Collective Brands Makes Strides

Collective Brands Makes Strides
Payless

As its wholesale division continues to show strong growth, Collective Brands Inc. is focused on a long-term strategy to boost earnings by 12 percent to 16 percent.

Matt Rubel, president and CEO of Collective, told Footwear News last Thursday that “branded businesses continued to show high double-digit growth [in 2010] because they are driven by innovation and creativity.”

Looking ahead to 2011, Rubel added he is most excited to see the firm “gain consistency across all brands and all business units, [as] the hybrid business model continues to leverage corporate overheads.”

Payless Domestic, which has been a weak spot, posted better results than analysts expected in the fourth quarter of 2010. Overall revenue slipped 0.4 percent, and the company posted higher sales in key categories such as boots, fitness, flats, moccasins and accessories. But slower customer traffic led to sales declines for children’s and dress footwear.

“We went back to focus on a few key points, [including having a] clear focus on the expressive consumer and making sure we’re marrying on-trend product with our house of brands,” Rubel said. “We would certainly hope to see sales growth [of Payless Domestic] be positive this year.”

Susquehanna Financial analyst Christopher Svezia wrote in a research note that although Payless Domestic is making progress, “it is still not out of the woods, [but] has done a nice job transitioning, doing a better job in boots, [which] clearly showed in the results.”

Once again the global Payless business was a bright spot, with Payless International recording a 9 percent sales gain in 2010 and expanding operating margins by 400 basis points.  

More than 60 percent of the company’s profits in 2010 came from its fastest-growing and highest-margin operations, in PLG Wholesale and Payless International, Rubel added. Revenue from PLG Wholesale, which includes the Stride Rite, Saucony, Sperry Top-Sider, Keds and Robeez brands, grew by nearly 20 percent in the fourth quarter alone.

Wholesale now represents 18 percent of Collective’s total business and its sales are expected to increase in the high teens percentage in the first quarter of 2011, the firm said. Backlog for first-quarter delivery was also up 49 percent.

Looking ahead, gross margin will continue to face pressure as costs rise.

Rubel said he expects product costs to increase by a high, single-digit percentage rate by the second quarter of 2011, but company-specific initiatives are under way to mitigate the rising costs by strengthening the firm’s reliance on factories outside China and pursuing more cost-effective locations within China.

For the fourth quarter ended Jan. 29, the Topeka, Kan.-based firm reported a net loss of $10.1 million, or 16 cents a share, versus a net loss of $10.9 million, or 17 cents, in the same period a year ago. Net sales during the quarter increased more than 4 percent to $773.8 million, compared with $741.7 million the previous year.

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