Stein Mart (SMRT)

For the 13 weeks ended May 2, 2009 compared to the 13 weeks ended May 3, 2008

Net sales for the 13 weeks ended May 2, 2009 were $319.6 million, down 9.2 percent from $352.1 million for 2008. The $32.6 million sales decrease reflects a $26.6 million decrease in the comparable store group and a $9.4 million decrease in the closed store group, offset by a $3.4 million increase in the non-comparable store group due to the inclusion of sales for one store opened in 2009 and six stores opened in 2008. The closed store group includes two stores closed in 2009 and ten stores closed in 2008. Comparable stores sales for the first quarter of 2009 decreased 8.0 percent compared to the same 2008 period.

Gross profit for the 13 weeks ended May 2, 2009 was $96.8 million or 30.3 percent of net sales compared to $97.7 million or 27.8 percent of net sales for the 13 weeks ended May 3, 2008. The $0.9 million decrease in gross profit reflects a $2.0 million decrease in the closed store group, offset by a $0.6 million increase in the comparable store group and a $0.5 million increase in the non-comparable store group due to the inclusion of operating results for one store opened in 2009 and six stores opened in 2008. Gross profit as a percent of sales increased 2.5 percentage points during the first quarter of 2009 due to a 2.6 percentage point decrease in markdowns and a 1.0 percentage point increase in markup, offset by a 1.1 percentage point increase in occupancy costs due to a lack of leverage on lower sales.

SG&A expenses were $79.9 million or 25.0 percent of net sales for the 13 weeks ended May 2, 2009 as compared to $91.5 million or 26.0 percent of net sales for the same 2008 period. The $11.7 million decrease in SG&A expenses reflects a $9.6 million reduction in store operating expenses, a $1.3 million decrease in depreciation expense and a $1.1 million decrease in non-buying expenses in the corporate office, offset by a $0.3 million increase in advertising expenses. Store operating expenses decreased $7.9 million for the comparable store group due to headcount reductions and other cost saving initiatives and decreased $2.0 million for the closed store group, but were offset by a $0.3 million increase for the non-comparable store group. Depreciation expense decreased as a result of asset impairment charges taken during the fourth quarter of 2008. Corporate office expenses decreased primarily due to compensation and benefit reductions.

Other income, net decreased $0.9 million for the 13 weeks ended May 2, 2009 compared the same 2008 period due to a decrease in the number of credit cards issued through our co-brand credit card program.

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The effective tax rate of 25.8 percent for the first quarter of 2009 is lower than the statutory rate, and is lower than the effective tax rate of 40.5 percent for the first quarter of 2008, primarily due to the 2009 first quarter including the benefit from net favorable temporary differences and utilization of federal tax credits that decreased the valuation allowance for deferred tax assets.

Year Ended January 31, 2009 Compared to Year Ended February 2, 2008

Net sales for the year ended January 31, 2009 were $1,326.5 million, down 9.0% from $1,457.6 million for the prior year. The $131.2 million decrease reflects a $152.2 million decrease in the comparable store group and a $16.2 million decrease in the closed store group, offset by a $37.2 million increase in the non-comparable store group due to the inclusion of sales for the 14 stores opened in 2007 and the six stores opened in 2008. The closed store group includes the ten stores closed in 2008 and the two stores closed in 2007. Comparable stores sales for 2008 decreased 10.9% compared to 2007.

Gross profit for year ended January 31, 2009 was $294.2 million or 22.2 percent of net sales compared to $361.4 million or 24.8 percent of net sales for the prior year. The $67.2 million decrease in gross profit reflects a $64.9 million decrease in the comparable store group and a $4.4 million decrease in the closed store group, partially offset by a $2.1 million increase in the non-comparable store group due to the inclusion of operating results for the 14 stores opened in 2007 and the six stores opened in 2008. Gross profit as a percent of sales decreased during fiscal 2008 due to a 1.1 percentage point increase in markdowns and a 2.0 percentage point increase in buying and occupancy costs, offset by a 0.5 percentage point increase in markup.

SG&A expenses were $394.8 million or 29.8 percent of net sales for the year ended January 31, 2009 as compared to $388.6 million or 26.7 percent of net sales for 2007. SG&A expenses for 2008 include $25.4 million of primarily non-cash pre-tax asset impairment and store closing charges compared to $5.2 million in 2007. Asset impairment charges were $16.7 million higher than last year due to a greater number of stores with projected cash flows that do not support the carrying value of their long-lived assets. Store closing charges increased $3.5 million over last year because ten stores were closed in 2008 compared to only two store closings in 2007.

Excluding asset impairment and store closing charges, SG&A expenses were $369.3 million or 27.8 percent of sales in 2008 compared to $383.4 million or 26.3 percent of sales in 2007. This $14.1 million decrease in SG&A expenses resulted primarily from significant reductions in advertising and store operating expenses, somewhat offset by professional fees related to expense reduction initiatives. Advertising expenses decreased $15.2 million this year due primarily to reduced broadcast media. Store operating expenses decreased $8.2 million for the comparable store group due to cost saving initiatives and decreased $3.4 million for the closed store group, but were offset by an $8.9 million increase for the non-comparable store group due to the inclusion of operating results for the 14 stores opened in 2007 and the six stores opened in 2008. Corporate SG&A expenses were higher in 2008 primarily due to professional fees related to ongoing expense reduction initiatives and higher benefit costs, while last year included $1.8 million of separation costs for the resignation of the former President/Chief Executive Officer. SG&A expenses as a percentage of net sales were higher this year due to a lack of leverage on lower sales.

Pre-opening expenses for the six stores opened in 2008 and the 14 stores opened in 2007 amounted to $1.5 million and $2.7 million, respectively.

Other income, net decreased $1.0 million in 2008 compared to 2007 due to decreases in credit card income and shoe department income, both resulting from the decreased net sales.

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Interest expense, net increased $1.0 million during 2008 compared to 2007 due to higher borrowings at lower interest rates this year compared to last year. During the third quarter of 2008, we borrowed an additional $75 million on our revolving credit agreement which increased our notes payable to banks balance to $100 million. We maintained that notes payable balance through January 31, 2009, investing excess borrowings in short-term money market funds. Subsequent to year end, the Company liquidated these money market funds and repaid that portion of its borrowings.

The effective income tax benefit decreased from 31.2 percent in 2007 to 12.9 percent in 2008 primarily due to recording a $19.0 million valuation allowance for deferred tax assets during the fourth quarter of 2008. The Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (“SFAS No. 109”), requires that companies assess whether valuation allowances should be established against their deferred tax assets based on consideration of all available evidence using a “more likely than not” standard. In making such assessments, significant weight is to be given to evidence that can be objectively verified. A company’s current or previous losses are given more weight than its future outlook, and although the Company was profitable in 2006 and posted a small loss in 2007, the results in 2008 produced a cumulative three-year loss, which is considered a significant factor that is difficult to overcome. Accordingly, the Company established a deferred tax asset valuation allowance of $19.0 million through a charge to tax expense.

Year Ended January 31, 2009 Compared to Year Ended February 2, 2008