Collective Brands Inc. (PSS) does not see its Payless business rebounding anytime soon in lower-income urban neighborhoods due to high unemployment, CEO Matt Rubel told analysts at the Goldman Sachs Retail Conference last week.
Traffic remains down in urban stores, where the company’s Payless stores have a big presence, and so PSS will focus its investment on attracting middle and upper class consumers with “very well priced, on trend promotions” during the holidays. Rubel said he sees little evidence middle and upper income Americans are trading down, but still sees an an opportunity to attract more of those customers to Payless.
On the wholesale side, PSS sees strong demand for its Sperry Top-Sider brand and expects to ship more of its women’s footwear in the fourth quarter than men’s. It also sees an opportunity to grow the Saucony business beyond core speed running and into outdoor and long distance running and to make the brand more accessible to a broader audience. Saucony has quadrupled its budget for sponsoring athletes and is investing in an innovation center to develop advanced materials. PSS also owns the Stride-Rite and Keds brands.
PSS expects its wholesale business to grow two to three times faster internationally than domestically, in part due to an aggressive franchising plan that Rubel thinks can spawn up to 700 Payless stores in countries where it’s already announced franchisees. Ultimately, franchising could lead to 1,000 stores. That won’t affect PSS topline sale, but will greatly enhance its margins.
Rubel said the company expects cost of goods to rise in the mid- to low-single digit range over the next couple of quarters. PSS will pass on some of that cost to consumers.
