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.”
SalesTotal 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 ProfitGross 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
ExpensesSelling, 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 SheetInventories 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 FlowsCash 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 ActivityWe 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-QReported 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 CallA 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 PresentationStein 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
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
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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