Lower sales and costs associated with its $900m acquisition of The Stride Rite Corp have pushed Collective Brands, formerly Payless ShoeSource, to a 23% drop in second quarter profit. 

For the three months to 4 August, net earnings fell to US$24.9m, from $32.5m in the prior year period.

The company endured second quarter expenses of $3.6m related to changes in its distribution system as well as r$1.8m in costs related to the Stride Rite buy.

Total sales fell 1% to $699m, which the company blamed on weak sandals sales and the later timing of the back-to-school season in certain key markets. These factors were partially offset by higher customer conversion, strength in athletic and casual footwear, and growth in average unit retails of 1%.

Same-store sales were down 1.4% in the quarter.

"Although Payless's second quarter sales and earnings under performed our expectations, we continued to pick up market share in a challenging industry environment," said Matthew E Rubel, chief executive officer and president.

"We believe Payless is firmly in a position of long-term strength due to our ability to consistently offer on-trend targeted product, our compelling brands, our highly efficient supply chain, and other initiatives that are key to serving our customers."

During second quarter 2007, the company opened 15 new Payless stores, closed 19, and relocated 20. Collective Brands ended the period with 4,560 Payless stores, down 24 compared to second quarter 2006. As of today, Collective Brands also has 327 stores through its Stride Rite business unit.

The Stride Rite acquisition is expected to be accretive to earnings per share in 2008, and the group's 2006-2009 compound annual growth rate in operating profit is likely to be in the mid-to-upper teens, it said.

Collective Brands is now the holding company of Payless ShoeSource, Stride Rite, and Collective Licensing International, although it continues to trade under the symbol (PSS).The name change was announced earlier this month.