PHILADELPHIA, Sept. 1 - Mothers Work, Inc. (Nasdaq: MWRK), the world's leading maternity apparel retailer, today announced that preliminary net sales for the month of August 2005 increased approximately 17% to approximately $45.8 million from $39.0 million reported for the month of August 2004. The increase in net sales for August was driven primarily by sales from the Company's new Oh Baby! By Motherhood(TM) licensed arrangement with Kohl's(R), which launched during the second quarter of fiscal 2005, and sales from the expansion of the Company's Two Hearts(TM) Maternity collection to an additional 497 Sears(R) locations during late March 2005. Comparable store sales for August 2005 were down approximately 0.5% (based on 1014 locations) versus a comparable store sales decrease of 13.0% (based on 888 locations) for August 2004. The comparable store sales decrease of 13.0% for August 2004 was negatively impacted by approximately 5 percentage points due to having only four Fridays and four Saturdays in August 2004 compared to five Fridays and five Saturdays in August 2003, as well as the later timing of the Labor Day holiday weekend in 2004 compared to 2003. During August 2005, the Company opened 1 store (a multi-brand store) and 6 leased department locations, and closed 2 stores, with 1 of these store closings related to a multi-brand store opening. The Company ended the month with 855 stores and 1,598 total retail locations, compared to 879 stores and 1,106 total retail locations at the end of August 2004. The significant increase in the Company's total retail location count compared to a year ago resulted predominantly from the expansion of the Company's proprietary Two Hearts(TM) Maternity collection during late March 2005.
Rebecca Matthias, President and Chief Operating Officer of Mothers Work, noted, "Our sales for the month of August improved significantly compared to July, even with the adverse impact on sales over the past week from Hurricane Katrina, as we saw the continued beneficial impact on sales of the additional markdowns we took in mid July on Spring merchandise. We estimate that our comparable store sales for August would have been flat to very slightly higher than last year, excluding the impact of Hurricane Katrina. As we discussed in our August 4 and July 26 press releases, we have seen an increasingly severe clearance environment for Spring maternity apparel since the middle of June, with this clearance environment being more severe than we had previously anticipated. Our aggressive markdowns of Spring merchandise have enabled us to achieve a lower level of Spring inventory than a year ago, although our total inventory remains significantly higher than a year ago, driven largely by inventory for our new initiatives with Kohl's and Sears, as well as intentionally increasing inventory for our Fall selling season earlier than last year to enable earlier positioning of Fall merchandise in our stores. We expect our comparable store sales to increase modestly for September, as Fall product becomes a more important driver of sales and we continue to face a very weak last year sales comparison. We expect our comparable store sales for our fourth quarter to be within, but probably in the bottom half of, our previously stated target for fourth quarter comparable store sales of between down 1% and up 1%. This would result in continued improvement from our comparable store sales decreases of 1.9% for the third quarter this year, 3.0% for the second quarter this year, 4.2% for the first quarter this year, and 8.3% for the fourth quarter of last year. However, given our somewhat weaker than expected sales and gross margin during July and August, we recognize there is risk to achieving our previous earnings guidance for the fourth quarter and full year fiscal 2005, which we provided in our July 26, 2005 press release, depending on our performance in September. Looking ahead, we are pleased with our Fall product lines and continue to be very excited about our new strategic business initiatives, including our Kohl's(R) and Sears(R) initiatives and our multi-brand store initiatives, to promote our long-term growth in sales and profitability, while addressing the continued strong competitive pressures in the maternity apparel business."
Mothers Work is the world's largest designer and retailer of maternity apparel, using its custom TrendTrack(TM) merchandise analysis and planning system as well as its quick response replenishment process to "give the customer what she wants, when she wants it." As of August 31, 2005, Mothers Work operates 1,598 maternity locations, including 855 stores, predominantly under the tradenames Motherhood Maternity(R), A Pea in the Pod(R), Mimi Maternity(R), and Destination Maternity(TM), and 743 leased departments, and sells on the web through its DestinationMaternity.com, maternitymall.com and brand-specific websites.
The Company cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this press release or made from time to time by management of the Company, including those regarding lease accounting and restatements of historical financial statements and expected results of operations and new business initiatives, involve risks and uncertainties, and are subject to change based on various important factors. The following factors, among others, in some cases have affected and in the future could affect the Company's financial performance and actual results and could cause actual results to differ materially from those expressed or implied in any such forward-looking statements: our ability to successfully manage our new initiatives, future sales trends in our existing store base, changes in consumer spending patterns, raw material price increases, consumer preferences and overall economic conditions, the impact of competition and pricing, availability of suitable store locations, continued availability of capital and financing, ability to hire and develop senior management and sales associates, ability to develop and source merchandise, ability to receive production from foreign sources on a timely basis, potential stock repurchases, potential debt repurchases, war or acts of terrorism, and other factors set forth in the Company's periodic filings with the Securities and Exchange Commission, or in materials incorporated therein by reference.
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