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Momentum

Shares of Stage Stores Inc. have climbed by more than 22% since May 1 on stellar fiscal first-quarter 2012 results and solid same-store sales increases of 8% in May and 3.3% in June. This department and off-price store retailer is a Zacks #1 Rank (Strong Buy) and is presently trading near its 52-week high.

Fabulous Quarter, Forecast Raised

On May 17, Stage Stores reported fiscal first-quarter 2012 earnings per share of 5 cents, compared with the Zacks Consensus Estimate for a loss of 2 cents, marking a surprise of 350%. The result was also 6 cents above the year-ago quarter. The upside came on the back of higher sales and improved margins.

The company’s net sales of $365.7 million were above the Zacks Consensus Estimate of $362.0 million and grew 5.5% year over year. Comparable store sales were up 2.5%, while merchandise margins expanded 55 basis points during the quarter.

Stage Stores continued to expand its store count in the fiscal first quarter. The company opened about 6 new department stores and 9 new Steele’s stores, while it also added 7 Estee Lauder and 7 Clinique counters. Additionally, the company witnessed strong trends in its e-commerce business.

The company’s increased optimism for the rest of the year was evident when it boosted its comparable store sales guidance for fiscal 2012.The company reiterated its earnings per share guidance of $1.02 to $1.14.

Stable Estimates

Earnings estimates have been stagnant in the last 30 days. However, the Zacks Consensus Estimate for fiscal 2012 has grown about 4.5% to $1.17 per share in the last 60 days. This reflects a year over year growth of 26.9%. The Zacks Consensus Estimate for fiscal 2013 remains stable in the last 60 days at $1.31 per share, depicting a 12.1% year-over-year rise.

Favorable Valuation

Stage Stores currently trades at a forward P/E of 16.01x, on par with the peer group average. On a price to book basis, shares trade at 1.39x, a discount of 34.4% to the peer group average of 2.12x. Similarly, the price-to-sales ratio reflects a discount of 47.2% to the peer group, with shares trading at a multiple of 0.38. The company’s compelling fundamentals are well supported by its long-term estimated EPS growth rate of 15.2%.

Chart Shows Sturdy Growth

The chart below indicates a steady growth in the company’s share price in the last six months, reflecting an upside of about 35.1%. Currently, trading close to its 52-week high, shares of Stage Stores have continually outperformed the 50 and 200-day moving averages since almost mid-May this year. Volume is fairly strong, averaging roughly 346K daily.

Headquartered in Houston, Texas, Stage Stores operates department stores and off-price stores in the small and mid-sized towns and communities of the United States. The company’s department stores operate under the names Bealls, Goody’s, Palais Royal, Peebles and Stage, while its off-price chain carries the Steeles name. These stores offer moderately priced, nationally recognized brand name apparel, accessories, cosmetics and footwear for the entire family. Stage Stores primarily competes with Ross Stores Inc. (ROST).

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