The Basch Report: Stein Mart outlook, stock price improve
First-quarter earnings increase and company says operations are improving.
| 5:20 a.m. May 29, 2018
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Four months after a dire-sounding announcement that Stein Mart Inc. was exploring potential “strategic alternatives,” the Jacksonville-based fashion retailer’s outlook continues to brighten.
Stein Mart last week reported higher first-quarter earnings despite a drop in sales.
Total sales for the first quarter ended May 5 fell 3.2 percent to $326.7 million, mainly due to store closings over the past year. But comparable-store sales (sales of stores that have continued in operation for more than a year) fell 0.7 percent.
However, net income for the quarter doubled to $7.3 million, or 16 cents a share.
The results were helped by lower income tax payments, but the company also said operations are improving.
“Our disciplined inventory management and strong inventory productivity helped us deliver higher than expected gross profit,” CEO Hunt Hawkins said in a conference call Wednesday.
“We also tightly controlled our expenses, keeping them below plan. These factors drove our earnings for the period and offset the impact of our somewhat lower sales,” he said.
Because of the strong results, Stein Mart increased its forecast for operating income by $2 million to $10 million for the first half of this year. The company had a net operating loss in the first half of fiscal 2017.
Hawkins said comparable-store sales turned positive in late April as the weather improved in its markets, and the company is projecting an overall “flat to low single-digit” percentage increase for the second quarter.
Stein Mart had 289 stores in operation after closing four during the first quarter. The company expects to close a total of seven this year while opening two new stores.
Stein Mart’s stock was trading below $1 in late January when it announced its exploration of strategic alternatives but with its outlook improving, the stock price had been rising before its late Wednesday earnings report.
The stock rose 33 cents to $3.53 Thursday.
“We’ve made dramatic improvements to our business that significantly impacted our results for the past two quarters. As we continue to execute and improve upon the many new practices we have in place, we’re well positioned to deliver even more meaningful results in the future,” Hawkins said.
Same Jacksonville Fortune 500 companies
The new Fortune 500 list released last week includes the same three Jacksonville-based companies that have been on that list in recent years, but all three slipped a bit in the rankings of the largest U.S. companies.
CSX Corp. ranked 265th with $11.41 billion in 2017 revenue, down from its 257th ranking last year.
Fidelity National Financial Inc. ranked 302nd with $9.77 billion in revenue, down from 293rd.
Fidelity National Information Services Inc., or FIS, ranked 326th with $9.12 billion in revenue, down from 301st.
Fidelity National Financial will drop further in next year’s list. Fortune apparently included revenue from Black Knight Inc. and Cannae Holdings Inc., two companies spun off from Fidelity last fall, in Fidelity’s total.
The company reported 2017 revenue of $7.66 billion in its annual report after the spinoffs were completed. That would have ranked Fidelity at 371st in the magazine’s list.
One other Jacksonville-based company made the Fortune 1000 list, Landstar System Inc.
Landstar moved up in the rankings from 699th to 638th, with revenue of $3.65 billion last year.
Southeastern Grocers would be 298 on list
Fortune magazine only includes publicly traded companies and other companies that file official financial reports with a regulatory agency. So privately owned Southeastern Grocers LLC, operator of Winn-Dixie and three other supermarket chains, is not on the list.
However, Jacksonville-based Southeastern would be a Fortune 500 company if it filed public financial reports.
When Southeastern filed for a Chapter 11 bankruptcy reorganization in March, it said 2017 sales were $9.875 billion. That would have ranked the company at 298th.
After the company’s prepackaged reorganization plan was confirmed two weeks ago, Southeastern expects to soon emerge from bankruptcy with about 575 stores after closing 94 stores and selling more than two dozen others.
The company projects that will reduce sales to $8.45 billion in 2019, but that would have been good enough to rank 345th on this year’s Fortune 500 list.
Southeastern last week filed a monthly operating report with the U.S. Bankruptcy Court for the District of Delaware showing revenue of $735.4 million for the period from March 22 to April 18.
The company recorded a net loss of $74.9 million for the month, but it has been projecting it will be profitable when it emerges from Chapter 11.
Deutsche Bank plans to cut workforce by 7,000
Deutsche Bank last week announced plans to cut more than 7,000 jobs in its global operations, but the German bank isn’t saying how that will affect its Jacksonville operations.
The announcement at the company’s annual meeting in Frankfurt was no surprise after new CEO Christian Sewing last month announced plans to cut jobs in the U.S.
Last week’s announcement did not say the location of the pending job cuts. Deutsche Bank employs about 2,000 people in Jacksonville.
A Deutsche Bank spokeswoman said the company will not comment on the impact on Jacksonville.
Deutsche Bank’s announcement said it will reduce global employment from a little more than 97,000 to “well below 90,000.”
Gazit-Globe reduces stake in Regency Centers
Gazit-Globe Ltd., which had been the largest stockholder of Jacksonville-based Regency Centers Corp., reduced its stake in Regency below 5 percent with two recent stock sales.
The Israel-based company which, like Regency, develops mainly grocery-anchored shopping centers, said it sold 3.5 million Regency shares last week for $57.07 each after selling 1.7 million shares for $55.96 each two weeks ago.
That reduced Gazit-Globe’s holdings to 8.2 million Regency shares, or 4.8 percent of the stock, below the 5 percent threshold which requires filings with the Securities and Exchange Commission.
Gazit-Globe became Regency’s largest stockholder last year after Regency acquired Equity One Inc. Gazit-Globe owned 34 percent of Equity One and ended up with 13.2 percent of Regency after the merger.
The company has reduced its stake in Regency with several stock sales in the past year.
Gazit-Globe sold its stock near Regency’s 52-week lows, but Baird analyst R.J. Milligan said in a research note last week that shopping center real estate investment trusts like Regency are poised for a rebound.
“We believe the end of April signaled a near-term bottom in the sector, with first-quarter earnings proving out shopping centers fundamentals remain challenged but stable,” he said.
Milligan increased his price target for Regency from $68 to $69.
Rayonier raises dividend 2 cents to 27 cents
Rayonier Inc. last week said it is increasing its quarterly cash dividend by 2 cents to 27 cents per share.
The Yulee-based timber and real estate company said the increase was based on cash flow growth, its strong capital position and the sustainability of its core businesses.
“A stable and growing dividend is a fundamental component of our capital allocation strategy and long-term value proposition for our shareholders,” CEO David Nunes said in a news release.
FRP Holdings completes warehouse deal
FRP Holdings Inc. last week completed the sale of its portfolio of industrial warehouses to an affiliate of Blackstone Real Estate Partners, but Blackstone ended up with one fewer warehouse than it originally planned.
Jacksonville-based FRP said one tenant exercised its right of first refusal and bought its property for $11.7 million. So Blackstone acquired 40 buildings for $347.2 million.
The net result for FRP was the same, selling 41 buildings for a total of $358.9 million.
The company expects its net proceeds from the sale will be about $250 million.
Web.com appoints Jennifer Lada as CFO
Jacksonville-based Web.com Group Inc. last week announced the appointment of Jennifer Lada as senior vice president and chief financial officer.
She succeeds Kevin Carney, CFO since 2002, who is retiring June 30.
Lada joined Web.com in 2017 as vice president and chief accounting officer after previously serving as vice president of financial reporting at PGA Tour Inc.