Stage Stores Reports Third Quarter Results and Declares Quarterly Cash Dividend

HOUSTON--(BUSINESS WIRE)--

Stage Stores, Inc. 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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