Stein Mart, Inc. (NASDAQ:SMRT) today announced financial results
for the first quarter ended April 29, 2017.
Highlights
- Total sales decreased 5.2 percent and comparable store sales
decreased 7.6 percent
- Diluted earnings per share of $0.08 compared to $0.29 in
2016
- Solidifying financial position by suspending quarterly dividend
and reducing capital expenditures
Net income for the first quarter was $3.7 million
or $0.08 per diluted share compared to net income of $13.3 million
or $0.29 per diluted share in 2016. Income tax expense for the
first quarter of 2017 includes $1.1 million ($0.02 per diluted
share) higher expense related to the new accounting standard on
stock compensation.
“We continue to experience softer than planned
store traffic and sales. As a result, markdowns were significantly
higher for the quarter despite our focus on inventory management.
Given the uncertain retail environment, we are being more
conservative planning fall, keeping a higher percentage of our
buying in reserve to opportunistically take advantage of any sales
upside. We expect to see additional inventory reductions as the
year progresses,” said Hunt Hawkins, Chief Executive Officer.
“Until we gain improved visibility during this period of weak
retail apparel sales, we believe it is important to implement
measures to maximize free cash flow to improve our financial
position. In that regard, we have decided to suspend our quarterly
dividend and significantly reduce our planned capital
expenditures.”
SalesTotal sales for the first quarter of 2017
were $337.3 million compared to $355.7 million in 2016. Comparable
store sales decreased 7.6 percent primarily due to lower traffic.
Ecommerce sales were up 38 percent over last year’s first
quarter.
Gross ProfitGross profit for the first quarter
of 2017 was $95.6 million or 28.3 percent of sales compared to
$108.9 million or 30.6 percent of sales in 2016. The lower gross
profit rate for the quarter reflects higher markdowns and higher
occupancy costs that negatively leverage on lower sales.
Selling, General and Administrative
ExpensesSelling, general and administrative (SG&A)
expenses for the first quarter of 2017 were $85.5 million compared
to $86.5 million in 2016. SG&A expenses were lower this year as
a result of operating savings and lower expense for legal
settlements that more than offset higher operating expenses from
new stores.
Balance SheetInventories were $322
million at the end of the first quarter of 2017 compared to $317
million at the same time last year. Average inventories per store
were down 2.1 percent to last year.
Borrowings under our credit facilities were $157 million and
unused availability was $94 million at the end of the first
quarter. At the end of the first quarter last year, borrowings were
$149 million and unused availability was $113 million.
Cash FlowsCash provided by
operating activities was $40.2 million for the first quarter of
2017 compared to $60.3 million for the first quarter of 2016.
Capital expenditures totaled $7.2 million for the first quarter
of 2017 compared to $11.3 million in 2016. Planned capital
expenditures for fiscal 2017 have been decreased to approximately
$24 million or $21 million net of tenant improvement allowances.
Capital expenditures were $42 million or $36 million net of tenant
improvement allowances in fiscal 2016.
Suspending the $0.075 quarterly dividend will free up
approximately $14 million of cash to apply against debt on an
annual basis.
Store ActivityWe had 292 stores at the end of
the first quarter compared to 283 at the end of the first quarter
last year. We opened five new stores and closed three stores during
the quarter. We are now expecting to open a total of 10 new stores
and close seven stores in 2017.
Updated 2017 Outlook We
have updated our full year 2017 outlook as follows:
- We continue to expect our total sales to be at least four
percent above our comparable store sales for the year due to net
new stores and this year’s additional 53rd week.
- We now expect our gross profit rate will be about the same as
the fiscal 2016 rate. This is significantly less than previously
estimated primarily due to higher first and second quarter
markdowns to reduce inventories for the remainder of the year.
- We are forecasting SG&A expenses to increase only $5
million this year instead of the $15 million previously estimated
due to additional operating savings and eliminating most incentive
compensation.
- Future quarters’ effective tax rate will be higher than the
38.0 percent previously estimated due to the impact of permanent
items on lower anticipated earnings.
- If first quarter sales trends continue into the second quarter,
we estimate that our loss per share will be in the range of $0.20
to $0.25 for the second quarter.
Filing of Form 10-QReported results are
preliminary and not final until the filing of our Form 10-Q for the
fiscal quarter ended April 29, 2017 with the Securities and
Exchange Commission (SEC), and therefore remain subject to
adjustment.
Conference CallA conference call for investment
analysts to discuss the Company’s first quarter 2017 results will
be held at 4:30 p.m. ET on May 17, 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 May 31, 2017.
Investor PresentationStein Mart’s first 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
StatementsExcept 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
Income |
(Unaudited) |
(In thousands, except per share amounts) |
|
|
|
13 Weeks Ended |
13 Weeks Ended |
|
|
April 29, 2017 |
April 30, 2016 |
|
|
|
|
Net sales |
|
$ |
337,335 |
$ |
355,712 |
Cost of merchandise
sold |
|
|
241,779 |
|
246,820 |
Gross
profit |
|
|
95,556 |
|
108,892 |
Selling, general and
administrative expenses |
|
|
85,494 |
|
86,474 |
Operating
income |
|
|
10,062 |
|
22,418 |
Interest expense,
net |
|
|
1,139 |
|
966 |
Income
before income taxes |
|
|
8,923 |
|
21,452 |
Income tax expense |
|
|
5,223 |
|
8,141 |
Net
income |
|
$ |
3,700 |
$ |
13,311 |
|
|
|
|
Net income per
share: |
|
|
|
Basic |
|
$ |
0.08 |
$ |
0.29 |
Diluted |
|
$ |
0.08 |
$ |
0.29 |
|
|
|
|
Weighted-average shares
outstanding: |
|
|
|
Basic |
|
|
46,165 |
|
45,595 |
Diluted |
|
|
46,171 |
|
46,275 |
|
|
|
|
|
Stein Mart, Inc. |
Condensed Consolidated Balance
Sheets |
(Unaudited) |
(In thousands, except for share and per share
data) |
|
|
|
April 29, 2017 |
|
|
January 28, 2017 |
|
|
April 30, 2016 |
|
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and
cash equivalents |
$ |
15,554 |
|
$ |
10,604 |
|
$ |
16,317 |
|
Inventories |
|
322,030 |
|
|
291,110 |
|
|
316,897 |
|
Prepaid
expenses and other current assets |
|
24,161 |
|
|
30,249 |
|
|
22,676 |
|
Total
current assets |
|
361,745 |
|
|
331,963 |
|
|
355,890 |
|
Property
and equipment, net |
|
164,012 |
|
|
165,542 |
|
|
166,261 |
|
Other
assets |
|
28,692 |
|
|
30,344 |
|
|
30,141 |
|
Total
assets |
$ |
554,449 |
|
$ |
527,849 |
|
$ |
552,292 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
162,208 |
|
$ |
114,419 |
|
$ |
152,807 |
|
Current
portion of debt |
|
8,333 |
|
|
10,000 |
|
|
10,000 |
|
Accrued
expenses and other current liabilities |
|
71,360 |
|
|
72,772 |
|
|
75,385 |
|
Total
current liabilities |
|
241,901 |
|
|
197,191 |
|
|
238,192 |
|
Long-term debt |
|
149,119 |
|
|
171,792 |
|
|
138,960 |
|
Deferred
rent |
|
42,509 |
|
|
41,774 |
|
|
41,667 |
|
Other
liabilities |
|
49,128 |
|
|
46,832 |
|
|
45,738 |
|
Total
liabilities |
|
482,657 |
|
|
457,589 |
|
|
464,557 |
|
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; 47,181,498, 47,018,942 and 46,372,908 |
|
|
|
shares
issued and outstanding, respectively |
|
472 |
|
|
470 |
|
|
464 |
|
Additional paid-in capital |
|
51,557 |
|
|
50,241 |
|
|
44,370 |
|
Retained
earnings |
|
20,059 |
|
|
19,853 |
|
|
43,175 |
|
Accumulated other comprehensive loss |
|
(296 |
) |
|
(304 |
) |
|
(274 |
) |
Total
shareholders’ equity |
|
71,792 |
|
|
70,260 |
|
|
87,735 |
|
Total
liabilities and shareholders’ equity |
$ |
554,449 |
|
$ |
527,849 |
|
$ |
552,292 |
|
|
|
|
|
|
Stein Mart, Inc. |
Condensed Consolidated Statements of Cash
Flows |
(Unaudited) |
(In thousands) |
|
|
|
|
13
Weeks Ended |
|
|
13
Weeks Ended |
|
|
|
April 29, 2017 |
|
|
April 30, 2016 |
|
Cash flows from
operating activities: |
|
|
|
Net
income |
|
$ |
3,700 |
|
$ |
13,311 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
|
8,085 |
|
|
7,660 |
|
Share-based compensation |
|
|
1,523 |
|
|
1,590 |
|
Store
closing charges |
|
|
286 |
|
|
- |
|
Impairment of property and other assets |
|
|
31 |
|
|
- |
|
Loss on
disposal of property and equipment |
|
|
232 |
|
|
9 |
|
Deferred
income taxes |
|
|
4,858 |
|
|
197 |
|
Tax
expense from equity issuances |
|
|
- |
|
|
(145 |
) |
Excess
tax benefits from share-based compensation |
|
|
- |
|
|
(5 |
) |
Changes
in assets and liabilities: |
|
|
|
Inventories |
|
|
(30,920 |
) |
|
(23,289 |
) |
Prepaid
expenses and other current assets |
|
|
6,088 |
|
|
(4,090 |
) |
Other
assets |
|
|
1,279 |
|
|
(909 |
) |
Accounts
payable |
|
|
47,924 |
|
|
46,501 |
|
Accrued
expenses and other current liabilities |
|
|
(1,550 |
) |
|
4,801 |
|
Other
liabilities |
|
|
(1,355 |
) |
|
14,635 |
|
Net cash
provided by operating activities |
|
|
40,181 |
|
|
60,266 |
|
Cash flows from
investing activity: |
|
|
|
Net
acquisition of property and equipment |
|
|
(7,182 |
) |
|
(11,271 |
) |
Net cash
used in investing activity |
|
|
(7,182 |
) |
|
(11,271 |
) |
Cash flows from
financing activities: |
|
|
|
Proceeds
from borrowings |
|
|
108,911 |
|
|
80,855 |
|
Repayments of debt |
|
|
(133,261 |
) |
|
(122,055 |
) |
Cash
dividends paid |
|
|
(3,494 |
) |
|
(3,443 |
) |
Excess
tax benefits from share-based compensation |
|
|
- |
|
|
5 |
|
Proceeds
from exercise of stock options and other |
|
|
- |
|
|
1,073 |
|
Repurchase of common stock |
|
|
(205 |
) |
|
(943 |
) |
Net cash
used in financing activities |
|
|
(28,049 |
) |
|
(44,508 |
) |
Net
increase in cash and cash equivalents |
|
|
4,950 |
|
|
4,487 |
|
Cash
and cash equivalents at beginning of year |
|
|
10,604 |
|
|
11,830 |
|
Cash
and cash equivalents at end of period |
|
$ |
15,554 |
|
$ |
16,317 |
|
|
|
|
|
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 Income to
EBITDA and Adjusted EBITDA |
Unaudited (in
thousands) |
|
|
|
13 Weeks |
|
13 Weeks |
|
|
|
Ended |
|
Ended |
|
|
|
April 29, 2017 |
|
April 30, 2016 |
|
Net
income |
$ |
3,700 |
|
|
$ |
13,311 |
|
Add back
amounts for computation of EBITDA: |
|
|
|
|
Interest expense, net |
|
1,139 |
|
|
|
966 |
|
|
Income tax expense |
|
5,223 |
|
|
|
8,141 |
|
|
Depreciation and amortization |
|
8,085 |
|
|
|
7,660 |
|
EBITDA |
|
18,147 |
|
|
|
30,078 |
|
Adjustments: |
|
|
|
Expense related to legal settlements |
|
25 |
|
|
|
1,425 |
|
Non-cash impairment charges |
|
31 |
|
|
|
1 |
|
New store pre-opening costs |
|
1,131 |
|
|
|
1,126 |
|
Total adjustments |
|
1,187 |
|
|
|
2,552 |
|
Adjusted
EBITDA |
$ |
19,334 |
|
|
$ |
32,630 |
|
|
|
|
|
|
|
|
For more information:
Linda L. Tasseff
Director, Investor Relations
(904) 858-2639
ltasseff@steinmart.com
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