Stein Mart Slips in Quarter, Solid for Year
March 20, 2006,
Hobbled by weaker same-store sales, thinning margins and higher costs, fourth-quarter profits at off-price fashion retailer Stein Mart fell by 7.8%, to $21.1 million from $22.8 million.
Earnings at the chain might have fallen even further, but were aided by $1.9 million in insurance proceeds from losses sustained during last year’s hurricane season. The company said results got a further boost of $3.4 million “from a better-than-expected inventory shrinkage performance.”
The company also got an assist from a reduction in its effective tax rate. As a result, income taxes were pared by 18.3%, to $21.1 million from $22.8 million, generating a cash savings of $1.8 million.
In a further lift to the bottom line, Stein Mart owed no money and paid no interest expense during the period, but instead collected $690,000 in interest income, more than treble the $190,000 it earned during the prior-year quarter.
Average gross margin improved slightly, by 10 basis points, or one-tenth of a percentage point, to 29.3% from 29.2% a year ago. But hampered by the lower level of sales, gross margin dollars declined by 3.6%, to $125.2 million from $129.8 million. Offsetting any margin improvement, operating costs climbed higher by 100 basis points, or 1.0 percentage point, to 22.8% of sales from 21.8% during the same period a year ago.
For all of last year, helped by stronger sales, modestly stronger comps, wider margins and interest income, Stein Mart pushed profits up by 34.0%, to $50.9 million from $38.0 million. Sales rose by 1.5%, to $1.5 billion, while same-store sales improved by 0.2%.
Michael Fisher, president and ceo, said, “Our performance demonstrates the underlying strength of our efforts to improve productivity. Our mission to return to a 7.0% operating margin continues, with new and evolving initiatives that will be more apparent in the second half of 2006, as we realize the return on investments we continue to make for the long-term benefit of our company.”
Looking ahead, Stein Mart plans to open about 20 new stores this year, and launch a newly assorted home area, including gifts and linens, by the end of the first quarter. The children’s apparel business will be eliminated beginning in the second quarter, to be replaced by additional categories of ready-to-wear and intimate apparel.
Fisher added, “We anticipate that 2006 results will improve over 2005, although we anticipate earnings for the first half of 2006 to be less than last year since we are taking more markdowns to ensure appropriate inventory freshness in the first quarter,” and as the company exits children’s apparel.
Stein Mart Inc.
|Qtr. 1/28 (x000)||2005||2004||%change|
|>a. Fourth-quarter results include $4.2 million in miscellaneous income, compared with $3.8 million during the same period a year ago.
>b. Twelve-month results include $15.5 million in miscellaneous income, compared with $14.3 million last year. 2004 results included an after-tax loss of $145,000 from discontinued operations.
|Oper. income (EBIT)||27,632||32,828||-15.8|
|Per share (diluted)||0.48||0.53||-9.4|
|Average gross margin||29.3%||29.2%||–|
|Oper. income (EBIT)||63,102||46,872||34.6|
|Per share (diluted)||1.15||0.89||29.2|
|Average gross margin||28.1%||26.6%||–|