Market Overview

Stage Stores Reports Third Quarter Results, Declares Quarterly Cash Dividend, and Narrows Guidance Range

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Stage Stores, Inc. (NYSE:SSI) today reported financial results for the
third quarter ended October 28, 2017. For the third quarter, comparable
sales declined 3.9%. Net loss for the quarter was $17.7 million, or a
$0.64 loss per diluted share, including an estimated negative impact of
$0.05 per diluted share from Hurricanes Harvey and Irma.

"Despite the disruption of Hurricanes Harvey and Irma, we returned to
positive comparable sales in October, regaining our momentum from the
second quarter," said Michael Glazer, President and Chief Executive
Officer. "We estimate that the hurricanes negatively impacted total
sales by $3.8 million or 1.1%. Our immediate response to the disaster
was to provide aid to our affected guests and associates, many of whom
suffered tremendous losses as a result of the storms. The Company, our
associates, our guests, and our vendors provided much needed assistance
through generous donations of cash, merchandise, and supplies to the
communities we serve. I am humbled by the overwhelming response and
generosity that we have experienced during this difficult time.

"Throughout the third quarter, we continued to make progress on our key
initiatives across merchandising, marketing, and operations. Notably, we
achieved another quarter of double digit growth in e-commerce as we
remained focused on enhancing our omni-channel business. We ended the
quarter with department store inventory down 8.7%, which helped
contribute to a 260 basis point merchandise margin improvement,
positioning us for a successful holiday season," continued Mr. Glazer.
"In the fourth quarter, we will capitalize on the momentum in our
department stores by focusing on trending categories like cosmetics,
gifts, and active, reissuing our private label credit cards, and
shifting more of our marketing efforts to digital. In our Gordmans
stores, our inventory is well positioned for the fourth quarter, and we
are excited to launch our first marketing campaign that announces our
presence in the off-price industry as we head into the holiday season.
As we execute these strategies, our team remains focused on generating
positive free cash flow and enhancing shareholder value through our
dividend."

The Company also announced that its Board of Directors declared a
quarterly cash dividend of $0.05 per share on its common stock, payable
on December 13, 2017 to shareholders of record at the close of business
on November 28, 2017.

Third Quarter Reported Results

For the third quarter, comparable sales decreased 3.9%. Total sales
increased 12.6% to $357.2 million, as compared to $317.1 million in the
prior year. Net loss was $17.7 million, or $0.64 per diluted share,
compared to a net loss of $15.6 million, or $0.58 per diluted share, for
the prior year third quarter. Excluding after-tax charges related to
store closures and other strategic initiatives of approximately $0.2
million, or $0.01 per diluted share, third quarter 2016 adjusted net
loss was $15.5 million, or $0.57 per diluted share.

2017 Guidance

The Company has narrowed its guidance range for 2017. Adjusted loss per
diluted share is now expected to be between $0.90 and $1.25, compared to
the prior guidance of an adjusted loss of $0.90 to $1.35. Updated 2017
guidance assumes comparable sales are in a range of -4% to -6%, compared
to the prior guidance of -4% to -7%, and excludes after-tax charges
associated with the Gordmans acquisition, store closures, and other
totaling approximately $0.23 per diluted share. Weighted average shares
for the year are expected to be approximately 27.5 million. The
effective tax rate is now projected to be between 35% and 37%. Capital
expenditures in 2017, net of construction allowances from landlords, are
expected to be $40 million, compared to $67 million in 2016.

Conference Call / Webcast Information

The Company will hold a conference call today at 8:30 a.m. Eastern Time
to discuss its results. Interested parties may participate in the
Company's conference call by dialing 844-415-6993. Alternatively,
interested parties may listen to a live webcast of the conference call
through the Investor Relations section of the Company's website (corporate.stage.com)
under the "Webcasts" caption. A replay of the conference call will be
available online until midnight on Friday, December 1, 2017.

About Stage Stores

Stage Stores, Inc. is a leading retailer of trend-right, name-brand
values for apparel, accessories, cosmetics, footwear and home goods. As
of November 16, 2017, the Company operates in 42 states through 789
BEALLS, GOODY'S, PALAIS ROYAL, PEEBLES, and STAGE specialty department
stores and 58 GORDMANS off-price stores, as well as an e-commerce
website at www.stage.com.
For more information about Stage Stores, visit the Company's website at corporate.stage.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.

(Tables to Follow)

 

Stage Stores, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

 
  Three Months Ended
October 28, 2017   October 29, 2016
Amount   % to Sales (a) Amount   % to Sales (a)
Net sales $ 357,236 100.0 % $ 317,140 100.0 %
Cost of sales and related buying, occupancy and distribution expenses 285,542   79.9 % 260,550   82.2 %
Gross profit 71,694 20.1 % 56,590 17.8 %
Selling, general and administrative expenses 100,036 28.0 % 84,564 26.7 %
Interest expense 2,001   0.6 % 1,395   0.4 %
Loss before income tax (30,343 ) (8.5 )% (29,369 ) (9.3 )%
Income tax benefit (12,621 ) (3.5 )% (13,735 ) (4.3 )%
Net loss $ (17,722 ) (5.0 )% $ (15,634 ) (4.9 )%
 
Basic loss per share data:
Basic loss per share $ (0.64 ) $ (0.58 )
Basic weighted average shares outstanding 27,602   27,155  
 
Diluted loss per share data:
Diluted loss per share $ (0.64 ) $ (0.58 )
Diluted weighted average shares outstanding 27,602   27,155  
 
(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 28, 2017   October 29, 2016
Amount   % to Sales (a) Amount   % to Sales (a)
Net sales $ 1,042,924 100.0 % $ 988,275 100.0 %
Cost of sales and related buying, occupancy and distribution expenses 816,071   78.2 % 779,128   78.8 %
Gross profit 226,853 21.8 % 209,147 21.2 %
Selling, general and administrative expenses 289,188 27.7 % 260,076 26.3 %
Interest expense 5,505   0.5 % 3,616   0.4 %
Loss before income tax (67,840 ) (6.5 )% (54,545 ) (5.5 )%
Income tax benefit (24,873 ) (2.4 )% (23,492 ) (2.4 )%
Net loss $ (42,967 ) (4.1 )% $ (31,053 ) (3.1 )%
 
Basic loss per share data:
Basic loss per share $ (1.57 ) $ (1.15 )
Basic weighted average shares outstanding 27,468   27,066  
 
Diluted loss per share data:
Diluted loss per share $ (1.57 ) $ (1.15 )
Diluted weighted average shares outstanding 27,468   27,066  
 
(a) Percentages may not foot due to rounding.
 
 

Stage Stores, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value)

(Unaudited)

 
  October 28, 2017   January 28, 2017

ASSETS

Cash and cash equivalents $ 30,330 $ 13,803
Merchandise inventories, net 578,633 409,384
Prepaid expenses and other current assets 52,376   41,574  
Total current assets 661,339 464,761
 
Property, equipment and leasehold improvements, net 260,870 284,110
Intangible assets 17,135 15,235
Other non-current assets, net 28,237   22,883  
Total assets $ 967,581   $ 786,989  
 

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable $ 214,783 $ 101,985
Accrued expenses and other current liabilities 77,093   66,685  
Total current liabilities 291,876 168,670
 
Long-term debt obligations 268,969 163,749
Other long-term liabilities 70,052   74,410  
Total liabilities 630,897   406,829  
 
Commitments and contingencies
 
Common stock, par value $0.01, 100,000 shares authorized, 32,794 and
32,340 shares issued, respectively
328 323
Additional paid-in capital 416,422 410,504
Treasury stock, at cost, 5,175 shares, respectively (43,248 ) (43,286 )
Accumulated other comprehensive loss (5,021 ) (5,648 )
(Accumulated deficit) retained earnings (31,797 ) 18,267  
Total stockholders' equity 336,684   380,160  
Total liabilities and stockholders' equity $ 967,581   $ 786,989  
 
 

Stage Stores, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 
  Nine Months Ended
October 28, 2017   October 29, 2016
Cash flows from operating activities:
Net loss $ (42,967 ) $ (31,053 )
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation, amortization and impairment of long-lived assets 49,476 54,285
(Gain) loss on retirements of property, equipment and leasehold
improvements
(926 ) 273
Deferred income taxes (6,065 ) 1,965
Tax deficiency from stock-based compensation (3,295 )
Stock-based compensation expense 6,191 7,345
Amortization of debt issuance costs 216 164
Deferred compensation obligation (38 ) 233
Amortization of employee benefit related costs and loss on pension
settlement
1,011 673
Construction allowances from landlords 1,228 6,994
Other changes in operating assets and liabilities:
Increase in merchandise inventories (137,479 ) (133,347 )
Increase in other assets (9,709 ) (18,527 )
Increase in accounts payable and other liabilities 120,137   119,544  
Net cash (used in) provided by operating activities (18,925 ) 5,254  
 
Cash flows from investing activities:
Additions to property, equipment and leasehold improvements (25,342 ) (67,934 )
Proceeds from insurance and disposal of assets 2,404 1,177
Business acquisition (36,144 )  
Net cash used in investing activities (59,082 ) (66,757 )
 
Cash flows from financing activities:
Proceeds from revolving credit facility borrowings 426,308 389,701
Payments of revolving credit facility borrowings (318,851 ) (314,783 )
Proceeds from long-term debt obligation 5,830
Payments of long-term debt obligations (5,626 ) (3,507 )
Payments of debt issuance costs (8 )
Payments for stock related compensation (192 ) (857 )
Cash dividends paid (7,097 ) (12,466 )
Net cash provided by financing activities 94,534   63,918  
Net increase in cash and cash equivalents 16,527 2,415
 
Cash and cash equivalents:
Beginning of period 13,803   16,487  
End of period $ 30,330   $ 18,902  
 
 

Stage Stores, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except earnings per share)

(Unaudited)

 
  Three Months Ended   Nine Months Ended

October 28,
2017

 

October 29,
2016

October 28,
2017

 

October 29,
2016

Net loss (GAAP) $ (17,722 ) $ (15,634 ) $ (42,967 ) $ (31,053 )
Business acquisition costs (pretax) (39 ) 9,169
Store closures, impairments and other (pretax) 552 443 1,333 1,394
Consolidation of corporate headquarters and severance charges
associated with workforce reduction (pretax)
904
Income tax impact (370 ) (271 ) (4,176 ) (989 )
Adjusted net loss (non-GAAP) $ (17,579 ) $ (15,462 ) $ (36,641 ) $ (29,744 )
 
Diluted loss per share (GAAP) $ (0.64 ) $ (0.58 ) $ (1.57 ) $ (1.15 )
Business acquisition costs (pretax) 0.33
Store closures, impairments and other (pretax) 0.02 0.02 0.05 0.05
Consolidation of corporate headquarters and severance charges
associated with workforce reduction (pretax)
0.03
Income tax impact (0.02 ) (0.01 ) (0.15 ) (0.03 )
Adjusted diluted loss per share (non-GAAP) $ (0.64 ) $ (0.57 ) $ (1.34 ) $ (1.10 )
 
 
Three Months Ended Nine Months Ended

October 28,
2017

October 29,
2016

October 28,
2017

October 29,
2016

Gross profit (GAAP) $ 71,694 $ 56,590 $ 226,853 $ 209,147
Store closures and impairments 70     583   231  
Adjusted gross profit (non-GAAP) $ 71,764   $ 56,590   $ 227,436   $ 209,378  
 
Selling, general and administrative expenses (GAAP) $ 100,036 $ 84,564 $ 289,188 $ 260,076
Business acquisition costs 39 (9,169 )
Store closures and other (482 ) (443 ) (750 ) (1,163 )
Consolidation of corporate headquarters and severance charges
associated with workforce reduction
      (904 )
Adjusted selling, general and administrative expenses (non-GAAP) $ 99,593   $ 84,121   $ 279,269   $ 258,009  
 
 

Stage Stores, Inc.

Reconciliation of Non-GAAP Financial Measures (continued)

(in thousands, except earnings per share)

(Unaudited)

 
  2017 Guidance Range
Low   High
Diluted loss per share (GAAP) $ (1.48 ) $ (1.13 )
Business acquisition costs (pretax) 0.33 0.33
Store closures, impairments and other (pretax) 0.05 0.05
Income tax impact (0.15 ) (0.15 )
Adjusted diluted loss per share (non-GAAP) $ (1.25 ) $ (0.90 )
 

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