Stein Mart sees 2Q profits decline

By Don Hogsett -- Home Textiles Today, 9/16/2002 12:00:00 AM

JACKSONVILLE, FL —

Crimped by weakening same-store sales and higher costs, second-quarter profits at Stein Mart Inc. fell by 9.0 percent, to $2.8 million from $3.0 million last year.

Boosted by new store openings, overall sales at the Southeastern off-price retailer climbed by 6.8 percent, to $311.4 million from $291.5 million last year. Same-store sales, however, fell by 2.3 percent in a persistently tricky environment for U.S. retailers.

Putting pressure on the bottom line, increased overhead costs more than offset stronger margins during the period. Costs climbed higher, as a percentage of sales, by 80 basis points, to 24.5 percent from 23.7 percent a year ago. In absolute dollars, expenses increased by 10.3 percent, to $76.3 million from $69.2 million last year.

Average gross margin widened by 50 basis points, to 25.1 percent from 24.6 percent the preceding year. Gross margin dollars rose by 8.8 percent, to $78.1 million, from $71.8 million, but not enough to ballast the quarter's higher costs.

In a lift to the bottom line, the retailer worked down its debt and interest expense. Bank debt was reduced by 7.7 percent, to $93.1 million from $100.9 million a year ago. And interest costs were pared by 35.9 percent, to $669,000 from $1.0 million.

Inventories were held in check, rising by just 3.0 percent, to $325.8 million from $296.2 million, well behind the 6.8 percent rate of sales growth.

Going forward, the retailer said it expects same-store sales for the third and fourth quarters to improve by about 3 percent, resulting in a loss of $0.05 per share during the third quarter, and earnings of about $0.35 per share during the closing quarter. For all of this year, the company is now forecasting earnings of about $0.65 per share.

The retailer opened three new stores during the quarter, in Irvine and Granada Hills, CA, and Indianapolis, IN. Three others were closed, in Appleton, WI, Joplin, MO, and Wichita, KS. So far this year, 13 new stores have opened, with three more set for the fall.

Stein Mart Inc.