Hit with a $130.2 million charge for Stride Rite’s acquisition, Collective Brands registered a $144.0 million loss for the quarter ended Jan. 31, compared with a $46.6 million loss last year. Revenues dropped by 5.4 percent to $735.2 million. Some $88 million of the impairment was charged to the wholesale operations of Keds and Stride Rite.
The adjusted net loss, not including charges, was $34.9 million. Adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) fell by 65.4 percent to $8.4 million.
Revenues from the Payless ShoeSource chain were $573.1 million, while Stride Rite reported turnover of $162.1 million. Payless sales were helped by a 5 percent increase in average unit retail prices.
For the fiscal year, Collective lost $68.7 million against profits of $42.2 million, and saw sales grow by 13 percent to $3,442.0 million, largely because of a full year of Stride Rite. The company noted exceptionally strong performances from Payless Latin America (up by double digits) and Stride Rite Europe.
Comparable store sales fell by 6.6 percent in the fourth quarter, and the company added 11 Payless stores in Latin America and five Stride Rite stores during the period, while closing 26 Payless and three Stride Rite stores. The gross margin fell by 10.8 percentage points to 16.7 percent. The results for the quarter were hurt by higher promotions, lower traffic, as well as mainstream brands bringing their prices down closer to Payless’ typical level to keep up sales in a difficult market. Collective also suffered from higher product costs from China. The company said it expected to see those cost pressures moderating by the second half of this fiscal year. Traffic at Payless stores fell by high single digits in the quarter, and while this business held up somewhat better than Stride Rite’s, the difference was minimal.
On the wholesale front, Saucony continued to shine with a double-digit sales increase on the strength of its running shoes, particularly the Omni, ProGrid Ride and Hurricane models. Collective sees continued growth for it in family shoe channels as well. Sperry Top-Sider was also performing well with another double-digit gain as it draws more female customers, but Keds fell in the low teens for the full year. Collective has reworked the brand around the Champion model in different fabrications and believes it finally has a plan to revive the brand. It also plans to launch a green collection for Keds and get into the men’s business. In the Stride Rite children’s business, the leading sellers were from Jessica Simpson and Nickelodeon.
With the end of the Tommy Hilfiger license, Collective will lose some $78 million in sales. However, during the fourth quarter it did make some new deals, such as Airwalk in Australia and New Zealand, and Vision Street Wear in South Korea.
Inventory at the end of the full year was $492.0 million, a 4.7 percent increase over the end of 2007, but aged stock made up a smaller proportion of this. The company gave no specific guidance for 2009, but said it plans to reduce by a net 100 the number of Payless stores in the U.S. while opening 35 stores net outside the domestic market for Payless, as well as five stores for Stride Rite. Capital expenditures are budgeted at $85 million for 2009, down from $129.2 million.