Stein Mart, Inc.
Aug 16, 2017
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Stein Mart, Inc. Reports Second Quarter Fiscal 2017 Results

JACKSONVILLE, Fla., Aug. 16, 2017 (GLOBE NEWSWIRE) -- Stein Mart, Inc. (NASDAQ:SMRT) today announced financial results for the second quarter ended July 29, 2017.

Highlights

Net loss for the second quarter was $13.0 million or $0.28 per diluted share compared to net income of $3.0 million or $0.06 per diluted share in 2016. For the first six months of 2017, net loss was $9.3 million or $0.20 per diluted share compared to net income of $16.3 million or $0.35 per diluted share in the same period in 2016.

"Our second quarter sales trends improved from the first quarter and were strongest in July as we more aggressively priced our clearance merchandise," said Hunt Hawkins, Chief Executive Officer. "We are very pleased with the progress we made on our inventory management initiatives that resulted in 15 percent lower average store inventories at the end of the quarter. It is important that our inventories are in a very good position and well-balanced going into the fall season."

"We will continue to operate our business with lean store inventories and tight expense control this fall while putting into place new merchandising and marketing strategies that include the launch of a new advertising campaign in September. We expect our lower inventories will give us better margins from lower markdowns primarily in the fourth quarter."

Sales
Total sales for the second quarter of 2017 decreased 2.7 percent to $311.0 million, while comparable store sales decreased 5.0 percent. Ecommerce sales were up 41 percent over last year's second quarter. For the first six months of 2017, total sales decreased 4.0 percent to $648.4 million, while comparable store sales decreased 6.4 percent.

Gross Profit
Gross profit for the second quarter of 2017 was $64.7 million or 20.8 percent of sales compared to $89.4 million or 28.0 percent of sales in 2016. Gross profit for the first six months of 2017 was $160.2 million or 24.7 percent of sales compared to $198.3 million or 29.4 percent of sales in 2016. The lower gross profit rate for both periods reflects much higher markdowns and to a lesser extent higher occupancy costs that negatively leverage on lower sales. 

Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses for the second quarter of 2017 were $86.2 million compared to $83.8 million in 2016. SG&A expenses for the first six months of 2017 were $171.7 million compared to $170.3 million in 2016. The increase in SG&A expenses for both periods is primarily the result of higher operating expenses from new stores that were mostly offset by operating savings.

Balance Sheet
Inventories were $246 million at the end of the second quarter of 2017 compared to $280 million at the same time last year. Average inventories per store were down 15 percent to last year.

Borrowings under our credit facilities were $170.6 million at the end of the second quarter of 2017 compared to $167.4 million at the end of the second quarter last year. Unused availability at the end of the second quarter was $49.5 million.   

Cash Flows
Cash provided by operating activities was $24.9 million for the first six months of 2017 compared to $52.6 million for the first six months of 2016.

Capital expenditures totaled $11.8 million for the first six months of 2017 compared to $23.9 million for the first six months of 2016. 

Store Activity
We had 292 stores at the end of the second quarter compared to 283 at the end of the second quarter last year. No stores were opened or closed during the second quarter. We are now expecting to open a total of 10 new stores and close six stores in 2017.  

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 July 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 second quarter 2017 results will be held at 4:30 p.m. ET on August 16, 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 August 31, 2017.

Investor Presentation
Stein Mart's second 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 Operations
(Unaudited)
(In thousands, except per share amounts)
      
   13 Weeks Ended  13 Weeks Ended  26 Weeks Ended  26 Weeks Ended 
  July 29, 2017July 30, 2016July 29, 2017July 30, 2016
      
Net sales $  311,036 $  319,761$  648,371 $  675,473
Cost of merchandise sold  246,368  230,322 488,147  477,142
Gross profit  64,668  89,439 160,224  198,331
Selling, general and administrative expenses  86,201  83,840 171,695  170,314
Operating (loss) income  (21,533) 5,599 (11,471) 28,017
Interest expense, net  1,142  883 2,281  1,849
(Loss) Income before income taxes  (22,675) 4,716 (13,752) 26,168
Income tax (benefit) expense  (9,682) 1,709 (4,459) 9,850
Net (loss) income $  (12,993)$  3,007$  (9,293)$  16,318
      
Net (loss) income per share:     
Basic $  (0.28)$  0.07$  (0.20)$  0.36
Diluted $  (0.28)$  0.06$  (0.20)$  0.35
      
Weighted-average shares outstanding:     
Basic  46,264  45,719 46,214  45,657
Diluted  46,264  46,555 46,214  46,415
      

 


Stein Mart, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except for share and per share data)
    
  July 29, 2017  January 28, 2017  July 30, 2016 
ASSETS   
Current assets:   
Cash and cash equivalents$  10,577 $  10,604 $  11,765 
Inventories   246,243    291,110    279,691 
Prepaid expenses and other current assets   32,200    30,249    20,925 
Total current assets   289,020    331,963    312,381 
Property and equipment, net   160,282    165,542    169,597 
Other assets   29,806    30,344    29,892 
Total assets$  479,108 $  527,849 $  511,870 
LIABILITIES AND SHAREHOLDERS' EQUITY   
Current liabilities:   
Accounts payable$  87,561 $  114,419 $  98,185 
Current portion of debt   5,833    10,000    10,000 
Accrued expenses and other current liabilities   69,418    72,772    68,411 
Total current liabilities   162,812    197,191    176,596 
Long-term debt   164,779    171,792    157,371 
Deferred rent   42,293    41,774    42,286 
Other liabilities   48,271    46,832    46,149 
Total liabilities   418,155    457,589    422,402 
COMMITMENTS AND CONTINGENCIES   
Shareholders' equity:   
Preferred stock - $.01 par value; 1,000,000 shares   
authorized; no shares issued or outstanding   
Common stock - $.01 par value; 100,000,000 shares   
authorized; 47,904,091, 47,018,942 and  46,848,195   
shares issued and outstanding, respectively   479    470    468 
Additional paid-in capital   53,721    50,241    46,547 
Retained earnings   7,040    19,853    42,722 
Accumulated other comprehensive loss    (287)   (304)   (269)
Total shareholders' equity   60,953    70,260    89,468 
Total liabilities and shareholders' equity$  479,108 $  527,849 $  511,870 
    

 

Stein Mart, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
   26 Weeks Ended  26 Weeks Ended 
 July 29, 2017July 30, 2016
Cash flows from operating activities: (Unaudited)(Unaudited)
Net (loss) income $  (9,293)$  16,318 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization    16,226    15,611 
Share-based compensation    3,379    3,511 
Store closing charges    172    37 
Impairment of property and other assets    640    - 
Loss on disposal of property and equipment    236    10 
Deferred income taxes    4,199    978 
Tax expense from equity issuances    -    (196)
Excess tax benefits from share-based compensation    -    (471)
Changes in assets and liabilities:   
Inventories    44,867    13,917 
Prepaid expenses and other current assets    (1,951)   (2,339)
Other assets    (566)   (763)
Accounts payable    (26,800)   (7,763)
Accrued expenses and other current liabilities    (3,757)   (1,207)
Other liabilities    (2,409)   14,949 
Net cash provided by operating activities    24,943    52,592 
Cash flows from investing activities:   
Net acquisition of property and equipment    (11,761)   (23,939)
Proceeds from cancelled corporate owned life insurance policies    1,445    55 
Net cash used in investing activities    (10,316)   (23,884)
Cash flows from financing activities:   
Proceeds from borrowings    230,094    164,913 
Repayments of debt    (241,295)   (187,713)
Cash dividends paid    (3,563)   (6,885)
Excess tax benefits from share-based compensation    -    471 
Proceeds from exercise of stock options and other    328    1,439 
Repurchase of common stock    (218)   (998)
Net cash used in financing activities    (14,654)   (28,773)
Net decrease in cash and cash equivalents    (27)   (65)
Cash and cash equivalents at beginning of year    10,604    11,830 
Cash and cash equivalents at end of period $  10,577 $  11,765 
    

 

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 (Loss) Income to EBITDA and Adjusted EBITDA
Unaudited (in thousands)
  26 Weeks26 Weeks
  EndedEnded
  July 29, 2017July 30, 2016
Net (loss) income ($9,293) $16,318
Add back amounts for computation of EBITDA:  
 Interest expense, net2,2811,849
 Income tax (benefit) expense (4,459)9,850
 Depreciation and amortization16,22615,611
EBITDA4,75543,628
Adjustments:  
Expense related to legal settlements441,833
Non-cash impairment charges640-
New store pre-opening costs1,2311,388
Total adjustments1,9153,221
Adjusted EBITDA $6,670 $46,849

 

For more information:
Linda L. Tasseff
Director, Investor Relations
(904) 858-2639
ltasseff@steinmart.com