Market Overview

Stein Mart, Inc. Reports Second Quarter Fiscal 2019 Results

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  • Operating income of $0.2 million in the second quarter of 2019 compared to $2.0 million in 2018
  • Net loss of $2.1 million, or $0.04 per share in the second quarter of 2019 compared to net loss of $1.0 million, or $0.02 per share in 2018
  • Outstanding debt reduced $36.8 million compared to end of second quarter of 2018
  • Strategic sales initiatives rolling out in the second half

JACKSONVILLE, Fla., Aug. 21, 2019 (GLOBE NEWSWIRE) -- Stein Mart, Inc. (NASDAQ:SMRT) today announced financial results for the second quarter ended August 3, 2019.  

For the second quarter, operating income was $0.2 million for 2019 compared to $2.0 million for 2018. Net loss for the second quarter was $2.1 million or $0.04 per diluted share for 2019 compared to net loss of $1.0 million or $0.02 per diluted share for 2018. Adjusted earnings before interest, income taxes, depreciation and amortization for the first half of 2019 was $20.8 million compared to $28.7 million for the first half of 2018 (see Note 1).

As reported earlier, comparable sales in the first quarter benefitted by approximately 150 basis points from the shift of a 12-Hour Sale event from the second quarter to the first. Excluding the shift, adjusted comparable sales decreased an estimated 3.3 percent for the first quarter of 2019 and 1.9 percent for the second quarter.

"After a slow start to the quarter caused by the event shift and soft selling, comp sales stabilized in the combined June/July period to essentially flat," said Hunt Hawkins, Chief Executive Officer. "With our fall sales-driving initiatives beginning to roll out this month, we believe our comp sales trend will improve in the second half."
                                               
This month, Stein Mart is launching its new Kids department and Buy Online, Pick Up in Store service. The Company will also début a Fine Jewelry product line by October. These and other initiatives are expected to drive incremental sales and store traffic beginning this fall.

Net Sales
Net sales for the second quarter of 2019 were $292.4 million compared to $310.9 million for the second quarter of 2018. Net sales were impacted by comparable sales results, including the event shift, and fewer stores operating during the quarter. Comparable sales for the second quarter of 2019 decreased 3.6 percent (see Note 2), or decreased 1.9 percent on an adjusted basis. Digital sales increased 7 percent over last year's second quarter.

For the first six months of 2019, net sales decreased 4.9 percent to $606.5 million while comparable sales decreased 2.6 percent to last year. Net sales were impacted by comparable sales results and fewer stores operating during the year. Digital sales increased 11 percent over last year's first half.

Gross Profit
Gross profit for the second quarter of 2019 was $74.7 million compared to $79.3 million in 2018. The gross profit rate for the second quarter of 2019 was flat to last year's significantly improved rate of 25.5 percent of sales.

Gross profit for the first six months of 2019 was $162.1 million or 26.7 percent of sales compared to $175.3 million or 27.5 percent of sales in 2018. The decrease in the first half gross profit rate reflects higher markdowns as a percent of sales, as well as the deleverage of occupancy costs on lower sales. Markdowns were higher as a percent of sales primarily due to a planned accelerated markdown cadence.

Selling, General and Administrative Expenses 
Selling, general and administrative ("SG&A") expenses for the second quarter of 2019 were $78.5 million compared to $80.9 million in 2018. For the first six months, SG&A expenses were $164.6 million in 2019 and $171.4 million in 2018. The decrease in SG&A expenses for both periods was primarily from lower store related expenses, including the impact of closed stores.

Cash Flows
Inventories were $238.4 million at the end of the second quarter of 2019 compared to $240.8 million at the same time last year. Inventories at the end of the second quarter of 2019 included higher amounts for the planned acceleration of receipts for categories that were trending strong, as well as amounts to support our recently launched Kids department. Excluding these impacts, average inventories per store were down 3 percent to last year.

Accounts payable was $21.0 million higher at the end of the second quarter of 2019 compared to the end of the second quarter of 2018, reflecting improved credit terms from our vendors and factors since the second quarter of 2018.

Debt decreased $36.8 million to $138.5 million at the end of the second quarter of 2019 compared to $175.3 million at the end of the second quarter of 2018. Unused availability under our credit facility increased $18.6 million to $61.9 million at the end of the second quarter of 2019 compared to $43.3 million at the end of the second quarter of 2018.  At the end of the second quarter of 2019, we had an additional $15.5 million available to borrow that would be collateralized by life insurance policies.

Store Activity                   
We had 283 stores at the end of the second quarter of 2019 compared to 289 at the end of the second quarter of 2018. We closed four stores during the first half 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.

Prior Year Financial Statements
Prior year amounts in the attached financial statements have been revised to reflect a correction to the impairment of fixed assets, as described in Note 2 to the financial statements included in our Form 10-Q for first quarter of 2019.

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 August 3, 2019 with the Securities and Exchange Commission ("SEC"), and therefore remain subject to adjustment.

Conference Call
A conference call to discuss the Company's second quarter results will be held at 4:30 p.m. ET on August 21, 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 August 31, 2019.

Investor Presentation
Stein Mart's second 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 Operations
(Unaudited)
(In thousands, except per share amounts)
           
    13 Weeks Ended 13 Weeks Ended 26 Weeks Ended 26 Weeks Ended
    August 3, 2019 August 4, 2018 August 3, 2019 August 4, 2018
           
Net sales   $   292,369   $   310,859   $   606,526 $   637,464
Other revenue     3,963     3,569     9,188   7,951
Total revenue     296,332     314,428     615,714   645,415
Cost of merchandise sold     217,703     231,519     444,401   462,140
Selling, general and administrative expenses     78,470     80,936     164,606   171,445
Operating income     159     1,973     6,707   11,830
Interest expense, net     2,192     2,865     4,718   5,328
(Loss) income before income taxes     (2,033 )   (892 )   1,989   6,502
Income tax expense     52     60     105   120
Net (loss) income   $   (2,085 ) $   (952 ) $   1,884 $   6,382
           
Net (loss) income per share:          
Basic   $   (0.04 ) $   (0.02 ) $   0.04 $   0.14
Diluted   $   (0.04 ) $   (0.02 )
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