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Stein Mart, Inc. Reports Second Quarter Fiscal 2017 Results

/EIN News/ -- JACKSONVILLE, Fla., Aug. 16, 2017 (GLOBE NEWSWIRE) -- Stein Mart, Inc. (NASDAQ:SMRT) today announced financial results for the second quarter ended July 29, 2017.

Highlights

  • Total sales decreased 2.7 percent and comparable store sales decreased 5.0 percent
  • Diluted loss per share of $0.28 compared to diluted earnings per share of $0.06 in 2016
  • Average store inventories 15 percent lower than last year’s second quarter

Net loss for the second quarter was $13.0 million or $0.28 per diluted share compared to net income of $3.0 million or $0.06 per diluted share in 2016. For the first six months of 2017, net loss was $9.3 million or $0.20 per diluted share compared to net income of $16.3 million or $0.35 per diluted share in the same period in 2016.

“Our second quarter sales trends improved from the first quarter and were strongest in July as we more aggressively priced our clearance merchandise,” said Hunt Hawkins, Chief Executive Officer. “We are very pleased with the progress we made on our inventory management initiatives that resulted in 15 percent lower average store inventories at the end of the quarter. It is important that our inventories are in a very good position and well-balanced going into the fall season.”

“We will continue to operate our business with lean store inventories and tight expense control this fall while putting into place new merchandising and marketing strategies that include the launch of a new advertising campaign in September. We expect our lower inventories will give us better margins from lower markdowns primarily in the fourth quarter.”

Sales
Total sales for the second quarter of 2017 decreased 2.7 percent to $311.0 million, while comparable store sales decreased 5.0 percent. Ecommerce sales were up 41 percent over last year’s second quarter. For the first six months of 2017, total sales decreased 4.0 percent to $648.4 million, while comparable store sales decreased 6.4 percent.

Gross Profit
Gross profit for the second quarter of 2017 was $64.7 million or 20.8 percent of sales compared to $89.4 million or 28.0 percent of sales in 2016. Gross profit for the first six months of 2017 was $160.2 million or 24.7 percent of sales compared to $198.3 million or 29.4 percent of sales in 2016. The lower gross profit rate for both periods reflects much higher markdowns and to a lesser extent higher occupancy costs that negatively leverage on lower sales. 

Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses for the second quarter of 2017 were $86.2 million compared to $83.8 million in 2016. SG&A expenses for the first six months of 2017 were $171.7 million compared to $170.3 million in 2016. The increase in SG&A expenses for both periods is primarily the result of higher operating expenses from new stores that were mostly offset by operating savings.

Balance Sheet
Inventories were $246 million at the end of the second quarter of 2017 compared to $280 million at the same time last year. Average inventories per store were down 15 percent to last year.

Borrowings under our credit facilities were $170.6 million at the end of the second quarter of 2017 compared to $167.4 million at the end of the second quarter last year. Unused availability at the end of the second quarter was $49.5 million.   

Cash Flows
Cash provided by operating activities was $24.9 million for the first six months of 2017 compared to $52.6 million for the first six months of 2016.

Capital expenditures totaled $11.8 million for the first six months of 2017 compared to $23.9 million for the first six months of 2016. 

Store Activity
We had 292 stores at the end of the second quarter compared to 283 at the end of the second quarter last year. No stores were opened or closed during the second quarter. We are now expecting to open a total of 10 new stores and close six stores in 2017.  

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 July 29, 2017 with the Securities and Exchange Commission (SEC), and therefore remain subject to adjustment.

Conference Call
A conference call for investment analysts to discuss the Company’s second quarter 2017 results will be held at 4:30 p.m. ET on August 16, 2017. The call may be heard on the investor relations portion of the Company’s website at http://ir.steinmart.com. A replay of the conference call will be available on the website through August 31, 2017.

Investor Presentation
Stein Mart’s second quarter 2017 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 and 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 will love every day both in stores and online. The Company currently operates 292 stores across 31 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: 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, dividend impact on stock price, 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, impacts of seasonality, increases in the cost of compensation and employee benefits, 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 
    July 29, 2017 July 30, 2016 July 29, 2017 July 30, 2016
           
Net sales   $   311,036   $   319,761 $   648,371   $   675,473
Cost of merchandise sold     246,368     230,322   488,147     477,142
Gross profit     64,668     89,439   160,224     198,331
Selling, general and administrative expenses     86,201     83,840   171,695     170,314
Operating (loss) income     (21,533 )   5,599   (11,471 )   28,017
Interest expense, net     1,142     883   2,281     1,849
(Loss) Income before income taxes     (22,675 )   4,716   (13,752 )   26,168
Income tax (benefit) expense     (9,682 )   1,709   (4,459 )   9,850
Net (loss) income   $   (12,993 ) $   3,007 $   (9,293 ) $   16,318
           
Net (loss) income per share:          
Basic   $   (0.28 ) $   0.07 $   (0.20 ) $   0.36
Diluted   $   (0.28 ) $   0.06 $   (0.20 ) $   0.35
           
Weighted-average shares outstanding:          
Basic     46,264     45,719   46,214     45,657
Diluted     46,264     46,555   46,214     46,415
           

 


Stein Mart, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except for share and per share data)
       
   July 29, 2017   January 28, 2017   July 30, 2016 
ASSETS      
Current assets:      
Cash and cash equivalents $   10,577   $   10,604   $   11,765  
Inventories     246,243       291,110       279,691  
Prepaid expenses and other current assets     32,200       30,249       20,925  
Total current assets     289,020       331,963       312,381  
Property and equipment, net     160,282       165,542       169,597  
Other assets     29,806       30,344       29,892  
Total assets $   479,108   $   527,849   $   511,870  
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $   87,561   $   114,419   $   98,185  
Current portion of debt     5,833       10,000       10,000  
Accrued expenses and other current liabilities     69,418       72,772       68,411  
Total current liabilities     162,812       197,191       176,596  
Long-term debt     164,779       171,792       157,371  
Deferred rent     42,293       41,774       42,286  
Other liabilities     48,271       46,832       46,149  
Total liabilities     418,155       457,589       422,402  
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; 47,904,091, 47,018,942 and  46,848,195      
shares issued and outstanding, respectively     479       470       468  
Additional paid-in capital     53,721       50,241       46,547  
Retained earnings     7,040       19,853       42,722  
Accumulated other comprehensive loss      (287 )     (304 )     (269 )
Total shareholders’ equity     60,953       70,260       89,468  
Total liabilities and shareholders’ equity $   479,108   $   527,849   $   511,870  
       

 

Stein Mart, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
     26 Weeks Ended   26 Weeks Ended 
  July 29, 2017 July 30, 2016
Cash flows from operating activities:   (Unaudited) (Unaudited)
Net (loss) income   $   (9,293 ) $   16,318  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization       16,226       15,611  
Share-based compensation       3,379       3,511  
Store closing charges       172       37  
Impairment of property and other assets       640       -  
Loss on disposal of property and equipment       236       10  
Deferred income taxes       4,199       978  
Tax expense from equity issuances       -       (196 )
Excess tax benefits from share-based compensation       -       (471 )
Changes in assets and liabilities:      
Inventories       44,867       13,917  
Prepaid expenses and other current assets       (1,951 )     (2,339 )
Other assets       (566 )     (763 )
Accounts payable       (26,800 )     (7,763 )
Accrued expenses and other current liabilities       (3,757 )     (1,207 )
Other liabilities       (2,409 )     14,949  
Net cash provided by operating activities       24,943       52,592  
Cash flows from investing activities:      
Net acquisition of property and equipment       (11,761 )     (23,939 )
Proceeds from cancelled corporate owned life insurance policies       1,445       55  
Net cash used in investing activities       (10,316 )     (23,884 )
Cash flows from financing activities:      
Proceeds from borrowings       230,094       164,913  
Repayments of debt       (241,295 )     (187,713 )
Cash dividends paid       (3,563 )     (6,885 )
Excess tax benefits from share-based compensation       -       471  
Proceeds from exercise of stock options and other       328       1,439  
Repurchase of common stock       (218 )     (998 )
Net cash used in financing activities       (14,654 )     (28,773 )
Net decrease in cash and cash equivalents       (27 )     (65 )
Cash and cash equivalents at beginning of year       10,604       11,830  
Cash and cash equivalents at end of period   $   10,577   $   11,765  
       

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA:           
EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is not a measure of financial performance under generally accepted accounting principles (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. Adjustments to EBITDA include non-cash items (impairment charges), significant non-recurring unusual items (legal settlements) and new stores investments (pre-opening costs).

Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA
Unaudited (in thousands)
    26 Weeks 26 Weeks
    Ended Ended
    July 29, 2017 July 30, 2016
Net (loss) income  ($9,293)  $16,318
Add back amounts for computation of EBITDA:    
  Interest expense, net 2,281 1,849
  Income tax (benefit) expense  (4,459) 9,850
  Depreciation and amortization 16,226 15,611
EBITDA 4,755 43,628
Adjustments:    
Expense related to legal settlements 44 1,833
Non-cash impairment charges 640 -
New store pre-opening costs 1,231 1,388
Total adjustments 1,915 3,221
Adjusted EBITDA  $6,670  $46,849

 

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

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