Stage Stores Daily Stock Roundup

Stage Stores is a company that operates Family Apparel stores in the US under a variety of brand names.

Stage Stores is one of the companies hated most by investors. It operates in an industry that is very much out of favor. There are extremely negative opinions about the company both from the group and the company itself. The company’s cash flow and dividends are attractive, but the lack of earnings and the poor figures recorded in the balance sheet make it only worth watching in the stock exchange market.

Stage store earnings: The company has lately reported weak earnings, and this could be attributed to the fact that it is facing stiff competition from its direct competitors, Amazon and Walmart, and a general weakness in the company’s retail. Recently the company held a conference call explaining all their issues. Weak traffic, margin pressure and promotional activities were some of the issues reported to be contributing to the company’s ailing profit margins.

President and chief executive officer of Stage Stores, Michael Glazer, remarked that the fourth quarter adjusted earnings reflected continued challenges in the overall soft retail environment and the oil impacted border states. He cited weak traffic as a major cause of heightened promotional activity and gross margin pressure during the quarter. Despite this, Stage Stores ended 2016 with inventory levels that were 6% lower than the previous year.

Customer behavior changes and external headwinds were expected to persist and still had a negative outlook. The company seeks to re-establish its performance by focusing on sales in key merchandise categories and creating top-rate customer experiences online and in their stores. Raising engagement levels with customers through marketing was also part of the company’s strategy to boost sales. The company generated positive free cash flow in 2016 and expects to do the same in 2017 by minimalizing capital expenditures, managing expenses with caution and improving working capital.

Stage store valuations: The company is generating continued cash flow despite its dwindling retail environment. The company is said to have been in the gutter in terms of retail. The company is lowly valuated at $54 million, but the cash flow level is very tempting.

Balance sheet: Stage Store’s balance sheet is not the most attractive. The current ratio does not provide a margin of safety. Assets, especially current assets that are crucial in adding safety to the risks are lacking in the balance sheet.

Earning Strength: The company’s earning strength is poor. The company lost money in 2016, and it is expected to lose money for three years running, and this makes it very hard for an investor to inject capital into the company. It would be a different story if the company was closer to break even, but this is not the case, and it further adds on to the level of risk to the shares. The company invested $40 million on store improvements and to foster a change in mix to include beauty and cosmetics, but earnings remained low.

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