Strong e-commerce sales not enough to save Stein Mart in Q4

Fourth quarter profits at Stein Mart were cut in half as the company relied on heavy promotional activity to clear inventory and eke out a 1% same-store sales increase.



Sales at Jacksonville-based Stein Mart’s 278 stores and Web site increased 1.8% to $394 million in fourth quarter ended Jan. 30, thanks largely to the addition last year of 10 new stores. Full year sales increased 3.2% to nearly $1.4 billion. The 1% increase in fourth quarter and full year same-store sales was due almost entirely to e-commerce sales, which grew by 70% from the same periods the prior year.



Achieving sales growth in the fourth quarter came at a heavy cost. The company said it experienced a high level of markdown activity from lower than planned sales and a heightened promotional environment during the holidays. Even more markdowns were required after the season ended to make sure inventories were at an acceptable level heading into spring.



As a result, gross margins contracted to 26.8% of sales from 29.4% of sales causing net income for the fourth quarter to tumble to $6.3 million, or 13 cents a share, from $12.3 million, or 17 cents a share.



“Disappointing fourth quarter sales and a more promotional holiday selling season drove our results lower than the prior year. Our fourth quarter gross profit rate was lower as we made appropriate valuation decisions on inventories,” said CEO Jay Stein. “On a positive note, we increased our comparable store sales for the year, had solid sales growth from 10 new stores and controlled our expenses well. We also ended the year with acceptable inventory levels going into our strong spring selling season.”



Looking ahead, Stein Mart did not provide a forecast for first quarter of full year same-store sales growth, but whatever that number is the 12 new stores the company plans to add will increase sales by an additional 4%.