Two analysts downgraded their ratings on Stein Mart Inc. Thursday following the abrupt resignation of CEO Dawn Robertson just six months into the job.
The Jacksonville-based fashion retailer did not give a reason for Robertson’s departure in its Thursday morning announcement, but did say recent sales results were disappointing.
“The merchandise and marketing changes implemented by Ms. Robertson have been too disruptive to the organization, with third quarter performance materially below expectations,” Johnson Rice and Co. analyst David Mann said in a report Thursday, as he downgraded Stein Mart from “accumulate” to “hold.”
“This surprise announcement comes at a critical juncture as the company has been underperforming its peer group for over a year, with potential to fall further behind as bigger off-price players continue to gain share,” Mann said.
Sidoti & Co. analyst Anthony Lebiedzinski downgraded Stein Mart from “buy” to “neutral” Thursday, but he said he could not comment further.
Robertson joined Stein Mart in March, succeeding Jay Stein as CEO, and quickly launched new marketing and merchandising programs, including plans to target “younger attitudinal” customers. Stein Mart’s traditional core customer has been women over 35.
Stein, who remains chairman of his namesake company, said in Thursday’s news release that some of Robertson’s sales initiatives will continue.
However, Stein Mart President D. Hunt Hawkins — who was named interim CEO — said “implementation has been too rapid and has been challenging for our customers.”
Stein Mart said comparable-store sales were down 4 percent in the first two months of the third quarter, which ends Oct. 29, although there has been some improvement in September.
Comparable-store sales are sales at stores open for more than one year and are considered a key indicator of a retailer’s performance.
Stein Mart traditionally loses money in the third quarter every year, making up for it with a big fourth-quarter profit during the holiday season.
Mann had been projecting a loss of 4 cents a share but with the disappointing sales results so far, he adjusted his third-quarter estimate to a loss of 18 cents.
Credit Suisse analyst Michael Exstein, who maintained a “neutral” rating on Stein Mart, lowered his third-quarter forecast from a loss of 3 cents to a loss of 11 cents per share.
“There have been two issues that have bedeviled the company for some time: smooth management succession and new merchandising strategies. Today’s developments remind the investors that these issues have not yet been put to rest,” Exstein said in his research note.
While Stein Mart may continue some of Robertson’s initiatives, “management execution of these initiatives is now more in question,” Mann said.
“These expansions have taken space away from core categories (like career), and the space allocation may need tweaking. In terms of marketing, the changes moved too quickly away from methods that speak to the core customer,” he said.
Mann said Stein Mart is facing a “strategic quandary” in trying to attract younger customers and Robertson’s resignation raises more questions about its plans.
“An abrupt CEO departure ahead of holiday season is never a good sign and brings tremendous uncertainty about the company’s future strategy and positioning,” he said.
Stein Mart’s stock dropped $1.24 to $6.30 Thursday after the resignation announcement, which came before the market opened.