Stein Mart, Inc. (NASDAQ: SMRT) today announced financial results
for the third quarter ended November 2, 2019.
Operating loss for the
third quarter was $9.6 million for 2019 compared to an operating
loss of $13.1 million for 2018. Net loss for the third quarter was
$12.1 million or $0.25 per diluted share for 2019 compared to net
loss of $16.3 million or $0.35 per diluted share for 2018.
“We saw a marked improvement in our sales trend in the third
quarter. Comparable sales improved 250 basis points from the first
half of the year to essentially flat, driven by incremental sales
from the launch of our Kids department and a double-digit increase
in omni sales,” said Hunt Hawkins, Chief Executive Officer. “Our
new fall initiatives are gaining traction and will continue to have
a positive impact on our performance in the fourth
quarter.”
Net SalesNet sales for the third quarter of
2019 were $276.1 million compared to $279.0 million for the third
quarter of 2018. Net sales were impacted by fewer stores operating
during the quarter. Comparable sales for the third quarter of 2019
decreased 0.1 percent (see Note 2). Omni sales, defined as all
online sales regardless of fulfillment channel, increased 18
percent over last year’s third quarter.
For the first nine months of 2019, net sales decreased 3.7
percent to $882.7 million while comparable sales decreased 1.9
percent to last year. Net sales were impacted by comparable sales
results and fewer stores operating during the year. Omni sales
increased 13 percent over last year’s first nine months.
Gross ProfitGross profit for the third quarter
of 2019 was $69.4 million or 25.1 percent of sales compared to
$69.8 million or 25.0 percent of sales in 2018. For the first nine
months, gross profit was $231.5 million or 26.2 percent of sales in
2019 compared to $245.1 million or 26.7 percent of sales in 2018.
The decrease in the gross profit rate for the first nine months of
2019 primarily reflects higher markdowns as a percent of sales
taken during the first half of the year.
Selling, General and Administrative
Expenses Selling, general and administrative
(“SG&A”) expenses for the third quarter were $83.3 million in
2019 compared to $86.6 million in 2018. SG&A expenses for the
third quarter of 2019 include a $1.9 million benefit from a
Visa/MasterCard claim settlement. SG&A expenses for the third
quarter of 2018 include $1.1 million in advisory fees for the
extension of our credit agreements and $0.7 million in
hurricane-related expenses. (See Note 1.) Excluding these items
from both periods, SG&A expenses were $85.2 million in 2019 and
$84.8 million in 2018.
For the first nine
months, SG&A expenses were $247.9 million in 2019 and $258.1
million in 2018. Excluding the discrete items mentioned above from
both periods, SG&A expenses were $249.8 million in 2019 and
$256.3 million in 2018. The decrease in SG&A expenses was
primarily from lower store-related expenses, including the impact
of closed stores, partially offset by higher advertising expenses
for planned additional branded television.
Balance SheetInventories were $307.1 million at
the end of the third quarter of 2019 compared to $305.0 million at
the same time last year. Inventories at the end of the third
quarter of 2019 included amounts to support our new Kids
department. Excluding the impact of Kids, average inventories per
store were down slightly to last year.
Debt decreased $20.6 million to $171.0 million at the end of the
third quarter of 2019 compared to $191.6 million at the end of the
third quarter of 2018. Unused availability under our credit
facility increased $12.1 million to $87.0 million at the end of the
third quarter of 2019 compared to $74.9 million at the end of the
third quarter of 2018. At the end of the third quarter of 2019, we
had an additional $12.6 million available to borrow that would be
collateralized by life insurance policies.
Store Activity We had 283 stores at the end of
the third quarter of 2019 compared to 288 at the end of the third
quarter of 2018. We closed five stores during the first nine months
of 2019, which completes our store plans for the year.
Fourth Quarter 2019 Outlook Based on our
results through the third quarter, we are projecting fourth quarter
operating income influenced by the following
factors:
- We anticipate a flat to low single-digit increase in comparable
sales impacted by our fall sales-driving initiatives
- We expect our gross profit rate to be slightly lower than last
year’s improved rate
- Excluding a $3.3 million benefit in last year’s fourth quarter
related to a change in vacation policy, SG&A expenses are
expected to be slightly lower than in last year’s fourth
quarter
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 Consolidated Balance
Sheet.
Prior Year Financial StatementsPrior year
amounts in the attached financial statements have been revised to
reflect a correction to the impairment of fixed assets, as
described in Note 2 to the financial statements included in our
Form 10-Q for first quarter of 2019.
Filing of Form 10-QReported results are
preliminary and not final until the filing of our Form 10-Q for the
fiscal quarter ended November 2, 2019 with the Securities and
Exchange Commission (“SEC”), and therefore remain subject to
adjustment.
Conference CallA conference call to discuss the
Company’s third quarter results will be held at 4:30 p.m. ET on
November 20, 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 December
31, 2019.
Investor PresentationStein Mart’s third 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 omni off-price retailer offering designer and
name-brand fashion apparel for him, for her and now for Kids!, home
décor, accessories and shoes at everyday discount
prices. Stein Mart provides real value that customers
love every day. The company operates 283 stores across 30 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: 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.Consolidated Statements of
Loss(Unaudited)(In thousands, except per
share amounts)
|
|
13 Weeks Ended |
13 Weeks Ended |
39 Weeks Ended |
39 Weeks Ended |
|
|
November 2, 2019 |
November 3, 2018 |
November 2, 2019 |
November 3, 2018 |
|
|
|
|
|
|
Net sales |
|
$ |
276,132 |
|
$ |
279,047 |
|
$ |
882,658 |
|
$ |
916,511 |
|
Other revenue |
|
|
4,291 |
|
|
3,814 |
|
|
13,479 |
|
|
11,765 |
|
Total revenue |
|
|
280,423 |
|
|
282,861 |
|
|
896,137 |
|
|
928,276 |
|
Cost of merchandise sold |
|
|
206,721 |
|
|
209,286 |
|
|
651,122 |
|
|
671,426 |
|
Selling, general and
administrative expenses |
|
|
83,285 |
|
|
86,626 |
|
|
247,891 |
|
|
258,071 |
|
Operating loss |
|
|
(9,583 |
) |
|
(13,051 |
) |
|
(2,876 |
) |
|
(1,221 |
) |
Interest expense, net |
|
|
2,306 |
|
|
3,078 |
|
|
7,024 |
|
|
8,406 |
|
Loss before income taxes |
|
|
(11,889 |
) |
|
(16,129 |
) |
|
(9,900 |
) |
|
(9,627 |
) |
Income tax expense |
|
|
203 |
|
|
171 |
|
|
308 |
|
|
291 |
|
Net loss |
|
$ |
(12,092 |
) |
$ |
(16,300 |
) |
$ |
(10,208 |
) |
$ |
(9,918 |
) |
|
|
|
|
|
|
Net loss per share: |
|
|
|
|
|
Basic and diluted |
|
$ |
(0.25 |
) |
$ |
(0.35 |
) |
$ |
(0.22 |
) |
$ |
(0.21 |
) |
|
|
|
|
|
|
Weighted-average shares
outstanding: |
|
|
|
|
|
Basic and diluted |
|
|
47,545 |
|
|
46,743 |
|
|
47,354 |
|
|
46,674 |
|
|
|
|
|
|
|
Stein Mart,
Inc. Consolidated Balance
Sheets (Unaudited) (In
thousands, except for share and per share data)
|
November 2, 2019 |
February 2, 2019 |
November 3, 2018 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
12,953 |
|
$ |
9,049 |
|
$ |
13,884 |
|
Inventories |
|
307,124 |
|
|
255,884 |
|
|
305,010 |
|
Prepaid expenses and other
current assets |
|
23,368 |
|
|
28,326 |
|
|
35,638 |
|
Total current assets |
|
343,445 |
|
|
293,259 |
|
|
354,532 |
|
Property and equipment,
net |
|
108,781 |
|
|
119,740 |
|
|
129,683 |
|
Operating lease assets |
|
361,168 |
|
|
- |
|
|
- |
|
Other assets |
|
25,949 |
|
|
24,108 |
|
|
24,594 |
|
Total assets |
$ |
839,343 |
|
$ |
437,107 |
|
$ |
508,809 |
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
126,541 |
|
$ |
89,646 |
|
$ |
122,019 |
|
Current portion of operating
lease liabilities |
|
80,936 |
|
|
- |
|
|
- |
|
Accrued expenses and other
current liabilities |
|
80,223 |
|
|
77,650 |
|
|
82,043 |
|
Total current liabilities |
|
287,700 |
|
|
167,296 |
|
|
204,062 |
|
Long-term debt |
|
170,292 |
|
|
153,253 |
|
|
190,657 |
|
Deferred rent |
|
- |
|
|
39,708 |
|
|
40,558 |
|
Noncurrent operating lease
liabilities |
|
316,890 |
|
|
- |
|
|
- |
|
Other liabilities |
|
32,554 |
|
|
33,897 |
|
|
35,982 |
|
Total liabilities |
|
807,436 |
|
|
394,154 |
|
|
471,259 |
|
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; 48,194,610, 47,874,286 and 47,898,068 |
|
|
|
shares issued and outstanding, respectively |
|
482 |
|
|
479 |
|
|
479 |
|
Additional paid-in
capital |
|
61,504 |
|
|
60,172 |
|
|
59,009 |
|
Retained deficit |
|
(30,283 |
) |
|
(17,951 |
) |
|
(21,706 |
) |
Accumulated other
comprehensive income (loss) |
|
204 |
|
|
253 |
|
|
(232 |
) |
Total shareholders’ equity |
|
31,907 |
|
|
42,953 |
|
|
37,550 |
|
Total liabilities and shareholders’ equity |
$ |
839,343 |
|
$ |
437,107 |
|
$ |
508,809 |
|
|
|
|
|
Stein Mart,
Inc. Consolidated Statements of Cash
Flows (Unaudited) (In
thousands)
|
39 Weeks Ended |
39 Weeks Ended |
|
November 2, 2019 |
November 3, 2018 |
Cash flows from operating activities: |
|
|
Net loss |
$ |
(10,208 |
) |
$ |
(9,918 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
Depreciation and amortization |
|
21,220 |
|
|
23,799 |
|
Share-based compensation |
|
1,348 |
|
|
2,973 |
|
Store closing benefits |
|
(31 |
) |
|
(180 |
) |
Impairment of property and other assets |
|
11 |
|
|
693 |
|
Loss on disposal of property and equipment |
|
44 |
|
|
137 |
|
Changes in assets and liabilities: |
|
|
Inventories |
|
(51,240 |
) |
|
(34,773 |
) |
Prepaid expenses and other current assets |
|
4,159 |
|
|
(9,018 |
) |
Other assets |
|
(5,348 |
) |
|
(1,882 |
) |
Accounts payable |
|
36,976 |
|
|
2,559 |
|
Accrued expenses and other current liabilities |
|
1,046 |
|
|
3,977 |
|
Operating lease assets and liabilities, net |
|
(3,640 |
) |
|
- |
|
Other liabilities |
|
(4,197 |
) |
|
(3,928 |
) |
Net cash used in operating activities |
|
(9,860 |
) |
|
(25,561 |
) |
Cash flows from investing activities: |
|
|
Net acquisition of property and equipment |
|
(5,145 |
) |
|
(7,379 |
) |
Proceeds from canceled corporate owned life insurance policies |
|
2,900 |
|
|
2,514 |
|
Proceeds from insurance claims |
|
82 |
|
|
296 |
|
Net cash used in investing activities |
|
(2,163 |
) |
|
(4,569 |
) |
Cash flows from financing activities: |
|
|
Proceeds from borrowings |
|
305,032 |
|
|
1,033,415 |
|
Repayments of debt |
|
(288,132 |
) |
|
(997,990 |
) |
Debit issuance costs |
|
- |
|
|
(1,146 |
) |
Cash dividends paid |
|
(91 |
) |
|
(147 |
) |
Capital lease payments |
|
(869 |
) |
|
(551 |
) |
Proceeds from exercise of stock options |
|
107 |
|
|
90 |
|
Repurchase of common stock |
|
(120 |
) |
|
(57 |
) |
Net cash provided by financing activities |
|
15,927 |
|
|
33,614 |
|
Net
increase in cash and cash equivalents |
|
3,904 |
|
|
3,484 |
|
Cash and
cash equivalents at beginning of year |
|
9,049 |
|
|
10,400 |
|
Cash and
cash equivalents at end of period |
$ |
12,953 |
|
$ |
13,884 |
|
|
|
|
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 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
loss to EBITDA and Adjusted EBITDA, which are considered Non-GAAP
financial measures. Adjusted EBITDA excludes certain non-cash items
(impairment charges) and amounts incurred with significant
transactions or events that we believe are not indicative of our
core operating performance.
|
|
13 Weeks Ended |
39 Weeks Ended |
|
|
Nov. 2, 2019 |
Nov. 3, 2018 |
Nov. 2, 2019 |
Nov. 3, 2018 |
Net loss |
$ |
(12,092 |
) |
$ |
(16,300 |
) |
$ |
(10,208 |
) |
$ |
(9,918 |
) |
Add back amounts
for computation of EBITDA: |
|
|
|
|
Interest expense, net |
|
2,306 |
|
|
3,078 |
|
|
7,024 |
|
|
8,406 |
|
Income tax expense |
|
203 |
|
|
171 |
|
|
308 |
|
|
291 |
|
Depreciation and amortization |
|
7,097 |
|
|
7,975 |
|
|
21,220 |
|
|
23,799 |
|
EBITDA |
|
(2,486 |
) |
|
(5,076 |
) |
|
18,344 |
|
|
22,578 |
|
Adjustments: |
|
|
|
|
Visa/MasterCard claim settlement |
|
(1,946 |
) |
|
- |
|
|
(1,946 |
) |
|
- |
|
Credit agreements extension fees |
|
- |
|
|
1,100 |
|
|
- |
|
|
1,100 |
|
Hurricane related expenses, net of insurance recoveries |
|
- |
|
|
718 |
|
|
- |
|
|
718 |
|
Non-cash impairment charges |
|
- |
|
|
4 |
|
|
11 |
|
|
693 |
|
Expense related to legal settlements |
|
13 |
|
|
96 |
|
|
15 |
|
|
139 |
|
New store pre-opening costs |
|
- |
|
|
373 |
|
|
- |
|
|
664 |
|
Total adjustments |
|
(1,933 |
) |
|
2,291 |
|
|
(1,920 |
) |
|
3,314 |
|
Adjusted
EBITDA |
$ |
(4,419 |
) |
$ |
(2,785 |
) |
$ |
16,424 |
|
$ |
25,892 |
|
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 |
39 Weeks Ended |
|
|
November 2, 2019 |
November 2, 2019 |
Increase/(decrease) in comparable sales excluding sales from
licensed departments (1) |
0.2% |
(2.3%) |
Impact of
comparable sales of licensed departments (2) |
(0.3%) |
0.4% |
Decrease in
comparable sales including sales from licensed departments |
(0.1%) |
(1.9%) |
(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 these 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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