Famous Footwear Posts Solid Q3 Despite Weaker BTS Athletic Business…

Brown Shoe Company, Inc. moved further into its strategy to strengthen its specialty retail and wholesale businesses in the third quarter, but the expenses attributed to the changes had less of an impact than they did in the second quarter. Those changes include initiatives to strengthen the children’s and Bass businesses, upgrading the Naturalizer platform with a new brand strategy, and integrating the recently-acquired Bennett Footwear business. Excluding after-tax charges related to the closure of underperforming Naturalizer stores, adjusted net earnings for the quarter would have been up nearly 24% to $23.0 million, or $1.21 per diluted share.

The weakness in Famous Footwear’s back-to-school business carried over into Q3 a bit more than anticipated, but turned around later in the period. Division president Joe Wood said that sales didn’t turn positive until mid-September.

Mr. Wood said the women’s business continued to “lead the way” with a mid-single-digit gain in the quarter, with junior casual and women’s clogs in the sports category posting “very impressive” results. The men’s business continued to deliver “very nice comp gains” in casual, work, and hiking product. Athletics comps, which were not able to recover enough to post positive growth for the period, were driven by strength in running, trail, and skate. Wood sad they missed comping “ever so slightly” for the quarter as October came roaring back. Wood said he hadn’t seen an October as healthy in athletic “probably in the last eight to ten years.” He said they saw that trend continuing into November.

Overall Famous Footwear comps rose 2.1% for the quarter, compared to a 0.4% decline in Q3 last year. Average selling prices and traffic were both up for the period. Gross margin was 44.0% of sales, flat to last year’s figure. Operating margins were up 20 basis points to 8.0% of sales in the quarter.