| | | Contacts: |
| | | Investors |
| | | Peggy Reilly Tharp, Brown Shoe Company |
| | | (314) 854-4134, ptharp@brownshoe.com |
| | | Media |
| | | Kelly Malone, Brown Shoe Company |
| | | (314) 854-4093, kmalone@brownshoe.com |
Brown Shoe Company Reports Third Quarter 2013 Results
and Raises EPS Guidance Range
Famous Footwear delivers record sales of $439.6 million
Sales at wholesale operations improve 4.5% to $205.3 million
ST. LOUIS, November 26, 2013 – Brown Shoe Company (NYSE: BWS, brownshoe.com) today reported third quarter 2013 financial results, with net sales of $702.8 million up 1.0% versus third quarter 2012 net sales of $696.0 million, excluding sales from discontinued operations for both quarters. Results for the third quarter of 2013 and 2012 included sales of $0.2 million and $1.4 million, respectively, from brands and businesses the company has exited.
The company reported third quarter 2013 net earnings of $27.3 million, or $0.63 per diluted share, up 12.4% compared to $24.3 million, or $0.56 per diluted share, in the prior year. Third quarter 2012 included $2.6 million of costs related to the company’s portfolio realignment efforts ($1.6 million on an after-tax basis, or $0.04 per diluted share). Gross profit margin for the third quarter of 2013 declined 50 basis points to 39.6% from 40.1% in 2012.
“Famous Footwear reported record sales in the third quarter, with strength across all geographies, climate zones and genders. We also reported a 4.9% increase in same-store-sales(1) for the quarter,” said Diane Sullivan, president and chief executive officer of Brown Shoe Company. “For our wholesale business, we saw continued improvement. Sales were up 4.5% in the quarter, as our trend-right styles continued to resonate with consumers.”
| US$M, except per share (unaudited) | 13 Weeks | 3Q |
| 3Q’13 | 3Q’12 | Change |
| Consolidated net sales | $702.8 | $696.0 | 1.0% |
| Famous Footwear | 439.6 | 436.8 | 0.6% |
| Wholesale Operations | 205.3 | 196.4 | 4.5% |
| Specialty Retail | 57.9 | 62.8 | (7.8%) |
| Gross profit | 278.2 | 279.3 | (0.4%) |
| Margin | 39.6% | 40.1% | (50 bps) |
| SG&A | 233.5 | 236.2 | (1.1%) |
| % of net sales | 33.2% | 33.9% | (70 bps) |
| Restructuring and other special charges, net | – | 2.1 | n/m |
| Operating earnings | 44.7 | 41.0 | 9.0% |
| % of net sales | 6.4% | 5.9% | 50 bps |
| Net interest expense | 5.1 | 5.3 | (3.8%) |
| Earnings from continuing operations before income taxes | 39.5 | 35.7 | 10.9% |
| Tax rate | 31.6% | 32.0% | (40 bps) |
| Net earnings (loss) from discontinued operations | 0.2 | – | n/m |
| Net earnings (loss) | $27.3 | $24.3 | 12.4% |
| Per diluted share | $0.63 | $0.56 | 12.5% |
| Adjusted net earnings | $27.3 | $25.9 | 5.5% |
| Per diluted share | $0.63 | $0.60 | 5.0% |
Third Quarter Highlights
Famous Footwear third quarter 2013 record sales of $439.6 million were up 0.6% year-over-year, with same-store-sales up 4.9%. For the back-to-school selling season, weeks 24 through 33, same-store-sales were up 5.6%. The strong performance in the quarter was led by good sales growth in sport slides, canvas shoe styles, sandals and lightweight running. During the quarter, the company closed or relocated 22 stores and added 11 new stores, as average revenue per square foot continued to improve.
Wholesale sales of $205.3 million were up 4.5% in the third quarter, excluding sales from discontinued brands. For the Healthy Living platform, wholesale sales of $106.6 million were down 5.6% (excluding sales from discontinued brands) reflecting the shift of approximately $7 million of sales into the second quarter from the third quarter, primarily for Naturalizer. On a year-to-date basis, Healthy Living sales improved 1.2% over 2012. The company’s Contemporary Fashion wholesale sales of $98.4 million were up 19.3% in the third quarter, excluding sales from discontinued brands, with strong double-digit growth from both Sam Edelman and Franco Sarto.
Consolidated gross profit of $278.2 million was down 0.4% in the third quarter, and gross margin of 39.6% declined by approximately 50 basis points versus the prior year. SG&A for the third quarter was $233.5 million, or 33.2% of net sales, which was down approximately 70 basis points from 33.9% of net sales in the prior year. For the quarter, operating margins improved 50 basis points to 6.4%.
Inventory at the end of the third quarter was $544.6 million, up from $512.2 million in the prior year. Wholesale inventory was up 8.5%, while Famous Footwear inventory was up 4.8%.
At quarter-end, Brown Shoe Company had no borrowings against its revolving credit facility and $42.4 million in cash and cash equivalents. The company’s debt-to-capital ratio improved to 30.6% from 41.7% in the third quarter of 2012.
Financial Review and 2013 Outlook
“To account for our strong performance year-to-date, we are raising our adjusted diluted EPS guidance to a range of $1.36 to $1.40,” said Russ Hammer, chief financial officer of Brown Shoe Company. “For the fourth quarter, we expect to operate under the same level of caution as many of our peers, as uncertainty around traffic, promotional activity and consumer sentiment appears to be permeating the overall industry this holiday season.”
| Metric | FY’13 |
| Consolidated net sales | $2.53 to $2.54 billion |
| Famous Footwear same-store sales | Up low-single digits |
| Wholesale Operations net sales | Up mid-single digits for continuing operations |
| Gross profit margin | Up approximately 10 basis points for continuing operations |
| SG&A | $910 to $915 million |
| Non-recurring costs | $31 million |
| Net interest expense | $21 to $22 million |
| Effective tax rate, on adjusted basis | 31% to 32% |
| Earnings per diluted share | $0.82 to $0.86 |
| Adjusted earnings per diluted share | $1.36 to $1.40 |
| Depreciation and amortization | $54 to $56 million |
| Capital expenditures | $54 to $56 million |
Investor Conference Call
Brown Shoe Company will webcast an investor conference call at 9:00 a.m. ET today, Nov. 26, 2013. The webcast and slides will be available at investor.brownshoe.com/news/events. A live conference call will be available at (877) 217-9089 for analysts in North America or (706) 679-1723 for international analysts by using the conference ID 11145746.
A replay will be available for a limited period at investor.brownshoe.com/news/events/archive. Investors may also access the replay by dialing (855) 859-2056 in North America or (404) 537-3406 internationally and using the conference ID 11145746 through Tuesday, Dec. 3, 2013.
(1) Same-Store-Sales: For comparability purposes, same-store-sales for the third quarter of 2013 are calculated based on retail sales for weeks 27 through 39 in 2013 as compared to weeks 28 through 40 in 2012. This adjustment is due to the impact of the 53rd week of sales in the fourth quarter of fiscal 2012. The calculation for the third quarter of 2013 appropriately reflects the change in same-store-sales on a true retail calendar basis.
Non-GAAP Financial Measures: In this press release, the company’s financial results are provided both in accordance with generally accepted accounting principles (GAAP) and using certain non-GAAP financial measures. In particular, the company provides historic and estimated future gross profit, operating earnings, net earnings and earnings per diluted share adjusted to exclude certain gains, charges and recoveries, which are non-GAAP financial measures. These results are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help identify underlying trends in the company’s business and provide useful information to both management and investors by excluding certain items that may not be indicative of the company’s core operating results. These measures should not be considered a substitute for or superior to GAAP results. Reconciliations to the applicable GAAP financial measures have been included in the attached schedules.
Definitions
All references in this press release, outside of the condensed consolidated financial statements that follow, unless otherwise noted, related to net earnings attributable to Brown Shoe Company, Inc. and diluted earnings per common share attributable to Brown Shoe Company, Inc. shareholders, are presented as net earnings and earnings per diluted share, respectively.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This press release contains certain forward-looking statements and expectations regarding the company’s future performance and the performance of its brands. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These risks include (i) changing consumer demands, which may be influenced by consumers' disposable income, which in turn can be influenced by general economic conditions; (ii) intense competition within the footwear industry; (iii) rapidly changing fashion trends and purchasing patterns; (iv) customer concentration and increased consolidation in the retail industry; (v) political and economic conditions or other threats to the continued and uninterrupted flow of inventory from China, where Brown Shoe Company relies heavily on manufacturing facilities for a significant amount of their inventory; (vi) the ability to recruit and retain senior management and other key associates; (vii) the ability to attract, retain and maintain good relationships with licensors and protect intellectual property rights; (viii) the ability to secure/exit leases on favorable terms; (ix) the ability to maintain relationships with current suppliers; (x) compliance with applicable laws and standards with respect to lead content in paint and other product safety issues; (xi) the ability to source product at a pace consistent with increased demand for footwear; and (xii) the impact of rising prices in a potentially inflationary global environment. The company's reports to the Securities and Exchange Commission contain detailed information relating to such factors, including, without limitation, the information under the caption Risk Factors in Item 1A of the company’s Annual Report on Form 10-K for the year ended Feb. 2, 2013, which information is incorporated by reference herein and updated by the company’s Quarterly Reports on Form 10-Q. The company does not undertake any obligation or plan to update these forward-looking statements, even though its situation may change.
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About Brown Shoe Company
Brown Shoe Company is a $2.6 billion, global, footwear company whose shoes are worn by people of all ages, from all walks of life. Our products are available virtually everywhere — in the over 1,200 Famous Footwear and Naturalizer retail stores we operate, in hundreds of major department and specialty stores, on 14 branded ecommerce sites, and on many additional third-party retail websites. Through our broad range of products, we serve three key market segments. Our Family brands — Famous Footwear, Famous.com, and shoes.com — are one-stop-shopping destinations for high quality, affordable styles for a family’s every occasion. Active people who want comfort, style and performance can look to our Healthy Living brands — Naturalizer, Dr. Scholl's, LifeStride and Ryka. Our Contemporary Fashion brands — Via Spiga, Vince, Sam Edelman, Franco Sarto, Carlos Santana and Fergie Footwear — keep fashionistas in step with the latest trends. At Brown Shoe Company, we inspire people to feel good and live better... feet first!
