Brown Shoe Company disappointed financial analysts by reporting a net loss of $8.2 million for the fourth quarter ended on Jan. 29, compared with a profit of $3.4 million in the same period a year ago, while its net sales grew to $628.9 million from $604.5 million. However, the management indicated that the company would have made a profit without exceptional charges related to the integration of American Sporting Goods (ASG), the athletic footwear company that it acquired in February 2011.
Independently of this factor, the group's gross margin declined to 37.9 percent in the quarter from 38.9 percent in the year-ago period, mainly because of a 0.9 percent drop in the revenues of Famous Footwear, its big American retail chain. On a same-store basis, they fell by 0.8 percent due to mild weather, which caused a 5.7 percent drop in sales of boots. The chain suffered a 44.8 percent drop in operating profit to $7.9 million on sales of $352.4 million for the period.
The acquisition of ASG, which markets the Avia, Rykä and Nevados brands, helped boost Brown Shoe's wholesale revenues by 17.9 percent to $205.1 million in the quarter. The group's specialty retail segment, which consists mainly of the Naturalizer stores and e-commerce, reported a loss of $900,000 on a 4.9 percent drop in sales to $71.4 million.
Total sales grew by 4.0 percent to $628.9 million in the fourth quarter. They were up by 3.1 percent for the full year to $2,582 million excluding discontinued operations. The group's gross margin for the year was down by 1.5 percentage points to 38.6 percent. The net profit declined by 34.0 percent to $24.6 million, and it even dropped by nearly 28 percent excluding onetime charges.
Sales have been improving at Famous Footwear since February, and while profits may still be down for the first quarter of the current financial year, they should show growth for the first half as a whole, as the company will no longer be saddled by integration costs, by charges related to the implementation of an SAP system or by unsold toning shoes sitting in its stores.
The company's store count declined to 1,089 doors from 1,110 in the course of last year. The management has identified 15 more Famous Footwear locations that are due to be closed in 2012. The company recently closed down a factory in Jiangxi, China, and announced plans to shut down a distribution center in Minnesota.
Toning shoes are expected to account for less than 2 percent of sales at Famous Footwear this year, compared with less than 10 percent in 2010 and just under 5 percent in 2011. Excluding them, the chain would have enjoyed a rise of about 1.9 percent in comparable store sales last year.