New Plan Expected to Speed Time-to-Market for On-Trend Products
TOPEKA, Kan., Feb. 9 /PRNewswire-FirstCall/ -- Payless ShoeSource, Inc.
(NYSE: PSS) announced today that its Board of Directors has approved
management's recommendation for a major investment in the company's supply
chain that is designed to enhance logistical efficiency and speed-to-market
for on-trend footwear and accessories.
The plan calls for the opening of a new 600,000-square-foot
distribution center east of the Mississippi river at a to-be-determined
location in the summer 2008 timeframe. Coupled with its previously
announced plans for a new 400,000-square-foot distribution center in
Redlands, Calif., which is due to open this summer, Payless will be
shifting from its single, 850,000 square foot distribution center located
in Topeka, Kan., to a dual-center distribution center model. The return on
capital from this investment is expected to be in excess of the company's
requirements.
"This initiative is a strategic step to enhance Payless' supply chain
operation, enabling us to more quickly deliver on-trend, targeted product
to our stores and customers, a key component of our business strategy,"
said Matt Rubel, Chief Executive Officer and President. "The dual-center
model is a prudent long-term investment in the company's infrastructure,
which will benefit customers and return value to long-term shareholders of
Payless stock."
Payless stores are heavily clustered in the more populated coasts and
borders of the U.S. With a distribution center on the west coast and
another east of the Mississippi river, the new supply chain model is
aligned with the company's store geography. The new model also provides the
company additional, long-term benefits such as redundancy and enhances its
ability to replenish product, which over time is expected to positively
affect in-stock positions and contribute to improved sales performance.
This is another step in implementing a corporate strategy that is already
delivering improved results.
In the summer of 2008, once the two new distribution centers are
operational and supporting the ongoing product inventory needs of Payless
stores, the company plans to close the Topeka facility, which it expects
will affect approximately 450-550 jobs. As the Topeka facility closing
approaches, Payless will work closely with union leadership and
distribution center management to transition affected employees with
severance packages and outplacement support.
The new distribution center plan includes $3 million to $4 million in
non- cash expenses for accelerated depreciation of property, plant and
equipment. The plan also includes cash expenses of approximately $5 million
for severance and $3 million to $5 million for other related costs. All of
these expense line items, totaling $11 million to $14 million, are
components of cost of goods sold, the bulk of which will be recognized
ratably during the period until the second distribution center is opened.
The company's capital spending for this investment will be
approximately $77 million from 2006 through 2008, which when coupled with
the other items above, is anticipated to be dilutive to earnings per share
by an estimated ($0.18) per diluted share in 2007 and by an estimated
($0.09) per diluted share in 2008. Starting in 2009, the impact is expected
to become accretive and contribute an estimated $0.10 per diluted share as
benefits from more advanced technology and lower transportation costs are
realized.
As of the end of third quarter 2006, Payless had 4,574 stores located
in the U.S., Canada, Puerto Rico, and Central and South America. The
company contracts with a third-party logistics provider for a distribution
center in Colon, Panama, which serves the product needs of stores in South
and Central America.
Statements in this news release which are forward-looking involve risks
and uncertainties and are indicated by words such as "expect," "should,"
"will," "plans," "estimated," and other similar words or phrases. Forward
looking statements by their nature address matters that are, to different
degrees, uncertain. Particular uncertainties which could adversely or
positively affect our future results include, but are not limited to, the
ability of the company to locate a suitable location for the east cost
facility on acceptable terms; the ability of the company to successfully
design, construct and integrate this new facility into the distribution
system; changes in transportation costs and other risks indicated in
filings with the SEC such as Payless' most recent Forms 10-K and 10-Q. The
company does not undertake any obligation to release publicly any revisions
to such forward-looking statements.
Payless ShoeSource, Inc. is one of the largest specialty footwear
retailers in the western hemisphere, dedicated to democratizing fashion and
design in footwear and accessories and inspiring fun, fashion possibilities
for the family at a great value. In addition to its stores, customers can
buy shoes over the Internet at http://www.payless.com .
SOURCE Payless ShoeSource, Inc.
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Related links:
http://www.payless.com
http://www.prnewswire.com/comp/136152.html/
CONTACT:
James Grant of Payless ShoeSource, Inc.,
+1-785-559-5321
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