Stage Stores Management Discusses Q1 2013 Results - Earnings Call Transcript

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Stage Stores (NYSE:SSI) Q1 2013 Earnings Call May 17, 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

Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division

Robert S. Drbul - Barclays Capital, Research Division

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

Steven J. Kernkraut - Berman Capital Management LP

Jonathan Hart - The Buckingham Research Group Incorporated

Operator

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

Bob Aronson

Thank you, operator. Good morning, and welcome to Stage Stores' first 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, and then following the conclusion of their remarks, they will all be available to take your questions.

Before we begin, I would like to point out that you will 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 consolidation of our South Hill, Virginia operations into our Houston corporate headquarters, and with the resignation of our former CEO in March of 2012.

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 SEC and other factors as may periodically be described in other company filings with the SEC.

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

Michael L. Glazer

Thanks, Bob. Good morning, everyone. Thanks for joining us today for our first quarter conference call. I'm going to begin today's call by providing a high-level overview of our performance and then, Oded will discuss our financial results for the quarter in much greater detail. Following that, all of us, including Ed and Steve, will be happy to answer all your questions.

Clearly, the first quarter was more challenging than we anticipated. The quarter actually started out fine, but the unseasonably cool weather, which started right before the important Easter Holiday shopping period and lasted throughout most of the quarter, definitely impacted our business. For those of you who know me, I hate blaming weather for lackluster sales. But it's really difficult to ignore the effect of the weather on our first quarter results. Our warm weather categories of shorts, sandals, capris, sundresses, tank tops, swimwear, those categories were actually down 18%.

For us at Stage, another meaningful statistic is the performance of what we call our South Central region, which is comprised primarily of stores in Texas, Louisiana and Oklahoma. This region alone accounts for over 50% of our sales, and guess what? The average temperatures in these 3 key states in March and April were well below last year. In fact, in this part of the country, it was actually warmer last November than it was in March.

Okay, enough about the weather. I assume you'll hear about it or have already heard about it from every single retailer that sells apparel. That said, our total sales for the first quarter were up 3.5%, growing to $379 million this year from $366 million last year. Comparable store sales were up slightly, increasing 0.7%. As part of our plan, we accelerated markdowns into the first quarter to clear merchandise closer to the natural selling window. These markdowns were taken in the second quarter last year. Now if you recall, for those of you who know Stage well, it is the exact same strategy we implemented in last year's third quarter. It negatively impacted our gross margin last third quarter, but it was offset by gross margin gains in our fourth quarter.

In addition, and in response to the sluggish sales this quarter, we took decisive action to manage our inventory and to make sure that the inventory was properly positioned for the second quarter. The end result was the year-over-year adjusted gross profit rate decline of 110 basis points. We definitely expect the second quarter's gross margin to benefit from the markdowns we accelerated into this year's first quarter.

We ended the quarter with comparable store inventories on plan, up 6.8%. We absolutely believe this is an appropriate level, given the receipt of goods to accommodate the Mother's Day calendar shift to the first week of fiscal May and the strategic investments, which most of you know we've made, in our basics and for our dot-com fulfillment.

Despite our adjusted loss for the quarter of $0.02 per share, we are confident about our prospects for the remainder of the year. We believe sales in the second quarter will benefit from some pent-up demand for seasonal merchandise as temperatures normalize. I'm pleased to say that we're already seeing some of that, but I caution everyone that it's just the start of the quarter.

We also feel strongly that our gross margin will see improvement due to the actions we took in the first quarter. As a result, we are maintaining our comparable store sales guidance for the year of an increase of 2% to 4%, and we're also maintaining our adjusted EPS guidance of $1.45 to $1.55.

Turning to sales by family of business. As I already mentioned, those categories disadvantaged by the weather had the weakest performances during the quarter, while those generally immune from weather were our strongest performers. Home & gifts once again led the way with a double-digit increase. Home benefited from the new product launches, such as Keurig and Cuisinart. That was followed by our accessory business, which posted a mid-single-digit gain. Handbags from vendors such as G by GUESS, Anne Klein, Nine West and Jessica Simpson drove the business in this category. Cosmetics also outperformed, thanks to nice increases, specifically in the nail category. Our cosmetic business will continue to benefit from the installation of new counters of which 68 are planned for this year.

We continue to focus on our mission statement, to deliver well-known brands to our customers' hometowns. This is reflected in some of the strong first quarter sales increases we saw from some key brands like Sperry, Hanes, Haggar and Nike. From a fashion trend standpoint, color continues to be the winner in almost all families of businesses, from female bottoms to girls' tops to athletic footwear.

Looking at comparable store sales by region of the country. No big surprise, the Southwest, which was the region least impacted by unfavorable weather, was the best-performing region for us. By market size, our large markets, once again, performed better than our small markets. From an operational standpoint, we made excellent progress on a number of our key initiatives during the quarter. The most important one, of course, is the South Hill consolidation. And we've said in the past, this consolidation was long overdue, but we're already beginning to see some of the benefits, especially in the home and footwear, which we consolidated late last fall. The great news is that we're right on schedule with this consolidation and should easily meet our goal of having everything completed by the start of the third quarter.

Our direct-to-consumer sales continued to grow. And for the quarter, we are up 66% over last year. As many of you know, we are re-platforming and enhancing our eCommerce site which will lead to an improved online shopping experience for our customers. We expect the re-platforming to be completed in time for the holiday shopping period. We will definitely continue to focus on accelerating the growth in our direct-to-consumer business and believe we will generate over $40 million in sales for this year.

With regard to Steele's, we have made solid progress. We beat our sales plan for the quarter and generated high-single-digit comp store sales increases in those stores that have been opened for more than a year.

Lastly, we were very pleased to announce last month that our board had approved a significant 25% increase in our quarterly dividend rate. This increase is a testament to the strength of our balance sheet and our confidence in delivering future growth in earnings and cash flow.

In summary, we remain optimistic about the remainder of the year. And as I said previously, we are maintaining our sales and earnings guidance for 2013. As we begin the second quarter, we feel very good about our merchandise selections, we feel good about our inventory position, our marketing strategies, our progress on the consolidation and all of our growth initiatives. We will continue to be innovative and add more excitement to our merchandising, more excitement to our marketing and more excitement at the store level. As always, we remain committed to providing our customers with an exceptional shopping experience every single day, and to producing the best possible returns for all of our shareholders.

That concludes my opening comments. I'm going to now turn the call over to Oded for some additional details on our first quarter results. Oded?

Oded Shein

Thanks, Michael. Good morning, everyone. Net sales for the first quarter increased 3.5% to $379 million. Same-store sales were up 0.7% to last year. Our average unit retail decreased 5%. Units per transaction increased 2%, while number of transactions increased by 4%. The decrease in AUR was mostly due to a greater percentage of clearance items in the sales mix. The gross profit rate for the quarter, on an adjusted basis, was 24.6%, 110 basis points lower than last year. The merchandise margin component decreased 150 basis points due to increased clearance sales and higher markdowns. The adjusted buying, occupancy and distribution cost component leveraged 40 basis points. The adjusted expense rate for the quarter was 10 basis points better than last year. Higher store and advertising expenses were offset by benefits from our private label credit card program as the penetration rate for the card during the first quarter was up by 120 basis points over last year.

We had an adjusted loss for the quarter of $0.02 per share versus adjusted earnings of $0.05 per share last year. As for onetime items, in the first quarter, we had onetime items related to the South Hill consolidation, totaling $9.7 million on a pretax basis. Of the total, $2.8 million was in gross margin and $6.9 million was in expense. The onetime items equate to $0.19 per share.

Moving onto balance sheet and cash flow items. Our cash balance at the end of the quarter was $27 million. We had $67 million of total debt obligations, of which $61 million was outstanding under our credit facility. Total merchandise inventories at quarter-end were 14% higher than the same period last year. A higher number of stores opened this year versus last year and strategic investments in inventory accounts for most of the year-over-year increase. Comparable store inventories were up 6.8%. We're happy with the content and level of our inventory and will continue to make strategic investments as long as they yield positive returns.

Capital expenditures, net of landlord construction allowances, totaled $16 million versus $9 million last year. During the first quarter, we opened 10 new stores and started the rollout of our new prototype fixture packages in our top 40 doors. We continue to anticipate net capital expenditures of $57 million for the year to cover the major initiatives that I discussed during our fourth quarter conference call.

That completes my remarks for the first quarter. At this point, I would like to make a few quick comments on our guidance for the year. As we noted in the earnings release, we are maintaining our sales and earnings guidance for the year. Although both metrics fell short of our expectations in the first quarter, we believe business will improve as the weather normalizes, and we will be able to recapture some of the lost gross profit due to our proactive inventory management. To reiterate, we expect comparable store sales for the year to be in the range of 2% to 4%. Our adjusted EPS guidance range for 2013 is $1.45 to $1.55. This excludes onetime items associated with the South Hill consolidation, which we continue to estimate to be $0.30 per share. We assume a diluted share count for the year of 33.5 million shares.

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

Just a couple of questions here. First of all, it looks like, relative to the release you put out fourth quarter, it looks like you modified your sales -- estimated sales range a little bit. You were at -- so it looks like you raised the lower end of the range and lowered the higher end of the range. I'm just wondering if you could just speak to that.

Oded Shein

Yes. As the year unfolded, we're able to estimate the sales coming from new stores through the length of the year and then, change the total sales a little bit. On a comp basis, it did not change.

Jeffrey S. Stein - Northcoast Research

Got it. Okay. And wondering if you could address the issue of the margin degradation in the first quarter, how much of that was attributable to the accelerated markdowns, and would you expect to pick all of that up in Q2?

Steven Paul Lawrence

This is Steve. I would tell you that the majority of the markdowns that we took in the first quarter were attributed to the accelerated clearance cadence. It's a strategy we embarked upon last year. And as Michael said, our goal is to continue to try to sell goods closer to the natural selling life. And much like last year, in the fourth quarter, we expect to recover the majority of that margin within the second quarter.

Jeffrey S. Stein - Northcoast Research

Okay, excellent. And final question, looking at -- there's been a -- just a limited number of earnings releases so far in retail, but Macy's called out weakness at the high-end, weakness in the low-end and pretty solid business in their core. And then, we saw Nordstrom report disappointing numbers; Kohl's, which is kind of in your sweet spot, also negative comp. Do you think, aside from weather, is there any concern that you're beginning to see a bit of weakness from the moderate consumer?

Michael L. Glazer

It's a great question, Jeff. Frankly, we're not sure. We have not -- there's nothing that would indicate that to us. I mean, if you look at -- when you look at our results, it's just, for whatever reason, it's just so weather-driven by categories, by parts of the country. And we just haven't seen it in terms of that there's been any macro situation out there that people have asked about the payroll situation and the late income tax and even some of the gasoline stuff, but it's just nothing that I actually -- that obviously points to any one of those things for us.

Jeffrey S. Stein - Northcoast Research

Okay. And final question, Mike, just kind of curious, the stores where you overlap with J.C. Penney, I guess, there was roughly 120 in that basket, I'm wondering how those stores performed relative to the rest of the fleet in the quarter?

Michael L. Glazer

Sure. So those stores, obviously, we continued in the first quarter to pick up market share. We picked up roughly round numbers, about 200 basis points versus our seasonal chain or versus our chain. So we were up 0.7 comp as a company, as you know. So in those 120, we're up just under 3%, frankly, on a comp basis. It's interesting, Jeff, going forward, I assume people would ask about Penney's, I'm not sure what exactly will end up happening there. But in terms of the guidance for the overall, in other words, our 2% to 4%, we're assuming were not going to continue to pick up any market share for the rest of the year in those markets, at least, to the tune that we saw last year and a little bit here first quarter. But on the other hand, we also don't expect we're going to lose any.

Jeffrey S. Stein - Northcoast Research

Okay. So you don't believe that the increased promotional cadence that they're going to undertake is going to have much effect on your business? That's the assumption?

Michael L. Glazer

No, no. We really -- like I say, I don't think we'll continue to pick up any -- that we'll continue to pick up market share. But maybe they'll bring some more traffic to some of the areas where we are. In these small cities, it's all about bringing in some traffic, so maybe they'll even help others.

Operator

Our next question comes from Jeff Van Sinderen with B. Riley.

Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division

Maybe you can talk little bit more about the comp progression throughout the quarter. Was the shift extreme? I think you said that the quarter started out pretty much on plan.

Michael L. Glazer

Yes, I mean, I don't -- I think it's really -- Jeff, it's Michael. It's just more was -- I know some of the other retailers called out that they saw that April started to get a lot better, but you've got to remember, in our part of the country, which is specifically where -- as I said before, Oklahoma, Louisiana, Texas, which is more than 50% of our business, it was really cold. I mean, there are statistics from the Weather Bureau basically saying in Oklahoma, for instance, it was the, the -- April was the sixth coldest April on record. And it wasn't much better in Texas, frankly, and some incredible statistic like that as well. So we -- it was really, it was unbelievable. It's just so much a part of weather. And as I said earlier, I hate talking about it. I always tell our people here that we don't know what the weather report. But in the meantime, it was difficult. Steve, you want to add a couple of thoughts?

Steven Paul Lawrence

I'd just say, it's -- when we're looking at, I think it's more, to Michael's point, a function of we saw the business kind of track with the weather throughout the quarter. And you could look at some areas of the country where -- or regions that we have where temperatures were flat to up on average and the business was up. And then you look at regions of the country or districts where temperatures were down dramatically, and the business tracked with it. So our belief, really, is that it really is a function, primarily, of weather. And you can see the business, whether it's a seasonal category's performance, whether it's the sales by region and district really correlate back to that.

Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division

Okay. And -- but I think you also said that you're starting to see a little bit of pent-up demand be unleashed. And just wondering when you feel that started or when you saw that start, and if you're seeing a meaningful rebound in comps in the last few weeks?

Michael L. Glazer

You've got to remember, we're only -- we're literally, like, 10 days into this quarter, so I just want to caution you. We've got -- February started off great, as well, in the first quarter, so I think we just got to be a little bit careful at this point. So yes, I mean, May has -- it started off fine, but again, it's very early in the quarter.

Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division

Okay. And then, with your inventory being clean, would you expect Q2 gross margin or at least merchandise margin to be up versus Q2 last year?

Steven Paul Lawrence

Yes.

Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division

Okay, good. And then, maybe you can just touch on how the new Stage Stores are performing and then, any more color you can share on Steele's?

Edward J. Record

Sure, Jeff. This is Ed. We've opened 10 stores, so far, this year. Frankly, these are the best store openings we've had in, probably, 4, 5 years. We're really excited about these year's store openings. And with regards to Steele's, we continue to make progress. We're ahead of our sales and earnings plan for the first quarter. The stores that have been open at least a year are all positive -- or as a group, are comping positively. And as we said last quarter, we're going to continue to go through the first -- through the spring season here and then, evaluate them at end of spring season to see how quickly we can roll these out.

Operator

Our next question comes from Bob Drbul with Barclays.

Robert S. Drbul - Barclays Capital, Research Division

Just on the inventory levels, can you give us any more detail around the buckets of inventory, the pockets of inventory? And specifically, in a lot of the cold-weather markets that you talked about, the inventory levels in those stores, are there any areas that you are concerned about within those levels?

Steven Paul Lawrence

This is Steve. I'll take a shot at answering that. We feel pretty good about our inventory content. What we did was, as we saw some of the sales be a little slower in some of the seasonal categories, obviously, we can react through allocation to make sure we're not overstocked. And at the same time, we went back and then, looked at it and said, where we missed some sales, we basically work -- the vendors try to work their way out of those inventories and cancel some goods at the tail end of the supply chain. So we feel good about our own ownership that's currently in the pipeline and balanced by store. And we feel well-positioned to take advantage when the weather normalizes. In terms of the increased inventory, I think Michael mentioned it, and it's the same story from first quarter, where we've gone out and strategically made some investments. We're going to own basics in some of these categories where, traditionally, we hadn't been as strong. And those categories, generally, don't have any markdown or margin liabilities and, in fact, they're margin-accretive if we can drive those sales. And at the same time, we are growing dot-com very aggressively, and we put a lot of inventory in place to try to make sure we can fulfill that and fulfill our promise to the customers on our dot-com site.

Robert S. Drbul - Barclays Capital, Research Division

Great. And, Steve, are there any new brands that you're getting in the back half of the year that you're excited about or any sort of bigger merchandising initiatives like that, that you could talk about today?

Steven Paul Lawrence

Michael mentioned we launched Keurig and Cuisinart, literally, right at the end of the quarter just in time for Mother's Day. We're excited by the results of Mother's Day, particularly at Keurig. We had a great Mother's Day with Keurig. Right now we've got some things in the hopper, but obviously, it's not in our best interest to probably share some of those. And as they get closer to launch time, we'll give you more color around it. But we continue to try to find new brands and I think we've got some fun things ahead of us.

Operator

The next question comes from David Mann with Johnson Rice.

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

If I could just piggyback on the questions about gross margin, can you quantify in dollars, perhaps, or percentage, the amount of markdowns that you took in the quarter that we might see to recover in Q2?

Steven Paul Lawrence

I don't think that's something we would quantify. I would just -- I would go back to the statement I made earlier, which was majority of the margin missed the markdowns that we took was an acceleration this year from markdowns that, at last, were taken in the second quarter as we moved into the first quarter.

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

And we talk about a margin miss, it would have been reasonable to assume that margin -- you would've planned margin up in the first quarter?

Oded Shein

David, this is Oded. No, we did not plan margin up in the first quarter. We were 150 basis points lower than last year in merchandise margin in the first quarter. And we still hold that for the year, we're going to be flat. So if you want to talk about the rest of the year, that's how we're going to pick up what we lost in the first quarter.

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

Okay, that's very helpful. In terms of the core Texas market, can you just talk about the overall health that you're seeing there? I mean, Texas, Louisiana have done well, parts of those markets have done well over the last 2 or 3 years. I'm just curious if you feel like you're seeing things moderate there, or if this is more of an abrupt slowdown that you more attribute to weather?

Edward J. Record

David, this is Ed. We would say, it's the latter. We really believe it's weather-driven. Texas was still outperforming the company, although, April was difficult from a weather standpoint here in Texas. Other areas in South Central, as Michael said, Oklahoma and Louisiana even had tougher weather compares, and were a little bit more impacted. But again, we continue to see it as weather, and we don't see, frankly, Texas slowing down other than the weather impact.

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

With -- as it relates to the J.C. Penney store, competitive markets, with the changeover in management at J.C. Penney and strategy, have you changed your strategy in those markets at all? I know if they were weak, you were doing some things targeted there. Is there any additions to that strategy, and if so, can you talk about that a little bit?

Steven Paul Lawrence

I would say, I think it's more of the same. I mean, when we talk about investing and things like basic categories, et cetera, a lot of that was targeted into some of those stores, and so that continues forward. Our sense is that, as they start adding promotional activity back in or inventory back in, they'll probably start with the larger markets and eventually, trickle its way down into the smaller markets, but we don't think that's where they're going to start.

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

Very good. And then, lastly, given the success of new stores, maybe you can talk little bit more about the longer-term potential in terms of your network? I know you've had 1,100 store number out there for a while. So any sense on where you are on updating that? And also, what's the pipeline you have right now towards accelerating unit growth next year when this South Hill consolidation is done?

Michael L. Glazer

David, it's a great question. We're just not prepared to talk about that at this point. So much of this year -- it has just been the first half of this year, for sure, is just focused on the consolidation. And I think as you've heard us say, we'll then turn our attention to some of the growth initiatives and specifically, more store growth. But as far as being able to quantify them at this point, I'm not going to do that right now because, frankly, we don't know for sure. But as Ed points out, we're really encouraged by just a few stores that we've opened here in 2013, and looking forward to the rest of the new ones we open here.

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

But in terms of the comments you've, I think, made in the past about accelerating into next year, is that still the case, and how much acceleration should we expect?

Michael L. Glazer

I think that nothing has changed, frankly, in terms of our store growth patterns. I mean, there's nothing changing at this point. And the plan is to accelerate whatever we deemed reasonable at this point.

Operator

The next question comes from Steven Kernkraut with Berman Capital.

Steven J. Kernkraut - Berman Capital Management LP

I've got a couple of questions. One is for Steve. I mean, you guys talked about the home & gifts being so strong. I just wanted to know what the strategy is, given that Penney's home business was really kind of shut down. They're relaunching it next month. What kind of strategies do you have, and if you could just talk about that a little bit? And secondly, if you could, Mike, if you could talk about the eCommerce strategy, where you were behind the curve and you've ramped it up quite a bit, doing a lot of investments. Where do you see that business being a year, 2 years from now in terms of percent of the total, and how are you going to be distributing the merchandise to the customers?

Steven Paul Lawrence

I'll start on the home strategy. I really don't think, quite honestly, that the J.C. Penney home business or the disruption they have that they are putting in their shops impacted us. They talked pretty publicly that, that's only like the top 505 stores, I believe, which generally don't overlap with any of the stores we're talking about. I would say, more so, our home strategy is benefiting this year from focus. We were virtually out of the category a couple of years ago. We started getting back into the category last year. And we've put a lot of things out there to try to figure out which direction we wanted to go. And I'd say, this year has been more about focusing into specific categories that, kind of, emerged last year as the leading categories. So obviously, houseware is a big category we're going into. We've got a couple of big brands we launched, and which we've already spoken to. Home decor, another big one we're going into and really, a double-down investment. And luggage has been a good category for us as well. And then, obviously, we really went after outdoor living this spring as well. So I think those are the big categories that are helping us right now. And I think the good news is, I think this will provide growth for us for many years to come because I think as we add in categories and get better at merchandising and presenting new stores, I think it gives us the opportunity to add on the next categories, so we've got a lot of growth here over the coming years.

Edward J. Record

Steve, this is Ed. I'll take eCom question. We had a really good first quarter in direct-to-consumer. As Michael said, we're up over 66%. eCommerce, which is included in there, as well as our kind of store-to-home business, was up over 100%. We continue to expect eCom to be over $40 million this year. For the first quarter, we penetrated a little under 2%. We think the full year will be $40 million on our businesses of over 2%. And for the eCom portion, we continue to expect it to be up 80% to 100% for the year -- for the foreseeable future. We're are re-platforming this year, which is a big initiative for us, really stepping up with ATG, Oracle, a new platform, one of the -- we think the leaders in the industry. And that new platform should support our growth for well over $100 million business.

Steven J. Kernkraut - Berman Capital Management LP

So -- and I mean, do you think you can get the $100 million in 2 years, or is there a timeframe that you would want to put out there?

Edward J. Record

I think we talked about it publicly on our Investor Relations, this year is $40 million-ish. Next year is in the $70 million, $75 million and then we're -- over $100 million in 2015.

Michael L. Glazer

And just to put in perspective, as you know, even if it's $100 million, what's that going to be? It's even -- barely touching, at that point, probably what? Probably 5% of the business at best. So it's still a long way to go. I mean, we're all about it. I think I've said publicly, we're all in when it comes to eCommerce and doing everything we can to ramp it up as quickly as possible.

Operator

The next question comes from Jonathan Hart with Buckingham Research.

Jonathan Hart - The Buckingham Research Group Incorporated

Michael, a question related to the buyback. I know you guys suspended the buyback last year to conserve cash to capitalize in some market opportunities. Looking forward, given the management changes at Penney's and the change in strategy, I was wondering if you had any updated thoughts toward the buyback? And wondering if you would consider getting more aggressive now, particularly, since the stock could be a little weaker given the tough Q1 performance? And just a follow up, I was just wondering about the mix of business in Q1, what percentage of the business is seasonal merchandise, and how much that could comp in Q1?

Michael L. Glazer

Well, I'll take the buyback, I'll let Steve handle the Q1 question. As far as the buyback, Jonathan, we've said along, there still, actually, is an authorization out there from our board for approximately $100 million. But we have, and frankly, no intention at this point of utilizing it. And the reason is quite simple, I mean, we just really believe that there's -- we can enhance shareholder value a lot more with our growth strategies. And we haven't really defined to David Mann, who asked me earlier what exactly will the growth strategy be once we get through this consolidation. I think that's something we'll talk about as we get further into the year and have a better definition of it. But there's, frankly, no intention right now to buy back any stock.

Steven Paul Lawrence

In terms of the percentage that the seasonal categories make up to the percent of business, obviously, that's not something we would share publicly. But I think if you would think about where most of our store base is located, you would think about the fact that 50% of the stores are in that Southern market, as Michael mentioned earlier. Obviously, these categories are meaningful or significant to us, so when they don't perform, it does move the total.

Operator

And I'm not showing further any questions at this time.

Michael L. Glazer

Okay. Well, thank you, everyone, for joining us on this call, and we look forward to talking to you after the conclusion of our second quarter. Thank you.

Operator

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.

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