To Our Stockholders

Although this past year was a very challenging year for our company, as it was for all retailers, we are confident that we are taking the right actions to manage our business in this extremely difficult economic environment.

Also, although we are by no means satisfied with our earnings performance for fiscal 2008, we are pleased with our sales performance in recent months, especially considering the tough environment. We have a strong foundation as the leader in the maternity apparel business and, with the actions we are taking, we are confident we will build on this foundation and develop an even stronger company.

Over the past year, we have: (1) continued to generate strong cash flow and pay down debt by tightly managing our inventory and expenditures; (2) continued to close under-performing stores; (3) taken proactive steps to reduce our cost structure by $5 million annually; (4) undertaken a streamlining of our merchandise brands and store nameplates; (5) intensified our focus on improving merchandise assortments while reducing SKU count and enhancing the shopping experience in our stores; and (6) made significant progress in our planned international expansion.

Pursuant to our strategic restructuring announced in July 2008, we are rebranding our Mimi Maternity® merchandise brand under our A Pea in the Pod® brand beginning with the Spring 2009 collection. Also beginning with the Spring 2009 collection, we are rebranding our existing luxury-priced A Pea in the Pod merchandise assortment as the A Pea in the Pod Collection™ to emphasize its exclusive designer brand position. We also plan on streamlining our store nameplates by January 2009, by rebranding our single-brand Mimi Maternity stores as A Pea in the Pod, and by rebranding our multi-brand Mimi Maternity stores as Destination Maternity®. Consistent with this brand restructuring, on December 8, 2008 we changed our corporate name to Destination Maternity Corporation to better reflect our corporate mission of being the global leader in the maternity apparel business.

Over the past two years, we have reduced our debt by 34% and our interest expense by 52%, driven by a strong focus on cash flow generation and our favorable March 2007 debt refinancing. We also have a very strong financial position, with minimal maturities of long-term debt prior to March 2013, and a fully committed revolving credit facility that does not mature until March 2012, with us having no outstanding borrowings under our credit facility at fiscal year end 2008. We plan to continue to deleverage our balance sheet, as evidenced by our announced intention to prepay $10 million of debt by December 31, 2008.

As we plan our business for both this year and beyond, we are guided by 5 key overall corporate goals and strategic objectives:

1. Be a profitable global leader in the maternity apparel business, treating all of our clients, partners, team members and stakeholders with respect and fairness.


2. Increase the profitability of our U.S. business, focusing on the following:
   
   • Increase comparable store sales, with continued focus on selling, continued improvement of our merchandise assortments, and lower SKU count, providing a more shoppable store environment for our customers.
   • Implement our brand restructuring to better leverage our renowned A Pea in the Pod luxury brand and our growing Destination Maternity retail nameplate to drive sales with our customers, and to simplify our operations and reduce our cost structure.
   • Continue to expand our Destination Maternity chain where ROI hurdles are met, to operate larger, more profitable stores.
   • Control our expenditures and continue to be more efficient in operating our business‹streamline, simplify and focus; and
   • Continue to close under-performing stores.


3. Grow our business and drive profitability by:
   • International expansion, with our initial internationally franchised stores scheduled to open in the Middle East in 2009.
   • Potential growth in our leased department and licensed relationships.
   • Selective new store openings and relocations in the U.S. and Canada.
   • Continued growth in sales through the internet; and
   • Continued focus on enhancing our overall customer relationship, including our marketing partnerships and futuretrust® college savings program.


4. Generate free cash flow to drive increased shareholder value, and continue to deleverage our balance sheet; and


5. Maintain and intensify our primary focus on delivering great maternity apparel product and service in each of our brands and store formats, to serve the maternity apparel customer like no one else can.

Although these are tough times for the overall economy, we are very confident that our team has the high level of commitment, energy and focus needed to manage our business through these challenging times, and that we are taking the right actions to emerge as an even stronger global leader in the maternity apparel business as the economy recovers.