JACKSONVILLE, Fla., May 22, 2019 (GLOBE NEWSWIRE) -- 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:

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 Sales
Net 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 Profit
Gross 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 Flows
Inventories 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 Accounting
We 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-Q
Reported 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 Call
A 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 Presentation
Stein 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 Mart
Stein 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 Ended13 Weeks Ended
  May 4, 2019May 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, 2019February 2, 2019May 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 Ended13 Weeks Ended
 May 4, 2019May 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 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 EBITDA
EBITDA 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 Weeks13 Weeks
   EndedEnded
   May 4, 2019May 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%)
  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 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. Tasseff
Director, Investor Relations
(904) 858-2639
ltasseff@steinmart.com