EX-99 3 ex99_er1.htm STAGE STORES, INC., FORM 8-K, 03-08-2006, EX 99.1
Exhibit 99.1

NEWS RELEASE

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

FOR IMMEDIATE RELEASE

STAGE STORES ANNOUNCES FOURTH QUARTER RESULTS

COMPANY PROVIDES FY 2006 EARNINGS GUIDANCE

--Fourth Quarter Net Income Increases To $0.68 Per Diluted Share--
--Full Year Net Income Increases To $1.90 Per Diluted Share--

HOUSTON, TX, March 9, 2006 -- Stage Stores, Inc. (Nasdaq: STGS) today reported its financial results for the fourth quarter and fiscal year ended January 28, 2006.

The Company reported that its total sales for the fourth quarter increased 7.6% to $418.6 million compared to $389.0 million last year, and its comparable store sales increased 5.6% versus an increase of 4.0% last year. Net income for the fourth quarter was $19.7 million, or $0.68 per diluted share, as compared to net income of $18.6 million, or $0.62 per diluted share, in the prior year period.

Commenting on fourth quarter results, Jim Scarborough, Chairman and Chief Executive Officer, stated, "Solid customer demand for our merchandise assortments during the holiday shopping period, coupled with strong comparable store sales gains in Louisiana and Mississippi, where those impacted by hurricanes Katrina and Rita continued to replenish their wardrobes, contributed to our 5.6% comparable store sales gain for the fourth quarter. Our higher sales and lower diluted share count versus last year contributed to a 9.7% increase in our diluted earnings per share, advancing to $0.68 from $0.62 in the prior year period."
 
For the 2005 fiscal year, total sales increased 8.1% to $1,344.1 million from $1,243.9 million in fiscal 2004, and comparable store sales increased 5.4% versus an increase of 2.5% last year. Net income for the 2005 fiscal year was $55.9 million, or $1.90 per diluted share, as compared to net income of $51.4 million, or $1.72 per diluted share, for the prior year.

 
--more--


Stage Stores Announces
Fourth Quarter Results
Page - 2

Commenting on the full year results, Mr. Scarborough stated, "Despite the enormous challenges that were thrown at us by Mother Nature, all in all, 2005 was a very successful year. We posted record sales, and achieved double-digit diluted earnings per share growth. In addition, most of our major merchandise categories achieved comparable store sales gains. In particular, our women's special sizes areas experienced exceptional growth, posting a 14.8% comparable store sales increase, and our accessories departments followed closely, with a strong 12.9% increase. Additionally, each of our small, mid-size and large market store groups posted positive comparable store sales results for the year."

Mr. Scarborough further stated, "We moved a step closer in narrowing the sales per square foot gap between our Stage and Peebles Divisions. In fact, we exceeded our goal of improving the sales productivity at our Peebles Division, as their full year sales increased by $6 per weighted average selling square foot over last year's level. We also increased the potential productivity and processing capacity of our South Hill, Virginia distribution center through the addition of new sortation equipment, and a new warehouse management system. As a result, we were able to close our Knoxville, Tennessee distribution center and consolidate their operations into our South Hill facility. We had a very successful introductory two-store launch of Clinique, by Estee Lauder in our Stage Division, and we will be increasing our door count with them during 2006. With regard to store growth, during the year, we opened 36 new stores and entered 2 new states. Unfortunately, we had to close 4 stores due to damage that they sustained during hurricanes Katrina and Rita, but we currently plan to reopen 3 of these affected stores shortly, with 1 reopening in March, 1 in April and 1 in May. Lastly, we completed a three-for-two stock split, initiated a quarterly cash dividend of 2.5 cents per share, and spent $48.7 million buying back 1.8 million shares of our common stock."

Mr. Scarborough continued, "While we clearly had an impressive list of accomplishments and milestones in 2005, we could not have accomplished so much without the help of our 13,000 valued Stage associates. They performed with diligence and dedication throughout the year, and our accomplishments are a result of their outstanding levels of customer service and caring."

Mr. Scarborough concluded, "As we enter 2006, we have already made some important strides. We acquired B.C. Moore & Sons on February 27th, and we currently plan to convert 69 of the 78 acquired locations into Peebles stores. In addition, we plan to open 35 organic new stores, reopen a store that we lost our lease on last year, and reopen 3 of our hurricane-damaged stores, for a total of 108 new stores this year, which is a significant growth milestone for our company. We've further strengthened our management team with the addition of Andy Hall, former Chairman of Foley's, as our President and Chief Operating Officer. We also promoted two of our senior executives to key roles within our Stage and Peebles Divisions.

 
--more--


Stage Stores Announces
Fourth Quarter Results
Page - 3

Lastly, we announced that we will be moving to the New York Stock Exchange on March 16th and will trade under the symbol "SSI". Our plates will be full in 2006, but as always, we remain intensely focused on providing our customers with an exceptional shopping experience, and to producing the best possible returns for our shareholders."

Fiscal 2006 - First Quarter and Full Year Outlook

1st Quarter 2006:
The Company provided the following guidance for the first quarter ending April 29, 2006:

   
1Q 2006 OUTLOOK
  
1Q 2005 ACTUAL
  
Sales ($mm)
  
 
$315.0
 -
 
 
$321.0
 
 
$310.1
  
           
 
          
 
  
Net Income ($mm)
 
 
$19.2
 -
 
 
$20.2
  
 
$20.5
  
           
 
          
 
  
Diluted EPS
  
 
$0.66
 -
 
 
$0.69
  
 
$0.68
  
                       
 
  
Diluted Shares (m)
  
29,200
    
29,973
  

In issuing its first quarter 2006 guidance, the Company provided the following additional information:
 
•
Comparable store sales assumption - low single digits
 
•
Assumed impact of stock option expensing and the increase in expense associated with other long-term incentive equity awards - $0.02 per share
 
•
The outlook does not yet include the projected impact from the acquired B.C. Moore stores. The Company expects to update guidance along with the March sales release, which is scheduled for April 6th, to include the effects of this transaction.

FY 2006:
The Company provided the following guidance for the 2006 fiscal year ending February 3, 2007:

   
FY 2006 OUTLOOK
  
FY 2005 ACTUAL
  
Sales ($mm)
  
 
$1,407.0
-
 
 
$1,435.0
 
 
$1,344.1
  
                           
Net Income ($mm)
 
 
$58.0
-
 
 
$61.5
 
 
$55.9
  
                           
Diluted EPS
  
 
$2.00
-
 
 
$2.12
 
 
$1.90
  
                           
Diluted Shares (m)
  
29,000
    
29,370
  
 
 
--more--

 
Stage Stores Announces
Fourth Quarter Results
Page - 4

In issuing its fiscal 2006 guidance, the Company provided the following additional information:
 
•
Comparable store sales assumption - low single digits
 
•
Assumed impact of stock option expensing and the increase in expense associated with other long-term incentive equity awards - $0.08 per share
 
•
The outlook does not yet include the projected impact from the acquired B.C. Moore stores. The Company expects to update guidance along with the March sales release, which is scheduled for April 6th, to include the effects of this transaction.
 
•
Fiscal 2006 will have an extra week (53rd week). The expected impact of the 53rd week is an increase in sales in the 4th quarter and full fiscal year of from $16.5 - $17.5 million, while the expected impact of the 53rd week on net earnings for the 4th quarter and full year is nil, as operating results for that week are expected to be at an approximate break-even level.

Conference Call Information

The Company will host a conference call today at 8:30 a.m. Eastern Time to discuss the fourth quarter results. Interested parties can participate in the Company's conference call by dialing 703-639-1316. 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 17, 2006.

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. The Company currently operates 194 Bealls, 48 Palais Royal and 134 Stage stores throughout the South Central states, and operates 174 Peebles stores throughout the Midwestern, Southeastern, Mid-Atlantic and New England states. On February 27, 2006, the Company purchased B.C. Moore & Sons, Inc., and acquired 78 retail locations. The Company currently plans to convert 69 of the acquired stores to its Peebles name and format, in phases, beginning in mid July. For more information about Stage Stores, visit the Company's web site at www.stagestores.com.

 
--more--


Stage Stores Announces
Fourth Quarter Results
Page - 5

"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 outlook and expectations for the first quarter of the 2006 fiscal year and for the full 2006 fiscal year, comments regarding the Company's store opening plans for the 2006 fiscal year, and comments regarding the number of acquired B.C. Moore stores to be converted into Peebles stores. 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 Report 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)


Stage Stores, Inc.
  
Condensed Consolidated Statements of Income
  
(in thousands, except earnings per share)
  
(unaudited)
  
       
   
Thirteen Weeks Ended
 
   
January 28, 2006
  
January 29, 2005
  
   
Amount
  
% to Sales
 
Amount
  
% to Sales (1)
  
                   
Net sales
  
$
418,566
    
100.0
%  
$
389,025
    
100.0
%
Cost of sales and related buying, occupancy
                          
and distribution expenses
   
304,792
   
72.8
%
  
282,717
   
72.7
%
Gross profit
    
113,774
   
27.2
%
  
106,308
   
27.3
%
Selling, general and administrative expenses
   
81,399
   
19.4
%
  
76,433
   
19.6
%
Store opening costs
    
223
   
0.1
%
  
611
   
0.2
%
Interest expense, net of interest income
                          
of $8 and $0, respectively
    
873
   
0.2
%
  
684
   
0.2
%
Income before income tax
   
31,279
   
7.5
%
  
28,580
   
7.3
%
Income tax expense
    
11,573
   
2.8
%
  
9,970
   
2.6
%
Net income
  
$
19,706
    
4.7
%  
$
18,610
    
4.8
%
                           
(1) Percentages may not foot due to rounding.
                          
                           
                           
Basic and diluted earnings per share data:
                          
Basic earnings per share
  
$
0.74
        
$
0.68
        
Basic weighted average shares outstanding
   
26,462
         
27,223
       
                           
Diluted earnings per share
  
$
0.68
        
$
0.62
        
Diluted weighted average shares outstanding
   
28,936
         
29,793
       
 

Stage Stores, Inc.
  
Condensed Consolidated Statements of Income
  
(in thousands, except earnings per share)
  
(unaudited)
  
       
   
Fifty-two Weeks Ended
  
   
January 28, 2006
  
January 29, 2005
  
   
Amount
  
% to Sales
 
Amount
  
% to Sales (1)
  
                   
Net sales
  
$
1,344,100
    
100.0
%
$
1,243,851
    
100.0
%
Cost of sales and related buying, occupancy
                          
and distribution expenses
   
952,680
   
70.9
%
  
884,291
   
71.1
%
Gross profit
    
391,420
   
29.1
%
  
359,560
   
28.9
%
Selling, general and administrative expenses
   
296,543
   
22.1
%
  
274,265
   
22.0
%
Store opening costs
    
3,210
   
0.2
%
  
2,172
   
0.2
%
Interest expense, net of interest income
                          
of $226 and $87, respectively
    
2,958
   
0.2
%
  
2,515
   
0.2
%
Income before income tax
   
88,709
   
6.6
%
  
80,608
   
6.5
%
Income tax expense
    
32,822
   
2.4
%
  
29,220
   
2.3
%
Net income
  
$
55,887
    
4.2
%
$
51,388
    
4.1
%
                           
(1) Percentages may not foot due to rounding.
                          
                           
                           
Basic and diluted earnings per share data:
                          
Basic earnings per share
  
$
2.07
        
$
1.87
        
Basic weighted average shares outstanding
   
27,046
         
27,423
     
                           
Diluted earnings per share
  
$
1.90
        
$
1.72
        
Diluted weighted average shares outstanding
   
29,370
         
29,838
     
 
 
Stage Stores, Inc.
  
Condensed Consolidated Balance Sheets
  
(in thousands, except par values)
  
(unaudited)
  
           
   
January 28, 2006
  
January 29, 2005
  
ASSETS
          
Cash and cash equivalents
 
$
33,683
  
$
40,455
  
Merchandise inventories, net
    
283,665
   
281,588
 
Current deferred taxes
    
24,270
   
24,031
 
Prepaid expenses and other current assets
    
36,076
   
22,278
 
Total current assets
    
377,694
   
368,352
 
               
Property, equipment and leasehold improvements, net
    
244,091
   
212,179
 
Goodwill
    
79,353
   
79,353
 
Intangible asset
    
14,910
   
14,910
 
Other non-current assets, net
    
15,605
   
12,205
 
Total assets
 
$
731,653
  
$
686,999
  
               
LIABILITIES AND STOCKHOLDERS' EQUITY
              
Accounts payable
 
$
81,719
  
$
74,957
  
Income taxes payable
    
8,968
   
11,024
 
Current portion of debt obligations
    
74
   
130
 
Accrued expenses and other current liabilities
    
64,423
   
57,080
 
Total current liabilities
   
155,184
   
143,191
 
               
Debt obligations
    
2,979
   
3,048
 
Deferred taxes
    
9,860
   
11,527
 
Other long-term liabilities
   
61,798
   
47,960
 
Total liabilities
    
229,821
   
205,726
 
               
Commitments and contingencies
              
               
Common stock, par value $0.01, 50,000 shares authorized,
             
33,033 and 32,107 shares issued, respectively
    
330
   
321
 
Additional paid-in capital
    
412,456
   
396,229
 
Less treasury stock - at cost, 6,448 and 4,625 shares, respectively
    
(143,515
)
  
(94,828
)
Minimum pension liability adjustment
    
(1,981
)
  
(451
)
Retained earnings
    
234,542
   
180,002
 
Stockholders' equity
   
501,832
   
481,273
 
Total liabilities and stockholders' equity
 
$
731,653
  
$
686,999
  

 
Stage Stores, Inc.
  
Condensed Consolidated Statements of Cash Flows
  
(in thousands)
  
(unaudited)
  
           
   
Fifty-Two
Weeks Ended
  
Fifty-Two
Weeks Ended
  
   
January 28, 2006
  
January 28, 2005
  
Cash flows from operating activities:
          
Net income
  
$
55,887
  
$
51,388
  
Adjustments to reconcile net income to net cash
             
provided by operating activities:
              
Depreciation and amortization
   
41,519
   
36,638
 
Deferred income taxes
    
(1,006
)
  
4,710
 
Stock option income tax benefits
   
4,968
   
7,593
 
Amortization of debt issue costs
    
447
   
446
 
Provision for bad debts
   
-
   
311
 
Deferred stock compensation
    
738
   
272
 
Proceeds from sale of proprietary credit card portfolio, net
    
-
   
34,764
 
Construction allowances received from landlords
    
13,302
   
3,104
 
Changes in operating assets and liabilities:
              
Decrease in accounts receivable and retained interest in receivables sold
    
-
   
2,880
 
Increase in merchandise inventories
    
(2,077
)
  
(21,901
)
(Increase) decrease in other assets
   
(17,926
)
  
1,679
 
Increase in accounts payable and other liabilities
    
10,155
   
10,510
 
Total adjustments
   
50,120
   
81,006
 
Net cash provided by operating activities
    
106,007
   
132,394
 
               
Cash flows from investing activities:
              
Additions to property, equipment and leasehold improvements
    
(75,168
)
  
(47,890
)
Proceeds from retirements of property, equipment and leasehold improvements
   
2,018
   
16
 
Net cash used in investing activities
    
(73,150
)
  
(47,874
)
               
Cash flows from financing activities:
              
Proceeds from (payments on):
              
Revolving credit facility, net
    
-
   
(10,700
)
Finance lease obligations
    
-
   
1,650
 
Repurchases of common stock
    
(48,687
)
  
(61,701
)
Debt obligations
    
(125
)
  
(891
)
Exercise of stock options and warrants
   
10,530
   
12,844
 
Payments of cash dividends
    
(1,347
)
  
-
 
Net cash used in financing activities
    
(39,629
)
  
(58,798
)
               
Net increase (decrease) in cash and cash equivalents
   
(6,772
)
  
25,722
 
Cash and cash equivalents:
              
Beginning of period
    
40,455
   
14,733
 
End of period
  
$
33,683
  
$
40,455
  
Supplemental disclosures:
              
Interest paid
  
$
2,666
  
$
1,870
  
Income taxes paid
  
$
30,917
  
$
8,513