Famous Footwear's operating profits jumped 43% in the third quarter to $28.6 million from $20 million a year ago. Sales improved 7.3% to $389.2 million with the help of a 4.7% comp gain and ten more stores versus Q3 last year.
On a conference call with analysts, Diane Sullivan, president and COO of the Brown Shoe Co. parent company, said Famous Footwear's Q3 sales and operating earnings exceeded expectations. Traffic was up 2.7%, pairs per transaction grew 3.3%, and footwear average unit retails increased 1.1% versus last year. A solid performance was seen in malls and strip centers, as well as “nice improvement” in outlet and a 34% jump at famousfootwear.com.
By category, adult athletics continued to fuel sales with a 5.9% comp gain and represented 50% of sales in the quarter. Double-digit increases were seen in running and skate, led by Nike, DC, Puma and Converse. Women's showed some improvement with a 5.2% comp increase, driven by athletics and boots. Women's Casual saw some “solid improvement.” In kids, comps inched up 1%, led by athletics. Accessories, the retailer’s smallest category, generated a 33.6% comp gain.
Gross margins dipped 10 basis points to 44% of sales with increased promotions early in the quarter nearly offset by the strength of boot margins later in the period.
SG&A was up $2.4 million, primarily related to increases in facilities cost from the higher store count and incentive compensation.
Inventories at the quarter's close were down 2.3% on average.
Regarding the fourth quarter, Sullivan said Famous has ramped up its receipts of key categories and brands, most notably boots and wellness product, “which we think will be the key drivers through holiday and in to spring led by Skecher Shape-ups and Reebok’s Easy Tone.” Its “Make Today Famous” campaign will continue with national TV advertising and social media marketing through viral video and Twitter initiatives as well as a Famous Footwear iPhone will be increased.
Overall, Brown Shoe's profit jumped 57% to $16.3 million, or 38 cents a share. On Nov. 17, BWS estimated earnings would reach between 40 to 41 cents a share, well above Wall Street's consensus estimate at the time of 30 cents. Both periods included special charges. Adjusted for restructuring and other special charges, operating earnings were $36.6 million versus $29.6 million in the year-earlier period, a 23.6% gain. Sales dipped 1% to $625.6 million.