`prunings of underperforming stores.
`
`Currently, we operate 31 Motherhood stores and two Destination Maternity superstores in Canada and a Motherhood website u11der a
`Canadian URL (MotherhoodCanada.ca). In addition, we believe there is a significant opportunity to continue to develop international sales beyond
`Canada. We currently have franchise agreements in place in the Middle East, South Korea and \4exieo. The initial franchise stores through our
`arrangement in the Middle East opened during 2009 and, as of September 30, 2013, there are 15 of our franchise stores operating in the Middle East.
`During fiscal 2011, we began offering our Motherhood Maternity branded merchandise in South Korea in maternity shop-in-shops operated by our
`franchise partner within other retail stores and in franchise stores. As of September 30, 2013, our merchandise is offered in 13 shop-in-shops and
`four franchise stores in South Korea. In November 2013, we announced our expansion into Mexico through a franchise agreement with El Puerto de
`Liverpool, S.A.B. de CV. (“Liverpool”), the largest department store company in Mexico. We will initially make our Motherhood Maternity and A
`Pea in the Pod branded merchandise available for sale in maternity shop—i11—shops located in our Mexico franchisee’s Liverpool department stores
`throughout Mexico, with plans to open freestanding franchise stores in Mexico later i11 2014 and beyond. In November 2013, we announced that we
`were unable to reach mutual agreement on acceptable renewal terms with our franchisee for India and, thus, this franchise relationship, which began
`in April 2009, will end in March 2014. We do not expect that the discontinuation of this franchise relationship will have a significant impact on our
`financial results. As of September 30, 2013, our merchandise is offered in 110 maternity shop-in-shops and o11e franchise store in India.
`
`We believe that our customers, particularly first-time mothers, are entering a new life stage that drives widespread changes in purchasing
`needs and behavior, thus making our matemity customer and her family a highly-valued demographic for a range of consumer products and
`services companies. As a result, we have been able to expand and leverage the relationship we have with our customers and generate incremental
`revenues and earnings by offering other value-added baby and parent-related products and services through a variety of marketing partnership
`programs utilizing our extensive opt—in customer database and various in—store marketing initiatives.
`
`The Company was founded in 1982 as a nrail-order maternity apparel catalog. We began operating retail stores in 1985 and completed our
`initial public offering in 1993. To address multiple price points in maternity apparel and improve operating productivity, we acquired Motherhood
`Maternity and A Pea in the Pod in 1995 and acquired other maternity apparel specialty chains from 1994 to 2001. Since the acquisitions of
`Motherhood Maternity and A Pea in the Pod, we have developed and grown these brands along with growing our Destination Maternity brand.
`Also, since the 1990s we have partnered with other retailers to sell our products through maternity apparel departments within their stores. On
`December 8, 200 8, we changed our corporate name from “Mothers Work, Inc.” to “Destination Matemity Corporation” and our Nasdaq® symbol
`from “MWRK” to “DEST” coincident with the name change.
`
`Industry Overview
`
`We are unaware of airy reliable external data on the size of the matemity apparel business. We believe that there is an opportunity to grow
`our business by selling maternity clothes to those pregnant women who currently purchase loose-fitting or larger-sized non-maternity clothing as a
`substitute or partial substitute for maternity wear. We also believe that our business can grow by reducing the amount of “hand-me-down” and
`“borrowing” associated with maternity apparel, particularly in the value-priced segment. Additionally, although we are not wholly unaffected by
`external factors (such as fluctuations in the birth rate), we believe that the demand for maternity apparel is relatively stable when compared to no11-
`maternity apparel. Expectant mothers continue to need to replace most of their wardrobe and the current rate of approximately four million United
`States births per year has remained relatively stable over the last decade, although the number ofbirths has declined by approximately 8.4% in the
`United States from 2007 to 2012,
`
`Source: Destination Maternity Corp, 10—K, 12/13/2013 | Powered by Intelligize
`
`
`
`DMC Exhibit 2042_O04
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`the period of latest available information. Also, although we are affected by fashion trends, we believe that maternity apparel is less fashion
`sensitive than women’s specialty apparel in general, as demand is driven primarily by the need to replace wardrobe basics as opposed to a desire to
`add to one’s wardrobe in order to meet current fashion trends.
`
`Our Competitive Strengths
`
`We are the leader in matemity apparel We are the leading designer and retailer of maternity apparel in the United States and are the only
`nationwide chain of maternity apparel specialty stores. We believe that our brands are the most recognized in matemity apparel. We have
`established a broad distribution network, with stores in a wide range of geographic areas and retailing venues. In addition, we have a leading
`position across all major price points of maternity apparel through our retail store nameplates and our merchandise brands. Our exclusive focus on
`maternity apparel and our leadership position enable us to gain a comprehensive understanding of the needs of our maternity customers and keep
`abreast of fashion and product developments. We further enhance our leadership position, increase market penetration and build our brands by
`distributing our products under leased department, licensed brand and international franchise relationships. We are also using the strength of our
`products, brands and store nameplates in the United States to expand internationally.
`
`We offer a comprehensive assortment of maternity apparel and accessories. A primary consideration for expectant mothers shopping for
`maternity clothes is product assortment, as pregnant women typically need to replace almost their entire wardrobe. We believe that we offer the
`widest selection of merchandise in the maternity apparel business. We also offer product for multiple seasons, as pregnant women’s clothing needs
`vary depending on their due date. Our ability to offer a broad assortment of product is due, in large part, to our vertically-integrated business
`model, which includes our extensive in-house design and contract manufacturing capabilities, as well as our rapid inventory replenishment system.
`
`We are vertically integrated. We design and contract manufacture over 90% of the merchandise we sell. We believe that vertical integration
`enables us to offer the broadest assortment of maternity apparel, to respond quickly to fashion trends and to optimize i11-stock levels. We combine
`our in—house design expertise. domestic and international sourcing capabilities, a rapid inventory replenishment process and extensive proprietary
`systems to enhance operational and financial results.
`
`We utilize a rapid inventory replenishment system We are able to offer a wide selection of merchandise in our retail locations due, in large
`part, to our rapid inventory replenishment system. Our proprietary inventory replenishment system enables us to offer our customers a much
`broader selection than any of our competitors, without dedicating retail space to “back-stock” storage. We coordinate the rapid replenishment of
`inventory for all of our retail locations through our Mid-Atlantic distribution facilities to meet the individualized needs of our retail locations. Our
`stores receive shipments from our distribution facilities between one and seven times per week. This enables us to maintain a high percentage in-
`stock merchandise position in each of o11r stores.
`
`We have proprietary systems that support our business. In order to support our vertically-integrated business model and inventory
`replenishment system, we have developed a fiilly integrated, proprietary enterprise resource planning (“ERP”) system. This system includes our
`point-of-sale systems, our merchandise analysis and planning systems, our materials requirement planning system, and our web-based, global
`sourcing and logistics systems. These systems also support our automated picking and sorting systems and other aspects of our logistics
`infrastructure. We believe that our proprietary systems enable us to offer a broad product assortment, rapidly replenish inventory in our retail
`locations, and respond quickly to fashion trends.
`
`We are able to obtain prime real estate locations. We believe our ability to lease attractive real estate locations is enhanced due to the
`brand awareness of our concepts, our multiple price point approach. our highly sought after maternity customer and our real estate management
`and procurement capabilities. V\7e are the only maternity apparel retailer to provide mall operators wit11 differently priced retail concepts, depending
`on the mall’s target demographics. We are also able to provide a Destination Maternity multi—brand store for malls whose maternity customers seek
`a wide range of price alternatives. In addition, in the case ofmulti-mall operators, we have the flexibility to provide several stores across multiple
`malls. As a result, we have been able to locate stores in many of what we believe are the most desirable shopping malls in the country and are able
`to obtain attractive locations within these malls.
`
`We are able to enhance our leadership position by distributing our products under exclusive leased department and licensed brand
`relationships. As of September 30, 2013 we operate 1,311 leased departments witl1i11 leading retailers such as MaCy’s, Sears, Gordmans, buybuy
`BABY, Boscov’s and Century 21. We are the exclusive maternity apparel provider in each of our leased department locations. We are also the
`exclusive provider ofmaternity apparel to Kohl’s pursuant to an exclusive licensed brand relationship. We believe that we have an opportunity to
`continue to increase the sales we generate from these ongoing relationships through expanding our relationships with our current retail partners as
`well as potentially developing relationships with new retail partners. In fiscal 2013, in connection with our broad-based partnership with Bed Bath &
`Beyond Inc. and its subsidiary, Buy Buy Baby, Inc., we began opening leased departments in select buybuy BABY stores. According to Bed Bath
`& Beyond lnc.’s latest public disclosure, as of October 9. 2013 there are 86 buybuy BABY stores. As of September 30, 2013 we operate leased
`departments in 59
`
`Source: Destination Maternity Corp, 10—K, 12/13/2013 | Powered by Intelligize
`
`
`
`DMC Exhibit 2042_O05
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`buybuy BABY stores. Over time, we expect to co11ti1111e to increase the nu111ber of buybuy BABY stores i11 which we l1ave a 1I1aternity apparel
`leased department.
`
`We have a highly experienced management team We have a management team with significant experience in all aspects of the retail a11d
`apparel business, including our Chief Executive Officer (“CEO”), Ed Krell, who has served as a senior executive of the Company for nearly 12 years
`a11d has over 25 years of business experience encompassing apparel, retail, finance and overall management, and our President, Chris Daniel, who
`has over 20 years of women’s apparel merchandising experience.
`
`Merchandise Brands
`
`We believe that our brands are the n1ost recognized brands in the matemity apparel business. We sell our merchandise under the following
`four distinct brands:
`
`Brand
`
`Motherhood Maternity
`
`A Pea in the Pod
`
`Two Hearts Maternity by
`Destination Maternity
`Oh Baby by Motherhood
`
`Brand Positioning
`
`Broad assortment of the latest fashions, offering great quality merchandise at everyday low
`prices
`Contemporary, fashion—forward and luxury, offering sophisticated career, as well as fi1n casual
`merchandise, including exclusive designer labels
`
`Select assortment of the latest fashions, offering great quality merchandise at value price points
`Select assortment of the latest fashions, offering great quality merchandise at value price points
`
`Typical
`Apparel
`Price Range
`
`$10 - $45
`
`$18 - $395
`
`$8 — $36
`
`$8 — $36 (1)
`
`(1)
`
`Kohl’s, which sells our Oh Baby by Motherhood brand under an exclusive product and license agreement, sets the prices for this
`merchandise.
`
`Motherhood Maternity. Our Motherhood Maternity brand serves the value-priced portion of the maternity apparel business, which has the
`greatest number of customers. The Motherhood brand is positioned with a broad assortment of quality fashion at everyday low prices. We believe
`that the \lotherhood customer shops at moderate-priced department stores, specialty stores and discount stores when she is not expecting.
`
`A Pea in the Pod Our A l’ea iii the Pod brand serves both the n1ediun1-priced (or “better”) portion a11d, through our A Pea in the Pod
`Collection line, the luxury portion of the maternity apparel business. The Pea brand is generally positioned as contemporary, fashio11-forward and
`luxury, with prices ranging from affordable mid-priced to true luxury prices, offering the n1om-to-be exceptional contemporary maternity pieces that
`reflect her uncompromising sense of style in both casual and career apparel. The Pea Collection is the distinctive premier matemity luxury line
`within the Pea brand, featuring a selection of extraordinary styles along with exclusive designer labels. In our stores which carry A Pea in the Pod
`brand merchandise, we also offer exclusive maternity versions of select styles from well-known designer and contemporary brands, where we have
`assisted in developing these maternity versions. We believe that the typical Pea customer shops at department stores a11d specialty apparel chains
`when she is not expecting, with the Pea Collection customer typically shopping at higher-end department stores and luxury designer boutiques
`when she is not expecting. We believe the Pea brand is the leading luxury maternity brand in the United States. Publicity, including celebrities
`wearing our clothes, is an important part of the marketing and positioning of the Pea brand.
`
`Two Hearts Maternity by Destination Maternity. Our Two Hearts Maternity by Destination Matemity collection is available at over 500
`Sears locations throughout the United States through a11 exclusive leased depaitrnent relationship. This collection delivers the latest i11 career and
`casual sportswear as well as dresses. swimwear. lingerie and nursing—friendly sleepwear, all specially designed to compliment the pregnant
`silhouette, with most items selling for under $25.
`
`0/: Baby by Motherhood. Our Oh Baby by Motherhood collection is available at Kohl’s stores throughout the United States and on
`Kohls.com. The Oh Baby by Motherhood collection is available under an exclusive product and license agreement with Koh1’s. The collection
`features a modern assortment of quality fashions. with n1ost items having initial prices (before price promotions) u11der $40. As of September 30,
`2013, Kohl’s operates approximately 1,158 stores throughout the United States and offers our maternity apparel in a significant number ofits stores.
`
`Source: Destination Matemity Corp, 102K, 12/13/2013 I Powered by Intelligize
`
`
`
`DMC Exhibit 2042_O06
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Retail Nameplates
`
`V\7e sell maternity apparel through our stores, and our leased department and licensed brand relationships, identified in the table below.
`
`Store Nameplate
`Stores:
`
`Motherhood Maternity
`
`A Pea in the Pod
`
`Destination Maternity
`
`Leased Departments:
`
`Macy’s
`
`Sears
`
`Gordmans
`buybuy BABY
`Bo scov ’ s
`Century 21
`Exclusive Licensed Brand
`Relatinnsh
`
`Kohl’ s
`
`Description of
`Target Location
`
`Mid-priced and moderate regional malls,
`strip and power centers, and central
`business districts
`Mid-priced and high-end regional malls,
`lifestyle centers, central business districts
`and some stand-alone stores in afflucnt
`street locations
`Combo stores located i11 mid-priced
`regional malls and lifestyle centers
`Superstores located primarily in outdoor
`and power centers and central business
`districts
`
`Brand(s) Carried
`
`Motherhood
`
`Pea (including, in some cases, Pea
`Collection)
`
`Motherhood; Pea (including, i11
`some cases, Pea Collection)
`
`Mid-priced regional malls
`
`Mid-priced and moderate regional malls
`
`Big box power centers
`Big box power centers
`Mid-priced and moderate regional malls
`World Trade Center, New York City
`
`Motherhood; Pea (includi11g, i11
`some cases, Pea Collection)
`Two Hearts Maternity by
`Destination Maternity
`Motherhood
`Motherhood; Pea
`Motherhood
`Motherhood; l’ca
`
`Typical
`Apparel
`Price Range
`
`Average
`Size (Sq. Ft.)
`
`1,800
`
`2,100
`
`Combo stores
`3,000
`Superstores
`6,200
`
`$10 — $45
`
`$18-$395
`
`$10- $395
`
`$10- $395
`
`$8- $36
`
`$10-$45
`$10— $198
`$10-$45
`$15 - $350
`
`Big box power centers
`
`Oh Baby by Motherhood
`
`$8 — $36 (1)
`
`( 1)
`
`Kohl’s, which sells our Oh Baby by Motherhood brand under an exclusive product and license agreement, sets the apparel price range for
`this merchandise.
`
`The following table sets forth our store count by nameplate as of September 30. 2013.
`
`Motherhood Maternity
`A Pea in the Pod
`Destination Maternity:
`Combo stores
`Superstores
`Total Destination Maternity stores
`Total stores (1)
`
`Number of Stores
`
`476
`31
`
`56
`33
`89
`596
`
`(1)
`
`Excludes (i) leased departments, (ii) locations where Kohl’s sells our products under an exclusive product and license agreement and (iii)
`international franchised locations.
`
`Maj or regional malls with several department stores and a wide range of price points may be able to accommodate a Destination Matemity
`store, or more than one maternity store. Our retail nameplates provide us with the ability to address multiple price alternatives at a given mall.
`Assuming we can obtain suitable locatio11s under acceptable financial terms, our preference is to operate one larger-sized n1ulti-bra11d store under
`the Destination Maternity nameplate i11 or near major regional malls, rather than two smaller
`
`Source: Destination Maternity Corp, 10~K, 12/13/2013 I Powered by Intelligize
`
`
`
`DMC Exhibit 2042_O07
`
`Target v. DMC
`|PR2013—OO530, 531, 532, 533
`
`

`
`single-bra11d stores. Over the last five fiscal years, we have reduced tl1e number of maj or regional malls ir1 which we had at least two of o11r store
`concepts, from 21 to five.
`
`Motherhood Maternity Stores. Motherhood Maternity is our largest chain with 476 stores as of September 30, 2013. Motherhood is
`position ed with a hroad assortment of quality fashion at everyday low prices. Motherhood stores average approximately 1,800 square feet and are
`located primarily in mid-priced a11d moderate regional malls, strip and power centers, a11d central business districts. Motherhood stores include 86
`outlet locations that carry Motherhood-branded merchandise as well as some closeout mercha11dise. In fiscal 2013, we opened six new Motherhood
`stores and outlets and closed 37 Motherhood stores and outlets, with 11 ofthese store closings related to Destination Maternity nameplate store
`openings. As of September 30, 2013, we operated 31 Motherhood stores in Canada and believe that market opportunities may permit us to open
`additional stores i11 Canada in the future.
`
`A Pet; in the Pod Stores. As of September 30, 2013, we had 31 A Pea i11 the Pod stores, averaging approximately 2,100 square feet. Certain of
`the A Pea in the Pod stores are located in mid-priced regional malls, lifestyle centers and central business districts while others are located in
`upscale venues, including Beverly Ilills, Water Tower Place (Chicago), South Coast Plaza (Orange County, California) and Newbury Street
`(Boston). In fiscal 2013, we closed five Pea stores, with two of these store closings related to Destination Maternity nameplate store openings.
`
`Destinutiun zllaternity Stores. As of September 30, 2013, we had 89 Destination Maternity nameplate stores averaging approximately 4,200
`square feet. including 56 Destination Maternity combo stores and 33 Destination Maternity supcrstores.
`
`Destzrzatiorz Maternity Combo Stores. As ofSeptember 30, 2013, we had 56 Destination Matemity combo stores. Our combo stores are
`larger (average of approximately 3,000 square feet) than our single-brand stores, generally have higher average sales volume than our
`average store and provide the opportunity to improve store operating profit margins over time. A new combo store often involves
`closing two stores (often one Motherhood store and one Pea store), although we sometimes close only one store in a given
`geog