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

November 20, 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))

Securities registered pursuant to Section 12(b) of the Act:

 

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

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).

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 November 20, 2019, Stein Mart, Inc. (“Stein Mart”) issued a press release announcing its financial results for the third quarter ended November 2, 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 November 20, 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: November 20, 2019     By:   /s/ James B. Brown
      James B. Brown
      Executive Vice President and Chief Financial Officer
EX-99.1

Exhibit 99.1

LOGO

 

November 20, 2019      For more information:
     Linda L. Tasseff
FOR IMMEDIATE RELEASE      Director, Investor Relations
     (904) 858-2639
     ltasseff@steinmart.com

Stein Mart, Inc. Reports Third Quarter Fiscal 2019 Results

 

   

Comparable sales were essentially flat, improving 250 basis points from the first half of the year

   

Net loss lowered 26 percent to $12.1 million, or $0.25 per share

   

Outstanding debt reduced $20.6 million compared to end of third quarter of 2018

JACKSONVILLE, Fla. – Stein Mart, Inc. (NASDAQ: SMRT) today announced financial results for the third quarter ended November 2, 2019.

Operating loss for the third quarter was $9.6 million for 2019 compared to an operating loss of $13.1 million for 2018. Net loss for the third quarter was $12.1 million or $0.25 per diluted share for 2019 compared to net loss of $16.3 million or $0.35 per diluted share for 2018.

“We saw a marked improvement in our sales trend in the third quarter. Comparable sales improved 250 basis points from the first half of the year to essentially flat, driven by incremental sales from the launch of our Kids department and a double-digit increase in omni sales,” said Hunt Hawkins, Chief Executive Officer. “Our new fall initiatives are gaining traction and will continue to have a positive impact on our performance in the fourth quarter.”

Net Sales

Net sales for the third quarter of 2019 were $276.1 million compared to $279.0 million for the third quarter of 2018. Net sales were impacted by fewer stores operating during the quarter. Comparable sales for the third quarter of 2019 decreased 0.1 percent (see Note 2). Omni sales, defined as all online sales regardless of fulfillment channel, increased 18 percent over last year’s third quarter.

For the first nine months of 2019, net sales decreased 3.7 percent to $882.7 million while comparable sales decreased 1.9 percent to last year. Net sales were impacted by comparable sales results and fewer stores operating during the year. Omni sales increased 13 percent over last year’s first nine months.

Gross Profit

Gross profit for the third quarter of 2019 was $69.4 million or 25.1 percent of sales compared to $69.8 million or 25.0 percent of sales in 2018. For the first nine months, gross profit was $231.5 million or 26.2 percent of sales in 2019 compared to $245.1 million or 26.7 percent of sales in 2018. The decrease in the gross profit rate for the first nine months of 2019 primarily reflects higher markdowns as a percent of sales taken during the first half of the year.


Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses for the third quarter were $83.3 million in 2019 compared to $86.6 million in 2018. SG&A expenses for the third quarter of 2019 include a $1.9 million benefit from a Visa/MasterCard claim settlement. SG&A expenses for the third quarter of 2018 include $1.1 million in advisory fees for the extension of our credit agreements and $0.7 million in hurricane-related expenses. (See Note 1.) Excluding these items from both periods, SG&A expenses were $85.2 million in 2019 and $84.8 million in 2018.

For the first nine months, SG&A expenses were $247.9 million in 2019 and $258.1 million in 2018. Excluding the discrete items mentioned above from both periods, SG&A expenses were $249.8 million in 2019 and $256.3 million in 2018. The decrease in SG&A expenses was primarily from lower store-related expenses, including the impact of closed stores, partially offset by higher advertising expenses for planned additional branded television.

Balance Sheet

Inventories were $307.1 million at the end of the third quarter of 2019 compared to $305.0 million at the same time last year. Inventories at the end of the third quarter of 2019 included amounts to support our new Kids department. Excluding the impact of Kids, average inventories per store were down slightly to last year.

Debt decreased $20.6 million to $171.0 million at the end of the third quarter of 2019 compared to $191.6 million at the end of the third quarter of 2018. Unused availability under our credit facility increased $12.1 million to $87.0 million at the end of the third quarter of 2019 compared to $74.9 million at the end of the third quarter of 2018. At the end of the third quarter of 2019, we had an additional $12.6 million available to borrow that would be collateralized by life insurance policies.

Store Activity

We had 283 stores at the end of the third quarter of 2019 compared to 288 at the end of the third quarter of 2018. We closed five stores during the first nine months of 2019, which completes our store plans for the year.

Fourth Quarter 2019 Outlook

Based on our results through the third quarter, we are projecting fourth quarter operating income influenced by the following factors:

   

We anticipate a flat to low single-digit increase in comparable sales impacted by our fall sales-driving initiatives

   

We expect our gross profit rate to be slightly lower than last year’s improved rate

   

Excluding a $3.3 million benefit in last year’s fourth quarter related to a change in vacation policy, SG&A expenses are expected to be slightly lower than in last year’s fourth quarter

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 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 November 2, 2019 with the Securities and Exchange Commission (“SEC”), and therefore remain subject to adjustment.


Conference Call

A conference call to discuss the Company’s third quarter results will be held at 4:30 p.m. ET on November 20, 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 December 31, 2019.

Investor Presentation

Stein Mart’s third 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 omni off-price retailer offering designer and name-brand fashion apparel for him, for her and now for Kids!, home décor, accessories and shoes at everyday discount prices. Stein Mart provides real value that customers love every day. The company operates 283 stores across 30 states. 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.

Consolidated Statements of Loss

(Unaudited)

(In thousands, except per share amounts)

 

       13 Weeks Ended
  November 2, 2019
    13 Weeks Ended
November 3, 2018
    39 Weeks Ended
November 2, 2019
    39 Weeks Ended
November 3, 2018
 
  

 

 

 

Net sales

     $ 276,132     $ 279,047     $ 882,658     $ 916,511  

Other revenue

     4,291       3,814       13,479       11,765  
  

 

 

 

Total revenue

     280,423       282,861       896,137       928,276  

Cost of merchandise sold

     206,721       209,286       651,122       671,426  

Selling, general and administrative expenses

     83,285       86,626       247,891       258,071  
  

 

 

 

Operating loss

     (9,583     (13,051     (2,876     (1,221

Interest expense, net

     2,306       3,078       7,024       8,406  
  

 

 

 

Loss before income taxes

     (11,889     (16,129     (9,900     (9,627

Income tax expense

     203       171       308       291  
  

 

 

 

Net loss

     $ (12,092   $ (16,300   $ (10,208   $ (9,918
  

 

 

 

Net loss per share:

        

Basic and diluted

     $ (0.25   $ (0.35   $ (0.22   $ (0.21
  

 

 

 

Weighted-average shares outstanding:

        

Basic and diluted

     47,545       46,743       47,354       46,674  
  

 

 

 


Stein Mart, Inc.

Consolidated Balance Sheets

(Unaudited)

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

 

       November 2, 2019     February 2, 2019     November 3, 2018  
  

 

 

 

ASSETS

      

Current assets:

      

Cash and cash equivalents

     $ 12,953     $ 9,049     $ 13,884  

Inventories

     307,124       255,884       305,010  

Prepaid expenses and other current assets

     23,368       28,326       35,638  
  

 

 

 

Total current assets

     343,445       293,259       354,532  

Property and equipment, net

     108,781       119,740       129,683  

Operating lease assets

     361,168       -       -  

Other assets

     25,949       24,108       24,594  
  

 

 

 

Total assets

     $ 839,343     $ 437,107     $ 508,809  
  

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

      

Current liabilities:

      

Accounts payable

     $ 126,541     $ 89,646     $ 122,019  

Current portion of operating lease liabilities

     80,936       -       -  

Accrued expenses and other current liabilities

     80,223       77,650       82,043  
  

 

 

 

Total current liabilities

     287,700       167,296       204,062  

Long-term debt

     170,292       153,253       190,657  

Deferred rent

     -       39,708       40,558  

Noncurrent operating lease liabilities

     316,890       -       -  

Other liabilities

     32,554       33,897       35,982  
  

 

 

 

Total liabilities

     807,436       394,154       471,259  
  

 

 

 

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; 48,194,610, 47,874,286 and 47,898,068 shares issued and outstanding, respectively

     482       479       479  

Additional paid-in capital

     61,504       60,172       59,009  

Retained deficit

     (30,283     (17,951     (21,706

Accumulated other comprehensive income (loss)

     204       253       (232
  

 

 

 

Total shareholders’ equity

     31,907       42,953       37,550  
  

 

 

 

Total liabilities and shareholders’ equity

     $ 839,343     $ 437,107     $ 508,809  
  

 

 

 


Stein Mart, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

       39 Weeks Ended
  November 2, 2019
    39 Weeks Ended
November 3, 2018
 
  

 

 

 

Cash flows from operating activities:

    

Net loss

     $ (10,208   $ (9,918

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation and amortization

     21,220       23,799  

Share-based compensation

     1,348       2,973  

Store closing benefits

     (31     (180

Impairment of property and other assets

     11       693  

Loss on disposal of property and equipment

     44       137  

Changes in assets and liabilities:

    

Inventories

     (51,240     (34,773

Prepaid expenses and other current assets

     4,159       (9,018

Other assets

     (5,348     (1,882

Accounts payable

     36,976       2,559  

Accrued expenses and other current liabilities

     1,046       3,977  

Operating lease assets and liabilities, net

     (3,640     -  

Other liabilities

     (4,197     (3,928
  

 

 

 

Net cash used in operating activities

     (9,860     (25,561
  

 

 

 

Cash flows from investing activities:

    

Net acquisition of property and equipment

     (5,145     (7,379

Proceeds from canceled corporate owned life insurance policies

     2,900       2,514  

Proceeds from insurance claims

     82       296  
  

 

 

 

Net cash used in investing activities

     (2,163     (4,569
  

 

 

 

Cash flows from financing activities:

    

Proceeds from borrowings

     305,032       1,033,415  

Repayments of debt

     (288,132     (997,990

Debit issuance costs

     -       (1,146

Cash dividends paid

     (91     (147

Capital lease payments

     (869     (551

Proceeds from exercise of stock options

     107       90  

Repurchase of common stock

     (120     (57
  

 

 

 

Net cash provided by financing activities

     15,927       33,614  
  

 

 

 

Net increase in cash and cash equivalents

     3,904       3,484  

Cash and cash equivalents at beginning of year

     9,049       10,400  
  

 

 

 

Cash and cash equivalents at end of period

     $ 12,953     $ 13,884  
  

 

 

 


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 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 Ended     39 Weeks Ended  
     Nov. 2, 2019     Nov. 3, 2018     Nov. 2, 2019     Nov. 3, 2018  

Net loss

     $(12,092     $(16,300     $(10,208     $(9,918

Add back amounts for computation of EBITDA:

        

Interest expense, net

     2,306       3,078       7,024       8,406  

Income tax expense

     203       171       308       291  

Depreciation and amortization

     7,097       7,975       21,220       23,799  
                                

EBITDA

     (2,486     (5,076     18,344       22,578  

Adjustments:

        

Visa/MasterCard claim settlement

     (1,946     -       (1,946     -  

Credit agreements extension fees

     -       1,100       -       1,100  

Hurricane related expenses, net of insurance recoveries

     -       718       -       718  

Non-cash impairment charges

     -       4       11       693  

Expense related to legal settlements

     13       96       15       139  

New store pre-opening costs

     -       373       -       664  
                                

Total adjustments

     (1,933     2,291       (1,920     3,314  
                                

Adjusted EBITDA

     $(4,419     $(2,785     $16,424       $25,892  
                                


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     39 Weeks Ended  
     November 2, 2019     November 2, 2019  

Increase/(decrease) in comparable sales excluding sales from licensed departments (1)

     0.2%       (2.3%

Impact of comparable sales of licensed departments (2)

     (0.3%     0.4%  
                

Decrease in comparable sales including sales from licensed departments

     (0.1%     (1.9%
                

 

(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.