I see, however, that the company did well with its gross margin. Also, free cash flow saw a nice improvement. These two elements make me feel better about the drop in both sales and adjusted earnings. One thing needs to be noted, however. Some of this improvement was driven by the absence of litigation effects. This provides important context for the shareholder.

I have to say, I like to buy Payless footwear. Recently, I took advantage of the company's BOGO offer. That's buy-one-get-one-half-off, in case you didn't know. But you know what? I bet you were aware of the promotion. Payless gets consumers excited about the deal, at least from my viewpoint. It helps differentiate the business, and provides a boost in the arm to brand equity. Nevertheless, comments in the release indicate to me that opportunities for further marketing innovation, as well as additional operational efficiencies, remain in the system.

My sense is that Collective Brands will be a decent investment vehicle for the longer term. As the retail environment gets better, footwear sales should go up. But since the reaction to the earnings news was not so hot, you should be careful and do a lot of due diligence before buying. And remember that the company does have strong competitors such as Wal-Mart (NYSE: WMT) and Kohl's (NYSE: KSS). Consumers have choices about where to buy footwear. And with same-store sales for Collective Brands in need of repair, such choice will only add to the headaches for management. We'll see what happens as we get into the busy holiday season.

Disclosure: I don't own any company mentioned; positions can change without notice.