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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

For the quarterly period ended November 1, 2008

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





STEIN MART, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|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





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
a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule
12b-2 of the Exchange Act.



|                                                                       |  |                             
|---------------------------------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈                                             |  | Accelerated filer  x        
|Non-accelerated filer   ̈ (Do not check if a smaller reporting company) |  | Smaller reporting company   ̈

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

The number of shares outstanding of the Registrants common stock as of November 26, 2008 was 42,351,188.









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##### Table of Contents

STEIN MART, INC.

TABLE OF CONTENTS



|           |  |                                                                                                                 |  |     
|---------- |  | --------------------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                                 |  | PAGE
|PART I     |  | FINANCIAL INFORMATION                                                                                           |  |     
|           |  |                                                                                                                
|Item 1.    |  | Financial Statements (Unaudited):                                                                               |  |     
|           |  |                                                                                                                
|           |  | Consolidated Balance Sheets at November 1, 2008, February 2, 2008 and November 3, 2007                          |  | 3   
|           |  |                                                                                                                
|           |  | Consolidated Statements of Operations for the 13 Weeks and 39 Weeks Ended November 1, 2008 and November 3, 2007 |  | 4   
|           |  |                                                                                                                
|           |  | Consolidated Statements of Cash Flows for the 39 Weeks Ended November 1, 2008 and November 3, 2007              |  | 5   
|           |  |                                                                                                                
|           |  | Notes to Consolidated Financial Statements                                                                      |  | 6   
|           |  |                                                                                                                
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                           |  | 9   
|           |  |                                                                                                                
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                      |  | 13  
|           |  |                                                                                                                
|Item 4.    |  | Controls and Procedures                                                                                         |  | 13  
|           |  |                                                                                                                
|PART II    |  | OTHER INFORMATION                                                                                               |  |     
|           |  |                                                                                                                
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                     |  | 14  
|           |  |                                                                                                                
|Item 5.    |  | Other Information                                                                                               |  | 14  
|           |  |                                                                                                                
|Item 6.    |  | Exhibits                                                                                                        |  | 14  
|           | 
|SIGNATURES |  | 15                                                                                                             



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##### Table of Contents

Stein Mart, Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except for share data)



|                                                                                                                                              |  |                  |         |                  |   |                  |  |   |        
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | ---------------- | - | ---------------- |  | - | -------
|                                                                                                                                              |  | November 1, 2008 |         | February 2, 2008 |   | November 3, 2007
|ASSETS                                                                                                                                        |  |                  |         |                  |   |                  |  |   |        
|Current assets:                                                                                                                               |  |                  |         |                  |   |                  |  |   |        
|Cash and cash equivalents                                                                                                                     |  | $                | 64,834  |                  | $ | 15,145           |  | $ | 20,481 
|Trade and other receivables                                                                                                                   |  |                  | 7,754   |                  |   | 12,372           |  |   | 14,669 
|Inventories                                                                                                                                   |  |                  | 306,030 |                  |   | 262,496          |  |   | 344,817
|Income taxes receivable                                                                                                                       |  |                  | 18,482  |                  |   | 14,103           |  |   | 13,252 
|Prepaid expenses and other current assets                                                                                                     |  |                  | 14,553  |                  |   | 13,985           |  |   | 16,260 
|                                                                                                                                              |  |                  |         |                  |   |                  |  |   |        
|Total current assets                                                                                                                          |  |                  | 411,653 |                  |   | 318,101          |  |   | 409,479
|Property and equipment, net                                                                                                                   |  |                  | 105,629 |                  |   | 110,687          |  |   | 115,074
|Other assets                                                                                                                                  |  |                  | 29,368  |                  |   | 31,751           |  |   | 30,783 
|                                                                                                                                              |  |                  |         |                  |   |                  |  |   |        
|Total assets                                                                                                                                  |  | $                | 546,650 |                  | $ | 460,539          |  | $ | 555,336
|                                                                                                                                              |  |                  |         |                  |   |                  |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                          |  |                  |         |                  |   |                  |  |   |        
|Current liabilities:                                                                                                                          |  |                  |         |                  |   |                  |  |   |        
|Accounts payable                                                                                                                              |  | $                | 100,019 |                  | $ | 77,124           |  | $ | 125,085
|Accrued liabilities                                                                                                                           |  |                  | 77,438  |                  |   | 75,508           |  |   | 80,139 
|                                                                                                                                              |  |                  |         |                  |   |                  |  |   |        
|Total current liabilities                                                                                                                     |  |                  | 177,457 |                  |   | 152,632          |  |   | 205,224
|Notes payable to banks                                                                                                                        |  |                  | 100,000 |                  |   | 27,133           |  |   | 54,966 
|Other liabilities                                                                                                                             |  |                  | 28,926  |                  |   | 24,085           |  |   | 23,594 
|                                                                                                                                              |  |                  |         |                  |   |                  |  |   |        
|Total liabilities                                                                                                                             |  |                  | 306,383 |                  |   | 203,850          |  |   | 283,784
|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; 42,332,941, 41,831,182 and 41,709,780 shares issued and outstanding,
respectively |  |                  | 423     |                  |   | 418              |  |   | 417    
|Additional paid-in capital                                                                                                                    |  |                  | 8,514   |                  |   | 5,288            |  |   | 5,612  
|Retained earnings                                                                                                                             |  |                  | 231,330 |                  |   | 250,983          |  |   | 265,523
|                                                                                                                                              |  |                  |         |                  |   |                  |  |   |        
|Total stockholders equity                                                                                                                    |  |                  | 240,267 |                  |   | 256,689          |  |   | 271,552
|                                                                                                                                              |  |                  |         |                  |   |                  |  |   |        
|Total liabilities and stockholders equity                                                                                                    |  | $                | 546,650 |                  | $ | 460,539          |  | $ | 555,336
|                                                                                                                                              |  |                  |         |                  |   |                  |  |   |        

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



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Stein Mart, Inc.

Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)



|                                             |  |                                |         |   |                                |   |         |                                |  |   |                                |   |  |   |           |  
|-------------------------------------------- |  | ------------------------------ | ------- | - | ------------------------------ | - | ------- | ------------------------------ |  | - | ------------------------------ | - |  | - | --------- | -
|                                             |  | 13 Weeks EndedNovember 1, 2008 |         |   | 13 Weeks EndedNovember 3, 2007 |   |         | 39 Weeks EndedNovember 1, 2008 |  |   | 39 Weeks EndedNovember 3, 2007 |  
|Net sales                                    |  | $                              | 298,815 |   |                                | $ | 333,343 |                                |  | $ | 962,566                        |   |  | $ | 1,040,201 |  
|Cost of merchandise sold                     |  |                                | 231,351 |   |                                |   | 247,131 |                                |  |   | 723,234                        |   |  |   | 762,881   |  
|                                             |  |                                |         |   |                                |   |         |                                |  |   |                                |   |  |   |           |  
|Gross profit                                 |  |                                | 67,464  |   |                                |   | 86,212  |                                |  |   | 239,332                        |   |  |   | 277,320   |  
|Selling, general and administrative expenses |  |                                | 93,525  |   |                                |   | 97,224  |                                |  |   | 277,587                        |   |  |   | 282,347   |  
|Other income, net                            |  |                                | 4,954   |   |                                |   | 5,736   |                                |  |   | 16,257                         |   |  |   | 16,370    |  
|                                             |  |                                |         |   |                                |   |         |                                |  |   |                                |   |  |   |           |  
|Income (loss) from operations                |  |                                | (21,107 | ) |                                |   | (5,276  | )                              |  |   | (21,998                        | ) |  |   | 11,343    |  
|Interest expense, net                        |  |                                | (519    | ) |                                |   | (445    | )                              |  |   | (1,091                         | ) |  |   | (361      | )
|                                             |  |                                |         |   |                                |   |         |                                |  |   |                                |   |  |   |           |  
|Income (loss) before income taxes            |  |                                | (21,626 | ) |                                |   | (5,721  | )                              |  |   | (23,089                        | ) |  |   | 10,982    |  
|Income tax benefit (provision)               |  |                                | 7,508   |   |                                |   | 3,032   |                                |  |   | 7,966                          |   |  |   | (3,364    | )
|                                             |  |                                |         |   |                                |   |         |                                |  |   |                                |   |  |   |           |  
|Net income (loss)                            |  | $                              | (14,118 | ) |                                | $ | (2,689  | )                              |  | $ | (15,123                        | ) |  | $ | 7,618     |  
|                                             |  |                                |         |   |                                |   |         |                                |  |   |                                |   |  |   |           |  
|Net income (loss) per share:                 |  |                                |         |   |                                |   |         |                                |  |   |                                |   |  |   |           |  
|Basic                                        |  | $                              | (0.34   | ) |                                | $ | (0.06   | )                              |  | $ | (0.37                          | ) |  | $ | 0.18      |  
|                                             |  |                                |         |   |                                |   |         |                                |  |   |                                |   |  |   |           |  
|Diluted                                      |  | $                              | (0.34   | ) |                                | $ | (0.06   | )                              |  | $ | (0.37                          | ) |  | $ | 0.18      |  
|                                             |  |                                |         |   |                                |   |         |                                |  |   |                                |   |  |   |           |  
|Weighted-average shares outstanding:         |  |                                |         |   |                                |   |         |                                |  |   |                                |   |  |   |           |  
|Basic                                        |  |                                | 41,410  |   |                                |   | 41,548  |                                |  |   | 41,323                         |   |  |   | 42,445    |  
|                                             |  |                                |         |   |                                |   |         |                                |  |   |                                |   |  |   |           |  
|Diluted                                      |  |                                | 41,410  |   |                                |   | 41,548  |                                |  |   | 41,323                         |   |  |   | 42,943    |  
|                                             |  |                                |         |   |                                |   |         |                                |  |   |                                |   |  |   |           |  

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



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Stein Mart, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)



|                                                                                     |  |                                |          |   |                                |   |          |  
|------------------------------------------------------------------------------------ |  | ------------------------------ | -------- | - | ------------------------------ | - | -------- | -
|                                                                                     |  | 39 Weeks EndedNovember 1, 2008 |          |   | 39 Weeks EndedNovember 3, 2007 |  
|Cash flows from operating activities:                                                |  |                                |          |   |                                |   |          |  
|Net income (loss)                                                                    |  | $                              | (15,123  | ) |                                | $ | 7,618    |  
|Adjustments to reconcile net income (loss) to net cash used in operating activities: |  |                                |          |   |                                |   |          |  
|Depreciation and amortization                                                        |  |                                | 19,027   |   |                                |   | 19,190   |  
|Impairment of property and other assets                                              |  |                                | 475      |   |                                |   | 108      |  
|Store closing charges                                                                |  |                                | 3,810    |   |                                |   | 396      |  
|Deferred income taxes                                                                |  |                                | (584     | ) |                                |   | (943     | )
|Share-based compensation                                                             |  |                                | 2,836    |   |                                |   | 6,496    |  
|Tax benefit from equity issuances                                                    |  |                                |         |   |                                |   | 287      |  
|Excess tax benefits from share-based compensation                                    |  |                                |         |   |                                |   | (258     | )
|Changes in assets and liabilities:                                                   |  |                                |          |   |                                |   |          |  
|Trade and other receivables                                                          |  |                                | 4,618    |   |                                |   | (4,505   | )
|Inventories                                                                          |  |                                | (43,534  | ) |                                |   | (53,874  | )
|Income taxes receivable                                                              |  |                                | (4,379   | ) |                                |   | (13,252  | )
|Prepaid expenses and other current assets                                            |  |                                | (690     | ) |                                |   | (1,729   | )
|Other assets                                                                         |  |                                | 1,898    |   |                                |   | (2,560   | )
|Accounts payable                                                                     |  |                                | 22,895   |   |                                |   | 41,842   |  
|Accrued liabilities                                                                  |  |                                | 872      |   |                                |   | 800      |  
|Income taxes payable                                                                 |  |                                |         |   |                                |   | (13,091  | )
|Other liabilities                                                                    |  |                                | (1,906   | ) |                                |   | 1,273    |  
|                                                                                     |  |                                |          |   |                                |   |          |  
|Net cash used in operating activities                                                |  |                                | (9,785   | ) |                                |   | (12,202  | )
|                                                                                     |  |                                |          |   |                                |   |          |  
|Cash flows from investing activities:                                                |  |                                |          |   |                                |   |          |  
|Capital expenditures                                                                 |  |                                | (13,924  | ) |                                |   | (20,071  | )
|Purchases of short-term investments                                                  |  |                                |         |   |                                |   | (36,580  | )
|Sales of short-term investments                                                      |  |                                |         |   |                                |   | 47,415   |  
|                                                                                     |  |                                |          |   |                                |   |          |  
|Net cash used in investing activities                                                |  |                                | (13,924  | ) |                                |   | (9,236   | )
|                                                                                     |  |                                |          |   |                                |   |          |  
|Cash flows from financing activities:                                                |  |                                |          |   |                                |   |          |  
|Borrowings under notes payable to banks                                              |  |                                | 625,860  |   |                                |   | 236,054  |  
|Repayments of notes payable to banks                                                 |  |                                | (552,993 | ) |                                |   | (181,088 | )
|Cash dividends paid                                                                  |  |                                |         |   |                                |   | (8,073   | )
|Excess tax benefits from share-based compensation                                    |  |                                |         |   |                                |   | 258      |  
|Proceeds from exercise of stock options                                              |  |                                |         |   |                                |   | 3,521    |  
|Proceeds from employee stock purchase plan                                           |  |                                | 548      |   |                                |   | 586      |  
|Repurchase of common stock                                                           |  |                                | (17      | ) |                                |   | (26,899  | )
|                                                                                     |  |                                |          |   |                                |   |          |  
|Net cash provided by financing activities                                            |  |                                | 73,398   |   |                                |   | 24,359   |  
|                                                                                     |  |                                |          |   |                                |   |          |  
|Net increase in cash and cash equivalents                                            |  |                                | 49,689   |   |                                |   | 2,921    |  
|Cash and cash equivalents at beginning of year                                       |  |                                | 15,145   |   |                                |   | 17,560   |  
|                                                                                     |  |                                |          |   |                                |   |          |  
|Cash and cash equivalents at end of period                                           |  | $                              | 64,834   |   |                                | $ | 20,481   |  
|                                                                                     |  |                                |          |   |                                |   |          |  

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



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STEIN MART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(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 primarily of normal and recurring adjustments) 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 February 2, 2008.

As used herein, the terms we, our, us, Stein Mart and the Company
refer to Stein Mart, Inc. and its wholly-owned subsidiaries.

Recent Accounting Pronouncements

In June 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Emerging Issues Task Force (EITF)
No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. FSP EITF No. 03-6-1 addresses whether instruments granted in share-based payment transactions are participating
securities prior to vesting, and therefore need to be included in the earnings allocation in computing earnings per share under the two-class method as described in Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings per Share. Under the guidance of FSP EITF No. 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall
be included in the computation of earnings-per-share pursuant to the two-class method. The Companys restricted stock awards are considered participating securities because they contain non-forfeitable rights to dividends. FSP EITF
No. 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and all prior-period earnings per share data presented shall be adjusted retrospectively. Early application is not permitted. The
adoption of FSP EITF No. 03-6-1 will not have a material impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS
No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at
fair value. SFAS No. 159 was effective for the Company on February 3, 2008 and had no effect on the Companys financial position or results of operations.

In September 2006, the EITF issued EITF No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. EITF
No. 06-4 states that an employer accounting for endorsement split-dollar life insurance arrangements that provide a benefit to an employee that extends to postretirement periods should recognize a liability for future benefits in accordance
with SFAS No. 106,Employers Accounting for Postretirement Benefits Other Than Pensions, or Accounting Principles Board Opinion No. 12,Omnibus Opinion-1967. The Company adopted EITF 06-4 on
February 3, 2008 and recognized a liability of $4.5 million (included in other liabilities) and recorded a corresponding reduction to retained earnings representing the cumulative effect of the change in accounting principle. Subsequent changes
in this liability are recorded through expense.

In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 was effective for the
Company on February 3, 2008 and had no effect on the Companys financial position or results of operations. Currently, the only instruments that fall under the scope of this pronouncement are cash equivalents of approximately $41 million
as of November 1, 2008, which are Level 1 securities with readily available market prices.

2. Revolving Credit Agreement

The Company has a senior revolving secured credit agreement (the Agreement) with a group of lenders which extends through January 2011.
Effective September 10, 2008, the Company exercised an option to increase the facility from $100 million to $150 million. On September 29, 2008, the Company borrowed $75 million under the Agreement as a proactive step to increase its cash
position to preserve its financial flexibility in light of the current uncertainty in the credit markets. The funds are being used to support seasonal working capital needs. The proceeds from this borrowing were invested on a short-term basis in
AAA-rated United States Treasury money market funds. As of November 1, 2008, the Company had $100 million in direct borrowings, $8.0 million of outstanding standby letters of credit, and cash and cash equivalents of $64.8 million. Approximately
$42 million was available under the Agreement and no event of default existed under the terms of the Agreement at November 1, 2008.



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The interest rates on borrowings under the Agreement range from Prime (4.0% at November 1, 2008) to Prime plus
..25% per annum for Prime Rate Loans and LIBOR plus 1.00% to LIBOR plus 1.75% per annum for Eurodollar Rate Loans and are established quarterly, based on excess availability as defined in the Agreement. An unused line fee of .20% is charged
on the unused portion of the revolving credit facility, based on excess availability. The weighted-average interest rate on borrowings at November 1, 2008 was 4.24%. Because all borrowings bear interest at variable rates that approximate
current market rates, the carrying value of these borrowings approximates fair value.

3. Stockholders Equity

Stock Repurchase Plan

During the 39 weeks ended
November 1, 2008 and November 3, 2007, the Company repurchased 4,009 shares and 2,438,854 shares of its common stock in the open market at a total cost of $17,000 and $26.9 million, respectively. As of November 1, 2008, there are
803,975 shares which can be repurchased pursuant to the Board of Directors current authorizations.

Share-Based Compensation Expense

For the 13 weeks and 39 weeks ended November 1, 2008 and November 3, 2007, pre-tax share-based compensation expense was recorded as follows:



|                                             |  |                                |     |                                |   |                                |  |                                |       |  |   |      
|-------------------------------------------- |  | ------------------------------ | --- | ------------------------------ | - | ------------------------------ |  | ------------------------------ | ----- |  | - | -----
|                                             |  | 13 Weeks EndedNovember 1, 2008 |     | 13 Weeks EndedNovember 3, 2007 |   | 39 Weeks EndedNovember 1, 2008 |  | 39 Weeks EndedNovember 3, 2007
|Cost of merchandise sold                     |  | $                              | 236 |                                | $ | 1,148                          |  | $                              | 1,761 |  | $ | 4,107
|Selling, general and administrative expenses |  |                                | 120 |                                |   | 638                            |  |                                | 1,075 |  |   | 2,389
|                                             |  |                                |     |                                |   |                                |  |                                |       |  |   |      
|Total share-based compensation expense       |  | $                              | 356 |                                | $ | 1,786                          |  | $                              | 2,836 |  | $ | 6,496
|                                             |  |                                |     |                                |   |                                |  |                                |       |  |   |      

4. Earnings Per Share (EPS)

Basic EPS is computed by dividing net income (loss) by the basic weighted-average number of common shares outstanding for the period. Diluted EPS is calculated by also considering the impact of potential common stock
equivalents on both net income and the weighted-average number of common shares outstanding.

A reconciliation of basic weighted-average number of common
shares to diluted weighted-average number of common shares is as follows (shares in thousands):



|                                                       |  |                                |  |                                |  |                                |  |                               
|------------------------------------------------------ |  | ------------------------------ |  | ------------------------------ |  | ------------------------------ |  | ------------------------------
|                                                       |  | 13 Weeks EndedNovember 1, 2008 |  | 13 Weeks EndedNovember 3, 2007 |  | 39 Weeks EndedNovember 1, 2008 |  | 39 Weeks EndedNovember 3, 2007
|Basic weighted-average number of common shares         |  | 41,410                         |  | 41,548                         |  | 41,323                         |  | 42,445                        
|Incremental shares from share-based compensation plans |  |                               |  |                               |  |                               |  | 498                           
|                                                       |  |                                |  |                                |  |                                |  |                               
|Diluted weighted-average number of common shares       |  | 41,410                         |  | 41,548                         |  | 41,323                         |  | 42,943                        
|                                                       |  |                                |  |                                |  |                                |  |                               

Options to purchase approximately 2.0 million and 2.5 million shares of common stock that were
outstanding during the 13 weeks ended November 1, 2008 and November 3, 2007, respectively, were not included in the computation of diluted net income (loss) per share as the exercise prices of these options were greater than the average
market price of the common shares. For the 39 weeks ended November 1, 2008 and November 3, 2007, options to purchase 2.0 million and 1.8 million shares of common stock, respectively, were not included in the computation of
diluted net income (loss) per share for the aforementioned reason. Common stock equivalents totaling 279,888, 195,071 and 300,238, respectively, would have been included in a diluted net income per share calculation had the Company reported net
income for the 13 weeks and 39 weeks ended November 1, 2008 and the 13 weeks ended November 3, 2007.

5. Subsequent Events

On December 2, 2008, the Companys Board of Directors appointed David H. Stovall, Jr. as President and Chief Executive Officer (CEO) of the Company.
Mr. Stovall assumed his new responsibilities on December 5, 2008. Mr. Stovall succeeds Linda McFarland Farthing, longtime Stein Mart board member who has held the president and CEO position since September 2007, but announced earlier
this fall that a search for her successor had begun. Ms. Farthings responsibilities as CEO will conclude on December 10, 2008, at which time she will continue to serve on the Companys Board of Directors.

In connection with Mr. Stovalls appointment, the Company and Mr. Stovall executed an employment agreement which, among other things, provides for:
(i) a term of three years which will be extended for successive one-year periods unless either the executive or the Company cancels the automatic extension by providing at least 120 days advance written notice, (ii) a base salary of
$826,000 per year, (iii) severance compensation equal to 100% of annual base salary and continuation of insurance benefits for one year if terminated without cause by the Company or with good reason by the executive, (iv) restrictive
covenants against competing with the Company or recruiting any Company personnel for two years following termination, and (v) vesting of all unvested options and interests in incentive compensation plans upon death or disability. The executive
remains eligible for other benefit plans and incentive plans in effect from time to time.



7



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##### Table of Contents

On December 5, 2008, Mr. Stovall was granted an option to purchase one million shares of the Companys
common stock, at an exercise price of $1.25, under the Companys 2001 Omnibus Plan. The option is valued at $570,000. One-third of the option vests on the first, second and third anniversary dates of grant. The vested portion of the option may
be exercised two years after the grant date and no vested portion of the option may be exercised on or after December 5, 2015. Shares acquired on exercise of the option may not be sold until the earlier of (1) one year from date of
exercise, or (2) a change of control of the Company. In January 2009, Mr. Stovall will be granted a second option to purchase 200,000 shares of common stock, which has terms similar to the initial option, but will have an exercise price
based on the market value of the Companys common stock on the date of grant.



8



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##### Table of Contents

STEIN MART, INC.



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

As used herein, the terms we, our, us, Stein Mart and the Company refer to Stein Mart, Inc. and its wholly-owned subsidiaries.

Forward-Looking Statements

This report contains forward-looking
statements which are subject to certain risks, uncertainties or assumptions and may be affected by certain factors, including but not limited to changes in consumer spending due to general economic conditions including uncertainty in the financial
and credit markets, the effectiveness of advertising, marketing and promotional strategies, ongoing competition from other retailers, changing preferences in apparel, unanticipated weather conditions and unseasonable weather, adequate sources of
merchandise at acceptable prices, the Companys ability to attract and retain qualified employees, the ability to successfully implement strategies to exit or improve under-performing stores, disruption of the Companys distribution
system, acts of terrorism and failure to adequately protect our trademark Stein Mart® and other marks we use. Readers are urged to review and consider the matters discussed in Item 1A. Risk Factors of our Form 10-K for 2007.

Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results,
performance or achievements of the Company may vary materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on beliefs and assumptions of the
Companys management and on information currently available to such management. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to publicly update or revise its forward-looking
statements in light of new information or future events. Undue reliance should not be placed on such forward-looking statements, which are based on current expectations. Forward-looking statements are no guarantees of performance.

Overview

Stein Mart is a retailer offering the fashion merchandise,
service and presentation of a better department or specialty store at prices up to 60 percent off department and specialty store original prices, every day. Our focused assortment of merchandise features current-season moderate to better fashion
apparel for women and men, as well as accessories, gifts, linens and shoes. Management believes that Stein Mart differentiates itself from typical off-price retailers by offering: (i) primarily current-season merchandise carried by better
department and specialty stores, (ii) at moderate to better price levels, (iii) a stronger merchandising statement, consistently offering more depth of color and size in individual stock-keeping units, and (iv) merchandise
presentation and customer service more comparable to other upscale retailers. As of November 1, 2008, we operated 279 stores.

For the 13 weeks ended
November 1, 2008, the Company incurred a net loss of $(14.1) million or $(0.34) per share compared to a net loss of $(2.7) million or $(0.06) per share for the same 2007 period. For the 39 weeks ended November 1, 2008, the Company incurred
a net loss of $(15.1) million or $(0.37) per share compared to net income of $7.6 million or $0.18 per share for the same 2007 period. The 2008 net loss was driven by negative comparable store sales. Comparable store sales decreased 12.6 percent and
10.5 percent, respectively, for the 13 weeks and 39 weeks ended November 1, 2008 from the same 2007 periods. Gross profit decreased for both 2008 periods due to lower merchandise margins resulting from higher markdowns taken to keep inventory
levels in line with current sales trends.

Our third quarter was the most challenging in the Companys history as the economic developments and
aggressive promotional activities by the Companys competitors severely curbed our customers normal shopping habits. Despite more aggressive promotion by the Company, reducing average store inventories 12.2 percent year over year, and
accelerating our efforts to control costs, the magnitude of the sales shortfall could not be overcome. Although we planned conservatively for the holiday season, current sales trends and the amount and scale of competitive promotion already underway
suggest that we will have to be especially aggressive to reduce seasonal inventory in a timely manner resulting in increased markdowns.

We are focused on
cash and liquidity and, to that end, we continue to do everything possible to maximize our financial flexibility. In addition to cutting operating expenses, we have expanded our credit facility, scaled back our opening plans to one store, planned
significantly reduced capital expenditures in 2009, and suspended the cash dividend and the stock buyback.

Initiatives and Outlook

In light of the severity of the current economic environment, management has accelerated various initiatives begun earlier this year to increase sales, motivate existing
customers and attract new ones, reduce expenses and maximize cash flow.



| |  |  | In the merchandise area, efforts continue to expand the customer base by adding more desirable name brand merchandise throughout the store, and by extending our
assortment to attract a somewhat younger customer to join our traditional base. At the same time, overall inventories are planned to reflect an expectation of continued consumer caution and extreme value-consciousness for the foreseeable future.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | Customers are understandably focused on superior value. Our updated marketing message positions Stein Mart as a different kind of discount store with
better brands, service, ambiance and convenience vs. other discount stores. We continue to focus spending on those tactics that deliver a positive return on our marketing investment, including more targeted direct mail, email and efficient reach in
newspaper. Like most other retailers, we added promotional events in the third quarter and offered deeper discounts compared to 2007. Going into the holiday season, we plan an even more aggressive promotional cadence, with deeper discounts and
unique events designed to capture customers interest.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company has undergone a comprehensive strategic review of expenses throughout the organization. The review surfaced savings opportunities in non-merchandise
procurement, some of which are now in effect, with greater potential in 2009 and beyond. Additionally, we have reduced headcount at the managerial level by approximately ten percent, and we have reduced the number of associates hours in the
stores, also by approximately ten percent.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A significant outcome of the strategic review involves the Companys existing supply chain/distribution process, where we currently have merchandise
drop-shipped directly from vendors to individual stores. We anticipate transforming the current process over the next 18 months to one that utilizes outside parties to consolidate merchandise from vendors into third-party owned regional distribution
centers for store cluster delivery. Once fully operational, the new third-party-based distribution system is expected to yield significant expense reductions.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We are continuing to manage our business to preserve cash and enhance liquidity. Earlier this year, we suspended payment of a cash dividend and the repurchase of
the Companys common stock. We have also reduced capital expenditures for fiscal year 2008 by approximately thirty percent from last year and capital expenditures for 2009 will be significantly less than those in 2008. We have also ceased
opening additional stores except where we are obligated by prior agreements to do so.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Although we have been persistently re-forecasting
our inventory plan as the economic climate worsens, it appears we will need even more aggressive markdowns in the fourth quarter to end the year with season-appropriate inventories at the proper level. Looking ahead, we are buying very
conservatively for the spring season, not only to keep inventories in line, but also to be able to take advantage of many better brand opportunities that have opened up in this environment.

On December 2, 2008, the Companys Board of Directors appointed David H. Stovall, Jr. as President and Chief Executive Officer (CEO) of the
Company. Mr. Stovall assumed his new responsibilities on December 5, 2008. Mr. Stovall succeeds Linda McFarland Farthing, longtime Stein Mart board member who has held the president and CEO position since September 2007, but announced
earlier this fall that a search for her successor had begun. Ms. Farthings responsibilities as CEO will conclude on December 10, 2008, at which time she will continue to serve on the Companys Board of Directors.

In connection with Mr. Stovalls appointment, the Company and Mr. Stovall executed an employment agreement which, among other things, provides for:
(i) a term of three years which will be extended for successive one-year periods unless either the executive or the Company cancels the automatic extension by providing at least 120 days advance written notice, (ii) a base salary of
$826,000 per year, (iii) severance compensation equal to 100% of annual base salary and continuation of insurance benefits for one year if terminated without cause by the Company or with good reason by the executive, (iv) restrictive
covenants against competing with the Company or recruiting any Company personnel for two years following termination, and (v) vesting of all unvested options and interests in incentive compensation plans upon death or disability. The executive
remains eligible for other benefit plans and incentive plans in effect from time to time.

On December 5, 2008, Mr. Stovall was granted an option
to purchase one million shares of the Companys common stock, at an exercise price of $1.25, under the Companys 2001 Omnibus Plan. The option is valued at $570,000. One-third of the option vests on the first, second and third anniversary
dates of grant. The vested portion of the option may be exercised two years after the grant date and no vested portion of the option may be exercised on or after December 5, 2015. Shares acquired on exercise of the option may not be sold until
the earlier of (1) one year from date of exercise, or (2) a change of control of the Company. In January 2009, Mr. Stovall will be granted a second option to purchase 200,000 shares of common stock, which has terms similar to the
initial option, but will have an exercise price based on the market value of the Companys common stock on the date of grant.



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##### Table of Contents

Stores

There were
279 stores open as of November 1, 2008 and 276 stores open as of November 3, 2007. We completed our 2008 store-opening program during the third quarter. We plan to close three more stores by the end of fiscal year 2008, which will bring to
ten the number of stores closed this year, and the total number of stores in operation to 276 at the end of fiscal year 2008. For 2009, we have not actively sought new real estate, although we will open one new store next year based on a previously
signed lease. We anticipate closing ten stores in 2009.



|                                |  |                                |   |  |                                |   |  |                                |   |  |                                |  
|------------------------------- |  | ------------------------------ | - |  | ------------------------------ | - |  | ------------------------------ | - |  | ------------------------------ | -
|                                |  | 13 Weeks EndedNovember 1, 2008 |   |  | 13 Weeks EndedNovember 3, 2007 |   |  | 39 Weeks EndedNovember 1, 2008 |   |  | 39 Weeks EndedNovember 3, 2007 |  
|Stores at beginning of period   |  | 283                            |   |  | 270                            |   |  | 280                            |   |  | 268                            |  
|Stores opened during the period |  | 2                              |   |  | 8                              |   |  | 6                              |   |  | 10                             |  
|Stores closed during the period |  | (6                             | ) |  | (2                             | ) |  | (7                             | ) |  | (2                             | )
|                                |  |                                |   |  |                                |   |  |                                |   |  |                                |  
|Stores at the end of period     |  | 279                            |   |  | 276                            |   |  | 279                            |   |  | 276                            |  
|                                |  |                                |   |  |                                |   |  |                                |   |  |                                |  

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 EndedNovember 1, 2008 |    |  | 13 Weeks EndedNovember 3, 2007 |    |  | 39 Weeks EndedNovember 1, 2008 |    |  | 39 Weeks EndedNovember 3, 2007 |  
|Net sales                                    |  | 100.0                          | %  |  | 100.0                          | %  |  | 100.0                          | %  |  | 100.0                          | %
|Cost of merchandise sold                     |  | 77.4                           |    |  | 74.1                           |    |  | 75.1                           |    |  | 73.3                           |  
|                                             |  |                                |    |  |                                |    |  |                                |    |  |                                |  
|Gross profit                                 |  | 22.6                           |    |  | 25.9                           |    |  | 24.9                           |    |  | 26.7                           |  
|Selling, general and administrative expenses |  | 31.3                           |    |  | 29.2                           |    |  | 28.8                           |    |  | 27.1                           |  
|Other income, net                            |  | 1.7                            |    |  | 1.7                            |    |  | 1.7                            |    |  | 1.6                            |  
|                                             |  |                                |    |  |                                |    |  |                                |    |  |                                |  
|Income (loss) from operations                |  | (7.1                           | )  |  | (1.6                           | )  |  | (2.3                           | )  |  | 1.1                            |  
|Interest expense, net                        |  | (0.2                           | )  |  | (0.1                           | )  |  | (0.1                           | )  |  |                               |  
|                                             |  |                                |    |  |                                |    |  |                                |    |  |                                |  
|Income (loss) before income taxes            |  | (7.2                           | )  |  | (1.7                           | )  |  | (2.4                           | )  |  | 1.1                            |  
|Income tax benefit (provision)               |  | 2.5                            |    |  | 0.9                            |    |  | 0.8                            |    |  | (0.3                           | )
|                                             |  |                                |    |  |                                |    |  |                                |    |  |                                |  
|Net income (loss)                            |  | (4.7                           | )% |  | (0.8                           | )% |  | (1.6                           | )% |  | 0.7                            | %
|                                             |  |                                |    |  |                                |    |  |                                |    |  |                                |  

For the 13 weeks ended November 1, 2008 compared to the 13 weeks ended November 3, 2007

Net sales for the third quarter of 2008 were $298.8 million, down 10.4% from $333.3 million in last years third quarter. The $34.5 million
decrease reflects a $40.3 million decrease in the comparable store group and a $3.8 million decrease in the closing/closed store group, offset by a $9.6 million increase in the non-comparable store group due to the inclusion of sales for the 14
stores opened in 2007 and the 6 stores opened in 2008. The closing/closed store group includes the ten stores we plan to close in 2008 and the two stores closed in 2007. Comparable stores sales for the third quarter of 2008 decreased 12.6% compared
to third quarter of 2007.

Gross profit for the third quarter of 2008 was $67.5 million or 22.6 percent of net sales compared to $86.2 million or 25.9
percent of net sales for the third quarter of 2007. The $18.7 million decrease in gross profit reflects a $17.7 million decrease in the comparable store group and a $1.5 million decrease in the closing/closed store group, partially offset by a $0.5
million increase in the non-comparable store group due to the inclusion of operating results for the 14 stores opened in 2007 and six stores opened in 2008. Gross profit as a percent of sales decreased during the third quarter of 2008 primarily from
a 1.9 percentage point increase in occupancy costs due to a lack of leverage on lower sales and a 1.0 percentage point decrease in merchandise margin due to increased markdowns slightly offset by an increase in markup.

Selling, general and administrative (SG&A) expenses were $93.5 million or 31.3 percent of net sales for the third quarter of 2008 as compared to $97.2
million or 29.2 percent of net sales for the third quarter of 2007. The $3.7 million decrease primarily reflects reductions in advertising and store operating expenses, somewhat offset by increased store closing expenses. Advertising expense
decreased $5.2 million this quarter primarily due to reduced broadcast media. Store operating expenses decreased $2.0 million for the comparable store group due to cost saving initiatives, but were offset by a $1.0 million increase for the
non-comparable store group due to the inclusion of operating results for the 14 stores opened in 2007 and the six stores opened in 2008. Store closing costs increased $2.6 million due to more planned store closings in 2008. SG&A expenses for the
third quarter of 2008 also included $2.3 million for professional fees related to ongoing expense reduction initiatives and higher benefits costs, while last years third quarter included $1.8 million of separation costs for the resignation of
the former President/Chief Executive Officer. SG&A expenses as a percentage of net sales was higher for the third quarter of 2008 due to a lack of leverage on lower sales.

Interest expense, net increased only slightly for the third quarter of 2008 over the third quarter of 2007 due to higher borrowings at lower interest rates this quarter compared to last year.



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Other income, net decreased $0.8 million in the third quarter of 2008 compared to the third quarter of 2007 due to
decreases in both credit card income and leased shoe department income resulting from the decreased net sales.

The effective income tax benefit, including
certain book/tax differences and the recording of unrecognized tax benefits, is 34.7 percent for the third quarter of 2008 and 34.5 percent for the first 39 weeks of 2008. We expect the effective tax rate to be approximately 35 percent for the 2008
year. The income tax benefit was decreased in the third quarter of 2007 due to lower estimated annual taxable income, certain federal and state tax credits, and other state tax benefits.

For the 39 weeks ended November 1, 2008 compared to the 39 weeks ended November 1, 2007

Net sales for the
first 39 weeks of 2008 were $962.6 million, down 7.5% from $1,040.2 million for the first 39 weeks of 2007. The $77.6 million decrease reflects a $105.3 million decrease in the comparable store group and an $8.1 million decrease in the
closing/closed store group, offset by a $35.8 million increase in the non-comparable store group due to the inclusion of sales for the 14 stores opened in 2007 and the six stores opened in 2008. Comparable stores sales for the first 39 weeks of 2008
decreased 10.5% compared to the first 39 weeks of 2007.

Gross profit for first 39 weeks of 2008 was $239.3 million or 24.9 percent of net sales compared
to $277.3 million or 26.7 percent of net sales for the first 39 weeks of 2007. The $38.0 million decrease in gross profit reflects a $39.7 million decrease in the comparable store group and a $3.2 million decrease in the closing/closed store group,
partially offset by a $4.9 million increase in the non-comparable store group due to the inclusion of operating results for the 14 stores opened in 2007 and the six stores opened in 2008. Gross profit as a percent of sales decreased during the first
39 weeks of 2008 primarily from a 1.6 percentage point increase in occupancy costs due to a lack of leverage on lower sales and relatively flat merchandise margin due to increased markdowns mostly offset by an increase in markup.

SG&A expenses were $277.6 million or 28.8 percent of net sales for first 39 weeks of 2008 as compared to $282.3 million or 27.1 percent of net sales for the first 39
weeks of 2007. The $4.8 million decrease in SG&A expenses primarily reflects significant reductions in advertising expenses and share-based compensation, somewhat offset by increased store closing expenses, professional fees and benefits costs.
Advertising expenses decreased $10.3 million this year due primarily to reduced broadcast media. Share-based compensation expense decreased $3.7 million ($2.4 million in cost of merchandise sold and $1.3 million in SG&A expenses) primarily due
to compensation expense for performance shares issued in 2006 being fully amortized through the first quarter of 2008. Store closing costs increased $3.8 million due to more planned store closings in 2008. SG&A expenses for 2008 also include
$4.9 million for professional fees related to ongoing expense reduction initiatives and higher benefits costs, while last year included $1.8 million of separation costs for the resignation of the former President/Chief Executive Officer. SG&A
expenses as a percentage of net sales was higher this year due to a lack of leverage on lower sales.

Interest expense, net increased $0.7 million during
the first 39 weeks of 2008 compared to the first 39 weeks of 2007 due to higher borrowings at lower interest rates this year compared to last year.

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
November 1, 2008, the Company had $64.8 million in cash and cash equivalents.

Net cash used in operating activities was $9.8 million for the first 39
weeks of 2008 compared to $12.2 million for the first 39 weeks of 2007. The $2.4 million decrease in cash used in operating activities for the first 39 weeks of 2008 compared to 2007 is primarily due to $22.5 million less cash provided by net income
(loss) plus non-cash charges and $8.6 million more cash used for inventories and accounts payable, offset by a $22.0 million decrease in cash used for income taxes receivable/payable and $11.5 million more cash provided by other operating
activities, primarily collection of construction receivables. Less cash was needed for income taxes in 2008 due to a significant income tax receivable recorded at February 2, 2008. While both inventories and accounts payable decreased during
the first 39 weeks of each year, the decrease in inventories was greater during the first 39 weeks of 2008 due to timing of merchandise receipts and vendor payments.

Net cash used in investing activities was $13.9 million for the first 39 weeks of 2008 and $9.2 million for the first 39 weeks of 2007. Less cash was used in investing activities last year primarily due to the $10.8
million net liquidation of short-term investments partially offsetting higher capital expenditures from more stores being opened last year. The Company expects to spend a total of $17-19 million in capital expenditures in 2008 to open new
stores and continue updating systems and existing stores and anticipates that 2009 capital expenditures will be significantly less than in 2008.



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Net cash provided by financing activities was $73.4 million for the first 39 weeks of 2008 compared to $24.4 million of
cash used in financing activities for the first 39 weeks of 2007. More cash was provided by financing activities during 2008 primarily due to higher net borrowings, no cash dividends paid and fewer shares of common stock repurchased this year. In
February 2008 the Board of Directors suspended the payment of a quarterly dividend in order to conserve cash until improvements occur in the Companys business and in the current difficult economic conditions.

The Company has a senior revolving secured credit agreement (the Agreement) with a group of lenders which extends through January 2011. Effective
September 10, 2008, the Company exercised an option to increase the facility from $100 million to $150 million. On September 29, 2008, the Company borrowed $75 million under the Agreement as a proactive step to increase its cash position
to preserve its financial flexibility in light of the current uncertainty in the credit markets. The funds are being used to support seasonal working capital needs. The proceeds from this borrowing were invested on a short-term basis in AAA-rated
United States Treasury money market funds. As of November 1, 2008, the Company had $100 million in direct borrowings, $8.0 million of outstanding standby letters of credit, and cash and cash equivalents of $64.8 million. Approximately $42
million was available under the Agreement and no event of default existed under the terms of the Agreement at November 1, 2008.

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 and working capital requirements. Should
current operating conditions change, management can borrow on the revolving credit agreement or adjust operating plans, including new store rollout.

Recent Accounting Pronouncements

In June 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position
(FSP) Emerging Issues Task Force (EITF) No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. FSP EITF No. 03-6-1 addresses whether instruments
granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the earnings allocation in computing earnings per share under the two-class method as described in Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings per Share. Under the guidance of FSP EITF No. 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether
paid or unpaid) are participating securities and shall be included in the computation of earnings-per-share pursuant to the two-class method. The Companys restricted stock awards are considered participating securities because they
contain non-forfeitable rights to dividends. FSP EITF No. 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and all prior-period earnings per share data presented shall be adjusted
retrospectively. Early application is not permitted. The adoption of FSP EITF No. 03-6-1 will not have a material impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which permits entities to choose to measure many financial instruments and certain
other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 was effective for the Company on February 3, 2008 and had no effect on the Companys financial position or results of operations.

In September 2006, the EITF issued EITF No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements. EITF No. 06-4 states that an employer accounting for endorsement split-dollar life insurance arrangements that provide a benefit to an employee that extends to postretirement
periods should recognize a liability for future benefits in accordance with SFAS No. 106,Employers Accounting for Postretirement Benefits Other Than Pensions, or Accounting Principles Board Opinion
No. 12,Omnibus Opinion-1967. The Company adopted EITF 06-4 on February 3, 2008 and recognized a liability of $4.5 million (included in other liabilities) and recorded a corresponding reduction to retained earnings
representing the cumulative effect of the change in accounting principle. Subsequent changes in this liability are recorded through expense.

In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value
measurements. SFAS No. 157 was effective for the Company on February 3, 2008 and had no effect on the Companys financial position or results of operations.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

For
information regarding our exposure to certain market risk, see Quantitative and Qualitative Disclosures About Market Risk in Part II, Item 7A of our Form 10-K for the year ended February 2, 2008, filed with the Securities and
Exchange Commission on April 17, 2008. There were no material changes to our market risk during the 39 weeks ended November 1, 2008.





|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Our management, with the participation of
the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) as of the end of the period covered by



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this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls
and procedures were effective as of November 1, 2008 to provide reasonable assurance that the objectives of disclosure controls and procedures are met.

There were no changes in the Companys internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect,
the Companys internal control 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 November 1, 2008:



|                                      |  |                               |  |                           |      |                                                                                  |       |                                                                                 |        
|------------------------------------- |  | ----------------------------- |  | ------------------------- | ---- | -------------------------------------------------------------------------------- | ----- | ------------------------------------------------------------------------------- | -------
|ISSUER PURCHASES OF EQUITY
SECURITIES
|Period                                |  | Totalnumberof
sharespurchased |  | Averagepricepaid pershare |      | Total number ofshares purchasedas part of publiclyannounced plansor programs (1) |       | Maximum number ofshares that may yet bepurchased under theplans or programs (1)
|August 3, 2008  August 30, 2008      |  | 2,031                         |  | $                         | 4.68 |                                                                                  | 2,031 |                                                                                 | 805,223
|August 31, 2008  October 4, 2008     |  | 981                           |  |                           | 3.94 |                                                                                  | 981   |                                                                                 | 804,242
|October 5, 2008  November 1, 2008    |  | 267                           |  |                           | 1.87 |                                                                                  | 267   |                                                                                 | 803,975
|                                      |  |                               |  |                           |      |                                                                                  |       |                                                                                 |        
|Total                                 |  | 3,279                         |  | $                         | 4.23 |                                                                                  | 3,279 |                                                                                 | 803,975
|                                      |  |                               |  |                           |      |                                                                                  |       |                                                                                 |        



|(1) | 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 an April 17, 2007 Board authorization to repurchase 2.5 million shares of common stock which does not have an expiration date. This quarters repurchases are related to taxes due on the vesting of restricted stock
awards which fall under the Companys repurchase program.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

On August 26, 2008, the Company entered
into a First Amendment to Amended and Restated Supply Agreement (the Amendment) with DSW Inc. The Amendment extends the initial term of the Amended and Restated Supply Agreement, dated May 30, 2006, from December 31, 2009 to
December 31, 2012. The Amendment is attached hereto as Exhibit 10.1.



|ITEM 6. | EXHIBITS
|------- | --------



|     |  |                                                                                                                       
|---- |  | ----------------------------------------------------------------------------------------------------------------------
|10.1 |  | First Amendment to Amended and Restated Supply Agreement, dated August 26, 2008, between DSW Inc. and Stein Mart, Inc.
|     | 
|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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##### Table of Contents

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 10, 2008 |  | By:              |  | /s/ Linda M. Farthing                                     
|                        |  |                  |  | Linda M. Farthing                                         
|                        |  |                  |  | President and Chief Executive Officer                     
|                        |  |                 
|                        |  |                  |  | /s/ James G. Delfs                                        
|                        |  |                  |  | James G. Delfs                                            
|                        |  |                  |  | Senior Vice President, Finance and Chief Financial Officer



15