The following unaudited Consolidated Proforma Statement of Operations reflects the financial results of the Company for the thirty weeks ended September 1, 2001, the thirty weeks ended August 26, 2000 and the year ended February 3, 2001 as if the Plan had been effective and the 1999 and 2000 Store Closures Programs had been completed as of the beginning of fiscal 2000.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 .

          Certain statements contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, the ability of Stage Stores and its subsidiaries to maintain normal trade terms with vendors, the ability of the Company and its subsidiaries to comply with the various covenant requirements contained in the Company's Financing Agreements (as defined below), the ability of the Company to maintain its private label credit card program, including the quality of its accounts receivable portfolio, the demand for apparel and other factors. The demand for apparel can be affected by an economic downturn, a decline in consumer confidence, unusual weather patterns, an increase in the level of competition in the Company's market areas, competitors' marketing strategies, changes in fashion trends, availability of product on normal payment terms and the failure to achieve the expected results of the Company's merchandising and marketing plans as well as its store opening and closing plans. In addition, the Company cannot predict, with any degree of certainty, what effect, if any, the tragic events of September 11, 2001 and subsequent and continuing events of terrorism will have on the Company and its operations. The occurrence of any of the above could have a material and adverse impact on the Company's operating results. Most of these factors are difficult to predict accurately and are generally beyond our control. Readers should consider the areas of risk described in connection with any forward-looking statements that may be made in this Registration Statement. Readers should carefully review this Registration Statement in its entirety, including but not limited to the Company's financial statements and the notes thereto and the risks described in this section under "Risk Factors." Except for the Company's ongoing obligations to disclose material information under the Federal securities laws, the Company undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

          Overview . Stage Stores is a Houston, Texas-based regional department store retailer offering moderately priced, nationally recognized brand name and private label apparel, accessories, cosmetics and footwear for the entire family. The Company has recognized the high level of brand awareness and demand for fashionable, quality apparel by consumers in small and mid-size markets and has identified these markets as a profitable and under-served niche. The Company believes that it has developed a unique retailing concept in these markets by offering a broad range of brand name merchandise with a high level of customer service in convenient locations.

          As of September 1, 2001, the Company, through its wholly owned subsidiary Specialty Retailers (TX) LP, operated 342 stores located in 13 states throughout the south central United States. Although the Company's stores may be operated under its "Stage", "Bealls" and "Palais Royal" trade names depending on the geographical market, the Company operates the vast majority of its stores under one concept and one strategy. Utilizing a 10 mile radius from each store, approximately 57% of the Company's stores are located in small towns and communities with populations below 50,000 people, while an additional 21% of the Company's stores are located in mid-sized communities with populations between 50,000 and 150,000 people. The remainder of the Company's stores are located in metropolitan areas, such as Houston and San Antonio, Texas.

          Chapter 11 Filing and Reorganization. As a result of many factors including, but not limited to, the Company's rapid growth during 1997 and 1998, significant turnover in key executive positions, significant leverage coupled with an inflexible capital structure and changes in the retail environment, the Company's financial performance deteriorated significantly during 1999 and 2000. Because of the Company's rapidly deteriorating financial performance, the Company's suppliers significantly curtailed merchandise shipments to the Company during Spring of 2000, thereby further exacerbating the Company's financial difficulties. In order to address these financial and operational issues facing the Company, the Company and its wholly owned subsidiaries, SRI and SRI NV, filed voluntary petitions under the Bankruptcy Code in the United States Bankruptcy Court on June 1, 2000. On June 2, 2000, the Company entered into a $450 million debtor-in-possession credit facility with a lender to finance, among other things, the Company's working capital requirements during the Chapter 11 Proceedings. During the Chapter 11 Proceedings, the Company continued to manage and operate its assets and business as a debtor-in-possession, pending the formulation and confirmation of a Plan of Reorganization and subject to the supervision and orders of the Court.

          Subsequent to the Petition Date, the Company developed a Plan which it believed would fairly address pre-petition creditors while also allowing it to emerge from the Chapter 11 Proceedings without significant leverage. In addition, in order to strengthen the Company and improve its financial condition, during the reorganization period the Company rationalized its existing store base, exited markets that did not fit its current strategic focus, replaced the majority of its senior management team, including the Chief Executive Officer, re-established its historically strong relationship with its merchandise vendors, brought the stores' merchandise inventory and mix closer to planned levels, improved execution at the store level, reduced store operating expenses and reduced headcount at the Company's central office. As a result of the Company's review of its store base and geographic markets, the number of stores in operation was reduced over the reorganization period from 647 at April 29, 2000 to 342 at September 1, 2001, and the Company's geographic presence was reduced from 33 states to 13 states over the same period.

          The Plan was approved by the requisite number of pre-petition creditors and was confirmed by the Court on August 8, 2001. The Plan was subsequently consummated by the Company on August 24, 2001. For financial reporting purposes here, the Effective Date was assumed to be September 1, 2001, the last day of the Company's seventh fiscal period. In conjunction with the Company's emergence from the Chapter 11 Proceedings, the Company entered into two separate financing agreements (see Item 2. "Liquidity and Capital Resources"). A portion of the initial loan proceeds was used to retire the DIP Facility. Under the Plan, the Company generally settled pre-petition debt claims by issuing shares of a new class of Common Stock in a reorganized Stage Stores to those pre-petition creditors entitled to receive such distribution under the Plan. As set forth in the Plan, the pre-petition bank group, in the aggregate, received approximately 46% of the new Common Stock while the previous holders of the Company's pre-petition 8 1/2% Senior Notes, in the aggregate, similarly received approximately 46% of the new Common Stock. The remaining shares of new Common Stock issuable under the Plan were either distributed to other pre-petition creditors or are currently being held in escrow for future distribution. The Plan did not provide for any distribution to the holders of pre-petition equity interest in the Company, including holders of the Company's old Common Stock and holders of the Company's old Class B Common Stock. Further, under the Plan, all pre-petition equity interests, including all shares of old Common Stock and old Class B Common Stock outstanding on the Effective Date were cancelled. As a result of the consummation of the Plan, the Company's leverage and debt service requirements were significantly reduced from pre-petition levels.

          The following sets forth the results of operations as a percentage of sales for the periods indicated:

          Prior to the Petition Date, there was a significant disruption in the flow of merchandise from the Company's vendors due to the financial difficulties experienced by the Company. This disruption negatively affected the execution of merchandise and advertising plans during the prior year resulting in decreased sales and gross margin due to frequent use of "percent-off" promotions on available inventory to drive sales. Subsequent to the Petition Date and the implementation of the DIP Facility, the level of trade support increased significantly. As a result, the flow of merchandise from the Company's vendors normalized, thereby allowing the Company to properly inventory its stores. In the current year, the flow and content of merchandise receipts has been consistent with merchandising and advertising plans allowing for effective execution of those plans. The positive impact of the Company's improved inventory levels and merchandise mix is reflected in the comparable store sales and gross profit reported for the period.

          Although the Company has experienced a 19.0% increase in comparable store sales in the current year through September 1, 2001 as compared to a 13.7% decline in the comparable prior year period, this rate of improvement is not expected to continue as the Company began to benefit from the factors discussed above in the fall of 2000. To illustrate, comparable store sales for September 2001 increased 9.3% as compared to a comparable store sales decline of 1.1% in September 2000, while comparable store sales increased 2.2% for the period October 2000 through January 2001.

          Gross profit increased 8.5% to $139.6 million for the current year from $128.6 million for the prior year. Gross profit, as a percent of sales, increased to 30.2% for the current year from 24.5% for the prior year. The gross profit percentage for the current year benefited from, among other things, (i) a reduction in the level of markdowns taken during the period as a result of a lower level of clearance merchandise and (ii) an improved merchandise flow and content as discussed above. Gross profit in the current year includes shrink expense of $8.2 million, or 1.8% of sales, as compared to $9.0 million, or 1.7% of sales, in the prior year. Because of the volatility in shrink expense in the prior two fiscal years (See 2000 compared to 1999 comments), the Company took physical inventories of all stores during June 2001. The current year accrual rate is consistent with results realized on those physical inventories.

          Selling, general and administrative expenses ("SG&A") for the current year decreased 29.3% to $104.1 million from $147.3 million in the prior year and, as a percent of sales, decreased to 22.6% from 28.1% in the comparable period last year. SG&A expenses for the current year benefited from, among other things, (i) fewer stores in operation during the current year (approximately $29.4 million) and (ii) the Company's continuing efforts in controlling SG&A expenses. The improvement in SG&A expense expressed as a percent to sales reflects (i) improved leverage of store labor resulting from higher sales volume in the current year, (ii) improved leverage in advertising expense, (iii) reduction in costs in the Company's corporate office, and (iv) an increase in net credit income from the Company's private label credit card program.

          As discussed in Note 2 to the Audited Consolidated Financial Statements, prior to the Petition Date, the Company securitized substantially all accounts receivable under the Company's private label credit card (the "Accounts Receivable Securitization Program") through a wholly owned special purpose entity prior to the Petition Date. The Company held a retained interest (the "Retained Interest") in the securitization vehicle, a special purpose trust (the "Trust"). In connection with the bankruptcy filing and DIP Financing, the Company repurchased the accounts receivable from the Trust. The Company accounted for the repurchase as described in Note 2 to the Audited Consolidated Financial Statements. The following table summarizes the total credit card portfolio results when combining the Trust and the Company, the net of which is included in the Company's SG&A expense:

          Reorganization items and store closure costs decreased to $23.1 million for the current year from $76.7 million for the prior year. The net expense resulting from the Company's Chapter 11 Proceedings, subsequent reorganization efforts and store closures is as follows (in thousands):

          The Company expects to close 4 stores, open 4 new stores and relocate 3 stores from September 2001 through February 2002.

          With the change in ownership resulting from the Plan, the Company has adopted fresh-start reporting in accordance with the recommended accounting principles for entities emerging from Chapter 11 set forth in the American Institute of Certified Public Accountants Statement of Position 90-7 Financial Reporting by Entities in Reorganization under the Bankruptcy Code. The adjustments to reflect the consummation of the Plan, including the gain on discharge of pre-petition liabilities of $266.0 million and the adjustment of $35.2 million to record assets and liabilities at their fair values have been reflected in the accompanying consolidated financial data for the period ended September 1, 2001. Accordingly, the financial data as of September 1, 2001 and subsequent to September 1, 2001 for the Reorganized Company are not prepared on a basis comparable to the prior periods presented.

          Net interest expense for the current year decreased 59.5% to $10.7 million from $26.4 million for the prior year. The current year benefited from, among other things, (i) the suspension of interest accrued on the pre-petition borrowings and (ii) a lower level of average borrowings outstanding during the current year as compared to the prior year. In addition, all gains or losses associated with the Company's previously existing Accounts Receivable Securitization Program (which included $7.5 million of interest expense incurred on borrowings under the Accounts Receivable Securitization Program during the prior year) were charged to SG&A expenses in the prior year, while all interest expense incurred on borrowings subsequent to the Petition Date is charged to net interest expense. As discussed and defined in "Liquidity and Capital Resources" below, on the Effective Date the Company entered into a Revolving Facility and a Securitization Facility. Management believes that the majority of borrowings required to support the Company's funding needs going forward will be made under the Securitization Facility. As a result, most of the interest expense incurred on borrowings subsequent to the Effective Date will be charged to SG&A expenses. The amount of contractual interest expense not recognized in the Unaudited Consolidated Condensed Statement of Operations related to the pre-petition borrowings for the current year and prior year was $16.3 million and $6.7 million, respectively.

          As a result of the foregoing, the Company had net income of $232.4 million for the current year as compared to a net loss of $121.9 million for the prior year.

          Sales for the year ended February 3, 2001, which included one extra week as compared to 1999, decreased 15.1% to $952.3 million from $1,121.6 million for the year ended January 29, 2000. The decrease in sales for 2000 reflects, among other things, (i) the impact of significantly fewer stores in operation during 2000 as compared to the number of stores in operation during 1999 and (ii) a 7.2% decline in comparable store sales. Comparable store sales declined 12.2% from February 2000 through September 2000 due to a significant disruption in the flow of merchandise from the Company's vendors due to the financial difficulties experienced by the Company. Subsequent to the Petition Date and the implementation of the DIP Facility, the level of trade support increased significantly. As a result, the flow of merchandise from the Company's vendors improved significantly, thereby allowing the Company to properly inventory its stores. As a result, comparable store sales increased 2.2% for the period October 2000 through January 2001.

          Gross profit increased 6.1% to $238.1 million for 2000 from $224.5 million for 1999. Gross profit, as a percent of sales, increased to 25.0% for 2000 from 20.0% for 1999. Both years gross profit percent were below historical rates. In 1999, gross profit included $69.3 million of charges related to store closings, lower of cost or market reserves for seasonal inventory and LIFO inventory reserves. Additionally, shrink expense for 1999 was $30.7 million, or 2.7% of sales, while in 2000 shrink expense was only $5.2 million, or 0.5% of sales. Negative factors affecting gross profit percentage for 2000 include, among other things, (i) the impact of the increased level of promotional and liquidation activity utilized during the 2000 first quarter, (ii) additional markdowns taken during the 2000 second quarter to implement the Company's new markdown program, (iii) the negative sales leverage associated with the Company's fixed buying, occupancy and distribution expenses which are included in cost of goods sold and (iv) lower vendor discounts during the first two quarters of 2000 as a result of reduced inventory purchases.

          Selling, general and administrative expenses for 2000 decreased 36.5% to $246.2 million from $387.8 million for 1999. SG&A expenses, as a percent of sales, decreased to 25.9% in 2000 from 34.6% in 1999. In 1999, SG&A expenses included $115.9 million of charges related to the write down of long-lived assets, including goodwill, and certain other charges. SG&A expenses for 2000 benefited from, among other things, (i) the net reduction of 300 stores during the year and (ii) the Company's continuing efforts in controlling SG&A expenses. SG&A expenses for 2000 also include $5.7 million of operating costs at the stores, which were in the process of being, closed prior to the Chapter 11 filing. The net revenues and expenses associated with stores in the process of closing subsequent to the Petition Date were recorded as a component of reorganization items and store closure costs.

          As discussed in Note 2 to the Audited Consolidated Financial Statements prior to the Petition Date, the Company securitized substantially all accounts receivable under the Company's private label credit card through a wholly-owned special purpose entity. The Company held a retained interest in the securitization vehicle, a special purpose trust. In connection with the bankruptcy filing and DIP Financing, the Company repurchased the accounts receivable from the Trust. The Company accounted for the repurchase as described in Note 2 to the Audited Consolidated Financial Statements. The following table summarizes the total credit card portfolio results when combining the Trust and the Company, the net of which is included in the Company's SG&A expense:

          There were no store opening costs for 2000. Store opening costs of $0.8 million for 1999 reflect costs associated with the opening of 10 new stores during 1999's first quarter.

          Reorganization items and store closure costs for 2000 increased to $114.2 million from $44.2 million for 1999. The net expense for 2000 resulting from the Company's Chapter 11 Proceedings, subsequent reorganization efforts and store closures is as follows (in thousands):

          Because of the foregoing, the Company's net loss for 2000 was $162.2 million as compared to a net loss in 1999 of $277.2 million before extraordinary item and the cumulative effect of a change in accounting principle.

          In April 1998, the Accounting Standards Executive Committee issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"), effective for fiscal years beginning after December 15, 1998. In connection with the adoption of SOP 98-5 in 1999, the Company recorded the cumulative effect of change in accounting principle, net of tax, of $3.9 million. The charge reflects the write-off of the unamortized organizational costs associated with the Company's accounts receivable trust and credit card bank. During the fourth quarter of 1999, the Company recorded an extraordinary item, net of tax, of $0.7 million in connection with the early retirement in November 1999 of the then outstanding $30.0 million aggregate principal amount of SRPC 12.5% Trust certificate-backed notes.

          Sales for the year ended January 29, 2000 decreased 4.4% to $1,121.6 million from $1,173.5 million for the year ended January 30, 1999. The decrease in sales for 1999 reflects, among other things, the net reduction of 31 stores during the year and a 7.0% decline in comparable store sales. Management believes the majority of the decline in comparable store sales was attributable to (i) the impact on the first quarter of the aggressive management of the Company's inventory levels throughout the 1998 fall selling season, (ii) the impact on the second and third quarters of the Company's more conservative promotional strategy throughout the two periods and (iii) the impact on the fourth quarter of the softness in the Company's sales during the Christmas selling period.

          The Company's aggressive inventory management activities that were put into place during the 1998 fall selling season negatively impacted the Company's merchandise mix and, to a lesser extent, the Company's customer base. As a result, the Company began the first quarter with significantly lower levels of inventory on a comparable store basis as compared to the prior year's first quarter levels, particularly with respect to clearance merchandise. The lower levels of clearance inventory, as well as the continued aggressive pricing on this clearance merchandise throughout February, was a significant contributor to the decline in comparable store sales for the first quarter. In addition, sales for the Easter selling period were softer than expected as a result of lower than planned inventory levels during the period.

          Sales results for the second and third quarters were negatively impacted by a reduction in the number of promotional events and a lower level of price discounting as compared to the same periods in the prior year. While the Company anticipated that this strategy would negatively impact sales, the more conservative promotional strategy was designed to improve merchandise margins by increasing the sell-through of regular priced goods. In addition, comparable store sales for the third quarter were negatively impacted by a reduction in the level of clearance activities during the early part of the quarter as compared to last year. Due to inventory management initiatives that the Company put into place during the early part of 1999, the level of seasonal clearance merchandise on hand at the beginning of the third quarter of 1999 was significantly below the prior year's level and, therefore, sales for the third quarter of 1999 were negatively impacted as compared to the third quarter of 1998.

          Finally, management believes that the weakness in sales over the Christmas holiday period reflected an increased level of competitive promotional activity during the period as well as inventory management issues during the fourth quarter of 1999. As a result, the Company ended the year with an abnormally high portion of its inventory in fall clearance product that required significant markdowns to sell during the first quarter of 2000. As a result, the Company recorded a lower of cost or market reserve for this seasonal inventory during the fourth quarter.

           Gross profit decreased 32.8% to $224.5 million for 1999 from $334.3 million for 1998. Gross profit, as a percent of sales, decreased to 20.0% for 1999 from 28.5% for the prior year. The lower gross profit percentage for 1999 reflects, among other things, (i) the impact of the increased level of promotional activity utilized during the fourth quarter of 1999, (ii) the negative sales leverage associated with the Company's fixed buying, occupancy and distribution expenses which are included in cost of goods sold, (iii) lower vendor discounts on new store inventory purchases and reduced levels of store grand opening sales, which typically carry a higher level of gross margin, as a result of the reduction in the number of new stores opened during 1999 as compared to 1998, (iv) the recording of lower of cost or market reserves during the second and fourth quarters aggregating $61.3 million, (v) an $8.0 million LIFO charge relating to an overall decrease in inventories which resulted in the liquidation of certain high cost historical inventory layers and (vi) higher than anticipated net shrinkage expense. The lower of cost or market reserves recorded during these two periods relate to inventory liquidated in conjunction with store closures and the excess Christmas clearance inventory as discussed above. The decline in the gross profit percentage was partially offset by higher merchandise margins during the second and third quarters of 1999 resulting from a reduction in the level of clearance sales and a more conservative promotional strategy followed during these periods.

          SG&A expenses for 1999 increased 42.8% to $387.8 million from $271.5 million in the comparable period of 1998 and, as a percent of sales, increased to 34.6% from 23.1% in the comparable period last year. SG&A expenses for 1999 reflect, among other things, a $110.6 million write down of long-lived assets in accordance with Statement of Financial Accounting Standards No. 121 and Accounting Principles Board Opinion No. 17 consisting of increased depreciation and amortization of $26.0 million related to property, equipment and leasehold improvements associated with under performing stores and associated goodwill and other intangibles of $84.6 million, a $2.8 million provision against certain miscellaneous receivables, $0.6 million of severance for workforce reduction programs and $1.9 million associated with certain costs related to the refinancing of the Company's Accounts Receivable Program which was completed in November 1999. SG&A expenses for 1999 benefited from an increase in the fair value of the Company's retained interest in its accounts receivable trust, the result of which is included in SG&A expenses, reduced payroll and payroll related costs and the Company's continuing efforts in controlling SG&A expenses. The reduction in payroll related costs were primarily associated with reduced vacation expense resulting from a change in the Company's employee benefit program during the first quarter of 1999. SG&A expenses in 1999 also benefited from a reduction in operating costs associated with the stores included in the store closure program that was implemented during the second quarter of 1999.

          Store opening costs for 1999 of $0.8 million reflect the costs associated with 10 new stores opened during 1999.

          Reorganization items and store closure costs of $44.2 million in 1999 reflect costs associated with the Company's 1999 store closure program.

          Net interest expense for 1999 increased 4.5% to $48.6 million from $46.5 million for the comparable period in 1998 due to a higher level of average borrowings outstanding and an increase in overall borrowing rates.

          Income tax expense for 1999 of $20.2 million includes an $89.5 million valuation allowance provided for certain deferred tax assets.

          As a result of the foregoing, the Company's net loss, before extraordinary item and the cumulative effect of change in accounting principle, for the year ended January 29, 2000 was $277.2 million as compared to net income of $3.7 million for the year ended January 30, 1999.

          In connection with the adoption of SOP 98-5, the Company recorded the cumulative effect of change in accounting principle, net of tax, of $3.9 million during the first quarter of 1999. The charge reflects the write-off of the unamortized organizational costs associated with the Company's accounts receivable trust and credit card bank. During the fourth quarter of 1999, the Company recorded an extraordinary item, net of tax, of $0.7 million in connection with the early retirement in November 1999 of the $30.0 million aggregate principal amount of SRPC 12.5% Trust certificate-backed notes.

          The Company's business is seasonal and sales traditionally are lower during the first three quarters of the year (February through October) and higher during the last three months of the year (November through January). Working capital requirements fluctuate during the year and generally reach their highest levels during the third and fourth quarters.

           Unaudited quarterly financial data is summarized as follows (in thousands, except per share amounts):

          The Company's liquidity is currently provided by (i) existing cash balances, (ii) operating cash flows, (iii) normal trade credit terms from the vendor and factor community and (iv) the Financing Agreements (as defined below).

          In conjunction with the Company's emergence from the Chapter 11 Proceedings, on the Effective Date the Company entered into a three year, $125 million senior secured revolving credit facility (the "Revolving Facility"), which also supports the Company's outstanding letters of credit, and a three year, $200 million accounts receivable securitization facility (the "Securitization Facility") (collectively, the "Financing Agreements"). The initial proceeds from the Securitization Facility were used by the Company to (i) repay the total amount outstanding under the DIP Facility as of the Effective Date, (ii) make certain payments under the Plan in connection with priority claims, administrative claims and secured claims and (iii) pay related transaction costs, fees and expenses. On a go-forward basis, the Financing Agreements will be used by the Company, in conjunction with other liquidity sources, to provide financing for working capital, letters of credit, capital expenditures, interest payments and other general corporate purposes.

          Borrowings under the Revolving Facility are limited to the availability under a borrowing base based on eligible inventory, while borrowings under the Securitization Facility are limited to eligible accounts receivable under the Company's private label credit card program. Borrowings under both facilities are payable upon maturity. The daily interest rates under the Revolving Facility are based upon a Base rate or Eurodollar rate plus an applicable margin based on availability as set forth in the Revolving Facility agreement, while the daily interest rates under the Securitization Facility are based upon commercial paper rates of the applicable conduit purchasers. On September 1, 2001, there were no borrowings outstanding under the Revolving Facility, while borrowings under the Securitization Facility totaled $175.0 million. On September 1, 2001, availability under the Revolving Facility, net of letters of credit outstanding of $14.1 million, was $105.4 million, while availability under the Securitization Facility was $25.0 million. In addition, the Company had permitted cash investments of $13.0 million on September 1, 2001.

          The Company continually monitors its liquidity position and compliance with its Financing Agreements. The Revolving Facility contains covenants which, among other things, restrict the (i) incurrence of additional debt, (ii) incurrence of capital lease obligations, (iii) aggregate amount of capital expenditures and (iv) transactions with related parties. In addition, the Revolving Facility requires the Company to maintain compliance with specific financial covenants, including specified Leverage Ratio, Fixed Charge Coverage Ratio and Tangible Net Worth levels calculated quarterly. Further, the Securitization Facility describes certain conditions and events that could cause an early amortization of the amounts then outstanding under the Securitization Facility. These include such things as the Company not maintaining compliance with certain financial covenants, having a material adverse change in the ability of the Company to perform its obligations under the Securitization Facility, having a material adverse change in the collectibility of the accounts receivable and other specific conditions and events. Each facility contains cross default provisions.

          Capital expenditures are generally for new store openings, remodeling of existing stores and facilities, customary store maintenance and operating and information system enhancements and upgrades. For the thirty weeks ended September 1, 2001, capital expenditures were $6.3 million as compared to $2.8 million for the prior year period. This year's capital expenditures have primarily been related to information system enhancements and upgrades and store maintenance. Management estimates that capital expenditures will be approximately $17.0 million for the full fiscal year 2001. While there can be no assurances, management believes that there should be sufficient liquidity to cover both the Company's short-term and long-term funding needs.

          In June 1998 the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments and hedging activity. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. SFAS No. 133 is effective for all fiscal years beginning after June 15, 2000. The Company adopted SFAS No. 133, as amended, effective February 4, 2001. The adoption did not have a material effect on the Company's financial statements.

          In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No. 140, which replaces SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities", provides accounting and reporting standards for securitizations and other transfers of assets. Those standards are based on consistent application of a financial components approach that focuses on control. Under that approach, after a transfer of assets, an entity recognizes the assets it controls and derecognizes assets when control has been surrendered. SFAS No. 140 provides consistent standards for distinguishing transfers of financial assets that are sales from those that are secured borrowings. The accounting requirements of this standard are effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001 and must be applied prospectively. The Company has accounted for the Securitization Facility entered into on the Effective Date in accordance with SFAS No. 140.

          On July 20, 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets."  The statements will change the accounting for business combinations and goodwill in two significant ways.  SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001.  Use of the pooling-of-interests method will be prohibited.  SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach.  Thus, amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of that statement, which for the Compan y will be February 3, 2002.  In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company is currently evaluating the effects, if any, of adopting these pronouncements.

          Events of September 11, 2001 and Subsequent Events: As of the date of this Registration Statement, the Company cannot predict, with any degree of certainty, what effect, if any, the tragic events of September 11, 2001 and subsequent and continuing events of terrorism, such as those related to the use of the U.S. Postal System to spread anthrax, will have on the Company, its operations, the other risk factors discussed below and the forward-looking statements made by the Company in this Registration Statement. However, the consequences of these events could have a material and adverse effect on the Company's business and financial condition.

          Economic and Market Conditions: A substantial portion of the Company's operations is located in the south central United States. In addition, many of the Company's stores are situated in small towns and rural environments that are substantially dependent upon the local economy. The retail apparel business is dependent upon the level of consumer spending, which may be adversely affected by an economic downturn or a decline in consumer confidence. An economic downturn or decline in consumer confidence, particularly in the south central United States and any state (such as Texas) from which the Company derives a significant portion of its net sales, could have a material and adverse effect on the Company's business and financial condition, including affecting demand for the Company's product and the underlying quality of the private label credit card portfolio.

          The Company's success depends, in part, upon its ability to anticipate and respond to changing consumer preferences and fashion trends in a timely manner. Although the Company attempts to stay abreast of emerging lifestyle and consumer preferences affecting its merchandise, any sustained failure by the Company to identify and respond to such trends could have a material and adverse effect on the Company's business and financial condition.

          The Company's business is seasonal and its quarterly sales and profits traditionally have been lower during the first three fiscal quarters of the year (February through October) and higher during the fourth fiscal quarter (November through January). In addition, working capital requirements fluctuate throughout the year, increasing substantially in October and November in anticipation of the holiday season due to requirements for significantly higher inventory levels. Any substantial decrease in sales for the last three months of the year could have a material and adverse effect on the Company's business and financial condition.

          The Company's business depends, in part, on normal weather patterns across its markets. Any unusual weather patterns in the Company's markets can have a material and adverse impact on the Company's business and financial condition.

          Competition: The retail apparel business is highly competitive. Although competition varies widely from market to market, the Company faces the risk of increased competition, particularly in its more highly populated markets, from national, regional and local department and specialty stores. In fact, Kohl's, who has a similar retailing concept only in larger stores, has recently opened or announced their intention to open new stores in and around several of the Company's larger market areas, namely El Paso (2), Austin (3), Oklahoma City (4) and Houston (12 - as reported in the Houston Chronicle). As a result, the Company will face increased competition in these markets once these stores are opened. Some of the Company's competitors are considerably larger than the Company and have substantially greater financial and other resources. Although the Company currently offers labels not available at certain other retailers (including regional department stores, such as Goody's, national department stores, such as JC Penney and large national discounters, such as Wal-Mart) in its small to mid-size market stores, there can be no assurance that existing or new competitors will not carry similar branded merchandise in the future, which could have a material and adverse effect on the Company's business and financial condition.

          Dependence on Key Personnel: The success of the Company depends largely on its executive management team, including the Company's Chief Executive Officer and President, James Scarborough. Although the Company has entered into employment agreements with certain of its executive officers, it is possible that members of executive management may leave the Company, and such departures could have a material and adverse effect on the Company's business and financial condition.

          Expansion Strategy: The Company's current expansion strategy focuses on carefully managed growth. The success of the Company's expansion strategy depends upon many factors, including the ability of the Company to obtain suitable sites for new stores at acceptable costs, to hire, train and retain qualified personnel and to integrate new stores into existing information systems and operations. The Company cannot guarantee that it will reach its targets for opening new stores or that such stores will operate profitably when opened. If the Company fails to effectively implement its expansion strategy, it could have a material and adverse effect on the Company's business and financial condition.

          Consumer Credit Risks - Private Label Credit Card Program : Sales under the Company's private label credit card program represent a significant portion of the Company's business. Any significant deterioration in the quality of the Company's accounts receivable portfolio or any adverse changes in laws regulating the granting or servicing of credit (including late fees and the finance charge applied to outstanding balances) could have a material and adverse effect on the Company's business and financial condition. In addition, the ability of GNB to maintain its bank charter and to continue to generate new accounts receivable under the Company's private label credit card program is dependant upon its ability to maintain compliance with all applicable banking laws and regulations.

          Compliance with Financing Agreements: The Company's Financing Agreements impose operating and financial restrictions on the Company and certain of its subsidiaries. Such restrictions limit the Company's ability to incur additional indebtedness, to make dividend payments, to make capital expenditures in excess of authorized amounts and to enter into related party transactions. In addition, any material or adverse developments affecting the business of the Company could significantly limit its ability to meet its obligations as they become due or to comply with the various covenant requirements contained in the Company's Financing Agreements.

           Availability of Merchandise Product on Normal Trade Terms: The Company is highly dependent on obtaining merchandise product on normal trade terms. If the Company does not meet its performance objectives, the Company's key vendors and factors may become more restrictive in granting trade credit by either reducing the Company's credit lines or shortening payment terms. The tightening of credit from the vendor or factor community would have a material adverse impact on the Company's business and financial condition.

          Interest Rate Risk: Borrowings under the Company's Financing Agreements bear a floating rate of interest. If market rates of interest increase, the Company's financial results could be materially and adversely affected. See Item 2A. "Quantitative and Qualitative Disclosures about Market Risk".

           Centralized Operations: The Company's buying, credit, distribution and other corporate operations are highly centralized in three main locations. The Company's operations could be materially and adversely affected if a catastrophic event (such as, but not limited to, fire, hurricanes or floods) impacts the use of these facilities. There can be no assurances that the Company would be successful in obtaining alternative servicing facilities in a timely manner if such a catastrophic event should occur.

Borrowings under the Company's Securitization Facility, which totaled $175.0 million at September 1, 2001, bear a floating rate of interest. A hypothetical 10% change in interest rates from the September 1, 2001 levels would have an approximate $0.6 million effect on the Company's annual results of operations and cash flows.

          The Company's corporate headquarters is located in a 130,000 square foot building in Houston, Texas. The Company leases the building and most of the land at its Houston facility. The Company owns a 450,000 square foot distribution center, as well as a credit department facility, which are located in Jacksonville, Texas. The Jacksonville distribution center and credit department facility, along with substantially all of the Company's other assets, serve as collateral for the Company's Revolving Facility.

          At September 1, 2001, the Company operated 342 stores, located in 13 states, as follows:

          The table below sets forth certain information regarding ownership of Common Stock as of September 21, 2001 (the Plan Initial Distribution Date) by (i) any person or entity who is known to the Company to be the beneficial owner of more than five percent (5%) of the Common Stock, (ii) each director and each named executive officer and (iii) all directors and executive officers as a group.

          The following table lists the names, ages and all positions held by the directors and executive officers of Stage Stores as of September 1, 2001. All of the executive officers in the table were employed by the Company's predecessors or a subsidiary during the Chapter 11 Proceedings.

          Mr. McCreery joined the Company's predecessor as Executive Vice President and Chief Financial Officer in February 2001. He has been a Director of the Company since August 24, 2001. Previously, Mr. McCreery was Senior Vice President and Chief Financial Officer of Levitz Furniture from 1998 to 2001. From 1990 to 1997, Mr. McCreery held various positions at C.R. Anthony Company, where he served as Vice Chairman and Chief Administrative Officer from 1995 to 1997, as Senior Executive Vice President and Chief Financial Officer from 1992 to 1995 and as Executive Vice President and Chief Financial Officer from 1990 to 1992. Before joining C.R. Anthony Company, Mr. McCreery was employed at Deloitte & Touche LLP from 1973 to 1990, where he served as an audit partner from 1983 to 1990.

          Mr. Lucas joined the Company in July 1995 as Senior Vice President, Human Resources and was promoted to Executive Vice President, Human Resources in March 1998. Between 1987 and 1995, Mr. Lucas served as Vice President, Human Resources at two different divisions of Limited, Inc., the Limited Stores Division and Lane Bryant. Previously, he spent seventeen years at the Venture Stores Division of May Co. where from 1985 to 1987 he was Vice President, Organization Development.

          Mr. Cruse, who was promoted to Executive Vice President, Store Operations in August 2001, joined Bealls Department Stores, which is now part of Stage Stores, in 1966 and held various store positions. In 1983, Mr. Cruse was promoted to Vice President District Manager. He served as Senior Vice President Regional Manager from 1994 to 1998, as Senior Vice President Planning and Allocation from 1999 to 2000, and prior to his promotion to Executive Vice President, served as Senior Vice President, Director of Stores.

          Mr. Abramczyk joined the Company in 1999 as Vice President of mens sportswear and furnishings. He was promoted to Senior Vice President, General Merchandise Manager of mens, young mens, cosmetics and shoes in May of 1999. In January 2000, the childrens and intimate apparel divisions were added to his responsibility. From 1996 to 1999 Mr. Abramczyk was Chief Operations Officer of Ralph Marlin, a manufacturer, wholesaler and retailer of licensed mens neckwear, womens neckwear and apparel. At Ralph Marlin he was responsible for sourcing, manufacturing, sales and marketing. From 1988 to 1996 Mr. Abramczyk held several positions at Carson Pirie Scott that included Senior Vice President, General Merchandise Manager of mens, young mens and childrens divisions. Prior to that, Mr. Abramczyk was Senior Vice President, Director of Stores for the Boston Stores division of Carson Pirie Scott Co. Mr. Abramczyk started his career as an executive trainee with the Boston Stores, which was a division of Federated Department Stores, where he worked from 1970 to 1988.

          Ms. Baker came out of retirement to rejoin the Company as General Merchandise Manager in September 2000. From 1983 and 1998, Ms. Baker held various merchandising positions at Bealls Department Stores, which is now part of Stage Stores, where she served as Divisional Merchandise Manager and later was promoted to Vice President, General Merchandise Manager. Between 1979 and 1983, Ms. Baker served as Divisional Merchandise Manager at Dillard's. Prior to joining Dillard's, Ms. Baker was employed at Woodward and Lothrop, where she served as Buying and Store Management from 1964 to 1979.

          Mr. Brumfield joined the Company in November 1997 as Vice President, Credit Services and was promoted to Senior Vice President, Credit Services in November 2000. Prior to taking over responsibility for the entire division, Mr. Brumfield had been involved in establishing/managing Granite National Bank, NA, directing credit systems development/implementation, directing the human resources/staffing/training functions for the credit division, and leading all budgeting/accounting activities for the credit division. Between 1986 and 1997, Mr. Brumfield served as Senior Operations Manager at Zale Corp., where he established and managed credit-marketing function, helped establish Customer Marketing Database infrastructure for the corporation, managed budgeting and accounting functions for the credit division, provided staff oversight of all Authorization Department activities, and was the Audit Team Leader for operational audits of all credit processing centers.

          Mr. Kish joined the Company in May 1999 as Vice President, Systems Development and was promoted to Senior Vice President and Chief Information Officer in August 2000. From 1994 to 1999, he held various positions with Caldor Corporation, including Director of Store Systems and Vice President, Systems Development. Between 1993 and 1994, Mr. Kish served as Director of Store Systems for Ann Taylor. Previously, he held various positions within the Information Systems organization at Walden Books from 1988 to 1993, and was with the United States Surgical Corporation during 1987 and 1988. Prior to United States Surgical, he held various positions with Allied stores from 1983 to 1987.

          Mr. Stasyszen joined the Company in March 1998 as Assistant Controller and was subsequently promoted to Vice President and Controller in February 1999. In July 2001, Mr. Stasyszen was promoted to Senior Vice President Finance and Controller. Previously, Mr. Stasyszen was Vice President and Controller of C.R. Anthony Company between August 1992 and February 1998 and was Assistant Controller from April 1991 to July 1992. Before joining C.R. Anthony Company, Mr. Stasyszen was employed at Deloitte & Touche LLP from May 1982 to March 1991, where he served as an audit manager from 1988 to 1991.

          Ms. Swartz joined the Company in January 1994 as Vice President, Marketing and was subsequently promoted to Senior Vice President, Marketing in November 1995. Between 1988 and 1994, Ms. Swartz served as Advertising Director for the Southwest Retail Division of U.S. Shoe and NAL Texas Specialty Stores. Between 1985 and 1988, she held the position of Advertising Manager at Foley's, formerly a division of Federated Department Stores. Prior to joining Foley's, Ms. Swartz spent four years in the advertising agency industry, where she held various media planning and retail account management positions.

          Mr. Ward started with Beall's Department Stores in March of 1979. In April of 1980 he became a Contract Assistant Manager in San Antonio. In June of 1983 he was relocated to the corporate office as Store Opener. He began his career in Real Estate in May of 1985 as a Real Estate Negotiator. In April of 1993 he was promoted to Vice President, Real Estate and as of April 1996 he has been Senior Vice President, Real Estate. Prior to his career with Stage Stores, he was a buyer for various department stores in Central Texas from 1976 to 1979.

          Mr. August has been a Director since August 24, 2001. Since August 1996, he has served as President of Oak Hill Advisors, Inc., an investment management firm. Mr. August and affiliates of Oak Hill Advisors, Inc. hold an aggregate of approximately 17.4% of the Company's Common Stock. Mr. August is also a Director of Ivex Packaging Corporation.

          Mr. Davido has been a Director since August 24, 2001. Since March 1999, he has served as Executive Vice President, Chief Financial Officer, Treasurer and Secretary of The Elder-Beerman Stores Corp. ("Elder-Beerman"). Elder-Beerman operates department stores that sell a wide range of moderate to better branded merchandise, including women's, men's and children's apparel and accessories, cosmetics, home furnishings, and other consumer goods. From January 1998 to March 1999, Mr. Davido served as Senior Vice President, General Counsel and Secretary of Elder-Beerman. From September 1994 to December 1997, he was a partner at Jones, Day, Reavis & Pogue, a law firm located in Pittsburgh, Pennsylvania, where he specialized in corporate and bankruptcy law.

          Mr. Gilman has been a Director since August 24, 2001. Since July 2000, he has been a financial and business consultant. From September 1978 to July 2000, Mr. Gilman was a partner at Arthur Andersen LLP, during the last twelve years of which he served as Worldwide Managing Partner of Consumer Products and Retail Industry Programs. He is also a Director of Catuity, Inc.

          Mr. Glazer has been a Director since August 24, 2001. Since May of 1996, he has served as President and Chief Executive Officer of KB Toys, a division of Consolidated Stores. Prior to that, from 1995, Mr. Glazer served as President of Consolidated Stores. He is also a Director of Big Lots, Inc., Brookstone, Inc. and Berkshire Life Insurance Company.

          Mr. Mentzer has been a Director since August 24, 2001. Since January 1994, he has been a professor of Business Policy in the Department of Marketing, Logistics and Transportation at the University of Tennessee. Mr. Mentzer is also President of JTM & Associates, a consulting firm.

          Mr. Salmon has been a Director since August 24, 2001. Since 1997, he has been the Stanley Roth Sr., Professor of Retailing, Emeritus at the Harvard University Graduate School of Business Administration. He has been a member of the Harvard Business School faculty since 1956. Professor Salmon is also a Director of Cole National Corporation, Harrah's Entertainment, Inc., Luby's Cafeterias, Inc., The Neiman Marcus Group, PetsMart, Inc. and Party City, Inc.

          Mr. Wuensch has been a Director since August 24, 2001. Since 1992, he has been the President of Wuensch Consulting Group. In his position with Wuensch Consulting Group, Mr. Wuensch provides executive and financial consulting services to other companies. Mr. Wuensch is also a Director of American Homestar Corporation.

          Directors who are full-time employees of the Company receive no additional compensation for serving on the Board of Directors. Directors who are not full-time employees of the Company (the "Outside Directors"), namely Messrs. August, Davido, Gilman, Glazer, Mentzer, Salmon and Wuensch, receive monthly cash compensation of $2,500 for services rendered as a Director including quarterly Board of Director meetings, periodic telephone consultations and any other occasional actions requiring a Board Resolution. The Outside Directors also receive $1,500 for each special meeting of the Board and committee meeting held at times other than regularly scheduled quarterly meetings. In addition, the Outside Directors, in the aggregate, have been granted 140,000 options effective August 24, 2001 pursuant to the 2001 Equity Incentive Plan.

          At the direction of Mr. August, the options to purchase 20,000 shares of Company Common Stock granted to Mr. August were issued to Oak Hill Advisors L.P. rather than to Mr. August. In addition, Mr. August has directed that any fees payable to him for his service as a director are to be paid to Oak Hill Advisors L.P.

          The following table summarizes, for the fiscal years indicated, the principal components of compensation for the Company's Chief Executive Officer (the "CEO"), the Company's former CEO who held the position during 2000 and the Company's four most highly compensated executive officers other than the CEO (collectively, the "named executive officers")

(1)	Amounts reflect bonuses earned during the fiscal year covered (and paid during the subsequent fiscal year).
(2)	Represents the restricted stock awards of the Company's predecessor to the named executives multiplied by the market price of the underlying common stock as of the grant date. These shares, which were subject to various vesting requirements, were cancelled upon effectiveness of the Plan of Reorganization.
(3)	Amounts reflect premiums paid for life insurance coverage.
(4)	Amount shown reflects moving expenses of $127,918, automobile allowance of $5,000, health insurance benefits of $1,257 and gross up for taxes of $85,243 paid to Mr. Scarborough during 2000.
(5)	Mr. McCreery joined the Company's predecessor as Executive Vice President and Chief Financial Officer in February 2001.
(6)	Amount shown reflects debt forgiveness of $150,000 during 2000. Amount shown also reflects deferred compensation distribution of $257,999, pension equalization benefit of $23,954, gross up for taxes of $50,000, Key Employee Retention Program bonus of $41,850, automobile allowance of $12,000 and health insurance benefits of $5,134 paid to Mr. Lucas during 2000.
(7)	Amount reflects automobile allowance of $12,000 and health insurance benefits of $5,002 paid to Mr. Lucas during 1999.
(8)	Amount shown reflects the value realized upon the exercise of options for common stock of $985,139 during 1998. Value realized is based upon the fair market value of the stock at the exercise date minus the exercise price. Amount shown also reflects imputed interest on executive loans of $25,788, automobile allowance of $12,000 and health insurance benefits of $4,568 paid to Mr. Lucas during 1998.
(9)	Amount shown reflects deferred compensation distribution of $109,801, pension equalization benefit of $476 and a Key Employee Retention Program bonus of $40,500 paid to Mr. Cruse during 2000.
(10)	Amount shown reflects the value realized upon the exercise of options for common stock of $326,657 during 1998. Value realized is based upon the fair market value of the stock at the exercise date minus the exercise price. Amount shown also reflects miscellaneous compensation of $824 paid to Mr. Cruse during 1998.
(11)	Amount shown reflects deferred compensation distribution of $137 and a Key Employee Retention Program bonus of $43,200 paid to Mr. Abramczyk during 2000.
(12)	Amount shown reflects moving expenses of $16,339, gross up for taxes of $10,375 and a lump sum relocation allowance of $40,000 paid to Mr. Abramczyk during 1999.
(13)	Amounts shown reflect payments to Mr. Wiesner pursuant to employment and severance agreements with C.R. Anthony Company, which the Company's predecessor acquired in 1997.
(14)	At the time of Mr. Wiesner's appointment by the Company's predecessor to the positions of Chairman, Interim Chief Executive Officer and President in February 2000, he signed an Employment Agreement, which provided a fully vested stock option for 200,000 shares. Although fully vested, the option was not exercised. On May 5, 2000, Mr. Wiesner signed a First Amendment to his Employment Agreement by which he voluntarily and unconditionally revoked any and all previously granted stock option agreements he had with the Company's predecessor.

Employment Agreements

          On July 31, 2000 and February 28, 2001, the Company entered into Employment Agreements (the "Agreements") with James Scarborough and Michael McCreery, respectively (individually, the "Executive" and collectively, the "Executives"). Under the terms of the Agreements, Mr. Scarborough is employed as Chief Executive Officer and President of the Company, while Mr. McCreery is employed as Executive Vice President and Chief Financial Officer. The Agreements provide for a Base Salary, as well as a Merit Bonus commencing with the fiscal year ending February 2, 2002 based upon the Company's operating results for, and the Executives' performance during, the applicable fiscal year and such other performance targets and criteria as the Board and the Executives may establish and adjust for that fiscal year. The Agreements also provide for the Executives' participation in all other bonus and benefit plans available to executive officers of the Company. The specific details of the Agreements are contained in copies included as exhibits to the Registration Statement.

          The Agreements provide that if any Executive is terminated by the Company for Good Cause (as defined in the Agreements), he will be entitled to receive any Base Salary earned through the date of termination. If any Executive is terminated by the Company without Good Cause, he will be entitled to receive (i) any Base Salary earned through the date of termination and (ii) an amount equal to the sum of (1) one times the Base Salary in effect as of the date of termination and (2) one times the targeted Merit Bonus of fifty percent (50%), in the case of Mr. Scarborough, and forty percent (40%), in the case of Mr. McCreery, of Base Salary (collectively, payments under clause (i) and (ii) constitute the "Severance Payment"). If any Executive terminates his Employment Agreement for Good Reason (as that term is defined in the Agreements and which includes the assignment of duties or responsibilities materially inconsistent with his position or status with the Company at the time of a Change of Control, as defined in the Agreements), he will be entitled to receive (i) any Base Salary earned through termination and (ii) the Severance Payment. If any Executive terminates his Employment Agreement without Good Reason, he will be entitled to receive only any Base Salary earned through the date of termination.

          The Stage Stores, Inc. Retirement Plan (the "Plan") is a qualified defined benefit plan. Benefits under the Plan are administered through a trust arrangement providing benefits in the form of monthly payments or a single lump sum payment. The Plan covers substantially all employees who have completed one year of service with 1,000 hours of service as of June 30, 1998. Effective June 30, 1998, the Plan was frozen. There are no future benefit accruals after that date. Any service after that date will continue toward vesting and eligibility for normal and early retirement.

          The Plan is administered by the retirement plan committee (the "Retirement Committee"), and the Company appoints its three to five members. All determinations of the Retirement Committee are made in accordance with the provisions of the Plan in a uniform and nondiscriminatory manner.

          Generally, a participant is eligible for a benefit on his/her normal retirement date, which is the later of age 65 or the fifth anniversary of the date of hire. A participant may elect an early retirement benefit if he/she is at least 55 years old, has ten (10) Years of Service (as defined below) and retires from active employment with the Company. Early retirement benefits are reduced according to a formula established in the Plan based upon each full month that the participant's age is less than 65 on the date the payments commence. If a participant who is vested terminates employment, he/she is entitled to a deferred benefit payable at his/her normal retirement date or an earlier date, if requested, but not before age 55.

          The amount of a participant's retirement benefit is based on each Year of Credited Service (as defined below) and on his/her earnings for that year. The individual yearly benefits are then totaled to determine the annual benefit at age 65. The annual amount of the participant's normal retirement benefit is derived, subject to certain limitations, by adding (i) 1% of earnings up to $30,600 plus 1-1/2% of the excess of such earnings over $30,600 for each Year of Credited Service earned on or after July 1, 1989 through December 31, 1991, (ii) 1% of earnings up to $31,800 plus 1-1/2% of the excess of such earnings over $31,800 for each Year of Credited Service earned after December 31, 1991 and (iii) 1% of earnings up to $42,500 plus 1-1/2% of the excess of such earnings over $42,500 for each Year of Credited Service earned after December 31, 1994 through June 30, 1998. The normal retirement benefit formula produces an annual benefit which is paid to the participant in equal monthly installments. The standard form of payment for a single participant is a monthly benefit payable for the participant's life only. The standard form of payment for a married participant is a 50% joint and survivor benefit, which provides a reduced monthly benefit to the participant during his/her lifetime, and 50% of that benefit to the participant's spouse for his/her lifetime in the event of the participant's death. Other forms of the payment are also provided including lump sum payouts, but they require participant election. In addition, the Retirement Committee may elect to pay the benefit equivalent of a benefit payable at normal retirement date in the form of a lump sum payment, if the lump sum payment does not exceed $5,000.

          Any participant who is credited with 1,000 or more hours of service in a calendar year receives a "Year of Service", while any participant who is credited with 1,284 or more hours of service in a calendar year receives a "Year of Credited Service". Years of Service determine a participant's eligibility for benefits under the Plan, and the percentage vested in those benefits. After five Years of Service, a participant is 100% vested.

          The Plan is funded entirely by Company contributions that are held by a trustee for the exclusive benefit of the participants. The Company voluntarily agreed to contribute the amounts necessary to provide the assets required to meet the future benefits payable to Plan participants. Under the Retirement Plan, contributions are not specifically allocated to individual participants.

          The Company has a contributory 401(k) savings plan covering substantially all qualifying employees. Under the 401(k), participants may contribute up to 15% of their qualifying earnings, subject to certain restrictions. The Company currently matches 50% of each participant's contributions, limited to 6% of each participant's salary. The Company's matching contributions were approximately $0.8 million for 2000, $1.0 million for 1999 and $0.8 million for 1998.

           Pursuant to the Plan, the Company has established the 2001 Equity Incentive Plan to reward, retain and attract key personnel and has reserved 4,000,000 shares for issuance of awards under the 2001 Equity Incentive Plan. The 2001 Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors, who has the power to select the key employees and other key individuals to be granted awards under the 2001 Equity Incentive Plan, to determine the size, type and term of awards to be made to each individual selected, to modify the terms of any award that has been granted, to determine the time when awards will be granted, to establish performance objectives and to prescribe the form of the instruments embodying awards under the 2001 Equity Incentive Plan. Key employees and Outside Directors are eligible to receive grants of options under the 2001 Equity Incentive Plan. Awards under the 2001 Equity Incentive Plan include, but need not be limited to, qualified and non-qualified stock options, stock appreciation rights or restricted stock grants. See also Item 11. "Options".

          Glenn August, a Director of the Company, is also the President of Oak Hill Advisors, Inc. As of September 21, 2001, by virtue of their positions as holders of allowed pre-petition claims in the Chapter 11 Proceedings, Mr. August and his affiliates were issued Common Stock as detailed in Item 4.

          Beginning in April 2000, Ronald Wuensch, a Director of the Company, began providing certain bankruptcy related consulting services to the Company's predecessors through Wuensch Consulting Group. Under the consulting agreement, Wuensch Consulting Group was paid $440,906 plus $2,473 as reimbursement for expenses during the 2000 fiscal year and $265,212 plus $1,100 as reimbursement for expenses during the 2001 fiscal year. The consulting agreement expired on August 24, 2001 and Mr. Wuensch is no longer providing consulting services to the Company.

          Pursuant to the Plan and for their efforts during the Chapter 11 Proceedings, the following executive officers received bonuses upon the Company's emergence from bankruptcy on August 24, 2001 and, effective August 24, 2001, were granted options to purchase the Company's Common Stock under the Company's 2001 Equity Incentive Plan, as follows:

          As part of his retention agreement, Ron Lucas, the Company's Executive Vice President, Human Resources, had the $143,252 balance of his indebtedness to the Company forgiven upon the Company's emergence from bankruptcy on August 24, 2001.

         From time to time the Company and its subsidiaries are involved in various litigation matters arising in the ordinary course of their business.

          On March 30, 1999, a class action lawsuit was filed against one of the predecessors, Stage Stores, Inc., a Delaware corporation ("Stage Delaware"), and certain of its officers, directors and stockholders in the United States District Court for the Southern District of Texas, Houston Division by John C. Weld, Jr., a stockholder who purchased 125 shares of Stage Delaware's common stock on August 3, 1998, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated there under (the "Weld Suit"). Stage Delaware believed that the allegations of the Weld Suit were without merit, and on July 23, 1999, Stage Delaware filed a motion to dismiss. United States District Judge Kenneth Hoyt entered an order on December 8, 1999 dismissing the Weld Suit. Mr. Weld appealed the order to the United States Court of Appeals for the Fifth Circuit (the "Fifth Circuit"). Because of Stage Delaware's bankruptcy proceeding (see below), the appeal was stayed as to Stage Delaware. On May 16, 2001, the Fifth Circuit affirmed the District Court's dismissal of the Weld Suit as to the other defendants in the case. The plaintiffs have now consented to the dismissal of the action against  the Company pending in the Fifth Circuit, and that Court entered its order dismissing those claims on October 15, 2001.   In addition, in the Chapter 11 Proceedings, Mr. Weld filed and asserted a "Class Proof of Claim" making the same allegation as in the Weld Suit. The Company filed a claim objection to the Weld Class Proof of Claim which claim objection has been sustained by the Bankruptcy Court.

          In March 2000, eleven former employees of one of the Company's subsidiaries, Specialty Retailers, Inc., a Texas corporation d/b/a Palais Royal ("SRI"), filed two separate suits in the United States District Court for the Southern District of Texas against Stage Delaware, SRI and Mary Elizabeth Pena, arising out of alleged conduct occurring over an unspecified time while the plaintiffs were working at one or more Palais Royal stores in the Houston, Texas area. The plaintiffs allege that on separate occasions they were falsely accused of stealing merchandise and other company property and giving discounts for purchases against company policy. The suits accuse the defendants of defamation, false imprisonment, intentional infliction of mental distress, assault and violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act. The claims seek unspecified damages for mental anguish, lost earnings, exemplary damages, treble damages, interest, attorneys' fees and costs. SRI denies the allegations and intends to vigorously defend the claims. These claims are currently stayed pursuant to the provisions of the Plan. SRI has agreed to liquidate the claims through its compulsory ADR program for employee disputes. The payment of any amounts deemed owed by SRI, however, is subject to the Plan.

          On June 1, 2000, the Company's predecessors (Stage Delaware and Specialty Retailers, Inc. (NV)) and SRI (collectively, the "Debtors") filed voluntary petitions under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. During the Chapter 11 Proceedings, the Debtors continued to manage and operate their assets and business as a debtors-in-possession, pending the formulation and confirmation of a plan of reorganization and subject to the supervision and orders of the Court. Additionally, an unsecured creditor committee was formed and had the right to review and participate in the Chapter 11 Proceedings. On April 24, 2001, the Debtors filed, and subsequently amended on May 14, May 21, May 25 and June 6, 2001, a "Disclosure Statement," pursuant to Section 1125 of the Bankruptcy Code, and a "Plan of Reorganization" with the Court. On June 6, 2001, the Court approved the Disclosure Statement. On August 8, 2001, the Plan, as modified on August 8, 2001, was confirmed by the Court (the "Confirmation Order"). On August 24, 2001 (the "Effective Date") the Debtors emerged from the Chapter 11 Proceedings. Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court will retain jurisdiction over the Chapter 11 Proceedings after the Effective Date as is legally permissible, including jurisdiction over matters set forth in Article XII Retention of Jurisdiction in the Plan including, but not limited to, jurisdiction to (i) issue injunctions, enforce the injunctions contained in the Plan and the Confirmation Order, enter and implement other orders or take such other actions as may be necessary to restrain interference by any entity with consummation, implementation or enforcement of the Plan or the Confirmation Order; (ii) enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason or in any respect modified, stayed, reversed, revoked or vacated or distributions pursuant to the Plan are enjoined or stayed; and (iii) determine any other matters that may arise in connection with or relate to the Plan, the Disclosure Statement, the Confirmation Order or any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, the Disclosure Statement or the Confirmation Order. One pre-petition shareholder has appealed the Confirmation Order. The Bankruptcy Court has denied his request for a stay pending appeal.

          On November 3, 2000, Stage Delaware received a copy of the United States Securities and Exchange Commission's (the "SEC") August 3, 2000 Order Directing Private Investigation "In the Matter of Stage Stores, Inc." (the "SEC Order"). The SEC Order is a confidential document directing a non-public investigation into related party transactions previously reported by Stage Delaware on Form 8-K dated March 9, 2000. The Company is cooperating with the SEC in the investigation, which is still ongoing.

          On April 14, 2000, Stage Delaware was named as one of 135 defendants in a patent infringement action brought by The Lemelson Medical, Education & Research Foundation, in the United States District Court for the District of Arizona. The plaintiff claims to be the owner of various patents covering optical scanning devices commonly used by retail outlets at checkout counters to scan prices for customer purchases. The complaint seeks injunctive relief to prevent alleged continuing infringement and unspecified damages for alleged past infringement. The court and the plaintiff were advised of the Chapter 11 Proceedings, and Stage Delaware asserted the protection of the automatic stay. The remaining defendants have formed a common defense group and plan to vigorously defend against the claims. The plaintiffs' several actions against retailers allegedly using the scanning technology have been stayed, pending the outcome of the affirmative actions filed by certain manufacturers of the scanning equipment to declare the plaintiffs' patents invalid. The Company disputes the plaintiff's allegations and plans to monitor the action closely.

          In the Chapter 11 Proceedings, Stage Delaware engaged in litigation with General Electric Capital Corporation ("GE Capital") regarding the proceeds received from Stage Delaware's sale of an aircraft (the "Aircraft"), which was financed by GE Capital. On July 19, 2000, the Court entered its Order Authorizing Sale of Aircraft Located in Houston, Texas, Subject to All Liens Attaching to the Proceeds and Pursuant to 11 U.S.C. Section 363, which enabled Stage Delaware to sell the Aircraft but provided that excess proceeds in the amount of $1,065,217 would be held in escrow, pending resolution of the entitlement to such proceeds. On January 1, 2001, in its Order Authorizing Disbursement of "Excess Proceeds" Upon Sale of Aircraft and the Findings of Fact and Conclusions of Law Concerning Entitlement to "Excess Proceeds" After Sale of Aircraft, the Court ordered that GE Capital was entitled to the excess proceeds. Stage Delaware appealed this ruling and this matter is currently before the United States District Court for the Southern District of Texas, Houston Division. The Company has obtained court approval of a settlement in principle. Generally, the Company will keep certain leased equipment not involved in the litigation for a limited period of time. The disputed escrow funds will be applied to reduce other obligations due to GE Capital. The pending litigation will be dismissed. The details of the final settlement agreement are being negotiated. The settlement is contingent on the final settlement agreement.

          Management believes that none of the litigation matters described above, either individually or in the aggregate, is material to the financial position, results of operations or cash flows of the Company or its subsidiaries.

          While the Common Stock is currently being quoted over-the-counter on the Pink Sheets Electronic Quotation Service under the symbol "STGS," trading is sporadic and there is no established public trading market for the Common Stock and Warrants.

           Common Stock . As of October 1, 2001, 19,972,653 shares of Common Stock were outstanding and held by approximately 580 holders of record.

           Warrants . Pursuant to the Plan, the Company intends to issue up to 512,821 Series A Warrants and up to 1,079,622 Series B Warrants.

           Options . As of October 1, 2001, options to purchase an aggregate of 2,450,000 shares of Common Stock were outstanding and held by 8 officers and 7 Outside Directors of the Company under the Company's 2001 Equity Incentive Plan. The Company intends to issue an additional 1,191,000 options to other key employees with an effective date of August 24, 2001 at the same exercise price and vesting provisions as those outstanding.

          For a description of the Common Stock, Warrants and Options, see Item 11. "Description of Registrant's Securities to be Registered".

          The Company has not declared or paid any cash dividends on its Common Stock and does not expect to pay cash dividends in the foreseeable future. The Company anticipates that, for the foreseeable future, earnings will be reinvested in the business and used to service indebtedness. The declaration and payment of dividends by the Company are subject to the discretion of the Board of Directors (the "Board"). Any future determination to pay dividends will depend on the Company's results of operations, financial condition, capital requirements, contractual restrictions under its Financing Agreements and other factors deemed relevant by the Board. See Item 2. Financial Information - Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.

           As of October 1, 2001 under the Plan, the Company has issued 19,972,653 shares of Common Stock to former creditors, of which 904,166 shares were issued to escrow related to unresolved claims of unsecured creditors under the Plan. Pursuant to the cash share option under the Plan, up to approximately 28,500 of the shares held in escrow may be cancelled if the eligible claimholders subject to the escrow shares elect the partial cash payment option.

          Pursuant to the Plan, the Company intends to issue up to 512,821 Series A Warrants and up to 1,079,622 Series B Warrants to purchase Common Stock to former creditors.

          The Company believes that the offer and sale of Common Stock and Warrants under the Plan satisfies the requirements under Section 1145(a)(1) of the Bankruptcy Code and, therefore, are exempt from registration under the Securities Act of 1933 (the "Securities Act") and state securities laws.

          As of October 1, 2001, there were outstanding options to purchase an aggregate of 2,450,000 shares of Common Stock granted by the Company to key executives and Outside Directors of the Company and its subsidiaries pursuant to the 2001 Equity Incentive Plan. The Company has approved a maximum of 4,000,000 shares of restricted Common Stock for sale pursuant to the 2001 Equity Incentive Plan. These grants of options were made, or will be made, pursuant to Rule 701 under the Securities Act, which exempts issuances of security under certain written compensatory employee benefit plans. The Company intends to issue an additional 1,191,000 options to other key employees with an effective date of August 24, 2001 at the same exercise price and vesting provisions as those outstanding.

          The Company is authorized to issue 50,000,000 shares of Common Stock, par value $0.01. As of October 1, 2001, 19,972,653 shares of Common Stock were outstanding, of which 904,166 shares were issued to escrow related to unresolved claims of unsecured creditors under the Plan. Pursuant to the cash share option under the Plan, up to approximately 28,500 of the shares held in escrow may be cancelled if the eligible claimholders subject to the escrow shares elect the partial cash payment option.

          The holders of Common Stock are entitled to one vote per share upon each matter submitted to a vote at a meeting of shareholders. A majority of the outstanding shares of the Company, represented by person or by proxy, constitutes a quorum at each meeting of the shareholders. If a quorum exists, action on a matter, other than the election of directors is approved if the votes cast favoring the action exceeds the votes cast opposing the action. Every shareholder entitled to vote for the election of directors has the right to cast, in person or by proxy, all of the votes to which the shareholder's shares are entitled for as many persons as there are directors to be elected and for whom election such shareholder has the right to vote. Directors are elected by a plurality of the votes cast by the shares entitled to vote for each director in the election at a meeting at which a quorum is present. The Articles of Incorporation and Bylaws do not provide for cumulative voting for the election of directors. A director may be removed only if the number of votes cast to remove him is at least two thirds (2/3) of the votes cast.

          Holders of Common Stock are entitled to receive ratable dividends, if any, as may be declared from time to time by the Board out of funds legally available for them. In the event of liquidation, dissolution, or winding up of the Company, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding. There are no redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are fully paid and non-assessable, and any shares of Common Stock to be issued by the Company will be fully paid and non-assessable.

          The Company's Board of Directors may provide by resolution for the issuance of preferred stock, in one or more series, and fix the powers, preferences, and rights, and the qualifications, limitations, and restrictions upon, preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund provisions, if any, and the number of shares constituting any series of preferred stock or the designation of any series of preferred stock. The issuance of preferred stock could have the effect of decreasing the market price of the Common Stock and could adversely affect the voting and other rights of the holders of the Common Stock.

          Some provision of the Company's Restated Articles of Incorporation and Bylaws, which provisions are summarized in the following paragraphs, may be deemed to have an anti-takeover effect and may delay, defer, or prevent a tender offer or takeover attempt that a shareholder may consider in its best interest, including those attempts that might result in a premium over the market price for the Common Stock held by shareholders.

           Acquisition of Controlling Interest . In Article VIII- Acquisition of Controlling Interest of the Company's Restated Articles of Incorporation, the Company expressly elected to be governed by Chapter 78 of the Nevada Revised Statutes. However, the Amended or Restated Articles of Incorporation, the Bylaws, or a resolution adopted by the Directors of the Company may impose stricter requirements on the acquisition of a controlling interest in the Company than the provisions of Chapter 78 of the Nevada Revised Statutes. Furthermore, this election to be governed by Chapter 78 of the Nevada Revised Statutes is not intended to, and shall not, restrict the Directors of the Company from taking any action to protect the interests of the Company and its shareholders including, but not limited to, adopting or executing plans, arrangements or instruments that deny rights, privileges, power or authority to a holder of a specified number of shares or percentage of share ownership or voting power.

           Shareholder Action; Special Meeting of Shareholders . The Bylaws provide that any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting and without prior notice if one or more consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shareholders entitled to vote with respect to the subject matter thereof were present and voted. Special meetings of the shareholders, for any purpose or purposes described in the meeting notice, may be called by the Company's President, or by the Board, and shall be called by the President at the request of the holders of not less than one-fourth of all outstanding votes of the Company entitled to be cast on any issue at the meeting.

           Classified Board . Pursuant to the Company's Bylaws, the Board, at its discretion, is authorized to fix the number of Directors constituting the Board up to eleven. While the Bylaws currently provide that the term of office for each Director is one year, the Board may, in its discretion, increase the term of office and divide the Board into classes with staggered terms so that only a percentage of the Board will be elected each year. That provision, when coupled with the provision limiting the voting rights of certain persons, may prevent a shareholder from removing incumbent directors and simultaneously gaining control of the Board by filling the vacancies created by such removal with its own nominees. In addition, a director may be removed only if the number of votes cast to remove him is at least two thirds (2/3) of the votes cast.

           Authorized But Unissued Shares . The authorized but unissued shares of Common Stock and preferred stock, if any, will be available for future issuance without shareholder approval. These additional shares may be used for a variety of corporate purposes, including future pubic or private offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of Common Stock and preferred stock could render more difficult or discourage an attempt to obtain control of the Company by means of a proxy contest, tender offer, merger or otherwise.

           Nevada Business Combination Statute . The Company is organized under Nevada law. Under Section 78.438 of the Nevada Revised Statutes, the Company may not engage in any "combination" with any "interested shareholder" of the Company for three years after the shareholder's date of acquiring shares unless the combination or the purchase of shares made by the interested shareholder on the interested shareholder's date of acquiring shares is approved by the Board before that date. Under Section 78.439 of the Nevada Revised Statutes, the Company may not engage in any combination with an interested shareholder of the Company after the expiration of 3 years after his date of acquiring shares unless either (i) the combination is approved by the Board before the interested shareholder's date of acquiring shares, or as to which the purchase of shares made by the interested shareholder on that date had been approved by the Board, or (ii) the combination is approved by the affirmative vote of the holders of the Common Stock representing a majority of the outstanding voting power not beneficially owned by the interested shareholder proposing the combination, or any affiliate or associate of the interested shareholder proposing the combination, at a meeting called for that purpose no earlier than 3 years after the interested shareholder's date of acquiring shares. An "interested shareholder" is a person who is the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares. A "combination" includes any sale, lease, exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions, to or with the interested shareholder or any affiliate or associate of the interested shareholder of the assets of the corporation or any subsidiary of the corporation.

Options

          Pursuant to the Plan, the Company has established the 2001 Equity Incentive Plan to reward, retain and attract key personnel. To fund the 2001 Equity Incentive Plan, 4,000,000 shares of the Company's Common Stock have been reserved.

          Of the 4,000,000 shares of Common Stock reserved for issuance under the 2001 Equity Incentive Plan, the Company has issued options to key executives and directors for 2,450,000 shares as of August 24, 2001, in three equal groupings, and with per share exercise prices of $13.75, $15.00 and $16.25 respectively. The right to exercise these options will vest over four years from August 24, 2001, with 25% of each grouping vesting at the end of each of the first four years following the date of grant, and will expire if not exercised ten years from the date of the grant. The Company intends to issue an additional 1,191,000 options to other key employees with an effective date of August 24, 2001 at the same price and vesting provisions as those outstanding.

Warrants

          Pursuant to the Plan, the Company intends to issue up to 512,821 Series A Warrants (exercise price: $15 per share) and up to 1,079,622 Series B Warrants (exercise price: $20 per share). The Series A and Series B Warrants expire on August 23, 2006.

ITEM 12.            INDEMNIFICATION OF DIRECTORS AND OFFICERS

Indemnification of Directors and Officers

          As permitted by Section 78.7502 of the Nevada Revised Statutes, Article 5 of the Company's First Amended Bylaws provides that the Company will indemnify any individual made a party to a proceeding because the individual is or was a director or officer of the Company against liability and expenses incurred in the proceeding, but only if the individual demonstrates that (a) he or she conducted himself or herself in good faith, and (b) he or she reasonably believed (i) in the case of conduct in his or her official capacity with the Company, that his or her conduct was in the Company's best interests; (ii) in all other cases, that his or her conduct was at least not opposed to the Company's best interests; and (iii) in the case of any criminal proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful.

Indemnification of PricewaterhouseCoopers LLP

            The Company requested PricewaterhouseCoopers LLP ("PWC"), as the Company's former independent accountant, to consent to the inclusion in this Registration Statement of its audit report on the consolidated financial statements of the Company as of January 29, 2000 and for each of the two years in the period ended January 29, 2000.  As one of the terms under which PWC agreed to give its consent, the Company agreed to indemnify PWC for the payment of all legal costs and expenses incurred in PWC's successful defense of any legal action or proceeding that arises as a result of the inclusion of PWC's previous audit report on the Company's past financial statements in this Registration Statement.

ITEM 13.            FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 2. "Seasonality and Inflation" and "Index to Consolidated Financial Statements and Schedules" included on page 42 for information required under this Item 13.

ITEM 14.            CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

          On January 4, 2001, PricewaterhouseCoopers LLP ("PricewaterhouseCoopers"), the independent accountant which was previously engaged as the principal accountant to audit the Company's financial statements, was dismissed so that the Company could engage the auditing services of Deloitte & Touche LLP.

          PricewaterhouseCoopers' report on the Company's financial statements for the fiscal year ended January 30, 1999 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles. However, in its report on the Company's financial statements for the fiscal year ended January 29, 2000, it described certain adverse financial developments, which resulted in the Company's filing for protection under Chapter 11 of Title 11 of the United States Bankruptcy Code on June 1, 2000, and qualified its report as follows: "These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty."

          The decision to change accountants was recommended by the Company's audit committee.

          During the Company's two most recent fiscal years and through January 4, 2001, there were not any disagreements with PricewaterhouseCoopers on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement if not resolved to the satisfaction of PricewaterhouseCoopers would have (i) caused them to make reference thereto in their report on the financial statements for such years and/or (ii) required disclosure herein.

          The year ended February 3, 2001 was audited by Deloitte & Touche LLP. There were no disagreements with Deloitte & Touche on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

ITEM 15.            FINANCIAL STATEMENTS AND EXHIBITS

(a)       Financial Statements - See "Index to Consolidated Financial Statements and Schedules" included on page 42.

(b)       Exhibits - See "Exhibit Index" at X-1.

Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized.

Stage Stores, Inc.

Date:    October 29, 2001

By:   /s/ Michael E. McCreery
        Michael E. McCreery

      Executive Vice President, Chief Financial Officer