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Brown Shoe Steps it Up in Q4

Brown Shoe Company (BWS), operator of Famous Footwear and Naturalizer shoe stores and owner of many fashion brands including Sam Edelman, Via Spiga and Franco Sarto, reported fourth quarter 2014 financial results that beat Wall Street expectations, but tempered its earnings guidance for the current fiscal year due in part to the west coast port slowdown.

Net sales rose 2.6% to $615.4 million. Both of the company’s business segments helped drive fourth quarter results, with Famous Footwear, which includes the company’s 1,000+ Famous Footwear retail stores, delivering strong same-store-sales growth of 4.0% while Brand Portfolio sales, which include wholesale sales to thirty party retailers,  improved by an even higher 5.4%.

Famous Footwear sales of $369.4 million were up 0.8% year-over-year. For the quarter, same-store-sales were up 4 percent with performance driven by continued steady improvement in athletics and good performance in boots. During the quarter, 13 stores were closed and 10 new stores were added.

Brand Portfolio sales of $246.0 million were up 5.4% in the fourth quarter.

Gross margin was flat compared to the prior year period, at 40.2%, while SG&A was $231.2 million, or 37.6% of net sales, down approximately 90 basis points versus the prior year. For the quarter, adjusted operating margins improved approximately 90 basis points year-over-year to 2.6%.

Fourth quarter net earnings were $16.2 million, or $0.37 per diluted share, including $0.17 per diluted share of adjustments, primarily related to the sale of Shoes.com in December 2014. Adjusted net earnings of $9.0 million, or $0.20 per diluted share, were up 45.5% compared to reported net earnings of $6.2 million, or $0.14 per diluted share, in the prior year period, and beat the $.16 per share expected by analysts.

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For the full year, net sales rose 2.3% to $2.6 billion.  Famous Footwear reported full year 2014 sales of $1.6 billion, roughly flat year-over-year, including Shoes.com. Excluding Shoes.com, sales were up 1.1% in 2014, while same-store-sales were up 1.5%. During the year, 56 stores were closed and 50 new stores were added, as average revenue per square foot improved to $215. Brand Portfolio sales of $982.5 million were up 6.3% over $924.6 million in 2013.

Gross margin was flat year-over-year, at 40.4%, while operating earnings of $125.9 million were up 27.7%. SG&A for 2014 was $910.7 million, or 35.4% of net sales and down 80 basis points versus the prior year. For the year, adjusted operating margins improved by 80 basis points to 5.0%.

Reported net earnings for 2014 were $82.8 million, or $1.89 per diluted share, versus $38.1 million, or $0.88 per diluted share, in 2013. Including adjustments, they rose 23 percent to $75.6 million, or $1.72 per diluted share.

“We’re looking forward to following up a strong 2014 with additional growth in 2015, and we expect to deliver diluted EPS between $1.78 and $1.88 this year,” said CFO Ken Hannah. “While we’re confident about our 2015 strategy, we are also cautious about the potential for product delays in the first half of the year, as the west coast port situation is gradually untangled. However, we believe the supply chain changes we implemented last fall should help mitigate most of the impact.”