Stage Stores to Sell Steele’s as Q4 Profit, Sales Decline

steelesHouston—Shares of Stage Stores Inc. today rose in early trading after the department store company posted better-than-expected fourth quarter earnings, adding it plans to sell its Steele’s off-price division.

Stage reported that the deal (for an undisclosed sum) to purchase Steele’s was reached with Hilco Global Group and expects the deal to close during first quarter.

Launched in 2011, Steele’s sells apparel, accessories, shoes, home décor etc. at discounted prices. Hilco will acquire the store through a 100% equity purchase.

According to the agreement, Hilco will assume responsibility for all but one of the remaining Steele’s real estate leases and will also take over the Steele’s buying operation located in New York City.

Stage Stores said it posted $4.5 million in impairment charges related to the sale, as well as $745,000 in charges from Steele’s operating results.

Net, Comp Sales Decline

For the three month ended Feb. 1, Stage Stores posted net earnings of $24.9 million, or 78 cents a share, compared with earnings of $35.8 million, or $1.09 a share, a year earlier. Excluding the impairment charge related to Steele’s and items tied to the consolidation of its South Hill, Va. operations into its Houston headquarters, adjusted earnings were $1.01 a share, ahead of analysts’ average estimate for 99 cents a share.

Net revenue declined 5% to $527.9 million (excluding Steele’s revenue for the current quarter totaled $493 million). Analysts had expected $510.36 million in sales.

Comparable store sales decreased 3.4%, while on a shifted calendar basis, comparable store sales were down 1.1%. Analysts had forecast a comp sales drop of 2.2%.

In January, Stage Stores warned that store traffic was off in the weeks leading up to Christmas after posting strong sales in November.

Cosmetics, children’s, related sportswear, plus sizes, men’s business and footwear were its best performing categories during the quarter. Geographically, the South Central and Northwest regions performed better than the company average.

Gross margin narrowed to 28.4% from 32.4%, though selling, general and administrative expenses fell 11%.

For its fiscal 2013, Stage Stores reported earnings of $16.6 million, or 51 cents a share, compared with $38.2 million, or $1.19 a share, in the previous year. Adjusted earnings were $1.22 a share.

Annual revenue edged down 1% to $1.63 billion (excluding Steele’s revenue totaled $1.61 billion). Comp sales for the year were down 1.1%.

“We are optimistic about our prospects for 2014. The initiatives we undertook last year should drive 2014 growth,” said Michael Glazer, president/ceo. “We plan on opening, expanding or relocating 40 to 50 stores, introducing additional high profile brands, rolling out more cosmetics counters and leveraging our e-commerce platform to accelerate the growth of our direct-to-consumer business.”

For 2014, the company projected adjusted earnings per share between $1.35 to $1.45 with sales in the range of $1.64 billion to $1.67 billion. Comp store sales are expected to be in the range of flat to up 2%.

Analysts’ consensus expects 2014 earnings of $1.36 a share on sales of $1.71 billion.

 

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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com