Payless puts its best shoe forward

INDEPENDENCE, Mo. — When Matt Rubel took over as chief executive of Payless ShoeSource Inc. last summer, he inherited a company a little worn down at the heel.

With more than 4,600 stores, Payless is the largest specialty shoe retailer in the country. But years of conservative management had left it in the worst place for a seller of fashion — out of date.

The company continued to use a 1980s-era bubble-lettered logo, some stores hadn’t seen a new coat of paint in a decade and the stores’ simple layout of shoe box aisles fostered self-service but didn’t do much to showcase new products.

Worse, customers found the product mix itself leaned more toward providing functional shoes for bargain shoppers, not catering to style mavens.

“People just thought of us as cheap shoes,” Rubel said as he stood outside the Payless store in Independence Center, an upscale mall in suburban Kansas City.

The Independence store represents Payless’ future and reflects Rubel’s vision for the company.

A new, contemporary logo hangs above the door, beckoning shoppers into a brightly lit area, dubbed the “hot zone,” with displays of the store’s latest styles and the company’s growing line of handbags and accessories.

The shoes themselves — including fashionable cork wedges, espadrilles and strappy sandals — reflect more contemporary fashion and feature more brand names, such as Champion and Airwalk, to go alongside the chain’s in-house products.

The company this fall plans to roll out Abaete for Payless, a line of shoes created by New York designer Laura Poretzky, and it recently signed a deal to put out shoes affiliated with the American Ballet Theater — a virtual lock for attracting young girls and their moms.

“I think Matt was clearly charged with shaking things up,” said Michael Atmore, editorial director for industry magazine Footwear News. “This is just the beginning really. He’s doing a lot of things that have worked for other people.”

The challenges are still massive. Overall, the shoe market has exploded in the past year, growing almost 11 percent to $42.7 billion, according to market research firm The NPD Group.

NPD analyst Marshal Cohen said shoppers are becoming more judicious in their apparel purchases, buying several pairs of shoes to freshen up their wardrobe rather than replace it.

That has competing shoe chains, such as Famous Footwear and Shoe Carnival, as well as the big-box retailers Wal-Mart Stores Inc. and Target Corp., also trying to boost their products with better styling — Target, for example, is selling shoes designed by Isaac Mizrahi.

The true bargain hunters could prove a sticky balance for Payless as the company tries to introduce higher-priced shoes without forgetting the shoppers who aren’t willing to pay more than $20 for a pair.

So far, it’s unknown how well the public is receiving Rubel’s changes.

In Payless’ first quarter, the company said sales for stores open at least a year rose 0.4 percent from the same period a year ago. The uptick came from costlier shoes, as the average price rose 11.2 percent, and not more buyers — unit sales declined 8.6 percent.

Analysts are optimistic, however, noting that the company’s first-quarter earnings rose 19 percent to $36 million and turned a profit last year for the first time since 2002. They also said Payless is only in the early stages of its efforts to rejuvenate the brand and selling more fashionable, high-margin shoes can only help.