Stage Stores Announces Fourth Quarter Results; Company Provides FY 2006 Earnings Guidance

Share Name	Share Symbol	Market	Type
Stage Stores (MM)	NASDAQ:STGS	NASDAQ	Common Stock

Stage Stores (NASDAQ:STGS)
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Stage Stores, Inc. (Nasdaq:STGS): -- Fourth Quarter Net Income Increases To $0.68 Per Diluted Share -- Full Year Net Income Increases To $1.90 Per Diluted Share Stage Stores, Inc. (Nasdaq:STGS) today reported its financial results for the fourth quarter and fiscal year ended January 28, 2006. The Company reported that its total sales for the fourth quarter increased 7.6% to $418.6 million compared to $389.0 million last year, and its comparable store sales increased 5.6% versus an increase of 4.0% last year. Net income for the fourth quarter was $19.7 million, or $0.68 per diluted share, as compared to net income of $18.6 million, or $0.62 per diluted share, in the prior year period. Commenting on fourth quarter results, Jim Scarborough, Chairman and Chief Executive Officer, stated, "Solid customer demand for our merchandise assortments during the holiday shopping period, coupled with strong comparable store sales gains in Louisiana and Mississippi, where those impacted by hurricanes Katrina and Rita continued to replenish their wardrobes, contributed to our 5.6% comparable store sales gain for the fourth quarter. Our higher sales and lower diluted share count versus last year contributed to a 9.7% increase in our diluted earnings per share, advancing to $0.68 from $0.62 in the prior year period." For the 2005 fiscal year, total sales increased 8.1% to $1,344.1 million from $1,243.9 million in fiscal 2004, and comparable store sales increased 5.4% versus an increase of 2.5% last year. Net income for the 2005 fiscal year was $55.9 million, or $1.90 per diluted share, as compared to net income of $51.4 million, or $1.72 per diluted share, for the prior year. Commenting on the full year results, Mr. Scarborough stated, "Despite the enormous challenges that were thrown at us by Mother Nature, all in all, 2005 was a very successful year. We posted record sales, and achieved double-digit diluted earnings per share growth. In addition, most of our major merchandise categories achieved comparable store sales gains. In particular, our women's special sizes areas experienced exceptional growth, posting a 14.8% comparable store sales increase, and our accessories departments followed closely, with a strong 12.9% increase. Additionally, each of our small, mid-size and large market store groups posted positive comparable store sales results for the year." Mr. Scarborough further stated, "We moved a step closer in narrowing the sales per square foot gap between our Stage and Peebles Divisions. In fact, we exceeded our goal of improving the sales productivity at our Peebles Division, as their full year sales increased by $6 per weighted average selling square foot over last year's level. We also increased the potential productivity and processing capacity of our South Hill, Virginia distribution center through the addition of new sortation equipment, and a new warehouse management system. As a result, we were able to close our Knoxville, Tennessee distribution center and consolidate their operations into our South Hill facility. We had a very successful introductory two-store launch of Clinique, by Estee Lauder in our Stage Division, and we will be increasing our door count with them during 2006. With regard to store growth, during the year, we opened 36 new stores and entered 2 new states. Unfortunately, we had to close 4 stores due to damage that they sustained during hurricanes Katrina and Rita, but we currently plan to reopen 3 of these affected stores shortly, with 1 reopening in March, 1 in April and 1 in May. Lastly, we completed a three-for-two stock split, initiated a quarterly cash dividend of 2.5 cents per share, and spent $48.7 million buying back 1.8 million shares of our common stock." Mr. Scarborough continued, "While we clearly had an impressive list of accomplishments and milestones in 2005, we could not have accomplished so much without the help of our 13,000 valued Stage associates. They performed with diligence and dedication throughout the year, and our accomplishments are a result of their outstanding levels of customer service and caring." Mr. Scarborough concluded, "As we enter 2006, we have already made some important strides. We acquired B.C. Moore & Sons on February 27th, and we currently plan to convert 69 of the 78 acquired locations into Peebles stores. In addition, we plan to open 35 organic new stores, reopen a store that we lost our lease on last year, and reopen 3 of our hurricane-damaged stores, for a total of 108 new stores this year, which is a significant growth milestone for our company. We've further strengthened our management team with the addition of Andy Hall, former Chairman of Foley's, as our President and Chief Operating Officer. We also promoted two of our senior executives to key roles within our Stage and Peebles Divisions. Lastly, we announced that we will be moving to the New York Stock Exchange on March 16th and will trade under the symbol "SSI". Our plates will be full in 2006, but as always, we remain intensely focused on providing our customers with an exceptional shopping experience, and to producing the best possible returns for our shareholders." Fiscal 2006 -- First Quarter and Full Year Outlook 1st Quarter 2006: The Company provided the following guidance for the first quarter ending April 29, 2006: -0- *T 1Q 2006 OUTLOOK 1Q 2005 ACTUAL ------------------------ -------------------- Sales ($mm) $315.0 - $321.0 $310.1 Net Income ($mm) $19.2 - $20.2 $20.5 Diluted EPS $0.66 - $0.69 $0.68 Diluted Shares (m) 29,200 29,973 *T In issuing its first quarter 2006 guidance, the Company provided the following additional information: -- Comparable store sales assumption -- low single digits -- Assumed impact of stock option expensing and the increase in expense associated with other long-term incentive equity awards -- $0.02 per share -- The outlook does not yet include the projected impact from the acquired B.C. Moore stores. The Company expects to update guidance along with the March sales release, which is scheduled for April 6th, to include the effects of this transaction. FY 2006: The Company provided the following guidance for the 2006 fiscal year ending February 3, 2007: -0- *T FY 2006 OUTLOOK FY 2005 ACTUAL ------------------------ -------------------- Sales ($mm) $1,407.0 - $1,435.0 $1,344.1 Net Income ($mm) $58.0 - $61.5 $55.9 Diluted EPS $2.00 - $2.12 $1.90 Diluted Shares (m) 29,000 29,370 *T In issuing its fiscal 2006 guidance, the Company provided the following additional information: -- Comparable store sales assumption -- low single digits -- Assumed impact of stock option expensing and the increase in expense associated with other long-term incentive equity awards -- $0.08 per share -- The outlook does not yet include the projected impact from the acquired B.C. Moore stores. The Company expects to update guidance along with the March sales release, which is scheduled for April 6th, to include the effects of this transaction. -- Fiscal 2006 will have an extra week (53rd week). The expected impact of the 53rd week is an increase in sales in the 4th quarter and full fiscal year of from $16.5 - $17.5 million, while the expected impact of the 53rd week on net earnings for the 4th quarter and full year is nil, as operating results for that week are expected to be at an approximate break-even level. Conference Call Information The Company will host a conference call today at 8:30 a.m. Eastern Time to discuss the fourth quarter results. Interested parties can participate in the Company's conference call by dialing 703-639-1316. 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, March 17, 2006. 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. The Company currently operates 194 Bealls, 48 Palais Royal and 134 Stage stores throughout the South Central states, and operates 174 Peebles stores throughout the Midwestern, Southeastern, Mid-Atlantic and New England states. On February 27, 2006, the Company purchased B.C. Moore & Sons, Inc., and acquired 78 retail locations. The Company currently plans to convert 69 of the acquired stores to its Peebles name and format, in phases, beginning in mid July. For more information about Stage Stores, visit the Company's web site at www.stagestores.com. "Safe Harbor" Statement This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including comments regarding the Company's outlook and expectations for the first quarter of the 2006 fiscal year and for the full 2006 fiscal year, comments regarding the Company's store opening plans for the 2006 fiscal year, and comments regarding the number of acquired B.C. Moore stores to be converted into Peebles stores. The Company intends forward looking terminology such as "believes", "expects", "may", "will", "should", "could", "anticipates", "plans" or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause the Company's 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 the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the "SEC") on April 28, 2005, in the Company's Quarterly Report on Form 10-Q as filed with the SEC and other factors as may periodically be described in other Company filings with the SEC. (Tables to Follow) -0- *T Stage Stores, Inc. Condensed Consolidated Statements of Income (in thousands, except earnings per share) (unaudited) Thirteen Weeks Ended ---------------------------------- January 28, 2006 January 29, 2005 ---------------- ----------------- Amount % to Amount % to Sales Sales (1) --------- ------ --------- ------- Net sales $418,566 100.0% $389,025 100.0% Cost of sales and related buying, occupancy and distribution expenses 304,792 72.8% 282,717 72.7% -------- ------ -------- ------- Gross profit 113,774 27.2% 106,308 27.3% Selling, general and administrative expenses 81,399 19.4% 76,433 19.6% Store opening costs 223 0.1% 611 0.2% Interest expense, net of interest income of $8 and $0, respectively 873 0.2% 684 0.2% -------- ------ -------- ------- Income before income tax 31,279 7.5% 28,580 7.3% Income tax expense 11,573 2.8% 9,970 2.6% -------- ------ -------- ------- Net income $ 19,706 4.7% $ 18,610 4.8% ======== ====== ======== ======= (1) Percentages may not foot due to rounding. Basic and diluted earnings per share data: Basic earnings per share $ 0.74 $ 0.68 ======== ======== Basic weighted average shares outstanding 26,462 27,223 ======== ======== Diluted earnings per share $ 0.68 $ 0.62 ======== ======== Diluted weighted average shares outstanding 28,936 29,793 ======== ======== Stage Stores, Inc. Condensed Consolidated Statements of Income (in thousands, except earnings per share) (unaudited) Fifty-two Weeks Ended -------------------------------------- January 28, 2006 January 29, 2005 ------------------ ------------------- Amount % to Amount % to Sales Sales (1) ----------- ------ ----------- ------- Net sales $1,344,100 100.0% $1,243,851 100.0% Cost of sales and related buying, occupancy and distribution expenses 952,680 70.9% 884,291 71.1% ---------- ------ ---------- ------- Gross profit 391,420 29.1% 359,560 28.9% Selling, general and administrative expenses 296,543 22.1% 274,265 22.0% Store opening costs 3,210 0.2% 2,172 0.2% Interest expense, net of interest income of $226 and $87, respectively 2,958 0.2% 2,515 0.2% ---------- ------ ---------- ------- Income before income tax 88,709 6.6% 80,608 6.5% Income tax expense 32,822 2.4% 29,220 2.3% ---------- ------ ---------- ------- Net income $ 55,887 4.2% $ 51,388 4.1% ========== ====== ========== ======= (1) Percentages may not foot due to rounding. Basic and diluted earnings per share data: Basic earnings per share $ 2.07 $ 1.87 ========== ========== Basic weighted average shares outstanding 27,046 27,423 ========== ========== Diluted earnings per share $ 1.90 $ 1.72 ========== ========== Diluted weighted average shares outstanding 29,370 29,838 ========== ========== Stage Stores, Inc. Condensed Consolidated Balance Sheets (in thousands, except par values) (unaudited) January 28, January 29, 2006 2005 ----------- ------------ ASSETS --------------------------------------------- Cash and cash equivalents $ 33,683 $ 40,455 Merchandise inventories, net 283,665 281,588 Current deferred taxes 24,270 24,031 Prepaid expenses and other current assets 36,076 22,278 --------- --------- Total current assets 377,694 368,352 Property, equipment and leasehold improvements, net 244,091 212,179 Goodwill 79,353 79,353 Intangible asset 14,910 14,910 Other non-current assets, net 15,605 12,205 --------- --------- Total assets $ 731,653 $ 686,999 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY --------------------------------------------- Accounts payable $ 81,719 $ 74,957 Income taxes payable 8,968 11,024 Current portion of debt obligations 74 130 Accrued expenses and other current liabilities 64,423 57,080 --------- --------- Total current liabilities 155,184 143,191 Debt obligations 2,979 3,048 Deferred taxes 9,860 11,527 Other long-term liabilities 61,798 47,960 --------- --------- Total liabilities 229,821 205,726 --------- --------- Commitments and contingencies Common stock, par value $0.01, 50,000 shares authorized, 33,033 and 32,107 shares issued, respectively 330 321 Additional paid-in capital 412,456 396,229 Less treasury stock - at cost, 6,448 and 4,625 shares, respectively (143,515) (94,828) Minimum pension liability adjustment (1,981) (451) Retained earnings 234,542 180,002 --------- --------- Stockholders' equity 501,832 481,273 --------- --------- Total liabilities and stockholders' equity $ 731,653 $ 686,999 ========= ========= Stage Stores, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Fifty-Two Fifty-Two Weeks Ended Weeks Ended ------------ ------------- January 28, January 28, 2006 2005 ------------ ------------- Cash flows from operating activities: Net income $ 55,887 $ 51,388 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 41,519 36,638 Deferred income taxes (1,006) 4,710 Stock option income tax benefits 4,968 7,593 Amortization of debt issue costs 447 446 Provision for bad debts - 311 Deferred stock compensation 738 272 Proceeds from sale of proprietary credit card portfolio, net - 34,764 Construction allowances received from landlords 13,302 3,104 Changes in operating assets and liabilities: Decrease in accounts receivable and retained interest in receivables sold - 2,880 Increase in merchandise inventories (2,077) (21,901) (Increase) decrease in other assets (17,926) 1,679 Increase in accounts payable and other liabilities 10,155 10,510 -------- --------- Total adjustments 50,120 81,006 -------- --------- Net cash provided by operating activities 106,007 132,394 -------- --------- Cash flows from investing activities: Additions to property, equipment and leasehold improvements (75,168) (47,890) Proceeds from retirements of property, equipment and leasehold improvements 2,018 16 -------- --------- Net cash used in investing activities (73,150) (47,874) -------- --------- Cash flows from financing activities: Proceeds from (payments on): Revolving credit facility, net - (10,700) Finance lease obligations - 1,650 Repurchases of common stock (48,687) (61,701) Debt obligations (125) (891) Exercise of stock options and warrants 10,530 12,844 Payments of cash dividends (1,347) - -------- --------- Net cash used in financing activities (39,629) (58,798) -------- --------- Net increase (decrease) in cash and cash equivalents (6,772) 25,722 Cash and cash equivalents: Beginning of period 40,455 14,733 -------- --------- End of period $ 33,683 $ 40,455 ======== ========= Supplemental disclosures: Interest paid $ 2,666 $ 1,870 ======== ========= Income taxes paid $ 30,917 $ 8,513 ======== ========= *T

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STGS Stage Stores (MM)