Stein Mart 2009 Annual Report Download - page 2

On behalf of your Board of Directors, I am
proud of the progress being made at Stein Mart.
The year 2009 began with a tremendous
amount of trepidation about the overall state of
the economy, retail in general, and specifically,
changes in the spending habits of our
customers for apparel and accessories.
David Stovall faced this very challenging
environment when we installed him as chief
executive officer at the close of an enormously
disappointing Fall ’08 season. Dave led our
company through the many difficult days
of 2009—but by reducing expenses and
streamlining inventories, he has returned us
to profitability. Along the way, he selected new
key executives—Greg Kleffner, chief financial
officer, who joined us in August and Brian
Morrow, chief merchandising officer, who
joined us earlier this year. We also welcomed
Robert Mettler, former chairman of Macy’s
West, to the Board of Directors.
I think the results speak for themselves.
We went from a loss of more than $70 million
in 2008 to a profit of nearly $24 million in
2009. We made great progress toward restoring
gross profit and reducing expenses. With
lowered inventories and expenses, nearly $100
million in cash was generated from operations.
While our comparable store sales remain below
our expectations, we saw an improvement in the
year-over-year trend in each quarter of 2009.
There is still much work to be done. Improving
our top line revenues is key to profit acceleration,
and your Board and management are focused
on that objective. As the chairman and largest
shareholder, I am eagerly anticipating a
continuing improvement
in our sales trend and
promise that I will do
everything I can to facilitate
that goal. Let me thank
you for your interest and
support in our Company
during the past year.
We are pleased to have ended the year a much stronger Company
than we began the year. In the face of some of the most daunting
challenges in retail, we were able to return to a profit in all four
quarters, improve gross margin by nearly 500 basis points, reduce
SG&A prior to store closing and impairment charges by $66.4
million, and increase cash generated from operations five-fold.
We started the year with a net debt to our banks of $11 million, and
ended the year debt-free and with $81 million in cash. We made a
dramatic change in the way we do business by instituting new supply
chain distribution, and we added strength to our leadership team with
a new chief financial officer and a new chief merchant.
During 2009, we also made progress toward our goal of attracting a
more youthful customer as we intensified our more updated offering
in ladies’ sportswear by featuring branded denim and related tops.
Dresses and ladies’ accessories improved last year, as did golf in the
men’s area. Changes in the Home area are beginning to take hold,
with positive comparable store sales in both Gifts and Linens at the
end of 2009. We will begin installing a new merchandise information
system in 2010 to replace our older, legacy system that has been in
place for some time to help address our merchandising initiatives.
We successfully completed our supply chain transformation as our
California store distribution facility came on line this spring and now
virtually all our inventory now flows through a third-party network
of consolidation and store distribution centers. We are pleased with
the savings and efficiencies we have seen, particularly in the stores
and with our transportation expenses.
For 2010, our first priority is improving sales through a combination
of merchandising initiatives and changes in our marketing strategy.
We will continue our focus on keeping inventories and expenses in
line with sales. We do anticipate additional expense savings from our
supply chain improvement; however they will be mostly offset by
increased costs, such as those associated with the restoration of
certain compensation and related benefits that were temporarily
lowered in 2009. Within our store network, our net number of stores
won’t change much this year, but our portfolio should be much
stronger as we relocate five to ten stores, close
four existing locations and open three new stores.
In summary, we believe we’re operating from a
much stronger business foundation; we’re
investing in the right people, merchandise, real
estate and systems, and we are tackling the
challenges that remain so that we can move
forward. On behalf of the executive team, and the
nearly 13,000 associates who have worked so hard
to improve our performance this year, let me thank
you for your confidence in our Company.
Jay Stein
Chairman of the Board
David H. Stovall, Jr.
President and
Chief Executive Officer
Letter to Shareholders – 2009 Annual Report