EX-99 3 ex99er2q1.htm STAGE STORES, INC. FORM 8-K EXHIBIT 99 Stage Stores, Inc. Exhibit 99
Exhibit 99
 
NEWS RELEASE

CONTACT:
Bob Aronson
Vice President, Investor Relations
(800) 579-2302
(baronson@stagestores.com)

FOR IMMEDIATE RELEASE

Stage Stores Announces Second Quarter Results and Provides Earnings Projections for Second Half of Fiscal Year

--Second Quarter Sales Increase to Record $309.4 Million--
--Reports Earnings of $0.33 Per Diluted Share--

HOUSTON, TX, August 18, 2005 -- Stage Stores, Inc. (Nasdaq: STGS) today reported that total sales for the second quarter ended July 30, 2005 increased 10.5% to a record $309.4 million from $279.9 million for the prior year second quarter ended July 31, 2004. The increase was driven by the Company's comparable store sales increase for the quarter of 7.0% and sales from new stores. Net income increased 20.4% during the second quarter, rising to $6.5 million from $5.4 million last year, and diluted earnings per share increased 22.2% to $0.33 from $0.27 in the prior year period. 

Jim Scarborough, Chairman, President and Chief Executive Officer, commented, "This was a quarter filled with significant achievements and important milestones. We achieved record sales for the second quarter, driven by our strong 7.0% comparable store sales increase, as our customers responded positively to our spring and summer merchandise assortments. We enjoyed strong sales performances across a broad range of product categories, with three merchandise categories, namely women's special sizes (+20.9%), accessories (+16.9%) and misses sportswear (+10.8%), achieving double-digit comparable store sales growth for the quarter. Additionally, our comparable store sales performance at our Peebles stores once again exceeded our Company average for the quarter, demonstrating that our initiatives to improve the sales productivity in these stores continue to yield favorable results."

Mr. Scarborough continued, "During the quarter, we announced a 3-for-2 stock split, payable on August 19, 2005, and instituted a new $30 million Stock Repurchase Program. We also had a changing of the guard in our Peebles merchandising organization. In conjunction with the retirement of Ron Palmore, we have promoted two exceptionally talented individuals, John Bower and Wendy Morgan, who will continue to build upon the success of our Peebles merchandising team."


--more--


Stage Stores Announces
Second Quarter Results
Page - 2


Total sales for the six-month period ended July 30, 2005 increased 8.8% to $619.5 million from $569.5 million last year. Comparable store sales increased 5.9% versus an increase of 0.6% for the prior year. The Company noted that last year's comparable store sales results were negatively impacted by a calendar shift in the Texas sales tax holiday weekend, which moved this significant event from the second quarter in 2003 to the third quarter in 2004. Net income for the period was $27.0 million, or $1.36 per diluted share, compared to $23.9 million, or $1.17 per diluted share, for the same period last year. For the six-month period, diluted earnings per share have grown by 16.2%.

Mr. Scarborough concluded, "We are also very pleased with our solid performance during the first half of the year, as our comparable store sales increased 5.9%, and our diluted earnings per share increased 16.2%. Looking ahead, our merchants have done an outstanding job of putting together great merchandise assortments for back-to-school and the upcoming fall season, and we are upbeat about our prospects for the second half of the year."

Store Activity

The Company reported that it opened seven new stores during the second quarter, including one Bealls store, four Stage stores and two Peebles stores. These seven openings brought the total number of stores opened during the first half of the year to seventeen. The Company also reported that it closed one Stage store and one Palais Royal store during the period. The Company further reported that it relocated two stores and remodeled three stores during the quarter. The Company added that it currently anticipates opening twenty-one new stores during the second half of the year, with the majority of the stores opening in the third quarter.

Fiscal 2005 - Third Quarter, Fourth Quarter and Full Year Outlook

Fiscal 2005 - 3rd Quarter:
For the third quarter ending October 29, 2005, the Company currently anticipates reporting revenues in the range of $298 to $304 million, with the expectation of a comparable store sales increase in the low single digits. Net income is currently projected to be in the range of $9.3 to $10.1 million, or earnings of $0.47 to $0.51 per diluted share. This outlook compares to earnings of $8.9 million, or $0.46 per diluted share, for the prior year third quarter. In projecting diluted earnings per share for the fiscal 2005 third quarter, the Company used an estimated diluted share count of 19.9 million shares.


--more--


Stage Stores Announces
Second Quarter Results
Page - 3


Fiscal 2005 - 4th Quarter:
For the fourth quarter ending January 28, 2006, the Company currently anticipates reporting revenues in the range of $409 to $417 million, with the expectation of a comparable store sales increase in the low single digits. Net income is currently projected to be in the range of $19.6 to $20.6 million, or earnings of $0.99 to $1.04 per diluted share. This outlook compares to earnings of $18.6 million, or $0.94 per diluted share, for the prior year fourth quarter. In projecting diluted earnings per share for the fiscal 2005 fourth quarter, the Company used an estimated diluted share count of 19.8 million shares.

Fiscal 2005 - Full Year:
Updating its outlook for the 2005 fiscal year ending January 28, 2006, the Company currently anticipates reporting revenues in the range of $1.327 to $1.341 billion, with the expectation of a comparable store sales increase in the upper low single digits. Net income is currently projected to be in the range of $55.9 to $57.7 million, or earnings of $2.81 to $2.90 per diluted share. This outlook compares to earnings of $51.4 million, or $2.58 per diluted share, for the 2004 fiscal year. In projecting diluted earnings per share for the 2005 fiscal year, the Company used an estimated diluted share count of 19.9 million shares.

In comparing this year's net income forecast to last year's actual results, the Company noted that its 2005 projections include non-recurring costs expected to be incurred in connection with the closure of its Knoxville, Tennessee distribution center, which is anticipated to occur in the fourth quarter, as well as expenses associated with improvements being made to its South Hill, Virginia distribution center and merchandising system. The Company currently estimates that these expenses will total, after tax, approximately $1.5 million, or $0.07 to $0.08 per diluted share, split $0.01 in each of the first three quarters of the year, and $0.04 to $0.05 in the fourth quarter.

3-for-2 Stock Split

The Company stated that its previously announced stock split would be paid tomorrow, August 19, 2005. As such, effective August 22, 2005, the Company's stock price as quoted on Nasdaq will be adjusted for the split, and the Company will begin issuing financial information and earnings guidance on a post-split basis.


--more--


Stage Stores Announces
Second Quarter Results
Page - 4


Conference Call Information

The Company will host a conference call today at 8:30 a.m. Eastern Time to discuss the second quarter's results as well as its outlook for the second half of the 2005 fiscal year. All interested parties can listen to a live webcast of the Company's 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 at each web site until midnight on Friday, August 26, 2005.


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 545 stores located in 30 states. The Company operates under the Bealls, Palais Royal and Stage names throughout the South Central states, and under the Peebles name throughout the Mid-Atlantic, Southeastern and Midwestern states. For more information about Stage Stores, visit the Company's web site at www.stagestores.com.

"Safe Harbor" Statement

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including comments regarding the Company's store opening plans for the second half of the 2005 fiscal year, as well as the Company's outlook and expectations for the third quarter of the 2005 fiscal year, the fourth quarter of the 2005 fiscal year and for the entire 2005 fiscal year. The Company intends forward looking terminology such as "believes", "expects", "may", "will", "should", "could", "anticipates", "plans" or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause the Company's 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 the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the "SEC") on April 28, 2005, in the Company's Quarterly Reports on Form 10-Q as filed with the SEC and other factors as may periodically be described in other Company filings with the SEC.


(Tables to Follow)
 
 
Condensed Consolidated Statements of Income
(in thousands, except earnings per share)
(unaudited)
 
   
Thirteen Weeks Ended
 
   
July 30, 2005
  
July 31, 2004
  
   
Amount
  
% to Sales (1)
  
Amount
  
% to Sales (1)
  
                   
Net sales
  
$
309,430
    
100.0%
 
$
279,872
    
100.0%
 
Cost of sales and related buying, occupancy and distribution expenses
   
226,661
   
73.3%
 
  
207,210
   
74.0%
 
Gross profit
    
82,769
   
26.7%
 
  
72,662
   
26.0%
 
Selling, general and administrative expenses
   
71,047
   
23.0%
 
  
63,359
   
22.6%
 
Store pre-opening costs
    
739
   
0.2%
 
  
155
   
0.1%
 
Interest expense
    
645
   
0.2%
 
  
581
   
0.2%
 
Income before income tax
   
10,338
   
3.3%
 
  
8,567
   
3.1%
 
Income tax expense
    
3,825
   
1.2%
 
  
3,170
   
1.1%
 
Net income
  
$
6,513
    
2.1%
 
$
5,397
    
1.9%
 
                           
(1) Percentages may not foot due to rounding.
                          
                           
                           
Basic and diluted earnings per share data:
                          
Basic earnings per share
  
$
0.36
        
$
0.30
        
Basic weighted average shares outstanding
   
18,150
         
18,194
     
                           
Diluted earnings per share
  
$
0.33
        
$
0.27
        
Diluted weighted average shares outstanding
   
19,869
         
20,016
     
 
 
Stage Stores, Inc.
Condensed Consolidated Statements of Income
(in thousands, except earnings per share)
(unaudited)
 
   
Twenty-Six Weeks Ended
  
   
July 30, 2005
  
July 31, 2004
  
   
Amount
  
% to Sales (1)
  
Amount
  
% to Sales (1)
  
                   
Net sales
  
$
619,490
    
100.0%
 
$
569,530
    
100.0%
 
Cost of sales and related buying, occupancy and distribution expenses
   
432,559
   
69.8%
 
  
400,404
   
70.3%
 
Gross profit
    
186,931
   
30.2%
 
  
169,126
   
29.7%
 
Selling, general and administrative expenses
   
141,211
   
22.8%
 
  
129,672
   
22.8%
 
Store pre-opening costs
    
1,694
   
0.3%
 
  
496
   
0.1%
 
Interest expense, net of interest income of $128 and $13, respectively
    
1,113
   
0.2%
 
  
1,057
   
0.2%
 
Income before income tax
   
42,913
   
6.9%
 
  
37,901
   
6.7%
 
Income tax expense
    
15,878
   
2.6%
 
  
14,023
   
2.5%
 
Net income
  
$
27,035
    
4.4%
 
$
23,878
    
4.2%
 
                           
(1) Percentages may not foot due to rounding.
                          
                           
                           
Basic and diluted earnings per share data:
                          
Basic earnings per share
  
$
1.48
        
$
1.29
        
Basic weighted average shares outstanding
   
18,230
         
18,559
     
                           
Diluted earnings per share
  
$
1.36
        
$
1.17
        
Diluted weighted average shares outstanding
    
19,890
         
20,381
     
 
 
Condensed Consolidated Balance Sheets
(in thousands, except par values)
(unaudited)
 
   
July 30, 2005
  
January 29, 2005
  
ASSETS
          
Cash and cash equivalents
 
$
15,649
  
$
40,455
  
Merchandise inventories, net
    
323,133
   
281,588
 
Current deferred taxes
    
23,672
   
24,031
 
Prepaid expenses and other current assets
    
26,638
   
22,278
 
Total current assets
    
389,092
   
368,352
 
               
Property, equipment and leasehold improvements, net
    
230,996
   
212,179
 
Goodwill
    
79,353
   
79,353
 
Intangible asset
    
14,910
   
14,910
 
Other non-current assets, net
    
13,874
   
12,205
 
Total assets
 
$
728,225
  
$
686,999
  
               
LIABILITIES AND STOCKHOLDERS' EQUITY
              
Accounts payable
 
$
98,271
  
$
74,957
  
Income taxes payable
    
2,796
   
11,024
 
Current portion of debt obligations
    
69
   
130
 
Accrued expenses and other current liabilities
    
58,233
   
57,080
 
Total current liabilities
   
159,369
   
143,191
 
               
Debt obligations
    
5,018
   
3,048
 
Deferred taxes
    
10,323
   
11,527
 
Other long-term liabilities
   
53,683
   
47,960
 
Total liabilities
    
228,393
   
205,726
 
               
Commitments and contingencies
              
               
Common stock, par value $0.01, 50,000 shares authorized,  21,642 and 21,405 shares issued, respectively
    
216
   
214
 
Additional paid-in capital
    
402,951
   
396,336
 
Less treasury stock - at cost, 3,458 and 3,083 shares, respectively
    
(109,921
)
  
(94,828
)
Minimum pension liability adjustment
    
(451
)
  
(451
)
Retained earnings
    
207,037
   
180,002
 
Stockholders' equity
   
499,832
   
481,273
 
Total liabilities and stockholders' equity
 
$
728,225
  
$
686,999
  
 
 
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
   
Twenty-Six
  
Twenty-Six
  
   
Weeks Ended
  
Weeks Ended
  
   
July 30, 2005
  
July 31, 2004
  
Cash flows from operating activities:
          
Net income
  
$
27,035
  
$
23,878
  
Adjustments to reconcile net income to net cash provided by operating activities:
              
Depreciation and amortization
   
19,493
   
17,414
 
Deferred income taxes
    
(845
)
  
1,834
 
Amortization of debt issue costs
    
223
   
223
 
Provision for bad debts
   
-
   
311
 
Deferred stock compensation
    
347
   
115
 
Proceeds from sale of proprietary credit card portfolio, net
    
-
   
34,764
 
Construction allowances received from landlords
    
6,303
   
979
 
Changes in operating assets and liabilities:
              
Decrease in accounts receivable and retained interest in receivables sold
    
-
   
3,537
 
Increase in merchandise inventories
    
(41,545
)
  
(27,301
)
(Increase) decrease in other assets
   
(6,323
)
  
4,996
 
Increase in accounts payable and other liabilities
    
15,659
   
2,726
 
Total adjustments
   
(6,688
)
  
39,598
 
Net cash provided by operating activities
    
20,347
   
63,476
 
               
Cash flows from investing activities:
              
Additions to property, equipment and leasehold improvements
    
(38,239
)
  
(15,251
)
Net cash used in investing activities
    
(38,239
)
  
(15,251
)
               
Cash flows from financing activities:
              
Proceeds from (payments on):
              
Revolving credit facility, net
    
2,000
   
7,790
 
Repurchases of common stock
    
(15,093
)
  
(57,060
)
Debt obligations
    
(91
)
  
(782
)
Exercise of stock options
   
6,270
   
4,461
 
Net cash used in financing activities
    
(6,914
)
  
(45,591
)
Net increase (decrease) in cash and cash equivalents
   
(24,806
)
  
2,634
 
Cash and cash equivalents:
              
Beginning of period
    
40,455
   
14,733
 
End of period
  
$
15,649
  
$
17,367
  
Supplemental disclosures:
              
Interest paid
  
$
906
  
$
716
  
Income taxes paid
  
$
22,640
  
$
3,176