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

March 10, 2016

(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 March 10, 2016, Stein Mart, Inc. issued a press release, a copy of which is attached as Exhibit 99.1, that includes financial results for the fourth quarter and fiscal year ended January 30, 2016.

 

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

 

(d) Exhibits

 

99.1    Press Release dated March 10, 2016.


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: March 10, 2016   By:  

/s/ Gregory W. Kleffner

    Gregory W. Kleffner
    Executive Vice President and Chief Financial Officer


EXHIBIT INDEX

 

99.1    Press Release dated March 10, 2016.


Exhibit 99.1

 

LOGO

 

March 10, 2016       For more information:     
      Linda L. Tasseff     
FOR IMMEDIATE RELEASE       Director, Investor
Relations
    
      (904) 858-2639     
      ltasseff@steinmart.com     

Stein Mart, Inc. Reports Fourth Quarter and Fiscal 2015 Results

Achieved Sales Growth of 3.2 Percent for the Year

Highlights

 

    Full year total sales increased 3.2 percent and comparable store sales increased 1.0 percent

 

    Full year diluted earnings per share of $0.51 or $0.58 as adjusted, compared to $0.59 or $0.72 as adjusted in 2014

 

    Returned $239 million of dividends to shareholders in 2015

JACKSONVILLE, Fla. – Stein Mart, Inc. (NASDAQ: SMRT) today announced financial results for the fourth quarter and fiscal year ended January 30, 2016.

Overview of Results

Net income for the fourth quarter was $6.3 million or $0.13 per diluted share compared to net income of $12.3 million or $0.27 per diluted share in 2014. Fourth quarter adjusted net income was $8.0 million or $0.17 per diluted share in 2015 compared to adjusted net income of $14.6 million or $0.32 per diluted share in 2014 (see Note 1). Fourth quarter 2015 results were significantly impacted by higher markdowns.

For the year, net income was $23.7 million or $0.51 per diluted share compared to $26.9 million or $0.59 per diluted share in 2014. Adjusted net income was $27.2 million or $0.58 per diluted share for 2015 compared to adjusted net income of $33.0 million or $0.72 per diluted share for 2014 (see Note 1). The year 2015 includes $3.0 million, or $0.04 per diluted share, higher interest expense. Adjusted earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the year was $80.1 million compared to $87.0 million in 2014 (see Note 2).

Comments on Results

“Disappointing fourth quarter sales and a more promotional holiday selling season drove our results lower than the prior year. Our fourth quarter gross profit rate was lower as we made appropriate valuation decisions on inventories,” said Jay Stein, Chief Executive Officer. “On a positive note, we increased our comparable store sales for the year, had solid sales growth from ten new stores and controlled our expenses well. We also ended the year with acceptable inventory levels going into our strong spring selling season.”

Sales

Total sales for the fourth quarter of 2015 increased 1.8 percent to $394.1 million, while comparable store sales decreased 1.1 percent. For the year 2015, total sales increased 3.2 percent to $1.36 billion, while comparable store sales increased 1.0 percent. Sales from our ecommerce business increased by 70 percent in 2015 and were a 70 basis point lift to comparable store sales results in both the fourth quarter and the year.


Gross Profit

Gross profit for the fourth quarter of 2015 was $105.8 million or 26.8 percent of sales compared to $113.6 million or 29.4 percent of sales in 2014. The decrease in the gross profit rate is due to higher markdowns from lower than planned sales and an elevated promotional environment during the holiday selling season. Additionally, fall inventories levels were higher after the holiday selling season and required additional markdowns.

Gross profit for the year 2015 was $385.3 million or 28.3 percent of sales compared to $386.7 million or 29.3 percent of sales in 2014. The decrease in the gross profit rate for the year was primarily due to the fourth quarter impact discussed above.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses for the fourth quarter of 2015 were $95.1 million or 24.1 percent of sales compared to $93.1 million or 24.0 percent of sales in 2014. The $2.0 million increase in SG&A expenses is primarily the result of higher operating expenses for new stores and higher asset impairment charges, offset by lower earnings-based incentive compensation and SEC investigation fees (see Note 1).

SG&A expenses were $343.7 million for the year compared to $342.0 million in 2014. SEC investigation costs, net of insurance recoveries were $51 thousand in 2015 compared to $4.1 million in 2014 (see Note 1). Excluding these costs, SG&A expenses would be $343.7 million or 25.3 percent of sales compared to $338.0 million or 25.6 percent of sales in 2014.

Interest Expense and Debt

Interest expense for the fourth quarter of 2015 was $0.9 million compared to $0.1 million in 2014, decreasing earnings $0.01 per diluted share. For the year, interest expense was $3.3 million compared to $0.3 million in 2014, decreasing earnings $0.04 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 $190 million at the end of the year. Unused availability was $74 million at the end of the year.

Inventories

Inventories were $294 million at the end of 2015 compared to $286 million at the end of 2014 reflecting additional stores. Average inventories for our comparable stores, not including ecommerce, were down 1.5 percent from last year.

Store Activity

We had 278 stores at the end of 2015 compared to 270 at the end of 2014. Ten new stores were opened and two were closed in 2015.

2016 Outlook

We expect the following factors to influence our business in 2016:

 

    We opened 5 new stores today and currently plan to open at least 7 new stores in October and November for a total plan of at least 12 stores.

 

    We currently plan to close one and relocate two stores

 

    New stores should increase sales an estimated 4 percent above our comparable store sales increases for the year

 

    We expect our gross profit rate to be 50 basis points higher than 2015

 

    SG&A expenses are expected to be approximately $370 million with the increase primarily due to new stores and planned payroll increases


    Interest expense is estimated to be about the same as in 2015

 

    The effective tax rate for the year is estimated to be 38.5 percent.

 

    Capital expenditures for 2016 are expected to be approximately $43 million, or $33 million net of tenant improvement allowances.

Filing of Form 10-K

Reported results are preliminary and not final until the filing of our Form 10-K for the fiscal year ended January 30, 2016 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 fourth quarter and fiscal year 2015 results will be held at 10 a.m. EDT on March 10, 2016. 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 April 30, 2016.

Investor Presentation

Stein Mart’s fiscal 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, 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, 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 Securities and Exchange Commission.

SMRT-F

###

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


Stein Mart, Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except for share and per share data)

 

     January 30, 2016     January 31, 2015  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 11,830      $ 65,314   

Inventories

     293,608        285,623   

Prepaid expenses and other current assets

     18,586        19,340   
  

 

 

   

 

 

 

Total current assets

     324,024        370,277   

Property and equipment, net

     162,954        148,782   

Other assets

     29,247        30,768   
  

 

 

   

 

 

 

Total assets

   $ 516,225      $ 549,827   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 105,569      $ 129,924   

Current portion of debt

     10,000        —     

Accrued expenses and other current liabilities

     71,571        69,213   
  

 

 

   

 

 

 

Total current liabilities

     187,140        199,137   

Long-term debt

     180,150        —     

Deferred rent

     41,146        31,284   

Other liabilities

     31,472        34,468   
  

 

 

   

 

 

 

Total liabilities

     439,908        264,889   
  

 

 

   

 

 

 

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; 45,814,583 and 44,918,649 shares issued and outstanding, respectively

     458        449   

Additional paid-in capital

     42,801        34,875   

Retained earnings

     33,337        250,046   

Accumulated other comprehensive loss

     (279     (432
  

 

 

   

 

 

 

Total shareholders’ equity

     76,317        284,938   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 516,225      $ 549,827   
  

 

 

   

 

 

 


Stein Mart, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

 

     13 Weeks Ended      13 Weeks Ended      52 Weeks Ended      52 Weeks Ended  
     January 30, 2016      January 31, 2015      January 30, 2016      January 31, 2015  
     (Unaudited)             (Unaudited)         

Net sales

   $ 394,132       $ 386,999       $ 1,359,901       $ 1,317,677   

Cost of merchandise sold

     288,328         273,394         974,614         930,941   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit

     105,804         113,605         385,287         386,736   

Selling, general and administrative expenses

     95,093         93,070         343,724         342,027   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     10,711         20,535         41,563         44,709   

Interest expense, net

     899         66         3,283         266   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     9,812         20,469         38,280         44,443   

Income tax expense

     3,562         8,164         14,569         17,537   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 6,250       $ 12,305       $ 23,711       $ 26,906   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share:

           

Basic

   $ 0.14       $ 0.28       $ 0.52       $ 0.60   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

   $ 0.13       $ 0.27       $ 0.51       $ 0.59   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average shares outstanding:

           

Basic

     44,905         43,898         44,754         43,850   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     46,061         45,004         45,953         44,749   
  

 

 

    

 

 

    

 

 

    

 

 

 


Stein Mart, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

 

     13 Weeks Ended      13 Weeks Ended     52 Weeks Ended      52 Weeks Ended  
     January 30, 2016      January 31, 2015     January 30, 2016      January 31, 2015  
     (Unaudited)            (Unaudited)         

Net income

   $ 6,250       $ 12,305      $ 23,711       $ 26,906   

Other comprehensive income, net of tax:

          

Other comprehensive income (loss) before reclassifications

     137         (181     137         (181

Amounts reclassified from accumulated other comprehensive income

     4         2        16         10   
  

 

 

    

 

 

   

 

 

    

 

 

 

Comprehensive income

   $ 6,391       $ 12,126      $ 23,864       $ 26,735   
  

 

 

    

 

 

   

 

 

    

 

 

 


Stein Mart, Inc.

Consolidated Statements of Cash Flows

(In thousands)

 

     Year Ended
January 30, 2016
    Year Ended
January 31, 2015
 
     (Unaudited)        

Cash flows from operating activities:

    

Net income

   $ 23,711      $ 26,906   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     29,873        29,116   

Share-based compensation

     6,516        7,596   

Store closing charges

     7        25   

Impairment of property and other assets

     2,008        1,480   

Loss on disposal of property and equipment

     167        319   

Deferred income taxes

     (5,121     1,201   

Tax benefit from equity issuances

     3,646        1,813   

Excess tax benefits from share-based compensation

     (3,932     (1,942

Changes in assets and liabilities:

    

Inventories

     (7,985     (24,106

Prepaid expenses and other current assets

     806        5,096   

Other assets

     2,045        (3,114

Accounts payable

     (24,438     (1,237

Accrued expenses and other current liabilities

     (316     4,307   

Other liabilities

     11,425        4,971   
  

 

 

   

 

 

 

Net cash provided by operating activities

     38,412        52,431   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Net acquisition of property and equipment

     (44,365     (40,231

Change in cash surrender value of life insurance

     —          (111
  

 

 

   

 

 

 

Net cash used in investing activities

     (44,365     (40,342
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from borrowings

     673,312        —     

Repayments of debt

     (483,079     —     

Debit issuance costs

     (380     —     

Cash dividends paid

     (239,089     (12,295

Excess tax benefits from share-based compensation

     3,932        1,942   

Proceeds from exercise of stock options and other

     1,339        868   

Repurchase of common stock

     (3,566     (4,144
  

 

 

   

 

 

 

Net cash used in financing activities

     (47,531     (13,629
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (53,484     (1,540

Cash and cash equivalents at beginning of year

     65,314        66,854   
  

 

 

   

 

 

 

Cash and cash equivalents at end of year

   $ 11,830      $ 65,314   
  

 

 

   

 

 

 


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 January 30, 2016      13 Weeks Ended January 31, 2015  
     Operating
Income
    Tax
Provision
    Net
Income
    Diluted
EPS
     Operating
Income
     Tax
Provision
     Net
Income
     Diluted
EPS
 

GAAP Basis

   $ 10,711      $ 3,562      $ 6,250      $ 0.13       $ 20,535       $ 8,164       $ 12,305       $ 0.27   

Adjustments:

                    

Ecommerce losses

     1,013        385        628        0.01         588         223         365         0.01   

SEC investigation costs (1)

     (166     (63     (103     —           1,136         52         1,084         0.02   

Store closing & impairment charges

     2,008        763        1,245        0.03         1,443         548         895         0.02   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total adjustments

     2,855        1,085        1,770        0.04         3,167         823         2,344         0.05   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Non-GAAP Basis

   $ 13,566      $ 4,647      $ 8,020      $ 0.17       $ 23,702       $ 8,987       $ 14,649       $ 0.32   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     52 Weeks Ended January 30, 2016      52 Weeks Ended January 31, 2015  
     Operating
Income
     Tax
Provision
     Net
Income
     Diluted
EPS
     Operating
Income
     Tax
Provision
     Net
Income
     Diluted
EPS
 

GAAP Basis

   $ 41,563       $ 14,569       $ 23,711       $ 0.51       $ 44,709       $ 17,537       $ 26,906       $ 0.59   

Adjustments:

                       

Ecommerce losses

     3,565         1,355         2,210         0.04         2,624         997         1,627         0.04   

SEC investigation costs (1)

     51         19         32         —           4,058         1,162         2,896         0.06   

Store closing & impairment charges

     2,035         773         1,262         0.03         2,481         943         1,538         0.03   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total adjustments

     5,651         2,147         3,504         0.07         9,163         3,102         6,061         0.13   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Non-GAAP Basis

   $ 47,214       $ 16,716       $ 27,215       $ 0.58       $ 53,872       $ 20,639       $ 32,967       $ 0.72   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Professional fees and other expenses, net of insurance recoveries, related to the SEC investigation into our 2012 financial restatement which was settled in September 2015.


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)

 

     52 Weeks
Ended
     52 Weeks
Ended
 
     Jan. 30, 2016      Jan. 31, 2015  

Net income

   $ 23,711       $ 26,906   

Add back amounts for computation of EBITDA:

     

Interest expense, net

     3,283         266   

Income tax expense

     14,569         17,537   

Depreciation and amortization

     29,873         29,116   
  

 

 

    

 

 

 

EBITDA

     71,436         73,825   
  

 

 

    

 

 

 

Adjustments:

     

Ecommerce losses

     3,565         2,624   

SEC Investigation costs

     51         4,058   

Store closing & impairment charges

     2,035         2,481   

Pre-opening costs

     3,036         4,049   
  

 

 

    

 

 

 

Total adjustments

     8,687         13,212   
  

 

 

    

 

 

 

Adjusted EBITDA

   $ 80,123       $ 87,037   
  

 

 

    

 

 

 
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