Specialty off-price retailer Stein Mart Inc. (SMRT) reported a 46% dip in earnings for the first quarter of 2019 due to lower sales as well as the planned reduction from accelerated markdown cadence and the impact of the sales event shift.
Net income plunged 46% to $3.97 million and earnings dipped 50% to $0.08 per share. Adjusted earnings before interest, income taxes, depreciation and amortization for the first quarter dropped by 24.5% to $13.9 million.
Net sales declined 3.8% to $314.2 million. Net sales were impacted by comparable sales results and fewer stores operating during the quarter.
Comparable sales decreased 1.7% during the first quarter due to lower store traffic and average unit retail, partially offset by higher units per transaction. Digital sales increased by 14% in the first quarter of 2019.
For the first quarter, gross margin fell to 27.8% from 29.4% a year ago, due to a planned rate decrease from a change in 2019 markdown cadence, the impact of the highly promotional event shift, and slightly higher markdowns to clear fall merchandise. Selling, general and administrative expenses decreased by $4.4 million year-over-year to $86.1 million, primarily from lower store related expenses including the impact of closed stores.
The company had 283 stores at the end of the first quarter of 2019 compared to 289 at the end of the first quarter of 2018. Stein Mart closed four stores during the first quarter, which completes its store plans for the year.
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Accounts payable was $20.9 million higher at the end of the first quarter compared to the prior year quarter, reflecting improved credit terms from its vendors and factors since the first quarter of 2018. Debt decreased $55.6 million to $153.8 million. Unused availability under credit facility increased $62 million to $102. Also, the company had $15.2 million available to borrow which would be collateralized by life insurance policies at the end of the quarter.
Looking forward, the company expects that its comp sales trends and results will improve in the second half, with its 2019 sales-driving initiatives rolling out this fall. The initiatives include launching two new product lines (kids and fine jewelry), buy online, pick up in store, and implementation of a marketing campaign management tool.
Shares of Stein Mart ended Tuesday’s regular session up 16.66% at $1.10 on the Nasdaq. Following the earnings release, the stock inched down over 7% in the pre-market session.
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