Houston-based Stage Stores expects to covert about 85 of its department stores to the off-price format it inherited when it bought Gordmans two year ago, CEO Michael Glazer said in releasing Q3 earnings. The stores being converted are more profitable locations, while those that are losing money are being closed.

The former department stores – largely from the Peebles (187 stores) and Goody’s (200) chains that Stage bought in 2003 and 2009, respectively– will be stripped of promotional offers and adopt everyday low pricing at the heart of the off-price retailing strategy championed by Ross, Burlington and T.J. Maxx.

About 300 of Stage’s locations will have switched to off-price by 2020 with the new strategy accounting for about 50% of annual sales. As part the change, Stage also will increase its assortment of homegoods.

Stage also will close 40-60 unprofitable department store locations (Peebles, Goody’s, Stage, Palais Royal) this year, further shrinking a chain that stood at 793 locations as of March, including 688 department stores and 105 Gordmans.

The conversions plans follow a test last year where sales at nine locations with the new format increased sales 150%. About 60% of Stage’s stores are in markets with populations of less than 50,000, with Louisiana (50), Virginia (35), Oklahoma (34) and Kentucky (34) having the most.

Stage swung to an $8 million net loss in Q4 ended Feb. 2 from a $6 million profit a year earlier as it took $14.9 million impairment charge largely tied to converting Peebles stores to the Gordmans format. Revenue declined 5.4% to $519.5 million in a 2.4% decrease in same-stores sales.

Contact:

Stage Stores, Jason Curtis, CFO, 800-579-2302