Brown Shoe Company, Inc. (BWS)
Q3 2008 Earnings Call
November 25, 2008 9:00 am ET
Kenneth Golden - Director, Investor Relations
Ronald A. Fromm - Chairman of the Board, Chief Executive Officer
Mark E. Hood - Chief Financial Officer, Senior Vice President
Diane M. Sullivan - President, Chief Operating Officer
Joseph W. Wood - President - Brown Shoe Retail
Christopher Svezia - Susquehanna Financial Group
Heather Boksen - Sidoti & Company
Jeffery Stein - Soleil Securities
Scott Krasik - C.L. King & Associates, Inc.
Sam Poser - Sterne, Agee & Leach
Previous Statements by BWS
» Brown Shoe Co. Inc. Q3 2009 Earnings Call Transcript
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» Brown Shoe Company, Inc. Q4 2008 Earnings Call Transcript
Good morning everyone and welcome to the Brown Shoe third quarter 2008 financial results conference call. This call is being made accessible to the public via webcast in accordance with the SEC's regulation FD.
Before we begin, I'd like to remind you of the company's Safe Harbor language. During this conference call, the company will make certain forward-looking statements to help you better understand its financial results and competitive outlook. Discussion of the company's future plans and other statements in this call that are not current or historical facts are forward-looking statements. These involve known and unknown risks and uncertainties that could cause the actual results to materially differ from historical results or from any future results expressed or implied by forward-looking statements. Factors that could cause actual results to differ materially include those listed in our press release issued this morning and available on our 8-K filed prior to this call and other risk factors listed from time to time in the company's SEC reports. Copies of the company's reports are available online and from the company's Investor Relations Department.
The company does not undertake any obligation or plan to update these forward-looking statements even though the situation may change. On the call this morning will be Ron Fromm, Chairman and CEO; Diane Sullivan, President and Chief Operating Officer; Mark Hood, Chief Financial Officer; and Joe Wood, President of Brown Shoe Retail.
Now I’d like to turn the call over to Ron Fromm.
Ronald A. Fromm
As you know, it was a challenging quarter and we experienced a slowdown in consumer traffic and spending that has impacted retailers and wholesalers of footwear and apparel. Macroeconomic forces significantly altered consumer shopping patterns mid quarter, and we began to take decisive action and proactive steps to manage inventory and expenses. We have a great team here and they managed the business with great rigor, and adjusted mid-stream to respond to these unprecedented challenges.
We are now into the heart of our planning and budgeting process, and following the FFANY New York show next week, we will complete the working of the details of our 2009 budget.
As we approach our business for 2009, we are developing multiple scenarios that will give us the flexibility to position us to achieve the best possible outcome as we set our plans and operate in this down-turned environment. We do not see an immediate change in the economic environment; however, we are developing initiatives to enable us to compete more effectively and garner market share in a more efficient resilient manner.
So, what does this mean for Brown Shoe? Well, we are working harder to differentiate our offerings and drive newness in the market through our core brands as well as the newly developed brands. As you are aware, we have developed a strong pipeline of new businesses to more effectively compete and win market share. These new businesses were developed not only to increase our penetration in new accounts and channels but also because many of them provide terrific vertical opportunities at Famous Footwear.
Our portfolio is shifting toward higher margin brands and away from low margin private label. We see this as positive movement that will be accelerating in the years ahead. As you expect, we are also intensely focused on efficiency and are applying strict disciplines to our management of expenses and capital in order to lower our cost and maximize cash flow and profitability. We are reviewing every dollar of capital and expense to ensure that we receive an appropriate return. In doing so, we will change the pace of expenditures for new stores and major capital projects.
We have dramatically cut our store expansion plans for the 2009-2011 timeframe and now expect to open a net of just 25 Famous Footwear stores next year. We will also reduce our modeling and re-modeling activity, and we are also indefinitely delaying our plans for headquarters redevelopment. In doing so, we will forego a potential gain in the fourth quarter to which we had previously guided related to the sale of the real estate we own here in Clayton, but we believe this is an appropriate decision given the climate.
Our logistics and IT initiatives are on plan and on budget and are strategically significantly important and designed to increase operating efficiencies. However, we will monitor the pace of the investments in these projects closely.
At this time, we will maintain our investment in the brands of businesses that are generating strong returns and driving our growth. During November, we increased our equity steak in the Sam Edelman brand to 50% furthering the partnership we began some 15 months ago. Importantly, Brown Shoe continues to deliver on its core values, applying conservative philosophies to our business such as our stringent inventory management disciplines.
We believe firmly that Brown Shoe is prepared to weather the economic downturn. We have a heritage in footwear spanning 130 years and have successfully operated in both growing and declining economies. We operate a diversified portfolio of brands having long established and valued partnerships throughout retail, and our vast sourcing, design, and distribution expertise will also be a key advantage for us as we navigate through these unprecedented times.