Collective Brands, Inc., which in early May reached an agreement to be sold to Wolverine World Wide and a pair of private-equity firms, reported earnings improved 25.8 percent in its first quarter.
Earnings reached $33.2 million, or 54 cents per share, compared to $26.4 million, or 42 cents, in the first quarter of 2011. Net sales increased 5.0 percent to $912.1 million. This was driven by the company's 8.1 percent comparable store sales increase and sales growth of 8.3 percent in the Performance + Lifestyle Group (PLG) Wholesale segment, offset in part by operating 365 fewer stores.
Adjusted earnings per share were 68 cents a share compared to 42 cents in the first quarter of 2011. Adjusted earnings before interest, taxes, depreciation and amortization were $88.4 million compared to $75.0 million the prior year, an increase of 17.9 percent.
The first quarter 2012 adjustments totaled $9.1 million on a pre-tax basis, or $0.14 per diluted share:
- $6.4 million related to the review of strategic alternatives, and,
- $2.7 million related to the store closing initiative for lease termination and other exit costs.
“Our first quarter results show that the new Payless strategy is working domestically and the turnaround in that business has begun,” said Michael J. Massey, chief executive officer of Collective Brands, Inc. “At Payless we are employing a strategy that emphasizes re-connecting with our core budget-conscious consumer with more relevant price points and styles. We are now implementing these strategic changes across Payless internationally and seeing some positive results there as well. Similarly, the double-digit same store sales growth at Stride Rite retail stores demonstrates the progress we are making at the Stride Rite Children's Group, which helped offset a slightly more challenging wholesale environment at the Performance + Lifestyle Group.”
Consolidated Quarterly Results Selected unaudited financial data (dollars in millions, except per share data) for the 13 weeks ended April 28, 2012 and April 30, 2011:
|
1st Qtr 2012 |
Adjusted(2) 2012 |
1st Qtr 2011 |
Change |
|||||
|
Net sales |
$912.1 |
$912.1 |
$869.0 |
$43.1 |
||||
|
Gross margin |
35.6% |
35.8% |
35.7% |
10 bps |
||||
|
Selling, general & administrative (SG&A) expense ratio |
30.2% |
29.4% |
30.8% |
140 bps |
||||
|
Net earnings attributable to Collective Brands, Inc. |
$33.2 |
$41.7 |
$26.4 |
$15.3 |
||||
|
Diluted earnings per share |
$0.54 |
$0.68 |
$0.42 |
$0.26 |
Net sales for the quarter increased due to same store sales growth at Payless in North America and growth at PLG. An improved merchandise mix focused on increasing the percentage of our Incredible Value Every Day program, sharper opening price points, and more basic fashions along with favorable weather drove the Payless increase. PLG Wholesale and retail stores also contributed to the overall net sales increase.
The flat gross margin rate reflected improved margins in our retail businesses driven by sales strength offset by declines in PLG Wholesale.
The SG&A ratio improved, driven by sales leverage in both Payless Domestic and PLG.
Inventory at the end of the quarter was $571.4 million, down 0.8 percent versus year ago levels. Inventory was lower as the result of having fewer retail stores, higher sales, and better matching inventory levels to demand at PLG, while at the same time having greater depth, as planned, in Payless and Stride Rite retail stores.
During the first quarter, the company added 7 new stores (5 Payless and 2 PLG), closed 27 stores (25 Payless and 2 PLG), and relocated 12 stores (11 Payless and 1 PLG).
Wholly-Owned and Joint Venture Store Counts
|
Wholly-Owned and Joint Venture Store Counts |
Apr. 28, 2012 |
Jan. 28, 2012 |
Apr. 30, 2011 |
|
Payless Domestic |
3,480 |
3,499 |
3,788 |
|
Payless International |
660 |
661 |
670 |
|
Performance + Lifestyle Group |
336 |
336 |
383 |
|
Total Stores |
4,476 |
4,496 |
4,841 |
The Company also franchised stores in 24 countries and territories as of the end of the first quarter 2012.
|
Franchise Store Counts |
Apr. 28, 2012 |
Jan. 28, 2012 |
Apr. 30, 2011 |
|
Payless International |
160 |
143 |
79 |
|
Stride Rite |
25 |
20 |
10 |
|
Total Franchise Stores |
185 |
163 |
89 |
Quarterly Segment Results (dollars in millions)
|
2012 |
Adjustments |
Adjusted(2) 2012 |
2011 |
Adjusted 2012 vs. 2011 |
% Change |
||
|
Net Sales |
|||||||
|
Payless Domestic |
$513.9 |
– |
$513.9 |
$498.4 |
$15.5 |
3.1% |
|
|
Payless International |
101.2 |
– |
101.2 |
97.5 |
3.7 |
3.8% |
|
|
PLG Wholesale |
230.2 |
– |
230.2 |
212.5 |
17.7 |
8.3% |
|
|
PLG Retail |
66.8 |
– |
66.8 |
60.6 |
6.2 |
10.2% |
|
|
Total |
$912.1 |
– |
$912.1 |
$869.0 |
$43.1 |
5.0% |
|
|
Operating Profit/(Loss) |
|||||||
|
Payless Domestic |
$23.3 |
$8.0 |
$31.3 |
$13.0 |
$18.3 |
140.8% |
|
|
Payless International |
(1.4) |
0.7 |
(0.7) |
3.0 |
(3.7) |
(123.3%) |
|
|
PLG Wholesale |
22.9 |
0.3 |
23.2 |
25.3 |
(2.1) |
(8.3%) |
|
|
PLG Retail |
4.4 |
0.1 |
4.5 |
1.1 |
3.4 |
309.1% |
|
|
Total |
$49.2 |
$9.1 |
$58.3 |
$42.4 |
$15.9 |
37.5% |
|
|
2012 |
Adjusted(2) 2012 |
2011 |
Adjusted 2012 vs. 2011 |
||
|
Operating Margin |
|||||
|
Payless Domestic |
4.5% |
6.1% |
2.6% |
350 bps |
|
|
Payless International |
(1.4%) |
(0.7%) |
3.1% |
(380) bps |
|
|
PLG Wholesale |
9.9% |
10.1% |
11.9% |
(180) bps |
|
|
PLG Retail |
6.6% |
6.7% |
1.8% |
490 bps |
|
|
Total |
5.4% |
6.4% |
4.9% |
150 bps |
|
|
Wholly-Owned and Joint Venture Store Counts |
Apr. 28, 2012 |
Jan. 28, 2012 |
Apr. 30, 2011 |
|
Payless Domestic |
3,480 |
3,499 |
3,788 |
|
Payless International |
660 |
661 |
670 |
|
Performance + Lifestyle Group |
336 |
