Bankrupt Destination Maternity is on the brink of collapse - and declining birthrates may be to blame
- US birthrates have reached a 32-year low, a drop that has already negatively impacted sales at several companies including the manufacturers of diapers, baby bottles, and now maternity apparel.
- Destination Maternity, the largest global maternity company, filed for bankruptcy in October, with plans to close 183 stores across its three brands.
- According to Lyman Stone, an advisor at Demographic Intelligence, "Destination Maternity's declining net sales in recent years have tracked fairly closely with the sharp decline in births in the United States."
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The declining national birthrate isn't just a sociological concern - it also holds perilous economic implications for several industries, including, most recently, maternity apparel.
US birthrates hit a record 32-year low in 2018 after dropping 2% from 2017, according to the Centers for Disease Control and Prevention. Over the past two years, the dip has negatively impacted a variety of companies, from Toys R Us and Babies R Us to consumer-packaged-goods companies like Kimberly-Clark and Procter & Gamble that sell diapers and other products for babies.
Now it's coming for Destination Maternity, the largest global maternity company.
Destination Maternity- which operates Motherhood Maternity, A Pea in the Pod, and its namesake brand - filed for bankruptcy on October 21, with plans to shutter 183 US stores. While Destination Maternity has attributed sales declines to factors like lowered foot traffic and increased competition from e-commerce, it has also routinely mentioned "demographics and other macroeconomic factors" that include "fluctuations in pregnancy rates and birth rates" in forward-looking statements on earnings calls.
Other companies are feeling the impact
Destination Maternity is just the latest of a series of companies that have felt the strain of a dropping birthrate. In January 2018, Kimberly-Clark - which sells Huggies diapers - announced it would cut 13% of its global workforce as a result of slumping sales, citing a number of factors including lowered birthrates.
"I'd say, certainly in 2017 we had some factors like the birthrate in the U.S. and Korea being more negative than expected, that you can't encourage moms to use more diapers in a developed market where the babies aren't being born in those markets," CEO Thomas Falk said in an earnings call in January 2018.
Though Johnson & Johnson just last month was hit with a major recall of 33,000 baby powder bottles with possible traces of asbestos, in 2018 the company relaunched its baby-care line after reporting a 20% sales drop in the sector since 2011. Likewise, the recently appointed CEO of Edgewell Personal Care - which makes Playtex baby bottles - is considering selling off its feminine and infant care businesses, the St. Louis Post-Dispatch reported in February.
On Thursday, analysts at Demographic Intelligence - a forecasting firm specializing in national marriage and birthrates - said decreasing birthrates have played a direct role in the Destination Maternity bankruptcy.
"While competition from online retailers and other widely discussed factors may have had some role to play, Destination Maternity's declining net sales in recent years have tracked fairly closely with the sharp decline in births in the United States," Lyman Stone, an advisor at Demographic Intelligence advisor, said in a statement.
Further, Stone said the impact of declining birthrates is wide-ranging and will have significant ramifications for a wide number of industries in the future.
"Infant and maternity products are the canary in the coal mine," Stone said. "In a few years, we can expect to see weakness in the earnings reports for products aimed at older children, and, eventually, universities will face serious enrollment declines. From there, a smaller prime-age population will present challenges to many sectors of the economy, ranging from retail, to housing, to historically robust sectors like healthcare."