Stein Mart (SMRT) Revises Q3 Loss Due to Additional Markdowns
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Financial Fact:
Provision for income taxes: -6.26M
Today's EPS Names:
BTTX, VAXX, ELYS, More
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Stein Mart, Inc. (Nasdaq: SMRT) today announced revisions to its financial results for the third quarter and first nine months ended October 29, 2011.
As the result of information technology systems issues discussed below, markdowns in the third quarter were understated in the earnings reported on November 17, 2011. The unrecorded markdowns are estimated to have a pre-tax impact of $2.1 to $2.6 million which will reduce gross margin and inventory from what was reported previously. The after tax impact of the estimated additional markdowns will increase the net loss previously released by $1.3 to $1.6 million or $0.03 to $0.04 per diluted share.
The company originally announced a loss of $0.04 per share for the quarter, versus the consensus of a loss of $0.03 per share.
This matter will delay our filing of the Form 10-Q containing third quarter financial results. The impacts discussed in this release are preliminary and remain subject to adjustment until the filing of our financial statements on Form 10-Q.
n July and August merchandise unit balances in the legacy perpetual inventory system were understated as a result of a planned but improperly executed one-time override of an automated records purge process. The legacy perpetual inventory system is scheduled to be replaced with a new system which is anticipated to "go live" in the first quarter of 2012. Transactions recorded in the Retail Stock Ledger, which is the accounting system of record for inventory and cost of merchandise sold, were correct except for permanent markdowns. Permanent markdowns are recorded in the Retail Stock Ledger based on calculations using unit quantities from the perpetual inventory system. As the perpetual system units were understated, permanent markdowns were understated with an estimated pre-tax impact of $2.1 to $2.6 million, primarily in the third quarter. Understated markdowns in the second quarter are not material.
As a result of the issues described above, management has preliminarily determined that the breakdown in controls is a material weakness. Enhanced controls are being put in place to prevent these weaknesses from recurring.
As the result of information technology systems issues discussed below, markdowns in the third quarter were understated in the earnings reported on November 17, 2011. The unrecorded markdowns are estimated to have a pre-tax impact of $2.1 to $2.6 million which will reduce gross margin and inventory from what was reported previously. The after tax impact of the estimated additional markdowns will increase the net loss previously released by $1.3 to $1.6 million or $0.03 to $0.04 per diluted share.
The company originally announced a loss of $0.04 per share for the quarter, versus the consensus of a loss of $0.03 per share.
This matter will delay our filing of the Form 10-Q containing third quarter financial results. The impacts discussed in this release are preliminary and remain subject to adjustment until the filing of our financial statements on Form 10-Q.
n July and August merchandise unit balances in the legacy perpetual inventory system were understated as a result of a planned but improperly executed one-time override of an automated records purge process. The legacy perpetual inventory system is scheduled to be replaced with a new system which is anticipated to "go live" in the first quarter of 2012. Transactions recorded in the Retail Stock Ledger, which is the accounting system of record for inventory and cost of merchandise sold, were correct except for permanent markdowns. Permanent markdowns are recorded in the Retail Stock Ledger based on calculations using unit quantities from the perpetual inventory system. As the perpetual system units were understated, permanent markdowns were understated with an estimated pre-tax impact of $2.1 to $2.6 million, primarily in the third quarter. Understated markdowns in the second quarter are not material.
As a result of the issues described above, management has preliminarily determined that the breakdown in controls is a material weakness. Enhanced controls are being put in place to prevent these weaknesses from recurring.
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