Stage Stores Announces Fourth Quarter and Fiscal 2008 Earnings Results; Provides First Quarter and Fiscal 2009 Sales and Earnings Guidance

HOUSTON--(BUSINESS WIRE)--Stage Stores, Inc. (NYSE:SSI) today reported net income for the fourth quarter ended January 31, 2009 of $25.3 million, or $0.67 per diluted share, compared to net income of $31.7 million, or $0.78 per diluted share, for the prior year fourth quarter ended February 2, 2008.

For the 2008 fiscal year, the Company reported a net loss of $65.5 million, or $1.71 per share, compared to net income of $53.1 million, or $1.24 per diluted share, for the 2007 fiscal year. This year’s results include a non-cash goodwill impairment charge of $95.4 million, or $2.49 per share. Excluding the impairment charge, the Company’s net income for the fiscal year was $29.8 million, or $0.77 per diluted share. Last year’s results include a non-comparable income item of $1.7 million, or $0.04 per diluted share, related to the March 2004 sale of the Peebles private label credit card portfolio. Excluding this income item, the Company’s net income for fiscal 2007 was $1.20 per diluted share.

Andy Hall, President and Chief Executive Officer, commented, “Our financial results and operational accomplishments during 2008 are a reflection of the hard work put forth by our 14,000 dedicated associates. We opened 56 new stores, entered three new states and brought our third distribution center on line. We also added 31 Estee Lauder and 23 Clinique counters. Our inventory levels were conservatively managed throughout the year and we ended with our comparable store inventories down 17%. We tightly controlled our SG&A expenses, limiting the year-over-year increase to $1 million while operating 45 more stores at year end versus last year. We increased cash by $9 million to $26 million and we had no borrowings on our $250 million revolving credit facility at year end. Our net debt was less than half of what it was a year ago and we increased our cash flow from operations to $163 million, a $38 million increase over last year.

“While we believe the economic environment will remain challenging throughout 2009, we will continue to focus on those aspects of our business that we can control, and we will emerge from 2009 as a stronger company poised for sustained sales and earnings growth,” Mr. Hall concluded.

Fiscal 2009 - First Quarter and Full Year Projections

Commenting on the Company’s projections, Mr. Hall stated, “We are projecting that our first quarter comparable store sales will be in line with the 2008 fall season trend and are guiding down 6.0% to 9.0%. Within the quarter, we expect the shift in Easter from March 23^rd last year to April 12^th this year will hurt March’s and benefit April’s comparable store sales.”

1st Quarter 2009:
		1Q 2009 OUTLOOK				1Q 2008 ACTUAL
Sales ($mm)		$337	-	$347		$354
Net Income ($mm)		$(2)	-	$1		$2
Diluted EPS		$(0.04)	-	$0.03		$0.06
Diluted Shares (m)		37,950				38,919

Mr. Hall continued, “For the fiscal year, we are projecting a comparable store sales decrease of 5.0% to 8.0%. We believe that comparable store sales in the second half of the year will benefit from easier comparisons, the anniversary of Hurricane Ike and Goody’s exiting over 90 of our markets.”

FY 2009:
		FY 2009 OUTLOOK				FY 2008 ACTUAL
Sales ($mm)		$1,443	-	$1,487		$1,516
Net Income(Loss)($mm)		$13	-	$25		$(65)
Goodwill Impairment		0	-	0		95
Non-GAAP Net Income		$13	-	$25		$30
Diluted EPS		$0.35	-	$0.65		$(1.71)
Goodwill Impairment		0	-	0		2.49
Non-GAAP Diluted EPS		$0.35	-	$0.65		$0.77
Diluted Shares (m)		37,965				38,285

• FY 2008 results include a non-cash goodwill impairment charge of $95.4 million, or $2.49 per share. Excluding the impairment charge, the Company’s net income was $29.8 million, or $0.77 per diluted share.

Conference Call Information

The Company will host a conference call today at 8:30 a.m. Eastern Time to discuss its fourth quarter results. Interested parties can participate in the Company’s conference call by dialing 703-639-1410. 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, March 20, 2009.

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 738 stores located in 38 states. The Company operates its stores under the four names of Bealls, Palais Royal, Peebles and Stage. 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 projections for the first quarter of the 2009 fiscal year and full 2009 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, in our Quarterly Report on Form 10-Q as filed with the SEC on December 9, 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.

Stage Stores, Inc. Condensed Consolidated Statements of Operations (in thousands, except earnings per share) (Unaudited)
		Thirteen Weeks Ended
		January 31, 2009						February 2, 2008
		Amount			% to Sales (1)			Amount			% to Sales (1)
Net sales		$	455,821		100.0	%		$	473,010		100.0	%
Cost of sales and related buying, occupancy and distribution expenses			323,113		70.9	%			326,357		69.0	%
Gross profit			132,708		29.1	%			146,653		31.0	%
Selling, general and administrative expenses			89,969		19.7	%			93,359		19.7	%
Store opening costs			600		0.1	%			978		0.2	%
Interest expense, net of income of $12 and $0, respectively			1,329		0.3	%			1,744		0.4	%
Income before income tax			40,810		9.0	%			50,572		10.7	%
Income tax expense			15,475		3.4	%			18,921		4.0	%
Net income		$	25,335		5.6	%		$	31,651		6.7	%
Basic and diluted earnings per share data:
Basic earnings per share		$	0.67					$	0.80
Basic weighted average shares outstanding			37,951						39,742
Diluted earnings per share		$	0.67					$	0.78
Diluted weighted average shares outstanding			37,994						40,462
(1) Percentages may not foot due to rounding.

Stage Stores, Inc. Condensed Consolidated Statements of Operations (in thousands, except earnings per share) (Unaudited)
		Fifty-Two Weeks Ended
		January 31, 2009							February 2, 2008
		Amount				% to Sales (1)			Amount			% to Sales (1)
Net sales		$	1,515,820			100.0	%		$	1,545,606		100.0	%
Cost of sales and related buying, occupancy and distribution expenses			1,106,236			73.0	%			1,100,892		71.2	%
Gross profit			409,584			27.0	%			444,714		28.8	%
Selling, general and administrative expenses			351,246			23.2	%			350,248		22.7	%
Store opening costs			6,479			0.4	%			4,678		0.3	%
Goodwill impairment			95,374			6.3	%			-		0.0	%
Interest expense, net of income of $23 and $0, respectively			5,216			0.3	%			4,792		0.3	%
(Loss) income before income tax			(48,731	)		-3.2	%			84,996		5.5	%
Income tax expense			16,804			1.1	%			31,916		2.1	%
Net (loss) income		$	(65,535	)		-4.3	%		$	53,080		3.4	%
Basic and diluted earnings per share data:
Basic (loss) earnings per share		$	(1.71	)					$	1.27
Basic weighted average shares outstanding			38,285							41,764
Diluted (loss) earnings per share		$	(1.71	)					$	1.24
Diluted weighted average shares outstanding			38,285							42,720
Non-U.S. GAAP Supplemental Information
Net (loss) income:
On a U.S. GAAP basis		$	(65,535	)					$	53,080
Add back: Goodwill impairment			95,374							-
On a non-U.S. GAAP basis		$	29,839						$	53,080
Diluted (loss) earnings per share:
On a U.S. GAAP basis		$	(1.71	)					$	1.24
Add back: Goodwill impairment			2.49							-
On a non-U.S. GAAP basis		$	0.77						$	1.24
(1) Percentages may not foot due to rounding.

Stage Stores, Inc. Condensed Consolidated Balance Sheets (in thousands, except par values) (Unaudited)
		January 31, 2009				February 2, 2008
ASSETS
Cash and cash equivalents		$	26,278			$	17,028
Merchandise inventories, net			314,517				342,622
Current deferred taxes			385				32
Prepaid expenses and other current assets			30,439				43,557
Total current assets			371,619				403,239
Property, equipment and leasehold improvements, net			367,135				329,709
Goodwill			-				95,374
Intangible asset			14,910				14,910
Other non-current assets, net			14,379				28,258
Total assets		$	768,043			$	871,490
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable		$	97,760			$	94,505
Current portion of debt obligations			11,161				6,158
Accrued expenses and other current liabilities			60,727				66,538
Total current liabilities			169,648				167,201
Debt obligations			45,851				94,436
Deferred taxes			8,208				-
Other long-term liabilities			94,333				89,007
Total liabilities			318,040				350,644
Commitments and contingencies
Common stock, par value $0.01, 100,000 shares authorized, 55,849 and 55,113 shares issued, respectively			558				551
Additional paid-in capital			494,765				479,960
Less treasury stock - at cost, 17,986 and 16,907 shares, respectively			(286,751	)			(277,691	)
Accumulated other comprehensive loss			(5,138	)			(1,766	)
Retained earnings			246,569				319,792
Stockholders' equity			450,003				520,846
Total liabilities and stockholders' equity		$	768,043			$	871,490

Stage Stores, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited)
		Fifty-Two Weeks Ended
		January 31, 2009				February 2, 2008
Cash flows from operating activities:
Net (loss) income		$	(65,535	)		$	53,080
Non-cash goodwill impairment			95,374				-
Net income adjusted for non-cash goodwill impairment			29,839				53,080
Other adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			58,985				49,699
Deferred income taxes			11,419				21,095
Stock-based compensation tax benefits			1,356				3,816
Stock-based compensation expense			7,671				7,695
Amortization of debt issue costs			263				239
Excess tax benefits from stock-based compensation			(2,207	)			(3,801	)
Deferred compensation			494				-
Construction allowances from landlords			17,536				18,765
Changes in operating assets and liabilities:
Decrease (increase) in merchandise inventories			28,105				(9,859	)
Decrease (increase) in other assets			25,319				(4,531	)
Decrease in accounts payable and other liabilities			(15,997	)			(11,663	)
Net cash provided by operating activities			162,783				124,535
Cash flows from investing activities:
Additions to property, equipment and leasehold improvements			(99,841	)			(95,311	)
Proceeds from sale of property and equipment			3				41
Net cash used in investing activities			(99,838	)			(95,270	)
Cash flows from financing activities:
Proceeds from (payments on):
Borrowings under revolving credit facility, net			(63,504	)			49,869
Repurchases of common stock			(9,060	)			(112,597	)
Finance lease obligations			2,640				1,850
Equipment financing			24,846				32,419
Debt obligations			(7,564	)			(158	)
Debt issuance costs			(248	)			(589	)
Exercise of stock options and stock appreciation rights			4,687				5,712
Excess tax benefits from stock-based compensation			2,207				3,801
Cash dividends			(7,699	)			(8,410	)
Net cash used in financing activities			(53,695	)			(28,103	)
Net increase in cash and cash equivalents			9,250				1,162
Cash and cash equivalents:
Beginning of period			17,028				15,866
End of period		$	26,278			$	17,028