This is a summary of the fourth quarter fiscal 2008 earnings call conducted by Stein Mart, Inc. (SMRT) on March 19, 2009.
Management:
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President and CEO: David H. Stovall, Jr.
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Senior VP and CFO: James Delfs
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Senior VP, Marketing/Advertising: Glori Katz
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Senior VP, Stores: Michael D. Ray
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Chief Administrative Officer and Executive VP, Operations: D. Hunt Hawkins
Key Investor Issues:
- For the quarter the company reported a loss of $56.2 million, or $1.35 per share, compared with a loss of $12.1 million, or 30 cents per share.
- Revenue fell 13% to $363.9 million from $417.4 million. Same-store sales fell 12%.
- For the year, the company posted a loss of $71.3 million, or $1.72 per share, compared with a loss of $4.5 million, or 11 cents per share in 2007. Revenue fell 9%.
- For 2009, the company expects cost-savings of $40 million to $50 million and will cut capital expenditures by 50%.
Fourth Quarter Highlights:
- On the statement of operations for the fourth quarter of 2008, net sales decreased 12.8% to $363.9 million from $417.4 million in the same period the previous year.
- Comp store sales for the quarter decreased 12%, driven by a 9% decrease in the average transaction and a 3% decrease in the number of transactions.
Gross profit decreased to $54.9 million or 15.1% of net sales compared to $84.1 million or 20.1% of net sales in the fourth quarter last year.
The 500 basis point decrease in the gross profit rate resulted from a 320 basis point increase in markdowns and a 260 basis point increase in buying and occupancy costs, slightly offset by an 80 basis point increase in markup.
SG&A expenses were $117.1 million or 32.2% of net sales as compared to $106.2 million or 25.4% of net sales during the same period last year.
Excluding asset impairment and store closing charges, SG&A expenses in the fourth quarter of 2008 were $96.1 million or 26.4% of net sales compared to $101.6 million or 24.3% of net sales in the same period last year. This $5.5 million decrease in SG&A resulted from significant reductions in advertising and store operating expenses, somewhat offset by professional fees related to our expense reduction initiatives. The SG&A rate was higher due to a lack of sales leverage.
Excluding the $40.1 million in charges for asset impairments, store closings and deferred tax asset valuation allowance, the company had an adjusted net loss of $23.8 million or $0.57 per diluted share in the fourth quarter of 2008 compared to an adjusted net loss of $9.4 million or $0.23 per diluted share in the fourth quarter of 2007.
For the year 2008, net sales decreased 9% to $1.3265 billion from $1.4576 billion last year.
Comp store sales for the year decreased 10.9%, driven by a 6.3% decrease in the average transaction and a 4.6% decrease in the number of transactions.
For the year, gross profit decreased to $294.2 million or 22.2% of net sales compared to $361.4 million or 24.8% of net sales in 2007.
The 260 basis point decrease in the gross profit rate resulted from a 110 basis point increase in markdowns and a 200 basis point increase in buying and occupancy costs, slightly offset by a 50 basis point increase in markups.
For the year, SG&A expenses were $394.8 million or 29.8% of net sales as compared to $388.6 million or 26.7% of net sales last year.
Excluding asset impairment and store closing charges, SG&A expenses were $369.3 million or 27.8% of net sales in 2008 compared to $383.4 million or 26.3% of net sales last year. This $14.1 million decrease in SG&A resulted from significant reductions in advertising and store operating expenses, somewhat offset by professional fees related to the company’s expense reduction initiatives. The SG&A rate for the year was higher due to a lack of sales leverage.
Excluding the $44.4 million in charges for asset impairments, store closings and deferred tax asset valuation allowance, the company had an adjusted net loss of $36.2 million or $0.87 per diluted share for the year compared to an adjusted net loss of $1.5 million or $0.04 per diluted share in 2007.
Other income for the year was down $975,000, but as a percent of sales both the income from the leased shoe department and from the credit card program were flat to last year.
Interest expense increased $959,000 over last year due to increased borrowings at lower interest rates.
Stein Mart still generated $19.4 million of cash from operations, a $1.5 million increase over last year.
