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Stein Mart Inc. Reports Operating Results (10-Q)

September 09, 2009 | About:
10qk

10qk

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Stein Mart Inc. (SMRT) filed Quarterly Report for the period ended 2009-08-01.

Stein Mart Inc. operates retail store chain offering fashionable current-season primarily branded merchandise comparable in quality and presentation to that of traditional department and fine specialty stores at prices typically 25% to 60% below those regularly charged by such stores. The company is focused on assorting merchandise that features moderate to designer brand-name apparel for women men and children as well as accessories gifts linens shoes and fragrances. Stein Mart Inc. has a market cap of $520.5 million; its shares were traded at around $12.2 with and P/S ratio of 0.4.

Highlight of Business Operations:

For the second quarter of 2009, we had net income of $1.5 million or $0.04 per diluted share as compared to a net loss $(8.0) million or $(0.19) per diluted share for the same 2008 period. For the first half of 2009, the Company had net income of $17.6 million or $0.41 per diluted share compared to a net loss of $(1.0) million or $(0.02) per diluted share for the same 2008 period. While net sales decreased $24.1 million and $56.7 million, respectively, for the second quarter and first half of 2009, gross margin increased slightly for both periods. Selling, general and administrative (SG&A) expenses were $18.3 million lower during the second quarter and $30.0 million lower during the first half of 2009 compared to the same 2008 periods, primarily from significant reductions in payroll expense in the stores and corporate office, reduced advertising and lower depreciation expense.

Gross profit for the second quarter of 2009 was $75.4 million or 26.2 percent of net sales compared to $74.1 million or 23.8 percent of net sales for the second quarter of 2008. The $1.3 million increase in gross profit reflects a $3.6 million increase in the comparable store group and a $0.3 million increase in the non-comparable store group, offset by a $2.6 million decrease in the closing/closed store group. Gross profit as a percent of sales increased 2.4 percentage points during the second quarter of 2009 primarily due to a 1.4 percentage point increase in markup and a 1.3 percentage point decrease in markdowns, offset by a 0.6 percent increase in occupancy costs due to a lack of leverage on lower sales.

SG&A expenses were $74.2 million or 25.8 percent of net sales for the second quarter of 2009 as compared to $92.5 million or 29.7 percent of net sales for the same 2008 period. The $18.3 million decrease in SG&A expenses reflects a $9.5 million reduction in store operating expenses, a $4.7 million decrease in non-buying expenses in the corporate office, a $2.8 million decrease in advertising expenses, and a $1.3 million decrease in depreciation expense. Store operating expenses decreased $7.1 million for the comparable store group due to headcount reductions and other cost saving initiatives and decreased $2.4 million for the closing/closed store group. Corporate office expenses decreased from 2008 primarily due to compensation and benefit reductions, lower legal expenses and lower professional fees related to expense reduction initiatives. Advertising expense was lower this period primarily due to reduced spending on direct mail marketing and newspaper advertising. Depreciation expense decreased as a result of asset impairment charges taken during the fourth quarter of 2008.

Gross profit for first half 2009 was $172.3 million or 28.4 percent of net sales compared to $171.9 million or 25.9 percent of net sales for the first half of 2008. The $0.4 million increase in gross profit reflects a $4.2 million increase in the comparable store group and a $0.8 million increase in the non-comparable store group due to the inclusion of operating results for one store opened in 2009 and six stores opened in 2008, offset by a $4.6 million decrease in the closing/closed store group. Gross profit as a percent of sales increased 2.5 percentage points during the first half of 2009 primarily due to a 1.2 percentage point increase in markup and a 2.0 percentage point decrease in markdowns, offset by a 0.8 percent increase in occupancy costs due to a lack of leverage on lower sales.

SG&A expenses were $154.1 million or 25.4 percent of sales for the first half of 2009 compared to $184.1 million or 27.7 percent of sales for the same 2008 period. The $30.0 million decrease in SG&A reflects a $19.1 million reduction in store operating expenses, a $5.8 million decrease in non-buying expenses in the corporate office, a $2.6 million decrease in depreciation expense, and a $2.5 million decrease in advertising expenses. Store operating expenses decreased $14.9 million for the comparable store group due to headcount reductions and other cost saving initiatives and decreased $4.4 million for the closing/closed store group. Corporate office expenses decreased from 2008 primarily due to compensation and benefit reductions, lower legal expenses and lower professional fees related to expense reduction initiatives. Depreciation expense decreased as a result of asset impairment charges taken during the fourth quarter of 2008. Advertising expense was lower this period primarily due to reduced spending on direct mail marketing and newspaper advertising.

Net cash provided by operating activities was $58.8 million for the first half of 2009 compared to $8.7 million for the first half of 2008. The increase in cash provided by operating activities during the first half of 2009 compared to the first half of 2008 is due to $34.3 million less cash used for inventories and to reduce accounts payable, $16.4 million more cash provided by net income plus non-cash charges and a $12.8 million increase in cash provided by income taxes receivable, offset by $13.3 million more cash used by other operating activities. Inventories decreased in the first half of 2009 compared to the first half of 2008 due to less inventory being purchased in response to lower sales and a strategy to maintain lower average store inventory levels.

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