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Executives

Linda M. Farthing - President, Chief Executive Officer, Director

James G. Delfs - Chief Financial Officer, Senior Vice President-Finance

William A. Moll - Executive Vice President and Chief Merchandising Officer

Jay Stein - Chairman of the Board

Michael D. Ray - Senior Vice President, Director of Stores

Analysts

Shaun Smolarz - Sidoti & Company

David M. Mann - Johnson Rice & Company

Paula Kalandiak - Broadpoint Capital

Robin Murchison - SunTrust Robinson Humphrey

Larry Source - Robert W. Baird

Stein Mart, Inc. (SMRT) F3Q07 Earnings Call November 29, 2007 11:00 AM ET

Operator

Good morning. My name is Takia and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Stein Mart Inc. third quarter financial results conference call. (Operator Instructions) It is now my pleasure to turn the floor over to your host, Ms. Linda Farthing, President and CEO of Stein Mart. Madam, you may begin your conference.

Linda M. Farthing

Good morning. Thank you for joining us. I will provide a brief recap of our third quarter performance and share my perspectives of how we see our business going forward. Please keep in mind that I have been in my capacity as CEO for just two months, so what you will hear today is evolving.

After my comments, you’ll here from Jim Delfs, our CFO; Bill Moll, our Chief Merchant. We will then take questions, at which time Jay Stein, Chairman of the Board, Hunt Hawkins, Chief Administrative Officer, and Mike Ray, Senior Vice President of Stores, will also be available for questions and comments.

Our third quarter performance was unacceptable. We were unable to drive sales, resulting in our worst third quarter comp performance in recent history. As the environment deteriorated, we made midcourse corrections in marketing, promotion and store environment to try and improve sales. Unfortunately, our efforts were not sufficient.

November sales are trending significantly below last year and below plan, and we expect the pressure to continue, given the intense level of promotional activity both pre- and post-Thanksgiving by other retailers.

We will liquidate inventories as expeditiously as possible in the fourth quarter so we don’t burden 2008 with 2007’s merchandise. Our plans for next year are still in their initial stages but they are being built and in a much more conservative assumptions until we have solid indicators of a turnaround in business.

I don’t have to tell you how difficult the current environment is for retailers in general and for companies catering to our core customer in particular. Our target customer has not been tempted to shop for apparel, either because the fashion doesn’t excite her or she is worried about the economy or both.

Meanwhile, our competitors have already gone to extraordinary lengths, including deep discounts off of regular priced merchandise to attract customers, making it especially difficult for an everyday low price retailer like Stein Mart.

Additionally, we have experienced softness in what has traditionally been a Stein Mart strength -- our geographic concentration in the Southeast. Our core region has come under increasing economic and weather pressures and are business has suffered accordingly.

We have started to see some slight improvement in the South Florida business but it’s being offset by the overall regional underperformance. We also continue to have problems with our home business that has continued to track well below the company trend.

Fixing this area is a priority but in a soft housing market, this does provide additional challenges. We are looking at alternatives to maximize the productivity of the home square footage.

Since my arrival at the end of September, I have focused on a top to bottom review of the business. I have spent time in a number of stores and with the corporate division. I have spoken directly with customers and personally solicited additional input. I have also enlisted some of our third party partners and other stakeholders to provide their viewpoints as to the strength and the weaknesses in our business.

This process is far from over but there are some actions we are taking.

We are focused on top line and reversing the negative comp store sales trend we have been experiencing for some time. We have redeployed our marketing dollars. The new branding campaign that the company had embarked on earlier in the year did not drive customers into the store, so we have stepped away from our television base branding to an aggressive promotion campaign to be more competitive. As a result, you are seeing a much stronger value message in every communication from us and both inside and outside our stores as we reinforce the message with signage. We are using direct mail to our preferred customers and purchase lists, e-mail and special targeting to our credit card customers, and we will use TV and radio for our 14-hour sales. This correction has cost us on the expense side but was necessary to advance our goal.

But I also want to tell you that I’m not willing to lay our poor performance off on marketing alone. We are looking at every aspect of our operation to assess where we are succeeding and what needs to work.

We are pulling back on our new store opening plans to dedicate all of our efforts to returning our core business to profitability. In addition, we are reevaluating our merchandise mix and the productivity of each category.

We are continuing to ensure we present a strong value message in our store and media. We are evaluating the productivity of each square foot of selling space. We are focusing our capital spending on those areas that provide the most immediate and greatest return. We will also be cutting costs commensurate with our trend of business.

We assure you that we will leave no stone unturned in looking into the heart of the Stein Mart business and revalidating every aspect of our operations. This will not happen overnight but I look forward to keeping you informed on our progress as we continue to develop our strategy going forward.

I thank you and I now turn it over to Jim Delfs, our Chief Financial Officer.

James G. Delfs

Thanks, Linda. In the course of our presentation this morning and in response to your questions, we may make statements as to certain matters that constitute forward-looking statements. Additional information concerning those factors that could cause actual results to differ from those in the forward-looking statements can be found in our current report on Form 10-K for the year ended February 3, 2007.

For the third quarter of 2007, total sales decreased 1.7% from the third quarter of 2006, while comp store sales decreased 6.3%. Please note that total sales for the 13 weeks and 39 weeks ended November 3, 2007 are compared to total sales for the 13 weeks and 39 weeks ended October 28, 2006, a one-week shift for each period.

Comp-store sales, on the other hand, are compared for the equivalent 13- and 39-week periods, thus comp-store sales for the 13-week and 39-week period ended November 3, 2007 are compared to the equivalent 13-week and 39-week period ended November 4, 2006. The effect of the one-week shift positively affected total sales by approximately $6.7 million for the third quarter and positively affected total sales by approximately $7.3 million year-to-date.

For the third quarter, gross profit declined to $86.2 million, or 25.9% of sales, compared to $89.3 million, or 26.3% of sales in the same period last year. Merchandise margin was flat due to increased markdowns offset by increased markups. Occupancy and buying costs increased 40 basis points, primarily from lack of leverage on lower sales.

Selling, general and administrative expenses were $97.2 million, or 29.2% of sales as compared to $92.6 million, or 27.3% of sales during the same period last year. For the third quarter, SG&A expenses increased $4.6 million when compared to last year. Store operating expenses for the non-comp group of stores increased $2.3 million while operating expenses for the comp stores decreased $3.3 million.

Advertising increased $3.5 million and depreciation increased $400,000. Costs associated with the transition of the President and CEO were $2.4 million. Share-based compensation totaled $1.8 million in the quarter. That amount is net of a $500,000 reversal of previously accrued performance grants, since our results do not now support such awards. The increase of $300,000 over the prior year’s third quarter is included in cost of sales at $200,000 and in SG&A at $100,000.

Other income grew to 1.7% of sales in the third quarter of this year from 1.1% of sales last year. The increase is due to the addition of credit card income this year.

For the third quarter of 2007, we incurred a net loss of $2.7 million, or $0.06 per diluted share, as compared to net income of $237,000, or $0.01 per diluted share in the third quarter of 2006.

For the first nine months of 2007, total sales were flat compared to the first nine months of 2006 while comp store sales decreased 3.1%. Gross profit declined to $277.3 million, or 26.7% of sales in the first nine months of 2007 compared to $280.9 million, or 27% of sales in the same period last year. Merchandise margin was flat as increased markup was offset by increased markdown.

Occupancy and buying costs increased 30 basis points, primarily from lack of sales leverage and increased share-based buying costs.

SG&A expenses were $282.3 million, or 27.1% of sales in the first nine months of 2007 as compared to $268 million or 25.8% of sales during the same period last year. SG&A expenses increased $14.4 million in the first nine months of 2007 when compared to last year.

Store operating expenses for the non-comp group of stores increased $4.5 million and operating expenses for the comp stores decreased $2.7 million. Advertising increased $7.1 million and depreciation increased $2.2 million.

Share-based compensation totaled $6.5 million in the first nine months, which was an increase of $2.8 million over the prior year’s first nine months. That increase is included in cost of sales at $1.8 million and in SG&A at $1 million.

Other income grew to 1.6% of sales in the first nine months of this year from 1.1% of sales last year. The increase is due to the addition of credit card income this year.

The effective tax rate for the quarter and for the year-to-date was reduced due to lower estimated annual taxable income, certain federal and state tax credits, and other state tax benefits.

For the first nine months of 2007, net income was $7.6 million, or $0.18 per diluted share as compared to net income of $16.1 million or $0.37 per diluted share for the first nine months of 2006. Bill.

William A. Moll

Thanks, Jim. As you know, our comparable store sales declined more than 6% in the quarter. Just briefly, for the third quarter, only our intimate apparel area posted positive comps. Ladies and boutique was actually above the company trend and accessories was flat to the company trend. Men’s fell below the company trend in the third quarter and in our home division, both gifts and linens were down double digits.

Specific positive callouts within divisions were men’s dress furnishing and accessories, men’s moderate branded sports wear and golf apparel. In ladies, dresses, novelty jackets, key item sweaters and basic pants. Special sizes and intimate apparel both continued to outperform since we expanded them last year.

In accessories, jewelry, particularly bracelets and rings, bath and body and hosiery did well. Our luggage business continues to excel.

Obviously men’s and ladies cold weather categories suffered in this period, as did men’s suit separates and ladies career collections, social occasion, and casual bottoms. In accessories, handbags continued to be difficult. Linens, furniture and home décor continue to significantly under-perform.

Year-to-date, while our comps are down 3.1%, there is a wide range of performance among the divisions. Men’s, ladies and boutique are above the company trend and ladies and boutique, which is our largest contributor to the business, is actually low single digit positive on a year-to-date basis.

I want to note here that some of the softness we are seeing in the men’s area is related to the diminished polo assortment and the fact that our strategy to replace that product with other brands and proprietary product is still evolving.

Ladies accessories lags the company’s trends slightly and intimate apparel, a very small part of our business, is up double digits. Unfortunately, our home business continues to decline and for the year, it is down double digits as well.

Overall, inventories were down 5.2% on an average store basis at the end of the quarter. Coming into the fourth quarter, the areas where we have seen holiday strength are in ladies cashmere sweaters, men’s moderate sportswear and dress shirts, and box accessories, both men’s and women’s.

Our goal for the fourth quarter is to effectively clear remaining fall and winter merchandise through aggressive price point promotion before the holidays and begin our traditional red dot clearance cadence after Christmas.

Looking ahead, we have intensified the moderate part of our assortment and have adopted a more aggressive price point approach across our entire assortment, and we have aligned our advertising and promotion to support that action. In our troubled home area, this will be particularly visible in the coming months. We have a conservative posture about our spring plans and we’ll strive to enter this season with enough liquidity to take advantage of opportunistic purchases.

Our goal is a smooth conversion to the new season so we can feature and promote fresh product without the hangover of prior season merchandise. We have advanced some early spring product to our resort stores and have been pleased with the initial reaction to that product.

That concludes our prepared remarks and now we will take questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question is coming from Shaun Smolarz with Sidoti & Company.

Shaun Smolarz - Sidoti & Company

My first question is I would appreciate some additional transparency on the circumstances surrounding Linda’s appointment as CEO. How did the board decide to immediately announce Mike’s replacement? And also, were other candidates considered?

Linda M. Farthing

Jay, would you mind?

Jay Stein

I’ll be happy to. Let me say this; we have been with Linda in excess of 10 years, so we knew her capability. She has chaired the major committees on the board. She is a very action oriented person. She thinks very clearly and we found her to be on the board itself a clear leader.

Now, we announced it so immediately because we started obviously before -- we started talking to her some time ago and we worked out the details of it so that she could -- there would be as immediate continuity as possible after Mike left.

Shaun Smolarz - Sidoti & Company

Okay. That was very helpful. I appreciate that.

Jay Stein

It was done in a very planned, orderly manner, I can assure you. I called Linda and it took a while to in fact convince her that she needed one more challenge in her life and she loves this company and loves it a great deal. And as a result, accepted it.

Linda M. Farthing

Thank you, Jay.

Shaun Smolarz - Sidoti & Company

My next question is as you look out into 2008, do you think 2008 in terms of results will be closer to this year’s 2007 or 2006?

Linda M. Farthing

Obviously we are looking at 2008 from -- I mean, we’re looking at all aspects of our business and as I stated, what we are looking to do is to bring the company back to the kind of productivity levels and results that we have seen historically, so we are looking at all aspects to make that happen.

Shaun Smolarz - Sidoti & Company

And do you think that your results could significantly improve in 2008, absent a macroeconomic improvement in the Southeast, and thus improving the results just based on internal changes that you hope to see?

Linda M. Farthing

Jim, would you like to?

James G. Delfs

I think right now we are focusing primarily on managing our way through the fourth quarter and as Linda said, we are focusing on all aspects of the business right now. She’s looking with a fresh set of eyes at all aspects and we are putting together plans for 2008 but at this point, we’re not ready to share any of the details of those plans.

Linda M. Farthing

It would be very inappropriate at this time.

Shaun Smolarz - Sidoti & Company

In terms of possible changes in terms of new initiatives, perhaps you could comment on some of them, like in terms of with a downturn in the housing market, are you considering downscaling on the home division, or eliminating it in some stores entirely?

Linda M. Farthing

What we are looking at is the productivity of the square footage in our stores and you can take it from there.

Shaun Smolarz - Sidoti & Company

And when you look at the distribution process, are you considering possibly building a full scale distribution center as opposed to a drop shipment under the current process?

James G. Delfs

That’s not anywhere in our current thinking right now, Sean.

Linda M. Farthing

Everything is on the table but that is not currently in the thinking.

Shaun Smolarz - Sidoti & Company

And you said that you were going to downscale the new store openings for 2008. Do you have a range of store openings for 2008 that you are considering?

William A. Moll

Shaun, we don’t have a range of stores because it’s still a work in progress but I can tell you it will be significantly fewer than the 14 we opened this past year.

Jay Stein

It will be in the single digits.

Shaun Smolarz - Sidoti & Company

All right, and my last question for now is given the expense cutting initiatives and reduced store opening schedule, could you give us any additional insight into how you expect total SG&A dollars to increase next year?

James G. Delfs

Again, Sean, we’re looking at all areas of the business and that’s certainly part of that exercise.

Shaun Smolarz - Sidoti & Company

All right. Thank you very much, guys.

Operator

Thank you. Your next question is from David Mann with Johnson Rice.

David M. Mann - Johnson Rice & Company

Thank you. Linda, welcome back to the hot seat.

Linda M. Farthing

Thank you.

David M. Mann - Johnson Rice & Company

My question first is on the store base, the existing store base; if you assume the outlook that you’ve put out today, how many stores will be losing money on an [overall] basis this year?

James G. Delfs

We don’t go into those kinds of specifics, David.

David M. Mann - Johnson Rice & Company

Okay. Would it be reasonable to assume that you are, in addition to slowing store growth, you’re considering closing stores again?

James G. Delfs

As we’ve said in the past, after the fourth quarter is over, we look at all stores, looking at the underperforming stores and make determinations as to how to react to those stores, whether it be additional emphasis on improving their operations or taking the steps to close them and we probably will close a handful of stores every year.

Jay Stein

David, I want to emphasize a handful only. This is not a mass closing.

David M. Mann - Johnson Rice & Company

Okay. Thank you, Jay. In terms of capital expenditures, can you give us a sense on what maintenance CapEx is, at least on a go-forward basis? Or what it’s been, at least?

James G. Delfs

Again, we’re looking at all aspects of the business, how to best utilize our cash flow. That’s something that will go along with the valuation of new stores, how much to spend on existing stores, as well as systems next year.

Linda M. Farthing

And we’re taking a very conservative approach on that.

David M. Mann - Johnson Rice & Company

All right. And then in terms of regional issues, you talk in terms of November, was the weakness pretty -- or the deceleration, was it pretty broad-based or was it in certain markets that you felt it?

Michael D. Ray

We performed better in the north than we did elsewhere. Our weakest area was in the west where we had some unseasonably warm temperatures and to some extent, wildfires affected us there.

David M. Mann - Johnson Rice & Company

Okay, and then maybe one last question, Linda; it sounds like in this quarter there’s obviously a change in the promotional cadence versus what the company had tried to do a few years ago towards avoiding getting into the -- you know, going head-to-head with the department stores and every promotional coupon and item out there. Can you just talk about positioning wise how you are thinking about that? Do you think you’re going to be able to get back to more branding, less coupon oriented kind of promotional sales?

Linda M. Farthing

David, that obviously would be our goal but in this current environment, I am sure all of you are opening your newspapers and seeing 40% off entire stock of this, come in and get a third off of anything you want. I mean, I have never seen it as promotional as it is.

We do realize that that promotion is going to go into 2008 but we are addressing it as appropriate for our particular business. We had originally planned a very aggressive branding campaign, as I mentioned in my earlier remarks. Branding takes a long time and right now we needed immediate action and therefore diverted those dollars to where we could be much more promotional in our approach and that’s the way we need to be in this environment.

David M. Mann - Johnson Rice & Company

Thank you. Good luck in the holiday.

Operator

Thank you. Your next question is coming from Paula Kalandiak with Broadpoint Capital.

Paula Kalandiak - Broadpoint Capital

Good morning. My first question is about your merchandise. I was wondering if you’re seeing more opportunistic buys from your vendors as some of the other retailers, like department stores, cancel orders from them.

William A. Moll

Paula, that’s very accurate. There’s the opportunistic buys out there are starting to increase from all avenues and we are looking at those and as you noted, as you remember my comment, that is a part of our plan going forward to make sure we are aggressively positioned to take advantage of those opportunistic buys as they open up.

Paula Kalandiak - Broadpoint Capital

Okay, and then I think you also mentioned that you are going to intensify your moderate offering. So would that be some of the less well-recognized brand things that are below say Ann Klein or Michael Kors?

William A. Moll

No, they are very well recognizable brands, quite frankly. They could just be at moderate price points but very well recognizable and understood brands in the economy at large.

Paula Kalandiak - Broadpoint Capital

Can you give us some examples of what you consider moderate brands?

William A. Moll

Well, you can go on the floor right now and see Geoffrey Beene. You can see Arrow. You can see all different brands like that on the floor. You can go on the ladies floor and see Joan’s divisions on the floor in there. You can see Pappagallo brands on the floor that have intensified. So you can see many different brands on the floor.

Paula Kalandiak - Broadpoint Capital

Okay. And then just finally, and I know you won’t know how many stores you’re closing until the end of the year, but at this point do you expect to be a net store opener or closer next year?

William A. Moll

I think that’s still a decision that will still be made.

Paula Kalandiak - Broadpoint Capital

Okay. Thanks and good luck.

Operator

Thank you. Your next question is coming from Robin Murchison with SunTrust Robinson.

Robin Murchison - SunTrust Robinson Humphrey

Thanks very much. Good morning. Some of my questions have been answered but I wondered if it’s too difficult at this point to provide any sort of inventory guidance at the end of fourth quarter. Clearly it depends on your liquidation but I’m just thinking about it all holistically from an end of quarter positioning and then how you view inventory receipts. I’m sure defensively heading into first quarter but how you would be planning your open to buy. And would you even buy for positive comps or maybe flat comps and try to chase margin here?

William A. Moll

Robin, a lot of questions there. I think you can look at it this way, as you heard in my statements, our goal is to liquidate our fall holiday product properly on time to go into the new season with the proper amount of freshness and that is very important. It is a hallmark to Stein Mart that we enter January and February with fresh fashion appropriate color and weights for wherever our stores are geographically. So we are doing that.

We are obviously, as I just stated, looking at opportunistic buys that will enhance those situations. So that is a goal and I really believe we will follow that goal and that is where we are headed right now and we are aggressive in December to get to that number.

Linda M. Farthing

And Robin, as you saw in our guidance, it reflects very aggressive markdowns to get ourselves positioned so that we can go 2008 as fresh as possible.

Robin Murchison - SunTrust Robinson Humphrey

Thank you, Linda. Bill, with regard to spring ’08 and maybe just looking about and looking at business trends, merchandise trends, and getting a little bit away from this other stuff but when you look at Spring ’08, what do you think about the trends out there? I mean, correct me if I’m wrong, but the return to the waist look is what I’m seeing out there and then generally a more colorful palette and bright colors, intensified colors versus what we had in spring ’07, which would seem to benefit the novelty part of the equation, which would seem to benefit Stein Mart.

William A. Moll

Robin, you are absolutely accurate. I’ll give one addition to that; the colors look very strong, they fit into our strength and metallic on top of the colors look to be very good in handbags and accessories. Waist treatment has definitely got a little higher and also if you remember last year, we talked about narrow leg jeans and narrow leg pants. The wider leg is being tested and I think will hit our sweet spot of our demographics much better.

So yes, we feel good about the fashion trends going into 2008 because of color, fabrication and I think it’s also that core career customer that we do so well with.

Robin Murchison - SunTrust Robinson Humphrey

Bill, when you talk about the intensified moderate assortment, do you mean bringing in more merchandise in the middle part -- speaking of the women’s business, sort of like the middle part and maybe redoing boutique square footage and putting it over to the moderate, or you’re just talking about --

William A. Moll

No, no, no -- boutique is a hallmark of this company and it will not change. As you noticed in my comments, boutique is actually slightly ahead in the year-to-date number. Boutique will stay the same. We will continue to grow that, continue to work that as we will [over time].

We are going to intensify our moderate product in the ladies floor and try to intensify as much branding in there as we possibly can and that’s a major initiative, and then to be at very key price points so we can have key price points on a day-to-day basis and challenge ourselves on what are those key price points.

Robin Murchison - SunTrust Robinson Humphrey

Is Florida still tracking at about three times, give or take, the chain average?

James G. Delfs

It is. We’re performing -- obviously that’s one of our strongholds, so it is.

Robin Murchison - SunTrust Robinson Humphrey

Okay, and then lastly, I just had a little bit of a difficult time trying to dig up the covenants. Do you remain in compliance? Are the banks -- are you hearing anything from the banks?

James G. Delfs

We are hearing nothing from them and our covenant basically is do we have enough inventory to secure the borrowings, and we do.

Robin Murchison - SunTrust Robinson Humphrey

Very good. Thank you, guys and good luck.

Operator

Thank you. Your next question is coming from Larry [Source] with Robert W. Baird.

Larry Source - Robert W. Baird

Good morning, everybody. Stepping away from your operations for a second, on the question of your stock buy-back, could you tell us and remind us, I guess, where we are against your current authorization and what your current feelings are. Your average cost, just doing some quick arithmetic, is over $11 on shares you’ve accumulated so far. Where are we against the current authorization and what are your views with a $5.36 stock these days?

James G. Delfs

We have about 800,000 shares left on the board’s current authorization and I trust that your math is probably correct on the average price that we bought back at. Certainly at today’s price, that would not look like it was a very good buy.

As to what we’re going to do, I think again let me go back to what we’ve said -- we’re evaluating all parts of the business, continuing to evaluate alternative uses of cash and at this time, I’m not going to predict when we’ll be back in the market purchasing stock.

Larry Source - Robert W. Baird

Thank you.

Operator

(Operator Instructions) Your next question is a follow-up question from Shaun Smolarz.

Shaun Smolarz - Sidoti & Company

Linda, you mentioned earlier that you are undertaking a complete analysis of the company from top to bottom to find areas for improvement. My question is what is your goal with regard to the timing of when your analysis will conclude and then communicate a detailed turnaround initiative for 2008 and beyond?

Linda M. Farthing

That’s a good question. To remind everyone, I’ve been here two months. We are working aggressively to review all of these areas and I would hope to be able to give you a much more definitive answer in terms of the changes in our strategy probably at the -- I want to say some time at the end of the first quarter but it’s evolving and there will be things prior to that.

Shaun Smolarz - Sidoti & Company

All right. Thanks a lot.

Operator

Thank you. Your next question is also a follow-up from David Mann.

David M. Mann - Johnson Rice & Company

Thank you. In your previous comments, you were talking about moving towards more moderate brands. Can you just talk about what that means about the performance of some of your private label product and how you expect private label to play a role going forward, Linda?

William A. Moll

David, I’ll answer that question for you. We still feel good about our proprietary brands, both in men’s and women’s and in home, and we will continue to grow them at the pace that they should grow at, evaluating everything on board. We are looking at moderate brands to be -- to have the proper brands that the consumer can identify with and have very compelling price points, and that’s what that whole message means.

It is not a reflection against or for the proprietary brands. They will stand on their own and we will evaluate them as we go forward.

David M. Mann - Johnson Rice & Company

Is there anything in terms of customer research that supports that your customers are looking for more moderate brands or is it just more to be able to offer them a lower price point?

William A. Moll

It’s more -- it’s not so much a lower price point; it’s a value-oriented price point through our proposition.

David M. Mann - Johnson Rice & Company

Okay. Can you give us an update on profit logic? It seems like you should have enough data now to be able to assess -- it seems like it hasn’t helped you too much.

William A. Moll

Well, remember profit logic is a tool to work you through your markdowns. When you are in a down-trending economy, the markdowns are the markdowns, so profit logic is working. We’re working with it and I think we use to the best of our ability right now but we are in a down-trending market that we need to liquidate our product on a timely basis.

David M. Mann - Johnson Rice & Company

Okay, and then one last question; I think in this past quarter, you had some change by DSW in terms of the product offering. Could you just give an update on how that might have worked?

William A. Moll

Sure. Our shoe business continues to track our business, but there’s been -- the difference between spring and fall, there’s been dramatic improvement and I think DSW is very pleased with what they are seeing happen here as we are.

David M. Mann - Johnson Rice & Company

Okay, great. Thank you very much.

Linda M. Farthing

I want to respond further to the question that Sean asked as to when we would present the whole strategy and re-emphasizing that this is evolving and there are pieces that we are adding as we go along. So when I said the end of the first quarter, I don’t want you to think that there are going to be no changes until the end of the first quarter. I just want to clarify that.

Operator

Thank you. There appear to be no further questions. I’ll turn it back to management for any closing remarks.

Linda M. Farthing

Again, I would like to thank all of you for being on the call. We appreciate your interest in our company and I look forward to the opportunity to speak with your again as our strategy is evolving. Again, thank you very much.

Operator

This does conclude today’s Stein Mart Inc. conference call. You may now disconnect your lines.

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