Stage Stores Reports Second Quarter Results and Updates Guidance

HOUSTON--()--Stage Stores, Inc. (NYSE:SSI) today reported results for the second quarter ended August 4, 2018, and updated guidance for fiscal year 2018. For the second quarter, comparable sales decreased 0.2%. Loss before income tax was $16.8 million compared to a loss before income tax of $9.6 million in the second quarter 2017, driven by investments in the growth of the off-price business, additional supply chain costs, and increased promotional markdowns.

“Our comparable sales results for the second quarter reflected a sequential improvement of 260 basis points versus the first quarter,” commented Michael Glazer, President and Chief Executive Officer. “While our department store business was challenged in the middle of the quarter, we saw comparable sales increase in late July. Gordmans comparable sales increased 11% during the second quarter, and we are particularly encouraged by the momentum created by our back-to-school business that began late in the quarter. We continue to be pleased with inventory content and levels, with department store inventory lower than last year, and normalized inventory in Gordmans.”

Mr. Glazer continued, “Looking ahead, many of our underlying first half trends provide optimism for the back half of the year, including our growing off-price business, trending non-apparel categories which will make great holiday gifts, and strong momentum in our e-commerce business which is the most highly penetrated in the fourth quarter. As a result, we anticipate 2018 EBITDA will increase 40% versus 2017 at the middle of our updated guidance range. In addition, we are pleased to have ended the second quarter with $95 million in excess availability, including the impact of our recent credit facility amendment, which illustrates the strong relationship we have with our bank partners.”

The company also announced that its Board of Directors declared a quarterly cash dividend of $0.05 per share on its common stock, payable on September 19, 2018 to shareholders of record at the close of business on September 4, 2018.

Second Quarter Results

Second quarter 2018 results compared to second quarter 2017 results were as follows:

  • Net sales were $369 million compared to $377 million
  • Comparable sales decreased 0.2% for the total company, decreased 2.2% for department stores, and increased 11.4% for Gordmans off-price stores
  • Net loss was $16.9 million compared to a net loss of $6.3 million
  • Loss per share was $0.60 compared to a loss per share of $0.23
  • EBIT was $(14.1) million compared to $(7.7) million

2018 Guidance

For fiscal 2018, the company reaffirmed the following guidance:

  • Net sales between $1,610 million and $1,640 million
  • Comparable sales of flat to an increase of 2.0%
  • Depreciation and amortization between $55 million and $60 million
  • Capital expenditures of $30 million to $35 million

For fiscal 2018, the company updated the following guidance:

  • Net loss of between $41 million and $34 million
  • Tax rate of 0%, which, when compared to 2017, is expected to negatively impact 2018 EPS by $0.30 to $0.35 per diluted share, or net loss by $8 million to $10 million
  • Loss per diluted share between $1.45 and $1.20
  • EBIT between $(29) million and $(22) million
  • EBITDA between $26 million and $38 million
  • Opening one new Gordmans off-price store, converting nine department stores to Gordmans off-price stores, and closing 30 to 40 department stores

Revenue Recognition

During the first quarter of 2018, the company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). As a result of the adoption, the condensed consolidated statements of operations reflect the reclassification of credit income related to the company’s private label credit card program from selling, general and administrative expenses to revenue. The condensed consolidated balance sheets and condensed consolidated statements of cash flows reflect the reclassification of the asset for the right to recover sales return merchandise from merchandise inventories to prepaid expenses and other current assets. The company adopted the standard using the full retrospective method, and the condensed consolidated statements of operations, balance sheets and cash flows for the prior year periods have been restated.

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 7298454. 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 September 27, 2018.

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 August 23, 2018, the company operates in 42 states through 764 BEALLS, GOODY'S, PALAIS ROYAL, PEEBLES and STAGE specialty department stores and 63 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 earnings (loss) before interest and taxes (“EBIT”) and earnings (loss) before interest, taxes, depreciation and amortization (“EBITDA”), 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
August 4, 2018   July 29, 2017
As Adjusted
Amount   % to Sales (a) Amount   % to Sales (a)
Net sales $ 369,294 100.0% $ 377,081 100.0%
Credit income 14,305   3.9% 13,190   3.5%
Total revenues 383,599 103.9% 390,271 103.5%
Cost of sales and related buying, occupancy and distribution expenses 286,807 77.7% 284,140 75.4%
Selling, general and administrative expenses 110,914 30.0% 113,833 30.2%
Interest expense 2,650   0.7% 1,918   0.5%
Loss before income tax (16,772 ) (4.5)% (9,620 ) (2.6)%
Income tax expense (benefit) 150   —% (3,362 ) (0.9)%
Net loss $ (16,922 ) (4.6)% $ (6,258 ) (1.7)%
 
Loss per share
Basic $ (0.60 ) $ (0.23 )
Diluted $ (0.60 ) $ (0.23 )
 
Weighted average shares outstanding
Basic 28,152   27,535  
Diluted 28,152   27,535  
 
(a) Percentages may not foot due to rounding.
 
 
Stage Stores, Inc.
Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

 
Six Months Ended
August 4, 2018   July 29, 2017
As Adjusted
Amount   % to Sales (a) Amount   % to Sales (a)
Net sales $ 713,523 100.0% $ 685,688 100.0%
Credit income 29,819   4.2% 26,118   3.8%
Total revenues 743,342 104.2% 711,806 103.8%
Cost of sales and related buying, occupancy and distribution expenses 568,548 79.7% 530,529 77.4%
Selling, general and administrative expenses 218,191 30.6% 215,270 31.4%
Interest expense 4,903   0.7% 3,504   0.5%
Loss before income tax (48,300 ) (6.8)% (37,497 ) (5.5)%
Income tax expense (benefit) 300   —% (12,252 ) (1.8)%
Net loss $ (48,600 ) (6.8)% $ (25,245 ) (3.7)%
 
Loss per share
Basic $ (1.74 ) $ (0.93 )
Diluted $ (1.74 ) $ (0.93 )
 
Weighted average shares outstanding
Basic 27,959   27,401  
Diluted 27,959   27,401  
 
(a) Percentages may not foot due to rounding.
 
 
Stage Stores, Inc.
Condensed Consolidated Balance Sheets

(in thousands, except par value)

(Unaudited)

 
    February 3, 2018   July 29, 2017
August 4, 2018 As Adjusted As Adjusted

ASSETS

Cash and cash equivalents $ 26,573 $ 21,250 $ 26,132
Merchandise inventories, net 476,883 438,377 458,319
Prepaid expenses and other current assets 48,525   52,407   64,443  
Total current assets 551,981 512,034 548,894
 
Property, equipment and leasehold improvements, net 236,151 252,788 269,977
Intangible assets 17,135 17,135 17,135
Other non-current assets, net 24,409   24,449   23,925  
Total assets $ 829,676   $ 806,406   $ 859,931  
 

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable $ 122,680 $ 145,991 $ 126,904
Current portion of debt obligations 3,542 2,985 3,050
Accrued expenses and other current liabilities 73,506   64,442   70,754  
Total current liabilities 199,728 213,418 200,708
 
Long-term debt obligations 268,682 180,350 227,385
Other long-term liabilities 65,431   68,524   78,209  
Total liabilities 533,841   462,292   506,302  
 
Commitments and contingencies
 
Common stock, par value $0.01, 100,000 shares authorized, 33,418, 32,806 and 32,766 shares issued, respectively 334 328 328
Additional paid-in capital 421,621 418,658 414,524
Treasury stock, at cost, 5,175 shares, respectively (43,388 ) (43,298 ) (43,210 )
Accumulated other comprehensive loss (4,823 ) (5,177 ) (5,385 )
Accumulated deficit (77,909 ) (26,397 ) (12,628 )
Total stockholders' equity 295,835   344,114   353,629  
Total liabilities and stockholders' equity $ 829,676   $ 806,406   $ 859,931  
 
 
Stage Stores, Inc.
Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 
  Six Months Ended
August 4, 2018   July 29, 2017
As Adjusted
Cash flows from operating activities:
Net loss $ (48,600 ) $ (25,245 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation, amortization and impairment of long-lived assets 31,217 33,177
Loss (gain) on retirements of property, equipment and leasehold improvements 17 (528 )
Deferred income taxes 5,520
Stock-based compensation expense 3,049 4,312
Amortization of debt issuance costs 148 144
Deferred compensation obligation 90 (76 )
Amortization of employee benefit related costs 354 424
Construction allowances from landlords 757 1,098
Other changes in operating assets and liabilities:
Increase in merchandise inventories (38,506 ) (18,199 )
Decrease (increase) in other assets 2,412 (23,240 )
(Decrease) increase in accounts payable and other liabilities (19,958 ) 30,802  
Net cash (used in) provided by operating activities (69,020 ) 8,189  
 
Cash flows from investing activities:
Additions to property, equipment and leasehold improvements (12,822 ) (15,502 )
Proceeds from insurance and disposal of assets 1,802 1,307
Business acquisition   (36,144 )
Net cash used in investing activities (11,020 ) (50,339 )
 
Cash flows from financing activities:
Proceeds from revolving credit facility borrowings 298,509 277,013
Payments of revolving credit facility borrowings (233,148 ) (211,891 )
Proceeds from long-term debt obligation 25,000
Payments of long-term debt obligations (1,472 ) (4,850 )
Payments of debt issuance costs (354 ) (8 )
Payments for stock related compensation (260 ) (135 )
Cash dividends paid (2,912 ) (5,650 )
Net cash provided by financing activities 85,363   54,479  
Net increase in cash and cash equivalents 5,323 12,329
 
Cash and cash equivalents:
Beginning of period 21,250   13,803  
End of period $ 26,573   $ 26,132  
 
 

Stage Stores, Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

The following table reconciles earnings (loss) before interest and taxes (“EBIT”), which is a non-GAAP financial measure, to the most directly comparable GAAP measure, net loss (amounts in thousands):

   
Three Months Ended Six Months Ended
August 4, 2018   July 29, 2017 August 4, 2018   July 29, 2017
Net loss (GAAP) $ (16,922 ) $ (6,258 ) $ (48,600 ) $ (25,245 )
Interest expense 2,650 1,918 4,903 3,504
Income tax expense (benefit) 150   (3,362 ) 300   (12,252 )
EBIT (non-GAAP) $ (14,122 ) $ (7,702 ) $ (43,397 ) $ (33,993 )
 

The following table reconciles EBIT and earnings (loss) before interest, taxes, depreciation and amortization (“EBITDA”), non-GAAP financial measures, to the most directly comparable GAAP measure, net loss (amounts in millions):

   
2018 Guidance Range
Low   High 2017
Net loss (GAAP) $ (41 ) $ (34 ) $ (37 )
Interest expense 11 11 7
Income tax expense (benefit) 1   1   (13 )
EBIT (non-GAAP) $ (29 ) $ (22 ) $ (43 )
Depreciation and amortization 55   60   66  
EBITDA (non-GAAP) $ 26   $ 38   $ 23  
 

Contacts

For Stage Stores, Inc.
Jean Fontana, 646-277-1214
Jean.Fontana@icrinc.com

Contacts

For Stage Stores, Inc.
Jean Fontana, 646-277-1214
Jean.Fontana@icrinc.com