Highlights
- Comparable store sales increased 2.6 percent.
- Adjusted diluted earnings per share of $0.32 compared to $0.33 in 2013.
- Adjusted EBITDA increased $0.8 million to $32.4 million
JACKSONVILLE, Fla., May 22, 2014 (GLOBE NEWSWIRE) -- Stein Mart, Inc. (Nasdaq: SMRT) today announced financial results for the first quarter ended May 3, 2014.
Overview of Results
Net income for the first quarter was $14.1 million or $0.31 per diluted share compared to net income of $14.7 million or $0.33 per diluted share in 2013. First quarter adjusted net income was $14.7 million or $0.32 per diluted share compared to adjusted net income of $14.6 million or $0.33 per diluted share in 2013 (see Note 1).
Adjusted earnings before interest, income taxes, depreciation and amortization ("EBITDA") for the first quarter increased $0.8 million to $32.4 million, compared to adjusted EBITDA of $31.6 million in 2013 (see Note 2).
Comments on Results
"We are pleased with our operating performance thus far this year, which included a solid comp sales increase for the quarter once the weather improved," said Jay Stein, Chief Executive Officer. "Our planned growth investments in new stores and ecommerce, as well as the timing of our annual advertising spend, caused our earnings to be below last year. We continue to be excited about our growth opportunities as we open more stores and continue to produce solid same store sales results."
Sales
Comparable store sales for the first quarter of 2014 increased 2.6 percent over the first quarter ended May 4, 2013. Total sales for the first quarter were $328.9 million compared to $321.4 million for the first quarter of 2013.
Gross Profit
Gross profit for the first quarter of 2014 was $104.3 million or 31.7 percent of sales. Including the $3.0 million impact of the fourth quarter 2013 accounting estimate change (see Note 3), adjusted gross profit for the first quarter of 2013 would have been $100.9 million or 31.4 percent of sales.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses for the first quarter of 2014 were $81.2 million. Including the $4.1 million impact of the fourth quarter 2013 accounting estimate change (see Note 3), SG&A expenses for the first quarter of 2013 would have been $77.7 million. The $3.5 million increase over adjusted 2013 SG&A expenses is primarily the result of higher advertising and store selling expenses. Advertising expense is higher in the first quarter this year primarily due to the addition of television to support our more extensive April dress event and increases to drive first quarter sales. Store selling is higher due to planned payroll increases and new and relocated stores.
Income Tax Provision
The effective tax rate for the first quarter of 2014 was 38.9 percent compared to 39.6 percent in 2013.
Balance Sheet Highlights
Cash at the end of the first quarter was $88.3 million compared to $83.9 million at the end of the first quarter of 2013. The 2014 balance reflects quarterly dividend payments totaling $2.2 million, stock repurchases totaling $2.6 million and capital expenditures of $9.2 million.
Inventories were $295.2 million at the end of the first quarter of 2014, 6.0 percent higher than the $278.4 million at the end of the first quarter last year. Giving impact to the end of year $5.0 million decrease from our accounting estimate change (see Note 3), inventories would have increased 8.0 percent. The increase is due to higher Home amounts to support our new programs and higher sales, inventories related to our new online store, one additional store opened in the first quarter and two stores opened last week.
Capital Expenditures
Capital expenditures for 2014 are now expected to be approximately $43 million up from our original estimate of $38 million. Approximately $2.5 million of the $5 million increase is for information technology enhancements, as we are accelerating certain expenditures and increasing others to enhance point-of-sale credit card capabilities. The remaining $2.5 million is for the reconfiguration of our corporate office space in connection with the finalization of a 10-year extension of our lease. We are receiving lease incentives and lower rent that will fund this spend and lower our annual costs.
Dividend
As announced last month, the Board of Directors has increased the quarterly dividend from $0.05 to $0.075 per share. The next quarterly dividend is payable on July 18 to shareholders of record at close of business on July 3, 2014.
Store Activity
The Company ended the quarter with 263 stores compared to 262 at the end of the first quarter last year. During the quarter, one new store was opened, two were closed and three were relocated.
Two other new stores, in Aventura, FL (Miami) and Falls Church, VA (Washington D.C.), were opened last week as part of this year's significant store expansion plan that includes a total of 10 new stores and 6 relocations. Pre-opening costs related to new and relocated stores were $1.3 million in the first quarter of 2014 compared to $0.5 million in the first quarter last year.
New Director of Ecommerce
We are pleased to announce the appointment of Sara Meza as Director of Ecommerce. Ms. Meza joined us in April after 12 years with Belk, most recently as Director of Ecommerce, where she led the original launch of Belk's website business. She has more than 25 years of retail experience, including buying and store operations.
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 May 3, 2014 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 first quarter 2014 results will be held at 10 a.m. EDT on May 22, 2014. 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 June 30, 2014.
Investor Presentation
Stein Mart's first quarter 2014 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 over 260 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.
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 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
- increases in the cost of employee benefits
- disruption of the Company's distribution process
- information technology failures
- data security breaches
- acts of terrorism
- material weaknesses in internal control over financial reporting
- ability to adapt to new regulatory compliance and disclosure obligations
- 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) | |||
| May 3, 2014 | February 1, 2014 | May 4, 2013 | |
| ASSETS | |||
| Current assets: | |||
| Cash and cash equivalents | $ 88,311 | $ 66,854 | $ 83,946 |
| Inventories | 295,190 | 261,517 | 278,435 |
| Prepaid expenses and other current assets | 25,396 | 28,800 | 18,007 |
| Total current assets | 408,897 | 357,171 | 380,388 |
| Property and equipment, net | 143,610 | 139,673 | 132,335 |
| Other assets | 28,202 | 27,414 | 26,603 |
| Total assets | $ 580,709 | $ 524,258 | $ 539,326 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Current liabilities: | |||
| Accounts payable | $ 178,295 | $ 131,338 | $ 165,629 |
| Accrued expenses and other current liabilities | 58,900 | 64,875 | 65,755 |
| Total current liabilities | 237,195 | 196,213 | 231,384 |
| Deferred rent | 21,400 | 16,946 | 15,457 |
| Other liabilities | 46,433 | 46,698 | 42,778 |
| Total liabilities | 305,028 | 259,857 | 289,619 |
| 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; 44,727,231, 44,551,676 and 43,825,455 shares issued and outstanding, respectively | 447 | 446 | 438 |
| Additional paid-in capital | 28,186 | 28,745 | 18,470 |
| Retained earnings | 247,306 | 235,471 | 231,266 |
| Accumulated other comprehensive loss | (258) | (261) | (467) |
| Total shareholders' equity | 275,681 | 264,401 | 249,707 |
| Total liabilities and shareholders' equity | $ 580,709 | $ 524,258 | $ 539,326 |
| Stein Mart, Inc. | |||
| Condensed Consolidated Statements of Income | |||
| (Unaudited) | |||
| (In thousands, except per share amounts) | |||
| 13 Weeks Ended | 13 Weeks Ended | ||
| May 3, 2014 | May 4, 2013 | ||
| Net sales | $ 328,854 | $ 321,364 | |
| Cost of merchandise sold | 224,528 | 223,419 | |
| Gross profit | 104,326 | 97,945 | |
| Selling, general and administrative expenses | 81,229 | 73,563 | |
| Operating income | 23,097 | 24,382 | |
| Interest expense, net | 65 | 61 | |
| Income before income taxes | 23,032 | 24,321 | |
| Income tax expense | 8,957 | 9,629 | |
| Net income | $ 14,075 | $ 14,692 | |
| Net income per share: | |||
| Basic | $ 0.31 | $ 0.34 | |
| Diluted | $ 0.31 | $ 0.33 | |
| Weighted-average shares outstanding: | |||
| Basic | 43,829 | 42,814 | |
| Diluted | 44,456 | 43,262 | |
| Stein Mart, Inc. | ||
| Condensed Consolidated Statements of Comprehensive Income | ||
| (Unaudited) | ||
| (In thousands) | ||
| 13 Weeks Ended | 13 Weeks Ended | |
| May 3, 2014 | May 4, 2013 | |
| Net income | $ 14,075 | $ 14,692 |
| Other comprehensive income, net of tax: | ||
| Amounts reclassified from accumulated other comprehensive income | 3 | 2 |
| Comprehensive income | $ 14,078 | $ 14,694 |
| Stein Mart, Inc. | ||
| Condensed Consolidated Statements of Cash Flows | ||
| (Unaudited) | ||
| (In thousands) | ||
| 13 Weeks Ended | 13 Weeks Ended | |
| May 3, 2014 | May 4, 2013 | |
| Cash flows from operating activities: | ||
| Net income | $ 14,075 | $ 14,692 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 6,991 | 6,812 |
| Share-based compensation | 1,369 | 1,362 |
| Store closing benefits | (46) | (176) |
| Loss on disposal of property and equipment | 59 | 120 |
| Deferred income taxes | 4,175 | 1,865 |
| Tax benefit (deficiency) from equity issuances | 662 | (389) |
| Excess tax benefits from share-based compensation | (688) | (24) |
| Changes in assets and liabilities: | ||
| Inventories | (33,673) | (35,090) |
| Prepaid expenses and other current assets | (960) | 2,336 |
| Other assets | (788) | 103 |
| Accounts payable | 46,881 | 34,657 |
| Accrued expenses and other current liabilities | (8,107) | 329 |
| Other liabilities | 4,889 | (826) |
| Net cash provided by operating activities | 34,839 | 25,771 |
| Cash flows from investing activities: | ||
| Acquisition of property and equipment | (9,241) | (7,697) |
| Net cash used in investing activities | (9,241) | (7,697) |
| Cash flows from financing activities: | ||
| Cash dividends paid | (2,240) | -- |
| Capital lease payments | -- | (1,391) |
| Excess tax benefits from share-based compensation | 688 | 24 |
| Proceeds from exercise of stock options and other | 52 | 14 |
| Repurchase of common stock | (2,641) | (8) |
| Net cash used in financing activities | (4,141) | (1,361) |
| Net increase in cash and cash equivalents | 21,457 | 16,713 |
| Cash and cash equivalents at beginning of year | 66,854 | 67,233 |
| Cash and cash equivalents at end of period | $ 88,311 | $ 83,946 |
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 May 3, 2014 | 13 Weeks Ended May 4, 2013 | |||||
| Operating Income | Net Income | Diluted EPS | Operating Income | Net Income | Diluted EPS | |
| GAAP Basis | $ 23,097 | $ 14,075 | $ 0.31 | $ 24,382 | $ 14,692 | $ 0.33 |
| Adjustments: | ||||||
| Supply chain & ecommerce start-up costs (1) | 645 | 400 | 0.01 | 305 | 189 | 0.00 |
| Investigation and related fees (2) | 328 | 203 | 0.00 | 710 | 440 | 0.01 |
| Change in estimate for allocated merchandise buying costs (3) | -- | -- | -- | (1,100) | (682) | (0.01) |
| Total adjustments | 973 | 603 | 0.01 | (85) | (53) | 0.00 |
| Adjusted Non-GAAP Basis | $ 24,070 | $ 14,678 | $ 0.32 | $ 24,297 | $ 14,639 | $ 0.33 |
| (1) Start-up costs for the transition of our Supply Chain operations from third-party operated to Company operated (2013 impact only) and the net loss from start-up of our ecommerce business launched in September 2013. | ||||||
| (2) Professional fees related to our 2012 financial restatement and related SEC investigation. | ||||||
| (3) A change in estimation of buying and distribution costs allocated to inventories, recorded in the fourth quarter of 2013, lowered the percentage of expenses allocated to inventories. See Supplemental Schedule in Note 3 which presents the impact of the change on each fiscal 2013 quarter. | ||||||
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) | ||
| 13 Weeks | 13 Weeks | |
| Ended | Ended | |
| May 3, 2014 | May 4, 2013 | |
| Net income | $ 14,075 | $ 14,692 |
| Add back amounts for computation of EBITDA: | ||
| Interest expense, net | 65 | 61 |
| Income tax expense | 8,957 | 9,629 |
| Depreciation and amortization | 6,991 | 6,812 |
| EBITDA | 30,088 | 31,194 |
| Adjustments: | ||
| Supply chain & ecommerce start-up costs | 645 | 305 |
| Investigation and related fees | 328 | 710 |
| Change in estimate for allocated merchandise buying costs (see Note 3) | -- | (1,100) |
| Pre-opening costs | 1,332 | 506 |
| Total adjustments | 2,305 | 421 |
| Adjusted EBITDA | $ 32,393 | $ 31,615 |
Note 3 – Supplemental Schedule: Impact of Fourth Quarter 2013 Change in Estimate on 2013 Quarters
We refined our estimation of the buying and distribution costs allocated to inventories during the fourth quarter of 2013. The change lowered the percentage of expenses allocated to inventory purchases resulting in a $5.0 million decrease in inventories comprised of a $15.0 million increase in SG&A expenses and a $10.0 million increase in gross profit, recorded in the 2013 fourth quarter. The lower cost allocation percentage will similarly impact both the beginning and ending inventory amounts in 2014 and future periods. That is, the higher SG&A expenses will be offset by higher gross profit. The only expected meaningful impact to earnings will result from changes in inventory levels.
Because the cumulative effect of the change in estimate was recorded in the fourth quarter, management believes that certain non-GAAP operating results, which present our best estimate of the impact of the fourth quarter 2013 change in allocation estimate on all 2013 quarters, may provide a more meaningful measure on which to compare our results of operations between 2014 and 2013 periods. See reconciliation below.
| Reconciliation of Fiscal 2013 Gross Profit and SG&A Expenses from GAAP Basis to Adjusted Non-GAAP Basis For Fourth Quarter 2013 Accounting Estimate Change | ||||||||||
| Unaudited | ||||||||||
| (in thousands) | ||||||||||
| Q1-13 | Q2-13 | Q3-13 | Q4-13 | Year 2013 | ||||||
| Gross Profit | SG&A* | Gross Profit | SG&A | Gross Profit | SG&A | Gross Profit | SG&A | Gross Profit | SG&A | |
| GAAP Basis | $ 97,945 | $ 73,563 | $ 80,316 | $ 74,473 | $ 77,765 | $ 77,873 | $ 111,327 | $ 100,611 | $ 367,353 | $ 326,520 |
| Adjustments: | ||||||||||
| Remove change from Q4 (1) | (10,000) | (15,000) | (10,000) | (15,000) | ||||||
| Distribute change to all quarters (2) | 3,000 | 4,100 | 4,200 | 3,100 | 2,400 | 3,800 | 5,400 | 4,000 | 15,000 | 15,000 |
| Total adjustments | 3,000 | 4,100 | 4,200 | 3,100 | 2,400 | 3,800 | (4,600) | (11,000) | 5,000 | -- |
| Adjusted/Non-GAAP Basis | $ 100,945 | $ 77,663 | $ 84,516 | $ 77,573 | $ 80,165 | $ 81,673 | $ 106,727 | $ 89,611 | $ 372,353 | $ 326,520 |
| (1) The adjustment resulted in a net decrease in operating income and a decrease in inventories of $5 million recorded in the fourth quarter of 2014 comprised of a $15.0 million increase in SG&A expenses and a $10.0 million increase in gross profit. | ||||||||||
| (2) The $5 million fourth quarter impact on inventories represented the cumulative impact on inventory for the change in allocation estimate. Each quarter has been adjusted by its share of the $15 million total annual amount of the increase in SG&A expense and gross profit, excluding the fourth quarter 2013 impact of the estimate change. | ||||||||||
| * See Note 1 for other impacts to SG&A expenses for the first quarter of 2013. | ||||||||||