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JACKSONVILLE, Fla., Aug 17, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Stein Mart, Inc. (Nasdaq: SMRT) today announced financial results for its second quarter and first half ended July 29, 2006.
For the second quarter of 2006, the Company earned $8.3 million or $0.19 per diluted share as compared to net income of $11.6 million or $0.26 per diluted share in the second quarter of 2005. Net sales for the second quarter of 2006 were $336.3 million, down 0.2 percent from the $337.1 million in sales for the same period last year. Comparable store sales decreased 0.8 percent from the second quarter of 2005 to the second quarter of 2006. Gross profit decreased to $94.0 million or 28.0 percent of net sales in the second quarter of 2006 compared to $96.3 million or 28.6 percent of net sales in the same period of 2005. Gross profit was negatively impacted by increased markdowns and occupancy costs, somewhat offset by improved mark-up. Selling, general and administrative (SG&A) expenses were $84.8 million or 25.2 percent of net sales as compared to $81.5 million or 24.2 percent of net sales during the prior year's second quarter. The SG&A rate was higher due to a lack of leverage on decreased sales and reflected an increase in depreciation, store-closing costs and equity-based compensation.
For the first half of 2006, the Company earned $15.9 million or $0.36 per diluted share as compared to net income of $28.4 million or $0.64 per diluted share in the first half of 2005. Net sales for the first six months were $701.1 million, down 2.3 percent from the $717.7 million in sales for the same period last year. Comparable store sales decreased 3.1 percent from the first half of 2005 to the first half of 2006. Gross profit decreased to $191.6 million or 27.3 percent of net sales in the first six months of 2006 compared to $208.0 million or 29.0 percent of net sales in the same period of 2005. Gross profit was negatively impacted by increased markdowns and occupancy costs, somewhat offset by improved mark-up. Selling, general and administrative (SG&A) expenses were $175.3 million or 25.0 percent of net sales as compared to $170.5 million or 23.8 percent of net sales during the prior year's first half. The SG&A rate was higher due to the lack of leverage on decreased sales and reflected an increase in depreciation and equity-based compensation.
"We were disappointed with the results of the second quarter, especially after having positive comparable store sales through May and June," said Michael D. Fisher, president and chief executive officer of Stein Mart, Inc. "However, an integration problem with the price optimization software impaired our clearance cadence and as a result, we experienced substantial sales and margin deterioration. The price optimization issue has been rectified, and we expect full utilization in the fall."
Fisher continued, "Our plan was to end June with less spring clearance and more fall transition inventory than last year and we achieved that objective. With the loss of sales momentum in July due to the less compelling clearance offering, we did not achieve our planned rate of sale on the transition merchandise, which further impacted our July sales results. Therefore, we entered the fall season with slightly elevated inventory, but it is more current than last year and we are on track in our spring liquidation cycle."
Updates on Recent Initiatives
The exit of the children's apparel business continues on track. As of this week, 118 stores across the country are featuring the expanded merchandise categories (e.g. intimate apparel, special sizes, other sportswear classifications) that replaced kids' clothing. The remaining stores will continue to consolidate their children's apparel into select stores for final closeout as the third quarter progresses, with all stores cleared of this category and carrying the new items in October.
As of July 29, 2006, 185 stores have acquired the 360 Commerce software and hardware for transaction processing. The planned transition of the remaining stores will be completed in the third quarter.
New initiatives
The Company expects to launch its co-branded credit card in October 2006. The new arrangement will present the Company with new marketing opportunities as well as a rewards program for its credit card holders.
Store Network Update
In the first six months of the year, Stein Mart opened three new stores and closed four under-performing locations, for a mid-year store count of 261 locations as compared to 259 at the same point last year.
This morning, the Company's first fall location opens in Jacksonville, FL. A total of six stores are planned to open and two to close during the third quarter of 2006 as compared to three openings and no closings during third quarter of 2005. Three additional stores are planned to open in the fourth quarter of 2006, for a total of nine fall season openings. New fall stores include the new markets of Sacramento and Pittsburgh, as well as fill-in locations in Florida, Georgia, North Carolina, South Carolina and Texas. At the end of the year, Stein Mart expects to have opened 12 new stores and closed six for a year-end total of 268 stores.
Four locations previously expected to open in Fall '06 will become Spring '07 stores due to store delivery timing issues. Management now expects to open a total of approximately 20 stores in 2007.
Guidance
Management expects comparable store sales to increase 2-3 percent in the third quarter ending October 28, 2006, which would produce break-even results as compared to earnings per share of $0.03 in the third quarter of 2005. For the fourth quarter of 2006, management expects comparable store sales to increase in the mid-single digit range. If both these premises occur, earnings for the year would be approximately $1.00 per share.
Quarterly Dividend Declared
The Stein Mart board of directors declared a quarterly dividend of $0.0625 per common share payable on September 22, 2006 to stockholders of record at the close of business on September 8, 2006.
Conference Call with Management
Management will discuss this information and answer questions from analysts in a conference call today (August 17, 2006) at 10:30 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 the end of the month.
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 better 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:
* changing preferences in apparel
* changes in consumer spending due to current events and/or general economic conditions
* availability of new store sites at acceptable lease terms
* unanticipated weather conditions and unseasonable weather
* the effectiveness of advertising, marketing and promotional strategies
* on-going competition from other retailers
* adequate sources of merchandise at acceptable prices
* 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.
Additional information about Stein Mart, Inc. can be found at
http://www.steinmart.com
Stein Mart, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands)
July January July
29, 28, 30,
2006 2006 2005
ASSETS
Current assets:
Cash and cash equivalents $21,559 $20,200 $18,916
Short-term investments 5,000 104,935 76,000
Trade and other receivables 11,303 11,121 7,912
Inventories 266,543 265,788 263,122
Prepaid taxes 5,201 -- 4,185
Prepaid expenses and other current assets 13,901 13,672 16,178
Total current assets 323,507 415,716 386,313
Property and equipment, net 104,795 87,106 77,975
Other assets 18,624 17,023 14,725
Total assets $446,926 $519,845 $479,013
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $84,864 $88,408 $72,862
Accrued liabilities 70,136 80,337 72,872
Income taxes payable -- 5,453 --
Total current liabilities 155,000 174,198 145,734
Other liabilities 21,922 21,908 21,761
Total liabilities 176,922 196,106 167,495
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;
43,676,810; 43,516,372 and 43,658,910
shares issued and outstanding,
respectively 437 435 437
Additional paid-in capital 25,638 21,967 25,782
Unearned compensation (6,141) (3,704) (2,760)
Retained earnings 250,070 305,041 288,059
Total stockholders' equity 270,004 323,739 311,518
Total liabilities and stockholders'
equity $446,926 $519,845 $479,013
Stein Mart, Inc.
Consolidated Statements of Income
(Unaudited)
(In thousands except per share amounts)
13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
July July July July
29, 30, 29, 30,
2006 2005 2006 2005
Net sales $336,304 $337,065 $701,135 $717,719
Cost of merchandise sold 242,298 240,809 509,543 509,768
Gross profit 94,006 96,256 191,592 207,951
Selling, general and
administrative expenses 84,790 81,507 175,326 170,475
Other income, net 3,441 3,591 7,594 7,557
Income from operations 12,657 18,340 23,860 45,033
Interest income, net 233 433 1,124 827
Income before income taxes 12,890 18,773 24,984 45,860
Provision for income taxes 4,578 7,134 9,113 17,427
Net income $8,312 $11,639 $15,871 $28,433
Net income per share:
Basic $0.19 $0.27 $0.37 $0.66
Diluted $0.19 $0.26 $0.36 $0.64
Weighted-average shares
outstanding:
Basic 43,245 43,299 43,236 43,102
Diluted 43,985 44,465 44,029 44,334
Stein Mart, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
26 Weeks 26 Weeks
Ended Ended
July 29, July 30,
2006 2005
Cash flows from operating activities:
Net income $15,871 $28,433
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 12,248 9,741
Impairment of property and other assets -- 195
Store closing charges 1,190 481
Deferred income taxes (818) 1,353
Share-based compensation 2,188 307
Changes in assets and liabilities:
Trade and other receivables (182) 3,468
Inventories (755) 14,042
Prepaid taxes (5,201) (4,185)
Prepaid expenses and other current
assets (229) (3,253)
Other assets (2,486) (686)
Accounts payable (3,544) (26,301)
Accrued liabilities (11,079) (7,390)
Income taxes payable (5,453) (5,089)
Other liabilities (526) 657
Net cash provided by operating activities 1,224 11,773
Cash flows from investing activities:
Capital expenditures (28,006) (15,850)
Purchases of short-term investments (580,925) (945,400)
Sales of short-term investments 680,860 941,875
Net cash provided by (used in) investing
activities 71,929 (19,375)
Cash flows from financing activities:
Cash dividends paid (70,842) (2,718)
Excess tax benefits from share-based compensation 425 3,499
Proceeds from exercise of stock options 1,675 11,563
Proceeds from employee stock purchase plan 581 499
Repurchase of common stock (3,633) (6,575)
Net cash (used in) provided by financing
activities (71,794) 6,268
Net increase (decrease) in cash and cash equivalents 1,359 (1,334)
Cash and cash equivalents at beginning of year 20,200 20,250
Cash and cash equivalents at end of year $21,559 $18,916
Supplemental disclosures of cash flow information:
Income taxes paid $20,230 $21,974
SMRT-F
SOURCE Stein Mart, Inc.
Susan Datz Edelman, Director, Stockholder Relations, Stein Mart, Inc., +1-904-346-1506, or sedelman@steinmart.com
http://www.prnewswire.com
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