Brown Shoe, parent company of Famous Footwear said net sales for the subsidiary during the 13-week period ended July 31, 2010 increased 10.6% to $347.3 million. The sales results were driven by an 11.8% same-store sales increase, which reflects positive performances across all categories, channels, and geographies in the quarter. Overall net sales saw a similar 14.5% bump from the second quarter of 2009 to $585.8 million. Net earnings (loss) attributable to Brown Shoe Company, Inc. were $5.3 million, or 12 cents per diluted share, compared to a net loss of $4.2 million, or 10 cents per diluted share, in the second quarter of 2009. On an adjusted basis, excluding charges related to the Company's information technology initiatives, net earnings were $6.5 million, or 15 cents per diluted share, compared to a net loss of $3.0 million, or 7 cents per diluted share in the second quarter of 2009. See Schedule 4 attached for a reconciliation to net earnings (loss) on a GAAP basis and the discussion of “Non-GAAP Financial Measures.”
Ron Fromm, Brown Shoe's Chairman and Chief Executive Officer, said, “The positive momentum for our retail and wholesale brands continued in the second quarter and resulted in strong sales growth across our multi-channel portfolio and a significant improvement in earnings during the period. This performance reflects our growing engagement with our consumers, built upon exceptional product and compelling merchandising and marketing plans.
We have seen tremendous growth from our Wholesale division, with strong performances in the quarter from Naturalizer, Dr. Scholl's, and our contemporary fashion brands. Additionally, Famous Footwear drove a double-digit sales gain with a significantly reduced promotional cadence in the quarter, resulting in solid year-over-year gross profit rate improvement. As a result of the strong performance for the first six months of the year, we are proud to have achieved our short-term milestone of delivering adjusted earnings of $1.00 per diluted share on a trailing 12-month basis in a much faster timeframe than previously anticipated.”
Fromm concluded, “We remain well-positioned to continue our market share gains during the important Back-to-School season and are encouraged by the early results we have seen. Historically, one out of 10 American families shops at Famous Footwear during Back-to-School, and we expect 2010 to be no exception. We plan to drive increased market share gains with a powerful assortment of brands and traffic-generating TV, print and digital-marketing campaigns. Our portfolio of wholesale brands is equally poised for growth, as evidenced by our strong backlog for fall and holiday shipments. While the economic environment remains uncertain, we expect our initiatives to fuel a strong year for Brown Shoe and lead to increased value for our shareholders, as we continue to invest in our core brands to support our long-term growth.”
Consolidated Results for the Second Quarter of 2010:
Net sales for the second quarter were $585.8 million, up 14.5% over $511.6 million in the year-earlier quarter;
Famous Footwear net sales improved 10.6% to $347.3 million. The sales results were driven by an 11.8% same-store sales increase, which reflects positive performances across all categories, channels, and geographies in the quarter;
Net sales in the Wholesale division rose 25.8% to $178.6 million, driven by sales increases across all of its channels of distribution; and
Net sales in the Specialty Retail division were $59.8 million, reflecting a 6.8% same-store sales increase.
Gross profit rate climbed 90 basis points to 40.7% of net sales compared with the year-ago level of 39.8%;
The key driver was a 320 basis point improvement in the Famous Footwear division versus the same period last year, benefiting from 85% fewer store BOGO days than in the year-ago period and improved sell-through across all categories; and
This improvement was partially offset by a 230 basis point decline in gross profit rate in the Wholesale division, attributable primarily to an increased mix of sales to third parties as well as shifts in brand and channel mix and increased freight costs.
Selling and administrative expenses increased to $224.5 million from $206.6 million in the year-ago second quarter. As a percent of net sales, selling and administrative expenses were 38.3%, a decrease of 210 basis points, resulting from better expense leverage from the Company's improved sales performance. The year-over-year increase in expense was principally related to increased payroll costs, a portion of which is variable with sales volume, a 44% increase in marketing expense, and higher incentive compensation expense due to improved performance. These increases were partially offset by operating 64 fewer stores across the retail portfolio as well as expense controls across the enterprise;
Net restructuring and other special charges related to the Company's information technology initiatives were $1.9 million and $2.0 million in the 2010 and 2009 second quarters, respectively;
Operating earnings improved to $12.1 million, contrasted with an operating loss of $5.0 million in the second quarter of 2009;
Net interest expense was $4.8 million in the quarter;
The Company's effective tax rate in the second quarter of 2010 was 35.0%;
Net earnings were $5.3 million, or 12 cents per diluted share, versus a net loss of $4.2 million, or 10 cents per diluted share, in the year-ago quarter. Both quarters included after-tax charges of $1.3 million, or 3 cents per diluted share, related to the Company's information technology initiatives;
Inventory at quarter-end was $578.1 million, a 9.7% increase from the year-ago level of $526.8 million. Average units on a per-store basis at Famous Footwear increased 8.9% at quarter-end versus the year-ago period, reflecting the strong sales trend and outlook. Inventory at the Wholesale division increased 28.3% year-over-year, consistent with a strong, unshipped order position; and
At quarter-end, the Company had $331.9 million in availability under its revolving credit facility and had $30.7 million in cash and cash equivalents. During the second quarter, the Company completed the acquisition of Edelman Shoe, Inc. for $32.7 million in cash and $7.3 million in stock.
Outlook
Based on its current outlook, the Company expects the following:
Consolidated net sales for the full year of 2010 are expected to grow in the low double-digit range, with third quarter net sales expected to increase in the low-teens range;
Famous Footwear same-store sales are expected to grow in the high single- to low double-digit range for both the full year of 2010 and the third quarter. Famous Footwear plans to open 30 to 35 stores while closing 50 stores in 2010;
Wholesale net sales are currently estimated to grow in the high-teens range for the full year of 2010, with low- to mid-20's growth in the third quarter;
Gross profit rate in the second half of 2010 is expected to be in the range of 40.0 to 40.5%;
Selling and administrative expenses as a percent of net sales are expected to be in the range of 37.5 to 38.0% for the full year of 2010, which includes net restructuring and other special charges of $7.0 million to $7.5 million for the Company's information technology initiatives. Third quarter selling and administrative expenses as a percent of net sales are expected to be in the range of 35.8 to 36.3%, which includes net restructuring and other special charges of $2.0 to $2.5 million for information technology initiatives as well as an increase in marketing and incentive compensation costs versus the third quarter last year of approximately $20.0 million, or 29 cents per diluted share on an after-tax basis;
Depreciation and amortization of capitalized software and intangible assets are expected to total $50.0 million to $52.0 million for the full year of 2010;
Net interest expense is expected to approximate $20.0 million to $21.0 million for the full year of 2010;
The Company expects an effective tax rate of 36.5 to 37.0% for the full year of 2010; and
Purchases of property and equipment and capitalized software are targeted in the range of $60.0 million to $63.0 million for the full year of 2010.
|
BROWN SHOE COMPANY, INC. |
|||||||||||||
|
(Thousands, except per share data) |
Thirteen Weeks Ended |
Twenty-six Weeks Ended |
|||||||||||
|
July 31, |
August 1, |
July 31, |
August 1, |
||||||||||
|
Net sales |
$ |
585,756 |
$ |
511,621 |
$ |
1,183,474 |
$ |
1,050,361 |
|||||
|
Cost of goods sold |
347,286 |
307,981 |
697,444 |
638,557 |
|||||||||
|
Gross profit |
238,470 |
203,640 |
486,030 |
411,804 |
|||||||||
|
Selling and administrative expenses |
224,448 |
206,620 |
448,963 |
419,337 |
|||||||||
|
Restructuring and other special charges, net |
1,891 |
1,998 |
3,608 |
4,612 |
|||||||||
|
Operating earnings (loss) |
12,131 |
(4,978) |
33,459 |
(12,145) |
|||||||||
|
Interest expense |
(4,810) |
(4,914) |
(9,322) |
(10,163) |
|||||||||
|
Interest income |
49 |
145 |
67 |
288 |
|||||||||
