Seeking Alpha: Stage Stores Taking A More Realistic Approach

Amidst a challenging retail environment, Stage Stores (NYSE:SSI) has been an interesting story to follow as the company has been challenged by internal execution issues and a changing retail industry. Stage still has some real issues with sales productivity and margins, but management seems willing and able to address these issues more directly instead of trying to grow its way past them.

I've run hot-and-cold on the shares (or rather bullish and "hold/wait") over the past couple of years as the shares have oscillated between the mid-to-high teens and mid-to-high $20's. I was bullish on the stock as of my last article and while the stock is up more than 20% since then, the shares spent the following six months trending down about 15% before a rally late in 2014. I'd also note that investors would have done much better with Kohl's (NYSE:KSS) and a little better with Dillard's (NYSE:DDS).

This is a challenging stock for me right now. On one hand, I do still see the potential for the company to meaningfully grow its footprint and improve its internal sales productivity by adding more cosmetics and home goods and refurbishing its store base. On the other hand, the company has become more dependent on credit-related income and there is a real risk that the retailing landscape has fundamentally shifted. I don't think these shares are necessarily expensive today, but further upside really is tied to real progress with comp growth and margins more than the Street regaining its enthusiasm for the name.

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Stage Stores Taking A More Realistic Approach

Investopedia: Nordstrom Shows That Even The Best Can Struggle A Bit

It's hard to find new positive things to say about Nordstrom (NYSE:JWN). This high-end retailer has long stood out from the crowd with its sharp-eyed merchandising, high inventory turns, flexible operating model, and above-average returns on capital. Couple that with a still-growing Rack store concept and e-commerce opportunities, and it's hard to ever get too negative on this company. On the other hand, Nordstrom's excellence has been well-known for years and this second quarter shows that even well-run retailers can struggle to make headway in the face of a tougher consumer spending environment.

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http://www.investopedia.com/stock-analysis/081913/nordstrom-shows-even-best-can-struggle-bit-jwn-m-oxm-sks.aspx

Investopedia: Kohl's Could Work For A Trade, But It's In A Brutal Business

Retailers have to try to pick winners, and whenever a company builds its model upon picking winners it's just a matter of “when” (not “if”) the company stumbles. Kohl's (NYSE:KSS) did a lot of things right in building up its 1,150-store chain of value-oriented specialty department stores, but execution has been more problematic recently. Conventional valuation metrics suggest Kohl's could have further to run if/when the reported numbers improve, but investors thinking long term should be wary of the cash flow model and the ability of any company to establish long-term competitive edges in retailing.

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Investopedia: Kohl's Could Work For A Trade, But It's In A Brutal Business

Retailers have to try to pick winners, and whenever a company builds its model upon picking winners it's just a matter of “when” (not “if”) the company stumbles. Kohl's (NYSE:KSS) did a lot of things right in building up its 1,150-store chain of value-oriented specialty department stores, but execution has been more problematic recently. Conventional valuation metrics suggest Kohl's could have further to run if/when the reported numbers improve, but investors thinking long term should be wary of the cash flow model and the ability of any company to establish long-term competitive edges in retailing.

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http://www.investopedia.com/stock-analysis/051613/kohls-could-work-trade-its-brutal-business-kss-jcp-gman-m-sks.aspx

Investopedia: Are Investors Being Rational About J.C. Penney?

There are more than a few similarities between Wall Street and a spoiled toddler. Not only do both expect someone else to clean up their messes, but when they want something they want it NOW. Accordingly, I can't say I'm all that surprised to see the widespread negative reaction to J.C. Penney's (NYSE:JCP) first quarter results. While these results were disappointing and do highlight the amount of work the new management team has to do, the fact is that major business restructurings and repositionings don't happen overnight.

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http://stocks.investopedia.com/stock-analysis/2012/Are-Investors-Being-Rational-About-J.C.-Penney-JCP-KSS-M-MSO0518.aspx

Investopedia: Oxford Reaping The Rewards Of Transformation

Change just for the sake of change is a often a really bad idea, as is changing up a successful business plan. And yet, it looks as though a major shift in the business plan has been just the ticket for Oxford Industries (NYSE:OXM), as the company seems to be reaping better margins and a better valuation as it has shifted away from its traditional private label apparel manufacturing business. 

A Decent Beginning to the Fiscal Year 

Oxford got its fiscal year off to a solid state. Revenue rose 27% on a reported basis and was more or less in line with the average analyst expectation. Revenue growth was fueled by the inclusion of sales from the Lilly Pulitzer business that Oxford acquired roughly six months ago and was therefore not part of year-ago sales. The inclusion of this revenue was responsible for two-thirds of the company's reported revenue growth, though the Tommy Bahama business was up nearly 13%. Unfortunately, the turnaround in the Ben Sherman business line continues to falter and revenue was down a further 13%.

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http://stocks.investopedia.com/stock-analysis/2011/Oxford-Reaping-The-Rewards-Of-Transformation-OXM-JWN-M-URBN-TGT-RL-PVH0609.aspx

Investopedia: Waiting For A Clearance Sale On Ulta

As investors in retailers like Talbots (NYSE:TLB) or American Eagle (NYSE:AEO) can easily attest, this is not the easiest environment for retail. Oh true, conditions are better now than a year or two ago, but retailers really need to offer something distinctive in terms of product selection, pricing or shopping experience to draw in the crowds.

To that end, Ulta (Nasdaq:ULTA) seems to have hit on an attractive and differentiated concept - a beauty and personal care superstore format that is competitive on pricing while offering a wide selection and pleasant environment. Like lululemon (Nasdaq:LULU) and its own differentiated products and branding, Ulta is carving out an impressive growth trajectory while many of its rivals are struggling to hold on to what they have.



Keeping up the Momentum in Q1
Ulta's fiscal first quarter showed no slowdown in the company's momentum. Sales were up almost 21% on a reported basis, with same-store sales up more than 11%. There is a decided lack of direct comps to Ulta (one of the positives in the company's thesis), but anecdotal from the likes of Macy's (NYSE:M), Nordstrom (NYSE:JWN) and Kohl's (NYSE:KSS) would suggest that Ulta's performance is quite a bit stronger than the average department store cosmetics counter.


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http://stocks.investopedia.com/stock-analysis/2011/Waiting-For-A-Clearance-Sale-On-Ulta-ULTA-LULU-M-JWN-WAG-AVP-SBH0608.aspx

Men's Wearhouse Gets A Sharp Markdown

Men's apparel retailer Men's Wearhouse (NYSE:MW) may guarantee that its customers will like how they look, but that doesn't guarantee that shareholders will be happy. Although the company's third-quarter report held no particularly bad surprises, management guided toward a larger loss in the fourth quarter and traders swiftly cut down the price of the stock. 

A Mixed Bag for the Third Quarter 

On the top and bottom lines, there was not much to fault about the third quarter at Men's Wearhouse. Revenue jumped 19% and handily exceeded even the highest published estimate. Sales were helped by 13% growth in tuxedo rentals, 8% growth in the retail segment and over $50 million of acquired growth in the corporate apparel segment. That puts overall organic growth more in the range of 8% (and consistent with comp-store growth of 9.6% at Men's Wearhouse) - a level that compares favorably to MW's most direct comparable, JoS. A. Bank (Nasdaq:JOSB), which reported overall growth of 7% and comp-store growth of 3% for its third quarter. 

Profitability, however, was more problematic. Gross margins dropped a full point, due in large part to aggressive promotions. Consequently, a more than two-and-a-half point drop in clothing margins offset ongoing improvement in the very high-margin tuxedo rental business. Although operating expense growth of 16% was less than sales growth (so there was positive leverage), that is still a pretty rapid pace of growth - even stripping out some "one-time costs" leaves SG&A growth at 12%; a level that may still concern investors waiting to see whether this company can recapture past margin leverage.

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http://stocks.investopedia.com/stock-analysis/2010/Mens-Wearhouse-Gets-A-Sharp-Markdown-MW-JOSB-M-DDS-JCP-CTAS-UNF1210.aspx

Kohl's Keeps It Simple

The retailing industry constantly recycles itself, as once-popular stores lose touch with their shoppers and fade away and newer entrants more in tune with customers rise to the fore. Kohl's (NYSE:KSS) is hardly a newcomer, but the company is showing that it has the mettle to last in the cutthroat world of broad-line apparel retailing.   

A So-So Quarter
Kohl's may be winning the war, but the company does not win every battle. For the third quarter, the company delivered total sales growth of a bit more than 4% on the back of 1.8% comp-store sales growth. That 1.8% is below the company's 2 to 4% target, but perhaps not so much so to be a long-term worry. Interestingly, it appears that traffic stayed pretty strong, but the average ticket declined - a positive outcome in the sense that it means shoppers keep showing up at Kohl's, even if they are spending less.

Profitability was a bit more of a concern. Gross margin did rise 50 basis points, but the company lost all of that and more on the SG&A line, leading to a 50-basis point decline in operating margin. Kohl's also reported a 5.9% increase in inventory; a figure that bears monitoring for the next quarter or two. 


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http://stocks.investopedia.com/stock-analysis/2010/Kohls-Keeps-It-Simple-KSS-TGT-M-GPS-JCP-SHLD1116.aspx