Stage Stores Announces First Quarter Results

HOUSTON--(BUSINESS WIRE)--Stage Stores, Inc. (NYSE:SSI) today reported net income for the first quarter ended May 3, 2008 of $2.3 million, or $0.06 per diluted share. Last year’s net income, excluding a non-comparable gain of $1.7 million, or $0.04 per diluted share, related to the March 2004 sale of the Peebles private label credit card portfolio, was $7.4 million, or $0.16 per diluted share.

As previously reported by the Company, total sales for the first quarter were $353.5 million versus $358.2 million for the same period last year. Comparable store sales for the quarter decreased 5.4% versus an increase of 0.1% in the prior year.

Jim Scarborough, Chairman and Chief Executive Officer, commented, “Our first quarter results are a reflection of the currently challenging economic and retail environment. Ongoing price increases for gasoline and groceries, continuing turmoil in the housing market, and job uncertainty clearly dampened the mood of the consumer, leading to the shortfall in our first quarter sales and earnings vs. last year.

“We are proud of the way that our associates have responded to these challenges during these uncertain economic times by carefully managing inventory levels and expenses, while continuing to provide exceptional service to our customers. As a result of our tightened inventory management practices, we ended the quarter with inventories on a comparable store basis down 4.8% compared to last year’s levels.

“During the quarter, we made progress on a number of our strategic initiatives. We opened 23 new stores, relocated 5 stores, and expanded 2 stores. We also completed the installation of 17 new Estee Lauder counters and 14 new Clinique counters. Our efforts to grow our cosmetics business yielded positive results as this category achieved a comparable store sales increase of 12.9% during the period.

“As we enter the second quarter, we believe that our inventories are at appropriate levels and we are pleased with our merchandise assortments. We plan to open 5 new stores during the quarter, 2 of which will be in Idaho, our 36^th state. We also plan to complete the installation of 6 additional Estee Lauder and 2 additional Clinique counters. Lastly, we look forward to the July opening of our third distribution center, which is located in Jeffersonville, Ohio. This new distribution facility will play an important role in supporting our ongoing unit growth and geographic expansion,” Mr. Scarborough concluded.

FISCAL 2008 - SECOND QUARTER, SECOND HALF AND UPDATED FULL YEAR GUIDANCE

Commenting on the Company’s outlook, Mr. Scarborough stated, “Certainly, for the near term, we believe that consumers will continue to face economic headwinds, and as a result, we are projecting that our comparable store sales will be down between 3.0% and 5.0% during the second quarter. Based upon easier year-over-year sales comparisons, we currently forecast that our comparable store sales will be down in the range of 1.0% to 3.0% during the second half of the year.”

2nd Quarter 2008:
		2Q 2008 OUTLOOK								2Q 2007 ACTUAL
Sales ($mm)		$	360		-		$	368		$	359.2
Net Income ($mm)		$	6.5		-		$	8.9		$	9.9
Diluted EPS		$	0.17		-		$	0.23		$	0.23
Diluted Shares (m)		38,925									43,373

2nd Half 2008:
		2H 2008 OUTLOOK								2H 2007 ACTUAL
Sales ($mm)		$	852		-		$	870		$	828.2
Net Income ($mm)		$	31.7		-		$	37.1		$	34.1
Diluted EPS		$	0.81		-		$	0.95		$	0.82
Diluted Shares (m)		39,040									41,360

FY 2008:
		FY 2008 OUTLOOK								FY 2007 ACTUAL
Sales ($mm)		$	1,566		-		$	1,591		$	1,545.6
Net Income ($mm)		$	40.5		-		$	48.2		$	53.1
Diluted EPS		$	1.04		-		$	1.24		$	1.24
Diluted Shares (m)		38,960									42,720

• FY 2007 results include a non-comparable gain of $0.04 per diluted share related to the March 2004 sale of the Peebles private label credit card portfolio.

Conference Call Information

The Company will hold a conference call today at 8:30 a.m. Eastern Time to discuss its first quarter results. Interested parties can participate in the Company’s conference call by dialing 703-639-1173. Alternatively, interested parties can listen to a live webcast of the conference call by logging on to the Company's web site at www.stagestores.com and then clicking on Investor Relations, then Webcasts, then the webcast link. A replay of the conference call will be available online until midnight on Friday, May 30, 2008.

About Stage Stores

Stage Stores, Inc. brings nationally recognized brand name apparel, accessories, cosmetics and footwear for the entire family to small and mid-size towns and communities through 717 stores located in 35 states. The Company operates under the Bealls, Palais Royal and Stage names throughout the South Central and Southwestern states, and under the Peebles name throughout the Midwestern, Southeastern, Mid-Atlantic and New England states. For more information about Stage Stores, visit the Company’s web site at www.stagestores.com.

Caution Concerning Forward-Looking Statements

This document contains “forward-looking statements”. Forward-looking statements reflect our expectations regarding future events and operating performance and often contain words such as "believe", "expect", "may", "will", "should", "could", "anticipate", "plan" or similar words. In this document, forward-looking statements include comments regarding the Company’s sales and earnings outlook for the second quarter and second half of the 2008 fiscal year, as well as for the full 2008 fiscal year. Forward-looking statements also include comments regarding the number of stores that the Company plans to open, and the number of Estee Lauder and Clinique counters that the Company intends to install, in the second quarter of the 2008 fiscal year. Forward-looking statements are subject to a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the "SEC") on April 1, 2008 and other factors as may periodically be described in our other filings with the SEC. Forward-looking statements speak only as of the date of this document. We do not undertake to update our forward-looking statements.

(Tables to Follow)

Stage Stores, Inc.
Condensed Consolidated Statements of Income
(in thousands, except earnings per share)
(Unaudited)
		Thirteen Weeks Ended
		May 3, 2008						May 5, 2007
		Amount			% to Sales (1)			Amount			% to Sales (1)
Net sales		$	353,536		100.0	%		$	358,244		100.0	%
Cost of sales and related buying, occupancy and distribution expenses			257,938		73.0	%			259,919		72.6	%
Gross profit			95,598		27.0	%			98,325		27.4	%
Selling, general and administrative expenses			88,339		25.0	%			82,288		23.0	%
Store opening costs			2,308		0.7	%			755		0.2	%
Interest expense, net of income of $5 and $0, respectively			1,301		0.4	%			769		0.2	%
Income before income tax			3,650		1.0	%			14,513		4.1	%
Income tax expense			1,387		0.4	%			5,406		1.5	%
Net income		$	2,263		0.6	%		$	9,107		2.5	%
Basic and diluted earnings per share data:
Basic earnings per share		$	0.06					$	0.21
Basic weighted average shares outstanding			38,243						43,507
Diluted earnings per share		$	0.06					$	0.20
Diluted weighted average shares outstanding			38,919						44,790
(1) Percentages may not foot due to rounding.

Stage Stores, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par values)
(Unaudited)
		May 3, 2008				February 2, 2008
ASSETS
Cash and cash equivalents		$	21,165			$	17,028
Merchandise inventories, net			381,458				342,622
Current deferred taxes			28				32
Prepaid expenses and other current assets			26,921				43,557
Total current assets			429,572				403,239
Property, equipment and leasehold improvements, net			339,389				329,709
Goodwill			95,374				95,374
Intangible asset			14,910				14,910
Other non-current assets, net			27,865				28,258
Total assets		$	907,110			$	871,490
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable		$	117,546			$	94,505
Current portion of debt obligations			6,250				6,158
Accrued expenses and other current liabilities			64,390				66,538
Total current liabilities			188,186				167,201
Debt obligations			100,691				94,436
Other long-term liabilities			93,978				89,007
Total liabilities			382,855				350,644
Commitments and contingencies
Common stock, par value $0.01, 100,100 shares authorized, 55,227 and 55,113 shares issued, respectively			552				551
Additional paid-in capital			483,480				479,960
Less treasury stock - at cost, 16,907 and 16,907 shares, respectively			(278,167	)			(277,691	)
Accumulated other comprehensive loss			(1,766	)			(1,766	)
Retained earnings			320,156				319,792
Stockholders' equity			524,255				520,846
Total liabilities and stockholders' equity		$	907,110			$	871,490

Stage Stores, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
		Thirteen Weeks Ended
		May 3, 2008				May 5, 2007
Cash flows from operating activities:
Net income		$	2,263			$	9,107
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			13,239				11,546
Deferred income taxes			(498	)			(520	)
Stock-based compensation tax benefits			725				3,448
Stock-based compensation expense			1,821				1,521
Amortization of debt issue costs			60				100
Excess tax benefits from stock-based compensation			(431	)			(3,400	)
Deferred compensation			324				-
Construction allowances from landlords			6,732				2,786
Changes in operating assets and liabilities:
Increase in merchandise inventories			(38,836	)			(34,174	)
Decrease in other assets			17,414				18,217
Increase in accounts payable and other liabilities			23,588				8,909
Total adjustments			24,138				8,433
Net cash provided by operating activities			26,401				17,540
Cash flows from investing activities:
Additions to property, equipment and leasehold improvements			(27,307	)			(17,888	)
Proceeds from sale of property and equipment			-				31
Net cash used in investing activities			(27,307	)			(17,857	)
Cash flows from financing activities:
Proceeds from (payments on):
Borrowings under revolving credit facility, net			7,852				8,365
Repurchases of common stock			(476	)			(9,283	)
Debt obligations			(1,505	)			(20	)
Exercise of stock options and stock appreciation rights			651				4,567
Excess tax benefits from stock-based compensation			431				3,400
Cash dividends			(1,910	)			(2,172	)
Net cash provided by financing activities			5,043				4,857
Net increase in cash and cash equivalents			4,137				4,540
Cash and cash equivalents:
Beginning of period			17,028				15,866
End of period		$	21,165			$	20,406