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Stein Mart, Inc. Reports First Quarter 2011 Financial Results

Financial highlights:

JACKSONVILLE, Fla.--(BUSINESS WIRE)-- Stein Mart, Inc. (Nasdaq:SMRT) today announced financial results for the first quarter ended April 30, 2011.

Overview of Results

Net income for the first quarter was $15.9 million or $0.35 per diluted share compared to net income of $14.3 million or $0.32 per diluted share in 2010. Net income as adjusted was $14.7 million or $0.32 per diluted share for the first quarter of 2011. The results as adjusted exclude an after-tax gain of $1.2 million or $0.03 per diluted share to correct an error in the Company's credit card reward liability (see Reward Breakage Gain below).

Sales increased to $303.5 million, up 0.8 percent from $301.0 million in the first quarter in 2010. Comparable store sales increased 1.5 percent for the same period.

"We are pleased to report solid first quarter results including higher comparable store sales, improved margins and a 14.2 percent increase in operating income as adjusted," said David H. Stovall, Jr., president and chief executive officer of Stein Mart, Inc. "Customers responded positively to our growing assortment of designer labels and brands at great values."

Operating income as adjusted increased to $24.2 million or 8.0 percent of sales, from $21.2 million or 7.0 percent of sales in the first quarter of 2010 as a result of higher gross profit and other income. Gross profit increased to $89.9 million or 29.6 percent of sales, from $87.5 million or 29.1 percent of sales in the first quarter 2010. Other income as adjusted increased $1.0 million to $6.3 million due to higher income from the credit card program, the leased shoe department, and breakage on unused gift and merchandise return cards. Selling, general and administrative expenses were $72.0 million or 23.7 percent of sales, compared to $71.6 million or 23.8 percent of sales in the first quarter of 2010.

The effective tax rate ("ETR") of 39.3 percent for the first quarter increased from 32.3 percent in the same period in 2010. The lower ETR in 2010 benefited first quarter 2010 earnings by $0.03 per share.

Balance Sheet Highlights

The Company maintained a strong balance sheet with $94.2 million in cash at the end of the first quarter, compared to $71.6 million at the end of the first quarter of 2010, and no debt.

Inventories were $258.8 million at the end of the first quarter compared to $237.5 million at the same time in 2010. This increase resulted from higher basic replenishment and year-round merchandise, lower than expected sales in April, and increased opportunistic purchases for next season. The Company is managing its position and expects inventories to be more in line with sales performance at the end of the second quarter.

Accounts payable increased as a result of a change in payment terms to be more consistent with industry practices and higher inventories.

Capital Expenditures

The Company is increasing its plan for capital expenditure in 2011 by $5 million to a range of $30 to $35 million. The increase is for the purchase of point-of-sale hardware in all stores which will increase operational efficiency.

Store network

The Company operated 262 Stein Mart stores at the end of the first quarter of 2011. No new stores were opened, two stores were closed and two were relocated in the quarter.

Reward Breakage Gain

Results for the first quarter include a pretax gain of $2.0 million ($1.2 million after tax or $0.03 per diluted share) to correct an error that resulted in an overstatement of the liability for outstanding and unused credit card rewards issued under the Stein Mart MasterCard program. The overstatement was due to inaccuracies in the data used to calculate breakage income for expired rewards in fiscal years 2008 through 2010. This correction was not material to any previously reported period and is reported in Other income.

Conference Call

A conference call for investment analysts to discuss the Company's first quarter results will be held at 10 a.m. ET today, Thursday, May 19, 2011. 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 June 3, 2011.

Investor Presentation

Stein Mart's first quarter 2011 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 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 Massachusetts, Stein Mart's focused assortment of merchandise features current season, moderate to better fashion apparel for women and men, as well as accessories, shoes and home fashions.

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:

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.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except for share data)

 
 

April 30, 2011

 

January 29, 2011

 

May 1, 2010

ASSETS    
Current assets:
Cash and cash equivalents $ 94,163 $ 80,171 $ 71,624
Trade and other receivables 8,864 10,360 7,910
Inventories 258,804 232,295 237,524
Income taxes receivable - 2,382 -
Prepaid expenses and other current assets   14,386   15,226   12,430
Total current assets 376,217 340,434 329,488
Property and equipment, net 81,072 79,964 73,139
Other assets   14,992   16,046   16,198
Total assets $ 472,281 $ 436,444 $ 418,825
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 117,039 $ 95,545 $ 82,783
Accrued liabilities 63,184 72,587 80,363
Income taxes payable   5,010   -   4,551
Total current liabilities 185,233 168,132 167,697
Other liabilities   20,949   21,061   20,444
Total liabilities 206,182 189,193 188,141
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; 44,659,326, 44,396,504 and 43,381,693

shares issued and outstanding, respectively

447

444

434

Additional paid-in capital 24,071 21,126 16,622
Retained earnings 241,125 225,225 213,053
Accumulated other comprehensive income   456   456   575
Total stockholders' equity   266,099   247,251   230,684
Total liabilities and stockholders' equity $ 472,281 $ 436,444 $ 418,825
 

Stein Mart, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share amounts)

 
 

13 Weeks Ended

April 30, 2011

 

13 Weeks Ended

May 1, 2010

Net sales $ 303,546 $ 300,998
Cost of merchandise sold   213,626   213,495
Gross profit 89,920 87,503
Selling, general and administrative expenses 72,025 71,598
Other income, net   8,316   5,273
Operating income 26,211 21,178
Interest income, net   4   8
Income before income taxes 26,215 21,186
Provision for income taxes   10,315   6,838
Net income $ 15,900 $ 14,348
 
Net income per share:
Basic $ 0.35 $ 0.33
Diluted $ 0.35 $ 0.32
 
Weighted-average shares outstanding:
Basic   43,851   42,512
Diluted   44,186   43,657
 

Stein Mart, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 
 

13 Weeks Ended

April 30, 2011

 

13 Weeks Ended

May 1, 2010

Cash flows from operating activities:
Net income $ 15,900 $ 14,348
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 4,286 4,336
Change in valuation allowance for deferred tax assets - (798 )

Deferred income taxes

4,595 798
Store closing charges 143 138
Share-based compensation 914 198
Tax benefit from equity issuances 80 2,041
Excess tax benefits from share-based compensation (124 ) (1,998 )
Changes in assets and liabilities:
Trade and other receivables 1,496 2,268
Inventories (26,509 ) (19,399 )
Income taxes receivable 2,382 -
Prepaid expenses and other current assets (2,303 ) (1,318 )
Other assets (501 ) (645 )
Accounts payable 21,494 2,465
Accrued liabilities (9,454 ) (4,334 )
Income taxes payable 5,010 1,590
Other liabilities   (71 )   (579 )
Net cash provided by (used in) operating activities   17,338     (889 )
Cash flows from investing activities:
Capital expenditures   (5,424 )   (8,871 )
Net cash used in investing activities   (5,424 )   (8,871 )
Cash flows from financing activities:
Excess tax benefits from share-based compensation 124 1,998
Proceeds from exercise of stock options 2,009 434
Repurchase of common stock for employee withholdings   (55 )   (2,023 )
Net cash provided by financing activities   2,078     409  
Net increase (decrease) in cash and cash equivalents 13,992 (9,351 )
Cash and cash equivalents at beginning of year   80,171     80,975  
Cash and cash equivalents at end of period $ 94,163   $ 71,624  

Stein Mart, Inc.
Nancy Murphy, 904-346-1506
Director, Investor Relations
nmurphy@steinmart.com

Source: Stein Mart, Inc.

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