Stein Mart, Inc. Reports Second Quarter 2013 Financial Results

Stein Mart, Inc. Reports Second Quarter 2013 Financial Results

Second Quarter Highlights:

  oComparable store sales up 6.4 percent over last year, total sales up 3.8
    percent.
  oDiluted earnings per share of $0.08 compared to $0.05 ($0.02 as adjusted)
    last year.

JACKSONVILLE, Fla., Aug. 22, 2013 (GLOBE NEWSWIRE) -- Stein Mart, Inc.
(Nasdaq:SMRT) today announced financial results for the second quarter ended
August 3, 2013.

Overview of Results

Net income for the second quarter of 2013 was $3.4 million or $0.08 per
diluted share compared to net income of $2.3 million or $0.05 per diluted
share in 2012. Second quarter 2012 adjusted net income was $1.0 million or
$0.02 per diluted share (see Note 1).

For the first six months of 2013, net income was $18.1 million or $0.41 per
diluted share compared to $13.1 million or $0.30 per diluted share in the same
period in 2012. First half 2012 adjusted net income was $11.8 million or $0.27
per diluted share (see Note 1).

EBITDA for the second quarter was $12.8 million compared to $9.4 million ($7.3
million as adjusted - see Note 2) in 2012. EBITDA for the first six months of
2013 was $44.0 million compared to $33.5 million ($31.4 million as adjusted -
see Note 2) in 2012.

Comments on Results

"Our second quarter same store sales increase of 6.4 percent was driven by our
great merchandise, brands and pricing" said Jay Stein, Chief Executive
Officer. "We've said for a long while that increases in sales and margin will
leverage against our lean expense structure resulting in higher earnings
growth. This is now happening."

Total sales for the second quarter of 2013 increased 3.8 percent to $291.0
million, while comparable store sales increased 6.4 percent. For the first six
months of 2013, total sales increased 3.8 percent to $612.3 million, while
comparable store sales increased 3.6 percent.

Gross profit for the second quarter increased to $80.3 million or 27.6 percent
of sales from $73.8 million or 26.3 percent of sales in 2012. Gross profit for
the first six months of 2013 increased $12.6 million to $178.3 million or 29.1
percent of sales from $165.7 million or 28.1 percent of sales in 2012. The
increase in the gross profit rate was primarily the result of lower markdowns
and slightly higher markup.

Selling, general and administrative ("SG&A") expenses for the second quarter
were $74.5 million or 25.6 percent of sales compared to $70.0 million or 25.0
percent of sales in 2012. Second quarter 2012 adjusted SG&A expense was $72.1
million or 25.7 percent of sales (see Note 1). The $2.4 million increase over
2012 adjusted SG&A expenses were primarily due to higher depreciation expense,
higher compensation costs, including $0.8 million in incentive compensation
paid based on our higher stock price, and $0.7 million of start-up costs for
our e-commerce launch and supply chain transition. These increases were
partially offset by lower healthcare costs, due to favorable claims
experience, and slightly higher credit card program income.

For the first six months, SG&A expenses were $148.0 million or 24.2 percent of
sales compared to $142.9 million or 24.2 percent of sales last year. Adjusted
SG&A expenses for the first six months of 2012 were $145.0 million and 24.6
percent of sales (see Note 1).The $3.0 million increase in 2013 over 2012
adjusted SG&A includes the same items set forth in the previous paragraph plus
$0.7 million of professional fees related to last year's restatement recorded
in the first quarter of 2013.

Our effective tax rate was 39.8 percent for the first six months of 2013
compared to 42.2 percent in 2012.Last year's rate was higher primarily due to
non-deductible expenses associated with our post-retirement life insurance
benefit that was discontinued during the fourth quarter of 2012. 

Balance Sheet Highlights

Cash at the end of the second quarter was $48.1 million compared to $94.1
million at the end of the second quarter of 2012.The lower cash balance
reflects payment of a special dividend of $43.8 million at the end of 2012 and
a quarterly dividend ($0.05 per share) of $2.2 million during the second
quarter of 2013.We have not borrowed on our credit facility since the
beginning of 2009.

Inventories were $250.7 million at the end of the second quarter of 2013
compared to $237.9 million at the end of the second quarter last
year.Inventories were 5.4 percent higher than last year to support our higher
sales.

Initiatives

We have completed the transition of two of the three supply chain distribution
centers from third-party to company-operated locations during the second
quarter.While this change will not result in an immediate savings in
distribution expenses due to start-up costs and an initial capital investment
in equipment and software, we believe transitioning distribution to
company-operated locations will provide an excellent return on our investment
and we expect to see a positive impact starting in 2014.The third and final
distribution center in Los Angeles will be completed by early next year.

Over the next few weeks we will be launching our new e-commerce business.As
discussed in our fall outlook below, this initiative will have a negative
bottom line impact in 2013 from start-up costs and margins that are lower than
ourphysical stores due to relatively high fulfillment costs at our initial
expected sales levels.We expect significant future benefit as we grow our
e-commerce sales.

Store Network

We operated 262 Stein Mart stores at the end of the second quarter of 2013 and
263 stores at the end of the second quarter last year.We expect to open four
new stores, relocate two stores and close two stores during the second half of
the year.

Fall 2013 Outlook/Updated Guidance

"Supported by our strong first six months results, we are entering the fall
season with optimism about our ability to grow sales," commented Stein."As we
begin our third quarter, we now believe that our gross margin rate will
continue to be better than last year and that our expense structure will allow
much of our higher gross margin dollars to drop to our bottom line."

We expect the following factors to influence our sales and earnings for the
second half of 2013:

  *Fiscal 2012 included a 53^rd week in January.Sales for the extra week
    were approximately $16 million.
  *The gross profit rate is expected to be 50 to 100 basis points higher than
    the second half 2012 rate as we continue to manage our selling prices,
    inventory levels and markdowns.
    - While we expect lower margins on e-commerce sales in the second half of
    the year, the lower margins on expected volumes will likely impact our
    overall gross profit rate only slightly.
  *Excluding last year's fourth quarter $4.0 million of legal and accounting
    fees related to the restatement of our financial statements, SG&A expenses
    are expected to increase slightly in the second half of this year with the
    following primary drivers:
    - We will incur approximately $0.5 million in remaining start-up costs
    related to the launch of our new e-commerce business and the final
    transition of our supply chain from third-party to a company-operated
    location.
    - Depreciation will increase by approximately $1 million in the second
    half compared to last year as a result of recent years' investments in
    capital improvements.
    - Wage and other expense increases.
  *The effective tax rate for the year is expected to be consistent with our
    first half 39.8 percent rate.
  *Total capital expenditures for 2013 are expected to be approximately $34
    million, including $14 million for continuing information system upgrades,
    $5 million for distribution center equipment and software, and the
    remainder for new and relocated stores, store remodels and new fixtures.

Filing of Form 10-Q

Reported results are preliminary and not final until the filing of our Form
10-Q for the fiscal quarter ended August 3, 2013 with the Securities and
Exchange Commission ("SEC"), and therefore remain subject to adjustment.

Other Matters

The SEC recently informed us that it is conducting an investigation related to
our restatement of prior years' financial statements and change in auditors.
We are cooperating fully with the SEC in this matter.

Conference Call

A conference call for investment analysts to discuss our second quarter
results will be held at 10 a.m. ET today, Thursday, August 22, 2013.The call
may be heard on the investor relations portion of the Company's website at
http://ir.steinmart.com. A replay of the conference call will be available
on the website through September 30, 2013.

Investor Presentation

Stein Mart's second quarter 2013 investor presentation has been posted to the
investor relations portion of the Company's website at
http://ir.steinmart.com.

About Stein Mart

Stein Mart stores offer the fashion merchandise, service and presentation of a
better department or specialty store, at prices competitive with off-price
retail chains.Currently with locations from California to Massachusetts,
Stein Mart's focused assortment of merchandise features current season,
moderate to better fashion apparel for women and men, as well as accessories,
shoes and home fashions.

Safe Harbor Statement

Except for historical information contained herein, the statements in this
release may be forward-looking, and are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. The
Company does not assume any obligation to update or revise any forward-looking
statements even if experience or future changes make it clear that projected
results expressed or implied will not be realized.Forward-looking statements
involve known and unknown risks and uncertainties that may cause Stein Mart's
actual results in future periods to differ materially from forecasted or
expected results.Those risks include, without limitation:

  oconsumer sensitivity to economic conditions;
  ocompetition in the retail industry;
  ochanges in consumer preferences and fashion trends;
  othe effectiveness of advertising, marketing and promotional strategies;
  oability to negotiate acceptable lease terms with current and potential
    landlords;
  oability to successfully implement strategies to exit under-performing
    stores;
  oextreme and/or unseasonable weather conditions;
  oadequate sources of merchandise at acceptable prices;
  odependence on certain key personnel and ability to attract and retain
    qualified employees;
  oincreases in the cost of employee benefits;
  odisruption of the Company's distribution process;
  oinformation technology failures;
  oacts of terrorism;
  othe effectiveness of our internal control over financial reporting;
  ocosts and other adverse developments associated with the SEC
    investigation; and
  oother risks and uncertainties described in the Company's filings with the
    SEC.

SMRT-F

        Additional information about Stein Mart, Inc. can be found at
                              www.steinmart.com

Stein Mart, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except for share and per share data)

                                August 3, 2013 February 2, 2013 July 28, 2012
ASSETS                                                         
Current assets:                                                
Cash and cash equivalents        $48,146      $67,233        $94,126
Inventories                      250,728        243,345         237,897
Prepaid expenses and other       19,769         22,855          27,032
current assets
Total current assets             318,643       333,433         359,055
Property and equipment, net      136,490        131,570         120,089
Other assets                     26,561         26,706          22,496
Total assets                     $481,694     $491,709       $501,640
LIABILITIES AND SHAREHOLDERS'                                  
EQUITY
Current liabilities:                                           
Accounts payable                 $114,121     $130,972       $113,432
Accrued expenses and other       55,825         66,109          62,333
current liabilities
Total current liabilities        169,946       197,081         175,765
Other liabilities                57,562         60,594          63,654
Total liabilities                227,508       257,675         239,419
COMMITMENTS AND CONTINGENCIES                                  
Shareholders' equity:                                          
Preferred stock -- $.01 par
value; 1,000,000 shares                                        
authorized; no shares issued or
outstanding
Common stock -- $.01 par value;
100,000,000 shares authorized;
44,275,662, 43,808,485 and       443            438             437
43,718,348 shares issued and
outstanding, respectively
Additional paid-in capital       21,741         17,491          14,627
Retained earnings                232,466        216,574         248,525
Accumulated other comprehensive  (464)          (469)           (1,368)
loss
Total shareholders' equity       254,186       234,034         262,221
Total liabilities and            $481,694     $491,709       $501,640
shareholders' equity
                                                              

                                                             
Stein Mart, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)

                            13 Weeks   13 Weeks      26 Weeks   26 Weeks
                             Ended      Ended         Ended      Ended
                            August 3,  July 28, 2012 August 3,  July 28, 2012
                             2013                     2013
                                                             
Net sales                    $290,969 $280,372    $612,333 $590,080
Cost of merchandise sold     210,653    206,553      434,072    424,397
Gross profit                 80,316     73,819       178,261   165,683
Selling, general and         74,473     69,968       148,036    142,875
administrative expenses
Operating income             5,843      3,851        30,225    22,808
Interest expense, net        67         43           128        89
Income before income taxes   5,776      3,808        30,097    22,719
Income tax expense           2,362      1,502        11,991     9,580
Net income                   $3,414   $2,306      $18,106  $13,139
                                                             
Net income per share:                                         
Basic                        $0.08    $0.05       $0.41    $0.30
Diluted                      $0.08    $0.05       $0.41    $0.30
                                                             
Weighted-average shares                                       
outstanding:
Basic                        42,931     42,586       42,872     42,649
Diluted                      43,707     42,715       43,485     42,734
                                                             

                                                             
Stein Mart, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(In thousands)
                                                             
                                   13 Weeks  13 Weeks 26 Weeks  26 Weeks
                                    Ended     Ended    Ended     Ended
                                   August 3, July 28, August 3, July 28, 2012
                                    2013      2012     2013
                                                             
Net income                          $3,414  $2,306 $18,106 $13,139
Other comprehensive income, net of                            
tax:
Change in post-retirement benefit   3         42      5         51
obligations
Comprehensive income                $3,417  $2,348 $18,111 $13,190
                                                             


Stein Mart, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
                                                              
                                                26 Weeks Ended 26 Weeks Ended
                                                August 3, 2013 July 28, 2012
Cash flows from operating activities:                          
Net income                                       $18,106      $13,139
Adjustments to reconcile net income to net cash                
provided by operating activities:
Depreciation and amortization                    13,815         10,677
Share-based compensation                         3,297          2,122
Store closing charges                            (261)          199
Loss on disposals of property and equipment      254            818
Deferred income taxes                            2,157          5,555
Tax deficiency from equity issuances             (459)          (654)
Excess tax benefits from share-based             (157)          (51)
compensation
Changes in assets and liabilities:                             
Inventories                                      (7,383)        (19,065)
Prepaid expenses and other current assets        485            6,945
Other assets                                     145            73
Accounts payable                                 (16,851)       7,369
Accrued expenses and other current liabilities   (4,859)        (5,383)
Other liabilities                                (5,550)        3,854
Net cash provided by operating activities        2,739          25,598
Cash flows from investing activities:                          
Acquisition of property and equipment            (18,989)       (20,586)
Net cash used in investing activities            (18,989)       (20,586)
Cash flows from financing activities:                          
Cash dividends paid                              (2,214)       --
Capital lease payments                           (2,197)        (2,882)
Excess tax benefits from share-based             157            51
compensation
Proceeds from exercise of stock options and      1,520          413
other
Repurchase of common stock                       (103)          (2,521)
Net cash used in financing activities            (2,837)        (4,939)
Net (decrease) increase in cash and cash         (19,087)       73
equivalents
Cash and cash equivalents at beginning of year   67,233        94,053
Cash and cash equivalents at end of period       $48,146      $94,126
                                                              

NOTES TO PRESS RELEASE

Note 1 - Adjusted Results

We report our consolidated financial results in accordance with generally
accepted accounting principles ("GAAP").However, to supplement these
consolidated financial results, management believes that certain non-GAAP
operating results, which exclude certain breakage income on unused gift and
merchandise return cards, may provide a more meaningful measure on which to
compare our results of operations between periods.We believe these non-GAAP
results provide useful information to both management and investors by
excluding certain items that impact comparability of the results.

2012 results include $2.1 million higher breakage income on unused gift and
merchandise return cards as a result of changes in breakage assumptions during
the second quarter of 2012 ($1.3 million after tax or $0.03 per diluted
share).Below is a reconciliation of Selling, general and administrative
expenses ("SG&A"), Net income and Diluted EPS (GAAP Basis) to adjusted SG&A,
Net income and Diluted EPS (Non-GAAP Basis) for the 13 weeks and 26 weeks
ended July 28, 2012.

                     13 Weeks Ended July 28,     26 Weeks Ended July 28, 2012
                      2012
                     SG&A    Net       Diluted   SG&A     Net       Diluted
                              Income    EPS                Income    EPS
GAAP Basis            $69,968 $2,306    $0.05     $142,875 $13,139   $0.30
Adjustments:                                                    
Gift card breakage   2,100   1,292     0.03      2,100    1,292     0.03
Adjusted/Non-GAAP     $72,068 $1,014    $0.02     $144,975 $11,847   $0.27
Basis

Note 2 - EBITDA

As used in this release, EBITDA is defined as earnings before interest, income
taxes, depreciation and amortization.EBITDA is not a measure of financial
performance under generally accepted accounting principles ("GAAP").However,
we present EBITDA in this release because we consider it to be an important
supplemental measure of our performance and because it is frequently used by
analysts, investors and others to evaluate the performance of
companies.EBITDA is not calculated in the same manner by all
companies.EBITDA should be used as a supplement to results of operations and
cash flows as reported under GAAP and should not be considered to be a more
meaningful measure than, or an alternative to, measures of operating
performance as determined in accordance with GAAP. Below is a reconciliation
of Net income to EBITDA and Adjusted EBITDA for the 13 weeks and 26 weeks
ended August 3, 2013 and July 28, 2012.

                                   13 Weeks  13 Weeks      26 Weeks  26 Weeks
                                    Ended     Ended         Ended     Ended
                                   August 3, July 28, 2012 August 3, July 28,
                                    2013                    2013      2012
Net income                          $3,414    $2,306        $18,106   $13,139
Add back amounts for computation of                                
EBITDA:
Interest expense, net               67        43            128       89
Income tax expense                  2,362     1,502         11,991    9,580
Depreciation and amortization       7,003     5,510         13,815    10,677
EBITDA                              12,846    9,361         44,040    33,485
Gift card breakage (see Note 1)     --        (2,100)       --       (2,100)
Adjusted EBITDA                     $12,846   $7,261        $44,040   $31,385

CONTACT: For more information:
         Linda Tasseff
         Director, Investor Relations
         (904) 858-2639
         ltasseff@steinmart.com

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