The fate of Stein Mart was sealed this week when the 112-year-old discount retailer filed for bankruptcy. An inability to adapt to the changing retail environment of the 2010s, a dependency on debt, and a lack of liquidity doomed Stein Mart as it approached the pandemic.
💎 Data Digs
As part of its bankruptcy filing, the company announced plans to close nearly all of its 300 stores. Some of the real estate investment trusts (REITs) that have Stein Mart locations include Brixmor Property Group (with ten locations), Site Centers (with eight locations), and Kimco Realty (with eight locations).
If Stein Mart does close all of its locations, customers could flock to the closest nearby discount retailer. In this map, we show how close other retail competitors are located to current Stein Mart stores. Retailers poised to benefit from Stein Mart's failure include Target, Best Buy, Ross Stores, Macy's, and TJ Maxx. There's an average of two Target stores, two Ross Stores, one Best Buy, and one TJ Maxx within five miles of every Stein Mart.
🔬 Failure Blueprint
- After multiple CEO changes in 2016, Stein Mart implemented a $10 million cost savings reduction plan that included a 10% elimination of corporate workers and a 15% decrease in inventory.
- With sales declining, the company appointed a special committee in 2018 to “identify potential strategic alternatives.”
- Stein Mart reported a $10.5 million loss in 2019 after sales dropped by 3% due to fewer operational stores.
- In January 2020, the company announced that it would be acquired by Kingswood Capital Management, however, the deal fell apart in April due to the economic conditions from the pandemic.
- Store closures from the pandemic resulted in a net loss of $66 million in the quarter, with total debt increasing from $154 million to $198 million.
- Even after staggered store reopenings and a $10 million Paycheck Protection Program loan, Stein Mart revealed in a regulatory filing in June that there was “substantial doubt” about continuing operations for the next year.
⚡ Opportunity
With the presumed closure of Stein Mart’s stores, several competitors in the discount retail space could capitalize on its absence. However, evolving consumer trends suggest that the time is ripe for e-commerce to engulf retail stores. Online sales increased by 55% year-over-year in July and by 76% in June, according to Adobe Analytics.