UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



þ☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October 28, 2017~~November 2, 2019



o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number 1-14035

Stage Stores, Inc.

(Exact name of registrant as specified in its charter)



~~NEVADA~~ ~~(State~~Nevada			91-1826900
(State or other jurisdiction of incorporation or organization)		~~91-1826900~~ ~~(I.R.S.~~	(I.R.S. Employer Identification No.)

2425 West Loop South			77027
Houston,	Texas ~~(Address~~		(Zip Code)
(Address of principal executive offices)		~~77027~~ ~~(Zip Code)~~

(800)579-2302

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($0.01 par value)	SSI	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ☑ No o☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes þ ☑No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	o☐	Accelerated filer	þ☑

Non-accelerated filer	o ~~(Do not check if a smaller reporting company)~~ ☐	Smaller reporting company	o☑

		Emerging growth company	o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No þ☑

As of ~~November 29, 2017,~~December 4, 2019, there were ~~27,627,382~~28,911,336 shares of the registrant’s common stock outstanding.



TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
			Page No.
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets
		~~October 28, 2017~~November 2, 2019, February 2, 2019 and ~~January 28, 2017~~November 3, 2018	34
			Condensed Consolidated Statements of Operations and Comprehensive Loss
		Three and Nine Months Ended ~~October 28, 2017~~November 2, 2019 and ~~October 29, 2016~~November 3, 2018	45
	Condensed Consolidated Statements of Cash Flows
		Nine Months Ended ~~October 28, 2017~~November 2, 2019 and ~~October 29, 2016~~November 3, 2018	56
	Condensed Consolidated ~~Statement~~Statements of ~~Stockholders'~~Stockholders’ Equity
		Three and Nine Months Ended ~~October 28, 2017~~November 2, 2019 and November 3, 2018	67
			Notes to Condensed Consolidated Financial Statements (Unaudited)	79
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		18
~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~		27
Item 4.3.	~~Controls~~Quantitative and ~~Procedures~~Qualitative Disclosures about Market Risk		2736
Item 4.	Controls and Procedures		36

PART II OTHER INFORMATION

Item 1.	Legal Proceedings		2836
Item 1A.	Risk Factors		2837
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		2938
Item 3.	Defaults Upon Senior Securities		3039
Item 4.	Mine Safety Disclosures		3039
Item 5.	Other Information		3039
Item 6.	Exhibits		3139

SIGNATURES			3240

~~Table of Contents~~

PART I – FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

Stage Stores, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value)

(Unaudited)



	October 28, 2017			January 28, 2017			November 2, 2019			February 2, 2019			November 3, 2018
ASSETS
Cash and cash equivalents	$	30,330		$	13,803		$	26,268		$	15,830		$	25,825
Merchandise inventories, net	578,633			409,384			581,495			424,555			602,283
Prepaid expenses and other current assets	52,376			41,574			43,754			52,518			47,181
Total current assets	661,339			464,761			651,517			492,903			675,289

Property, equipment and leasehold improvements, net of accumulated depreciation of $734,626 and $697,087, respectively	260,870			284,110
Property, equipment and leasehold improvements, net of accumulated depreciation of $778,376, $733,366 and $736,014, respectively							181,716			224,803			229,942
Operating lease assets							319,036			—			—
Intangible assets	17,135			15,235			1,900			2,225			17,135
Other non-current assets, net	28,237			22,883			19,544			24,230			23,152
Total assets	$	967,581		$	786,989		$	1,173,713		$	744,161		$	945,518

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	214,783		$	101,985		$	176,304		$	106,825		$	190,070
Current portion of debt obligations							5,000			4,812			3,555
Current portion of operating lease liabilities							75,709			—			—
Accrued expenses and other current liabilities	77,093			66,685			86,767			65,715			80,320
Total current liabilities	291,876			168,670			343,780			177,352			273,945

Long-term debt obligations	268,969			163,749			360,123			250,294			345,840
Long-term operating lease liabilities							275,604			—			—
Other long-term liabilities	70,052			74,410			30,703			61,990			62,809
Total liabilities	630,897			406,829			1,010,210			489,636			682,594

Commitments and contingencies

Common stock, par value $0.01, 100,000 shares authorized, 32,794 and 32,340 shares issued, respectively	328			323
Common stock, par value $0.01, 100,000 shares authorized, 34,076, 33,469 and 33,458 shares issued, respectively							341			335			335
Additional paid-in capital	416,422			410,504			426,606			423,535			422,539
Treasury stock, at cost, 5,175 shares, respectively	(43,248		)	(43,286		)	(44,444		)	(43,579		)	(43,527		)
Accumulated other comprehensive loss	(5,021		)	(5,648		)	(6,566		)	(5,857		)	(5,731		)
(Accumulated deficit) retained earnings	(31,797		)	18,267
Accumulated deficit							(212,434		)	(119,909		)	(110,692		)
Total stockholders' equity	336,684			380,160			163,503			254,525			262,924
Total liabilities and stockholders' equity	$	967,581		$	786,989		$	1,173,713		$	744,161		$	945,518

Stage Stores, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(Unaudited)

Three Months Ended Nine Months Ended
October 28, 2017
October 29, 2016 October 28, 2017 October 29, 2016
Net sales $ 357,236
$ 317,140
$ 1,042,924
$ 988,275
Cost of sales and related buying, occupancy and distribution expenses 285,542
260,550
816,071
779,128
Gross profit 71,694

56,590
226,853

209,147
Selling, general and administrative expenses 100,036
84,564
289,188
260,076
Interest expense 2,001
1,395
5,505
3,616
Loss before income tax (30,343 )
(29,369 ) (67,840 )
(54,545 )
Income tax benefit (12,621 ) (13,735 ) (24,873 ) (23,492 )
Net loss $ (17,722 )
$ (15,634 ) $ (42,967 )
$ (31,053 )

Other comprehensive income:
Amortization of employee benefit related costs, net of tax of $81, $86, $242 and $256, respectively $ 132
$ 139
$ 395
$ 417
Pension settlement charge, net of tax of $142 232
—
232
—
Total other comprehensive income 364

139
627

417
Comprehensive loss $ (17,358 )
$ (15,495 ) $ (42,340 )
$ (30,636 )

Basic loss per share data:
Basic loss per share $ (0.64 )
$ (0.58 ) $ (1.57 ) $ (1.15 )
Basic weighted average shares outstanding 27,602
27,155
27,468
27,066

Diluted loss per share data:
Diluted loss earnings per share $ (0.64 )
$ (0.58 ) $ (1.57 ) $ (1.15 )
Diluted weighted average shares outstanding 27,602
27,155
27,468
27,066



	Three Months Ended						Nine Months Ended
	November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Net sales	$	399,302		$	347,100		$	1,094,888		$	1,060,623
Credit income	15,678			13,324			42,774			43,143
Total revenues	414,980			360,424			1,137,662			1,103,766
Cost of sales and related buying, occupancy and distribution expenses	315,494			278,665			888,297			847,213
Selling, general and administrative expenses	111,180			109,774			324,066			327,965
Interest expense	4,070			3,350			12,187			8,253
Loss before income tax	(15,764		)	(31,365		)	(86,888		)	(79,665		)
Income tax expense (benefit)	150			(12		)	450			288
Net loss	$	(15,914	)	$	(31,353	)	$	(87,338	)	$	(79,953	)

Other comprehensive income (loss):
Amortization of employee benefit related costs, net of tax of $0, respectively	$	186		$	85		$	558		$	439
Pension settlement charges, net of tax of $0, respectively	270			411			270			411
Employee benefit related adjustment, net of tax of $0, respectively	(1,537		)	(1,404		)	(1,537		)	(1,404		)
Total other comprehensive loss	(1,081		)	(908		)	(709		)	(554		)
Comprehensive loss	$	(16,995	)	$	(32,261	)	$	(88,047	)	$	(80,507	)

Net loss per share:
Basic	$	(0.55	)	$	(1.11	)	$	(3.04	)	$	(2.85	)
Diluted	$	(0.55	)	$	(1.11	)	$	(3.04	)	$	(2.85	)

Weighted average shares outstanding:
Basic	28,886			28,261			28,706			28,059
Diluted	28,886			28,261			28,706			28,059

Stage Stores, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Nine Months Ended						Nine Months Ended
	October 28, 2017			October 29, 2016			November 2, 2019			November 3, 2018
Cash flows from operating activities:
Net loss	$	(42,967	)	$	(31,053	)	$	(87,338	)	$	(79,953	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation, amortization and impairment of long-lived assets	49,476			54,285
(Gain) loss on retirements of property, equipment and leasehold improvements	(926		)	273
Deferred income taxes	(6,065		)	1,965
Tax deficiency from stock-based compensation	—			(3,295		)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of long-lived assets							45,144			44,135
Impairment of long-lived assets							11,295			1,070
Gain on retirements of property, equipment and leasehold improvements							(302		)	(505		)
Non-cash operating lease expense							52,617			—
Stock-based compensation expense	6,191			7,345			2,276			3,854
Dividends charged to compensation expense							21			—
Amortization of debt issuance costs	216			164			512			248
Deferred compensation obligation	(38		)	233			865			229
Amortization of employee benefit related costs and pension settlement charge	1,011			673
Amortization of employee benefit related costs and pension settlement charges							828			850
Construction allowances from landlords	1,228			6,994			4,833			757
Other changes in operating assets and liabilities:
Increase in merchandise inventories	(137,479		)	(133,347		)	(156,940		)	(163,906		)
Increase in other assets	(9,709		)	(18,527		)
Decrease in other assets							15,111			4,910
Decrease in operating lease liabilities							(56,234		)	—
Increase in accounts payable and other liabilities	120,137			119,544			90,402			51,394
Net cash (used in) provided by operating activities	(18,925		)	5,254
Net cash used in operating activities							(76,910		)	(136,917		)

Cash flows from investing activities:
Additions to property, equipment and leasehold improvements	(25,342		)	(67,934		)	(25,145		)	(21,793		)
Proceeds from insurance and disposal of assets	2,404			1,177			2,887			2,349
Business acquisition	(36,144		)	—
Net cash used in investing activities	(59,082		)	(66,757		)	(22,258		)	(19,444		)

Cash flows from financing activities:
Proceeds from revolving credit facility borrowings	426,308			389,701			419,397			481,384
Payments of revolving credit facility borrowings	(318,851		)	(314,783		)	(305,818		)	(338,100		)
Proceeds from long-term debt obligation	—			5,830			—			25,000
Payments of long-term debt obligations	(5,626		)	(3,507		)	(3,008		)	(2,224		)
Payments of debt issuance costs	(8		)	—			(36		)	(358		)
Payments for stock related compensation	(192		)	(857		)	(929		)	(424		)
Cash dividends paid	(7,097		)	(12,466		)	—			(4,342		)
Net cash provided by financing activities	94,534			63,918			109,606			160,936
Net increase in cash and cash equivalents	16,527			2,415			10,438			4,575

Cash and cash equivalents:
Beginning of period	13,803			16,487			15,830			21,250
End of period	$	30,330		$	18,902		$	26,268		$	25,825

Supplemental disclosures including non-cash investing and financing activities:
Interest paid	$	5,221		$	3,425		$	11,652		$	8,097
Income taxes (refunded) paid	$	(8,485	)	$	2,931
Income taxes paid (refunded)							$	417		$	(11	)
Unpaid liabilities for capital expenditures	$	5,362		$	4,631		$	3,255		$	3,624

Stage Stores, Inc.

Condensed Consolidated ~~Statement~~Statements of Stockholders’ Equity

~~For the Nine Months Ended October 28, 2017~~

(in thousands, except per share ~~data)~~amounts)

(Unaudited)



	Common Stock			Additional Paid-in Capital				Treasury Stock							Accumulated Other Comprehensive Loss				Retained Earnings (Accumulated Deficit)							Common Stock					Additional Paid-in Capital				Treasury Stock							Accumulated Other Comprehensive Loss				Accumulated Deficit
	Shares	Amount					Shares			Amount								Total				Shares			Amount					Shares	Additional Paid-in Capital			Amount						Total						Accumulated Deficit
Balance at January 28, 2017	32,340	$	323	Additional Paid-in Capital	$	410,504			(5,175	)		$	(43,286	)	Accumulated Other Comprehensive Loss		$	(5,648	Retained Earnings (Accumulated Deficit)		)		$	18,267			$	380,160
Balance at August 3, 2019																										34,052			$	341	$	425,033			(5,175	)		$	(43,546	)		Accumulated Other Comprehensive Loss	$	(5,485	)		$	(196,520	)		$	179,823
Net loss	—	—		—				—			—				—				(42,967		)		(42,967		)	—			—		—				—			—				—				(15,914		)		(15,914		)
Other comprehensive income	—	—		—				—			—				627				—				627
Dividends on common stock, $0.25 per share	—	—		—				—			—				—				(7,097		)		(7,097		)
Other comprehensive loss																										—			—		—				—			—				(1,081		)		—				(1,081		)
Deferred compensation	—	—		(38		)		—			38				—				—				—			—			—		898				—			(898		)		—				—				—
Issuance of equity awards, net	454	5		(5		)		—			—				—				—				—			24			—		—				—			—				—				—				—
Tax withholdings paid for net settlement of stock awards	—	—		(230		)		—			—				—				—				(230		)	—			—		(16		)		—			—				—				—				(16		)
Stock-based compensation expense	—	—		6,191				—			—				—				—				6,191			—			—		691				—			—				—				—				691
Balance at October 28, 2017	32,794	$	328	$	416,422			(5,175	)		$	(43,248	)		$	(5,021	)		$	(31,797	)		$	336,684
Balance at November 2, 2019																										34,076			$	341	$	426,606			(5,175	)		$	(44,444	)		$	(6,566	)		$	(212,434	)		$	163,503


																										Common Stock					Additional Paid-in Capital				Treasury Stock							Accumulated Other Comprehensive Loss				Accumulated Deficit
																										Shares			Amount					Shares			Amount								Total
Balance at August 4, 2018																										33,418			$	334	Additional Paid-in Capital	$	421,621			(5,175	)		$	(43,388	)	Accumulated Other Comprehensive Loss		$	(4,823	Accumulated Deficit		)		$	(77,909	)	$	295,835
Net loss																										—			—		—				—			—				—				(31,353		)		(31,353		)
Other comprehensive loss																										—			—		—				—			—				(908		)		—				(908		)
Dividends on common stock, $0.05 per share																										—			—		—				—			—				—				(1,430		)		(1,430		)
Deferred compensation																										—			—		139				—			(139		)		—				—				—
Issuance of equity awards, net																										40			1		(1		)		—			—				—				—				—
Tax withholdings paid for net settlement of stock awards																										—			—		(25		)		—			—				—				—				(25		)
Stock-based compensation expense																										—			—		805				—			—				—				—				805
Balance at November 3, 2018																										33,458			$	335	$	422,539			(5,175	)		$	(43,527	)		$	(5,731	)		$	(110,692	)		$	262,924

Stage Stores, Inc.

Condensed Consolidated Statements of Stockholders’ Equity - continued

(in thousands, except per share amounts)

(Unaudited)



	Common Stock			Additional Paid-in Capital			Treasury Stock					Accumulated Other Comprehensive Loss			Accumulated Deficit
	Shares	Amount		Additional Paid-in Capital			Shares		Amount			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
Balance at February 2, 2019	33,469	$	335	$	423,535		(5,175	)	$	(43,579	)	$	(5,857	)	$	(119,909	)	$	254,525
Cumulative-effect adjustment ^(a)	—	—		—			—		—			—			(5,208		)	(5,208		)
Net loss	—	—		—			—		—			—			(87,338		)	(87,338		)
Other comprehensive loss	—	—		—			—		—			(709		)	—			(709		)
Deferred compensation	—	—		865			—		(865		)	—			—			—
Issuance of equity awards, net	607	6		(6		)	—		—			—			—			—
Tax withholdings paid for net settlement of stock awards	—	—		(64		)	—		—			—			—			(64		)
Stock-based compensation expense	—	—		2,276			—		—			—			—			2,276
Dividends on forfeited stock awards charged to compensation expense	—	—		—			—		—			—			21			21
Balance at November 2, 2019	34,076	$	341	$	426,606		(5,175	)	$	(44,444	)	$	(6,566	)	$	(212,434	)	$	163,503

^(a) Related to the adoption of the new lease accounting standard. See Note 1 for further disclosures regarding the adoption impact.

	Common Stock			Additional Paid-in Capital			Treasury Stock					Accumulated Other Comprehensive Loss			Accumulated Deficit
	Shares	Amount		Additional Paid-in Capital			Shares		Amount			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
Balance at February 3, 2018	32,806	$	328	$	418,658		(5,175	)	$	(43,298	)	$	(5,177	)	$	(26,397	)	$	344,114
Net loss	—	—		—			—		—			—			(79,953		)	(79,953		)
Other comprehensive loss	—	—		—			—		—			(554		)	—			(554		)
Dividends on common stock, $0.15 per share	—	—		—			—		—			—			(4,342		)	(4,342		)
Deferred compensation	—	—		229			—		(229		)	—			—			—
Issuance of equity awards, net	652	7		(7		)	—		—			—			—			—
Tax withholdings paid for net settlement of stock awards	—	—		(195		)	—		—			—			—			(195		)
Stock-based compensation expense	—	—		3,854			—		—			—			—			3,854
Balance at November 3, 2018	33,458	$	335	$	422,539		(5,175	)	$	(43,527	)	$	(5,731	)	$	(110,692	)	$	262,924

Stage Stores, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of Stage Stores, Inc. and its subsidiary (“we,” “us” or “our”) have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. Those adjustments that are, in the opinion of management, necessary for a fair presentation of the results of the interim periods have been made. Results of operations for such interim periods are not necessarily indicative of the results of operations for a full year due to seasonality and other factors. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto filed with our Annual Report on Form 10-K for the year ended ~~January 28, 2017~~February 2, 2019 (“Form 10-K”).

We are a retailer of trend-right, moderately priced, name-brand apparel, accessories, cosmetics, footwear and home goods. As of November 2, 2019, we operated in 42 states through 617 BEALLS, GOODY’S, PALAIS ROYAL, PEEBLES and STAGE department stores and 158 GORDMANS off-price stores, as well as an e-commerce website (www.stage.com). Our department stores are predominantly located in small towns and rural communities. Our off-price stores are predominantly located in smaller and mid-sized markets in the Midwest. In September 2019, we announced our plan to convert substantially all of our department stores to off-price beginning in February 2020. By the end of the third quarter of fiscal year 2020, we expect to be operating approximately 700 predominantly small-market, Gordmans stores, offering off-price values and broad assortments of name-brand merchandise in a fun, scarcity driven, treasure hunt experience.

References to a particular year are to our fiscal year, which is the 52- or 53-week period ending on the Saturday closest to January 31st of the following calendar year. For example, a reference to ~~“2017”~~“2019” is a reference to the fiscal year ending February ~~3, 2018,~~1, 2020, and ~~“2016”~~“2018” is a reference to the fiscal year ended ~~January 28, 2017.~~February 2, 2019. Fiscal years ~~2017~~2019 and ~~2016~~2018 are comprised of ~~53 weeks and~~ 52 ~~weeks, respectively.~~weeks. References to the “three months ended ~~October 28, 2017”~~November 2, 2019” and “three months ended ~~October 29, 2016”~~November 3, 2018” are for the respective 13-week fiscal quarters. References to quarters relate to our fiscal quarters. References to the “nine months ended ~~October 28, 2017”~~November 2, 2019” and “nine months ended ~~October 29, 2016”~~November 3, 2018” are for the respective 39-week fiscal periods.

On April 7, 2017, we acquired select assets of Gordmans Stores, Inc. and its subsidiaries through a bankruptcy auction (“Gordmans Acquisition”). The results of the Gordmans branded stores that we operated from April 7, 2017 through October 28, 2017 are included in our condensed consolidated statement of operations for the nine months ended October 28, 2017 (see Note 8).

Recently Adopted Accounting Pronouncements. In ~~March~~February 2016, the Financial Accounting Standards Board ~~(“FASB”)~~(FASB) issued Accounting Standards ~~Update~~Updates (“ASU”) ~~2016-09,~~ ~~Compensation - Stock Compensation~~2016-02, Leases (Topic ~~718): Improvements to Employee Share-Based Payment Accounting~~842), and subsequently issued related ASUs, which modifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows, and the option to estimate expected forfeitures or recognize forfeitures as they occur. We adopted this standard on a prospective basis in first quarter of 2017. were incorporated into Topic 842.Under the new standard, ~~excess income tax benefits~~lessees are required to recognize a right-of-use asset and ~~deficiencies related to awards that vest or settle are recognized in~~a lease liability, measured on a discounted basis, at the ~~provision for income taxes as a discrete event in~~later of the ~~period in which they occur, which may create significant volatility in~~lease commencement date and the ~~provision for income taxes~~date of adoption. The guidance also requires qualitative and ~~earnings. Historically, these amounts were reflected within additional paid-in capital on~~quantitative disclosures about the ~~balance sheet. In addition, upon adoption excess tax benefits are reflected within operating activities in the statements~~amount, timing and uncertainty of cash flows ~~whereas historically these amounts were reflected as a financing activity. Cash paid to tax authorities~~arising from leases. We adopted the new standard on ~~an employee’s behalf for withheld shares continues to be classified as a financing activity~~February 3, 2019, the first day of fiscal 2019.

Transition elections:


•	We elected to apply the effective date transition method as of the February 3, 2019 adoption date. Comparative periods prior to the adoption of the new standard have not been restated and are reported under the legacy guidance in Accounting Standards Codification (“ASC”) Topic 840, Leases.

We elected the package of practical expedients in the ~~statement~~transition guidance, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs.

We elected not to use the practical expedient of ~~cash flows.~~ using hindsight to determine the lease term and in assessing impairment of the right-of-use assets.

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Accounting policy elections:

We ~~made~~elected the short-term lease exemption for leases that have a ~~policy election~~lease term of twelve months or less. For leases that qualify for the short-term exemption, we will not recognize a right-of-use asset or liability and will recognize those lease expenses on a straight-line basis over the lease term.

We elected to ~~recognize forfeitures as they occur. For the three~~not separate lease and ~~nine months ended October 28, 2017, we recognized excess tax deficiencies~~non-lease components for all of ~~$0.1 million and $2.1 million, respectively, in the provision for income taxes.~~ our current lease classes.

The adoption of the ~~other requirements~~standard resulted in the recognition of ~~this~~operating lease assets and liabilities of $344.2 million and $375.8 million, respectively, as of February 3, 2019. Included in the measurement of the operating lease assets and liabilities is the reclassification of balances historically recorded as deferred rent and deferred rent tenant allowances. We also recognized a cumulative effect charge of $5.2 million, net of tax, to the opening accumulated deficit balance. This adjustment reflects $5.8 million in depreciation of leasehold improvements associated with conforming the asset useful life to the remaining lease life as of the transition date. It also reflects $0.6 million associated with the derecognition of lease obligations that had been classified as finance obligations under the former failed sale-leaseback guidance applied to build-to-suit arrangements. Under the new standard, these leases are classified as operating leases. The adoption of the standard did not have a material impact on our ~~consolidated financial statements.~~

results of operations or cash flows. In ~~August 2016,~~addition, our bank covenants under our Credit Facility were not affected by the ~~FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~, which provides guidance on certain specific cash flow issues including proceeds received from the settlement of insurance claims. This guidance requires cash proceeds received from the settlement of insurance claims to be classified on the statement of cash flows on the basisadoption of the ~~related insurance coverage (that is, the nature of the loss). The new standard is effective~~standard. See Note 6 for fiscal years and interim periods beginning after December 15, 2017, with early adoption permitted and is to be applied retrospectively. We adopted this guidance in the first quarter of 2017. The adoption of ASU 2016-15 did not have a material impact on our condensed consolidated statements of cash flows.further disclosures regarding leases.

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Recent Accounting Pronouncements Not Yet Adopted. In ~~May 2014,~~August 2018, the FASB issued ASU ~~2014-09,~~ ~~Revenue from Contracts with Customers~~2018-13, Fair Value Measurement (Topic ~~606)~~820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which ~~supersedes most existing revenue recognition guidance in GAAP.~~eliminates, adds and modifies certain disclosure requirements for fair value measurements. The core principle of the guidance is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects what the entity expects to be entitled to in exchange for those goods or services. The guidance establishes a five-step revenue recognition model, which includes (i) identifying the contract with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied. The guidance also requires additional disclosures to describe the nature, timing and uncertainty of revenue and cash flows from contracts with customers. ASU 2014-09 may be applied retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the guidance recognized in retained earnings at the date of adoption. The new ~~revenue~~ standard will be effective for us in the first quarter of fiscal 2020, with early adoption permitted. The provisions of ASU 2018-13 applicable to us should be applied prospectively. We expect ASU 2018-13 to impact our disclosures by eliminating the disclosure of valuation processes for Level 3 fair value measurements, and adding disclosure of quantitative information, such as the range and weighted average, of significant unobservable inputs used to develop Level 3 fair value measurements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force), which ~~begins on February 4, 2018, and~~aligns the requirements for capitalizing implementation costs in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance also requires disclosure of the nature of hosting arrangements that are service contracts. The new standard will be effective for us in the first quarter of fiscal 2020, with early adoption permitted. Upon adoption, we plan to apply the ~~full retrospective method~~provisions of ~~adoption.~~ASU 2018-15 prospectively. We expect the adoption to result in the recognition of prepaid expenses or other non-current assets that will be expensed over the contract term, whereas prior to adoption, these costs are recognized as long-lived assets and depreciated over the assets’ useful life. We do not expect the adoption to have a material impact on our financial condition, results of operations or cash flows.

~~In February 2016,~~

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NOTE 2 - FAIR VALUE MEASUREMENTS

We recognize or disclose the ~~FASB issued ASU 2016-02,~~ ~~Leases(Topic 842). The guidance in this ASU supersedes the leasing guidance in~~ ~~Topic 840~~, ~~Leases. The new standard requires lessees to recognize a right-of-use asset~~fair value of our financial and lease liability on the balance sheet for all leases with terms longer than 12 months. We plan to make a policy election that will keep leases with an initial term of 12 months or less off of the balance sheet and will result in recognizing those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. Consistent with current GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a financing or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, ASU 2016-02 will require both types of leases to be recognized on the balance sheet. As a result, lessees will be required to put most leases on their balance sheets while recognizing expense on their income statements in a manner similar to current accounting. In addition, this guidance requires disclosures about the amount, timing and uncertainty of cash flows arising from leases. The new standard will be effective for us in the first quarter of fiscal 2019, which begins on February 3, 2019. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We continue to evaluate the impact that the adoption of this ASU will have on our consolidated financial statements and disclosures, including the effect of certain optional practical expedients permitted under the transition guidance. Based on our assessment to date, we expect the adoption of ASU 2016-02 will result in a significant increase in lease-relatednon-financial assets and liabilities on ~~our consolidated balance sheets. The ultimate impact of adopting~~a recurring and non-recurring basis. Fair value is defined as the ~~new standard will depend on our lease portfolio as~~price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, we assume the highest and best use of the ~~adoption date.~~asset by market participants in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability.

~~In March 2017,~~We applied the ~~FASB issued ASU 2017-07,~~ ~~Improving~~following fair value hierarchy, which prioritizes the ~~Presentation~~inputs used to measure fair value into three levels, and bases the categorization within the hierarchy upon the lowest level of ~~Net Periodic Pension Cost~~input that is available and ~~Net Periodic Postretirement Benefit Cost, which requires~~significant to the ~~service cost component~~fair value measurement:



Level 1 –	Quoted prices in active markets for identical assets or liabilities.

Level 2 –	Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 –	Inputs that are both unobservable and significant to the overall fair value measurement reflect our estimates of assumptions that market participants would use in pricing the asset or liability.

Table of net periodic benefit cost to be presented in the same income statement line item as other employee compensation costs arising from services rendered during the period. If a subtotal for operating income is shown on the income statement, then the other components of the net periodic benefit cost must be presented separately from the line item that includes the service costContents

Financial assets and outside of any subtotal of operating income. The new standard also requires disclosure of the line item(s) in the income statement that include net periodic benefit costs. Additionally, only the service cost component of the net periodic benefit cost is eligible for capitalization. We plan to adopt ASU 2017-07 in the first quarter of fiscal 2018, which begins on February 4, 2018. The change in presentation of service cost must be applied retrospectively, while the capitalization of service cost must be appliedliabilities measured at fair value on a prospective basis. The pension plan that we sponsor is frozen, and therefore, service costs no longer accrue under the plan. Upon adoption, we will recognize net periodic pension costs in selling, general and administrative expenses, consistent with our current presentation, and we will disclose this in the notes to the financial statements.

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~~NOTE 2 - STOCK-BASED COMPENSATION~~

~~Stock-based compensation expense by type of grant for each period presented was~~recurring basis were as follows (in thousands):

Three Months Ended Nine Months Ended
October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Restricted stock units $ 108
$ —
$ 310
$ —
Non-vested stock 1,300
1,362
4,203
5,311
Performance shares 579
(569 ) 1,988
2,034
Total compensation expense 1,987
793
6,501
7,345
Related tax benefit (747 ) (298 ) (2,444 ) (2,762 )
Stock-based compensation expense, net of tax $ 1,240
$ 495
$ 4,057
$ 4,583



	November 2, 2019
	Balance		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other assets:
Securities held in grantor trust for deferred compensation plans ^(a)(b)	$	15,058	$	15,058	$	—	$	—


	February 2, 2019
	Balance		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other assets:
Securities held in grantor trust for deferred compensation plans ^(a)(b)	$	19,536	$	19,536	$	—	$	—


	November 3, 2018
	Balance		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other assets:
Securities held in grantor trust for deferred compensation plans ^(a)(b)	$	18,969	$	18,969	$	—	$	—

As^(a) The liability for the amount due to participants corresponding in value to the securities held in the grantor trust is recorded in other long-term liabilities.

^(b) Using the market approach, the fair values of ~~October 28, 2017, we have unrecognized compensation cost of $12.6 million~~these securities represent quoted market prices multiplied by the quantities held. Net gains and losses related to ~~stock-based~~the changes in fair value in the assets and liabilities under the various deferred compensation ~~awards granted, which is expected to be recognized over a weighted average period of 2.1 years.~~

~~Stock Appreciation Rights (“SARs”)~~

Prior to 2012, we granted SARs to our employees, which generally vested 25% annually over a four-year period from the grant date. Outstanding SARs expire, if not exercised or forfeited, within seven years from the grant date. Exercised SARsplans are ~~settled by the issuance of common stock~~recorded in ~~an amount equal to the increase in share price of our common stock between the grant date~~selling, general and ~~the exercise date.~~

~~The following table summarizes SARs activity~~administrative expenses and were nil for the ~~nine months~~year-to-date November 2, 2019 and November 3, 2018, and for the fiscal year ended ~~October 28, 2017:~~February 2, 2019.

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Non-financial assets measured at fair value on a nonrecurring basis were as follows (in thousands):

Stock Appreciation Rights Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years)
Aggregate Intrinsic Value
(in thousands)
Outstanding, vested and exercisable at January 28, 2017 177,900
$ 17.69

Expired (65,000 ) 16.29

Outstanding, vested and exercisable at October 28, 2017 112,900
$ 18.50
0.4 $ —



	November 2, 2019
	Balance		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Store property, equipment and leasehold improvements ^(a)	$	928	$	—	$	—	$	928
Operating lease assets ^(a)	5,419		—		—		5,419
Total assets	$	6,347	$	—	$	—	$	6,347


	February 2, 2019
	Balance		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Store property, equipment and leasehold improvements ^(a)	$	1,583	$	—	$	—	$	1,583


	November 3, 2018
	Balance		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Store property, equipment and leasehold improvements ^(a)	$	1,106	$	—	$	—	$	1,106

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~~Restricted Stock Units (“RSUs”)~~

~~We grant RSUs to our employees, which vest 25% annually over a four-year period from~~^(a)Using an undiscounted cash flow model, we evaluate the ~~grant date. Each vested RSU is settled in~~ cash ~~in an amount equal to the fair market value of one share~~flow trends of our common stock on the vesting date, not to exceed five times the per share fair market value of our common stock on the grant date. Unvested RSUs have the right to receive a dividend equivalent payment equal to cash dividends paid on our common stock. RSUs are accounted forstores at least annually and when events or changes in circumstances, such as a ~~liability in accordance with accounting guidance for~~store closure, indicate that the asset group may not be fully recoverable. When a store’s projected undiscounted cash settled stock awards. The liability for RSUs is remeasured based on the closing share price of our common stock at each reporting period until the award vests. Compensation expense is recognized ratably over the vesting period and adjusted with changes inflows indicate its asset carrying value may not be recoverable, we use a discounted cash flow model to estimate the fair value of the ~~liability.~~underlying asset group. An impairment write-down is recorded if the carrying value of an asset exceeds its fair value. Key assumptions in estimating future cash flows include, among other things, expected future operating performance, including expected closure date and lease term, and changes in economic conditions. We believe estimated future cash flows are sufficient to support the carrying value of our right-of-use operating lease and long-lived assets. Significant changes in the key assumptions used in our cash flow projections may result in additional asset impairments. For the year-to-date November 2, 2019 and November 3, 2018 and during fiscal year 2018, we recognized impairment charges of $2.1 million, $1.1 million, and $2.8 million, respectively. Impairment charges related to store property, equipment and leasehold improvements were recorded in cost of sales and related buying, occupancy and distribution expenses.

~~The following table summarizes RSU activity for~~Due to the ~~nine months ended October 28, 2017:~~

Restricted Stock Units Number of Units
Weighted
Average Grant
Date Fair Value
Outstanding at January 28, 2017 —
$ —
Granted 1,321,250
2.14
Forfeited (37,500 ) 2.09
Outstanding at October 28, 2017 1,283,750
2.14

~~Non-vested Stock~~

~~We grant shares~~short-term nature of ~~non-vested stock to our employees~~cash and ~~non-employee directors. Non-vested stock awarded to employees vests 25% annually over a four-year period from~~cash equivalents, payables and short-term debt obligations, the ~~grant date. Non-vested stock awarded to non-employee directors cliff vests after one year. At~~carrying value approximates the ~~end of the vesting period, non-vested stock converts one-for-one to common stock. Certain non-vested stock awards have shareholder rights, including the right to vote and to receive dividends. The~~ fair value of ~~non-vested stock awards with dividend rights is~~these instruments. In addition, we believe that the credit facility obligation approximates its fair value because interest rates are adjusted daily based on the closing share price of our common stock on the grant date. The fair value of non-vested stock awards that do not have dividend rights is discounted for the present value of expected dividends during the vesting period. Compensation expense is recognized ratably over the vesting period.current market rates.

~~The following table summarizes non-vested stock activity for the nine months ended October 28, 2017:~~

Non-vested Stock Number of Shares
Weighted
Average Grant
Date Fair Value
Outstanding at January 28, 2017 1,596,410
$ 10.22
Granted 668,371
2.21
Vested (562,122 ) 11.22
Forfeited (47,130 ) 9.39
Outstanding at October 28, 2017 1,655,529
6.67

The weighted-average grant date fair value for non-vested stock granted during the nine months ended October 28, 2017 and October 29, 2016 was $2.21 and $6.78, respectively. The aggregate intrinsic value of non-vested stock that vested during the nine months ended October 28, 2017 and October 29, 2016, was $1.2 million and $2.7 million, respectively. The payment of the employees’ tax liability for a portion of the vested shares was satisfied by withholding shares with a fair value equal to the tax liability. As a result, the actual number of shares issued during nine months ended October 28, 2017 was 453,677.

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~~Performance Shares~~

We grant performance shares as a means of rewarding management for our long-term performance based on total shareholder return relative to a specific group of companies over a three-year performance cycle. Performance shares cliff vest following a three-year performance cycle, and if earned are settled in shares of our common stock. The actual number of shares of our common stock that may be earned and issued ranges from zero to a maximum of twice the number of target shares outstanding on the vesting date. Grant recipients do not have any shareholder rights on unvested or unearned shares. The fair value of performance shares is estimated using a Monte Carlo simulation, based on the expected term of the award, a risk-free rate, expected dividends, expected volatility, and share price of our common stock and the specified peer group. The expected term is estimated based on the vesting period of the awards, the risk-free rate is based on the yield on U.S. Treasury securities matching the vesting period, and the volatility is based on the historical volatility over the expected term. Compensation expense is recorded ratably over the corresponding vesting period.

~~The following table summarizes information about the performance shares that were outstanding at October 28, 2017:~~

Period Granted Target Shares
Outstanding at January 28, 2017 Target Shares Granted Target Shares Vested Target Shares Forfeited Target Shares
Outstanding at October 28, 2017 Weighted Average
Grant Date Fair Value Per Share
2015 158,490
—
—
(4,444 ) 154,046
$ 28.33
2016 330,233
—
—
(8,527 ) 321,706
8.69
2017 —
600,000
—
—
600,000
1.80
Total 488,723
600,000
—
(12,971 ) 1,075,752
7.65

The weighted-average grant date fair value for performance shares granted during the nine months ended October 28, 2017 and October 29, 2016 was $1.80 and $8.69, respectively. No performance shares vested during the nine months ended October 28, 2017 and October 29, 2016, respectively.

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NOTE 3 - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

The components of property, equipment and leasehold improvements were as follows (in thousands):



	November 2, 2019		February 2, 2019		November 3, 2018
Land	$	540	$	1,544	$	1,544
Buildings and improvements	10,393		12,969		12,969
Fixtures and equipment	535,923		530,385		540,371
Leasehold improvements	413,236		413,271		411,072
Property, equipment and leasehold improvements	960,092		958,169		965,956
Less: Accumulated depreciation	778,376		733,366		736,014
Property, equipment and leasehold improvements, net	$	181,716	$	224,803	$	229,942

Depreciation expense and impairment charges were as follows for each period presented (in thousands):



	Three Months Ended				Nine Months Ended
	November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
Depreciation and amortization	$	15,272	$	13,988	$	45,144	$	44,135
Store impairment ^(a)	1,466		—		2,116		1,070
E-commerce impairment ^(b)	7,889		—		7,889		—
Intangible asset impairment ^(c)	325		—		325		—
Airplane impairment ^(d)	—		—		965		—
Total depreciation, amortization and impairment	$	24,952	$	13,988	$	56,439	$	45,205

Depreciation, amortization and impairment in cost of sales and related buying, occupancy and distribution expenses	$	16,070	$	11,241	$	39,767	$	35,617
Depreciation, amortization and impairment in selling, general and administrative expenses	8,882		2,747		16,672		9,588
Total depreciation, amortization and impairment	$	24,952	$	13,988	$	56,439	$	45,205

^(a)See Note 2 for further disclosures regarding store impairment charges.

^(b) We plan to discontinue e-commerce order fulfillment from our distribution centers and stores after the 2019 holiday shopping season to focus on off-price stores. Accordingly, we fully impaired property and equipment associated with these operations because we do not expect to recover any of the carrying value of these assets. E-commerce operations will subsequently be restricted to drop-ship order fulfillment. Of these impairment charges, $2.4 million were recorded in cost of sales and related buying, occupancy and distribution expenses, and $5.5 million were recorded in selling, general and administrative expenses.

^(c) Represents full impairment of the Stage.com domain name associated with the planned discontinuance of e-commerce order fulfillment from our distribution centers and stores after the 2019 holiday shopping season. Impairment charges related to the Stage.com domain name were recorded in selling, general and administrative expenses.

^(d) Represents partial impairment of an airplane based on a third-party valuation obtained in connection with its sale. Impairment charges related to the airplane were recorded in selling, general and administrative expenses. We sold the airplane in the third quarter 2019 and recognized a loss of $0.4 million on the sale for the three and nine months ended November 2, 2019. The loss on sale of the airplane was recorded in selling, general and administrative expenses.

As of November 2, 2019, we had land and buildings with a carrying value of $1.2 million classified as assets held-for-sale in connection with sale and leaseback arrangements for 4 stores, which were completed in the fourth quarter 2019. Assets held-for-sale were recorded in prepaid expenses and other current assets.

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NOTE 34 - DEBT OBLIGATIONS

Debt obligations for each period presented consisted of the following (in thousands):



	November 2, 2019		February 2, 2019		November 3, 2018
Revolving loan	$	317,623	$	204,044	$	322,572
Term loan	47,500		50,000		25,000
Finance obligations	—		554		812
Other financing	—		508		1,011
Total debt obligations	365,123		255,106		349,395
Less: Current portion of debt obligations	5,000		4,812		3,555
Long-term debt obligations	$	360,123	$	250,294	$	345,840

October 28, 2017 January 28, 2017
Revolving Credit Facility $ 267,159
$ 159,702
Finance obligations 1,849
2,708
Other financing 2,986
7,753
Total debt obligations 271,994

170,163
Less: Current portion of debt obligations 3,025
6,414
Long-term debt obligations $ 268,969

$ 163,749

We have total availability of $447.5 million with a ~~$400.0~~seasonal increase to $472.5 million under our senior secured revolving credit facility agreement including a revolving loan (“Revolving ~~Credit~~Loan”) and term loans (“Term Loan”), jointly referred to as the “Credit Facility”~~) with a seasonal increase to $450.0 million and~~. Additionally, we have a $25.0 million letter of credit sublimit. The ~~Revolving~~Term Loan is payable in quarterly installments of $1.3 million that began on June 15, 2019, with the remaining balance due upon maturity. The Credit Facility matures on December 16, ~~2021.~~2021.

We use the ~~Revolving~~ Credit Facility to provide financing for working capital and general corporate purposes, as well as to finance capital expenditures and to support our letter of credit requirements. Borrowings under the Credit Facility are limited to the availability under a borrowing base that is determined principally on eligible inventory as defined by the ~~Revolving~~ Credit Facility agreement. ~~Inventory,~~The Credit Facility is secured by our inventory, cash, ~~and~~ cash equivalents, ~~are pledged as collateral.~~and substantially all of our other assets. The daily interest rates are determined by a prime rate or LIBOR, plus an applicable margin, as set forth in the ~~Revolving~~ Credit Facility agreement. For the nine months ended ~~October 28, 2017,~~November 2, 2019, the weighted average interest rate on outstanding borrowings and the average daily borrowings on the Credit Facility, were ~~2.62%~~4.6% and ~~$221.7~~$320.9 million, respectively.

Letters of credit issued under the ~~Revolving~~ Credit Facility support certain merchandise purchases and collateralize retained risks and deductibles under various insurance programs. At ~~October 28, 2017,~~November 2, 2019, outstanding letters of credit totaled approximately ~~$7.3~~$6.5 million. These letters of credit expire within 12 months of issuance ~~but~~and may be renewed. ~~Excess availability under the Revolving~~

The Credit Facility agreement contains a covenant requiring us to maintain excess availability at ~~October 28, 2017 was $157.4 million.~~

or above $35.0 million or 10% of the Adjusted Combined Loan Cap (as defined therein). The ~~Revolving~~ Credit Facility agreement also contains covenants which, among other things, restrict ~~based on required levels of excess availability,~~ (i) the amount of additional debt or capital lease obligations, (ii) the payment of dividends to ~~$30~~$30.0 million in a fiscal year, and (iii) the repurchase of common stock under certain circumstances. ~~The agreement also contains a fixed charge coverage ratio covenant in the event excess availability is below a defined threshold or an event of default has occurred.~~ At ~~October 28, 2017,~~November 2, 2019, we were in compliance with ~~all of~~ the debt covenants of the ~~Revolving~~ Credit Facility agreement and we expect to remain in compliance. Excess availability under the Credit Facility at November 2, 2019 was $100.7 million.

We derecognized finance obligations of $0.6 million upon adoption of ASC Topic 842, Leases, on February 3, 2019. See Note 1 for further disclosures regarding the adoption impact.

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NOTE 45 - ~~EARNINGS PER SHARE~~REVENUE

Net Sales

We recognize revenue for merchandise sales, net of expected returns and sales tax, at the time of in-store purchase or delivery of the product to our guest. When merchandise is shipped to our guests, we estimate receipt based on historical experience. Revenue is deferred and a liability is established for sales returns based on historical return rates and sales for the return period. We recognize an asset and corresponding adjustment to cost of sales for our right to recover returned merchandise. At each financial reporting date, we assess our estimates of expected returns, refund liabilities and return assets. For merchandise sold in our stores and online, tender is accepted at the point of sale. When we receive payment before the guest has taken possession of the merchandise, the amount received is recorded as deferred revenue until the transaction is complete. Our performance obligations for unfulfilled merchandise orders are typically satisfied within one week. Shipping and handling fees charged to guests relate to fulfillment activities and are included in net sales with the corresponding costs recorded in cost of sales.

We record deferred revenue for the sale of gift cards and merchandise credits issued for returned merchandise, and we recognize revenue in net sales upon redemption. Gift card and merchandise credit redemptions typically occur within 12 months of the date of issuance with the majority redeemed within the first three months. Our gift cards and merchandise credits do not expire. Based on historical redemption rates, a small percentage of gift cards and merchandise credits will never be redeemed. We recognize estimated breakage income for gift cards and merchandise credits that will never be redeemed in proportion to actual historical redemption patterns.

Under our loyalty program, members can accumulate points, based on their spending, toward earning a reward certificate that can be redeemed for future merchandise purchases. Points earned by loyalty members reset to zero at the end of each calendar year. Reward certificates expire 30 days after the date of issuance. We allocate and defer a portion of our sales to reward certificates expected to be earned, based on the relative stand-alone sales transaction price and reward certificate value, and recognize the reward certificate as a net sale when it is redeemed.

The following ~~tables show~~table presents the ~~computation~~composition of ~~basic~~net sales by merchandise category (in thousands):



	Three Months Ended
	November 2, 2019									November 3, 2018
Merchandise Category	Department Stores			Off-price Stores			Total Company			Department Stores		Off-price Stores			Total Company
Women’s	$	100,929		$	27,834		$	128,763		$	94,732	$	19,934		$	114,666
Men’s	48,849			13,287			62,136			43,954		11,230			55,184
Children's	34,779			13,130			47,909			29,682		10,635			40,317
Apparel	184,557			54,251			238,808			168,368		41,799			210,167

Footwear	40,650			6,096			46,746			44,400		4,594			48,994
Accessories	18,830			4,281			23,111			17,823		4,863			22,686
Cosmetics/Fragrances	24,071			3,051			27,122			27,822		2,620			30,442
Home/Gifts	34,663			23,955			58,618			15,972		17,918			33,890
Other	4,242			717			4,959			693		156			849
Non-apparel	122,456			38,100			160,556			106,710		30,151			136,861

Revenue adjustments not allocated^(a)	(6		)	(56		)	(62		)	183		(111		)	72

Net sales	$	307,007		$	92,295		$	399,302		$	275,261	$	71,839		$	347,100

^(a) Includes adjustments related to deferred revenue, estimated sales returns, breakage income, shipping and miscellaneous revenues, which are not allocated to merchandise categories.

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	Nine Months Ended
	November 2, 2019									November 3, 2018
Merchandise Category	Department Stores			Off-price Stores			Total Company			Department Stores			Off-price Stores			Total Company
Women’s	$	285,183		$	73,649		$	358,832		$	315,428		$	59,165		$	374,593
Men’s	137,539			33,335			170,874			138,414			27,688			166,102
Children's	85,115			32,880			117,995			88,160			26,261			114,421
Apparel	507,837			139,864			647,701			542,002			113,114			655,116

Footwear	120,148			17,267			137,415			134,024			13,918			147,942
Accessories	53,532			12,490			66,022			55,121			13,118			68,239
Cosmetics/Fragrances	79,128			8,720			87,848			90,295			7,530			97,825
Home/Gifts	80,528			64,516			145,044			35,766			51,740			87,506
Other	11,929			2,220			14,149			5,697			1,587			7,284
Non-apparel	345,265			105,213			450,478			320,903			87,893			408,796

Revenue adjustments not allocated^(a)	(2,265		)	(1,026		)	(3,291		)	(2,986		)	(303		)	(3,289		)

Net sales	$	850,837		$	244,051		$	1,094,888		$	859,919		$	200,704		$	1,060,623

^(a) Includes adjustments related to deferred revenue, estimated sales returns, breakage income, shipping and miscellaneous revenues, which are not allocated to merchandise categories.

Contract Liabilities

Contract liabilities reflect our performance obligations related to gift cards, merchandise credits, loyalty program rewards and ~~diluted loss per common share~~merchandise orders that have not been satisfied as of a given date, and therefore, revenue recognition has been deferred. Contract liabilities (recorded in accrued expenses and other current liabilities) for each period presented were as follows (in thousands):



	November 2, 2019		February 2, 2019		November 3, 2018
Gift cards and merchandise credits, net	$	8,835	$	12,433	$	9,756
Loyalty program rewards, net	6,065		1,484		5,540
Merchandise fulfillment liability	657		488		1,180
Total contract liabilities	$	15,557	$	14,405	$	16,476

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The following table summarizes contract liability activity for each period presented (in ~~thousands, except per share amounts)~~thousands):



	Three Months Ended						Nine Months Ended
	November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Beginning balance	$	15,765		$	15,119		$	14,405		$	13,474
Net sales recognized during the period from amounts included in contract liability balances at the beginning of the period	(7,209		)	(6,574		)	(7,775		)	(7,396		)
Current period additions to contract liability balances included in contract liability balances at the end of the period	7,001			7,931			8,927			10,398
Ending balance	$	15,557		$	16,476		$	15,557		$	16,476

Credit Income

We earn credit income from our private label credit card (“PLCC”) through a profit-sharing arrangement with Comenity Bank, an affiliate of Alliance Data Systems Corporation. Comenity Bank owns the PLCC portfolio and manages the account activation, receivables funding, card authorization, card issuance, statement generation, remittance processing and guest service functions for our PLCC program. We perform certain duties, including electronic processing and transmitting of transaction records, and executing marketing promotions designed to increase card usage. We also accept payments in our stores from cardholders on behalf of Comenity Bank. We receive a monthly net portfolio yield payment from Comenity Bank, and we can potentially earn an annual bonus based upon the performance of the PLCC portfolio. The receivable for credit income, which is recorded in prepaid expenses and other current assets, was $4.5 million, $4.9 million and $4.0 million as of November 2, 2019, February 2, 2019 and November 3, 2018, respectively.

On April 11, 2019, we entered into an amendment to our profit-sharing arrangement with Comenity Bank. The amendment extended the term of the arrangement from July 31, 2021 to July 31, 2024.

We recorded deferred revenue for certain upfront payments received from Comenity Bank associated with the execution of the PLCC agreement. The amounts recognized in credit income related to these upfront payments for each period presented were as follows (in thousands):



	Three Months Ended				Nine Months Ended
	November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
Upfront payments recognized in credit income	$	469	$	438	$	1,344	$	1,313

As of November 2, 2019, deferred revenue of $6.5 million remained to be amortized.

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Three Months Ended Nine Months Ended
October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Basic:
Net loss $ (17,722 ) $ (15,634 ) $ (42,967 ) $ (31,053 )
Less: Allocation of earnings to participating securities (66 ) —
(268 ) —
Net loss allocated to common shares (17,788 ) (15,634 ) (43,235 )
(31,053 )

Basic weighted average shares outstanding 27,602
27,155
27,468
27,066
Basic loss per share $ (0.64 ) $ (0.58 ) $ (1.57 ) $ (1.15 )

Three Months Ended Nine Months Ended
October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Diluted:

Net loss $ (17,722 ) $ (15,634 ) $ (42,967 ) $ (31,053 )
Less: Allocation of earnings to participating securities (66 ) —
(268 ) —
Net loss allocated to common shares (17,788 ) (15,634 ) (43,235 )
(31,053 )

Basic weighted average shares outstanding 27,602
27,155
27,468
27,066
Add: Dilutive effect of stock awards —
—
—
—
Diluted weighted average shares outstanding 27,602
27,155
27,468

27,066
Diluted loss per share $ (0.64 ) $ (0.58 ) $ (1.57 ) $ (1.15 )

NOTE 6 - LEASES

Our lease agreements include leases for our retail stores, distribution centers and corporate headquarters. As of November 2, 2019, all of our leases were classified as operating leases. Our store leases typically have an initial term of 10 years and often have 2 renewal options of five years each. The exercise of a lease renewal option is at our sole discretion. The lease term includes the initial contractual term as well as any options to extend the lease when it is reasonably certain that we will exercise that option. Our lease agreements do not contain any residual value guarantees or material restrictive covenants.

We recognize a lease liability for our obligation to make lease payments arising from the lease and a related asset for our right to use the underlying asset for the lease term. The lease liability is measured based on the present value of lease payments over the lease term, and the asset is measured based on the value of the lease liability, net of landlord allowances. As the implicit interest rate in our lease agreements is not readily identifiable, we use our estimated collateralized incremental borrowing rate in determining the present value of lease payments. For all current lease classes, we made an accounting policy election not to separate lease and non-lease components.

The majority of our leases include fixed rent payments. A number of ~~shares attributable~~store leases provide for escalating minimum rent payments at pre-determined dates. Certain store leases provide for contingent rent payments based on a percentage of retail sales over contractual levels. Some of our leases include variable payments for maintenance, taxes and insurance.

Operating lease payments are expensed on a straight-line basis over the lease term. Variable payments are not included in the measurement of the lease liability or asset and are expensed as incurred.

We sublease our former corporate office building and space in one of our distribution centers to ~~SARs~~third parties and ~~non-vested stock grants that would have been considered dilutive securities, but~~recognize sublease income on a straight-line basis over the lease terms.

ASC 842 Disclosures

Lease cost includes both the fixed and variable expenses recorded for leases. The components of lease cost were ~~excluded from the calculation~~as follows (in thousands):



	Three Months Ended			Nine Months Ended
	November 2, 2019			November 2, 2019
Operating lease cost	$	26,448		$	78,905
Variable lease cost	9,676			29,117
Short-term lease cost	152			176
Sublease income	(553		)	(1,290		)
Total net lease cost	$	35,723		$	106,908

Net lease cost in cost of sales and related buying, occupancy and distribution expenses	$	34,712		$	103,588
Net lease cost in selling, general and administrative expenses	1,011			3,320
Total net lease cost	$	35,723		$	106,908

Table of ~~diluted loss per common share because the effect was anti-dilutive~~Contents

Cash and non-cash activities associated with our leases were as follows (in thousands):

Three Months Ended Nine Months Ended
October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Number of anti-dilutive shares due to net loss for the period —
20
—
42
Number of anti-dilutive SARs due to exercise price greater than average market price of our common stock 113

187
129
198



	Nine Months Ended
	November 2, 2019
Cash paid for operating leases	$	82,522
Cash received from sublease	1,271
Lease assets obtained in exchange for lease liabilities ^(a)	27,454

^(a)Excludes operating lease assets of $344.2 million recognized on February 3, 2019 as a result of the adoption of ASU 2016-02, Leases (Topic 842). See Note 1 for further disclosures regarding the adoption impact.

The weighted average remaining lease term and weighted average discount rate associated with our leases as of November 2, 2019 were as follows:



Weighted average remaining lease term	5.3 years
Weighted average discount rate	10.1	%

Maturities of operating leases as of November 2, 2019 were as follows (in thousands):



Fiscal Year	Operating Leases		Sublease
2019 (remainder of year)	$	27,459	$	(424	)
2020	105,350		(1,739		)
2021	90,889		(1,829		)
2022	74,893		(1,829		)
2023	54,382		(1,184		)
2024	36,359		—
Thereafter	68,584		—
Total lease payments	457,916		$	(7,005	)
Less: Effects of discounting	106,603
Present value of lease liabilities	351,313
Less: Current portion of lease liabilities	75,709
Long-term lease liabilities	$	275,604

As of November 2, 2019, we had an additional operating lease that has not yet commenced of $0.1 million. The lease will commence in 2020 and has a lease term of six years.

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Comparative Period Disclosures Reported Under ASC 840

Future minimum rental commitments on long-term, non-cancelable operating leases at February 2, 2019, were as follows (in thousands):



Fiscal Year	Commitments		Sublease Income			Net Minimum Lease Commitments
2019	$	108,541	$	(1,447	)	$	107,094
2020	98,859		(1,492		)	97,367
2021	83,377		(1,582		)	81,795
2022	67,447		(1,582		)	65,865
2023	46,887		(1,054		)	45,833
Thereafter	77,910		—			77,910
Total	$	483,021	$	(7,157	)	$	475,864

While infrequent in occurrence, occasionally we are responsible for the construction of leased stores and for paying project costs. ASC 840-40-55, The Effect of Lessee Involvement in Asset Construction, requires us to be considered the owner (for accounting purposes) of such build-to-suit arrangements during the construction period. The leases are accounted for as finance obligations with the amounts received from the landlord being recorded in debt obligations. Interest expense is recognized at a rate that will amortize the finance obligation over the initial term of the lease. Where ASC 840-40-55 was applicable, we have recorded finance obligations with interest rates of 6.1% and 12.3% on our condensed consolidated financial statements related to 2 store leases as of February 2, 2019.

Future minimum annual payments required under existing finance obligations as of February 2, 2019 were as follows (in thousands):



Fiscal Year	Minimum Payments		Less: Interest		Principal Payments
2019	$	580	$	26	$	554

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NOTE 57 - ~~STOCKHOLDERS’ EQUITY~~STOCK-BASED COMPENSATION

OnStock-based compensation expense by type of grant for each period presented was as follows (in thousands):



	Three Months Ended					Nine Months Ended
	November 2, 2019		November 3, 2018			November 2, 2019		November 3, 2018
Non-vested stock	$	505	$	887		$	1,801	$	3,153
Restricted stock units	807		196			1,053		947
Stock-settled performance share units	186		(82		)	475		701
Cash-settled performance share units	913		11			941		161
Total stock-based compensation expense	2,411		1,012			4,270		4,962
Related tax benefit	—		—			—		—
Stock-based compensation expense, net of tax	$	2,411	$	1,012		$	4,270	$	4,962

As of November ~~16, 2017,~~2, 2019, we have estimated unrecognized compensation cost of $9.4 million related to stock-based compensation awards granted, which is expected to be recognized over a weighted average period of 2.4 years.

Non-vested Stock

We grant shares of non-vested stock to our employees and non-employee directors. Shares of non-vested stock awarded to employees vest 25% annually over a period of four years from the grant date. Shares of non-vested stock awarded to non-employee directors cliff vest after one year. At the end of the vesting period, shares of non-vested stock convert one-for-one to common stock. Certain non-vested stock awards have shareholder rights, including the right to vote and to receive dividends. The fair value of non-vested stock awards with dividend rights is based on the closing share price of our common stock on the grant date. The fair value of non-vested stock awards that do not have dividend rights is discounted for the present value of expected dividends during the vesting period. Compensation expense is recognized ratably over the vesting period.

The following table summarizes non-vested stock activity for the nine months ended November 2, 2019:



Non-vested Stock	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding at February 2, 2019	1,379,616		$	4.43
Granted	1,004,670		0.94
Vested	(663,427	)	5.40
Forfeited	(40,974	)	6.87
Outstanding at November 2, 2019	1,679,885		1.90

The weighted average grant date fair value for non-vested stock granted during the nine months ended November 2, 2019 and November 3, 2018 was $0.94 and $2.41, respectively. The aggregate intrinsic value of non-vested stock that vested during the nine months ended November 2, 2019 and November 3, 2018, was $0.7 million and $1.3 million, respectively. The payment of employees’ tax liabilities for a portion of the vested shares was satisfied by withholding shares with a fair value equal to the tax liabilities. As a result, the actual number of shares issued during the nine months ended November 2, 2019 was 607,579.

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Restricted Stock Units (“RSUs”)

We grant RSUs to our employees, which vest 25% annually over a period of four years from the grant date. Each vested RSU is settled in cash in an amount equal to the fair market value of one share of our common stock on the vesting date, not to exceed five times the per share fair market value of our common stock on the grant date. Unvested RSUs have the right to receive a dividend equivalent payment equal to cash dividends paid on our common stock. RSUs are accounted for as a liability in accordance with accounting guidance for cash settled stock awards. The liability for RSUs is remeasured based on the closing share price of our common stock at each reporting period until the award vests. Compensation expense is recognized ratably over the vesting period and adjusted with changes in the fair value of the liability.

The following table summarizes RSU activity for the nine months ended November 2, 2019:



Restricted Stock Units	Number of Units		Weighted Average Grant Date Fair Value
Outstanding at February 2, 2019	1,740,314		$	2.16
Granted	1,615,000		0.98
Vested	(492,814	)	2.16
Forfeited	(613,125	)	1.59
Outstanding at November 2, 2019	2,249,375		1.47

Stock-settled Performance Share Units (“Stock-settled PSUs”)

We grant stock-settled PSUs as a means of rewarding management for our long-term performance based on total shareholder return relative to a specific group of companies over a performance cycle of three years. These awards cliff vest following a performance cycle of three years, and if earned, are settled in shares of our common stock, unless otherwise determined by our Board of Directors (“Board”) ~~declared~~, or its Compensation Committee. The actual number of shares of our common stock that may be earned ranges from 0 to a ~~quarterly cash dividend~~maximum of ~~$0.05 per~~twice the number of target units awarded to the recipient. Grant recipients do not have any shareholder rights on unvested or unearned stock-settled PSUs. The fair value of these PSUs is estimated using a Monte Carlo simulation, based on the expected term of the award, a risk-free rate, expected dividends, expected volatility, and share price of our common stock and the specified peer group. The expected term is estimated based on the vesting period of the awards, the risk-free rate is based on the yield on U.S. Treasury securities matching the vesting period, and the volatility is based on the historical volatility over the expected term. Compensation expense is recognized ratably over the corresponding vesting period for stock-settled PSUs.

The following table summarizes stock-settled PSU activity for the nine months ended November 2, 2019:



Period Granted	Target PSUs Outstanding at February 2, 2019	Target PSUs Granted	Target PSUs Forfeited		Target PSUs Outstanding at November 2, 2019	Weighted Average Grant Date Fair Value per Target PSU
2017	470,000	—	(50,000	)	420,000	$	1.80
2018	280,000	—	—		280,000	3.05
2019	—	375,000	—		375,000	1.39
Total	750,000	375,000	(50,000	)	1,075,000	1.98

The weighted average grant date fair value for stock-settled PSUs granted during the nine months ended November 2, 2019 and November 3, 2018 was $1.39 and $3.05, respectively. The aggregate intrinsic value of stock settled PSUs that vested during the nine months ended November 2, 2019 and November 3, 2018 was nil and $0.02 million, respectively. No stock-settled PSUs vested during the nine months ended November 2, 2019.

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Cash-settled Performance Share Units (“Cash-settled PSUs”)

We grant cash-settled PSUs as a means of rewarding management for our long-term performance based on total shareholder return relative to a specific group of companies over a performance cycle of three years. These awards cliff vest following a performance cycle of three years, and if earned, are settled in cash. The amount of settlement ranges from 0 to a maximum of twice the number of target units awarded multiplied by the fair market value of one share of our common stock ~~payable~~ on ~~December 13, 2017 to shareholders~~the vesting date. Grant recipients do not have any shareholder rights on unvested or unearned cash-settled PSUs. Cash-settled PSUs are accounted for as a liability in accordance with accounting guidance for cash settled stock awards. The liability for cash-settled PSUs is remeasured based on their fair value at each reporting period until the award vests, which is estimated using a Monte Carlo simulation. Assumptions used in the valuation include the expected term of ~~record at~~ the ~~close~~award, a risk-free rate, expected dividends, expected volatility, and share price of ~~business~~our common stock and the specified peer group. The expected term is estimated based on the vesting period of the awards, the risk-free rate is based on the yield on U.S. Treasury securities matching the vesting period, and the volatility is based on the historical volatility over the expected term. Compensation expense is recognized ratably over the corresponding vesting period and adjusted with changes in the fair value of the liability.

The following table summarizes cash-settled PSU activity nine months ended November ~~28, 2017.~~2, 2019:



Period Granted	Target PSUs Outstanding at February 2, 2019	Target PSUs Granted	Target PSUs Forfeited		Target PSUs Outstanding at November 2, 2019	Weighted Average Grant Date Fair Value per Target PSU
2018	300,000	—	(50,000	)	250,000	$	3.05
2019	—	530,000	(50,000	)	480,000	$	1.39
Total	300,000	530,000	(100,000	)	730,000	$	1.96

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NOTE 68 - PENSION PLAN

We sponsor a frozen defined benefit pension plan. The components of net periodic pension cost, which were recognized in selling, general and administrative expenses, were as follows (in thousands):



	Three Months Ended						Nine Months Ended
	November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Employer service cost	$	135		$	127		$	405		$	383
Interest cost on pension benefit obligation	321			338			965			1,013
Expected return on plan assets	(363		)	(435		)	(1,090		)	(1,305		)
Amortization of net loss	186			85			558			439
Settlement charges ^(a)	270			411			270			411
Net periodic pension cost	$	549		$	526		$	1,108		$	941

^(a) Non-cash pension settlement charges were recognized as a result of lump sum distributions exceeding interest cost for the nine months ended November 2, 2019 and November 3, 2018, respectively.

Three Months Ended Nine Months Ended
October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Employer service cost $ 123
$ 85
$ 368
$ 255
Interest cost on pension benefit obligation 363
400
1,090
1,198
Expected return on plan assets (407 ) (437 ) (1,222 ) (1,312 )
Amortization of net loss 213
225
637
673
Pension settlement charge 374
—
374
—
Net periodic pension cost $ 666

$ 273
$ 1,247

$ 814

~~During~~Other changes in plan assets and benefit obligations recognized in other comprehensive loss were as follows (in thousands):



	Three Months Ended						Nine Months Ended
	November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Amortization of net loss	$	(186	)	$	(85	)	$	(558	)	$	(439	)
Settlement charges	(270		)	(411		)	(270		)	(411		)
Net loss	1,537			1,404			1,537			1,404
Net change recognized in other comprehensive loss, pre-tax	$	1,081		$	908		$	709		$	554

The actuarial net loss recognized in other comprehensive loss comprised of the three and nine months ended October 28, 2017, we recognized a non-cash pension settlement charge of $0.4 million as a result of lump sum distributions exceeding interest cost for 2017. This settlement was included in selling, general and administrative expenses in our condensed consolidated statements of operation.following changes (in thousands):



	Three Months Ended						Nine Months Ended
	November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Loss (gain) from decrease (increase) in discount rate	$	3,818		$	(2,521	)	$	3,818		$	(2,521	)
(Gain) loss from investment return on plan assets	(1,803		)	3,365			(1,803		)	3,365
(Gain) loss due to updated demographic data and assumption changes (other than discount rate)	(478		)	560			(478		)	560
Net loss	$	1,537		$	1,404		$	1,537		$	1,404

Our funding policy is to make contributions to maintain the minimum funding requirements for our pension obligations in accordance with the Employee Retirement Income Security Act. We may elect to contribute additional amounts to maintain a level of funding to minimize the Pension Benefit Guaranty Corporation premium costs or to cover the short-term liquidity needs of the plan in order to maintain current invested positions. We contributed ~~$0.7~~$1.0 million during the ~~nine months ended October 28, 2017,~~year-to-date November 2, 2019, and we expect to contribute an additional ~~$0.2~~$0.3 million in ~~2017.~~2019.

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NOTE 79 - ~~FAIR VALUE MEASUREMENTS~~EARNINGS PER SHARE

~~We recognize or disclose~~The following tables show the ~~fair value~~computation of ~~our financial~~basic and ~~non-financial assets and liabilities on a recurring and non-recurring basis. Fair value is defined as the price~~diluted loss per common share for each period presented (in thousands, except per share amounts):



	Three Months Ended						Nine Months Ended
	November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Basic:
Net loss	$	(15,914	)	$	(31,353	)	$	(87,338	)	$	(79,953	)
Distributed earnings allocated to participating securities	—			(18		)	—			(149		)
Net loss allocated to common shares	(15,914		)	(31,371		)	(87,338		)	(80,102		)

Basic weighted average shares outstanding	28,886			28,261			28,706			28,059
Basic loss per share	$	(0.55	)	$	(1.11	)	$	(3.04	)	$	(2.85	)

	Three Months Ended						Nine Months Ended
	November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Diluted:
Net loss	$	(15,914	)	$	(31,353	)	$	(87,338	)	$	(79,953	)
Distributed earnings allocated to participating securities	—			(18		)	—			(149		)
Net loss allocated to common shares	(15,914		)	(31,371		)	(87,338		)	(80,102		)

Basic weighted average shares outstanding	28,886			28,261			28,706			28,059
Dilutive effect of stock awards	—			—			—			—
Diluted weighted average shares outstanding	28,886			28,261			28,706			28,059
Diluted loss per share	$	(0.55	)	$	(1.11	)	$	(3.04	)	$	(2.85	)

The number of shares attributable to outstanding stock-based compensation awards that would ~~be received~~have been considered dilutive securities, but were excluded from ~~selling an asset or paid to transfer a liability in an orderly transaction between market participants at~~ the ~~measurement date. When determining~~calculation of diluted loss per common share because the fair value measurements for assets and liabilities which are required to be recorded at fair value, we assume the highest and best use of the asset by market participants in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability.

We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels, and base the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:



~~Level 1 –~~	~~Quoted prices in active markets for identical assets or liabilities.~~

~~Level 2 –~~	Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

~~Level 3 –~~	~~Inputs that are both unobservable and significant to the overall fair value measurement reflect our estimates of assumptions that market participants would use in pricing the asset or liability.~~

~~Table of Contents~~

~~Financial assets and liabilities measured at fair value on a recurring basis~~effect was anti-dilutive were as follows (in thousands):



	Three Months Ended		Nine Months Ended
	November 2, 2019	November 3, 2018	November 2, 2019	November 3, 2018
Number of anti-dilutive shares due to net loss for the period	1,120	89	373	341

October 28, 2017
Balance
Quoted Prices in Active Markets for Identical Instruments
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
Other assets:
Securities held in grantor trust for deferred
compensation plans ^(a)(b)
$ 18,750
$ 18,750
$ —
$ —

January 28, 2017
Balance
Quoted Prices in Active Markets for Identical Instruments
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
Other assets:

Securities held in grantor trust for deferred
compensation plans ^(a)(b)
$ 18,094
$ 18,094
$ —
$ —

^(a) ~~The liability for the amount due to participants corresponding in value to the securities held in the grantor trust is recorded in other long-term liabilities.~~

^(b) Using the market approach, the fair values of these items represent quoted market prices multiplied by the quantities held. Net gains and losses related to the changes in fair value in the assets and liabilities under the various deferred compensation plans are recorded in selling, general and administrative expenses and were nil ~~for the~~ ~~nine months ended October 28, 2017 and for the fiscal year ended January 28, 2017.~~

~~Table of Contents~~

~~Non-financial assets measured at fair value on a nonrecurring basis were as follows (in thousands):~~

October 28, 2017
Balance Quoted Prices in Active Markets for Identical Instruments
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3)
Assets:
Store property, equipment and leasehold improvements ^(a)
$ 229
$ —
$ —
$ 229

January 28, 2017
Balance Quoted Prices in Active Markets for Identical Instruments
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3)
Assets:
Store property, equipment and leasehold improvements ^(a)
$ 8,795
$ —
$ —
$ 8,795

^(a)Using an undiscounted cash flow model, we evaluate the cash flow trends of our stores at least annually and when events or changes in circumstances, such as a store closure, indicate that property, equipment and leasehold improvements may not be fully recoverable. When a store’s projected undiscounted cash flows indicate its carrying value may not be recoverable, we use a discounted cash flow model, with a 10% discount rate, to estimate the fair value of the underlying long-lived assets. An impairment write-down is recorded if the carrying value of a long-lived asset exceeds its fair value. Key assumptions in estimating future cash flows include, among other things, expected future operating performance, including expected closure date and lease term, and changes in economic conditions. We believe estimated future cash flows are sufficient to support the carrying value of our long-lived assets. Significant changes in the key assumptions used in our cash flow projections may result in additional asset impairments. For the nine months ended October 28, 2017 and fiscal year 2016, we recognized impairment charges of $0.2 million and $19.9 million respectively. Impairment charges are recorded in cost of sales and related buying, occupancy and distribution expenses.

Due to the short-term nature of cash and cash equivalents, payables and short-term debt obligations, the carrying value approximates the fair value of these instruments. In addition, we believe that the Revolving Credit Facility obligation approximates its fair value because interest rates are adjusted daily based on current market rates.

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~~NOTE 8 - GORDMANS ACQUISITION~~

On April 7, 2017, we acquired select assets of Gordmans Stores, Inc. and its subsidiaries (collectively, the “Sellers”) through a bankruptcy auction. The terms of the transaction agreement required us to take assignment of a minimum of 50 of the Sellers’ store leases, with rights to take assignment of the leases for an additional seven stores and a distribution center. We also acquired all of the Sellers’ inventory, furniture, fixtures and equipment at the 57 store locations and distribution center, as well as the trademarks and other intellectual property of the Sellers. The Gordmans branded stores, which we intend to operate as an off-price concept, add scale to our business, while allowing us to leverage strategic synergies and our current infrastructure. The acquisition also brings beneficial geographic and customer diversification.

The purchase price for the inventory and other assets acquired from the Sellers was approximately $36.1 million, all of which was paid by the end of the second quarter 2017 using existing cash and availability under the Revolving Credit Facility. We took assignment of 55 of the 57 store locations and the distribution center. We also entered into new leases for three former Gordmans store locations, of which, two were opened in the second quarter 2017 and one opened in August 2017.

~~The estimated fair values of the assets acquired at the acquisition date were as follows (in thousands):~~

April 7, 2017
Inventory $ 31,770
Property, plant and equipment and other assets 4,374
Total $ 36,144

~~Acquisition and integration related costs were recognized in selling, general and administrative expenses and were as follows for each period presented (in thousands):~~

Three Months Ended Nine Months Ended
October 28, 2017
Business acquisition costs $ (39 ) $ 9,169

Net sales included in our condensed consolidated statements of operations from the GORDMANS branded stores that we operated beginning on April 7, 2017, were as follows for each period presented (in thousands):

Three Months Ended Nine Months Ended
October 28, 2017
Net sales $ 61,774
$ 133,591

Pro forma net sales and earnings for the three and nine months ended October 28, 2017 and October 29, 2016 are not presented due to the impracticability in substantiating this information as the Gordmans Acquisition was limited to select assets and assignment of leases acquired through a bankruptcy auction. Furthermore, the results of operations may have been impacted by the Sellers’ liquidation and may not be indicative of future performance.

~~Table of Contents~~


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Concerning Forward-Looking Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 (“Act”) provides a safe harbor for forward-looking statements to encourage companies to provide prospective information, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statements. We wish to take advantage of the “safe harbor” provisions of the Act.

Certain statements in this report are forward-looking statements within the meaning of the Act, and such statements are intended to qualify for the protection of the safe harbor provided by the Act. The words “anticipate,” “estimate,” “expect,” “objective,” “goal,” “project,” “intend,” “plan,” “believe,” “will,” “should,” “may,” “target,” “forecast,” “guidance,” “outlook,” and similar expressions generally identify forward-looking statements. Similarly, descriptions of our objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements relate to the expectations of management as to future occurrences and trends, including statements expressing optimism or pessimism about future operating results or events and projected sales, earnings, capital expenditures and business strategy.

Forward-looking statements are based upon a number of assumptions and factors concerning future conditions that may ultimately prove to be inaccurate and could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements that are made herein and in other reports and releases are not guarantees of future performance and actual results may differ materially from those discussed in such forward-looking statements as a result of various factors. These factors include, but are not limited to, ~~the~~our ability ~~for us~~ to maintain ~~normal~~customary trade terms with vendors, ~~the~~our ability ~~for us~~ to comply with the various covenant requirements contained in the ~~Revolving Credit Facility~~credit facility agreement, the demand for apparel, and other factors. The demand for apparel and sales volume can be affected by significant changes in economic conditions, including an economic downturn, employment levels in our markets, consumer confidence, energy and gasoline prices, the value of the Mexican peso, and other factors influencing discretionary consumer spending. Other factors affecting the demand for apparel and sales volume include unusual weather patterns, an increase in the level of competition in our market areas, competitors’ marketing strategies, changes in fashion trends, changes in the average cost of merchandise purchased for resale, availability of product on normal payment terms and the failure to achieve the expected results of our merchandising and marketing plans as well as our store opening or relocation plans. Additional assumptions, factors and risks concerning future conditions are discussed in the Risk Factors section of the Form 10-K, and may be discussed from time to time in our other filings with the SEC, including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Most of these factors are difficult to predict accurately and are generally beyond our control.

Forward-looking statements are and will be based upon management’s then-current views and assumptions regarding future events and operating performance, and ~~are applicable~~apply only as of the dates of such statements. Although management believes the expectations expressed in forward-looking statements are based on reasonable assumptions within the bounds of our knowledge, forward-looking statements, by their nature, involve risks, uncertainties and other factors, any one or a combination of which could materially affect our business, financial condition, results of operations or liquidity.

Readers should carefully review the Form 10-K in its entirety including, but not limited to, our financial statements and the notes thereto and the risks and uncertainties described in Part I, Item 1A (Risk Factors) of the Form 10-K. This report should be read in conjunction with the Form 10-K, and you should consider all of these risks, uncertainties and other factors carefully in evaluating forward-looking statements.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made. We undertake no obligation to publicly update forward-looking statements whether as a result of new information, future events or otherwise. Readers are advised, however, to consult any further disclosures we make on related subjects in our public announcements and SEC filings.

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For purposes of the following discussion, all references to the “third quarter ~~2017”~~2019” and the “third quarter ~~2016”~~2018” are for the 13-week fiscal periods ended ~~October 28, 2017~~November 2, 2019 and ~~October 29, 2016,~~November 3, 2018, respectively, and all references to the “year-to-date ~~2017”~~2019” and the “year-to-date ~~2016”~~2018” are for the 39-week fiscal periods ended ~~October 28, 2017~~November 2, 2019 and ~~October 29, 2016, respectively.~~November 3, 2018, respectively

The financial information, discussion and analysis that follow should be read in conjunction with our consolidated financial statements and the related notes included in this Form 10-Q as well as the financial and other information included in the Form 10-K.

Our Business

We are a ~~leading~~ retailer of trend-right, moderately priced, name-brand apparel, accessories, cosmetics, footwear and home goods. As of ~~October 28, 2017,~~November 2, 2019, we operated in 42 states through ~~789~~617 BEALLS, GOODY’S, PALAIS ROYAL, PEEBLES and STAGE ~~specialty~~ department stores and 58158 GORDMANS off-price stores, as well as an e-commerce ~~website.~~website (www.stage.com). Our ~~specialty~~ department stores are predominantly located in small towns and rural communities. Our ~~GORDMANS~~ off-price stores are predominantly located in smaller and mid-sized ~~non-rural Midwest markets.~~markets in the Midwest. In September 2019, we announced our plan to convert substantially all of our department stores to off-price beginning in February 2020. By the end of the third quarter of fiscal year 2020, we expect to be operating approximately 700 predominantly small-market, Gordmans stores, offering off-price values and broad assortments of name-brand merchandise in a fun, scarcity driven, treasure hunt experience.

~~Results of Operations~~Third Quarter 2019 Financial Overview

Select financial results for the third quarter ~~2017~~2019 were as follows (comparisons are to the third quarter ~~2016)~~2018):

Net sales increased ~~$40.1~~$52.2 million, or ~~12.6%, including $61.8 million in sales from the Gordmans off-price stores.~~15.0%.

Comparable sales ~~decreased 3.9%~~increased 17.4%. Comparable sales consist of store sales after a store has been in operation for 14 full months, including pre-conversion department store sales, post-conversion off-price sales and e-commerce sales.

~~Gross profit increased $15.1~~Net loss was $15.9 million ~~or 26.7%.~~compared to $31.4 million.

~~Selling, general and administrative (“SG&A”) expenses increased $15.5 million, or 18.3%, primarily due to the addition of the Gordmans off-price stores.~~

~~Diluted loss~~Loss per common share was ~~$0.64,~~$0.55, compared to ~~$0.58.~~

~~Adjusted (non-GAAP) diluted loss per common share was $0.64, compared to adjusted (non-GAAP) diluted~~a loss per common share of ~~$0.57~~$1.11.

Adjusted net loss was $4.2 million compared to $30.5 million (see the reconciliation of non-GAAP financial measures on page ~~21)~~30).

~~Paid cash dividends of $1.4 million, or $0.05~~Adjusted loss per common ~~share.~~share was $0.15, compared to an adjusted loss per common share of $1.08 (see the reconciliation of non-GAAP financial measures on page 30).

Adjusted EBITDA was $15.3 million compared to adjusted EBITDA of $(13.2) million (see the reconciliation of non-GAAP financial measures on page 30).


•	Recognized impairment charges of $9.7 million compared to nil.

Converted 17 department stores to off-price, bringing the year-to-date conversion total to 89.

~~2017~~

Strategy and Outlook

Our 2019 strategy is to grow our off-price stores, emphasize trending merchandise such as home goods, drive sales through pre-conversion promotions associated with our transition to off-price, and ~~Strategy~~

~~Although in-store traffic continues~~exit underperforming department stores. These initiatives, along with the strong performances of our home and women’s categories, contributed to ~~be negative and we experienced temporary disruption from hurricanes~~the 17.4% increase in comparable sales for the third quarter ~~2017, some macroeconomic challenges have moderated and we have undertaken steps that~~2019. Based on the sales trend for the year-to-date 2019, we expect to ~~improve our business. Year-over-year store traffic has declined during each quarter of 2017, although~~generate positive comparable sales for the ~~rate of decline has decreased in the last two quarters. We believe that the headwinds from the downturn in the oil and gas sector are no longer a factor~~fourth quarter.

In October 2019, we launched Amazon Hub Counter (“Counter”) pick-up points in our ~~comparable sales performance as we anniversary those results. Comparable sales for~~off-price and department stores. With Counter, Amazon shoppers have the option to pick up their Amazon packages at our ~~stores in Texas, Louisiana, Oklahoma and New Mexico, which have been impacted by the oil and gas sector, slightly outperformed the balance~~stores. Counter is currently available over 700 of our ~~chain during each quarter~~stores. While it is still too early to determine the impact of the program on our sales, we expect Counter to bring in ~~the year-to-date 2017.~~additional traffic to our stores.

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Our 2019 and long-term strategic objectives are ~~focused on effectively managing our inventory, promotional levels and expenses. For~~to:

Transition to an off-price business model by converting substantially all stores to off-price by the third quarter ~~2017, compared~~of 2020. The recent growth in the off-price retail industry, the success of our 2018 and 2019 off-price conversions, and our presence in small markets without major off-price competitors, have driven our strategy which we believe provides a sustained growth opportunity. Following the 2020 conversions, we will have more than 700 off-price stores, representing over 90% of our total sales volume in 2020. During the year-to-date 2019, we completed 89 store conversions and opened one new off-price store.

Build a national brand through our growing population of Gordmans off-price stores and promote brand recognition of our Gordmans nameplate through our private label credit card and loyalty program. In July 2019, we reissued our existing credit cards as a combined off-price and department store branded credit card to more than 2 million cardholders. We expect off-price credit sales as a percentage of total off-price sales to continue to grow in 2019 and beyond, and reach 25% in the future.

Expand the home department in our department stores to drive sales in this trending category and prepare for off-price conversion. During the first quarter 2019, we relocated the home department to the ~~third quarter 2016:~~

~~Department~~ store ~~inventory was down 9%~~front and ~~clearance inventory was down 20% as~~added new high capacity home fixtures in the majority of our department stores. This, along with expanding the ~~quarter end.~~

~~Gross profit~~merchandise assortments, increased home department sales by approximately 150% in our department stores for the year-to-date 2019. We expect home department sales as a percent of total sales ~~increased by 230 basis points.~~to increase in penetration and provide the greatest benefit to sales during the fourth quarter holiday gift period.

~~SG&A expenses as~~

Optimize our supply chain to support the full-chain rollout of off-price conversions in 2020.

Shift our e-commerce operations to a ~~percent of sales increased by 130 basis points due~~drop-ship model to allow our stores, merchants and distribution centers to focus on our pivot to our off-price model. We plan to discontinue order fulfillment from our distribution centers and stores after the ~~deleverage from lower department store sales.~~2019 holiday shopping season.

~~Approximately 130 of our~~Close 60 underperforming department stores ~~were disrupted or~~in 2019. During the year-to-date 2019, we permanently closed ~~during~~22 department stores. The majority of the remaining closures are planned for January 2020.

Store counts at the end of the third quarter ~~2017 due to Hurricanes Harvey~~2019 and Irma. The majority of those stores were reopened within a week, however, nine of those stores suffered significant damage. Six of the nine stores reopened in time for Thanksgiving, one will reopen in the spring of 2018 and we have permanently closed two of the stores. We estimate that the hurricanes negatively impacted total sales by approximately $3.8 million, or 1.1% of sales, during the time the stores were closed. Excluding the impact of the hurricanes, our comparable sales improved from the second quarter to the third quarter ~~2017.~~2018 were as follows:



	November 2, 2019	November 3, 2018
Department stores	617	754
Off-price stores	158	68
Total stores	775	822

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During the third quarter 2017, we progressed with the transition of the Gordmans stores to an off-price concept by eliminating coupons and promotions and implementing a pricing strategy that is competitive with the off-price industry. In addition, we have increased the inventory in the Gordmans stores closer to planned levels as we head into the holiday season. Our first marketing campaign for Gordmans, featuring digital, radio and television advertisements, launched in mid-November and will continue through Christmas.

We closed nine department stores during the year-to-date 2017, and we expect to close approximately 20 department stores in total in 2017, as part of our multi-year plan to exit stores that do not meet our sales productivity and profitability benchmarks.

In September 2017, we announced the planned closure of our South Hill, Virginia distribution center by the end of 2017 as part of our strategy to increase the efficiency of our distribution network. Operations from the Virginia distribution center will be transferred to our distribution centers in Texas, Ohio and Nebraska.

~~During the year-to-date 2017, we made progress on our Jump Start Plan key strategic initiatives for our department stores, which are to:~~

•Continue building our e-commerce business with further enhancements to the site design and functionality, improved mobile capabilities, additional digital marketing, expanded assortments and investments in our supply chain. These efforts contributed to double-digit e-commerce growth in each quarter of 2017 compared to the prior year periods. In the third quarter 2017, we introduced online ordering from within our stores, giving guests access to an assortment that is approximately seven times larger than our average store.

•Invigorate merchandise with a more frequent flow of new items, an emphasis on style and value and an expanded gift selection. We aim to be the gift destination for our guests this holiday season by expanding our women’s gift power center and adding a toy power center featuring the iconic FAO Schwarz brand. By building more liquidity into our merchandise plans and editing less productive categories, we have been able to increase our emphasis on key categories that appeal to our guests, including beauty, plus sizes, gifts and women’s updated and contemporary apparel.

•Build on beauty with the addition of new, smaller Estee Lauder and Clinique counters in 32 stores and the launch of an expanded self-service beauty concept featuring new brands in 150 stores during the third quarter 2017. We have also expanded assortments within beauty, bath and body across the store base.

•Improve merchandise margin by increasing average unit retail price, eliminating overlapping coupons and enhancing seasonal transitions. In addition, we have begun adding off-price buys into our department stores.

•Improve our relationship with our customers by communicating through the channels she uses most often and engaging her through our loyalty programs. We continue to reduce the amount of print marketing and shift our media mix to digital as we place more emphasis on our mobile app, email and social media. We have also shifted the timing of marketing campaigns to align with the heavier shopping periods. In July, we relaunched the value proposition for our Style Circle Rewards^® ~~loyalty program and private label credit card in conjunction with launching the gRewards~~^TM~~loyalty program. In November, we reissued over 2 million new private label credit cards for our department and off-price stores.~~

•Enhance the shopping experience for our guests by creating a culture of strong customer service and execution through our suggestive selling program, referred to as “Sell One More.” We have simplified administrative tasks to enable our store associates to direct their attention on providing exceptional service to our guests.

~~Table of Contents~~

Non-GAAP Financial Measures

~~To provide additional transparency,~~The following table presents adjusted earnings (loss) before interest, taxes, depreciation and amortization (adjusted EBITDA), adjusted net loss and adjusted diluted loss per share, non-GAAP financial measures. We believe the ~~following~~presentation of these supplemental ~~information reflects~~non-GAAP financial measures helps facilitate comparisons of our operating performance across periods. In addition, management uses these non-GAAP financial measures to assess the results of operations for the periods presented on a basis in conformity with GAAP and on a non-GAAP basis to show earnings excluding certain items presented below. We believe this supplemental financial information enhances an investor’s understanding of our ~~financial performance as it excludes those items which impact comparability of operating trends. The non-GAAP~~operations. Non-GAAP financial information should not be considered in isolation or viewed as a substitute for net income, cash flow from operations, diluted earnings per common share or other measures of performance as defined by GAAP. Moreover, the inclusion of non-GAAP financial information as used herein is not necessarily comparable to other similarly titled measures of other companies due to the potential inconsistencies in the method of presentation and items considered. The following ~~tables set~~table sets forth the supplemental financial information and the reconciliation of ~~GAAP disclosures to~~the non-GAAP financial measures to the most directly comparable GAAP measure (in ~~thousands, except diluted loss per share)~~thousands):

Three Months Ended Nine Months Ended
October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Net loss (GAAP) $ (17,722 ) $ (15,634 ) $ (42,967 ) $ (31,053 )
Business acquisition costs (pretax)^(a)
(39 ) —
9,169
—
Store closures, impairments and other (pretax)^(b)
552
443
1,333
1,394
Consolidation of corporate headquarters and severance charges associated with workforce reduction (pretax)^(c)
—
—
—
904
Income tax impact^(d)
(370 ) (271 ) (4,176 ) (989 )
Adjusted net loss (non-GAAP) $ (17,579 )
$ (15,462 ) $ (36,641 )
$ (29,744 )

Diluted loss per share (GAAP) $ (0.64 ) $ (0.58 ) $ (1.57 ) $ (1.15 )
Business acquisition costs (pretax)^(a)
—
—
0.33
—
Store closures, impairments and other (pretax)^(b)
0.02
0.02
0.05
0.05
Consolidation of corporate headquarters and severance charges associated with workforce reduction (pretax)^(c)
—
—
—
0.03
Income tax impact^(d)
(0.02 ) (0.01 ) (0.15 ) (0.03 )
Adjusted diluted loss per share (non-GAAP) $ (0.64 )
$ (0.57 ) $ (1.34 )
$ (1.10 )



	Three Months Ended						Nine Months Ended
	November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Net loss (GAAP)	$	(15,914	)	$	(31,353	)	$	(87,338	)	$	(79,953	)
Interest expense	4,070			3,350			12,187			8,253
Income tax expense	150			(12		)	450			288
Depreciation and amortization	15,272			13,988			45,144			44,135
Impairment of long-lived assets	9,680			—			11,295			1,070
Severance	425			819			2,928			938
Pre-opening expenses ^(a)	560			—			3,457			—
Store closing services	1,038			—			2,216			—
Adjusted EBITDA (non-GAAP)	$	15,281		$	(13,208	)	$	(9,661	)	$	(25,269	)

Net loss (GAAP)	$	(15,914	)	$	(31,353	)	$	(87,338	)	$	(79,953	)
Impairment of long-lived assets	9,680			—			11,295			1,070
Severance	425			819			2,928			938
Pre-opening expenses ^(a)	560			—			3,457			—
Store closing services	1,038			—			2,216			—
Adjusted net loss (non-GAAP)	$	(4,211	)	$	(30,534	)	$	(67,442	)	$	(77,945	)

Diluted loss per share (GAAP)	$	(0.55	)	$	(1.11	)	$	(3.04	)	$	(2.85	)
Impairment of long-lived assets	0.34			—			0.39			0.04
Severance	0.01			0.03			0.10			0.03
Pre-opening expenses ^(a)	0.02			—			0.12			—
Store closing services	0.04			—			0.08			—
Adjusted diluted loss per share (non-GAAP) ^(b)	$	(0.15	)	$	(1.08	)	$	(2.35	)	$	(2.78	)

^(a) Pre-opening expenses include store payroll, marketing expenses, meals and travel expenses, and supplies.
^(b) Per share amounts may not foot due to rounding.

^(a) ~~Reflects acquisition and integration costs related to the Gordmans Acquisition.~~

^(b)Reflects store closing costs related to our strategic store closure plan that was announced in fiscal 2015, which primarily consists of fixture moving costs, lease termination charges, severance, and impairment charges. In addition, the three and nine months ended October 28, 2017 include a pension settlement charge, and the three and nine months ended October 29, 2016 include costs related to other strategic initiatives.

^(c) Reflects duplicate rent expense and moving related costs associated with the consolidation of our corporate headquarters into a single location, which was completed in February 2016, and severance charges associated with workforce reductions.

^(d) ~~Taxes were allocated based on the estimated annual effective tax rate, excluding the impact of the stock-based compensation tax deficiency discreet item.~~

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Results of Operations

Third Quarter ~~2017 Compared~~2019 compared to Third Quarter ~~2016~~

~~The following table sets forth the results of operations for the periods presented (in~~2018 and Year-to-Date 2019 compared to Year-to-Date 2018 (amounts in thousands, except percentages):

Three Months Ended
October 28, 2017 October 29, 2016 Change
Amount
% to Sales ^(a)
Amount
% to Sales ^(a)
Amount %
Net sales $ 357,236
100.0 % $ 317,140
100.0 %
$ 40,096
12.6 %
Cost of sales and related buying, occupancy and distribution expenses 285,542
79.9 % 260,550
82.2 %
24,992
9.6 %
Gross profit 71,694
20.1 % 56,590
17.8 %
15,104
26.7 %
Selling, general and administrative expenses 100,036
28.0 % 84,564
26.7 %
15,472
18.3 %
Interest expense 2,001
0.6 % 1,395
0.4 %
606
43.4 %
Loss before income tax (30,343 ) (8.5 )% (29,369 ) (9.3 )%
(974 ) 3.3 %
Income tax benefit (12,621 ) (3.5 )% (13,735 ) (4.3 )%
1,114
(8.1 )%
Net loss $ (17,722 ) (5.0 )% $ (15,634 ) (4.9 )%
$ (2,088 ) 13.4 %

^(a) Percentages may not foot due to rounding.

Net Sales

~~Sales increased $40.1 million, or 12.6%, to $357.2 million~~



	Three Months Ended							Nine Months Ended
	November 2, 2019		November 3, 2018		Change			November 2, 2019		November 3, 2018		Change
Net sales	$	399,302	$	347,100	$	52,202		$	1,094,888	$	1,060,623	$	34,265
Sales percent change:
Total net sales					15.0		%					3.2		%
Comparable sales					17.4		%					5.3		%

Net sales for the third quarter 2017 from $317.1 million for the third quarter 2016, primarily due to $61.8 million in sales from the Gordmans branded stores, partially offset by a decline in comparable sales and closed stores. Comparable sales include store sales after a store has been in operation for 14 full months and e-commerce sales. Comparable sales decreased 3.9% in the third quarter 20172019 increased compared to the third quarter ~~2016, reflecting a 7.3% decrease~~2018 primarily due to an increase in ~~the number of transactions,~~comparable sales, partially offset by ~~a 3.7% increase in average transaction value.~~store closures. The increase in comparable sales was driven by off-price conversions completed during 2019, strong performances of our home and women’s categories, and favorable response to pre-conversion promotions in our department stores as we execute our transition to off-price. The increase in comparable sales reflects increases in transaction count and average transaction value, ~~was comprised of a 5.2%~~with an increase in ~~average unit retail,~~units per transaction partially offset by ~~a 1.4% decrease~~lower average unit retail.

Net sales for the year-to-date 2019 increased compared to the year-to-date 2018 primarily due to an increase in comparable sales, partially offset by store closures. The increase in comparable sales was driven by off-price conversions completed during 2019, strong performance of our home category, and favorable response to third quarter pre-conversion promotions in our department stores. The increase in comparable sales reflects increases in transaction count and average transaction value, with an increase in units per ~~transaction.~~transaction partially offset by lower average unit retail.

Our non-apparel categories outperformed our comparable sales average and our apparel categories underperformed. Home, gifts, cosmetics, handbags and footwear were our best performing merchandise categories. Our best performing apparel areas were denim, plus sizes, dresses and activewear.Credit Income

~~Gross Profit~~



	Three Months Ended									Nine Months Ended
	November 2, 2019			November 3, 2018			Change			November 2, 2019			November 3, 2018			Change
Credit income	$	15,678		$	13,324		$	2,354		$	42,774		$	43,143		$	(369	)
As a percent of net sales	3.9		%	3.8		%	0.1		%	3.9		%	4.1		%	(0.2		)%

~~Gross profit increased $15.1 million, or 26.7%, to $71.7 million~~

The increase in credit income for the third quarter ~~2017 from $56.6 million~~2019 compared to the third quarter 2018 was primarily driven by higher credit sales and timing of income earned.

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Cost of Sales and Gross Margin



	Three Months Ended									Nine Months Ended
	November 2, 2019			November 3, 2018			Change			November 2, 2019			November 3, 2018			Change
Net sales	$	399,302		$	347,100		$	52,202		$	1,094,888		$	1,060,623		$	34,265
Cost of sales and related buying, occupancy and distribution expenses	315,494			278,665			36,829			888,297			847,213			41,084
Gross profit	$	83,808		$	68,435		$	15,373		$	206,591		$	213,410		$	(6,819	)
As a percent of net sales	21.0		%	19.7		%	1.3		%	18.9		%	20.1		%	(1.2		)%

The increase in gross profit rate for the third quarter ~~2016. Gross profit as a percent of sales increased 230 basis points~~2019 compared to ~~20.1% for~~ the third quarter ~~2017 from 17.8% for the third quarter 2016.~~ 2018 was driven by lower markdowns and sales leverage on fixed costs, partially offset by increased supply chain costs and impairment of long-lived assets.

The ~~increase~~decrease in ~~the~~ gross profit rate ~~reflects a decrease of 260 basis points in~~for the ~~merchandise costs of sales rate~~year-to-date 2019 compared to the year-to-date 2018 was primarily due to ~~fewer markdowns~~increased supply chain costs and ~~less clearance sales attributable to effective inventory management, partially offset by an increase~~impairment of ~~30 basis points in the buying, occupancy and distribution expenses rate.~~long-lived assets.

Selling, General and Administrative Expenses (“SG&A Expenses”)



	Three Months Ended									Nine Months Ended
	November 2, 2019			November 3, 2018			Change			November 2, 2019			November 3, 2018			Change
SG&A expenses	$	111,180		$	109,774		$	1,406		$	324,066		$	327,965		$	(3,899	)
As a percent of net sales	27.8		%	31.6		%	(3.8		)%	29.6		%	30.9		%	(1.3		)%

The decrease in SG&A expenses rate for the third quarter ~~2017 increased $15.5 million~~2019 compared to ~~$100.0 million from $84.6 million for~~ the third quarter ~~2016. As a percent~~2018 was driven by lower store expenses due to the closure of underperforming stores, lower marketing costs associated with operating our off-price stores, planned reductions in department store marketing and sales ~~SG&A expenses increased~~leverage on fixed costs, partially offset by impairment of long-lived assets and higher incentive compensation costs due to ~~28.0% for the third quarter 2017 from 26.7% for the third quarter 2016.~~ better results.

The ~~increase~~decrease in SG&A expenses ~~is primarily attributable~~rate for the year-to-date 2019 compared to ~~higher~~the year-to-date 2018 was driven by lower store expenses ~~from~~due to the ~~addition~~closure of underperforming stores, lower marketing costs associated with operating our off-price stores, planned reductions in department store marketing and sales leverage on fixed costs, partially offset by higher impairment of long-lived assets, pre-opening expenses associated with conversion stores in the ~~Gordmans branded stores.~~year-to-date 2019 and higher incentive compensation costs due to better results.

~~Table of Contents~~

Interest Expense

~~Net interest expense was $2.0 million for the third quarter 2017, compared to $1.4 million for the third quarter 2016.~~



	Three Months Ended									Nine Months Ended
	November 2, 2019			November 3, 2018			Change			November 2, 2019			November 3, 2018			Change
Interest expense	$	4,070		$	3,350		$	720		$	12,187		$	8,253		$	3,934
As a percent of net sales	1.0		%	1.0		%	—		%	1.1		%	0.8		%	0.3		%

Interest expense is ~~primarily~~ comprised of interest on borrowings under the ~~Revolving~~ Credit Facility, related letters of credit and commitment fees, amortization of debt issuance costs and interest on finance obligations. The increase in interest expense iswas primarily due to an increase in average borrowings and higher interest rates under the ~~Revolving~~ Credit Facility for the ~~third quarter 2017~~year-to-date 2019 compared to the ~~third quarter 2016.~~year-to-date 2018. For the year-to-date 2019, the weighted average interest rate on outstanding borrowings and the average daily borrowings under the credit facility, including the term loan, were 4.6% and $320.9 million, respectively, as compared to 3.53% and $274.3 million for the year-to-date 2018.

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Income Taxes

~~Our~~



	Three Months Ended									Nine Months Ended
	November 2, 2019			November 3, 2018			Change			November 2, 2019			November 3, 2018			Change
Income tax expense (benefit)	$	150		$	(12	)	$	162		$	450		$	288		$	162
Effective tax rate	(1.0		)%	—		%	(1.0		)%	(0.5		)%	(0.4		)%	(0.1		)%

The effective income tax rate for the third quarter ~~2017 was 41.6%, resulting in an estimated tax benefit of $12.6 million. This compares to an effective tax rate of 46.8%~~ and ~~an income tax benefit of $13.7 million for~~year-to-date 2019 and the third quarter ~~2016. The effective income~~and year-to-date 2018, was approximately 0%. A valuation allowance has been recognized for substantially all tax ~~rates were impacted~~benefits generated by ~~a $0.1 million~~ tax ~~deficiency charge related to share-based compensation~~losses in ~~the third quarter 2017, and the settlement of an Internal Revenue Service (“IRS”) appeal in the third quarter 2016, which resulted in a $0.7 million tax benefit.~~

~~Year-to-Date 2017 Compared to Year-to-Date 2016~~

~~The following table sets forth the results of operations for the periods presented (in thousands, except percentages):~~

Nine Months Ended
October 28, 2017 October 29, 2016 Change
Amount
% to Sales ^(a)
Amount
% to Sales ^(a)
Amount %

Net sales $ 1,042,924
100.0 % $ 988,275
100.0 % $ 54,649
5.5 %
Cost of sales and related buying, occupancy and distribution expenses 816,071
78.2 % 779,128
78.8 % 36,943
4.7 %
Gross profit 226,853
21.8 % 209,147
21.2 % 17,706
8.5 %
Selling, general and administrative expenses 289,188
27.7 % 260,076
26.3 % 29,112
11.2 %
Interest expense 5,505
0.5 % 3,616
0.4 % 1,889
52.2 %
Loss before income tax (67,840 ) (6.5 )% (54,545 ) (5.5 )% (13,295 ) 24.4 %
Income tax benefit (24,873 ) (2.4 )% (23,492 ) (2.4 )% (1,381 ) 5.9 %
Net loss $ (42,967 ) (4.1 )% $ (31,053 ) (3.1 )% $ (11,914 ) 38.4 %

^(a) Percentages may not foot due to rounding.

~~Net Sales~~

~~Sales increased $54.6 million, or 5.5%, to $1,042.9 million for the year-to-date 2017 from $988.3 million for the year-to-date 2016, primarily~~each period due to ~~$133.6 million in sales from~~ the Gordmans branded stores, partially offset by a decline in comparable sales and closed stores. Comparable sales decreased 5.7% for the year-to-date 2017 compared to the year-to-date 2016, reflecting a decreaseuncertainly of ~~8.3% in the number~~realization, which is dependent upon generation of transactions, partially offset by an increase of 2.8% in average transaction value. The increase in average transaction value was comprised of a 2.3% increase in average unit retail and a 0.5% increase in units per transaction.

~~Our non-apparel categories outperformed~~future taxable income. We expect our comparable sales average and our apparel categories underperformed. Home, gifts, cosmetics, handbags and footwear were our best performing merchandise categories. Our best performing apparel areas were denim, plus sizes, dresses and activewear.

~~Table of Contents~~

~~Gross Profit~~

Gross profit increased $17.7 million, or 8.5%, to $226.9 million for the year-to-date 2017 from $209.1 million for the year-to-date 2016. Gross profit as a percent of sales increased 60 basis points to 21.8% for the year-to-date 2017 from 21.2% for the year-to-date 2016. The increase in the gross profit rate reflects a decrease of 130 basis points in the merchandise cost of sales rate due to fewer markdowns and less clearance sales attributable to effective inventory management, partially offset by an increase of 70 basis points in the buying, occupancy and distribution expenses rate.

~~Selling, General and Administrative Expenses~~

SG&A expenses for the year-to-date 2017 increased $29.1 million to $289.2 million from $260.1 million for the year-to-date 2016. As a percent of sales, SG&A expenses increased to 27.7% for the year-to-date 2017 from 26.3% for the year-to-date 2016. The increase in SG&A expenses is primarily attributable to higher store expenses from the addition of the Gordmans branded stores, partially offset by a reduction in advertising expense. SG&A expenses for the year-to-date 2017 also included Gordmans Acquisition related costs of $9.2 million, or 0.9% of sales.

~~Interest Expense~~

Net interest expense was $5.5 million for the year-to-date 2017, compared to $3.6 million for the year-to-date 2016. Interest expense is primarily comprised of interest on borrowings under the Revolving Credit Facility, related letters of credit and commitment fees, amortization of debt issuance costs and interest on finance obligations. The increase in interest expense is primarily due to an increase in average borrowings and higher interest rates under the Revolving Credit Facility for the year-to-date 2017 as compared to the year-to-date 2016.

~~Income Taxes~~

~~Our~~ effective income tax rate to be approximately 0% percent for ~~the year-to-date 2017 was 36.7%, resulting in an estimated tax benefit of $24.9 million. This compares to an effective tax rate of 43.1%~~2019.

Loss Before Income Tax and ~~an income tax benefit of $23.5 million for the year-to-date 2016.~~Net Loss

The effective income tax rates were impacted by a $2.1 million tax deficiency charge related to share-based compensation in the year-to-date 2017, and the settlement of an IRS appeal in the year-to-date 2016, which resulted in a $0.7 million tax benefit.



	Three Months Ended								Nine Months Ended
	November 2, 2019			November 3, 2018			Change		November 2, 2019			November 3, 2018			Change
Loss before income tax	$	(15,764	)	$	(31,365	)	$	15,601	$	(86,888	)	$	(79,665	)	$	(7,223	)
Net loss	(15,914		)	(31,353		)	15,439		(87,338		)	(79,953		)	(7,385		)

~~Table of Contents~~

Seasonality and Inflation

Our business, like many other retailers, is subject to seasonal influences, with a significant portion of sales and income typically realized during the last quarter of our fiscal year. Working capital requirements fluctuate during the year and generally reach their highest levels during the third and fourth quarters. Because of the seasonality of our business, results from any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.

We do not believe that inflation has had a material effect on our results of operations. However, there can be no assurance that our business will not be affected by inflation in the future.

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Liquidity and Capital Resources

Our liquidity is currently provided by (i) existing cash balances, (ii) operating cash flows, (iii) ~~normal~~ trade credit terms from our vendors and their factors and (iv) the ~~Revolving~~ Credit Facility. The loss of key vendors, or material changes in support by our vendors or their factors, can have a material impact on our business and liquidity. To date, we have successfully managed our vendor relationships to maintain inventory purchases at planned levels on acceptable payment terms. However, if we fail to meet our performance objectives, we may experience a tightening of credit or payment terms from our vendors or their factors. Our primary cash requirements are for operational needs, including rent and salaries, inventory purchases, and capital investments in our stores, ~~e-commerce~~supply chain and information technology. ~~We also have used~~

Our working capital fluctuates with seasonal variations which affect our ~~cash flows~~borrowings and ~~other liquidity sources to pay quarterly cash dividends.~~availability under the Credit Facility. Our ~~cash requirements for 2017 include~~availability under the ~~Gordmans Acquisition~~Credit Facility is generally highest after the holiday selling season and ~~additional investments required to support the integration of the Gordmans operations into~~is lowest just before this season as we build inventory levels. Based on our ~~infrastructure.~~

Wecurrent expectations regarding our operating results, we believe that our sources of liquidity will be sufficient to cover working capital needs, planned capital expenditures and debt service requirements for at least the ~~remainder of 2017 and the foreseeable future.~~ next 12 months.

Key components of our cash flow are summarized below (in thousands):


	Nine Months Ended						Nine Months Ended
	October 28, 2017			October 29, 2016			November 2, 2019			November 3, 2018			Change
Net cash (used in) provided by:
Operating activities	$	(18,925	)	$	5,254		$	(76,910	)	$	(136,917	)	$	60,007
Investing activities	(59,082		)	(66,757		)	(22,258		)	(19,444		)	(2,814		)
Financing activities	94,534			63,918			109,606			160,936			(51,330		)

Operating Activities

During the year-to-date ~~2017,~~2019, we used ~~$18.9~~$76.9 million in cash from operating activities. Net loss, adjusted for non-cash expenses, ~~generated~~provided cash of approximately ~~$6.9~~$25.9 million, including non-cash operating lease expense of $52.6 million. Changes in operating assets and liabilities used net cash of approximately ~~$27.1~~$107.7 million, which included ~~increases of $137.5~~a $156.9 million increase in merchandise inventories, primarily due to the seasonal build of inventories, and ~~$9.7~~a $56.2 million decrease in operating lease liabilities, partially offset by a $15.1 million decrease in other assets ~~partially offset by an~~and a $90.4 million increase ~~of $120.1 million~~ in accounts payable and other liabilities. Additionally, cash flows from operating activities included construction allowances from landlords of ~~$1.2~~$4.8 million, which funded a portion of the capital expenditures ~~related to store leasehold improvements~~ in ~~relocated, expanded and remodeled stores.~~investing activities.

~~Table of Contents~~

During the year-to-date ~~2016,~~2018, we ~~generated $5.3~~used $136.9 million in cash from operating activities. Net loss, adjusted for non-cash expenses, ~~provided~~used cash of approximately ~~$30.6~~$30.1 million. Changes in operating assets and liabilities used net cash of approximately ~~$32.3~~$107.6 million, which included ~~increases of $133.3~~a $163.9 million increase in merchandise inventories, primarily due to the seasonal build of inventories, ~~and $18.5~~partially offset by a $4.9 million decrease in other assets ~~partially offset by an~~and a $51.4 million increase ~~of $119.5 million~~ in accounts payable and other ~~liabilities primarily related to inventory purchases.~~liabilities. Additionally, cash flows from operating activities included construction allowances from landlords of ~~$7.0~~$0.8 million, which funded a portion of the capital expenditures ~~related~~in investing activities.

The $60.0 million year-over-year improvement was driven by (i) a $39.0 million favorable change in cash flows from accounts payable and other liabilities resulting from continued trade support, (ii) a $7.0 million favorable change in cash flows from inventories attributable to ~~leasehold improvements~~faster inventory turnover, lower inventory investments in ~~our new corporate office building~~off-price stores compared to department stores, and ~~store leasehold improvements~~the closure of underperforming stores, (iii) a $10.2 million favorable change in ~~relocated, expanded~~cash flows from other assets, and ~~remodeled stores.~~(iv) a $3.8 million improvement in net loss excluding non-cash depreciation, amortization and impairment.

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Investing Activities

Net cash used in investing activities ~~was $59.1~~increased $2.8 million to $22.3 million for the year-to-date ~~2017,~~2019, compared to ~~$66.8~~$19.4 million for the year-to-date ~~2016.~~2018.

Capital expenditures were ~~$25.3~~$25.1 million for the year-to-date ~~2017,~~2019, compared to ~~$67.9~~$21.8 million for the year-to-date ~~2016, reflecting a decrease~~2018. The increase in ~~store expansions~~capital expenditures reflect our investments in converting stores to off-price and ~~remodels.~~adding high capacity home fixtures in our department stores. We received construction allowances from landlords of ~~$1.2~~$4.8 million in the year-to-date ~~2017~~2019, which are included in cash flows from operating activities, and ~~$7.0 million in the year-to-date 2016~~were used to fund a portion of the capital ~~expenditures related to store leasehold improvements and our new corporate office building.~~expenditures. These funds are recorded as a ~~deferred rent credit~~reduction from our operating lease assets on the balance sheet and are recognized as an offset to rent expense over the lease term commencing with the date the allowances are earned.

~~During the year-to-date 2017, we paid $36.1 million~~We estimate that capital expenditures in 2019, net of construction allowances to be received from landlords, will be approximately $30.0 million. The expenditures will principally be for ~~the Gordmans Acquisition (see Note 8 to the condensed consolidated financial statements), which was funded with existing cash~~investments in our stores, supply chain and ~~availability under the Revolving Credit Facility.~~technology.

Financing Activities

Net cash provided by financing activities ~~for the year-to-date 2017 was $94.5~~decreased $51.3 million ~~compared~~ to ~~$63.9~~$109.6 million for the year-to-date ~~2016. The change is~~2019, compared to $160.9 million for the year-to-date 2018, primarily due to ~~increased~~lower net borrowings during the current year under the ~~Revolving~~ Credit ~~Facility.~~Facility due to improved cash usage in the year-to-date 2019 compared to the year-to-date 2018.

We use the ~~Revolving~~ Credit Facility to provide financing for working capital and general corporate purposes, as well as to finance capital expenditures and to support our letter of credit requirements. Borrowings are limited to the availability under a borrowing base that is determined principally on eligible inventory as defined by the ~~Revolving~~ Credit Facility agreement. ~~Inventory,~~The Credit Facility is secured by our inventory, cash, ~~and~~ cash equivalents, ~~are pledged as collateral.~~and substantially all of our other assets. The daily interest rates are determined by a prime rate or LIBOR, plus an applicable margin, as set forth in the ~~Revolving Credit Facility~~credit facility agreement. For the ~~year-to-date 2017,~~nine months ended November 2, 2019, the weighted average interest rate on outstanding borrowings and the average daily borrowings on the credit facility, including the term loan, were ~~2.62%~~4.6% and ~~$221.7~~$320.9 million, respectively, compared to ~~1.83%~~3.5% and ~~$188.0~~$274.3 million for the year-to-date ~~2016. The increase in average daily borrowings for the year-to-date 2017 compared to the year-to-date 2016 includes the Gordmans Acquisition and related costs.~~2018.

Letters of credit issued under the ~~Revolving Credit Facility~~credit facility support certain merchandise purchases and collateralize retained risks and deductibles under various insurance programs. At ~~October 28, 2017,~~November 2, 2019, outstanding letters of credit totaled approximately ~~$7.3~~$6.5 million. These letters of credit expire within 12 months of issuance ~~but~~and may be renewed. ~~Excess borrowing availability under the Revolving~~

The Credit Facility agreement contains a covenant requiring us to maintain excess availability at ~~October 28, 2017 was $157.4 million.~~

or above $35.0 million or 10% of the Adjusted Combined Loan Cap (as defined therein). The ~~Revolving~~ Credit Facility agreement also contains covenants which, among other things, restrict ~~based on required levels of excess availability,~~ (i) the amount of additional debt or capital lease obligations, (ii) the payment of dividends to $30.0 million in a fiscal year, and (iii) the repurchase of common stock under certain circumstances. ~~The agreement also contains a fixed charge coverage ratio covenant in the event excess availability is below a defined threshold or an event of default has occurred.~~ At ~~October 28, 2017,~~November 2, 2019, we were in compliance with ~~all of~~ the debt covenants of the credit facility agreement and we expect to remain in ~~compliance.~~compliance for the next 12 months. Excess availability under the credit facility at November 2, 2019 was $100.7 million.

During the year-to-date 2017, we paid $7.1 million in cash dividends. On November 16, 2017, our Board declared a quarterly cash dividend of $0.05 per share of common stock, payable on December 13, 2017 to shareholders of record at the close of business on November 28, 2017.

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Recent Accounting Standards

Disclosure concerning recent accounting standards is incorporated by reference to Note 1 of our Condensed Consolidated Financial Statements (Unaudited) contained in this Form 10-Q.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~We are subject to market risk from exposure to changes in interest rates on borrowings~~No response is required under ~~the Revolving Credit Facility. An increase or decrease~~Item 305 of ~~10% in interest rates would not have a material effect on our financial condition, results of operations, or liquidity.~~Regulation S-K.

ITEM 4.CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have each concluded that such disclosure controls and procedures were effective as of the end of the period covered by this report.

Internal Control Over Financial Reporting

As defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act, the term “internal control over financial reporting” means a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:


(1)	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;


(2)	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and


(3)	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material adverse effect on the financial statements.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. There were no changes in our internal control over financial reporting during the three months ended ~~October 28, 2017~~November 2, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Table of Contents~~

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

No response is required under Item 103 of Regulation S-K.

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ITEM 1A.RISK FACTORS

In addition to the other information set forth in this report, ~~you~~readers should carefully consider the factors discussed in Part I, Item 1A (Risk Factors) of the Form 10-K. There have not been noany material changes from the risk factors as previously disclosed in ~~our~~the Form 10-K, except ~~for~~updates to the ~~addition~~following risk factors:

Risks associated with our vendors from whom our products are sourced may have a material adverse effect on our business and financial condition. Our merchandise is sourced from a variety of domestic and international vendors. All our vendors must comply with applicable laws, including our required standards of conduct. Political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to foreign trade, the ability to access suitable merchandise on acceptable terms and the financial viability of our vendors are beyond our control and may adversely impact our performance.

Risks associated with future economic and industry trends may have a material adverse effect on our business and financial condition. A slowdown in the U.S. economy, an uncertain global economic outlook or a credit crisis could adversely affect consumer spending habits resulting in lower net sales and profits than expected on a quarterly or annual basis. Consumer confidence is also affected by the domestic and international political situation. We are still evaluating the potential impact of the ~~risk factor~~tariffs that ~~follows:~~

~~Failure~~the current U.S. Administration has imposed and may continue to ~~successfully integrate~~impose on imports from China and other countries around the ~~Gordmans~~world, as well as other recent changes in foreign trade policy on our supply chain, costs, sales and profitability. We are actively working through strategies to mitigate such impact, including reviewing sourcing options and working with our vendors and merchants. At this time, it is unknown how long U.S. tariffs on Chinese goods will remain in effect or whether additional tariffs will be imposed. While it is too early to predict how these changes in foreign trade policy and any recently enacted, proposed and future tariffs will affect our business, ~~and convert~~these changes have the ~~Gordmans business~~potential to ~~off-price retail operations, and to do so~~adversely impact demand for our products, our costs, consumer prices, and/or the U.S. economy, which in ~~the time frame we anticipate, may~~turn could adversely ~~affect~~impact our results of operations and ~~financial condition.~~ ~~The acquisition involves numerous risks and uncertainties, including the following:~~business.

~~The potential loss of distributors, vendors and other business partners following the Gordmans acquisition.~~

~~The potential loss of customers as we rebuild inventory levels and implement new pricing and marketing strategies in the Gordmans off-price stores.~~

~~We may not be able to attract or retain key employees with experience in off-price retail operations.~~

~~We may be unable to adapt our supply chain, or convert the former Gordmans supply chain, well enough or quickly enough to support off-price retail operations.~~

~~Projected sales and margins for the Gordmans off-price stores may not be achieved.~~

~~Integration of the Gordmans business may take longer or be more costly than anticipated.~~

If we are not able to successfully and timely integrate the Gordmans business and operate the Gordmans business as profitably was we plan, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected, which may adversely affect our results of operations and financial condition.

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ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On March 7, 2011, our Board approved a stock repurchase program (“2011 Stock Repurchase Program”), which authorized us to repurchase up to $200.0 million of our outstanding common stock. The 2011 Stock Repurchase Program will expire when we have exhausted the authorization, unless terminated earlier by our Board. Through ~~October 28, 2017,~~November 2, 2019, we repurchased approximately $141.6 million of our outstanding common shares under the 2011 Stock Repurchase Program. Also in March 2011, our Board authorized us to repurchase shares of our outstanding common stock equal to the amount of the proceeds and related tax benefits from the exercise of stock options, stock appreciation rights and other equity grants. Purchases of shares of our common stock may be made from time to time, either on the open market or through privately negotiated transactions and are financed by our existing cash, cash flow and other liquidity sources, as appropriate.

The table below sets forth information regarding our repurchases of common stock during the three months ended ~~October 28, 2017:~~November 2, 2019:

													ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased ^(a)	Average Price Paid Per Share ^(a)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ^(b)		Total Number of Shares Purchased ^(a)	Average Price Paid Per Share ^(a)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ^(b)

July 30, 2017 to August 26, 2017	6,249	$	1.84	—	$	58,351,202
August 4, 2019 to August 31, 2019							19,619	$	0.72	—	$	58,351,202

August 27, 2017 to September 30, 2017	20,312	1.85		—	$	58,351,202
September 1, 2019 to October 5, 2019							649,120	1.37		—	$	58,351,202

October 1, 2017 to October 28, 2017	4,797	1.86		—	$	58,351,202
October 6, 2019 to November 2, 2019							5,478	2.18		—	$	58,351,202

Total	31,358	$	1.85	—			674,217	$	1.36	—

^(a)Although we did not repurchase any of our common stock during the three months ended ~~October 28, 2017~~November 2, 2019 under the 2011 Stock Repurchase Program:

We reacquired ~~10,580~~7,927 shares of common stock from certain employees to cover tax withholding obligations from the vesting of restricted stock at a weighted average acquisition price of ~~$1.82~~$1.98 per common share; and

The trustee of the grantor trust established by us for the purpose of holding assets under our deferred compensation plan purchased an aggregate of ~~20,778~~666,290 shares of our common stock in the open market at a weighted average price of ~~$1.87~~$1.35 in connection with the option to invest in our stock under the deferred compensation plan and reinvestment of dividends paid on our common stock held in trust in the deferred compensation plan.

^(b)Reflects the $200.0 million authorized under the 2011 Stock Purchase Program, less the $141.6 million repurchased as of ~~October 28, 2017~~November 2, 2019 using our existing cash, cash flow and other liquidity sources since March 2011.

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ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

None.

ITEM 5.OTHER INFORMATION

None.

~~Table of Contents~~

ITEM 6.EXHIBITS

The following documents are the exhibits to this Form 10-Q. For convenient reference, each exhibit is listed according to the Exhibit Table of Item 601 of Regulation S-K.



Exhibit Number	Description

~~10.1*#~~	~~Amendment No. Five to Amended and Restated Private Label Credit Card Plan Agreement dated as of August 11, 2017, between Stage Stores, Inc. and Comenity Bank.~~

31.1*	Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*	Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32*	Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	Inline XBRL Instance Document - the instance document does not appear in Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



*	Filed electronically herewith.
#	~~Certain confidential portions marked with a [****] have been omitted pursuant to a confidential treatment request that has been filed separately with the U.S. Securities and Exchange Commission.~~

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	STAGE STORES, INC.

Dated: December ~~7, 2017~~12, 2019	/s/ Michael L. Glazer
	Michael L. Glazer
	President and Chief Executive Officer
	(Principal Executive Officer)


Dated: December ~~7, 2017~~12, 2019	/s/ ~~Oded Shein~~Jason T. Curtis
	~~Oded Shein~~Jason T. Curtis
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Financial Officer)

3240



Stock Appreciation Rights	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding, vested and exercisable at January 28, 2017	177,900		$	17.69
Expired	(65,000	)	16.29
Outstanding, vested and exercisable at October 28, 2017	112,900		$	18.50	0.4	$	—



Period Granted	Target Shares Outstanding at January 28, 2017	Target Shares Granted	Target Shares Vested	Target Shares Forfeited		Target Shares Outstanding at October 28, 2017	Weighted Average Grant Date Fair Value Per Share
2015	158,490	—	—	(4,444	)	154,046	$	28.33
2016	330,233	—	—	(8,527	)	321,706	8.69
2017	—	600,000	—	—		600,000	1.80
Total	488,723	600,000	—	(12,971	)	1,075,752	7.65



	October 28, 2017		January 28, 2017
Revolving Credit Facility	$	267,159	$	159,702
Finance obligations	1,849		2,708
Other financing	2,986		7,753
Total debt obligations	271,994		170,163
Less: Current portion of debt obligations	3,025		6,414
Long-term debt obligations	$	268,969	$	163,749



	April 7, 2017
Inventory	$	31,770
Property, plant and equipment and other assets	4,374
Total	$	36,144