Stein Mart is the latest retailer to warn of “substantial” doubts about its ability to survive the COVID-19 pandemic.
The off-price retailer disclosed in a 10-K filing that its revenues, liquidity, cash flows, and ability to pay vendors and landlords have been materially adversely impacted as a result of store closures due to COVID-19.
“As a result of the impact of the COVID-19 pandemic on our operations and liquidity, our management has determined that there is a substantial doubt about our ability to continue as a going concern over the next twelve months and our independent registered public accounting firm has included a “going concern” explanatory paragraph in their report on our financial statements as of and for the year ended February 1, 2020,” Stein Mart stated in the filing.
The retailer said it is actively exploring additional sources of financing to provide it with additional liquidity and other strategic alternatives, including a sale of the company. But there is no assurance that such efforts will be successful.
“As stores have reopened, the traffic at our stores has steadily increased, but has not yet recovered to pre-pandemic levels,” Stein Mart stated. “Although omnichannel sales have remained strong, they have not compensated for the loss of in-store sales.”
The company said that the "going concern" warning represented a default on its revolver and term loan agreements. It subsequently reached waiver agreements with Wells Fargo and Gordon Brothers that put additional restrictions on its borrowing terms.
Similar to Francesca’s and J. Jill, both of which recently raised red flags about their ability to survive the pandemic, Stein Mart was struggling before its stores had to temporarily go dark, posting a net loss for each of the past four years. Its plans to go private were derailed by the pandemic, with the retailer and Kingswood Capital Management saying in April that they mutually agreed to terminate their merger agreement, announced in January.