Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

August 21, 2019

(Date of Report; Date of Earliest Event Reported)

 

 

 

 

LOGO

STEIN MART, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Florida   0-20052   64-0466198

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

1200 Riverplace Blvd., Jacksonville, Florida 32207

(Address of Principal Executive Offices Including Zip Code)

(904) 346-1500

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act (§240.12b-2 of this chapter).

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, $0.01 par value   SMRT   The NASDAQ Global Select Market

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.  ☐

 

 

 


ITEM 2.02

RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On August 21, 2019, Stein Mart, Inc. (“Stein Mart”) issued a press release announcing its financial results for the second quarter ended August 3, 2019. The information in this Current Report is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.

The Stein Mart press release is attached as exhibit 99.1.

 

ITEM 9.01

FINANCIAL STATEMENTS AND EXHIBITS

 

(d)

Exhibits

 

99.1    Press Release dated August 21, 2019.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

      STEIN MART, INC.
      (Registrant)
Date: August 21, 2019     By:  

/s/ James B. Brown

      James B. Brown
      Executive Vice President and Chief Financial Officer
EX-99.1

Exhibit 99.1

 

LOGO

 

August 21, 2019       For more information:
      Linda L. Tasseff
FOR IMMEDIATE RELEASE       Director, Investor Relations
      (904) 858-2639
      ltasseff@steinmart.com

Stein Mart, Inc. Reports Second Quarter Fiscal 2019 Results

 

   

Operating income of $0.2 million in the second quarter of 2019 compared to $2.0 million in 2018

 

   

Net loss of $2.1 million, or $0.04 per share in the second quarter of 2019 compared to net loss of $1.0 million, or $0.02 per share in 2018

 

   

Outstanding debt reduced $36.8 million compared to end of second quarter of 2018

 

   

Strategic sales initiatives rolling out in the second half

JACKSONVILLE, Fla. – Stein Mart, Inc. (NASDAQ: SMRT) today announced financial results for the second quarter ended August 3, 2019.

For the second quarter, operating income was $0.2 million for 2019 compared to $2.0 million for 2018. Net loss for the second quarter was $2.1 million or $0.04 per diluted share for 2019 compared to net loss of $1.0 million or $0.02 per diluted share for 2018. Adjusted earnings before interest, income taxes, depreciation and amortization for the first half of 2019 was $20.8 million compared to $28.7 million for the first half of 2018 (see Note 1).

As reported earlier, comparable sales in the first quarter benefitted by approximately 150 basis points from the shift of a 12-Hour Sale event from the second quarter to the first. Excluding the shift, adjusted comparable sales decreased an estimated 3.3 percent for the first quarter of 2019 and 1.9 percent for the second quarter.

“After a slow start to the quarter caused by the event shift and soft selling, comp sales stabilized in the combined June/July period to essentially flat,” said Hunt Hawkins, Chief Executive Officer. “With our fall sales-driving initiatives beginning to roll out this month, we believe our comp sales trend will improve in the second half.”

This month, Stein Mart is launching its new Kids department and Buy Online, Pick Up in Store service. The Company will also début a Fine Jewelry product line by October. These and other initiatives are expected to drive incremental sales and store traffic beginning this fall.

Net Sales

Net sales for the second quarter of 2019 were $292.4 million compared to $310.9 million for the second quarter of 2018. Net sales were impacted by comparable sales results, including the event shift, and fewer stores operating during the quarter. Comparable sales for the second quarter of 2019 decreased 3.6 percent (see Note 2), or decreased 1.9 percent on an adjusted basis. Digital sales increased 7 percent over last year’s second quarter.


For the first six months of 2019, net sales decreased 4.9 percent to $606.5 million while comparable sales decreased 2.6 percent to last year. Net sales were impacted by comparable sales results and fewer stores operating during the year. Digital sales increased 11 percent over last year’s first half.

Gross Profit

Gross profit for the second quarter of 2019 was $74.7 million compared to $79.3 million in 2018. The gross profit rate for the second quarter of 2019 was flat to last year’s significantly improved rate of 25.5 percent of sales.

Gross profit for the first six months of 2019 was $162.1 million or 26.7 percent of sales compared to $175.3 million or 27.5 percent of sales in 2018. The decrease in the first half gross profit rate reflects higher markdowns as a percent of sales, as well as the deleverage of occupancy costs on lower sales. Markdowns were higher as a percent of sales primarily due to a planned accelerated markdown cadence.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses for the second quarter of 2019 were $78.5 million compared to $80.9 million in 2018. For the first six months, SG&A expenses were $164.6 million in 2019 and $171.4 million in 2018. The decrease in SG&A expenses for both periods was primarily from lower store related expenses, including the impact of closed stores.

Cash Flows

Inventories were $238.4 million at the end of the second quarter of 2019 compared to $240.8 million at the same time last year. Inventories at the end of the second quarter of 2019 included higher amounts for the planned acceleration of receipts for categories that were trending strong, as well as amounts to support our recently launched Kids department. Excluding these impacts, average inventories per store were down 3 percent to last year.

Accounts payable was $21.0 million higher at the end of the second quarter of 2019 compared to the end of the second quarter of 2018, reflecting improved credit terms from our vendors and factors since the second quarter of 2018.

Debt decreased $36.8 million to $138.5 million at the end of the second quarter of 2019 compared to $175.3 million at the end of the second quarter of 2018. Unused availability under our credit facility increased $18.6 million to $61.9 million at the end of the second quarter of 2019 compared to $43.3 million at the end of the second quarter of 2018. At the end of the second quarter of 2019, we had an additional $15.5 million available to borrow that would be collateralized by life insurance policies.

Store Activity

We had 283 stores at the end of the second quarter of 2019 compared to 289 at the end of the second quarter of 2018. We closed four stores during the first half of 2019, which completes our store plans for the year.

Lease Accounting

We adopted the new lease accounting standard during the first quarter of 2019. The new standard required us to recognize right-of-use assets and lease liabilities for operating leases on the Condensed Consolidated Balance Sheet.

Prior Year Financial Statements

Prior year amounts in the attached financial statements have been revised to reflect a correction to the impairment of fixed assets, as described in Note 2 to the financial statements included in our Form 10-Q for first quarter of 2019.


Filing of Form 10-Q

Reported results are preliminary and not final until the filing of our Form 10-Q for the fiscal quarter ended August 3, 2019 with the Securities and Exchange Commission (“SEC”), and therefore remain subject to adjustment.

Conference Call

A conference call to discuss the Company’s second quarter results will be held at 4:30 p.m. ET on August 21, 2019. The call may be heard on the Company’s investor relations website at http://ir.steinmart.com. A replay of the conference call will be available on the website through August 31, 2019.

Investor Presentation

Stein Mart’s second quarter 2019 investor presentation has been posted to the investor relations portion of the Company’s website at http://ir.steinmart.com.

About Stein Mart

Stein Mart, Inc. is a national specialty off-price retailer offering designer and name-brand fashion apparel, home décor, accessories and shoes at everyday discount prices. Stein Mart provides real value that customers love every day both in stores and online. For more information, please visit www.steinmart.com.

Cautionary Statement Regarding Forward-Looking Statements

Except for historical information contained herein, the statements in this release may be forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company does not assume any obligation to update or revise any forward-looking statements even if experience or future changes make it clear that projected results expressed or implied will not be realized. Forward-looking statements involve known and unknown risks and uncertainties that may cause Stein Mart’s actual results in future periods to differ materially from forecasted or expected results. Those risks include, without limitation: dependence on our ability to purchase merchandise at competitive terms through relationships with our vendors and their factors, consumer sensitivity to economic conditions, competition in the retail industry, changes in fashion trends and consumer preferences, ability to implement our strategic plans to sustain profitable growth, effectiveness of advertising and marketing, capital availability and debt levels, ability to negotiate acceptable lease terms with current and potential landlords, ability to successfully implement strategies to exit under-performing stores, extreme and/or unseasonable weather conditions, adequate sources of merchandise at acceptable prices, dependence on certain key personnel and ability to attract and retain qualified employees, increases in the cost of compensation and employee benefits, impacts of seasonality, disruption of the Company’s distribution process, dependence on imported merchandise, information technology failures, data security breaches, single supplier for shoe department, single provider for Ecommerce website, acts of terrorism, ability to adapt to new regulatory compliance and disclosure obligations, material weaknesses in internal control over financial reporting and other risks and uncertainties described in the Company’s filings with the SEC.


Stein Mart, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

 

     13 Weeks Ended     13 Weeks Ended     26 Weeks Ended      26 Weeks Ended  
     August 3, 2019     August 4, 2018     August 3, 2019      August 4, 2018  

Net sales

   $  292,369     $  310,859     $  606,526      $  637,464  

Other revenue

     3,963       3,569       9,188        7,951  
  

 

 

   

 

 

   

 

 

    

 

 

 

Total revenue

     296,332       314,428       615,714        645,415  

Cost of merchandise sold

     217,703       231,519       444,401        462,140  

Selling, general and administrative expenses

     78,470       80,936       164,606        171,445  
  

 

 

   

 

 

   

 

 

    

 

 

 

Operating income

     159       1,973       6,707        11,830  

Interest expense, net

     2,192       2,865       4,718        5,328  
  

 

 

   

 

 

   

 

 

    

 

 

 

(Loss) income before income taxes

     (2,033     (892     1,989        6,502  

Income tax expense

     52       60       105        120  
  

 

 

   

 

 

   

 

 

    

 

 

 

Net (loss) income

   $ (2,085   $ (952   $ 1,884      $ 6,382  
  

 

 

   

 

 

   

 

 

    

 

 

 

Net (loss) income per share:

         

Basic

   $ (0.04   $ (0.02   $ 0.04      $ 0.14  
  

 

 

   

 

 

   

 

 

    

 

 

 

Diluted

   $ (0.04   $ (0.02   $ 0.04      $ 0.14  
  

 

 

   

 

 

   

 

 

    

 

 

 

Weighted-average shares outstanding:

         

Basic

     47,406       46,669       47,258        46,639  
  

 

 

   

 

 

   

 

 

    

 

 

 

Diluted

     47,406       46,669       47,581        47,139  
  

 

 

   

 

 

   

 

 

    

 

 

 


Stein Mart, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

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

 

     August 3, 2019     February 2, 2019     August 4, 2018  

ASSETS

      

Current assets:

      

Cash and cash equivalents

   $ 9,481     $ 9,049     $ 10,030  

Inventories

     238,433       255,884       240,813  

Prepaid expenses and other current assets

     30,817       28,326       34,215  
  

 

 

   

 

 

   

 

 

 

Total current assets

     278,731       293,259       285,058  

Property and equipment, net

     110,344       119,740       134,930  

Operating lease assets

     362,244       —         —    

Other assets

     23,910       24,108       24,970  
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 775,229     $ 437,107     $ 444,958  
  

 

 

   

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

      

Current liabilities:

      

Accounts payable

   $ 87,301     $ 89,646     $ 66,272  

Current portion of debt

     —         —         125,253  

Current portion of operating lease liabilities

     80,300       —         —    

Accrued expenses and other current liabilities

     75,861       77,650       73,741  
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     243,462       167,296       265,266  

Long-term debt

     137,762       153,253       49,286  

Deferred rent

     —         39,708       40,814  

Noncurrent operating lease liabilities

     319,150       —         —    

Other liabilities

     31,138       33,897       36,881  
  

 

 

   

 

 

   

 

 

 

Total liabilities

     731,512       394,154       392,247  
  

 

 

   

 

 

   

 

 

 

COMMITMENT S 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; 48,225,585, 47,874,286 and 47,937,786 shares issued and outstanding, respectively

     482       479       479  

Additional paid-in capital

     61,208       60,172       57,888  

Retained deficit

     (18,194     (17,951     (5,419

Accumulated other comprehensive income (loss)

     221       253       (237
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     43,717       42,953       52,711  
  

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 775,229     $ 437,107     $ 444,958  
  

 

 

   

 

 

   

 

 

 


Stein Mart, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     26 Weeks Ended     26 Weeks Ended  
     August 3, 2019     August 4, 2018  

Cash flows from operating activities:

    

Net income

   $ 1,884     $ 6,382  

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

    

Depreciation and amortization

     14,123       15,824  

Share-based compensation

     1,046       1,842  

Store closing benefits

     (101     (92

Impairment of property and other assets

     11       689  

Loss on disposal of property and equipment

     43       102  

Changes in assets and liabilities:

    

Inventories

     17,451       29,424  

Prepaid expenses and other current assets

     (3,290     (7,595

Other assets

     (456     (2,329

Accounts payable

     (2,400     (53,528

Accrued expenses and other current liabilities

     (2,196     (4,619

Operating lease assets and liabilities, net

     (3,092     —    

Other liabilities

     (3,189     (2,984
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     19,834       (16,884
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Net acquisition of property and equipment

     (3,458     (4,082

Proceeds from cancelled corporate owned life insurance policies

     —         2,514  

Proceeds from insurance claims

     82       296  
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,376     (1,272
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from borrowings

     185,288       781,051  

Repayments of debt

     (200,871     (761,923

Debit issuance costs

     —         (896

Cash dividends paid

     (70     (122

Capital lease payments

     (366     (367

Proceeds from exercise of stock options and other

     107       90  

Repurchase of common stock

     (114     (47
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (16,026     17,786  
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     432       (370

Cash and cash equivalents at beginning of year

     9,049       10,400  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 9,481     $ 10,030  
  

 

 

   

 

 

 


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

We report our consolidated financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP financial measures provide users of the Company’s financial information with additional useful information in evaluating operating performance.

Note 1: Adjusted EBITDA

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is not a measure of financial performance under GAAP. However, we present EBITDA in this release because we consider it to be an important supplemental measure of our performance and because it is frequently used by analysts, investors and others to evaluate the performance of companies. EBITDA is not calculated in the same manner by all companies. EBITDA should be used as a supplement to results of operations and cash flows as reported under GAAP and should not be considered to be a more meaningful measure than, or an alternative to, measures of operating performance as determined in accordance with GAAP.

The following table shows the Company’s reconciliation of net (loss) income to EBITDA and Adjusted EBITDA, which are considered Non-GAAP financial measures. Adjusted EBITDA excludes certain non-cash items (impairment charges) and amounts incurred with significant transactions or events that we believe are not indicative of our core operating performance.     

 

     13 Weeks      13 Weeks      26 Weeks      26 Weeks  
     Ended      Ended      Ended      Ended  
     Aug. 3, 2019      Aug. 4, 2018      Aug. 3, 2019      Aug. 4, 2018  

Net (loss) income

   $ (2,085    $ (952    $ 1,884      $ 6,382  

Add back amounts for computation of EBITDA:

           

Interest expense, net

     2,192        2,865        4,718        5,328  

Income tax expense

     52        60        105        120  

Depreciation and amortization

     6,785        7,754        14,123        15,824  
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     6,944        9,727        20,830        27,654  

Adjustments:

           

Non-cash impairment charges

     11        390        11        689  

Expense related to legal settlements

     2        32        2        43  

New store pre-opening costs

     —          99        —          291  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total adjustments

     13        521        13        1,023  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 6,957      $ 10,248      $ 20,843      $ 28,677  
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 2: Changes in Comparable Sales

Management believes that providing calculations of changes in comparable sales including and excluding sales from licensed departments assists in evaluating the Company’s ability to generate sales growth, whether through owned businesses or departments licensed to third parties. The following table shows the Company’s reconciliation of these calculations.

 

     13 Weeks Ended  
     August 3, 2019  

Decrease in comparable sales excluding sales from licensed departments (1)

     (4.4 %) 

Impact of growth in comparable sales of licensed departments (2)

     0.8
  

 

 

 

Decrease in comparable sales including sales from licensed departments

     (3.6 %) 
  

 

 

 
     26 Weeks Ended  
     August 4, 2019  

Decrease in comparable sales excluding sales from licensed departments (1)

     (3.4 %) 

Impact of growth in comparable sales of licensed departments (2)

     0.8
  

 

 

 

Decrease in comparable sales including sales from licensed departments

     (2.6 %) 
  

 

 

 


(1)

Represents the period-to-period percentage change in net sales from stores open throughout the period presented and the same period in the prior year and all online sales of steinmart.com, excluding commissions from departments licensed to third parties.

(2)

Represents the impact of including sales of departments licensed to third parties throughout the period presented and the same period in the prior year and all online sales of steinmart.com in the calculation of comparable sales. The Company licenses its shoe and vintage handbag departments in its stores and online to third parties and receives a commission from these third parties based on a percentage of their sales. In these financial statements prepared in conformity with GAAP, the Company includes commissions (rather than sales of the departments licensed to third parties) in its net sales. The Company does not include the commission amounts from licensed department sales in its comparable sales calculations.