Collective Beats the Street

Higher sales and lower expenses allowed Collective Brands Inc. to boost its first-quarter profits 47 percent and exceed analysts’ expectations despite top-line erosion at its largest division.

In the 13 weeks ended May 1, the Topeka, Kan.-based operator of Payless ShoeSource generated net income of $54.2 million, or 83 cents a diluted share, 8 cents better than the consensus estimate of 75 cents compiled by Yahoo Finance. In the year-ago quarter, earnings tallied $38.2 million, or 59 cents.

Net sales increased roughly 2 percent to $878.8 million from $862.9 million in the 2009 period. Gross margin jumped to 38 percent of sales from 34 percent, attributed to lower markdowns resulting from a cleaner inventory position. The sum of cost of goods sold and selling, general and administrative costs declined $5.2 million to $797.2 million.

The firm said that domestic sales at Payless fell 4 percent to $546.6 million, were up 18 percent to $100 million at Payless International, rose 17 percent to $173.4 million at the Performance and Lifestyle Group’s wholesale operations, and gained 1 percent at PLG Retail. All units but PLG Retail experienced increases in operating profit. Same-store sales were up 1.2 percent but fell 2.2 percent when gains from currency translation were excluded. The decline at Payless Domestic resulted from a 3.3 percent descent in comparable-store sales and a net decline of 59 stores.

The company said international sales growth reached 23 percent.
“We experienced strong global growth in a number of our Performance and Lifestyle Group brands and had excellent sales performance at Payless International to drive strong earnings and cash flow for the company,” said Matthew Rubel, chairman, president and CEO, indicating that the current wholesale backlog is “up significantly.”

“Even though certain customer segments are still being negatively impacted by the economy, the resilience and diversity of our hybrid business model gives us confidence that we can generate continued growth in earnings,” he added.

At the end of the quarter, the company operated 4,476 Payless stores and 376 units through its Performance and Lifestyle Group, which includes the Stride Rite, Saucony, Sperry Top-Sider, Keds and Robeez brands.

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