Collective Brands, Inc. slightly trimmed its fourth-quarter loss to $10.1 million, or 16 cents per share, from $10.9 million, or 17 cents, a year ago. Revenues increased 4.3% to
$773.8 million. The revenue gain was driven by sales growth of 19.8% from the
Performance + Lifestyle Group Wholesale segment and a comparable store sales increase for its retail stores.
Collective Brands' 2010 net sales were $3.38 billion, up 2.0% versus the prior year driven by net sales gains at PLG Wholesale and Payless International of 22.3% and 9.0%, respectively. Full year 2010 net earnings attributable to Collective Brands, Inc. were $112.8 million, or $1.75 per diluted share, up 36.4% versus 2009. Adjusted earnings before interest, taxes, depreciation and amortization were $325.1 million for 2010 compared to $298.4 million the prior year, an increase of 8.9%.
“We finished a strong year with a solid fourth quarter as our portfolio of leading brands and innovative, on-trend products connected with consumers across geographies and price points. As a result, we delivered improved financial results for both the fourth quarter and the year,” said Matthew E. Rubel, chairman, chief executive officer and president of Collective Brands, Inc. “In aggregate, the strength of our hybrid business model enabled us to grow in a variety of ways in 2010. PLG delivered record annual sales and earnings. Payless successfully expanded franchising, accessory categories, and its footwear house of brands. Going into 2011, we have great momentum in wholesale and international, improving domestic retail sales, and a strong balance sheet.”
Consolidated Quarterly Results — Selected unaudited financial data
(dollars in millions, except per share data) for the 13 weeks ended January
29, 2011 and January 30, 2010:
4th Qtr 4th Qtr
2010 2009 Change
-------- -------- ---------
Net sales $ 773.8 $ 741.7 $ 32.1
Gross margin 31.8% 32.9% (110) bps
Selling, general & administrative (SG&A)
expense ratio 31.5% 32.2% (70) bps
Net (loss) attributable to Collective Brands,
Inc. ($ 10.1)($ 10.9) $ 0.8
Diluted (loss) per share ($ 0.16)($ 0.17) $ 0.01
- Net sales for the quarter increased $32.1 million due to growth in three operating segments: PLG Wholesale, Payless International, and PLG Retail.
- The sales increase was driven primarily by growth in wholesale as well as the contributions from 11 more stores and the comparable store sales increase.
- The gross margin rate decreased 110 basis points due principally to more markdown activity this year versus lower-than-normal markdown activity last year; higher product and freight costs; and a greater mix of wholesale sales which generate lower gross margins than retail.
- SG&A ratio improved by 70 basis points. SG&A dollars grew 2.0% due to increases in Payless International and PLG Wholesale while net sales grew 4.3%.
Consolidated Full Year Results
In addition to higher net sales and earnings, Collective Brands improved its liquidity and strengthened its balance sheet in 2010. Net debt(2) was $340.4 million at the end of 2010, 1.0-times EBITDA and down $115.4 million versus 2009. In addition, the Company repaid $185.2 million of long term debt in 2010.''
Comparable store sales(1) for the year decreased 2.2%. Comparable store sales by operating segment were Payless Domestic -3.8%; Payless International 5.9%; and PLG Retail -1.6%.
Inventory at the end of 2010 was $531.7 million, up 20.0% versus last year. The higher inventory level was driven by increased units, returning them to a more normal year-end level; a greater mix of higher-cost products at Payless and PLG; and higher costs per unit. Inventory is well-positioned for the spring season with relatively low levels of aged inventory.
In 2010, capital expenditures were $97.6 million while depreciation & amortization was $138.2 million, contributing to free cash flow(2) of $173.9 million. Collective Brands repurchased $59.8 million of stock for the year which reduced shares outstanding (net of issuances) by 4.2%. This included 1.0 million shares repurchased for $20.0 million during the fourth quarter.
Collective Brands opened 11 stores in 2010, net of closings. The Company closed 13 stores during the fourth quarter, net of openings. Store count grew in Payless International, and in PLG due to Sperry and Stride Rite. Store count declined for Payless in the U.S.
Wholly-Owned and Joint Venture
Store Counts Jan. 29, 2011 Oct. 30, 2010 Jan. 30, 2010
------------- ------------- -------------
Payless ShoeSource 4,461 4,477 4,470
Performance + Lifestyle Group 383 380 363
------------- ------------- -------------
Total Stores 4,844 4,857 4,833
============= ============= =============
The Company also franchised stores in 10 countries and territories at the
end of 2010.
Franchise Store Counts Jan. 29, 2011 Oct. 30, 2010 Jan. 30, 2010
------------- ------------- -------------
Payless ShoeSource 62 32 9
Stride Rite 8 0 0
------------- ------------- -------------
Total Stores 70 32 9
============= ============= =============
Quarterly Segment Results (dollars in millions)
2010 2009 $ Change % Change
--------- --------- --------- ---------
NET SALES
Payless Domestic $ 455.8 $ 457.5 ($ 1.7) (0.4%)
Payless International 132.0 123.9 8.1 6.5%
PLG Wholesale 138.7 115.8 22.9 19.8%
PLG Retail 47.3 44.5 2.8 6.3%
--------- --------- --------- ---------
TOTAL $ 773.8 $ 741.7 $ 32.1 4.3%
========= ========= ========= =========
2010 2009 $ Change % Change
--------- --------- --------- ---------
OPERATING PROFIT/(LOSS)
Payless Domestic ($ 16.2)($ 12.7)($ 3.5) (27.6%)
Payless International 17.8 16.7 1.1 6.6%
PLG Wholesale 8.2 8.3 (0.1) (1.2%)
PLG Retail (7.2) (7.6) 0.4 5.3%
--------- --------- --------- ---------
TOTAL $ 2.6 $ 4.7 ($ 2.1) (44.7%)
========= ========= ========= =========
2010 2009 Change
--------- --------- ---------
OPERATING MARGIN
Payless Domestic (3.6%) (2.8%) (80) bps
Payless International 13.5% 13.5% 0 bps
PLG Wholesale 5.9% 7.2% (130) bps
PLG Retail (15.2%) (17.1%) 190 bps
--------- --------- ---------
TOTAL 0.3% 0.6% (30) bps
========= ========= =========
- Payless Domestic — Net sales were down slightly due to a comparable store sales decrease of 0.4% and operating 33 fewer stores. Gains in boots, accessories, and fitness footwear were offset by declines primarily in children's and dress footwear. The operating loss increased due principally to more markdowns and marketing investments in conjunction with the small sales decline.
- Payless International — Net sales increased driven in part by comparable store sales growth of 3.3%. Strength in Latin America and Canada, including the impact of foreign exchange, as well as 24 more net new stores drove higher sales. Operating profit increased due to profit growth in Latin America and in the franchise channel.
- PLG Wholesale — Net sales increased led by Sperry Top-Sider and Saucony as well as higher sales of all brands internationally. Operating profit was flat. An increase in sales was offset by higher product costs. Amortization of intangible assets due to the acquisition of PLG was $2.8 million, or $0.03 per share, in the quarter.
- PLG Retail — Net sales increased driven by 0.4% comparable store sales growth and 20 more stores. The operating loss improved due to the sales increases, SG&A improvement initiatives, and fewer markdowns.
Outlook for Collective Brands
Over the long term, the Company has set a target to grow earnings per
share, on average, approximately 12% to 16% annually. This would be driven by 3% to 5% net sales growth and 9% to 12% operating profit growth.
The 2011 effective tax rate is expected to be approximately 21%
excluding discrete events.
Depreciation and amortization for 2011 is expected to total approximately $135 million.
Capital expenditures are expected to total approximately $110 million in 2011.
Year-end 2011 retail store count is expected to decrease by approximately 15 stores, as Payless Domestic closings more than offset
openings in Payless International and Sperry.
Open Close Change
------- ------- ------
Payless
Payless Domestic 25 65 (40)
Payless International 25 10 15
------- ------- ------
Payless Total 50 75 (25)
PLG 20 10 10
------- ------- ------
Collective Brands Total 70 85 (15)
======= ======= ======
In addition, franchise locations are expected to more-than-double by
year-end to over 140 in 15 countries.
As a result of its backlog of $191 million for delivery in first quarter 2011, which increased 49%, PLG Wholesale sales in the first
quarter of 2011 are expected to increase in the high-teens percentage over first quarter 2010.
COLLECTIVE BRANDS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(dollars and shares in
millions, except per
share data) 13 Weeks Ended 52 Weeks Ended
------------------------ ------------------------
January 29, January 30, January 29, January 30,
2011 2010 2011 2010
----------- ----------- ----------- -----------
Net sales $ 773.8 $ 741.7 $ 3,375.7 $ 3,307.9
Cost of sales 527.6 498.0 2,174.5 2,166.9
----------- ----------- ----------- -----------
Gross margin 246.2 243.7 1,201.2 1,141.0
Selling, general and
administrative
expenses 243.6 238.9 1,011.5 982.4
Restructuring charges - 0.1 - 0.1
----------- ----------- ----------- -----------
Operating profit from
continuing operations 2.6 4.7 189.7 158.5
Interest expense 11.1 14.4 48.7 60.8
Interest income (0.1) (0.1) (0.7) (1.1)
Loss on early
extinguishment of debt 0.4 1.2 1.7 1.2
----------- ----------- ----------- -----------
Net (loss) earnings
from continuing
operations before
income taxes (8.8) (10.8) 140.0 97.6
(Benefit) provision for
income taxes (3.2) (3.7) 17.4 9.4
----------- ----------- ----------- -----------
Net (loss) earnings
from continuing
operations (5.6) (7.1) 122.6 88.2
Earnings from
discontinued
operations, net of
income taxes - 0.3 - 0.1
----------- ----------- ----------- -----------
Net (loss) earnings (5.6) (6.8) 122.6 88.3
Net earnings
attributable to
noncontrolling
interests (4.5) (4.1) (9.8) (5.6)
----------- ----------- ----------- -----------
Net (loss) earnings
attributable to
Collective Brands,
Inc. $ (10.1) $ (10.9) $ 112.8 $ 82.7
=========== =========== =========== ===========
Basic (loss) earnings
per share attributable
to Collective Brands,
Inc. common
shareholders:
(Loss) earnings
per share from
continuing
operations $ (0.16) $ (0.18) $ 1.77 $ 1.29
Earnings per share
from discontinued
operations - 0.01 - -
----------- ----------- ----------- -----------
Basic (loss) earnings
per share attributable
to Collective Brands,
Inc. common
shareholders: $ (0.16) $ (0.17) $ 1.77 $ 1.29
=========== =========== =========== ===========
Diluted (loss) earnings
per share attributable
to Collective Brands,
Inc. common
shareholders:
(Loss) earnings
per share from
continuing
operations $ (0.16) $ (0.18) $ 1.75 $ 1.28
Earnings per share
from discontinued
operations - 0.01 - -
----------- ----------- ----------- -----------
Diluted (loss) earnings
per share attributable
to Collective Brands,
Inc. common
shareholders: $ (0.16) $ (0.17) $ 1.75 $ 1.28
=========== =========== =========== ===========
Basic weighted average
shares outstanding 61.2 63.3 62.6 63.1
Diluted weighted
average shares
outstanding 61.2 63.3 63.3 63.5
