14 Mar Brown Shoe’s Q4 Profit Advances
Brown Shoe company reported fourth quarter 2013 financial results, with net sales of $600.0 million, down 3.0 percent versus fourth quarter 2012 net sales of $618.7 million. Fourth quarter 2013 net earnings jumped 55.0 percent to $6.2 million, or 14 cents share, slightly ahead of company expectations.
In the fourth quarter of the prior year, net earnings were $4.0 million, or $0.09 per diluted share. Fourth quarter 2012 results included $2.9 million of costs related to the company’s portfolio realignment efforts ($1.8 million on an after-tax basis, or $0.05 per diluted share).
For full year 2013, net sales of $2,513.1 million were up 1.4 percent compared to $2,477.8 million in 2012. Net earnings for 2013 were $38.1 million, or $0.88 per diluted share, versus $27.5 million, or $0.64 per diluted share, in 2012. Earnings for 2013 included portfolio realignment costs of $30.7 million, while earnings for 2012 included portfolio realignment, organization change and integration related costs of $32.9 million. On an adjusted basis, 2013 net earnings of $61.5 million, or $1.41 per diluted share, were up 26.5 percent compared to $48.6 million, or $1.13 per diluted share, in 2012.
Gross profit margin for the fourth quarter of 2013 improved to 40.2 percent from 40.0 percent in the fourth quarter of 2012. For the full year, it improved to 40.4 percent from 39.9 percent in 2012.
“Brown Shoe company delivered a successful fourth quarter and 2013. We reported year-over-year operating earnings growth of 32.4 percent, while delivering a 2.9 percent increase in 2013 Famous Footwear same-store-sales. Our wholesale brands continued to make progress, growing sales 13.5 percent in the fourth quarter and 5.3 percent in 2013,” said Diane Sullivan, CEO, president and chairman of Brown Shoe company. “We are looking forward to continuing to execute against our strategies to deliver increasing shareholder value, as we grow our retail and wholesale businesses in 2014.”
Fourth Quarter Highlights
Famous Footwear fourth quarter 2013 sales of $347.4 million were down 8.6 percent year-over-year, with same-store-sales(1) down 1.8 percent. Performance in the quarter was impacted by severe winter weather, which hurt running shoe sales while helping to drive boot sales. During the quarter, 13 stores were closed or relocated and nine new stores were added.
Wholesale sales of $196.3 million were up 13.5 percent in the fourth quarter. For the Healthy Living platform, wholesale sales of $107.2 million were up 4.3 percent, led by a double-digit improvement in Naturalizer. The company’s Contemporary Fashion wholesale sales of $89.1 million were up 28.2 percent in the fourth quarter, with double-digit growth from key brands Sam Edelman and Franco Sarto.
Consolidated gross profit of $241.4 million was down 2.4 percent in the fourth quarter, while gross margin increased by 20 basis points to 40.2 percent. SG&A for the fourth quarter was $231.2 million, or 38.5 percent of net sales, which was up 90 basis points from 37.6 percent of net sales in the prior year. For the quarter, operating margins declined by 30 basis points year-over-year to 1.7 percent.
Inventory at the end of the fourth quarter was $547.5 million, up 8.7 percent from $503.7 million in the prior year. Wholesale inventory was up 8.7 percent, while Famous Footwear inventory was up 8.6 percent.
At quarter-end, Brown Shoe company had $7.0 million of borrowings against its revolving credit facility and $82.5 million in cash and equivalents. Net of short term borrowings, cash and equivalents were $75.5 million, an improvement of $112.3 million versus 2012. The company’s debt-to-capital ratio improved to 30.1 percent from 41.6 percent in the fourth quarter of 2012.
Full Year Highlights
Famous Footwear reported full year 2013 sales of $1,527.5 million, a 0.9 percent year-over-year improvement, while annual operating earnings of $107.1 million were up 13.8 percent. For 2013, same-store-sales(1) were up 2.9 percent over 2012. During the year, 62 stores were closed or relocated and 51 new stores were added, as average revenue per square foot improved to $207.
Wholesale Operations sales of $763.7 million (including $1.6 million of sales from exited brands) were up 5.3 percent over $724.9 million in 2013. In the Healthy Living portfolio, wholesale sales of $421.3 million were up 2.4 percent in 2013. For Contemporary Fashion, wholesale sales of $340.8 million were up 12.7 percent.
For 2013, gross margin of 40.4 percent improved 50 basis points over 2012. SG&A for 2013 was $909.7 million, or 36.2 percent of net sales up 20 basis points from 36.0 percent in the prior year. Operating earnings improved 32.4 percent to $98.6 million from $74.5 million in 2012. For the year, operating margins improved by 90 basis points to 3.9 percent. Capital expenditures of $49.2 million were down 22.8 percent from $63.7 million in the prior year.
Financial Review and 2014 Outlook
“At Brown Shoe company, we executed on our strategy in 2013 and improved our operating performance, delivering steady improvement toward our long term financial goals by driving sustainable profitability,” said Russ Hammer, chief financial officer of Brown Shoe company. “For 2014, we expect to continue to deliver toward our long term goals, while balancing our realistic outlook in terms of the economy, the consumer and the weather — especially this early in the year. As a result, we believe we will deliver 2014 earnings per share of $1.45 to $1.55, or a 3 percent to 10 percent increase over 2013.”