Brown Shoe Company, Inc., which owns the Naturalizer, Dr. Scholl’s Shoes, LifeStride, Avia and Ryka active footwear brands,  reported net sales of $640.2 million for the the fourth quarter 2012 versus fourth quarter 2011 net sales of $628.9 million.

 
Results for both the fourth quarter of 2012 and 2011 included sales of $2.8 million and $16.5 million, respectively, from brands and businesses the company has divested. Excluding exited brands, year-over-year net sales were up 4.8 percent in the quarter.
 
The company operates nearly 1,300 Famous Footwear and Naturalizer retail stores and also sells through major department and specialty stores, on 14 branded ecommerce sites, and on many additional third-party retail websites.
Net earnings were $4.0 million, or $0.09 per diluted share, in the fourth quarter of 2012 versus a loss of ($8.2) million, or ($0.21) per diluted share, in the prior year. Fourth quarter 2012 results included portfolio realignment costs of $2.9 million, while earnings for the fourth quarter of 2011 included portfolio realignment and integration related costs of $18.5 million. On an adjusted basis, net earnings of $5.9 million, or $0.14 per diluted share, improved 43.0 percent compared to $4.1 million, or $0.10 per diluted share, in the prior year.
For full year 2012, net sales of $2.60 million compared to $2.58 billion in 2011. Results for both 2012 and 2011 included sales from exited brands and businesses of $42.5 million and $92.5 million, respectively. Excluding exited brands, 2012 sales were up 2.6 percent over 2011. Full year 2012 includes 53 weeks, compared to 52 weeks in 2011, with the additional week occurring in the fourth quarter. The 53rd week increased net sales by $21.2 million and had an immaterial impact on fourth quarter 2012 earnings.
Net earnings for 2012 were $27.5 million, or $0.64 per diluted share, versus $24.6 million, or $0.56 per diluted share, in 2011. Earnings for 2012 included portfolio realignment, organization change and integration related costs of $32.9 million, while earnings for 2011 included portfolio realignment and integration related costs of $30.8 million, which were partially offset by a $20.6 million gain on the sale of AND 1. On an adjusted basis, 2012 net earnings of $48.6 million, or $1.13 per diluted share, improved 60.4 percent compared to $30.3 million, or $0.70 per diluted share, in 2011.
Gross profit margin for the fourth quarter of 2012 improved to 39.3 percent from 37.9 percent in 2011. For the full year, it improved to 38.9 percent from 38.6 percent in 2011.
In 2012, we hit several milestones at Famous Footwear, by achieving record-breaking sales for the 52-week year, as well as our highest annual operating profit, said Diane Sullivan, president and chief executive officer of Brown Shoe Company. We also strengthened our balance sheet, by reducing short term borrowings by nearly $100 million and reduced our SG&A expenses by $18.3 million. Thanks to the hard work of the entire Brown Shoe Company team, we ended 2012 on a high note, as our share price increased by 106 percent over the course of calendar 2012.

US$M, except per share (unaudited)

14 Weeks 13 Weeks 4Q 53 Weeks 52 Weeks FY
4Q12 4Q11 Change 4Q12 4Q11 Change
Consolidated net sales $640.2 $628.9 1.8% $2,598.1 $2,582.8 0.6%
Famous Footwear 380.1 352.4 7.9% 1,514.3 1,456.3 4.0%
Wholesale Operations 194.5 205.1 (5.2%) 845.2 870.9 (3.0%)
Specialty Retail 65.6 71.4 (8.1%) 238.5 255.6 (6.7%)
Gross profit 251.7 238.6 5.5% 1,010.4 996.6 1.4%
Margin 39.3% 37.9% 140 bps 38.9% 38.6% 30 bps
SG&A 238.5 230.0 3.7% 919.0 937.3 (2.0%)
% of net sales 37.3% 36.6% 70 bps 35.4% 36.3% – 90 bps
Net restructuring, other special charges 2.7 16.5 (83.5%) 24.0 23.7 1.5%
Impairment of intangible assets — — — 5.8 — —
Operating earnings (loss) 10.5 (7.9) n/m 61.6 35.6 73.3%
% of net sales 1.6% (1.3%) 290 bps 2.4% 1.4% 100 bps
Net interest expense 5.9 5.8 0.4% 23.1 26.5 (13.0%)
Earnings (loss) before income tax 4.6 (13.7) n/m 38.5 9.1 325.9%
Tax rate 13.7% 50.7% 29.4% 3.6%
Net earnings (loss) from discontinued operations — (1.4) — — 15.7 —
Net earnings (loss) $4.0 ($8.2) 149.1% $27.5 $24.6 11.8%
Per diluted share $0.09 ($0.21) 142.9% $0.64 $0.56 14.3%
Adjusted net earnings $5.9 $4.1 43.0% $48.6 $30.3 60.4%
Per diluted share $0.14 $0.10 40.0% $1.13 $0.70 61.4%
Fourth quarter highlights
Famous Footwear reported record fourth quarter 2012 sales of $380.1 million, a 7.9 percent year-over-year improvement, with good growth in athletic shoes, boat shoes and womens boots. On a 52 week same-store-sales basis, the fourth quarter was up 4.4 percent over the prior year. During the quarter, the company closed or relocated 18 stores and added 12 new stores, and average revenue per square foot improved 6.9 percent year-over-year.
Contemporary Fashion platform wholesale sales were up slightly in the fourth quarter, with the companys Sam Edelman and Franco Sarto brands delivering strong performance. In the Healthy Living portfolio, wholesale sales were up 1.8 percent, with contribution from LifeStride, Ryka and Dr. Scholls Shoes. Excluding exited brands, Wholesale Operations sales were up 1.6 percent year-over-year in the fourth quarter.
Consolidated gross profit was up in the fourth quarter, while gross profit margin of 39.3 percent improved by approximately 140 basis points versus the prior year. SG&A for the fourth quarter was $238.5 million, or 37.3 percent of net sales, up approximately 70 basis points from 36.6 percent of net sales in the prior year. For the quarter, adjusted operating earnings improved 39.0 percent to $13.4 million from $9.7 million in the fourth quarter of 2011.
Inventory at the end of the fourth quarter was $533.3 million, down 5.1 percent compared to $561.8 million in the prior year. Wholesale inventory was down 21.6 percent, while Famous Footwear inventory was up 2.3 percent.
At quarter-end, Brown Shoe Company had $380.6 million in availability under its revolving credit facility and $68.2 million in cash and cash equivalents. The companys debt-to-capital ratio declined to 41.6 percent from 49.1 percent in the fourth quarter of 2011.
Full Year Highlights
Famous Footwear reported full year 2012 sales of $1,514.3 million, a 4.0 percent year-over-year improvement, with adjusted annual operating earnings topping $100 million. On a 52-week basis, same-store-sales in 2012 were up 4.5 percent over 2011. During the year, the company closed or relocated 89 stores and added 55 new stores, and average revenue per square foot improved to $199.
Contemporary Fashion platform wholesale sales were up 11.0 percent in 2012, with the companys Sam Edelman brand closing in on the $100 million sales threshold. In the Healthy Living portfolio, wholesale sales were down 3.5 percent. Excluding exited brands, Wholesale Operations sales were up 1.6 percent year-over-year in 2012.
Consolidated gross profit was up in 2012, while gross profit margin of 38.9 percent improved by approximately 30 basis points over 2011. SG&A for 2012 was $919.0 million, or 35.4 percent of net sales versus 36.3 percent in the prior year. For 2012, adjusted operating earnings improved 44.6 percent to $94.5 million from $65.4 million in 2011.