The financial results of Brown Shoe Company showed a marked improvement for the third quarter ended Oct. 31, as compared with the first half of this year, indicating an apparent improvement in American consumption.
As compared to the third quarter of last year, however, the American group reported a 1.0 percent drop in sales to $625.6 million, despite a 4.7 percent increase in comparable store sales for its Famous Footwear chain and a 4.1 percent hike for its specialty retail stores, with Naturalizer singled out.
The group’s gross profit margin rose by 2.1 percentage points to 41.4 percent year-on-year in the quarter. The company attributed this to several things: a 3.9-percentage-point increase in the wholesale division’s gross margin to 34.0 percent; an increase in the mix of the retail business, which has a higher margin (retail made up 73 percent of consolidated net sales compared with 68 percent last year); and an increase of 3.5 percentage points in the gross margin of the specialty store division to 45.1 percent.
Operating earnings more than doubled to $34.3 million from $13.1 million, including restructuring and other special charges of $2.2 million for this year’s third quarter, and $16.5 million for the period last year. Net earnings spiked by 56.7 percent to $16.3 million, counting $1.4 million in charges related to IT initiatives for this year, and $10.1 million in special charges for 2008.
Famous Footwear had a 7.3 percent increase in turnover to $389.2 million. Operating earnings jumped by 43 percent to $28.6 million, but the gross margin crept down by 0.1 percentage point to 44.0 percent.
The back-to-school period was good for the American retailer, with a 2.7 percent increase in store traffic, a 3.3 percent rise in pairs per transaction and 1.5 percent growth in the average selling price. Athletics turned in a 5.9 percent growth in comparable store sales, led by running and skate, which both grew by double digits. Athletics made up half of third-quarter sales. Strong brands in this segment were Nike, DC, Puma and Converse. Children’s shoes saw a 1 percent increase in comparable sales, and the company said athletics led the way in this category.
Through winter and into spring, Brown Shoe thinks that boots and wellness footwear will be key drivers of sales at Famous Footwear. The chain had 10 more stores than it did in the third quarter 2008 for a total of 1,148. The total new stores planned to open for the full year is 54, while 55 to 70 will have closed.
Net sales for Brown Shoe’s specialty retail division rose by 1.4 percent to $66.5 million. It had an operating loss of $1.4 million, compared with a loss of $3.0 million in 2008. At the end of the quarter the division had 294 stores, nine fewer than the same time last year.
Revenues in the wholesale division fell by 16.5 percent to $169.9 million; this had been expected by the company. Its operating earnings dropped by 10.3 percent to $16.6 million.
For the nine months ended Oct. 31, net group sales dropped by 4.5 percent to $1,675 million, and operating earnings plunged by 30.3 percent to $22.2 million. The gross profit margin for the period grew by 0.8 percentage points to 40.0 percent for the nine months.
Net sales at Famous Footwear grew by 1.3 percent to $1,008 million with a 0.6-percentage-point drop in the gross margin. The wholesale division saw a 14.3 percent sales drop to $480.7 million while the gross profit grew by 2.2 percentage points. For specialty retail, sales were down by 6.5 percent to $174.4 million, and its gross margin grew by 0.9 percentage points.
For the fourth quarter, Brown Shoe is forecasting a low- to mid-single-digit increase in net sales compared with the fourth quarter of last year. Comparable store sales for Famous Footwear should be flat to low-single-digit growth. Net sales in wholesale should increase by high single digits or low double digits in the fourth quarter.