Stein Mart Recovers From Woes

Last November, Stein Mart's new executive team completed a "mini-restructuring plan" under the guidance of president & CEO Michael Fisher, says Dennis Van Zelfden, a managing director of SunTrust Robinson Humphrey who covers the retail segment. "The leadership now is much better than it has been in a while," he points out.

As part of the measure, the retailer closed under-performing stores, re-allocated square footage within the stores to focus on women's apparel, stopped excessive couponing and rolled out national ad campaign.

"The benefits of all those things showed up in the improving fundamentals this year," Van Zelfden notes. "Stein Mart is showing dramatically improved fundamentals, and the earnings and stock price has increased as well."

Van Zelfden expects that the 96-year-old retail company will post $1.4 billion in revenue and $34 million in net income earnings this year. "I expect growth to be measured – not huge and not zero," he says. "For example, for 2005 I am forecasting about 7% square footage growth, which is about 15 stores."

Stein Mart, which offers brand-name fashion merchandise at discount prices, expects to have 262 stores in 29 states in operation by the end of this year. The retailer will open seven new stores and close one store. New store openings include two locations in Philadelphia, and one each in Omaha, NE; La Quinta, CA; Indianapolis, IN and Jackson, MS. For 2005, the Company plans to open approximately 15 new stores.

Stein Mart is focused on growing in cities with an MSA of at least 300,000 people, according to Marsha Sullivan, assistant manager of retail services for Regency Centers Corp., which handles Stein Mart's East Coast expansion. "Stein Mart is not pursuing new markets that are smaller," she says. Moreover, the retailer is looking for locations with at least 150,000 people within a five-mile radius.

While Stein Mart will occasionally consider regional mall locations, it prefers to be located in neighborhood power centers, "They try to get into the neighborhood and serve their customers at a convenience level," she says. "Their customers appreciate easy access."

Additionally, Stein Mart looks for centers that boast upscale co-tenancy. "They like the synergies that the co-tenancy provides," Sullivan says. In particular, the company likes to be near bookstores like Barnes & Noble Booksellers, home stores like Bed, Bath & Beyond and even other apparel stores like Talbots. "Stein Mart is looking for a customer with a high taste level," she explains.

Van Zelfden notes: "They really have not had any problems with their store locations because they put them in better areas. The locations are not necessarily high end but they tend to locate in centers that attract women over age 35 with discretionary income." He adds that Stein Mart may reap some benefits from the Baby Boomers population in the future.

Stein Mart stores average 36,000 sf, and according to Sullivan, center owners are more than happy to welcome the retailer to their centers. "There's lot of foot traffic when Stein Mart comes in, and it's usually upscale traffic," she says. "It's a real attractive use."