Payless Earnings Rise

Margins expand.
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Footwear retailer

Payless ShoeSource

(PSS)

said its third-quarter earnings rose 32% from a year ago, helped by gross margin expansion.

The company earned $28.9 million, or 43 cents a share, including option expenses of 2 cents a share, for the quarter ended Oct. 28, compared with $21.9 million, or 32 cents a share, in the year-ago period. Third quarter results also included a loss of 3 cents a share related to discontinued retail operations in Japan and a favorable income tax impact of 3 cents a share for changes in the effective income tax rate. Analysts surveyed by Thomson First Call were expecting a profit of 42 cents a share.

Third-quarter revenue rose 5.5% from a year ago to $703.4 million as against analysts' estimate of $693.5 million. Same-store sales increased 5.2% during the quarter. The average unit retail price for footwear rose by 5.9% and unit sales rose 1.1%.

In the third quarter, the company opened 9 new stores and closed 19. The company also relocated 21 stores. The store count as of the end of the third quarter was 4,574.

During the third quarter, the company repurchased $35 million, or about 1.5 million shares of common stock under its stock buyback program. Under the indenture governing the company's 8.25% senior subordinated notes, the company may repurchase about an additional $19 million of common stock.

"We saw gains in sales and earnings, driven both by an increase in average retail and an increase in footwear units sold. Our new product, store format and service initiatives are clearly resonating across all customer types and store sizes," the Topeka, Kan.-based company said.

In a seperate development, the company teamed up with

Exeter Brands Group

, a wholly owned subsidiary of

Nike

(NKE) - Get Report

, to launch women's athletic shoes called Tailwind.

The Tailwind branded product, expected to retail initially at under $35 a pair, will be available exclusively at Payless stores and Payless.com beginning in spring 2007.

The agreement is a multi-year deal with Exeter designing and producing the styles, Exeter and Payless jointly launching the brand, and Payless serving as the exclusive retailer of the Tailwind branded footwear line.

This story was created through a joint venture between TheStreet.com and IRIS.