Consolidated net sales increased by 14.5 percent to $585.8 million for the second quarter ended July 31 at Brown Shoe Company. Net earnings turned around to $5.3 million, compared with a loss of $4.2 million in the same period last year. Excluding charges related to the company's IT initiatives, net earnings were $6.5 million, against a loss of $3.0 million last year.
Brown Shoe's gross profit margin crept up by 0.9 percentage points to 40.7 percent of sales, led by a 3.2 percentage point increase at Famous Footwear that resulted from significantly fewer buy-one-get-one sale days this year as well as improved sell-through in all categories. Wholesale's gross profit fell by 2.3 percentage points, though, as there were an increased mix of sales to third parties as well as shifts in brand and channel mix, and increased freight costs.
The company's operating earnings were $12.1 million, a big improvement over the operating loss of $5.0 million last year.
The company's wholesale division saw sales climb by 25.8 percent to $178.6 million, driven by sales increases across all channels. Brown Shoe singled out Naturalizer, Dr. Scholl's and its contemporary fashion brands as exceptional performers. The specialty retail division had turnover of $59.8 million on a 6.8 percent increase in comparable store sales.
Revenues from the Famous Footwear chain rose by 10.6 percent to $347.3 million on an 11.8 percent rise in comparable store sales, attributed to good performances in all categories, channels and regions. The chain's operating income was $15.8 million. Management said the early signs for the back-to-school period looked good, with comps up by the low double digits so far in the current quarter with customers buying dress shoes and boots as well the more seasonal juniors and athletic footwear products. Running and trail shoes, particularly styles from Nike, Puma and Asics, remain key categories for the 1,128-door chain, as do skate shoes
Brown Shoe executives said they believe that the evolving toning concept would continue to resonate with consumers for ?quite a long time,? and are excited about developments in the category including new products from Avia, New Balance and Nike in the fourth quarter of this year. With the Skechers brand continuing to drive the category, Famous sees higher average unit revenues and price points prevailing in through the second half. Toning shoes represented 8 percent of total company sales in the second quarter, which would be about $46.9 million, versus 9 percent ($53.8 million) of the total volume in the first quarter. This would mean there was a 13 percent slide in overall category sales in the second quarter.
In the second quarter, Famous Footwear had a low-single-digit increase in traffic while average unit revenues rose in the mid single digits. Comparable store sales in the women's category rose by the mid-teens, and the men's and kids' were up mid-single digits.
The company expects to increase its market share through a good back-to-school period as well as a marketing push with ads on television, in print and online. Order books for autumn and the holidays are strong. For the full fiscal year, Brown Shoe is forecasting a low-double-digit increase in net sales, with a low-teen rise in the third quarter alone. Comparable store sales at Famous Footwear should be up by high single digits to low double digits, and the full year shall see 30 to 35 new stores opening and 50 stores closing. The wholesale division is expected to see revenues go up by the high teens. For the second half of the year, the gross profit margin is forecast to be 40.0 to 40.5 percent.