Brown Shoe reported operating earnings at Famous Footwear vaulted 59.3%
to $19 million for the fiscal second quarter and revenues rose 8% to
$316.1 million, driven by 61 new stores and a 3.6% same-store sales
increase. The bottom line improvement was particularly fueled by
gross margin gains recorded in all categories. SG&A improved 150
basis points as the chain continued to leverage expenses against a
greater store base.
On a conference call with analysts, Joe Wood, president, Brown Shoe
Retail, said Famous Footwear comp results were slightly below its
guidance largely due to an unanticipated shift in tax-free holidays.
On a comparable-store basis, athletics grew 7% in Q2 as Nike and skate
brands “continued to show impressive strength.” Wood said the athletics
business accounts for about 43% or 44% of revenues on an annual basis,
but runs as high as 57% or 58% during back-to-school. “We need
our athletic business to work during back-to-school and it has done
so,” Wood said.
In womens, comps were down 1%. Women's casual had a “very strong
quarter, bumping juniors from its perennial leadership position.”
Particular strength in women's casuals was seen in sporty looks, as
well as tailored. Women's dress and sandals remained soft, reflecting
industry trends. Men's likewise comped down slightly less than 1% in
Q2. In men's, sandals performed “extremely well,” led by sport
slides, technical athletic river and contemporary selections.
Children's turned in a 12.6% comp increase, and accessories, a
high-margin category, jumped 17.9% for the quarter.
Average unit sales for footwear were up 1.7%; customer count was up
0.4%. Inventory at the close of Q2 was down $2.1 million from last year
despite the addition of 61 stores, and aged inventory ended the quarter
at a historic low.
Regarding BTS, Wood said that with the shift of tax-free holidays and
later start dates, especially in the South, “it will be the second or
third week in September before we fully understand if the shifting of
our marketing investments to reflect the shop now/buy now just before
or after back-to-school sessions start capture the sales that we plan
for. The next four weeks obviously remain extremely important to
our success.”
Asked by an analyst if Famous was feeling the weakness in urban
customers cited by some competitors, Wood said, “We are a little bit
different. We have an urban customer [but] at the same timeframe, we
really don't have a base of stores that are driven on an urban
business. So unlike maybe a specialty store in the mall or other
concepts outside the mall, our business really isn't driven on an urban
customer so we don't get the swings that maybe some other retailers are
experiencing.”
At Q2's close, Famous had 1,024 stores versus 963 a year ago, and was
on track to open 110 and close between 35 and 40 this year.
Approximately 85% of the store base has been remodeled to the new
chocolate and cherry format.
In the 279-store specialty retail division, which includes Naturalizer
and Shoes.com, sales grew 4.3% to $62 million. Comps decreased 1.3%,
but are up 0.9% year-to-date. Shoes.com generated a 45.2% increase.
This segment widened its operating loss to $1.7 million from $1.5
million a year ago.
Wholesale sales declined 12.6% to $198.4 million, driven by the exit
from the Bass shoe business and a decision to reduce emphasis on lower
margin private-label businesses. Solid performances came from
Naturalizer, Dr. Scholl's and children's.
Brown Shoe Co.s net earnings dropped 35.5% to $9.8 million, or 22
cents a share. Excluding charges related to the company's “Earnings
Enhancement Plan” of 8 cents a share in the latest quarter, net
earnings increased 11% to $13.4 million, or 30 a share. Revenues slid
0.5% to $576.6 million.
