US: Payless buys Collective International for $91m, swings to Q4 profit
Footwear retailer Payless ShoeSource on Tuesday (6 March) said it swung to a fourth quarter profit and revealed plans to buy skate and snowboard licensing company Collective International for approximately $91m.
The purchase of privately held Collective International takes Payless into the brand development, management and licensing business for the first time. The deal is expected to close in the first half of Payless' fiscal 2007.
Collective's portfolio includes Airwalk, Vision Street Wear, Lamar, Sims, LTD, genetic, Dukes, Rage, Ultra-Wheels, and Skate Attack. Payless has been a licensee of the Airwalk brand since 2003, and features the brand on a wide range of footwear and accessories.
"The acquisition of Collective is another significant step in our strategy to position Payless as a vertically integrated, House of Brands retailer offering well-recognised brands combined with on-trend, high-quality footwear and accessories at a great price," said Matthew Rubel, CEO and president of Payless.
"Collective owns some of the most popular youth lifestyle brands in the US. Through this acquisition, we have an opportunity to expand Airwalk, an important brand for Payless, secure access to great brand management talent and expertise, as well as establish a platform to enter the brand development, management and licensing business."
Payless plans to operate Collective as a Denver-based wholly-owned subsidiary headed by Collective's president and CEO Bruce Pettet, and staffed by Collective's talented design and licensing team.
Separately, Payless reported fourth quarter 2006 net earnings of US$24.6m, versus a fourth quarter 2005 net loss of $5.6m. Earnings for the quarterly period were favourably impacted by the release of $14.3m of income tax reserves, related primarily to the closing of income tax audits in various jurisdictions.
Fourth quarter 2006 comparable store sales were up 6.8%, with total sales jumping 13% compared to the fourth quarter of 2005.
The company also said it generated total sales of $2.80bn for the full-year 2006 period, up 4.9% compared to 2005 total sales of $2.67bn.
Comparable store sales were up 3.5% for the year, while net earnings stood at $122m, versus net earnings of $66m in 2005. Increases were driven by timing and an increase in raw materials due to a higher percentage of products sourced directly by the company.
"Payless delivered an outstanding quarter of sales and earnings due primarily to strong results in our women's and children's categories," said Rubel. "In 2006, we started to successfully execute the key components of our strategy, and in doing so, have strengthened our position in the marketplace with our customers."
In its outlook, meanwhile, Payless said it expects to achieve low single-digit positive same-store sales on a consistent basis, while its long-term goal is to achieve earnings per share percentage growth in the mid-teens.
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