Stein Mart, Inc. (SMRT)
F2Q09 Earnings Call
August 20, 2009 10:00 am ET
David H. Stovall, Jr. – President and Chief Executive Officer
Gregory Kleffner – Senior Vice President and Chief Financial Officer
Glori Katz - Senior Vice President, Marketing/Advertising
Michael D. Ray - Senior Vice President, Stores
D. Hunt Hawkins - Chief Administrative Officer and Executive Vice President, Operations
Jimmy [Sheber] – [Rice Felcher]
David Mann - Johnson Rice & Company
Robin Murchison - Suntrust Robinson Humphrey
Brian Gaines – Springhouse Capital
Welcome everyone to the Stein Mart second quarter financial results conference call. (Operator Instructions)
Previous Statements by SMRT
» Stein Mart, Inc. Q3 2009 Earnings Call Transcript
» Stein Mart, Inc. F4Q08 (Qtr End 1/31/09) Earnings Call Transcript
» Stein Mart, Inc. F3Q08 (Qtr End 11/1/08) Earnings Call Transcript
I would now like to turn the call over to David Stovall. Mr. Stovall you may begin your conference.
David Stovall, Jr.
Good morning and thank you for joining us. We are pleased to be able to report a profit again this quarter despite the continued difficult sales environment. A number of the initiatives we spoke about last quarter are gaining traction. This morning I will update you on some specific projects. After my initial comments our new Chief Financial Officer, Greg Kleffner, will review the financials for you.
The external environment remains difficult although I think we are growing more accustomed to the diminished consumer appetite. Our observation is that the consumer is motivated to purchase if we can offer her something fresh or if an item has a value proposition too compelling to ignore. So in our attitudes areas where we are offering better branded denim and denim inspired tops at easily recognizable values, the customer is incented to buy. The same goes in our dress area where the new maxi dresses have been selling all summer.
We don’t see a major change in her behavior on the horizon so we are approaching the second half of the year with a high degree of conservatism but with an understanding that in order to improve sales we will have to have a most attractive merchandise offering. So you can continue to expect rigorous control of both inventory levels and expenses but we will be poised to chase business if the customer signals she is becoming more receptive.
Geographically our business continues to improve in the western part of the country, in Texas and in the Ohio valley area. Florida continues to be challenging although the deterioration has abated somewhat. Unfortunately, similar difficulty is now being felt in other southeastern states, especially in the Carolinas. In the third quarter the last quarter of this year’s slated store closings will occur. We will open our final location for the year in Phoenix at the end of October.
Our merchandise inventories were down more than 22% on an average store basis at the end of July. While that is a dramatic reduction it is interesting that we have had very little push back from the customer regarding the inventory levels. In fact we are getting kudos for improving the shopability of the store. Reducing our inventory has had multiple benefits including far less clearance merchandise, better sell through at regular price and improved turn. It has also helped us improve our cash position and while our heaviest delivery season is still in front of us it appears unlikely that we will need to borrow against our credit line for the remainder of the year.
We were also pleased with the impact our stronger marketing efforts had on the second quarter. Research completed in February helped shape our marketing strategies which focused on keeping our existing customers, attracting a newer younger customer, making sure we are consistently on our radar screen with more incentives for her to shop and jumping into the digital age.
For the fall season our promotional calendar will be an aggressive one although we plan the marketing spend at flat to last year. We will have significantly more days of TV versus fall 2008 with a fresh round of commercials featuring real Stein Mart shoppers. Again, we will feature the modern customer who can authentically deliver our marketing message of brand name fashion at discounted prices every day.
Tracking research from this spring shows we are making headway particularly with the younger customer while retaining our core customer. We will have a mix of media including broadcast, direct mail, newspaper, online advertising and an intensified email program. As with the case for spring, we will strategically reduce our direct mail quantities as well as our newspaper distribution.
As we told you last quarter we have begun using social media using Facebook and Twitter to engage and communicate with our Stein Mart shoppers. Our newly updated Steinmart.com website is the hub for much of this digital activity and we have had nearly half a million visitors during the first six weeks.
Finally, we believe our target customers will continue to need incentives to shop. We plan to give her reasons to shop every week. This will mean a mix of new and strengthened events along with continued attention to our best customers through our Preferred Customer program.