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CST: 15/09/2019 21:30:48   

Stein Mart, Inc. Reports First Quarter Fiscal 2019 Results

116 Days ago

  • Net income of $4.0 million, or $0.08 per share in the first quarter of 2019 compared to $7.3 million, or $0.16 per share in 2018
  • Outstanding debt $55.6 million lower compared to end of first quarter of 2018
  • Comparable sales decreased 1.7%

JACKSONVILLE, Fla., May 22, 2019 (GLOBE NEWSWIRE) -- Stein Mart, Inc. (NASDAQ: SMRT) today announced financial results for the first quarter ended May 4, 2019.      

Net income for the first quarter of 2019 was $4.0 million or $0.08 per diluted share compared to a net income of $7.3 million or $0.16 per diluted share in 2018. Adjusted earnings before interest, income taxes, depreciation and amortization for the first quarter of 2019 was $13.9 million compared to $18.4 million for the first quarter of 2018 (see Note 1).

“With a late start to spring in the South and West, February was a challenging month with negative mid-single digit comp sales. Our comp sales for the combined March and April period dramatically improved. Comp sales in the first quarter also benefited by approximately 150 basis points from the shift of a 12-Hour Sale event from the second quarter to the first. With the event shift and slow selling thus far in May, we expect headwinds to impact the second quarter,” said Hunt Hawkins, Chief Executive Officer. “Looking forward, with our 2019 sales-driving initiatives rolling out this fall, we believe that our comp sales trends and results will improve in the second half.”
                                               
Stein Mart’s second half sales initiatives include:

  • Launching two new product lines (kids and fine jewelry), which will increase transactions and appeal to a broader customer base
  • Buy online, pick up in store (“BOPIS”), which will drive store traffic and deliver incremental sales
  • Implementation of a marketing campaign management tool, which will analyze customer data to create personalized email and direct mail messaging to unlock additional sales

Mr. Hawkins continued, “Our lower gross profit rate reflects a planned rate decrease for the quarter from a change in our 2019 markdown cadence, the impact of the highly promotional event shift, and slightly higher markdowns to clear Fall merchandise. Despite the lower rate in the first quarter, we continue to expect our full year rate to be consistent with 2018. Finally, we are very pleased that we reduced borrowings by more than $55 million compared to the end of the first quarter of 2018.”

Net Sales
Net sales for the first quarter of 2019 were $314.2 million compared to $326.6 million for the first quarter of 2018. Net sales were impacted by comparable sales results and fewer stores operating during the quarter.

Comparable sales decreased 1.7 percent (see Note 2) during the first quarter due to lower store traffic and average unit retail, partially offset by higher units per transaction. Digital sales increased 14 percent in the first quarter of 2019.

Gross Profit
Gross profit for the first quarter of 2019 was $87.5 million or 27.8 percent of sales compared to $96.0 million or 29.4 percent of sales in 2018. The decrease in the gross profit rate was driven primarily by a planned reduction from accelerated markdown cadence and the impact of the sales event shift.

Selling, General and Administrative Expenses  

Selling, general and administrative (“SG&A”) expenses for the first quarter of 2019 decreased $4.4 million to $86.1 million compared to $90.5 million in 2018. The decrease in SG&A expenses was primarily from lower store related expenses including the impact of closed stores.

Income Taxes    
Income tax expense was less than $0.1 million for first quarter of 2019 and 2018. The small amount of income taxes reflects our estimated minimal taxable income for the year.

Cash Flows
Inventories were $274.3 million at the end of the first quarter of 2019 compared to $297.0 million at the same time last year. Average inventories per store were down 5 percent to last year.

Accounts payable was $20.9 million higher at the end of the first quarter of 2019 compared to the end of the first quarter of 2018, reflecting improved credit terms from our vendors and factors since the first quarter of 2018.

Debt decreased $55.6 million to $153.8 million at the end of the first quarter of 2019 compared to $209.4 million at the end of the first quarter of 2018. Unused availability under our credit facility increased $62.0 million to $102.0 million at the end of the first quarter of 2019 compared to $40.0 million at the end of the first quarter of 2018. In addition, we had $15.2 million available to borrow which would be collateralized by life insurance policies at the end of the first quarter of 2019.

Store Activity                    
We had 283 stores at the end of the first quarter of 2019 compared to 289 at the end of the first quarter of 2018. We closed four stores during the first quarter 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.  

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 May 4, 2019 with the Securities and Exchange Commission (“SEC”), and therefore remain subject to adjustment.

Conference Call
A conference call to discuss the Company’s first quarter results will be held at 9:00 a.m. ET on May 22, 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 June 30, 2019.

Investor Presentation
Stein Mart’s first 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 Income
(Unaudited)
(In thousands, except per share amounts)

    13 Weeks Ended 13 Weeks Ended
    May 4, 2019 May 5, 2018
       
Net sales   $  314,157 $  326,605
Other revenue     5,225   4,382
Total revenue     319,382   330,987
Cost of merchandise sold     226,698   230,621
Selling, general and administrative expenses     86,136   90,509
Operating income     6,548   9,857
Interest expense, net     2,526   2,463
Income before income taxes     4,022   7,394
Income tax expense     53   60
Net income   $  3,969 $  7,334
       
Net income per share:      
Basic   $  0.08 $  0.16
Diluted   $  0.08 $  0.16
       
Weighted-average shares outstanding:      
Basic     47,111   46,610
Diluted     47,489   46,659


Stein Mart, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except for share and per share data)

  May 4, 2019 February 2, 2019 May 5, 2018
ASSETS      
Current assets:      
Cash and cash equivalents $   21,933   $   9,049   $   16,165  
Inventories     274,281       255,884       296,964  
Prepaid expenses and other current assets     31,838       28,326       35,597  
Total current assets     328,052       293,259       348,726  
Property and equipment, net     118,350       123,838       144,109  
Operating lease assets     376,172       -       -  
Other assets     24,255       24,108       24,838  
Total assets $   846,829   $   441,205   $   517,673  
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $   114,495   $   89,646   $   93,632  
Current portion of debt     -       -       159,415  
Current portion of operating lease liabilities     84,153       -       -  
Accrued expenses and other current liabilities     84,118       77,650       78,418  
Total current liabilities     282,766       167,296       331,465  
Long-term debt     152,999       153,253       49,266  
Deferred rent     -       39,708       41,535  
Noncurrent operating lease liabilities     328,093       -       -  
Other liabilities     31,335       33,897       38,785  
Total liabilities     795,193       394,154       461,051  
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; 48,065,250, 47,874,286 and 47,910,450      
shares issued and outstanding, respectively     481       479       479  
Additional paid-in capital     60,797       60,172       56,961  
Retained deficit     (9,879 )     (13,853 )     (576 )
Accumulated other comprehensive income (loss)     237       253       (242 )
Total shareholders’ equity     51,636       47,051       56,622  
Total liabilities and shareholders’ equity $   846,829   $   441,205   $   517,673  
       


Stein Mart, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

    13 Weeks Ended 13 Weeks Ended
  May 4, 2019 May 5, 2018
Cash flows from operating activities:      
Net income   $   3,969   $   7,334  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:      
Depreciation and amortization       7,338       8,070  
Share-based compensation       730       995  
Store closing (benefits) charges       (8 )     116  
Impairment of property and other assets       -       299  
Loss on disposal of property and equipment       1       99  
Changes in assets and liabilities:      
  Inventories       (18,397 )     (26,727 )
  Prepaid expenses and other current assets       (4,311 )     (8,977 )
  Other assets       7,553       (2,311 )
  Accounts payable       24,951       (25,735 )
  Accrued expenses and other current liabilities       10,424       217  
  Other liabilities       (17,051 )     (586 )
Net cash provided by (used in) operating activities       15,199       (47,206 )
Cash flows from investing activities:      
Net acquisition of property and equipment       (1,679 )     (1,664 )
Proceeds from cancelled corporate owned life insurance policies       -       2,514  
Net cash (used in) provided by investing activities       (1,679 )     850  
Cash flows from financing activities:      
Proceeds from borrowings       102,025       428,877  
Repayments of debt       (102,325 )     (375,587 )
Debit issuance costs       -       (802 )
Cash dividends paid       (49 )     (147 )
Capital lease payments       (184 )     (183 )
Repurchase of common stock       (103 )     (37 )
Net cash (used in) provided by financing activities       (636 )     52,121  
Net increase in cash and cash equivalents       12,884       5,765  
Cash and cash equivalents at beginning of year       9,049       10,400  
Cash and cash equivalents at end of period   $   21,933   $   16,165  
       

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 income to EBITDA and Adjusted EBITDA which are considered Non-GAAP financial measures. Adjusted EBITDA excludes non-cash items (impairment charges) and significant non-recurring unusual items.                               

      13 Weeks 13 Weeks
      Ended Ended
      May 4, 2019 May 5, 2018
  Net income $ 3,969 $ 7,334
  Add back amounts for computation of EBITDA:    
    Interest expense, net   2,526   2,463
    Income tax expense   53   60
    Depreciation and amortization   7,338   8,070
  EBITDA   13,886   17,927
  Adjustments:    
  Non-cash impairment charges   -   299
  Expense related to legal settlements   -   11
  New store pre-opening costs   -   192
    Total adjustments   -   502
  Adjusted EBITDA $ 13,866 $ 18,429

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
    May 4, 2019
Decrease in comparable sales excluding sales from licensed departments (1)  (2.5%)
Impact of growth in comparable sales of licensed departments (2)   0.8%
Decrease in comparable sales including sales from licensed departments (1.7%)
  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 our 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.

For more information:
Linda L. Tasseff
Director, Investor Relations
(904) 858-2639
ltasseff@steinmart.com

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