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., March 10, 2016 (GLOBE NEWSWIRE) -- 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. EST 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 | Year Ended | ||||||
| January 30, 2016 | January 31, 2015 | ||||||
| Cash flows from operating activities: | (Unaudited) | ||||||
| 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 | 52 Weeks | |||||||||||
| Ended | 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 | ||||||||