Stage Stores converts to an off-price future
Stage Stores, which has traditionally operated a variety of department store banners in small towns and rural communities, recently announced plans to convert approximately 220 department stores to its new off-price concept, Gordmans, by the middle of 2020.
By the end of 2020, the nearly 300 expected Gordmans locations are projected to represent almost 50 percent of total sales volume. As of March 7, the company operated 709 Bealls, Goody’s, Palais Royal, Peebles and Stage specialty department stores, 87 Gordmans, as well as the stage.com e-commerce site.
“For the last few years, the off-price sector has seen tremendous growth despite the challenges that have faced traditional retailers,” said Michael Glazer, Stage’s president and CEO, in explaining the shift to analysts last week on a quarterly conference call.
Stage acquired Gordmans out of bankruptcy proceedings in April 2017. Last year, the chain was converted from what had been a bargain-driven department store model to a “true off-price concept,” said Mr. Glazer. Management eliminated promotions, reduced pricing to be on par with off-price retailers, and re-merchandised to create a “treasure hunt” shopping experience.
The nine department stores converted to the off-price format last year saw sales increases of more than 50 percent in the holiday quarter. Importantly, sales in its six smaller Midwest conversions were up more than 150 percent, and the majority of its more than 70 conversions in 2019 will occur in similar markets.
“The 2018 conversions have delivered fantastic results, illustrating the appetite in our smaller markets for off-price stores,” said Mr. Glazer.
Approximately 60 of its department stores are located in communities with populations below 50,000.
The off-price stores, when compared to its department stores, also benefit from a higher penetration of outperforming non-apparel categories, including home, toys and gifts.
The department store channel struggled over the holiday season and Bon-Ton Stores, a department store operator that targeted secondary markets, liquidated in 2018. Off-price continues to outperform with healthy fourth-quarter showings by TJX Cos., Ross Stores and Nordstrom Rack, but faces the possibility of oversaturation as existing and newer players such as Macy’s Backstage open stores.
- Stage Stores Reports Fourth Quarter Results and Initiates Fiscal 2019 Guidance – Stage Stores
- Stage Stores Reports Comparable Sales for Holiday Period and Announces Multi-Year Plan to Accelerate Off-Price Growth – Stage Stores
- Stage Stores’ (SSI) CEO Michael Glazer on Q4 2018 Results – Earnings Call Transcript – Seeking Alpha
- Gordmans will face plenty of competition as it converts into an off-price retailer – Omaha World Herald
DISCUSSION QUESTIONS: Is Stage Stores’ shift to off-price a good idea, and will the conversions likely work across its smaller markets? What concerns would you have about its off-price push?