St. Louis, Missouri-based
Brown Shoe Company, Inc.
) recently posted second quarter 2012 adjusted earnings of 16 cents
per share, breezing past the Zacks Consensus Estimate of 3 cents
and the year-ago quarter loss of 6 cents per share. The
better-than-expected results were attributable to cost control
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On GAAP basis, the company reported loss of $2.5 million, or 6
cents per share, better than a loss of $4.6 million, or 11 cents
per share, a year earlier.
The company reported net sales of $599.3 million, down 3.4% year
over year, due to sluggish performances at the Wholesale division
and Specialty Retail.
Segment wise, Famous Footwear sales climbed 1.6% to $350.3 million
in the second quarter, thanks to higher sales of running shoes and
sandals. However, revenue at the Wholesale division fell 9.4% to
$195.0 million, due to the loss from exited brands, partially
offset by the solid performance of existing brands. Sales at the
Specialty Retail also dropped 10.8% to $54.0 million.
Same-store sales at Famous Footwear crept up 3.9% and also compared
favorably with the year-ago rise of 0.2%. Same-store sales at
Specialty Retail slipped 1.5% during the quarter as opposed to a
5.2% upside in the year-ago quarter.
During the quarter, adjusted gross margin expanded 140 bps to
39.0%, aided by impressive performance of the Famous Footwear
division (up 160 bps) and Wholesale division (up 40 bps), partially
offset by the plunge in Specialty Retail division (down 50 bps).
Moreover, adjusted operating margin expanded 40 bps to 0.2%,
benefiting from 120 bps plunge in SG&A expense as a percentage
of revenue. Lower SG&A expense was attributable to cost-saving
During the quarter, Brown Shoe opened 14 new Famous Footwear stores
and closed or relocated 26 underperforming stores. At the end of
the quarter, the company had 1,054 Famous Footwear stores and 224
Specialty Retail stores.
To boost profitability, the company continues to realign its
portfolio by closing underperforming stores and discarding
struggling business units. Brown Shoe plans to shut down
approximately 90 stores in 2012 and approximately 40 to 50 stores
in 2013 and 2014. The benefit of portfolio realignment is mainly
weighted towards the latter half of 2012 and into 2013.
At the end of the quarter, the company had cash and cash
equivalents of $47.4 million and shareholders' equity of $407.7
million. At the end of the quarter, Brown Shoe had $405.0 million
available under its current revolving credit facility. The
company's debt-to-capital ratio declined to 43.6% from 53.4% in the
For 2012, the company tightened its adjusted earnings guidance in
the range of 85 to 95 cents per share from its previous
expectations of 83 to 95 cents per share. The sales guidance
remains unchanged at $2.57- $2.59 billion.
Footwear retailer and wholesaler Brown Shoe is optimistic regarding
2012 based on better-than-expected first half 2012 results.
However, it remains apprehensive regarding the overall
macroeconomic environment and consumer spending.
We expect estimates to go up in the coming days as Brown Shoe
raised the lower end of its full-year profit outlook and reported
better-than-expected second quarter results. The Zacks Consensus
Estimates for 2012 and 2013 are pegged at 92 cents and $1.19 per
Brown Shoe has a Zacks #2 Rank, implying a Buy rating over the
short term. We also reiterate our long-term Neutral recommendation
on the stock.
One of Brown Shoe's primary competitors,
), a global leader in sports equipment and apparel, reported
fourth-quarter 2012 earnings of $1.17 per share, down 6.0% from the
year-ago earnings and missing the Zacks Consensus Estimate of $1.37