11 Mar Brown Shoe’s Q4 Profits Jump
Brown Shoe Company reported earnings on an adjusted basis were up 45.5 percent in the fourth quarter, to $9.0 million, or 20 cents per share, compared to reported net earnings of $6.2 million, or 14 cents, in the fourth quarter of 2013.
Sales reached $615.4 million up 2.6 percent versus fourth quarter 2013 net sales of $600.0 million. Fourth quarter 2014 reported net earnings of $16.2 million, or 37 cents per diluted share, included 17 cents per diluted share of adjustments, primarily related to the sale of Shoes.com in December 2014. Gross margin was flat year-over-year, at 40.2 percent, while operating earnings of $12.7 million were up 24.7 percent.
For the full year, the company reported net sales of $2,571.7 million up 2.3 percent versus 2013 net sales of $2,513.1 million. Reported net earnings for 2014 were $82.8 million, or $1.89 per diluted share, versus $38.1 million, or $0.88 per diluted share, in 2013. Adjusted net earnings for 2014 were $75.6 million, or $1.72 per diluted share, and were up 23.0 percent compared to 2013 adjusted net earnings of $61.5 million, or $1.41 per diluted share. Gross margin was flat year-over-year, at 40.4 percent, while operating earnings of $125.9 million were up 27.7 percent.
“Both of our business segments helped drive fourth quarter results, with Famous Footwear delivering strong same-store-sales growth of 4.0 percent while Brand Portfolio sales improved 5.4 percent. Both segments also delivered good improvement in adjusted operating margin for the quarter, with Famous Footwear up 90 basis points and Brand Portfolio adjusted operating margin up 160 basis points,” said Diane Sullivan, CEO, president and chairman of Brown Shoe company. “This is in addition to record adjusted operating earnings for 2014 and good year-over-year improvement in adjusted operating margin – up 80 basis points to 5.0 percent.”
Fourth Quarter Highlights
Famous Footwear fourth quarter 2014 sales of $369.4 million were up 0.8 percent year-over-year, including Shoes.com through December 12, 2014. Excluding Shoes.com, fourth quarter sales were up 3.6 percent. For the quarter, same-store-sales were up 4.0 percent, with performance driven by continued steady improvement in athletics and good performance in boots. During the quarter, 13 stores were closed and 10 new stores were added.
Brand Portfolio sales of $246.0 million were up 5.4 percent in the fourth quarter. Performance in the quarter was driven by a 22.8 percent improvement in Contemporary Fashion sales, offset by a 4.7 percent decline in Healthy Living sales.
Consolidated gross profit of $247.4 million was up 2.5 percent in the fourth quarter, while gross margin was flat year-over-year at 40.2 percent. SG&A for the fourth quarter was $231.2 million, or 37.6 percent of net sales, which was down approximately 90 basis points versus the prior year. For the quarter, adjusted operating margins improved approximately 90 basis points year-over-year to 2.6 percent.
Inventory at the end of the fourth quarter was $543.1 million, down slightly from $547.5 million in the prior year. Famous Footwear inventory was down 8.0 percent, while Brand Portfolio inventory was up 14.5 percent. At quarter-end, Brown Shoe company had no borrowings against its revolving credit facility and had $67.4 million of cash and equivalents. The company’s debt-to-capital ratio improved to 26.9 percent from 30.1 percent in the fourth quarter of 2013.
Full Year Highlights
Famous Footwear reported full year 2014 sales of $1,589.3 million, roughly flat year-over-year, including Shoes.com. Excluding Shoes.com, sales were up 1.1 percent in 2014, while same-store-sales were up 1.5 percent. During the year, 56 stores were closed and 50 new stores were added, as average revenue per square foot improved to $215.
Brand Portfolio sales of $982.5 million were up 6.3 percent over $924.6 million in 2013. For the year, strong Contemporary Fashion sales growth of 20.0 percent was offset by a slight decline in Healthy Living sales of 1.6 percent.
For 2014, consolidated gross profit of $1,040.1 million was up 2.5 percent, while gross margin of 40.4 percent was flat year-over-year. SG&A for 2014 was $910.7 million, or 35.4 percent of net sales and down 80 basis points versus the prior year. For the year, adjusted operating margins improved by 80 basis points to 5.0 percent. Capital expenditures of $50.0 million were up 1.7 percent from $49.2 million in the prior year.
Financial Review and 2015 Outlook
“We’re looking forward to following up a strong 2014 with additional growth in 2015, and we expect to deliver diluted EPS between $1.78 and $1.88 this year,” said Ken Hannah, chief financial officer of Brown Shoe company. “While we’re confident about our 2015 strategy, we are also cautious about the potential for product delays in the first half of the year, as the west coast port situation is gradually untangled. However, we believe the supply chain changes we implemented last fall should help mitigate most of the impact.”