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 But years of conservative management had left it in the worst place for a seller of fashion - out of date.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 the bottom line.
Goldman Sachs analyst Margaret Mager said in a research note that she expected the company to get profits back to and perhaps above historic peak levels.
"CEO Matt Rubel has identified the appropriate focus areas including improvement in consumer segmentation, merchandise, messaging and the sale experience to drive results and growth," Mager said.
Rubel's move to Topeka, Kan.-based Payless in July, replacing the retiring Steven Douglass, was a natural progression for a man credited with turning Nike Inc.'s Cole Haan division from a staid, men's luxury shoe brand into a high-profile fashion line.
His background in merchandising and retailing included stints managing such well-known brands as J. Crew, Revlon and Tommy Hilfiger.
Rubel said he was attracted to what he saw as Payless' untapped potential of marrying its ubiquitous presence in shopping centers to shoppers' need for affordable quality.
"Great platform. It had great distribution into the marketplace but wasn't emotionally connecting with the customer in the way I though it could," he said.
Other observers are less diplomatic in what they saw as the company's problems.
"His predecessor had really done a disservice to the Payless shareholders and customers by making some really boneheaded decisions," said John Shanley of Susquehanna Financial Group. He pointed to decisions to eliminate popular products and using cash flow to open underperforming stores in South America instead of upgrading the chain's computer system.
Rubel has taken his sense of style to renovate the product mix, sending buyers to Europe to study fashion trends and incorporate that into new designs. He's also introduced a "House of Brands" concept, inking deals with footwear companies like youth-oriented American Eagle and producing the Shaquille O'Neal Dunkman athletic shoe - priced at $40, a fraction of what his old boss Nike charges for its Air Jordans at the Foot Locker across the mall.
He also developed a series of store renovations to help stores emphasize new products and get female shoppers thinking about buying purses to go with their new shoes. The "hot zone" concept now on display in Independence will soon expand from 40 to 250 stores.
Most importantly, Rubel said, he's trying to change people's perceptions of mass-produced footwear and that just because something isn't pricey doesn't mean it's cheap. He frequently points out the deal with Abaete will provide women with shoes they've seen on fashion runways in New York for between $25 and $45.
"The whole thing is, style and design do not have to be exclusive, they can be inclusive," he said. "So the mission we've made for ourselves is to democratize style and fashion. Make it for everyone."
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