Stein Mart, Inc.
STEIN MART INC (Form: 10-Q, Received: 11/29/2017 16:26:06)
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 28, 2017

or

 

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number 0-20052

STEIN MART, INC.

(Exact name of registrant as specified in its charter)

 

Florida

   64-0466198

(State or other jurisdiction of

   (I.R.S. Employer

incorporation or organization)

   Identification Number)

1200 Riverplace Blvd., Jacksonville, Florida

   32207

(Address of principal executive offices)

   (Zip Code)

Registrant’s telephone number, including area code: (904) 346-1500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [ ]

  

Accelerated filer [ ]

Non-accelerated filer [ ]

  

Smaller reporting company [X]

(Do not check if a smaller reporting company)

  

Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The number of shares outstanding of the Registrant’s common stock as of November 28, 2017, was 47,952,360.


Table of Contents

Stein Mart, Inc.

Table of Contents

 

         PAGE  

PART I

  FINANCIAL INFORMATION   

Item 1.

  Condensed Consolidated Financial Statements (Unaudited):   
  Condensed Consolidated Balance Sheets at October 28, 2017, January 28, 2017 and October 29, 2016      3  
  Condensed Consolidated Statements of Operations for the 13 and 39 Weeks Ended October 28, 2017 and October 29, 2016      4  
  Condensed Consolidated Statements of Comprehensive (Loss) Income for the 13 and 39 Weeks Ended October 28, 2017 and October 29, 2016      5  
  Condensed Consolidated Statements of Cash Flows for the 39 Weeks Ended October 28, 2017 and October 29, 2016      6  
  Notes to Condensed Consolidated Financial Statements (Unaudited)      7  

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      11  

Item 3.

  Quantitative and Qualitative Disclosures about Market Risk      15  

Item 4.

  Controls and Procedures      15  

PART II

  OTHER INFORMATION   

Item 1.

  Legal Proceedings      16  

Item 1A.

  Risk Factors      16  

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      16  

Item 3.

  Defaults upon Senior Securities      16  

Item 4.

  Mine Safety Disclosures      16  

Item 5.

  Other Information      16  

Item 6.

  Exhibits      17  

SIGNATURES

     18  

 

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Stein Mart, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except for share and per share data)

 

                                                                    
     October 28, 2017     January 28, 2017     October 29, 2016  
     (Unaudited)           (Unaudited)  

ASSETS

      

Current assets:

      

Cash and cash equivalents

   $ 13,230     $ 10,604     $ 13,968  

Inventories

     311,255       291,110       383,932  

Prepaid expenses and other current assets

     31,371       30,249       29,980  

Total current assets

     355,856       331,963       427,880  

Property and equipment, net of accumulated depreciation and amortization of $236,623, $218,304 and $212,689, respectively

     159,006       165,542       172,771  

Other assets

     30,192       30,344       29,831  

Total assets

   $ 545,054     $ 527,849     $ 630,482  

LIABILITIES AND SHAREHOLDERS’ EQUITY

      

Current liabilities:

      

Accounts payable

   $ 179,666     $ 114,419     $ 208,161  

Current portion of long-term debt

     3,333       10,000       10,000  

Accrued expenses and other current liabilities

     78,595       72,772       77,076  

Total current liabilities

     261,594       197,191       295,237  

Long-term debt, net of current portion

     147,472       171,792       169,681  

Deferred rent

     41,592       41,774       42,266  

Other liabilities

     47,219       46,832       45,401  

Total liabilities

     497,877       457,589       552,585  

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; 47,867,630, 47,018,942 and 46,919,426 shares issued and outstanding, respectively

     479       470       469  

Additional paid-in capital

     54,528       50,241       49,497  

Retained (deficit) earnings

     (7,552     19,853       28,196  

Accumulated other comprehensive loss

     (278     (304     (265

Total shareholders’ equity

     47,177       70,260       77,897  

Total liabilities and shareholders’ equity

   $ 545,054     $ 527,849     $ 630,482  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Stein Mart, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

 

                                                                                   
     13 Weeks Ended     13 Weeks Ended     39 Weeks Ended     39 Weeks Ended
     October 28, 2017     October 29, 2016     October 28, 2017     October 29, 2016

Net sales

   $ 285,395     $ 299,527     $ 933,766     $ 975,000  

Cost of merchandise sold

     217,126       226,816       705,273       703,958  

Gross profit

     68,269       72,711       228,493       271,042  

Selling, general and administrative expenses

     92,158       89,034       263,853       259,348  

Operating (loss) income

     (23,889     (16,323     (35,360     11,694  

Interest expense, net

     1,156       949       3,437       2,798  

(Loss) income before income taxes

     (25,045     (17,272     (38,797     8,896  

Income tax (benefit) expense

     (10,429     (6,262     (14,888     3,588  

Net (loss) income

   $ (14,616   $ (11,010   $ (23,909   $ 5,308  

Net (loss) earnings per common share:

        

Basic

   $ (0.31   $ (0.24   $ (0.52   $ 0.12  

Diluted

   $ (0.31   $ (0.24   $ (0.52   $ 0.11  

Weighted-average shares outstanding:

        

Basic

     46,447       45,845       46,292       45,720  

Diluted

     46,447       45,845       46,292       46,599  

Dividends declared per common share

   $ -     $ 0.075     $ 0.075     $ 0.225  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Stein Mart, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)

(In thousands)

 

                                                                                   
     13 Weeks Ended     13 Weeks Ended     39 Weeks Ended     39 Weeks Ended
     October 28, 2017     October 29, 2016     October 28, 2017     October 29, 2016

Net (loss) income

   $ (14,616   $ (11,010   $ (23,909   $ 5,308  

Other comprehensive income, net of tax:

        

Amounts reclassified from accumulated other comprehensive loss

     9       4       26       14  

Comprehensive (loss) income

   $ (14,607   $ (11,006   $ (23,883   $ 5,322  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Stein Mart, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     39 Weeks Ended     39 Weeks Ended  
     October 28, 2017     October 29, 2016  

Cash flows from operating activities:

    

Net (loss) income

   $ (23,909   $ 5,308  

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

    

Depreciation and amortization

     24,254       23,636  

Share-based compensation

     4,194       6,306  

Store closing charges

     97       25  

Impairment of property and other assets

     640       277  

Loss on disposal of property and equipment

     287       14  

Deferred income taxes

     1,900       520  

Tax expense from equity issuances

     -       (187

Excess tax benefits from share-based compensation

     -       (31

Changes in assets and liabilities:

    

Inventories

     (20,145     (90,324

Prepaid expenses and other current assets

     (1,122     (11,581

Other assets

     (820     (831

Accounts payable

     65,298       102,469  

Accrued expenses and other current liabilities

     4,696       6,812  

Other liabilities

     (2,566     14,764  

Net cash provided by operating activities

     52,804       57,177  

Cash flows from investing activities:

    

Net acquisition of property and equipment

     (17,168     (35,026

Proceeds from cancelled corporate owned life insurance policies

     1,504       246  

Net cash used in investing activities

     (15,664     (34,780

Cash flows from financing activities:

    

Proceeds from borrowings

     290,169       292,183  

Repayments of debt

     (321,187     (302,683

Cash dividends paid

     (3,597     (10,378

Capital lease payments

     (1     -  

Excess tax benefits from share-based compensation

     -       31  

Proceeds from exercise of stock options and other

     328       1,715  

Repurchase of common stock

     (226     (1,127 )  

Net cash used in financing activities

     (34,514     (20,259

Net increase in cash and cash equivalents

     2,626       2,138  

Cash and cash equivalents at beginning of year

     10,604       11,830  

Cash and cash equivalents at end of period

   $ 13,230     $ 13,968  

Supplemental disclosures of cash flow information:

    

Income taxes (received) paid

   $ (18,103   $ 11,818  

Interest paid

     3,340       2,715  

Accruals and accounts payable for capital expenditures

     2,479       2,866  

Property and equipment acquired through capital lease

     826       -  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Stein Mart, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1. Basis of Presentation

The accompanying Condensed Consolidated Financial Statements (Unaudited) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments (consisting primarily of normal and recurring adjustments) considered necessary for a fair presentation have been included. Due to the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. These Condensed Consolidated Financial Statements (Unaudited) should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K/A for the year ended January 28, 2017, filed with the Securities and Exchange Commission (“SEC”) on April 18, 2017.

As used herein, the terms “we,” “our,” “us” and “Stein Mart” refer to Stein Mart, Inc. and its wholly-owned subsidiaries.

Certain reclassifications have been made in the Condensed Consolidated Statements of Cash Flows (Unaudited) during the 39 weeks ended October 29, 2016, to conform to the 2017 presentation.

Correction of an Immaterial Error

During the fourth quarter of fiscal 2016, we identified an immaterial prior period error in our lower-of-cost-or-market adjustment for aged inventory. The immaterial error was corrected with a charge during the fourth quarter of fiscal 2016 resulting in an out-of-period increase in Cost of merchandise sold. The effect of this immaterial error on the 13 and 39 weeks ended October 29, 2016 would have been an increase of $0.2 million to Cost of merchandise sold, a decrease of $0.1 million in net income and an increase of $0.7 million to Cost of merchandise sold and a decrease of $0.4 million in net income, respectively.

Accrued Expenses and Other Current Liabilities

The major components of accrued expenses and other current liabilities are as follows (in thousands):

 

            October 28, 2017      January 28, 2017      October 29, 2016  

Compensation and employee benefits

      $ 7,944      $ 11,016      $ 7,701  

Unredeemed gift and merchandise return cards

        8,777        11,954        8,180  

Property taxes

        17,364        14,274        15,000  

Accrued vacation

        7,715        7,715        7,306  

Other

        36,795        27,813        38,889  

Accrued expenses and other current liabilities

      $                   78,595      $                   72,772      $                   77,076  

Capital Leases

In October 2017, Stein Mart entered into a three-year capital lease agreement for networking and telephone equipment. The capital lease agreement carries a bargain purchase option for the equipment. The leased networking equipment has a useful life of three years and the telephone equipment has a useful life of five years; the equipment will be depreciated on a straight-line basis over the respective periods. The leased equipment was recorded at fair value as this amount was less than the present value of the minimum lease payments, which was $0.8 million.

The gross value of assets subject to capital leases was $0.8 million as of October 28, 2017, and is included in Property and equipment, net on the Condensed Consolidated Balance Sheets (Unaudited). The remaining capital lease obligation of $0.8 million as of October 28, 2017, is split between Accrued expenses and other current liabilities for the short-term portion and Other liabilities for the long-term portion on the Condensed Consolidated Balance Sheets (Unaudited).

Hurricanes Harvey and Irma

During the third quarter of 2017, hurricanes Harvey and Irma made landfall in Texas and Florida, respectively. We operate 44 stores in Texas and 46 stores in Florida and approximately half of these locations were closed for multiple days or had reduced hours of operation. We have recognized a loss of approximately $1.4 million in hurricane-related expenses, mainly related to damaged inventory. We have also received $0.5 million in insurance recoveries during the period. We continue to work with our insurers on our claims and will recover additional amounts for our losses related to the hurricanes. Those recoveries will be recorded when they are received.

 

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Stein Mart, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

(Unaudited)

 

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-04,  Liabilities-Extinguishments of Liabilities  ( Subtopic 405-20 ):  Recognition of Breakage for Certain Prepaid Stored-Value Products . The amendments in the ASU are designed to provide guidance and eliminate diversity in practice of accounting for derecognition of prepaid stored-value product liabilities. Typically, a prepaid stored-value product liability is to be derecognized when it is probable that a significant reversal of the recognized breakage amount will not subsequently occur. This is when the likelihood of the product holder exercising its remaining rights becomes remote. This estimate shall be updated at the end of each period. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Earlier application is permitted. We plan to adopt this ASU in fiscal year 2018 and do not expect the adoption to have a material effect on our financial condition, results of operations or cash flows.

In February 2016, the FASB issued ASU No. 2016-02,  Leases (Topic 842) . This update requires organizations to recognize lease assets and lease liabilities on the balance sheet and also disclose key information about leasing arrangements. The main provisions of the new standard include: clarifications to the definitions of a lease, components of leases, and criteria for determining lease classification; requiring virtually all leased assets, including operating leases and related liabilities, to be reflected on the lessee’s balance sheet; and expanding and adding to the required disclosures for lessees. This ASU is effective for annual reporting periods beginning on or after December 15, 2018, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual period. We are in the process of evaluating our lease portfolio and identifying what additional data will be needed to comply with the new standard. We have identified a software application suited to track and account for leases under the new standard. We plan to adopt ASU 2016-02 in fiscal year 2019 and are currently evaluating the overall effect the adoption of this ASU will have on our financial condition, results of operations and cash flows. We currently believe the adoption of this ASU will have a significant effect on our Consolidated Balance Sheets due to the addition of our applicable leased assets and related liabilities. We do not believe the adoption of this ASU will have a significant effect on our results of operations as the depreciation and interest under the new standard will approximate our rent expense as it is currently being recorded.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) . This update provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU No. 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update creates a five-step model that requires entities to exercise judgment when considering the terms of the contract(s) which include (i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied.

We have completed an initial scoping analysis of the effect of the standards to identify the revenue streams that may be affected by this ASU. In our ongoing evaluation of this ASU, we have determined that the new standard will primarily apply to the following areas of our business: point of sale transactions, ecommerce, consignment, drop ship, shipping and handling, credit card income, gift card breakage and loyalty programs. We expect the adoption will not change the timing or amount of revenue recognized as it relates to revenue from point of sale at the registers in our stores, which constitutes approximately 97% of our Net sales revenue. We continue to evaluate other revenue streams, such as ecommerce sales and shipping revenue, and there may be a slight change in the timing of when such revenue is recognized.

This guidance was deferred by ASU No. 2015-14, issued by the FASB in August 2015, and is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted for annual and interim reporting periods beginning after December 15, 2016. While do not expect this change, if any, to have a material effect, we are currently evaluating the effect the adoption of these ASUs may have on our financial condition, results of operations and cash flows, as well as our preferred method of adoption. We will adopt these ASUs, including all related new disclosures, beginning in the first quarter of fiscal 2018.

 

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Stein Mart, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

(Unaudited)

 

2. Shareholders’ Equity

Dividends

During the 39 weeks ended October 28, 2017, we paid a quarterly dividend of $0.075 per common share on April 14, 2017. During the 39 weeks ended October 29, 2016, we paid three quarterly dividends of $0.075 per common share on April 15, 2016, July 15, 2016 and October 14, 2016.

Stock Repurchase Plan

During the 13 weeks ended October 28, 2017, we repurchased 5,636 shares of our common stock at a total cost of less than $0.1 million. During the 13 weeks ended October 29, 2016, we repurchased 15,999 shares of our common stock at a total cost of approximately $0.1 million. During the 39 weeks ended October 28, 2017, we repurchased 69,122 shares of our common stock at a total cost of approximately $0.2 million. During the 39 weeks ended October 29, 2016, we repurchased 166,657 shares of our common stock at a total cost of approximately $1.1 million. Stock repurchases were for tax withholding amounts due on employee stock awards and during 2017 and 2016, included no shares purchased on the open market under our previously authorized stock repurchase plan. As of October 28, 2017, there are 427,408 shares that can be repurchased pursuant to the Board of Directors’ current authorization.

3. Earnings per Share

Our restricted stock awards granted in 2013 contain non-forfeitable rights to dividends and, as such, are considered participating securities. Participating securities are to be included in the calculation of earnings per share under the two-class method. In applying the two-class method, income is allocated to both common stock shares and participating securities based on their respective weighted-average shares outstanding for the period.

The following table sets forth the calculation of basic and diluted (loss) earnings per common share (in thousands, except per share data):

 

                                                                                           
     13 Weeks Ended     13 Weeks Ended     39 Weeks Ended     39 Weeks Ended  
     October 28, 2017     October 29, 2016     October 28, 2017     October 29, 2016  

Basic:

        

Net (loss) income

   $ (14,616   $ (11,010   $ (23,909   $ 5,308  

Income allocated to participating securities

     -       18       2       22  

Net (loss) income available to common shareholders

   $ (14,616   $ (11,028   $ (23,911   $ 5,286  

Basic weighted-average shares outstanding

     46,447       45,845       46,292       45,720  

Basic (loss) earnings per common share

   $ (0.31   $ (0.24   $ (0.52   $ 0.12  

Diluted:

        

Net (loss) income

   $ (14,616   $ (11,010   $ (23,909   $ 5,308  

Income allocated to diluted participating securities

     -       18       2       22  

Net (loss) income available to common shareholders

   $ (14,616   $ (11,028   $ (23,911   $ 5,286  

Basic weighted-average shares outstanding

     46,447       45,845       46,292       45,720  

Incremental shares from share-based compensation plans

     -       -       -       879  

Diluted weighted-average shares outstanding

     46,447       45,845       46,292       46,599  

Diluted (loss) earnings per common share

   $ (0.31   $ (0.24   $ (0.52   $ 0.11  

Options to acquire shares and performance share awards totaling approximately 2.9 million and 1.4 million shares of common stock that were outstanding during the 13 weeks ended October 28, 2017 and October 29, 2016, respectively, were not included in the computation of diluted (loss) earnings per common share. Options excluded were those that had exercise prices greater than the average market price of the common shares such that inclusion would have been anti-dilutive. Options to acquire shares and performance share awards totaling approximately 2.9 million and 2.1 million shares of common stock that were outstanding during the 39 weeks ended October 28, 2017 and October 29, 2016, respectively, were not included in the computation of diluted (loss) earnings per common share. Options excluded were those that had exercise prices greater than the average market price of the common shares such that inclusion would have been anti-dilutive. For periods of net loss, basic and diluted EPS are the same, as the assumed conversion of stock options and performance awards are anti-dilutive.

 

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Stein Mart, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

(Unaudited)

 

4. Commitments and Contingencies

We are involved in various routine legal proceedings incidental to the conduct of our business. During the 13 weeks ended October 28, 2017, we did not accrue for any actual or anticipated legal settlements. During the 13 weeks ended October 29, 2016, we accrued less than $0.1 million for actual and anticipated legal settlements. During the 39 weeks ended October 28, 2017 we did not accrue for any actual or anticipated legal settlements. During the 39 weeks ended October 29, 2016, we accrued $1.9 million for actual and anticipated legal settlements. While some of these matters could be material to our results of operations or cash flows for any particular period if an unfavorable outcome results, we do not believe that the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on our overall financial condition.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As used herein, the terms “we,” “our,” “us” and “Stein Mart” refer to Stein Mart, Inc. and its wholly-owned subsidiaries.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to certain risks, uncertainties or assumptions and may be affected by certain factors including, but not limited to, the matters discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K/A for the fiscal year ended January 28, 2017, filed with the Securities and Exchange Commission (“SEC”) on April 18, 2017. Wherever used, the words “plan,” “expect,” “anticipate,” “believe,” “estimate” and similar expressions identify forward-looking statements. Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on beliefs and assumptions of our management and on information currently available to such management. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise our forward-looking statements in light of new information or future events. Undue reliance should not be placed on such forward-looking statements, which are based on current expectations. Forward-looking statements are not guarantees of performance.

The following discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K/A for the year ended January 28, 2017, filed with the SEC on April 18, 2017.

Overview

We are a national specialty and off-price retailer offering designer and name-brand fashion apparel, home décor, accessories and shoes at everyday low prices. We currently operate 293 stores across 31 states.

Financial Overview for the 13 and 39 weeks ended October 28, 2017

 

Net sales were $285.4 million for the 13 weeks ended October 28, 2017, compared to $299.5 million for the 13 weeks ended October 29, 2016, and $933.8 million for the 39 weeks ended October 28, 2017, compared to $975.0 million for the 39 weeks ended October 29, 2016.

 

Comparable store sales for the 13 weeks ended October 28, 2017, decreased 6.9 percent compared to the 13 weeks ended October 29, 2016, and for the 39 weeks ended October 28, 2017, decreased 6.5 percent compared to the 39 weeks ended October 29, 2016.

 

Net loss for the 13 weeks ended October 28, 2017, was $14.6 million, or $0.31 per diluted share, compared to net loss of $11.0 million, or $0.24 per diluted share, during the 13 weeks ended October 29, 2016.

 

Net loss for the 39 weeks ended October 28, 2017, was $23.9 million, or $0.52 per diluted share, compared to net income of $5.3 million, or $0.11 per diluted share, during the 39 weeks ended October 29, 2016.

 

We had $150.8 million, $181.8 million and $179.7 million of direct borrowings on our Credit Facilities as of October 28, 2017, January 28, 2017, and October 29, 2016, respectively.

Stores

The following table sets forth the stores activity for the 13 and 39 weeks ended October 28, 2017 and October 29, 2016:

 

                                                                                           
     13 Weeks Ended     13 Weeks Ended     39 Weeks Ended     39 Weeks Ended  
     October 28, 2017     October 29, 2016     October 28, 2017     October 29, 2016  

Stores at beginning of period

     292       283       290       278  

Stores opened during the period

     4       8       9       13  

Stores closed during the period

     (3     (1     (6     (1

Stores at the end of period

     293       290       293       290  

Inventories

Inventory levels were $311.3 million as of October 28, 2017, compared to $383.9 million as of October 29, 2016. Average inventories per store as of October 28, 2017, decreased approximately 20.4% from average inventories per store as of October 29, 2016. We have intentionally operated with lower inventory levels during 2017, mainly by purchasing inventory closer to the time of sales and purchasing more merchandise during the selling season. We anticipate inventory levels will continue to be at a substantially lower level at year-end as compared to the prior year-end.

 

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Results of Operations

The following table sets forth each line item of our Condensed Consolidated Statements of Operations (Unaudited) expressed as a percentage of net sales (1):

 

                                                                                           
    

13 Weeks Ended

 

October 28, 2017

   

13 Weeks Ended

 

October 29, 2016

   

39 Weeks Ended

 

October 28, 2017

   

39 Weeks Ended  

 

October 29, 2016  

Net sales

     100.0     100.0     100.0     100.0

Cost of merchandise sold

     76.1     75.7     75.5     72.2

Gross profit

     23.9     24.3     24.5     27.8

Selling, general and administrative expenses

     32.3     29.7     28.3     26.6

Operating (loss) income

     -8.4     -5.5     -3.8     1.2

Interest expense, net

     0.4     0.3     0.4     0.3

(Loss) income before income taxes

     -8.8     -5.8     -4.2     0.9

Income tax (benefit) expense

     -3.7     -2.1     -1.6     0.4

Net (loss) income

     -5.1     -3.7     -2.6     0.5

 

  (1)

Table may not foot, due to rounding.

13 and 39 Weeks Ended October 28, 2017, Compared to the 13 and 39 Weeks Ended October 29, 2016 (tables presented in thousands):

Net Sales

 

                                                                                                                                         
    13 Weeks Ended     13 Weeks Ended           39 Weeks Ended     39 Weeks Ended        
    October 28, 2017     October 29, 2016     (Decrease)     October 28, 2017     October 29, 2016     (Decrease)  

Net sales

  $ 285,395     $ 299,527       $(14,132)     $ 933,766     $ 975,000       $(41,234)  

Sales percent change:

           

Total net sales

        (4.7)%           (4.2)%  

Comparable store sales

        (6.9)%           (6.5)%  

The 6.9 percent and 6.5 percent decrease in comparable stores sales for the 13 and 39 weeks ended October 28, 2017, respectively, were both primarily driven by decreases in the number of transactions, which was driven by lower traffic. Approximately one-third of the chain was directly affected by closures or reduced hours as a result of hurricanes Harvey and Irma during the 13 weeks ended October 28, 2017. Comparable store sales reflect stores open throughout the period and prior fiscal year and include ecommerce sales. Ecommerce sales were up 24.7 percent and contributed approximately 0.6 percent increase to the comparable store sales for the 13 weeks ended October 28, 2017 and were up 34.5 percent and contributed approximately 0.7 percent increase to comparable store sales for the 39 weeks ended October 28, 2017. Comparable store sales do not include shoe department commissions.

Gross Profit

 

                                                                                                                                         
     13 Weeks Ended      13 Weeks Ended             39 Weeks Ended      39 Weeks Ended         
     October 28, 2017      October 29, 2016      (Decrease)      October 28, 2017      October 29, 2016      (Decrease)  

Gross profit

   $ 68,269      $ 72,711      $ (4,442)      $ 228,493      $ 271,042      $ (42,549)  
Percentage of net sales      23.9%        24.3%        (0.4)%        24.5%        27.8%        (3.3)%  

The gross profit decreases for the 13 weeks ended October 28, 2017, were primarily due to higher occupancy costs on lower sales volumes. The gross profit decreases for the 39 weeks ended October 28, 2017, were primarily due to higher markdowns taken to manage our inventories and furthered by higher occupancy cost that negatively leveraged on lower sales.

 

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Selling, General and Administrative Expenses (“SG&A”)

 

                                                                                                                                         
     13 Weeks Ended      13 Weeks Ended             39 Weeks Ended      39 Weeks Ended         
     October 28, 2017      October 29, 2016      Increase      October 28, 2017      October 29, 2016      Increase  
Selling, general and administrative expenses    $ 92,158      $ 89,034      $ 3,124      $ 263,853      $ 259,348      $ 4,505  
Percentage of net sales      32.3%        29.7%        2.6%        28.3%        26.6%        1.7%  

The SG&A increases for the 13 weeks ended October 28, 2017 were primarily the result of higher operating expenses from new stores, higher advertising expense to support our new campaign, increased consulting and severance expenses associated with our recently announced cost reductions and hurricane-related expenses, which were partially offset by insurance recoveries received during the period. We continue to work with our insurers on our claims and will recover additional amounts for our losses related to the hurricanes, which are primarily related to damaged inventory. Those recoveries will be recorded when they are received. See Note 1 “Basis of Presentation” of the Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion of the effects of hurricanes Harvey and Irma. The SG&A increase for the 39 weeks ended October 28, 2017, is primarily the result of higher operating expenses from new stores that were mostly offset by operating savings and lower expense for legal settlements.

Interest Expense, net

 

                                                                                                                                         
     13 Weeks Ended      13 Weeks Ended             39 Weeks Ended      39 Weeks Ended         
     October 28, 2017      October 29, 2016      Increase      October 28, 2017      October 29, 2016      Increase  

Interest expense, net

   $ 1,156      $ 949      $ 207      $ 3,437      $ 2,798      $ 639  

Precentage of net sales

     0.4%        0.3%        0.1%        0.4%        0.3%        0.1%  

The increases in interest expense for the 13 and 39 weeks ended October 28, 2017, are both due to increases in the London Interbank Offered Rate, which raised our overall interest rates.

Income Taxes

 

                                                                                                                                         
     13 Weeks Ended      13 Weeks Ended      (Decrease)      39 Weeks Ended      39 Weeks Ended         
     October 28, 2017      October 29, 2016      Increase      October 28, 2017      October 29, 2016      (Decrease)  

Income tax (benefit) expense

   $ (10,429)      $ (6,262)      $ (4,167)      $ (14,888)      $ 3,588      $ (18,476)  

Effective tax rate

     41.6%        36.3%        5.3%        38.4%        40.3%        (1.9)%  

Our effective tax rate represents the applicable combined federal and state statutory rates reduced by the federal benefit of state taxes deductible on federal returns, adjusted for the effect of permanent differences. During the 2017 periods, our pre-tax losses caused our taxes to be a benefit. The increase in the effective tax rate for the 13 weeks ended October 28, 2017, was primarily driven by the effect of our net favorable permanent items on the pre-tax net loss of $25.0 million for the 13 weeks ended October 28, 2017 compared to the effect of our net favorable permanent items on our pre-tax net loss of $17.3 million for the 13 weeks ended October 29, 2016. The decrease in the effective tax rate for the 39 weeks ended October 28, 2017, was primarily driven by the adoption of ASU 2016-09, which resulted in $1.2 million additional income tax expense, partially offset by the effect of our net favorable permanent items. This amount was previously carried within equity on the Condensed Consolidated Balance Sheets (Unaudited). Excluding the effect of the recent adoption of ASU 2016-09, our effective tax rate for the 39 weeks ended October 28, 2017, would have been 41.7 percent.

Liquidity and Capital Resources

Capital requirements and working capital needs are funded through a combination of internally generated funds, available cash, credit terms from vendors and our $250 million senior secured revolving credit facility pursuant to a second amended and restated credit agreement with Wells Fargo Bank (the “Credit Agreement”). We also have a secured $25 million master loan agreement with Wells Fargo Equipment Finance, Inc. (the “Equipment Term Loan” and, together with the Credit Agreement, the “Credit Facilities”). Working capital is used to support store inventories and capital investments for system improvements, fund new store openings, maintain existing stores, make debt service payments and repurchase shares of our common stock. Historically, our investments in working capital are lowest in August and September, after our heavy spring selling season, and in February, after the holiday selling season. Investments in working capital are highest in April, October and November as we begin procuring and paying for merchandise to support our heavy spring and

 

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holiday seasons. We believe that our cash flows from operations and our available cash and cash equivalents are sufficient to cover our liquidity requirements over the next 12 months.

On May 17, 2017, we announced we suspended our quarterly cash dividend and significantly reduced our planned capital expenditures (see below under “Cash Flows”). Planned capital expenditures for fiscal 2017 are approximately $20.4 million, or $17.6 million net of tenant improvement allowances. Capital expenditures were $42.4 million, or $36.1 million net of tenant improvement allowances, in fiscal 2016.

As of October 28, 2017, we had cash and cash equivalents of $13.2 million and $150.8 million in borrowings under our Credit Facilities. The total amount available for borrowings and letters of credit under our Credit Agreement is the lesser of $250 million or 100% of eligible credit card receivables and the net recovery percentage value of inventories less reserves. At October 28, 2017, in addition to outstanding borrowings under the Credit Agreement, we had $7.9 million of outstanding letters of credit. Our Excess Availability (as defined in the Credit Agreement) was $94.6 million at October 28, 2017. We currently do not meet the Fixed Charge Coverage Ratio set forth in the Credit Agreement, as a result, our ability to borrow $25.0 million of this Excess Availability is subject to significant restrictions.

Our business is dependent upon the ability to purchase merchandise at competitive terms through relationships with our vendors and their factors. A significant change in vendor and factor support could limit our ability to acquire desired merchandise at competitive prices or terms in the future. Additionally, if we experience declining operating performance or liquidity challenges, vendors and their factors may seek protection against non-payment, such as accelerated payment terms. This could have an adverse effect on our operating cash flow and liquidity.

Cash Flows

                                                                                                  
     39 Weeks Ended     39 Weeks Ended        
Cash provided by (used in):    October 28, 2017     October 29, 2016     $ Change  

Operating activities

   $ 52,804     $ 57,177     $ (4,373

Investing activities

     (15,664     (34,780     19,116  

Financing activities

     (34,514     (20,259     (14,255

Net increase in cash and cash equivalents

   $ 2,626     $ 2,138     $ 488  

Net cash provided by operating activities was $52.8 million for the 39 weeks ended October 28, 2017 compared to net cash provided by operating activities of $57.2 million for the 39 weeks ended October 29, 2016. The decrease in cash provided by operating activities was mainly due to a Net loss during the 39 weeks ended October 28, 2017 compared to the 39 weeks ended October 29, 2016. Also contributing to the decrease was a one-time cash inflow during the 2016 period relating to the Synchrony Financial signing bonus we received with the new agreement entered into in February of 2016 for co-branded and private label credit cards. This is partially offset by lower planned inventory levels, which also results in lower payables to vendors, and an inflow for Income taxes received, net.

Net cash used in investing activities was primarily for capital expenditures and was $15.7 million for the 39 weeks ended October 28, 2017 compared to $34.8 million for the 39 weeks ended October 29, 2016. The decrease in capital expenditures was primarily due to lower investment in technologies, fewer remodels to existing stores and fewer tenant improvements for fiscal 2017. Non-cash investing activities were $0.8 million for equipment purchased with a capital lease during the 13 weeks ended October 28, 2017.

Net cash used in financing activities was $34.5 million during the 39 weeks ended October 28, 2017 compared to cash used in financing activities of $20.3 million during the 39 weeks ended October 29, 2016. During the 39 weeks ended October 28, 2017, we had net repayments of debt of $31.0 million. We paid cash dividends of $3.6 million. In addition, we repurchased 69,122 shares of common stock for $0.2 million. We also received $0.3 million from our Employee Share Purchase Plan. During the 39 weeks ended October 29, 2016, we had net repayments of debt of $10.5 million. We also paid cash dividends of $10.4 million. In addition, we repurchased 166,657 shares of common stock for $1.1 million. We also received $1.7 million from our Employee Share Purchase Plan. See Note 2 “Shareholders’ Equity” of the Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion.

On May 17, 2017, we announced we suspended our quarterly cash dividend and significantly reduced our planned capital expenditures. Suspending the $0.075 quarterly dividend is expected to save approximately $14.0 million in cash annually and approximately $11.0 million in cash during fiscal 2017. We are using the related annual cash savings to repay indebtedness, maximize free cash flow and improve our financial position. Any future determination to declare and pay dividends will be made at the discretion of our Board of Directors, after taking into account our future earnings, cash flows, financial condition, capital requirements and other factors that the Board may deem relevant.

 

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Critical Accounting Policies and Estimates

We discuss our critical accounting policies and estimates in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K/A for the year ended January 28, 2017, and filed with the SEC on April 18, 2017. We have made no significant change in our critical accounting policies and estimates since January 28, 2017.

Recent Accounting Pronouncements

Recently issued accounting pronouncements are discussed in Note 1 “Basis of Presentation” of the Notes to Condensed Consolidated Financial Statements (Unaudited).

Seasonality and Inflation

Our business is seasonal. Sales and profitability are historically higher in the first and fourth quarters of the fiscal year, which include the spring and holiday seasons. Therefore, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.

Although we expect that our operations will be influenced by general economic conditions, we do not believe that inflation has had a material effect on our results of operations. However, there can be no assurance that our business will not be affected by inflation in the future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information regarding our exposure to certain market risks, see “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K/A for the year ended January 28, 2017. There were no material changes to our market risk during the quarter ended October 28, 2017.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report due to the material weakness identified in our internal control over financial reporting described below.

As previously disclosed in our 2016 Annual Report on Form 10-K/A, we identified a material weakness in the design and effectiveness in the operation of our controls that are intended to ensure that the data contained in a report used by management to review the lower-of-cost-or-market adjustment for our aged inventory was complete and accurate. As a result of this material weakness, a reasonable possibility exists that a material misstatement in inventory in our annual or interim financial statements could occur and not be prevented or detected on a timely basis.

We have taken steps to remediate this material weakness, including implementing new policies and procedures to enhance our risk assessment process to effectively design and implement control activities that verify the completeness and accuracy of data in reports that support management review controls. We have also re-performed procedures over our key reports, including retesting the completeness and accuracy of these key reports.

We believe that these remediation measures have strengthened our internal control over financial reporting. As we are still assessing the design and operating effectiveness of our internal controls and procedures, the identified material weakness has not been fully remediated as of October 28, 2017. We will continue to monitor the effectiveness of our internal control over financial reporting and confirm that the material weakness has been remediated through our annual assessment of internal control over financial reporting for the fiscal year ending February 3, 2018.

In September 2015, we settled an administrative proceeding instituted by the SEC in which the SEC ordered us to cease and desist from committing, or causing, any violations and any future violations of the periodic reporting, books and records, and internal control provisions of the Securities Exchange Act of 1934, as amended. The existence of the above-referenced material weakness, and the failure to discover and disclose such material weakness in periodic reports filed prior to the Annual Report on Form 10-K/A for the year ended January 28, 2017, means that we have not been in compliance with the cease and desist order.

We assessed the effect of the material weakness on these Condensed Consolidated Financial Statements (Unaudited) to ensure they were prepared in accordance with GAAP and present fairly the consolidated financial position, financial results of operation and cash flows as of and for the 39 weeks ended October 28, 2017. Based on these additional procedures and assessment, we concluded that the Condensed Consolidated Financial Statements (Unaudited) included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented.

 

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Except as described above in regards to the remediation process, there were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See the discussion of legal proceedings in Note 4 “Commitments and Contingencies” of the Notes to Condensed Consolidated Financial Statements (Unaudited) included in Item 1 of Part I of this Quarterly Report, which is incorporated by reference into this Item 1 of Part II.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those described in our Annual Report on Form 10-K/A for the year ended January 28, 2017.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information regarding repurchases of our common stock during the quarter ended October 28, 2017:

 

Period   

Total

 

number

 

of shares

 

purchased    

    

Average    

 

price

 

paid per

 

share

    

Total number of

 

shares purchased    

 

as part of publicly

 

announced plans

 

or programs (1)

    

Maximum number

 

of shares that may

 

yet be purchased

 

under the plans or    

 

programs (1)

 

July 30, 2017 - August 26, 2017

     914      $ 1.28        914        432,130  

August 27, 2017 - September 30, 2017

     1,219        1.30        1,219        430,911  

October 1, 2017 - October 28, 2017

     3,503        1.19        3,503        427,408  

Total

     5,636      $ 1.23        5,636        427,408  

 

(1)

All stock repurchases were for tax withholding amounts due on employee stock awards. No shares were purchased on the open market pursuant to our open market repurchase program. Our open market repurchase program is conducted pursuant to authorizations made from time to time by our Board of Directors, including the most recent authorization of an additional 500,000 shares by the Board of Directors on November 30, 2015.

ITEM 3. DE FAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

 

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ITEM 6. EXHIBITS

10.1    Employment Agreement between Stein Mart, Inc. and Roseann McLean, dated September  20, 2017 incorporated by reference to the Registrant’s Current Report on Form 8-K filed on September 22, 2017.
31.1    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a)
31.2    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a)
32.1    Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
32.2    Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
101    Interactive data files from Stein Mart, Inc.’s Quarterly Report on Form 10-Q for the quarter ended October 28, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets (Unaudited), (ii) the Condensed Consolidated Statements of Operations (Unaudited), (iii) the Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited), (iv) the Condensed Consolidated Statements of Cash Flows (Unaudited), and (v) the Notes to Condensed Consolidated Financial Statements (Unaudited)

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

 

     

STEIN MART, INC.

Date: November 29, 2017

     

By:

  

/s/ D. Hunt Hawkins

        

D. Hunt Hawkins

        

Chief Executive Officer

        

/s/ Gregory W. Kleffner

        

Gregory W. Kleffner

        

Executive Vice President and Chief Financial Officer

 

 

18

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a)

I, D. Hunt Hawkins, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Stein Mart, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

 

4.

The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

 

  a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c.

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d.

Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

5.

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

 

  a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

 

  b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Date: November 29, 2017

   

/s/ D. Hunt Hawkins

   

D. Hunt Hawkins

   

Chief Executive Officer

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a)

I, Gregory W. Kleffner, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Stein Mart, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

 

4.

The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

 

  a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c.

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d.

Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

5.

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

 

  a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

 

  b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Date: November 29, 2017

   

/s/ Gregory W. Kleffner

   

Gregory W. Kleffner

   

Executive Vice President and Chief Financial Officer

Exhibit 32.1

Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 2017 of Stein Mart, Inc. (the “Form 10-Q”), I, D. Hunt Hawkins, Chief Executive Officer of Stein Mart, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1.

The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Stein Mart, Inc.

 

Date: November 29, 2017

   

/s/ D. Hunt Hawkins

   

D. Hunt Hawkins

   

Chief Executive Officer

Exhibit 32.2

Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 2017 of Stein Mart, Inc. (the “Form 10-Q”), I, Gregory W. Kleffner, Executive Vice President and Chief Financial Officer of Stein Mart, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1.

The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Stein Mart, Inc.

 

Date: November 29, 2017

   

/s/ Gregory W. Kleffner

   

Gregory W. Kleffner

   

Executive Vice President and Chief Financial Officer