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Stein Mart to Restate Earnings

Value chain going over errors in more than three years of financial filings.

Stein Mart Inc. disclosed a number of accounting problems that will cause it to restate more than three years of results.

Shares of the Jacksonville, Fla.-based value retailer held up relatively well, falling 2.4 percent to $6.90 on Friday.

Stein Mart plans to restate its financial results beginning in fiscal 2009 through the first quarter of this year.

The retailer said it accounted for some price cuts as promotional, and therefore temporary, when they should have been logged as permanent, which would have reduced the value of unsold inventory and impacted the cost of goods sold.

Stein Mart believes the value of its inventory was overstated by about $3 million as of July 28. That would pull inventories at the end of the second quarter down to $240.8 million.

Also under review is the company’s accounting of leasehold improvement costs, which appears to have overstated the firm’s net assets by roughly $5 million. The adjustments will not impact the company’s cash balance, which at the end of July stood at $94.1 million, including cash and cash equivalents.

“The company is early in the process of its investigation and analysis of these areas so all amounts are preliminary estimates and subject to change,” Stein Mart said. “Until the restatement process is complete, additional information may become available which could cause the company’s current estimates to change.”

Avondale Partners analyst Mark Montagna kept his “market perform” rating on the stock and said accounting restatement “does not appear to have a meaningful impact to current year sales and earnings.”

Stein Mart delayed the filing of its quarterly statement with the Securities and Exchange Commission in September after running into problems when it replaced a merchandise information system.