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Collective Brands Reverses Q2 Loss

The slowing growth of Collective Brands Inc.’s wholesale Performance + Lifestyle Group (PLG) business may not bode well for Wolverine World Wide Inc., said analysts Wednesday.

“It’s a little dicey. The deceleration of PLG wholesale is indicative that … [Wolverine] bit off more than they can chew. The women’s boat-shoe trend may have top-ticked, which is bad for Sperry Topsider,” said Sam Poser, an analyst at Sterne Agee.

Susquehanna Financial analyst Christopher Svezia said, “It’s tough to gauge what it means for Wolverine, but we’re expecting a mid- to high-single-digit [sales] growth rate and a slight EBIT growth. We have very low expectations for next year.”

But, Svezia added, “Overall, the Payless Domestic strategy seems to be working. Their second quarter comps are so much stronger, and more importantly, margins are improving as they lap some pretty dreadful comparisons from last year.”

For the period ended Aug. 31, the PLG wholesale segment grew 6.1 percent, slowing from an 8.3 percent rise in the first quarter and year-over-year from 25 percent in the second quarter a year ago.

Meanwhile, both Payless Domestic and Payless International logged a 2 percent comparable-store sales increase.

“The results reinforce the point that the new Payless strategy is working domestically as we are reconnecting with our core budget-conscious consumer through more relevant price points and styles,” said Michael Massey, CEO of Collective Brands, in a statement.

“Within PLG, Sperry Top-Sider continues to deliver strong growth, and we are again posting double-digit comparable-store sales gains at Stride Rite retail stores, demonstrating their resurgence,” he added.

The Topeka (Kansas) firm earned a second-quarter net income of $9.7 million, or 16 cents a share, compared to a loss of $35 million, or 58 cents, in the same quarter a year ago.

Total revenue inched up 0.4 percent, to $886 million, driven by a 2.9 percent comparable-store sales increase.

Wolverine’s acquisition of Collective’s PLG group, which was announced May 1, is expected to be completed by the end of the year. Collective did not hold a conference call after announcing its second quarter results last Friday.

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