Stage Stores Reports Fourth Quarter and Annual Results

HOUSTON--()--Stage Stores, Inc. (NYSE:SSI) today reported results for the fourth quarter and fiscal year ended January 28, 2017, and provided guidance for fiscal year 2017. For the fourth quarter, comparable sales decreased 8.5%, net loss was $6.8 million, or a $0.25 loss per diluted share and, on an adjusted basis, fourth quarter net income was $5.7 million, or $0.20 per diluted share.

Michael Glazer, President and Chief Executive Officer, commented, “Our fourth quarter adjusted earnings reflect continued challenges in our oil impacted and border states, as well as the overall soft retail environment. Weak traffic led to heightened promotional activity and gross margin pressure in the quarter, yet we are pleased to end 2016 with inventory levels that are 6% lower than last year. In addition, our direct-to-consumer business grew at a double digit rate as we enhanced our customers’ online experience.”

Mr. Glazer continued, “As we look ahead to 2017, we expect external headwinds and customer behavior changes to persist. We will take steps to drive improved performance by focusing on sales in key merchandise categories, creating an exceptional customer experience in our stores and online, and raising the level of engagement with customers through our marketing. We generated positive free cash flow in 2016 and expect to deliver positive free cash flow again in 2017 by reducing capital expenditures, managing expenses prudently, and improving working capital.”

Fourth Quarter and 2016 Results

For the fourth quarter, comparable sales decreased 8.5%. Total sales decreased 9.6% to $454.4 million, as compared to $502.6 million in the fourth quarter of the prior year. Net loss was $6.8 million, or $0.25 per diluted share, versus net income of $21.0 million, or $0.71 per diluted share, in the fourth quarter of the prior year. On an adjusted basis, fourth quarter net income was $5.7 million, or $0.20 per diluted share, as compared to adjusted net income of $26.8 million, or $0.91 per diluted share, in the fourth quarter of the prior year.

For fiscal 2016, comparable sales decreased 8.8%. Total sales decreased 10.1% to $1,442.7 million, as compared to $1,604.4 million for the prior year. Net loss was $37.9 million, or $1.40 per diluted share, versus net income of $3.8 million, or $0.12 per diluted share, for the prior year. On an adjusted basis, 2016 net loss was $24.1 million, or $0.89 per diluted share, as compared to adjusted net income of $16.2 million, or $0.51 per diluted share, for the prior year.

Adjusted results for fiscal years 2016 and 2015 and the fourth quarters of those years exclude charges related to the consolidation of the Company’s corporate headquarters, severance associated with workforce reductions, strategic store closures and impairments, including a non-cash $11.7 million net of tax impairment in the fourth quarter of 2016. The adjustments, after tax, totaled approximately $12.5 million ($0.44 per diluted share) and $5.9 million ($0.20 per diluted share) for the fourth quarters of fiscal 2016 and 2015, respectively. The adjustments, after tax, totaled approximately $13.8 million ($0.51 per diluted share) and $12.4 million ($0.39 per diluted share) for fiscal years 2016 and 2015, respectively.

The Company did not open any stores and closed 37 stores during 2016.

2017 Guidance

The Company expects sales to be in a range of $1,330 million to $1,385 million, assuming comparable sales in a range of -4% to -8%. Total sales include the impact of a 53rd week, while comparable sales reflect a 52-week period.

Loss per diluted share is expected to be between $0.95 and $1.55. Weighted average shares for the year are expected to be approximately 27.5 million. The effective tax rate is projected to be between 32% and 35%.

Free cash flow (defined as net cash provided by operating activities less capital expenditures) is expected to be positive within the Company’s provided guidance range.

Capital expenditures in 2017, net of construction allowances from landlords, are expected to be in the range of $35 million to $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 and guidance. Interested parties may access 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 (www.stagestoresinc.com) under the “Webcasts” caption. A replay of the conference call will be available online until midnight on Friday, March 17, 2017.

About Stage Stores

Stage Stores operates 798 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
January 28, 2017   January 30, 2016
Amount   % to Sales (a) Amount   % to Sales (a)
 
Net sales $ 454,443 100.0

 %

$ 502,629 100.0 %
Cost of sales and related buying, occupancy and distribution expenses 365,538   80.4

 %

361,678   72.0 %
Gross profit 88,905 19.6

 %

140,951 28.0 %
Selling, general and administrative expenses 95,988 21.1

 %

106,075 21.1 %
Interest expense 1,435   0.3

 %

982   0.2 %
Income (loss) before income tax (8,518 ) (1.9 )% 33,894 6.7 %
Income tax expense (benefit) (1,674 ) (0.4 )% 12,909   2.6 %
Net income (loss) $ (6,844 ) (1.5 )% $ 20,985   4.2 %
 
Basic earnings (loss) per share data:
Basic earnings (loss) per share $ (0.25 ) $ 0.72  
Basic weighted average shares outstanding 27,163   28,828  
 
Diluted earnings (loss) per share data:
Diluted earnings (loss) per share $ (0.25 ) $ 0.71  
Diluted weighted average shares outstanding 27,163   28,848  
 
(a) Percentages may not foot due to rounding.
 
 

Stage Stores, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

   
Twelve Months Ended
January 28, 2017     January 30, 2016
Amount   % to Sales (a) Amount   % to Sales (a)
 
Net sales $ 1,442,718 100.0

 %

$ 1,604,433 100.0 %
Cost of sales and related buying, occupancy and distribution expenses 1,144,666   79.3

 %

1,208,002   75.3 %
Gross profit 298,052 20.7

 %

396,431 24.7 %
Selling, general and administrative expenses 356,064 24.7

 %

387,859 24.2 %
Interest expense 5,051   0.4

 %

2,977   0.2 %
Income (loss) before income tax (63,063 ) (4.4 )% 5,595 0.3 %
Income tax expense (benefit) (25,166 ) (1.7 )% 1,815   0.1 %
Net income (loss) $ (37,897 ) (2.6 )% $ 3,780   0.2 %
 
Basic earnings (loss) per share data:
Basic earnings (loss) per share $ (1.40 ) $ 0.12  
Basic weighted average shares outstanding 27,090   31,145  
 
Diluted earnings (loss) per share data:
Diluted earnings (loss) per share $ (1.40 ) $ 0.12  
Diluted weighted average shares outstanding 27,090   31,188  
 
(a) Percentages may not foot due to rounding.
 
 

Stage Stores, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value)

(Unaudited)

       
January 28, 2017 January 30, 2016

ASSETS

Cash and cash equivalents $ 13,803 $ 16,487
Merchandise inventories, net 409,384 435,996
Prepaid expenses and other current assets 41,574   48,279  
Total current assets 464,761 500,762
 
Property, equipment and leasehold improvements, net 284,110 311,717
Intangible assets 15,235 15,235
Other non-current assets, net 22,883   20,385  
Total assets $ 786,989   $ 848,099  
 

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable $ 101,985 $ 84,019
Accrued expenses and other current liabilities 66,685   71,863  
Total current liabilities 168,670 155,882
 
Long-term debt obligations 163,749 162,876
Other long-term liabilities 74,410   99,588  
Total liabilities 406,829   418,346  
 
Commitments and contingencies
 

Common stock, par value $0.01, 100,000 shares authorized, 32,340 and 32,030 shares issued, respectively

323 320
Additional paid-in capital 410,504 406,034
Less treasury stock - at cost, 5,175 shares, respectively (43,286 ) (43,068 )
Accumulated other comprehensive loss (5,648 ) (6,353 )
Retained earnings 18,267   72,820  
Total stockholders' equity 380,160   429,753  
Total liabilities and stockholders' equity $ 786,989   $ 848,099  
 
 

Stage Stores, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

   
Twelve Months Ended
January 28, 2017     January 30, 2016
Cash flows from operating activities:
Net income (loss) $ (37,897 ) $ 3,780
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, amortization and impairment of long-lived assets 91,656 77,599
Loss on retirements of property, equipment and leasehold improvements 296 719
Deferred income taxes (20,224 ) (2,330 )
Tax (deficiency) benefit from stock-based compensation (4,565 ) 409
Stock-based compensation expense 9,461 12,394
Amortization of debt issuance costs 229 218
Excess tax benefits from stock-based compensation (945 )
Deferred compensation obligation 218 881
Amortization of employee benefit related costs 897 1,522
Construction allowances from landlords 7,079 3,444
Other changes in operating assets and liabilities:
Decrease in merchandise inventories 26,612 5,456
Decrease in other assets 754 1,551
Increase (decrease) in accounts payable and other liabilities 9,768   (64,398 )
Net cash provided by operating activities 84,284   40,300  
 
Cash flows from investing activities:
Additions to property, equipment and leasehold improvements (74,257 ) (90,695 )
Proceeds from disposal of assets 1,179 43
Addition to intangible asset   (325 )
Net cash used in investing activities (73,078 ) (90,977 )
 
Cash flows from financing activities:
Proceeds from revolving credit facility borrowings 512,873 575,570
Payments of revolving credit facility borrowings (510,011 ) (460,640 )
Proceeds from long-term debt obligation 5,830
Payments of long-term debt obligations (4,252 ) (1,714 )
Payments of debt issuance costs (815 )
Repurchases of common stock (41,587 )
Payments for stock related compensation (859 ) (4,465 )
Proceeds from issuance of stock awards 543
Excess tax benefits from stock-based compensation 945
Cash dividends paid (16,656 ) (18,653 )
Net cash provided by (used in) financing activities (13,890 ) 49,999  
Net increase in cash and cash equivalents (2,684 ) (678 )
 
Cash and cash equivalents:
Beginning of period 16,487   17,165  
End of period $ 13,803   $ 16,487  
 
 

Stage Stores, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except earnings per share)

(Unaudited)

       
Three Months Ended Twelve Months Ended

January 28,

2017

 

January 30,

2016

January 28,

2017

 

January 30,

2016

Net income (loss) (GAAP) $ (6,844 ) $ 20,985 $ (37,897 ) $ 3,780
Consolidation of corporate headquarters (pretax) 1,597 110 3,538
Severance charges associated with workforce reduction and pension settlement (pretax) 839 2,633 1,632 2,633
Store closures, impairments and other strategic initiatives (pretax) 19,861 3,351 21,256 12,186
Income tax impact (8,189 ) (1,731 ) (9,179 ) (5,955 )
Adjusted net income (loss) (non-GAAP) $ 5,667   $ 26,835   $ (24,078 ) $ 16,182  
 
Diluted earnings (loss) per share (GAAP) $ (0.25 ) $ 0.71 $ (1.40 ) $ 0.12
Consolidation of corporate headquarters (pretax) 0.06 0.11
Severance charges associated with workforce reduction and pension settlement (pretax) 0.03 0.09 0.06 0.08
Store closures, impairments and other strategic initiatives (pretax) 0.70 0.11 0.78 0.39
Income tax impact (0.29 ) (0.06 ) (0.33 ) (0.19 )
Adjusted diluted earnings (loss) per share (non-GAAP)(a) $ 0.20   $ 0.91   $ (0.89 ) $ 0.51  

 

(a) Adjusted diluted earnings per share for the three months ended January 28, 2017, reflect a $0.01 adjustment attributable to the weighted average shares outstanding used in the computations for a GAAP net loss and non-GAAP net income. GAAP diluted loss per share excludes the effect of potentially dilutive shares due to a net loss for the period, whereas adjusted diluted earnings per share includes the effect of dilutive shares due to adjusted net income for the period.
 
 
 

Stage Stores, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except earnings per share)

(Unaudited)

   
Three Months Ended
January 28, 2017     January 30, 2016
Amount   % to Sales (a) Amount   % to Sales (a)
Gross profit (GAAP) $ 88,905 19.6 % $ 140,951 28.0 %
Store impairments 19,353   4.3 % 1,929   0.4 %
Adjusted gross profit (non-GAAP) $ 108,258   23.8 % $ 142,880   28.4 %
 
Twelve Months Ended
January 28, 2017 January 30, 2016
Amount % to Sales (a) Amount % to Sales (a)
Gross profit (GAAP) $ 298,052 20.7 % $ 396,431 24.7 %
Store impairments 19,584   1.4 % 10,580   0.7 %
Adjusted gross profit (non-GAAP) $ 317,636   22.0 % $ 407,011   25.4 %
 
(a) Percentages may not foot due to rounding.
 
Three Months Ended Twelve Months Ended

January 28,

2017

January 30,

2016

January 28,

2017

January 30,

2016

Selling, general and administrative expenses (GAAP) $ 95,988 $ 106,075 $ 356,064 $ 387,859
Consolidation of corporate headquarters (1,597 ) (110 ) (3,538 )
Severance charges associated with workforce reduction initiative and pension settlement (839 ) (2,633 ) (1,632 ) (2,633 )
Store closures and other strategic initiatives (508 ) (1,422 ) (1,672 ) (1,606 )
Adjusted selling, general and administrative expenses (non-GAAP) $ 94,641   $ 100,423   $ 352,650   $ 380,082  

Contacts

Stage Stores, Inc.
Randi Sonenshein, 713-331-4967
Senior Vice President, Finance and Strategy
rsonenshein@stagestores.com

Contacts

Stage Stores, Inc.
Randi Sonenshein, 713-331-4967
Senior Vice President, Finance and Strategy
rsonenshein@stagestores.com