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Stein Mart (SMRT) Q3 Loss Narrows Y/Y, Sales Deteriorate

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Stein Mart, Inc. reported third-quarter fiscal 2019 results, wherein the company posted a loss that narrowed from the year-ago period. Further, the top line declined year over year. However, the company is hopeful about its fourth-quarter performance.

Q3 in Detail

Stein Mart reported a loss of 25 cents per share, narrower than a loss of 35 cents in the prior-year quarter.

Net sales dipped 1% to $276.1 million due to lower store count. Comparable sales or comps edged down 0.1%. However, the company’s sales marked an improvement from the first half of the fiscal, courtesy of increased sales from the Kids department launch and a double-digit rise in omni sales.

Omni sales (including all online sales) grew 18% year over year and formed about 6.1% of Stein Mart’s net sales. This was backed by the company’s constant focus on enhancing omnichannel capacities. To this end, it rolled out Endless Aisle and mobile point of sale technology to its stores earlier this year. Further, the company started using Smart Fulfillment logic and launched its Buy Online Pick Up in Store service at all locations during the third quarter. Further, it made improvements to its website to draw traffic.

Markedly, average unit retail sales price rose, whereas units per transaction were flat year over year. Number of transactions slightly declined year over year.

Moving on, gross profit dropped 0.6% to $69.4 million, whereas the gross margin rose 10 basis points to 25.1%. Adjusted SG&A expenses increased 0.5% to $85.2 million. This can be accountable to elevated advertising expenses and escalated e-commerce expenses, somewhat negated by reduced store-related costs.

Financial Update

Stein Mart, which shares space with Buckle, Inc. (BKE - Free Report) , Boot Barn Holdings (BOOT - Free Report) and Abercrombie & Fitch (ANF - Free Report) ended the quarter with cash and cash equivalents of about $13 million, long-term debt of $170.2 million and total shareholders’ equity of $31.9 million. Further, the company used $9.9 million of net cash in operating activities during the 39 weeks ended Nov 2, 2019.

Stein Mart shuttered five stores during the first nine months of 2019. The company operated 283 stores at the end of the third quarter compared with 288 in the same period last year.

Outlook

Management is encouraged about the fourth-quarter performance, given its solid initiatives for the fall season. For the fourth quarter, Stein Mart expects comps to be flat to up low-single digit. Gross margin is likely to slightly decline from the year-ago period. Further, adjusted SG&A expenses are anticipated to marginally decrease year over year.



Shares of Stein Mart have gained 13.5% in the past three months compared with the industry’s growth of 6.1%.

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