It must have been a relief for Stein Mart
To recap, Stein Mart lost $12.1 million in the fourth quarter, or $0.30 a share. Quite a difference from last year's fourth-quarter profits of $0.48 per share. The top line sank 9.4%, but excluding an extra week from 2006 results, sales fell only 3.3%. Gross profit took a significant hit from markdowns and plummeted to 20.1% of net sales, compared with 29.4% for the previous year.
Still, the stock is up by nearly 9% on these initial results since the losses weren't as bad as folks expected. Stein Mart CEO Linda Farthing states that the company has set itself up with lower inventory via the aggressive price markdowns. In addition, the company hopes to bring in new and current customers with marketing campaigns, while tightly controlling costs to bring profits back in line.
Stein Mart has done a decent job of keeping costs from getting out of control, with a fourth-quarter increase of 2.4% in cost of goods sold, and a selling, general, and administrative cost reduction of 2.2%. However, I think boosting sales is going to be the big challenge, with the market trend among boomer women seeming to move to younger styles. We've seen this in the results from fellow retailers like Coldwater Creek
A quick look at current advertising shows a move toward value and youth, with the slogan "Once You Go, You Get It" replaced by "We Can Save You" on the company's website. Models in sophisticated but youthful styles and relatively low prices are featured throughout the advertisement, but additional markdowns are still a fear, with those 15% discount coupons also appearing.
One speck of "good" news: Stein Mart won't be disappointing investors by not meeting stretched goals since it isn't delivering sales and earnings guidance anymore. When your stock drops as much as 60% in a year, no expectations is probably not a bad course, especially when you're trying to make a big turnaround.
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