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 SalesNet 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 ProfitGross 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 FlowsInventories 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 AccountingWe 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-QReported 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 CallA 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 PresentationStein 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 MartStein 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
MEASURESWe 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 EBITDAEBITDA 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%) |
- 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.
- 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. TasseffDirector, Investor
Relations(904) 858-2639ltasseff@steinmart.com
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