Market Overview

Stage Stores Reports 17.4% Comparable Sales Increase for the Third Quarter, Raises Fiscal 2019 Guidance

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Stage Stores, Inc. (NYSE:SSI) today reported results for the third quarter ended November 2, 2019.

Third quarter highlights:

  • Comparable sales increased 17.4%.
  • Net loss was $15.9 million compared to net loss of $31.4 million in the third quarter 2018.
  • Adjusted net loss improved by $26.3 million to $4.2 million.
  • Adjusted EBITDA improved $28.5 million to $15.3 million.
  • Converted 17 department stores to Gordmans off-price, bringing total year-to-date conversions to 89.
  • Excess availability under the credit facility at quarter end was $101 million, an increase of approximately $35 million compared to the end of the second quarter 2019.
  • Amazon Counter was expanded to approximately 700 of our stores, generating convenience for customers and increased store traffic.

"Our outstanding third quarter results give us further confidence in our decision to convert the entire company to an off-price business model," commented Michael Glazer, Chief Executive Officer. "The 17.4% increase in third quarter comparable sales was driven by a variety of factors that encompass our guests' positive reaction to the new Gordmans stores and our pre-conversion activities. The 89 department stores converted to off-price during 2019 delivered a combined sales increase of nearly 40% in the third quarter.

"Our results also reflect that guests in our department stores are responding quite favorably as we celebrate sales and events prior to their store converting. Our expanded home business in department stores delivered a comparable sales increase of 180% in the third quarter. In the fourth quarter, we expect excitement to grow with our holiday marketing focusing on celebrating the last holiday season at our department stores with messages including 'Last Black Friday Sale Ever' and 'Last Christmas Sale Ever.' Notably, our pre-conversion promotional efforts do not involve incremental couponing or markdowns and as a result, retail margins have not been negatively impacted. In fact, in the third quarter, retail margins increased 130 basis points.

"Additionally, we are thrilled with the early results of our Amazon partnership which is popular with Amazon customers and our loyal guests. Over 700 of our stores are now active pick-up points for Amazon Counter just in time for the holiday season. This will increase our traffic and provide Amazon shoppers with fast, flexible and convenient package pick-up."

Michael Glazer continued, "Looking ahead, we remain on track to complete our conversions by the third quarter of fiscal 2020. Based on the outstanding results in the third quarter and strong momentum entering the fourth quarter, we are raising our full year guidance. We now project fiscal 2019 adjusted EBITDA of $35 million to $40 million, compared to prior guidance of $20 million to $25 million. This reflects revised annual comparable sales of +7% to +9%. We also expect to deliver positive cash flow for the full year 2019 of more than $35 million."

Third Quarter Results

Third quarter 2019 results compared to third quarter 2018 results were as follows:

  • Net sales were $399 million compared to $347 million
  • Comparable sales increased 17.4%
  • Net loss was $15.9 million compared to net loss of $31.4 million
  • Adjusted net loss was $4.2 million compared to adjusted net loss of $30.5 million
  • Loss per share was $0.55 compared to loss per share of $1.11
  • Adjusted loss per share was $0.15 compared to adjusted loss per share of $1.08
  • Adjusted EBITDA was $15.3 million compared to adjusted EBITDA loss of $13.2 million
  • Converted 17 department stores to Gordmans off-price, bringing the year to date conversion total to 89

2019 Guidance

For 2019, the company provided the following annual guidance:

  • Net sales between $1,640 million and $1,670 million
  • Comparable sales increase of 7% to 9%
  • Adjusted EBITDA between $35 million and $40 million
  • Net loss between $65 million and $60 million, and tax rate of 0%
  • Adjusted net loss between $40 million and $35 million, and a tax rate of 0%
  • Loss per share between $2.25 and $2.10
  • Adjusted loss per share between $1.40 and $1.25
  • Convert 89 department stores to Gordmans off-price stores, open one new Gordmans stores, and close 60 department stores
  • Capital expenditures of $30 million

Lease Accounting

On February 3, 2019, we adopted ASU No. 2016-02, Leases, which resulted in a significant increase in our reported assets and liabilities associated with our leases. The recognition of rent expense and payments associated with these lease assets and liabilities will not result in material differences to operating income or cash flows compared to the previous accounting rules. The adoption of the new accounting standard will not impact our credit facility covenants. The company applied the new standard prospectively with a cumulative effect charge of $5.2 million, net of tax, to the opening accumulated deficit balance in the first quarter of fiscal 2019.

Conference Call / Webcast Information

The company will post a pre-recorded conference call today at 8:30 a.m. Eastern Time to discuss its results and guidance. Interested parties may access the company's call by dialing 866-393-5631 and providing conference ID 5582308. Alternatively, interested parties may listen to an audio webcast of the call through the Investor Relations section of the company's website (corporate.stage.com) under the "Webcasts" caption. A replay of the call will be available online through January 3, 2020.

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 21, 2019, the company operates in 42 states through 614 BEALLS, GOODY'S, PALAIS ROYAL, PEEBLES and STAGE specialty department stores, and 158 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 Non-GAAP / Adjusted 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 adjusted earnings (loss) before interest, taxes, depreciation and amortization (adjusted EBITDA), adjusted net loss and adjusted diluted loss per share, which are non-GAAP financial measures. A reconciliation of 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

 

November 2, 2019

 

November 3, 2018

 

Amount

 

% to Sales (a)

 

Amount

 

% to Sales (a)

Net sales

$

399,302

 

 

100.0

%

 

$

347,100

 

 

100.0

%

Credit income

15,678

 

 

3.9

%

 

13,324

 

 

3.8

%

Total revenues

414,980

 

 

103.9

%

 

360,424

 

 

103.8

%

Cost of sales and related buying, occupancy and distribution expenses

315,494

 

 

79.0

%

 

278,665

 

 

80.3

%

Selling, general and administrative expenses

111,180

 

 

27.8

%

 

109,774

 

 

31.6

%

Interest expense

4,070

 

 

1.0

%

 

3,350

 

 

1.0

%

Loss before income tax

(15,764

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