Collective Brands produces record free cash flow

15 Mar '10

5 min read

Collective Brands, Inc reported financial results for its 2009 fourth quarter and fiscal year ended January 30, 2010. The fourth quarter 2009 net loss attributable to Collective Brands, Inc. was $10.9 million, or $0.17 per diluted share, compared to a net loss of $144.0 million, or $2.28 per share, in the fourth quarter of 2008. Taking adjustments into account, the fourth quarter 2009 net loss attributable to Collective Brands, Inc. was $11.6 million, or $0.18 per diluted share, driven by significant gross margin expansion. This compares to a fourth quarter 2008 net loss of $38.1 million, or $0.60 per share.

Full year 2009 net earnings increased to $82.7 million, or $1.28 per diluted share, compared to a net loss of $68.7 million, or $1.09 per diluted share in 2008.Adjusted earnings before interest, taxes, depreciation and amortization was $301.6 million for 2009 compared to $282.8 million in 2008. Collective Brands generated record free cash flow of $223.6 million in 2009 due to effective working capital management, higher earnings, and reduced capital spending. As a result, net debt decreased $208.1 million, to $455.8 million. In addition, the Company repaid over $40 million of long term debt during the fourth quarter of 2009.

"Our results were strong as we delivered fresh, innovative product throughout our portfolio of brands both domestically and internationally," said Matthew E. Rubel, Chairman, Chief Executive Officer and President of Collective Brands, Inc. "This focus on the consumer led to improved gross margins that, combined with actions that lowered operating costs, drove an 11% increase in adjusted operating profit for the year. As a result, we produced record free cash flow, strengthened our capital structure, and positioned Collective Brands for further growth."

Collective Brands' fourth quarter 2009 net sales were $741.7 million up 0.9%, or 3.3% on an adjusted basis. The Company's fourth quarter 2009 comparable store sales increased 0.7%. Comparable store sales for Payless increased 1.0% and comparable store sales for the Performance + Lifestyle Group (PLG) decreased 3.3%.

• Net sales for the quarter increased from last year due primarily to strong growth at PLG in Saucony and Sperry Top-Sider.
• The gross margin rate increased 470 basis points on an adjusted basis due to lower product costs, lower markdowns as a result of a clean inventory position, and leveraging occupancy and distribution center expenses.
• Operating profit increased to $4.7 million as a result of higher net sales and gross margin expansion.

Consolidated Full Year Results

Collective Brands' 2009 net sales were $3.31 billion, down 3.9% or 1.7% on an adjusted(1) basis. The Company's 2009 comparable store sales decreased 2.3%. Comparable store sales for Payless and PLG declined 2.3% and 1.6%, respectively. Adjusted 2009 net earnings attributable to Collective Brands, Inc were $84.5 million, or $1.31 per diluted share, compared to $62.2 million, or $0.99 per diluted share, in 2008.

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