Stein Mart, Inc. Reports First Quarter Fiscal 2017 Results
JACKSONVILLE, Fla. -- Stein Mart, Inc. (NASDAQ:SMRT) announced financial results for the first quarter ended April 29, 2017.
- Total sales decreased 5.2 percent and comparable store sales decreased 7.6 percent
- Diluted earnings per share of $0.08 compared to $0.29 in 2016
- Solidifying financial position by suspending quarterly dividend and reducing capital expenditures
Net income for the first quarter was $3.7 million or $0.08 per diluted share compared to net income of $13.3 million or $0.29 per diluted share in 2016. Income tax expense for the first quarter of 2017 includes $1.1 million ($0.02 per diluted share) higher expense related to the new accounting standard on stock compensation.
"We continue to experience softer than planned store traffic and sales. As a result, markdowns were significantly higher for the quarter despite our focus on inventory management. Given the uncertain retail environment, we are being more conservative planning fall, keeping a higher percentage of our buying in reserve to opportunistically take advantage of any sales upside. We expect to see additional inventory reductions as the year progresses," said Hunt Hawkins, Chief Executive Officer.
"Until we gain improved visibility during this period of weak retail apparel sales, we believe it is important to implement measures to maximize free cash flow to improve our financial position. In that regard, we have decided to suspend our quarterly dividend and significantly reduce our planned capital expenditures."
Total sales for the first quarter of 2017 were $337.3 million compared to $355.7 million in 2016. Comparable store sales decreased 7.6 percent primarily due to lower traffic. Ecommerce sales were up 38 percent over last year's first quarter.
Gross profit for the first quarter of 2017 was $95.6 million or 28.3 percent of sales compared to $108.9 million or 30.6 percent of sales in 2016. The lower gross profit rate for the quarter reflects higher markdowns and higher occupancy costs that negatively leverage on lower sales.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses for the first quarter of 2017 were $85.5 million compared to $86.5 million in 2016. SG&A expenses were lower this year as a result of operating savings and lower expense for legal settlements that more than offset higher operating expenses from new stores.
Inventories were $322 million at the end of the first quarter of 2017 compared to $317 million at the same time last year. Average inventories per store were down 2.1 percent to last year.
Borrowings under our credit facilities were $157 million and unused availability was $94 million at the end of the first quarter. At the end of the first quarter last year, borrowings were $149 million and unused availability was $113 million.
Cash provided by operating activities was $40.2 million for the first quarter of 2017 compared to $60.3 million for the first quarter of 2016.
Capital expenditures totaled $7.2 million for the first quarter of 2017 compared to $11.3 million in 2016. Planned capital expenditures for fiscal 2017 have been decreased to approximately $24 million or $21 million net of tenant improvement allowances. Capital expenditures were $42 million or $36 million net of tenant improvement allowances in fiscal 2016.
Suspending the $0.075 quarterly dividend will free up approximately $14 million of cash to apply against debt on an annual basis.
We had 292 stores at the end of the first quarter compared to 283 at the end of the first quarter last year. We opened five new stores and closed three stores during the quarter. We are now expecting to open a total of 10 new stores and close seven stores in 2017.
Updated 2017 Outlook
We have updated our full year 2017 outlook as follows:
- We continue to expect our total sales to be at least four percent above our comparable store sales for the year due to net new stores and this year's additional 53rdweek.
- We now expect our gross profit rate will be about the same as the fiscal 2016 rate. This is significantly less than previously estimated primarily due to higher first and second quarter markdowns to reduce inventories for the remainder of the year.
- We are forecasting SG&A expenses to increase only $5 million this year instead of the $15 million previously estimated due to additional operating savings and eliminating most incentive compensation.
- Future quarters' effective tax rate will be higher than the 38.0 percent previously estimated due to the impact of permanent items on lower anticipated earnings.
- If first quarter sales trends continue into the second quarter, we estimate that our loss per share will be in the range of $0.20 to $0.25 for the second quarter.
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 April 29, 2017 with the Securities and Exchange Commission (SEC), and therefore remain subject to adjustment.
A conference call for investment analysts to discuss the Company's first quarter 2017 results will be held at 4:30 p.m. ET on May 17, 2017. 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 May 31, 2017.
Stein Mart's first quarter 2017 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 and 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 will love every day both in stores and online. The Company currently operates 292 stores across 31 states. For more information, please visit www.steinmart.com.
Cautionary Statement Regarding Forward-Looking Statements
Except for historical information contained herein, the statements in this release may be forward-looking, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company does not assume any obligation to update or revise any forward-looking statements even if experience or future changes make it clear that projected results expressed or implied will not be realized. Forward-looking statements involve known and unknown risks and uncertainties that may cause Stein Mart's actual results in future periods to differ materially from forecasted or expected results. Those risks include, without limitation: consumer sensitivity to economic conditions, competition in the retail industry, changes in fashion trends and consumer preferences, ability to implement our strategic plans to sustain profitable growth, effectiveness of advertising and marketing, capital availability and debt levels, dividend impact on stock price, ability to negotiate acceptable lease terms with current and potential landlords, ability to successfully implement strategies to exit under-performing stores, extreme and/or unseasonable weather conditions, adequate sources of merchandise at acceptable prices, dependence on certain key personnel and ability to attract and retain qualified employees, impacts of seasonality, increases in the cost of compensation and employee benefits, disruption of the Company's distribution process, dependence on imported merchandise, information technology failures, data security breaches, single supplier for shoe department, single provider for ecommerce website, acts of terrorism, ability to adapt to new regulatory compliance and disclosure obligations, material weaknesses in internal control over financial reporting and other risks and uncertainties described in the Company's filings with the SEC.