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Jay Stein
Jax Daily Record Monday, Nov. 23, 201512:00 PM EST

Texas slump impacts Stein Mart sales

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by: Mark Basch Contributing Writer

Two weeks after reporting a sales decline for the third quarter, Stein Mart Inc. officials Thursday gave more insight into what caused the sales slump.

You can blame Texas.

The Jacksonville-based fashion retailer reported a net loss of 1 cent a share for the third quarter ended Oct. 31, which is not unusual because the third quarter is often a down quarter for Stein Mart before the holiday season rush. But after three straight years of strong sales growth, the comparable-store sales drop of 2.3 percent was notable.

Comparable-store sales are sales at stores open for more than one year and are considered a key indicator of a retailer’s performance.

During Stein Mart’s conference call with analysts Thursday, Chief Financial Officer Gregory Kleffner said the company’s 44 stores in Texas recorded comparable-store sales that were “several percentage points lower” than the rest of the chain, which has a total of 278 stores in operation across the country.

Kleffner said the Texas economy has been hurt by the drop in oil prices and the strong dollar, but that may not be the only reason for the sales drop.

“This is really the first quarter that we have seen weakness in Texas relative to the rest of our chain, so we’re analyzing and monitoring our results and are going to react appropriately as we see opportunities to do so,” he said.

“I promise you, we will get that back because Texas has always been a very important Stein Mart state,” CEO Jay Stein said.

“We know how to merchandise to Texas. We’ve done so for many years and we did not forget how to do it in one quarter,” he said.

Stein Mart will also be looking to lift sales in other states, Stein said, but he thinks the company’s core strategy is sound despite the weak third quarter.

“First and foremost we are going to react appropriately, not recklessly. We have a robust promotional calendar through the holidays which frankly I’m very excited about,” Stein said.

“We’ll be promoting earlier and somewhat deeper this year and our value message will be loud and it will be clear,” he said.

Stein Mart announced sales declines in every month during the quarter, but we won’t be seeing monthly results in the future. The company also announced that, beginning in fiscal 2016, it will no longer report monthly sales figures to the public and will only release the data quarterly.

“Reporting quarterly sales reflect our longer-term focus and will eliminate discussion of variances caused by changes in the timing of promotions and, frankly, the short-term weather impacts like we’re going through right now,” Stein said.

Stein Mart’s final results for the quarter were better than analysts’ expectations. Excluding some items, including 2 cents per share in losses related to its e-commerce business, Stein Mart reported adjusted net income of 1 cent a share.

Analysts were projecting a net loss of between 1 cent and 8 cents per share, according to Thomson Financial.

Stein Mart’s stock has been falling this month during a general downturn for retail stocks, trading at its lowest level in almost three years. After the quarterly report, Stein Mart’s stock rose 68 cents to $7.89 Thursday and traded as high as $8.61.

Credit Suisse analyst Michael Exstein maintained a “neutral” rating on the stock after the earnings report.

“While Stein Mart has had a successful turnaround and remains disciplined in its expansion plans, we remain on the sidelines due to the general retail industry cycle in the shorter term, as well as our longer term caution on the off-price sector in particular. The off-price sector is facing increasing competition from existing players, new entrants, and the growth of fast fashion entrants,” Exstein said in a research note.

Patriot Transportation doubles earnings

Patriot Transportation Holding Inc. last week reported earnings doubled in the fourth quarter ended Sept. 30 to $1.6 million, or 48 cents a share.

The Jacksonville-based trucking company’s results were helped by several items, including a $1 million improvement in insurance costs due to lower medical, workers’ compensation and liability claims.

Revenue, excluding fuel surcharges, rose 4.8 percent to $28.3 million.

Patriot, through its main subsidiary Florida Rock & Tank Lines Inc., transports liquid and dry bulk commodities throughout the Southeast.

The company was originally spun off from construction materials firm Florida Rock Industries Inc. and early this year, it split with commercial real estate firm FRP Holdings Inc. into two separate public companies.

In a conference call with investors, Patriot officials said their biggest challenge is hiring drivers in a tight market for truck drivers.

“Going into fiscal year 2016, we remain focused on adding and retaining drivers so that we can take advantage of the opportunities to grow with our customers that are being presented to us today,” said CEO Tom Baker.

St. Joe picks new CEO

The St. Joe Co. on Thursday said Jeffrey Keil retired as president and interim chief executive officer and Senior Vice President of Development Jorge Gonzalez was promoted to president and CEO to replace him.

Keil had been serving as interim CEO of the real estate development company since Park Brady retired in August 2014.

Gonzalez has been with St. Joe for 13 years in positions of increasing responsibility, the company said.

St. Joe moved its headquarters from Jacksonville to WaterSound in the Florida Panhandle in 2010 and has completely overhauled its management since then.

Dick’s Wings owner profitable again

ARC Group Inc., franchisor of the Dick’s Wings & Grill restaurant chain, reported its second straight quarterly profit last week.

According to its quarterly report filed with the Securities and Exchange Commission, ARC Group had net income of $23,688 in the third quarter, which followed a second-quarter profit of $40,398.

ARC Group had previously reported losses in every year since going public in 2010.

Revenue in the quarter jumped 76 percent to $249,363. The company said franchise fees increased because of the opening of new Dick’s Wings restaurants.

ARC Group is officially headquartered in Louisiana but its corporate office is in Jacksonville and most of the 20 Dick’s Wings restaurants are in the Jacksonville area.

Drone Aviation reports loss

Drone Aviation Holding Corp. reported a net loss of $1.6 million, or 77 cents a share, for the third quarter, according to its quarterly report filed with the SEC.

Revenue dropped 67 percent to $108,548.

Jacksonville-based Drone Aviation is focused on the development and sale of lighter-than-air advanced aerostats and tethered drones.

The company said in its SEC filing that third-quarter revenue was derived mainly from small aerostat products and accessories while it focuses on development of a new product line.

Duos Technologies raises forecast

Duos Technologies Group Inc. last week reported a third-quarter profit of $64,424, reversing a loss in the third quarter of 2014.

Revenue more than doubled to $2.2 million, and the company said it is increasing its revenue forecast for all of 2015 by 10 percent to $6.8 million.

Duos is a Jacksonville-based company that provides intelligent security analytical technology solutions. It became publicly traded by merging with an existing public company in April.

Canadian Pacific chases Norfolk Southern

A year after Jacksonville-based CSX Corp. rebuffed merger overtures from Canadian Pacific Railway Ltd., the Calgary-based railroad is going after the other major Eastern U.S. railroad, Norfolk Southern Corp.

Canadian Pacific made an unsolicited $28 billion bid to buy Norfolk Southern, a bid that was met with an initial icy response last week from Norfolk Southern.

In October 2014, Canadian Pacific CEO Hunter Harrison said he had met with CSX about a possible merger but no offer was made and CSX officials were not interested.

CSX CEO Michael Ward would not comment publicly on the merger talks.

CSX, Canadian Pacific and Norfolk Southern are three of just seven Class 1 Railroads operating in the U.S. and Canada.

Analysts said a merger involving any of those large railroads would be difficult because it would receive intense regulatory scrutiny.

In a news release Tuesday, Norfolk Southern said again any merger would “face significant regulatory hurdles,” and it described the offer from Canadian Pacific as “unsolicited, low-premium, non-binding and highly conditional.”

However, the Virginia-based railroad did say its board of directors will evaluate and consider the “indication of interest.”

Canadian Pacific said in a news release “the combined railroad would offer unparalleled customer service and competitive rates that will support the success of the shippers and industries it serves, and satisfy the U.S. Surface Transportation Board and Canadian regulators.”

Nexstar, Media General still talking merger

In other unsolicited merger news, Media General Inc. last week rejected a $4.1 billion buyout offer from Nexstar Broadcasting Group Inc., but said it will discuss a possible merger with Nexstar.

Virginia-based Media General, which operates 71 television stations in 48 markets, said in a news release the offer from Nexstar “significantly undervalues Media General and its prospects.”

Nexstar CEO Perry Sook said in a news release his company was “surprised” that Media General considers the bid to be inadequate, but it is willing to engage in further negotiations.

“We are eager to move forward with discussions with Media General regarding our proposal, while at the same time maintaining our financial discipline,” he said.

After completing pending deals, Texas-based Nexstar will operate 115 stations in 62 markets, including Jacksonville CW network affiliate WCWJ TV-17.

Nexstar bought WCWJ from Media General in 2009.

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