Collective Brands Reports 2010 Fourth Quarter, Full Year Financial ResultsFourth Quarter: Net Sales up 4%; Loss per Share Improved 6%; Full Year: Net Sales up 2%; Earnings per Share up 37%
TOPEKA, KS -- (Marketwire - March 02, 2011) - Collective Brands, Inc. (NYSE: PSS) today reported financial results for its 2010 fourth quarter and fiscal year ended January 29, 2011. The fourth quarter 2010 net loss attributable to Collective Brands, Inc. was $10.1 million, or $0.16 per share, compared to a net loss of $10.9 million, or $0.17 per share, in the fourth quarter of 2009.
Collective Brands' fourth quarter 2010 net sales increased 4.3% to $773.8 million. This was driven by sales growth of 19.8% from the Performance + Lifestyle Group ("PLG") Wholesale segment and Collective Brands' 0.4% comparable store sales1 increase.
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 ("Adjusted EBITDA")(2) 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.
Notes to Financial Data
(1) Comparable store sales include Payless stores from all regions and PLG stores. The calculation excludes franchised stores.
(2) This release contains certain non-GAAP financial measures. These measures are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help explain underlying performance trends in Collective Brands' business and provide useful information to both management and investors. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. Please see the reconciliations of the non-GAAP financial measures after the condensed consolidated statements of cash flows. The measures used in this release are as follows:
Free cash flow -- Defined as cash flow provided by operating activities less capital expenditures. Free cash flow provides useful information about the Company's liquidity, its ability to make investments and to service debt.
Net debt -- Defined as total debt minus cash and cash equivalents. Net debt provides useful information about the capacity of the Company to reduce its debt and improve its capital structure.
Adjusted EBITDA -- Defined as earnings before interest (including loss on early extinguishment of debt), taxes, depreciation and amortization. Adjusted EBITDA provides useful information about the Company's operations because it eliminates the effect of invested capital on the Company's operating profit.
About Collective Brands and Forward-Looking Statements
Collective Brands, Inc. is a leader in bringing compelling lifestyle, fashion and performance brands for footwear and related accessories to consumers worldwide. Collective Brands, Inc. is the holding company for Payless ShoeSource, Collective Brands Performance + Lifestyle Group, and Collective Licensing International. Payless ShoeSource is the largest specialty family footwear retailer in the Western Hemisphere. It is dedicated to democratizing fashion and design in footwear and accessories and inspiring fun, fashion possibilities for the family at a great value. The Collective Brands Performance + Lifestyle Group markets lifestyle and performance branded footwear for children and adults sold primarily through wholesale and retail under well-known brand names including Stride Rite, Saucony, Sperry Top-Sider, Keds, and Robeez. Collective Licensing International is a leading youth lifestyle marketing and global licensing business. Information about, and links for shopping at, each of Collective Brands' units can be found at www.collectivebrands.com.
This release contains forward-looking statements. The statements in this news release regarding the business outlook, expected performance and forward-looking guidance, as well as other statements that are not historical facts, are forward-looking statements. The words "expected," "anticipates," "intends," and similar expressions are intended to identify forward-looking statements. Forward-looking statements are estimates and projections reflecting management's judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to forward-looking statements, management has made assumptions regarding, among other things, customer spending patterns, weather, pricing, operating costs, the timing of various events and the economic and regulatory environment. A variety of factors could cause actual results and experience to differ materially from the anticipated results or expectations expressed in forward-looking statements. These risks and uncertainties that may affect the operations, performance, and results of Collective Brands' business include, but are not limited to, the impact of competition and pricing; changes in consumer preferences and spending patterns; general economic, business and social conditions in the countries where Collective Brands sources products, supplies or has or intends to open stores; changes in weather patterns; the inability to renew material leases, licenses, or contracts upon their expiration; the ability to identify and negotiate leases for new locations on acceptable terms or to terminate unwanted leases on acceptable terms; the financial condition of suppliers; changes in existing or potential duties, tariffs or quotas and the application thereof; changes in relationships between the U.S. and foreign countries as well as between foreign countries; economic and political instability in foreign countries, or restrictive actions by the governments of foreign countries in which suppliers and manufacturers from whom the Company sources are located or in which the Company does business; changes in trade, intellectual property, customs and/or tax laws; fluctuations in currency exchange rates, e.g. changes in the value of the dollar relative to the Chinese yuan or Canadian dollar; the ability to hire, train and retain associates; performance of other parties in strategic alliances; outcomes of intellectual property, employment litigation, and class actions; the ability to comply with local laws in foreign countries; our ability to maintain and upgrade information systems; threats or acts of terrorism or war; strikes, work stoppages and/or slowdowns by unions that play a significant role in the manufacture, distribution or sale of product; changes in commodity prices such as oil; and other risks referenced from time to time in filings of ours with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended January 30, 2010 in Part I, Item 1A, "Risk Factors". Collective Brands believes these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date of this release. Collective Brands is not obligated to publicly release any revisions to forward-looking statements to reflect events after the date of this release.
All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Collective Brands does not undertake any obligation to release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The unaudited condensed consolidated statements of earnings, balance sheets and statements of cash flows have been prepared in accordance with the Company's accounting policies as described in the Company's 2009 Form 10-K, on file with the Securities and Exchange Commission, are subject to reclassification and adjustments and should be read in conjunction with the 2009 Annual Report to Shareowners. In the opinion of management, this information is fairly presented and all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods have been included.
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
COLLECTIVE BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
January 29, January 30,
(dollars in millions) 2011 2010
----------- -----------
ASSETS:
Current assets:
Cash and cash equivalents $ 324.1 $ 393.5
Accounts receivable, net 114.4 95.5
Inventories 531.7 442.9
Current deferred income taxes 30.7 42.1
Prepaid expenses 55.1 48.9
Other current assets 22.2 21.7
Current assets of discontinued operations - 0.5
----------- -----------
Total current assets 1,078.2 1,045.1
Property and Equipment:
Land 6.7 7.0
Property, buildings and equipment 1,444.6 1,403.1
Accumulated depreciation and amortization (1,019.0) (945.9)
----------- -----------
Property and equipment, net 432.3 464.2
Intangible assets, net 428.4 445.5
Goodwill 279.8 279.8
Deferred income taxes 10.1 6.5
Other assets 39.7 43.2
----------- -----------
TOTAL ASSETS $ 2,268.5 $ 2,284.3
=========== ===========
LIABILITIES AND EQUITY:
Current liabilities:
Current maturities of long-term debt $ 5.1 $ 6.9
Accounts payable 287.4 195.9
Accrued expenses 184.4 181.8
Current liabilities of discontinued
operations - 1.3
----------- -----------
Total current liabilities 476.9 385.9
Long-term debt 659.4 842.4
Deferred income taxes 65.4 65.5
Other liabilities 212.4 226.3
Noncurrent liabilities of discontinued operations - 0.3
Equity:
Collective Brands, Inc. shareowners' equity 822.9 735.2
Noncontrolling interests 31.5 28.7
----------- -----------
Total equity 854.4 763.9
----------- -----------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 2,268.5 $ 2,284.3
=========== ===========
COLLECTIVE BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
52 Weeks Ended
------------------------
January 29, January 30,
(dollars in millions) 2011 2010
----------- -----------
OPERATING ACTIVITIES:
Net earnings $ 122.6 $ 88.3
Earnings from discontinued operations, net of
income taxes - (0.1)
Adjustments for non-cash items included in net
earnings:
Loss on impairment and disposal of assets 12.2 11.8
Depreciation and amortization 138.2 143.2
Provision for losses on accounts receivable 2.0 2.9
Share-based compensation expense 16.6 16.4
Deferred income taxes 4.2 3.8
Loss on early extinguishment of debt 1.7 1.2
Other, net - (0.1)
Changes in working capital:
Accounts Receivable (20.7) 0.6
Inventories (86.7) 53.2
Prepaid expenses and other current assets (7.5) 15.2
Accounts payable 92.2 20.2
Accrued expenses 5.9 (24.6)
Changes in other assets and liabilities, net (7.6) (15.2)
Contributions to pension plans (1.6) (9.5)
Net cash provided by discontinued operations - 0.3
----------- -----------
Cash flow provided by operating activities 271.5 307.6
----------- -----------
INVESTING ACTIVITIES:
Capital expenditures (97.6) (84.0)
Proceeds from the sale of property and equipment - 2.8
Intangible asset additions - (19.0)
----------- -----------
Cash flow used in investing activities (97.6) (100.2)
----------- -----------
FINANCING ACTIVITIES:
Issuances of debt - 1.2
Repayment of debt (185.2) (66.1)
Issuances of common stock 10.7 8.2
Purchases of common stock (63.9) (7.6)
Contributions by noncontrolling interests 3.1 5.5
Distribution to noncontrolling interests (10.8) (6.2)
----------- -----------
Cash flow used in financing activities (246.1) (65.0)
----------- -----------
Effect of exchange rate changes on cash 2.8 1.8
(Decrease) Increase in cash and cash equivalents (69.4) 144.2
Cash and cash equivalents, beginning of year 393.5 249.3
----------- -----------
Cash and cash equivalents, end of year $ 324.1 $ 393.5
=========== ===========
COLLECTIVE BRANDS, INC.
FULL YEAR SEGMENT RESULTS
(UNAUDITED)
52 Weeks Ended
--------------------------------------------------
January 29, January 30,
(dollars in millions) 2011 2010 Change ($) Change (%)
----------- ----------- ----------- -----------
NET SALES
Payless Domestic $ 2,059.3 $ 2,153.2 $ (93.9) (4.4%)
Payless International 460.3 422.4 37.9 9.0%
PLG Wholesale 628.4 513.9 114.5 22.3%
PLG Retail 227.7 218.4 9.3 4.3%
----------- ----------- ----------- -----------
TOTAL $ 3,375.7 $ 3,307.9 $ 67.8 2.0%
=========== =========== =========== ===========
OPERATING PROFIT (LOSS)
Payless Domestic $ 75.2 $ 98.1 $ (22.9) (23.3%)
Payless International 55.6 34.1 21.5 63.0%
PLG Wholesale 61.7 30.0 31.7 105.7%
PLG Retail (2.8) (3.7) 0.9 24.3%
----------- ----------- ----------- -----------
TOTAL $ 189.7 $ 158.5 $ 31.2 19.7%
=========== =========== =========== ===========
52 Weeks Ended
-------------------------------------
January 29, January 30,
2011 2010 Change (BPS)
----------- ----------- -----------
OPERATING MARGIN
Payless Domestic 3.7% 4.6% (90)
Payless International 12.1% 8.1% 400
PLG Wholesale 9.8% 5.8% 400
PLG Retail (1.2%) (1.7%) 50
----------- ----------- -----------
TOTAL 5.6% 4.8% 80
=========== =========== ===========
COLLECTIVE BRANDS, INC.
CALCULATION OF NON-GAAP CONSOLIDATED FREE CASH FLOW
(UNAUDITED)
(dollars in millions)
52 weeks ended
---------------------------
January 29, January 30,
2011 2010
------------- -------------
Cash flow provided by operating activities $ 271.5 $ 307.6
Less: Capital expenditures 97.6 84.0
------------- -------------
Free cash flow $ 173.9 $ 223.6
============= =============
COLLECTIVE BRANDS, INC.
CALCULATION OF NON-GAAP CONSOLIDATED NET DEBT
(UNAUDITED)
(dollars in millions)
January 29, January 30,
2011 2010
------------ ------------
Total debt: $ 664.5 $ 849.3
Less: cash and cash equivalents 324.1 393.5
------------ ------------
Net debt $ 340.4 $ 455.8
============ ============
COLLECTIVE BRANDS, INC.
RECONCILIATION OF GAAP NET EARNINGS TO NON-GAAP ADJUSTED EBITDA
(UNAUDITED)
(dollars in millions)
52 weeks ended 52 weeks ended
January 29, January 30,
2011 2010
--------------- --------------
Net earnings $ 122.6 $ 88.3
Earnings from discontinued operations, net
of tax - (0.1)
Provision for income taxes 17.4 9.4
Net interest expense (including loss on
early extinguisment of debt) 49.7 60.9
Depreciation and amortization 135.4 139.9
--------------- --------------
Adjusted EBITDA $ 325.1 $ 298.4
=============== ==============
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James Grant
(785) 559-5321
Media Contact:
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(612) 928-0202
