Payless ShoeSource, Inc. focused on back-end efficiencies in its first quarter to drive a double-digit bottom line increase off of relatively flat sales. In addition, the company took another step in its plan to build a “house of brands” by acquiring the American Eagle brand for footwear and accessories from Jimlar Corporation. Company sales during the first quarter totaled $694.8 million, a 0.1% decrease from $695.2 million during the same quarter last year. Same-store sales increased 0.4% during the quarter after a 2.7% increase last year. Comps in the footwear category were said to be “around the 2.5% gain mark,” with “the other category” weighing the comp down. Sales were driven by strength throughout women’s, but were weak in boy’s shoes and in accessories. Average unit retail for footwear increased by 11.2%, but footwear unit sales decreased by 8.6% from Q1 last year.

Gross margin was 36.8% of sales in the first quarter, up 170 basis points from 35.1% last year. SG&A expenses were 28.7%, down 40 basis points from 28.3% in the first quarter 2005. PSS recorded net earnings of $36.0 million or 53 cents per diluted share in Q1, a 19.2% increase from $30.2 million, or 45 cents per diluted share, during the year-ago quarter.