Stein Mart, Inc. announced unaudited consolidated financial results for thirteen weeks and twenty six weeks ended August 4, 2018. For the thirteen weeks, the company reported net sales of $310,939,000 against $311,036,000 a year ago. Comparable store sales for the second quarter increased 70 basis points. Operating income was $1,781,000 against loss of $21,533,000 a year ago. Loss before income taxes was $1,084,000 against $22,675,000 a year ago. Net loss was $1,144,000 against $12,993,000 a year ago. The positive shift in operating income for the second quarter was even more dramatic. This year, the company earned $1.8 million on an operating basis compared to operating loss last year of $21.5 million. Net loss per diluted share was $0.02 against $0.28 a year ago. The company operating income for the quarter exceeded last year's operating income by more than $23 million, with nearly $15 million of the increase coming from the 470 basis point expansion of gross profit rate, driven by much higher gross margins and improved inventory productivity. Capital expenditures were $4.1 million for the second quarter of 2018, which compares to $11.8 million in 2017.

For twenty six weeks, the company reported net sales of $637,624,000 against $648,371,000 a year ago. With comparable sales slightly positive, the decrease was coming from closings of unproductive stores. And e-commerce sales for the first half were up 106%, including online orders shipped from stores. Operating income was $11,638,000 against loss of $11,471,000 a year ago. Income before income taxes was $6,310,000 against loss of $13,752,000 a year ago. Net income was $6,190,000 against loss of $9,293,000 a year ago. The important measure of improved liquidity is adjusted EBITDA, which, for the first half of 2018, increased to $28.7 million compared to $6.7 million for the first half last year. As I'll discuss more in a moment, EBITDA improvements and CapEx reductions continue to drive improving debt position. Net income per diluted share was $0.13 against net loss per diluted share of $0.20 a year ago. Net cash used in operating activities was $16,884,000 against net cash provided by operating activities of $24,943,000 a year ago. Net acquisition of property and equipment was $4,082,000 against $11,761,000 a year ago. EBITDA was $27,853,000 against $4,755,000 a year ago. Adjusted EBITDA was $28,675,000 against $6,670,000 a year ago.

For the fiscal year 2018, the company is projecting EBITDA in excess of $45 million for fiscal 2018 compared to $7 million for fiscal 2017. With loss carry-forward and valuation allowance, The company expects effective tax rate to be close to 0 for all of 2018. The company continues to expect 2018 capital spending of approximately $10 million compared to $21 million in 2017, primarily due to fewer new stores and lower IT investments.

For the second half, the company expects operating income compared to an operating loss of $19.8 million last year. The company anticipates low single-digit increases in comparable sales for the second half driven by higher regular-price selling, offset by lower clearance sales. The company expects its second half gross profit rate to be slightly higher than last year's second half. SG&A expenses are expected to be $15 to $20 million lower in the second half . The company forecasting operating earnings in the second half, which is a significant improvement from last year's second half operating loss of almost $20 million.

For the third quarter, the company anticipates an operating loss of approximately $10 million in the third quarter that will be more than offset by fourth quarter earnings. The gross profit rate in third quarter is planned higher than last year due to lower clearance sales in this year's third quarter.

For the fourth quarter gross profit rate is planned similar to last year, when clearance selling normalized.