Stride Rite Ready to Unlace

Footwear firm Stride Rite's (NYSE: SRR  ) days are numbered as an independent firm. That's because Payless Shoesource (NYSE: PSS  ) recently announced it was acquiring its rival for $20.50 in cold, hard cash per share. Yesterday's earnings release helped illuminate just what Payless will soon be receiving, and it looks promising.

Stride Rite's reported second-quarter earnings fell nearly 16% as it took charges for the upcoming Payless buyout and is also integrating its own purchase of the Robeez shoe brand. Strip out the charges, and the bottom line fell only slightly, while overall sales advanced a respectable 8%.

However, top-line results were uneven as children's wholesale revenue, or footwear sales made to department stores such as Macy's (NYSE: M  ) and Dillard's (NYSE: DDS  ) , fell 16%. Retail sales at company-owned stores were only slightly positive as they grew 4%. Trends from Stride Rite's stable of proprietary brands were also quite mixed, with Keds sales advancing a meager 1% and Hind plummeting 28% -- though it accounted for the smallest proportion of total sales.

The Sperry Top-Sider brand and international markets experienced a double-digit sales increase and the Tommy Hilfiger and Saucony lines enjoyed a healthy increase of 4% and 2%, respectively. While the company faced a steep drop in wholesale sales, this was slightly offset by management's strategy to grow its core retail business. Overall, Payless does appear to be getting several well-known, profitable brands, and the move to license brands is much more lucrative than selling outside shoe names such as Skechers (NYSE: SKX  ) and Steve Madden (Nasdaq: SHOO  ) .

Fellow Fool Nathan Parmelee recently estimated that the price being paid for Stride Rite is high, but by no means exorbitant. The potential benefit for Payless is that with inconsistency comes opportunity, for if it can leverage Stride Rite's internal brands and accelerating sales expansion into steady-eddy profit growth, the soon-to-be-named Collective Brands could begin marching to new stock highs and further rewards for shareholders. 

For related Foolishness:

Get yourself a Motley Fool CAPS account today and help us find the best -- and worst -- stocks on the market. It's fun, fast, and totally free.

Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 530331, ~/Articles/ArticleHandler.aspx, 10/1/2014 8:43:06 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement