Steven Marotta, analyst at C.L. King & Associates, said, “They’re slicing off the children’s business, which is a good move because that’s an inherently difficult business. It streamlines their focus back onto [the contemporary brands]. Accelerating store closures is also a good thing because they’re taking costs out of the business. They’re not necessarily giving anything up from a competitive standpoint.”
Sterne Agee analyst Sam Poser agreed, saying, “Brown Shoe has to increase the speed of what they’re doing. [The leadership] knows that. They just have a lot of balls in the air right now.”
In a call with analysts, Brown Shoe President, CEO and COO Diane Sullivan said the company plans to close to 145 stores over the next two years and will exit its children’s wholesale business as part of a strategic portfolio review. (That business included licensed brands such as Marvel and Barbie.)
But Sullivan still sees potential in the kids’ business and is turning to BBC International to serve as children’s licensee for three of its brands: Buster Brown, Avia and Sam Edelman.
Bob Campbell, founder and chairman of BBC, said the deal makes a lot of sense for both companies. “Brown can now concentrate on its women’s business, which is what it does best, while we use our expertise in the children’s market to grow these brands to their full potential,” he said.
Campbell is particularly bullish about the addition of Sam Edelman to BBC’s roster, calling it “one of the most exciting brands in footwear right now.” He said his company would push to broaden the kids’ product offering and open up international distribution for the line.
The 107-year-old Buster Brown brand, Campbell said, “needs to be repositioned a bit and given a new look,” while the Avia label gives BBC an opportunity to boost its profile in the branded athletic space.
BBC will showcase the new lines at this week’s FFANY show.
Sullivan also noted that Brown Shoe signed a footwear license with contemporary fashion brand Vince in the third quarter. “With Vince, we’re continuing to build and strengthen our contemporary fashion portfolio. Distribution of this brand will begin in fall ’12 and will be aligned with the same strong luxury department and specialty store consumer base as the Vince sportswear line,” she said. “The Vince footwear line will expand our presence in this $1.5 billion premier department store channel, which is currently being served by the Via Spiga, Vera Wang and our Sam Edelman brands.”
Sales were a mixed bag at the firm in the third quarter. The Famous Footwear business slipped 1 percent, wholesale operations rose 3 percent and specialty retail fell 5 percent. Total revenue came in flat at $713.8 million.
Net income was $33.7 million, or 79 cents a share, compared with $18.6 million, or 42 cents, in the third quarter of 2010. The firm ended the quarter with $42 million in cash and $199 million in debt.