Brown Shoe Company raised its EPS guidance about 5 percent Wednesday after reporting net earnings rose nearly 25 percent in the fiscal first quarter ended May 2 on a 1.9 percent increase in sales compared with a year earlier.
The owner of Famous Footwear and the Naturalizer, Ryka and Dr. Scholls brands reported net sales reached $602.3 million during the quarter compared with $591.2 million in the quarter ended May 3, 2014.
First quarter 2015 net earnings of $19.3 million, or $0.44 per diluted share, were up 24.8 percent versus $15.4 million, or $0.35 per diluted share. Gross margin of 41.3 percent was up approximately 30 basis points year-over-year, while operating margin of 5.0 percent was up approximately 10 basis points.
“First quarter exceeded our expectations virtually across the board including sales, margin and earnings – despite a late start to spring and caution around potential west coast port delays,” said Diane Sullivan, CEO, president and chairman of Brown Shoe Company. “We’re pleased with our first quarter results, which were achieved thanks to strong sales from our Brand Portfolio and exceptional gross margin and operating margin gains at Famous Footwear combined with better than expected same-store-sales.”
| US$M, except per share (unaudited) | 1Q’15 | 1Q’14 | 1Q Change | ||||||||||||
Consolidated net sales |
$ |
602.3 |
$ |
591.2 |
1.9 |
% |
|||||||||
Famous Footwear |
360.0 |
366.7 |
(1.8 |
%) |
|||||||||||
Brand Portfolio |
242.3 |
224.4 |
7.9 |
% |
|||||||||||
Gross profit |
248.5 |
242.3 |
2.6 |
% |
|||||||||||
| Margin | 41.3 | % | 41.0 | % | 30 bps | ||||||||||
SG&A |
218.2 |
213.6 |
2.1 |
% |
|||||||||||
| % of net sales | 36.3 | % | 36.1 | % | 20 bps | ||||||||||
Operating earnings |
30.3 |
28.7 |
5.6 |
% |
|||||||||||
| Margin | 5.0 | % | 4.9 | % | 10 bps | ||||||||||
Net interest expense |
4.1 |
5.2 |
(20.5 |
%) |
|||||||||||
Earnings before income taxes |
26.2 |
23.5 |
11.4 |
% |
|||||||||||
Tax rate |
25.9 |
% |
34.1 |
% |
(820 bps) |
||||||||||
Net earnings |
$ |
19.3 |
$ |
15.4 |
24.8 |
% |
|||||||||
| Per diluted share | $ | 0.44 | $ | 0.35 | 25.7 | % | |||||||||
First Quarter Highlights
Famous Footwear first quarter 2015 sales of $360.0 million were up 1.5 percent year-over-year, excluding Shoes.com, which was sold in December of 2014. For the quarter, same-store-sales were up 3.1 percent, with performance driven by continued strength in canvas, residual boot sales, and spring sandals. During the quarter, 13 stores were closed and 15 new stores were opened.
Brand Portfolio sales of $242.3 million were up 7.9 percent in the first quarter. Performance in the quarter was driven by a 9.1 percent improvement in Healthy Living, combined with a 4.9 percent improvement in Contemporary Fashion sales.
Consolidated gross profit of $248.5 million was up 2.6 percent in the first quarter, while gross margin of 41.3 percent was up approximately 30 basis points year-over-year. SG&A for the first quarter was $218.2 million, representing 36.3 percent of net sales up approximately 20 basis points versus the prior year. For the quarter, operating margins improved approximately 10 basis points year-over-year to 5.0 percent.
Inventory at the end of the first quarter was $498.5 million, down 2.8 percent from $512.8 million in the prior year. Famous Footwear inventory was down 1.2 percent, excluding Shoes.com, while Brand Portfolio inventory was up 1.0 percent. At quarter-end, Brown Shoe Company had no borrowings against its revolving credit facility and had $66.3 million of cash and equivalents. The company’s debt-to-capital ratio improved to 26.4 percent from 28.8 percent in the first quarter of 2014.
Financial Review and 2015 Outlook
“We reported a very strong first quarter, which included a relatively uneventful untangling of the west coast port situation,” said Ken Hannah, chief financial officer of Brown Shoe Company. “With the strong sales and margin performance we saw in the first quarter, we feel comfortable raising our diluted EPS guidance range for 2015 to $1.84 to $1.94.”
| Guidance Metric | FY’15 | |||
Consolidated net sales |
|
|
|
$2.61 to $2.63 billion |
Famous Footwear same-store sales |
|
|
|
Up low-single digits |
| Famous Footwear reported sales |
|
|
|
Flat, due to sale of Shoes.com |
Brand Portfolio sales |
|
|
