Stein Mart’s Q2 Stock Stunner

by MR Magazine Staff May 25, 2007

NEW YORK – Shares of Stein Mart lost one-seventh of their value in Nasdaq trading Thursday after the company issued a pessimistic second quarter forecast that drowned out the effects of its higher first quarter profits.

For the 13 weeks ended May 5, net income was up 7.3% to $8.1 million, or $0.18 a diluted share, from $7.6 million, or $0.17, in the year-ago period. The $0.18 EPS mark matched analysts’ consensus estimates and coincided with the company’s view, issued two weeks ago, that its EPS for the quarter would slightly exceed $0.17.

Net sales moved up 3.1% to $376.1 million from $364.8 million. While same-store sales were off 2%, gross margin improved to 27.9% of sales from 26.7% in the 2006 quarter.

However, Stein Mart was among the hardest-hit victims of softness in April sales, finishing the month with its same-store sales down 13.9%.

“Our first quarter performance was severely impaired by the significant shortfall in April sales,” said Michael Fisher, president and chief executive officer. “Following the earlier Easter and record cold weather in early April, we had hoped to see a stronger recovery, but our business is still underperforming our spring plan and we are concerned about the impact of a lower level of consumer spending going forward.”

Management now expects same-store sales to be flat to “slightly positive” during the second quarter, and it expects markdowns to be heavier than expected as it looks to work through its spring stocks.

As a result, EPS for the quarter is now set at $0.06 to $0.10 a share, less than half the $0.24 consensus with which analysts began the day.

On a more positive note, Fisher said that he expects the investments Stein Mart has made in its business to “begin to benefit the bottom line in the second half of the year.”

That notwithstanding, investors looked to sell Stein Mart shares throughout the day. The stock ended Thursday’s Nasdaq session at $12.70, down $2.16 or 14.5%.

As of May 5, Stein Mart operated 270 value-oriented department stores throughout the US.