Brown Shoe Company has announced plans to further streamline its business by closing stores, exiting some license agreements and businesses. The news comes after the company announced a 0.3 percent decline in its third-quarter revenues to $713.8 million partly due the sale of the basketball and lifestyle And 1 unit and the termination of some other activities. The company trimmed its full-year top line forecast to $2.60-2.62 billion from $2.68-2.71 billion previously, as it expects fourth quarter sales to grow by 0-2 percent due to the elimination of two weeks of “buy one get one” promotions and a cautious view of the year-end shopping season.
As part of its business review, the company is exiting the children's wholesale business as well as some women's specialty activities and private labels. It will also close about 145 Famous Footwear stores by the end of next year along with all its Brown Shoe Closet and F.X. LaSalle stores, which are part of its specialty retail division. Next year it will close down the Sun Prairie distribution center.
The phase-out of these activities will reduce annual sales by $200 million but also trim selling, general and administrative expenses by about $80 million a year. The restructuring will generate a $20 million charge spread over the coming quarters.
By quitting the children's business, the company is putting an end to a series of licenses including Barbie. Brown Shoe also signed an agreement to license its Buster Brown, Sam Edelman and Avia brands to BBC International for children's wholesale. The transition starts immediately and will last throughout the first quarter of 2012. BBC specializes in children's and athletic footwear.
To reinforce its fashion business, Brown Shoe added Vince to its license portfolio and will start distributing the brand in the autumn of 2012. With Vince it aims to strengthen its presence in the premium department store channel, where it is present with Via Spiga, Vera Wang and Sam Edelman brands.
The group's Famous Footwear retail chain reported a 1.3 percent decline in sales to $416.2 million in the quarter ended on Oct. 29 due to a 55.0 percent drop in toning shoes. Sales of running shoes rose by 33.4 percent, boot sales grew by 3.9 percent and sandals increased by nearly 17 percent. Same-store sales decreased by 0.4 percent. Excluding toning footwear, comparable sales would have been up by 2.6 percent. During the quarter, the chain closed 12 stores and added 17. The total number of stores increased to 1,121.
The wholesale division boosted sales by 2.9 percent to $233.6 million thanks to the contribution of American Sporting Goods (ASG), acquired in February. Without ASG, sales dropped by 11.8 percent due to the termination of some wholesale brands and weaker sales for Dr. Scholl's, whose sales fell by 41.4 percent to $24.3 million. Wholesale turnover was lifted by Vera Wang, Via Spiga, Franco Sarto and Sam Edelman, whose revenues rose by 8.1 percent.
Sales of the specialty retail division, which includes the Naturalizer stores, Shoes.com and overall direct-to-consumer business, decreased by 5.2 percent to $64.0 million, largely stemming from a decline at Naturalizer stores. The number of specialty stores fell to 242 at the end of October from 259 a year earlier and same-store sales fell by 1.9 percent.
The group anticipates same-store sales to decline by 1 percent for Famous Footwear in the full year, and wholesale sales, excluding ASG, to drop by 2 percent.
Brown Shoe's gross margin slipped to 38.7 percent from 39.4 percent a year earlier. The company expects the margin to narrow by 1.0-1.4 percentage points in the full year.
In the quarter, the margin fell for Famous Footwear, passing to 42.8 percent from 44.3 percent, and specialty retail, down to 43.6 percent from 45.2 percent, while it rose to 30.1 percent from 28.6 percent and for wholesale.
The group's selling, general and administrative expenditures were cut by 3.1 percent to $239.4 million and the bottom line booked a net profit of $33.7 million, representing an adjusted $0.51 per share, compared with a $18.6 million profit a year earlier. Brown Shoe forecasts adjusted earnings per diluted share of $0.73-$0.85 for the full year.