Payless Cashways continues improvement

KANSAS CITY, Mo. -- Payless Cashways continues to improve its bottom line, reporting that it earned $2.8 million in the second fiscal quarter, helped by some one-time items.

Excluding those extraordinary items -- ranging from a gain of $5.6 million as a result of freezing its pension plan to a charge of $2.8 million related to store closings -- Payless earned $1.6 million, compared with the $732,000 for the same period a year ago.

Sales for the quarter, which ended May 29, were $492.7 million, an increase of 1.6 percent based on same-store sales, or sales at stores open at least one year. The home improvement and building supply retailer, based in Kansas City, also said it was opening a store in Tempe, Ariz., and closing five stores elsewhere. The stores being closed, which will mean a loss of about 250 full- and part-time jobs, will comprise one in Cincinnati, three in Minneapolis and the only Payless-owned store in Bloomington, Ind. Payless said it hoped to place many of those employees affected by the Minneapolis and Cincinnati closings in other stores in those markets. Meanwhile, Payless is opening what it describes as an "express store" in Tempe in September. That 35,000-square-foot store will be largely focused on a professional contractor selection of paint, tools, plumbing and electrical supplies, housewares and seasonal products. It will not have a lumberyard. The Tempe store will be the first new store for Payless since 1997 and will open just over two years after the company filed for Chapter 11 bankruptcy reorganization in July 1997. The company was forced to take the action after strangling on more than $600 million in long-term debt, left over from an ill-fated management-led buyout in 1988. The company also said it was scouting locations to open more stores -- traditional and express -- and expected to make more store- opening announcements before the end of the year. Payless has 154 stores in 18 states, including four in the Oklahoma City area. As for converting existing stores to its new contractor-friendly prototype, Payless said it expected most of its stores to be switched over within three years. Four stores, including the one in Lenexa, already have been converted, and two more, including one in Kansas City, North, are undergoing similar changes. The new store format is "designed around and focused on the professional customer," said the company's chief executive officer, Millard Barron. "Early returns from the initial two locations that have been converted are encouraging, and customer response has been extremely favorable," Barron said. Payless officials declined to reveal same-store sales trends at those early conversions. But same-store sales figures overall for the second quarter suggest that Payless' focus on the professional customer is paying off, with such sales to that segment up 13 percent in the second quarter, about the same as in the first quarter. Same-store sales to do-it-yourselfers, however, continue to be disappointing, declining 8 percent in the second quarter on top of a 7.9 percent drop in the first quarter.

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