Famous Footwear's fiscal first quarter sales dipped 0.4% to $317.6 million from $318.8 million in the year-ago period. The addition of 66 net new stores since the prior year wasn't enough to offset a 4.9% drop in comp store sales. The chain also increased its store closings planned for this year from 55 to 70 stores as part of a renewed effort to improve the profitability rate at the chain.
With 55 new stores planned for this year, net new stores openings are now expected to be flat to down 15 stores in '09, and net closings of 30 stores are now planned in each of the next two years.
“We continue to be committed to on the long term getting back to that 6.5% to 7.5% operating margin that Famous Footwear achieved a few years ago, and cleansing and rinsing the real estate portfolio is part of that process,” said Ron Fromm, Brown's chairman and CEO. He also noted that numerous kickouts at three and five years will enable the chain to do exit leases “in a pretty orderly fashion.”
In the first quarter, average unit retails rose 5.1% and gross margin was even at 43%. Expenses were up $4.1 million due to new store openings, leading operating earnings to fall 60.5% to $3.0 million from $7.6 million. Better-than-expected cost controls still helped net results beat internal plans.
Diane Sullivan, Brown's president and COO, said consumers are buying “with that emphasis on need over want,” impacting traffic. Customers also shopped early in the quarter but “the Easter build was below our expectations” due to inclement weather.
Athletics continued to lead Famous' performance with comps up 2.8%. Sullivan said athletic remains driven by strong skate styles from brands like DC, running styles from brands such as Nike and ASICS, and fashion and value athletics such as Converse. Increases in athletic inventories are being planned for BTS, when the category ramps up to about 60% of sales. Comps grew 6% in accessories, but declined 12.7% in women's, 12.9% in men's and 8.8% in kid's. At the quarter's end, average inventories were down 5.1%, in line with comp trends.
Joe Wood, president of Brown Shoe Retail, noted that the chain ran approximately two less weeks of BOGO sales in the first quarter versus a year ago. Replacing those promotions with item-priced vehicles “had some success,” But BOGOS may increase later in the year.
“If the consumer accepts what we did in the first quarter, terrific,” Wood said. “If not, we'll compete at a BOGO level a little more about aggressively in second and third, but, again, consumer will tell us if we can stay in the current strategy.”