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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Payless ShoeSource parent company Collective Brands (NYSE: PSS ) gave the Street's profits estimates a swift kick in the shin last night. This morning, it's running away with Mr. Market's lunch money -- shooting 14% higher on earnings that bested the consensus by 12%.
So what: Somehow, Collective Brands took a mere 2% increase in third-quarter sales and transformed it into a 32% hike in profits. Nice!
Now what: Wholesale sales drove CB's revenue gains, but that's where the good news ends. Same-store sales for the quarter slipped 3%. So basically the quarter would've been a bust if not for marquee brand names like Saucony and Stride Rite, which CB sells through distributors like Dick's Sporting Goods (NYSE: DKS ) , Foot Locker (NYSE: FL ) , and Finish Line (Nasdaq: FINL ) .
Conclusion: Some-where down the supply chain, some-one was buying those CB-branded shoes. It clearly wasn't at Payless, so it must have been at one of the other retailers. Now sounds like a good time to start shoe shopping for value at the shoe hawkers.
An alternative play: Strong sales of CB's shoes could bode well for shoe sales overall, or they could suggest market share loss at rivals like Nike (NYSE: NKE ) and Under Armour (NYSE: UA ) . Be alert for possible weakness in their sales numbers.
Want to keep closer track of Collective Brands' ups and downs? Add it to your watchlist.