Stage Stores Management Discusses Q4 2012 Results - Earnings Call Transcript

Mar.12.13 | About: Stage Stores, (SSI)

Stage Stores (NYSE:SSI)

Q4 2012 Earnings Call

March 12, 2013 8:30 am ET

Executives

Bob Aronson - Vice President of Investor Relations

Michael L. Glazer - Chief Executive Officer, President and Independent Director

Oded Shein - Chief Financial Officer and Executive Vice President

Steven Paul Lawrence - Chief Merchandising Officer

Edward J. Record - Chief Operating Officer and Secretary

Analysts

Jeffrey S. Stein - Northcoast Research

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

Robert S. Drbul - Barclays Capital, Research Division

Jeffrey Wallin Van Sinderen - B. Riley & Co., LLC, Research Division

Mitch Van Zelfden

Jonathan Hart - The Buckingham Research Group Incorporated

Michael Richardson - Sidoti & Company, LLC

David J. Glick - The Buckingham Research Group Incorporated

Operator

Good morning, and welcome to Stage Stores' conference call. [Operator Instructions] As a reminder, the conference call is being recorded. I would now like to introduce your moderator for today's conference, Mr. Bob Aronson, Vice President, Investor Relations. Mr. Aronson, please begin your conference.

Bob Aronson

Thank you, operator. Good morning, and welcome to Stage Stores' Fourth Quarter Conference Call. With us on the call this morning is Michael Glazer, President and Chief Executive Officer; Oded Shein, Chief Financial Officer; Ed Record, Chief Operating Officer; and Steve Lawrence, Chief Merchandising Officer. Michael and Oded will begin the call with some prepared remarks. Following the conclusion of their remarks, all of them will be available to take your questions.

But before we begin, I would like to point out you'll be hearing Michael and Oded using the terms reported earnings and adjusted earnings. Reported earnings are on a GAAP basis. Adjusted earnings are on a non-GAAP basis and refer to our GAAP earnings, which have been adjusted to exclude certain onetime items. We believe adjusted earnings provide a better comparison of operating trends between the periods as they exclude those items which impact comparability. The onetime items that they will be referring to are costs associated with the resignation of our former CEO in March of 2012 and the consolidation of our South Hill, Virginia, operations into our Houston corporate headquarters, which we announced last month.

I would also like to point out that our comments this morning contain forward-looking statements. Forward-looking statements reflect our expectations regarding future events and operating performance and often contain words such as believe, expect, may, will, should, could, anticipate, plan or similar words. Such forward-looking statements are subject to a number of risks and uncertainties, which could cause our actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in our most recent annual report on Form 10-K as filed with the Securities and Exchange Commission and other factors as may periodically be described in other company filings with the SEC.

And now with all that said, I would like to turn the call over to Michael.

Michael L. Glazer

Thanks, Bob. That was quite the introduction and good morning, everyone. We appreciate you joining us on our call today. As Bob mentioned, I'm here with Ed, Oded and Steve Lawrence. Given it's our year-end call, I thought it would be appropriate to have Steve here to answer any merchandising-type questions that you may have. And I know since it's his first conference call for Stage Stores, I know you'll go easy on him.

I'm obviously happy to talk about 2012, and we'll share some initial thoughts about 2013. When I became CEO last March, I discussed with all of our associates the importance of comp store sales increases and how every single decision should be made to maximize sales and profits. And guess what? Over 14,000 of our valued and dedicated associates delivered big time. 2012 was truly a phenomenal year for Stage Stores. We achieved incredible gains in sales and earnings, and significant progress was made on our strategic initiatives.

Total sales for the year exceeded $1.6 billion for the first time in our history, and we achieved a strong 5.7% increase in comparable store sales, which was the highest percentage increase in over 10 years. Our comparable store sales increase was broad-based, as almost every merchandise category posted a comparable store sales gain. We were particularly pleased with the strength of our feminine apparel business as missy sportswear, petite's and junior's all exceeded the company average. We were also thrilled with the performance of our home and gifts business, which had the largest comparable store sales increase of all of our categories.

Looking at sales by market size for the year, it is most gratifying to note that our large-market stores, which constitute about 20% of our business, had the greatest comp store sales increase. Of course, here at Stage, our definition of a large market is any city with a population of over 150,000. That larger-market success is attributable to, for sure, our improved merchandising, marketing and store execution, and it confirms that we can compete effectively in these markets. This point is critical, and the reason I mention it is because it potentially provides us with even more opportunities to find locations that will meet our new store criteria.

Driven by our record sales and benefiting from a 90-basis-point improvement in the adjusted gross profit rate, our adjusted earnings per share increased by an outstanding 45% to a record $1.33 per share. So what initiatives did we undertake in 2012 that helped us achieve our results, and what were some of our major accomplishments?

From a leadership standpoint, which from my standpoint is everything, we strengthened our executive management team: we added Steve Lawrence, our Chief Merchandising Officer; we added Bill Gentner, our Chief Marketing Officer; and we promoted Russ Lundy to Executive Vice President of all 864 stores. Thanks to their talents and direction, and in collaboration with the other members of the executive management team, we made tremendous strides in bringing excitement to our merchandising, marketing and stores. We clearly became more customer-focused. And most importantly, we stopped underestimating our small-town customer.

To bring more excitement to our merchandise, we reembraced the concept of bringing higher-profile, national brands across all merchandise categories to small -- to smaller towns. Names like Calvin Klein, Nine West, Anne Klein, Jessica Simpson and G by GUESS were all added or expanded. We also greatly increased our current offerings in sought-after brands such as Nike, Levi's and Carter's. Nike actually ended up being our #1 brand in 2012.

In cosmetics, we created a huge buzz with celebrity launches such as the Lady Gaga back in August. Of course, Estée Lauder, Clinique and L'Oréal were huge contributors for us all year. We expanded our offerings in the home area, and we'll continue with that initiative in 2013. Keurig and Cuisinart are 2 new names that our customers will see later this quarter.

Our inventory management has been very thoughtful and strategic. We are finally at a level that makes sense for our stores and our growth. Much of our performance has been driven by increasing our ownership of basic goods and by adding merchandise to support our fulfillment stores. In addition, we have increased inventory to take advantage of both calendar shifts and certain competitive situations.

From a marketing standpoint, we have become much more innovative. We have definitely enhanced the effectiveness of our efforts by updating and improving our message and more importantly, diversifying into all types of media. A small piece of our strength, about 1%, this past year, is a result of us capturing some market share from J.C. Penney's. In the roughly 120 rural markets where we go head-to-head with a J.C. Penney store, our comps ran more than 300 basis points, above our company average. Obviously, we still believe in coupons and event-driven promotional pricing.

Returning to our major accomplishments. We continue with our new store growth in 2012 as we opened 25 traditional stores and 31 Steele's stores during the year. With regard to Steele's, we learn more every day, and we are pleased with the progress that is being made. We continue to believe that there is significant growth potential for an off-price concept in the underserved rural markets. Having said that, we do not plan -- we do not currently plan to open any new Steele's stores during the first half of the year. We want to continue to evaluate and monitor the progress of the 34 Steele's stores to help us determine how aggressively we want to move forward with our off-price concept.

Our direct-to-consumer sales increased 65% over last year, but it needs to grow faster. So increasing our investments in this area remains one of our top priorities. We extended our nearly decade-long relationship with Alliance Data, our private label credit card partner. The most important part of that was launching a new loyalty program with significantly enhanced cardholder benefits. We opened our stores, as many of you remember, for the first time on Thanksgiving night and participated in all the excitement and fun like never before on Black Friday.

And finally, we return capital to our shareholders by increasing our quarterly dividend by 11%.

I'll assume that everyone saw the announcement last month that we are officially consolidating our South Hill office operations into our Houston corporate headquarters. This is a long-overdue move that will serve us well going forward. We took this action with cosmetics a few years ago, moved our footwear and home merchandising late last year and now will consolidate all of the remaining South Hill functions prior to the fall season this year. Areas being consolidated include merchandising, planning and allocation, human resources and all other services currently supporting 331 stores in 24 states. Given the impact on our South Hill employees, the decision to consolidate was a difficult one from -- certainly from a personal and from an emotional standpoint. However, the significant benefits from having all department store functions and processes entirely together in one location could not be ignored. The consolidation would definitely increase our productivity, create synergies, strengthen collaboration, enhance our purchasing power and accelerate our sales growth. It should result in annual cost savings, as we said previously, of approximately $5 million. But more importantly, it will give us the ability to communicate a consistent message to our customers.

I want to share with you that Stage Stores places a high priority on supporting the hundreds of communities that we serve. To enhance those efforts, last year, we introduced our Community Counts program, which is our umbrella program housing our philanthropic and associate volunteer activities. Through our Community Counts program, we are giving back to the communities that we serve and are actively involved in many charitable causes and sponsorships. With millions of dollars raised so far, it is our goal to help our customers and our associates seize every opportunity for a brighter future.

As we enter 2013, we are enthused and excited about our prospects, and we are looking forward to achieving even stronger top line and bottom line results. I am not going to give specific sales numbers, but I will say that in the month of February, we exceeded our internal plans and have continued the positive momentum from last year. We have tremendous growth potential, and we will continue to exploit the significant opportunities that we have in areas such as new store growth, merchandising, marketing, seasonal events, direct-to-consumer, Steele's, the in-store experience, especially visual merchandising, and also information systems. In addition, we will continue to reap the benefits of our new cardholder loyalty program and will begin to realize the synergies of the South Hill consolidation.

Stage Stores continues to be America's leading small-town retailer dedicated to delivering exceptional customer service and desirable brand name merchandise for the entire family. If you combine our successful model with our outstanding management team, our innovation and our strong financial position, it is easy to conclude that the future of Stage Stores is extremely bright.

2012 was a spectacular year for us, but it is only the beginning. That actually concludes my remarks for now. I'm now going to turn the call over to Oded. But again, following his remarks, all of us here will be happy to answer any questions that you may have. Oded?

Oded Shein

Thanks, Michael, and good morning, everyone. I would like to review the results for 2012 and provide sales and earnings guidance for 2013. For the fourth quarter, our net sales for the 14-week period increased 10% to $528 million. The 14th week added $16 million to sales. Comparable store sales over the first 13 weeks of the quarter increased 6.6%. Our reported earnings were $1.09 per share. Last year, we earned $1.05 per share.

For the fiscal year, our net sales for the 53-week period increased by 9% to a record $1,646,000,000. Comparable store sales over the first 52 weeks of the year increased 5.7%, which, as Michael said, was the largest percentage increase in over 10 years. For the year, our average unit retail increased by 3.1%, units per transaction increased by 1.4%, while the number of transactions, a good proxy for traffic, increased by 1.1%. The gross profit rate for the year on an adjusted basis was 28.1%, which was 90 basis points higher than last year. The adjusted merchandise margin component increased 20 basis points due to lower overall markdowns, while the buying, occupancy and distribution cost component improved 70 basis points, driven by improved leverage from the year's higher sales.

The adjusted expense rate for the year was flat to last year. Expense increase was due to investments in Steele's, eCommerce and enhancing our merchandise teams and also higher incentive compensation costs, as our results were better than planned. This was offset by leverage in store operating expenses, lower store opening costs and the performance of our private label credit card program.

With regard to our private label credit card, if you will recall, we launched a new loyalty program and reissued new private label credit cards to more than 2 million customers in November. Our goal in taking these actions was to increase both sales and penetration rate for our card. During the fourth quarter, the penetration rate was up over last year by 220 basis points, while it was up 140 basis points for the entire year. We expect to see additional gains in 2013.

Adjusted earnings for the year were a record $1.33 per share, a 45% increase to the $0.92 per share reported last year. Including onetime items of $0.14 per share, our reported earnings were $1.19. On a pretax basis, the onetime items consisted of approximately $3 million for the former CEO transition and $4 million associated with the South Hill consolidation.

A couple of other statistics. Our adjusted EBIT margin for the year improved 90 basis points versus last year to 4.3%, while our adjusted EBITDA margin improved 50 basis points over last year to 7.9%. As we have shared with you previously, our goal is to grow our EBITDA margin to 10% within the next 3 to 4 years.

Moving to balance sheet and cash flow items. Our cash balance at the end of the year was $18 million. We had $12 million of total debt obligations, of which $6 million was outstanding under our credit facility. Compared to where we were at the end of last year, we have reduced our debt by $37 million. Total merchandise inventory at year-end were 19% higher than the same period last year. Comparable store inventories were up 10%. There are several factors that contributed to the year-over-year increase in total inventories. First, we had 51 more stores open at the end of the year than at the end of last year. Second, we flowed goods in earlier this year to have a greater selection of spring goods on the floor, as well as to support our strong promotional events around Valentine's Day and Easter, which are celebrated earlier in fiscal 2013 than last year. Third, we made strategic investments in inventories to support our higher sales, including eCommerce fulfillment and what we call opportunity doors, where we have the ability to take advantage of a macro trend, for example, energy boom areas in West Texas and Pennsylvania; competitive situations, J.C. Penney's stores, for example, or brand enhancement in border stores. Lastly, we strategically increased the level of basic and commodity items such as socks, underwear and jeans. We are pleased with the content and level of our inventory, and will continue to make such investments as long as they yield positive returns.

Capital expenditures, net of landlord construction allowances, totaled $45 million in 2012 versus $41 million last year. We opened 56 stores, including 25 traditional stores and 31 Steele's stores. That completes my remarks for the 2012 fiscal year.

At this point, I would like review our guidance for the 2013 fiscal year. For the 2013 fiscal year, we expect comparable store sales to be in a range of 2% to 4% increase. Total sales are projected in the range of $1,689,000,000 to $1,721,000,000, an increase of 2.6% to 4.6% to last year. Fiscal 2013 has 52 weeks compared to 53 weeks in 2012. Our adjusted EPS guidance range for 2013 is $1.45 to $1.55. This excludes onetime items associated with the South Hill consolidation, which are estimated to be $0.30 per share. We assumed a diluted share count of 33.2 million shares.

We expect the adjusted gross profit rate for the year to be 10 to 20 basis points better than last year, driven by flat merchandise margins and continued leverage on buying, occupancy and distribution cost component. The adjusted expense rate is expected to be 20 to 40 basis points better than last year as we anticipate improved leverage in store expense, lower store opening and incentive plan costs and higher credit income.

The 2013 capital plan is $57 million. Key capital initiatives for the year include the planned opening of approximately 40 stores and an increased investment in our existing store base with twice as many remodels than last year, new prototype fixture packages for top 40 doors and more cosmetic counters. We're also increasing our technology spend with a new eCommerce platform, an assortment planning tool, store-level price optimization and mobile POS in stores.

That concludes my remarks. We would now like to open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Jeff Stein from Northcoast Research.

Jeffrey S. Stein - Northcoast Research

A couple of questions here. First of all, Mike, wondering if you could address any concerns you might have with respect to the consolidation and how that might play out, moving merchants from East Coast to Houston or hiring new merchants, any concerns that something might be -- you might drop the ball somewhere along the line. And what contingency plans do you have built in for that? And then, you have a pretty big jump this year in CapEx. And Oded, I'm wondering if you could just discuss perhaps whether or not we should expect to see this higher level of CapEx staying beyond this year.

Michael L. Glazer

Sure. I think for your first question about the merchandise risk, I mean, Steve Lawrence is here, our EVP of Merchandising, maybe I'll ask him to address it from that standpoint. I mean, I think it's fair to say any time you make a change like this, there -- you hope not to drop any balls. But I think, Steve, why don't you talk about that? And then maybe Ed can talk about the -- his other question.

Steven Paul Lawrence

Yes, sure. When we thought about this, obviously, pretty much everybody here has worked at other companies and has been through one or two of these, so we certainly know that there are risks associated when you do a consolidation like that. And quite honestly, that's one of the reasons why we did the shoe and home area in the fall, so we could have some learnings that could help inform how we approach the spring consolidation. What we became more convinced of as we got deeper and deeper into the shoe and home consolidation was that, yes, there were a couple of places where we missed some -- or dropped some balls. For example, we might have had a brand that was in a certain door count that we said it's a small brand, we're going to absorb that into a bigger brand, and -- but we might have dropped a little bit in sales there. But what we found was a lot of the wins more than outweighed any of the minor hits we were taking. For example, we found Nike was dramatically under-penetrated in some of the South Hill stores, or the kids' shoe business was dramatically under-penetrated. And so what we found in a lot of cases was the wins far outweighed any sort of hits we took along the way. And we're pretty confident that the same thing is going to happen as we go through it area by area. I will note that we are -- as we consolidate down, we are creating jobs here in Houston, about 75 jobs. And we're actively recruiting and bringing South Hill people here to fill a lot of those jobs. So ideally, what we're going to end up with this is strong -- the strongest culture between the 2 consolidated divisions. We'll have a lot of that knowledge that the people there had about the store base. So hopefully, we won't drop too many balls here because they help us make sure we don't do that.

Michael L. Glazer

Ed?

Edward J. Record

Jeff, this is Ed. I'll take the capital question. We're really excited to be able to have the opportunities to make the investments we're going to make this year. As Oded talked about, we're making significant investments in technology. We're going to re-platform eCommerce. Store-level price optimization, we've been on price optimization a few years now, and we're going to take that down to the store level. We think that's going to have -- be a big win for us. We're putting a new assortment planning to win, which is going to be a big initiative in the merchandising area and, well, actually help with the -- your prior question about consolidation. Then we're looking to roll out mobile POS this year. We're also continuing to invest in new stores, with over 40 this year, and we're going to invest more in our existing store base than we ever have before. I think as Oded talked about a little bit, we're -- we have a new prototype -- typical fixture package and signing package that we're putting on our top 40 doors that we're extremely excited about. Our Meyerland store in Houston has been retrofitted already and looks amazing. We're going to do more remodels this year than we have in the past and double last year's amount. And in addition, with the new stores and the remodels and the 40 doors, we're going to touch over 100 stores this year. In addition to that, we're going to open significant more cosmetic counters than in the past. Last year, we opened 19 counters. This year, we're going to open over 45 Clinique and Lauder counter -- I'm sorry 65 Clinique and Lauder counters. In addition to that, we're going to open our first Origins and Smashbox counters in 25 stores, so a total of 50 new counters for Origins and Smashbox. So we're really excited about the opportunities we have from a capital standpoint. Did that answer your question?

Jeffrey S. Stein - Northcoast Research

Is that sustainable, do you think, beyond this year?

Edward J. Record

Yes, I do. I think we expect the 40 new stores to probably accelerate in the future, which will continue to ramp up the investment in capital, as well as eCommerce continuing to grow. And assuming we get the results we expect in our new fixture package, we expect to be able to continue to roll that out year-over-year.

Jeffrey S. Stein - Northcoast Research

And Oded, I got one quick one for you. Can you give us the breakdown of the allocation of the $4 million charge for fourth quarter between cost of goods and SG&A?

Oded Shein

Sure. So cost of goods sold is about $0.05. SG&A is about $0.03 of the $0.08 of added onetime items. It's -- just remember that cost of goods sold includes margin but also the allocation of buying and occupancy and distribution, and some of this onetime charge has to do with the buying area.

Operator

And our next question comes from David Mann from Johnson Rice.

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

Steve, if I can ask you a question in terms of the first half, it seems like this is the first season where you're going to have a complete impact on the assortment. Can you just talk about how you approach that and what your -- and what you think are the key differentiations that you've brought to the assortment?

Steven Paul Lawrence

Sure, that's -- there are several things we've been working on. I'd say, first, we've been refocusing on kind of what our brand mission is. Our mission is to bring trusted, well-known national brands to small towns, and I think we lost focus on that over the years, and so we've been refocused on that. There's really 2 prongs to that. First is to really go after some of the brands we already have in our portfolio like Nike, Levi's, Sperry, Carter's. We are the destination in small towns for these brands in a lot of cases. We -- a, we're not aggressively going after them or distorting our ownership in them; or b, getting credit for, with our customer when we can do that. So that's been one big focus, along with trying to add in new relevant brands where we see the opportunities. So Michael touched on a couple. Obviously, we're putting Keurig and Cuisinart in. And there's always brands we're looking at to add, so that's one focus. I'd say, second, as we've narrowed and focused our investment behind some of these key national brands, we've focused the assortment overall. I think our assortments were a little broad, and we had a bias towards maybe more broad and shallow versus a little narrow and deep, from an assortment perspective. So we're certainly doing that. Certainly, the consolidation helps us with that. I tell you there's an opportunity for us to build a younger customer base. I think we are going after it in a much more aggressive way. Growth within the business has been over-indexed with the younger consumer, areas such as children's, such as junior's or young men's, and then also building the modern or contemporary zone in both the missy and the men's world. I think you're seeing us move to more of an omni-channel approach, and we're working really hard to get 100% of our bricks-and-mortar assortment available online. Once again, that's something that's going to really be helped through this consolidation because in the past, when you had a South Hill team buying and a Houston team buying for dot-com, it was very difficult to get 100% assortment congruency. But we think, as we go through the consolidation, that's definitely going to help us and have more of an omni-channel approach. Then lastly, I think Ed hit on, we really need to reinvigorate our store environments, so we've got roughly 40 stores rolling a whole new visual and signing package out as long -- along with fixtures. And this is really designed to celebrate what our strengths are in terms of the brands we're bringing to small towns. And it looks pretty good, and we're pretty excited about the results so far. So I'd say those were kind of the 5 big pushes that we're working on for merchandising.

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

Great. Oded or Michael, if you could talk about Steele's for a moment, can you elaborate on what your -- on the overall performance there, what was the loss in '12? What you think the improvement might be in '13, and what's the breakeven point there?

Michael L. Glazer

Sure, I'm going to have Ed -- Ed, he's -- we're all responsible for Steele's, but I'm going to have Ed answer that, he's great, works directly to it [ph].

Edward J. Record

David, we're really happy with the progress we made in Steele's. We continue to augment and strengthen the team there. We went into this year doing business with about 400 vendors. We're now doing business with over 1,200 vendors. We continue to see the sales increase month-over-month. We have actually a pretty good -- very good December, and we've seen the sales strengthen, January and February. So we're feeling pretty good about where we are right now. We want to continue to make progress and continue to let that kind of digest through the spring season, and we'll decide how we roll out there as we move forward. It was dilutive last year to our earnings. It was less than 10% of our earnings dilution. I don't think we want to give the exact number. And the breakeven is really dependent on how quickly we roll it out, but if we start ramping up stores this year, we think we can be breakeven towards the end of 2014.

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

That's very helpful. One last question. Michael, in your prepared remarks, you've talked about your strength or the improved performance in larger markets. Given that Stage is seen as a small-market concept, are you opening the door towards expansion in larger markets? And if so, maybe you can elaborate on what you're seeing there.

Michael L. Glazer

Sure. I made that -- you're right, David, I did make that point because I think it's an important one in the sense that Stage is pretty much -- the strategy for the last couple years has been pretty much just going to cities there were 50,000 population and less. And I think what we've seen this year with the improvement in the merchandising and the marketing and, frankly, the store execution is that we can do quite well in these markets that just go to the next up, if you will. So remember, my definition is -- of a large market, or Stage definition, is 150,000 population. So you're talking about cities like out of Chattanooga or -- I mean, you're not -- we're not talking Chicago, New York or Atlanta, so to speak. But I think that we have shown now our ability to produce and to really outperform in those cities, and that opens up a whole new opportunity as we move forward. One of the things we haven't talked about is that we have just hired a new Senior Vice President of Real Estate, and I'm excited about his coming onboard, and I think he'll bring some -- just some new vigor and enthusiasm to our whole real estate moving forward.

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

And just one last clarification. So with the store base that you have now, what's the current potential that you see for number of stores?

Michael L. Glazer

At this point, David, I wouldn't go beyond the 1,100 that we've continued to talk about. But as soon as we -- after we test a few of these other markets and so forth, it wouldn't surprise me that we can increase that number significantly. But we'll see. One step at a time. We got to test a few of these and make sure that our thoughts are correct here.

Oded Shein

Yes, David, just a reminder that the small-town stores performed very well in 2012, with almost a 5% comp, so we were very happy about those, too. We're not ditching them.

Operator

And our next question comes from Bob Drbul from Barclays.

Robert S. Drbul - Barclays Capital, Research Division

Just a couple questions for you. On -- and you talked about the gains from J.C. Penney. In your 2% to 4% comp line for the year, how much of your plans are on the sustainability of those J.C. Penney? What do you have in your 2% to 4% comp from those markets that you had significant, I think, 300-basis-point gains in your comps?

Michael L. Glazer

Sure. As far as from a plan standpoint, 0 because frankly, we don't have any better idea than anybody else what's going to go on at Penney's. And frankly, Bob, our strategy here is just to continue to do our thing. I think we know what it takes, from our standpoint, to -- from a merchandising and marketing and store execution standpoint. And so when we say 2% to 4%, that frankly doesn't involve any potential gain in those 120 markets where we go head-to-head with Penney's. It's -- frankly, we just can't predict what that situation will bring.

Robert S. Drbul - Barclays Capital, Research Division

Okay, great. And then on the 10% comp inventory number, you said you made a conscious decision to invest in inventories. Can you maybe just give us some buckets around what is different sort of on your comp plan, the comp inventory plan and just how you expect that to play out from a sales perspective?

Michael L. Glazer

Yes, I'm going to have Steve, our EVP of Merchandising, respond to that.

Steven Paul Lawrence

Yes, sure. Bob, I'll tell you that there'd be a couple of buckets. If you look at it and you say of that 10%, I'd say about 30% of it was inventory that we brought in a little earlier to take advantage of Valentine's Day and Easter. Obviously, with the 53rd week, the calendar shifts out, right? So we started looking at it. We realized that Easter was 1 week earlier on the customers' calendar, Easter is a couple weeks earlier. And when we started looking at how we wanted to prepare for that, we realized we wanted to have some of that inventories hit in January versus February week 1 last year. Our goal, quite honestly, going forward is to try to manage inventory along with our sales trend. But I will say that inventory, the way we're reporting it is a point in time. So we're telling you where our February BOP was, we're going to turn around and tell you where our May BOP is, but I'd also tell you that Mother's Day moves up a week. So you're going to have Mother's Day this year at the first Sunday of May versus last year, the second Sunday of May. So obviously, as we look at that, we're looking at receipts that we received in the first week of May last year that obviously impacted Mother's Day sales, and do we want to have some of those land in April. But our goal is, overall, to manage inventory along with sales. In terms of the other 70% of that 10%, it really broke up into a couple of buckets. I'd say probably about 20 of those points were attributable to us ramping up investment in dot-com because we definitely needed to ramp up our dot-com fulfillment if that business gets bigger. I would say that there's another 20% that we put into basics, where we really wanted to invest in things like underwear, socks, jeans, basic footwear, et cetera. And then the remainder would've been opportunity doors such as the gas -- oil and gas stores that Oded talked about or J.C. Penney doors.

Robert S. Drbul - Barclays Capital, Research Division

Okay, great. My last question is -- I think, Michael, you said February is above your internal sales plan. Can you just talk a little bit about how the macro you think is impacting your customer? Have a lot of discussion around payroll, tax increases, income tax refunds and even gas prices at this point, anything that you're seeing from that perspective that you could share with us?

Michael L. Glazer

Sure, I'd be happy to. We were as concerned like everybody else about the payroll tax increase, as well as the lateness of those tax refunds, and really not sure how it would impact us. Honestly, Bob, I would tell you, at this point, we can't really measure it. It doesn't seem to have had much of an impact on us. We were nervous about it, to be quite candid, Bob. We were nervous in January. We were nervous about it in February. But for whatever reason, it just does not seem, at least in our case, to have been a factor, which is now -- or is it just somehow delayed or something? I don't know, but so far, so good, frankly.

Operator

And our next question comes from Jeff Van Sinderen from B. Riley.

Jeffrey Wallin Van Sinderen - B. Riley & Co., LLC, Research Division

Just as a follow-up to the last question, since you're not really seeing much of an impact so far from the macro, can we assume that you're really not making changes in terms of your merchandising or promotional plans for 2013 because you're not really seeing a change, in other words, due to that -- or due to impact?

Michael L. Glazer

Yes, I think that's a fair statement. We have -- at this point, we haven't done anything. We're, really frankly, stuck to our game plan and have made no change. We've been concerned -- there was a concern -- we're always worried about all the macro-type issues, the price of gas as well, no one's mentioned, and we're concerned about that as well. That there's just hasn't been anything, frankly, that has changed our thinking in terms of what our strategy is for 2013 at this point.

Jeffrey Wallin Van Sinderen - B. Riley & Co., LLC, Research Division

Okay, good. And then, Oded, just to clarify, I had to jump off the call for a second, did you say -- was it $0.08 in charges, onetime charges in Q4, is that right?

Oded Shein

So let me clarify that because there are some other questions about that. We talked today about an additional $0.08 in onetime items. The timing of those items were $0.05 in the fourth quarter, and actually, $0.03 occurred in the third quarter. We couldn't talk about it at the time because, for the benefit of our associates, the announcement on the consolidation happened in early February. So we couldn't talk about it at the end of the third quarter, but technically, $0.03 belonged to the third quarter.

Jeffrey Wallin Van Sinderen - B. Riley & Co., LLC, Research Division

Okay, that's helpful. And then in your CapEx budget, I know, obviously, this year, you're working on remodels and new fixturing. I might've missed it, but did you say how much of the CapEx budget this year is attributed to those projects?

Edward J. Record

Jeff, this is Ed. We didn't break that out. And frankly, I don't have that with me. But I would tell you that as a percent of the total CapEx budget, we're spending more on existing stores than we have in the past, that's both the dollar and percent.

Operator

And our next question comes from Mitch Van Zelfden from SunTrust.

Mitch Van Zelfden

Have been answered, but would you be able to speak at least directionally on how the 3 Steele's stores comped in February?

Edward J. Record

Positively.

Mitch Van Zelfden

Okay, it's helpful. And have you seen any uptick in cannibalization beyond 2% to 3% you previously spoke to?

Edward J. Record

Again, this is Ed. No, we're really still hovering around 3%.

Operator

And our next question comes from Jonathan Hart from Buckingham Research.

Jonathan Hart - The Buckingham Research Group Incorporated

Michael, a longer-term question. Given the better-than-expected financial performance in 2012 and the strong start to 2013, I was wondering how the team was thinking about the 2015 10% EBITDA goal? Are you guys feeling more confident in achieving it?

Michael L. Glazer

Yes, I think so in the sense that we've said all along that from an EBITDA goal, we should be at -- we believe we should be at about 10%, Jonathan, as you know. And I think we're way -- we're on our way, if you will. And so there's certainly nothing that has happened to deter us from that. I think, frankly, the South Hill consolidation gives us even more confidence because it's not even the $5 million that we're saving on an annual basis that we've talked about, but it's what Steve was talking about earlier and what we all feel is the fact that we can have one voice going to the customer now, we have our -- there are just so many positives, frankly, besides the obvious expense savings with that. So to your original question, yes, we feel good that we will -- we'll get to our double-digit return on EBITDA hopefully sooner rather than later, but certainly by -- within the next couple years.

Jonathan Hart - The Buckingham Research Group Incorporated

Okay, good. And a follow-up for Oded. I was just wondering how you're thinking about the outlook for comps in gross margin, first half versus second half, given the more difficult second half compares?

Oded Shein

Sure. So probably just from thinking from a calendar point of view, the first half of the year is more beneficial than the second half. Just remember this year, there are least amount of days between Thanksgiving and Christmas. So from, again, a calendar point of view, the fourth quarter may be a little bit more challenging.

Operator

And we have a follow-up question coming from Jeff Stein from Northcoast Research.

Jeffrey S. Stein - Northcoast Research

Yes, a couple of questions here. First of all, Oded, could you talk about the $5 million of cost savings you hope to realize? How much of that might you see this year? And secondly, how much did the extra week add from an earnings per share standpoint, the 14th week?

Oded Shein

Sure. So out of the $5 million, somewhere in the neighborhood of $3 million could be realized in 2013. And of course, the rest is 2014. The 53rd week didn't mean much from an earnings point of view. It's the smallest sales week of the year at $16 million. I would say, basically, breakeven maybe between 0 and $0.01.

Jeffrey S. Stein - Northcoast Research

Okay. And I've got one for Steve and one for Mike. Mike, longer term, any thoughts about the possibility of a nameplate consolidation? And if the answer is yes, how far out might that be in the cards? And secondly, Steve, can you talk about potential benefits in terms of purchasing leverage that you would hope to realize from consolidating the buying offices into Houston?

Michael L. Glazer

I'll let Steve go first, and then I'll tackle the -- my favorite subject, the nameplates. Go ahead, Steve.

Steven Paul Lawrence

Well, obviously, we've look at the consolidation, and we've already kind of alluded to this several times. The savings itself from a headcount is -- it's probably the last reason we did it. Although it's a reason, it was all the other reasons, the synergies we get from a buying, from a marketing perspective, et cetera. Our belief is that we should, when we start buying with a bigger pencil, realize some cost savings. I think Oded said it earlier that we're not looking necessarily this year for improvements in the merchandising margins based off of that. That's just really a function of where we're at in the buying cycles with a lot of these different categories. I mean, some categories we're buying very close in, and we'll have assortments aligned much faster. But a lot of the categories are bought much further out. So we really didn't to account on any of those synergies helping us this year from a margin perspective, although if any do occur, it would be upside to where we're projecting right now. So we see that really impacting 2014 and beyond.

Michael L. Glazer

From a nameplate standpoint, Jeff, to your question, first of all, let me back up. Last year was really the year for us to really get our fundamentals back in line from a merchandising and marketing standpoint. This year is, frankly, the year of consolidation. And I see next year and beyond to be really the years of growth, much more significant growth, frankly, than we've had in the past. Having said that, certainly, from -- there's 2 subjects, frankly, that we haven't spent a lot of time on at this point: one would be the whole real estate thing, which we discussed earlier and some of these other markets that might be, possibly, opportunities for us; and the other is the nameplate itself. I personally, frankly, don't like the idea that we have 5 nameplates. It's a pain with all the versioning of our marketing and so forth. And while it does resonate a lot of the local communities and it is important, I think it's fair to say that, at some point, we will attack that issue. And I'm not going to tell you we're going to go to 1 nameplate, but it certainly will be -- we'll probably reduce the 5 that we have down to manageable couple or possibly even 1. I think that's probably a task for next year, if you will, 2014, 2015. But we will start thinking about that for sure.

Operator

And our next question comes from Mike Richardson from Sidito (sic) [Sidoti].

Michael Richardson - Sidoti & Company, LLC

I know home performed very well in 2012. I'm wondering which category might provide the biggest opportunity for fiscal '13. And then if Oded can just let us know what the penetration rate is on the new private label card, that would be helpful.

Steven Paul Lawrence

This is Steve. I'll try to take the home question. I think we had been out of the home business for a while. And I think last year, we went into a lot of different categories. I think if you think about 2013, it's where we start zeroing in on the categories that we really think are going to drive growth for us and are going to be kind of the basis for our home business going forward. I'd say houseware is probably the biggest category, Michael. I already mentioned that we're launching Keurig and Cuisinart in the later part of this quarter, so we'll have it set for Mother's and Father's Day. We're pretty excited about this as a category, and we think this is probably the biggest platform for growth for us going forward for this year in home.

Oded Shein

From a penetration point of view on the private label credit card, we ended the year slightly above 33%. However, in the fourth quarter, we are just above 35%, so we feel very good about this statistic going forward.

Michael Richardson - Sidoti & Company, LLC

And the goal there is, what, close to 40% longer-term?

Oded Shein

That will be an outstanding achievement, thinking about where we started and our geography and so on. So yes, long-term goal is to reach about 40%.

Operator

[Operator Instructions] And our next question comes from David Glick from Buckingham Research.

David J. Glick - The Buckingham Research Group Incorporated

Michael, just a question on how you look at the productivity of your stores from a sales-per-square-foot perspective. I mean, the most common question that I get about Stage Stores is, can you guys comp the comp? I know your comparisons get more difficult in the second half. But when you take a step back and look to kind of where you guys peaked from a sales-per-square-foot perspective and where you are now, it paints a different picture. Can you kind of talk us through how you look at the productivity peak and where you are and what you think you can get back to? Obviously, you've laid it out, a lot of initiatives that you think will help you get there. But if you can talk about it from that perspective, it would be helpful.

Michael L. Glazer

Sure. Well, just got start, David, as you and I talked about it, with the sales per square foot in the stores. And we have certainly been, as a big picture, disappointed that we haven't achieved more than we have in the last couple years. So I think we have a huge opportunity to go from roughly $100 a square foot to $120 over time here, not suggesting it's all going to happen this year. But I think as we continue to do some of the things we've talked about, just continuing to concentrate on those fundamentals, I mentioned visual merchandising, we have such an opportunity with some of our visual merchandising things in the stores that we haven't taken advantage of in the past, suggestive selling, just things that you and I would probably call basic retail 101 and then, frankly, I think as we go forward, will be huge wins for us, and we'll get that productivity up. We don't fool ourselves. In these small markets, you're never going to get to the productivity that you can. You're not going to get to $200 a square foot generally, on average, that you just don't have the density of population to be able to do that. But given the rents we pay and so forth, then we can just start working our way towards that $120 a square foot. I think the rest will kind of take care of itself.

David J. Glick - The Buckingham Research Group Incorporated

And then just a follow-up for Steve, as you look at the second half compares and you strategize from a sales promotion perspective and from a merchandising perspective, if you could talk about some of the strategies you have in place that, just by the tough compares, that you think you can take advantage of the sales opportunities against tougher compares?

Steven Paul Lawrence

Well, I'd go back to -- obviously, the longer you're in a job, the more opportunity you see. And I think we felt good about the fall season. But as we come around the horn on it, we feel pretty confident that we've got some things we can do to enhance our promotional calendar. I mean, we feel good about pretty much every month until you get to December, where we lose the 5 days between Thanksgiving and Christmas. So I think that there's a lot more opportunity from a marketing perspective. From a merchandising perspective, I talked about some of the initiatives we're working on in terms of refocusing back on delivering national brands, going after younger consumer, the whole synergy with dot-com. Those things really are just starting to take root in 2013. What was interesting coming in, Dave, was that we built a marketing strategy, for example, for Thanksgiving, but we had to kind of retrofit the marketing strategy around the buys that were made. And now, once we've had as successful as Black Friday as we did, we now know how high up it is, and we can buy into that versus trying to retrofit the marketing strategy around existing buys. So I think that there's still a lot of opportunity throughout the back half of the year as we've kind of gotten a handle on how big these events can be for us to buy into those and to really maximize them.

Operator

And our next question comes from David Mann from Johnson Rice.

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

In terms of eCommerce, can you give us a sense on the projected growth you're looking for in 2013?

Edward J. Record

Yes, David, this is Ed. We finished last year at 23%, 24% range for direct-to-consumer, and we're expecting to be over $40 million this year.

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

Okay, great. And then one other question about your plans for Christmas in '13. When you look back at the comp trend in the fourth quarter, you had a great fourth quarter, but December was a little bit weaker. When you do a postmortem on that, what do you think happened there and what you'd do for the upcoming holiday season to perhaps not have that kind of volatility?

Michael L. Glazer

I think there's a couple things when we went back. I mean, we're really good at, obviously, doing autopsies or postmortems on our business. And I think we had a pretty good promotional rhythm. In hindsight, I think we probably could have had a-- done a better job of having a true kind of gift-giving overlay on top of the promotional rhythm. We have a lot of great brands and gift offerings, whether it's fragrances, apparel, shoes, et cetera, in a smaller door count that we really didn't get credit for as we got closer to holidays. So I think you're going to see us do a better job of having a one-two punch from a hard-hitting promotional calendar, along with a more of a branded gift-giving approach leading up to the holiday. And I think the after-holidays are just a big opportunity for us as well to have more of a spring forward floor, set on the floor, and to get credit for that. So I think those are 2 big things that we've identified where we can do much better next year for holiday.

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

Great. And then, Oded, one last housekeeping question. On the share count that you're using in your guidance, is that based on the current shares outstanding and dilution?

Oded Shein

Yes.

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

For the full year, based on the current stock price, is that correct?

Oded Shein

Correct, yes.

Operator

[Operator Instructions] And I am showing no further questions in queue. You may continue.

Michael L. Glazer

Great. Well, thank you again. This is Michael. Thank you again for participating in our conference call. I hope we answered most of your questions, and we definitely will be happy to answer them going forward and look forward to speaking with everybody again at the conclusion of the first quarter. Thanks, everybody.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does end the conference call for today. You may now disconnect, and have a great day.

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