After the market closed on Nov. 21, footwear retailer Payless Shoesource (NYSE:PSS) released fiscal third-quarter 2006 earnings for the period ended Oct. 28. Here are the quick and dirty details for the quarter.

  • Sales grew 5.5% to $703.4 million, while same-store sales advanced a healthy 5.2%.

  • Gross margins improved 150 basis points, as Payless was able to sell shoes for higher prices, consistent with its strategy of moving to a more upscale product mix. Higher profitability and share repurchases contributed to a 34.4% rise in diluted earnings.

  • Management doesn't provide sales or earnings guidance, but expects low-single-digit store comps and shoots for mid-teens earnings growth "over time."

(Figures in thousands, except per-share data)

Income Statement Highlights

Q3 2006

Q3 2005

Change

Sales

$703,400

$666,500

5.5%

Net Profit

$28,900

$21,900

32%

EPS

$0.43

$0.32

34.4%

Diluted Shares

66,400

68,100

(2.5%)

*13 weeks ended Oct. 28, 2006 and Oct. 29, 2005.

Get back to basics with a look at the income statement.

Margin Checkup

Q3 2006

Q3 2005

Change*

Gross Margin

34.3%

32.8%

1.5

Operating Margin

6.3%

5.2%

1.1

Net Margin

4.1%

3.3%

0.8

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets

Q3 2006

Q3 2005

Change

Cash + ST Invest.

$472,400

$404,100

16.9%

Inventory

$349,200

$342,400

2%



Liabilities

Q3 2006

Q3 2005

Change

Accounts Payable

$166,200

$139,900

18.8%

Long-Term Debt

$201,700

$204,200

(1.2%)



Learn the ways of the balance sheet.

Cash Flow Highlights

Q3 2006

Q3 2005

Change

Cash From Ops.

$196,100

$159,200

23.1%

Capital Expenditures

$86,400

$48,700

77.4%

Free Cash Flow

$109,700

$110,500

(0.1%)

*39 weeks ended Oct. 28, 2006 and Oct. 29, 2005.

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