EX-99 3 ex99_q2er.htm STAGE STORES, INC., FORM 8-K, 08-21-2008, EX 99
Exhibit 99
NEWS RELEASE

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


FOR IMMEDIATE RELEASE

Stage Stores Announces Second Quarter Results and Provides Third Quarter, Fourth Quarter and Updated Full Year Projections

--Second Quarter Earnings Increase To $0.25 Per Diluted Share--

HOUSTON, TX, August 21, 2008 -- Stage Stores, Inc. (NYSE: SSI) today reported net income for the second quarter ended August 2, 2008 of $9.7 million, or $0.25 per diluted share, compared to $9.9 million, or $0.23 per diluted share, for the prior year second quarter ended August 4, 2007.

As previously reported by the Company, sales for the second quarter were $372.7 million as compared to sales of $359.2 million last year.  Comparable store sales for the second quarter decreased 1.4% versus an increase of 0.5% in the prior year period.

Jim Scarborough, Chairman and Chief Executive Officer, commented, “We are pleased to have achieved a year-over-year increase in our second quarter diluted earnings per share.  Our Q-2 results benefited from higher than projected sales in May and June, combined with the positive impact of our tight inventory and expense controls and previous stock repurchase activities.  As a result of our strong inventory controls, we ended the quarter with our retail inventories down 8.9% on a comparable store basis.  Additionally, despite the difficult macroeconomic environment, our financial condition remains strong.  Our free cash flow for the first half of the year exceeded last year’s level, while opening 28 stores this year versus 14 stores last year.


--more--

 
 
 

Stage Stores Announces
Second Quarter Results
Page - 2


“Operationally, we made progress on a number of our strategic initiatives during the second quarter.  We opened 5 new stores, two of which were opened in Idaho which expanded our geographic presence to 36 states, and we remain on track to open between 55 and 60 new stores for the entire year.  We also relocated 3 stores during the quarter.  As we continue to focus our growth strategy on small markets, it is encouraging to note that we achieved positive comparable store sales results in our small markets during the quarter.  We also completed the installation of 5 new Estee Lauder counters and 1 new Clinique counter.  Our continuing roll-out of Estee Lauder and Clinique counters is clearly having a positive impact on our cosmetics business, as this category achieved a 12.6% comparable store sales increase during the quarter. We also posted positive comp store sales results in our dresses, footwear, intimate apparel and petites businesses during the quarter.  Lastly, I’m pleased to report that we successfully opened our third distribution center in July, which is located in Jeffersonville, Ohio.  This new distribution center is capable of supporting approximately 300 stores, and we now have in place the overall distribution capacity for more than 1,100 stores, which is a key element in our future corporate growth plans,” Mr. Scarborough concluded.

Total sales for the six-month period ended August 2, 2008 were $726.2 million versus $717.4 million for the prior year six-month period ended August 4, 2007.  Comparable store sales decreased 3.4% versus an increase of 0.3% in the prior year period.  Net income for the six-month period was $11.9 million, or $0.31 per diluted share, compared to $19.0 million, or $0.43 per diluted share, last year.  Last year’s six months results include a non-comparable gain of $1.7 million, or $0.04 per diluted share, related to the March 2004 sale of the Peebles private label credit card portfolio.

Fiscal 2008 - Third Quarter, Fourth Quarter and Updated Full Year Projections
Commenting on the Company’s projections, Mr. Scarborough stated, “Despite some relative strengthening of our business in the second quarter, we believe that the macroeconomic environment will continue to be difficult during the last half of the year.  As such, we are maintaining our previous guidance for our comparable store sales to be down between 1.0% and 3.0% during the final two quarters of the year.”


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Stage Stores Announces
Second Quarter Results
Page - 3


3rd Quarter 2008:

   
3Q 2008 OUTLOOK
    
3Q 2007 ACTUAL
  
Sales ($mm)
   $ 366      
-
     $ 373     $ 355.1  
                                 
Net Income ($mm)
   $ (0.4 )    
-
     $ 1.9     $ 2.4  
                                 
Diluted EPS
   $ (0.01 )    
-
     $ 0.05     $ 0.06  
                                 
Diluted Shares (m)
            
39,000 
              
42,258
  

4th Quarter 2008:

   
4Q 2008 OUTLOOK
    
4Q 2007 ACTUAL
  
Sales ($mm)
   $ 486       -     $ 497     $ 473.0  
                                 
Net Income ($mm)
   $ 32.1       -     $ 35.2     $ 31.7  
                                 
Diluted EPS
   $ 0.82       -     $ 0.90     $ 0.78  
             
 
                  
Diluted Shares (m)
            
39,000
               40,462  

FY 2008:

   
FY 2008 OUTLOOK
    
FY 2007 ACTUAL
  
Sales ($mm)
   $ 1,578       -     $ 1,596     $ 1,545.6  
                                 
Net Income ($mm)
   $ 43.6       -     $ 49.0     $ 53.1  
                                 
Diluted EPS
   $ 1.12       -     $ 1.26     $ 1.24  
                                 
Diluted Shares (m)
             38,970               42,720  


 
·
FY 2007 results include a non-comparable gain of $1.7 million, or $0.04 per diluted share, related to the March 2004 sale of the Peebles private label credit card portfolio.


Conference Call Information
The Company will host a conference call today at 8:30 a.m. Eastern Time to discuss its second quarter results.  Interested parties can participate in the Company’s conference call by dialing 703-639-1125.  Alternatively, interested parties can listen to a live webcast of the conference call by logging on to the Company's web site at www.stagestores.com and then clicking on Investor Relations, then Webcasts, then the webcast link.  A replay of the conference call will be available online until midnight on Friday, August 29, 2008.


--more--

 
 
 

Stage Stores Announces
Second Quarter Results
Page - 4


About Stage Stores
Stage Stores, Inc. brings nationally recognized brand name apparel, accessories, cosmetics and footwear for the entire family to small and mid-size towns and communities through 723 stores located in 36 states.  The Company operates under the Bealls, Palais Royal and Stage names throughout the South Central, Southwestern and Northwestern states, and under the Peebles name throughout the Midwestern, Southeastern, Mid-Atlantic and New England states.  For more information about Stage Stores, visit the Company’s web site at www.stagestores.com.

Caution Concerning Forward-Looking Statements
This document contains “forward-looking statements”. Forward-looking statements reflect our expectations regarding future events and operating performance and often contain words such as "believe", "expect", "may", "will", "should", "could", "anticipate", "plan" or similar words.  In this document, forward-looking statements include comments regarding the number of new stores that the Company plans to open in the 2008 fiscal year, as well as comments regarding the Company’s sales and earnings projections for the third and fourth quarters of the 2008 fiscal year and full 2008 fiscal year.  Forward-looking statements are subject to a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the forward-looking statements.  These risks and uncertainties include, but are not limited to, those described in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the "SEC") on April 1, 2008 and other factors as may periodically be described in our other filings with the SEC.  Forward-looking statements speak only as of the date of this document.  We do not undertake to update our forward-looking statements.


(Tables to Follow)

 
 
 
 
Stage Stores, Inc.
  
Condensed Consolidated Statements of Income
  
(in thousands, except earnings per share)
  
(Unaudited)
  
                         
   
Thirteen Weeks Ended
  
   
August 2, 2008
    
August 4, 2007
  
   
Amount
    
% to Sales (1)
    
Amount
    
% to Sales (1)
  
                         
Net sales
   $ 372,707       100.0 %   $ 359,205       100.0 %
Cost of sales and related buying, occupancy and distribution expenses
     266,149       71.4 %     253,718       70.6 %
Gross profit
     106,558       28.6 %     105,487       29.4 %
Selling, general and administrative expenses
     88,521       23.8 %     87,950       24.5 %
Store opening costs
     1,231       0.3 %     486       0.1 %
Interest expense, net of income of $6 and $0, respectively
     1,221       0.3 %     1,069       0.3 %
Income before income tax
     15,585       4.2 %     15,982       4.4 %
Income tax expense
     5,922       1.6 %     6,106       1.7 %
Net income
   $ 9,663       2.6 %   $ 9,876       2.7 %
                                 
Basic and diluted earnings per share data:
                                
Basic earnings per share
   $ 0.25             $ 0.23          
Basic weighted average shares outstanding
     38,342               42,408          
                                 
Diluted earnings per share
   $ 0.25             $ 0.23          
Diluted weighted average shares outstanding
     38,960               43,373          
                                 
(1) Percentages may not foot due to rounding.
                                

 
 
 
 
Stage Stores, Inc.
  
Condensed Consolidated Statements of Income
  
(in thousands, except earnings per share)
  
(Unaudited)
  
                         
   
Twenty-Six Weeks Ended
  
   
August 2, 2008
    
August 4, 2007
  
   
Amount
    
% to Sales (1)
    
Amount
    
% to Sales (1)
  
                         
Net sales
   $ 726,243       100.0 %   $ 717,449       100.0 %
Cost of sales and related buying, occupancy and distribution expenses
     524,087       72.2 %     513,637       71.6 %
Gross profit
     202,156       27.8 %     203,812       28.4 %
Selling, general and administrative expenses
     176,860       24.4 %     170,238       23.7 %
Store opening costs
     3,539       0.5 %     1,241       0.2 %
Interest expense, net of income of $11 and $0, respectively
     2,522       0.3 %     1,838       0.3 %
Income before income tax
     19,235       2.6 %     30,495       4.3 %
Income tax expense
     7,309       1.0 %     11,512       1.6 %
Net income
   $ 11,926       1.6 %   $ 18,983       2.6 %
                                 
Basic and diluted earnings per share data:
                                
Basic earnings per share
   $ 0.31             $ 0.44          
Basic weighted average shares outstanding
     38,292               42,957          
                                 
Diluted earnings per share
   $ 0.31             $ 0.43          
Diluted weighted average shares outstanding
     38,939               44,080          
                                 
(1) Percentages may not foot due to rounding.
                                

 
 
 
 
Stage Stores, Inc.
  
Condensed Consolidated Balance Sheets
  
(in thousands, except par values)
  
(Unaudited)
  
             
   
August 2, 2008
    
February 2, 2008
  
             
ASSETS
            
Cash and cash equivalents
   $ 20,371     $ 17,028  
Merchandise inventories, net
     349,586       342,622  
Prepaid expenses and other current assets
     27,884       43,589  
Total current assets
     397,841       403,239  
                 
Property, equipment and leasehold improvements, net
     354,177       329,709  
Goodwill
     95,374       95,374  
Intangible asset
     14,910       14,910  
Other non-current assets, net
     25,412       28,258  
Total assets
   $ 887,714     $ 871,490  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
Accounts payable
   $ 116,321     $ 94,505  
Current portion of debt obligations
     8,915       6,158  
Accrued expenses and other current liabilities
     72,210       66,538  
Total current liabilities
     197,446       167,201  
                 
Debt obligations
     63,915       94,436  
Other long-term liabilities
     93,324       89,007  
Total liabilities
     354,685       350,644  
                 
Commitments and contingencies
                
                 
Common stock, par value $0.01, 100,000 shares authorized,55,298 and 55,113 shares issued, respectively
     553       551  
Additional paid-in capital
     484,544       479,960  
Less treasury stock - at cost, 16,907 and 16,907 shares, respectively
     (278,200 )     (277,691 )
Accumulated other comprehensive loss
     (1,766 )     (1,766 )
Retained earnings
     327,898       319,792  
Stockholders' equity
     533,029       520,846  
Total liabilities and stockholders' equity
   $ 887,714     $ 871,490  

 
 
 
 
Stage Stores, Inc.
  
Condensed Consolidated Statements of Cash Flows
  
(in thousands)
  
(Unaudited)
  
             
   
Twenty-Six Weeks Ended
  
   
August 2, 2008
    
August 4, 2007
  
             
Cash flows from operating activities:
            
Net income
   $ 11,926     $ 18,983  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
     29,204       23,547  
Deferred income taxes
     (33 )     (1,116 )
Stock-based compensation tax (deficiency) benefits
     (146 )     3,826  
Stock-based compensation expense
     3,280       3,487  
Amortization of debt issue costs
     123       144  
Excess tax benefits from stock-based compensation
     (468 )     (3,684 )
Deferred compensation
     357       -  
Construction allowances from landlords
     9,167       5,099  
Changes in operating assets and liabilities:
                
Increase in merchandise inventories
     (6,964 )     (12,093 )
Decrease in other assets
     18,499       13,547  
Increase in accounts payable and other liabilities
     21,418       12,081  
Total adjustments
     74,437       44,838  
Net cash provided by operating activities
     86,363       63,821  
                 
Cash flows from investing activities:
                
Additions to property, equipment and leasehold improvements
     (52,334 )     (33,373 )
Proceeds from sale of property and equipment
     -       31  
Net cash used in investing activities
     (52,334 )     (33,342 )
                 
Cash flows from financing activities:
                
Proceeds from (payments on):
                
Borrowings under revolving credit facility, net
     (39,059 )     29,197  
Repurchases of common stock
     (509 )     (62,540 )
Finance lease obligations
     -       1,850  
Debt obligation payments
     (3,190 )     (50 )
Debt issuance
     14,485       -  
Debt issuance costs
     (145 )     (258 )
Exercise of stock options and stock appreciation rights
     1,095       5,567  
Excess tax benefits from stock-based compensation
     468       3,684  
Cash dividends
     (3,831 )     (4,310 )
Net cash used in financing activities
     (30,686 )     (26,860 )
Net increase in cash and cash equivalents
     3,343       3,619  
                 
Cash and cash equivalents:
                
Beginning of period
     17,028       15,866  
End of period
   $ 20,371     $ 19,485