Stage Stores Reports Third Quarter Results; Announces Resumption of Share Repurchase Program

HOUSTON--()--Stage Stores, Inc. (NYSE: SSI) today reported financial results for the third quarter ended October 31, 2015. Sales and comparable sales each decreased 3.5%. On an adjusted basis, the Company reported a net loss of $9.4 million, or $0.29 per diluted share compared to an adjusted net loss of $0.16 per diluted share in the prior year.

“Our third quarter results were negatively impacted by stores located in geographies which were pressured by oil and gas and a devalued peso. Stores outside of those areas achieved a flat comp for the quarter,” said Michael Glazer, President and Chief Executive Officer. “Based on these results and our expectation that these challenges will continue in the near term, we are guiding our comp sales to a range of -2% to -4% for the fourth quarter and adjusted earnings per diluted share to $0.70 to $0.80 for the fiscal year. We will manage our business with discipline around inventory control, implement additional cost reductions and maintain our focus on improving store productivity and driving online sales. Overall, we continue to believe that our strategic initiatives around e-commerce, an increased emphasis on merchandise style and value, a rationalized store base, store remodels, and rejuvenated marketing programs will better position us for sustainable long-term growth.”

Third Quarter Reported Results

Sales decreased 3.5% to $351.6 million for the third quarter, as compared to $364.2 million in the prior year period. Comparable sales decreased 3.5%. Net loss was $10.2 million, or $0.32 per diluted share, versus $0.16 per diluted share for the prior year.

On an adjusted basis, net loss was $9.4 million, or $0.29 per diluted share, for the third quarter. Adjusted third quarter results exclude charges associated with the consolidation of the Company’s headquarters and asset disposals associated with our store remodel program of approximately $1.5 million, or $0.03 per diluted share.

Share Repurchase Program

The Company also announced today that its Board of Directors approved the resumption of the $200 million share repurchase program authorized in 2011. The Company has $99.9 million remaining under the program.

Mr. Glazer commented, “The Board’s decision reflects confidence in the Company’s future growth and cash flow generation. At current levels, we believe the share price does not reflect Stage’s intrinsic value, making this an opportune time to resume our share repurchases.”

Under the program, the Company has the discretion to repurchase its common shares in the open market and/or in privately negotiated transactions. The extent to which the Company repurchases its common shares under the program, and the timing of such repurchases, will depend on market conditions, regulatory considerations and other factors. Purchases under the program will be financed by existing cash, cash flow or other liquidity sources. The program is eligible to begin on November 20, 2015 with no expiration date and may be suspended or discontinued at any time. Any common shares acquired will be available to meet obligations under equity compensation plans and for general corporate purposes.

Conference Call / Webcast Information

The Company will hold a conference call today at 8:30 a.m. Eastern Time to discuss its third quarter results. Interested parties may participate in the Company’s conference call by dialing 844-368-2238. Alternatively, interested parties may listen to a live webcast of the conference call through the Investor Relations section of the Company’s website (www.stagestoresinc.com) under the “Webcasts” caption. A replay of the conference call will be available online until midnight on Friday, December 4, 2015.

About Stage Stores

Stage Stores, Inc. operates 847 specialty department stores in 40 states and a direct-to-consumer channel under the BEALLS, GOODY'S, PALAIS ROYAL, PEEBLES and STAGE nameplates. The Company’s stores, predominantly located in small towns and communities, and direct-to-consumer business offer a moderately priced, broad selection of trend-right, brand name apparel, accessories, cosmetics, footwear and home goods for the entire family. The Company’s direct-to-consumer channel includes its e-commerce website and Send program. Its e-commerce website features assortments of merchandise similar to that found in its stores, as well as products available exclusively online. The Send program allows customers in the stores to have merchandise shipped directly to their homes if the merchandise is not available in the local store. For more information about Stage Stores, visit the Company’s website at www.stagestoresinc.com.

Use of Adjusted (Non-GAAP) Financial Measures

The Company reports its financial results in accordance with generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures help to facilitate comparisons of Company operating performance across periods. This release includes non-GAAP financial measures identified as “adjusted” results. A reconciliation of all non-GAAP financial measures to the most comparable GAAP financial measures is provided in a table included with this release.

Caution Concerning Forward-Looking Statements

Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements are intended to qualify for the protection of the safe harbor provided by the Act. The words “anticipate,” “estimate,” “expect,” “objective,” “goal,” “project,” “intend,” “plan,” “believe,” “will,” “should,” “may,” “target,” “forecast,” “guidance,” “outlook” and similar expressions generally identify forward-looking statements. Similarly, descriptions of the Company’s objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements relate to the expectations of management as to future occurrences and trends, including statements expressing optimism or pessimism about future operating results or events and projected sales, earnings, capital expenditures and business strategy. Forward-looking statements are based upon a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Forward-looking statements are based upon management’s then-current views and assumptions regarding future events and operating performance. Although management believes the expectations expressed in forward-looking statements are based on reasonable assumptions within the bounds of its knowledge, forward-looking statements involve risks, uncertainties and other factors which may materially affect the Company’s business, financial condition, results of operations or liquidity.

Forward-looking statements are not guarantees of future performance and actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, but not limited to, economic conditions, cost and availability of goods, inability to successfully execute strategic initiatives, competitive pressures, economic pressures on the Company and its customers, freight costs, the risks discussed in the Risk Factors section of the Company’s most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”), and other factors discussed from time to time in the Company’s other SEC filings. This release should be read in conjunction with such filings, and you should consider all of such risks, uncertainties and other factors carefully in evaluating forward-looking statements.

You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. The Company undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures the Company makes on related subjects in its public announcements and SEC filings.

Stage Stores, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

 
Three Months Ended
October 31, 2015   November 1, 2014
Amount   % to Sales (a) Amount   % to Sales (a)
 
Net sales $ 351,575 100.0 % $ 364,197 100.0 %
Cost of sales and related buying, occupancy and distribution expenses 275,479   78.4 % 276,031   75.8 %
Gross profit 76,096 21.6 % 88,166 24.2 %
Selling, general and administrative expenses 92,079 26.2 % 94,652 26.0 %
Store opening costs 17 % 998 0.3 %
Interest expense 743   0.2 % 814   0.2 %
Loss from continuing operations before income tax (16,743 ) (4.8 )% (8,298 ) (2.3 )%
Income tax benefit (6,560 ) (1.9 )% (3,191 ) (0.9 )%
Loss from continuing operations (10,183 ) (2.9 )% (5,107 ) (1.4 )%
Loss from discontinued operations, net of tax benefit of $65   % (161 ) %
Net loss $ (10,183 ) (2.9 )% $ (5,268 ) (1.4 )%
 
 
Basic loss per share data:
Continuing operations $ (0.32 ) $ (0.16 )
Discontinued operations   (0.01 )
Basic loss per share $ (0.32 ) $ (0.17 )
Basic weighted average shares outstanding 32,017   31,794  
 
Diluted loss per share data:
Continuing operations $ (0.32 ) $ (0.16 )
Discontinued operations   (0.01 )
Diluted loss per share $ (0.32 ) $ (0.17 )
Diluted weighted average shares outstanding 32,017   31,794  
 
(a) Percentages may not foot due to rounding.

Stage Stores, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

 
Nine Months Ended
October 31, 2015   November 1, 2014
Amount   % to Sales (a) Amount   % to Sales (a)
 
Net sales $ 1,101,804 100.0 % $ 1,113,683 100.0 %
Cost of sales and related buying, occupancy and distribution expenses 846,324   76.8 % 835,236   75.0 %
Gross profit 255,480 23.2 % 278,447 25.0 %
Selling, general and administrative expenses 281,387 25.5 % 283,814 25.5 %
Store opening costs 396 % 2,030 0.2 %
Interest expense 1,995   0.2 % 2,293   0.2 %
Loss from continuing operations before income tax (28,298 ) (2.6 )% (9,690 ) (0.9 )%
Income tax benefit (11,093 ) (1.0 )% (3,729 ) (0.3 )%
Loss from continuing operations (17,205 ) (1.6 )% (5,961 ) (0.5 )%
Loss from discontinued operations, net of tax benefit of $4,322   % (6,909 ) (0.6 )%
Net loss $ (17,205 ) (1.6 )% $ (12,870 ) (1.2 )%
 
Basic loss per share data:
Continuing operations $ (0.54 ) $ (0.19 )
Discontinued operations   (0.22 )
Basic loss per share $ (0.54 ) $ (0.41 )
Basic weighted average shares outstanding 31,917   31,681  
 
Diluted loss per share data:
Continuing operations $ (0.54 ) $ (0.19 )
Discontinued operations   (0.22 )
Diluted loss per share $ (0.54 ) $ (0.41 )
Diluted weighted average shares outstanding 31,917   31,681  
 
(a) Percentages may not foot due to rounding.

Stage Stores, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value)

(Unaudited)

   
October 31, 2015 January 31, 2015
ASSETS
Cash and cash equivalents $ 23,434 $ 17,165
Merchandise inventories, net 617,258 441,452
Prepaid expenses and other current assets 46,849   45,444  
Total current assets 687,541 504,061
 
Property, equipment and leasehold improvements, net 308,034 285,450
Intangible asset 14,910 14,910
Other non-current assets, net 21,996   20,256  
Total assets $ 1,032,481   $ 824,677  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 241,549 $ 121,778
Accrued expenses and other current liabilities 70,393   83,004  
Total current liabilities 311,942 204,782
 
Long-term debt obligations 172,042 45,673
Other long-term liabilities 96,864   98,292  
Total liabilities 580,848   348,747  
 
Commitments and contingencies
 
Common stock, par value $0.01, 100,000 shares authorized, 32,020 and 31,632 shares issued, respectively 320 316
Additional paid-in capital 402,018 395,395
Less treasury stock - at cost, 0 and 0 shares, respectively (763 ) (600 )
Accumulated other comprehensive loss (6,514 ) (6,874 )
Retained earnings 56,572   87,693  
Total stockholders' equity 451,633   475,930  
Total liabilities and stockholders' equity $ 1,032,481   $ 824,677  

Stage Stores, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 
Nine Months Ended
October 31, 2015   November 1, 2014
Cash flows from operating activities:
Net loss $ (17,205 ) $ (12,870 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and impairment of long-lived assets 58,326 46,896
Loss on retirements of property, equipment and leasehold improvements 712 854
Deferred income taxes (557 ) (451 )
Tax benefit from stock-based compensation 540 109
Stock-based compensation expense 8,926 7,018
Amortization of debt issuance costs 164 220
Excess tax benefits from stock-based compensation (945 ) (829 )
Deferred compensation obligation 163 (104 )
Amortization of employee benefit related costs 581 299
Construction allowances from landlords 2,127 5,529
Changes in operating assets and liabilities:
Increase in merchandise inventories (175,806 ) (140,569 )
Increase in other assets (3,335 ) (3,500 )
Increase in accounts payable and other liabilities 95,476   93,021  
Net cash used in operating activities (30,833 ) (4,377 )
 
Cash flows from investing activities:
Additions to property, equipment and leasehold improvements (69,156 ) (48,308 )
Proceeds from disposal of assets 37   1,468  
Net cash used in investing activities (69,119 ) (46,840 )
 
Cash flows from financing activities:
Proceeds from revolving credit facility borrowings 428,783 331,518
Payments of revolving credit facility borrowings (304,960 ) (262,970 )
Payments of long-term debt obligations (1,466 ) (2,017 )
Payments of debt issuance costs (634 )
Repurchases of common stock (5 )
Payments for stock related compensation (3,708 ) (2,038 )
Proceeds from exercise of stock awards 543 5,041
Excess tax benefits from stock-based compensation 945 829
Cash dividends paid (13,916 ) (12,483 )
Net cash provided by financing activities 106,221   57,241  
Net increase in cash and cash equivalents 6,269 6,024
 
Cash and cash equivalents:
Beginning of period 17,165   14,762  
End of period $ 23,434   $ 20,786  

Stage Stores, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except earnings per share)

(Unaudited)

   
Three Months Ended Nine Months Ended
October 31, 2015   November 1, 2014 October 31, 2015   November 1, 2014
Net loss (GAAP) $ (10,183 ) $ (5,268 ) $ (17,205 ) $ (12,870 )
Loss from discontinued operations   161     6,909  
Loss from continuing operations (10,183 ) (5,107 ) (17,205 ) (5,961 )
Corporate headquarters consolidation, net of tax of $522 and $761, respectively 791 1,180
Strategic store closures and remodels, net of tax of $170 and $3,463, respectively 13     5,371    
Adjusted loss (non-GAAP) $ (9,379 ) $ (5,107 ) $ (10,654 ) $ (5,961 )
 
Diluted loss per share (GAAP) $ (0.32 ) $ (0.17 ) $ (0.54 ) $ (0.41 )
Loss from discontinued operations   0.01     0.22  
Loss from continuing operations (0.32 ) (0.16 ) (0.54 ) (0.19 )
Corporate headquarters consolidation 0.03 0.04
Strategic store closures and remodels     0.17    
Adjusted diluted loss per share (non-GAAP) $ (0.29 ) $ (0.16 ) $ (0.33 ) $ (0.19 )
  Three Months Ended
October 31, 2015   November 1, 2014
Amount   % to Sales (a) Amount   % to Sales (a)
Selling, general and administrative expenses (GAAP) $ 92,079 26.2 % $ 94,652 26.0 %
Store opening costs (GAAP) 17 % 998 0.3 %
Interest expense (GAAP) 743 0.2 % 814 0.2 %
Corporate headquarters consolidation (1,313 ) (0.4 )% %
Strategic store closures and remodels (183 ) (0.1 )%   %
Adjusted expenses (non-GAAP) $ 91,343   26.0 % $ 96,464   26.5 %
 
(a) Percentages may not foot due to rounding.

Contacts

Stage Stores, Inc.
Randi Sonenshein, 713-346-2430
Senior Vice President, Finance and Strategy
rsonenshein@stagestores.com

Release Summary

Stage Stores Reports Third Quarter Results; Announces Resumption of Share Repurchase Program

Contacts

Stage Stores, Inc.
Randi Sonenshein, 713-346-2430
Senior Vice President, Finance and Strategy
rsonenshein@stagestores.com