SSI Stage Stores Inc

Stage Stores, Inc. (NYSE:SSI) today reported results for the third quarter ended November 2, 2019.

Third quarter highlights:

• Comparable sales increased 17.4%.
• Net loss was $15.9 million compared to net loss of $31.4 million in the third quarter 2018.
• Adjusted net loss improved by $26.3 million to $4.2 million.
• Adjusted EBITDA improved $28.5 million to $15.3 million.
• Converted 17 department stores to Gordmans off-price, bringing total year-to-date conversions to 89.
• Excess availability under the credit facility at quarter end was $101 million, an increase of approximately $35 million compared to the end of the second quarter 2019.
• Amazon Counter was expanded to approximately 700 of our stores, generating convenience for customers and increased store traffic.

“Our outstanding third quarter results give us further confidence in our decision to convert the entire company to an off-price business model,” commented Michael Glazer, Chief Executive Officer. “The 17.4% increase in third quarter comparable sales was driven by a variety of factors that encompass our guests’ positive reaction to the new Gordmans stores and our pre-conversion activities. The 89 department stores converted to off-price during 2019 delivered a combined sales increase of nearly 40% in the third quarter.

“Our results also reflect that guests in our department stores are responding quite favorably as we celebrate sales and events prior to their store converting. Our expanded home business in department stores delivered a comparable sales increase of 180% in the third quarter. In the fourth quarter, we expect excitement to grow with our holiday marketing focusing on celebrating the last holiday season at our department stores with messages including 'Last Black Friday Sale Ever' and 'Last Christmas Sale Ever.' Notably, our pre-conversion promotional efforts do not involve incremental couponing or markdowns and as a result, retail margins have not been negatively impacted. In fact, in the third quarter, retail margins increased 130 basis points.

“Additionally, we are thrilled with the early results of our Amazon partnership which is popular with Amazon customers and our loyal guests. Over 700 of our stores are now active pick-up points for Amazon Counter just in time for the holiday season. This will increase our traffic and provide Amazon shoppers with fast, flexible and convenient package pick-up.”

Michael Glazer continued, “Looking ahead, we remain on track to complete our conversions by the third quarter of fiscal 2020. Based on the outstanding results in the third quarter and strong momentum entering the fourth quarter, we are raising our full year guidance. We now project fiscal 2019 adjusted EBITDA of $35 million to $40 million, compared to prior guidance of $20 million to $25 million. This reflects revised annual comparable sales of +7% to +9%. We also expect to deliver positive cash flow for the full year 2019 of more than $35 million.”

Third Quarter Results

Third quarter 2019 results compared to third quarter 2018 results were as follows:

• Net sales were $399 million compared to $347 million
• Comparable sales increased 17.4%
• Net loss was $15.9 million compared to net loss of $31.4 million
• Adjusted net loss was $4.2 million compared to adjusted net loss of $30.5 million
• Loss per share was $0.55 compared to loss per share of $1.11
• Adjusted loss per share was $0.15 compared to adjusted loss per share of $1.08
• Adjusted EBITDA was $15.3 million compared to adjusted EBITDA loss of $13.2 million
• Converted 17 department stores to Gordmans off-price, bringing the year to date conversion total to 89

2019 Guidance

For 2019, the company provided the following annual guidance:

• Net sales between $1,640 million and $1,670 million
• Comparable sales increase of 7% to 9%
• Adjusted EBITDA between $35 million and $40 million
• Net loss between $65 million and $60 million, and tax rate of 0%
• Adjusted net loss between $40 million and $35 million, and a tax rate of 0%
• Loss per share between $2.25 and $2.10
• Adjusted loss per share between $1.40 and $1.25
• Convert 89 department stores to Gordmans off-price stores, open one new Gordmans stores, and close 60 department stores
• Capital expenditures of $30 million

Lease Accounting

On February 3, 2019, we adopted ASU No. 2016-02, Leases, which resulted in a significant increase in our reported assets and liabilities associated with our leases. The recognition of rent expense and payments associated with these lease assets and liabilities will not result in material differences to operating income or cash flows compared to the previous accounting rules. The adoption of the new accounting standard will not impact our credit facility covenants. The company applied the new standard prospectively with a cumulative effect charge of $5.2 million, net of tax, to the opening accumulated deficit balance in the first quarter of fiscal 2019.

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 5582308. 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 January 3, 2020.

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 21, 2019, the company operates in 42 states through 614 BEALLS, GOODY'S, PALAIS ROYAL, PEEBLES and STAGE specialty department stores, and 158 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 adjusted earnings (loss) before interest, taxes, depreciation and amortization (adjusted EBITDA), adjusted net loss and adjusted diluted loss per share, 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.

(Tables to follow)

Stage Stores, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

November 2, 2019

 

November 3, 2018

 

Amount

 

% to Sales (a)

 

Amount

 

% to Sales (a)

Net sales

$

399,302

 

 

100.0

%

 

$

347,100

 

 

100.0

%

Credit income

15,678

 

 

3.9

%

 

13,324

 

 

3.8

%

Total revenues

414,980

 

 

103.9

%

 

360,424

 

 

103.8

%

Cost of sales and related buying, occupancy and distribution expenses

315,494

 

 

79.0

%

 

278,665

 

 

80.3

%

Selling, general and administrative expenses

111,180

 

 

27.8

%

 

109,774

 

 

31.6

%

Interest expense

4,070

 

 

1.0

%

 

3,350

 

 

1.0

%

Loss before income tax

(15,764

)

 

(3.9

)%

 

(31,365

)

 

(9.0

)%

Income tax expense (benefit)

150

 

 

—

%

 

(12

)

 

—

%

Net loss

$

(15,914

)

 

(4.0

)%

 

$

(31,353

)

 

(9.0

)%

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

 

Basic

$

(0.55

)

 

 

 

$

(1.11

)

 

 

Diluted

$

(0.55

)

 

 

 

$

(1.11

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

28,886

 

 

 

 

28,261

 

 

 

Diluted

28,886

 

 

 

 

28,261

 

 

 

 

 

 

 

 

 

 

 

(a) Percentages may not foot due to rounding.

Stage Stores, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

 

 

Nine Months Ended

 

November 2, 2019

 

November 3, 2018

 

Amount

 

% to Sales (a)

 

Amount

 

% to Sales (a)

Net sales

$

1,094,888

 

 

100.0

%

 

$

1,060,623

 

 

100.0

%

Credit income

42,774

 

 

3.9

%

 

43,143

 

 

4.1

%

Total revenues

1,137,662

 

 

103.9

%

 

1,103,766

 

 

104.1

%

Cost of sales and related buying, occupancy and distribution expenses

888,297

 

 

81.1

%

 

847,213

 

 

79.9

%

Selling, general and administrative expenses

324,066

 

 

29.6

%

 

327,965

 

 

30.9

%

Interest expense

12,187

 

 

1.1

%

 

8,253

 

 

0.8

%

Loss before income tax

(86,888

)

 

(7.9

)%

 

(79,665

)

 

(7.5

)%

Income tax expense

450

 

 

—

%

 

288

 

 

—

%

Net loss

$

(87,338

)

 

(8.0

)%

 

$

(79,953

)

 

(7.5

)%

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

 

Basic

$

(3.04

)

 

 

 

$

(2.85

)

 

 

Diluted

$

(3.04

)

 

 

 

$

(2.85

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

28,706

 

 

 

 

28,059

 

 

 

Diluted

28,706

 

 

 

 

28,059

 

 

 

 

 

 

 

 

 

 

 

(a) Percentages may not foot due to rounding.

Stage Stores, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value)

(Unaudited)

 

 

November 2, 2019

 

February 2, 2019

 

November 3, 2018

ASSETS

 

 

 

 

 

Cash and cash equivalents

$

26,268

 

 

$

15,830

 

 

$

25,825

 

Merchandise inventories, net

581,495

 

 

424,555

 

 

602,283

 

Prepaid expenses and other current assets

43,754

 

 

52,518

 

 

47,181

 

Total current assets

651,517

 

 

492,903

 

 

675,289

 

 

 

 

 

 

 

Property, equipment and leasehold improvements, net

181,716

 

 

224,803

 

 

229,942

 

Operating lease assets

319,036

 

 

—

 

 

—

 

Intangible assets

1,900

 

 

2,225

 

 

17,135

 

Other non-current assets, net

19,544

 

 

24,230

 

 

23,152

 

Total assets

$

1,173,713

 

 

$

744,161

 

 

$

945,518

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

Accounts payable

$

176,304

 

 

$

106,825

 

 

$

190,070

 

Current portion of debt obligations

5,000

 

 

4,812

 

 

3,555

 

Current portion of operating lease liabilities

75,709

 

 

—

 

 

—

 

Accrued expenses and other current liabilities

86,767

 

 

65,715

 

 

80,320

 

Total current liabilities

343,780

 

 

177,352

 

 

273,945

 

 

 

 

 

 

 

Long-term debt obligations

360,123

 

 

250,294

 

 

345,840

 

Long-term operating lease liabilities

275,604

 

 

—

 

 

—

 

Other long-term liabilities

30,703

 

 

61,990

 

 

62,809

 

Total liabilities

1,010,210

 

 

489,636

 

 

682,594

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Common stock, par value $0.01, 100,000 shares authorized, 34,076, 33,469 and 33,458 shares issued, respectively

341

 

 

335

 

 

335

 

Additional paid-in capital

426,606

 

 

423,535

 

 

422,539

 

Treasury stock, at cost, 5,175 shares, respectively

(44,444

)

 

(43,579

)

 

(43,527

)

Accumulated other comprehensive loss

(6,566

)

 

(5,857

)

 

(5,731

)

Accumulated deficit

(212,434

)

 

(119,909

)

 

(110,692

)

Total stockholders' equity

163,503

 

 

254,525

 

 

262,924

 

Total liabilities and stockholders' equity

$

1,173,713

 

 

$

744,161

 

 

$

945,518

 

Stage Stores, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

Nine Months Ended

 

November 2, 2019

 

November 3, 2018

Cash flows from operating activities:

 

 

 

Net loss

$

(87,338

)

 

$

(79,953

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation and amortization of long-lived assets

45,144

 

 

44,135

 

Impairment of long-lived assets

11,295

 

 

1,070

 

Gain on retirements of property, equipment and leasehold improvements

(302

)

 

(505

)

Non-cash operating lease expense

52,617

 

 

—

 

Stock-based compensation expense

2,276

 

 

3,854

 

Dividends charged to compensation expense

21

 

 

—

 

Amortization of debt issuance costs

512

 

 

248

 

Deferred compensation obligation

865

 

 

229

 

Amortization of employee benefit related costs and pension settlement charges

828

 

 

850

 

Construction allowances from landlords

4,833

 

 

757

 

Other changes in operating assets and liabilities:

 

 

 

Increase in merchandise inventories

(156,940

)

 

(163,906

)

Decrease in other assets

15,111

 

 

4,910

 

Decrease in operating lease liabilities

(56,234

)

 

—

 

Increase in accounts payable and other liabilities

90,402

 

 

51,394

 

Net cash used in operating activities

(76,910

)

 

(136,917

)

 

 

 

 

Cash flows from investing activities:

 

 

 

Additions to property, equipment and leasehold improvements

(25,145

)

 

(21,793

)

Proceeds from insurance and disposal of assets

2,887

 

 

2,349

 

Net cash used in investing activities

(22,258

)

 

(19,444

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Proceeds from revolving credit facility borrowings

419,397

 

 

481,384

 

Payments of revolving credit facility borrowings

(305,818

)

 

(338,100

)

Proceeds from long-term debt obligation

—

 

 

25,000

 

Payments of long-term debt obligations

(3,008

)

 

(2,224

)

Payments of debt issuance costs

(36

)

 

(358

)

Payments for stock related compensation

(929

)

 

(424

)

Cash dividends paid

—

 

 

(4,342

)

Net cash provided by financing activities

109,606

 

 

160,936

 

Net increase in cash and cash equivalents

10,438

 

 

4,575

 

 

 

 

 

Cash and cash equivalents:

 

 

 

Beginning of period

15,830

 

 

21,250

 

End of period

$

26,268

 

 

$

25,825

 

Stage Stores, Inc. Reconciliation of Non-GAAP Financial Measures (Unaudited)

The following tables reconcile adjusted earnings (loss) before interest, taxes, depreciation and amortization (adjusted EBITDA), adjusted net loss and adjusted diluted loss per share, non-GAAP financial measures, to the most directly comparable GAAP measures, net loss and diluted loss per share (amounts in thousands, except per share data):

 

Three Months Ended

 

Nine Months Ended

 

November 2, 2019

 

November 3, 2018

 

November 2, 2019

 

November 3, 2018

Net loss (GAAP)

$

(15,914

)

 

$

(31,353

)

 

$

(87,338

)

 

$

(79,953

)

Interest expense

4,070

 

 

3,350

 

 

12,187

 

 

8,253

 

Income tax expense

150

 

 

(12

)

 

450

 

 

288

 

Depreciation and amortization

15,272

 

 

13,988

 

 

45,144

 

 

44,135

 

Impairment of long-lived assets

9,680

 

 

—

 

 

11,295

 

 

1,070

 

Severance

425

 

 

819

 

 

2,928

 

 

938

 

Pre-opening expenses

560

 

 

—

 

 

3,457

 

 

—

 

Store closing services

1,038

 

 

—

 

 

2,216

 

 

—

 

Adjusted EBITDA (non-GAAP)

$

15,281

 

 

$

(13,208

)

 

$

(9,661

)

 

$

(25,269

)

 

 

 

 

 

 

 

 

Net loss (GAAP)

$

(15,914

)

 

$

(31,353

)

 

$

(87,338

)

 

$

(79,953

)

Impairment of long-lived assets

9,680

 

 

—

 

 

11,295

 

 

1,070

 

Severance

425

 

 

819

 

 

2,928

 

 

938

 

Pre-opening expenses

560

 

 

—

 

 

3,457

 

 

—

 

Store closing services

1,038

 

 

—

 

 

2,216

 

 

—

 

Adjusted net loss (non-GAAP)

$

(4,211

)

 

$

(30,534

)

 

$

(67,442

)

 

$

(77,945

)

 

 

 

 

 

 

 

 

Diluted loss per share (GAAP)

$

(0.55

)

 

$

(1.11

)

 

$

(3.04

)

 

$

(2.85

)

Impairment of long-lived assets

0.34

 

 

—

 

 

0.39

 

 

0.04

 

Severance

0.01

 

 

0.03

 

 

0.10

 

 

0.03

 

Pre-opening expenses

0.02

 

 

—

 

 

0.12

 

 

—

 

Store closing services

0.04

 

 

—

 

 

0.08

 

 

—

 

Adjusted diluted loss per share (non-GAAP) (a)

$

(0.15

)

 

$

(1.08

)

 

$

(2.35

)

 

$

(2.78

)

 

 

 

 

 

 

 

 

(a) Per share amounts may not foot due to rounding.

Stage Stores, Inc.

Reconciliation of Non-GAAP Financial Measures (continued)

(Unaudited)

 

Fiscal 2019 guidance range (amounts in millions, except per share data):

 

 

Fiscal 2019

 

Fiscal 2018

 

Low

 

High

 

 

Net loss (GAAP)

$

(65

)

 

$

(60

)

 

$

(88

)

Interest expense

16

 

 

16

 

 

12

 

Income tax expense

1

 

 

1

 

 

—

 

Depreciation and amortization

58

 

 

58

 

 

59

 

Impairments, severance, pre-opening and store closing services

25

 

 

25

 

 

19

 

Adjusted EBITDA (non-GAAP)

$

35

 

 

$

40

 

 

$

2

 

 

 

 

 

 

 

Net loss (GAAP)

$

(65

)

 

$

(60

)

 

$

(88

)

Impairments, severance, pre-opening and store closing services

25

 

 

25

 

 

19

 

Adjusted net loss (non-GAAP)

$

(40

)

 

$

(35

)

 

$

(69

)

 

 

 

 

 

 

Diluted loss per share (GAAP)

$

(2.25

)

 

$

(2.10

)

 

$

(3.13

)

Impairments, severance, pre-opening and store closing services

0.85

 

 

0.85

 

 

0.68

 

Adjusted diluted loss per share (non-GAAP)

$

(1.40

)

 

$

(1.25

)

 

$

(2.45

)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191121005232/en/

Jean Fontana 646-277-1214 Jean.Fontana@icrinc.com