06/09/2012

Business News : Collective Brands Reports 2012 Second Quarter Financial Results

Same Store Sales Up 2.9%; Earnings Per Share Improves $0.74

TOPEKA, Kan., Aug. 31, 2012 /PRNewswire/ -- Collective Brands, Inc. (NYSE:PSS) today reported financial results for its 2012 second quarter ended July 28, 2012.  The 2012 second quarter net earnings attributable to Collective Brands, Inc. were $9.7 million, or $0.16 per share, compared to a loss of $35.0 million, or $0.58 per share, in the second quarter of 2011.

Collective Brands' second quarter 2012 net sales increased 0.4% to $886.0 million.  This was driven by the Company's 2.9% comparable store sales1 increase and sales growth of 6.1% in the Performance + Lifestyle Group ("PLG") Wholesale segment, offset in part by operating 375 fewer stores.
Adjusted earnings per share2 were $0.34 compared to $0.16 in the second quarter of 2011.  Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA")2 were $61.3 million compared to $53.7 million the prior year, an increase of 14.2%.

The second quarter 2012 adjustments were comprised substantially of costs related to the review of strategic alternatives / pending sale of the Company.  These costs totaled $11.9 million on a pre-tax basis, or $0.18 per share after tax.

"Our second quarter results illustrate the progress that Collective Brands is making in executing the turnaround of the Payless business and continuing the growth in the Performance + Lifestyle Group," said Michael J. Massey, Chief Executive Officer of Collective Brands, Inc.  "The results reinforce the point that the new Payless strategy is working domestically as we are re-connecting with our core budget-conscious consumer through more relevant price points and styles.  As we implemented the Payless strategy in Latin America during the quarter, we saw strong comparable store sales results.  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."
Massey added, "I cannot emphasize enough how proud I am of our 30,000 associates and our leadership team for their contributions to our success."

  • Net sales for the quarter increased as a result of the comparable store sales increases in each of our retail businesses and growth in PLG Wholesale, offset, in part, by operating 8% fewer stores than at the end of second quarter last year.  PLG Wholesale sales were driven by strength in Sperry Top-Sider and the Stride Rite Children's Group.  In Payless, an improved merchandise mix built on a higher percentage of Incredible Value Every Day product, sharper opening price points and more basic fashions drove the same store sales increase.
  • The improved gross margin rate reflects strong improvement in our retail businesses resulting from same store sales increases, fewer markdowns consistent with the revised strategy in Payless and lower occupancy costs as a percent of sales from closing under-performing and non-strategic stores over the last year.
  • The SG&A expense ratio increased as the result of additional marketing spend, primarily at Payless, and an increase in incentive compensation linked to performance improvements.

Inventory at the end of the quarter was $624.4 million, up 6.7% versus year ago levels.  The planned inventory increase in Payless and Stride Rite retail stores provides greater depth to support planned comparable store sales increases, offset, in part, by operating fewer retail stores.
During the second quarter, the Company added 22 new stores (14 Payless and 8 PLG) and closed 34 stores (27 Payless and 7 PLG).

  • Payless Domestic – Net sales decreased as a result of Payless operating 319 fewer stores than in the comparable period last year, offset in part by a same store sales increase of 2% driven by the factors noted above.  From a category perspective, women's posted a mid-single digit comparable store sales increase.  Dress and casual shoes posted double digit gains while sandals had mid to high single digit gains.  Children's and men's categories were down single digits.  Adjusted operating profit2 increased as a result of the comparable store sales increase, reduced markdowns and lower occupancy costs.
  • Payless International – Net sales reflect a 2% same store sales increase.  Latin America experienced an 11% increase in same store sales, benefiting from the revised strategy and improved inventory levels, while Canada and Puerto Rico experienced mid and low single digit declines, respectively.  Foreign exchange rate impacted Canada sales.  Adjusted operating profit2 decreased slightly due to higher markdowns in Latin America as we finalized the roll out of our new merchandising strategy and as a result of sales declines in Canada and Puerto Rico.
  • PLG Wholesale – Net sales increased based upon the strength of Sperry Top-Sider, which grew over 20% from the comparable period last year, and the Stride Rite Children's Group which grew high single digits, offset by a mid single digit decline at Saucony as it awaited the launch of new franchise models for fall.  Adjusted operating profit2 improved slightly, from higher sales and a 100 basis point improvement in gross margin, offset by SG&A increases due to the annualization of prior year investments in infrastructure and talent
  • PLG Retail – Net sales increased as the result of an 12% increase in same store sales and the opening of 13 new Sperry Top-Sider stores, offset in part by operating 60 fewer Stride Rite stores.  The adjusted operating loss2 declined as a result of the sales growth and 50 basis point improvement in gross margin rate, offset by higher SG&A costs.

Transaction Update
The Company still anticipates the sale of Collective Brands to a consortium made up of Blum Strategic Partners IV, L.P., Golden Gate Capital Opportunity Fund, L.P. and Wolverine World Wide, Inc. to close late in the third calendar quarter or early in the fourth quarter.

About Collective Brands
Collective Brands, Inc. is a leader in bringing compelling lifestyle, fashion and performance brands for footwear and related accessories to consumers worldwide. The company operates three strategic units:  Payless ShoeSource, Collective Brands Performance + Lifestyle Group (PLG) and Collective Licensing International.  Payless ShoeSource is one of the largest footwear retailers in the western hemisphere. It is dedicated to providing incredible values of on-trend and validated styles of footwear and accessories.  PLG markets footwear and related products for children and adults under well-known brand names including Stride Rite, Sperry Top-Sider, Saucony, and Keds. Collective Licensing International (Airwalk, Vision street wear, SIMS, LAMAR, Above Rim, Clinch gear, hind ) is a leading youth lifestyle marketing and global licensing business. Information about, and links for shopping on, each of Collective Brands' business units can be found at www.collectivebrands.com.

SOURCE Collective Brands, Inc.
Investment Community, Doug Treff, +1-785-559-5369, or Media, Mardi Larson, +1-612-928-0202

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