Stein Mart Earnings Preview

By Motley Fool Staff | More Articles
August 15, 2011 | Comments (10)

Investors are on the edge of their collective seats, hoping that Stein Mart (Nasdaq: SMRT ) will top analyst expectations for the fifth consecutive quarter. The company will unveil its latest earnings on Thursday, August 18. Stein Mart is a national retailer offering the fashion merchandise, service, and presentation of a better department or specialty store at prices competitive with off-price retail chains.

What analysts say:

Buy, sell, or hold?: Analysts strongly back Stein Mart, with three of four rating it a buy and the remainder rating it a hold. Analysts like Stein Mart better than competitor Citi Trends overall. Analysts still rate the stock a moderate buy, but they are a bit more wary about it compared to three months ago.
Revenue Forecasts: On average, analysts predict $273.3 million in revenue this quarter. That would represent a decline of 1% from the year-ago quarter.
Wall Street Earnings Expectations: The average analyst estimate is earnings of $0.06 per share. Estimates range from $0.03 to $0.07.

What our community says:
The majority of CAPS All Stars see SMRT as a good bet, with 61.4% giving it an "outperform" rating. The majority of the Fools are in agreement, with the All Stars as 60.1% give it an "outperform" rating. Fools are keen on Stein Mart and haven't been shy with their opinions lately, logging 104 posts in the past 30 days. Stein Mart's bearish CAPS rating of one out of five stars falls short of the Fool community sentiment.

Management:
Stein Mart's profit has risen year over year by an average of more than fourfold over the past five quarters.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters:

Quarter	Q1	Q4	Q3	Q2
Gross Margin	29.6%	26.0%	25.4%	25.0%
Operating Margin	8.6%	4.7%	1.0%	4.9%
Net Margin	5.2%	5.6%	1.6%	4.1%

One final thing: If you want to keep tabs on Stein Mart movements, and for more analysis on the company, make sure you add it to your Watchlist.

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Report this Comment On August 16, 2011, at 6:10 AM, investspec wrote:

Not a stock professional but shouldn't a vertical anlysis have multiyear data so ppl can make a comparison. The industry avgs could b compared to the company ratios. Digging into the financials, one finds that in the 2q 10 and 1q 11 the company had large breakage gains (one time items). In the 3d q of 2010, SMRT had an income tax benefit from favorable book/tax differences (valuation allowance). Would have been interesting to check out a horizontal anlysis as well. Anyways...... the 2q sales numbers (ending July 30th) were published on the 4th of August. Sales were 270.2 million dollars. There isn't a real need for the above "revenue forecasting section."
It is always interesting to see the anlysts revenue forecasts for the entire year. So far....they have been too optimistic for the past 2 years (as a consensus). Next year, they are predicting 3% revenue growth. The stock is trading at low valuation ratio multiples (in comparision to most of its peers in the retail clothing space). Yahoo Finance has a $11.50 price target for the stock. Wikiwealth has a price target of $8.90. Sales growth has been negative for the past few years. On an incremental basis, growth has been getting better. It might be this incremental growth and expectations for future growth that could make the stock appreciate somewhat if the economy improves. SMRT in fy 2006 had sales per square foot at $201. In fy 10 sales per square foot had dropped to $160. So...there is a lot of room for improvement. SSS is getting better yoy on an annual basis. ROIC is at the industry norms at 21%. The recovery for smrt has been slow at best. 3% revenue growth (next year) is tepid but at least it is forecasted to b positive if the analysts are correct???lol. In the past 5 years, the stock has declined almost 41%. S and JCP have fared worse than SMRT in the past 5 years. Bottom line: Smrt needs to see meaningful gains in its revenues. Net income gains from breakage, cost cutting, and income tax benefits do not make the grade. Free Cash Flow and good ROIC adds value which is good. Revenue growth is the name of the game.
On the other side of the coin retailers with good histories of revenue and earnings growth should b checked out to see how they are valued in relation to other companies in the retail space.
Report this Comment On August 16, 2011, at 6:20 AM, investspec wrote:

Earnings last year 2q w/o adjustments .25 cents a share. Adjusted earnings .08 cents. It looks like the efficiency ratios (operating and net --- 2 q 10) above are geared towards the .25 a share, possibly.
Report this Comment On August 17, 2011, at 1:53 PM, investspec wrote:

FY ' 06 FY'10
Sales per store 6,079,000 4,813,000
Revenues 1,501,000,000 1,181,510,000
Store comps (fy '06-'10) (1.2) (4.0) (10.9) (5.6) (1.8)
26 wks (2011 vs 2010):
Sales 573.7 million vs. 577 million
Store comps: 0.3% vs. (3.0%)
Report this Comment On August 17, 2011, at 2:58 PM, investspec wrote:

Revenue comps (past 5 years) in billions of $.
KSS 15.6 to 18.4
JWN 8.6 to 9.3
ROST5.6 to 7.9
TJX 17.1 to 22.0
SKS 2.9 to 2.8
DDS 7.6 to 6.1
M 27.0 to 25.6
JCP 18.8 to 17.8
Of course...past performance does not necessarily reflect any future trends. These figures are from the annual reports. To understand the numbers better, one would need to go into the annual reports to research and understand the dynamics behind the sales results.
Report this Comment On August 18, 2011, at 1:29 PM, investspec wrote:

OK....so as stated in my first post, SMRT had a one time gain that was related to a breakage gain last year 2 q of 9.7 million dollars(other income). The sales figures were given on August 4th. One could have guesstimated what the results in the "other income" category could have been without the breakage gain. The other two items: a charge associated with changing the physical inventory process and lower tax rate almost cancelled each other out resulting in a net benefit of 100k in favor to the company.
Next quarter, the company will not see the income tax benefit from 3q 2010. However....just looking at last year's results we find that if SMRT was taxed at its statutory tax rate net income would have been reduced dramatically (maybe .02 a share). However, if revenues shrink at a faster rate than cost reductions then could b looking at a negative quarter with regards to net income. More on this later as the 3q progresses. The 3rd quarter is always challenging because of the gearing up for the holiday season. FYI: Stein Mart does have some Halloween, Thanksgiving and Christmas items stocked at least in some locations.
Report this Comment On August 18, 2011, at 1:36 PM, investspec wrote:

Not a stock professional so my conclusions regarding next quarter's result should b taken with a grain of salt. Research the quarterly reports for information that will allow u the reader to have a better understanding the company itself.
Report this Comment On August 18, 2011, at 2:22 PM, investspec wrote:

VERY Brief Overview of Balance Sheet and Cash Flow Statement.
1. A large cash position which is good for SMRT
2. moderate free cash flow
3. no debt
4. 2.4 million dollars (approx) in stock buy backs
5. Shareholders equity up 23 million dollars
6. Sizeable Investment in cap ex
Things to b cognizant of:
1. +30 million dollars in A/P vs. last year (2q)
2. +9.5 million dollars in Inventory.
"opportunistic purchasing" and "changes in vendor payment terms" Maybe advanced pre holiday purchasing as well????
Report this Comment On August 19, 2011, at 11:35 AM, investspec wrote:

.......and there was an income tax benefit in the 4q of 2010 as well. So.....4th quarter earnings of this year will probably be lower vs. last year. Will see as the year progresses.
Report this Comment On August 19, 2011, at 12:05 PM, investspec wrote:

Good things about the company's turnaround effort.
1. Brought in a more experienced management team
a. merchandising and department format changes
b. financials look cleaner vs. the end of 2008 (no lt debt)

2. Controlling costs
a. technology driven .
b. changes in f/t vs p/t staff (reductions) less benefits
3. Operational efficiency
Various IT upgrades, initiatives, and etc throughout the entire supply chain and stores.
another plus: merchandise locator (storewide)
4. Clothing
a. more differentiated assortment of clothing
b. brought in many new brand names
c. fabulous finds
d. some of the clothing offerings are meant for younger ppl (new extension of the target audience?)

5. Marketing
a. social networking and internet presence
b. banner ads on Yahoo!
c. new look given to catalogs
d. in store ad campaign banners
e. experimenting in viral marketing, text message ads .
f. new tagline
g. elite preferred membership card (2009)
h. free shipping for elite card members
6. Revenue/Other income
a. magazine sales
b. accounting for breakage
c. e-commerce for certain types of merchandise
7. Home Dept.
a. better assortment of gifty and home type items--- brand names
8. Distribution/Supply Chain
a. new distribution initiative
b. revamping of supply chain
savings of 20 million dollars in 2010 approx.
9. Children's dept.
a. New clothing rollouts
Report this Comment On August 20, 2011, at 6:09 PM, investspec wrote:

Let's add this information to the above "headliner" Stein Mart Earnings Preview.
q2
Gross Profit Margin: 24.2%
Operating Margin: 0.8%
Net Profit Margin: 0.5%
Whoa.....wha' happened to the trend of higher gpm's,opm's, and npm's. Extrapolating a trend without going thru a financial statement may or may not b too smart.