Stein Mart Posts Profit In Q3, But Sees Lower Gross Profit Rate In Q4

(RTTNews) - Apparel retailer Stein Mart Inc. (SMRT), Thursday reported a turnaround to profit in the third quarter on higher net sales and margins. While quarterly earnings per share were matched analysts' estimates, sales beat their expectations.

Looking ahead, the company projects gross profit rate for the fourth quarter to be about 100 basis points lower than the prior-year period. Shares of Stein Mart are trading lower by 9 percent in the regular trading session.

Jay Stein, Chief Executive Officer of Stein Mart said, "Our earnings continue to improve as a result of our continued sales momentum. We have been very focused on refining our brands, pricing and sales execution and the improvements are evident in our results."

Jacksonville, Florida-based Stein Mart's net income for the third quarter was $28 thousand or breakeven per share, compared to net loss of $1.66 million or $0.04 per share in the year-ago period. On average, four analysts polled by Thomson Reuters expected the company to report breakeven per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter rose 6 percent at $290.45 million from $273.73 million in the same period last year. Analysts had a consensus revenue estimate of $287.94 million for the quarter.

Comparable store sales for the quarter rose 4.8 percent.

Gross margin for the quarter expanded to 26.8 percent from 25.8 percent in the prior year, primarily the result of higher markup and slightly lower occupancy costs as a percentage of sales, offset by slightly higher markdowns.

Stein Mart said that its e-commerce business has been operational for just over two months. As a new business venture, the company said it was continually enhancing its site presentation and analyzing results to drive online traffic.

Further, the company said that the important transition of its supply chain distribution centers from third-party to company-operated was nearly complete. The company noted that the final distribution center in Ontario, California, will be fully operational in January.

Looking ahead to the fourth quarter, Stein Mart projects gross profit rate for the fourth quarter to be about 100 basis points lower than the prior-year period, resulting in a second half rate that is slightly lower than last year's second half rate.

The company noted that the lower gross profit rate reflects more normal markdown levels compared to the year-ago fourth quarter when sales exceeded its planned merchandise levels, the positive impact of the 53rd week in 2012, increasing e-commerce sales which have lower margins due to fulfillment costs,and greater penetration of sales from its home division which has lower margins.

In Thursday's regular session, SMRT is trading at $14.64, down $1.45 or 9.01 percent on a volume of 131,142 shares.