JACKSONVILLE, Fla., Nov 29, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Stein Mart, Inc. (Nasdaq: SMRT) today announced financial results for its third quarter and first nine months ended November 3, 2007.
Note: the 53rd week in fiscal 2006 created a timing shift in the 4-5-4 calendar for fiscal 2007, resulting in a one-week difference between Stein Mart's fiscal reporting periods and comparable store sales reporting periods. This timing shift positively impacted total net sales for the third quarter of 2007 and for the first nine months of the year.
Third Quarter of 2007
For the 13-week third quarter of 2007, the Company incurred a net loss of $2.7 million or $(0.06) per diluted share as compared to net income of $237,000 or $0.01 per diluted share in 2006. Net sales decreased 1.7 percent to $333.3 million for the 13 weeks ended November 3, 2007 from $339.2 million for the 13 weeks ended October 28, 2006. Comparable store sales for the 13 weeks ended November 3, 2007 decreased 6.3 percent from the 13 weeks ended November 4, 2006.
Gross profit declined to $86.2 million or 25.9 percent of sales in the third quarter of 2007 compared to $89.3 million or 26.3 percent of sales in the same period last year. The gross profit rate decreased primarily due to a lack of leverage on lower sales, as increased mark-up was offset by higher markdowns.
Selling, general and administrative (SG&A) expenses were $97.2 million or 29.2 percent of sales as compared to $92.6 million or 27.3 percent of sales during the same period last year. The SG&A rate was higher due to a lack of leverage on lower sales, and reflected increases in advertising and costs related to the transition of the president/CEO position.
First Nine Months of 2007
For the first nine months of 2007, the Company earned $7.6 million or $0.18 per diluted share as compared to net income of $16.1 million or $0.37 per diluted share in 2006. Net sales were $1.04 billion for the 39-week period ending November 3, 2007, which were flat compared to the same period last year. Comparable store sales for the 39 weeks ended November 3, 2007 decreased 3.1 percent from the 39 weeks ended November 4, 2006.
Gross profit declined to $277.3 million or 26.7 percent of sales in the first nine months of 2007 compared to $280.9 million or 27.0 percent of sales in the same period last year. Higher mark-up was offset by increased markdowns, and the gross profit rate decreased due to a lack of sales leverage and increased buying costs, primarily from share-based compensation.
Selling, general and administrative (SG&A) expenses were $282.3 million or 27.1 percent of sales as compared to $268.0 million or 25.8 percent of sales during the same period last year. The SG&A rate was higher due to a lack of sales leverage, and reflected increases in advertising, store operating expenses, depreciation, share-based compensation and costs related to the transition of the president/CEO position.
"We were unable to overcome a deteriorating macro environment, record warm temperatures, and a highly promotional competitive landscape that impacted our customer this fall," said Linda M. Farthing, president and chief executive officer of Stein Mart, Inc. "Despite substantial markdowns and additional advertising, our offering failed to generate sufficient sales in the quarter and the resulting loss was extremely disappointing."
Guidance for Fourth Quarter 2007
Management expects a comparable stores sales decrease of approximately ten percent for the current November month ending December 1, 2007, and if this trend continues, comparable store sales would also decline approximately ten percent for the fourth quarter. In addition, the timing shift associated with the 4-5-4 calendar in 2007 and the 53rd week in 2006 will have a negative impact of approximately $29 million on total net sales for the fourth quarter of 2007 in comparison to total net sales for the fourth quarter of 2006.
Given this lowered sales outlook, escalating competitive pressure, and the prospect of extremely aggressive markdowns to move merchandise on lower than planned sales, the Company would expect an operating loss of approximately $(0.15) per diluted share for the fourth quarter ending February 2, 2008.
"The customer clearly has an appetite for value pricing right now, and we have redoubled our efforts to provide and promote exceptional savings throughout the store," Farthing continued. "The negative impact on gross margin will be significant in the fourth quarter, but these actions are necessary in order to exit the year without the burden of prior season merchandise. Additionally, we are actively reviewing all aspects of our business for profit opportunities and expense savings in order to improve our performance in the future."
Eight new stores opened in the third quarter; one store was relocated and two stores were closed, bringing the chain-wide total to 276 at the end of the quarter as compared to 265 at the same time last year.
The Company completed its 2007 store-opening program with four stores that opened in November, bringing to 14 the number of new stores opened during 2007. For the year, a total of two stores closed and two were relocated. As of today, the Company operates 280 stores, a 4.5% increase in store count over the 268 stores open at the end of 2006.
"After careful review, we have decided to focus our efforts on the productivity of the existing store network, and accordingly, have scaled back our new store openings," noted Farthing. "While this is still a work in progress, we plan to open significantly fewer stores in 2008 than we opened in 2007."
Dividend and Stock Repurchase Update
The Board of Directors has declared a quarterly dividend of $0.0625 per common share payable on December 21, 2007 to stockholders of record at the close of business on December 7, 2007.
In the third quarter of 2007, the Company repurchased 1.2 million shares of stock at a cost of $10.7 million. So far this year, the Company has repurchased a total of 2.4 million shares of stock at a cost of $26.9 million.
Conference Call with Management
Management will discuss these financial results and the Company's perspective on the fall season in a conference call with financial analysts today (November 29, 2007) at 11:00 a.m. ET. The call may be heard on the investor relations portion of Stein Mart's website at http://ir.steinmart.com, and a recording of the call will remain on the website until December 7, 2007.
About Stein Mart
Stein Mart stores offer the fashion merchandise, service and presentation of a better department or specialty store, at prices competitive with off- price retail chains. Currently with locations from California to New York, Stein Mart's focused assortment of merchandise features moderate to designer brand-name apparel for women and men, as well as accessories, gifts, linens and shoes.
SAFE HARBOR STATEMENT>>>>>>> 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:
-- on-going competition from other retailers -- the effectiveness of advertising, marketing and promotional strategies -- changes in consumer spending due to current events and/or general economic conditions -- unanticipated weather conditions and unseasonable weather -- changing preferences in apparel -- adequate sources of merchandise at acceptable prices -- availability of new store sites at acceptable lease terms -- the Company's ability to attract and retain qualified employees to support planned growth -- ability to successfully implement strategies to exit or improve under- performing stores -- disruption of the Company's distribution system -- acts of terrorism
and the other risks and uncertainties described in the Company's filings with the Securities and Exchange Commission.
SMRT-F Additional information about Stein Mart, Inc. can be found at www.steinmart.com Stein Mart, Inc. Consolidated Balance Sheets (Unaudited) (In thousands, except for share data) November 3, February 3, October 28, 2007 2007 2006 ASSETS Current assets: Cash and cash equivalents $20,481 $17,560 $14,928 Short-term investments - 10,835 - Trade and other receivables 14,669 10,164 11,546 Inventories 344,817 290,943 349,024 Prepaid income taxes 13,252 - 2,609 Prepaid expenses and other current assets 16,260 14,531 14,764 Total current assets 409,479 344,033 392,871 Property and equipment, net 115,074 113,254 110,187 Other assets 30,783 23,064 19,018 Total assets $555,336 $480,351 $522,076 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $125,085 $83,243 $133,387 Accrued liabilities 80,139 78,522 76,367 Income taxes payable - 7,483 - Total current liabilities 205,224 169,248 209,754 Notes payable to banks 54,966 - 26,494 Other liabilities 23,594 22,931 18,856 Total liabilities 283,784 192,179 255,104 COMMITMENTS AND CONTINGENCIES Stockholders' 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; 41,709,780, 43,736,720 and 43,548,314 shares issued and outstanding, respectively 417 437 435 Additional paid-in capital 5,612 21,803 18,961 Retained earnings 265,523 265,932 247,576 Total stockholders' equity 271,552 288,172 266,972 Total liabilities and stockholders' equity $555,336 $480,351 $522,076 Stein Mart, Inc. Consolidated Statements of Income (Unaudited) (In thousands, except per share amounts) 13 Weeks 13 Weeks 39 Weeks 39 Weeks Ended Ended Ended Ended November 3, October 28, November 3, October 28, 2007 2006 2007 2006 Net sales $333,343 $339,171 $1,040,201 $1,040,306 Cost of merchandise sold 247,131 249,909 762,881 759,452 Gross profit 86,212 89,262 277,320 280,854 Selling, general and administrative expenses 97,224 92,634 282,347 267,960 Other income, net 5,736 3,777 16,370 11,371 Income (loss) from operations (5,276) 405 11,343 24,265 Interest (expense) income, net (445) (28) (361) 1,096 Income (loss) before income taxes (5,721) 377 10,982 25,361 Income tax benefit (provision) 3,032 (140) (3,364) (9,253) Net income (loss) $(2,689) $237 $7,618 $16,108 Net income (loss) per share: Basic $(0.06) $0.01 $0.18 $0.37 Diluted $(0.06) $0.01 $0.18 $0.37 Weighted-average shares outstanding: Basic 41,548 43,162 42,445 43,212 Diluted 41,848 43,662 42,943 43,907 Stein Mart, Inc. Consolidated Statements of Cash Flows (Unaudited) (In thousands) 39 Weeks Ended 39 Weeks Ended November 3, 2007 October 28, 2006 Cash flows from operating activities: Net income $7,618 $16,108 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 19,190 18,881 Impairment of property and other assets 108 - Store closing charges 396 1,243 Deferred income taxes (943) (2,821) Share-based compensation 6,496 3,657 Tax benefit from equity issuances 287 502 Excess tax benefits from share-based compensation (258) (296) Changes in assets and liabilities: Trade and other receivables (4,505) (425) Inventories (53,874) (83,236) Prepaid income taxes (13,252) (2,609) Prepaid expenses and other current assets (1,729) (1,092) Other assets (2,560) (3,317) Accounts payable 41,842 44,979 Accrued liabilities 800 (4,230) Income taxes payable (13,091) (9,892) Other liabilities 1,273 1,651 Net cash used in operating activities (12,202) (20,897) Cash flows from investing activities: Capital expenditures (20,071) (39,067) Purchases of short-term investments (36,580) (586,225) Sales of short-term investments 47,415 691,160 Net cash (used in) provided by investing activities (9,236) 65,868 Cash flows from financing activities: Borrowings under notes payable to banks 236,054 65,669 Repayments of notes payable to banks (181,088) (39,175) Cash dividends paid (8,073) (73,572) Excess tax benefits from share-based compensation 258 296 Proceeds from exercise of stock options 3,521 2,046 Proceeds from employee stock purchase plan 586 581 Repurchase of common stock (26,899) (6,088) Net cash provided by (used in) financing activities 24,359 (50,243) Net increase (decrease) in cash and cash equivalents 2,921 (5,272) Cash and cash equivalents at beginning of year 17,560 20,200 Cash and cash equivalents at end of period $20,481 $14,928
SOURCE Stein Mart, Inc.
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