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Home puts big hurt on Stein Mart  

 

Jacksonville, Fla. – Stein Mart’s home business woes doubled in pain last fall, so much so that the 280-unit mid-tier department store plans to reduce square footage space in the department, in order to expand its more lucrative fashion accessory business, the company said this morning during its fourth-quarter and yearend earnings call.

“This fall season was our most difficult for our home area – gifts and linens,” said Linda Farthing, president and ceo. “Frankly, this has been the case for several seasons now.”

Compared to Stein Mart’s other departments, home proved the poorest performer, with comp store sales for home’s gifts and linens together declining 14.1% in the recent fall season, after being down more than 7% in the spring.

“This area remains under intense scrutiny in an attempt to find the right merchandise to entice customers in this environment,” said William Moll, evp, chief merchandising officer.

For fiscal 2007, Stein Mart recorded a net loss of $4.5 million, compared to net income of $37.2 million one year ago. Sales of $1.46 billion were down 2.9% from $1.50 billion in 2006. Comps fell 4.0%.

With fashion accessories posing “the greatest margin opportunity” for Stein Mart, Farthing said, home is positioned as the best candidate from whence to steal space. Specific dimension adjustments were not shared, but Moll did say during the question-and-answer session, “A lot of the space” for the enhanced accessory section “is coming from home.”

He noted that Stein Mart is working to “redo the home world by de-emphasizing parts of furniture and home décor, and we’ll see where that goes.” In turn, Stein Mart boasted “a very healthy home entertainment and gift-able business, and also pet gifts business – a nice niche business there.”

Impulse purchases are a target, as Farthing later commented that one of several new merchandising strategies for this new fiscal year includes “refocusing our home area to be much more promotional and gift-able.”

The fourth quarter overall represented Stein Mart’s “most challenging in the company’s history and produced the worst result,” the company said. Stein Mart posted a quarterly net loss of $12.1 million, compared to net income of $21.1 million in the year-ago period. Sales fell 9.4% to $417.4, while comps dipped 6.2%.

Stein Mart sales were weighed down by home’s continued downturns -- as well as a significant slowdown in the retailer’s Florida markets. Florida is home to 17% of Stein Mart’s stores, and the market “continued its disproportionate contribution to our comp-store sales decline,” Farthing said. “Because of [our Florida stores’] traditional strength, their weakness is weighing more heavily on bottom line.”

Looking to the new fiscal year, Farthing said Stein Mart “is aggressively working to make 2008 a turnaround year” for itself.

In operations, the retailer is evaluating “further opportunities to streamline our process and organization,” she said.

Several tests are underway in merchandising, to spark improvements. They include the expanded accessory department and the addition of fragrances in limited doors. “We see this as a great opportunity,” she said.

As part of the accessories expansion, now testing, new self-service displays for some lower-priced jewelry items have been added to reduce some counter service. While this is still in its “very early” stages, Moll said, “initial results are very exciting and nice dollars will come out of that.”

The marketing front poses Stein Mart’s self-described “biggest challenge, far and away,” in finding “the appropriate blend of marketing vehicles to get more feet into our stores,” Farthing said. The chain has already steered away from branded TV messages and instead turned to “a much more promotional and value-based” approach. It is using e-mail more than ever before, and is intensifying its direct mailers and newspaper inserts.

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