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 30, 2016. The Company reported adjusted earnings per diluted share of $0.91 for the fourth quarter and $0.51 for fiscal 2015.

“Our decision to repurchase shares reflects the Board’s confidence in the Company’s strategic plan as well as our belief that our share price trades at a discount to its intrinsic value. In addition, our capital allocation strategy reflects our commitment to the dividend and investing in our core business.”

“Our holiday results were pressured by low oil prices, the devalued peso and record warm temperatures. Stores in the oil patch and along the Mexican border account for more than 40% of our sales, and the economic uncertainty in those areas negatively impacted our comp sales by 240 basis points during the fourth quarter. In light of these challenges and resulting soft traffic, we responded with higher than planned markdowns that enabled us to reduce inventory levels; ending the year more than 1% below last year,” said Michael Glazer, President and Chief Executive Officer. “We saw positive sales performance in several non-apparel categories along with 20% growth in our direct-to-consumer business. As we look ahead to 2016, we expect external headwinds to continue to impact the business. However, we believe our investments in omni-channel and store upgrades will position our business to deliver improved performance.”

Fourth Quarter and 2015 Results

For the fourth quarter, comparable sales decreased 3.4%. Sales decreased 4.2% to $502.6 million, as compared to $524.9 million in the prior year. Net income was $21.0 million, or $0.71 per diluted share, versus $1.36 per diluted share for the prior year. On an adjusted basis, net income was $26.8 million, or $0.91 per diluted share.

For fiscal 2015, comparable sales decreased 2.0%. Sales decreased 2.1% to $1,604.4 million for the fiscal year, as compared to $1,638.6 million in the prior year. Net income was $3.8 million, or $0.12 per diluted share, versus $0.96 per diluted share for the prior year. On an adjusted basis, net income was $16.2 million, or $0.51 per diluted share versus $1.18 per diluted share from continuing operations in the prior year. Three stores opened and 23 stores closed during the year.

Adjusted results exclude charges primarily associated with various strategic initiatives, including the consolidation of the Company’s headquarters, impairments related to store closures and severance charges associated with a workforce reduction. The adjustments, after tax, totaled approximately $12.4 million, or $0.39 per diluted share, for the fiscal year, with approximately $5.9 million, or $0.20 per diluted share, incurred during the fourth quarter.

Share Repurchase Program Update

During the fourth quarter, the Company repurchased 5.2 million shares for $41.6 million under the previously announced Board-approved repurchase program. The Company has $58.4 million remaining under the program.

Mr. Glazer commented, “Our decision to repurchase shares reflects the Board’s confidence in the Company’s strategic plan as well as our belief that our share price trades at a discount to its intrinsic value. In addition, our capital allocation strategy reflects our commitment to the dividend and investing in our core business.”

The share repurchase program has no expiration date and may be suspended or discontinued at any time. Any common shares acquired will be available to meet obligations under equity compensation plans and for general corporate purposes.

2016 Guidance

Sales are expected to be in a range of $1,530 to $1,560 million, assuming a -3% to -1% comparable sales. The Company has no plans to open stores and anticipates closing approximately 30 locations in 2016.

Earnings per diluted share are expected to be between $0.40 and $0.60. Weighted average diluted shares for the year are expected to be 27.8 million. The effective tax rate is estimated to be 36.2%.

Capital expenditures in 2016, net of construction allowances from landlords, are expected to be $72 million, compared to $87 million in 2015.

Mr. Glazer concluded, “We will continue to operate with disciplined expense controls and inventory management as we remain cautious in the current environment. We believe that investing in our omni-channel capabilities and stores will invigorate our business, drive sales, improve margins and create positive cash flow in 2016.”

Conference Call / Webcast Information

The Company will hold a conference call today at 8:30 a.m. Eastern Time to discuss its fiscal year results. Interested parties may participate in the Company’s conference call by dialing 844-368-2238. 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 18, 2016.

About Stage Stores

Stage Stores, Inc. operates 832 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,” “position” 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 30, 2016     January 31, 2015
Amount   % to Sales (a) Amount   % to Sales (a)
 
Net sales $ 502,629 100.0% $ 524,886 100.0%
Cost of sales and related buying, occupancy and distribution expenses 361,678 72.0% 353,527   67.4%
Gross profit 140,951 28.0% 171,359 32.6%
Selling, general and administrative expenses 106,076 21.1% 100,260 19.1%
Interest expense 982 0.2% 709   0.1%
Income before income tax 33,893 6.7% 70,390 13.4%
Income tax expense 12,908 2.6% 26,576   5.1%
Income from continuing operations 20,985 4.2% 43,814 8.3%
Loss from discontinued operations, net of tax benefit of $94 —% (94 ) —%
Net income $ 20,985 4.2% $ 43,720   8.3%
 
Basic earnings per share data:
Continuing operations $ 0.72 $ 1.37
Discontinued operations  
Basic earnings per share (b) $ 0.72 $ 1.37  
Basic weighted average shares outstanding 28,828 31,657
 
Diluted earnings per share data:
Continuing operations $ 0.71 $ 1.36
Discontinued operations  
Diluted earnings per share (b) $ 0.71 $ 1.36  
Diluted weighted average shares outstanding 28,848 31,740
 
(a) Percentages may not foot due to rounding.
(b) EPS 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 30, 2016     January 31, 2015
Amount   % to Sales (a) Amount   % to Sales (a)
 
Net sales $ 1,604,433 100.0% $ 1,638,569 100.0%
Cost of sales and related buying, occupancy and distribution expenses 1,208,002 75.3% 1,188,763   72.5%
Gross profit 396,431 24.7% 449,806 27.5%
Selling, general and administrative expenses 387,859 24.2% 386,104 23.6%
Interest expense 2,977 0.2% 3,002   0.2%
Income before income tax 5,595 0.3% 60,700 3.7%
Income tax expense 1,815 0.1% 22,847   1.4%
Income from continuing operations 3,780 0.2% 37,853 2.3%
Loss from discontinued operations, net of tax benefit of $4,228 —% (7,003 ) (0.4)%
Net income $ 3,780 0.2% $ 30,850   1.9%
 
Basic earnings (loss) per share data:
Continuing operations $ 0.12 $ 1.18
Discontinued operations (0.22 )
Basic earnings per share (b) $ 0.12 $ 0.96  
Basic weighted average shares outstanding 31,145 31,675
 
Diluted earnings (loss) per share data:
Continuing operations $ 0.12 $ 1.18
Discontinued operations (0.22 )
Diluted earnings per share (b) $ 0.12 $ 0.96  
Diluted weighted average shares outstanding 31,188 31,763
 
(a) Percentages may not foot due to rounding.
(b) EPS may not foot due to rounding.
 
 

Stage Stores, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value)

(Unaudited)

           
January 30, 2016 January 31, 2015

ASSETS

Cash and cash equivalents $ 16,487 $ 17,165
Merchandise inventories, net 435,996 441,452
Prepaid expenses and other current assets 48,279   45,444  
Total current assets 500,762 504,061
 
Property, equipment and leasehold improvements, net 311,717 285,450
Intangible assets 15,235 14,910
Other non-current assets, net 20,385   20,256  
Total assets $ 848,099   $ 824,677  
 

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable $ 84,019 $ 121,778
Income taxes payable 1,850 13,455
Accrued expenses and other current liabilities 70,013   69,549  
Total current liabilities 155,882 204,782
 
Long-term debt obligations 162,876 45,673
Deferred taxes 20,277 20,474
Other long-term liabilities 79,311   77,818  
Total liabilities 418,346   348,747  
 
Commitments and contingencies
 

Common stock, par value $0.01, 100,000 shares authorized,
32,030 and 31,632 shares issued, respectively

320 316
Additional paid-in capital 406,034 395,395
Less treasury stock - at cost, 5,175 and 0 shares, respectively (43,068 ) (600 )
Accumulated other comprehensive loss (6,353 ) (6,874 )
Retained earnings 72,820   87,693  
Total stockholders' equity 429,753   475,930  
Total liabilities and stockholders' equity $ 848,099   $ 824,677  
 
 

Stage Stores, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

   
Twelve Months Ended

   January 30,   

   2016   

   

   January 31,   

   2015   

Cash flows from operating activities:
Net income $ 3,780 $ 30,850
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and impairment of long-lived assets 77,599 63,447
Loss on retirements of property, equipment and leasehold improvements 719 110
Deferred income taxes (2,330 ) 3,348
Tax benefit from stock-based compensation 409 64
Stock-based compensation expense 12,394 9,664
Amortization of debt issuance costs 218 275
Excess tax benefits from stock-based compensation (945 ) (852 )
Deferred compensation obligation 881 (367 )
Amortization of employee benefit related costs 774 399
Pension settlement 748
Construction allowances from landlords 3,444 5,538
Changes in operating assets and liabilities:
Decrease (increase) in merchandise inventories 5,456 (7,045 )
Decrease (increase) in other assets 1,551 (1,737 )
Decrease in accounts payable and other liabilities (64,398 ) (1,480 )
Net cash provided by operating activities 40,300   102,214  
 
Cash flows from investing activities:
Additions to property, equipment and leasehold improvements (90,695 ) (70,580 )
Proceeds from insurance and disposal of assets 43 2,946
Addition to intangible assets (325 )  
Net cash used in investing activities (90,977 ) (67,634 )
 
Cash flows from financing activities:
Proceeds from revolving credit facility borrowings 575,570 457,742
Payments of revolving credit facility borrowings (460,640 ) (471,227 )
Payments of long-term debt obligations (1,714 ) (2,352 )
Payments of debt issuance costs (663 )
Repurchases of common stock (41,587 ) (2,755 )
Payments for stock related compensation (4,465 ) (1,844 )
Proceeds from exercise of stock awards 543 5,040
Excess tax benefits from stock-based compensation 945 852
Cash dividends paid (18,653 ) (16,970 )
Net cash provided by (used in) financing activities 49,999   (32,177 )
Net (decrease) increase in cash and cash equivalents (678 ) 2,403
 
Cash and cash equivalents:
Beginning of period 17,165   14,762  
End of period $ 16,487   $ 17,165  
   
 

Stage Stores, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except earnings per share)

(Unaudited)

   
Three Months Ended Twelve Months Ended

January 30,

2016

 

January 31,

2015

January 30,

2016

 

January 31,

2015

Net income (GAAP) $ 20,985 $ 43,720 $ 3,780 $ 30,850
Loss from discontinued operations (GAAP)   94   7,003
Income from continuing operations (GAAP) 20,985 43,814 3,780 37,853

Consolidation of company headquarters, net of tax of $387 and $1,148, respectively

1,210 2,390
Store closures and other strategic initiatives, net of tax of $490 and $3,953, respectively 2,861 8,233
Severance charges associated with workforce reduction initiative and pension settlement, net of tax of $854 1,779   1,779  
Adjusted net income (non-GAAP)(a) $ 26,835   $ 43,814 $ 16,182   $ 37,853
 
Diluted earnings per share (GAAP) $ 0.71 $ 1.36 $ 0.12 $ 0.96
Loss from discontinued operations (GAAP)     0.22
Diluted earnings per share from continuing operations (GAAP) 0.71 1.36 0.12 1.18
Corporate headquarters consolidation 0.04 0.07
Store closures and other strategic initiatives 0.10 0.26
Severance charges associated with workforce reduction initiative and pension settlement 0.06   0.06  
Adjusted diluted earnings per share (non-GAAP)(a) (b) $ 0.91   $ 1.36 $ 0.51   $ 1.18
 
(a) Fiscal 2014 amounts are not adjusted.
(b) EPS may not foot due to rounding.
 
 
Three Months Ended Twelve Months Ended

January 30,

2016

January 31,

2015

January 30,

2016

January 31,

2015

Gross profit (GAAP) $ 140,951 $ 171,359 $ 396,431 $ 449,806
Store closures and other strategic initiatives 1,929   10,580  
Adjusted gross profit (non-GAAP) $ 142,880   $ 171,359 $ 407,011   $ 449,806
 
Selling, general and administrative expenses (GAAP) $ 106,076 $ 100,260 $ 387,859 $ 386,104
Interest expense (GAAP) 982 709 2,977 3,002
Corporate headquarters consolidation (1,597 ) (3,538 )
Store closures and other strategic initiatives (1,422 ) (1,606 )
Severance charges associated with workforce reduction initiative and pension settlement (2,633 ) (2,633 )
Adjusted expenses (non-GAAP)(a) $ 101,406   $ 100,969 $ 383,059   $ 389,106
 
(a) Fiscal 2014 amounts are not adjusted.

Contacts

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

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