Stage Stores Announces Third Quarter Results

Thu Nov 19, 6:01 AM

HOUSTON--(BUSINESS WIRE)--Stage Stores, Inc. (NYSE: SSI) today reported a net loss for the third quarter ended October 31, 2009 of $7.3 million, or $0.19 per share, compared to a net loss of $102.8 million, or $2.66 per share, for the prior year third quarter ended November 1, 2008. Last year’s third quarter results include a non-cash goodwill impairment charge of $95.4 million, or $2.47 per share. Excluding the impairment charge last year, the comparable non-GAAP net loss was $7.4 million, or $0.19 per share.

Andy Hall, President and Chief Executive Officer, commented, “We are pleased with our ability to once again manage our business and deliver better than originally expected results. Strong inventory and expense control lead to increases in both our gross margin and SG&A leverage. In the quarter, our gross margin rate increased 20 basis points while our SG&A expenses declined by $1.2 million, despite operating 27 additional stores. While sales were in line with expectations, we are encouraged by the improving same store sales trend throughout the quarter. At quarter end, our balance sheet remains very strong, with same-store inventories down 8%, no borrowings on our $250 million revolving credit facility and a reduction in net debt of $97 million compared to last year.”

Mr. Hall continued, “During the quarter, we opened 16 new stores, 13 of which were under the new Goody’s nameplate. We increased the total number of Goody’s locations to 15 on November 12th with the opening of a new Goody’s store in Bartlesville, OK, and the rebranding of a Stage store in Russellville, AR. During the year, we opened a total of 27 new stores and reopened our hurricane-damaged store in Galveston, TX. While our plans have not been finalized, we anticipate opening a similar number of new stores in 2010.”

Mr. Hall concluded, “We remain optimistic about our business. Our merchants have done a terrific job in filling our stores with appealing seasonal merchandise to satisfy our customers’ personal and gift giving needs. In addition, new productivity initiatives such as the realignment of our north and south divisions and a new POS software platform give us more tools to better manage the business and drive operating margin improvements going forward.”

Fiscal 2009 – Updated Fourth Quarter and Full Year Guidance

Commenting on the Company’s updated guidance, Mr. Hall stated, “Although unemployment has topped 10% and we anticipate challenging economic conditions during the fourth quarter, we are raising our fourth quarter comparable store sales outlook to a decrease of 4.0% to 7.0% from the decrease of 5.0% to 8.0% provided in August. In conjunction with that change, we are raising our fourth quarter EPS guidance to $0.56 to $0.66 from $0.54 to $0.65. For the fiscal year, we are projecting a comparable store sales decrease of 7.0% to 8.0%. Given our better than expected results for the third quarter, and our increased fourth quarter outlook, we are raising our EPS guidance for the year to $0.59 to $0.69 versus our August guidance of $0.47 to $0.65.”

4th Quarter 2009:

  4Q 2009 OUTLOOK   4Q 2008
Sales ($mm) $429 - $442 $456
 
Diluted EPS $0.56 - $0.66 $0.67
 
Diluted Shares (m) 38,535 37,994

FY 2009:

  FY 2009 OUTLOOK   FY 2008
Sales ($mm) $1,429 - $1,442 $1,516
 
Diluted EPS $0.59 - $0.69 $0.77
 
Diluted Shares (m) 38,455 38,729
  • FY 2008 results are on a non-GAAP basis and exclude a goodwill impairment charge recorded in the third quarter of $95.4 million.

Conference Call Information

The Company will hold a conference call today at 8:30 a.m. Eastern Time to discuss its third quarter results. Interested parties can participate in the Company’s conference call by dialing 703-639-1328. Alternatively, interested parties can listen to a live webcast of the conference call by logging on to the Company's web site at www.stagestoresinc.com and then clicking on Webcasts, then the webcast link. A replay of the conference call will be available online until midnight on Friday, November 27, 2009.

About Stage Stores

Stage Stores, Inc. brings nationally recognized brand name apparel, accessories, cosmetics and footwear for the entire family to small and mid-size towns and communities through 759 stores located in 39 states. The Company operates its stores under the five names of Bealls, Goody’s, Palais Royal, Peebles and Stage. For more information about Stage Stores, visit the Company’s web site at www.stagestoresinc.com.

Caution Concerning Forward-Looking Statements

This document contains “forward-looking statements.” Forward-looking statements reflect our expectations regarding future events and operating performance and often contain words such as “believe,” “expect,” “may,” “will,” “should,” “could,” “anticipate,” “plan” or similar words. In this document, forward-looking statements include comments regarding the number of stores that the Company anticipates opening in 2010, as well as comments regarding the Company’s sales and EPS outlooks for the fourth quarter of the 2009 fiscal year, as well as for the 2009 fiscal year. Forward-looking statements are subject to a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2009, and other factors as may periodically be described in our other filings with the SEC. Forward-looking statements speak only as of the date of this document. We do not undertake to update our forward-looking statements.

Stage Stores, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except earnings per share)
(Unaudited)
       
Thirteen Weeks Ended
October 31, 2009 November 1, 2008
Amount % to Sales (1) Amount % to Sales (1)
 
Net sales $ 324,944 100.0 % $ 333,756 100.0 %
Cost of sales and related buying, occupancy
and distribution expenses   251,396   77.4 %   259,036   77.6 %
Gross profit 73,548 22.6 % 74,720 22.4 %
Selling, general and administrative expenses 83,222 25.6 % 84,417 25.3 %
Store opening costs 1,174 0.4 % 2,340 0.7 %
Goodwill impairment - 0.0 % 95,374 28.6 %
Interest expense, net of income of $1 and $0, respectively   1,079   0.3 %   1,365   0.4 %
Loss before income tax (11,927 ) -3.7 % (108,776 ) -32.6 %
Income tax benefit   (4,608 ) -1.4 %   (5,980 ) -1.8 %
Net loss $ (7,319 ) -2.3 % $ (102,796 ) -30.8 %
 
Basic and diluted loss per share data:
Basic loss per share $ (0.19 ) $ (2.66 )
Basic weighted average shares outstanding   38,084     38,603  
 
Diluted loss per share $ (0.19 ) $ (2.66 )
Diluted weighted average shares outstanding   38,084     38,603  
 
 

Supplemental Information

 
Net loss:
On a U.S. GAAP basis $ (7,319 ) $ (102,796 )
Goodwill impairment   -     95,374  
On a non-GAAP basis $ (7,319 ) $ (7,422 )
 
Diluted loss per share:
On a U.S. GAAP basis $ (0.19 ) $ (2.66 )
Goodwill impairment   -     2.47  
On a non-GAAP basis $ (0.19 ) $ (0.19 )
 
(1) Percentages may not foot due to rounding.
Stage Stores, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except earnings per share)
(Unaudited)
       
Thirty-Nine Weeks Ended
October 31, 2009 November 1, 2008
Amount % to Sales (1) Amount % to Sales (1)
 
Net sales $ 1,000,247 100.0 % $ 1,059,999 100.0 %
Cost of sales and related buying, occupancy
and distribution expenses   742,019 74.2 %   783,123   73.9 %
Gross profit 258,228 25.8 % 276,876 26.1 %
Selling, general and administrative expenses 250,682 25.1 % 261,277 24.6 %
Store opening costs 2,825 0.3 % 5,879 0.6 %
Goodwill impairment - 0.0 % 95,374 9.0 %
Interest expense, net of income of $77 and $11, respectively   3,378 0.3 %   3,887   0.4 %
Income (loss) before income tax 1,343 0.1 % (89,541 ) -8.4 %
Income tax expense   474 0.0 %   1,329   0.1 %
Net income (loss) $ 869 0.1 % $ (90,870 ) -8.6 %
 
Basic and diluted earnings (loss) per share data:
Basic earnings (loss) per share $ 0.02 $ (2.37 )
Basic weighted average shares outstanding   38,028   38,396  
 
Diluted earnings (loss) per share $ 0.02 $ (2.37 )
Diluted weighted average shares outstanding   38,403   38,396  
 
 

Supplemental Information

 
Net income (loss):
On a U.S. GAAP basis $ 869 $ (90,870 )
Goodwill impairment   -   95,374  
On a non-GAAP basis $ 869 $ 4,504  
 
Diluted earnings (loss) per share:
On a U.S. GAAP basis $ 0.02 $ (2.37 )
Goodwill impairment   -   2.48  
On a non-GAAP basis $ 0.02 $ 0.12  
 
(1) Percentages may not foot due to rounding.
Stage Stores, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par value)
(Unaudited)
   
October 31, 2009 January 31, 2009
 

ASSETS

Cash and cash equivalents $ 45,483 $ 26,278
Merchandise inventories, net 379,331 314,517
Prepaid expenses and other current assets   26,575     30,824  
Total current assets 451,389 371,619
 
Property, equipment and leasehold improvements, net 353,199 367,135
Intangible asset 14,910 14,910
Other non-current assets, net   15,619     14,379  
Total assets $ 835,117   $ 768,043.00  
 

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable $ 172,577 $ 97,760
Current portion of debt obligations 11,856 11,161
Accrued expenses and other current liabilities   62,415     60,727  
Total current liabilities 246,848 169,648
 
Debt obligations 37,936 45,851
Other long-term liabilities   99,676     102,541  
Total liabilities   384,460     318,040  
 
Commitments and contingencies
 
Common stock, par value $0.01, 100,000 shares authorized,
56,077 and 55,849 shares issued, respectively 561 558
Additional paid-in capital 500,308 494,765
Less treasury stock - at cost, 17,986 shares (287,040 ) (286,751 )
Accumulated other comprehensive loss (4,898 ) (5,138 )
Retained earnings   241,726     246,569  
Stockholders' equity   450,657     450,003  
Total liabilities and stockholders' equity $ 835,117   $ 768,043  
Stage Stores, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
   
 
Thirty-Nine Weeks Ended
October 31, 2009 November 1, 2008
 
Cash flows from operating activities:
Net income $ 869 $ (90,870 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, amortization and leasehold impairments 45,053 43,615
Deferred income taxes 662 330
Tax (deficiency) benefits from stock-based compensation (391 ) 1,564
Stock-based compensation expense 4,953 5,717
Amortization of debt issue costs 218 191
Goodwill impairment - 95,374
Excess tax benefits from stock-based compensation (129 ) (2,270 )
Deferred compensation 93 396
Amortization of employee benefit related costs 390 -
Construction allowances from landlords 3,543 18,921
Changes in operating assets and liabilities:
Increase in merchandise inventories (64,814 ) (85,194 )
Decrease in other assets 2,060 12,899
Increase in accounts payable and other liabilities   74,431     66,897  
Total adjustments   66,069     158,440  
Net cash provided by operating activities   66,938     67,570  
 
Cash flows from investing activities:
Additions to property, equipment and leasehold improvements (36,110 ) (79,710 )
Proceeds from insurance and retirements of property, equipment
and leasehold improvements   578     3  
Net cash used in investing activities   (35,532 )   (79,707 )
 
Cash flows from financing activities:
Proceeds from (payments on):
Borrowings under revolving credit facility, net - 2,124
Equipment financing - 18,961
Finance lease obligations 1,585 1,625
Debt obligations (8,805 ) (5,431 )
Debt issuance costs - (190 )
Repurchases of common stock (289 ) (6,949 )
Exercise of stock options 891 4,687
Excess tax benefits from stock-based compensation 129 2,270
Cash dividends   (5,712 )   (5,777 )
Net cash (used in) provided by financing activities   (12,201 )   11,320  
Net increase (decrease) in cash and cash equivalents 19,205 (817 )
 
Cash and cash equivalents:
Beginning of period   26,278     17,028  
End of period $ 45,483   $ 16,211  

Stage Stores, Inc.
Bob Aronson, 800-579-2302
Vice President, Investor Relations
baronson@stagestores.com