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Value

Tracey Ryniec

Destination Maternity Corporation

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Destination Maternity Corporation has been making news lately. It recently opened its first Indian freestanding store and announced a partnership with entertainer Jessica Simpson on a new maternity line. This Zacks #1 Rank (Strong Buy) is still a value stock with a forward P/E of 12.6.

Most people know Destination Maternity through its biggest brands of Motherhood Maternity and a Pea in the Pod.

It operates 643 stores in the United States and Canada under those two names as well as Destination Maternity. The company also operates in 1384 leased department locations and has a website through destinationmaternity.com.

The company also sells its Oh Baby by Motherhood collection through a licensed arrangement at 1,100 Kohls and on kohls.com.

Internationally, it has 94 international franchised locations, including 80 shop-in-shop locations and 14 Destination Maternity brand stores.

First Freestanding Store in India

On May 16, the company announced the opening of its first freestanding store in Ambience Mall, the largest mall in India, which is located in Gurgaon which is near Delhi.

It is partnering with Mahindra Retail, which since 2009 had already been licensing the company's brands in shop-in-shops within its own Mom & Me stores.

Jessica Simpson Maternity Line To Launch

On May 14, Destination Maternity announced that it had entered into an exclusive licensing agreement between Camuto Group, the master licensee of the Jessica Simpson Collection, for a full line of maternity apparel.

"I'm so excited to partner with Destination Maternity to design a collection of fashionable styles that make you look and feel great!" Simpson has said, "You want to wear clothes that are flattering to your baby bump; you want to show your bump off."

The line will have a 70s vintage feel. It is due to launch in the fall.

Destination Maternity Beat By 15% in Fiscal Q2

On Apr 26, Destination Maternity reported fiscal second quarter 2012 results and surprised on the Zacks Consensus by 5 cents. Earnings per share were 38 cents compared to the consensus of 33 cents.

This was higher than the company's January guidance of between 21 and 31 cents per share.

Sales rose 3% to $137.8 million from $133.8 million in last year's quarter. The increase was primarily due to an increase in comparable sales and increased sales due to the expansion of its leased department relationship with Macy's.

Comparable sales rose 3.2% compared to just 0.3% in the year ago quarter. Comparable sales includes Internet sales. It included an extra calendar day due to leap year. Adjusting for the differences, comparable sales rose 0.7%.

Raised Full Year Guidance

With a better than expected second quarter, Destination Maternity raised its full year guidance to a range of $1.38 to $1.62 from the prior range of $1.26 to $1.51.

However, that is still 12% below last year's earnings of $1.76.

Zacks Consensus Estimate Rises

Given the more bullish full year guidance, the analysts raised estimates over the last 90 days. The fiscal 2012 Zacks Consensus jumped to $1.53 from $1.36 in the last 3 months.

Still Has Value

Shares sold off in 2011 on jitters over the U.S. economy but have since rebounded.

Still, shares haven't regained 2 year highs.

Destination Maternity still has a lot of value. In addition to a P/E under 15, which is my cut-off for value, it also has a price-to-book ratio of 2.7. A P/B ratio under 3.0 can mean a company is a value.

Its price-to-sales ratio is also indicating value at 0.5. A P/S ratio under 1.0 usually means a company is undervalued.

Juicy Dividend

On top of the value, shareholders are being rewarded with a juicy dividend currently yielding 3.6%. The average for its industry is to pay no dividend whatsoever so this is a nice added bonus.

Destination Maternity is an attractive value stock in the specialty retail sector.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec.

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