Stein Mart, Inc. Reports Second Quarter 2012 Financial Results

JACKSONVILLE, Fla., Aug. 16, 2012 (GLOBE NEWSWIRE) -- Stein Mart, Inc. (Nasdaq:SMRT) today announced financial results for the second quarter ended July 28, 2012.

Overview of Results

Net income for the second quarter was $0.7 million or $0.02 per diluted share compared to net income of $1.3 million or $0.03 per diluted share in 2011. For the first six months, net income was $12.6 million or $0.29 per diluted share compared to $17.2 million or $0.38 per diluted share in the same period in 2011. The first six months of 2011 include a first quarter gain of $2.0 million, or $1.2 million after tax and $0.03 per share (see discussion of other income below).

Comparable store sales increased 1.6 percent for the second quarter, while total sales increased 2.3 percent to $276.4 million. For the first six months, comparable store sales increased 0.5 percent, while total sales increased 1.1 percent to $579.8 million.

"We are very pleased with our comparable store sales increase for the second quarter," said Jay Stein, Interim Chief Executive Officer. "The increased sales and improved merchandise margin rate reflect proper execution of our merchandising strategy to reinforce the value of our every-day prices."

Operational Highlights

Gross profit for the second quarter increased to $68.0 million or 24.6 percent of sales from $65.4 million or 24.2 percent of sales in 2011 due to increased sales and an increase in the gross profit rate. The increase in the gross profit rate was the result of lower markdowns, offset by lower initial markup and slightly higher occupancy and buying costs. Markdowns and initial markup were lower due to the Company decreasing coupons and selectively lowering prices on certain merchandise in accordance with its new pricing strategy.

Selling, general and administrative expenses ("SG&A") were $72.6 million for the second quarter of 2012. This includes a $1.8 million charge to expense certain software related costs incorrectly capitalized in prior periods and software no longer in use. Excluding this charge, SG&A was $70.8 million or 25.6 percent of sales for the second quarter of 2012 compared to $68.2 million or 25.2 percent of sales in 2011. The increase in SG&A for the second quarter is primarily due to higher depreciation, legal, medical and store payroll expenses.

Other income was $5.9 million for the second quarter of 2012 compared to $5.1 million for the second quarter of 2011. The $0.8 million increase in other income includes $2.1 million higher breakage income due to reductions in obligations for unused gift and merchandise return card balances offset by lower income from the new credit card agreement and discontinuing our magazine program.

For the first six months of 2012, gross profit was $155.2 million compared to $155.3 million in 2011 due to increased sales and a slightly lower gross profit rate. SG&A was $144.0 million for the first six months of 2012 compared to $140.1 million in 2011. The first six months of 2012 includes the second quarter $1.8 million expense discussed above.

Other income was $10.4 million for the first six months of 2012 compared to $13.5 million in 2011. The first six months of 2012 include the second quarter $2.1 million higher breakage income discussed above. The first six months of 2011 include a first quarter gain of $2.0 million for a prior period adjustment to a liability for credit card rewards. Other income for the first six months decreased primarily due to lower income from the new credit card agreement and the magazine program.

The effective tax rate for the first six months of 2012 increased to 41.9 percent from 39.5 percent for the first six months of 2011 due to the unfavorable impact of certain expense items not deductible for tax purposes.

Balance Sheet Highlights

The Company maintained a strong balance sheet with $94.1 million in cash at the end of the second quarter compared to $101.1 million at the end of the second quarter of 2011. Inventories were $243.8 million at the end of the second quarter compared to $228.0 million at the end of the second quarter last year.

Share buyback

During the second quarter of 2012 the Company repurchased 43,000 shares at a cost of $0.3 million. The Company has approximately 1.1 million shares remaining on the current repurchase authorization.

Store network

The Company operated 263 stores at the end of the second quarter of 2012 and 260 stores at the end of the second quarter last year. No new stores were opened or existing stores closed during the second quarter. The Company expects to open four new stores, relocate three stores and close four stores during the second half of 2012.

Fall 2012 Outlook

"We expect that great product offerings and execution of our new merchandising strategy will continue to yield positive sales results," commented Stein. "As we begin our third quarter, we are replacing our August 12-hour sale with two smaller product-focused events to address a significant portion of these sales more profitably. While this may diminish our top line somewhat for August, we feel this will improve results going forward. The positive impact of our 12-hour sales has clearly lessened over the last several years as we increased their number. We also plan to eliminate our February 12-hour sale in 2013 as we continue to assess the impact of these events."

The Company expects the following to influence its earnings for fall 2012:
  • The gross profit rate in 2012 will be slightly lower than 2011 as it continues to be impacted by our pricing strategy and coupon reduction efforts to drive long-term sales growth, as well as inflationary and new store occupancy cost increases.
  • SG&A dollars (excluding depreciation) will increase approximately one percent over 2011, including approximately $1.0 million higher pre-opening costs for new and relocated stores.
  • Depreciation expense (in SG&A) will increase by approximately $3.0 million due to new systems and store remodeling.
  • Other income will be reduced by approximately $2.5 million due to the $1.6 million one-time payment received from GE Capital Retail Bank in the third quarter of 2011, reduced credit card income under the new agreement and the elimination of our magazine program.
  • The tax rate for the year is expected to be approximately 41.5 percent.
  • Capital expenditures for 2012 are expected to be approximately $35 million, including $20 million for continuing IT system upgrades and the remainder for new and relocated stores, store remodels and new fixturing.

Filing of Form 10-Q

Reported results are preliminary and not final until the filing of Form 10-Q for the fiscal quarter ended July 28, 2012 with the SEC, and therefore remain subject to adjustment.

Conference Call

A conference call for investment analysts to discuss the Company's second quarter results will be held at 10 a.m. ET today, Thursday, August 16, 2012. 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, 2012.

Investor Presentation

Stein Mart's second quarter 2012 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 stores offer the fashion merchandise, service and presentation of a better department or specialty store, at prices competitive with off-price retail chains. Currently with locations from California to Massachusetts, Stein Mart's focused assortment of merchandise features current season, moderate to better fashion apparel for women and men, as well as accessories, shoes and home fashions. 

The Stein Mart, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=9827

SAFE HARBOR STATEMENT>>>>>>>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:
  • continued consumer sensitivity to economic conditions
  • on-going competition from other retailers
  • changing preferences in apparel
  • the effectiveness of advertising , marketing and promotional strategies
  • ability to negotiate acceptable lease terms with current landlords
  • ability to successfully implement strategies to exit under-performing stores
  • unanticipated weather conditions and unseasonable weather
  • adequate sources of merchandise at acceptable prices
  • changes in merchandise prices and couponing which could impact sales and margin
  • the Company's ability to attract and retain qualified employees
  • disruption of the Company's distribution system
  • failure of information technology
  • acts of terrorism and the other risks and uncertainties described in the Company's filings with the Securities and Exchange Commission

SMRT-F

Additional information about Stein Mart, Inc. can be found at www.steinmart.com .

       
Stein Mart, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except for share data)
       
  July 28, 2012  January 28, 2012   July 30, 2011
ASSETS      
Current assets:      
Cash and cash equivalents $94,126  $94,053   $101,139
Inventories 243,828  220,775   227,959
Prepaid expenses and other current assets 29,135  36,838   28,227
Total current assets 367,089  351,666   357,325
Property and equipment, net 109,124  104,141   89,492
Other assets 17,490  17,409   13,966
Total assets $493,703  $473,216   $460,783
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
Accounts payable $115,543  $106,063   $105,131
Accrued expenses and other current liabilities 67,911  72,731   65,304
Total current liabilities 183,454  178,794   170,435
Other liabilities 38,939  35,084   23,893
Total liabilities 222,393  213,878   194,328
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; 43,718,348, 43,588,821 and 44,791,876 shares issued and outstanding, respectively 437    436     448
Additional paid-in capital 14,626  15,268   23,110
Retained earnings 257,615  245,053   242,441
Accumulated other comprehensive (loss) income (1,368) (1,419) 456
Total shareholders' equity 271,310  259,338   266,455
Total liabilities and shareholders' equity $493,703  $473,216   $460,783
         
 
Stein Mart, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
         
  13 Weeks Ended  July 28, 2012 13 Weeks Ended  July 30, 2011  26 Weeks Ended  July 28, 2012  26 Weeks Ended  July 30,2011 
Net sales $276,396   $270,167   $579,788   $573,713  
Cost of merchandise sold 208,395   204,796   424,558   418,422  
Gross profit 68,001   65,371   155,230   155,291  
Selling, general and administrative expenses 72,629   68,180   143,978   140,116  
Other income, net 5,909   5,141   10,447   13,457  
Operating income 1,281   2,332   21,699   28,632  
Interest expense, net 43   82   89   167  
Income before income taxes 1,238   2,250   21,610   28,465  
Provision for income taxes 508   934   9,048   11,249  
Net income $730   $1,316   $12,562   $17,216  
         
Net income per share:        
Basic $0.02   $0.03   $0.29   $0.38  
Diluted $0.02   $0.03   $0.29   $0.38  
         
Weighted-average shares outstanding:        
Basic 42,586   44,095   42,649   43,973  
Diluted 42,715   44,415   42,734   44,300  
 
 
Stein Mart, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(In thousands)
         
  13 Weeks Ended  July 28, 2012 13 Weeks Ended  July 30, 2011  26 Weeks Ended  July 28, 2012 26 Weeks Ended  July 30,2011 
Net income $730   $1,316   $12,562   $17,216  
Other comprehensive income, net of tax:        
Change in post-retirement benefit obligations 42   --   51   --  
Comprehensive income $772   $1,316   $12,613   $17,216  
 
 
Stein Mart, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
     
  26 Weeks Ended  July 28, 2012  26 Weeks Ended  July 30, 2011 
Cash flows from operating activities:    
Net income $12,562  $17,216 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 10,139  8,891 
Share-based compensation 2,122  1,934 
Loss on disposals of property and equipment 220  --  
Store closing charges 199  120 
Deferred income taxes 5,127  4,728 
Tax deficiency from equity issuances (655) (49)
Excess tax benefits from share-based compensation (51) (294)
Other non-cash items 1,732  --  
Changes in assets and liabilities:    
Inventories (23,053) 4,336 
Prepaid expenses and other current assets 7,186 (1,986)
Other assets (81) (100)
Accounts payable 9,480  9,586 
Accrued expenses and other current liabilities (4,473) (9,041)
Other liabilities 807 72 
Net cash provided by operating activities 21,261  35,413 
Cash flows from investing activities:    
Net acquisition of property and equipment (16,249) (14,842)
Net cash used in investing activities (16,249) (14,842)
Cash flows from financing activities:    
Capital lease payments (2,882) -- 
Excess tax benefits from share-based compensation 51  294 
Proceeds from exercise of stock options and other 413  2,500 
Repurchase of common stock (2,521) (2,397)
Net cash (used in) provided by financing activities (4,939) 397 
Net increase in cash and cash equivalents 73  20,968 
Cash and cash equivalents at beginning of year 94,053  80,171 
Cash and cash equivalents at end of period $94,126  $101,139 
CONTACT: For more information:         Linda Tasseff         Director, Investor Relations         (904) 858-2639         ltasseff@steinmart.com

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