Rising earnings estimates on the back of strong second-quarter
results that included a 41.7% earnings surprise, helped
) achieve a Zacks #1 Rank (Strong Buy) on September 11, 2012.
Moreover, this leading lifestyle footwear and accessories brand
company has delivered positive earnings surprises over the last
four quarters with an average beat of 33.5%.
With a solid year-to-date return of 47.8% and a history of
exceeding the quarterly earnings estimates, this stock offers an
attractive investment opportunity.
The Rank Driver
Better-than-expected second-quarter earnings, sales increase in
almost all divisions except Payless Domestic, strong comps growth
year to date and improved margins are the primary rank drivers for
On August 31, Collective Brands reported fiscal second quarter
(ended July, 28 2012) adjusted earnings of 34 cents per share,
which easily surpassed the Zacks Consensus Estimate of 24 cents.
Moreover, earnings surged 112.5% from last year's 16 cents a share
driven by comps growth.
Total net sales during the quarter grew 0.4% year over year to
$886.0 million from $882.4 million in the comparable prior-year
period. Collective Brands' consolidated same-store sales increased
2.9% in the quarter and experienced a revenue growth of 6.1% in PLG
The top line was aided by overall growth at PLG, both retail and
wholesale and strong same store sales at Payless International. The
PLG Retail segment did well due to strong comparable store sales
growth and contribution from the new Sperry stores. Latin America
is one of the fastest growing retail markets and the company banked
a comps growth of 11% in that region, driven by strong strategies
and better inventory levels.
Gross profit in dollar terms increased 8.6% to $295.4 million
from $272.1 million in the year-ago quarter. Moreover, gross margin
expanded 250 basis points to 30.8%, reflecting robust comps in the
retail segments, lesser markdowns and decreased lower occupancy
costs as a percentage of revenue mainly due to shutting down of the
non-performing and non-strategic stores compared with the last
Earnings Estimate Revisions
The Zacks Consensus Estimate for 2012 increased 9.3% to $1.53
per share based on 2 out of 3 upward estimate revisions over the
last 30 days, whereas, for 2013, 2 out of 3 estimates were revised
higher over the same time frame, lifting the Zacks Consensus
Estimate by 6.0% to $1.77 per share.
Collective Brands currently trades at a forward P/E of 14.21x, a
2.5% discount to the peer group average of 14.57x. Also, on a
price-to-book basis, the shares are trading at 1.82x, a 24.5%
discount to the peer group average of 2.41x based on the company's
fundamentals, we expect the company's discount to narrow in the
About the Company
Based in Topeka, Kansas, Collective Brands markets a portfolio
of footwear and related accessories brands through its three
strategic units - Payless ShoeSource, Collective Brands Performance
+ Lifestyle Group (PLG) and Collective Licensing International. The
company reports its business in four segments - Payless Domestic,
Payless International, PLG Wholesale and PLG Retail. The market cap
of the company is $1.33 billion.
Other Zacks #1 Rank retail stocks include
Group 1 Automotive Inc.
Hain Celestial Group Inc.
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