Stein Mart August Sales Plunge

Stein Mart Inc. (SMRT - Snapshot Report) reported total sales of $73.9 million in August 2011, down 8.7% from $80.9 million in August 2010. The company’s comparable store sales (comps) for the month also declined 7.5% versus a handsome 8.5% growth recorded in the year-earlier period. 

During the month, Hurricane Irene upset business across North Carolina to Massachusetts, leading to a shortfall in sales during the last weekend. The natural calamity was concurrent with a large-scale promotional event the company organizes in August. Further, the company tested a new media mix to support this event that failed to drive traffic and sales during the promotion like it did last year.

In August, the categories that performed well were ladies' dresses, casual sportswear and costume jewelry while ladies' special sizes, accessories and home were the dampeners. Geographically, August sales were stronger in California, Florida and Texas, while sales were weaker on the East Coast, excluding Florida and the Midwest. 

Stein Mart’s year-to-date total revenue was down 1.6% year over year at $647.6 million while same-store sales dipped 0.7% versus a 1.7% drop in the same-period last year. In the recently concluded second quarter, the company’s total sales decreased 2.1% year over year to $270.2 million due to a 1.1% reduction in comps. 

However, the massive drop in August results did not come as a big shock. The company had already commented that August is a clearance month and not a big driver for the fall season. Additionally, with the reduction in debt ceiling, people’s attention diverted from spending to the debt crisis.

Stein Mart, which offers fashion merchandise and service, ended the August quarter with 260 stores compared with 264 stores in the year-ago period. The company expects to open three new stores, relocate two stores and close one store in the second half of 2011.

However, Stein Mart remains committed to enhance shareholder value with the authorization of repurchasing 2.5 million common shares in August. This enhanced the limit of share repurchase authorization to approximately 3.1 million shares.

The Zacks Consensus earnings estimates for the third quarter and fiscal 2011 are pegged at 3 cents and 61 cents, respectively, representing year-over-year declines of 50.0% and 29.65%. Stein Mart currently retains a Zacks #4 Rank, which translates into a short-term Sell rating. However, we are maintaining our long-term Neutral recommendation on the stock. One of its competitors, Cache Inc. (CACH - Snapshot Report) currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating.

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