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Value

While the luxury retailers make a serious comeback, what about those catering to the other end of the shopping spectrum? Stage Stores Inc. (SSI - Snapshot Report) recently reported fiscal 2010 earnings that rose 32% from 2009. This Zacks #1 Rank (strong buy) has an attractive price-to-sales ratio of just 0.4.

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 784 stores under the names of Bealls, Goody's, Palais Royal, Peebles and Stage.

Stage Stores Surprised By 2.4% in the Fiscal Fourth Quarter

On Mar 8, Stage Stores reported its fourth quarter results and beat the Zacks Consensus Estimate by 2 cents. Earnings per share were 86 cents, a 19% increase from the 72 cents reported a year ago.

Earnings per share for the full year rose to 99 cents from 75 cents in fiscal 2009.

Total sales rose 5.1% in the fourth quarter and gross profit improved by 130 basis points.

The company opened 33 new stores, of which 30 were opened under the Goody's brand. It also rebranded 26 stores as Goody's stores during the year. Cosmetics were also expanded, adding 8 Estee Lauder and 17 Clinique counters for the year.

Stage Stores also finally got into the ecommerce game, launching its eCommerce web site in the fourth quarter. The company said initial public interest and sales activity exceeded its expectations but it didn't break down how much it contributed to overall sales.

Huge Share Buy Back Announced

In the fourth quarter, Stage Stores bought back $25 million in shares but that was nothing compared to the $200 million share repurchase program it announced on Mar 8. It represents a third of the company's market value.

The company intends to purchase $100 million during fiscal 2011 and then finish the program in fiscal 2012.

Outlook for Fiscal 2011

First quarter sales are expected to rise between 1% and 3%. March is expected to be a bit weak, with sales falling in the mid-single digits, but April should see a rebound due to the timing of Easter. The company expects double digit sales growth in April.

For the year, Stage Stores expects to make $1.07 to $1.17, up from the 99 cents it made in fiscal 2010. Same store sales are expected to rise 1% to 3% for the year.

Expansion is expected to continue, with 35 to 40 new stores planned for the year.

SSI Is a Value Stock

Stage Stores is trading at 14.8x forward estimates which is just on the edge of being a value stock (as I use 15x as a cut-off.)

Its price-to-book ratio, however, is just 1.2, which is well within the range of a value stock as it's under 3.0.

In addition to the share repurchase program, Stage Stores also pays a dividend, which it raised 50% in fiscal 2010. The dividend is currently yielding 1.6%.

Shares got a boost off the earnings report, hitting a 3-year high.

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. You can follow her at twitter.com/traceyryniec.

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