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Collective Brands produces record free cash flow

15 Mar '10
5 min read

Inventory at the end of the year was $442.9 million, down 10.0% compared to the prior year end due to lower product costs and a decrease in footwear units. Capital expenditures were $84.0 million compared to $129.2 million last year. The lower capital expenditures reflect the completion of distribution centers and reduced spending on stores. During the fourth quarter of 2009, Collective Brands added 11 new Payless stores, closed 24 Payless stores, and relocated three stores (two Payless and one PLG). For the year, the Company opened 60 new stores (51 Payless and nine PLG), closed 104 stores (103 Payless and one PLG), and relocated 25 stores (22 Payless and three PLG).

• Payless Domestic - Net sales were virtually flat, as a comparable store sales increase was offset by 73 fewer stores at year-end. Sales increased in children's footwear, boots, and women's accessories. The operating results improved primarily due to gross margin rate expansion.
• Payless International - The net sales increase was driven primarily by 28 new store openings in Colombia and a $5 million benefit from foreign exchange rates. The increase was partially offset by a sales decline in Ecuador due to incremental tariffs. Operating profit increased due primarily to a stronger holiday season and lower operating expenses offset in part by increased costs to comply with incremental tariffs in Ecuador. Fourth quarter operating profit in Payless International is seasonally greater than Payless Domestic due to the importance of the holiday season in Latin America and Puerto Rico.
• PLG Wholesale - Higher net sales at Saucony and Sperry Top-Sider were more than offset by the expiration of the Tommy Hilfiger adult footwear licensing agreement. Operating profit increased due to not incurring charges as in 2008, gross margin rate expansion, and higher net sales at Saucony and Sperry Top-Sider.
• PLG Retail - Net sales increased due to eight additional stores at quarter-end offset in part by lower comparable store sales. The operating loss narrowed due to not incurring charges as in 2008.

Outlook for Collective Brands

• The 2010 effective tax rate is expected to be approximately 20%, excluding discrete events primarily associated with the resolution of outstanding tax audits.
• Depreciation and amortization in 2010 is expected to total $140 million.
• Capital expenditures in 2010 are expected to total approximately $100 million.
• Collective Brands 2010 retail store count is expected to decline by approximately 15 stores, net of store openings.

Collective Brands Inc

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