Stage Stores Inc. (SSI) reported modest results for the second quarter with earnings of 24 cents per share, which was a penny above the Zacks Consensus Estimate. However, earnings were down 4% year over year.
 
Net sales for the quarter declined 8.3% year over year to $342 million. The average transaction value for the quarter was flat year over year, as a 1% increase in the average unit retail was fully offset by a 1% decrease in units per transaction. Further, comparable store sales were also down 10.7% driven primarily by reduced merchandise clearance in stores.
 
However, the private label credit card program continued to perform well. Credit penetration increased 210 basis points during the second quarter. Delinquency rates — defined as 90 days past due, remained approximately flat on a sequential basis and were up marginally year over year. Further, credit limits and customers ready to buy remained above 2008 levels.
 
Gross margins for the quarter improved 73 basis points (bps) year over year, primarily due to efficient inventory management. The operating margin also expanded 79 bps driven by increased credit income, lower store expenses and reduced corporate overhead expenses. Capital expenditures for the quarter were $11 million.
 
Stage Stores brings nationally recognized brand name apparel, accessories, cosmetics and footwear for the entire family to small and mid-size towns and communities through 752 stores located in 39 states. The company operates its stores under the five names of Bealls, Goody’s, Palais Royal, Peebles and Stage.
 
Based on the performance of the company in the first half of 2009, management provided guidance for the third and fourth quarter, and updated guidance for fiscal 2009. For the third quarter, sales are expected to be in the range of $318 million to $328 million. Management expects a third-quarter loss of 29 cents to 21 cents per share.
 
Fourth quarter sales are forecasted in the range of $425 million to $435 million, while earnings are expected in the range of 54 cents to 65 cents per share. 
 
Management reduced the sales guidance for fiscal 2009 to between $14.2 billion and $14.4 billion. It previously guided in the range of $14.3 billion to $14.7 billion. Stage Stores now expects full-year earnings of 47 cents to 65 cents per share, compared to the prior expectation of 40 cents to 65 cents per share.
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