Hot Stock under Review: Stein Mart, Inc. (NASDAQ: SMRT)

On Monday, Shares of Stein Mart, Inc. (NASDAQ: SMRT) showed the bearish trend with a lower momentum of -0.44% and ended its trading session at $2.24. The company traded total volume of 197.73K shares as contrast to its average volume of 805.56K shares. The company has a market value of $105.30M and about 47.01M shares outstanding. During the 52-week trading session, the minimum price at which share price traded was registered at $0.48 and reached the max level of $4.04.

Stein Mart, Inc. (SMRT) recently declared financial results for the first quarter ended May 5, 2018 and raised its first half 2018 outlook.

Net income for the first quarter was $7.30M or $0.16 per diluted share contrast to a net income of $3.70M or $0.08 per diluted share in 2017. Operating income for the first quarter was $9.90M contrast to $10.10M in 2017. First quarter 2018 results include less than $0.10M in income tax expense (see Income Taxes below).

Adjusted earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the first quarter was $18.40M contrast to $19.30M in 2017 (see Note 1).

Net Sales

Total sales for the first quarter of 2018 were $326.70M, a decrease of 3.2 percent contrast with $337.30M for the first quarter of 2017. The decrease in total sales includes the impact of six stores closed in 2017 and four stores closed during the first quarter of 2018. Comparable store sales for the first quarter of 2018 reduced 0.7 percent counting sales from leased departments (see Note 2). Ecommerce sales were up 85 percent over last year’s first quarter.

Gross Profit

Gross profit for the first quarter of 2018 was $96.10M or 29.4 percent of sales contrast to $95.60M or 28.3 percent of sales in 2017. The 110 basis points expansion in the gross profit rate was driven mainly by higher gross margin from reduced markdowns and better inventory productivity. Occupancy costs were flat for the quarter, but higher as a percentage of sales.

Selling, General and Administrative Expenses

SG&A expenses for the first quarter of 2018 were $90.50M contrast to $89.20M in 2017. The slight increase in SG&A expenses was mainly because of planned higher advertising and Ecommerce expenses in the first quarter of 2018 that were mostly offset by cost savings.

Interest Expense, Net

Interest expense for the first quarter of 2018 was $2.50M contrast to $1.10M in 2017. The increase in interest expense reflects higher interest rates and borrowing levels in the first quarter of 2018.

Income Taxes

Income tax expense reduced $5.20M to less than $0.10M in the first quarter of 2018 contrast to the first quarter of 2017. The decrease reflects our net operating loss carry forward position together with the valuation allowance established against deferred tax assets during the fourth quarter of 2017. The first quarter of 2018 expense represents certain state income tax expense. We expect the effective tax rate to be close to zero percent for all of 2018.

Working Capital and Capital Expenditures

Inventories were $297.0M at the end of the first quarter of 2018 contrast to $322.0M at the same time last year. Average inventories per store were down nearly 10 percent to last year.

Capital expenditures totaled $1.70M for the first quarter of 2018 contrast to $7.20M in 2017. For fiscal 2018, we expect capital expenditures to be about $10.0M contrast to $21.0M in fiscal 2017.

Accounts payable reduced more than $68.0M contrast to the end of the first quarter last year as a result of reduced credit terms from our vendors and their factors. Our availability under our expanded credit facility allowed us to fund this reduction and keep merchandise receipts timely. Borrowings increased to $209.0M at the end of the first quarter contrast to $157.0M at the end of last year’s first quarter. Unused availability at the end of the first quarter of 2018 was $40.0M. Credit terms began expanding late in the quarter after we declared positive fourth quarter 2017 results.

Updated First Half 2018 Outlook

We now expect first half 2018 operating income to be in excess of $10.0M contrast to an operating loss of $11.50M for the first half of 2017. Our outlook has improved because of first quarter results together with expected additional first-half gross profit expansion and lower SG&A expenses.

The Company offered net profit margin of -1.60% while its gross profit margin was 25.60%. ROE was recorded as -38.80% while beta factor was -1.10. The stock, as of recent close, has shown the weekly upbeat performance of 3.23% which was maintained at 93.10% in this year.

Marion Frost

Marion Frost

I am Marion Frost and I have over 16 years experience in the financial services industry giving me a vast understanding of how news affects the financial markets. I am an active day trader spending the majority of my time analyzing earnings reports and watching commodities and derivatives. I have a Masters Degree in Economics from Westminster University with previous roles counting Investment Banking.