Collective Brands Tops Estimates - Analyst Blog

Collective Brands, Inc. (PSS), the wholesaler and retailer of footwear and related accessories, recently posted fourth-quarter 2009 results that topped the Zacks expectation on the heels of a strong gross margin.
 
The company reported a quarterly net loss of 18 cents a share that fared far better than the Zacks Consensus estimated net loss of 25 cents, and improved sharply from a loss of 60 cents delivered in the prior-year quarter.
 
Collective Brands earnings surprise history compared to the Zacks Consensus Estimate for the last four quarters (including the reported) varies from flat to 28.3% with the four quarters averaging 26.9%.
 
On a reported basis, including one-time items, Collective Brands reported a net loss of 17 cents a share versus a loss of $2.28 posted in the year-ago quarter.
 
The operator of Payless ShoeSource and Stride Rite chains, delivered net sales of $741.7 million, up 0.9% year-over-year, reflecting an increase in comparable-store sales and sales increases across brands, such as Saucony and Sperry Top-Sider.
 
On an adjusted basis, excluding adjustments related to the expiration of the Tommy Hilfiger adult footwear license agreement from the prior-year quarter, net sales climbed 3.3%.
 
Collective Brands’ comparable-store sales for the quarter rose 0.7%. Comps for Payless ShoeSource grew 1%, whereas comps for Performance + Lifestyle Group (PLG) dropped 3.3%.
 
PLG sells branded footwear for children and adults, under brand names including Stride Rite, Saucony, Sperry Top-Sider, Keds, and Robeez. The company’s Payless ShoeSource chain is the specialty family footwear retailer.
 
Payless ShoeSource domestic chains’ revenue tumbled 0.8% to $457.5 million, whereas Payless ShoeSource international chains’ revenue rose 10.6% to $123.9 million. PLG wholesale revenue dipped 2.2% to $115.8 million, whereas PLG retail revenue climbed by 1.8% to $44.5 million.
 
Gross margin for the quarter rose to 32.9% from 16.7% achieved in the prior-year quarter, whereas on an adjusted basis, gross margin expanded 470 basis points to 33%.  Cost of sales declined 5% to $498 million.
 
During the quarter, Collective Brands opened 11 Payless ShoeSource stores, closed 24 Payless ShoeSource stores and relocated 3 stores (2 Payless ShoeSource and 1 PLG).
 
During fiscal year 2009, the company opened 60 stores (51 Payless ShoeSource and 9 PLG), closed 104 stores (103 Payless ShoeSource and 1 PLG) and relocated 25 stores (22 Payless ShoeSource and 3 PLG). As on January 30, 2010, the company operates 4,833 stores. Management expects fiscal 2010 retail stores count to decline by 15 stores.

Collective Brands generated a free cash flow of $223.6 million in fiscal 2009 reflecting lower capital expenditures, effective working capital management and increased earnings. Capital expenditures for the year were $84 million compared to $129.2 million in fiscal 2008. Management now expects capital expenditures for fiscal 2010 to be $100 million.

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