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Stage Stores Inc. (SSI - Snapshot Report) just raised its dividend by 50%. The moderately priced retailer is trading at 13.2x forward earnings.

Stage Stores has a unique niche in the retail industry as it sells moderately priced merchandise in small and mid-size towns in 39 states. The company operates 770 stores under the names of Bealls, Goody's, Palais Royal, Peebles and Stage.

Dividend Raised 50%

On June 14, the company announced it was raising its dividend to 7.5 cents from 5 cents applicable to dividends declared after June 23.

Stage Stores said the increase was due to its confidence in its strong cash flow and earnings growth ability.

Before the announcement, the dividend was yielding 1.6% for shareholders.

May Sales Declined 0.6%

On June 3, the company reported that May sales fell 0.6% to $116 million from $117 million in the year ago period. Comparable store sales declined 2.9% but were down 7.2% in the year ago period. The 2010 numbers did not include Memorial Day.

Footwear and swimwear saw same store sales gains. All of the company's regions had strong same store sales gains in the month except for the South Central region, where Texas continued to be soft.

The company did not open any new stores in May, but it did close a flood-damaged store in Tennessee during the month.

"May, which was up against the toughest second quarter comparison to last year and the loss of Memorial Day, performed in line with our internal expectations," said Andy Hall, President and Chief Executive Officer.

"We saw improving sales and traffic trends in the back half of the month and remain cautiously optimistic as we head into June and July with the appropriate inventory levels, merchandise content and easier comparisons," he added.

Stage Stores Beats by 50% in the First Quarter

On May 20, Stage Stores surprised on the Zacks Consensus for the first quarter by 2 cents. It was the fourth straight earnings surprise.

Earnings per share were 6 cents compared to the consensus of 4 cents. The company saw a loss of 2 cents in the prior year quarter.

Sales rose 1.9% as tightly managed inventories and expenses boosted the bottom line. Stage Stores opened 18 new stores in the quarter, with 16 of them under the Goody's name. The company said it continues to gain market share in its 33 Goody's locations.

Full Year Guidance Raised

The company expects second quarter sales to rise between 2.3% and 4.4%. Same store sales are projected to be flat to up 2%.

Fiscal 2010 earnings per share are now expected to be in the range of 90 cents to $1.00, up from the prior guidance of 80 cents to 90 cents.

Zacks Consensus Estimates Rise

Given the increased guidance, it's not a surprise that the fiscal 2010 Zacks Consensus Estimate has jumped by 2 cents to 94 cents in the last month.

Analysts now expect 2010 earnings growth of 25%.

Value Fundamentals

Stage Stores has a value price-to-book ratio of 1.0 which is also well-under the industry average of 1.8. It also has a price-to-sales ratio of just 0.3, which is well within the value stock parameters and also under the industry average of 0.5.

Stage Stores is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.

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