Stage Stores Inc. is looking for a reason to exist and it still thinks off-price is the answer, but that’s a move that could mean less focus on apparel and more on seasonal home décor and gifts.
Michael Glazer, chief executive officer, said Thursday, “Looking to 2019, our pivot to off-price will accelerate, with 70 to 80 department stores converting to Gordmans….We are very excited about the future, including converting 150 more department stores to off-price by the middle of 2020. As a result, by the end of 2020, off-price sales will represent approximately 50 percent of our sales volume.”
Glazer’s comments came in line with the company posting a net loss for the fourth quarter. Stage Stores operates 709 retail doors across 42 states under the nameplates Bealls, Goody’s, Palais Royal, Peebles and Stage. It also operates 87 Gordmans off-price stores. About 10 years ago, a few of the nameplates operated their own websites, but online sales seem to now be centralized at stage.com. While there are a few items from national brands, mostly for intimates and active apparel, much of what’s sold on the site appears to be private label goods that have been staples of a Bealls or Palais Royal merchandise mix.
Price points aren’t exactly on par with either prices or brand offerings that one might find at a Macy’s or Dillard’s, and seem to target more the value-conscious consumer. From a brand standpoint, it’s hard to tell exactly what’s sold at a Stage store these days. A scan of the stage.com website shows the presence of some recognized brands like Gloria Vanderbilt, Nike, Levi’s, Columbia, Chaps, Bali, Maidenform and Skechers. There’s also a selection from older brand names–Alfred Dunner, Briggs New York, Kasper– that were once favorites at major departments stores in the aughts, but then went downstream to the mass merchandisers and are now hardly the go-to brand-of-choice among younger consumers seeking more youthful, contemporary looks.
Stage has been on the radar of many factors and credit watchers for several quarters now. One factor said earlier this month that the retailer has been struggling, though the source was referring more to the department store business and not its off-price model.
A look at the Yahoo Finance chart for fourth-quarter estimates for earnings per share and sales suggests there are no longer any analysts covering the stock, which comes as little surprise as the company said last month that it received a letter from the New York Stock Exchange indicating that Stage shares were no longer in compliance with a requirement connected to the average closing price. Stage has six months to regain compliance with the listing requirement. Shares of Stage on Thursday were down 10.4 percent to close at $1.03.
With many retailers talking about closing stores even as some simultaneously report decent earnings results, it’s clear that the retail landscape is still in the midst of change.
The shift in consumer shopping preferences has also impacted the regional store base, particularly locations in underserved markets referred to as small-town America, where many of Stage’s doors are housed. And with most of the U.S. now having some wired access, and wireless capability, those shoppers can now access the internet and surf their way across sites for the best price.
That said, Glazer said Thursday the company saw sequential improvement in comp sales on a shifted basis, taking into account the shift in the calendar from the extra week in 2017. He also said the improvement included “double digit e-commerce sales growth.”
And as retailers have continued closing stores, many brands also examined their operations and pulled back on accounts to right-size their wholesale distributions. That has impacted many department store doors, including in all likelihood, Stage.
The Stage website has a Michael Kors jacket or two, but not any handbags. And the Coach brand, at least on the site, seems limited to just a few fragrance selections. In beauty, the name brands available for sale is broader, but that’s a category that’s also perfect for seasonal and special occasion gift-giving options. Beauty brands still include Clinique, Elizabeth Arden, Estée Lauder, Georgio Armani, Origins, Philosophy and Smashbox.
For the quarter ended Feb. 2, the net loss was $7.8 million, or 28 cents a diluted share, against net income of $5.6 million, or 19 cents, a year ago. The loss included a $14.9 million trade name impairment charge. Total revenues were down 5.4 percent to $537.7 million from $568.5 million. That total represented a 5.4 slip in sales to $519.5 million and a 4.9 percent decline in credit income. Consolidated comparable sales fell 2.4 percent. In January, reporting on just the nine-week holiday period, Stage said comp sales were down 0.4 percent for the department stores, but rose 2.4 percent at its Gordmans off-price business.
Glazer also said Thursday, “The six department stores converted to Gordmans in smaller mid-west markets delivered a shifted comparable sales increase of more than 150 percent in the fourth quarter. This further increases our confidence in the next phase of our strategy, as the 2019 conversions are predominantly in these smaller mid-west markets.”
Palais Royal and Bealls were the original nameplates operated as a family-owned business in the 1920s. It made some local acquisitions along the way, including in 1992 a 76-unit retailer called Fashion Bar of Denver, which included a juniors’ chain called Stage. The company went public in 1996 and began trading under the name Stage Stores Inc. It later found itself under bankruptcy court protection in June 2000 and exited bankruptcy proceedings in August 2001. Other acquisitions followed, including Peebles in 2003 and the Goody’s name in 2006 in a bankruptcy court auction. Stage began an off-price concept called Steele’s in 2011, but it wasn’t until its March 2017 acquisition of 48 Gordmans stores, a distribution center and the store name—also through a bankruptcy court auction—that the company actually entered the off-price segment with a much bigger presence.
Stage turned Gordmans into an off-price chain, and then began converting a few of its department stores to the nameplate. Seeing success at the converted sites, Stage has plans for about 300 Gordmans off-price stores by the end of 2020.
“Given the strong conversion results in 2018, we expect these efforts to benefit our comparable sales performance in 2019 by at least 200 basis points,” Glazer said.
The company is looking at expanding its home department offerings, and expects that more off-price stores, e-commerce trends, non-apparel merchandise and active apparel sales would be able to support its comp sales guidance of up 3 percent to 5 percent for 2019.