Famous Footwear delivered a 4.9% comp gain in the fiscal fourth quarter on top of a 9% increase in the prior-year quarter. But overall operating earnings for the chain, which is owned by Brown Shoe Co., grew only modestly, held back by increased marketing and store selling expenses.


Famous Footwear operating earnings increased 2.9% to $14.3 million. Sales increased 3.7% to $355.5 million. The sales gain was fueled by low-single-digit increases in traffic and average unit retail and a mid-single-digit improvement in the conversion rate. Sales were up across all genders, channels, and geographies. Boots were a key driver across genders, and women's running, casual, and juniors were also key contributors. Sales of non-toning product were up 3.9% on a comp basis.


“Toning footwear continues to sell well at Famous as well, though down and as expected from the pace and average retail levels achieved at its peak in 2010,' said Diane Sullivan, Brown Shoe's president and COO, on a conference call with analysts. 

 

Strength in lightweight and technical running product is also helping offset any lost volume.


“The good news is that our early indications on this are very positive, and we're confident that these categories will not only fill the gap but will provide additional growth,” said Sullivan.  “And for the first six weeks in the quarter, toning and running combined were equal to the same levels in the same period last year. And importantly, the addition of toning product and now with lightweight and technical running, has both broadened our customer base.”


Current quarter-to-date comp results are positive despite extreme weather across the country earlier in the quarter, according to Sullivan. “Our confidence is supported by the fact that our hot and warm markets are performing at a rate significantly above the Company average for month-to-date,” she added.


FF gross margin improved 50 basis points to 44.6% of sales in the quarter due to strong performance from higher margin categories, including boots, which saw nearly a 17% increase at nearly a 50% gross margin, as well as operating with 33% fewer store BOGO days than in the year-ago period.


For the year, Famous' operating income doubled to $90.4 million from $44.6 million in fiscal 2009. Revenues advanced 9.0% to $1.49 billion on a 10.5% comp increase. Gross margins improved to 45.0% of sales from 43.5%, with 44% fewer store BOGO days during the year. Sales per square foot reached $187/sf in fiscal 2010 versus $167/sf in fiscal 2009.
Companywide, Brown Shoe Co.'s fourth quarter earnings fell 34%, falling short of analysts' estimates, as issues with its new information technology systems hurt its wholesale division's gross profit.  EPS missed the low-end of the projected EPS range by 3 cents a share.
E-commerce sales across the company exceeded $120 million, increasing by 21% for both the year and the quarter, including a 14.4% increase at Shoes.com.


Total inventory at quarter-end increased 14.8% to $524.3 million. The increase was driven by a 7.8% increase in inventory levels at Famous Footwear.


Inventory excluding toning was down 1.9% on a per store basis.
Brown Shoe lowered its EPS expectations for fiscal 2011 to a range of $1.25 to $1.32, from a range of $1.31 to $1.43, to reflect its acquisition of American Sporting Goods and ongoing challenges associated with its fourth quarter systems conversion.


The estimate includes 10 cents to 12 cents in accretion from the ASG brands, and also includes the impact of inventory purchase accounting on 2011 cost of goods sold as well as transaction and integration costs that are expected to be in the range of 12 cents to 15 cents.