Coronavirus Threatens Stein Mart Survival

As it filed its annual 10-K report with the United States Securities and Exchange Commission on June 15, Stein Mart executives warned that the company might not be able to continue operations due to pressures related to the COVID-19 pandemic.

In the filing, Stein Mart pointed out that, on March 18, the company temporarily closed all of its bricks and mortar stores and only began reopening them on April 23. As of the filing date, the company had reopened substantially all of its 281 stores in limited capacity, whether through reduced hours or measures to support social distancing or both. Stein Mart implemented various safety measures and initiatives to cut costs including furloughing workers and cutting executive salaries to deal with the crisis. It also has worked with vendors and landlords to negotiate temporary terms and used funds available under the company’s revolving credit facility and third promissory note.

However, the company maintained in the filing:

As a result of the COVID-19 pandemic and subsequent temporary store closures, our revenues, liquidity, results of operations and cash flows, and our ability to pay vendors and landlords according to standard terms have been materially adversely impacted. Accordingly, our management has determined that there is a substantial doubt about our ability to continue as a going concern over the next 12 months and our independent registered public accounting firm has included a ‘going concern’ explanatory paragraph in their report on our financial statements as of and for the year ended February 1, 2020.

Stein Mart is actively negotiating with vendors and landlords regarding restructuring payments of accounts and rent, but there is no assurance the discussions will succeed, it conceded. Stein Mart also is actively exploring additional sources of financing to provide additional liquidity and other strategic alternatives including a sale of the company.

On a positive note, the company indicated that store traffic has steadily increased since reopenings commenced. Still, store visits have not yet recovered to pre-pandemic levels. Omnichannel sales have been strong, the company maintained, but have not compensated for the loss of in-store sales. Overall, sales continue to recover as stores reopen, Stein Mart added, but remain well below last year.