Stage Stores (SSI) Reports Q4 Loss of $0.28, Revenues Beat, Comp. Sales Down 2%; Offers FY19 Revenue Mid-Point Outlook Above Consensus

Stage Stores (NYSE: SSI) reported Q4 EPS of ($0.28), versus $0.19 reported last year. Revenue for the quarter came in at $520 million versus the consensus estimate of $357.24 million.

• Net sales were $520 million compared to $549 million
• Comparable sales decreased 2.4% for total company
• Shifted comparable sales increased 0.8% in off-price, increased 0.5% for department stores, and increased 0.6% for total company
• Net loss was $7.8 million compared to net income of $5.6 million
• Tax rate of 0% due to a full valuation allowance
• Loss per share was $0.28 compared to an earnings per share of $0.19
• EBIT was $(4.1) million compared to $19.6 million
• EBITDA adjusted for impairments was $27.1 million compared to $37.3 million

“The fourth quarter represented our best quarter of shifted comparable sales results in fiscal 2018, and we are excited for the momentum to carry forward,” commented Michael Glazer, Chief Executive Officer. “We drove sequential improvement in shifted comparable sales, including double digit e-commerce sales growth, each quarter this year. The fourth quarter positive sales results were primarily attributed to a strong performance by our non-apparel categories, particularly home and gifts. The six department stores converted to Gordmans in smaller mid-west markets delivered a shifted comparable sales increase of more than 150% in the fourth quarter. This further increases our confidence in the next phase of our strategy, as the 2019 conversions are predominantly in these smaller mid-west markets. At year-end, total inventories were down 3%, in line with our expectations, and excess availability under our credit facility was $82 million.”

Michael Glazer continued, “Looking to 2019, our pivot to off-price will accelerate, with 70 to 80 department stores converting to Gordmans. Given the strong conversion results in 2018, we expect these efforts to benefit our comparable sales performance in 2019 by at least 200 basis points. Additionally, we believe that capital and inventory investments will enable us to nearly double home department penetration in our department stores, delivering a total company comparable sales benefit of approximately 300 basis points. These 2019 initiatives, combined with strong trends in e-commerce, non-apparel, and active apparel support our comparable sales guidance of +3% to +5% for 2019. In addition to comparable sales growth, our efforts to close 40 to 60 underperforming stores, drive gross margin improvement, and enhance the profitability of our existing off-price stores are expected to deliver an EBITDA of $10 million to $15 million in 2019. Capital spend will be between $30 and $35 million, in line with 2018, and meaningful inventory reductions associated with closing and converting stores will result in positive cash flow for the year. We are very excited about the future, including converting 150 more department stores to off-price by the middle of 2020. As a result, by the end of 2020, off-price sales will represent approximately 50% of our sales volume.”

GUIDANCE:

Stage Stores sees FY2019 revenue of $1.59-1.62 billion, versus the consensus of $1.59 billion.

• Comparable sales increase of +3% to +5%
• EBITDA between $10 million and $15 million
• Net loss between $65 million and $60 million, and tax rate of 0%
• Loss per share between $2.25 and $2.10
• Convert 70 to 80 department stores to Gordmans off-price stores, and close 40 to 60 department stores
• Capital expenditures of $30 million to $35 million

For earnings history and earnings-related data on Stage Stores (SSI) click here.

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