Third Quarter Highlights
Stein Mart, Inc. (NASDAQ:SMRT) today announced financial results
for the third quarter ended October 31, 2015.
Overview of ResultsNet loss for the third
quarter was $0.2 million or $0.01 per diluted share compared to net
loss of $1.2 million or $0.03 per diluted share in 2014. Third
quarter adjusted operating income was $2.0 million compared to $1.8
million in 2014. Adjusted net income was $0.6 million or $0.01 per
diluted share in 2015 compared to adjusted net income of $0.9
million or $0.02 per diluted share in 2014 (see Note 1). Third
quarter 2015 includes $0.8 million, or $0.01 per diluted share,
higher interest expense.
For the first nine months of 2015, net income was
$17.5 million or $0.37 per diluted share compared to $14.6 million
or $0.32 per diluted share in the same period in 2014.
Adjusted operating income was $33.7 million for the first nine
months of 2015 compared to $30.2 million in 2014. Adjusted
net income was $19.2 million or $0.41 per diluted share for 2015
compared to adjusted net income of $18.3 million or $0.40 per
diluted share for 2014 (see Note 1). The first nine months of 2015
includes $2.2 million, or $0.03 per diluted share, higher interest
expense.
Adjusted earnings before interest, income taxes,
depreciation and amortization (“EBITDA”) for the first nine months
of 2015 increased $2.7 million to $58.4 million (see Note 2).
Comments on Results “Our third quarter
sales were severely impacted by unseasonably warm weather. We are
working to address our sales and promotional strategies for the
fourth quarter to get back to more acceptable top-line results,”
said Jay Stein, Chief Executive Officer. “Our sales-focused
initiatives have produced strong results for more than three years
and it is important that we continue to make the right long-term
investments. As an example, our new store growth is already giving
us excellent returns with our fall store openings delivering
outstanding results.”
SalesTotal sales for the third quarter of 2015
decreased 1.0 percent to $300.7 million, while comparable store
sales decreased 2.3 percent. For the first nine months of 2015,
total sales increased 3.8 percent to $965.8 million, while
comparable store sales increased 1.9 percent. Our ecommerce
business contribution to comparable store sales growth was 60 basis
points in the third quarter and 70 basis points in the nine-month
period.
Gross ProfitGross profit for the third quarter
of 2015 was $82.2 million or 27.3 percent of sales compared to
$84.6 million or 27.8 percent of sales in 2014. The decrease in the
third quarter gross profit rate was primarily due to the
deleveraging of higher occupancy costs (including new stores) on
lower sales, somewhat offset by lower buying and distribution
expenses allocated to cost of sales. Merchandise margins were
consistent with the prior year.
Gross profit for the first nine months of 2015 was $279.5
million or 28.9 percent of sales compared to $273.1 million or 29.3
percent of sales in 2014. The decrease in the gross profit rate for
the first nine months was primarily due to the deleveraging of
higher occupancy costs (including new stores) with merchandise
margins consistent with the prior year.
Selling, General and Administrative
Expenses Selling, general and administrative
(SG&A) expenses for the third quarter of 2015 were $81.5
million compared to $86.3 million in 2014. Costs related to our SEC
investigation which was settled in September were $30,000 in the
third quarter of 2015, net of expected insurance recoveries,
compared to $1.6 million in 2014 (see Note 1). The remaining $3.2
million decrease in SG&A expenses was the result of lower
earnings-based incentive compensation, store closing costs and
store operating expenses.
For the first nine months, SG&A expenses were $248.6 million
compared to $249.0 million in 2014. SEC investigation costs, net of
expected insurance recoveries, were $0.2 million in the first nine
months of 2015 compared to $2.9 million in 2014 (see Note 1). The
remaining $2.3 million increase in SG&A expenses was primarily
the result of higher ecommerce costs and store operating expenses
to support new stores, somewhat offset by lower healthcare and
store closing costs.
Interest Expense and DebtInterest
expense for the third quarter of 2015 was $0.9 million compared to
$0.1 million in 2014, decreasing earnings $0.01 per diluted share.
For the first nine months, interest expense was $2.4 million
compared to $0.2 million in 2014, decreasing earnings $0.03 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 $192 million at the
end of the third quarter. Unused availability was $75 million at
the end of the quarter.
InventoriesInventories were $372.9
million at the end of the third quarter of 2015 compared to $343.7
million at the end of the third quarter last year. Average
inventories for our comparable stores, not including ecommerce,
were 5 percent higher than last year.
Store ActivityWe had 274 stores at the end of
the third quarter compared to 268 last year. We opened six new
stores through this year’s third quarter and four more last week.
Our 2015 store plan is now complete. We closed two stores earlier
in the year and as of today have 278 stores.
While our 2016 store plan is not finalized, we currently plan to
open at least 12 new stores next year with five new stores opening
in the spring and the remainder in the fall.
Updated 2015 Outlook
Based on our results through the third quarter, we have updated our
full year 2015 outlook as follows:
- New stores should increase sales 3 to 4 percent above our
comparable store sales increases for the fourth quarter.
- We now expect our full year gross profit rate to be lower than
the 29.3 percent reported in 2014 which reflects higher pre-opening
occupancy costs for new stores opening in the first quarter of 2016
and a more promotional fall selling season due to the slow
start.
- SG&A expenses should be $6 to $8 million higher than the
$338 million reported in 2014 (not including the $4 million of SEC
investigation costs) which is $6 million lower than our second
quarter projection.
- The effective tax rate is expected to be about the same as our
current rate of 38.7 percent.
- Capital expenditures are now estimated to be approximately $47
million, or $34 million net of tenant improvement allowances.
Discontinuing Monthly Sales Reporting in
2016Beginning in 2016, consistent with most other
retailers, we will no longer report monthly sales. We will continue
our monthly reporting through the end of this year and move to a
quarterly reporting schedule thereafter.
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 31, 2015 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 2015 results will
be held at 10 a.m. EST on November 19, 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 December 31, 2015.
Investor PresentationStein Mart’s third 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. With 278 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) |
|
|
October 31, 2015 |
January 31, 2015 |
November 1, 2014 |
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and
cash equivalents |
$ |
14,126 |
|
$ |
65,314 |
|
$ |
64,882 |
|
Inventories |
|
372,912 |
|
|
285,623 |
|
|
343,721 |
|
Prepaid
expenses and other current assets |
|
34,681 |
|
|
22,733 |
|
|
29,840 |
|
Total current assets |
|
421,719 |
|
|
373,670 |
|
|
438,443 |
|
Property
and equipment, net |
|
162,907 |
|
|
148,782 |
|
|
150,646 |
|
Other
assets |
|
30,323 |
|
|
30,639 |
|
|
31,005 |
|
Total assets |
$ |
614,949 |
|
$ |
553,091 |
|
$ |
620,094 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
202,176 |
|
$ |
129,924 |
|
$ |
214,635 |
|
Current
portion of debt |
|
10,000 |
|
|
- |
|
|
- |
|
Accrued
expenses and other current liabilities |
|
68,162 |
|
|
69,213 |
|
|
63,332 |
|
Total current liabilities |
|
280,338 |
|
|
199,137 |
|
|
277,967 |
|
Long-term debt |
|
181,833 |
|
|
- |
|
|
- |
|
Deferred
rent |
|
41,163 |
|
|
31,284 |
|
|
32,063 |
|
Other
liabilities |
|
39,355 |
|
|
37,732 |
|
|
36,211 |
|
Total liabilities |
|
542,689 |
|
|
268,153 |
|
|
346,241 |
|
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; 45,675,579, 44,918,649
and 44,945,280 |
|
|
|
shares issued and outstanding,
respectively |
|
457 |
|
|
449 |
|
|
449 |
|
Additional paid-in capital |
|
41,826 |
|
|
34,875 |
|
|
32,532 |
|
Retained
earnings |
|
30,397 |
|
|
250,046 |
|
|
241,125 |
|
Accumulated other comprehensive loss |
|
(420 |
) |
|
(432 |
) |
|
(253 |
) |
Total shareholders’ equity |
|
72,260 |
|
|
284,938 |
|
|
273,853 |
|
Total liabilities and shareholders’
equity |
$ |
614,949 |
|
$ |
553,091 |
|
$ |
620,094 |
|
|
|
|
|
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 31, 2015 |
November 1, 2014 |
October 31, 2015 |
November 1, 2014 |
|
|
|
|
|
Net sales |
$ |
300,665 |
|
$ |
303,667 |
|
$ |
965,769 |
|
$ |
930,678 |
|
Cost of merchandise
sold |
|
218,497 |
|
|
219,106 |
|
|
686,286 |
|
|
657,547 |
|
Gross profit |
|
82,168 |
|
|
84,561 |
|
|
279,483 |
|
|
273,131 |
|
Selling, general and
administrative expenses |
|
81,464 |
|
|
86,277 |
|
|
248,631 |
|
|
248,957 |
|
Operating income (loss) |
|
704 |
|
|
(1,716 |
) |
|
30,852 |
|
|
24,174 |
|
Interest expense,
net |
|
891 |
|
|
66 |
|
|
2,384 |
|
|
200 |
|
(Loss) income before income
taxes |
|
(187 |
) |
|
(1,782 |
) |
|
28,468 |
|
|
23,974 |
|
Income tax expense
(benefit) |
|
10 |
|
|
(571 |
) |
|
11,007 |
|
|
9,373 |
|
Net (loss) income |
$ |
(197 |
) |
$ |
(1,211 |
) |
$ |
17,461 |
|
$ |
14,601 |
|
|
|
|
|
|
Net (loss) income per
share: |
|
|
|
|
Basic |
$ |
(0.01 |
) |
$ |
(0.03 |
) |
$ |
0.39 |
|
$ |
0.33 |
|
Diluted |
$ |
(0.01 |
) |
$ |
(0.03 |
) |
$ |
0.37 |
|
$ |
0.32 |
|
|
|
|
|
|
Weighted-average shares
outstanding: |
|
|
|
|
Basic |
|
44,791 |
|
|
43,857 |
|
|
44,704 |
|
|
43,833 |
|
Diluted |
|
44,791 |
|
|
43,857 |
|
|
45,916 |
|
|
44,664 |
|
Stein Mart, Inc. |
Condensed Consolidated Statements of
Comprehensive (Loss) Income |
(Unaudited) |
(In thousands) |
|
|
|
|
|
|
13 Weeks Ended |
13 Weeks Ended |
39 Weeks Ended |
39 Weeks Ended |
|
October 31, 2015 |
November 1, 2014 |
October 31, 2015 |
November 1, 2014 |
|
|
|
|
|
Net (loss) income |
$ |
(197 |
) |
$ |
(1,211 |
) |
$ |
17,461 |
|
$ |
14,601 |
|
Other comprehensive
income, net of tax: |
|
|
|
|
Amounts reclassified from
accumulated |
|
|
|
|
other comprehensive income |
|
4 |
|
|
3 |
|
|
12 |
|
|
8 |
|
Comprehensive (loss)
income |
$ |
(193 |
) |
$ |
(1,208 |
) |
$ |
17,473 |
|
$ |
14,609 |
|
|
|
|
|
|
NOTES TO PRESS RELEASE
Note 1 - Adjusted ResultsWe
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 October 31, 2015 |
|
13 Weeks Ended November 1, 2014 |
|
|
OperatingIncome(Loss) |
TaxProvision(Benefit) |
NetIncome(Loss) |
DilutedEPS |
|
OperatingIncome(Loss) |
TaxProvision |
NetIncome(Loss) |
Diluted EPS |
GAAP
Basis |
$ |
704 |
|
$ |
10 |
|
$ |
(197 |
) |
$ |
(0.01 |
) |
|
$ |
(1,716 |
) |
$ |
(571 |
) |
$ |
(1,211 |
) |
$ |
(0.03 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
Ecommerce losses |
|
1,280 |
|
|
486 |
|
|
794 |
|
|
0.02 |
|
|
|
678 |
|
|
258 |
|
|
420 |
|
|
0.01 |
|
|
SEC investigation costs
(1) |
|
30 |
|
|
11 |
|
|
19 |
|
|
- |
|
|
|
1,630 |
|
|
619 |
|
|
1,011 |
|
|
0.02 |
|
|
Store closing &
impairment charges |
|
(37 |
) |
|
(14 |
) |
|
(23 |
) |
|
- |
|
|
|
1,172 |
|
|
445 |
|
|
727 |
|
|
0.02 |
|
|
Total adjustments |
|
1,273 |
|
|
483 |
|
|
790 |
|
|
0.02 |
|
|
|
3,480 |
|
|
1,322 |
|
|
2,158 |
|
|
0.05 |
|
Adjusted
Non-GAAP Basis |
$ |
1,977 |
|
$ |
493 |
|
$ |
593 |
|
$ |
0.01 |
|
|
$ |
1,764 |
|
$ |
751 |
|
$ |
947 |
|
$ |
0.02 |
|
|
|
|
|
39 Weeks Ended October 31, 2015 |
|
39 Weeks Ended November 1, 2014 |
|
|
OperatingIncome |
TaxProvision |
NetIncome |
DilutedEPS |
|
OperatingIncome |
TaxProvision |
NetIncome |
DilutedEPS |
GAAP
Basis |
$ |
30,852 |
|
$ |
11,007 |
|
$ |
17,461 |
|
$ |
0.37 |
|
|
$ |
24,174 |
|
$ |
9,373 |
|
$ |
14,601 |
|
$ |
0.32 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
Ecommerce losses |
|
2,553 |
|
|
970 |
|
|
1,583 |
|
|
0.04 |
|
|
|
2,036 |
|
|
774 |
|
|
1,262 |
|
|
0.03 |
|
|
SEC investigation costs
(1) |
|
217 |
|
|
82 |
|
|
135 |
|
|
- |
|
|
|
2,921 |
|
|
1,110 |
|
|
1,811 |
|
|
0.04 |
|
|
Store closing &
impairment charges |
|
28 |
|
|
11 |
|
|
17 |
|
|
- |
|
|
|
1,038 |
|
|
394 |
|
|
644 |
|
|
0.01 |
|
|
Total adjustments |
|
2,798 |
|
|
1,063 |
|
|
1,735 |
|
|
0.04 |
|
|
|
5,995 |
|
|
2,278 |
|
|
3,717 |
|
|
0.08 |
|
Adjusted
Non-GAAP Basis |
$ |
33,650 |
|
$ |
12,070 |
|
$ |
19,196 |
|
$ |
0.41 |
|
|
$ |
30,169 |
|
$ |
11,651 |
|
$ |
18,318 |
|
$ |
0.40 |
|
|
(1) Professional fees and other expenses related to
the SEC investigation into our 2012 financial restatement which was
settled in September 2015. |
Note 2 - EBITDAAs 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) |
|
|
|
|
39 Weeks |
39 Weeks |
|
|
|
|
Ended |
Ended |
|
|
|
|
Oct. 31, 2015 |
Nov. 1, 2014 |
|
|
Net
income |
$ |
17,461 |
|
$ |
14,601 |
|
|
|
Add back
amounts for computation of EBITDA: |
|
|
|
|
Interest expense,
net |
|
2,384 |
|
|
200 |
|
|
|
Income tax expense |
|
11,007 |
|
|
9,373 |
|
|
|
Depreciation and
amortization |
|
22,050 |
|
|
21,709 |
|
|
|
EBITDA |
|
52,902 |
|
|
45,883 |
|
|
|
Adjustments: |
|
|
|
|
Ecommerce losses |
|
2,553 |
|
|
2,036 |
|
|
|
SEC Investigation
costs |
|
217 |
|
|
2,921 |
|
|
|
Store closing &
impairment charges |
|
28 |
|
|
1,038 |
|
|
|
Pre-opening costs |
|
2,651 |
|
|
3,755 |
|
|
|
|
Total adjustments |
|
5,449 |
|
|
9,750 |
|
|
|
Adjusted
EBITDA |
$ |
58,351 |
|
$ |
55,633 |
|
For more information:
Linda L. Tasseff
Director, Investor Relations
(904) 858-2639
ltasseff@steinmart.com
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