Quarterly Report

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, changes in store closings, changing preferences in apparel, changes in the level of consumer spending due to current events and/or general economic conditions, the effectiveness of planned advertising, marketing, and promotional strategies, adequate sources of designer and brand-name merchandise at acceptable prices, 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.

                                                           13 Weeks Ended            39 Weeks Ended
                                                      -----------------------   -----------------------
                                                        Nov. 1,      Nov. 2,      Nov. 1,      Nov. 2,
                                                         2003         2002         2003         2002
                                                      ----------   ----------   ----------   ----------
Net sales                                               100.0%       100.0%       100.0%       100.0%
Cost of merchandise sold                                 76.7         77.9         75.9         75.2
                                                      ----------   ----------   ----------   ----------
     Gross profit                                        23.3         22.1         24.1         24.8
Selling, general and
     administrative expenses                             29.5         24.7         27.0         24.0
Other income, net                                         1.0          1.0          1.1          1.1
                                                      ----------   ----------   ----------   ----------
     Income (loss) from operations                       (5.2)        (1.6)        (1.8)         1.9
Interest expense                                          0.1          0.3          0.2          0.2
                                                      ----------   ----------   ----------   ----------
Income (loss) before income taxes                        (5.3)        (1.9)        (2.0)         1.7
Income tax benefit (provision)                            2.0          0.7          0.8         (0.7)
                                                      ----------   ----------   ----------   ----------
     Net income (loss)                                   (3.3)%       (1.2)%       (1.2)%        1.0%
                                                      ==========   ==========   ==========   ==========

                                                           13 Weeks Ended            39 Weeks Ended
                                                      -----------------------   -----------------------
                                                        Nov. 1,      Nov. 2,      Nov. 1,      Nov. 2,
                                                         2003         2002         2003         2002
                                                      ----------   ----------   ----------   ----------
Stores at beginning of period                              270          261          265          253
Stores opened in the period                                  2            5           11           16
Stores closed in the period                                 (8)          -           (12)          (3)
                                                      ----------   ----------   ----------   ----------
Stores at the end of period                                264          266          264          266
                                                      ==========   ==========   ==========   ==========

Stein Mart, Inc.

Store Closings
During 2003, management decided to close 16 under-performing stores (see Note 3 to the Financial Statements). Two stores were closed during the first quarter, two during the second quarter and eight during the third quarter. The remaining four will close in the fourth quarter. Total store closing charges for 2003 are estimated to be approximately $10.0 million, including other related store closing expenses.

Sales and operating losses of the 12 stores closed and the four stores closing during 2003 are shown below (in thousands):

                                               Net      Loss From
                                              Sales     Operations
                                           ----------   ----------
For the 13 weeks ended November 1, 2003      $ 6,411     $ (9,725)
                                           ==========   ==========
For the 39 weeks ended November 1, 2003      $30,886     $(20,467)
                                           ==========   ==========

For the 13 weeks ended November 1, 2003 compared with the 13 weeks ended November 2, 2002:
The 5.1% total sales decrease for the 13 weeks ended November 1, 2003 from the prior year reflects a 5.8% decrease in sales from "comparable" stores (defined as stores that have been open throughout this period and for the entire prior year), the opening of 2 new stores, the closing of 8 stores and the 13-week impact of the non-comparable stores opened in 2002 and 2003.

Gross profit for the quarter ended November 1, 2003 was $73.6 million or 23.3 percent of net sales, a 1.2 percentage point increase from gross profit of $73.7 million or 22.1 percent of net sales for the third quarter of 2002. Mark-up improved over last year, but was offset by higher markdowns and a lack of occupancy leverage. Additional markdowns in the going out of business stores represented a 0.8 percentage point decrease in gross profit.

Selling, general and administrative expenses were $93.2 million or 29.5 percent of net sales for the quarter ended November 1, 2003, as compared to $82.3 million or 24.7 percent of net sales for the same 2002 quarter. Approximately half of the 4.8 percentage point increase in selling, general and administrative expenses as a percent of sales is due to a pre-tax asset impairment charge of $1.5 million for under-performing stores and store closing expenses of $6.2 million, including a $5.6 million charge for the present value of lease termination costs for eight stores closed in the third quarter, $0.2 million for severance costs (see Note 3 to the Financial Statements) and $0.4 million of other related store closing expenses. The balance of the increase was due to a lack of leverage resulting from the 5.8% decrease in comparable store net sales, as well as additional expenses related to a new advertising campaign.

Other income, primarily from in-store leased shoe departments, was $3.3 million and $3.2 million for the third quarter of 2003 and 2002, respectively.

Interest expense was $0.4 million for the third quarter of 2003 and $0.8 million for the third quarter of 2002. The decrease resulted from lower average borrowings at lower interest rates during the third quarter this year compared to last year.

Net loss for the third quarter of 2003 was $(10.4) million or $(0.25) loss per share compared to net loss of $(3.8) million or $(0.09) loss per share for the same quarter last year. The pre-tax loss from operations incurred by the 16 stores closed or closing during 2003 totaled $(9.7) million or $(0.14) after tax loss per share in the third quarter of 2003. Excluding the losses from these stores, the loss per share would have been $(0.11).

For the 39 weeks ended November 1, 2003 compared with the 39 weeks ended November 2, 2002:
The 5.0% total sales decrease for the 39 weeks ended November 1, 2003 from the prior year reflects a 7.0% decrease in sales from comparable stores, the opening of 11 new stores, the closing of 12 stores and the 39-week impact of the non-comparable stores opened in 2002.

Stein Mart, Inc.

Gross profit for the 39 weeks ended November 1, 2003 was $228.5 million or 24.1 percent of net sales, a 0.7 percentage point decrease from gross profit of $248.3 million or 24.8 percent of net sales in the first 39 weeks of 2002. Mark-up improved over last year, but was more than offset by higher markdowns and a lack of occupancy leverage. Additional markdowns in the stores that were in a going-out-of-business process accounted for almost half of the markdown impact.

Selling, general and administrative expenses were $256.1 million or 27.0 percent of net sales for the 39 weeks ended November 1, 2003, as compared to $239.9 million or 24.0 percent of net sales for the same 2002 period. More than one-third of the 3.0 percentage point increase in selling, general and administrative expenses as a percent of sales is due to store closing expenses of $9.1 million and a pre-tax asset impairment charge of $1.5 million for under-performing stores. The remaining increase is due to a lack of leverage resulting from the 7.0% decrease in comparable store sales for the first 39 weeks of 2003 and, to a lesser extent, expenses related to a new advertising campaign. Store closing expenses include a $6.6 million charge for the present value of lease termination costs for 12 closed stores, a pre-tax asset impairment charge of $0.8 million related to 2003 store closings, $0.7 million for severance costs (see Note 3 to the Financial Statements) and $1.0 million of other related store closing expenses.

Other income, primarily from in-store leased shoe departments, was $10.0 million and $10.3 million for the first 39 weeks of 2003 and 2002, respectively.

Interest expense was $1.3 million and $2.1 million for the first 39 weeks of 2003 and 2002, respectively. The decrease resulted from lower average borrowings at lower interest rates this year compared to last year.

Net loss for the first 39 weeks of 2003 was $(11.7) million or $(0.28) loss per share compared to net income of $10.3 million or $0.25 earnings per share for the first 39 weeks of 2002. The pre-tax loss from operations incurred by the 16 stores closed or closing during 2003 totaled $(20.5) million or $(0.30) after tax loss per share in the first 39 weeks of 2003. Excluding the losses from these stores, the 39 weeks ended November 1, 2003 would have shown earnings of $0.02 per share.

Liquidity and Capital Resources
Net cash used in operating activities was $18.4 million for the 39 weeks ended November 1, 2003 and $5.8 million for the 39 weeks ended November 2, 2002. The primary use of cash in operations for the 39 weeks ended November 1, 2003 resulted from the net loss of $11.7 million reduced by non-cash expenses for depreciation and amortization, asset impairments and store closing charges. Additionally, cash was used to finance merchandise inventory.

During the first 39 weeks of 2003 and 2002, cash flows used in investing activities amounted to $11.8 million and $15.7 million, respectively, primarily for acquisition of fixtures, equipment, and leasehold improvements for new and existing stores. Total capital expenditures for 2003 are anticipated to be approximately $13 million.

Cash flows from financing activities were $33.9 million and $26.7 million for the first 39 weeks of 2003 and 2002, respectively, reflecting primarily net borrowing under the Company's revolving credit agreement to meet working capital requirements.

As discussed in Note 5 to the Financial Statements, in July 2003 the Company completed a three-year $150 million senior revolving credit agreement to replace its existing loan facility. The Company believes that cash flow generated from operating activities, bank borrowings and vendor credit will be sufficient to fund current and long-term capital expenditures and working capital requirements.

Stein Mart, Inc.

New Marketing Initiative
For the past three years, as a marketing vehicle to attract new customers, the Company has used various coupons that allowed customers to take a specified percentage discount off of full-priced merchandise. As this practice escalated, it became apparent that these coupons did not support the Company's unique selling proposition. As a result, the Company discontinued these `percentage off full price' coupons as of the last weekend in July 2003. While coupons may continue to be used on a limited basis in new markets and specific circumstances, the widespread distribution of full-price, percentage off coupons has ceased.

As anticipated, the discontinuation of these customer traffic incentives has hindered sales growth. However, discounts that had previously been devoted to these coupon incentives are now being used to clear seasonal goods more efficiently and create additional freshness in the inventory.

In the third quarter of 2003, the Company began a new advertising campaign to showcase its unique blend of fashion merchandise, outstanding value and convenient locations. The new campaign is both image and event-focused, and uses newspaper inserts, direct mail, radio and television advertising which was rolled out nationwide in October.

Fourth Quarter 2003 Expectations
Although response to the Company's fall merchandise assortment has been encouraging, fourth quarter sales will be disadvantaged by comparisons to almost daily coupons in November and December 2002. Consequently, management expects comparable store sales to decline in the mid-single digit range for those two months, with an opportunity for improvement in January. As a result of tighter inventory control and profitability initiatives, as well as some initial benefit from the new advertising campaign, the Company now expects to approach profitability for the year, in spite of negative comparable store sales and including the costs of closing 16 stores.

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.