According to the National Retail Federation, discount stores are the most popular back-to-school shopping destination this year. So companies such as Stein Mart (NASDAQ:SMRT) and TJX (NYSE:TJX) should be thriving right now. Sure enough, TJX enjoyed a 4% increase in its August same-store sales. Yet at Stein Mart, August comps were anything but hot.

Same-store sales at Stein Mart fell 5.2% for the month -- even worse than the 4% decline that analysts expected. We didn't get any real explanation for the bigger-than-expected drop. Perhaps retailers are finally beginning to realize that the "poor retail environment" story is growing old.

Stein Mart offers quality merchandise at attractive prices, so the problem doesn't seem to lie in those areas. J.C. Penney (NYSE:JCP) has begun to see more improvement, and Kohl's (NYSE:KSS) has been displaying some nice results, too. Therefore, it seems the competition is simply outpacing Stein Mart.

That's a problem. In the current retail environment, retailers have a hard time predicting how much inventory they'll need, and as a result, companies are left with bulging inventories. What that means for Stein Mart -- and we saw it happen last month -- is that management must significantly mark down existing merchandise to clear out the excess inventory. That has the potential to hurt the numbers even more.

Last month, the company sunk lower, after it ramped down its expectations way in advance. As for the longer term, management hasn't provided yearly guidance, but it does expect to post a loss in the upcoming third quarter. Unless things improve quickly, I think the red ink may flow even more freely than what it expects.

New CEO Linda McFarland Farthing, who officially takes over on Sept. 24, will certainly have her work cut out for her. She's familiar with the situation, having been a member of the board since 1999. However, whether her familiarity can stop the bleeding remains to be seen.

Now, I know a bargain when I see one. But despite the stock's trailing price-to-earnings ratio of 12, the company seems to have trouble getting people into the stores to shop. Consequently, the low P/E isn't much of a discount at all. So while Stein Mart might offer up some great deals in its stores, it sure doesn't look like too much of a bargain to this investor.