Earnings Preview: Brown Shoe, DSW and Genesco

Brown Shoe Company, Inc.

While wholesale continues to be a strength at Brown Shoe, potential inventory issues at the firm’s Famous Footwear division in the third quarter are worrying analysts, who are concerned that discounting is still going on in stores.

“Recent store visits and discussions with industry contacts have revealed that Famous may have been overzealous with its inventory plans in its bid to drive same store sales increases in the second half,” said Scott Krasik, analyst at BB&T Capital Markets, in a research note released last Monday.

According to Krasik, who visited stores on Nov 12, skate and fashion athletic footwear was marked down between 20 and 40 percent off, and technical running product by leading brands was promoted at 10 to 20 percent off.

“All boots were being promoted at between 30 and 50 percent off, which stood out since Famous is the only retailer we know that is aggressively discounting boots,” added Krasik.

The largest opportunity lies in the wholesale division, said Susquehanna Financial Group in its research note, as wholesale revenue is projected to grow in the high-teens range this year.

The St. Louis, Mo.-based company earned 38 cents a share in the third quarter of 2009, and its stock is currently trading in the middle of its 52-week range.

Analysts are looking for earnings of 38 cents a share on revenue of $700.6 million, as polled by Yahoo Finance, when the firm releases its results tomorrow.

DSW Inc.

Analysts expect momentum at DSW to continue after the retailer’s same store sales rose 10.1 percent in the third quarter, on top of an 8.7 percent rise last year.

That puts the two-year stacked comp at 18.8 percent, a significant acceleration from the second quarter’s 9.1 percent, observed Patrick McKeever, analyst at MKM Partners, in a research note.

“We believe boots comped up about 10 percent, while other women’s footwear classifications were also very strong, especially flats. We believe accessories comped up nearly 20 percent [and] that September and October [were] stronger than August,” McKeever added.

Susquehanna Financial Group said in its research note that it “believes the company is well-positioned moving into the fourth quarter from a product perspective and expects continued comp momentum despite difficult comparisons.”

DSW earned 60 cents in the third quarter a year ago, and analysts are now looking for EPS of 75 cents on revenue of $489.3 million, as polled by Yahoo Finance.

The firm’s shares have risen 53 percent in the last three months.


Genesco Inc.

Analysts are expecting the Nashville, Tenn.-based retailer’s results to come in above the firm’s previous guidance.

Sterne Agee said in a research note that Genesco saw a strong start in August and stands to benefit from the strong footwear trends that many retailers have reported success with in the third quarter.

“In boots, the expanded UGG collection has been well received at retail and the multiple styles and colors have been selling out. We believe the footwear and boot trends have accelerated through the rest of the quarter aiding Genesco’s footwear business,” added Sterne Agee.

The firm’s shares have risen 36 percent in the last three months.

Analysts will be looking for earnings of 59 cents a share on revenue of $418.8 million, as polled by Yahoo Finance, tomorrow. Genesco earned 53 cents a share in the third quarter of 2009.

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