Is Stein Mart Bankrupt?
Stein Mart, the storied chain that began in 1908 with a first location in Greenville, Mississippi by Russian Jewish immigrant Sam Stein, recently filed for Chapter 11 bankruptcy due to the COVID-19 pandemic back on August 12, 2020. All 281 stores across 30 U.S. states will be liquidated. We will examine the company’s history, its rise and fall, and show footage from our visit to a liquidating store.
Timeline of Stein Mart History
1908 – Stein Mart begins in 1908 with the first location in Greenville, Mississippi by Russian Jewish immigrant Sam Stein who moved to Greenville after tiring of the hustle and bustle of being a Wall Street runner in New York City.
1933 – Sam’s son, Jake, takes over the company after his father’s death in 1933. While the store previously sold general merchandise, Jake re-focused the store on clothing. The focus on clothing came as almost an accident. Jake wanted to move the store to a better location as the town expanded. He asked his siblings to open up the new store while he focused on closing out the old one. The going-out-of-business sale was so successful, Jake realized he should keep the old store to run the off price model that eventually became the main focus of Stein Mart.
1960s – The store, previously known as “Stein’s” becomes “Stein Mart” after Jake Stein’s uncle tells him that his friend Sam Walton named his stores “Wal-Mart”.
1968 – Jake Stein incorporates Stein Mart in the state of Mississippi.
1977 – Part of Stein Mart’s business model was selling off excess Saks Fifth Avenue inventory. Jake’s son, Jay, was now involved with the business and was encouraging his more old school father to look at expansion. Jay convinced his father to look at a vacant 30,000 square-foot-space in Memphis, Tennessee. Jake only wanted half, his son convinced him to take the full space.
The opening night was such a hit that Jay Stein had to head to New York to promptly source more merchandise. Jay Stein said in a profile piece later that many local women would want to work at stores to get a store discount and the first look at merchandise. At this time, the company had three stores.
1984 – The company establishes its corporate headquarters in Jacksonville, Florida a year after opening its first store location there.
1990 – By the year 1990, under Jay Stein’s leadership, the company has 40 stores. In determining the best locations for stores, the company looked for metro areas with populations over 125,000 and at income, education, and occupation data to determine if the area would have demand for discount designer clothing.
1992 – The company went public in 1992 with 46 stores. The initial public offering was so that the company could have more liquidity for the family to expand.
2002 – Jay Stein stepped down as CEO in 2002, but remained the Chairman and largest shareholder.
2010 – Stein Mart begins limited online ship from store options.
2011 – After a number of leadership changes over the previous decade, Jay Stein returns as Stein Mart’s interim CEO.
2013 – In 2013, the company reports a profit of $25.6 million with the operation of 260 stores in 29 different states.
2014 – In a profile piece, Jay Stein notes the company has 266 stores and states he hopes to open 25 more in the next year or two. He believed at the time that the company could hopefully double its size and eventually merge with a business partner when the time is right.
2016 – The company was operating 278 stores by 2016. In March, Jay Stein leaves his role as CEO when Dawn Robertson is announced as taking the post. However, she only lasted six months and the company replaced her with established Stein Mart executive D. Hunt Hawkins.
2017 – In October, the company responds to their falling stock price by vowing to make cuts including cuts of 10% of their corporate staff, reductions in capital expenditures by $22 million from the previous year, and a suspension of their quarterly dividend to save $14 million annually.
2018 – As the company continued to struggle, Stein Mart announced in January 2018 that they had appointed a special committee to work with management to explore strategic alternatives. The announcement, rather vague, seemed to be the company trying to signify they intended to right the ship. By this time, Stein Mart had nearly 300 locations and fully functioning e-commerce operation.
2020 – In February 2020, the company announced that they had reached a deal to go private and would no longer be publicly traded. The company would still be controlled by Jay Stein, the largest shareholder, with his shares going to a newly formed private entity. The deal was expected to close in the first half of 2020 subject to company shareholders but never came to fruition.
In August, the company announced it would be filing for Chapter 11 bankruptcy and liquidating all 280 of its stores across 30 states. CEO D. Hunt Hawkins cited the challenges of the COVID-19 pandemic and increasingly challenging retail environment as primary reasons for the bankruptcy. By September 2020, they began marketing leases for stores, distribution centers, and corporate offices.
Stein Mart: A Mighty Rise and Fall
The optimistic projections of Jay Stein in the previously cited Fortune magazine profile, unfortunately, would never come to pass, however, it is admirable what Jay was able to do to rapidly grow the company in his lifetime. The family-run business of selling off rack discount clothing was one adopted more successfully by later players such as TJ Maxx and Marshall’s. Now, many retail players that were likely sources to Stein Mart are even taking notice of the business model. For example, Sak’s 5th Avenue with Off 5th, Macy’s with Macy’s Backstage, and Nordstrom with Nordstrom Rack.
Stein Mart’s liquidation has been quite successful as it has been reported that they reported profits for the first two and a half weeks after their bankruptcy filing, reporting a net income of $20.6 million between August 12-29, 2020. This came despite net losses of $105 million overall in the seven months prior to August 29. As stated in our timeline, the late Jake Stein crafted his business model after seeing the success of liquidating his first store prior to moving to a larger location. The success of Jake’s business model lives on, even as Stein Mart marks another family business legacy making its COVID-19 era exit from the retail stage.
Check out our video below from our walk through of a Stein Mart store liquidating in the Pittsburgh, Pennsylvania area.