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Stein Mart, Inc. (NASDAQ:SMRT) Q2 2019 Results Earnings Conference Call August 21, 2019 4:30 PM ET
Hunt Hawkins - Chief Executive Officer
MaryAnne Morin - President
James Brown - Chief Financial Officer
Linda Tasseff - Director, Investor Relations
- 亨特霍金斯 - 首席执行官
- MaryAnne Morin - 总统
- 詹姆斯布朗 - 首席财务官
- Linda Tasseff - 投资者关系总监
Greetings, and welcome to the Stein Mart Second Quarter 2019 Earnings Conference Call.
In the course of this presentation, statements may be made as to certain matters that constitute forward-looking information that is subject to certain risks and uncertainties. Additional information concerning those factors that could cause actual results to differ from those in the forward-looking statements can be found in the company's fiscal 2018 Annual Report on Form 10-K for the year ended February 2, 2019, and other filings with the SEC. All participants are in a listen-only mode. [Operator Instructions]
I would now like to turn the conference over to Hunt Hawkins, CEO of Stein Mart.
问候，并欢迎参加Stein Mart 2019年第二季度收益电话会议。
在本演示过程中，可以就构成具有某些风险和不确定性的前瞻性信息的某些事项发表声明。 有关那些可能导致实际结果与前瞻性陈述不同的因素的其他信息可以在2019年2月2日截止的公司2018年度的10-K表年度报告中找到，以及向SEC提交的其他文件。。 所有参与者都处于只听模式。 [操作说明]
Good afternoon, everyone, and welcome to Stein Mart's second quarter earnings call. I have with me today our President, MaryAnne Morin; our Chief Financial Officer, James Brown; and our Director of Investor Relations, Linda Tasseff. As always, I'll begin with some opening comments, and then I'll turn the call over to MaryAnne to add some more color, and after that, James will review our financial results.
So let's start with our sales results. As we previously discussed, the shift of our 12-Hour Sale event from the second quarter to the first benefited sales in the first quarter but unfavorably impacted sales in the second quarter. However, if we adjust for the event shift, comparable sales decreased to 1.9% for the second quarter, compared to a decrease of 3.3% for the first quarter.
While adjusted comps are still negative, comp sales for the combined last 2 months of the quarter were essentially flat. Our 2019 sales driving initiatives were all planned for deployment in the back half of the year, and are all beginning to roll out now. This gives us confidence that our comp sales trend will improve in the second half.
Our gross profit rate for the second quarter was flat to last year's improved rate. However, as a reminder, in 2018, we drove our gross profit rate significantly higher with strong inventory productivity and we continue to emphasize this to our teams. We've been quite disciplined about maintaining an appropriate mix of our regular priced and plant inventories. Accelerating our markdown cadence and having a continuous flow of receipts across all month, has increased our turn and keeps our inventory position healthy.
Excluding some year-over-year timing differences, average store inventories were down 3% at the end of the second quarter. Through our continued conservative cash management and improved credit terms from our factors and vendors compared to last year, we significantly reduced our debt and increased our total availability compared to the end of the second quarter of 2018. And like I mentioned over the past year, our teams have been working hard on a number of initiatives that are now being introduced.
We completed the rollout of our endless aisle mobile technology to all stores at the end of June. This month, we launched our new Kids department. And just this week we are launching our Buy Online, Pick up in-store service or BOPIS. And by the end of October, we'll have our new Fine Jewelry product line available in 50 plus stores online and with a smaller offering in all stores. We are very excited about the opportunities that these and other initiatives provide us to grow sales through higher traffic and new customer acquisitions throughout the fall and beyond.
So now I'd like to turn the call over to MaryAnne to add more color. MaryAnne?
大家下午好，欢迎来到斯坦马特的第二季度财报电话会议。我今天和我在一起，我们的总统玛丽安娜莫林;我们的首席财务官James Brown;和我们的投资者关系总监Linda Tasseff。与往常一样，我将从一些开场评论开始，然后我将把电话转给MaryAnne以增加更多颜色，之后，詹姆斯将审查我们的财务结果。
Thank you, Hunt. Good afternoon, everyone. As we begin the fall selling season, our new strategies have begun to rollout with more to come over the next few weeks. And it's terrific to see them come to life. These actions will serve to broaden our appeal to a larger consumer base. These include new businesses, new brands, new technology, new marketing initiatives and new ways of understanding customer shopping behaviors.
We are laser focused on giving her what she wants. The right fashion, a great value. And now for the whole family with the addition of Kids, we are now giving her multiple shopping options which is unique in the off price space. She can shop in-store, online or by online pick up in store. We can locate merchandise her local store may have sold out of in another location, and ship it to her. We are tailoring her marketing message that is appropriate to the way she shops and we are now giving her richer reward program as if she shops with her credit card.
Let's start with our newly launched Kids department. We are so excited about Kids. Kids is now available in our stores with an expanded online offering. Years ago, Kids was a fairly sizable business for us and our customer has been asking us to bring it back. Some of our Kids features apparel for babies, girl sizes 2 to 16 and boy sizes 2 to 20, plus several other categories including shoes and toys.
Our buyers have obtained some of the best kids brands available such as Little Me, Baby Essentials, Disney's Frozen, Lucky, Champion, Nautica and many other famous brands, you will instantly recognize them but we are not able to discuss them publicly. You will just have to come visit our stores and check them out.
This month, we are marketing Kids through e-mail and in-store signage, holding a more comprehensive media launch for inclusion in our fall marketing campaign. In September, we'll be launching Kids through a 16 page insert that will be part of our fall fashion mailer. Digital and TV will also kick off in September and continue into October. After that Kids becomes part of our store wide marketing as we ramp up for the holiday selling season.
We anticipate that Kids will create incremental sales by attracting new customer and increase basket size for existing customers that can now conveniently shop for their children in our stores and online. And while we have only receded a percentage of our assortment, and so far, we are very pleased with early sales results and have already placed three orders.
Next, moving on to Fine Jewelry. Our Fine Jewelry department will debut in 51 stores in October. E-comm will be previewing an expanded assortment in September. This is the next step in the evolution of our luxury offerings. Our jewelry will have an average price point of $500 and includes a great collection of diamonds, pearls, 14 karat gold, gemstones and more. Our everyday low pricing is very compelling since we have partnered with a vendor that has amazing sourcing capabilities. We expect to expand the full assortment to more doors in 2020.
我们的买家已经获得了一些最好的儿童品牌，如Little Me，Baby Essentials，Disney's Frozen，Lucky，Champion，Nautica和许多其他知名品牌，您将立即认出它们，但我们无法公开讨论它们。你只需要来我们的商店看看吧。
In addition to this, we are also introducing some key item Fine Jewelry styles, at great prices below $200 that will go to all stores and have special fixtures to highlight this product. Continuing our digital expansion, we are launching Buy Online, Pickup In Store or BOPIS, this week. Customers can now purchase most merchandise on steinmart.com and conveniently pick it up at a store of their choice. BOPIS is gaining momentum as a customer experience differentiator.
Customers want a quick, convenient online shopping journey. They also want to save time and money with a free in-store pickup and BOPIS provides both. And we are the first authorized retailer to offer this option. We expect about 15% of our demand sales will shift to in-store pickup. By bringing a customer into the store, they are more likely to purchase additional items. While expanding your customer choices, BOPIS will also improve our profitability by creating incremental attachment sales and reducing shipping costs.
Next, an update on endless aisle and mobile point-of-sale. We've completed our chain ride rollout of this technology. Using a mobile device, our store associates can now locate product and order it online for their customers. It also provides convenient mobile checkout to expedite line busting during peak selling periods. We are already seeing great results, including higher order average values and a significant increase in credit card enrollment.
Smart fulfillment logic and initiative to speed up shipping times and lower direct-to-consumer costs, using enterprise wide view of inventory was launched early this month. This technology identifies the best location, either warehouse or store from which to ship a steinmart.com order. Well, we only have a couple weeks' worth of data, we are beginning to see the intended benefits of this system including. Fewer split orders, decreased packages per order and increased units per package.
We're introducing our new Stein Mart rewards program in October. This program combines our existing credit card and preferred customer programs into a single loyalty program. Under the new program, we've doubled the earn rate which means cardholders will earn their rewards reward twice as fast. Cardholders will now earn 2 points per dollar and Stein Mart Elite cardholders will earn 4 points per dollar on purchases made on the Stein Mart credit card. Rebranding our credit card and issuing a new card will reengage current cardholders and encourage new cardholders to sign-up to engage into the program, which will drive incremental trips and traffic to the stores. As we look for new ways to advance loyalties, we have plans to pilot and enhance multi-tender loyalty program early next year in about 100 stores. This pilot program will be available to all customers regardless of pay method.
Its primary focus is to attract non-credit cardholders. It will include a value proposition for non-credit customers, lower hurdle to achieve rewards and faster expiration of rewards to create urgency to use.
我们将于10月份推出新的Stein Mart奖励计划。该计划将我们现有的信用卡和首选客户计划整合到一个忠诚度计划中。根据新计划，我们将收益率提高了一倍，这意味着持卡人将获得两倍的奖励回报。持卡人现在每美元可获得2分，而Stein Mart Elite持卡人在Stein Mart信用卡购物时每美元可获得4分。重新标记我们的信用卡并发行新卡将重新锁定现有持卡人并鼓励新持卡人注册参与该计划，这将推动增量旅行和商店的流量。在我们寻找提升忠诚度的新方法时，我们计划在明年初在约100家商店试行并加强多招标忠诚度计划。无论付费方式如何，所有客户都可以使用该试点计划。
Now an update on our new marketing tool, campaign management. We've just begun using this tool and have executed several automated email marketing campaigns based on our customers' behavior. Campaign management enables us to use customer spending and online browsing information to create and push out personalized email and direct mail messaging that is focused on individual preferences. This technology will unlock incremental sales as we begin to communicate and market to the customers, the way they shop.
Since our last call we've completed the planned rollout of our conversion improvement program. This program analyses store traffic and transactions and provides daily store level performance feedback to store management. Using this data stores can adjust payroll hours and task to better align with customer peak traffic periods. This allows for better customer service and thus drives conversion. Early results are encouraging. This program is now active in about half of our stores and we have plans for further expanse in next year. With all these exciting initiatives we have not lost sight of our core businesses and continue to seek out new opportunities. We have over 30 new brands in women apparel and 15 in accessories. The teams have truly embraced testing and reacting to newness since the consumer is moving ever faster.
Now over to James to discuss our operating results. James?
Thank you, MaryAnne, and good afternoon everyone. Operating income for the second quarter of 2019 was 0.2 million compared to 2 million in 2018. Net loss for the second quarter of 2019 was 2.1 million or $0.04 per share compared to net loss of 1 million or $0.02 per share in 2018. Comparable sales for the second quarter decreased 3.6%. As Hunt described, comparable sales in the first and second quarters were impacted by an event shift. Excluding the event shift, adjusted comp sales decreased an estimated 3.3% for the first quarter of 2019 and decreased 1.9% for the second quarter.
Transactions and units per transaction were lower and average unit retail sales price was slightly higher. E-commerce sales, which are included in comp sales were up 7% including online order shipped from our stores. E-commerce lifted our comparable sales results by 40 basis points for the quarter and represented 6.1% of net sales. Net sales for the second quarter of 2019 were 292.4 million, compared to 310.9 million in 2018. The decrease reflects fewer stores in 2019 and lower comparable sales, including the impact of the event shift.
Gross profit for the second quarter of 2019 was 74.7 million compared to 79.3 million in 2018. The gross profit rate for the second quarter was flat to last year's 25.5% of sales. On a two-year basis, our rate has improved 470 basis points on lower markdowns and improved inventory productivity.
SG&A expense for the second quarter were 78.5 million, compared to 80.9 million in 2018. The decrease in SG&A expense is primarily due to lower store expenses, including the impact of closed stores. Existing store expenses were lower as we continue to manage payroll well, reacting to the lower than planned sales trend. Interest expense was 2.2 million for the second quarter of 2019, compared to 2.9 million in 2018. The reduction in expense was primarily due to lower debt during the second quarter.
Now, I'll touch on results for the first half. Net income for the first half of 2019 was 1.9 million or $0.02 per share, compared to net income of 6.4 million or $0.14 per share in 2018. Adjusted EBITDA for the first half of 2019 was 20.8 million compared to 28.7 million in 2018. Comparable store sales for the first half of 2019 decreased 2.6%, primarily due to lower transactions.
E-commerce sales were up 11%, including online orders shipped from our stores. Online sales lifted our comparable sales results by 40 basis points for the half and represented 5.8% of net sales. Net sales for the first half of 2019 were 606.5 million, compared to 637.5 million in 2018. The decrease reflects lower comparable sales and fewer stores in 2019. Gross profits for the first half of 2019 was 162.1 million, or 26.7% of sales, compared to 175.3 million, or 27.5% of sales in 2018.
The lower gross profit rate reflects higher markdowns as a percent of sales, as well as the deleverage of occupancy costs on lower sales. Markdowns were higher as a percent of sales, primarily due to our planned accelerated markdown cadence. SG&A expenses for the first half of 2019 were 164.6 million, compared to 171.4 million in 2018. The decrease in SG&A expense was primarily due to lower store expenses, including the impact of closed stores, partially offset by higher e-commerce expenses to support this growing business.
电子商务销售额增长了11％，包括从我们的商店发货的在线订单。在线销售将我们的可比销售业绩提升了40个基点，占净销售额的5.8％。 2019年上半年的净销售额为6.065亿，而2018年为6.375亿。这一下降反映了2019年可比销售额和商店减少。2019年上半年的总利润为1.621亿，占销售额的26.7％， 20130年达到1.753亿美元，占销售额的27.5％。
For the second half of the year, we expect SG&A expenses to be down slightly to last year's second half. Taking a look at the balance sheet and cash flows. Inventories at the end of the second quarter of 2019 were 238.4 million, compared to 240.8 million at the end of the second quarter of last year. Inventories at the end of the second quarter of 2019 include higher amounts for the planned acceleration receipts for categories that were trending strong, as well as amounts to support our recently launched Kids department.
Excluding these impacts, average inventory per store were down 3% to last year. Total inventories were even lower due to fewer stores at the end of the quarter. Our accounts payable balance was 21 million higher at the end of the second quarter 2019, compared to the end of the second quarter of 2018. This reflects improved credit trends from our vendors and factors since the second quarter of 2018.
Total borrowings decreased 36.8 million to 138.5 million at the end of the second quarter of 2019, compared to 175.3 million at the end of the second quarter of 2018. Unused availability under our credit facility, plus additional amounts available to borrow under life insurance policies was 77.4 million at the end of the second quarter of 2019. This is a $34.1 million increase over 2018's unused availability. Cash management continues to be a priority for us and we diligently work to deleverage our balance sheet.
Now back to you Hunt.
对于下半年，我们预计SG＆A费用将略微下降至去年下半年。看一下资产负债表和现金流量。 2019年第二季度末的库存为2.384亿，而去年第二季度末为2.480亿。 2019年第二季度末的库存包括趋势强劲的类别的计划加速收据的更高金额，以及支持我们最近推出的儿童部门的金额。
Thank you, James. So, this will conclude today's call. As you've heard today, we're very excited about the great new initiatives beginning to come online to improve our second half results and we believe our customers will embrace the positive changes we've made to make their shopping experience at Stein Mart even more enjoyable. Of course, we're always available to answer any questions that you may have. You can reach us by calling our Director of Investor Relations, Linda Tasseff. Her contact information is included in our earnings release and posted on our website.
So let me thank you all for joining us today and say that we look forward to talking with you at the end of next quarter.
谢谢詹姆斯。 所以，这将结束今天的电话会议。 正如您今天所听到的那样，我们对于开始上线以改善下半年业绩的出色新举措感到非常兴奋，我们相信我们的客户将接受我们为在Stein Mart购物体验所做的积极改变。 更愉快。 当然，我们随时可以回答您的任何问题。 您可以致电我们的投资者关系总监Linda Tasseff与我们联系。 她的联系信息包含在我们的收入发布中，并发布在我们的网站上。
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
这就结束了今天的电话会议。 您可以在此时断开线路。 感谢您的参与。
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