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Press release from Business Wire

Stage Stores Reports 13.6% Increase in Second Quarter Net Income

<p class=' bwtextaligncenter'> <b>Announces $25 Million Stock Repurchase Program</b> </p>

Thursday, August 19, 2010

Stage Stores Reports 13.6% Increase in Second Quarter Net Income06:00 EDT Thursday, August 19, 2010 HOUSTON (Business Wire) -- Stage Stores, Inc. (NYSE:SSI) today reported that net income for the second quarter ended July 31, 2010 increased 13.6% to $10.3 million from $9.1 million for the prior year second quarter ended August 1, 2009. Diluted earnings per share were $0.27 this year versus $0.24 last year. Net income for the six months ended July 31, 2010 increased 53.0% to $12.5 million from $8.2 million for prior year period. Diluted earnings per share were $0.32 this year versus $0.21 last year. The Company also announced today that its Board of Directors has approved a new Stock Repurchase Program, which authorizes the Company to repurchase up to $25 million of its outstanding common stock. Commenting on the Company's second quarter results, Andy Hall, President and Chief Executive Officer, stated, “We are pleased to report a 13.6% increase in net income for the second quarter. Inventories were well managed throughout the quarter, and drove a better-than-expected 90 basis point improvement in our gross profit rate.” Mr. Hall continued, “Operationally during the first six months of the year, we increased the number of Goody's stores to 38 with the opening of eighteen new Goody's stores and the rebranding of five non-Goody's stores. We added six Estee Lauder and fifteen Clinique counters during the period, which raised the number of counters to 174 and 167, respectively. We completed the pilot for our markdown optimization tool and are beginning its roll out.” Commenting on the Company's new Stock Repurchase Program, Mr. Hall stated, “We are very pleased to be in a fiscal position to execute a $25 million stock repurchase program. We believe that the current market value of our shares does not reflect the underlying value of the company and the repurchase program represents an attractive opportunity to deploy capital in a way that will benefit shareholders. Our strong balance sheet, cash flows and business model bode well for the long term prospects of our company.” Third Quarter, Fourth Quarter and Updated Fiscal 2010 Full Year Guidance For the third and fourth quarters, the Company anticipates that comparable store sales will be in a range from flat to a 2.0% increase. For the fiscal year, the Company is projecting comparable store sales to be in a range of down 0.5% to an increase of 0.5%. The Company noted that the following guidance does not include the accretive impact on EPS from its new $25 million Stock Repurchase Program. 3rd Quarter 2010:   3Q 2010 OUTLOOK   3Q 2009 Sales ($mm) $333 - $340 $325   Diluted EPS $(0.18) - $(0.15) $(0.19)   Diluted Shares (m) 38,250 38,084   4th Quarter 2010:   4Q 2010 OUTLOOK   4Q 2009 Sales ($mm) $444 - $452 $432   Diluted EPS $0.76 - $0.79 $0.72   Diluted Shares (m) 38,500 38,446   FY 2010:   FY 2010 OUTLOOK   FY 2009 Sales ($mm) $1,462 - $1,477 $1,432   Diluted EPS $0.90 - $0.96 $0.75   Diluted Shares (m) 38,590 38,413   Details of $25 million Stock Repurchase Program Under the Company's new $25 million Stock Repurchase Program, the Company may repurchase its outstanding common stock from time to time up to the approved amount, either on the open market or through privately negotiated transactions. The Stock Repurchase Program will be financed by the Company's existing cash, cash flow and other liquidity sources, as appropriate. Since the specific timing and amount of repurchases will vary based on market conditions and other factors, there can be no assurance as to the amount, timing or prices of these stock repurchases. Additionally, this Stock Repurchase Program may be modified, extended or terminated by the Company's Board of Directors at any time. Conference Call Information The Company will hold a conference call today at 8:30 a.m. Eastern Time to discuss the items contained in this news release. Interested parties can participate in the Company's conference call by dialing 703-639-1414. Alternatively, interested parties can listen to a live webcast of the conference call by logging on to the Company's web site at www.stagestoresinc.com and then clicking on Webcasts, then the webcast link. A replay of the conference call will be available online until midnight on Friday, August 27, 2010. 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 777 stores located in 39 states. The Company operates its stores under the five names of Bealls, Goody's, Palais Royal, Peebles and Stage. For more information about Stage Stores, visit the Company's web site at www.stagestoresinc.com. Caution Concerning Forward-Looking Statements This document contains “forward-looking statements”. Forward-looking statements reflect our expectations regarding future events and operating performance and often contain words such as "believe", "expect", "may", "will", "should", "could", "anticipate", "plan" or similar words. In this document, forward-looking statements include comments regarding the Company's sales and EPS outlooks for the third and fourth quarters of the 2010 fiscal year, as well as for the entire 2010 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 March 30, 2010, 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.   Stage Stores, Inc.Condensed Consolidated Statements of Operations (in thousands, except earnings per share) (Unaudited)     Thirteen Weeks Ended July 31, 2010   August 1, 2009 Amount   % to Sales (1) Amount   % to Sales (1)   Net sales $ 345,019 100.0 % $ 341,737 100.0 % Cost of sales and related buying, occupancy and distribution expenses   240,869 69.8 %   241,540 70.7 % Gross profit 104,150 30.2 % 100,197 29.3 % Selling, general and administrative expenses 86,355 25.0 % 83,854 24.5 % Store opening costs 379 0.1 % 465 0.1 % Interest expense, net of income of $21 and $15, respectively   997 0.3 %   1,141 0.3 % Income before income tax 16,419 4.8 % 14,737 4.3 % Income tax expense   6,092 1.8 %   5,644 1.7 % Net income $ 10,327 3.0 % $ 9,093 2.7 %   Basic and diluted earnings per share data: Basic earnings per share $ 0.27 $ 0.24 Basic weighted average shares outstanding   38,359   38,070   Diluted earnings per share $ 0.27 $ 0.24 Diluted weighted average shares outstanding   38,587   38,467     (1) Percentages may not foot due to rounding.     Stage Stores, Inc.Condensed Consolidated Statements of Operations (in thousands, except earnings per share) (Unaudited)     Twenty-Six Weeks Ended July 31, 2010   August 1, 2009 Amount   % to Sales (1) Amount   % to Sales (1)   Net sales $ 685,061 100.0 % $ 675,303 100.0 % Cost of sales and related buying, occupancy and distribution expenses   491,016 71.7 %   490,623 72.7 % Gross profit 194,045 28.3 % 184,680 27.3 % Selling, general and administrative expenses 170,204 24.8 % 167,460 24.8 % Store opening costs 1,835 0.3 % 1,651 0.2 % Interest expense, net of income of $50 and $76, respectively   2,042 0.3 %   2,299 0.3 % Income before income tax 19,964 2.9 % 13,270 2.0 % Income tax expense   7,439 1.1 %   5,082 0.8 % Net income $ 12,525 1.8 % $ 8,188 1.2 %   Basic and diluted earnings per share data: Basic earnings per share $ 0.33 $ 0.22 Basic weighted average shares outstanding   38,316   38,000   Diluted earnings per share $ 0.32 $ 0.21 Diluted weighted average shares outstanding   38,680   38,350     (1) Percentages may not foot due to rounding.     Stage Stores, Inc.Condensed Consolidated Balance Sheets (in thousands, except par value) (Unaudited)     July 31, 2010   January 30, 2010   ASSETS Cash and cash equivalents $ 83,026 $ 93,714 Merchandise inventories, net 338,899 306,360 Prepaid expenses and other current assets   30,471     27,095   Total current assets 452,396 427,169   Property, equipment and leasehold improvements, net 327,870 342,001 Intangible asset 14,910 14,910 Other non-current assets, net   16,990     16,351   Total assets $ 812,166   $ 800,431     LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 115,012 $ 100,602 Current portion of debt obligations 13,122 12,726 Accrued expenses and other current liabilities   63,895     69,688   Total current liabilities 192,029 183,016   Long-term debt obligations 31,491 38,492 Other long-term liabilities   101,609     102,877   Total liabilities   325,129     324,385     Commitments and contingencies   Common stock, par value $0.01, 100,000 shares authorized, 56,820 and 56,080 shares issued, respectively 568 561 Additional paid-in capital 510,918 501,800 Less treasury stock - at cost, 18,554 and 18,071 shares, respectively (295,035 ) (288,079 ) Accumulated other comprehensive loss (5,765 ) (5,897 ) Retained earnings   276,351     267,661   Total stockholders' equity   487,037     476,046   Total liabilities and stockholders' equity $ 812,166   $ 800,431       Stage Stores, Inc.Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited)     Twenty-Six Weeks Ended July 31, 2010   August 1, 2009   Cash flows from operating activities: Net income $ 12,525 $ 8,188 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and impairment of long-lived assets 31,447 30,529 Deferred income taxes (216 ) 305 Tax benefits (deficiency) from stock-based compensation 1,103 (373 ) Stock-based compensation expense 2,958 3,294 Amortization of debt issue costs 149 145 Excess tax benefits from stock-based compensation (1,913 ) (124 ) Deferred compensation obligation 65 71 Amortization of employee benefit related costs 213 260 Construction allowances from landlords 3,924 2,005 Changes in operating assets and liabilities: (Increase) decrease in merchandise inventories (32,539 ) 4,479 (Increase) decrease in other assets (3,697 ) 1,703 Increase in accounts payable and other liabilities   2,970     15,545   Total adjustments   4,464     57,839   Net cash provided by operating activities   16,989     66,027     Cash flows from investing activities: Additions to property, equipment and leasehold improvements (17,193 ) (24,304 ) Proceeds from insurance related to property, equipment and leasehold improvements   -     578   Net cash used in investing activities   (17,193 )   (23,726 )   Cash flows from financing activities: Proceeds from revolving credit facility borrowings - 133,225 Payments of revolving credit facility borrowings - (133,225 ) Proceeds from long-term debt obligations - 1,585 Payments of long-term debt obligations (6,605 ) (5,946 ) Repurchases of common stock (6,956 ) (240 ) Proceeds from exercise of stock awards 4,999 879 Excess tax benefits from stock-based compensation 1,913 124 Cash dividends paid   (3,835 )   (3,801 ) Net cash used in financing activities   (10,484 )   (7,399 ) Net (decrease) increase in cash and cash equivalents (10,688 ) 34,902   Cash and cash equivalents: Beginning of period   93,714     26,278   End of period $ 83,026   $ 61,180