Stein Mart Inc. reported that total sales increased for the second quarter even as same-store sales declined.
Total sales for the three months ended July 30 increased 2.6 percent to $319.8 million from $311.5 million a year earlier. This missed the FactSet estimate for sales of $326 million. Comparable sales declined by 1.4 percent.
Net income for the quarter fell to $3.0 million, or 6 cents a diluted share, up from $4.1 million, or 9 cents, a year ago. The earnings were 1 cent below the Capital IQ estimate for 7 cents.
“Our sales trends improved in the second quarter from the first quarter. Though same store sales were down, the improved trend, along with our new stores, increased our total sales for the quarter,” said Dawn Robertson, chief executive officer. “We managed our spring markdowns and seasonal inventories well and continued our focus on controlling expenses in a challenging apparel sales environment.”
The stock was rising slightly by 2 cents to $9.01 as investors looked past the earnings miss and focused on the plans to open new stores. The stock has fallen 12 percent for the past year, although over the past 4 weeks the stock has staged a comeback and risen 4 percent.
Gross profits for the second quarter was $89.4 million or 28 percent of sales, which fell from $88.9 million or 28.5 percent of sales in 2015 for the same period. The drop was blamed on a high number of markdowns and higher occupancy costs.
“Beginning in the third quarter, we are introducing some of our exciting new merchandising and marketing initiatives,” continued Robertson. “For our existing loyal customers, these include rolling out our revitalized merchandise assortments, Fabulous Finds and the new ‘A List’ program. In addition, we are aggressively growing our activewear business in all stores and presenting a modern assortment in 60 stores to attract and grow a new customer demographic. We are excited about all of these new initiatives which we believe will positively impact sales.”
Stein Mart plans on opening eight new stores this fall for a total of 13 stores for the year.
Looking ahead, the company predicts fewer markdowns and expects gross margins to be 50 basis points higher. Expenses will grow as the company opens more stores, but they expect that the new stores will increase sales by 4 percent.