Stein Mart profits up 660 percent

By Don Hogsett -- Home Textiles Today, 5/24/2004 12:00:00 AM

JACKSONVILLE, FLA. —

Climbing back on track after building sales and margins, while slashing costs, stockpiles and interest expense; Southeastern off-pricer Stein Mart Inc. pushed profits more than seven-fold higher during the opening quarter, up 661.1 percent, to $11.5 million from $1.7 million last year.

Driving much of the earnings performance, sales climbed at a double-digit pace, improving 10.8 percent, to $363.6 million from $328.2 million. Same-store sales grew even faster, rising 11.2 percent.

Lending strength to the bottom line, average gross margin widened 180 basis points, or 1.8 percentage points, to 27.2 percent from 25.4 percent a year ago, due to higher initial mark-up and better occupancy leverage, partially offset by an increase in markdowns, the retailer said.

In another big assist to profits, costs were scythed 240 basis points, to 23.1 percent of sales from 25.5 percent the prior year.

With sales and margins up, and costs trending down, Stein Mart scored an operating profit of $15.2 million, recovering from a year-before loss of $523,000.

Stockpiles were whittled 12.6 percent, to $288.2 million from $329.8 million, and average store inventories declined 8.6 percent from last year's levels.

Steering toward a turnaround, Stein Mart shut down 16 underperforming stores in 2003, and another four during the opening quarter. Those stores had put up operating losses of $1.1 million in the first quarter of this year, and $4.1 million in the prior-year first quarter.

The current second quarter, the retailer said, "will be influenced by seasonal clearance activity, particularly in June and July." As it did following the Christmas clearance season, the company will begin in June to emphasize its "dot clearance" promotions within local newspapers, and scale back its branding campaign television ads, as well as its color newspaper inserts/mailers that were used heavily last year to deliver full-price coupons.

Stein Mart Inc.