JACKSONVILLE, Fla., May 23, 2018 (GLOBE NEWSWIRE) Stein Mart, Inc. (NASDAQ:SMRT) today announced financial results for the first quarter ended May 5, 2018 and raised its first half 2018 outlook.
Net income for the first quarter was $7.3 million or $0.16 per diluted share compared to a net income of $3.7 million or $0.08 per diluted share in 2017. Operating income for the first quarter was $9.9 million compared to $10.1 million in 2017. First quarter 2018 results include less than $0.1 million in income tax expense (see Income Taxes below).
Adjusted earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the first quarter was $18.4 million compared to $19.3 million in 2017 (see Note 1).
“Comparative sales trends showed considerable improvement for the quarter and operating income exceeded our expectations. Continuing strong inventory productivity drove a significantly higher gross profit rate. The higher gross profit and our below-plan expenses more than offset the impact of somewhat lower sales,” said Hunt Hawkins, Chief Executive Officer. “With better first quarter results, we now expect first-half operating income to be in excess of $10 million instead of the $8 million we previously discussed. Also, while it is early in the second quarter, we are pleased with May’s positive comparable sales trend which reflects the return of seasonal temperatures.”
Net Sales
Total sales for the first quarter of 2018 were $326.7 million, a decrease of 3.2 percent compared with $337.3 million for the first quarter of 2017. The decrease in total sales includes the impact of six stores closed in 2017 and four stores closed during the first quarter of 2018. Comparable store sales for the first quarter of 2018 decreased 0.7 percent including sales from leased departments (see Note 2). Ecommerce sales were up 85 percent over last year’s first quarter.
Other Revenue
During the first quarter of 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). As a result of the new accounting standard, income relating to our credit card program and gift card breakage that previously offset selling, general and administrative (“SG&A”) expenses has been recorded in other revenue in the Condensed Consolidated Statements of Income for all periods presented. The increase in other revenue for the first quarter of 2018 is the result of higher penetration from our growing credit card program.
Gross Profit
Gross profit for the first quarter of 2018 was $96.1 million or 29.4 percent of sales compared to $95.6 million or 28.3 percent of sales in 2017. The 110 basis points expansion in the gross profit rate was driven primarily by higher gross margin from reduced markdowns and better inventory productivity. Occupancy costs were flat for the quarter, but higher as a percentage of sales.
Selling, General and Administrative Expenses
SG&A expenses for the first quarter of 2018 were $90.5 million compared to $89.2 million in 2017. The slight increase in SG&A expenses was primarily due to planned higher advertising and Ecommerce expenses in the first quarter of 2018 that were mostly offset by cost savings.
Interest Expense, Net
Interest expense for the first quarter of 2018 was $2.5 million compared to $1.1 million in 2017. The increase in interest expense reflects higher interest rates and borrowing levels in the first quarter of 2018.
Income Taxes
Income tax expense decreased $5.2 million to less than $0.1 million in the first quarter of 2018 compared to the first quarter of 2017. The decrease reflects our net operating loss carry forward position along with the valuation allowance established against deferred tax assets during the fourth quarter of 2017. The first quarter of 2018 expense represents certain state income tax expense. We expect the effective tax rate to be close to zero percent for all of 2018.
Working Capital and Capital Expenditures
Inventories were $297 million at the end of the first quarter of 2018 compared to $322 million at the same time last year. Average inventories per store were down nearly 10 percent to last year.
Capital expenditures totaled $1.7 million for the first quarter of 2018 compared to $7.2 million in 2017. For fiscal 2018, we expect capital expenditures to be approximately $10 million compared to $21 million in fiscal 2017.
Accounts payable decreased more than $68 million compared to the end of the first quarter last year as a result of reduced credit terms from our vendors and their factors. Our availability under our expanded credit facility allowed us to fund this reduction and keep merchandise receipts timely. Borrowings increased to $209 million at the end of the first quarter compared to $157 million at the end of last year’s first quarter. Unused availability at the end of the first quarter of 2018 was $40 million. Credit terms began expanding late in the quarter after we announced positive fourth quarter 2017 results.
Store Activity
We had 289 stores at the end of the first quarter 2018 compared to 292 at the end of the first quarter last year. We closed four stores during the first quarter of 2018. We are now expecting to close a total of seven stores and open two new stores in 2018.
Updated First Half 2018 Outlook
We now expect first half 2018 operating income to be in excess of $10 million compared to an operating loss of $11.5 million for the first half of 2017. Our outlook has improved due to first quarter results along with expected additional first-half gross profit expansion and lower SG&A expenses. Second quarter of 2018 operating income is expected to be positive based on the following factors:
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 5, 2018 with the Securities and Exchange Commission (“SEC”), and therefore remain subject to adjustment.
Conference Call
A conference call to discuss the Company’s first quarter results will be held at 4:30 p.m. ET on May 23, 2018. 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, 2018.
Investor Presentation
Stein Mart’s first quarter 2018 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, Inc. is a national specialty off-price retailer offering designer and name-brand fashion apparel, home décor, accessories and shoes at everyday discount prices. Stein Mart provides real value that customers love every day both in stores and online.
Stein Mart, Inc. Condensed Consolidated Statements of Income (Unaudited) (In thousands, except per share amounts) |
|||||
13 Weeks Ended | 13 Weeks Ended | ||||
May 5, 2018 | April 29, 2017 | ||||
Net sales | $ | 326,685 | $ | 337,335 | |
Other revenue | 4,302 | 3,714 | |||
Total revenue | 330,987 | 341,049 | |||
Cost of merchandise sold | 230,621 | 241,779 | |||
Selling, general and administrative expenses | 90,509 | 89,208 | |||
Operating income | 9,857 | 10,062 | |||
Interest expense, net | 2,463 | 1,139 | |||
Income before income taxes | 7,394 | 8,923 | |||
Income tax expense | 60 | 5,223 | |||
Net income | $ | 7,334 | $ | 3,700 | |
Net income per share: | |||||
Basic | $ | 0.16 | $ | 0.08 | |
Diluted | $ | 0.16 | $ | 0.08 | |
Weighted-average shares outstanding: | |||||
Basic | 46,610 | 46,165 | |||
Diluted | 46,659 | 46,171 | |||
Stein Mart, Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except for share and per share data) |
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May 5, 2018 | February 3, 2018 | April 29, 2017 | |||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 16,165 | $ | 10,400 | $ | 15,554 | |||
Inventories | 296,964 | 270,237 | 322,030 | ||||||
Prepaid expenses and other current assets | 35,597 | 24,194 | 24,161 | ||||||
Total current assets | 348,726 | 304,831 | 361,745 | ||||||
Property and equipment, net | 144,109 | 151,128 | 164,012 | ||||||
Other assets | 24,838 | 24,973 | 28,692 | ||||||
Total assets | $ | 517,673 | $ | 480,932 | $ | 554,449 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 93,632 | $ | 119,388 | $ | 162,208 | |||
Current portion of debt (1) | 159,415 | 13,738 | 8,333 | ||||||
Accrued expenses and other current liabilities | 78,418 | 76,058 | 71,360 | ||||||
Total current liabilities | 331,465 | 209,184 | 241,901 | ||||||
Long-term debt | 49,266 | 142,387 | 149,119 | ||||||
Deferred rent | 41,535 | 40,860 | 42,509 | ||||||
Other liabilities | 38,785 | 40,214 | 49,128 | ||||||
Total liabilities | 461,051 | 432,645 | 482,657 | ||||||
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; 47,910,450, 47,978,275 and 47,181,498 | |||||||||
shares issued and outstanding, respectively | 479 | 480 | 472 | ||||||
Additional paid-in capital | 56,961 | 56,002 | 51,557 | ||||||
Retained (deficit) earnings | (576) | (7,949) | 20,059 | ||||||
Accumulated other comprehensive loss | (242) | (246) | (296) | ||||||
Total shareholders’ equity | 56,622 | 48,287 | 71,792 | ||||||
Total liabilities and shareholders’ equity | $ | 517,673 | $ | 480,932 | $ | 554,449 | |||
(1) As part of a February 2018 amendment to our credit agreement that allowed us to have additional availability, we agreed to enter cash dominion whereby our cash is swept daily to pay down outstanding debt. As a result of being in cash dominion, the amount outstanding under the credit agreement is required to be classified as a short-term obligation. As long as we remain within the terms of the credit agreement, the bank is obligated to allow us to draw up to our borrowing availability through the maturity of our credit agreement in February 2020.
Stein Mart, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) |
|||||||
13 Weeks Ended | 13 Weeks Ended | ||||||
May 5, 2018 | April 29, 2017 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 7,334 | $ | 3,700 | |||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |||||||
Depreciation and amortization |