Byline: Thomas J. Ryan

NEW YORK — Capitalizing on a key-item merchandising strategy and strength in career looks, Stein Mart Inc. notched a profit of $2.1 million, or 5 cents a share, in the third quarter ended Sept. 30, rebounding from a $2.8 million loss a year ago.
Sales climbed 17.5 percent to $267.6 million from $227.7 million, with same-store sales up 11.1 percent.
“We continued to enjoy steady, enthusiastic customer responses as we transitioned out of spring-summer and into fall merchandise,” said Jay Stein, chairman and chief executive of the Jacksonville, Fla.-based firm. “Our key-item strategy — featuring the use of color, texture and our traditional offerings of items with a special gift-ability — has certainly brought us to the party.”
Stein said the discount department store chain expects to slightly exceed Wall Street estimates of 45 cents a share for the fourth quarter. It earned 39 cents a year ago.
Kelly Armstrong, at First Union Securities, said Stein Mart is benefiting from a new merchandising team that is hitting trends better and emphasizing narrower assortments and key items.
“Focusing on important key items enables them to get aggressive on price points with department stores, but by having better merchandise assortments they can outmaneuver them,” said Armstrong.
The chain, which offers discounts between 30 and 60 percent on current season merchandise, said it is able to get lower prices up front from vendors because it doesn’t charge back for returns, markdowns or advertising allowances. On a conference call, Gwen Manto, executive vice president and chief merchandising officer, said sales were driven by improved product offerings with positive comparable-store sales in men’s, women’s, accessories, intimate apparel and home. Children’s and dresses struggled, but picked up in Sept. and Oct.
Strongest comp gains came in its boutiques department, which features designer and better brands. Career was the strongest category, led by suited looks, leather tops and bottoms, and sweaters featuring bright colors and novelty embellishments.
Moderate and special sizes are “also seeing a terrific business,” led by career looks in wool, stretch fabrics and prints, Manto said. Sterling silver, wraps and shawls, and handbags paced accessories, while foundations drove intimate apparel. In men’s, key collections brands as well as trends like knit tops and microfiber pants led.
Traffic particularly benefited from a shift in advertising to color inserts from newspapers. “When you expose fashion in color, it really showcases the assortments much more effectively for the consumer,” Manto said. For the fourth quarter, Stein Mart will be adding more animal prints to its boutique area, as well as newer trends such as metallic looks, chain belts and crop pants.
Reduced markdowns improved gross margins to 23.6 percent from 21.2 percent, while selling, general and administrative expenses were trimmed to 23.1 percent from 24.1 percent.
In the nine months, profits climbed 145.6 percent to $16.9 million, or 39 cents a share, from $6.9 million, or 15 cents, a year ago. Sales rose 17.5 percent to $804.2 million from $684.6 million, with same-store sales ahead 10.6 percent.

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