##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended October 29, 2005



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from  to



Commission file number 0-20052



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STEIN MART, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Florida                                                        |  | 64-0466198                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|1200 Riverplace Blvd., Jacksonville, Florida                   |  | 32207                                  
|(Address of principal executive offices)                       |  | (Zip Code)                             



Registrants
telephone number, including area code: (904) 346-1500



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Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    Yes  x    No ̈



Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No ̈



Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



At November 26, 2005, the latest practicable date, the Registrant had issued and outstanding an aggregate of 43,721,999 shares of its common stock.



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##### Table of Contents

STEIN MART, INC.

TABLE OF CONTENTS



|                               |  |                                                                                                                 |  |     
|------------------------------ |  | --------------------------------------------------------------------------------------------------------------- |  | ----
|                               |  |                                                                                                                 |  | PAGE
|PART I - FINANCIAL INFORMATION |  |                                                                                                                
|                               |  |                                                                                                                
|Item 1.                        |  | Consolidated Financial Statements (Unaudited):                                                                  |  |     
|                               |  |                                                                                                                
|                               |  | Consolidated Balance Sheets at October 29, 2005, January 29, 2005 and October 30, 2004                          |  | 3   
|                               |  |                                                                                                                
|                               |  | Consolidated Statements of Operations for the 13 Weeks and 39 Weeks Ended October 29, 2005 and October 30, 2004 |  | 4   
|                               |  |                                                                                                                
|                               |  | Consolidated Statements of Cash Flows for the 39 Weeks Ended October 29, 2005 and October 30, 2004              |  | 5   
|                               |  |                                                                                                                
|                               |  | Notes to Consolidated Financial Statements                                                                      |  | 6   
|                               |  |                                                                                                                
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                           |  | 10  
|                               |  |                                                                                                                
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                      |  | 14  
|                               |  |                                                                                                                
|Item 4.                        |  | Controls and Procedures                                                                                         |  | 15  
|                               | 
|PART II - OTHER INFORMATION    |  |                                                                                                                
|                               |  |                                                                                                                
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                     |  | 15  
|                               |  |                                                                                                                
|Item 6.                        |  | Exhibits                                                                                                        |  | 15  
|                               | 
|SIGNATURES                     |  | 16                                                                                                             



2



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##### Table of Contents

Stein Mart, Inc.

Consolidated Balance Sheets

(In thousands)



|                                                                                                                                                |  |                  |         |   |                  |   |         |                  |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | ---------------- |  | - | ------- | -
|                                                                                                                                                |  | October 29, 2005 |         |   | January 29, 2005 |   |         | October 30, 2004 | 
|                                                                                                                                                |  | (Unaudited)      |         |   |                  |   |         | (Unaudited)      | 
|ASSETS                                                                                                                                          |  |                  |         |   |                  |   |         |                  |  |   |         |  
|Current assets:                                                                                                                                 |  |                  |         |   |                  |   |         |                  |  |   |         |  
|Cash and cash equivalents                                                                                                                       |  | $                | 27,866  |   |                  | $ | 20,250  |                  |  | $ | 26,146  |  
|Short-term investments                                                                                                                          |  |                  | 65,895  |   |                  |   | 72,475  |                  |  |   | 9,000   |  
|Trade and other receivables                                                                                                                     |  |                  | 1,820   |   |                  |   | 5,852   |                  |  |   | 3,934   |  
|Inventories                                                                                                                                     |  |                  | 313,332 |   |                  |   | 277,164 |                  |  |   | 322,664 |  
|Prepaid expenses and other current assets                                                                                                       |  |                  | 21,696  |   |                  |   | 13,010  |                  |  |   | 22,418  |  
|                                                                                                                                                |  |                  |         |   |                  |   |         |                  |  |   |         |  
|Total current assets                                                                                                                            |  |                  | 430,609 |   |                  |   | 388,751 |                  |  |   | 384,162 |  
|Property and equipment, net                                                                                                                     |  |                  | 81,901  |   |                  |   | 71,048  |                  |  |   | 74,112  |  
|Other assets                                                                                                                                    |  |                  | 14,915  |   |                  |   | 14,781  |                  |  |   | 15,011  |  
|                                                                                                                                                |  |                  |         |   |                  |   |         |                  |  |   |         |  
|Total assets                                                                                                                                    |  | $                | 527,425 |   |                  | $ | 474,580 |                  |  | $ | 473,285 |  
|                                                                                                                                                |  |                  |         |   |                  |   |         |                  |  |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                            |  |                  |         |   |                  |   |         |                  |  |   |         |  
|Current liabilities:                                                                                                                            |  |                  |         |   |                  |   |         |                  |  |   |         |  
|Accounts payable                                                                                                                                |  | $                | 123,922 |   |                  | $ | 99,163  |                  |  | $ | 135,391 |  
|Accrued liabilities                                                                                                                             |  |                  | 71,827  |   |                  |   | 73,257  |                  |  |   | 69,437  |  
|Income taxes payable                                                                                                                            |  |                  |        |   |                  |   | 5,089   |                  |  |   |        |  
|                                                                                                                                                |  |                  |         |   |                  |   |         |                  |  |   |         |  
|Total current liabilities                                                                                                                       |  |                  | 195,749 |   |                  |   | 177,509 |                  |  |   | 204,828 |  
|Other liabilities                                                                                                                               |  |                  | 21,794  |   |                  |   | 20,561  |                  |  |   | 20,114  |  
|                                                                                                                                                |  |                  |         |   |                  |   |         |                  |  |   |         |  
|Total liabilities                                                                                                                               |  |                  | 217,543 |   |                  |   | 198,070 |                  |  |   | 224,942 |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                   |  |                  |         |   |                  |   |         |                  |  |   |         |  
|Stockholders equity:                                                                                                                           |  |                  |         |   |                  |   |         |                  |  |   |         |  
|Preferred stock - $.01 par value; 1,000,000 shares authorized; no shares issued or outstanding                                                  |  |                  |         |   |                  |   |         |                  |  |   |         |  
|Common stock - $.01 par value; 100,000,000 shares authorized; 43,759,295, 42,880,031 and 42,494,654 shares issued and outstanding,
respectively |  |                  | 438     |   |                  |   | 429     |                  |  |   | 425     |  
|Paid-in capital                                                                                                                                 |  |                  | 26,563  |   |                  |   | 14,340  |                  |  |   | 8,865   |  
|Unearned compensation                                                                                                                           |  |                  | (3,829  | ) |                  |   | (603    | )                |  |   | (454    | )
|Retained earnings                                                                                                                               |  |                  | 286,710 |   |                  |   | 262,344 |                  |  |   | 239,507 |  
|                                                                                                                                                |  |                  |         |   |                  |   |         |                  |  |   |         |  
|Total stockholders equity                                                                                                                      |  |                  | 309,882 |   |                  |   | 276,510 |                  |  |   | 248,343 |  
|                                                                                                                                                |  |                  |         |   |                  |   |         |                  |  |   |         |  
|Total liabilities and stockholders equity                                                                                                      |  | $                | 527,425 |   |                  | $ | 474,580 |                  |  | $ | 473,285 |  
|                                                                                                                                                |  |                  |         |   |                  |   |         |                  |  |   |         |  



The accompanying notes
are an integral part of these consolidated financial statements.



3



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##### Table of Contents

Stein Mart, Inc.

Consolidated Statements of Operations

(Unaudited)

(In thousands, except
per share amounts)



|                                                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|------------------------------------------------------------ |  | ---------------- | ------- | - | ---------------- | - | ------- | ---------------- |  | - | ---------------- | - |  | - | --------- | -
|                                                             |  | 13 Weeks Ended   |         |   | 39 Weeks Ended   |  
|                                                             |  | October 29, 2005 |         |   | October 30, 2004 |   |         | October 29, 2005 |  |   | October 30, 2004 |  
|Net sales                                                    |  | $                | 336,537 |   |                  | $ | 330,432 |                  |  | $ | 1,054,256        |   |  | $ | 1,014,664 |  
|Cost of merchandise sold                                     |  |                  | 253,486 |   |                  |   | 254,228 |                  |  |   | 763,254          |   |  |   | 755,802   |  
|                                                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|Gross profit                                                 |  |                  | 83,051  |   |                  |   | 76,204  |                  |  |   | 291,002          |   |  |   | 258,862   |  
|Selling, general and administrative expenses                 |  |                  | 85,057  |   |                  |   | 82,884  |                  |  |   | 255,532          |   |  |   | 244,818   |  
|Other income, net                                            |  |                  | 3,749   |   |                  |   | 3,293   |                  |  |   | 11,306           |   |  |   | 10,460    |  
|                                                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|Income (loss) from operations                                |  |                  | 1,743   |   |                  |   | (3,387  | )                |  |   | 46,776           |   |  |   | 24,504    |  
|Interest income, net                                         |  |                  | 509     |   |                  |   | 108     |                  |  |   | 1,336            |   |  |   | 142       |  
|                                                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|Income (loss) from continuing operations before income taxes |  |                  | 2,252   |   |                  |   | (3,279  | )                |  |   | 48,112           |   |  |   | 24,646    |  
|Income tax (provision) benefit                               |  |                  | (856    | ) |                  |   | 1,246   |                  |  |   | (18,283          | ) |  |   | (9,365    | )
|                                                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|Income (loss) from continuing operations                     |  |                  | 1,396   |   |                  |   | (2,033  | )                |  |   | 29,829           |   |  |   | 15,281    |  
|Loss from discontinued operations, net of tax benefit        |  |                  |        |   |                  |   |        |                  |  |   |                 |   |  |   | (145      | )
|                                                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|Net income (loss)                                            |  | $                | 1,396   |   |                  | $ | (2,033  | )                |  | $ | 29,829           |   |  | $ | 15,136    |  
|                                                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|Basic income (loss) per share:                               |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|Continuing operations                                        |  | $                | 0.03    |   |                  | $ | (0.05   | )                |  | $ | 0.69             |   |  | $ | 0.36      |  
|Discontinued operations                                      |  |                  |        |   |                  |   |        |                  |  |   |                 |   |  |   |          |  
|                                                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|Total                                                        |  | $                | 0.03    |   |                  | $ | (0.05   | )                |  | $ | 0.69             |   |  | $ | 0.36      |  
|                                                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|Diluted income (loss) per share:                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|Continuing operations                                        |  | $                | 0.03    |   |                  | $ | (0.05   | )                |  | $ | 0.67             |   |  | $ | 0.36      |  
|Discontinued operations                                      |  |                  |        |   |                  |   |        |                  |  |   |                 |   |  |   |          |  
|                                                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|Total                                                        |  | $                | 0.03    |   |                  | $ | (0.05   | )                |  | $ | 0.67             |   |  | $ | 0.36      |  
|                                                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|Weighted-average shares outstanding  Basic                  |  |                  | 43,553  |   |                  |   | 42,394  |                  |  |   | 43,252           |   |  |   | 42,181    |  
|                                                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  
|Weighted-average shares outstanding  Diluted                |  |                  | 44,605  |   |                  |   | 42,394  |                  |  |   | 44,424           |   |  |   | 42,578    |  
|                                                             |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |           |  



The accompanying notes
are an integral part of these consolidated financial statements.



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##### Table of Contents

Stein Mart, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)



|                                                                                  |  |                        |            |   |                  |   |          |  
|--------------------------------------------------------------------------------- |  | ---------------------- | ---------- | - | ---------------- | - | -------- | -
|                                                                                  |  | For The 39 Weeks Ended |           
|                                                                                  |  | October 29, 2005       |            |   | October 30, 2004 |  
|Cash flows from operating activities:                                             |  |                        |            |   |                  |   |          |  
|Net income                                                                        |  | $                      | 29,829     |   |                  | $ | 15,136   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                        |            |   |                  |   |          |  
|Depreciation and amortization                                                     |  |                        | 14,973     |   |                  |   | 14,054   |  
|Impairment (recovery) of property and other assets                                |  |                        | 531        |   |                  |   | (245     | )
|Store closing charges                                                             |  |                        | 452        |   |                  |   | 1,340    |  
|Deferred income taxes                                                             |  |                        | 1,381      |   |                  |   | 966      |  
|Restricted stock compensation                                                     |  |                        | 516        |   |                  |   | 80       |  
|Tax benefit from exercise of stock options                                        |  |                        | 4,595      |   |                  |   | 1,009    |  
|Changes in assets and liabilities:                                                |  |                        |            |   |                  |   |          |  
|Trade and other receivables                                                       |  |                        | 4,032      |   |                  |   | 293      |  
|Inventories                                                                       |  |                        | (36,168    | ) |                  |   | (39,285  | )
|Prepaid expenses and other current assets                                         |  |                        | (8,771     | ) |                  |   | (8,890   | )
|Other assets                                                                      |  |                        | (1,281     | ) |                  |   | (1,134   | )
|Accounts payable                                                                  |  |                        | 24,759     |   |                  |   | 70,273   |  
|Accrued liabilities                                                               |  |                        | (2,902     | ) |                  |   | 8,410    |  
|Income taxes payable                                                              |  |                        | (5,089     | ) |                  |   |         |  
|Other liabilities                                                                 |  |                        | 478        |   |                  |   | (2,769   | )
|                                                                                  |  |                        |            |   |                  |   |          |  
|Net cash provided by operating activities                                         |  |                        | 27,335     |   |                  |   | 59,238   |  
|                                                                                  |  |                        |            |   |                  |   |          |  
|Cash flows from investing activities:                                             |  |                        |            |   |                  |   |          |  
|Capital expenditures                                                              |  |                        | (24,731    | ) |                  |   | (15,535  | )
|Purchases of short-term investments                                               |  |                        | (1,379,420 | ) |                  |   | (465,100 | )
|Sales of short-term investments                                                   |  |                        | 1,386,000  |   |                  |   | 456,100  |  
|                                                                                  |  |                        |            |   |                  |   |          |  
|Net cash used in investing activities                                             |  |                        | (18,151    | ) |                  |   | (24,535  | )
|                                                                                  |  |                        |            |   |                  |   |          |  
|Cash flows from financing activities:                                             |  |                        |            |   |                  |   |          |  
|Net payments under notes payable to banks                                         |  |                        |           |   |                  |   | (24,962  | )
|Dividends paid                                                                    |  |                        | (5,463     | ) |                  |   |         |  
|Proceeds from exercise of stock options                                           |  |                        | 15,157     |   |                  |   | 4,034    |  
|Proceeds from employee stock purchase plan                                        |  |                        | 499        |   |                  |   | 406      |  
|Purchases of common stock                                                         |  |                        | (11,761    | ) |                  |   |         |  
|                                                                                  |  |                        |            |   |                  |   |          |  
|Net cash used in financing activities                                             |  |                        | (1,568     | ) |                  |   | (20,522  | )
|                                                                                  |  |                        |            |   |                  |   |          |  
|Net increase in cash and cash equivalents                                         |  |                        | 7,616      |   |                  |   | 14,181   |  
|Cash and cash equivalents at beginning of year                                    |  |                        | 20,250     |   |                  |   | 11,965   |  
|                                                                                  |  |                        |            |   |                  |   |          |  
|Cash and cash equivalents at end of period                                        |  | $                      | 27,866     |   |                  | $ | 26,146   |  
|                                                                                  |  |                        |            |   |                  |   |          |  
|Supplemental disclosures of cash flow information:                                |  |                        |            |   |                  |   |          |  
|Income taxes paid                                                                 |  | $                      | 24,896     |   |                  | $ | 15,709   |  
|Interest paid                                                                     |  |                        |           |   |                  |   | 64       |  



The accompanying notes
are an integral part of these consolidated financial statements.



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##### Table of Contents

STEIN MART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

October 29, 2005

(Dollars in
tables in thousands, except per share amounts)



1. Basis of Presentation



The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. Operating results for the 39-week periods
are not necessarily indicative of the results that may be expected for the entire year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Stein Mart, Inc. annual report on Form 10-K for the
year ended January 29, 2005.



The Company has reclassified its auction
rate securities of $9.0 million, previously classified in Cash and cash equivalents, as Short-term investments on the Consolidated Balance Sheet as of October 30, 2004 to be consistent with the classification in the
consolidated financial statements for the year ended January 29, 2005. Corresponding adjustments have been made to the prior periods Consolidated Statement of Cash Flows to reflect purchases and sales of auction rate securities as
investing, rather than as a component of cash and cash equivalents. Certain other reclassifications have also been made to the 2004 consolidated financial statements to conform to the 2005 presentation.



2. Stock-Based Compensation



The Company currently follows the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148. Accordingly, no compensation cost has been recognized for the Companys stock option plans. Restricted
stock awards issued by the Company are accounted for in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. The employee compensation cost is included in net
income, as reported, throughout the vesting period. Had the compensation cost of the Companys stock-based plans been recorded consistent with the provisions of SFAS No. 123, the Companys net income and earnings per share would have
been changed to the following pro forma amounts:



|                                                                                                                                                |  |                  |       |   |                  |   |        |                  |  |   |                  |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ----- | - | ---------------- | - | ------ | ---------------- |  | - | ---------------- | - |  | - | ------ | -
|                                                                                                                                                |  | 13 Weeks Ended   |       |   | 39 Weeks Ended   |  
|                                                                                                                                                |  | October 29, 2005 |       |   | October 30, 2004 |   |        | October 29, 2005 |  |   | October 30, 2004 |  
|Net income (loss)  as reported                                                                                                                 |  | $                | 1,396 |   |                  | $ | (2,033 | )                |  | $ | 29,829           |   |  | $ | 15,136 |  
|                                                                                                                                                |  |                  |       |  
|Add: Restricted stock-based employee compensation expense included in reported net income (loss), net of related tax effects                    |  |                  | 130   |   |                  |   | 20     |                  |  |   | 320              |   |  |   | 50     |  
|                                                                                                                                                |  |                  |       |  
|Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax
effects |  |                  | (421  | ) |                  |   | (259   | )                |  |   | (1,226           | ) |  |   | (828   | )
|                                                                                                                                                |  |                  |       |   |                  |   |        |                  |  |   |                  |   |  |   |        |  
|Net income (loss)  pro forma                                                                                                                   |  | $                | 1,105 |   |                  | $ | (2,272 | )                |  | $ | 28,923           |   |  | $ | 14,358 |  
|                                                                                                                                                |  |                  |       |   |                  |   |        |                  |  |   |                  |   |  |   |        |  
|Basic earnings (loss) per share  as reported                                                                                                   |  | $                | 0.03  |   |                  | $ | (0.05  | )                |  | $ | 0.69             |   |  | $ | 0.36   |  
|Diluted earnings (loss) per share  as reported                                                                                                 |  | $                | 0.03  |   |                  | $ | (0.05  | )                |  | $ | 0.67             |   |  | $ | 0.36   |  
|Basic earnings (loss) per share  pro forma                                                                                                     |  | $                | 0.03  |   |                  | $ | (0.05  | )                |  | $ | 0.67             |   |  | $ | 0.34   |  
|Diluted earnings (loss) per share  pro forma                                                                                                   |  | $                | 0.02  |   |                  | $ | (0.05  | )                |  | $ | 0.65             |   |  | $ | 0.34   |  



6



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##### Table of Contents

STEIN MART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment, which replaces SFAS No. 123 and supersedes APB Opinion No. 25. SFAS No. 123R requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. In April 2005, the Securities Exchange Commission amended the compliance date to the first annual period beginning after
June 15, 2005. The Company will adopt the provisions of SFAS No. 123R in the first quarter of 2006. The Company has elected to apply the modified prospective transition method to all past awards outstanding and unvested as of the effective
date of January 29, 2006, and will recognize the associated expense over the remaining vesting period based on the fair values previously determined and disclosed as part of its pro-forma disclosures. Thus, the Company will not restate the
results of prior periods. The Company expects the effects of applying the modified prospective transition method to outstanding and unvested awards as of the effective date to be immaterial.



3. Discontinued Operations



One store that closed during 2004 resulted in the exit from a market. SFAS No. 144
requires closed stores to be classified as discontinued operations when the operations and cash flows of the stores have been eliminated from ongoing operations. There are no discontinued operations included in operating results for 2005. During the
first 39 weeks of 2004, discontinued operations generated sales of $0.9 million, loss from operations of $0.2 million, income tax benefit of $0.1 million and loss from discontinued operations, net of tax benefit of $0.1 million. See Note 4 for a
description of store closing costs included in loss from discontinued operations for the first 39 weeks of 2004.



4. Store Closing Charges



The Company closed six stores during the first 39 weeks of 2005 incurring $1.0 million of lease termination and severance costs. Seven stores were closed during 2004, all
of which were closed during the first 39 weeks of 2004. Lease termination and severance costs were $1.8 million during the first 39 weeks of 2004. All store closing charges are included in selling, general and administrative expenses in the
Consolidated Statements of Operations, except for $154,000 in 2004 which is included in loss from discontinued operations for the 39 weeks ended October 30, 2004.



The following tables show the activity in the store closing reserve for the first 39 weeks of 2005 and
2004:



|                            |  |               |       |         |   |          |  |               |       |  |   |      
|--------------------------- |  | ------------- | ----- | ------- | - | -------- |  | ------------- | ----- |  | - | -----
|                            |  | Jan. 29, 2005 |       | Charges |   | Payments |  | Oct. 29, 2005
|Continuing operations:      |  |               |       |         |   |          |  |               |       |  |   |      
|Lease termination costs     |  | $             | 6,898 |         | $ | 579      |  | $             | 2,272 |  | $ | 5,205
|Severance                   |  |               | 131   |         |   | 471      |  |               | 602   |  |   |     
|                            |  |               |       |         |   |          |  |               |       |  |   |      
|Total store closing reserve |  | $             | 7,029 |         | $ | 1,050    |  | $             | 2,874 |  | $ | 5,205
|                            |  |               |       |         |   |          |  |               |       |  |   |      
|                            |  |               |       |        
|                            |  | Jan. 31, 2004 |       | Charges |   | Payments |  | Oct. 30, 2004
|Continuing operations:      |  |               |       |         |   |          |  |               |       |  |   |      
|Lease termination costs     |  | $             | 8,780 |         | $ | 1,028    |  | $             | 2,314 |  | $ | 7,494
|Severance                   |  |               | 131   |         |   | 579      |  |               | 580   |  |   | 130  
|Other                       |  |               | 105   |         |   |         |  |               | 105   |  |   |     
|                            |  |               |       |         |   |          |  |               |       |  |   |      
|                            |  |               | 9,016 |         |   | 1,607    |  |               | 2,999 |  |   | 7,624
|                            |  |               |       |         |   |          |  |               |       |  |   |      
|Discontinued operations:    |  |               |       |         |   |          |  |               |       |  |   |      
|Lease termination costs     |  |               | 159   |         |   | 77       |  |               | 236   |  |   |     
|Severance                   |  |               | 19    |         |   | 77       |  |               | 96    |  |   |     
|                            |  |               |       |         |   |          |  |               |       |  |   |      
|                            |  |               | 178   |         |   | 154      |  |               | 332   |  |   |     
|                            |  |               |       |         |   |          |  |               |       |  |   |      
|Total store closing reserve |  | $             | 9,194 |         | $ | 1,761    |  | $             | 3,331 |  | $ | 7,624
|                            |  |               |       |         |   |          |  |               |       |  |   |      



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##### Table of Contents

STEIN MART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



The store closing reserve at October 29, 2005, January 29, 2005 and October 30, 2004 includes a current portion (in accrued liabilities) of $2.1 million, $3.0 million and $3.1 million,
respectively, and a long-term portion (in other liabilities) of $3.1 million, $4.0 million and $4.5 million, respectively.



The tables below set forth the components of loss from operations for all stores closed during 2005 and 2004. The 2005 tables present the losses from the six stores that
closed during the first 39 weeks of 2005. The 2004 tables present the sum of the losses from the six stores that closed during the first 39 weeks of 2005 and the seven stores closed during fiscal year 2004. Operating results of closed stores are as
follows:



|                     |  |                                 |        |   |                                 |   |       |  |   |                       |   |  |                         |        |   |       |   |      |   |  |   |        |  
|-------------------- |  | ------------------------------- | ------ | - | ------------------------------- | - | ----- |  | - | --------------------- | - |  | ----------------------- | ------ | - | ----- | - | ---- | - |  | - | ------ | -
|                     |  | 13 weeks ended October 29, 2005 |        |   | 13 weeks ended October 30, 2004 |  
|                     |  | Continuing Operations           |        |   | Discontinued Operations         |   | Total |  |   | Continuing Operations |   |  | Discontinued Operations |        |   | Total |  
|Sales                |  | $                               |       |   |                                 | $ |      |  | $ |                      |   |  | $                       | 5,682  |   |       | $ |     |   |  | $ | 5,682  |  
|Cost of sales        |  |                                 | 47     |   |                                 |   |      |  |   | 47                    |   |  |                         | 5,137  |   |       |   |     |   |  |   | 5,137  |  
|                     |  |                                 |        |   |                                 |   |       |  |   |                       |   |  |                         |        |   |       |   |      |   |  |   |        |  
|Gross profit         |  |                                 | (47    | ) |                                 |   |      |  |   | (47                   | ) |  |                         | 545    |   |       |   |     |   |  |   | 545    |  
|SG&A expenses        |  |                                 | 43     |   |                                 |   |      |  |   | 43                    |   |  |                         | 2,728  |   |       |   |     |   |  |   | 2,728  |  
|Other income, net    |  |                                 | 1      |   |                                 |   |      |  |   | 1                     |   |  |                         | 64     |   |       |   |     |   |  |   | 64     |  
|                     |  |                                 |        |   |                                 |   |       |  |   |                       |   |  |                         |        |   |       |   |      |   |  |   |        |  
|Loss from operations |  | $                               | (89    | ) |                                 | $ |      |  | $ | (89                   | ) |  | $                       | (2,119 | ) |       | $ |     |   |  | $ | (2,119 | )
|                     |  |                                 |        |   |                                 |   |       |  |   |                       |   |  |                         |        |   |       |   |      |   |  |   |        |  
|# stores closed      |  |                                 | 6      |   |                                 |   |      |  |   | 6                     |   |  |                         | 12     |   |       |   | 1    |   |  |   | 13     |  
|                     |  |                                 |        |   |                                 |   |       |  |   |                       |   |  |                         |        |   |       |   |      |   |  |   |        |  
|                     |  |                                
|                     |  | 39 weeks ended October 29, 2005 |        |   | 39 weeks ended October 30, 2004 |  
|                     |  | Continuing Operations           |        |   | Discontinued Operations         |   | Total |  |   | Continuing Operations |   |  | Discontinued Operations |        |   | Total |  
|Sales                |  | $                               | 6,383  |   |                                 | $ |      |  | $ | 6,383                 |   |  | $                       | 21,558 |   |       | $ | 942  |   |  | $ | 22,500 |  
|Cost of sales        |  |                                 | 5,414  |   |                                 |   |      |  |   | 5,414                 |   |  |                         | 19,084 |   |       |   | 752  |   |  |   | 19,836 |  
|                     |  |                                 |        |   |                                 |   |       |  |   |                       |   |  |                         |        |   |       |   |      |   |  |   |        |  
|Gross profit         |  |                                 | 969    |   |                                 |   |      |  |   | 969                   |   |  |                         | 2,474  |   |       |   | 190  |   |  |   | 2,664  |  
|SG&A expenses        |  |                                 | 2,873  |   |                                 |   |      |  |   | 2,873                 |   |  |                         | 7,809  |   |       |   | 424  |   |  |   | 8,233  |  
|Other income, net    |  |                                 | 45     |   |                                 |   |      |  |   | 45                    |   |  |                         | 245    |   |       |   |     |   |  |   | 245    |  
|                     |  |                                 |        |   |                                 |   |       |  |   |                       |   |  |                         |        |   |       |   |      |   |  |   |        |  
|Loss from operations |  | $                               | (1,859 | ) |                                 | $ |      |  | $ | (1,859                | ) |  | $                       | (5,090 | ) |       | $ | (234 | ) |  | $ | (5,324 | )
|                     |  |                                 |        |   |                                 |   |       |  |   |                       |   |  |                         |        |   |       |   |      |   |  |   |        |  
|# stores closed      |  |                                 | 6      |   |                                 |   |      |  |   | 6                     |   |  |                         | 12     |   |       |   | 1    |   |  |   | 13     |  
|                     |  |                                 |        |   |                                 |   |       |  |   |                       |   |  |                         |        |   |       |   |      |   |  |   |        |  



5. Revolving Credit Facility



The Company has a three-year $150 million senior revolving credit
agreement (the Agreement) with a group of lenders, with an initial term ending July 2006. Under the terms of the Agreement, the Company has the option to increase the facility by an additional $25 million and to extend the terms for an
additional year. The Company had stand-by letters of credit of $7.0 million at October 29, 2005. At October 29, 2005 there were no direct borrowings under the credit facility and no Event of Default existed under the terms of the
Agreement.



6. Stockholders Equity and Earnings Per Share



During the first 39 weeks of 2005, the Company repurchased 536,550 shares
of its common stock in the open market at a cost of $11.8 million. As of October 29, 2005, there are 1,457,650 shares which can be repurchased pursuant to the Board of Directors current authorization.



Basic earnings per share is computed by dividing net income by the weighted-average number of
common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding plus common stock equivalents related to stock options for each period. Common stock
equivalents are not included in the diluted loss per share calculations for the 13 weeks ended October 30, 2004 because they are anti-dilutive.



8



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##### Table of Contents

STEIN MART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



A reconciliation of weighted-average number of common shares to weighted-average number of common shares plus common stock equivalents is as follows (000s):



|                                                                       |  |                |  |                |  |               |  |              
|---------------------------------------------------------------------- |  | -------------- |  | -------------- |  | ------------- |  | -------------
|                                                                       |  | 13 Weeks Ended |  | 39 Weeks Ended
|                                                                       |  | Oct. 29, 2005  |  | Oct. 30, 2004  |  | Oct. 29, 2005 |  | Oct. 30, 2004
|Weighted-average number of common shares                               |  | 43,553         |  | 42,394         |  | 43,252        |  | 42,181       
|Stock options                                                          |  | 1,052          |  |               |  | 1,172         |  | 397          
|                                                                       |  |                |  |                |  |               |  |              
|Weighted-average number of common shares plus common stock equivalents |  | 44,605         |  | 42,394         |  | 44,424        |  | 42,578       
|                                                                       |  |                |  |                |  |               |  |              



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##### Table of Contents

Stein Mart, Inc.



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



This document includes a number of forward-looking statements which reflect the Companys current views with respect to future events and financial performance.
Wherever used, the words plan, expect, anticipate, believe, estimate and similar expressions identify forward looking statements.



Any such forward-looking statements contained in this document are subject to risks and
uncertainties that could cause the Companys actual results of operations to differ materially from historical results or current expectations. These risks include, without limitation, ongoing competition from other retailers many of whom are
larger and have greater financial and marketing resources, the availability of suitable new store sites at acceptable lease terms, ability to successfully implement strategies to exit or improve under-performing stores, changing preferences in
apparel, changes in consumer spending due to current events and/or general economic conditions, the effectiveness of advertising, marketing and promotional strategies, adequate sources of merchandise at acceptable prices, disruption of the
Companys distribution system, unanticipated weather conditions and unseasonable weather, acts of terrorism, and the Companys ability to attract and retain qualified employees to support planned growth.



The Company does not undertake to publicly update or revise its forward-looking statements
even if experience or future changes make clear that any projected results expressed or implied therein will not be realized.



Overview



Stein Marts 262 stores offer the fashion merchandise, service and presentation of a better department or specialty store, at prices competitive with off-price retail chains. Currently with locations in 30 states
from California to New York, Stein Marts focused assortment of merchandise features moderate to designer brand-name apparel for women, men and young children, as well as accessories, gifts, linens and shoes. Management believes that Stein Mart
differentiates itself from typical off-price retailers by offering: (i) current-season merchandise carried by better department and specialty stores at value prices, (ii) a stronger merchandising statement, with more depth of
color and size, and (iii) merchandise presentation more comparable to other upscale retailers.



The Company faces competition for customers and for access to quality merchandise from better department stores, fine specialty stores and, to a lesser degree, from off-price retail chains. Many of these competitors
are units of large national or regional chains that have substantially greater resources than the Company. The retail apparel industry is highly fragmented and competitive, and the off-price retail business may become even more competitive in the
future.



During the third quarter of 2005, the Company had net income of $1.4
million compared to a net loss of $(2.0) million in the third quarter of 2004. Earnings improvements have continued as a result of productivity initiatives implemented over the past three years. Comparable store sales increased 0.4 percent from the
third quarter of 2004. Management estimates that $5.7 million in sales were lost during the third quarter due to stores that were closed at least one day due to hurricane activity during the quarter. Gross profit was favorably impacted by improved
mark-up and decreased markdowns. Selling, general and administrative (SG&A) expenses, as a percent of net sales, increased 0.2 percentage point primarily due to lack of leverage resulting from the 0.4 percent increase in comparable
store sales. On an average store basis, inventories were down 3.6 percent at the end of the quarter compared to last year.



During the first 39 weeks of 2005, net income nearly doubled from $15.1 million for the first 39 weeks of 2004 to $29.8 million for the first 39 weeks of 2005. Comparable
store sales increased 2.3 percent from the first 39 weeks of 2004. Gross profit increased to $291.0 million compared to $258.9 million in 2004. As a percent of net sales, gross profit increased primarily from improved mark-up and decreased
markdowns. SG&A expenses, as a percent of net sales, increased 0.1 percentage point primarily due to increased advertising expenses. The Companys performance has also benefited from closing six under-performing stores in the first 39 weeks
of 2005 and seven in 2004. These stores had operating losses of $1.9 million and $5.3 million in the first 39 weeks of 2005 and 2004, respectively.



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##### Table of Contents

Stein Mart, Inc.



Our progress each quarter is the direct result of the traction we continue to gain from:



| |  |  | focusing our fashion assortments,
| | - |  | ---------------------------------



| |  |  | tailoring our merchandise delivery and promotional timetables to a higher freshness level,
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | targeting our marketing efforts, and
| | - |  | ------------------------------------



| |  |  | improving the quality of our store real estate portfolio.
| | - |  | ---------------------------------------------------------



Outlook



During the fourth quarter of 2005, the Company anticipates:



| |  |  | Comparable store sales to be flat to slightly down when compared to double-digit comparable store sales increases from December and January last year
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A strong cash position with no debt, expected annual capital expenditures of approximately $30 million, and continued repurchasing of Company stock.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



Stores



There were 262 stores open as of October 29, 2005 and 260 as of October 30, 2004. The 2005 new store-opening program of eight
stores (including one relocation) is completed. Six under-performing stores have been closed in 2005 and another will complete its closing in early 2006.



|                                |  |                |  |               |                |  |               |   |  |               |  
|------------------------------- |  | -------------- |  | ------------- | -------------- |  | ------------- | - |  | ------------- | -
|                                |  | 13 Weeks Ended |  |               | 39 Weeks Ended | 
|                                |  | Oct. 29, 2005  |  | Oct. 30, 2004 |                |  | Oct. 29, 2005 |   |  | Oct. 30, 2004 |  
|Stores at beginning of period   |  | 259            |  | 257           |                |  | 261           |   |  | 261           |  
|Stores opened during the period |  | 3              |  | 4             |                |  | 7             |   |  | 6             |  
|Stores closed during the period |  |               |  | (1            | )              |  | (6            | ) |  | (7            | )
|                                |  |                |  |               |                |  |               |   |  |               |  
|Stores at the end of period     |  | 262            |  | 260           |                |  | 262           |   |  | 260           |  
|                                |  |                |  |               |                |  |               |   |  |               |  



Results of Operations



The following table sets forth each line item of the Consolidated
Statements of Operations expressed as a percentage of the Companys net sales (numbers may not add due to rounding):



|                                                             |  |                |   |  |                |    |  |               |   |  |               |  
|------------------------------------------------------------ |  | -------------- | - |  | -------------- | -- |  | ------------- | - |  | ------------- | -
|                                                             |  | 13 Weeks Ended |   |  | 39 Weeks Ended |   
|                                                             |  | Oct. 29, 2005  |   |  | Oct. 30, 2004  |    |  | Oct. 29, 2005 |   |  | Oct. 30, 2004 |  
|Net sales                                                    |  | 100.0          | % |  | 100.0          | %  |  | 100.0         | % |  | 100.0         | %
|Cost of merchandise sold                                     |  | 75.3           |   |  | 76.9           |    |  | 72.4          |   |  | 74.5          |  
|                                                             |  |                |   |  |                |    |  |               |   |  |               |  
|Gross profit                                                 |  | 24.7           |   |  | 23.1           |    |  | 27.6          |   |  | 25.5          |  
|Selling, general and administrative expenses                 |  | 25.3           |   |  | 25.1           |    |  | 24.2          |   |  | 24.1          |  
|Other income, net                                            |  | 1.1            |   |  | 1.0            |    |  | 1.1           |   |  | 1.0           |  
|                                                             |  |                |   |  |                |    |  |               |   |  |               |  
|Income (loss) from operations                                |  | 0.5            |   |  | (1.0           | )  |  | 4.4           |   |  | 2.4           |  
|Interest income, net                                         |  | 0.2            |   |  |               |    |  | 0.1           |   |  |              |  
|                                                             |  |                |   |  |                |    |  |               |   |  |               |  
|Income (loss) from continuing operations before income taxes |  | 0.7            |   |  | (1.0           | )  |  | 4.6           |   |  | 2.4           |  
|Income tax (provision) benefit                               |  | (0.3           | ) |  | 0.4            |    |  | (1.7          | ) |  | (0.9          | )
|                                                             |  |                |   |  |                |    |  |               |   |  |               |  
|Income (loss) from continuing operations                     |  | 0.4            |   |  | (0.6           | )  |  | 2.8           |   |  | 1.5           |  
|Loss from discontinued operations, net of tax benefit        |  |               |   |  |               |    |  |              |   |  |              |  
|                                                             |  |                |   |  |                |    |  |               |   |  |               |  
|Net income (loss)                                            |  | 0.4            | % |  | (0.6           | )% |  | 2.8           | % |  | 1.5           | %
|                                                             |  |                |   |  |                |    |  |               |   |  |               |  



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Stein Mart, Inc.



Store Closings



The Company closed six under-performing stores during the first 39 weeks of 2005 and will close one more in early 2006. Seven stores were closed during 2004, all of which
were closed during the first 39 weeks of 2004. One store that closed during 2004 resulted in the exit from a market and, in accordance with SFAS No. 144, is classified as discontinued operations as cash flows from this store have been
eliminated from ongoing operations.



Sales and operating losses for the six
stores closed in 2005 and the seven stores closed during fiscal year 2004 are shown below for the 13 weeks and 39 weeks ended October 29, 2005 and October 30, 2004. Included in the 2004 column are operating results of the seven stores
closed in 2004, in addition to six stores closed in 2005.



|                                     |  |                |     |   |                |   |        |               |  |   |               |   |  |   |        |  
|------------------------------------ |  | -------------- | --- | - | -------------- | - | ------ | ------------- |  | - | ------------- | - |  | - | ------ | -
|                                     |  | 13 Weeks Ended |     |   | 39 Weeks Ended |  
|                                     |  | Oct. 29, 2005  |     |   | Oct. 30, 2004  |   |        | Oct. 29, 2005 |  |   | Oct. 30, 2004 |  
|Sales from closed stores:            |  |                |     |   |                |   |        |               |  |   |               |   |  |   |        |  
|Included in continuing operations    |  | $              |    |   |                | $ | 5,682  |               |  | $ | 6,383         |   |  | $ | 21,558 |  
|Included in discontinued operations  |  |                |    |   |                |   |       |               |  |   |              |   |  |   | 942    |  
|                                     |  |                |     |   |                |   |        |               |  |   |               |   |  |   |        |  
|                                     |  | $              |    |   |                | $ | 5,682  |               |  | $ | 6,383         |   |  | $ | 22,500 |  
|                                     |  |                |     |   |                |   |        |               |  |   |               |   |  |   |        |  
|Operating losses from closed stores: |  |                |     |   |                |   |        |               |  |   |               |   |  |   |        |  
|Included in continuing operations    |  | $              | (89 | ) |                | $ | (2,119 | )             |  | $ | (1,859        | ) |  | $ | (5,090 | )
|Included in discontinued operations  |  |                |    |   |                |   |       |               |  |   |              |   |  |   | (234   | )
|                                     |  |                |     |   |                |   |        |               |  |   |               |   |  |   |        |  
|                                     |  | $              | (89 | ) |                | $ | (2,119 | )             |  | $ | (1,859        | ) |  | $ | (5,324 | )
|                                     |  |                |     |   |                |   |        |               |  |   |               |   |  |   |        |  



Operating losses from closed stores include the following store closing and asset impairment (recovery) charges:



|                                      |  |                |   |                |   |               |  |               |       |  |   |       |  
|------------------------------------- |  | -------------- | - | -------------- | - | ------------- |  | ------------- | ----- |  | - | ----- | -
|                                      |  | 13 Weeks Ended |   | 39 Weeks Ended |  
|                                      |  | Oct. 29, 2005  |   | Oct. 30, 2004  |   | Oct. 29, 2005 |  | Oct. 30, 2004 |      
|Continuing operations:                |  |                |   |                |   |               |  |               |       |  |   |       |  
|Lease termination costs               |  | $              |  |                | $ | 927           |  | $             | 579   |  | $ | 1,028 |  
|Asset impairment (recovery) charges   |  |                |  |                |   |              |  |               |      |  |   | (245  | )
|Severance                             |  |                | 2 |                |   | 106           |  |               | 471   |  |   | 579   |  
|Other                                 |  |                |  |                |   | 30            |  |               |      |  |   | 171   |  
|                                      |  |                |   |                |   |               |  |               |       |  |   |       |  
|                                      |  |                | 2 |                |   | 1,063         |  |               | 1,050 |  |   | 1,533 |  
|                                      |  |                |   |                |   |               |  |               |       |  |   |       |  
|Discontinued operations:              |  |                |   |                |   |               |  |               |       |  |   |       |  
|Lease termination costs and severance |  |                |  |                |   |              |  |               |      |  |   | 154   |  
|                                      |  |                |   |                |   |               |  |               |       |  |   |       |  
|Total                                 |  | $              | 2 |                | $ | 1,063         |  | $             | 1,050 |  | $ | 1,687 |  
|                                      |  |                |   |                |   |               |  |               |       |  |   |       |  



Continuing Operations



For the 13 weeks ended October 29, 2005 compared to the 13 weeks
ended October 30, 2004



The 1.8 percent total increase in net sales
for the 13 weeks ended October 29, 2005 from the same 2004 period reflects a 0.4 percent increase in net sales from comparable stores and the opening of seven new stores and the closing of six stores during the first 39 weeks of 2005.



Gross profit for the 13 weeks ended October 29, 2005 was $83.1 million or
24.7 percent of net sales, a 1.6 percentage point increase over gross profit of $76.2 million or 23.1 percent of net sales for the third quarter of 2004. Mark-up improved 1.1 percentage point, markdowns decreased by 0.6 percentage point, shrinkage
expense decreased 0.1 percentage point and occupancy costs increased 0.2 percentage point.



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Stein Mart, Inc.



SG&A expenses were $85.1 million or 25.3 percent of net sales for the 13 weeks ended October 29, 2005, as compared to $82.9 million
or 25.1 percent of net sales for the same 2004 quarter. Included in SG&A expenses for the third quarter of 2005 and 2004 are store closing and asset impairment charges of $0.3 million and $1.1 million, respectively. The 0.2 percentage point
increase in SG&A expenses as a percent of net sales is primarily due to a lack of leveraging expenses as a result of the 0.4 percent increase in comparable store sales.



The Company earned interest income of $509,000 and $108,000 on its cash and short-term investments during the third quarter of 2005 and
2004, respectively.



For the 39 weeks ended October 29, 2005 compared
to the 39 weeks ended October 30, 2004



The 3.9 percent total
increase in net sales for the 39 weeks ended October 29, 2005 from the same 2004 period reflects a 2.3 percent increase in net sales from comparable stores, the opening of seven new stores and the closing of six stores during the first 39 weeks
of 2005.



Gross profit for the 39 weeks ended October 29, 2005 was $291.0
million or 27.6 percent of net sales, a 2.1 percentage point increase over gross profit of $258.9 million or 25.5 percent of net sales for the first 39 weeks of 2004. Mark-up improved 1.1 percentage point, markdowns decreased 0.8 percentage point
and shrinkage expense decreased 0.2 percentage point.



SG&A expenses were
$255.5 million or 24.2 percent of net sales for the 39 weeks ended October 29, 2005, as compared to $244.8 million or 24.1 percent of net sales for the same 2004 period. Included in SG&A expenses for the first 39 weeks of 2005 and 2004 are
store closing and asset impairment charges of $1.6 million and $1.5 million, respectively. The 0.1 percentage point increase in SG&A expenses as a percent of net sales is primarily due to increased advertising expenses.



The Company earned interest income of $1.3 million on its cash and short-term investments
during the first 39 weeks of 2005. Interest income of $142,000 (net of $39,000 interest expense) was earned during the 39 weeks ended October 30, 2004. The Company has not borrowed on its revolving credit agreement since the first quarter of
2004.



Liquidity and Capital Resources



The Companys primary source of liquidity is the sale of its merchandise inventories.
Capital requirements and working capital needs are funded through a combination of internally generated funds, a revolving credit facility and credit terms from vendors. Working capital is needed to support store inventories and capital investments
for new store openings and to maintain existing stores. Historically, the Companys working capital needs are lowest in the first quarter and highest in either the third or fourth quarter in anticipation of the fourth quarter peak selling
season. As of October 29, 2005, the Company had $27.9 million in cash and cash equivalents and $65.9 million in short-term investments.



Net cash provided by operating activities was $27.3 million for the first 39 weeks of 2005 compared to $59.2 million for the first 39 weeks of 2004. More cash was used by
operating activities during the first 39 weeks of 2005 compared to the first 39 weeks of 2004 primarily due to a $24.8 million increase in accounts payable during the first 39 weeks of 2005 compared to a $70.3 million increase during the first 39
weeks of 2004. A significant increase in accounts payable occurred at year-end 2004 as a result of merchandise receipts being more current. Merchandise inventories have continued to be more current throughout 2005.



Net cash used in investing activities was $18.2 million for the first 39 weeks of 2005
compared to $24.5 million for the first 39 weeks of 2004. Cash provided by operations during the first 39 weeks of 2004 and 2005 enabled the Company to invest in short-term investments. Capital expenditures, primarily for the acquisition of store
fixtures, equipment and leasehold improvements and information system enhancements, were $24.7 million and $15.5 million for the first 39 weeks of 2005 and 2004, respectively. Capital expenditures were higher in 2005 compared to 2004 due primarily
to enhancements to the point of sale system and remodeling costs for existing stores. Total 2005 capital expenditures, which include ongoing enhancements to the point of sale system and inventory management system developments, are anticipated to be
approximately $30 million.



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Net cash used in financing activities was $1.6 million during first 39 weeks of 2005 compared to $20.5 million during the first 39 weeks of
2004. More cash was used in financing activities during 2004 as a result of the Company eliminating borrowings under its revolving credit agreement. In May 2005, the Company announced an annual cash dividend of $0.25 per share, to be paid quarterly.
Quarterly dividend payments of $0.0625 per share were paid in June and September 2005. In December 2005, the Company declared a third quarterly dividend of $0.0625 per share which will be paid on December 23, 2005.



The Company has a $150 million senior revolving credit agreement with a group of lenders,
with an initial term ending July 2006. Borrowings are based on and secured by eligible inventory and certain other assets. At October 29, 2005 there were no direct borrowings under the credit facility and no Event of Default existed under terms
of the Agreement.



The Company believes that expected net cash provided by
operating activities and unused borrowing capacity under the revolving credit agreement will be sufficient to fund anticipated current and long-term capital expenditures, working capital requirements and dividend payments. Should current operating
conditions deteriorate, management can borrow on the revolving credit agreement or adjust operating plans, including new store rollout.



Contractual Obligations



To facilitate an understanding of the Companys contractual obligations, the following payments due by period is provided:



|                 |  |       |         |                  |   |             |  |            |        |               |   |         |  |   |        
|---------------- |  | ----- | ------- | ---------------- | - | ----------- |  | ---------- | ------ | ------------- | - | ------- |  | - | -------
|                 |  | Total |         | Less than 1 Year |   | 1  2 Years |  | 3  5Years |        | After 5 Years
|Operating leases |  | $     | 374,774 |                  | $ | 65,897      |  | $          | 61,244 |               | $ | 142,968 |  | $ | 104,665
|                 |  |       |         |                  |   |             |  |            |        |               |   |         |  |   |        



At October 29, 2005, the Company
had no direct borrowings under its credit facility. Other long-term liabilities on the balance sheet include deferred income taxes, deferred compensation and other long-term liabilities that do not have specific due dates and therefore are excluded
from the preceding table. Other long-term liabilities also include long-term store closing reserves, a component of which is future minimum payments under non-cancelable leases for closed stores, net of estimated sublease income. These future
minimum lease payments total $14.8 million and are included in the above table.



Off-Balance Sheet Arrangements



The Company has outstanding
standby letters of credit totaling $7.0 million securing certain insurance programs at October 29, 2005. If certain conditions occurred under these arrangements, the Company would be required to satisfy the obligations in cash. Due to the
nature of these arrangements and based on historical experience, the Company does not expect to make any payments; therefore, the letters of credit are excluded from the preceding table. There are no other off-balance sheet arrangements that could
affect the financial condition of the Company.



Seasonality



The Companys business is seasonal in nature with a higher percentage of the
Companys merchandise sales and earnings generated in the fall and holiday selling seasons. Accordingly, selling, general and administrative expenses are typically higher as a percent of net sales during the first three quarters of each year.



Item 3. Quantitative and Qualitative Disclosures about Market Risk



The Company is exposed to interest rate risk primarily through borrowings under its revolving credit facility. The Company eliminated borrowings under its credit facility during the first quarter of 2004 and, at
October 29, 2005, had no direct borrowings under its credit facility.



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Stein Mart, Inc.



Item 4. Controls and Procedures



The
Companys management, including the Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Companys disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) of the Securities
Exchange Act of 1934, as amended, (the Exchange Act). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures were effective as of
October 29, 2005. There have been no changes in the Companys internal controls over financial reporting identified in connection with this evaluation that occurred during the quarter ended October 29, 2005 that have affected, or are
reasonably likely to materially affect, the Companys internal controls over financial reporting.



PART II - OTHER INFORMATION



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



The following table provides information regarding repurchases by the Company of its common stock during the 13-week period ended October 29, 2005:



ISSUER PURCHASES OF EQUITY SECURITIES



|                                   |  |                                  |  |                              |       |                                                                                      |         |                                                                                    |          
|---------------------------------- |  | -------------------------------- |  | ---------------------------- | ----- | ------------------------------------------------------------------------------------ | ------- | ---------------------------------------------------------------------------------- | ---------
|Period (1)                         |  | Total Number of Shares Purchased |  | Average Price Paid per Share |       | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(2) |         | Maximum Number of Shares that May Yet Be Purchased Under the Plans
or Programs (2)
|July 31, 2005  August 27, 2005    |  | 40,000                           |  | $                            | 22.54 |                                                                                      | 40,000  |                                                                                    | 1,657,650
|August 28, 2005  October 1, 2005  |  | 200,000                          |  | $                            | 21.42 |                                                                                      | 200,000 |                                                                                    | 1,457,650
|October 2, 2005  October 29, 2005 |  |                                 |  |                              |      |                                                                                      |        |                                                                                    | 1,457,650
|                                   |  |                                  |  |                              |       |                                                                                      |         |                                                                                    |          
|Total                              |  | 240,000                          |  | $                            | 21.61 |                                                                                      | 240,000 |                                                                                    |          
|                                   |  |                                  |  |                              |       |                                                                                      |         |                                                                                    |          

---

|(1) | Monthly information is presented by reference to the Companys fiscal months during the period covered by this Quarterly Report on Form 10-Q.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The Companys Open Market Repurchase Program is conducted pursuant to authorizations made from time to time by the Companys Board of Directors. The shares reported in the
table are covered by a Board authorization to repurchase 2.5 million shares of common stock announced on March 5, 2001 which does not have an expiration date.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Item 6. Exhibits



|31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a)
|---- | --------------------------------------------------------------------------------



|31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a)
|---- | --------------------------------------------------------------------------------



|32.1 | Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
|---- | -------------------------------------------------------------------------------



|32.2 | Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
|---- | -------------------------------------------------------------------------------



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SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                       |  |                  |  |                                                  
|---------------------- |  | ---------------- |  | -------------------------------------------------
|                       |  | Stein Mart, Inc.
|                       |  |                 
|Date: December 6, 2005 |  | By:              |  | /s/ Michael D. Fisher                            
|                       |  |                  |  | Michael D. Fisher                                
|                       |  |                  |  | President and Chief Executive Officer            
|                       |  |                 
|                       |  |                  |  | /s/ James G. Delfs                               
|                       |  |                  |  | James G. Delfs                                   
|                       |  |                  |  | Senior Vice President and Chief Financial Officer



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