EX-99 3 ex99_q3errel.htm STAGE STORES, INC., FORM 8-K, 11-20-2007, EX 99
Exhibit 99
NEWS RELEASE

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


FOR IMMEDIATE RELEASE

Stage Stores Reports Third Quarter Results

Announces New $50 Million Stock Repurchase Program

Provides Updated Fourth Quarter and Full Year Guidance

HOUSTON, TX, November 20, 2007 -- Stage Stores, Inc. (NYSE: SSI) today reported net income for the third quarter ended November 3, 2007 of $2.4 million, or $0.06 per diluted share, compared to $2.8 million, or $0.06 per diluted share, for the prior year third quarter ended October 28, 2006.  Last year’s third quarter results include various non-comparable income and expense items that net to a charge of $(0.06) per diluted share.

As previously reported by the Company, sales for the third quarter were $355.1 million versus sales of $353.4 million last year.  Prior year sales results include inventory liquidation sales of $11.5 million generated by the acquired B.C. Moore stores prior to their conversion to Peebles stores.  Comparable store sales for the third quarter decreased 1.0% versus an increase of 4.1% in the same period last year.

Jim Scarborough, Chairman and Chief Executive Officer, commented, “We achieved sales and earnings that were in line with our expectations, despite the challenges presented by the unseasonably warm weather throughout much of the third quarter.  One of the consequences of the persistently warm weather was a reduction in the demand for our higher priced fall and winter goods, which resulted in an unfavorable merchandise sales mix for the quarter.  We were, however, able to mitigate the negative impact of our unfavorable sales mix on our gross margins through tight control of our operating expenses.

“Looking forward, we feel good about our merchandise offerings and we believe that our inventories are at appropriate levels as we enter the holiday shopping period.  Given the current uncertainties in the economic environment, we will continue to prudently manage our inventory levels and our operating expenses,” Mr. Scarborough concluded.

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Stage Stores Reports
Third Quarter Results
Page - 2


The Company reported that it opened 21 new stores during the third quarter and entered the new states of Wisconsin and Utah.  The Company noted that 17 of the new stores were opened in market areas of less than 50,000 people.  These less competitive and under-served markets continue to be the primary focus of the Company’s new store growth plans.  The Company also relocated 4 stores during the quarter.

With regard to its major merchandise categories, cosmetics, plus sizes and dresses were the Company’s best performing businesses during the quarter with comparable store sales increases of 10.8%, 9.0% and 5.2%, respectively.  The Company continued its roll-out of Estee Lauder and Clinique counters during the quarter, as it completed the installation of 20 new Estee Lauder and 20 new Clinique counters, ending the period with 116 Estee Lauder and 107 Clinique counters.

Total sales for the nine-month period ended November 3, 2007 rose 1.3% to $1,072.6 million from $1,059.0 million for the prior year nine-month period ended October 28, 2006.  Prior year sales results include inventory liquidation sales of $62.1 million generated by the acquired B.C. Moore stores prior to their conversion to Peebles stores.  Net income for the nine-month period was $21.4 million, or $0.49 per diluted share, compared to $15.7 million, or $0.36 per diluted share, last year.  The Company noted that last year’s nine months results included various non-comparable income and expense items that netted to a charge of $(0.11) per diluted share, while this year’s nine month results includes a non-comparable income item of $0.04 per diluted share.

NEW $50 MILLION STOCK REPURCHASE PROGRAM

The Company also announced today that its Board of Directors approved a new Stock Repurchase Program, authorizing the repurchase of up to $50 million of the Company’s outstanding common stock.  The authorization permits the Company to affect the repurchases from time to time in the open market or through privately negotiated transactions including, but not limited to, accelerated share repurchases, as deemed appropriate by the Company.
 
Commenting on the Company’s new Stock Repurchase Program, Mr. Scarborough stated, "We are very pleased with our Board's decision.  This new $50 million stock repurchase program underscores our strong belief in the long term prospects of our company, as well as our ongoing commitment to enhancing shareholder value."


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Stage Stores Reports
Third Quarter Results
Page - 3


Since the specific timing and amount of repurchases will vary based on market conditions and other factors, there can be no assurance as to the amount, timing or prices of these stock repurchases.  Additionally, this stock repurchase program may be modified, extended or terminated by the Company’s Board of Directors at any time.


FISCAL 2007 - UPDATED FOURTH QUARTER AND FULL YEAR GUIDANCE

4th Quarter 2007:
The Company provided the following updated guidance for the fourth quarter ending February 2, 2008:

   
4Q 2007 OUTLOOK
  
4Q 2006 ACTUAL
Sales ($mm)
  
$483.0
-
$495.0
  
$491.2
     
 
      
Net Income ($mm)
  
$33.8
-
$36.1
  
$39.6
             
Diluted EPS
  
$0.80
-
$0.85
  
$0.88
             
Diluted Shares (m)
  
42,304
  
44,954
 

In issuing its fourth quarter guidance, the Company provided the following additional information:

 
·
Comparable store sales assumption – flat (13 weeks vs 13 weeks)
 
·
4Q 2006 results include several non-comparable income items that total $0.10 per diluted share, including income related to reimbursements received by the Company for its 2005 hurricane related losses, income produced in the fourteenth week of the quarter, and income associated with the reduction of the liability for old gift cards and merchandise credits issued to customers, which the Company believed the likelihood of redemption was remote.
 
·
4Q 2007 outlook does not reflect any benefits from the Company’s new $50 million Stock Repurchase Program.
 
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Stage Stores Reports
Third Quarter Results
Page - 4


FY 2007:
The Company provided the following updated guidance for the 2007 fiscal year ending February 2, 2008 to reflect actual nine month results:

   
FY 2007 OUTLOOK
  
FY 2006 ACTUAL
Sales ($mm)
  
$1,555.6
-
$1,567.6
  
$1,550.2
             
Net Income ($mm)
  
$55.2
-
$57.5
  
$55.3
             
Diluted EPS
  
$1.28
-
$1.33
  
$1.25
             
Diluted Shares (m)
  
43,182
  
44,111


In updating its fiscal 2007 full year guidance, the Company provided the following additional information:

 
·
Comparable store sales assumption – flat (52 weeks vs 52 weeks)
 
·
FY 2006 sales include inventory liquidation sales of $62.1 million generated by the acquired B.C. Moore stores prior to their conversion to Peebles stores.
 
·
FY 2007 outlook includes a non-comparable gain of $0.04 per diluted share related to the March 2004 sale of the Peebles private label credit card portfolio.
 
·
FY 2007 outlook does not reflect any benefits from the Company’s new $50 million Stock Repurchase Program.

Conference Call Information

The Company will host a conference call today at 8:30 a.m. Eastern Time to discuss its third quarter results.  Interested parties can participate in the Company’s conference call by dialing 703-639-1418.  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, November 30, 2007.
 
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Stage Stores Reports
Third Quarter Results
Page - 5


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 699 stores located in 35 states.  The Company operates under the Bealls, Palais Royal and Stage names throughout the South Central states, and under the Peebles name throughout the Midwestern, Southeastern, Mid-Atlantic and New England states.  For more information about Stage Stores, visit the Company’s web site at www.stagestores.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 Company’s outlook and expectations for the fourth quarter of the 2007 fiscal year and full 2007 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 April 3, 2007 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.


(Tables to Follow)

 
 
Condensed Consolidated Statements of Income
  
(in thousands, except earnings per share)
  
(Unaudited)
  
                         
   
Thirteen Weeks Ended
  
   
November 3, 2007
    
October 28, 2006
  
   
Amount
    
% to Sales
    
Amount
    
% to Sales
  
                         
Net sales
   $
355,147
       100.0 %   $
353,348
       100.0 %
                                 
Cost of sales and related buying, occupancy and distribution expenses
    
260,898
       73.5 %    
253,034
       71.6 %
Gross profit
    
94,249
       26.5 %    
100,314
       28.4 %
Selling, general and administrative expenses
    
86,651
       24.4 %    
90,477
       25.6 %
Store opening costs
    
2,459
       0.7 %    
4,034
       1.1 %
Interest expense, net of income of $0 and $29, respectively
    
1,210
       0.3 %    
1,344
       0.4 %
Income before income tax
    
3,929
       1.1 %    
4,459
       1.3 %
Income tax expense
    
1,483
       0.4 %    
1,661
       0.5 %
Net income
   $
2,446
       0.7 %   $
2,798
       0.8 %
                                 
Basic and diluted earnings per share data:
                                
Basic earnings per share
   $
0.06
             $
0.07
          
Basic weighted average shares outstanding
    
41,400
              
42,511
          
                                 
Diluted earnings per share
   $
0.06
             $
0.06
          
Diluted weighted average shares outstanding
    
42,258
              
44,384
          
 

Stage Stores, Inc.
  
Condensed Consolidated Statements of Income
  
(in thousands, except earnings per share)
  
(Unaudited)
  
                         
   
Thirty-Nine Weeks Ended
  
   
November 3, 2007
    
October 28, 2006
  
   
Amount
    
% to Sales
    
Amount
    
% to Sales
  
                         
Net sales
   $
1,072,596
       100.0 %   $
1,058,993
       100.0 %
Cost of sales and related buying, occupancy and distribution expenses
    
774,535
       72.2 %    
763,435
       72.1 %
Gross profit
    
298,061
       27.8 %    
295,558
       27.9 %
Selling, general and administrative expenses
    
256,889
       24.0 %    
260,312
       24.6 %
Store opening costs
    
3,700
       0.3 %    
6,770
       0.6 %
Interest expense, net of income of $0 and $130, respectively
    
3,048
       0.3 %    
3,463
       0.3 %
Income before income tax
    
34,424
       3.2 %    
25,013
       2.4 %
Income tax expense
    
12,995
       1.2 %    
9,317
       0.9 %
Net income
   $
21,429
       2.0 %   $
15,696
       1.5 %
                                 
Basic and diluted earnings per share data:
                                
Basic earnings per share
   $
0.50
             $
0.38
          
Basic weighted average shares outstanding
    
42,438
              
40,808
          
                                 
Diluted earnings per share
   $
0.49
             $
0.36
          
Diluted weighted average shares outstanding
    
43,473
              
43,809
          
 

Stage Stores, Inc.
  
Condensed Consolidated Balance Sheets
  
(in thousands, except par values)
  
(Unaudited)
  
             
   
November 3, 2007
    
February 3, 2007
  
             
ASSETS
            
Cash and cash equivalents
   $
17,889
     $
15,866
  
Merchandise inventories, net
    
441,068
      
332,763
  
Current deferred taxes
    
23,135
      
23,231
  
Prepaid expenses and other current assets
    
36,699
      
42,512
  
Total current assets
    
518,791
      
414,372
  
                 
Property, equipment and leasehold improvements, net
    
302,700
      
278,839
  
Goodwill
    
95,374
      
95,374
  
Intangible asset
    
14,910
      
14,910
  
Other non-current assets, net
    
29,730
      
21,491
  
Total assets
   $
961,505
     $
824,986
  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
Accounts payable
   $
155,352
     $
85,477
  
Income taxes payable
    
-
      
-
  
Current portion of debt obligations
    
229
      
86
  
Accrued expenses and other current liabilities
    
68,271
      
75,141
  
Total current liabilities
    
223,852
      
160,704
  
                 
Debt obligations
    
107,642
      
16,528
  
Other long-term liabilities
    
91,147
      
76,346
  
Total liabilities
    
422,641
      
253,578
  
                 
Commitments and contingencies
                
                 
Common stock, par value $0.01, 100,000 and 64,603 shares authorized,   55,095 and 54,343 shares issued, respectively
    
551
      
543
  
Additional paid-in capital
    
477,686
      
462,745
  
Less treasury stock - at cost, 13,691 and 10,708 shares, respectively
     (227,634 )     (165,094 )
Accumulated other comprehensive loss
     (1,908 )     (1,908 )
Retained earnings
    
290,169
      
275,122
  
Stockholders' equity
    
538,864
      
571,408
  
Total liabilities and stockholders' equity
   $
961,505
     $
824,986
  
 
 
Stage Stores, Inc.
  
Condensed Consolidated Statements of Cash Flows
  
(in thousands)
  
(Unaudited)
  
             
   
Thirty-Nine Weeks Ended
  
   
November 3, 2007
    
October 28, 2006
  
Cash flows from operating activities:
            
Net income
   $
21,429
     $
15,696
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
    
35,901
      
34,136
  
Gain on insurance proceeds related to property, equipment and leashold improvements
    
-
       (1,756 )
Deferred income taxes
     (963 )     (9,510 )
Stock-based compensation tax benefits
    
3,853
      
6,178
  
Stock-based compensation expense
    
5,453
      
3,441
  
Amortization of debt issue costs
    
188
      
335
  
Excess tax benefits from stock based compensation
     (3,794 )     (6,009 )
Construction allowances from landlords
    
19,678
      
6,905
  
Proceeds from sale of private label credit card portfolio, net
    
-
      
4,436
  
Other changes in operating assets and liabilities:
                
Increase in merchandise inventories
     (108,305 )     (129,683 )
(Increase) Decrease in other assets
     (371 )    
8,018
  
Increase in accounts payable and other liabilities
    
61,502
      
45,778
  
Total adjustments
    
13,142
       (37,731 )
Net cash provided by (used in) operating activities
    
34,571
       (22,035 )
                 
Cash flows from investing activities:
                
Additions to property, equipment and leasehold improvements
     (64,093 )     (51,410 )
Acquisition of B.C. Moore, net of cash acquired
    
-
       (35,622 )
Proceeds from insurance proceeds related to property, equipment and leashold improvements
    
-
      
1,756
  
Proceeds from sale of property and equipment
    
31
      
269
  
Net cash used in investing activities
     (64,062 )     (85,007 )
                 
Cash flows from financing activities:
                
Proceeds from (payments on):
                
Borrowings under revolving credit facility, net
    
89,510
      
74,339
  
Repurchases of common stock
     (62,540 )     (17,695 )
Finance lease obligations
    
1,850
      
-
  
Debt obligations
     (103 )     (55 )
Debt issuance costs
     (258 )    
-
  
Exercise of stock options, warrants and stock appreciation rights
    
5,643
      
36,342
  
Excess tax benefits from stock based compensation
    
3,794
      
6,009
  
Cash dividends
     (6,382 )     (3,455 )
Net cash provided by financing activities
    
31,514
      
95,485
  
Net increase (decrease) in cash and cash equivalents
    
2,023
       (11,557 )
                 
Cash and cash equivalents:
                
Beginning of period
    
15,866
      
33,683
  
End of period
   $
17,889
     $
22,126