August Sales Down at Stage Stores

Stage Stores Inc. (SSI - Snapshot Report) reported total sales of $113.0 million in August 2011, down 0.9% from $114.0 million in August 2010. The company’s comparable store sales (comps) also declined 1.7% versus a 0.5% increase recorded in the same month a year ago. After recording modest increases in two consecutive quarters, the company saw a decline in sales during August. This could be due to a delay in the back-to-school shopping pattern.

Stage Stores’ year-to-date total revenue was up 1.6% year over year at $812.0 million while comps grew 0.2% against a decline of 0.9% in the corresponding period last year. In the recently concluded second quarter, the company’s total sales increased 2.3% year over year to $353.0 million attributable to a 0.9% upside in comps.

In August, the categories that performed well in terms of comps were children’s, cosmetics, home & gifts and junior’s merchandise division. Geographically, the Southeast and Southwest regions recorded comparable store sales gains during the month. With a pick-up in the back-to-school shopping season, management expects comps to be up 1–3% for the third quarter of 2011.

The company also rebranded 12 stores as Goody’s in August, completing its rebranding program for 2011. We believe the rebranded Goody’s locations, which are likely to expand to around 240 at the end of fiscal 2012, will fetch further sales for the company. In the second quarter, the rebranded Goody’s locations generated double-digit comps growth.

Stage Stores which houses nationally branded apparel, accessories, cosmetics and footwear for the entire family to small and mid-size towns, ended the August quarter with 801 retail outlets in 39 states. During August, the company closed two stores. Management expects to end this year with roughly 820 stores among which the opening of 21–22 new stores and reopening of one fire-damaged store are scheduled for the back half of the year.

The company also remains committed to enhance shareholder value having repurchased $57.4 million worth common stock and announcing a 20% hike in the dividend rate in the second quarter. The Zacks Consensus earnings estimates for the third quarter and fiscal 2011 are pegged at 24 cents and $1.11, respectively.

Stage Store currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Cache Inc. (CACH - Snapshot Report) currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating.