Stein Mart, Inc.
May 17, 2017
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Stein Mart, Inc. Reports First Quarter Fiscal 2017 Results

JACKSONVILLE, Fla., May 17, 2017 (GLOBE NEWSWIRE) -- Stein Mart, Inc. (NASDAQ:SMRT) today announced financial results for the first quarter ended April 29, 2017.

Highlights

Net income for the first quarter was $3.7 million or $0.08 per diluted share compared to net income of $13.3 million or $0.29 per diluted share in 2016. Income tax expense for the first quarter of 2017 includes $1.1 million ($0.02 per diluted share) higher expense related to the new accounting standard on stock compensation.

"We continue to experience softer than planned store traffic and sales. As a result, markdowns were significantly higher for the quarter despite our focus on inventory management. Given the uncertain retail environment, we are being more conservative planning fall, keeping a higher percentage of our buying in reserve to opportunistically take advantage of any sales upside. We expect to see additional inventory reductions as the year progresses," said Hunt Hawkins, Chief Executive Officer.

"Until we gain improved visibility during this period of weak retail apparel sales, we believe it is important to implement measures to maximize free cash flow to improve our financial position. In that regard, we have decided to suspend our quarterly dividend and significantly reduce our planned capital expenditures."

Sales
Total sales for the first quarter of 2017 were $337.3 million compared to $355.7 million in 2016. Comparable store sales decreased 7.6 percent primarily due to lower traffic. Ecommerce sales were up 38 percent over last year's first quarter.

Gross Profit
Gross profit for the first quarter of 2017 was $95.6 million or 28.3 percent of sales compared to $108.9 million or 30.6 percent of sales in 2016. The lower gross profit rate for the quarter reflects higher markdowns and higher occupancy costs that negatively leverage on lower sales.

Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses for the first quarter of 2017 were $85.5 million compared to $86.5 million in 2016. SG&A expenses were lower this year as a result of operating savings and lower expense for legal settlements that more than offset higher operating expenses from new stores.

Balance Sheet
Inventories were $322 million at the end of the first quarter of 2017 compared to $317 million at the same time last year. Average inventories per store were down 2.1 percent to last year.

Borrowings under our credit facilities were $157 million and unused availability was $94 million at the end of the first quarter. At the end of the first quarter last year, borrowings were $149 million and unused availability was $113 million.

Cash Flows
Cash provided by operating activities was $40.2 million for the first quarter of 2017 compared to $60.3 million for the first quarter of 2016.

Capital expenditures totaled $7.2 million for the first quarter of 2017 compared to $11.3 million in 2016.  Planned capital expenditures for fiscal 2017 have been decreased to approximately $24 million or $21 million net of tenant improvement allowances. Capital expenditures were $42 million or $36 million net of tenant improvement allowances in fiscal 2016.

Suspending the $0.075 quarterly dividend will free up approximately $14 million of cash to apply against debt on an annual basis.

Store Activity
We had 292 stores at the end of the first quarter compared to 283 at the end of the first quarter last year. We opened five new stores and closed three stores during the quarter. We are now expecting to open a total of 10 new stores and close seven stores in 2017.

Updated 2017 Outlook 
We have updated our full year 2017 outlook as follows:  

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 April 29, 2017 with the Securities and Exchange Commission (SEC), and therefore remain subject to adjustment.

Conference Call
A conference call for investment analysts to discuss the Company's first quarter 2017 results will be held at 4:30 p.m. ET on May 17, 2017. The call may be heard on the investor relations portion of the Company's website at http://ir.steinmart.com. A replay of the conference call will be available on the website through May 31, 2017.

Investor Presentation
Stein Mart's first quarter 2017 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 and 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 will love every day both in stores and online. The Company currently operates 292 stores across 31 states. 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: 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, dividend impact on stock price, 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, impacts of seasonality, increases in the cost of compensation and employee benefits, 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 Ended13 Weeks Ended
  April 29, 2017April 30, 2016
    
Net sales $  337,335$  355,712
Cost of merchandise sold  241,779 246,820
Gross profit  95,556 108,892
Selling, general and administrative expenses  85,494 86,474
Operating income  10,062 22,418
Interest expense, net  1,139 966
Income before income taxes  8,923 21,452
Income tax expense  5,223 8,141
Net income $  3,700$  13,311
    
Net income per share:   
Basic $  0.08$  0.29
Diluted $  0.08$  0.29
    
Weighted-average shares outstanding:   
Basic  46,165 45,595
Diluted  46,171 46,275
    


 
Stein Mart, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except for share and per share data)
 
  April 29, 2017  January 28, 2017  April 30, 2016 
ASSETS   
Current assets:   
Cash and cash equivalents$  15,554 $  10,604 $  16,317 
Inventories   322,030    291,110    316,897 
Prepaid expenses and other current assets   24,161    30,249    22,676 
Total current assets   361,745    331,963    355,890 
Property and equipment, net   164,012    165,542    166,261 
Other assets   28,692    30,344    30,141 
Total assets$  554,449 $  527,849 $  552,292 
LIABILITIES AND SHAREHOLDERS' EQUITY   
Current liabilities:   
Accounts payable$  162,208 $  114,419 $  152,807 
Current portion of debt   8,333    10,000    10,000 
Accrued expenses and other current liabilities   71,360    72,772    75,385 
Total current liabilities   241,901    197,191    238,192 
Long-term debt   149,119    171,792    138,960 
Deferred rent   42,509    41,774    41,667 
Other liabilities   49,128    46,832    45,738 
Total liabilities   482,657    457,589    464,557 
COMMITMENTS AND CONTINGENCIES   
Shareholders' equity:   
Preferred stock - $.01 par value; 1,000,000 shares   
authorized; no shares issued or outstanding   
Common stock - $.01 par value; 100,000,000 shares   
authorized; 47,181,498, 47,018,942 and 46,372,908   
shares issued and outstanding, respectively   472    470    464 
Additional paid-in capital   51,557    50,241    44,370 
Retained earnings   20,059    19,853    43,175 
Accumulated other comprehensive loss    (296)   (304)   (274)
Total shareholders' equity   71,792    70,260    87,735 
Total liabilities and shareholders' equity$  554,449 $  527,849 $  552,292 
    


 
Stein Mart, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
   13 Weeks Ended  13 Weeks Ended 
  April 29, 2017  April 30, 2016 
Cash flows from operating activities:   
Net income $  3,700 $  13,311 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization    8,085    7,660 
Share-based compensation    1,523    1,590 
Store closing charges    286    - 
Impairment of property and other assets    31    - 
Loss on disposal of property and equipment    232    9 
Deferred income taxes    4,858    197 
Tax expense from equity issuances    -    (145)
Excess tax benefits from share-based compensation    -    (5)
Changes in assets and liabilities:   
Inventories    (30,920)   (23,289)
Prepaid expenses and other current assets    6,088    (4,090)
Other assets    1,279    (909)
Accounts payable    47,924    46,501 
Accrued expenses and other current liabilities    (1,550)   4,801 
Other liabilities    (1,355)   14,635 
Net cash provided by operating activities    40,181    60,266 
Cash flows from investing activity:   
Net acquisition of property and equipment    (7,182)   (11,271)
Net cash used in investing activity    (7,182)   (11,271)
Cash flows from financing activities:   
Proceeds from borrowings    108,911    80,855 
Repayments of debt    (133,261)   (122,055)
Cash dividends paid    (3,494)   (3,443)
Excess tax benefits from share-based compensation    -    5 
Proceeds from exercise of stock options and other    -    1,073 
Repurchase of common stock    (205)   (943)
Net cash used in financing activities    (28,049)   (44,508)
Net increase in cash and cash equivalents    4,950    4,487 
Cash and cash equivalents at beginning of year    10,604    11,830 
Cash and cash equivalents at end of period $  15,554 $  16,317 
    

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA:           
EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is not a measure of financial performance under generally accepted accounting principles (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. Adjustments to EBITDA include non-cash items (impairment charges), significant non-recurring unusual items (legal settlements) and new stores investments (pre-opening costs).

 Reconciliation of Net Income to EBITDA and Adjusted EBITDA
 Unaudited (in thousands)
   13 Weeks 13 Weeks
   Ended Ended
   April 29, 2017 April 30, 2016
 Net income$ 3,700  $ 13,311
 Add back amounts for computation of EBITDA:  
  Interest expense, net 1,139   966
  Income tax expense 5,223   8,141
  Depreciation and amortization 8,085   7,660
 EBITDA 18,147   30,078
 Adjustments:  
 Expense related to legal settlements 25   1,425
 Non-cash impairment charges 31   1
 New store pre-opening costs 1,131   1,126
 Total adjustments 1,187   2,552
 Adjusted EBITDA$ 19,334  $ 32,630
        
For more information:
Linda L. Tasseff
Director, Investor Relations
(904) 858-2639
ltasseff@steinmart.com