Houston-based Stage Stores Inc. (NYSE: SSI) has been in the process of converting its existing department stores, to its off-price Gordmans chain. Due to the success, the company recently announced that it plans to transition all stores, including Goody’s, to the off-price strategy.
The company currently operates 625 specialty department stores — under the Bealls, Goody’s, Palais Royal, Peebles and Stage brands — and 158 Gordmans. As of July 23, the company had planned to end fiscal year 2020 with 400 of its locations operating under the Gordmans brand.
Now, Stage Stores expects to be operating about 700 Gordmans off-price stores, predominantly in small markets, by the third quarter of fiscal 2020, according to a Sept. 17 press release. A limited number of stores could continue operating under their existing brands until their leases allow them to close, per the release. The company plans to close about 40 stores during fiscal 2020, which ends Feb. 2, 2021. As of July, the company planned to close between 55 and 60 stores in fiscal 2019.
“We are excited about our future as we fully transition to an off-price business model,” Stage Stores CEO Michael Glazer said in the release. “Since 2018, we have converted 98 department stores to off-price, including 17 small-market conversions which are grand opening today in Michigan, Pennsylvania, Ohio, Kentuck and Tennessee. Compared to their performance as a department store, off-price conversions have consistently delivered higher sales with less inventory, similar retail margins, and lower (selling, general and administrative expenses). Additionally, with the success of our recent tests of lower-cost conversions, we are able to execute our fiscal 2020 conversion strategy while maintaining our capital spend in line with fiscal years 2018 and 2019.”
Each store conversion used to cost about $125,000, according to Stage Stores’ 2018 annual report filed with the U.S. Securities and Exchange Commission. As of July, “contributions from (Stage’s) landlord partners and value engineering” had reduced that figure to about $80,000 per store, and the company planned to test a conversion strategy costing just $40,000 per store in September. That allowed Stage Stores to lower its capital expenditure guidance for 2019 to $30 million.