Stage Stores, Inc. announced that net income for the first quarter ended May 3, 2003 was $13.4 million, or $0.69 per diluted share, compared to $17.8 million, or $0.82 per diluted share, for the prior year first quarter ended May 4, 2002. Total sales for the 13-week period decreased 4.2% to $198.0 million from $206.7 million last year. Comparable store sales decreased 7.5% during the quarter.
Jim Scarborough, Chairman, President and Chief Executive Officer, commented, “This year’s first quarter was an extremely difficult and challenging period. Our top-line results were adversely affected by the weak economic and retail environment, unseasonably cool and inclement weather and the impact on consumers associated with the military conflict in Iraq. The combination of these factors resulted in weak consumer demand and highly promotional market conditions during the period. Accordingly, we focused our efforts on driving sales and prudently managing our inventory levels. While our merchandise margins were negatively impacted by our heightened promotional activities, we ended the quarter with inventories per selling square foot at approximately 7.1% below the level at the end of last year’s first quarter. As compared to last year, lower inventory shrink expense, higher income from our credit card program and lower incentive compensation expense all helped to partially offset the impact of lower sales and lower merchandise margins. Our results for the quarter were also affected by start-up costs associated with our new warehouse management system, which was brought on-line in January.”
Mr. Scarborough continued, “Operationally, during the first quarter, we opened eight new stores, remodeled three stores and relocated one store. Additionally, we reduced our securitization facility borrowings by $24.0 million.”
Commenting on the strategic alliance with Alliance Data Systems Corporation (“Alliance Data”), Mr. Scarborough stated, “As we announced after the market closed yesterday, we have reached a definitive agreement with Alliance Data under which they will acquire and operate our private label credit card business. Further, Alliance Data will own the new accounts and balances generated during the ten-year term of the alliance. We believe that Alliance Data will be a great partner who will help us continue to build and strengthen the important relationship that we have with our private label credit card customers, while eliminating the complexities associated with operating and financing our own credit card operation, allowing us to focus exclusively on our core retail business.”
The transaction is subject to certain regulatory approvals. No assurances can be provided that the parties to the agreement will be successful in receiving the necessary regulatory approvals or that the transaction will be consummated.
Stage Stores, Inc.
Consolidated Statements of Operations
(in thousands, except earnings per share)
(unaudited)
Quarter Ended
-----------------------------------
May 3, 2003 May 4, 2002
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% to % to
Amount Sales Amount Sales
--------- ------ --------- ------
Net sales $197,987 100.0% $206,668 100.0%
Cost of sales and related buying,
occupancy and distribution
expenses 135,486 68.4% 134,413 65.0%
--------- ------ --------- ------
Gross profit 62,501 31.6% 72,255 35.0%
Selling, general and
administrative expenses 40,515 20.5% 43,645 21.1%
Store opening costs 509 0.3% 22 0.0%
Interest, net 397 0.2% 389 0.2%
--------- ------ --------- ------
Income before income tax 21,080 10.6% 28,199 13.6%
Income tax expense 7,694 3.9% 10,434 5.0%
--------- ------ --------- ------
Net income $13,386 6.8% $17,765 8.6%
