By  on August 21, 2014

Stein Mart Inc. endured a “choppy” second quarter in which it reported higher sales and lower earnings that each fell short of analysts’ expectations.

The Jacksonville, Fla.–based value retailer’s net income for the three months ended Aug. 2 declined 49.1 percent to $1.7 million, or 4 cents a diluted share, from $3.4 million, or 8 cents, in the 2013 period. Excluding special items, such as costs associated with the Securities and Exchange Commission investigation into earlier accounting issues, earnings per share was 6 cents, 2 cents below analysts’ estimates. The company also incurred higher than expected health-care claims.

Sales in the quarter rose 2.5 percent to $298.2 million from $291 million but were below the $300.8 million consensus estimate of analysts. Comparable-store sales were up 1.3 percent, the retailer’s ninth consecutive quarter of comp increases, while gross margin rose to 28.3 percent of sales from 27.6 percent.

Inventories were up 6.2 percent at the end of the quarter, at $266.2 million, and up 5.1 percent on a per-store basis. The increases reflect planned increases in the home and accessories categories as well as the e-commerce business.

May comps were up 0.4 percent, followed by a 2.6 percent rise in June and a 0.8 percent gain last month. “July started out weaker, but ended much stronger as early fall merchandise began to arrive in our stores,” said Jay Stein, chief executive officer, backing up his claims of an “unusually choppy” quarter.
He noted that August sales have shown signs of improvement.

Investors drove shares down 5.4 percent to $12.92 in morning trading on the Nasdaq exchange.

Stein emphasized that, “as a value retailer and everyday-low-price retailer, we will not participate in extreme promotions to drive sales. We believe that our best long-term approach is to continue executing our current growth strategy,” which includes focus on national and designer brands, adding stores while relocating and remodeling existing units and building the e-commerce business, which accounted for less than 1 percent of sales in the second quarter.

Stein Mart continues to expect its gross margin for the year to be “slightly less” than the 29.1 percent reported in 2013.

In the first half, net income fell 12.7 percent to $15.8 million, or 35 cents a diluted share, while sales rose 2.4 percent to $627 million.

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