Stage Stores Reports Third Quarter Results And Declares Quarterly Cash Dividend

Stage Stores, Inc. (NYSE:SSI) today reported financial results for the third quarter ended October 29, 2016 and lowered guidance for the fiscal year.

The Company also announced that its Board of Directors declared a quarterly cash dividend of 15 cents per share on the Company's common stock, payable on December 14, 2016 to shareholders of record at the close of business on November 29, 2016.

"Our third quarter results remained challenged by a difficult retail environment, unseasonably warm weather, the weak peso, and ongoing pressure in Texas, Oklahoma, Louisiana, and New Mexico from depressed oil prices," said Michael Glazer, President and Chief Executive Officer. "As a result, we increased clearance sales to position inventory levels for the important fourth quarter. We have enhanced our assortments, heightened our promotions, and created a more engaging customer experience online and in stores to drive sales during the holiday season. We are pleased to announce our quarterly dividend and we remain committed to generating positive free cash flow and delivering value to our shareholders."

Third Quarter Results

For the third quarter, comparable sales decreased 8.2%. Total sales decreased 9.8% to $317.1 million, as compared to $351.6 million in the third quarter of the prior year. The Company's third quarter net loss was $15.6 million, or $0.58 per diluted share, versus a $0.32 loss per diluted share during the same period in the prior year.

On an adjusted basis, the Company incurred a third quarter net loss of $15.5 million, or $0.57 per diluted share, versus a $0.29 loss per diluted share during the same period in the prior year. Adjusted results exclude charges related to the consolidation of the Company's corporate headquarters, severance associated with workforce reductions, and strategic store closures, which adjustments totaled approximately $0.2 million after tax, or $0.01 per diluted share, in the third quarter of 2016.

Guidance

The Company anticipates fourth quarter comparable sales to be in the range of -2% to -6% and earnings per diluted share to be between $0.65 and $0.90. Weighted average diluted shares for the fourth quarter are expected to be 28.3 million.

The Company lowered its guidance for the fiscal year with comparable sales expected to be in the range of -7% to -8% and adjusted loss per share to be between $0.15 and $0.40. Weighted average shares for the year are expected to be 27.1 million.

Capital expenditures in 2016, net of construction allowances from landlords, are expected to be approximately $65 million, compared to $87 million in 2015.

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 2, 2016.

About Stage Stores

Stage Stores operates 820 specialty department stores in 38 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 29, 2016   October 31, 2015
Amount   % to Sales (a) Amount   % to Sales (a)
 
Net sales $ 317,140 100.0 % $ 351,575 100.0 %
Cost of sales and related buying, occupancy and distribution expenses 260,550   82.2   % 275,479   78.4   %
Gross profit 56,590 17.8 % 76,096 21.6 %
Selling, general and administrative expenses 84,564 26.7 % 92,096 26.2 %
Interest expense 1,395   0.4   % 743   0.2   %
Loss before income tax (29,369 ) (9.3

)

%
(16,743 ) (4.8

)

%
Income tax benefit (13,735 ) (4.3

)

%
(6,560 ) (1.9

)

%
Net loss $ (15,634 ) (4.9

)

%
$ (10,183 ) (2.9

)

%
 
Basic loss per share data:
Basic loss per share $ (0.58 ) $ (0.32 )
Basic weighted average shares outstanding 27,155   32,017  
 
Diluted loss per share data:
Diluted loss per share $ (0.58 ) $ (0.32 )
Diluted weighted average shares outstanding 27,155   32,017  
 
(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 29, 2016   October 31, 2015
Amount   % to Sales (a) Amount   % to Sales (a)
 
Net sales $ 988,275 100.0 % $ 1,101,804 100.0 %
Cost of sales and related buying, occupancy and distribution expenses 779,128   78.8   % 846,324   76.8   %
Gross profit 209,147 21.2 % 255,480 23.2 %
Selling, general and administrative expenses 260,076 26.3 % 281,783 25.6 %
Interest expense 3,616   0.4   % 1,995   0.2   %
Loss before income tax (54,545 ) (5.5

)

%
(28,298 ) (2.6

)

%
Income tax benefit (23,492 ) (2.4

)

%
(11,093 ) (1.0

)

%
Net loss $ (31,053 ) (3.1

)

%
$ (17,205 ) (1.6

)

%
 
Basic loss per share data:
Basic loss per share $ (1.15 ) $ (0.54 )
Basic weighted average shares outstanding 27,066   31,917  
 
Diluted loss per share data:
Diluted loss per share $ (1.15 ) $ (0.54 )
Diluted weighted average shares outstanding 27,066   31,917  
 
(a) Percentages may not foot due to rounding.

Stage Stores, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value)

(Unaudited)
   
October 29, 2016 January 30, 2016
ASSETS
Cash and cash equivalents $ 18,902 $ 16,487
Merchandise inventories, net 569,343 435,996
Prepaid expenses and other current assets 60,283   48,279  
Total current assets 648,528 500,762
 
Property, equipment and leasehold improvements, net 315,865 311,717
Intangible assets 15,235 15,235
Other non-current assets, net 22,711   20,385  
Total assets $ 1,002,339   $ 848,099  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 210,995 $ 84,019
Accrued expenses and other current liabilities 64,126   71,863  
Total current liabilities 275,121 155,882
 
Long-term debt obligations 236,592 162,876
Other long-term liabilities 100,549   99,588  
Total liabilities 612,262   418,346  
 
Commitments and contingencies
 
Common stock, par value $0.01, 100,000 shares authorized, 32,331 and 32,030 shares issued, respectively 323 320
Additional paid-in capital 409,690 406,034
Treasury stock, at cost, 5,175 shares, respectively (43,301 ) (43,068 )
Accumulated other comprehensive loss (5,936 ) (6,353 )
Retained earnings 29,301   72,820  
Total stockholders' equity 390,077   429,753  
Total liabilities and stockholders' equity $ 1,002,339   $ 848,099  

Stage Stores, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)
 
Nine Months Ended
October 29, 2016   October 31, 2015
Cash flows from operating activities:
Net loss $ (31,053 ) $ (17,205 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, amortization and impairment of long-lived assets 54,285 58,326
Loss on retirements of property, equipment and leasehold improvements 273 712
Deferred income taxes 1,965 (557 )
Tax (deficiency) benefit from stock-based compensation (3,295 ) 540
Stock-based compensation expense 7,345 8,926
Amortization of debt issuance costs 164 164
Excess tax benefits from stock-based compensation (945 )
Deferred compensation obligation 233 163
Amortization of employee benefit related costs 673 581
Construction allowances from landlords 6,994 2,127
Other changes in operating assets and liabilities:
Increase in merchandise inventories (133,347 ) (175,806 )
Increase in other assets (18,527 ) (3,335 )
Increase in accounts payable and other liabilities 119,544   95,476  
Net cash provided by (used in) operating activities 5,254   (30,833 )
 
Cash flows from investing activities:
Additions to property, equipment and leasehold improvements (67,934 ) (69,156 )
Proceeds from disposal of assets 1,177   37  
Net cash used in investing activities (66,757 ) (69,119 )
 
Cash flows from financing activities:
Proceeds from revolving credit facility borrowings 389,701 428,783
Payments of revolving credit facility borrowings (314,783 ) (304,960 )
Proceeds from long-term debt obligation 5,830
Payments of long-term debt obligations (3,507 ) (1,466 )
Payments for stock related compensation (857 ) (3,708 )
Proceeds from issuance of stock awards 543
Excess tax benefits from stock-based compensation 945
Cash dividends paid (12,466 ) (13,916 )
Net cash provided by financing activities 63,918   106,221  
Net increase in cash and cash equivalents 2,415 6,269
 
Cash and cash equivalents:
Beginning of period 16,487   17,165  
End of period $ 18,902   $ 23,434  

Stage Stores, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except earnings per share)

(Unaudited)
   
Three Months Ended Nine Months Ended
October 29, 2016   October 31, 2015 October 29, 2016   October 31, 2015
Net loss (GAAP) $ (15,634 ) $ (10,183 ) $ (31,053 ) $ (17,205 )
Consolidation of corporate headquarters (pretax) 1,313 110 1,941
Severance charges associated with workforce reduction (pretax) 794
Strategic store closures and other initiatives (pretax) 443 183 1,394 8,834
Income tax impact $ (271 ) $ (692 ) $ (989 ) $ (4,224 )
Adjusted net loss (non-GAAP) $ (15,462 ) $ (9,379 ) $ (29,744 ) $ (10,654 )
 
Diluted loss per share (GAAP) $ (0.58 ) $ (0.32 ) $ (1.15 ) $ (0.54 )
Consolidation of corporate headquarters (pretax) 0.04 0.06
Severance charges associated with workforce reduction (pretax) 0.03
Strategic store closures and other initiatives (pretax) 0.02 0.01 0.05 0.28
Income tax impact $ (0.01 ) $ (0.02 ) $ (0.03 ) $ (0.13 )
Adjusted diluted loss per share (non-GAAP) $ (0.57 ) $ (0.29 ) $ (1.10 ) $ (0.33 )
  Three Months Ended
October 29, 2016   October 31, 2015
Amount   % to Sales (a) Amount   % to Sales (a)
Selling, general and administrative expenses (GAAP) $ 84,564 26.7 % $ 92,096 26.2 %
Consolidation of corporate headquarters % (1,313 ) (0.4

)

%
Strategic store closures (443 ) (0.1

)

%
(183 ) (0.1

)

%
Adjusted selling, general and administrative expenses (non-GAAP) $ 84,121   26.5   % $ 90,600   25.8   %
 
(a) Percentages may not foot due to rounding.
  2016 Guidance Range
Low   High
Diluted loss per share (GAAP) $ (0.45 ) $ (0.20 )
Consolidation of corporate headquarters, severance charges associated with workforce reduction and strategic store closures 0.05   0.05  
Adjusted diluted loss per share (non-GAAP) $ (0.40 ) $ (0.15 )

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