Collective
Brands Inc. reported a fourth-quarter loss of $144.0 million, or $2.28 per share, including a
$130.2 million write-down linked to Stride Rite. The company also recorded $2.5
million in charges, not including insurance recoveries because of litigation. Net
sales of $735.2 million for the quarter were 5.4% lower than last year
primarily due to a comparable store sales decrease of 6.6% driven by lower
Payless store traffic partially offset by higher average unit retail prices.

Fourth
quarter net sales for Payless and Stride Rite were $573.1 million and $162.1
million, respectively.

The
adjusted net loss, which excludes the impact of the charges, was $34.9 million,
or 55 cents per diluted share, for the quarter, which compares with a deficit
of $46.6 million, or 73 cents per share, during the same period a year ago.

Fourth
quarter adjusted EBITDA plunged 65.4% to $8.4 million from $24.2 million due to
lower sales and gross margin.

The
fourth quarter gross margin rate was favorably impacted by higher average unit
retail prices and by increased direct sourcing of product through the company's
vertically-integrated sourcing organization and unfavorably impacted by higher
merchandise costs and negative sales leverage on Payless occupancy costs. SG&A was lower due to cost reduction
actions that produced lower compensation expense and integration savings.

For the full year, the net loss of $68.7, or $1.09 a share, compares with earnings of $42.7 million, or 66 cents, a year ago. Adjusted EBITDA rose 16.6% to $296.6 million from $254.4 million. Revenues advanced 13.4% to $3.44 billion from $3.04 billion and were down 3.6% for the full year.

At
year-end, the company had $249.3 million in cash and cash equivalents and
$209.0 million of borrowing capacity available under its revolving credit
facility for total liquidity of $458.3 million.

“We
strengthened the company in 2008 as we maintained market share in a highly
promotional domestic retail environment and delivered strong cash flows. We
accomplished this by providing record customer satisfaction at Payless and
growing Saucony and Sperry Top-Sider,” said Matthew E. Rubel, chairman,
CEO and president of Collective Brands, Inc. “Internationally, we achieved
strong growth in Payless Latin America and Stride Rite Europe.”

Rubel
continued, “We have continued to manage costs aggressively in the current
economic climate. At the same time, we are managing inventories effectively to
make sure fresh, on-trend product is flowing to our stores.”

Net debt
at the end of 2008 was $663.9 million, down $25.9 million versus the prior
year. Inventory was $492.0 million at the end of 2008, up 4.7% compared to last
year as a result of higher product costs. Payless average in-store inventory
was up at the end of 2008 while footwear units were lower. Aged inventory as a
percentage of total inventory was lower than the prior year reflecting a
cleaner inventory position.

Inventory was $492.0 million at the end of 2008, up 4.7% compared to last year as a result of higher product costs. Payless average in-store inventory was up at the end of 2008 while footwear units were lower. Aged inventory as a percentage of total inventory was lower than the prior year reflecting a cleaner inventory position.

Capital
expenditures were $129.2 million in 2008 compared to $167.4 million in
2007. The lower expenditures in 2008
reflect reduced spending on certain multi-year capital projects such as the
distribution centers and new point-of-sale registers as well as lower spending
on domestic stores.

During
the fourth quarter of 2008, Collective Brands added 16 new stores (11 Payless
stores in Latin America and 5 Stride Rite stores), closed 29 stores (26 Payless
and 3 Stride Rite), and relocated 5 Payless stores.

Outlook
for Collective Brands

Capital
expenditures in 2009 are expected to total approximately $85 million. The 2009
effective tax rate is expected to be approximately 20%, excluding adjustments
and discrete events associated with the resolution of outstanding tax audits.

Depreciation
and amortization in 2009 is expected to total approximately $145 million, due
to greater investments in supply chain and stores in recent years as well as
the 2007 acquisition of Stride Rite.

Collective
Brands retail store count is expected to decline by approximately 60, net of
store openings. Payless International
and Stride Rite anticipate adding about 35 and 5 stores, respectively, net of closings.
Payless domestic is expected to close about 100 stores, net of openings.

COLLECTIVE BRANDS,
INC.

CONSOLIDATED STATEMENTS OF (LOSS)
EARNINGS

(UNAUDITED)

(Dollars
and shares in

millions,
except per share

data) 13 Weeks
Ended 52 Weeks Ended


——————–
——————–

January February
January February

31, 2, 31, 2,

2009 2008 2009 2008

——— ———
——— ———

Net
sales $ 735.2
$ 776.8 $ 3,442.0
$ 3,035.4

Cost of
sales:

Cost of sales 524.4 562.6
2,344.6 2,044.5

Impairment of tradenames 88.2 – 88.2 –

——— ———
——— ———

Total
cost of sales 612.6 562.6
2,432.8 2,044.5

——— ———
——— ———

Gross
margin 122.6 214.2
1,009.2 990.9

Selling,
general and

administrative
expenses 239.1 248.9
1,007.2 899.4

Impairment
of goodwill 42.0 – 42.0 –

Restructuring
charges – – 0.2 0.2

——— ———
——— ———

Operating
(loss) profit from

continuing
operations (158.5) (34.7)
(40.2) 91.3

Interest
expense 17.5 19.0 75.2 46.7

Interest
income (1.6) (2.8)
(8.1) (14.4)

———
——— ——— ———

(Loss)
earnings from continuing

operations
before income

taxes and
minority interest (174.4) (50.9)
(107.3) 59.0

(Benefit)
provision for income

taxes (34.6) (7.8)
(48.0) 8.6

——— ———
——— ———

(Loss)
earnings from continuing

operations
before minority

interest (139.8) (43.1)
(59.3) 50.4

Minority
interest, net of

income
taxes (3.9) (3.5)
(8.7) (7.7)

——— ———
——— ———

Net
(loss) earnings from

continuing
operations (143.7) (46.6)
(68.0) 42.7

Loss from
discontinued

operations,
net of

income
taxes and minority

interest (0.3) –
(0.7) –

——— ———
——— ———

Net
(loss) earnings $ (144.0) $
(46.6) $ (68.7) $ 42.7

========= =========
========= =========

Basic
(loss) earnings per

share:

(Loss) earnings from

continuing operations $
(2.28) $ (0.73) $ (1.08) $
0.66

Loss from discontinued

operations – –
(0.01) –

——— ———
——— ———

Basic
(loss) earnings per share $ (2.28)
$ (0.73) $ (1.09) $
0.66

========= =========
========= =========

Diluted
(loss) earnings per

share:

(Loss) earnings from

continuing operations $
(2.28) $ (0.73) $ (1.08) $
0.65

Loss from discontinued

operations – –
(0.01) –

——— ———
——— ———

Diluted
(loss) earnings per

share $ (2.28) $
(0.73) $ (1.09) $ 0.65

========= =========
========= =========

Basic
weighted average shares

outstanding 63.0 64.2 62.9 64.5

Diluted
weighted average shares

outstanding 63.0 64.2 62.9 65.4