Dive Brief:

• Stein Mart's deal to be acquired by private equity firm Kingswood Capital Management has been canceled by mutual agreement, the discount retailer announced Thursday. 
• Stein Mart board directors on a special committee voted to terminate the merger agreement, which the company inked in late January.
• The committee did so in response to "the unpredictable economic conditions resulting from the global health crisis caused by the coronavirus (COVID-19) pandemic, uncertainty regarding Stein Mart's ability to satisfy the conditions to closing, and the substantial expense to Stein Mart of soliciting shareholder approval for a transaction which is unlikely to close," the company said in a press release.

Dive Insight:

Stein Mart's deal with Kingswood would have ended years of stock price declines and provided shareholders an exit (at a 38% premium to its stock price) which, in the best of scenarios, could have sheltered the company from the short term scrutiny of public markets. It also would have added new debt to the books of a retailer already in some financial distress. 

Along with the uncertainty in day-to-day operations for retailers, the COVID-19 pandemic has cast shadows on all manner of financial deals, from mergers to debt refinancing as global markets become volatile. 

In a joint statement, Stein Mart board director Richard Sisisky, who chairs the Special Committee, and Alex Wolf, managing partner of Kingswood, said, "While we both believed in the benefits of the proposed transaction, we have mutually concluded after careful consideration that given the current environment and significant uncertainty, it would not be prudent to continue to pursue the transaction."

Stein Mart first signaled more than two years ago that it was exploring its "strategic alternatives,"often code for seeking a buyer. Since then, its share prices fell to such deep lows it faced stock de-listing, in part because its sales have fallen every year since fiscal 2016.

To rebuild sales, Stein Mart has worked to improve its merchandise, reduce inventory, cut costs and add services such as ship from store. In an effort to drive traffic, it has also installed self-service Amazon Hub Lockers in hundreds of stores, and it teamed up with Oracle to streamline planning and forecasting for its stores, e-commerce site and warehouses.

But the retailer's trends are still negative. Comparable sales were flat for the fourth quarter while net sales declined. Comparable sales for 2019 were down 1.4%, and top-line sales fell 3%.

And the pandemic has only heightened Stein Mart's challenges. Like scores of other retailers, it has closed its stores for an indefinite period and furloughed employees in an effort to retain enough cash to stay in business.