loss of $7.6 million, or 18 cents a share, in the first quarter. Sales declined
2.8% to $538.7 million from $554.5 million in the year ago quarter. Famous
Footwear net sales were $317.6 million, a decline of 0.4% from the first
quarter of last year, as same-store sales declined 4.9% in the quarter,
partially offset by operating 66 more stores.
Net sales at the company's wholesale division decreased by
5.0% in the quarter versus the same period last year, with net sales of
Naturalizer increasing by 0.6% versus the same period last year and Dr.
Scholl's decreasing by 5.1%;
The loss in the quarter includes of information technology
initiatives costs of $1.7 million, or 4 cents
per diluted share. The results compare to net earnings of $7.2 million, or 17 cents, a year ago. First quarter 2008 net earnings
included costs, net of tax, of $1.1 million, or $0.03 per diluted share related
to its headquarters consolidation, offset by net recoveries of $6.2 million,
net of tax, or $0.15 per diluted share, for insurance recoveries, net of
associated fees and costs, related to environmental remediation;
Gross margin rate in the first quarter decreased 40 basis
points to 38.6% of net sales from 39.0% of net sales in the first quarter of
2008, driven by the continued promotional environment at retail as well as a
greater mix of mid-tier channel sales versus department stores sales;
Selling and administrative expenses in the first quarter
increased by $1.6 million to $212.8 million, or 39.4% of net sales, versus
$211.2 million, or 38.1% of net sales, in the same period last year. The
year-over-year change was primarily related to the impact of operating 69 more
North American stores as well as the consolidation of Edelman Shoe, Inc.,
offset partially by expense reductions across the company;
Net restructuring and other special charges (recoveries)
increased the company's operating loss by $2.6 million in the first quarter of
2009 and increased operating earnings in the year-earlier period by $8.4
million. Charges in 2009 include costs related to implementing a new
information technology platform, while the net benefit in 2008 reflects net
insurance recoveries related to environmental remediation, partially offset by
costs related to the company's headquarters consolidation initiatives;
As a result, the company generated an operating loss in the
quarter of $7.2 million versus operating earnings of $13.6 million in the first
quarter of 2008;
Net interest expense in the quarter increased $1.3 million
to $5.1 million versus $3.8 million in the first quarter of 2008 due to
increased borrowings on the company's revolving credit facility;
The company recognized a $5.2 million income tax benefit in
the quarter due to its loss in the quarter;
Inventory at quarter-end was $408.5 million, as compared to
$403.6 million at the end of the first quarter of 2008. The year-over-year
inventory increase was due primarily to operating 69 more North American stores
and the consolidation of Edelman Shoe, Inc. Average inventory on a per store
basis at Famous Footwear was down 5.1% in the quarter and average inventory per
store at the company's North American Specialty Retail stores was down 5.6%, on
a constant dollar basis, as compared to first quarter-end last year;
At quarter-end, the company's borrowings against its
revolving credit facility were $39.0 million versus no borrowings in the
year-earlier period and $112.5 million at the end of fiscal 2008. Cash and cash
equivalents at quarter-end were $46.1 million versus $63.2 million at first
quarter-end last year and $86.9 million at the end of fiscal 2008.
Ron Fromm, Brown Shoe's Chairman and CEO, stated, “As
anticipated, the consumer spending environment remained challenging in the
first quarter, which negatively impacted our sales and profitability. During
the quarter, we were successful in advancing our key priorities that focused on
managing expenses, inventory, working capital and debt, while maximizing
opportunities within our largest businesses of Famous Footwear, Naturalizer,
and Dr. Scholl's. As a result, our sales and operating performance were
slightly better than our expectations, we generated positive cash flow, and we lowered
our net borrowings by more than $30 million from the end of last year.”
Fromm concluded, “While sentiment in the industry may
have improved some since last quarter, visibility remains difficult, so we will
continue to manage our business with discipline, focusing on expense, capital,
and balance sheet management. In keeping with this objective, we have decreased
our Famous Footwear store opening plan for 2009 and we now expect net openings
to be flat to down 15 in 2009 (open 55 and close 55 to 70). Additionally, we
are planning net store closings of approximately 30 stores per year in 2010 and
2011. We expect sequential improvement of operating results in the second
quarter, resulting in a narrower loss than in the first quarter, and that our
efforts to manage expenses will enable us to generate positive net earnings for
the full-year.”
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Thirteen Weeks Ended
(Thousands, except per share data) May 2, 2009 May 3, 2008
Net sales $538,740 $554,491
Cost of goods sold 330,576 338,029
Gross profit 208,164 216,462
- % of Net Sales 38.6% 39.0%
Selling and administrative expenses 212,717 211,175
- % of Net Sales 39.4% 38.1%
Restructuring and other special
charges (recoveries), net 2,614 (8,387)
Equity in net loss of nonconsolidated
affiliate - 114
Operating (loss) earnings (7,167) 13,560
Interest expense, net (5,106) (3,758)
(Loss) earnings before income taxes (12,273) 9,802
Income tax benefit (provision) 5,202 (2,980)
Net (loss) earnings $(7,071) $6,822
Less: Net earnings (loss) attributable
to noncontrolling interests 532 (373)
Net (loss) earnings attributable
to Brown Shoe Company, Inc. $(7,603) $7,195
Basic (loss) earnings per common
share attributable to Brown Shoe
Company, Inc. shareholders $(0.18) $0.17
Diluted (loss) earnings per common
share attributable to Brown Shoe
Company, Inc. shareholders $(0.18) $0.17
Basic number of shares 41,566 41,463
Diluted number of shares 41,566 41,675
