Market Overview

Stein Mart, Inc. Reports First Quarter Fiscal 2019 Results

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  • Net income of $4.0 million, or $0.08 per share in the first quarter of 2019 compared to $7.3 million, or $0.16 per share in 2018
  • Outstanding debt $55.6 million lower compared to end of first quarter of 2018
  • Comparable sales decreased 1.7%

JACKSONVILLE, Fla., May 22, 2019 (GLOBE NEWSWIRE) -- Stein Mart, Inc. (NASDAQ:SMRT) today announced financial results for the first quarter ended May 4, 2019.      

Net income for the first quarter of 2019 was $4.0 million or $0.08 per diluted share compared to a net income of $7.3 million or $0.16 per diluted share in 2018. Adjusted earnings before interest, income taxes, depreciation and amortization for the first quarter of 2019 was $13.9 million compared to $18.4 million for the first quarter of 2018 (see Note 1).

"With a late start to spring in the South and West, February was a challenging month with negative mid-single digit comp sales. Our comp sales for the combined March and April period dramatically improved. Comp sales in the first quarter also benefited by approximately 150 basis points from the shift of a 12-Hour Sale event from the second quarter to the first. With the event shift and slow selling thus far in May, we expect headwinds to impact the second quarter," said Hunt Hawkins, Chief Executive Officer. "Looking forward, with our 2019 sales-driving initiatives rolling out this fall, we believe that our comp sales trends and results will improve in the second half."
                                               
Stein Mart's second half sales initiatives include:

  • Launching two new product lines (kids and fine jewelry), which will increase transactions and appeal to a broader customer base
  • Buy online, pick up in store ("BOPIS"), which will drive store traffic and deliver incremental sales
  • Implementation of a marketing campaign management tool, which will analyze customer data to create personalized email and direct mail messaging to unlock additional sales

Mr. Hawkins continued, "Our lower gross profit rate reflects a planned rate decrease for the quarter from a change in our 2019 markdown cadence, the impact of the highly promotional event shift, and slightly higher markdowns to clear Fall merchandise. Despite the lower rate in the first quarter, we continue to expect our full year rate to be consistent with 2018. Finally, we are very pleased that we reduced borrowings by more than $55 million compared to the end of the first quarter of 2018."

Net Sales
Net sales for the first quarter of 2019 were $314.2 million compared to $326.6 million for the first quarter of 2018. Net sales were impacted by comparable sales results and fewer stores operating during the quarter.

Comparable sales decreased 1.7 percent (see Note 2) during the first quarter due to lower store traffic and average unit retail, partially offset by higher units per transaction. Digital sales increased 14 percent in the first quarter of 2019.

Gross Profit
Gross profit for the first quarter of 2019 was $87.5 million or 27.8 percent of sales compared to $96.0 million or 29.4 percent of sales in 2018. The decrease in the gross profit rate was driven primarily by a planned reduction from accelerated markdown cadence and the impact of the sales event shift.

Selling, General and Administrative Expenses 

Selling, general and administrative ("SG&A") expenses for the first quarter of 2019 decreased $4.4 million to $86.1 million compared to $90.5 million in 2018. The decrease in SG&A expenses was primarily from lower store related expenses including the impact of closed stores.

Income Taxes   
Income tax expense was less than $0.1 million for first quarter of 2019 and 2018. The small amount of income taxes reflects our estimated minimal taxable income for the year.

Cash Flows
Inventories were $274.3 million at the end of the first quarter of 2019 compared to $297.0 million at the same time last year. Average inventories per store were down 5 percent to last year.

Accounts payable was $20.9 million higher at the end of the first quarter of 2019 compared to the end of the first quarter of 2018, reflecting improved credit terms from our vendors and factors since the first quarter of 2018.

Debt decreased $55.6 million to $153.8 million at the end of the first quarter of 2019 compared to $209.4 million at the end of the first quarter of 2018. Unused availability under our credit facility increased $62.0 million to $102.0 million at the end of the first quarter of 2019 compared to $40.0 million at the end of the first quarter of 2018. In addition, we had $15.2 million available to borrow which would be collateralized by life insurance policies at the end of the first quarter of 2019.

Store Activity                   
We had 283 stores at the end of the first quarter of 2019 compared to 289 at the end of the first quarter of 2018. We closed four stores during the first quarter of 2019, which completes our store plans for the year.

Lease Accounting
We adopted the new lease accounting standard during the first quarter of 2019. The new standard required us to recognize right-of-use assets and lease liabilities for operating leases on the Condensed Consolidated Balance Sheet.  

Filing of Form 10-Q
Reported results are preliminary and not final until the filing of our Form 10-Q for the fiscal quarter ended May 4, 2019 with the Securities and Exchange Commission ("SEC"), and therefore remain subject to adjustment.

Conference Call
A conference call to discuss the Company's first quarter results will be held at 9:00 a.m. ET on May 22, 2019. The call may be heard on the Company's investor relations website at http://ir.steinmart.com. A replay of the conference call will be available on the website through June 30, 2019.

Investor Presentation
Stein Mart's first quarter 2019 investor presentation has been posted to the investor relations portion of the Company's website at http://ir.steinmart.com.

About Stein Mart
Stein Mart, Inc. is a national specialty off-price retailer offering designer and name-brand fashion apparel, home décor, accessories and shoes at everyday discount prices. Stein Mart provides real value that customers love every day both in stores and online. For more information, please visit www.steinmart.com.

Cautionary Statement Regarding Forward-Looking Statements
Except for historical information contained herein, the statements in this release may be forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company does not assume any obligation to update or revise any forward-looking statements even if experience or future changes make it clear that projected results expressed or implied will not be realized. Forward-looking statements involve known and unknown risks and uncertainties that may cause Stein Mart's actual results in future periods to differ materially from forecasted or expected results. Those risks include, without limitation: dependence on our ability to purchase merchandise at competitive terms through relationships with our vendors and their factors, consumer sensitivity to economic conditions, competition in the retail industry, changes in fashion trends and consumer preferences, ability to implement our strategic plans to sustain profitable growth, effectiveness of advertising and marketing, capital availability and debt levels, ability to negotiate acceptable lease terms with current and potential landlords, ability to successfully implement strategies to exit under-performing stores, extreme and/or unseasonable weather conditions, adequate sources of merchandise at acceptable prices, dependence on certain key personnel and ability to attract and retain qualified employees, increases in the cost of compensation and employee benefits, impacts of seasonality, disruption of the Company's distribution process, dependence on imported merchandise, information technology failures, data security breaches, single supplier for shoe department, single provider for Ecommerce website, acts of terrorism, ability to adapt to new regulatory compliance and disclosure obligations, material weaknesses in internal control over financial reporting and other risks and uncertainties described in the Company's filings with the SEC.   


Stein Mart, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)

    13 Weeks Ended 13 Weeks Ended
    May 4, 2019 May 5, 2018
       
Net sales   $  314,157 $  326,605
Other revenue     5,225   4,382
Total revenue     319,382   330,987
Cost of merchandise sold     226,698   230,621
Selling, general and administrative expenses     86,136   90,509
Operating income     6,548   9,857
Interest expense, net     2,526   2,463
Income before income taxes     4,022   7,394
Income tax expense     53   60
Net income   $  3,969 $  7,334
       
Net income per share:      
Basic   $  0.08 $  0.16
Diluted   $  0.08 $  0.16
       
Weighted-average shares outstanding:      
Basic     47,111   46,610
Diluted     47,489   46,659


Stein Mart, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except for share and per share data)

  May 4, 2019 February 2, 2019 May 5, 2018
ASSETS      
Current assets:      
Cash and cash equivalents $   21,933   $   9,049   $   16,165  
Inventories     274,281       255,884       296,964  
Prepaid expenses and other current assets     31,838       28,326       35,597  
Total current assets     328,052       293,259       348,726  
Property and equipment, net     118,350       123,838       144,109  
Operating lease assets     376,172       -       -  
Other assets     24,255       24,108       24,838  
Total assets $   846,829   $   441,205   $   517,673  
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
Accounts payable $   114,495   $   89,646   $   93,632  
Current portion of debt     -       -       159,415  
Current portion of operating lease liabilities     84,153       -  
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