Brown Shoe Company reported third quarter earnings rose 21.2 percent to $33.1 million, or 75 cents per share. Revenues rose 3.8 percent. Wholesale segment sales jumped 18.2 percent with both Healthy Living and Contemporary Fashion contributing strong double-digit sales improvement. Famous Footwear’s comps were ahead 1.6 percent, driven by continued strong growth in canvas and aided by an increase in both sandals and boots.
Gross margin for the third quarter of 2014 was 39.9 percent up 30 basis points compared to 39.6 percent in the prior year.
Wholesale overachieved again, with sales up 18.2 percent in third quarter, and both Healthy Living and Contemporary Fashion contributed strong double-digit sales improvement. At Famous Footwear, our focus on big ideas for back-to-school continued to deliver. Same-store-sales were up 1.6 percent, for the 10 weeks that make up this key selling season, said Diane Sullivan, CEO, president and chairman of Brown Shoe Company. Although our biggest quarter of the year is past, with nine strong months behind us — and an easier comp ahead of us for the fourth quarter — we expect to deliver a strong 2014.
Third Quarter Highlights
Famous Footwear third quarter 2014 sales of $435.4 million were down 1.0 percent year-over-year, with same-store-sales down 0.2 percent. For the back-to-school selling season, weeks 24 through 33, same-store-sales were up 1.6 percent. Performance in the quarter was driven by continued strong growth in canvas and aided by an increase in both sandals and boots. During the quarter, six stores were closed or relocated and 12 new stores were added.
Wholesale sales of $242.6 million were up 18.2 percent in the third quarter. For the Healthy Living platform, wholesale sales of $118.3 million were up 12.4 percent, while Contemporary Fashion wholesale sales of $124.1 million were up 24.4 percent.
Consolidated gross profit of $290.7 million was up 4.5 percent in the third quarter, while gross margin improved by 30 basis points to 39.9 percent. SG&A for the third quarter was $237.5 million, or 32.6 percent of net sales, which was down approximately 60 basis points versus the prior year. For the quarter, operating margins improved approximately 90 basis points year-over-year to 7.3 percent.
Inventory at the end of the third quarter was $567.8 million, up 4.3 percent from $544.6 million in the prior year. Famous Footwear inventory was down 1.2 percent, while Wholesale inventory was up 31.0 percent. At quarter-end, Brown Shoe Company had $14.0 million of borrowings against its revolving credit facility and $39.1 million of cash and equivalents. The companys debt-to-capital ratio improved to 28.3 percent from 30.6 percent in the third quarter of 2013.
Financial Review and 2014 Outlook
Thanks to strong wholesale results in the third quarter, along with steady performance at Famous Footwear, we are raising our full-year EPS guidance to $1.65 to $1.69, said Russ Hammer, chief financial officer of Brown Shoe Company. While we expect to end the year on a positive note, we remain aware of the promotional potential at retail for the holiday season and alert to possible shifts in consumer sentiment.
