UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

August 20, 2015

(Date of Report; Date of Earliest Event Reported)

 

 

STEIN MART, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Florida   0-20052   64-0466198

(State or Other Jurisdiction

of Incorporation)

  (Commission File Number)  

(IRS Employer

Identification No.)

1200 Riverplace Blvd., Jacksonville, Florida 32207

(Address of Principal Executive Offices Including Zip Code)

(904) 346-1500

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On August 20, 2015, Stein Mart, Inc. issued a press release, a copy of which is attached as Exhibit 99.1, that includes financial results for the quarterly period and six months ended August 1, 2015.

 

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits

99.1 Press Release dated August 20, 2015.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

      STEIN MART, INC.
      (Registrant)
Date: August 20, 2015     By:  

/s/ Gregory W. Kleffner

      Gregory W. Kleffner
      Executive Vice President and Chief Financial Officer


EXHIBIT INDEX

99.1 Press Release dated August 20, 2015.



Exhibit 99.1

 

LOGO

 

August 20, 2015    For more information:
   Linda L. Tasseff
FOR IMMEDIATE RELEASE    Director, Investor Relations
   (904) 858-2639
   ltasseff@steinmart.com

Stein Mart, Inc. Reports Strong Second Quarter 2015 Results

Adjusted EPS of $0.10 versus $0.06 last year

Second Quarter Highlights

    Adjusted diluted earnings per share of $0.10 compared to $0.06 in 2014, a 67% increase
    Sales grew 4.5 percent in the second quarter; comparable store sales increased 3.0 percent
    SG&A improved 70 basis points, on an adjusted basis
    Plans to open at least 12 new stores in 2016

JACKSONVILLE, Fla. – Stein Mart, Inc. (NASDAQ: SMRT) today announced financial results for the second quarter ended August 1, 2015.

Overview of Results

Net income for the second quarter was $4.1 million or $0.09 per diluted share compared to net income of $1.7 million or $0.04 per diluted share in 2014. Second quarter adjusted net income was $4.4 million or $0.10 per diluted share compared to adjusted net income of $2.7 million or $0.06 per diluted share in 2014 (see Note 1). Second quarter 2015 includes $0.7 million, or $0.01 per diluted share, higher interest expense.

For the first six months of 2015, net income was $17.7 million or $0.38 per diluted share compared to $15.8 million or $0.35 per diluted share in the same period in 2014. First half adjusted net income was $18.6 million or $0.40 per diluted share compared to adjusted net income of $17.4 million or $0.38 per diluted share in 2014 (see Note 1). The first half of 2015 includes $1.4 million, or $0.02 per diluted share, higher interest expense.

Adjusted earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the first half of 2015 increased $2.4 million to $47.0 million (see Note 2).

Comments on Results

“We are very pleased with our strong second quarter earnings which were driven by leveraging our increased sales along with a higher gross profit rate,” said Jay Stein, Chief Executive Officer. “We are looking forward to opening nine great stores this fall starting next month, including our first Long Island store in Commack.”

Sales

Total sales for the second quarter of 2015 increased 4.5 percent to $311.6, while comparable store sales increased 3.0 percent. For the first six months of 2015, total sales increased 6.1 percent to $665.1 million, while comparable store sales increased 4.0 percent. Our ecommerce business contributed 80 basis points to comparable sales growth in both periods.


Gross Profit

Gross profit for the second quarter of 2015 was $88.9 million or 28.5 percent of sales compared to $84.2 million or 28.3 percent of sales in 2014. The increase in the second quarter gross profit rate was primarily the result of higher markon and slightly lower markdowns, somewhat offset by higher occupancy costs.

Gross profit for the first half of 2015 was $197.3 million or 29.7 percent of sales compared to $188.6 million or 30.1 percent of sales in 2014. The decrease in the gross profit rate for the first half was the result of a number of items including higher markdowns in the first quarter, the timing and amount of buying and distribution expenses allocated to cost of sales, higher fulfillment costs for ecommerce sales and slightly higher occupancy costs, somewhat offset by higher markon.

Selling, General and Administrative Expenses

SG&A expenses for the second quarters of 2015 and 2014 were $81.5 million. SEC investigation costs were $1.2 million lower in the second quarter of 2015 compared to 2014 (see Note 1). Excluding these costs from each period, SG&A expenses for the second quarter of 2015 would have been $81.8 million or 26.3 percent of sales compared to $80.5 million or 27.0 percent of sales in 2014. The 70 basis point improvement in SG&A expenses was primarily due to lower store selling and advertising expenses as a percentage of sales as well-controlled expenses continue to leverage against our higher sales and slightly lower healthcare costs.

For the first six months, SG&A expenses were $167.2 million compared to $162.7 million in 2014. SEC investigation costs were $1.1 million lower in the first half of 2015 compared to 2014 (see Note 1). Excluding these costs from each period, SG&A expenses would have been $167.0 million or 25.1 percent of sales for the first half of 2015 compared to $161.4 million or 25.7 percent of sales in 2014. The 60 basis point improvement in SG&A expenses was primarily was due to the same items set forth in the previous paragraph, somewhat offset by higher earnings-based incentive compensation expense.

Interest Expense and Debt

Interest expense for the second quarter of 2015 was $0.8 million compared to $0.1 million in 2014, impacting second quarter earnings $0.01 per diluted share. For the first six months, interest expense was $1.5 million compared to $0.1 million in 2014, impacting first half earnings $0.02 per diluted share. Interest expense is higher this year due to borrowings on our credit facilities which were used to partially fund a $226 million special dividend paid in February 2015.

Borrowings under our credit facilities were $170 million at the end of the second quarter. Unused availability was $98 million at the end of the quarter.

Inventories

Inventories were $277.2 million at the end of the second quarter of 2015, 4.1 percent higher than the $266.2 million at the end of the second quarter last year reflecting additional stores. Average inventories per store were 2.0 percent higher than last year.

Store Activity

We had 269 stores at the end of the second quarter compared to 265 last year. We opened a new store in Cupertino, CA in March and will open another nine new stores this fall, for a total of 10 new stores this year. We closed two stores earlier in the year and will have 278 stores at the end of the year.

Our 2016 new store schedule is well underway with six new stores opening in the spring and plans for at least six more stores in the fall.


Updated 2015 Outlook

We have updated our full year 2015 outlook as follows:

    New stores will increase sales an estimated 2.5 percent above our comparable store sales increases for the full year due to changes in both the number and timing of new store openings. This will lift second half sales nearly 3.0 percent above comparable store sales increases.
    The gross profit rate is expected to be in line with the 29.3 percent reported in 2014, though it now includes $1 million (25 basis points) higher pre-opening occupancy costs for new stores opening in the first quarter of 2016.
    SG&A expenses should grow at a lower rate than previously expected and now will only be $12 to $14 million higher than the $338 million reported in 2014 (not including the $4 million of SEC investigation costs).
    We now expect the full year effective tax rate to be approximately 38.5 percent.
    Capital expenditures are now estimated to be approximately $51 million, or $42 million net of tenant improvement allowances, primarily due to additional leasehold improvements for new stores opening in the first quarter of 2016.

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 August 1, 2015 with the Securities and Exchange Commission (“SEC”), and therefore remain subject to adjustment.

Conference Call

A conference call for investment analysts to discuss the Company’s second quarter 2015 results will be held at 10 a.m. EDT on August 20, 2015. 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 September 30, 2015.

Investor Presentation

Stein Mart’s second quarter 2015 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, as well as steinmart.com, 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. 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: consumer sensitivity to economic conditions, competition in the retail industry, changes in consumer preferences and fashion trends, 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, 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, outcome of SEC investigation, material weaknesses in internal control over financial reporting and 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 and per share data)

 

     August 1, 2015     January 31, 2015     August 2, 2014  

ASSETS

      

Current assets:

      

Cash and cash equivalents

   $ 11,620      $ 65,314      $ 53,097   

Inventories

     277,243        285,623        266,215   

Prepaid expenses and other current assets

     33,815        22,733        26,703   
  

 

 

   

 

 

   

 

 

 

Total current assets

     322,678        373,670        346,015   

Property and equipment, net

     156,072        148,782        147,605   

Other assets

     30,027        30,639        28,887   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 508,777      $ 553,091      $ 522,507   
  

 

 

   

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

      

Current liabilities:

      

Accounts payable

   $ 122,699      $ 129,924      $ 120,635   

Current portion of debt

     9,167        —          —     

Accrued expenses and other current liabilities

     64,661        69,213        57,349   
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     196,527        199,137        177,984   

Long-term debt

     161,033        —          —     

Deferred rent

     37,532        31,284        30,804   

Other liabilities

     39,709        37,732        37,196   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     434,801        268,153        245,984   
  

 

 

   

 

 

   

 

 

 

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; 45,702,328, 44,918,649 and 44,936,387 shares issued and outstanding, respectively

     457        449        449   

Additional paid-in capital

     40,025        34,875        30,650   

Retained earnings

     33,918        250,046        245,680   

Accumulated other comprehensive loss

     (424     (432     (256
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     73,976        284,938        276,523   
  

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 508,777      $ 553,091      $ 522,507   
  

 

 

   

 

 

   

 

 

 


Stein Mart, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share amounts)

 

     13 Weeks Ended
August 1, 2015
     13 Weeks Ended
August 2, 2014
     26 Weeks Ended
August 1, 2015
     26 Weeks Ended
August 2, 2014
 

Net sales

   $ 311,583       $ 298,157       $ 665,104       $ 627,011   

Cost of merchandise sold

     222,648         213,913         467,789         438,441   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit

     88,935         84,244         197,315         188,570   

Selling, general and administrative expenses

     81,545         81,451         167,167         162,680   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     7,390         2,793         30,148         25,890   

Interest expense, net

     807         69         1,493         134   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     6,583         2,724         28,655         25,756   

Income tax expense

     2,489         987         10,997         9,944   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 4,094       $ 1,737       $ 17,658       $ 15,812   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share:

           

Basic

   $ 0.09       $ 0.04       $ 0.39       $ 0.35   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

   $ 0.09       $ 0.04       $ 0.38       $ 0.35   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average shares outstanding:

           

Basic

     44,710         43,814         44,661         43,822   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     45,926         44,704         45,846         44,580   
  

 

 

    

 

 

    

 

 

    

 

 

 


Stein Mart, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)

 

     13 Weeks Ended
August 1, 2015
     13 Weeks Ended
August 2, 2014
     26 Weeks Ended
August 1, 2015
     26 Weeks Ended
August 2, 2014
 

Net income

   $ 4,094       $ 1,737       $ 17,658       $ 15,812   

Other comprehensive income, net of tax:

           

Amounts reclassified from accumulated other comprehensive income

     4         2         8         5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive income

   $ 4,098       $ 1,739       $ 17,666       $ 15,817   
  

 

 

    

 

 

    

 

 

    

 

 

 


NOTES TO PRESS RELEASE

Note 1—Adjusted Results

We report our consolidated financial results in accordance with generally accepted accounting principles (“GAAP”). However, to supplement these consolidated financial results, management believes that certain non-GAAP operating results, which exclude those items detailed below, may provide a more meaningful measure to compare our results of operations between periods. We believe these non-GAAP results provide useful information to both management and investors by excluding certain items that impact comparability of the results.

Reconciliation of Operating Income, Net Income and Diluted EPS from GAAP Basis to Adjusted Non-GAAP Basis

Unaudited (in thousands, except for share data)

 

     13 Weeks Ended August 1, 2015      13 Weeks Ended August 2, 2014  
     Operating
Income
    Tax
Provision
    Net
Income
    Diluted
EPS
     Operating
Income
    Tax
Provision
    Net
Income
    Diluted
EPS
 

GAAP Basis

   $ 7,390      $ 2,489      $ 4,094      $ 0.09       $ 2,793      $ 987      $ 1,737      $ 0.04   

Adjustments:

               

Ecommerce losses

     772        293        479        0.01         714        271        443        0.01   

SEC investigation costs (1)

     (277     (105     (172     —           963        366        597        0.01   

Store closing & impairment charges

     9        3        6        —           (121     (46     (75     —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments

     504        191        313        0.01         1,556        591        965        0.02   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Non-GAAP Basis

   $ 7,894      $ 2,680      $ 4,407      $ 0.10       $ 4,349      $ 1,578      $ 2,702      $ 0.06   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     26 Weeks Ended August 1, 2015      26 Weeks Ended August 2, 2014  
     Operating
Income
    Tax
Provision
    Net
Income
    Diluted
EPS
     Operating
Income
    Tax
Provision
    Net
Income
    Diluted
EPS
 

GAAP Basis

   $ 30,148      $ 10,997      $ 17,658      $ 0.38       $ 25,890      $ 9,944      $ 15,812      $ 0.35   

Adjustments:

               

Ecommerce losses

     1,273        484        789        0.02         1,358        516        842        0.02   

SEC investigation costs (1)

     186        71        115        —           1,291        491        800        0.01   

Store closing & impairment charges

     64        24        40        —           (134     (51     (83     —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments

     1,523        579        944        0.02         2,515        956        1,559        0.03   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Non-GAAP Basis

   $ 31,671      $ 11,576      $ 18,602      $ 0.40       $ 28,405      $ 10,900      $ 17,371      $ 0.38   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

  (1) Professional fees and other expenses related to the SEC investigation into our 2012 financial restatement.


Note 2—EBITDA

As used in this release, 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.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

Unaudited (in thousands)

 

     26 Weeks
Ended
Aug. 1, 2015
     26 Weeks
Ended
Aug. 2, 2014
 

Net income

   $ 17,658       $ 15,812   

Add back amounts for computation of EBITDA:

     

Interest expense, net

     1,493         134   

Income tax expense

     10,997         9,944   

Depreciation and amortization

     14,534         14,322   
  

 

 

    

 

 

 

EBITDA

     44,682         40,212   
  

 

 

    

 

 

 

Adjustments:

     

Ecommerce losses

     1,273         1,358   

SEC Investigation costs

     186         1,291   

Store closing & impairment charges

     64         (134

Pre-opening costs

     815         1,909   
  

 

 

    

 

 

 

Total adjustments

     2,338         4,424   
  

 

 

    

 

 

 

Adjusted EBITDA

   $ 47,020       $ 44,636   
  

 

 

    

 

 

 
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