Stein Mart on road to recovery

JACKSONVILLE, FLA. — Extending a recent earnings turnaround, Stein Mart Inc. parlayed a double-digit gain in same-store sales, along with stronger margins, lower costs and leaner stockpiles, into a second quarter profit of $5.7 million, reversing a year-ago loss of $2.8 million.

In a lift to the bottom line, the Southeastern retailer recorded an impressive 10.3 percent increase in same-store sales. Following the closing of underperforming doors, overall sales rose at a slower pace of 6.5 percent, to $320.6 million from $301 million last year.

As part of an overhaul of operations that underpinned the earnings recovery, Stein Mart closed 16 underperforming units last year, and another six during the first six months of 2004. Those stores recorded an operating loss of $400,000 during the second quarter, and a $7.1 million loss during the prior-year period.

Lending further strength to the bottom line, average gross margin widened 280 basis points, stemming from higher initial mark-up, a reduced markdown rate and better occupancy leverage.

At the same time, costs were whittled 130 basis points to 24.5 percent from 25.8 percent during the same period a year ago.

In a further savings, the retailer reduced inventories 6.5 percent, even as it boosted same-store sales over 10 percent, to $265 million from $283.4 million, yielding a cash savings of $18.4 million. By the end of the quarter, average store inventories were down 7.1 percent from last year, and this year's stockpiles, the retailer said, "comprise more current merchandise and less prior-season inventory than last year."

Saving more, Stein Mart reduced its interest expense to zero from $487,000 last year.