Brown Shoe Co. had a bit of a tough first quarter as revenues slid slightly overall, but the results were much different at its Famous Footwear concept, where sales and comps both increased, but were well outpaced by gains in operating profit.
Revenues grew 7.6% to $325.3 million on a 3.4% comp gain for Q1, while operating profit climbed 31.8% to $21 million. Famous Footwears bottom line was helped by an increase in regular-priced sales that fueled a gross margins improvement of 90 basis points, as well as a 20 basis point improvement in SG&A as a percent of sales.
“Continued improvement in the freshness and velocity of our inventory as well as growth and preference for the Famous Footwear brand enable us to achieve these outstanding results,” said Joe Wood, president of the Famous Footwear division, on a conference call.
By category, athletics comps were up 1%, led by Nike, Asics and skate. Womens continued its momentum with a 5.9% gain, driven by junior casual product, particularly “impressive increases” by Skechers and Rocket Dog. Mens was up 2.4% with strength in boots in cold climate states and sandals in warm states. Kids was up 12.3%, led by casual styles with Buster Brown and Skechers leading the way.
Prompted by an analyst question on the call, Wood admitted that like many chains, Famous Footwear was impacted by the Easter shift and the “unbelievable weather patterns” during the quarter. But the chain continues to benefit from a repositioning started four years ago that moved the concept away from the item-driven, low-cost retail business model.
“Fortunately, the concept was strong enough and our message was strong enough the quarter came out fine, but it was up and down,” said Wood “It's a brand new Famous Footwear that continues to evolve very quickly.”
Famous Footwear plans to open 110 stores this year while closing approximately 40 to 45 units. Square footage is expected to grow about 6% this year. It also remodeled 41 stores in the quarter and 74% of its retail store base reflected the new chocolate and cherry format at the quarter's close. By back to school, all stores will be converted to this new look.
Looking ahead, Wood remained upbeat about Famous Footwear's prospects for the second half. “Consumers are continuing to show preference for our stores as we consistently meet our family's needs for fashion, quality and value,” said Wood.
“We believe we have identified strong selling and differentiated assortments across all categories and genders. We also believe our marketing is more effective as we continue to develop multi-channel communications that delivers the Famous story directly to her and her family.”
In Brown Shoe's specialty store division, which primarily includes Naturalizer Retail stores and Shoes.com e-Commerce, sales increased 6.9% to $60.3 million. The Specialty retail segment recorded an operating loss of $2.9 million. Company-wide, Brown Shoe earned $9.6 million, or 22 cents per share, compared with $10 million, or 23 cents per share, for the same quarter in 2006.
Excluding one-time charges related to the closures of its Italian sales office, its Dover, N.H., distribution center, and its Needham, Mass., office, the company posted an adjusted profit of $13 million, or 29 cents per share. Revenue slid 1.6% to $566.3 million from $575.5 million due to the exit of the Bass business at the end of 2006 and a reduced emphasis on private label.
