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Stage Stores, Inc. (SSI)
F3Q08 Earnings Call
November 20, 2008 8:30 am ET
Bob Aronson - Vice President Investor Relations
Andy Hall - President and Chief Executive Officer
Ed Record - Executive Vice President and Chief Financial Officer
Jeff Blaeser - Morgan Joseph
David Mann - Johnson Rice
Robert Drbul – Barclay’s Capital
David Glick - Buckingham Research
Previous Statements by SSI
» Stage Stores, Inc. Q2 2009 (Qtr End 08/01/09) Earnings Call Transcript
» Stage Stores, Inc. F4Q08 (Qtr End 1/31/09) Earnings Call Transcript
» Stage Stores, Inc. F2Q08 (Qtr End 08/02/08) Earnings Call Transcript
Welcome to Stage Stores Third Quarter Conference Call. Speaking this morning from the company will be Andy Hall, President and Chief Executive Officer, and Ed Record, Executive Vice President and Chief Financial Officer. Andy will provide a high level overview of the financial and operational highlights for the third quarter. Ed will discuss the quarter’s financial results in greater detail and will also cover the company’s fourth quarter sales and earnings outlooks.
Before they begin I would like to point out that our comments this morning contain forward looking statements. Forward looking statements reflect our expectations regarding future events and operating performance and often contain words such as believe, expect, may, will, should, could, anticipate, plan or similar words.
Our forward looking statements include comments regarding the number of new stores that we plan to open in November, the number of stores that we plan to close by the end of the year and the number of new stores that we plan to open in the 2009 fiscal year as well as the number of Estée Lauder and Clinique counters that we plan to roll out in the 2009 fiscal year.
Our forward looking statements also include comments regarding our net sales, comparable store sales, gross margin, SG&A expenses and earnings outlooks for the fourth quarter of the 2008 fiscal year, our anticipated year end borrowing amount and our planned capital expenditures for the 2009 fiscal year. Such forward looking statements are subject to a number of risks and uncertainties which could cause our actual results to differ materially from those anticipated by the forward looking statements.
These risks and uncertainties include but are not limited those described in our most recent annual report on Form 10-K as filed with the Securities and Exchange Commission and other factors as may periodically be described in other company filings with the SEC.
With all that said I would like to turn the call over to Andy.
We appreciate you joining us today for our third quarter conference call. The third quarter turned out to be an extremely difficult and challenging period in which our sales and earnings clearly did not meet our initial expectations. We experienced significantly reduced customer traffic in our stores as economic conditions deteriorated rapidly and consumer confidence reached historic lows. In addition, hurricanes Gustaf and Ike led to the temporary closing of 53 and 121 stores respectively.
We estimate that the storms cost us approximately $10 million in sales. We currently have all but four of the hurricane impacted stores operational. With sales trending below our expectations we became more aggressive in our marketing efforts and accelerated the liquidation of our clearance goods. While we are disappointed with our overall financial results we are satisfied with our quarter end inventory position of down 13% on a comparable store basis. We are also pleased with our expense control efforts as SG&A expenses were down $2.2 million versus last year despite operating 44 more stores.
Moving now to a brief discussion of our major merchandise categories; cosmetics once again led the way with a 7.8% comparable store sales gain for the quarter. Given the reduced store traffic all remaining merchandise categories and all market regions experienced negative comparable store sales for the quarter.
During the third quarter we completed the installation of three new Estée Lauder and three new Clinique counters. These additions brought the total number of Estée Lauder counters to 150 and our Clinique counters to 136. In the fourth quarter we currently expect to open six new Estée Lauder and five new Clinique counters. We are currently working with Estée Lauder and Clinique to finalize our roll out plans for fiscal 2009 but at this point we anticipate installing approximately 20 Estée Lauder and 20 Clinique counters.
With regard to our comparable store sales by market size all of which are adjusted for the impact of hurricanes our small markets led the way at down 7%, our mid size markets were down 8.2% and our large markets were down 9.8%. Even in these tough economic times our small markets continue to out perform our larger markets which supports our ongoing strategy of primarily opening new stores in small markets.
Turning now to our third quarter store based activities; we opened 17 new stores, relocated three stores and expanded two stores. We also increased our geographic presence to 38 states by entering Minnesota and Nevada. We closed five stores during the quarter which included four hurricane damaged stores. We ended the period with 731 stores comprising a total of approximately 13.6 million selling square feet.
In November we will open 11 additional new stores and re-open three of the four hurricane damaged stores. In total we will open 56 new stores in fiscal 2008. Finally, we anticipate closing five more stores by year end.
As we previously announced, given the current economic conditions we are moderating the pace of our 2009 new store openings. We plan to open between 30 and 40 new stores. We believe this store opening plan strikes an appropriate balance between growth and capital preservation. While we are currently in the midst of a slowing economy we are confident that we can open stores that meet our internal hurdle rates and we will be well positioned in our target markets when the economy improves.