Famous Footwear’s Q3 Comps Climb Double-Digits on Women’s Strength

On a conference call with analysts, Diane Sullivan, president and COO of Brown Shoe, Famous' parent, said the family shoe chain's sales performance was driven by low-single-digit gains in traffic and average unit retail as well as double-digit improvement in conversion rates.

 

Women's saw a high-single-digit comp gain with running, toning, casual shoes and sandals being “important contributors.” Men's grew mid-single-digits, driven by athletics, sandals and casual. Both kids and accessories increased low-double-digits.

Gross margins improved 70 basis points to 44.0% of sales from 43.3% of sales in the year-ago period, reflecting improved sell-through across categories and 19% fewer store BOGO days than Q3 last year.
Sales per square foot for the trailing 12-month period was $184/sf compared to $164/sf in the prior 12 months. Sullivan noted that according to Brand Index, which measures daily the public perception of about 850 brands across 34 different sectors, Famous had the largest improvement in overall brand health and quality perception by consumers during the July to September time period, rising nearly 14%.

Excluding toning products, average store inventory at quarter-end increased 5.6%, close to a comp increase of 6% in the quarter for non-toning products. The gain also reflects investments in key product trends such as boots and toning and a push to add more sizes and widths. Management felt they “missed some opportunities” last year by delaying shipments until the fourth quarter.

Regarding toning, Sullivan said that while Famous has “seen some moderations in the high-growth trend” in the category, demand for toning product remains healthy and margins in the category are expected to approximate its store average. Toning will generate over $100 million in sales for Famous this year.

“Toning has been a positive catalyst for Famous Footwear's business beyond the category itself,” added Sullivan. “It has led to new customer visits, expanded our opportunity in the athletic category, and has proven we can sell a higher price point versus our historical average,” said Sullivan.

Over 30% of the customers purchasing toning product in FF stores are new to Famous and one-third of those customers returned and made at least an additional purchase. The category is expected to represent roughly 6% to 7% of its volume in the fourth quarter. Sullivan nonetheless expects the toning category will “moderate somewhat” in 2011, particularly as lightweight and technical running styles gain momentum.

Comps at Famous are up in the high-single-digits month-to-date in November despite operating without BOGO in the month until last week versus being in BOGO all through the same period last year.
Overall, Brown Shoe's third quarter earnings advanced 14.1% to $18.6 million, or 42 cents a share.  BWS revenues climbed 14.5% to $716.1 million.

For 2010, EPS is expected between 90 cents and 95 cents for the year, or a range of $1.00 to $1.05 excluding one-time charges, which compares to 26 cents last year. Initial estimates for 2011 call for EPS ranging from $1.31 to $1.43.  Net sales and comps are expected to rise in the low- to mid-single-digit range.