Stage Stores Announces Second Quarter Results

HOUSTON--(BUSINESS WIRE)--Stage Stores, Inc. (NYSE:SSI) today reported net income for the second quarter ended August 1, 2009 of $9.1 million, or $0.24 per diluted share, compared to net income of $9.7 million, or $0.25 per diluted share, for the prior year second quarter ended August 2, 2008.

Andy Hall, President and Chief Executive Officer, commented, “We remain pleased with our ability to control inventories and expenses and deliver earnings that are within the guidance range provided for the quarter. The gross margin rate for the second quarter exceeded last year by 70 basis points. SG&A expenses were reduced by $4.7 million versus last year while operating 24 additional stores.”

Mr. Hall continued, “We opened our first three stores in former Goody’s markets under the Goody’s name on August 6^th. We plan to open eleven more Goody’s stores over the next three months, taking advantage of the current economic environment by negotiating very attractive lease rates for these new stores. As the former Goody’s store format is comparable to ours, the net capital investment in these locations is about one half of our typical new store expenditure. In addition to the 2009 openings, we expect to open 30 - 35 stores in former Goody’s markets in future years.

“With regard to our other priorities, we remain on track for a fall pilot of our markdown optimization tool in select merchandise zones and the fall roll-out of our new POS software platform. The markdown optimization tool will benefit sales and gross margin after its company-wide roll-out in 2010. Our north/south store realignment was executed successfully, and the new merchandise assortments for the 83 affected stores will be fully transitioned by the end of September.

“We remain financially sound, with strong operating cash flow, comparable store inventories down 11% and no borrowings on our $250 million credit facility,” Mr. Hall concluded.

Fiscal 2009 - Third Quarter, Fourth Quarter and Updated Full Year Guidance

Commenting on the Company’s guidance, Mr. Hall stated, “We expect the macroeconomic conditions to remain challenging during the second half of the year. However, we believe our comparable store sales will benefit from easier comparisons, a more favorable holiday calendar, the anniversary of Hurricane Ike (September 2008) and Goody’s exiting over 100 of our markets. As such, we are projecting a third quarter comparable store sales decrease of 4.0% to 7.0%, and a fourth quarter comparable store sales decrease of 5.0% to 8.0%. For the fiscal year, we are projecting a comparable store sales decrease of 7.0% to 8.5%. We are raising the low end of our EPS guidance range for the fiscal year, and are now projecting $0.47 to $0.65.”

3^rd Quarter 2009:

		3Q 2009 OUTLOOK						3Q 2008
Sales ($mm)		$318		-		$328		$334
Diluted EPS		$(0.29)		-		$(0.21)		$(0.19)
Diluted Shares (m)		38,080						38,603

• 3Q 2008 results are on a non-GAAP basis and exclude a goodwill impairment charge of $95.4 million.

4^th Quarter 2009:

		4Q 2009 OUTLOOK						4Q 2008
Sales ($mm)		$425		-		$438		$456
Diluted EPS		$0.54		-		$0.65		$0.67
Diluted Shares (m)		38,800						37,994

FY 2009:

		FY 2009 OUTLOOK						FY 2008
Sales ($mm)		$1,418		-		$1,441		$1,516
Diluted EPS		$0.47		-		$0.65		$0.77
Diluted Shares (m)		38,600						38,729

• FY 2008 results are on a non-GAAP basis and exclude a goodwill impairment charge recorded in the third quarter of $95.4 million.

Conference Call Information

The Company will hold a conference call today at 8:30 a.m. Eastern Time to discuss its second quarter results. Interested parties can participate in the Company’s conference call by dialing 703-639-1319. Alternatively, interested parties can listen to a live webcast of the conference call by logging on to the Company's web site at www.stagestoresinc.com and then clicking on Webcasts, then the webcast link. A replay of the conference call will be available online until midnight on Friday, August 28, 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 752 stores located in 39 states. The Company operates its stores under the five names of Bealls, Goody’s, Palais Royal, Peebles and Stage. For more information about Stage Stores, visit the Company’s web site at www.stagestoresinc.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 number of new Goody’s stores that the Company plans to open during the second half of the 2009 fiscal year as well as the number of stores that the Company intends to open beyond 2009 in former Goody’s markets. Forward-looking statements also include comments regarding the Company’s sales and EPS outlooks for the third and fourth quarters of the 2009 fiscal year, as well as for the 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 March 30, 2009, 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 Income
(in thousands, except earnings per share)
(Unaudited)
		Thirteen Weeks Ended
		August 1, 2009						August 2, 2008
		Amount			% to Sales (1)			Amount			% to Sales (1)
Net sales		$	341,737		100.0	%		$	372,707		100.0	%
Cost of sales and related buying, occupancy and distribution expenses			241,540		70.7	%			266,149		71.4	%
Gross profit			100,197		29.3	%			106,558		28.6	%
Selling, general and administrative expenses			83,854		24.5	%			88,521		23.8	%
Store opening costs			465		0.1	%			1,231		0.3	%
Interest expense, net of income of $15 and $6, respectively			1,141		0.3	%			1,221		0.3	%
Income before income tax			14,737		4.3	%			15,585		4.2	%
Income tax expense			5,644		1.7	%			5,922		1.6	%
Net income		$	9,093		2.7	%		$	9,663		2.6	%
Basic and diluted earnings per share data:
Basic earnings per share		$	0.24					$	0.25
Basic weighted average shares outstanding			38,070						38,342
Diluted earnings per share		$	0.24					$	0.25
Diluted weighted average shares outstanding			38,467						38,960
(1) Percentages may not foot due to rounding.

Stage Stores, Inc.
Condensed Consolidated Statements of Income
(in thousands, except earnings per share)
(Unaudited)
		Twenty-Six Weeks Ended
		August 1, 2009						August 2, 2008
		Amount			% to Sales (1)			Amount			% to Sales (1)
Net sales		$	675,303		100.0	%		$	726,243		100.0	%
Cost of sales and related buying, occupancy and distribution expenses			490,623		72.7	%			524,087		72.2	%
Gross profit			184,680		27.3	%			202,156		27.8	%
Selling, general and administrative expenses			167,460		24.8	%			176,860		24.4	%
Store opening costs			1,651		0.2	%			3,539		0.5	%
Interest expense, net of income of $76 and $11, respectively			2,299		0.3	%			2,522		0.3	%
Income before income tax			13,270		2.0	%			19,235		2.6	%
Income tax expense			5,082		0.8	%			7,309		1.0	%
Net income		$	8,188		1.2	%		$	11,926		1.6	%
Basic and diluted earnings per share data:
Basic earnings per share		$	0.22					$	0.31
Basic weighted average shares outstanding			38,000						38,292
Diluted earnings per share		$	0.21					$	0.31
Diluted weighted average shares outstanding			38,350						38,939
(1) Percentages may not foot due to rounding.

Stage Stores, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par values)
(Unaudited)
		August 1, 2009				January 31, 2009
ASSETS
Cash and cash equivalents		$	61,180			$	26,278
Merchandise inventories, net			310,038				314,517
Prepaid expenses and other current assets			27,048				30,824
Total current assets			398,266				371,619
Property, equipment and leasehold improvements, net			359,202				367,135
Intangible asset			14,910				14,910
Other non-current assets, net			15,617				14,379
Total assets		$	787,995			$	768,043
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable		$	110,660			$	97,760
Current portion of debt obligations			11,685				11,161
Accrued expenses and other current liabilities			65,821				60,727
Total current liabilities			188,166				169,648
Debt obligations			40,966				45,851
Other long-term liabilities			100,682				102,541
Total liabilities			329,814				318,040
Commitments and contingencies
Common stock, par value $0.01, 100,000 shares authorized, 56,069 and 55,849 shares issued, respectively			561				558
Additional paid-in capital			498,633				494,765
Less treasury stock - at cost, 17,986 shares			(286,991	)			(286,751	)
Accumulated other comprehensive loss			(4,978	)			(5,138	)
Retained earnings			250,956				246,569
Stockholders' equity			458,181				450,003
Total liabilities and stockholders' equity		$	787,995			$	768,043

Stage Stores, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
		Twenty-Six Weeks Ended
		August 1, 2009				August 2, 2008
Cash flows from operating activities:
Net income		$	8,188			$	11,926
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and impairments			30,529				29,204
Deferred income taxes			305				(33	)
Tax deficiency from stock-based compensation			(373	)			(146	)
Stock-based compensation expense			3,294				3,280
Amortization of debt issue costs			145				123
Excess tax benefits from stock-based compensation			(124	)			(468	)
Deferred compensation			71				357
Amortization of employee benefit related costs			260				-
Construction allowances from landlords			2,005				9,167
Changes in operating assets and liabilities:
Decrease (increase) in merchandise inventories			4,479				(6,964	)
Decrease in other assets			1,703				18,499
Increase in accounts payable and other liabilities			15,545				21,418
Total adjustments			57,839				74,437
Net cash provided by operating activities			66,027				86,363
Cash flows from investing activities:
Additions to property, equipment and leasehold improvements			(24,304	)			(52,334	)
Proceeds from insurance related to property, equipment and leasehold improvements			578				-
Net cash used in investing activities			(23,726	)			(52,334	)
Cash flows from financing activities:
Proceeds from (payments on):
Borrowings under revolving credit facility, net			-				(39,059	)
Equipment financing			-				14,485
Finance lease obligations			1,585				-
Debt obligations			(5,946	)			(3,190	)
Debt issuance costs			-				(145	)
Repurchases of common stock			(240	)			(509	)
Exercise of stock options			879				1,095
Excess tax benefits from stock-based compensation			124				468
Cash dividends			(3,801	)			(3,831	)
Net cash used in financing activities			(7,399	)			(30,686	)
Net increase in cash and cash equivalents			34,902				3,343
Cash and cash equivalents:
Beginning of period			26,278				17,028
End of period		$	61,180			$	20,371