Stage Stores Inc., which is converting many of its banners to the Gordmans off-price concept, cut its losses in the third quarter as same-store expanded 17.4 percent.
Third quarter highlights:
- Comparable sales increased 17.4 percent.
- 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 percent 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 percent 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 percent 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 percent to +9 percent. 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 percent
- 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
For 2019, the company provided the following annual guidance:
- Net sales between $1,640 million and $1,670 million
- Comparable sales increase of 7 percent to 9 percent
- Adjusted EBITDA between $35 million and $40 million
- Net loss between $65 million and $60 million, and tax rate of 0 percent
- Adjusted net loss between $40 million and $35 million, and a tax rate of 0 percent
- 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
Stage Stores 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.