Payless profits down 25% in second quarter
The largest shoe retailer in the US, Payless ShoeSource Inc., has posted a 25% decline in second-quarter profits owing to heavy markdowns, weakened sales and increased expenses. The company has also warned that third-quarter earnings are likely to be lower than last year’s, with sales being ‘flat to down.’
The Topeka, Kansas-based retailer reported a ‘conservative’ sales outlook for the remainder of 2001 and said it intends to tighten its control over inventories and expenses. The announcement follows on from a profits warning issued in early July, when the company said net income for the three-month period ended August 4 would come in at well under the $48.8 million or $2.16 forecast, at $36.4 million or $1.60 per share.
Analysts attribute the slump in sales to a combination of adverse weather conditions and the slowdown in the US economy, with heavy rain in the north and storms in the south helping to keep consumers at home. The company’s reliance on sandals is also thought to be a factor. Sales in the second-quarter declined from $816.9 million to $806 million year-on-year.
Payless operates around 4,900 stores nation-wide. During the period, the company opened 48 new stores while closing 38 others. Expenditure on store remodelling and systems upgrades is expected to top $100 million for the whole of 2001, while the company’s plans for the second half of the year include doubling the number of stores it has operating in Central America to 48.
