2 0 1 1 A N N U A L R E P O R T S T A G E S T O R E S , I N C . 2 0 1 1 A N N U A L R E P O R T 2 0 1 1 A N N U A L R E P O R T STAGE STORES, INC. $1.5B NET SALES GROWING OUR COMPANY As America’s leading small town and neighborhood retailer, we continue on our mission to deliver desirable, brand name family apparel with exceptional value and service. At 2011 year-end, 65% of our 813 stores were in towns with a market area population below 50,000. This small market focus provides us with competitive advantages and a cost-effective business model. We impacted our growth initiative for the year by adding 37 new stores, including the launch of the first 3 of our new Steele’s off-price stores. Another milestone…our entry into Wyoming, bringing our geographic footprint to 40 states. The addition of 10 new Estée Lauder and 10 new Clinique counters helped to bring about a 9% increase in Cosmetics and Fragrance business, representing 8% of the Company’s total sales. We are genuinely excited about our future. 2011 ANNUAL REPORT $8.6M eCOMMERCE salEs CONNECTING WITH OUR CUSTOMERS Our top priority in 2011 focused on our eCommerce growth initiative. We listened to our customers and their lifestyle needs, increased our presence through Facebook, Twitter and email, and forged ahead with a new, more convenient way to shop with us 24/7. Expanding the breadth and number of brand name and private label items offered for sale online, and improving our website for a more customer-friendly experience, achieved a significant number for 2011 eCommerce sales—$8.6 million. As we continue to put new customer-connection strategies into place, we expect that number to almost double, to $16 million, by year-end 2012. Online and in-store, our customer service and hassle-free return policy assure shoppers a great shopping experience, bringing them back, again and again. PAGE ONE sTaGE s TOREs, INC. DEaR SHaREHOlDERS, Once again, in 2011, Stage Stores delivered innovative solutions, driving progress, diversification and growth. As a fashion retailer, our financial results for the year reflect the economic pressures faced by our core moderate-income customer. A promotional business environment for the entire industry forced us, as well as other retailers, to contend for our share of the wallet. Increasing our promotional efforts led to lower merchandise margins, ultimately affecting earnings for the year. We remained focused on sharpening and controlling expenses, and we are very pleased with a 50 basis point drop in the SG&A rate for 2011, while operating 27 additional stores. We also prudently managed our inventory levels, exiting 2011 with comparable store inventories up 1.7%. Advancements in 2011 included significant milestones in areas of our ongoing priorities. We enhanced and improved our multi-channel selling capabilities by growing eCommerce sales, expanding the breadth and number of items offered, and achieving a significant increase in the number of visitors to our eCommerce website throughout the year. This concentration has allowed us to realize substantial synergies. 2011 eCommerce sales exceeded our expectations, reaching $8.6 million. We continue to implement new customer-connection strategies, and are confident eCommerce sales will reach $16 million by year-end 2012. To further complement our successful business model, we began piloting a new growth initiative—Steele’s—our new off-price concept, launching our first three Steele’s stores on November 1. With Steele’s, the Company is able to fill an off-price shopping void in small markets, and leverages our small market expertise with a complementary format to our successful department store model. We are on track to open 25 to 30 Steele’s stores in 2012. Securing our small-town market leadership position, we remain firm on the expansion of our geographic footprint. 2011 brought the opening of 34 new department stores, of which 28 were opened under the Goody’s nameplate. We also rebranded 148 non-Goody’s stores with the Goody’s name. We plan to open 30 to 35 new department stores in 2012. Our Cosmetics and Fragrance business continues to shine with a same store sales increase of 9.0% over 2010. The addition of 10 new Estée Lauder and 10 Clinique counters helped drive this impressive leap. Plus, 11 new Estée Lauder and 8 new Clinique counters are slated to open in 2012. PAGE TWO 2011 aNNU al REPORT Our strong balance sheet and financial flexibility position us to capitalize on important opportunities. In 2011, we spent $110 million buying back 6.8 million shares. Additionally, the Board of Directors voted to increase our quarterly dividend rate by 20%, as we remain committed to driving shareholder value. Lastly, we made great strides in our “giving back” initiative. We contributed more than $1.1 million to charitable causes such as Operation Homefront, benefiting military families and returning heroes, and the Marine Toys for Tots Foundation through our Bears That Care program. In addition, we supported the Bastrop Texas Wildfire Relief Fund and many other causes in the communities that we serve. In 2012, these efforts will be further enhanced through the introduction of Community Counts, our umbrella program housing our philanthropic and associate volunteerism initiatives. We will concentrate on bringing excitement and innovation via our merchandising and marketing strategies, enhancing the in-store experience, and expanding our eCommerce business. We are also excited about continuing to develop our off-price concept through the Steele’s nameplate. With a sound financial position and our small market business model in place, we have confidence in our ability to meet our 2012 growth objectives and emerge ever stronger. As we look to the future, we extend our deep appreciation to our 14,000 dedicated associates. We especially want to thank Andy Hall, former President and CEO, for his service and contributions to the Company over the last six years, and wish him well in his new endeavors. We sincerely thank our customers and shareholders for their continued support. Sincerely, Michael Glazer President and Chief Executive Officer PAGE THREE STAGE STORES, INc. 40 STaTES. 813 lOCaTIONS* 2 3 1 3 9 1 5 18 Distribution Centers Store Count by State *As of 2011 fiscal year end 4 2 2 2 2 3 4 14 16 4 24 25 10 30 35 28 6 3 6 35 24 23 27 34 22 11 37 234 18 24 57 5 GIVING SHaREHOlDER ValUE FINANcIAL HIGHLIGHTS 6 4 5 , 1 $ 6 1 5 , 1 $ 1 7 4 , 1 $ 2 1 5 , 1 $ 2 3 4 , 1 $ 9 3 1 $ 1 1 1 $ 4 1 1 $ 5 2 1 $ 3 1 1 $ 4 2 . 1 $ 9 9 . 0 $ 2 9 . 0 $ 7 7 . 0 $ 5 7 . 0 $ 3 1 8 6 8 7 9 3 7 8 5 7 4 9 6 ’07 ’08 ’09 ’10 ’11 N E T S A L E S ($ in Millions) ’07 ’08* ’09 ’10 ’11 E B I T D A * ($ in Millions) ’07 ’08** ’09 ’10 ’11 E A R N I N G S P E R S H A R E – D I L U T E D ($ in Dollars) ’07 ’08 ’09 ’10 ’11 S T O R E C O U NT (Fiscal Year End) SELEcTEd FINANcIAL HIGHLIGHTS (dollars in millions, except per share amounts) Net Sales EBITDA* Net Income Earnings Per Share (Diluted) 2011 2010 $ 1,511.9 $ 112.8 31.0 $ 0.92 $ $ 1,470.6 $ 125.2 37.6 $ 0.99 $ % Increase (Decrease) 2.8 (9.9) (17.6) (7.1) * Earnings before interest, taxes, depreciation and amortization. EBITDA for 2008 excludes a non-cash goodwill impairment charge of $95.4 million. ** Earnings per share for 2008 are on a NON-GAAP basis and exclude a non-cash goodwill impairment charge of $95.4 million, or $2.49 per share. Including the impairment charge, the Company reported a loss for 2008 of $65.5 million, or $1.71 per share (see the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2009 for additional information). PAGE FOUR 40 STATES. 813 LOCATIONS*GIVING SHAREHOLDER VALUE ShAREhOLdER INfORMATION (as of March 28, 2012) DIRECTORS ExECUTIvE OffICERS MIChAEL GLAzER President and Chief Executive Officer of the Company ALAN BAROCAS (1), (2), (3)* Senior Executive Vice President of Leasing, General Growth Properties, Inc. GABRIELLE GREENE (1), (3) General Partner, Rustic Canyon/ Fontis Partners EARL hESTERBERG (2)*, (3) President and Chief Executive Officer, Group 1 Automotive, Inc. WILLIAM MONTGORIS (1), (4) Former Chief Operating Officer, Bear Stearns DAvID SChWARTz (1)*, (3) Business Advisor and Consultant RALPh SCOzzAfAvA (2), (3) Chief Executive Officer, Furniture Brands International, Inc. 1) Audit Committee 2) Compensation Committee 3) Corporate Governance & Nominating Committee 4) Chairman of the Board * Committee Chairman MIChAEL GLAzER President and Chief Executive Officer EDWARD RECORD Chief Operating Officer and Secretary MIkE SEARLES President and Chief Operating Officer—South Hill Division STEvEN hUNTER Executive Vice President, Chief Information Officer RON LUCAS Executive Vice President, Human Resources ODED ShEIN Executive Vice President, Chief Financial Officer SENIOR vICE PRESIDENTS PAT BOWMAN Store Director— Houston Division LUCy CINDRIC General Merchandise Manager—South Hill Division BLAkE GARNER General Merchandise Manager—Houston Division GOUGh GRUBBS Logistics and Distribution JON GUNNERSON Director of Stores— Houston Division ChARLES hEAD Store Planning and Construction ChRISTINE JOhNSTON Cosmetics JANET kUShLAN Planning and Allocation— South Hill Division RUSSELL LUNDy II Director of Stores— South Hill Division JACk MATz ER General Merchandise Manager—Houston Division ChRISTINE RUDy Planning and Allocation— Houston Division LISA SEIGIES Chief Merchandising Officer— Steele’s RIChARD STASySzEN Finance/Controller MEL WARD Real Estate MARThA WIThERS General Merchandise Manager— South Hill Division CORPORATE hEADqUARTERS Stage Stores, Inc. 10201 Main Street Houston, Texas 77025 1-800-579-2302 www.stagestoresinc.com ANNUAL MEETING The Annual Meeting of Share holders will be held at 1:00 p.m. local time on Thursday, June 7, 2012, at the Company’s Corporate Headquarters: 10201 Main Street Houston, Texas 77025 fORM 10-k A copy of the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the fiscal year ended January 28, 2012, will be sent without charge upon written request to the Company’s Investor Relations Department at the Company’s Corporate Headquarters address. TRANSfER AGENT AND REGISTRAR Computershare Shareowner Services P.O. Box 358015 Pittsburgh, Pennsylvania 15252-8015 1-800-635-9270 www.bnymellon.com/shareowner/equityaccess AUDITORS Deloitte & Touche LLP Houston, Texas OUTSIDE GENERAL COUNSEL McAfee & Taft Oklahoma City, Oklahoma STOCk LISTING The Company’s common stock trades on the New York Stock Exchange under the symbol “SSI.” COMMON STOCk MARkET PRICE The following table sets forth the high and low market prices per share of the Company’s common stock for each quarter during fiscal 2011 as reported on the New York Stock Exchange: fISCAL 2011 First Quarter Second Quarter Third Quarter Fourth Quarter High $19.97 19.39 18.15 16.36 Low $15.44 14.07 12.18 11.21 m o c . s r o n n o c - n a r r u c . w w w / . c n I , s r o n n o C & n a r r u C y b n g i s e D t r o p e R l a u n n A S T A G E S T O R E S , I N C . 2 0 1 1 A N N U A L R E P O R T 10201 Main Street Houston, TX 77025 www.stagestoresinc.com