Payless ShoeSource ramps up $30.2mn in Q1 earnings

20 May '05

7 min read

gross margin was 35.1 percent of sales in the first quarter 2005 versus 31.3 percent in the first quarter 2004. the improvement resulted primarily from more favorable initial mark-on relative to last year and the positive leverage on occupancy costs due to increased sales. inventory condition also continued to improve in the first quarter. the company believes that inventory is currently in excellent condition, with a low level of aged merchandise.

in total, cost of sales decreased by $24.7 million in the first quarter 2005. the improvements in inventory condition in addition to other items relating to the costing of inventory represented approximately $12 million of the reduction in cost of sales in the first quarter and are unlikely to occur in this magnitude during future quarters.

selling, general and administrative expenses were 28.3 percent of sales in the first quarter 2005 versus 27.2 percent in the first quarter 2004. the increase reflects higher advertising expense relative to last year, and increased costs for employee incentive programs. these increases were partially offset by lower costs for payroll, reflecting reduced headcount.

the company's effective income tax rate on continuing operations was 28.6 percent during the first quarter 2005, including the benefit of released tax reserves relating to favorable income tax audit settlements. for the full fiscal year 2005, the effective income tax rate is expected to be approsts for payroll, reflecting reduced headcount.

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