Brown Shoe reported a 10.2% increase in consolidated net sales to $491.8 million for the first quarter of fiscal 2004 versus $446.4 million in the year-ago period.
Net earnings were $8.6 million for the quarter, or 45 cents per diluted share, versus net earnings of $9.0 million, or 49 cents per diluted share, in the first quarter of 2003. First quarter results for 2004 include 11 cents per diluted share cost for the assimilation and transition of the Bass footwear license, which Brown Shoe acquired on February 2, 2004.
“Our first quarter results were driven by a strong performance at Famous Footwear, which delivered same-store sales that were ahead-of-plan with an improvement in gross margins,” said Brown Shoe Chairman and CEO Ron Fromm. “We also benefited from better-than-expected results in our wholesale segment, as some wholesale shipments that were previously expected to ship during second quarter occurred in the first quarter. Additionally, we are pleased with the integration of the Bass wholesale footwear team, and continue to believe the brand offers great potential.
“Overall, we've had a strong start to the year, and look for the momentum we've created at Famous Footwear to be sustained for fiscal 2004. We will continue our program of aggressively investing in our business — – in systems, incremental marketing and updated store formats — in order to grow and build consumer preference for our retail concepts and our wholesale brands,” Fromm said.
At quarter-end, Company inventory levels were clean and current at $367 million versus $369 million at quarter-end last year. Increased wholesale inventories as a result of Bass product were more than offset by inventory decreases at Famous Footwear, where inventories were down approximately 6 percent at quarter-end on a square foot basis. Total debt at the end of the quarter was $143 million versus $148 million last year.
Retail Divisions
As previously reported, sales at Famous Footwear were up 4.2% to $272,124,000 for the quarter, from $261,115,000 for the same 13-week period last year. Same-store sales for the quarter increased 2.6%. Operating earnings increased 17.0 percent to $12,384,000 versus $10,582,000 for the year-ago period, as the chain increased sales at better margin rates during the quarter. The chain opened 12 stores in the quarter and closed 8 stores.
Naturalizer Retail, the company's 379-store chain selling the Naturalizer brand of women's shoes in both the U.S. and Canada, posted sales of $45,331,000, compared to $42,834,000 for the same period last year. Naturalizer Retail's 206 U.S.-based stores had a same-store sales increase of 4.1 percent for the quarter. The 173 Canadian stores had a same-store sales decrease of 1.0 percent for the quarter. Naturalizer opened 9 stores during the quarter and closed 8 stores.
Naturalizer Retail's operating loss was $2,220,000 versus a loss of $1,356,000 last year. The greater loss was due primarily to the same-store-sales decline in the Canadian stores and slightly lower margins during the quarter, as the Canadian chain transitions from domestically produced footwear to imported product, sourced through Brown Shoe's worldwide sourcing network.
Wholesale Divisions
Wholesale sales for the quarter were up 21.7 percent to $171,545,000 versus $140,985,000 last year, as the new Bass license added approximately $15 million to sales, and some sandal shipments to key accounts shifted to the first quarter from the second quarter. Brown Shoe's wholesale businesses include the Naturalizer, LifeStride, Bass, Carlos by Carlos Santana, and Dr. Scholl's brands, private label footwear, and the Company's Buster Brown & Co. kids' business.
Wholesale operating earnings were down slightly from last year at $12,805,000 versus $13,012,000 for the prior year quarter. Wholesale results included $3.3 million in expenses to transition the Bass line to Brown Shoe's St. Louis headquarters and distribution centers.
Wholesale sales of the company's flagship Naturalizer brand were Slightly lower than last year. Brown Shoe's LifeStride brand of women's footwear had a wholesale sales gain of 14 percent. The Company's Dr. Scholl's-licensed footwear business, and the private label footwear it sells to mass merchants, also posted strong increases over last year, while the Children's business was down about 9 percent, partially due to a contraction in the marketplace.
At the end of the quarter, unshipped wholesale orders were up 14 percent over the same time last year, including the effect of the new Bass business.
Outlook
For the second quarter, Brown Shoe estimates diluted earnings per share will be in the range of $0.60 to $0.65, versus $0.62 for the second quarter of last year. This estimate includes transition costs for the Bass footwear license of approximately $0.04 per share in the second quarter and reflects a more difficult wholesale children's business than anticipated.
The Company currently estimates fiscal 2004 diluted earnings per share in the range of $3.20 – $3.25, as compared to its previous guidance of $3.15 and last year's diluted earnings per share of $2.52. Fiscal 2004 net sales are currently estimated at $2.0 billion, versus fiscal 2003 net sales of $1.8 billion. This guidance is predicated on a store-for-store sales increases of 1 percent to 2 percent for Famous Footwear over the full year.
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Thousands, except per share data)
Thirteen Weeks Ended
May 1, May 3,
2004 2003
Net Sales $ 491,832 $ 446,444
Cost of Goods Sold 292,468 261,317
Gross Profit 199,364 185,127
- % of Sales 40.5% 41.5%
Selling & Administrative Expenses 184,447 169,790
- % of Sales 37.5% 38.0%
Operating Earnings 14,917 15,337
Interest Expense, Net 2,353 2,810
Earnings Before Income Taxes 12,564 12,527
Income Tax Provision 3,997 3,524
NET EARNINGS $ 8,567 $ 9,003
Basic Net Earnings per Common Share $ .48 $ .51
Diluted Net Earnings per Common Share $ .45 $ .49
