HOUSTON--(BUSINESS WIRE)--Stage Stores, Inc. (NYSE: SSI) today reported results for the third quarter ended November 3, 2018, and updated guidance for fiscal year 2018. For the third quarter, Gordmans off-price stores comparable sales increased 9.9%, department stores comparable sales decreased 5.5%, and total company comparable sales decreased 2.8%. On a shifted comparable sales basis, comparing the thirteen weeks ending November 3, 2018 and November 4, 2017, off-price increased 10.3%, department stores decreased 4.1%, and total company decreased 1.5%. Loss before income tax was $31.4 million compared to a loss before income tax of $30.3 million in the third quarter 2017. EBIT was $(28.0) million compared to $(28.3) million in the third quarter 2017.
“We remain extremely pleased with our off-price results, with third quarter comparable sales increasing about 10%. We also saw very strong results in the eight department stores we converted to off-price during the quarter, particularly in the smaller markets which make up the majority of our store base,” stated Michael Glazer, Chief Executive Officer. “In addition, our e-commerce business once again grew double digits. Excess availability under our credit facility at the end of the quarter was $95 million, consistent with the end of the second quarter and in line with our end of year expectations. Looking ahead, our inventory content and levels are well positioned, including lower clearance ownership.
We are thrilled about our new relationship with thredUP, the world’s largest online consignment and thrift store. The thredUP pop-up shops, which were recently launched in a select group of our off-price and department stores, will drive traffic and new guests to discover amazing deals on an expanded assortment of great designer and specialty brands.”
Mr. Glazer continued, “For the all-important fourth quarter, we are committed to being her holiday destination with our largest assortment ever in home, gifts, beauty, and toys. In department stores, home continues to be our top performing business as we build on our expertise from off-price and look to dramatically increase the business going forward. In Gordmans off-price, we anticipate another quarter of double digit comparable sales growth. Online, we expect to have a record breaking e-commerce quarter from a sales and penetration perspective.”
The company also announced that its Board of Directors declared a quarterly cash dividend of $0.05 per share on its common stock, payable on December 19, 2018 to shareholders of record at the close of business on December 4, 2018.
Third Quarter Results
Third quarter 2018 results compared to third quarter 2017 results were as follows:
- Net sales were $347 million compared to $357 million
- Comparable sales increased 9.9% in off-price, decreased 5.5% for department stores, and decreased 2.8% for total company
- Shifted comparable sales increased 10.3% in off-price, decreased 4.1% for department stores, and decreased 1.5% for total company
- Net loss was $31.4 million compared to a net loss of $17.7 million
- Tax rate of 0% due to a full valuation allowance, which negatively impacted 2018 EPS by $0.46 per diluted share, or net loss by $13 million compared to 2017
- Loss per share was $1.11 compared to a loss per share of $0.64
- EBIT was $(28.0) million compared to $(28.3) million
- EBITDA was $(14.0) million compared to $(12.0) million
2018 Guidance
The company updated its annual guidance to reflect the softer underlying department store trends while incorporating its optimism around off-price and department store home expansion, which are both expected to more materially benefit total company results in 2019 and beyond.
For 2018, the company detailed the following fourth quarter guidance components and updated the following annual guidance:
| Guidance | Q4 2018 | FY 2018 | ||
| Net Sales | $529 million to $544 million | $1,590 million to 1,605 million | ||
| Comparable Sales | -1% to +2% | -1.5% to -0.5% | ||
| Net Income (Loss) | $21 million to $26 million | $(59) million to $(54) million | ||
| Earnings (Loss) per diluted share | $0.65 to $0.80 | $(2.10) to $(1.90) | ||
| EBIT | $24 million to $29 million | $(47) million to $(42) million | ||
| EBITDA | $37 million to $42 million | $10 million to $15 million |
- Tax rate of 0% due to a full valuation allowance, which is expected to negatively impact full year 2018 loss per share by $0.51 to $0.56 per share, or net loss by $14 million to $16 million compared to 2017
- Open one new Gordmans off-price store, convert nine department stores to Gordmans off-price stores, and close 35 to 40 department stores.
For fiscal 2018, the company reaffirmed the following guidance:
- Capital expenditures of $30 million to $35 million
Revenue Recognition
During the first quarter of 2018, the company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). As a result of the adoption, the condensed consolidated statements of operations reflect the reclassification of credit income related to the company’s private label credit card program from selling, general and administrative expenses to revenue. The condensed consolidated balance sheets and condensed consolidated statements of cash flows reflect the reclassification of the asset for the right to recover sales return merchandise from merchandise inventories to prepaid expenses and other current assets. The company adopted the standard using the full retrospective method, and the condensed consolidated statements of operations, balance sheets and cash flows for the prior year periods have been restated.
Conference Call / Webcast Information
The company will post a pre-recorded conference call today at 8:30 a.m. Eastern Time to discuss its results and guidance. Interested parties may access the company’s call by dialing 866-393-5631 and providing conference ID 2860079. Alternatively, interested parties may listen to an audio webcast of the call through the Investor Relations section of the company’s website (corporate.stage.com) under the “Webcasts” caption. A replay of the call will be available online through December 26, 2018.
About Stage Stores
Stage Stores, Inc. is a leading retailer of trend-right, name-brand values for apparel, accessories, cosmetics, footwear and home goods. As of November 20, 2018, the company operates in 42 states through 754 BEALLS, GOODY'S, PALAIS ROYAL, PEEBLES and STAGE specialty department stores and 68 GORDMANS off-price stores, as well as an e-commerce website at www.stage.com. For more information about Stage Stores, visit the company’s website at corporate.stage.com.
Use of Non-GAAP / Adjusted Financial Measures
The company reports its financial results in accordance with generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures help to facilitate comparisons of company operating performance across periods. This release includes earnings (loss) before interest and taxes (“EBIT”) and earnings (loss) before interest, taxes, depreciation and amortization (“EBITDA”), which are non-GAAP financial measures. A reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures is provided in a table included with this release.
Caution Concerning Forward-Looking Statements
Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements are intended to qualify for the protection of the safe harbor provided by the Act. The words “anticipate,” “estimate,” “expect,” “objective,” “goal,” “project,” “intend,” “plan,” “believe,” “will,” “should,” “may,” “target,” “forecast,” “guidance,” “outlook” and similar expressions generally identify forward-looking statements. Similarly, descriptions of the company’s objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements relate to the expectations of management as to future occurrences and trends, including statements expressing optimism or pessimism about future operating results or events and projected sales, earnings, capital expenditures and business strategy. Forward-looking statements are based upon a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Forward-looking statements are based upon management’s then-current views and assumptions regarding future events and operating performance. Although management believes the expectations expressed in forward-looking statements are based on reasonable assumptions within the bounds of its knowledge, forward-looking statements involve risks, uncertainties and other factors which may materially affect the company’s business, financial condition, results of operations or liquidity.
Forward-looking statements are not guarantees of future performance and actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, but not limited to, economic conditions, cost and availability of goods, inability to successfully execute strategic initiatives, competitive pressures, economic pressures on the company and its customers, freight costs, the risks discussed in the Risk Factors section of the company’s most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”), and other factors discussed from time to time in the company’s other SEC filings. This release should be read in conjunction with such filings, and you should consider all of such risks, uncertainties and other factors carefully in evaluating forward-looking statements.
You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. The company undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures the company makes on related subjects in its public announcements and SEC filings.
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Stage Stores, Inc. |
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Condensed Consolidated Statements of Operations |
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(in thousands, except per share data) |
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(Unaudited) |
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| Three Months Ended | ||||||||||||||
| November 3, 2018 | October 28, 2017 | |||||||||||||
| As Adjusted | ||||||||||||||
| Amount | % to Sales (a) | Amount | % to Sales (a) | |||||||||||
| Net sales | $ | 347,100 | 100.0 | % | $ | 357,236 | 100.0 | % | ||||||
| Credit income | 13,324 | 3.8 | % | 13,670 | 3.8 | % | ||||||||
| Total revenues | 360,424 | 103.8 | % | 370,906 | 103.8 | % | ||||||||
| Cost of sales and related buying, occupancy and distribution expenses | 278,665 | 80.3 | % | 285,542 | 79.9 | % | ||||||||
| Selling, general and administrative expenses | 109,774 | 31.6 | % | 113,706 | 31.8 | % | ||||||||
| Interest expense | 3,350 | 1.0 | % | 2,001 | 0.6 | % | ||||||||
| Loss before income tax | (31,365 | ) | (9.0 | )% | (30,343 | ) | (8.5 | )% | ||||||
| Income tax benefit | (12 | ) | — | % | (12,621 | ) | (3.5 | )% | ||||||
| Net loss | $ | (31,353 | ) | (9.0 | )% | $ | (17,722 | ) | (5.0 | )% | ||||
| Loss per share: | ||||||||||||||
| Basic | $ | (1.11 | ) | $ | (0.64 | ) | ||||||||
| Diluted | $ | (1.11 | ) | $ | (0.64 | ) | ||||||||
| Weighted average shares outstanding: | ||||||||||||||
| Basic | 28,261 | 27,602 | ||||||||||||
| Diluted | 28,261 | 27,602 | ||||||||||||
| (a) Percentages may not foot due to rounding. | ||||||||||||||
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Stage Stores, Inc. |
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Condensed Consolidated Statements of Operations |
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(in thousands, except per share data) |
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(Unaudited) |
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| Nine Months Ended | ||||||||||||||
| November 3, 2018 | October 28, 2017 | |||||||||||||
| As Adjusted | ||||||||||||||
| Amount | % to Sales (a) | Amount | % to Sales (a) | |||||||||||
| Net sales | $ | 1,060,623 | 100.0 | % | $ | 1,042,924 | 100.0 | % | ||||||
| Credit income | 43,143 | 4.1 | % | 39,788 | 3.8 | % | ||||||||
| Total revenues | 1,103,766 | 104.1 | % | 1,082,712 | 103.8 | % | ||||||||
| Cost of sales and related buying, occupancy and distribution expenses | 847,213 | 79.9 | % | 816,071 | 78.2 | % | ||||||||
| Selling, general and administrative expenses | 327,965 | 30.9 | % | 328,976 | 31.5 | % | ||||||||
| Interest expense | 8,253 | 0.8 | % | 5,505 | 0.5 | % | ||||||||
| Loss before income tax | (79,665 | ) | (7.5 | )% | (67,840 | ) | (6.5 | )% | ||||||
| Income tax expense (benefit) | 288 | — | % | (24,873 | ) | (2.4 | )% | |||||||
| Net loss | $ | (79,953 | ) | (7.5 | )% | $ | (42,967 | ) | (4.1 | )% | ||||
| Loss per share: | ||||||||||||||
| Basic | $ | (2.85 | ) | $ | (1.57 | ) | ||||||||
| Diluted | $ | (2.85 | ) | $ | (1.57 | ) | ||||||||
| Weighted average shares outstanding: | ||||||||||||||
| Basic | 28,059 | 27,468 | ||||||||||||
| Diluted | 28,059 | 27,468 | ||||||||||||
| (a) Percentages may not foot due to rounding. | ||||||||||||||
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Stage Stores, Inc. |
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Condensed Consolidated Balance Sheets |
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(in thousands, except par value) |
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(Unaudited) |
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| February 3, 2018 | October 28, 2017 | |||||||||||
| November 3, 2018 | As Adjusted | As Adjusted | ||||||||||
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ASSETS |
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| Cash and cash equivalents | $ | 25,825 | $ | 21,250 | $ | 30,330 | ||||||
| Merchandise inventories, net | 602,283 | 438,377 | 576,367 | |||||||||
| Prepaid expenses and other current assets | 47,181 | 52,407 | 54,642 | |||||||||
| Total current assets | 675,289 | 512,034 | 661,339 | |||||||||
| Property, equipment and leasehold improvements, net | 229,942 | 252,788 | 260,870 | |||||||||
| Intangible assets | 17,135 | 17,135 | 17,135 | |||||||||
| Other non-current assets, net | 23,152 | 24,449 | 28,237 | |||||||||
| Total assets | $ | 945,518 | $ | 806,406 | $ | 967,581 | ||||||
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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| Accounts payable | $ | 190,070 | $ | 145,991 | $ | 214,783 | ||||||
| Current portion of debt obligations | 3,555 | 2,985 | 3,025 | |||||||||
| Accrued expenses and other current liabilities | 80,320 | 64,442 | 74,068 | |||||||||
| Total current liabilities | 273,945 | 213,418 | 291,876 | |||||||||
| Long-term debt obligations | 345,840 | 180,350 | 268,969 | |||||||||
| Other long-term liabilities | 62,809 | 68,524 | 70,052 | |||||||||
| Total liabilities | 682,594 | 462,292 | 630,897 | |||||||||
| Commitments and contingencies | ||||||||||||
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Common stock, par value $0.01, 100,000 shares authorized, 33,458, 32,806 and 32,794 shares issued, respectively |
335 | 328 | 328 | |||||||||
| Additional paid-in capital | 422,539 | 418,658 | 416,422 | |||||||||
| Treasury stock, at cost, 5,175 shares, respectively | (43,527 | ) | (43,298 | ) | (43,248 | ) | ||||||
| Accumulated other comprehensive loss | (5,731 | ) | (5,177 | ) | (5,021 | ) | ||||||
| Accumulated deficit | (110,692 | ) | (26,397 | ) | (31,797 | ) | ||||||
| Total stockholders' equity | 262,924 | 344,114 | 336,684 | |||||||||
| Total liabilities and stockholders' equity | $ | 945,518 | $ | 806,406 | $ | 967,581 | ||||||
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Stage Stores, Inc. |
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Condensed Consolidated Statements of Cash Flows |
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(in thousands) |
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(Unaudited) |
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| Nine Months Ended | ||||||||
| November 3, 2018 | October 28, 2017 | |||||||
| As Adjusted | ||||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (79,953 | ) | $ | (42,967 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization of long-lived assets | 44,135 | 49,300 | ||||||
| Impairment of long-lived assets | 1,070 | 176 | ||||||
| Gain on retirements of property, equipment and leasehold improvements | (505 | ) | (926 | ) | ||||
| Deferred income taxes | — | (6,065 | ) | |||||
| Stock-based compensation expense | 3,854 | 6,191 | ||||||
| Amortization of debt issuance costs | 248 | 216 | ||||||
| Deferred compensation obligation | 229 | (38 | ) | |||||
| Amortization of employee benefit related costs and pension settlement charge | 850 | 1,011 | ||||||
| Construction allowances from landlords | 757 | 1,228 | ||||||
| Other changes in operating assets and liabilities: | ||||||||
| Increase in merchandise inventories | (163,906 | ) | (136,247 | ) | ||||
| Decrease (increase) in other assets | 4,910 | (10,941 | ) | |||||
| Increase in accounts payable and other liabilities | 51,394 | 120,137 | ||||||
| Net cash used in operating activities | (136,917 | ) | (18,925 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Additions to property, equipment and leasehold improvements | (21,793 | ) | (25,342 | ) | ||||
| Proceeds from insurance and disposal of assets | 2,349 | 2,404 | ||||||
| Business acquisition | — | (36,144 | ) | |||||
| Net cash used in investing activities | (19,444 | ) | (59,082 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from revolving credit facility borrowings | 481,384 | 426,308 | ||||||
| Payments of revolving credit facility borrowings | (338,100 | ) | (318,851 | ) | ||||
| Proceeds from long-term debt obligation | 25,000 | — | ||||||
| Payments of long-term debt obligations | (2,224 | ) | (5,626 | ) | ||||
| Payments of debt issuance costs | (358 | ) | (8 | ) | ||||
| Payments for stock related compensation | (424 | ) | (192 | ) | ||||
| Cash dividends paid | (4,342 | ) | (7,097 | ) | ||||
| Net cash provided by financing activities | 160,936 | 94,534 | ||||||
| Net increase in cash and cash equivalents | 4,575 | 16,527 | ||||||
| Cash and cash equivalents: | ||||||||
| Beginning of period | 21,250 | 13,803 | ||||||
| End of period | $ | 25,825 | $ | 30,330 | ||||
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Stage Stores, Inc. |
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Reconciliation of Non-GAAP Financial Measures |
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(Unaudited) |
The following tables reconcile earnings (loss) before interest and taxes (“EBIT”) and earnings (loss) before interest, taxes, depreciation and amortization (“EBITDA”), non-GAAP financial measures, to the most directly comparable GAAP measure, net loss.
Third quarter and year-to-date 2018 compared to third quarter and year-to-date 2017 (amounts in thousands):
| Three Months Ended | Nine Months Ended | |||||||||||||||
| November 3, 2018 | October 28, 2017 | November 3, 2018 | October 28, 2017 | |||||||||||||
| Net loss (GAAP) | $ | (31,353 | ) | $ | (17,722 | ) | $ | (79,953 | ) | $ | (42,967 | ) | ||||
| Interest expense | 3,350 | 2,001 | 8,253 | 5,505 | ||||||||||||
| Income tax expense (benefit) | (12 | ) | (12,621 | ) | 288 | (24,873 | ) | |||||||||
| EBIT (non-GAAP) | $ | (28,015 | ) | $ | (28,342 | ) | $ | (71,412 | ) | $ | (62,335 | ) | ||||
| Depreciation and amortization | 13,988 | 16,299 | 44,135 | 49,300 | ||||||||||||
| EBITDA (non-GAAP) | $ | (14,027 | ) | $ | (12,043 | ) | $ | (27,277 | ) | $ | (13,035 | ) | ||||
Fourth quarter and fiscal 2018 guidance range (amounts in millions):
| Fourth Quarter 2018 | Fourth Quarter | |||||||||||
| Low | High | 2017 | ||||||||||
| Net income (GAAP) | $ | 21 | $ | 26 | $ | 6 | ||||||
| Interest expense | 3 | 3 | 2 | |||||||||
| Income tax expense | — | — | 12 | |||||||||
| EBIT (non-GAAP) | $ | 24 | $ | 29 | $ | 20 | ||||||
| Depreciation and amortization | 13 | 13 | 16 | |||||||||
| EBITDA (non-GAAP) | $ | 37 | $ | 42 | $ | 36 | ||||||
| Fiscal 2018 | ||||||||||||
| Low | High | Fiscal 2017 | ||||||||||
| Net loss (GAAP) | $ | (59 | ) | $ | (54 | ) | $ | (37 | ) | |||
| Interest expense | 11 | 11 | 7 | |||||||||
| Income tax expense (benefit) | 1 | 1 | (13 | ) | ||||||||
| EBIT (non-GAAP) | $ | (47 | ) | $ | (42 | ) | $ | (43 | ) | |||
| Depreciation and amortization | 57 | 57 | 66 | |||||||||
| EBITDA (non-GAAP) | $ | 10 | $ | 15 | $ | 23 | ||||||