Stage Stores

Stage Stores Inc. ( SSI - Snapshot Report ) achieved its 52-week high of $23.18 on October 4 due to several factors, including its solid year-to-date return of 65.6%, stellar second-quarter fiscal 2012 performance and strong comparable-store sales for September. This department and off-price store retailer had reached Zacks #1 Rank (Strong Buy) status a day earlier.

Stage Stores comparable-store sales for September rose 11.1%, buoyed by merchandising initiatives and marketing strategies. (In August, the company reported a gain of 6.5%.) Furthermore, SSI appears to have enough potential to attain new highs based on an upbeat outlook for fiscal 2012.

Profit Surges, Guidance Up

Stage Stores posted second-quarter fiscal 2012 earnings of 37 cents per share on August 16, beating the Zacks Consensus Estimate of 34 cents by 8.8% and last year’s earnings of 29 cents by 27.6%. The upside came on the back of higher comparable-store sales and improved merchandise margins.

Net sales of $381.6 million comfortably surpassed the Zacks Consensus Estimate of $370 million, and grew 8.2% year-over-year due to a comparable-store sales increase of 5.4%. Gross profit advanced 10.9% to $115.2 million, whereas gross margin expanded 80 basis points to 30.2% on the back of robust full-price sales and reduced markdowns.

Buoyed by a strong first half performance, Stage Stores raised its outlook for fiscal 2012. Management now envisions comparable-store sales growth between 2.5% and 3.5%, and earnings at $1.15 to $1.25 per share. Earlier, the company had forecasted a comparable-store sales increase of 0.8% to 2.4% and earnings between $1.08 and $1.20.

Stage Stores now expects fiscal 2012 sales between $1,605 million and $1,620 million. Previously, it had predicted sales of $1,592 million to $1,615 million.

Earnings Estimates Climbing

The Zacks Consensus Estimate for fiscal 2012 rose 3.4% to $1.23 per share over the last 60 days, implying year-over-year growth of 33.9%. For fiscal 2013, the Zacks Consensus Estimate is $1.40 per share, increasing 6.1% over the same time frame, and marking year-over-year growth of 13.4%.

Favorable Valuation

Stage Stores currently trades at a forward P/E of 18.82x, on par with the peer group average. Its price-to-book ratio of 1.67 reflects a substantial discount of 50.3% to the peer group average of 3.36. Similarly, the price-to-sales ratio reflects a discount of 42.7% to the peer group, with shares trading at a multiple of 0.47. The company’s compelling fundamentals are well supported by its long-term estimated EPS growth rate of 15.1%.

Chart Echoing Strength

Barring a few occasional pull backs, shares of Stage Stores have been steadily rising since the beginning of the year. The stock gained momentum on October 1, when the company reported strong comparable-store sales results, and rose 9% within three days to hit a 52-week high of $23.18 on October 4. The stock has been consistently trading above its 200-day moving average since May 10, 2012. It has also remained above its 50-day moving average since May 16, 2012. Volume is fairly strong, averaging roughly 317K daily. The year-to-date return for the stock is 65.6% compared with the S&P 500’s return of 14.4%.

Stage Stores operates department stores and off-price stores in the small and mid-sized markets of the United States. The company’s department stores operate under names such as 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. As of October 1, 2012, the company operated in 40 states through 842 stores. Stage Stores primarily competes with Ross Stores Inc. (ROST ).

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