Collective Brands reports higher 1Q profits

Collective Brands Inc., which operates the Payless ShoeSource and Stride Rite chains, said Wednesday that its first-quarter profit surged 93 percent from a year-ago quarter hurt by litigation and accounting expenses.

The earnings results beat Wall Street expectations, although sales declined, hurt by lower consumer spending, foreign currency fluctuations and the end of the company's relationship with designer Tommy Hilfiger for adult footwear.

"It continues to be tough out there," Chief Executive Matt Rubel told analysts during a conference call.

The Topeka, Kan.-based company reported earning $38 million, or 59 cents per share, during the three months ended May 2. By comparison, it earned $19.7 million, or 30 cents per share, during the same period a year ago, which included $33.5 million in litigation and accounting charges.

Analysts surveyed by Thomson Reuters had expected earnings of 46 cents per share.

Revenue during the quarter fell 7 percent from $932.4 million to $862.9 million, below analysts' expectations of $888.2 million. Sales in stores open for at least a year, a key measure of retail health, declined by 4.8 percent.

The company said foreign currency fluctuations affected $15 million in revenue while ending its sale of Tommy Hilfiger-branded adult footwear cost $23.4 million in sales.

Besides its retail operations, Collective Brands also sells branded footwear wholesale and manages a number of brand license agreements.

Looking ahead, the company didn't provide earnings guidance for the full year but said it will close a net of 60 stores, mostly in the Payless chain. Collective Brands operates more than 4,800 stores.

Rubel warned analysts that the second quarter "will be our toughest quarter of the whole year from a demand standpoint," noting that last year's sales were helped by federal economic stimulus checks.

"(This year) there is no stimulus and there is a recession," he said.

Analysts are expecting second-quarter profit of 42 cents per share on $873.4 million in sales.

The company released its earnings after markets closed Wednesday. During trading, shares fell 25 cents to close at $15.89.