Brown Shoe Company reported net income in the second quarter rose 17.5 percent to $18.1 million, or 41 cents a share, from $15.4 million, or 35 cents, a year earlier. Sales reached $635.9 million, up 2.3 percent versus second quarter 2013 net sales of $621.7 million.

Earnings were above Wall Street's consensus estimate of 35 cents s share.

Gross margin for the second quarter of 2014 was 40.8 percent compared to 41.0 percent in the prior year.

“Our second quarter results reflect the health of both our retail and wholesale businesses, as we continue to benefit from – and expand on – our portfolio realignment efforts,” said Diane Sullivan, CEO, president and chairman of Brown Shoe Company. “At Famous Footwear, our focus on delivering a seamless omni-channel experience to our consumers helped kick off our Back-to-School selling season. At our wholesale brands, our trend-right merchandise is resonating with both consumers and retailers.”


 
Second Quarter Highlights

Famous Footwear second quarter 2014 sales of $393.6 million were up 1.4 percent year-over-year, with same-store-sales up 1.6 percent. Performance in the quarter was driven by canvas, as casual styles continued to resonate with consumers. During the quarter, 16 stores were closed or relocated and 17 new stores were added.

Wholesale sales of $194.3 million were up 7.7 percent in the second quarter. For the Healthy Living platform, wholesale sales of $106.6 million were up 1.7 percent in the second quarter, while Contemporary Fashion wholesale sales of $87.3 million were up 17.1 percent.

Consolidated gross profit of $259.6 million was up 2.0 percent in the second quarter, while gross margin decreased by 20 basis points to 40.8 percent. SG&A for the second quarter was $228.3 million, or 35.9 percent of net sales, which was down approximately 130 basis points versus the prior year. For the quarter, operating margins improved approximately 120 basis points year-over-year to 4.9 percent.

Inventory at the end of the second quarter was $657.7 million, up 6.8 percent from $615.9 million in the prior year. Wholesale inventory was up 22.9 percent, while Famous Footwear inventory was up 2.5 percent. At quarter-end, Brown Shoe Company had no borrowings against its revolving credit facility and $46.9 million of cash and equivalents. The company’s debt-to-capital ratio improved to 28.1 percent from 34.2 percent in the second quarter of 2013.

Financial Review and 2014 Outlook

“Despite a continued, industry-wide decline in traffic patterns and an overall tough retail environment, we were able to deliver against expectations in the second quarter,” said Russ Hammer, chief financial officer of Brown Shoe Company. “To account for our better-than-expected second quarter performance, we are raising our annual guidance range to $1.50 to $1.60.”

Brown Shoe previously had been forecasting earnings in the range of $1.47 to $1.57.