Stein Mart sales propel 1Q profits

JACKSONVILLE, FL — Spurred on by stronger sales, wider margins and a deep cut in interest expense, first-quarter profits at Stein Mart Inc. jumped up by 24.5 percent, to $11.4 million from $9.1 million a year ago.

Fueled by continued expansion, sales in the opening quarter climbed by 12.3 percent, to $356.0 million from $317.1 million last year. The retailer opened eight new stores in the period. But absent the proceeds from the new units, same-store sales were relatively flat, edging up just 0.9 percent.

In a strong support to the bottom line, average gross margin improved substantially, offsetting somewhat higher costs. Margins widened by 90 basis points, to 27.1 percent from 26.2 percent the preceding year. Operating costs rose modestly during the period, climbing 30 basis points, to 22.8 percent of sales from 22.5 percent.

In another boost to profits, the retailer cut its interest expense by 34.0 percent, to $614,000 from $931,000 last year. The retailer worked its bank debt down by 19.4 percent, to $63.7 million from $79.1 million the prior year.

Saving even more money, inventories were held in check, rising just 1.2 percent — to $345.5 million from $341.6 million last year — well beneath the 12.3 percent increase in sales.

"Our first-quarter success resulted from enthusiastic customer acceptance of our fashion assortment, particularly in the boutique, ladies accessories and gifts areas," said Jack Williams, ceo. "This strong response and our progress in inventory planning and allocation resulted in improved merchandise sell-through and profit margins."

After getting off to a strong start early in May, sales have lately slipped, falling beneath expectations, Williams noted. "After an encouraging start in the first two weeks of May, subsequent customer traffic has declined, resulting in below-plan sales for the month-to-date. While we now anticipate flat comparable-store sales for the second quarter, we believe disciplined inventory control and our attractive merchandise assortment will support our continued progress toward improved profitability."

For all of 2002, the company forecast earnings will virtually double, climbing to $0.70 to $0.75 per share, up from $0.37 last year. The forecast, the retailer said, is based on 15 to 18 new stores, a low to mid-single-digit same-store sales gain for the year and improved store productivity, particularly in the second half of the year.

Eight new stores were opened in the quarter, and another seven to 11 will be opened during the year, while four others are set to be closed during the second quarter. Next year the company said it plans to return to a more normalized opening schedule of 30 new units.