Stage Stores, Inc. (NYSE:SSI) today reported results for the fourth quarter and fiscal year ended January 28, 2017, and provided guidance for fiscal year 2017. For the fourth quarter, comparable sales decreased 8.5%, net loss was $6.8 million, or a $0.25 loss per diluted share and, on an adjusted basis, fourth quarter net income was $5.7 million, or $0.20 per diluted share.
Michael Glazer, President and Chief Executive Officer, commented, “Our fourth quarter adjusted earnings reflect continued challenges in our oil impacted and border states, as well as the overall soft retail environment. Weak traffic led to heightened promotional activity and gross margin pressure in the quarter, yet we are pleased to end 2016 with inventory levels that are 6% lower than last year. In addition, our direct-to-consumer business grew at a double digit rate as we enhanced our customers’ online experience.”
Mr. Glazer continued, “As we look ahead to 2017, we expect external headwinds and customer behavior changes to persist. We will take steps to drive improved performance by focusing on sales in key merchandise categories, creating an exceptional customer experience in our stores and online, and raising the level of engagement with customers through our marketing. We generated positive free cash flow in 2016 and expect to deliver positive free cash flow again in 2017 by reducing capital expenditures, managing expenses prudently, and improving working capital.”
Fourth Quarter and 2016 Results
For the fourth quarter, comparable sales decreased 8.5%. Total sales decreased 9.6% to $454.4 million, as compared to $502.6 million in the fourth quarter of the prior year. Net loss was $6.8 million, or $0.25 per diluted share, versus net income of $21.0 million, or $0.71 per diluted share, in the fourth quarter of the prior year. On an adjusted basis, fourth quarter net income was $5.7 million, or $0.20 per diluted share, as compared to adjusted net income of $26.8 million, or $0.91 per diluted share, in the fourth quarter of the prior year.
For fiscal 2016, comparable sales decreased 8.8%. Total sales decreased 10.1% to $1,442.7 million, as compared to $1,604.4 million for the prior year. Net loss was $37.9 million, or $1.40 per diluted share, versus net income of $3.8 million, or $0.12 per diluted share, for the prior year. On an adjusted basis, 2016 net loss was $24.1 million, or $0.89 per diluted share, as compared to adjusted net income of $16.2 million, or $0.51 per diluted share, for the prior year.
Adjusted results for fiscal years 2016 and 2015 and the fourth quarters of those years exclude charges related to the consolidation of the Company’s corporate headquarters, severance associated with workforce reductions, strategic store closures and impairments, including a non-cash $11.7 million net of tax impairment in the fourth quarter of 2016. The adjustments, after tax, totaled approximately $12.5 million ($0.44 per diluted share) and $5.9 million ($0.20 per diluted share) for the fourth quarters of fiscal 2016 and 2015, respectively. The adjustments, after tax, totaled approximately $13.8 million ($0.51 per diluted share) and $12.4 million ($0.39 per diluted share) for fiscal years 2016 and 2015, respectively.
The Company did not open any stores and closed 37 stores during 2016.
2017 Guidance
The Company expects sales to be in a range of $1,330 million to $1,385 million, assuming comparable sales in a range of -4% to -8%. Total sales include the impact of a 53rd week, while comparable sales reflect a 52-week period.
Loss per diluted share is expected to be between $0.95 and $1.55. Weighted average shares for the year are expected to be approximately 27.5 million. The effective tax rate is projected to be between 32% and 35%.
Free cash flow (defined as net cash provided by operating activities less capital expenditures) is expected to be positive within the Company’s provided guidance range.
Capital expenditures in 2017, net of construction allowances from landlords, are expected to be in the range of $35 million to $40 million, compared to $67 million in 2016.
Conference Call / Webcast Information
The Company will hold a conference call today at 8:30 a.m. Eastern Time to discuss its results and guidance. Interested parties may access the Company’s conference call by dialing 844-415-6993. Alternatively, interested parties may listen to a live webcast of the conference call through the Investor Relations section of the Company’s website (www.stagestoresinc.com) under the “Webcasts” caption. A replay of the conference call will be available online until midnight on Friday, March 17, 2017.
About Stage Stores
Stage Stores operates 798 specialty department stores in 38 states and a direct-to-consumer channel under the BEALLS, GOODY'S, PALAIS ROYAL, PEEBLES and STAGE nameplates. The Company’s stores, predominantly located in small towns and communities, and direct-to-consumer business offer a moderately priced, broad selection of trend-right, brand name apparel, accessories, cosmetics, footwear and home goods for the entire family. The Company’s direct-to-consumer channel includes its e-commerce website and Send program. Its e-commerce website features assortments of merchandise similar to that found in its stores, as well as products available exclusively online. The Send program allows customers in the stores to have merchandise shipped directly to their homes if the merchandise is not available in the local store. For more information about Stage Stores, visit the Company’s website at www.stagestoresinc.com.
Use of Adjusted (Non-GAAP) 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 non-GAAP financial measures identified as “adjusted” results. A reconciliation of all 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.
Stage Stores, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share data) (Unaudited) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| January 28, 2017 | January 30, 2016 | ||||||||||||||
| Amount | % to Sales (a) | Amount | % to Sales (a) | ||||||||||||
| Net sales | $ | 454,443 | 100.0 | % | $ | 502,629 | 100.0 | % | |||||||
| Cost of sales and related buying, occupancy and distribution expenses | 365,538 | 80.4 | % | 361,678 | 72.0 | % | |||||||||
| Gross profit | 88,905 | 19.6 | % | 140,951 | 28.0 | % | |||||||||
| Selling, general and administrative expenses | 95,988 | 21.1 | % | 106,075 | 21.1 | % | |||||||||
| Interest expense | 1,435 | 0.3 | % | 982 | 0.2 | % | |||||||||
| Income (loss) before income tax | (8,518 | ) | (1.9 | )% | 33,894 | 6.7 | % | ||||||||
| Income tax expense (benefit) | (1,674 | ) | (0.4 | )% | 12,909 | 2.6 | % | ||||||||
| Net income (loss) | $ | (6,844 | ) | (1.5 | )% | $ | 20,985 | 4.2 | % | ||||||
| Basic earnings (loss) per share data: | |||||||||||||||
| Basic earnings (loss) per share | $ | (0.25 | ) | $ | 0.72 | ||||||||||
| Basic weighted average shares outstanding | 27,163 | 28,828 | |||||||||||||
| Diluted earnings (loss) per share data: | |||||||||||||||
| Diluted earnings (loss) per share | $ | (0.25 | ) | $ | 0.71 | ||||||||||
| Diluted weighted average shares outstanding | 27,163 | 28,848 | |||||||||||||
| (a) Percentages may not foot due to rounding. | |||||||||||||||
Stage Stores, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share data) (Unaudited) | ||||||||||||||||
| Twelve Months Ended | ||||||||||||||||
| January 28, 2017 | January 30, 2016 | |||||||||||||||
| Amount | % to Sales (a) | Amount | % to Sales (a) | |||||||||||||
| Net sales | $ | 1,442,718 | 100.0 | % | $ | 1,604,433 | 100.0 | % | ||||||||
| Cost of sales and related buying, occupancy and distribution expenses | 1,144,666 | 79.3 | % | 1,208,002 | 75.3 | % | ||||||||||
| Gross profit | 298,052 | 20.7 | % | 396,431 | 24.7 | % | ||||||||||
| Selling, general and administrative expenses | 356,064 | 24.7 | % | 387,859 | 24.2 | % | ||||||||||
| Interest expense | 5,051 | 0.4 | % | 2,977 | 0.2 | % | ||||||||||
| Income (loss) before income tax | (63,063 | ) | (4.4 | )% | 5,595 | 0.3 | % | |||||||||
| Income tax expense (benefit) | (25,166 | ) | (1.7 | )% | 1,815 | 0.1 | % | |||||||||
| Net income (loss) | $ | (37,897 | ) | (2.6 | )% | $ | 3,780 | 0.2 | % | |||||||
| Basic earnings (loss) per share data: | ||||||||||||||||
| Basic earnings (loss) per share | $ | (1.40 | ) | $ | 0.12 | |||||||||||
| Basic weighted average shares outstanding | 27,090 | 31,145 | ||||||||||||||
| Diluted earnings (loss) per share data: | ||||||||||||||||
| Diluted earnings (loss) per share | $ | (1.40 | ) | $ | 0.12 | |||||||||||
| Diluted weighted average shares outstanding | 27,090 | 31,188 | ||||||||||||||
| (a) Percentages may not foot due to rounding. | ||||||||||||||||
Stage Stores, Inc. Condensed Consolidated Balance Sheets (in thousands, except par value) (Unaudited) | ||||||||||
| January 28, 2017 | January 30, 2016 | |||||||||
ASSETS | ||||||||||
| Cash and cash equivalents | $ | 13,803 | $ | 16,487 | ||||||
| Merchandise inventories, net | 409,384 | 435,996 | ||||||||
| Prepaid expenses and other current assets | 41,574 | 48,279 | ||||||||
| Total current assets | 464,761 | 500,762 | ||||||||
| Property, equipment and leasehold improvements, net | 284,110 | 311,717 | ||||||||
| Intangible assets | 15,235 | 15,235 | ||||||||
| Other non-current assets, net | 22,883 | 20,385 | ||||||||
| Total assets | $ | 786,989 | $ | 848,099 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
| Accounts payable | $ | 101,985 | $ | 84,019 | ||||||
| Accrued expenses and other current liabilities | 66,685 | 71,863 | ||||||||
| Total current liabilities | 168,670 | 155,882 | ||||||||
| Long-term debt obligations | 163,749 | 162,876 | ||||||||
| Other long-term liabilities | 74,410 | 99,588 | ||||||||
| Total liabilities | 406,829 | 418,346 | ||||||||
| Commitments and contingencies | ||||||||||
Common stock, par value $0.01, 100,000 shares authorized, 32,340 and 32,030 shares issued, respectively | 323 | 320 | ||||||||
| Additional paid-in capital | 410,504 | 406,034 | ||||||||
| Less treasury stock - at cost, 5,175 shares, respectively | (43,286 | ) | (43,068 | ) | ||||||
| Accumulated other comprehensive loss | (5,648 | ) | (6,353 | ) | ||||||
| Retained earnings | 18,267 | 72,820 | ||||||||
| Total stockholders' equity | 380,160 | 429,753 | ||||||||
| Total liabilities and stockholders' equity | $ | 786,989 | $ | 848,099 | ||||||
Stage Stores, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) | ||||||||||
| Twelve Months Ended | ||||||||||
| January 28, 2017 | January 30, 2016 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net income (loss) | $ | (37,897 | ) | $ | 3,780 | |||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||
| Depreciation, amortization and impairment of long-lived assets | 91,656 | 77,599 | ||||||||
| Loss on retirements of property, equipment and leasehold improvements | 296 | 719 | ||||||||
| Deferred income taxes | (20,224 | ) | (2,330 | ) | ||||||
| Tax (deficiency) benefit from stock-based compensation | (4,565 | ) | 409 | |||||||
| Stock-based compensation expense | 9,461 | 12,394 | ||||||||
| Amortization of debt issuance costs | 229 | 218 | ||||||||
| Excess tax benefits from stock-based compensation | — | (945 | ) | |||||||
| Deferred compensation obligation | 218 | 881 | ||||||||
| Amortization of employee benefit related costs | 897 | 1,522 | ||||||||
| Construction allowances from landlords | 7,079 | 3,444 | ||||||||
| Other changes in operating assets and liabilities: | ||||||||||
| Decrease in merchandise inventories | 26,612 | 5,456 | ||||||||
| Decrease in other assets | 754 | 1,551 | ||||||||
| Increase (decrease) in accounts payable and other liabilities | 9,768 | (64,398 | ) | |||||||
| Net cash provided by operating activities | 84,284 | 40,300 | ||||||||
| Cash flows from investing activities: | ||||||||||
| Additions to property, equipment and leasehold improvements | (74,257 | ) | (90,695 | ) | ||||||
| Proceeds from disposal of assets | 1,179 | 43 | ||||||||
| Addition to intangible asset | — | (325 | ) | |||||||
| Net cash used in investing activities | (73,078 | ) | (90,977 | ) | ||||||
| Cash flows from financing activities: | ||||||||||
| Proceeds from revolving credit facility borrowings | 512,873 | 575,570 | ||||||||
| Payments of revolving credit facility borrowings | (510,011 | ) | (460,640 | ) | ||||||
| Proceeds from long-term debt obligation | 5,830 | — | ||||||||
| Payments of long-term debt obligations | (4,252 | ) | (1,714 | ) | ||||||
| Payments of debt issuance costs | (815 | ) | — | |||||||
| Repurchases of common stock | — | (41,587 | ) | |||||||
| Payments for stock related compensation | (859 | ) | (4,465 | ) | ||||||
| Proceeds from issuance of stock awards | — | 543 | ||||||||
| Excess tax benefits from stock-based compensation | — | 945 | ||||||||
| Cash dividends paid | (16,656 | ) | (18,653 | ) | ||||||
| Net cash provided by (used in) financing activities | (13,890 | ) | 49,999 | |||||||
| Net increase in cash and cash equivalents | (2,684 | ) | (678 | ) | ||||||
| Cash and cash equivalents: | ||||||||||
| Beginning of period | 16,487 | 17,165 | ||||||||
| End of period | $ | 13,803 | $ | 16,487 | ||||||
Stage Stores, Inc. Reconciliation of Non-GAAP Financial Measures (in thousands, except earnings per share) (Unaudited) | ||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||
January 28, 2017 | January 30, 2016 | January 28, 2017 | January 30, 2016 | |||||||||||||||
| Net income (loss) (GAAP) | $ | (6,844 | ) | $ | 20,985 | $ | (37,897 | ) | $ | 3,780 | ||||||||
| Consolidation of corporate headquarters (pretax) | — | 1,597 | 110 | 3,538 | ||||||||||||||
| Severance charges associated with workforce reduction and pension settlement (pretax) | 839 | 2,633 | 1,632 | 2,633 | ||||||||||||||
| Store closures, impairments and other strategic initiatives (pretax) | 19,861 | 3,351 | 21,256 | 12,186 | ||||||||||||||
| Income tax impact | (8,189 | ) | (1,731 | ) | (9,179 | ) | (5,955 | ) | ||||||||||
| Adjusted net income (loss) (non-GAAP) | $ | 5,667 | $ | 26,835 | $ | (24,078 | ) | $ | 16,182 | |||||||||
| Diluted earnings (loss) per share (GAAP) | $ | (0.25 | ) | $ | 0.71 | $ | (1.40 | ) | $ | 0.12 | ||||||||
| Consolidation of corporate headquarters (pretax) | — | 0.06 | — | 0.11 | ||||||||||||||
| Severance charges associated with workforce reduction and pension settlement (pretax) | 0.03 | 0.09 | 0.06 | 0.08 | ||||||||||||||
| Store closures, impairments and other strategic initiatives (pretax) | 0.70 | 0.11 | 0.78 | 0.39 | ||||||||||||||
| Income tax impact | (0.29 | ) | (0.06 | ) | (0.33 | ) | (0.19 | ) | ||||||||||
| Adjusted diluted earnings (loss) per share (non-GAAP)(a) | $ | 0.20 | $ | 0.91 | $ | (0.89 | ) | $ | 0.51 | |||||||||
| (a) Adjusted diluted earnings per share for the three months ended January 28, 2017, reflect a $0.01 adjustment attributable to the weighted average shares outstanding used in the computations for a GAAP net loss and non-GAAP net income. GAAP diluted loss per share excludes the effect of potentially dilutive shares due to a net loss for the period, whereas adjusted diluted earnings per share includes the effect of dilutive shares due to adjusted net income for the period. |
Stage Stores, Inc. Reconciliation of Non-GAAP Financial Measures (in thousands, except earnings per share) (Unaudited) | ||||||||||||||||||
| Three Months Ended | ||||||||||||||||||
| January 28, 2017 | January 30, 2016 | |||||||||||||||||
| Amount | % to Sales (a) | Amount | % to Sales (a) | |||||||||||||||
| Gross profit (GAAP) | $ | 88,905 | 19.6 | % | $ | 140,951 | 28.0 | % | ||||||||||
| Store impairments | 19,353 | 4.3 | % | 1,929 | 0.4 | % | ||||||||||||
| Adjusted gross profit (non-GAAP) | $ | 108,258 | 23.8 | % | $ | 142,880 | 28.4 | % | ||||||||||
| Twelve Months Ended | ||||||||||||||||||
| January 28, 2017 | January 30, 2016 | |||||||||||||||||
| Amount | % to Sales (a) | Amount | % to Sales (a) | |||||||||||||||
| Gross profit (GAAP) | $ | 298,052 | 20.7 | % | $ | 396,431 | 24.7 | % | ||||||||||
| Store impairments | 19,584 | 1.4 | % | 10,580 | 0.7 | % | ||||||||||||
| Adjusted gross profit (non-GAAP) | $ | 317,636 | 22.0 | % | $ | 407,011 | 25.4 | % | ||||||||||
| (a) Percentages may not foot due to rounding. | ||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||
January 28, 2017 | January 30, 2016 | January 28, 2017 | January 30, 2016 | |||||||||||||||
| Selling, general and administrative expenses (GAAP) | $ | 95,988 | $ | 106,075 | $ | 356,064 | $ | 387,859 | ||||||||||
| Consolidation of corporate headquarters | — | (1,597 | ) | (110 | ) | (3,538 | ) | |||||||||||
| Severance charges associated with workforce reduction initiative and pension settlement | (839 | ) | (2,633 | ) | (1,632 | ) | (2,633 | ) | ||||||||||
| Store closures and other strategic initiatives | (508 | ) | (1,422 | ) | (1,672 | ) | (1,606 | ) | ||||||||||
| Adjusted selling, general and administrative expenses (non-GAAP) | $ | 94,641 | $ | 100,423 | $ | 352,650 | $ | 380,082 | ||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170302005345/en/
Contacts:
Randi Sonenshein, 713-331-4967
Senior Vice
President, Finance and Strategy
rsonenshein@stagestores.com
