Stage Stores, Inc. (SSI)

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Stage Stores (SSI)

Q4 2012 Earnings Call

March 12, 2013 8:30 am ET


Bob Aronson - Vice President of Investor Relations

Michael L. Glazer - Chief Executive Officer, President and Independent Director

Oded Shein - Chief Financial Officer and Executive Vice President

Steven Paul Lawrence - Chief Merchandising Officer

Edward J. Record - Chief Operating Officer and Secretary


Jeffrey S. Stein - Northcoast Research

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

Robert S. Drbul - Barclays Capital, Research Division

Jeffrey Wallin Van Sinderen - B. Riley & Co., LLC, Research Division

Mitch Van Zelfden

Jonathan Hart - The Buckingham Research Group Incorporated

Michael Richardson - Sidoti & Company, LLC

David J. Glick - The Buckingham Research Group Incorporated



Good morning, and welcome to Stage Stores' conference call. [Operator Instructions] As a reminder, the conference call is being recorded. I would now like to introduce your moderator for today's conference, Mr. Bob Aronson, Vice President, Investor Relations. Mr. Aronson, please begin your conference.

Bob Aronson

Thank you, operator. Good morning, and welcome to Stage Stores' Fourth Quarter Conference Call. With us on the call this morning is Michael Glazer, President and Chief Executive Officer; Oded Shein, Chief Financial Officer; Ed Record, Chief Operating Officer; and Steve Lawrence, Chief Merchandising Officer. Michael and Oded will begin the call with some prepared remarks. Following the conclusion of their remarks, all of them will be available to take your questions.

But before we begin, I would like to point out you'll be hearing Michael and Oded using the terms reported earnings and adjusted earnings. Reported earnings are on a GAAP basis. Adjusted earnings are on a non-GAAP basis and refer to our GAAP earnings, which have been adjusted to exclude certain onetime items. We believe adjusted earnings provide a better comparison of operating trends between the periods as they exclude those items which impact comparability. The onetime items that they will be referring to are costs associated with the resignation of our former CEO in March of 2012 and the consolidation of our South Hill, Virginia, operations into our Houston corporate headquarters, which we announced last month.

I would also 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. 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 to, 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.

And now with all that said, I would like to turn the call over to Michael.

Michael L. Glazer

Thanks, Bob. That was quite the introduction. And good morning, everyone. We appreciate you joining us on our call today. As Bob mentioned, I'm here with Ed, Oded and Steve Lawrence. Given it's our year-end call, I thought it would be appropriate to have Steve here to answer any merchandising-type questions that you may have. And I know since it's his first conference call for Stage Stores, I know you'll go easy on him.

I'm obviously happy to talk about 2012, and we'll share some initial thoughts about 2013. When I became CEO last March, I discussed with all of our associates the importance of comp store sales increases and how every single decision should be made to maximize sales and profits. And guess what? Over 14,000 of our valued and dedicated associates delivered big time. 2012 was truly a phenomenal year for Stage Stores. We achieved incredible gains in sales and earnings, and significant progress was made on our strategic initiatives.

Total sales for the year exceeded $1.6 billion for the first time in our history, and we achieved a strong 5.7% increase in comparable store sales, which was the highest percentage increase in over 10 years. Our comparable store sales increase was broad-based, as almost every merchandise category posted a comparable store sales gain. We were particularly pleased with the strength of our feminine apparel business as missy sportswear, petite's and junior's all exceeded the company average. We were also thrilled with the performance of our home and gifts business, which had the largest comparable store sales increase of all of our categories.

Looking at sales by market size for the year, it is most gratifying to note that our large-market stores, which constitute about 20% of our business, had the greatest comp store sales increase. Of course, here at Stage, our definition of a large market is any city with a population of over 150,000. That larger-market success is attributable to, for sure, our improved merchandising, marketing and store execution, and it confirms that we can compete effectively in these markets. This point is critical, and the reason I mention it is because it potentially provides us with even more opportunities to find locations that will meet our new store criteria.

Driven by our record sales and benefiting from a 90-basis-point improvement in the adjusted gross profit rate, our adjusted earnings per share increased by an outstanding 45% to a record $1.33 per share. So what initiatives did we undertake in 2012 that helped us achieve our results, and what were some of our major accomplishments?

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