Brown on the Rebound

Brown on the Rebound
Brown Shoe’s Ron Fromm

LOS ANGELES — Analysts applauded Brown Shoe Co.’s return to profitability in its first quarter, and expectations are high for the rest of the year.

“They did a nice job and there will be more good news to come as the year unfolds,” said Christopher Svezia, an analyst at Susquehanna Financial Group.

For the quarter ended May 1, the St. Louis-based firm said earnings were $10.5 million, or 23 cents a diluted share, versus a loss of $7.1 million, or 18 cents, a year ago. Adjusted for certain charges, the company’s earnings per share totaled 26 cents.

An 11 percent gain in net sales to $597.7 million from $538.7 million helped the footwear firm return to the black for the first three months of its fiscal 2010.

The company’s top and bottom lines bested the estimates of analysts polled by Yahoo Finance, who had expected EPS of 13 cents on revenues of $582.9 million, on average.

“We attribute this success to the initiatives we had made over the last few years,” Ron Fromm, chairman and CEO, said during a conference call with investors and analysts. “It was our intent at the onset of the recession to continue our infrastructure and brand investments to better position ourselves when the environment improved. While there were challenges during that period, we feel confident today that those were the right decisions.”

The company’s Famous Footwear retail division saw a 14 percent increase in net sales in the quarter to $362.2 million, while comparable-store sales rose 15.5 percent.

Revenues at Brown Shoe’s wholesale division climbed 4 percent to $174.7 million. The company said its overall gross margin increased 280 basis points to 41.4 percent of sales, driven by a 230 basis point gain in Famous Footwear’s margins. It credited more on-trend merchandise and less promotional activity for the better performance at retail.

Brown Shoe expects an increase in the low- to mid-teens range for both its net sales and for Famous Footwear comps in the second quarter.

Fromm, however, said that instability in the economy would continue to impact consumer buying habits.

“The economic environment continues to show some uncertainty, and our consumers are facing the same economic realities as everyone else,” he said. “They are focusing on value and making every dollar go further.”

Fromm noted, though that Brown’s multichannel portfolio has helped it reach price-conscious consumers across the spectrum.

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