Stage Stores Reports Third Quarter Results

Stage Stores, Inc. (NYSE:SSI) today reported net income for the third quarter ended November 3, 2007 of $2.4 million, or $0.06 per diluted share, compared to $2.8 million, or $0.06 per diluted share, for the prior year third quarter ended October 28, 2006. Last year’s third quarter results include various non-comparable income and expense items that net to a charge of $(0.06) per diluted share. As previously reported by the Company, sales for the third quarter were $355.1 million versus sales of $353.4 million last year. Prior year sales results include inventory liquidation sales of $11.5 million generated by the acquired B.C. Moore stores prior to their conversion to Peebles stores. Comparable store sales for the third quarter decreased 1.0% versus an increase of 4.1% in the same period last year. Jim Scarborough, Chairman and Chief Executive Officer, commented, "We achieved sales and earnings that were in line with our expectations, despite the challenges presented by the unseasonably warm weather throughout much of the third quarter. One of the consequences of the persistently warm weather was a reduction in the demand for our higher priced fall and winter goods, which resulted in an unfavorable merchandise sales mix for the quarter. We were, however, able to mitigate the negative impact of our unfavorable sales mix on our gross margins through tight control of our operating expenses. "Looking forward, we feel good about our merchandise offerings and we believe that our inventories are at appropriate levels as we enter the holiday shopping period. Given the current uncertainties in the economic environment, we will continue to prudently manage our inventory levels and our operating expenses,” Mr. Scarborough concluded. The Company reported that it opened 21 new stores during the third quarter and entered the new states of Wisconsin and Utah. The Company noted that 17 of the new stores were opened in market areas of less than 50,000 people. These less competitive and under-served markets continue to be the primary focus of the Company’s new store growth plans. The Company also relocated 4 stores during the quarter. With regard to its major merchandise categories, cosmetics, plus sizes and dresses were the Company’s best performing businesses during the quarter with comparable store sales increases of 10.8%, 9.0% and 5.2%, respectively. The Company continued its roll-out of Estee Lauder and Clinique counters during the quarter, as it completed the installation of 20 new Estee Lauder and 20 new Clinique counters, ending the period with 116 Estee Lauder and 107 Clinique counters. Total sales for the nine-month period ended November 3, 2007 rose 1.3% to $1,072.6 million from $1,059.0 million for the prior year nine-month period ended October 28, 2006. Prior year sales results include inventory liquidation sales of $62.1 million generated by the acquired B.C. Moore stores prior to their conversion to Peebles stores. Net income for the nine-month period was $21.4 million, or $0.49 per diluted share, compared to $15.7 million, or $0.36 per diluted share, last year. The Company noted that last year’s nine months results included various non-comparable income and expense items that netted to a charge of $(0.11) per diluted share, while this year’s nine month results includes a non-comparable income item of $0.04 per diluted share. NEW $50 MILLION STOCK REPURCHASE PROGRAM The Company also announced today that its Board of Directors approved a new Stock Repurchase Program, authorizing the repurchase of up to $50 million of the Company’s outstanding common stock. The authorization permits the Company to affect the repurchases from time to time in the open market or through privately negotiated transactions including, but not limited to, accelerated share repurchases, as deemed appropriate by the Company. Commenting on the Company’s new Stock Repurchase Program, Mr. Scarborough stated, "We are very pleased with our Board's decision. This new $50 million stock repurchase program underscores our strong belief in the long term prospects of our company, as well as our ongoing commitment to enhancing shareholder value." Since the specific timing and amount of repurchases will vary based on market conditions and other factors, there can be no assurance as to the amount, timing or prices of these stock repurchases. Additionally, this stock repurchase program may be modified, extended or terminated by the Company’s Board of Directors at any time. FISCAL 2007 - UPDATED FOURTH QUARTER AND FULL YEAR GUIDANCE 4th Quarter 2007: The Company provided the following updated guidance for the fourth quarter ending February 2, 2008:   4Q 2007 OUTLOOK   4Q 2006 ACTUAL Sales ($mm) $483.0   -   $495.0 $491.2   Net Income ($mm) $33.8 - $36.1 $39.6   Diluted EPS $0.80 - $0.85 $0.88   Diluted Shares (m) 42,304 44,954 In issuing its fourth quarter guidance, the Company provided the following additional information: Comparable store sales assumption – flat (13 weeks vs 13 weeks) 4Q 2006 results include several non-comparable income items that total $0.10 per diluted share, including income related to reimbursements received by the Company for its 2005 hurricane related losses, income produced in the fourteenth week of the quarter, and income associated with the reduction of the liability for old gift cards and merchandise credits issued to customers, which the Company believed the likelihood of redemption was remote. 4Q 2007 outlook does not reflect any benefits from the Company’s new $50 million Stock Repurchase Program. FY 2007: The Company provided the following updated guidance for the 2007 fiscal year ending February 2, 2008 to reflect actual nine month results:   FY 2007 OUTLOOK   FY 2006 ACTUAL Sales ($mm) $1,555.6   -   $1,567.6 $1,550.2   Net Income ($mm) $55.2 - $57.5 $55.3   Diluted EPS $1.28 - $1.33 $1.25   Diluted Shares (m) 43,182 44,111 In updating its fiscal 2007 full year guidance, the Company provided the following additional information: Comparable store sales assumption – flat (52 weeks vs 52 weeks) FY 2006 sales include inventory liquidation sales of $62.1 million generated by the acquired B.C. Moore stores prior to their conversion to Peebles stores. FY 2007 outlook includes a non-comparable gain of $0.04 per diluted share related to the March 2004 sale of the Peebles private label credit card portfolio. FY 2007 outlook does not reflect any benefits from the Company’s new $50 million Stock Repurchase Program. Conference Call Information The Company will host a conference call today at 8:30 a.m. Eastern Time to discuss its third quarter results. Interested parties can participate in the Company’s conference call by dialing 703-639-1418. Alternatively, interested parties can listen to a live webcast of the conference call by logging on to the Company's web site at www.stagestores.com and then clicking on Investor Relations, then Webcasts, then the webcast link. A replay of the conference call will be available online until midnight on Friday, November 30, 2007. About Stage Stores Stage Stores, Inc. brings nationally recognized brand name apparel, accessories, cosmetics and footwear for the entire family to small and mid-size towns and communities through 699 stores located in 35 states. The Company operates under the Bealls, Palais Royal and Stage names throughout the South Central states, and under the Peebles name throughout the Midwestern, Southeastern, Mid-Atlantic and New England states. For more information about Stage Stores, visit the Company’s web site at www.stagestores.com. Caution Concerning Forward-Looking Statements This document contains "forward-looking statements”. Forward-looking statements reflect our expectations regarding future events and operating performance and often contain words such as "believe", "expect", "may", "will", "should", "could", "anticipate", "plan" or similar words. In this document, forward–looking statements include comments regarding the Company’s outlook and expectations for the fourth quarter of the 2007 fiscal year and full 2007 fiscal year. Forward looking statements are subject to a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the "SEC") on April 3, 2007 and other factors as may periodically be described in our other filings with the SEC. Forward-looking statements speak only as of the date of this document. We do not undertake to update our forward-looking statements. (Tables to Follow) Stage Stores, Inc. Condensed Consolidated Statements of Income (in thousands, except earnings per share) (Unaudited)         Thirteen Weeks Ended November 3, 2007 October 28, 2006 Amount % to Sales Amount % to Sales   Net sales $ 355,147 100.0 % $ 353,348 100.0 % Cost of sales and related buying, occupancy and distribution expenses   260,898 73.5 %   253,034 71.6 % Gross profit 94,249 26.5 % 100,314 28.4 % Selling, general and administrative expenses 86,651 24.4 % 90,477 25.6 % Store opening costs 2,459 0.7 % 4,034 1.1 % Interest expense, net of income of $0 and $29, respectively   1,210 0.3 %   1,344 0.4 % Income before income tax 3,929 1.1 % 4,459 1.3 % Income tax expense   1,483 0.4 %   1,661 0.5 % Net income $ 2,446 0.7 % $ 2,798 0.8 %   Basic and diluted earnings per share data: Basic earnings per share $ 0.06 $ 0.07 Basic weighted average shares outstanding   41,400   42,511   Diluted earnings per share $ 0.06 $ 0.06 Diluted weighted average shares outstanding   42,258   44,384   Stage Stores, Inc. Condensed Consolidated Statements of Income (in thousands, except earnings per share) (Unaudited)         Thirty-Nine Weeks Ended November 3, 2007 October 28, 2006 Amount % to Sales Amount % to Sales   Net sales $ 1,072,596 100.0 % $ 1,058,993 100.0 % Cost of sales and related buying, occupancy and distribution expenses   774,535 72.2 %   763,435 72.1 % Gross profit 298,061 27.8 % 295,558 27.9 % Selling, general and administrative expenses 256,889 24.0 % 260,312 24.6 % Store opening costs 3,700 0.3 % 6,770 0.6 % Interest expense, net of income of $0 and $130, respectively   3,048 0.3 %   3,463 0.3 % Income before income tax 34,424 3.2 % 25,013 2.4 % Income tax expense   12,995 1.2 %   9,317 0.9 % Net income $ 21,429 2.0 % $ 15,696 1.5 %   Basic and diluted earnings per share data: Basic earnings per share $ 0.50 $ 0.38 Basic weighted average shares outstanding   42,438   40,808   Diluted earnings per share $ 0.49 $ 0.36 Diluted weighted average shares outstanding   43,473   43,809   Stage Stores, Inc. Condensed Consolidated Balance Sheets (in thousands, except par values) (Unaudited)     November 3, 2007 February 3, 2007   ASSETS Cash and cash equivalents $ 17,889 $ 15,866 Merchandise inventories, net 441,068 332,763 Current deferred taxes 23,135 23,231 Prepaid expenses and other current assets   36,699     42,512   Total current assets 518,791 414,372   Property, equipment and leasehold improvements, net 302,700 278,839 Goodwill 95,374 95,374 Intangible asset 14,910 14,910 Other non-current assets, net   29,730     21,491   Total assets $ 961,505   $ 824,986     LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 155,352 $ 85,477 Income taxes payable - - Current portion of debt obligations 229 86 Accrued expenses and other current liabilities   68,271     75,141   Total current liabilities 223,852 160,704   Debt obligations 107,642 16,528 Other long-term liabilities   91,147     76,346   Total liabilities   422,641     253,578     Commitments and contingencies   Common stock, par value $0.01, 100,000 and 64,603 shares authorized, 55,095 and 54,343 shares issued, respectively 551 543 Additional paid-in capital 477,686 462,745 Less treasury stock - at cost, 13,691 and 10,708 shares, respectively (227,634 ) (165,094 ) Accumulated other comprehensive loss (1,908 ) (1,908 ) Retained earnings   290,169     275,122   Stockholders' equity   538,864     571,408   Total liabilities and stockholders' equity $ 961,505   $ 824,986     Stage Stores, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited)     Thirty-Nine Weeks Ended November 3, 2007 October 28, 2006 Cash flows from operating activities: Net income $ 21,429 $ 15,696 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 35,901 34,136 Gain on insurance proceeds related to property, equipment and leashold improvements - (1,756 ) Deferred income taxes (963 ) (9,510 ) Stock-based compensation tax benefits 3,853 6,178 Stock-based compensation expense 5,453 3,441 Amortization of debt issue costs 188 335 Excess tax benefits from stock based compensation (3,794 ) (6,009 ) Construction allowances from landlords 19,678 6,905 Proceeds from sale of private label credit card portfolio, net - 4,436 Other changes in operating assets and liabilities: Increase in merchandise inventories (108,305 ) (129,683 ) (Increase) Decrease in other assets (371 ) 8,018 Increase in accounts payable and other liabilities   61,502     45,778   Total adjustments   13,142     (37,731 ) Net cash provided by (used in) operating activities   34,571     (22,035 )   Cash flows from investing activities: Additions to property, equipment and leasehold improvements (64,093 ) (51,410 ) Acquisition of B.C. Moore, net of cash acquired - (35,622 ) Proceeds from insurance proceeds related to property, equipment and leashold improvements - 1,756 Proceeds from sale of property and equipment   31     269   Net cash used in investing activities   (64,062 )   (85,007 )   Cash flows from financing activities: Proceeds from (payments on): Borrowings under revolving credit facility, net 89,510 74,339 Repurchases of common stock (62,540 ) (17,695 ) Finance lease obligations 1,850 - Debt obligations (103 ) (55 ) Debt issuance costs (258 ) - Exercise of stock options, warrants and stock appreciation rights 5,643 36,342 Excess tax benefits from stock based compensation 3,794 6,009 Cash dividends   (6,382 )   (3,455 ) Net cash provided by financing activities   31,514     95,485   Net increase (decrease) in cash and cash equivalents 2,023 (11,557 )   Cash and cash equivalents: Beginning of period   15,866     33,683   End of period $ 17,889   $ 22,126