Collective Brands falls to 12-year low on verdict

NEW YORK (AP) _ Shares of Collective Brands Inc. fell to a 12-year low on Tuesday, following an unfavorable verdict in a lawsuit with Adidas.

A federal jury in Oregon ordered Collective Brands to pay $305 million in damages to Adidas AG. The verdict stems from a lawsuit that Adidas filed in 2001 against Payless ShoeSource — which changed its name to Collective Brands last year — for selling shoes that Adidas said violated its trademarked three-stripe logo.

Collective Brands said it is assessing the impact of the verdict and plans to ask the court to set it aside, or that it will "take all necessary steps to overturn it."

JPMorgan analyst Robert Samuels said that the verdict exceeds the combined dollar value of sales for the products at the center of the lawsuit over the past seven years.

"Given the recent acquisition of Stride Rite and the almost $900 million of debt currently on the company's balance sheet (and $232 million of cash) this is a serious concern for investors," Samuels wrote in a client note on Tuesday. "Acknowledging our limited understanding of patent law, this is one of the most excessive rulings that we have come across and would not be surprised to see it overturned."

Given the overhang from the ruling and the lack of a near-term catalyst to spur a rally, Samuels said he would recommend Collective Brands only for a "very patient investor."

Shares fell $1.67, or 13.6 percent, to $10.64 during midday trading. They earlier hit a low of $9.14, which the stock has not seen since May 1996.