How Stage Stores Intends to Keep Growing

On Friday, Stage Stores (SSI +0.00%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Stage Stores includes a number of small chain retailers , including Bealls, Palais Royal, and Peebles, that sell apparel and related accessories. Those chains aren't necessarily as well-known as those of some of its larger competitors, but the retailer's strategy is different from higher-profile retailers. Let's take an early look at what's been happening with Stage Stores over the past quarter and what we're likely to see in its quarterly report.

Stats on Stage Stores

Source: Yahoo! Finance.

Can Stage Stores raise its earnings this quarter?
Analysts have gotten more optimistic about Stage Stores and its earnings lately, raising their estimates for the just-finished quarter by a penny per share and adding a nickel per share to their consensus figures for the current fiscal year as well as next year. The stock has also reflected some of that enthusiasm, rising about 10% since early February.

Stage Stores has thrived by following a strategy of concentrating on serving small and mid-sized communities. Its stores aren't as large as big-box mall retailers, but in many smaller markets, they represent the most convenient option for shoppers seeking clothing and accessories.

That business strategy has worked well for Stage Stores, as the company announced in March that it had posted record sales over the past year. With innovations like a new loyalty card and a larger emphasis on its direct-to-consumer Internet channel, the company said it expects 2% to 4% rises in same-store sales.

Yet store expansion will also play a key role in growth for the company. Last year, Stage Stores emphasized its Steele's off-price store segment, opening 31 locations compared to just 25 among its other brands. Both T.J. Maxx operator TJX (TJX 1.36%) and Ross Stores (ROST 0.80%) have used the off-price strategy to great success over their respective histories, and although the two chains faced some headwinds more recently as a result of payroll tax hikes and delayed tax refunds, investors expect mid-single-digit sales growth from both Ross and TJX for the foreseeable future. If Stage Stores can cash in on the same trend, it could help the company accelerate its own rising revenue.

In Stage Stores' quarterly report, look for further comments on the company's decision to boost its dividend by 25% in April. With hedge-fund SAC Capital Advisors owning about 5.5% of the company's shares, Stage Stores may need to keep institutional investors happy in order to avoid what's currently a passive interest from turning into a more activist relationship in the future.

Click here to add Stage Stores to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.