Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

May 22, 2019

(Date of Report; Date of Earliest Event Reported)

 

 

 

LOGO

STEIN MART, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Florida   0-20052   64-0466198

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

1200 Riverplace Blvd., Jacksonville, Florida 32207

(Address of Principal Executive Offices Including Zip Code)

(904) 346-1500

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, $0.01 par value   SMRT   The NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act (§240.12b-2 of this chapter).

Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐


ITEM 2.02

RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On May 22, 2019, Stein Mart, Inc. (“Stein Mart”) issued a press release announcing its financial results for the first quarter ended May 4, 2019. The information in this Current Report is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.

The Stein Mart press release is attached as exhibit 99.1.

 

ITEM 9.01

FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits

 

99.1   

Press Release dated May 22, 2019.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

   

STEIN MART, INC.

(Registrant)

Date: May 22, 2019     By:   /s/ James B. Brown
     

James B. Brown

Executive Vice President and Chief Financial Officer

 

EX-99.1

Exhibit 99.1

 

LOGO

 

May 22, 2019      For more information:
     Linda L. Tasseff
FOR IMMEDIATE RELEASE      Director, Investor Relations
     (904) 858-2639
     ltasseff@steinmart.com

Stein Mart, Inc. Reports First Quarter Fiscal 2019 Results

 

 

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. – 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       -       -    

Accrued expenses and other current liabilities

     84,118       77,650       78,418    
  

 

 

 

Total current liabilities

     282,766       167,296       331,465    

Long-term debt

     152,999       153,253       49,266    

Deferred rent

     -       39,708       41,535    

Noncurrent operating lease liabilities

     328,093       -       -    

Other liabilities

     31,335       33,897       38,785    
  

 

 

 

Total liabilities

  

 

 

 

 

795,193

 

 

 

 

 

 

 

 

 

394,154

 

 

 

 

 

 

 

 

 

461,051  

 

 

 

 

  

 

 

 

COMMITMENTS AND CONTINGENCIES

      

Shareholders’ equity:

      

Preferred stock - $.01 par value; 1,000,000 shares authorized; no shares issued or outstanding

      

Common stock - $.01 par value; 100,000,000 shares authorized; 48,065,250, 47,874,286 and 47,910,450 shares issued and outstanding, respectively

     481       479       479    

Additional paid-in capital

     60,797       60,172       56,961    

Retained deficit

     (9,879     (13,853     (576)   

Accumulated other comprehensive income (loss)

     237       253       (242)   
  

 

 

 

Total shareholders’ equity

  

 

 

 

 

51,636

 

 

 

 

    47,051       56,622    
  

 

 

 

Total liabilities and shareholders’ equity

  

 

 

 

 

 $        846,829

 

 

 

 

 

 

 

 

 

$        441,205

 

 

 

 

 

 

 

 

 

$        517,673  

 

 

 

 

  

 

 

 


Stein Mart, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

   

13 Weeks Ended

   

13 Weeks Ended

 
    May 4, 2019     May 5, 2018  

Cash flows from operating activities:

       

Net income

  $     3,969       $       7,334  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

       

Depreciation and amortization

      7,338         8,070  

Share-based compensation

      730         995  

Store closing (benefits) charges

      (8       116  

Impairment of property and other assets

      -         299  

Loss on disposal of property and equipment

      1         99  

Changes in assets and liabilities:

       

Inventories

      (18,397       (26,727

Prepaid expenses and other current assets

      (4,311       (8,977

Other assets

      7,553         (2,311

Accounts payable

      24,951         (25,735

Accrued expenses and other current liabilities

      10,424         217  

Other liabilities

        (17,051             (586

Net cash provided by (used in) operating activities

       

 

15,199

 

 

 

           

 

(47,206

 

 

Cash flows from investing activities:

       

Net acquisition of property and equipment

      (1,679       (1,664

Proceeds from cancelled corporate owned life insurance policies

      -         2,514  

Net cash (used in) provided by investing activities

       

 

(1,679

 

 

           

 

850

 

 

 

Cash flows from financing activities:

       

Proceeds from borrowings

      102,025         428,877  

Repayments of debt

      (102,325       (375,587

Debit issuance costs

      -         (802

Cash dividends paid

      (49       (147

Capital lease payments

      (184       (183

Repurchase of common stock

      (103       (37

Net cash (used in) provided by financing activities

       

 

(636

 

 

           

 

52,121

 

 

 

Net increase in cash and cash equivalents

      12,884         5,765  

Cash and cash equivalents at beginning of year

      9,049         10,400  

Cash and cash equivalents at end of period

 

$

 

   

 

21,933

 

 

 

   

 

$

 

 

 

   

 

16,165

 

 

 


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

We report our consolidated financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP financial measures provide users of the company’s financial information with additional useful information in evaluating operating performance.

Note 1: Adjusted EBITDA

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is not a measure of financial performance under GAAP. However, we present EBITDA in this release because we consider it to be an important supplemental measure of our performance and because it is frequently used by analysts, investors and others to evaluate the performance of companies. EBITDA is not calculated in the same manner by all companies. EBITDA should be used as a supplement to results of operations and cash flows as reported under GAAP and should not be considered to be a more meaningful measure than, or an alternative to, measures of operating performance as determined in accordance with GAAP.

The following table shows the Company’s reconciliation of net income to EBITDA and Adjusted EBITDA which are considered Non-GAAP financial measures. Adjusted EBITDA excludes non-cash items (impairment charges) and significant non-recurring unusual items.

 

        13 Weeks        13 Weeks    
      Ended        Ended    
        May 4, 2019            May 5, 2018    
 

Net income

 

 

 

 

$3,969

 

 

    

 

 

 

$7,334  

 

 

 

 

Add back amounts for computation of EBITDA:

      
 

 

Interest expense, net

    2,526          2,463    
 

 

Income tax expense

    53          60    
 

 

Depreciation and amortization

    7,338          8,070    
 

 

EBITDA

    13,886          17,927    
 

 

Adjustments:

      
 

 

Non-cash impairment charges

 

    -          299    
 

Expense related to legal settlements

    -          11    
 

 

New store pre-opening costs

    -          192    
 

 

Total adjustments

    -          502    
 

 

Adjusted EBITDA

    $13,866          $18,429    

Note 2: Changes in Comparable Sales

Management believes that providing calculations of changes in comparable sales including and excluding sales from licensed departments assists in evaluating the Company’s ability to generate sales growth, whether through owned businesses or departments licensed to third parties. The following table shows the Company’s reconciliation of these calculations.

 

              13 Weeks Ended    
                       May 4, 2019    
 

Decrease in comparable sales excluding sales from licensed departments (1)

      (2.5%)    
 

Impact of growth in comparable sales of licensed departments (2)

      0.8%    
 

Decrease in comparable sales including sales from licensed departments

   

 

 

 

(1.7%)  

 

 

 

(1)

Represents the period-to-period percentage change in net sales from stores open throughout the period presented and the same period in the prior year and all online sales of steinmart.com, excluding commissions from departments licensed to third parties.

 

(2)

Represents the impact of including sales of departments licensed to third parties throughout the period presented and the same period in the prior year and all online sales of steinmart.com in the calculation of comparable sales. The company licenses its shoe and vintage handbag departments in its stores and online to third parties and receives a commission from these third parties based on a percentage of their sales. In our financial statements prepared in conformity with GAAP, the company includes commissions (rather than sales of the departments licensed to third parties) in its net sales. The Company does not include the commission amounts from licensed department sales in its comparable sales calculations.