Stein Mart Hindered by Home

Jacksonville, Fla. — Promotional softlines retailer Stein Mart turned in one if its "worst" third quarters ever — and cited its perpetually downtrodden home area as one of the main hindrances.

Said Linda Farthing, the 276-unit retailer's president and ceo who was promoted to her posts two months ago: "Our third-quarter performance was unacceptable. We were unable to drive sales, resulting in our worst third-quarter comp performance in recent history."

For the quarter, Stein Mart reported a net loss of $2.7 million, down from net income of $237,000 in the year-ago period. Sales fell 1.7% to $333.3 million as comps dropped 6.3%. Gross margins fell 40 basis points to 25.9% of sales, while SG&A costs soared 190 basis points to 29.2% of sales.

The home business segment, specifically, "continues to track well below the company trend," Farthing said. "Fixing this area is a priority, but in a soft housing market, we have additional challenges. We are looking at alternatives to maximize the productivity of the home square-footage."

Such alternatives could include a scaling down or elimination — in part or whole — of home categories — an assumption based on Farthing's response to an analyst's question on this possibility. "What we are looking at is the productivity of each square foot in our stores, and you can take it from there," she said.

During the quarter, home's gifts and linens categories were down double digits, said James Delfs, svp, cfo. "Linens, furniture and home décor continue to significantly under-perform," he continued. "And home, for the year is down double digits."

To avoid causing any "burden" to its 2008 business, Stein Mart plans to spend the holiday selling season liquidating its inventories "as expeditiously as possible," Farthing said.

While plans for the new year are still in the early stages of development, she added, "they are being built on much more conservative assumptions until we have solid indicators of a solid turn-around in business."

Added Delfs: "Our goal in the fourth quarter is to effectively clear remaining fall and winter merchandise through aggressive price point promotion throughout the holidays, and to begin our traditional red-door clearance cadence after Christmas. We've intensified the moderate part of our assortment and adopted a more aggressive price point approach across our entire assortment. And we have aligned our advertising and promotions to support that."

Related to "our troubled home area," he said on that note, "this will be particularly visible in the coming months."