Third Quarter Highlights
- Diluted loss per share of $0.01 compared to $0.03 loss in 2014
- Adjusted operating income of $2.0 million compared to $1.8 million in 2014
JACKSONVILLE, Fla., Nov. 19, 2015 (GLOBE NEWSWIRE) -- Stein Mart, Inc. (NASDAQ:SMRT) today announced financial results for the third quarter ended October 31, 2015.
Overview of Results
Net 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.”
Sales
Total 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 Profit
Gross 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 Debt
Interest 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.
Inventories
Inventories 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 Activity
We 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 2016
Beginning 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-Q
Reported 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 Call
A 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 Presentation
Stein 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 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 October 31, 2015 | 13 Weeks Ended November 1, 2014 | ||||||||||||||||||||||||||
| Operating Income (Loss) | Tax Provision (Benefit) | Net Income (Loss) | Diluted EPS | Operating Income (Loss) | Tax Provision | Net Income (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 | ||||||||||||||||||||||||||
| Operating Income | Tax Provision | Net Income | Diluted EPS | Operating Income | Tax Provision | Net Income | Diluted EPS | ||||||||||||||||||||
| 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 - 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) | ||||||||||||
| 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 | ||||||||