10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

Form 10-Q

(Mark One)

T QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 3, 2007

OR

£ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to

Commission file number 1-14035

Stage Stores, Inc.

(Exact name of registrant as specified in its charter)

NEVADA	91-1826900
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

10201 Main Street, Houston, Texas	77025
(Address of principal executive offices)	(Zip Code)

(800) 579-2302

Registrant's telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes T No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer TAccelerated filer £Non-accelerated filer £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes £ No T

As of November 30, 2007, there were 41,407,228 shares of the registrant's common stock outstanding.

TABLE OF CONTENTS

PART I  FINANCIAL INFORMATION
		Page No.
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets November 3, 2007 and February 3, 2007	3
	Condensed Consolidated Statements of Income Thirteen and Thirty-Nine Weeks Ended November 3, 2007 and October 28, 2006	4
	Condensed Consolidated Statements of Cash Flows Thirty-Nine Weeks Ended November 3, 2007 and October 28, 2006	5
	Condensed Consolidated Statement of Stockholders’ Equity Thirty-Nine Weeks Ended November 3, 2007	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	20
Item 4.	Controls and Procedures	21
PART II  OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Submission of Matters to a Vote of Security Holders	22
Item 5.	Other Information	22
Item 6.	Exhibits	23
SIGNATURES		24

2

 References to a particular year are to Stage Stores’ fiscal year, which is the 52 or 53 week period ending on the Saturday closest to January 31^st of the following calendar year.  For example, references to “2006” mean the fiscal year ended February 3, 2007 and a reference to "2007" is a reference to the fiscal year ending February 2, 2008.

PART I - FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

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
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

The accompanying notes are an integral part of these financial statements.

3

Stage Stores, Inc.

Condensed Consolidated Statements of Income

(in thousands, except earnings per share)

(Unaudited)

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	November 3, 2007		October 28, 2006		November 3, 2007		October 28, 2006
Net sales	$	355,147	$	353,348	$	1,072,596	$	1,058,993
Cost of sales and related buying, occupancy and distribution expenses		260,898		253,034		774,535		763,435
Gross profit		94,249		100,314		298,061		295,558
Selling, general and administrative expenses		86,651		90,477		256,889		260,312
Store opening costs		2,459		4,034		3,700		6,770
Interest expense, net of income of $0 and $29 for the thirteen weeks and $0 and $130 for the thirty-nine weeks, respectively		1,210		1,344		3,048		3,463
Income before income tax		3,929		4,459		34,424		25,013
Income tax expense		1,483		1,661		12,995		9,317
Net income	$	2,446	$	2,798	$	21,429	$	15,696
Basic earnings per share data:
Basic earnings per share	$	0.06	$	0.07	$	0.50	$	0.38
Basic weighted average shares outstanding		41,400		42,511		42,438		40,808
Diluted earnings per share data:
Diluted earnings per share	$	0.06	$	0.06	$	0.49	$	0.36
Diluted weighted average shares outstanding		42,258		44,384		43,473		43,809

The accompanying notes are an integral part of these financial statements.

4

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 (used in) operating activities:
Depreciation and amortization		35,901			34,136
Gain on insurance proceeds related to property, equipment and leasehold 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 related to property, equipment and leasehold 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
Supplemental disclosures:
Interest paid	$	2,911		$	2,744
Income taxes paid	$	7,700		$	24,097
Unpaid liabilities for capital expenditures	$	816		$	367

The accompanying notes are an integral part of these financial statements.

5

Stage Stores, Inc.

Condensed Consolidated Statement of Stockholders' Equity

For the Thirty-Nine Weeks Ended November 3, 2007

(in thousands)

(Unaudited)

	Common Stock				Additional Paid-in		Treasury Stock						Retained			Accumulated Other Comprehensive
	Shares		Amount		Capital		Shares			Amount			Earnings			Loss			Total
Balance, February 3, 2007		54,343	$	543	$	462,745		(10,708	)	$	(165,094	)	$	275,122		$	(1,908	)	$	571,408
Net income		-		-		-		-			-			21,429			-			21,429
Dividends on common stock		-		-		-		-			-			(6,382	)		-			(6,382	)
Repurchases of common stock		-		-		-		(2,983	)		(62,540	)		-			-			(62,540	)
Stock options exercised		717		8		5,635		-			-			-			-			5,643
Issuance of stock awards		35		-		-		-			-			-			-			-
Stock-based compensation expense		-		-		5,453		-			-			-			-			5,453
Stock-based compensation tax benefits		-		-		3,853		-			-			-			-			3,853
Balance, November 3, 2007		55,095	$	551	$	477,686		(13,691	)	$	(227,634	)	$	290,169		$	(1,908	)	$	538,864

The accompanying notes are an integral part of these financial statements.

6

Stage Stores, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The accompanying Condensed Consolidated Financial Statements (Unaudited) of Stage Stores, Inc. (“Stage Stores” or the "Company") have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  Those adjustments that are, in the opinion of management, necessary for a fair presentation of the results of the interim periods have been made.  The results of operations for such interim periods are not necessarily indicative of the results of operations for a full year.  The Condensed Consolidated Financial Statements (Unaudited) should be read in conjunction with the Audited Consolidated Financial Statements and notes thereto filed with Stage Stores’ Annual Report on Form 10-K for the year ended February 3, 2007.  References to a particular year are to Stage Stores’ fiscal year, which is the 52 or 53 week period ending on the Saturday closest to January 31^st of the following calendar year.  For example, references to “2006” mean the fiscal year ended February 3, 2007 and a reference to "2007" is a reference to the fiscal year ending February 2, 2008.  Reference to “current year” is a reference to the thirty-nine weeks ended November 3, 2007 and reference to “prior year” is a reference to the thirty-nine weeks ended October 28, 2006.  2006 consisted of 53 weeks while 2007 will consist of 52 weeks.

Stage Stores is a Houston, Texas-based regional specialty department store retailer offering moderately priced, nationally recognized brand name and private label apparel, accessories, cosmetics and footwear for the entire family.  As of November 3, 2007, the Company operated 687 stores located in 35 states under the Stage, Bealls and Palais Royal names throughout the South Central states, and under the Peebles name throughout the Midwestern, Southeastern, Mid-Atlantic and New England states.

Stock Split:  On January 5, 2007, the Company’s Board of Directors (the “Board”) approved a 3-for-2 stock split of the Company’s common stock, $0.01 par value, which was paid in the form of a stock dividend on January 31, 2007 to shareholders of record at the close of business on January 18, 2007.  The Company issued approximately 18.1 million shares of common stock as a result of the stock split.  The share and per share information included in the accompanying Condensed Consolidated Financial Statements (Unaudited) have been restated to reflect the stock split for all prior periods presented.

Recent Accounting Standards: In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income tax positions.  FIN 48 requires that a company recognize in its consolidated financial statements the impact of a tax position that is more likely than not to be sustained upon examination based on the technical merits of the position.  FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transitions.  The Company adopted FIN 48 on February 4, 2007 and has evaluated and concluded that there were no significant uncertain tax positions, as defined by FIN 48, requiring recognition in its financial statements.  See Note 6.

In June 2006, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 06-03, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement” (“EITF 06-03”).  EITF 06-03 concluded that the presentation of taxes assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer, such as sales, use, value added and certain excise taxes is an accounting policy decision that should be disclosed in a company’s financial statements.  Additionally, companies that record such taxes on a gross basis should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant.  The Company adopted the provisions of EITF 06-03 on February 4, 2007 and presents taxes within the scope of this issue on a net basis. This statement did not have a material impact on the Company’s consolidated financial statements.

In March 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) 156, “Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140” (“SFAS 156”).  SFAS 156 amends SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.”  SFAS 156 requires an entity to separately recognize financial assets as servicing assets or servicing liabilities each time it undertakes an obligation to service a financial asset by entering into certain kinds of servicing contracts.  The entity must also initially measure all separately recognized servicing assets and servicing liabilities at fair value, if practicable.  Servicing assets and servicing liabilities subsequently measured at fair value must be separately presented in the statement of financial position and additional disclosures are required for all separately recognized servicing assets and servicing liabilities.  The Company adopted SFAS 156 on February 4, 2007 and it did not have a material impact on the Company’s consolidated financial statements.

7

2. Stock-Based Compensation

The following table summarizes stock-based compensation expense by type of grant for the thirteen and thirty-nine weeks ended November 3, 2007 and October 28, 2006 (in thousands):

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	November 3, 2007		October 28, 2006		November 3, 2007		October 28, 2006
Stock options and stock appreciation rights ("SARs")	$	1,104	$	800	$	3,181	$	2,324
Non-vested stock		440		171		1,099		399
Performance shares		422		234		1,173		718
Total compensation expense	$	1,966	$	1,205	$	5,453	$	3,441

As of November 3, 2007, the Company had unrecognized compensation cost of $11.9 million related to stock-based compensation awards granted.  That cost is expected to be recognized over a weighted average period of 1.6 years.

The following table provides the significant weighted average assumptions used in determining the estimated fair value at the date of grant under the Black-Scholes option-pricing model of each type of award granted in the thirty-nine weeks ended November 3, 2007 and October 28, 2006:

	Thirty-Nine Weeks Ended
	November 3, 2007			October 28, 2006
Expected volatility		30.8	%		33.0	%
Weighted average volatility		30.8	%		33.0	%
Risk-free rate		4.5	%		4.8	%
Expected life of options and SARs (in years)		4.5			4.7
Expected dividend yield		0.9	%		0.3	%

The expected volatility was based on historical volatility for a period equal to the award’s expected life.  The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.  The expected life (estimated period of time outstanding) of options and SARs granted was estimated using the historical exercise behavior of employees.  The expected dividend yield is based on the current dividend payout activity and the current average market price of the Company’s stock.

Stock Incentive Plan

As approved by the Company’s shareholders, the Company established the Amended and Restated 2001 Equity Incentive Plan (the “Equity Incentive Plan”) to reward, retain, and attract key personnel.  The Equity Incentive Plan provides for grants of nonqualified or incentive stock options, SARs, performance shares or units, stock units and stock grants.  To fund the Equity Incentive Plan, 12,375,000 shares of the Company’s common stock have been reserved for issuance upon exercise of awards.

8

Stock Options and SARs

The right to exercise stock options and SARs, to be settled by issuance of common stock, generally vests over four years from the date of grant, with 25% vesting at the end of each of the first four years following the date of grant.  Options issued prior to January 29, 2005 will generally expire if not exercised ten years from the date of the grant, while options and SARs granted after that date generally expire if not exercised seven years from the date of grant.  The weighted average fair value for options and SARs granted during the thirty-nine weeks ended November 3, 2007 and October 28, 2006 was $6.90 and $6.76, respectively as of the date of grant.

A summary of option and SARs activity under the Equity Incentive Plan as of November 3, 2007, and changes during the thirty-nine weeks ended November 3, 2007, is detailed below:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding at February 3, 2007		4,562,836		$	12.09
Granted		724,758			22.49
Exercised		(715,775	)		7.64
Forfeited		(119,314	)		19.11
Outstanding at November 3, 2007		4,452,505		$	14.27		5.0	$	14,539
Vested or expected to vest at November 3, 2007		4,178,827		$	13.90		5.0	$	15,222
Exercisable at November 3, 2007		2,588,571		$	10.31		4.5	$	18,721

The following table summarizes information about non-vested stock option awards and SARs as of November 3, 2007 and changes for the thirty-nine weeks ended November 3, 2007:

Stock Options/SARs	Number of Shares			Weighted Average Grant Date Fair Value
Non-vested at February 3, 2007		1,763,883		$	6.15
Granted		724,758			6.90
Vested		(505,393	)		5.82
Forfeited		(119,314	)		6.23
Non-vested at November 3, 2007		1,863,934		$	6.51

The aggregate intrinsic value of options and SARs, defined as the amount by which the market price of the underlying stock on the date of exercise exceeds the exercise price of the option, exercised during the thirty-nine weeks ended November 3, 2007 and October 28, 2006 was $10.3 million and $16.8 million, respectively.

Non-vested Stock

The Company has granted shares of non-vested stock to members of management and independent directors.  The non-vested stock converts one for one to common stock at the end of the vesting period at no cost to the recipient to whom it is awarded.  The non-vested stock generally vests at the end of a three-year period from the date of grant.

9

The following table summarizes the activity for the non-vested stock granted by the Company for the thirty-nine weeks ended November 3, 2007:

Period Granted	Shares Outstanding at February 3, 2007		Shares Granted		Vested and Issued			Forfeited			Shares Outstanding at November 3,2007		Weighted Average Grant Date Fair Value per Share
2004		22,500		-		(22,500	)(1)		-			-	$	15.79
2006		78,913		-		-			(5,224	)		73,689		20.61
2007		-		95,066		-			-			95,066		21.04
Total		101,413		95,066		(22,500	)		(5,224	)		168,755

(1) The payment of the tax liability for the shares that vested during fiscal 2007 was satisfied by withholding shares with a fair value equal to the tax liability.  The actual number of shares issued was 16,549.

Performance Shares

The Company has granted performance shares to members of senior management, at no cost to the recipient, as a means of rewarding them for the Company’s long-term performance based on shareholder return performance measures.  A three-year performance cycle (the “Performance Cycle”) is established at the beginning of each performance shares grant and the amount of the award is determined by the Company’s performance on total shareholder return relative to an identified group of other companies over the Performance Cycle.  The actual number of shares that could be issued ranges from zero to a maximum of two times the number of granted shares outstanding as reflected in the table below.  Compensation expense is based on the fair value at grant date and the anticipated number of shares of the Company’s common stock determined on a Monte Carlo probability model and is recorded ratably over the vesting period.  Grant recipients do not have any rights of a shareholder in the Company with respect to common shares issuable under the grant until the shares have been issued.  During the thirty-nine weeks ended November 3, 2007, 27,691 shares of common stock were deemed to have been earned related to the 2004 stock grant.  The payment of the tax liability for the performance shares earned was satisfied by withholding shares with a fair value equal to the tax liability.  The actual number of shares issued was 18,776.

The following table summarizes information about the performance shares that remain outstanding as of November 3, 2007:

Period Granted	Target Shares Granted		Target Shares Forfeited			Target Shares Outstanding		Weighted Average Grant Date Fair Value per Share
2005		62,915		(1,976	)		60,939	$	17.39
2006		98,088		(2,250	)		95,838		19.19
2007		78,500		-			78,500		22.96
Total		239,503		(4,226	)		235,277

3. Acquisition of B. C. Moore & Sons, Incorporated

On February 27, 2006, the Company acquired 100% of the common stock of privately held B.C. Moore & Sons, Incorporated (“B.C. Moore”).  In purchasing B.C. Moore, the Company acquired 78 retail locations, located in small markets throughout Alabama, Georgia, North Carolina and South Carolina.  The Company converted 69 of the acquired stores to its Peebles name and format in 2006 and the remaining 9 stores were closed.  The purchase price of the acquisition was approximately $35.6 million, net of cash acquired, and was negotiated as an arms length transaction between two unrelated entities.  The acquisition was accounted for under the purchase method of accounting, and accordingly, the results of operations of B.C. Moore were included in the Company’s consolidated financial statements from the date of acquisition which, for accounting purposes, was February 26, 2006, the beginning of the Company’s second fiscal monthly period of 2006.

10

4. Sale of Private Label Credit Card Portfolios

On November 4, 2003, the Company acquired Peebles Inc. (“Peebles”), whose assets included their private label credit card portfolio.  On March 5, 2004, the Company sold this private label credit card portfolio to World Financial Network National Bank (the "Bank").  At closing, the Company received consideration of approximately $34.8 million, which approximated the amount of account balances outstanding at the time of closing.  Under the terms of the Amended and Restated Program Agreement dated March 5, 2004 (the “Amended and Restated Program Agreement”), the Company was obligated to reimburse the Bank up to a total of $3.5 million, based on the non-attainment of a defined net portfolio yield performance during the first three years after the sale (the “Measurement Period”), with a calculation of the cumulative amount due related to this obligation on each of the first three anniversary dates of the Amended and Restated Program Agreement.  At the time of the sale, an estimated liability of $3.5 million was recorded for this potential obligation.  The Amended and Restated Program Agreement also provided for the Company to receive 50% of the excess collected yield above the defined portfolio yield performance through the end of the Measurement Period.

The Company paid the Bank approximately $0.5 million after the first year of the Measurement Period, which reduced the recorded liability to $3.0 million, as a result of the actual net portfolio yield falling below the defined net portfolio yield during the initial year of the Measurement Period.  Based on the improving trend in the actual net portfolio yield during 2005, the Company recorded a benefit of $3.0 million to reverse the remaining recorded liability related to the Peebles private label credit card portfolio.  The Company received $1.3 million in April 2006 after the second year of the Measurement Period.  This amount represented repayment of the approximately $0.5 million paid to the Bank after the first year of the Measurement Period, as well as approximately $0.8 million in proceeds as a result of the 50% sharing arrangement on collected yield above the defined portfolio yield through the second anniversary date of the Amended and Restated Program Agreement.  The Company deferred recognition of this $1.3 million gain until after the third, and final year of the Measurement Period, which fell in the current year first quarter.  The Company received an additional $1.3 million in April 2007, which it also recognized in the current year first quarter.

In connection with the acquisition of B.C. Moore (see Note 3), the Company acquired the B.C. Moore private label credit card portfolio.  On June 30, 2006, the Company sold this private label credit card portfolio to the Bank.  At closing, the Company received $4.4 million and has no further obligation with regard to the sale of this portfolio.

5. Debt Obligations

Debt obligations consist of the following (in thousands):

	November 3, 2007		February 3, 2007
Revolving Credit Facility	$	103,145	$	13,635
Finance lease obligations		4,726		2,979
		107,871		16,614
Less: Current portion of debt obligations		229		86
	$	107,642	$	16,528

On April 20, 2007, the Company amended its $250.0 million senior secured revolving credit facility (the "Revolving Credit Facility"), that originally would have matured on August 21, 2008, to, among other things, (i) extend its term for five years through April 20, 2012, (ii) include an uncommitted accordion feature to increase the size of the Revolving Credit Facility to $350.0 million, and (iii) reduce the applicable margin rates by fifty basis points on Eurodollar rate based borrowings.  Borrowings under the Revolving Credit Facility are limited to the availability under a borrowing base that is determined principally on eligible inventory as defined by the Revolving Credit Facility agreement.  The daily interest rates under the Revolving Credit Facility are determined by a prime rate or Eurodollar rate plus an applicable margin as set forth in the Revolving Credit Facility agreement.  Inventory and cash and cash equivalents are pledged as collateral under the Revolving Credit Facility.  The Revolving Credit Facility is used by the Company to provide financing for working capital, capital expenditures, interest payments and other general corporate purposes, as well as to support its outstanding letters of credit requirements.  For the current year, the weighted average interest rate on outstanding borrowings and the average daily borrowings under the Revolving Credit Facility were 6.5% and $37.5 million, respectively.

11

The Company also issues letters of credit to support certain merchandise purchases and to collateralize retained risks and deductibles under various insurance programs.  The Company had outstanding letters of credit totaling approximately $19.8 million at November 3, 2007, all of which were collateralized by the Company’s Revolving Credit Facility.  These letters of credit expire within twelve months of issuance.  Excess availability under the Revolving Credit Facility at November 3, 2007, net of letters of credit outstanding and outstanding borrowings, was $127.0 million.

The Revolving Credit Facility contains covenants which, among other things, restrict, based on required levels of excess availability, (i) the amount of additional debt or capital lease obligations, (ii) the payment of dividends and repurchase of common stock under certain circumstances and (iii) related party transactions.  At November 3, 2007, the Company was in compliance with all of the debt covenants of the Revolving Credit Facility.

On November 20, 2007, the Company borrowed $23.3 million under equipment financing notes bearing interest of 6.0%.  The notes are payable in monthly installments over a five year term and are secured by certain fixtures and equipment.

While infrequent in occurrence, occasionally the Company is responsible for the construction of leased stores and for paying project costs.  EITF Issue 97-10, “The Effect of Lessee Involvement in Asset Construction,” requires the Company to be considered the owner (for accounting purposes) of this type of project during the construction period.  Such leases are accounted for as finance lease obligations with the amounts received from the landlord being recorded in debt obligations.  Interest expense is recognized at a rate that will amortize the finance lease obligation over the initial term of the lease.  As a result, the Company has recorded approximately $4.7 million as a finance lease obligation for three leases with interest rates ranging from 8.0% to 16.9% on its Condensed Consolidated Balance Sheet (Unaudited) where EITF 97-10 was applicable as of November 3, 2007.

6. Income Taxes

The provision for income taxes is computed based on the pretax income included in the Condensed Consolidated Statements of Income (Unaudited).  The assets and liability approach is used to recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts for financial reporting purposes and the tax basis of assets and liabilities.  The classification of the tax provision between current and deferred taxes on the interim period financials is based on the expected relationship of these classifications on the tax provision for the full fiscal year.

The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions.  The Company is subject to U.S. federal income tax examinations by tax authorities for the fiscal year ended January 28, 2006 and forward.  Although the outcome of tax audits is uncertain, the Company has concluded that there were no significant uncertain tax positions, as defined by FIN 48, requiring recognition in its financial statements.  However, the Company may, from time to time, be assessed interest and/or penalties.  In the event the Company receives an assessment for interest and/or penalties, it will be classified in the financial statements as income tax expense.

7. Earnings per Share

Basic earnings per share is computed using the weighted average number of common shares outstanding during the measurement period.  Diluted earnings per share is computed using the weighted average number of common shares and all potentially dilutive common share equivalents outstanding during the measurement period.  Stock options, SARs and non-vested stock grants were the only potentially dilutive share equivalents the Company had outstanding at November 3, 2007.  The Company’s diluted earnings per share computation for the thirteen and thirty-nine weeks ended October 28, 2006 was impacted by warrants outstanding during the respective periods.  Substantially all of these warrants were converted to common stock prior to their expiration in August 2006.

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The following table summarizes the components used to determine diluted weighted average shares for each period (in thousands):

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	November 3, 2007		October 28, 2006		November 3, 2007		October 28, 2006
Basic weighted average shares outstanding		41,400		42,511		42,438		40,808
Effect of dilutive securities:
Stock options, SARs and non-vested stock grants		858		1,243		1,035		1,475
Warrants		-		630		-		1,526
Diluted weighted average shares outstanding		42,258		44,384		43,473		43,809

The following table illustrates the number of stock options and SARs (in thousands) to purchase shares of common stock that were outstanding but not included in the computation of diluted earnings per share because the exercise price of the options and SARs was greater than the average market price of the common shares for each period:

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	November 3, 2007		October 28, 2006		November 3, 2007		October 28, 2006
Number of anti-dilutive options and SARs outstanding		1,833		51		648		51

8. Stockholders’ Equity

In the current year, the Company paid quarterly cash dividends of $0.05 per share on the Company’s common stock totaling $6.4 million.  On November 30, 2007, the Company announced that its Board declared a quarterly cash dividend of $0.05 per share of common stock, payable on December 26, 2007 to shareholders of record on December 11, 2007.

On January 5, 2007, the Board approved a stock repurchase program authorizing the Company to repurchase up to $50.0 million of its outstanding common stock which was completed in June 2007.  The Board also granted the Company the authority to repurchase additional amounts of its outstanding common stock using available proceeds from the exercise of stock options as well as the tax benefits that will accrue to the Company from the exercise of stock options, SARs and other equity grants.  During the thirty-nine weeks ended November 3, 2007, the Company purchased 2,983,172 shares of its common stock at a cost of approximately $62.2 million.  In addition, the Company paid $0.3 million on behalf of the recipients who relinquished shares to satisfy the tax liability associated with performance shares and stock awards.   At November 3, 2007, approximately $1.4 million was available to the Company for stock repurchases with proceeds and tax benefits from the exercise of its equity grants.  

On November 20, 2007, the Company announced that its Board approved a new stock repurchase program authorizing the Company to repurchase up to $50.0 million of its outstanding common stock.  This new stock repurchase program permits the Company to repurchase its outstanding common stock 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.  The Board also granted the Company the authority to repurchase additional amounts of its outstanding common stock using available proceeds from the exercise of stock options as well as the tax benefits that will accrue to the Company from the exercise of stock options, SARs and other equity grants.

9. Retirement Plans

The Company sponsors three defined benefit plans (the “Retirement Plans”).  One was closed to new participants at February 1, 1998 (the “Stage Plan”), one was frozen effective June 30, 1998 (the “Peebles Plan”), and the third, which was assumed in connection with the acquisition of B.C. Moore on February 27, 2006, was frozen effective January 31, 2006.

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The components of pension cost for the Retirement Plans are as follows (in thousands):

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	November 3, 2007			October 28, 2006			November 3, 2007			October 28, 2006
Service cost	$	-		$	10		$	19		$	30
Interest cost		715			670			2,008			1,952
Expected return on plan assets		(778	)		(633	)		(1,946	)		(1,855	)
Net loss amortization		8			39			18			117
Curtailment gain		(54	)		-			(54	)		-
Net periodic pension (income) cost	$	(109	)	$	86		$	45		$	244

The Company’s funding policy is to make contributions to maintain the minimum funding requirements for its pension obligations in accordance with the Employee Retirement Income Security Act.  The Company may elect to contribute additional amounts to maintain a level of funding to minimize the Pension Benefit Guaranty Corporation premium costs or to cover the short-term liquidity needs of the plans in order to maintain current invested positions.  For the thirty-nine weeks ended November 3, 2007, the Company has contributed $7.3 million to its Retirement Plans.

On August 6, 2007, the Company notified the participants of the Peebles Plan that this plan will be terminated.  The actual termination date of the Peebles Plan, which was conveyed in the participant notification, was on October 15, 2007.  The curtailment gain related to the Peebles Plan termination that was realized during the third quarter amounted to $0.1 million.  Participants may be offered immediate lump sum distributions or the election of receiving an annuity at the time the Peebles Plan is settled, which is expected to be in fiscal 2008.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

Certain statements in this Form 10-Q contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.  These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements.  These factors include, but are not limited to, the ability of the Company and its subsidiaries to maintain normal trade terms with vendors, the ability of the Company and its subsidiaries to comply with the various covenant requirements contained in the Company's Revolving Credit Facility (as defined below), the demand for apparel and other factors.  The demand for apparel and sales volume can be affected by significant changes in economic conditions, including an economic downturn, employment levels in the Company’s markets, consumer confidence, energy and gasoline prices, current uncertainty in the housing market and other factors influencing discretionary consumer spending.  Other factors affecting the demand for apparel and sales volume include unusual weather patterns, an increase in the level of competition in the Company's market areas, competitors' marketing strategies, changes in fashion trends, changes in the average cost of merchandise purchased for resale, availability of product on normal payment terms and the failure to achieve the expected results of the Company's merchandising and marketing plans as well as its store opening plans.  The occurrence of any of the above could have a material and adverse impact on the Company's operating results.  Most of these factors are difficult to predict accurately and are generally beyond the Company's control.  Readers should consider the risks and uncertainties described in the Company’s Annual Report on Form 10-K for the year ended February 3, 2007 (“Form 10-K”).  Readers should carefully review the Form 10-K in its entirety, including but not limited to the Company's financial statements and the notes thereto and the risks and uncertainties described in Item 1A - "Risk Factors" of the Form 10-K.  Forward-looking statements contained in this Form 10-Q speak only as of the date of this Form 10-Q.  The Company does not undertake to update its forward-looking statements.

General

Stage Stores is a Houston, Texas-based regional, specialty department store retailer offering moderately priced, nationally recognized brand name and private label apparel, accessories, cosmetics and footwear for the entire family.  As of November 3, 2007, the Company operated 687 stores located in 35 states under the Stage, Bealls and Palais Royal names throughout the South Central states, and under the Peebles name throughout the Midwestern, Southeastern, Mid-Atlantic and New England states.  The Company's principal focus is on consumers in small and mid-size markets which the Company believes are under-served and less competitive.  The Company believes that it is able to differentiate itself from the competition in the small and mid-size markets in which it operates by offering consumers access to basic as well as fashionable, brand name merchandise not typically carried by other retailers in the same market area.  In the highly competitive metropolitan markets in which it operates, the Company competes against national department store chains, which similarly offer moderately priced, brand name and private label merchandise.  As a way of differentiating itself from the competition in these larger metropolitan markets, the Company endeavors to offer consumers a high level of customer service in convenient locations.

On February 27, 2006, the Company acquired privately held B.C. Moore & Sons, Incorporated (“B.C. Moore”).  In purchasing B.C. Moore, the Company acquired 78 retail locations, located in small markets throughout Alabama, Georgia, North Carolina and South Carolina.  The Company converted 69 of the acquired stores to the Peebles name and format in 2006, and the remaining nine locations were closed.  The Company is intensifying its marketing efforts to drive additional foot traffic and sales in an effort to expedite the development of the traditional Peebles customer in these markets.

The financial information, discussion and analysis that follow should be read in conjunction with the Company's Consolidated Financial Statements as included in the Form 10-K.

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Results of Operations

The following table sets forth the results of operations as a percentage of sales for the periods indicated:

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	November 3, 2007			October 28, 2006			November 3, 2007			October 28, 2006
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales and related buying, occupancy and distribution expenses		73.5			71.6			72.2			72.1
Gross profit		26.5			28.4			27.8			27.9
Selling, general and administrative expenses		24.4			25.6			24.0			24.6
Store opening costs		0.7			1.1			0.3			0.6
Interest, net		0.3			0.4			0.3			0.3
Income before income tax		1.1			1.3			3.2			2.4
Income tax expense		0.4			0.5			1.2			0.9
Net income		0.7	%		0.8	%		2.0	%		1.5	%

Thirteen Weeks Ended November 3, 2007 Compared to Thirteen Weeks Ended October 28, 2006

Sales for the thirteen weeks ended November 3, 2007 (the “current year third quarter”) increased 0.5% to $355.1 million from $353.3 million for the thirteen weeks ended October 28, 2006 (the “prior year third quarter”).  The prior year third quarter 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, which are sales in stores open at least fourteen full months prior to the reporting period, decreased 1.0% in the current year third quarter as compared to a 4.1% increase in the prior year third quarter.  In the current year third quarter, new stores that were not in the comparable store base in the prior year third quarter contributed sales of $18.3 million.  This increase was partially offset by a loss of $1.9 million in sales from closed stores that were in operation during the prior year third quarter, as well as the Company’s comparable store sales decline.

Overall, sales in the current year third quarter were negatively impacted by unseasonably warm weather which persisted in many of the Company’s markets during much of the period.  The warm weather caused a reduction in the demand for the Company’s new and higher priced fall and winter goods.  Comparable store sales increases were achieved during the current year third quarter in certain key merchandise categories, namely dresses, cosmetics and plus sizes.  On a market population basis, utilizing a ten-mile radius from each store, the Company achieved an overall comparable store sales increase of 0.1% during the current year third quarter in its small market stores, or those in market areas with populations of less than 50,000.  In its mid-sized market stores, or those in market areas with populations of 50,000 to 150,000, comparable stores sales decreased by 3.3%.  In its large market stores, or those in market areas with populations greater than 150,000, comparable store sales decreased by 1.3%.

The following is a summary of the changes between the current year third quarter and the prior year third quarter in the components of cost of sales, expressed as a percent of sales:

	Increase Quarter 3
Merchandise cost of sales		1.8	%
Buying, occupancy and distribution expenses		0.1
Increase in merchandise cost of sales and related buying, occupancy and distribution expenses rate		1.9	%

Gross profit decreased 6.0% to $94.2 million for the current year third quarter from $100.3 million for the prior year third quarter.  Gross profit, as a rate of sales, was 26.5% in the current year third quarter and 28.4% in the prior year third quarter.  The prior year third quarter included gross profit from inventory liquidation sales associated with the conversion of the B.C. Moore stores.  Excluding the impact from the inventory liquidation sales, the gross profit rate decreased 1.5%.  This decrease reflects a 1.6% decline in merchandise margins which was offset by a 0.1% reduction in the allocated buying, occupancy and distribution components of cost of sales.  As a consequence of the unseasonably warm weather that persisted for most of the third quarter, the sales mix during the period was comprised of a greater percentage of clearance goods rather than higher priced fall and winter goods as compared to the prior year third quarter.  As a result, the average retail price of goods sold during the quarter was lower this year than last year resulting in lower merchandise margins.

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Selling, general and administrative (“SG&A”) expenses for the current year third quarter decreased $3.8 million, or 4.2%, to $86.7 million from $90.5 million in the prior year third quarter.  As a percent of sales, SG&A expenses decreased to 24.4% in the current year third quarter from 25.6% in the prior year third quarter.  The prior year third quarter included SG&A expenses for the B.C. Moore stores prior to their conversion and re-opening as Peebles stores totaling $4.3 million, which among other things, included the fee earned by the liquidator that managed operations of the stores during this period.  The prior year third quarter also included higher professional fees and other related expenses of $1.3 million associated with the Company’s inventory valuation methodology review, which were essentially offset by reimbursements totaling $1.1 million received by the Company for hurricane related losses suffered in the prior year.  Excluding B.C. Moore inventory liquidation sales and related SG&A expenses from the prior year third quarter results, the prior year third quarter SG&A rate would have been 25.2%.  The improvement in SG&A expenses in the current year third quarter reflects, among other things, a favorable experience in medical claims expenses and tight control of expenses.

Store opening costs of $2.5 million include costs related to 21 stores opened and 4 stores relocated during the current year third quarter, as well as costs associated with stores that are scheduled to be opened or relocated in subsequent months.  During the same period in the prior year third quarter, the Company incurred $4.0 million in store opening costs related to the opening of 13 new stores, the relocation of one store and expenses associated with the transition and conversion of the 69 B.C. Moore stores re-opened in the prior year third quarter.

Net interest expense was $1.2 million in the current year third quarter and $1.3 million in the prior year third quarter.  The decrease is reflective of lower average borrowings during the current year third quarter as compared to the prior year third quarter.  In addition, the weighted average interest rate was 6.3% for the current year third quarter, which included the benefit of a reduction in the applicable margin rate used for the interest rate charged under the Company’s amended Revolving Credit Facility (see “Liquidity and Capital Resources”), and 7.2% for the prior year third quarter.  Interest expense is principally comprised of interest on borrowings under the Company’s Revolving Credit Facility (as defined below in “Liquidity and Capital Resources”), related letters of credit and commitment fees, amortization of debt issuance costs and interest on financing lease obligations.

The Company’s effective tax rate for the current year third quarter was 37.8%.  The tax rate for 2007 is expected to be 37.8%.  Income tax expense was $1.5 million in the current year third quarter compared to income tax expense of $1.7 million in the prior year third quarter during which the effective tax rate was 37.3%.  The increase in the effective tax rate was due to legislation enacted by the Texas legislature, which subjects the Company to a Texas income tax.

As a result of the foregoing, the Company had net income of $2.5 million for the current year third quarter as compared to net income of $2.8 million for the prior year third quarter.

Thirty-Nine Weeks Ended November 3, 2007 Compared to Thirty-Nine Weeks Ended October 28, 2006

Sales for the thirty-nine weeks ended November 3, 2007 (the “current year”) increased 1.3% to $1,072.6 million from $1,059.0 million for the thirty-nine weeks ended October 28, 2006 (the “prior year”).  The prior year results include inventory liquidation sales of $62.1 million generated by the acquired B.C. Moore stores prior to their conversion to Peebles stores.  Comparable store sales decreased 0.1% in the current year as compared to a 3.9% increase in the prior year.  In the current year, new stores that were not in the comparable store base in the prior year contributed a sales increase of $84.5 million.  This was partially offset by a loss of $7.5 million in sales from closed stores that were in operation during the prior year.

Sales in the current year were negatively impacted by unfavorable weather conditions throughout many of the Company’s markets.  During the current year third quarter, the warm weather caused a reduction in demand for the new higher priced fall and winter goods, resulting in an unfavorable sales mix for the quarter.  Comparable store sales increases were achieved during the current year in certain key merchandise categories (i.e., those categories comprising greater than 5% of sales), namely dresses, cosmetics and women’s sportswear.  On a market population basis, utilizing a ten-mile radius from each store, the Company achieved an overall comparable store sales increase of 1.7% during the current year in its small market stores, or those in market areas with populations of less than 50,000.  In its mid-sized market stores, or those in market areas with populations of 50,000 to 150,000, comparable stores sales decreased by 2.9%.  In its large market stores, or those in market areas with populations greater than 150,000, comparable store sales decreased by 1.9%.

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The following is a summary of the changes between the current year and the prior year in the components of cost of sales, expressed as a percent of sales:

	Increase YTD
Merchandise cost of sales		0.1	%
Buying, occupancy and distribution expenses		-
Increase in merchandise cost of sales and related buying, occupancy and distribution expenses rate		0.1	%

Gross profit increased 0.8% to $298.1 million for the current year from $295.6 million for the prior year.  Gross profit, as a rate of sales, was 27.8% in the current year and 27.9% in the prior year.  The prior year included the gross margin from inventory liquidation sales associated with the conversion of the B.C. Moore stores.  Excluding the impact of the inventory liquidations sales, the gross margin rate increased 0.5%, which is reflective of a 0.2% improvement in merchandise margins and a 0.3% improvement in the buying, occupancy and distribution expenses components of cost of sales.  The increase in the merchandise gross margin rate is a combination of an improvement in the current year second quarter due to better inventory management practices as compared to the prior year second quarter, offset by the impact of the unfavorable sales mix in the first and third quarters related to the unfavorable weather conditions in the current year.  The prior year results were also negatively impacted by aggressive new store grand opening campaigns and a high level of promotional discounting in the Peebles division during the second and third quarters intended to drive sales.  The improvement in buying, occupancy and distribution expenses is principally due to the fact that the prior year second quarter included a $3.8 million charge, of which $3.3 million related to prior years, or 0.3% of sales, for the cumulative effect of the correction of an accounting error related to distribution center handling credits.

SG&A expenses for the current year decreased $3.4 million, or 1.3%, to $256.9 million from $260.3 million in the prior year.  As a percent of sales, SG&A expenses decreased to 24.0% in the current year from 24.6% in the prior year.  The prior year included SG&A expenses for the B.C. Moore stores prior to their conversion and re-opening as Peebles stores totaling $22.8 million, which among other things, included the fee earned by the liquidator that managed operations of the stores during this period.  Excluding B.C. Moore liquidation period sales and SG&A expenses, the prior year SG&A rate would have been 23.8% as compared to 24.0% in the current year.  The current year SG&A expenses benefited from the $2.6 million (0.2% of sales) gain related to the March 2004 sales of the Peebles private label credit card portfolio.  See Note 4 to the Condensed Consolidated Financial Statements (Unaudited).  The prior year also includes higher professional fees and other related expenses of $1.3 million (0.1% of sales) associated with the Company’s inventory valuation methodology review.  These favorable variances were offset by reimbursements totaling $3.2 million (0.3% of sales) received by the Company for hurricane-related losses in the prior year. The increase in the SG&A rate in the current year over the prior year is principally due  to the higher store expenses and advertisements due to the increased store count and less leverage on sales.

Store opening costs of $3.7 million include costs related to 35 stores opened and 8 stores relocated during the current year, as well as costs associated with stores that are scheduled to be opened or relocated in subsequent months.  During the prior year, the Company incurred $6.8 million in store opening costs related to the opening of 24 new stores, the relocation of nine stores and expenses associated with the transition and conversion of the 69 B.C. Moore stores re-opened in the prior year third quarter.

Net interest expense was $3.0 million in the current year and $3.5 million in the prior year.  The decrease is reflective of lower average borrowings during the current year as compared to the prior year.  In addition, the weighted average interest rate was 6.5% for the current year, which included the benefit of a reduction in the applicable margin rate used for the interest rate charged under the Company’s amended Revolving Credit Facility (see “Liquidity and Capital Resources”), and 6.9% for the prior year.

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The Company’s effective tax rate for the current year is estimated to be 37.8%.  Income tax expense was $13.0 million in the current year compared to income tax expense of $9.3 million in the prior year during which the effective tax rate was 37.3%.  The increase in the effective tax rate was due to the legislation enacted by the Texas Legislature which subjects the Company to a Texas income tax.

As a result of the foregoing, the Company had net income of $21.4 million for the current year as compared to net income of $15.7 million for the prior year.

Seasonality and Inflation

Historically, the Company's business is seasonal and sales are traditionally lower during the first three quarters of the year (February through October) and higher during the last three months of the year (November through January).  The fourth quarter typically accounts for slightly more than 30% of the Company's annual sales, with the other quarters accounting for approximately 22% to 24% each.  Working capital requirements fluctuate during the year and generally reach their highest levels during the third and fourth quarters.  The Company does not believe that inflation had a material effect on its results of operations during the thirteen and thirty-nine weeks ended November 3, 2007 and October 28, 2006, respectively.  However, there can be no assurance that the Company's business will not be affected by inflation in the future.

Liquidity and Capital Resources

The Company's liquidity is currently provided by (i) existing cash balances, (ii) operating cash flows, (iii) normal trade credit and (iv) its Revolving Credit Facility.

On April 20, 2007, the Company amended its $250.0 million senior secured revolving credit facility (the "Revolving Credit Facility"), that originally would have matured on August 21, 2008, to, among other things, (i) extend its term for five years through April 20, 2012, (ii) include an uncommitted accordion feature to increase the size of the Revolving Credit Facility to $350.0 million, and (iii) reduce the applicable margin rates by fifty basis points on Eurodollar rate based borrowings.  Borrowings under the Revolving Credit Facility are limited to the availability under a borrowing base that is determined principally on eligible inventory as defined by the Revolving Credit Facility agreement.  The daily interest rates under the Revolving Credit Facility are determined by a prime rate or Eurodollar rate plus an applicable margin as set forth in the Revolving Credit Facility agreement.  Inventory and cash and cash equivalents are pledged as collateral under the Revolving Credit Facility.  The Revolving Credit Facility is used by the Company to provide financing for working capital, capital expenditures, interest payments and other general corporate purposes, as well as to support its outstanding letters of credit requirements.  For the current year, the weighted average interest rate on outstanding borrowings and the average daily borrowings under the Revolving Credit Facility were 6.5% and $37.5 million, respectively.

The Revolving Credit Facility contains covenants that, among other things, restrict, based on required levels of excess availability, (i) the amount of additional debt or capital lease obligations, (ii) the payment of dividends and repurchase of common stock under certain circumstances and (iii) related party transactions.  The Company continually monitors its liquidity position and compliance with those covenants.  At November 3, 2007, the Company was in compliance with all of the debt covenants of the Revolving Credit Facility.

On November 20, 2007, the Company borrowed $23.3 million under equipment financing notes bearing interest of 6.0%.  The notes are payable in monthly installments over a five year term and are secured by certain fixtures and equipment.  The Company anticipates borrowing an additional $26.7 million in the next twelve months on similar terms.

The Company generated $34.6 million in cash from operating activities in the current year.  Net income, adjusted for non-cash expenses such as depreciation and amortization, deferred income taxes, amortization of debt issue costs, stock-based compensation and excess tax benefits from stock-based compensation provided cash of approximately $62.1 million.  Changes in operating assets and liabilities used net cash of approximately $47.2 million, which included a $108.3 million increase in merchandise inventories due to seasonal build of inventories, offset by an increase in accounts payable and other liabilities of $61.5 million.  Additionally, cash flows from operating activities included construction allowances from landlords of $19.7 million, which funded a portion of the capital expenditures related to store leasehold improvements in new and relocated stores.

19

On January 5, 2007, the Board approved a stock repurchase program authorizing the Company to repurchase up to $50.0 million of its outstanding common stock which was completed in June 2007.  The Board also granted the Company the authority to repurchase additional amounts of its outstanding common stock using available proceeds from the exercise of stock options as well as the tax benefits that will accrue to the Company from the exercise of stock options, SARs and other equity grants.  During the thirty-nine weeks ended November 3, 2007, the Company purchased 2,983,172 shares of its common stock at a cost of approximately $62.2 million.  In addition, the Company paid $0.3 million on behalf of the recipients who relinquished shares to satisfy the tax liability associated with performance shares and stock awards.   At November 3, 2007, approximately $1.4 million was available to the Company for stock repurchases with proceeds and tax benefits from the exercise of its equity grants.

On November 20, 2007, the Company announced that its Board approved a new stock repurchase program authorizing the Company to repurchase up to $50.0 million of its outstanding common stock.  This new stock repurchase program permits the Company to repurchase its outstanding common stock 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.  The Board also granted the Company the authority to repurchase additional amounts of its outstanding common stock using available proceeds from the exercise of stock options as well as the tax benefits that will accrue to the Company from the exercise of stock options, SARs and other equity grants.

In the current year, the Company paid quarterly cash dividends of $0.05 per share on the Company’s common stock totaling $6.4 million.  On November 30, 2007, the Company announced that its Board declared a quarterly cash dividend of $0.05 per share of common stock, payable on December 26, 2007 to shareholders of record on December 11, 2007.  While the Company expects to continue payment of quarterly dividends, the declaration and payment of future dividends by the Company are subject to the discretion of the Board.  Any future determination to pay dividends will depend on the Company’s results of operations and financial condition, as well as meeting certain criteria under its Revolving Credit Facility and other factors deemed relevant by the Board.

Management currently estimates capital expenditures in 2007, net of construction allowances to be received from landlords, will be approximately $85.0 million for the opening of 47 new stores, store expansions and relocations, and the initial expenditures on a third distribution center.  Capital expenditures were $64.1 million in the current year as compared to $51.4 million in the prior year.  For the current year, the Company opened 35 new stores and relocated 8 stores as compared to 93 stores opened and 9 relocated stores in the prior year.  As noted above, the Company received construction allowances from landlords of $19.7 million in the current year to fund a portion of the capital expenditures related to store leasehold improvements in new and relocated stores, while $6.9 million was received from landlords in the prior year.  These funds have been recorded as a deferred rent credit in the balance sheet and will be recorded as an offset to rent expense over the lease term commencing with the date the allowances were earned.

While there can be no assurances, management believes that there should be sufficient liquidity to cover both the Company's short-term and long-term funding needs.

Recent Accounting Standards

Disclosure concerning recent accounting standards is incorporated by reference to Note 1 of the Company's Condensed Consolidated Financial Statements (Unaudited) contained in this Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Borrowings under the Company’s Revolving Credit Facility bear a floating rate of interest.  As of November 3, 2007, outstanding borrowings under the Company's Revolving Credit Facility were $103.1 million.  An increase in interest rates in the future may have a negative impact on the Company’s results of operations and cash flows.  The Company had average daily borrowings of $37.5 million bearing a weighted average interest rate of 6.5% during the thirty-nine weeks ended November 3, 2007.  A hypothetical 10% change in interest rates would have an approximate $0.2 million effect on the Company's annual results of operations and cash flows.

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ITEM  4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act"), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Company’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures.  Based on this evaluation, they concluded that the Company’s disclosure controls and procedures were effective as of November 3, 2007.

Internal Control Over Financial Reporting

As defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act, the term "internal control over financial reporting" means a process designed by, or under the supervision of, the issuer's principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material adverse effect on the financial statements.

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  There were no changes in the Company’s internal control over financial reporting during the quarter ended November 3, 2007 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During the fiscal quarter ended November 3, 2007, the Company did not have any material legal proceedings brought against it, its subsidiaries or their properties.

ITEM 1A. RISK FACTORS

There have not been any material changes from the risk factors as previously disclosed in the Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

The following documents are the exhibits to this Form 10-Q.  For convenient reference, each exhibit is listed according to the Exhibit Table of Item 601 of Regulation S-K.

Exhibit Number	Description
10.1*	Employment Agreement between Ed Record and Stage Stores, Inc. dated September 13, 2007.
10.2*	Sixth Amendment to Credit Agreement dated as of November 20, 2007, by and among Specialty Retailers, Inc., Stage Stores, Inc., SRI General Partner LLC, Bank of America, N.A. (f/k/a Fleet National Bank) and the other lenders and parties named therein.
31.1*	Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
31.2*	Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
32*	Certification Pursuant to 18 U.S.C. Section 1350.

_________________________________

*     Filed electronically herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	STAGE STORES, INC.
December 12, 2007	/s/ James R. Scarborough
(Date)	James R. Scarborough
	Chief Executive Officer
	(Principal Executive Officer)
December 12, 2007	/s/ Edward J. Record
(Date)	Edward J. Record
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

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EX-10

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into and effective as of this 13th day of September, 2007, by and between STAGE STORES, INC., a Nevada corporation (the “Company”), and ED RECORD, an individual (the “Executive”).

WITNESSETH:

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company to appoint the Executive to the position of Executive Vice President, Chief Financial Officer of the Company (the “Position”), subject to the terms and conditions of this Agreement; and

WHEREAS, the Executive desires to be appointed to the Position, subject to the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the promises and mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.           EMPLOYMENT.  Company hereby appoints Executive to the Position, and Executive hereby accepts such appointment to the Position, subject to the terms and conditions set forth in this Agreement.  Subject to earlier termination in accordance with Section 4 below, this Agreement shall continue in effect for a period of thirty-six (36) months commencing from the effective date hereof (the “Initial Term”).  Upon the expiration of the Initial Term or any Renewal Period (as hereafter described), the term of Executive’s employment under this Agreement shall automatically be extended for an additional twelve (12) month period (a “Renewal Period”), unless either the Company or Executive notifies the other party in writing at least thirty (30) days prior to the expiration of the Initial Term or the then current Renewal Period that the Employment Period shall not be extended upon such expiration.

1.1           Failure to Extend by Company.  In the event the Company notifies Executive that the Employment Period shall not be extended at the expiration of the Initial Term or the then current Renewal Period in accordance with Section 1 hereof, such failure to extend shall constitute termination of this Agreement by the Company without Good Cause (as hereafter defined), and the Company and Executive agree that Executive shall be entitled to receive the payments described in Section 4.3 hereof.

1.2           Failure to Extend by Executive.  In the event Executive notifies the Company that the Employment Period shall not be extended at the expiration of the Initial term or the then current Renewal Period in accordance with Section 1 hereof, such failure to extend shall constitute termination of this Agreement by Executive without Good Reason (as hereafter defined), and the Company and Executive agree that Executive shall be entitled to receive the payments described in Section 4.5 hereof.

2.           POSITION AND DUTIES.  During such time as Executive is employed with the Company (the “Employment Period”), Executive shall serve in the Position and shall have the normal duties, responsibilities and authority associated with or related to such Position, subject to the power and authority of the Board to expand or limit such duties, responsibilities and authority and to override actions of the Executive.  Executive shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) exclusively to the business and affairs of the Company and its “Subsidiaries” (as hereafter defined) and any duty, task or responsibility assigned or given to Executive by the Board, and Executive shall perform his duties and responsibilities to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner. As used in this Agreement, “Subsidiaries” shall mean any entity of which the securities having a majority of the voting power in electing directors or managers are, at the time of determination, owned by the Company either directly or through one or more Subsidiaries.

2.1           Outside Directorships.  In the event Executive is invited, solicited or otherwise asked to become a director, advisor or consultant for any entity or organization of any type or function whatsoever other than the Company or its Subsidiaries, Executive shall notify the Board in writing of such invitation, the entity or organization extending such invitation and the capacity to be served by Executive for such entity or organization.  The Board shall have the sole power and authority to authorize Executive to accept such invitation based on such criteria and standards as the Board may determine, and Executive shall not accept such invitation without the Board’s prior written consent, which consent shall not be unreasonably withheld.

2.2           Delegation by Board.  Whenever this Agreement calls for action on the part of the Board, the Board may delegate responsibility for such action to a duly appointed committee of the Board, including but not limited to the Compensation Committee of the Board, and Executive agrees to treat, comply with and be bound by any action taken by such committee as if the Board had taken such action directly.

3.           COMPENSATION AND BENEFITS.  During the Employment Period, Executive shall be paid or receive compensation and benefits as follows:

3.1           Base Salary.  The base salary for Executive shall be $460,000 per year, or such other rate as the Board may designate from time to time (the “Base Salary”).  The Base Salary shall be payable in regular installments in accordance with the Company’s general payroll practices and shall be subject to withholdings for applicable taxes.  Executive’s performance shall be evaluated annually in March of each year.  Any future salary increases will be based on the Executive’s individual performance and will be approved by the Board in its sole discretion.  Executive will be eligible for a salary increase on April 1, 2008 and annually thereafter.  Executive has received a lump sum payment of $50,000 in conjunction with his active employment.  This lump sum payment is subject to tax withholding and is a one time event in consideration for Executives decision to accept employment with the Company.  Executive, however, must remain employed until May 14, 2008 in order to retain this payment.  If Executive’s employment is terminated by the Company without Good Cause or by the Executive for Good Reason prior to May 14, 2008, the Executive shall have no obligation to return this payment.  Otherwise, if Executive’s employment is separated prior to May 14, 2008, Executive shall return this payment to the Company within thirty (30) days of the separation of employment.

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3.2           Performance Bonus.  Executive will be eligible for an annual performance bonus award, payable on or about April 1, 2008 and every year thereafter that Executive is employed, as of April 1 of the then current year.  Executive’s annual bonus target will be 65% of the Base Salary.  Executive’s maximum bonus amount will be 130% of the Base Salary.  The award of any bonus shall be based upon the financial earning parameters which shall be determined by the Board in its sole discretion.  Executive’s earned bonus for fiscal 2007 will be paid fully and not prorated.  Thereafter, in order to receive any such performance bonuses, the Executive must be employed in the position on April 1 of the then current year and must have worked for the Company in the position for the previous 12 months.  Any such bonus award shall be subject to withholdings for applicable taxes.

3.3           Medical, Dental and Other Benefits.  Executive is eligible to enroll and participate in any and all benefits plans the Company provides to its executive officers and employees including, but not limited to, medical and dental insurance coverage for Executive and family, life insurance policy, long term disability insurance, stock options, and retirement plans and arrangements.  The premiums, costs and expenses for any such benefit plans under which Executive is participating shall be borne by Company.  Executive shall receive four (4) weeks of paid vacation each year, which if not taken may not be carried forward to any subsequent year.  Executive, however, shall not receive any compensation for any unused vacation days and upon termination of employment for any reason, any unused vacation days shall be forfeited.  Any and all benefits provided for hereunder shall not be included in the definition of the term “Base Salary” as such term is used in this Agreement.  All such medical and dental insurance, life insurance and long term disability insurance benefits shall immediately cease and terminate upon the later of (1) the termination date of the Employment Period or (2) the expiration date of coverage for such benefits by the Company as described in Section 4 hereof; provided, that upon such termination, Executive shall have the right to elect to continue any or all of such health benefits, programs or coverage, at his sole cost and expense, in accordance with and subject to the terms and limitations set forth in the Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”) and the regulations promulgated in connection therewith.

3.4           Automobile Allowance.  Company shall provide Executive with an automobile allowance in the amount of $1,000.00 per month to be allocated at Executive’s discretion, or such other amount designated by the Board in its sole discretion, and such allowance shall be payable in regular installments in accordance with the Company’s general payroll practices.

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3.5           Financial Planning Allowance.  Company shall reimburse Executive for any expenses incurred by Executive in connection with the preparation of taxes, estate planning or financial counseling up to a maximum amount of $7,500.00 per year, or such other annual amount designated by the Board in its sole discretion, which amount may not be carried forward to any subsequent year.  Such expenses shall be reimbursed in accordance with the standard policies and procedures of the Company in effect from time to time related to such reimbursable expenses.

3.6           Business Expense.  Company shall reimburse Executive for all reasonable travel, entertainment and other business expenses incurred by Executive in the course of performing the duties of the Position.  Such expenses shall be reimbursed in accordance with the standard policies and procedures of the Company in effect from time to time related to such reimbursable expenses.

4.           TERMINATION; EFFECTS OF TERMINATION.  This Agreement may be terminated upon the occurrence of any of the following events:

4.1           Terminable At Will.  Notwithstanding any other provision of this Agreement including, but not limited to Section 1 hereof, this Agreement and Executive’s employment with the Company or its Subsidiaries shall be terminable at will at any time for any reason by either party upon written notice, and this Agreement shall expire automatically when Executive ceases to hold the Position with the Company for any reason.  Upon such termination, the rights of Executive to receive the monies and benefits from the Company shall be determined in accordance with the terms and provisions contained in this Section 4, and Executives agrees that such monies and benefits are fair and reasonable and are the sole monies and benefits which shall be due to him from the Company in the event of termination.

4.2           By Company For Good Cause.  Upon written notice to Executive, Company may immediately terminate this Agreement at any time during the Employment Period for “Good Cause” (as hereafter defined).

4.2.1             Monies and Payments to Executive.  Upon such termination, Executive shall be entitled to receive any Base Salary earned and unpaid, and fringe benefits described in Section 3.3 hereof accrued and unpaid, through the date of such termination, and no other monies or benefits shall be payable or owed to Executive under this Agreement.

4.2.2             Forfeiture of Options.  Effective as of such termination date, any and all stock options, stock appreciation rights, restricted stock options, warrants and other similar rights granted to or received by Executive under any option or incentive plan of the Company to which Executive is participating or enrolled shall immediately be terminated and forfeited, except for such options or rights granted to or received by Executive which have fully and completely vested prior to such termination date.  Any and all such options and rights to which Executive has become fully and completely vested prior to such termination date shall expire as set forth in the respective plan document or agreement granting such options and rights.

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4.2.3             Good Cause Defined.  For purposes of this Agreement, “Good Cause” means (i) Executive’s conviction of, or plea of nolo contendere or guilty to, any criminal violation involving dishonesty, fraud or moral turpitude; (ii) Executive’s gross negligence; (iii) Executive’s willful and serious misconduct; (iv) Executive’s breach of trust or fiduciary duty in the performance of his duties or responsibilities; (v) Executive’s willful failure to comply with reasonable directives and policies of the Board; or (vi) Executive’s breach of any material term or provision of this Agreement and Executive’s failure to cure such breach within 30 days of his receipt of notice of the breach by the Company.

4.3           By Company Without Good Cause.  Upon ten (10) days prior written notice to Executive, Company may terminate this Agreement at any time during the Employment Period without Good Cause.

4.3.1             Monies and Benefits to Executive.  Upon such termination, Executive shall be entitled to receive: (i) any Base Salary earned and unpaid, and fringe benefits described in Section 3.3 hereof accrued and unpaid, through the date of such termination; (ii) one and one-half (1½) times the aggregate of: (x) the Base Salary plus (y) your annual bonus target amount (65% of Base Salary or such other higher amount as approved by the Board); (iii) any performance bonus (65% of Base Salary or such other higher amount as approved by the Board) for the fiscal year in which such termination occurs pro-rated through the date of such termination; provided, however, Executive shall not receive any portion of the performance bonus unless the Board determines in good faith that Executive would have been entitled to receive any performance bonus for the fiscal year in which such termination occurred in accordance with Section 3.2 hereof; (iv) continuation of the fringe benefits described in Section 3.3 hereof under which Executive is participating as of the date of such termination for a period of twelve (12) months from the date of such termination; (v) payment  for outplacement services for Executive for a period of twelve (12) months from the date of such termination, provided, however, the aggregate amount of such payments for outplacement services shall not exceed $15,000.00.

4.3.2             Payment of Monies and Benefits.  The payments described in Section 4.3.1(i) and 4.3.1(ii) hereof shall be paid to Executive in a lump sum within thirty (30) days from the date of such termination and shall be subject to withholdings for applicable taxes.  The payment described in Section 4.3.1(iii) hereof shall be payable in a lump sum on or before April 1 following the end of the fiscal year in which such termination occurred and shall be subject to withholdings for applicable taxes.  The benefits described in Section 4.3.1(iv) shall be provided in accordance with the Company’s standard policies and practices.  The payments described in Section 4.3.1(v) hereof shall be paid directly to the entity providing outplacement services to Executive within thirty (30) days of receipt of an invoice or statement from such entity.

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4.3.3             Forfeiture of Options.  Effective as of such termination date, any and all stock options, stock appreciation rights, restricted stock options, warrants and other similar rights granted to or received by Executive under any option or incentive plan of the Company to which Executive is participating shall immediately be terminated and forfeited, except for such options or rights granted to or received by Executive which have fully and completely vested prior to such termination date.  Any and all such options and rights to which Executive has become fully and completely vested prior to such termination date shall expire as set forth in the respective plan document or agreement granting such options and rights.

4.4           By Executive for Good Reason.  Upon thirty (30) days prior written notice to Company, Executive may terminate this Agreement at any time during the Employment Period for “Good Reason” (as hereafter defined), and if requested by Company, Executive shall continue to work exclusively for the Company during such thirty (30) day period; provided, however, the Company shall have the right, in its sole discretion, to terminate this Agreement at any time during such thirty (30) day period upon written notice to Executive.

4.4.1             Monies and Benefits to Executive.  Upon such termination, Executive shall be entitled to receive: (i) any Base Salary earned and unpaid, and fringe benefits described in Section 3.3 hereof accrued and unpaid, through the date of such termination; (ii) one and one-half (1½) times the aggregate of: (x) the Base Salary plus (y) your annual bonus target amount (65% of Base Salary or such other higher amount as approved by the Board); (iii) any performance bonus (65% of Base Salary or such other higher amount as approved by the Board) for the fiscal year in which such termination occurs pro-rated through the date of such termination; provided, however, Executive shall not receive any portion of the performance bonus unless the Board determines in good faith that Executive would have been entitled to receive any performance bonus for the fiscal year in which such termination occurred in accordance with Section 3.2 hereof; (iv) continuation of the fringe benefits described in Section 3.3 hereof under which Executive is participating as of the date of such termination for a period of twelve (12) months from the date of such termination; and (v) payment of outplacement services for Executive for a period of twelve (12) months from the date of such termination; provided, however, the aggregate amount of such payments for outplacement services shall not exceed $15,000.00.

4.4.2             Payment of Monies and Benefits.  The payments described in Section 4.4.1(i) and 4.4.1(ii) hereof shall be paid to Executive within thirty (30) days from the date of such termination and shall be subject to withholdings for applicable taxes.  The payment described in Section 4..1(iii) hereof shall be payable in a lump sum on or before April 1 following the end of the fiscal year in which such termination occurred and shall be subject to withholdings for applicable taxes.  The benefits described in Section 4.4.1(iv) shall be provided in accordance with the Company’s standard policies and practices.  The payments described in Section 4.4.1(v) hereof shall be paid directly to the entity providing outplacement services to Executive within ten (10) days of receipt of an invoice or statement from such entity.

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4.4.3             Forfeiture of Options.  Effective as of such termination date, any and all stock options, stock appreciation rights, restricted stock options, warrants and other similar rights granted to or received by Executive under any option of incentive plan of the Company to which Executive is participating shall immediately be terminated and forfeited, except for such options or rights granted to or received by Executive which have fully and completely vested prior to such termination date.  Any and all such options and rights to which Executive has become fully and completely vested prior to such termination date shall expire as set forth in the respective plan document or agreement granting such options and rights.

4.4.4             Good Reason Defined.  For purposes of this Agreement, “Good Reason” shall exist if, without Executive’s express written consent, the Company: (i)  decreases Executive’s Base Salary from the level in effect on the date of the decrease; (ii) willfully fails to include Executive in any incentive compensation plans, bonus plans, or other plans and benefits provided by the Company to other executive level executive; (iii) materially reduces, decreases or diminishes the nature, status or duties and responsibilities of the Position from those in effect on the date hereof, and such reduction, decrease or diminution is not reasonably related to or the result of an adverse change in Executive’s performance of assigned duties and responsibilities; (iv) the hiring by Company of an executive senior to Executive; (v) requires Executive to regularly perform the duties and responsibilities of the Position at a location which is more than fifty (50) miles from the location of Executive’s principal place of employment; or, (vi) requires Executive to engage in any accounting, financial reporting or other practice as part of the duties of the Position that Executive believes violates: (i) the law or (ii) US GAAP Principles and has so informed any of the Company’s senior executives.  Notwithstanding the above, Good Reason shall not include the death, disability or voluntary retirement of Executive or any other voluntary action taken by or agreed to by Executive related to the Position or its employment with the Company or its Subsidiaries.

4.5           By Executive Without Good Reason.  Upon thirty (30) days prior written notice to Company, Executive may terminate this Agreement at any time during the Employment Period without Good Reason, and if requested by the Company, Executive shall continue to work exclusively for the Company during such thirty (30) day period; provided, however, the Company shall have the right, in its sole discretion, to terminate this Agreement at any time during such thirty (30) day period upon written notice to Executive.

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4.5.1             Monies and Benefits to Executive.  Executive shall be entitled to receive any Base Salary earned and unpaid, and fringe benefits described in Section 3.3 hereof accrued and unpaid, through the date of such termination or the date on which the Company terminates this Agreement during such thirty (30) day period, and no other monies or benefits shall be payable or owed to Executive under this Agreement.

4.5.2             Forfeiture of Options.  Effective as of such termination date, any and all stock options, stock appreciation rights, restricted stock options, warrants and other similar rights granted to or received by Executive under any option or incentive plan of the Company to which Executive is participating or enrolled shall immediately be terminated and forfeited, except for such options or rights granted to or received by Executive which have fully and completely vested prior to such termination date.  Any and all such options and rights to which Executive has become fully and completely vested prior to such termination date shall expire as set forth in the respective plan document or agreement granting such options and rights.

4.6           By Company Due to Change in Control.  In the event a Change in Control (as hereafter defined) occurs and during the period beginning three (3) months before the Change in Control and ending twenty-four (24) months after the Change in Control:(i) this Agreement is terminated by the Company or its successor without Good Cause; or (ii) this Agreement is terminated by Executive with Good Reason, Executive shall be entitled to receive, and Company or its successor shall be obligated to pay, the monies and benefits described in this Section 4.6, and Sections 4.3 or 4.4 hereof shall not be applicable to such Change in Control or termination.  Solely for the purposes under this Section 4.6, the Executive shall have Good Reason to terminate this Agreement upon a Change of Control if the Executive is not the Chief Financial Officer for the Company’s successor and the successor is not a publicly traded entity on a listed exchange.

4.6.1             Monies and Benefits to Executive.  Upon such Change in Control or termination, Executive shall be entitled to receive: (i) any Base Salary earned and unpaid, and fringe benefits described in Section 3.3 hereof accrued and unpaid, through the date of such Change in Control or termination; (ii) three (3) times the aggregate of (x) the Base Salary plus (y) your annual bonus target (65% of Base Salary or such other higher amount as approved by the Board); (iii) any performance bonus (65% of Base Salary or such other higher amount as approved by the Board) for the fiscal year in which such Change in Control or termination occurs pro-rated through the date of such Change in Control or termination; provided, however, Executive shall not receive any portion of the performance bonus under this Section 4.6.1(iii) unless the Board determines in good faith that Executive would have been entitled to receive any performance bonus for the fiscal year in which such Change in Control or termination occurred in accordance with Section 3.2 hereof; (iv) continuation of the fringe benefits described in Sections 3.3 hereof under which Executive is participating as of the date of such Change in Control or termination for a period of thirty-six (36) months from the date of such Change in Control or termination; (v  payment of outplacement services for Executive for a period of twelve (12) months from the date of such Change in Control or termination; provided, however, the aggregate amount of such payments shall not exceed $15,000.00; and (vi) continuation of the financial planning allowance described in Section 3.5 hereof for a period of thirty-six (36) months from the date of such Change in Control or termination.

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4.6.2             Payment of Monies and Benefits.  The payments described in Sections 4.6.1(i) and 4.6.1(ii) hereof shall be paid to Executive in a lump sum within thirty (30) days of the date of such Change in Control or termination and shall be subject to withholdings for applicable taxes.  The payment described in Section 4.6.1(iii) hereof shall be payable in a lump sum on or before April 1 following the end of the fiscal year in which such Change in Control or termination occurred and shall be subject to withholdings for applicable taxes.  The benefits described in Section 4.6.1(iv) hereof shall be provided in accordance with the Company’s or its successor’s standard policies and practices.  The payments described in Section 4.6.1(v) hereof shall be paid directly to the entity providing outplacement services to Executive within ten (10) days of receipt of an invoice or statement from such entity.  The reimbursement of the expenses related to Section 4.6.1(vi) shall be made to Executive in accordance with the Company’s or its successor’s policies and procedures.

4.6.3             Vesting of Options.  Effective as of such Change in Control or termination date, any and all stock options, stock appreciation rights, restricted stock options, warrants and other similar rights granted to or received by Executive under any option or incentive plan of the Company or its successors to which Executive is participating or enrolled shall immediately become fully and completely vested and exercisable as if Executive had satisfied any and all terms, conditions or requirements described or contained in such plan.  In the event Executive has not previously exercised, or does not exercise, all or any portion of such options or rights within sixty (60) days of the date of such Change in  Control or termination (the “Exercise Period”), Executive shall be entitled to receive, and Company or its successor shall be obligated to pay, compensation for such unexercised options or rights in an amount equal to (i) the number of shares not exercised by Executive under such options or rights multiplied by (ii) the closing price of the common stock of the Company or its successor as of the day immediately prior to such Change in Control or termination minus the exercise price of Executive described in such options or rights (the “Option Compensation”).  The Option Compensation shall be payable in a lump sum within thirty (30) days after the expiration of the Exercise Period, and shall be subject to withholdings for applicable taxes.  Executive shall take any and all actions, and execute and deliver to Company or its successor any and all agreements, certificates or instruments, necessary or required to consummate the transactions contemplated under this Section 4.6.3 including, but not limited to, the assignment, transfer or conveyance of any and all shares and rights to be acquired by the Company or its successor and the cancellation, revocation or termination of any options or rights Executive has or may have under any such option or incentive plan.

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Notwithstanding anything herein to the contrary, if any payments or benefits due under this Agreement (including but not limited to the continuation of fringe benefits following termination of employment or the cash payment for options following a change in control) would subject the Executive to accelerated taxation and additional taxes under Code Section 409A if such payments or benefits were made at the time described herein, then the Company shall take such actions as are necessary (but only to the minimum extent necessary) to cause such payments to comply with the requirements of Code Section 409A such that the payments or benefits provided hereunder are not taxable under or are no longer subject to Code Section 409A.  Without limitation, if Executive is a “specified employee” within the meaning of Code Section 409A, the payments due under this Agreement may be delayed for a period of six months following the Executive’s separation from service and in such case, all payments that were otherwise scheduled to be paid within such six-month period shall be accumulated, with interest at the annual rate of 5%, and paid in a lump sum immediately following the end of such six-month period.

4.6.4             Change in Control Defined.  For purpose of this Agreement, a “Change in Control” shall be deemed to have occurred as of the date (i) any “person” or “group ” (as such terms are used in Section 13(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is or becomes the “beneficial owner” (as defined in Rule 13d 3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company’s then outstanding securities, and within one (1) year after such “person” or “group” becomes the beneficial owner of twenty-five percent (25%) or more of the combined voting power of the Company (the “Trigger Date”), the members of the Board immediately prior to the Trigger Date cease to constitute a majority of the Board, (ii) the consummation of a consolidation or merger of the Company in which the Company is not the surviving or continuing corporation, or pursuant to which shares of the Company’s common stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company’s common stock immediately prior to the merger have (directly or indirectly) at least a fifty one percent (51%) ownership interest in the outstanding common stock of the surviving corporation immediately after the merger, or (iii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, except for any sale, lease exchange or transfer resulting from any action taken by any creditor of the Company in enforcing its rights or remedies against any assets of the Company in which such creditor holds a security interest.

4.6.5             Payments from Tax Implications.

(a)           Gross-Up Payment.  Notwithstanding anything to the contrary in this Agreement, in the event it shall be determined that any payment or distribution made, or benefit provided (including, but not limited to, Section 4.6.3 hereof), by the Company to or for the benefit of Executive under this Agreement but determined without regard to any additional payments required under this Section 4.6.5 (each, a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”), or any similar excise tax, or any interest or penalties incurred by Executive with respect to such excise tax (such tax with any such interest and penalties being collectively referred to as the “Excise Tax”), Executive shall be entitled to receive an additional payment (a “Gross Up Payment”) from the Company in an amount such that after payment by Executive of all taxes (including any Excise Tax, income tax or payroll tax) imposed upon the Gross Up Payment and any interest or penalties imposed with respect to such taxes, Executive retains from the Gross Up Payment an amount equal to the Excise Tax imposed upon the Payments.

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(b)           Determination of Gross-Up Payment.  Subject to the provisions of Section 4.6.5(c) hereof, all determinations required to be made under this Section 4.6.5, including a determination of the requirement for and amount of any Gross Up Payment, shall be made by the independent public accounting firm which is then retained by the Company to audit its financial statements (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and Executive within thirty (30) business days of the date of such termination, if applicable, or such earlier time as is requested by the Company, provided that any determination that an Excise Tax is payable by Executive shall be made on the basis of substantial authority.  Any initial Gross Up Payment shall be paid to Executive within fifteen (15) business days of the receipt of the Accounting Firm’s determination.  If the Accounting Firm determines that no Excise Tax is payable by Executive, the Accounting Firm shall furnish Executive with a written opinion that he has substantial authority not to report any Excise Tax on his federal income tax return.  Any determination by the Accounting Firm meeting the requirements of this Section 4.6.5(b) shall be binding upon the Company and Executive; subject only to payments pursuant to the following sentence based on a determination that additional Gross Up Payments should have been made, consistent with the calculations required to be made hereunder (the amount of such additional payments, including any interest and penalties, being collectively referred to as the “Gross Up Underpayment” ).  In the event the Company exhausts its remedies pursuant to Section 4.6.5(c) hereof and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Gross Up Underpayment that has occurred and any such Gross Up Underpayment shall be promptly paid by the Company to or for the benefit of Executive.  The fees and disbursements of the Accounting Firm shall be paid by the Company.

(c)           Remedies to Company.  Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross Up Payment.  Such notification shall be given as soon as practicable but not later than ten (10) business days after Executive receives written notice of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid.  Executive shall not pay such claim prior to the expiration of thirty (30) days following the date on which Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due).  If the Company notifies Executive in writing prior to the expiration of such thirty (30) day period that the Company desires to contest such claim at the Company’s sole cost and expense and the Company will provide the indemnification as required by this Section 4.6.5(c), Executive shall: (1) give the Company any information reasonably requested by the Company relating to such claim; (2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, but not limited to, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably satisfactory to Executive; (3) cooperate with the Company in good faith in order effectively to contest such claim, and (4) permit the Company to participate in any proceedings relating to such claim.

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The Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after tax basis, for any Excise Tax, income tax or payroll tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses.  Without limitation on the foregoing provisions of this Section 4.6.5(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority with respect to such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest free basis and shall indemnify and hold Executive harmless, on an after tax basis, from any Excise Tax, income tax or payroll tax, including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to the payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due shall be limited solely to such contested amount, unless Executive agrees otherwise.  Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d)           Refund of Excise Tax to Company.  If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 4.6.5(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 4.6.5(c) hereof) promptly pay to the Company the amount of such refund, together with any and all interest paid or credited thereon after taxes applicable thereto.  If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 4.6.5(c) hereof a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then any obligation of Executive to repay such advance shall be forgiven and the amount of such advance shall offset, to the extent thereof, the amount of Gross Up Payment required to be paid by the Company.

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4.7           Execution of Release by Executive.  Company shall not be obligated to pay any portion of the monies and benefits described above, if any, unless and until Executive shall have executed and delivered to the Company a release of all claims against the Company and its Subsidiaries and their respective shareholders, partners, member, directors, managers, officers, employees, agents and attorneys, arising out of or related to any act or omission which occurred on or prior to the date on which this Agreement was terminated, in form and substance reasonably satisfactory to the Company.

5.           POST-EMPLOYMENT DUTIES.  For a period of three (3) years following the termination of this Agreement, Executive shall: (i) fully and truthfully cooperate and assist the Company and its Subsidiaries, to the fullest extent possible, in any and all issues, matters, legal proceedings or litigation related to or associated with the business, management or operation of or any other matter involving the Company or its Subsidiaries in any way or of any nature whatsoever arising from, related to or connected with any period in which Executive was employed by or otherwise provided services to the Company or its Subsidiaries or in which Executive has or may have past knowledge, information or experience or applicable expertise; and (ii) fully cooperate, assist, participate and work with the Company or its Subsidiaries on any and all issues or matters for which the Company or its Subsidiaries may seek his cooperation, assistance, participation, involvement or consultation.  Such assistance shall be provided at such times and dates which shall not unreasonably interfere or conflict with Executive’s then current employment.  The Company shall reimburse Executive for any and all costs and expenses reasonably incurred by Executive in providing such assistance in accordance with the standard policies and procedures of the Company in effect from time to time related to such reimbursable expenses.

6.           CONFIDENTIAL INFORMATION.  Executive acknowledges that Executive will have access or be privy to certain confidential business and proprietary information of the Company and its Subsidiaries as a result of Executive’s employment with the Company or its Subsidiaries.  Such confidential information may include but is not limited to business decisions, plans, procedures, strategies and policies, legal matters affecting Company and its Subsidiaries and their respective businesses, personnel, customer records information, trade secrets, bid prices, evaluations of bids, contractual terms and arrangements (prospective purchases and sales), pricing strategies, financial and business forecasts and plans and other information affecting the value or sales of products, goods, services or securities of the Company or its Subsidiaries, and personal information regarding employees (collectively, the “Confidential Information”).  Executive acknowledges and agrees the Confidential Information is and shall remain the sole and exclusive property of the Company or such Subsidiary.  Executive shall not disclose to any unauthorized person, or use for Executive’s own purposes, any Confidential Information without the prior written consent of the Board, which consent may be withheld by the Board at its sole discretion, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of Executive’s acts or omissions.  Executive agrees to maintain the confidentiality of the Confidential Information after the termination of Executive’s employment; provided, further, that if at any time Executive or any person or entity to which Executive has disclosed any Confidential Information becomes legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any of the Confidential Information, Executive shall provide the Company with prompt, prior written notice of such requirement so the Company, in its sole discretion, may seek a protective order or other appropriate remedy and/or waive compliance with the terms hereof.  In the event that such protective order or other remedy is not obtained or the Company waives compliance with the provisions hereof, Executive shall ensure that only the portion of the Confidential Information which Executive or such person is advised by written opinion of the Company’s counsel that Executive is legally required to disclose is disclosed, and Executive further covenants and agrees to exercise reasonable efforts to obtain assurance that the recipient of such Confidential Information shall not further disclose such Confidential Information to others, except as required by law, following such disclosure.  In addition Executive covenants and agrees to deliver to the Company upon termination of this Agreement, and at any other time as the Company may request, any and all property of the Company including, but not limited to, keys, computers, credit cards, company car, memoranda, notes, plans, records, reports, computer tapes, printouts and software, Confidential Information in any form whatsoever, and other documents and data (and copies thereof) and relating to the Company or any Subsidiary which he may then posses or have under his control or to which Executive had access to or possession of in the course of such employment.

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7.           COVENANT NOT TO COMPETE, SOLICIT OR DISPARAGE.  Executive hereby agrees that for a period of two (2) years following the expiration or termination of this Agreement (the “Non-Compete Period”), Executive shall not: (i) directly or indirectly, either individually or for any other person or entity (whether as an officer, director, employee, owner, stockholder, consultant, agent, advisor, general partner, limited partner or otherwise), or as a part of a group, own, operate, manage, control, participate in, consult with, render services for, or in any manner engage in any business competing with any part of the business presently engaged in by the Company within any geographical area in which the Company engages or has proposed to engage in such business (or solicit any person to engage in any of the foregoing activities); (ii) directly or indirectly, individually or for any other person or entity induce or attempt to induce any employee of the Company to leave the employ of the Company, hire any person who is an employee of the Company as of or immediately prior to the time of such hiring, or induce or attempt to induce any manufacturers’ representative, customer, supplier, licensee, agent or any other person or entity having a business relationship with the Company to cease doing business with or reduce the volume of its business with the Company; or (iii) initiate, participate or engage in any communication whatsoever with any current or former customer, supplier, vendor or competitor of the Company or its Subsidiaries or any of their respective shareholders, partners, members, directors, managers, officers, employees or agents, or with any current or former shareholder, partner, member, director, manager, officer, employee or agent of the Company or its Subsidiaries, or with any third party, which communication could reasonably be interpreted as derogatory or disparaging to the Company or its Subsidiaries, including but not limited to the business, practices, policies, shareholders, partners, members, directors, managers, officers, employees, agents, advisors and attorneys of the Company or its Subsidiaries.  Provided, however, nothing herein shall prohibit Executive from being a passive owner of or controlling, directly or indirectly, of not more than five percent (5%) in the aggregate of the outstanding stock of any class of a corporation which is publicly traded and which competes in the business of the Company so long as Executive has no direct or indirect participation in the management of such corporation.  Executive acknowledges that the foregoing restriction is reasonable in all respects and that there is no less restrictive provision in terms of duration, prohibited activities or geographic area which would adequately protect the Company’s assets and other legitimate business interests.  For purposes of the foregoing, a business shall be deemed to be competing with the business of the Company if such business (a) operates apparel stores in small markets (populations of less than 25,000) and (b) operates a significant number of its apparel stores (75% or more of its total apparel stores) in 10,000 to 30,000 square foot formats. Notwithstanding the foregoing, in the event any part of this covenant set forth in this provision shall be held invalid, illegal or unenforceable by a court of competent jurisdiction, Executive and the Company hereby agree that such invalid, illegal or unenforceable provision or section hereof shall be severed from this Agreement without affecting the remaining portions hereof in any manner.  In the event any portion of this provision related to the time or geographical area restrictions hereof shall be declared by a court of competent jurisdiction to exceed the maximum time or geographical area restrictions such court deems reasonable or enforceable, said time or geographic area restriction shall be deemed to become and thereafter shall be such time or geographic area which such court shall deem reasonable and enforceable.

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8.           ARBITRATION.  Should any dispute arise relating to the meaning, interpretation, enforcement or application of this Agreement, such dispute shall be settled in Harris County, Texas, in accordance with the terms, conditions and requirements described or contained in the Company’s arbitration policy, if any, and the employment dispute arbitration rules of the American Arbitration Association, and all costs of such arbitration including, but not limited to reasonable attorney’s fees and costs, shall be borne by the losing party.  The Company, however, shall be entitled to obtain injunctive relief from any court of competent jurisdiction to enforce the provisions of Sections 6 and 7 of this Agreement.

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9.           NOTICES.  Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, or mailed by first class mail, return receipt requested, to the recipient at the address indicated below:

To Executive:	Ed Record
	4418 Della Creek Way
	Missouri City, Texas 77459
To Company:	Stage Stores, Inc.
	10201 Main Street
	Houston, Texas 77025
	Attention:  EVP-Human Resources

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.  Any notice under this Agreement shall be deemed to have been given when so delivered or mailed.

10.           GOVERNING LAW.  All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas.  In furtherance of the foregoing, the internal law of the State of Texas shall control the interpretation and construction of this Agreement, even though under the jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply.

11.           SEVERABILITY.  Each section, subsection and lesser section of this Agreement constitutes a separate and distinct undertaking, covenant or provision hereof.  In the event that any provision of this Agreement shall be determined to be invalid or unenforceable, such provision shall be deemed limited by construction in scope and effect to the minimum extent necessary to render the same valid and enforceable, and, in the event such a limiting construction is impossible, such invalid or unenforceable provision shall be deemed severed from this Agreement, but every other provision of this Agreement shall remain in full force and effect.

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12.           AMENDMENTS; MODIFICATIONS.  Neither this Agreement nor any term or provision in it may be changed, waived, discharged, rescinded or terminated orally, but only by an agreement in writing signed by the party against whom or which the enforcement of such change, waiver, discharge, rescission or termination is sought.

13.           WAIVER.  No failure on the part of either party to this Agreement to exercise, and no delay in exercising, any right, power or remedy created hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or remedy by any such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  No waiver by any party hereto to any breach of, or default in, any term or condition of this Agreement shall constitute a waiver of or assent to any succeeding breach of or default in the same or any other term or condition hereof.  The terms and provisions of this Agreement, whether individually or in their entirety, may only be waived in writing and signed by the party against whom or which the enforcement of such waiver is sought.

14.           SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon and inure to the benefits of the successors, assigns, heirs, legatees, devisees, executors, administrators, receivers, trustees and representatives of Executive and the Company and its Subsidiaries and their respective successors, assigns, administrators, receivers, trustees and representatives.

15.           HEADINGS.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

16.           MULTIPLE COUNTERPARTS.  This Agreement may be executed in two or more counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

17.           CONFIDENTIAL INFORMATION.  The parties agree that Executive shall not disclose to or consciously utilize for the benefit of the Company any confidential, proprietary information of his prior employers that he learned during the course of employment.

18.           INDEMNIFICATION.  The Company agrees to indemnify and hold Executive harmless for any costs, attorney fees or damages that he may suffer if his former employer (Kohl’s) attempts to enforce the terms of any provision of his prior employment agreement.  The Executive shall have the right to select counsel to represent him in any such matters for which the Company will reimburse Executive for all reasonable costs and attorney fees.

19.           FURTHER ASSURANCES.  Executive and the Company covenant and agree that each will execute any additional instruments and take any actions as may be reasonably requested by the other party to confirm or perfect or otherwise to carry out the intent and purpose of this Agreement.

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20.           CONSTRUCTION.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by Executive and the Company, and no presumption or burden of proof shall arise favoring or disfavoring either by virtue of the authorship of any of the provisions of this Agreement.

21.           SURVIVAL.  Executive and the Company agree that the terms and conditions of Sections 4 through 15 (inclusive), 19, 20 and 21 hereof shall survive and continue in full force and effect, notwithstanding any expiration or termination of the Employment Period or this Agreement.

22.           ENTIRE AGREEMENT.  This Agreement contains and constitutes the entire agreement between Executive and the Company and supersedes and cancels any prior agreements, representations, warranties, or communications, whether oral or written, between Executive and the Company relating to the subject matter hereof in any way.

23.           GENDER AND NUMBER PLURALITY.  Unless the context otherwise requires, whenever used in this Agreement the singular shall include the plural, the plural shall include the singular, and the masculine gender shall include the neuter or feminine gender and vice versa.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.

	STAGE STORES, INC.,
“COMPANY”	a Nevada Corporation
	/s/ James R. Scarborough
	By:	Jim Scarborough
	Title:	Chairman & CEO
“EXECUTIVE”	/s/ Ed Record
	Ed Record, an individual

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EX-31

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, James R. Scarborough, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Stage Stores, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant, and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

December 12, 2007	/s/ James R. Scarborough
	James R. Scarborough
	Chief Executive Officer

EX-31

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Edward J. Record, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Stage Stores, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant, and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

December 12, 2007	/s/ Edward J. Record
	Edward J. Record
	Chief Financial Officer