Stein Mart, Inc. (NASDAQ:SMRT) today announced financial results
for the third quarter ended October 28, 2017.
Third Quarter Highlights
- Comparable store sales were down 6.9 percent for the quarter
and flat for October
- Diluted loss per share was $0.31 compared to $0.24 in 2016
- Average store inventories were 20 percent lower than last
year’s third quarter
- Borrowings were $29 million lower than last year’s third
quarter
Net loss for the third quarter was $14.6 million or
$0.31 per diluted share compared to net loss of $11.0 million or
$0.24 per diluted share in 2016. For the first nine months of 2017,
net loss was $23.9 million or $0.52 per diluted share compared to
net income of $5.3 million or $0.11 per diluted share in the same
period in 2016.
“We ended the quarter well with comparable store
sales improving to flat for the month of October with slightly
positive traffic. This is a reflection of the progress we have made
on our sales-driving initiatives,” said Hunt Hawkins, Chief
Executive Officer.
“Operating with lower inventory levels is resulting
in better merchandise margins from increased regular-priced selling
and lower markdowns. Now that we have moved past the disruptions of
hurricanes Harvey and Irma, we expect the progress we are making
with our business to be more apparent in the fourth quarter. As we
continue to operate with lean inventories and reduced spending, our
borrowings will be even lower by the end of the year.”
SalesTotal sales for the third quarter of 2017
decreased 4.7 percent to $285.4 million, while comparable store
sales decreased 6.9 percent. Approximately one-third of the chain
was directly impacted by closures or reduced hours as a result of
hurricanes Harvey and Irma during the third quarter this year. For
the first nine months of 2017, total sales decreased 4.2 percent to
$933.8 million, while comparable store sales decreased 6.5
percent.
Gross ProfitGross profit for the third quarter
of 2017 was $68.3 million or 23.9 percent of sales compared to
$72.7 million or 24.3 percent of sales in 2016. The gross profit
rate was lower due to higher occupancy costs on lower sales
volumes. The merchandise margin rate was higher due to reduced
markdowns and better productivity.
Gross profit for the first nine months of 2017 was $228.5
million or 24.5 percent of sales compared to $271.0 million or 27.8
percent of sales in 2016. The lower gross profit rate for the first
nine months reflects much higher markdowns during the first half of
the year and to a lesser extent higher occupancy costs on lower
sales. Due to first half results, we now anticipate our
fiscal 2017 gross profit rate will be lower than the fiscal 2016
rate with the fourth quarter 2017 rate significantly higher than
the fourth quarter last year.
Selling, General and Administrative
ExpensesSelling, general and administrative (SG&A)
expenses for the third quarter of 2017 were $92.2 million compared
to $89.0 million in 2016. SG&A expenses for this year’s third
quarter include several discrete drivers totaling $5.5 million that
impact year-over-year quarterly comparisons. These include higher
new store expenses, higher advertising expense to support our new
campaign, consulting and severance costs related to the company’s
cost reduction initiative and hurricane related expenses, net of
insurance recoveries.
SG&A expenses for the first nine months of 2017
were $263.9 million compared to $259.3 million in 2016.
Balance SheetInventories were $311
million at the end of the third quarter of 2017 compared to $384
million at the same time last year. Average inventories per store
were down 20 percent to last year and will continue to be down
substantially at the end of the year.
Borrowings under our credit facilities were $151 million at the
end of the third quarter of 2017 compared to $180 million at the
end of the third quarter last year. Unused availability at the end
of the third quarter was $95 million.
Cash FlowsCash provided by
operating activities was $52.8 million for the first nine months of
2017 compared to $57.2 million for the first nine months of 2016.
Capital expenditures totaled $17.2 million for the first nine
months of 2017 compared to $35.0 million for the first nine months
of 2016. For the full year, capital expenditures are now expected
to be $20 million compared to $42 million in 2016.
Store ActivityWe had 293 stores at the end of
the third quarter compared to 290 at the end of the third quarter
last year. We opened four new stores and closed three stores during
the third quarter which completed our 2017 store plans.
Filing of Form 10-QReported results are
preliminary and not final until the filing of our Form 10-Q for the
fiscal quarter ended October 28, 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 third quarter 2017 results will
be held at 4:30 p.m. ET on November 15, 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 December 31, 2017.
Investor PresentationStein Mart’s third quarter
2017 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 will
love every day both in stores and online. The Company currently
operates 293 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 |
39 Weeks Ended |
39 Weeks Ended |
|
|
October 28, 2017 |
October 29, 2016 |
October 28, 2017 |
October 29, 2016 |
|
|
|
|
|
|
Net sales |
|
$ |
285,395 |
|
$ |
299,527 |
|
$ |
933,766 |
|
$ |
975,000 |
Cost of merchandise
sold |
|
|
217,126 |
|
|
226,816 |
|
|
705,273 |
|
|
703,958 |
Gross
profit |
|
|
68,269 |
|
|
72,711 |
|
|
228,493 |
|
|
271,042 |
Selling, general and
administrative expenses |
|
|
92,158 |
|
|
89,034 |
|
|
263,853 |
|
|
259,348 |
Operating
(loss) income |
|
|
(23,889 |
) |
|
(16,323 |
) |
|
(35,360 |
) |
|
11,694 |
Interest expense,
net |
|
|
1,156 |
|
|
949 |
|
|
3,437 |
|
|
2,798 |
(Loss)
Income before income taxes |
|
|
(25,045 |
) |
|
(17,272 |
) |
|
(38,797 |
) |
|
8,896 |
Income tax (benefit)
expense |
|
|
(10,429 |
) |
|
(6,262 |
) |
|
(14,888 |
) |
|
3,588 |
Net
(loss) income |
|
$ |
(14,616 |
) |
$ |
(11,010 |
) |
$ |
(23,909 |
) |
$ |
5,308 |
|
|
|
|
|
|
Net (loss) income per
share: |
|
|
|
|
|
Basic |
|
$ |
(0.31 |
) |
$ |
(0.24 |
) |
$ |
(0.52 |
) |
$ |
0.12 |
Diluted |
|
$ |
(0.31 |
) |
$ |
(0.24 |
) |
$ |
(0.52 |
) |
$ |
0.11 |
|
|
|
|
|
|
Weighted-average shares
outstanding: |
|
|
|
|
|
Basic |
|
|
46,447 |
|
|
45,845 |
|
|
46,292 |
|
|
45,720 |
Diluted |
|
|
46,447 |
|
|
45,845 |
|
|
46,292 |
|
|
46,599 |
|
|
|
|
|
|
|
Stein Mart, Inc. |
Condensed Consolidated Balance
Sheets |
(Unaudited) |
(In thousands, except for share and per share
data) |
|
|
|
|
|
October 28, 2017 |
January 28, 2017 |
October 29, 2016 |
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and
cash equivalents |
$ |
13,230 |
|
$ |
10,604 |
|
$ |
13,968 |
|
Inventories |
|
311,255 |
|
|
291,110 |
|
|
383,932 |
|
Prepaid
expenses and other current assets |
|
31,371 |
|
|
30,249 |
|
|
29,980 |
|
Total
current assets |
|
355,856 |
|
|
331,963 |
|
|
427,880 |
|
Property
and equipment, net |
|
159,006 |
|
|
165,542 |
|
|
172,771 |
|
Other
assets |
|
30,192 |
|
|
30,344 |
|
|
29,831 |
|
Total
assets |
$ |
545,054 |
|
$ |
527,849 |
|
$ |
630,482 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
179,666 |
|
$ |
114,419 |
|
$ |
208,161 |
|
Current
portion of debt |
|
3,333 |
|
|
10,000 |
|
|
10,000 |
|
Accrued
expenses and other current liabilities |
|
78,595 |
|
|
72,772 |
|
|
77,076 |
|
Total
current liabilities |
|
261,594 |
|
|
197,191 |
|
|
295,237 |
|
Long-term debt |
|
147,472 |
|
|
171,792 |
|
|
169,681 |
|
Deferred
rent |
|
41,592 |
|
|
41,774 |
|
|
42,266 |
|
Other
liabilities |
|
47,219 |
|
|
46,832 |
|
|
45,401 |
|
Total
liabilities |
|
497,877 |
|
|
457,589 |
|
|
552,585 |
|
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; 47,867,630, 47,018,942 and 46,919,426 |
|
|
|
shares
issued and outstanding, respectively |
|
479 |
|
|
470 |
|
|
469 |
|
Additional paid-in capital |
|
54,528 |
|
|
50,241 |
|
|
49,497 |
|
Retained
(deficit) earnings |
|
(7,552 |
) |
|
19,853 |
|
|
28,196 |
|
Accumulated other comprehensive loss |
|
(278 |
) |
|
(304 |
) |
|
(265 |
) |
Total
shareholders’ equity |
|
47,177 |
|
|
70,260 |
|
|
77,897 |
|
Total
liabilities and shareholders’ equity |
$ |
545,054 |
|
$ |
527,849 |
|
$ |
630,482 |
|
|
|
|
|
|
Stein Mart, Inc. |
Condensed Consolidated Statements of Cash
Flows |
(In thousands) |
|
|
|
|
|
|
39 Weeks Ended |
39 Weeks Ended |
|
|
October 28, 2017 |
October 29, 2016 |
Cash flows from
operating activities: |
|
(Unaudited) |
(Unaudited) |
Net
(loss) income |
|
$ |
(23,909 |
) |
$ |
5,308 |
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
|
24,254 |
|
|
23,636 |
|
Share-based compensation |
|
|
4,194 |
|
|
6,306 |
|
Store
closing charges |
|
|
97 |
|
|
25 |
|
Impairment of property and other assets |
|
|
640 |
|
|
277 |
|
Loss on
disposal of property and equipment |
|
|
287 |
|
|
14 |
|
Deferred
income taxes |
|
|
1,900 |
|
|
520 |
|
Tax
expense from equity issuances |
|
|
- |
|
|
(187 |
) |
Excess
tax benefits from share-based compensation |
|
|
- |
|
|
(31 |
) |
Changes
in assets and liabilities: |
|
|
|
Inventories |
|
|
(20,145 |
) |
|
(90,324 |
) |
Prepaid
expenses and other current assets |
|
|
(1,122 |
) |
|
(11,581 |
) |
Other
assets |
|
|
(820 |
) |
|
(831 |
) |
Accounts
payable |
|
|
65,298 |
|
|
102,469 |
|
Accrued
expenses and other current liabilities |
|
|
4,696 |
|
|
6,812 |
|
Other
liabilities |
|
|
(2,566 |
) |
|
14,764 |
|
Net cash
provided by operating activities |
|
|
52,804 |
|
|
57,177 |
|
Cash flows from
investing activities: |
|
|
|
Net
acquisition of property and equipment |
|
|
(17,168 |
) |
|
(35,026 |
) |
Proceeds
from cancelled corporate owned life insurance policies |
|
|
1,504 |
|
|
246 |
|
Net cash
used in investing activities |
|
|
(15,664 |
) |
|
(34,780 |
) |
Cash flows from
financing activities: |
|
|
|
Proceeds
from borrowings |
|
|
290,169 |
|
|
292,183 |
|
Repayments of debt |
|
|
(321,187 |
) |
|
(302,683 |
) |
Cash
dividends paid |
|
|
(3,597 |
) |
|
(10,378 |
) |
Capital
lease payments |
|
|
(1 |
) |
|
- |
|
Excess
tax benefits from share-based compensation |
|
|
- |
|
|
31 |
|
Proceeds
from exercise of stock options and other |
|
|
328 |
|
|
1,715 |
|
Repurchase of common stock |
|
|
(226 |
) |
|
(1,127 |
) |
Net cash
used in financing activities |
|
|
(34,514 |
) |
|
(20,259 |
) |
Net
increase in cash and cash equivalents |
|
|
2,626 |
|
|
2,138 |
|
Cash
and cash equivalents at beginning of year |
|
|
10,604 |
|
|
11,830 |
|
Cash
and cash equivalents at end of period |
|
$ |
13,230 |
|
$ |
13,968 |
|
|
|
|
|
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. Adjusted EBITDA excludes non-cash items
(impairment charges), significant non-recurring unusual items (such
as legal settlements) and new stores investments (pre-opening
costs).
|
Reconciliation of Net (Loss) Income to EBITDA and Adjusted
EBITDA |
Unaudited (in thousands) |
|
39 Weeks |
|
39 Weeks |
|
Ended |
|
Ended |
|
Oct. 28, 2017 |
|
Oct. 29, 2016 |
Net (loss)
income |
($ 23,909 |
) |
$ 5,308 |
Add back
amounts for computation of EBITDA: |
|
|
Interest
expense, net |
3,437 |
|
2,798 |
Income
tax (benefit) expense |
(14,888 |
) |
3,588 |
Depreciation and amortization |
24,254 |
|
23,636 |
EBITDA |
(11,106 |
) |
35,330 |
Adjustments: |
|
|
Severance, including stock-related compensation impacts (1) |
205 |
|
1,440 |
Hurricane
related expenses, net of insurance recoveries |
855 |
|
- |
Expense
related to legal settlements |
67 |
|
1,894 |
Non-cash
impairment charges |
640 |
|
277 |
New store
pre-opening costs |
2,163 |
|
3,546 |
Total
adjustments |
3,930 |
|
7,157 |
Adjusted
EBITDA |
($ 7,176 |
) |
$ 42,487 |
|
|
|
|
(1) Stock compensation expense or income from forfeitures
related to severance is included in this adjustment.
For more information:Linda L. TasseffDirector, Investor
Relations(904) 858-2639ltasseff@steinmart.com
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