Payless ShoeSource, Inc. posted a mid-singles increase in both comparable and overall sales during the third quarter. Also at the end of the quarter, Payless announced that it would be partnering with Nike Inc.’s Exeter Brands Group to produce a line of women’s athletic shoes called Tailwind. The shoes are targeted to be priced under $35 per pair.

PSS reported that third quarter sales totaled $703.4 million, a 5.5% increase from $666.5 million during the third quarter 2005. Same-store sales increased 5.2% during the period. Average unit retail for footwear increased by 5.9%, and footwear unit sales increased by 1.1% relative to the same period last year.

Gross margin was 34.3% of sales in the quarter, up 150 basis points from 32.8% in the third quarter 2005, driven primarily by higher initial mark-on relative to last year.
SG&A expenses were 28.0% of sales in the third quarter, up 50 basis points from 27.5% in last year’s quarter. The increase was driven primarily by increased costs for employee incentive programs.

The company recorded net earnings of $28.9 million during the quarter, a 32.0% increase from $21.9 million reported one year ago, while diluted earnings per share were 43 cents for the third quarter, up from 32 cents in the year-ago period.

In the third quarter 2006, the company opened 9 new stores and closed 19, for a net decrease of 10 stores. The store count as of the end of the third quarter 2006 was 4,574.