Profit in 2000 probable, says Payless CEO - Brief Article

Home Channel News, Feb 7, 2000 by Kate Gibson

Emerging pro dealer steps up pace of store remodeling program

LEE'S SUMMIT, Mo. -- Payless Cashways is positioned for a return to profitability this year. "That's our goal," said Millard Barron, the president and CEO of the 150-unit retailer. Barron spoke to NHCN a week after word from Payless that it incurred a net loss of $2.7 million on sales of $435 million in the quarter ended Nov. 27, 1999. However, excluding non-recurring charges, Payless made $141,000 during the quarter on a pro-formula basis.

Beyond shoring up its bottom line, Payless is quickening the pace of its plan to overhaul all of its stores. It is also working on a pilot program to create an electronic catalog to facilitate the special orders that represent 10 percent of its annual revenue.

More immediately, by the end of February Payless wants to replace Raymond Springer, who resigned as chief financial officer in December after just four months on the job to join the online subsidiary of The Right Start, an infant and children's clothing retailer. Payless has retained New York executive search firm Spencer Stuart to help fill the position, which is being overseen on an interim basis by company treasurer Tim Mertz.

Springer's resignation followed at least a half dozen other senior executives who had left during Barron's 18-month reign. However, Barron said all but Springer's departure had been part of his own management team formation. Springer's resignation "is the only case where we've lost someone," he said.

In the fourth quarter, Payless' same-store sales were off 5.4 percent, though comp-stores sales to professionals. Payless' primary customer, increased by 0.7 percent.

In fiscal 1999, Payless lost $8.1 million (compared with a net loss of $22.4 million the year before), which included more than $13 million in charges last year related to store closings and staff cuts. Sales declined 5 percent to $1.81 billion, and same-store sales fell 0.8 percent for the year. Sales to the pro customer were up 7.3 percent for the year.

"We're never going to be satisfied if we don't see comp-store sales increases in total," Barron said. However, Payless has achieved six consecutive quarters of comp-store sales increases with the pro customer, contributing to its "best bottom-line performance since 1994," according to Barron. "1998 was really the year when the new team came into place and stopped the slide, 1999 was a year of re-engineering and re-merchandising and 2000 is the year of completing the process," proclaimed Barron, who joined Payless in June 1998.

Part of that process last year involved remodeling seven stores that wound up out-per-forming Payless' overall company performance, according to Barron. As a result, Payless is proceeding with its plan to remodel an additional 35 stores in 2000 and the remaining 100 stores during 2001 and 2002.

By the second half of this year, Payless is looking to roll out an electronic catalog to facilitate its special-order business. Having a direct computer link to vendors would greatly improve the speed and efficiency of the process now done manually, Barron said. "This potential convergence over the next year or so of bricks and clicks, we believe, represents a significant opportunity for our company."

Of the $29.2 million budgeted by Payless for capital expenditures in 2000, the company plans to invest $8.4 million on information systems, $8 million on routine maintenance and $12.8 million on store openings and upgrades, including merchandising and manufacturing initiatives, Barron said.