Future Looks Bright For Brown

NEW YORK — Fashion trends are clearly working in Brown Shoe Co.’s favor.

The company reported widespread strength across its retail and wholesale portfolio during the quarter, driven by a 10.6 percent increase in same-store sales at Famous Footwear, as well as a 34 percent rise in wholesale revenue.

While some analysts had been cautious about Famous Footwear’s performance, the retailer delivered, thanks to robust women’s sales, as well as solid gains in the running, toning, casual and sandal businesses.

“It was the right time to invest in elevating the Famous brand with consumers. We increased our marketing investment, emphasized great service and delivered a terrific store experience for our customers,” said Chairman and CEO Ron Fromm in a conference call last Tuesday. “As a result, Famous saw increases in traffic, conversion and average ticket growth, even as we reduced our BOGO cadence during the third quarter compared with last year.”

The toning trend has been one new growth avenue for the chain. “[It] has led to new customer visits [at Famous Footwear] … and has proven we can sell a higher price point versus our historical average,” Brown Shoe President and COO Diane Sullivan said during the call, adding that a third of customers purchasing toning product in stores are new to the category, while another third return to make at least one additional purchase.

In the wholesale business, boots and dress shoes continued to be in high demand in the third quarter. “This led to strong increases for our contemporary brands, led by gains in Via Spiga and Vera Wang, which both saw sales grow more than 50 percent. Sam Edelman delivered another strong double-digit performance, [and] we continue to see lots of excitement [in] contemporary,” said Fromm.

Fromm added that Brown’s labels have been allocated more space at retail because they are “delivering the right combination of fashion and value.”

As a result, backlog orders surged 25 percent at the end of the quarter, indicating continuing strength into the upcoming quarters.

The St. Louis-based firm beat expectations last week and raised its guidance for full-year earnings per share to be between $1.31 and $1.43.

For the period ended Oct. 30, earnings were $18.6 million, or 42 cents a diluted share, up from $16.3 million or 38 cents, in the third quarter of 2009. Total net sales in the quarter increased 15 percent year-over-year to $716.1 million.

Analysts were looking for earnings of 38 cents a share on revenue of $700.6 million, as polled by Yahoo Finance, and the company’s shares closed 16 percent higher on Tuesday. At quarter’s end, Brown Shoe had cash and cash equivalents of $29.7 million, compared with $34.1 million previously. It also borrowed $113 million, which went toward working capital investments and the completion of the Element Shoe acquisition in the second quarter.

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