Payless ShoeSource Posts Drop in Profit

Cloudy skies and cold weather put consumers in a bad shopping mood, according to Payless ShoeSource ( PSS), which posted a 40% decline in first-quarter earnings.

The company earned $14.1 million, or 21 cents a share, down from $23.9 million, or 35 cents a share, in the year-earlier period. Analysts had expected the company to earn 21 cents a share.

The company's hares were down 3.9% at $15.23 in morning trading.

Total sales were $697.7 million, down 5.5%. Same-store sales decreased 6.2%.

"Unfavorable weather patterns throughout many parts of the country negatively impacted sales of spring seasonal merchandise, particularly sandals. In addition, our sales were impacted by weakness in the retail environment," said Steven J. Douglass, chief executive. "Consumer sentiment was at historically low levels during the quarter due to a combination of factors, including the war in Iraq and continuing concerns about the economy."

In the second quarter, Payless expects to begin to increase promotional events, but said the markdowns will put pressure on gross margins. The company expects earnings of 40 cents to 45 cents a share in the second quarter. Analysts expect 62 cents a share, on average. Payless earned 69 cents a share in last year's second quarter.

For the full year, the company expects earnings of $1.25 to $1.35 a share, down from its previous guidance of $1.55 to $1.75 a share. Analysts expect $1.38 a share. The company earned $1.55 a share in 2002.

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