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Brown Shoe Company Reports First Quarter 2012 Results

05/18/2012

Net sales of $626.4 million

GAAP net earnings per share of $0.04

Adjusted net earnings per diluted share of $0.23

ST. LOUIS--(BUSINESS WIRE)--Brown Shoe Company, Inc. (NYSE: BWS, brownshoe.com) today reported its first quarter 2012 financial results, with net sales of $626.4 million compared to first quarter 2011 net sales of $619.6 million. First quarter net earnings of $1.7 million, or $0.04 per diluted share, compared to $3.7 million, or $0.08 per diluted share, in 2011. On an adjusted* basis, net earnings of $10.0 million, or $0.23 per diluted share, compared to $7.0 million, or $0.16 per diluted share, in the prior year. Gross profit margin for the first quarter of 2012 was 38.2% versus 40.0% in 2011.

“With sales of $626.4 million and adjusted earnings of $0.23 per share -- up 44% -- we had a great start to 2012. Strong topline sales growth and effective expense management helped drive good quarterly results, despite some gross margin pressure,” said Diane Sullivan, president and chief executive officer of Brown Shoe Company. “While good weather, an earlier Easter and an easier quarterly comp were welcome, these factors only helped to magnify the success we are seeing with the first phase of our portfolio realignment.”

“Our strong quarterly performance was better than expected and is reflective of the hard work we completed last year and are continuing to execute on this year,” continued Sullivan. “I’m looking forward to reporting ongoing benefits from these efforts throughout this year, and we will continue to evaluate our brands and our businesses against the financial hurdles we outlined during our portfolio realignment.”

   
 
US$M, except per share (unaudited) 13 Weeks 52 Weeks
  1Q’12   1Q’11   Change   1Q’12   1Q’11   Change
Famous Footwear     347.1       342.7     1.3 %     1,460.7       1,467.1     (0.4 %)
Wholesale Operations     223.2       217.1     2.8 %     877.0       796.7     10.1 %
Specialty Retail    

56.1

     

59.8

    (6.1 %)    

252.0

     

262.1

   

(3.9

%)

Consolidated net sales   $ 626.4     $ 619.6     1.1 %   $ 2,589.7     $ 2,525.9     2.5 %
Gross profit     239.1       248.0     (3.6 %)     987.7       1,004.0     (1.6 %)
Margin     38.2 %     40.0 %   -180 bps     38.1 %     39.7 %   -160 bps
SG&A expenses     218.9       234.2     (6.5 %)     922.1       932.7     (1.1 %)
% of net sales     35.0 %     37.8 %   -280 bps     35.6 %     36.9 %   -130 bps
Net restructuring, other special charges     11.5       1.7     n/m       33.4       7.9     320.4 %
Operating earnings     8.7       12.1     (28.0 %)     32.2       63.4     (49.3 %)
% of net sales     1.4 %     1.9 %   -50 bps     1.2 %     2.5 %   -130 bps
Net interest expense     6.1       6.6     (8.2 %)     26.0       21.5     20.4 %
Earnings before income tax     2.6       5.5     (52.1 %)     6.2       41.9     (85.2 %)
Tax rate     37.9 %     38.8 %   -90 bps     12.9 %     28.6 %   n/m  

Net earnings from discontinued operations

    --       0.3     (100.0 %)     15.4       0.3     n/m  
Net earnings   $ 1.7     $ 3.7     (54.0 %)   $ 22.6     $ 30.9     (26.8 %)
Per diluted share   $ 0.04     $ 0.08     (50.0 %)   $ 0.52     $ 0.70     (25.7 %)
Adjusted operating earnings   $ 21.5     $ 16.5     29.8 %   $ 70.3     $ 74.1     (5.1 %)
Adjusted per diluted share   $ 0.23     $ 0.16     43.8 %   $ 0.77     $ 0.86     (10.5 %)
       
 

First Quarter Highlights

Famous Footwear reported a year-over-year improvement in first quarter net sales of 1.3%, while same store sales were up 2.5%. Improved weather, both on a quarterly sequential and year-over-year basis, helped drive strong growth in running and sandals. During the quarter, the company closed or relocated 34 stores and added 11 new stores, and average revenue per square foot improved 4.5% over the first quarter of 2011.

Wholesale Operations net sales were up 2.8%, as sales of ongoing brands exceeded the decline in sales for exited brands. The company’s Contemporary Fashion brands were up 20.8%, with strong growth from both Franco Sarto and Sam Edelman. In the Healthy Living portfolio, Dr. Scholl’s Shoes and Ryka both saw improved performance, as spring weather trends helped drive sandal and athletic shoe sales.

Consolidated gross profit declined (3.6%) in the first quarter, while gross profit margin declined by (180) basis points. The change in gross margin, when compared to the first quarter of 2011, was primarily due to higher markdowns at both wholesale and retail. Net sales mix at retail and wholesale was 64% and 36%, respectively, versus 65% and 35% in the first quarter of 2011.

The decline in gross margin was more than offset by lower SG&A, which decreased by $15.3 million to 35.0% of net sales. These results were due to cost reduction initiatives, in conjunction with a quarterly shift in some marketing spend. In addition, the company operated fewer retail locations on a year-over-year basis.

Inventory at the end of the first quarter was $512.8 million, down (4.1%) compared to $534.7 million in the first quarter of 2011, with both Famous Footwear and Wholesale reporting a decrease in inventory. At quarter-end, Brown Shoe Company had approximately $354.3 million in availability under its revolving credit facility and $39.8 million in cash and cash equivalents.

Financial Review and 2012 Outlook

“Thanks to better than expected sales and earnings in the first quarter, we are increasing our full year EPS guidance to a range of $0.83 to $0.95,” said Mark Hood, chief financial officer of Brown Shoe Company. “While we remain cautious about the state of the economy and the pace of the consumer recovery, we are optimistic about our ability to successfully execute on our remaining portfolio realignment efforts and drive improvement in our ongoing business.”

 
Metric         FY’12
Consolidated net sales         $2.57 to $2.59 billion
Famous Footwear same-store sales         Flat to up low single-digits
Wholesale Operations net sales         Down low single-digits, reflecting brand exits
Gross profit margin         Up 20 to 40 basis points
SG&A         $920 to $925 million
Non-recurring costs         ~$20 million
Net interest expense         $23 to $25 million
Effective tax rate         38% to 40%
Earnings per diluted share         $0.53 to $0.65
Adjusted earnings per diluted share         $0.83 to $0.95
Depreciation and amortization         $57 to $58 million
Capital expenditures         $58 to $60 million
       
 

Investor Conference Call

Brown Shoe Company will webcast an investor conference call at 9:00 a.m. ET today, May 18, 2012. The webcast and accompanying slides will be available at brownshoe.com/investor. 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 78263811. A replay will be available on the website for a limited period. Investors may also access the replay by dialing (855) 859-2056 in North America or (404) 537-3406 internationally and using the conference ID 78263811 through June 2, 2012.

*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 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.

Definitions

All references in this press release, outside of the condensed consolidated financial statements that follow, unless otherwise noted, related to net earnings (loss) 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 future 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 ASG has manufacturing facilities and both ASG and Brown Shoe Company rely heavily on third-party manufacturing facilities for a significant amount of their inventory; (vi) Brown Shoe Company’s ability to utilize its new information technology system to successfully execute its strategies, including integrating ASG’s business; (vii) the ability to recruit and retain senior management and other key associates; (viii) the ability to attract and retain licensors and protect intellectual property rights; (ix) the ability to secure/exit leases on favorable terms; (x) the ability to maintain relationships with current suppliers; (xi) compliance with applicable laws and standards with respect to lead content in paint and other product safety issues; (xii) the ability to source product at a pace consistent with increased demand for footwear; (xiii) the impact of rising prices in a potentially inflationary global environment; and (xiv) the ability of Brown Shoe Company to execute on the first phase of its portfolio realignment. 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 January 28, 2012, 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.

About Brown Shoe Company

Brown Shoe Company is a $2.6 billion, global, footwear company that puts consumers and their needs first, by targeting the strategic Family, Healthy Living and Contemporary Fashion platforms. We have more than 130 years of experience, passion and product innovation and operate more than 1,300 Famous Footwear and Naturalizer retail stores across the United States, Canada and China. We also design, source and market many well-known wholesale shoe brands -- such as Naturalizer, Dr. Scholl's Shoes, LifeStride, Sam Edelman, Franco Sarto, Via Spiga, Vera Wang, Avia and Ryka -- across multiple distribution channels. In addition to our retail and wholesale operations, we maintain a strong online presence with our ecommerce sites, FamousFootwear.com, Naturalizer.com and Shoes.com. Visit brownshoe.com to learn more about us. Brown Shoe Company: feel good and live better... feet first!

 
 
 
 
 
 
SCHEDULE 1
 
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
       
13 Weeks Ended 52 Weeks Ended
(Thousands, except per share data) April 28, 2012 April 30, 2011 April 28, 2012 April 30, 2011
 
Net sales $ 626,441 $ 619,555 $ 2,589,710 $ 2,525,928
Cost of goods sold   387,377     371,591     1,601,970     1,521,970  
 
Gross profit   239,064     247,964     987,740     1,003,958  
 
Selling and administrative expenses 218,914 234,140 922,193 932,601
Restructuring and other special charges, net   11,455     1,744     33,382     7,941  
 
Operating earnings   8,695     12,080     32,165     63,416  
 
Interest expense (6,157 ) (6,698 ) (25,600 ) (21,833 )
Loss on early extinguishment of debt - - (1,003 ) -
Interest income   83     85     642     270  
 
Earnings from continuing operations before income taxes   2,621     5,467     6,204     41,853  
 
Income tax (provision) benefit   (993 )   (2,119 )   800     (11,980 )
 
Net earnings from continuing operations   1,628     3,348     7,004     29,873  
 
Discontinued operations:
Earnings from operations of subsidiary, net of tax of $0, $215, $1,097 and $215, respectively - 293 1,408 293
Gain on sale of subsidiary, net of tax of $0, $0, $6,670 and $0, respectively   -     -     13,965     -  
 
Net earnings from discontinued operations   -     293     15,373     293  
 
Net earnings   1,628     3,641     22,377     30,166  
 
Net loss attributable to noncontrolling interests   (67 )   (47 )   (219 )   (709 )
 
Net earnings attributable to Brown Shoe Company, Inc. $ 1,695   $ 3,688   $ 22,596   $ 30,875  
 
Basic earnings per common share:
From continuing operations $ 0.04 $ 0.08 $ 0.17 $ 0.69
From discontinued operations   -     -     0.36     0.01  

Basic earnings per common share attributable to Brown Shoe Company, Inc. shareholders

$ 0.04   $ 0.08   $ 0.53   $ 0.70  
 
Diluted earnings per common share:
From continuing operations $ 0.04 $ 0.08 $ 0.16 $ 0.69
From discontinued operations   -     -     0.36     0.01  

Diluted earnings per common share attributable to Brown Shoe Company, Inc. shareholders

$ 0.04   $ 0.08   $ 0.52   $ 0.70  
 
Basic number of shares 40,422 42,475 40,613 42,336
Diluted number of shares   40,744     43,006     41,093     42,699  
 
 
 
 
 
 
 
SCHEDULE 2
 
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
     
(Unaudited)
(Thousands) April 28, 2012 April 30, 2011 January 28, 2012
ASSETS
 
Cash and cash equivalents $ 39,792 $ 54,229 $ 47,682
Receivables, net 139,488 144,484 154,022
Inventories, net 512,819 534,725 561,797
Prepaid expenses and other current assets   46,051   57,468   51,637
Total current assets   738,150   790,906   815,138
 
Property and equipment, net 125,797 141,398 131,471
Goodwill and intangible assets, net 138,697 173,162 140,590
Other assets   138,178   135,103   140,277
Total assets $ 1,140,822 $ 1,240,569 $ 1,227,476
 
LIABILITIES AND EQUITY
 
Borrowings under revolving credit agreement $ 124,000 $ 288,000 $ 201,000
Trade accounts payable 182,380 171,386 190,611
Other accrued expenses   135,484   132,806   132,969
Total current liabilities   441,864   592,192   524,580
 
Long-term debt 198,680 150,000 198,633
Deferred rent 29,746 34,127 32,361
Other liabilities   57,538   44,438   58,186
Total other liabilities   285,964   228,565   289,180
 
Total Brown Shoe Company, Inc. shareholders’ equity 412,012 419,022 412,669
Noncontrolling interests   982   790   1,047
Total equity   412,994   419,812   413,716
Total liabilities and equity $ 1,140,822 $ 1,240,569 $ 1,227,476
 
 
 
 
 
 
 
SCHEDULE 3
 
BROWN SHOE COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
   
13 Weeks Ended
(Thousands) April 28, 2012 April 30, 2011
OPERATING ACTIVITIES:
Net earnings $ 1,628 $ 3,641
Adjustments to reconcile net earnings to net cash provided by (used for) operating activities:
Depreciation and amortization 13,280 14,314
Amortization of debt issuance costs 629 599
Share-based compensation expense 1,444 1,663
Tax (benefit) deficiency related to share-based plans (753 ) 431
Loss on disposal of facilities and equipment 456 308
Impairment charges for facilities and equipment 2,756 543
Deferred rent (2,615 ) (551 )
Provision for doubtful accounts 950 335
Changes in operating assets and liabilities, net of acquired business:
Receivables 13,587 (9,628 )
Inventories 49,251 39,362
Prepaid expenses and other current and noncurrent assets 6,377 268
Trade accounts payable (8,268 ) (9,155 )
Accrued expenses and other liabilities 1,900 (37,348 )
Other, net   (724 )   (1,125 )
Net cash provided by operating activities   79,898     3,657  
 
INVESTING ACTIVITIES:
Capital expenditures (7,008 ) (9,707 )
Acquisition cost - (156,636 )
Cash recognized on initial consolidation   -     3,121  
Net cash used for investing activities   (7,008 )   (163,222 )
 
FINANCING ACTIVITIES:
Borrowings under revolving credit agreement 165,000 759,500
Repayments under revolving credit agreement (242,000 ) (669,500 )
Dividends paid (2,999 ) (3,104 )
Debt issuance costs - (1,234 )
Issuance of common stock under share-based plans (2,148 ) 484
Tax benefit (deficiency) related to share-based plans   753     (431 )
Net cash (used for) provided by financing activities   (81,394 )   85,715  
Effect of exchange rate changes on cash and cash equivalents   614     1,531  
Decrease in cash and cash equivalents (7,890 ) (72,319 )
Cash and cash equivalents at beginning of period   47,682     126,548  
 
Cash and cash equivalents at end of period $ 39,792   $ 54,229  
 
 
 
 
 
 
 
SCHEDULE 4
 
BROWN SHOE COMPANY, INC.
RECONCILIATION OF NET EARNINGS AND DILUTED EARNINGS PER SHARE (GAAP BASIS) TO ADJUSTED NET EARNINGS AND DILUTED EARNINGS PER SHARE (NON-GAAP BASIS)
           
 
13 Weeks Ended April 28, 2012 13 Weeks Ended April 30, 2011
(Thousands, except per share data)

Pre-Tax

Impact of

Charges/

Other Items

Net Earnings

Attributable to

Brown Shoe

Company, Inc.

Diluted

Earnings Per

Share

Pre-Tax

Impact of

Charges/

Other Items

Net Earnings

Attributable to

Brown Shoe

Company, Inc.

Diluted

Earnings Per

Share

 
GAAP earnings $ 1,695 $ 0.04 $ 3,688 $ 0.08
 

Charges/Other Items:

Portfolio realignment
Business exits and cost reductions $ 12,091 7,883 0.18 $ - - -
ASG acquisition and integration-related costs 675 441 0.01 1,744 1,667 0.04

ASG cost of good sold adjustment (1)

- - - 2,710 1,604 0.04
           
Total charges/other items $ 12,766     8,324     0.19   $ 4,454   3,271   0.08
 
Adjusted earnings $ 10,019   $ 0.23   $ 6,959 $ 0.16
 
 
52 Weeks Ended April 28, 2012 52 Weeks Ended April 30, 2011
(Thousands, except per share data)

Pre-Tax

Impact of

Charges/

Other Items

Net Earnings

Attributable to

Brown Shoe

Company, Inc.

Diluted

Earnings Per

Share

Pre-Tax

Impact of

Charges/

Other Items

Net Earnings

Attributable to

Brown Shoe

Company, Inc.

Diluted

Earnings Per

Share

 
GAAP earnings $ 22,596 $ 0.52 $ 30,875 $ 0.70
 

Charges/Other Items:

Portfolio realignment
Gain on sale of subsidiary $ (20,635 ) (13,965 ) (0.32 ) $ - - -
Business exits and cost reductions 31,245 19,919 0.46 - - -
ASG acquisition and integration-related costs 5,388 3,293 0.07 2,863 2,391 0.05
ASG cost of goods sold adjustment (1) 1,479 873 0.02 2,710 1,604 0.04
Loss on early extinguishment of debt 1,003 638 0.02 - - -
IT initiatives - - - 5,078 3,351 0.07
           
Total charges/other items $ 18,480     10,758     0.25   $ 10,651   7,346   0.16
 
Adjusted earnings $ 33,354   $ 0.77   $ 38,221 $ 0.86
 
 

(1) In accordance with GAAP, purchase accounting rules require the company to record inventory at fair value (i.e., expected selling price less costs to sell) on the acquisition date. This results in lower than typical gross margins when the acquired inventory is sold. This adjustment reflects the elimination of the unfavorable impact of lower gross margins for ASG product sold in the first and second quarters of 2011.

 
 
 
 
 
 
 
SCHEDULE 5
 
BROWN SHOE COMPANY, INC.
SUMMARY FINANCIAL RESULTS BY SEGMENT
 
                   
SUMMARY FINANCIAL RESULTS
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended
April 28, April 30, April 28, April 30, April 28, April 30, April 28, April 30, April 28, April 30,
(Thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Net Sales $ 347,107 $ 342,727 $ 223,203 $ 217,064 $ 56,131 $ 59,764 $ - $ - $ 626,441 $ 619,555
 
Gross Profit $ 155,140 $ 156,634 $ 60,755 $ 65,951 $ 23,169 $ 25,379 $ - $ - $ 239,064 $ 247,964
Adjusted Gross Profit $ 155,140 $ 156,634 $ 61,845 $ 68,661 $ 23,390 $ 25,379 $ - $ - $ 240,375 $ 250,674
 
Gross Profit Rate 44.7 % 45.7 % 27.2 % 30.4 % 41.3 % 42.5 % - - 38.2 % 40.0 %
Adjusted Gross Profit Rate 44.7 % 45.7 % 27.7 % 31.6 % 41.7 % 42.5 % - - 38.4 % 40.5 %
 
Operating Earnings (Loss) $ 18,301 $ 18,782 $ 1,979 $ 6,019 $ (3,527 ) $ (3,744 ) $ (8,058 ) $ (8,977 ) $ 8,695 $ 12,080
Adjusted Operating Earnings (Loss) $ 25,326 $ 18,782 $ 6,275 $ 8,729 $ (2,538 ) $ (3,744 ) $ (7,602 ) $ (7,233 ) $ 21,461 $ 16,534
 
Operating Earnings (Loss) % 5.3 % 5.5 % 0.9 % 2.8 % (6.3 %) (6.3 %) - - 1.4 % 1.9 %
Adjusted Operating Earnings (Loss) % 7.3 % 5.5 % 2.8 % 4.0 % (4.5 %) (6.3 %) - - 3.4 % 2.7 %
 
Same-store Sales % 2.5 % (3.9 %) - - 2.6 % (1.0 %) - - - -
 
Number of Stores 1,066 1,112 - - 227 252 - - 1,293 1,364
                                       
 
 
RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP)
 
Famous Footwear Wholesale Operations   Specialty Retail Other Consolidated
13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended
April 28, April 30, April 28, April 30, April 28, April 30, April 28, April 30, April 28, April 30,
(Thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Gross Profit $ 155,140 $ 156,634 $ 60,755 $ 65,951 $ 23,169 $ 25,379 $ - $ - $ 239,064 $ 247,964
 

Charges/Other Items:

Portfolio realignment
Business exits and cost reductions - - 1,090 - 221 - - - 1,311 -
ASG cost of good sold adjustment - - - 2,710 - - - - - 2,710
                   
Total charges/other items   -     -     1,090     2,710     221     -     -     -     1,311     2,710  
 
Adjusted Gross Profit $ 155,140   $ 156,634   $ 61,845   $ 68,661   $ 23,390   $ 25,379   $ -   $ -   $ 240,375   $ 250,674  
 
 
Operating Earnings (Loss) $ 18,301 $ 18,782 $ 1,979 $ 6,019 $ (3,527 ) $ (3,744 ) $ (8,058 ) $ (8,977 ) $ 8,695 $ 12,080
 

Charges/Other Items:

Portfolio realignment
Business exits and cost reductions 7,025 - 3,621 - 989 - 456 - 12,091 -
ASG cost of good sold adjustment - - - 2,710 - - - - - 2,710
ASG acquisition and integration-related costs - - 675 - - - - 1,744 675 1,744
                   
Total charges/other items   7,025     -     4,296     2,710     989     -     456     1,744     12,766     4,454  
 
Adjusted Operating Earnings (Loss) $ 25,326   $ 18,782   $ 6,275   $ 8,729   $ (2,538 ) $ (3,744 ) $ (7,602 ) $ (7,233 ) $ 21,461   $ 16,534  
 
 
 
 
 
 
 
SCHEDULE 5 - CONTINUED
 
BROWN SHOE COMPANY, INC.
SUMMARY FINANCIAL RESULTS BY SEGMENT
                   
 
SUMMARY FINANCIAL RESULTS
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended 52 Weeks Ended 52 Weeks Ended
April 28, April 30, April 28, April 30, April 28, April 30, April 28, April 30, April 28, April 30,
(Thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Net Sales $ 1,460,694 $ 1,467,095 $ 877,012 $ 796,724 $ 252,004 $ 262,109 $ - $ - $ 2,589,710 $ 2,525,928
 
Gross Profit $ 633,727 $ 661,494 $ 251,150 $ 231,323 $ 102,863 $ 111,141 $ - $ - $ 987,740 $ 1,003,958
Adjusted Gross Profit $ 633,727 $ 661,494 $ 255,276 $ 234,033 $ 103,466 $ 111,141 $ - $ - $ 992,469 $ 1,006,668
 
Gross Profit Rate 43.4 % 45.1 % 28.6 % 29.0 % 40.8 % 42.4 % - - 38.1 % 39.7 %
Adjusted Gross Profit Rate 43.4 % 45.1 % 29.1 % 29.4 % 41.1 % 42.4 % - - 38.3 % 39.9 %
 
Operating Earnings (Loss) $ 62,034 $ 81,018 $ 12,699 $ 29,567 $ (7,410 ) $ (6,805 ) $ (35,158 ) $ (40,364 ) $ 32,165 $ 63,416
Adjusted Operating Earnings (Loss) $ 71,811 $ 81,018 $ 33,014 $ 32,808 $ (5,428 ) $ (6,805 ) $ (29,120 ) $ (32,954 ) $ 70,277 $ 74,067
 
Operating Earnings (Loss) % 4.2 % 5.5 % 1.4 % 3.7 % (2.9 %) (2.6 %) - - 1.2 % 2.5 %
Adjusted Operating Earnings (Loss) % 4.9 % 5.5 % 3.8 % 4.1 % (2.2 %) (2.6 %) - - 2.7 % 2.9 %
 
Same-store Sales % 0.3 % 5.7 % - - 2.6 % 2.8 % - - - -
 
Number of Stores 1,066 1,112 - - 227 252 - - 1,293 1,364
                                       
 
 
RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP)
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended 52 Weeks Ended 52 Weeks Ended
April 28, April 30, April 28, April 30, April 28, April 30, April 28, April 30, April 28, April 30,
(Thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Gross Profit $ 633,727 $ 661,494 $ 251,150 $ 231,323 $ 102,863 $ 111,141 $ - $ - $ 987,740 $ 1,003,958
 

Charges/Other Items:

Portfolio realignment
Business exits and cost reductions - - 2,647 - 603 - - - 3,250 -
ASG cost of good sold adjustment - - 1,479 2,710 - - - - 1,479 2,710
                   
Total charges/other items   -     -     4,126     2,710     603     -     -     -     4,729     2,710  
 
Adjusted Gross Profit $ 633,727   $ 661,494   $ 255,276   $ 234,033   $ 103,466   $ 111,141   $ -   $ -   $ 992,469   $ 1,006,668  
 
 
Operating Earnings (Loss) $ 62,034 $ 81,018 $ 12,699 $ 29,567 $ (7,410 ) $ (6,805 ) $ (35,158 ) $ (40,364 ) $ 32,165 $ 63,416
 

Charges/Other Items:

Portfolio realignment
Business exits and cost reductions 9,777 - 15,668 - 1,982 - 3,818 - 31,245 -
ASG cost of good sold adjustment - - 1,479 2,710 - - - - 1,479 2,710
ASG acquisition and integration-related costs - - 3,168 - - - 2,220 2,863 5,388 2,863
IT Initiatives - - - 531 - - - 4,547 - 5,078
                   
Total charges/other items   9,777     -     20,315     3,241     1,982     -     6,038     7,410     38,112     10,651  
 
Adjusted Operating Earnings (Loss) $ 71,811   $ 81,018   $ 33,014   $ 32,808   $ (5,428 ) $ (6,805 ) $ (29,120 ) $ (32,954 ) $ 70,277   $ 74,067  
 
 
 
 
 
 
 
SCHEDULE 5 - CONTINUED
 
BROWN SHOE COMPANY, INC.
SUMMARY FINANCIAL RESULTS BY SEGMENT
                   
 
SUMMARY FINANCIAL RESULTS
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
13 Weeks Ended 26 Weeks Ended 13 Weeks Ended 26 Weeks Ended 13 Weeks Ended 26 Weeks Ended 13 Weeks Ended 26 Weeks Ended 13 Weeks Ended 26 Weeks Ended
July 30, July 30, July 30, July 30, July 30, July 30, July 30, July 30, July 30, July 30,
(Thousands) 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011
 
Net Sales $ 344,930 $ 687,657 $ 215,117 $ 432,181 $ 60,543 $ 120,307 $ - $ - $ 620,590 $ 1,240,145
 
Gross Profit $ 148,995 $ 305,629 $ 60,414 $ 126,365 $ 24,196 $ 49,575 $ - $ - $ 233,605 $ 481,569
Adjusted Gross Profit $ 148,995 $ 305,629 $ 61,893 $ 130,554 $ 24,196 $ 49,575 $ - $ - $ 235,084 $ 485,758
 
Gross Profit Rate 43.2 % 44.4 % 28.1 % 29.2 % 40.0 % 41.2 % - - 37.6 % 38.8 %
Adjusted Gross Profit Rate 43.2 % 44.4 % 28.8 % 30.2 % 40.0 % 41.2 % - - 37.9 % 39.2 %
 
Operating Earnings (Loss) $ 7,495 $ 26,277 $ 2,925 $ 8,944 $ (3,012 ) $ (6,756 ) $ (8,406 ) $ (17,383 ) $ (998 ) $ 11,082
Adjusted Operating Earnings (Loss) $ 7,495 $ 26,277 $ 4,404 $ 13,133 $ (3,012 ) $ (6,756 ) $ (7,717 ) $ (14,950 ) $ 1,170 $ 17,704
 
Operating Earnings (Loss) % 2.2 % 3.8 % 1.4 % 2.1 % (5.0 %) (5.6 %) - - (0.2 %) 0.9 %
Adjusted Operating Earnings (Loss) % 2.2 % 3.8 % 2.0 % 3.0 % (5.0 %) (5.6 %) - - 0.2 % 1.4 %
 
Same-store Sales % 0.2 % (1.9 %) - - 5.2 % 2.1 % - - - -
 
Number of Stores 1,116 1,116 - - 245 245 - - 1,361 1,361
                                       
 
 
RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP)
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
13 Weeks Ended 26 Weeks Ended 13 Weeks Ended 26 Weeks Ended 13 Weeks Ended 26 Weeks Ended 13 Weeks Ended 26 Weeks Ended 13 Weeks Ended 26 Weeks Ended
July 30, July 30, July 30, July 30, July 30, July 30, July 30, July 30, July 30, July 30,
(Thousands) 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011
 
Gross Profit $ 148,995 $ 305,629 $ 60,414 $ 126,365 $ 24,196 $ 49,575 $ - $ - $ 233,605 $ 481,569
 

Charges/Other Items:

ASG cost of good sold adjustment - - 1,479 4,189 - - - - 1,479 4,189
                   
Total charges/other items   -     -     1,479     4,189     -     -     -     -     1,479     4,189  
 
Adjusted Gross Profit $ 148,995   $ 305,629   $ 61,893   $ 130,554   $ 24,196   $ 49,575   $ -   $ -   $ 235,084   $ 485,758  
 
 
Operating Earnings (Loss) $ 7,495 $ 26,277 $ 2,925 $ 8,944 $ (3,012 ) $ (6,756 ) $ (8,406 ) $ (17,383 ) $ (998 ) $ 11,082
 

Charges/Other Items:

ASG cost of good sold adjustment - - 1,479 4,189 - - - - 1,479 4,189
ASG acquisition and integration-related costs - - - - - - 689 2,433 689 2,433
                   
Total charges/other items   -     -     1,479     4,189     -     -     689     2,433     2,168     6,622  
 
Adjusted Operating Earnings (Loss) $ 7,495   $ 26,277   $ 4,404   $ 13,133   $ (3,012 ) $ (6,756 ) $ (7,717 ) $ (14,950 ) $ 1,170   $ 17,704  
 
 
 
 
 
 
 
SCHEDULE 5 - CONTINUED
 
BROWN SHOE COMPANY, INC.
SUMMARY FINANCIAL RESULTS BY SEGMENT
                   
 
SUMMARY FINANCIAL RESULTS
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
13 Weeks Ended 39 Weeks Ended 13 Weeks Ended 39 Weeks Ended 13 Weeks Ended 39 Weeks Ended 13 Weeks Ended 39 Weeks Ended 13 Weeks Ended 39 Weeks Ended
October 29, October 29, October 29, October 29, October 29, October 29, October 29, October 29, October 29, October 29,
(Thousands) 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011
 
Net Sales $ 416,243 $ 1,103,900 $ 233,590 $ 665,771 $ 63,955 $ 184,262 $ - $ - $ 713,788 $ 1,953,933
 
Gross Profit $ 178,323 $ 483,952 $ 70,295 $ 196,660 $ 27,880 $ 77,455 $ - $ - $ 276,498 $ 758,067
Adjusted Gross Profit $ 178,323 $ 483,952 $ 71,192 $ 201,746 $ 27,880 $ 77,455 $ - $ - $ 277,395 $ 763,153
 
Gross Profit Rate 42.8 % 43.8 % 30.1 % 29.5 % 43.6 % 42.0 % - - 38.7 % 38.8 %
Adjusted Gross Profit Rate 42.8 % 43.8 % 30.5 % 30.3 % 43.6 % 42.0 % - - 38.9 % 39.1 %
 
Operating Earnings (Loss) $ 28,374 $ 54,651 $ 9,558 $ 18,502 $ 53 $ (6,703 ) $ (5,624 ) $ (23,007 ) $ 32,361 $ 43,443
Adjusted Operating Earnings (Loss) $ 28,374 $ 54,651 $ 14,063 $ 27,196 $ 53 $ (6,703 ) $ (4,517 ) $ (19,467 ) $ 37,973 $ 55,677
 
Operating Earnings (Loss) % 6.8 % 5.0 % 4.1 % 2.8 % 0.1 % (3.6 %) - - 4.5 % 2.2 %
Adjusted Operating Earnings (Loss) % 6.8 % 5.0 % 6.0 % 4.1 % 0.1 % (3.6 %) - - 5.3 % 2.8 %
 
Same-store Sales % (0.4 %) (1.3 %) - - (1.9 %) 0.7 % - - - -
 
Number of Stores 1,121 1,121 - - 242 242 - - 1,363 1,363
                                       
 
 
RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP)
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
13 Weeks Ended 39 Weeks Ended 13 Weeks Ended 39 Weeks Ended 13 Weeks Ended 39 Weeks Ended 13 Weeks Ended 39 Weeks Ended 13 Weeks Ended 39 Weeks Ended
October 29, October 29, October 29, October 29, October 29, October 29, October 29, October 29, October 29, October 29,
(Thousands) 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011
 
Gross Profit $ 178,323 $ 483,952 $ 70,295 $ 196,660 $ 27,880 $ 77,455 $ - $ - $ 276,498 $ 758,067
 

Charges/Other Items:

Portfolio realignment
Business exits and cost reductions - - 897 897 - - - - 897 897
ASG cost of good sold adjustment - - - 4,189 - - - - - 4,189
                   
Total charges/other items   -     -     897     5,086     -     -     -     -     897     5,086  
 
Adjusted Gross Profit $ 178,323   $ 483,952   $ 71,192   $ 201,746   $ 27,880   $ 77,455   $ -   $ -   $ 277,395   $ 763,153  
 
 
Operating Earnings (Loss) $ 28,374 $ 54,651 $ 9,558 $ 18,502 $ 53 $ (6,703 ) $ (5,624 ) $ (23,007 ) $ 32,361 $ 43,443
 

Charges/Other Items:

Portfolio realignment
Business exits and cost reductions - - 4,505 4,505 - - - - 4,505 4,505
ASG cost of good sold adjustment - - - 4,189 - - - - - 4,189
ASG acquisition and integration-related costs - - - - - - 1,107 3,540 1,107 3,540
                   
Total charges/other items   -     -     4,505     8,694     -     -     1,107     3,540     5,612     12,234  
 
Adjusted Operating Earnings (Loss) $ 28,374   $ 54,651   $ 14,063   $ 27,196   $ 53   $ (6,703 ) $ (4,517 ) $ (19,467 ) $ 37,973   $ 55,677  
 
 
 
 
 
 
 
SCHEDULE 5 - CONTINUED
 
BROWN SHOE COMPANY, INC.
SUMMARY FINANCIAL RESULTS BY SEGMENT
                   
 
SUMMARY FINANCIAL RESULTS
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
13 Weeks Ended 52 Weeks Ended 13 Weeks Ended 52 Weeks Ended 13 Weeks Ended 52 Weeks Ended 13 Weeks Ended 52 Weeks Ended 13 Weeks Ended 52 Weeks Ended
January 28, January 28, January 28, January 28, January 28, January 28, January 28, January 28, January 28, January 28,
(Thousands) 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012
 
Net Sales $ 352,414 $ 1,456,314 $ 205,102 $ 870,873 $ 71,375 $ 255,637 $ - $ - $ 628,891 $ 2,582,824
 
Gross Profit $ 151,269 $ 635,221 $ 59,686 $ 256,346 $ 27,618 $ 105,073 $ - $ - $ 238,573 $ 996,640
Adjusted Gross Profit $ 151,269 $ 635,221 $ 60,346 $ 262,092 $ 28,000 $ 105,455 $ - $ - $ 239,615 $ 1,002,768
 
Gross Profit Rate 42.9 % 43.6 % 29.1 % 29.4 % 38.7 % 41.1 % - - 37.9 % 38.6 %
Adjusted Gross Profit Rate 42.9 % 43.6 % 29.4 % 30.1 % 39.2 % 41.3 % - - 38.1 % 38.8 %
 
Operating Earnings (Loss) $ 7,864 $ 62,515 $ (1,763 ) $ 16,739 $ (924 ) $ (7,627 ) $ (13,070 ) $ (36,077 ) $ (7,893 ) $ 35,550
Adjusted Operating Earnings (Loss) $ 10,616 $ 65,267 $ 8,272 $ 35,468 $ 69 $ (6,634 ) $ (9,284 ) $ (28,751 ) $ 9,673 $ 65,350
 
Operating Earnings (Loss) % 2.2 % 4.3 % (0.9 %) 1.9 % (1.3 %) (3.0 %) - - (1.3 %) 1.4 %
Adjusted Operating Earnings (Loss) % 3.0 % 4.5 % 4.0 % 4.1 % 0.1 % (2.6 %) - - 1.5 % 2.5 %
 
Same-store Sales % (0.8 %) (1.2 %) - - 4.7 % 1.7 % - - - -
 
Number of Stores 1,089 1,089 - - 234 234 - - 1,323 1,323
                                       
 
 
RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP)
 
Famous Footwear Wholesale Operations Specialty Retail Other Consolidated
13 Weeks Ended 52 Weeks Ended 13 Weeks Ended 52 Weeks Ended 13 Weeks Ended 52 Weeks Ended 13 Weeks Ended 52 Weeks Ended 13 Weeks Ended 52 Weeks Ended
January 28, January 28, January 28, January 28, January 28, January 28, January 28, January 28, January 28, January 28,
(Thousands) 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012
 
Gross Profit $ 151,269 $ 635,221 $ 59,686 $ 256,346 $ 27,618 $ 105,073 $ - $ - $ 238,573 $ 996,640
 

Charges/Other Items:

Portfolio realignment
Business exits and cost reductions - - 660 1,557 382 382 - - 1,042 1,939
ASG cost of good sold adjustment - - - 4,189 - - - - - 4,189
                   
Total charges/other items   -     -     660     5,746     382     382     -     -     1,042     6,128  
 
Adjusted Gross Profit $ 151,269   $ 635,221   $ 60,346   $ 262,092   $ 28,000   $ 105,455   $ -   $ -   $ 239,615   $ 1,002,768  
 
 
Operating Earnings (Loss) $ 7,864 $ 62,515 $ (1,763 ) $ 16,739 $ (924 ) $ (7,627 ) $ (13,070 ) $ (36,077 ) $ (7,893 ) $ 35,550
 

Charges/Other Items:

Portfolio realignment
Business exits and cost reductions 2,752 2,752 7,542 12,047 993 993 3,362 3,362 14,649 19,154
ASG cost of good sold adjustment - - - 4,189 - - - - - 4,189
ASG acquisition and integration-related costs - - 2,493 2,493 - - 424 3,964 2,917 6,457
                   
Total charges/other items   2,752     2,752     10,035     18,729     993     993     3,786     7,326     17,566     29,800  
 
Adjusted Operating Earnings (Loss) $ 10,616   $ 65,267   $ 8,272   $ 35,468   $ 69   $ (6,634 ) $ (9,284 ) $ (28,751 ) $ 9,673   $ 65,350  
 
 
 
 
 
 
 
SCHEDULE 6
 
BROWN SHOE COMPANY, INC.
BASIC AND DILUTED EARNINGS PER SHARE RECONCILIATION
       
 
13 Weeks Ended 52 Weeks Ended
April 28, April 30, April 28, April 30,
(Thousands, except per share data) 2012 2011 2012 2011
 
Net earnings attributable to Brown Shoe Company, Inc.:
Net earnings from continuing operations $ 1,628 $ 3,348 $ 7,004 $ 29,873
Net loss attributable to noncontrolling interests 67 47 219 709
Net earnings allocated to participating securities   (155 )   (138 )   (340 )   (1,098 )
Net earnings from continuing operations   1,540     3,257     6,883     29,484  
 
Net earnings from discontinued operations - 293 15,373 293
Net earnings allocated to participating securities   -     (11 )   (702 )   (10 )
Net earnings from discontinued operations   -     282     14,671     283  
 
Net earnings attributable to Brown Shoe Company, Inc. after allocation of earnings to participating securities $ 1,540   $ 3,539   $ 21,554   $ 29,767  
 
 
Basic and diluted common shares attributable to Brown Shoe Company, Inc.:
Basic common shares for continuing operations and discontinued operations 40,422 42,475 40,613 42,336
Dilutive effect of share-based awards for continuing operations and discontinued operations   322     531     480     363  
Diluted common shares for continuing operations and discontinued operations attributable to Brown Shoe Company, Inc.   40,744     43,006     41,093     42,699  
 
Basic earnings per share:
From continuing operations $ 0.04 $ 0.08 $ 0.17 $ 0.69
From discontinued operations   -     -     0.36     0.01  
Basic earnings per common share attributable to Brown Shoe Company, Inc. shareholders $ 0.04   $ 0.08   $ 0.53   $ 0.70  
 
Diluted earnings per share:
From continuing operations $ 0.04 $ 0.08 $ 0.16 $ 0.69
From discontinued operations   -     -     0.36     0.01  
Diluted earnings per common share attributable to Brown Shoe Company, Inc. shareholders $ 0.04   $ 0.08   $ 0.52   $ 0.70  
 
 
 
 
 
 
 
SCHEDULE 7
 
BROWN SHOE COMPANY, INC.
ADJUSTMENTS TO FIRST QUARTER 2011 RESULTS FOR DISCONTINUED OPERATIONS
     
 
13 Weeks Ended
(Thousands)

Previously

Reported

April 30, 2011

Adjustments

for

Discontinued

Operations

April 30, 2011
 
Net sales $ 624,620 $ (5,065 ) $ 619,555
Cost of goods sold   374,820     (3,229 )   371,591  
 
Gross profit   249,800     (1,836 )   247,964  
 
Selling and administrative expenses 235,468 (1,328 ) 234,140
Restructuring and other special charges, net   1,744     -     1,744  
 
Operating earnings   12,588     (508 )   12,080  
 
Interest expense (6,698 ) - (6,698 )
Interest income   85     -     85  
 
Earnings from continuing operations before income taxes   5,975     (508 )   5,467  
 
Income tax provision   (2,334 )   215     (2,119 )
 
Net earnings from continuing operations   3,641     (293 )   3,348  
 
Net earnings from discontinued operations   -     293     293  
 
Net earnings   3,641     -     3,641  
 
Net loss attributable to noncontrolling interests   (47 )   -     (47 )
 
Net earnings attributable to Brown Shoe Company, Inc. $ 3,688   $ -   $ 3,688  
 
 

Note: During the third quarter of 2011, we sold a subsidiary. The sale required presentation as discontinued operations, resulting in subsequent revisions to previously issued results. The above schedule presents the impact of presenting the operations of the sold subsidiary as discontinued operations.

 
 
 
 
 
 
 
SCHEDULE 7 - CONTINUED
 
BROWN SHOE COMPANY, INC.
ADJUSTMENTS TO SECOND QUARTER 2011 RESULTS FOR DISCONTINUED OPERATIONS
           
 
13 Weeks Ended 26 Weeks Ended
(Thousands)

Previously

Reported

July 30, 2011

Adjustments for

Discontinued

Operations

July 30, 2011

Previously

Reported

July 30, 2011

Adjustments for

Discontinued

Operations

July 30, 2011
 
Net sales $ 628,128 $ (7,538 ) $ 620,590 $ 1,252,748 $ (12,603 ) $ 1,240,145
Cost of goods sold   391,583     (4,598 )   386,985     766,403     (7,827 )   758,576  
 
Gross profit   236,545     (2,940 )   233,605     486,345     (4,776 )   481,569  
 
Selling and administrative expenses 235,696 (1,782 ) 233,914 471,164 (3,110 ) 468,054
Restructuring and other special charges, net   689     -     689     2,433     -     2,433  
 
Operating earnings (loss)   160     (1,158 )   (998 )   12,748     (1,666 )   11,082  
 
Interest expense (6,520 ) - (6,520 ) (13,218 ) - (13,218 )
Loss on early extinguishment of debt (1,003 ) - (1,003 ) (1,003 ) - (1,003 )
Interest income   65     -     65     150     -     150  
 
Loss from continuing operations before income taxes   (7,298 )   (1,158 )   (8,456 )   (1,323 )   (1,666 )   (2,989 )
 
Income tax benefit   2,530     475     3,005     196     690     886  
 
Net loss from continuing operations   (4,768 )   (683 )   (5,451 )   (1,127 )   (976 )   (2,103 )
 
Net earnings from discontinued operations   -     683     683     -     976     976  
 
Net loss   (4,768 )   -     (4,768 )   (1,127 )   -     (1,127 )
 
Net loss attributable to noncontrolling interests   (159 )   -     (159 )   (206 )   -     (206 )
 
Net loss attributable to Brown Shoe Company, Inc. $ (4,609 ) $ -   $ (4,609 ) $ (921 ) $ -   $ (921 )
 
 
Note: During the third quarter of 2011, we sold a subsidiary. The sale required presentation as discontinued operations, resulting in subsequent revisions to previously issued results. The above schedule presents the impact of presenting the operations of the sold subsidiary as discontinued operations.
 
 
 

Contact:

Brown Shoe Company, Inc.
Investors:
Peggy Reilly Tharp, 314-854-4134
ptharp@brownshoe.com
or
Media:
Kelly Malone, 314-854-4093
kmalone@brownshoe.com

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