Brown Shoe Sets New Targets

Brown Shoe Co. said Wednesday it is not the same company it used to be.

At an investor day held at its New York showroom, the firm stated that today the firm is “focused, dynamic and executing for improvement,” and it announced new long-term targets.

It aims to achieve long-term operating margins of 8 percent and returns on invested capital of 15 percent. It also has a goal to grow sales per square foot at the Famous Footwear chain by 22 percent by 2014.

It will do these by eliminating underperforming parts of its business as part of its ongoing portfolio realignment; evolving and expanding its portfolio through product and omnichannel opportunities; and becoming leaner and more profitable.

Diane Sullivan, CEO of Brown Shoe, told a roomful of about 25 analysts and investors, “It’s about productivity and profitability improvement on what we’re already doing.”

Russ Hammer, the firm’s CFO, told the crowd, “I see that we will get halfway [to our goals] within the next three years. That’s very achievable, very realistic and very exciting.” He added that the company would continue to exit underperforming brands to improve the bottom line.

Brown is counting on its fast-growing contemporary brands portfolio to drive the top line. It is particularly bullish on Sam Edelman, Via Spiga and Vera Wang (which will no longer be called Lavender, it said Wednesday).

Brown also is embarking on an aggressive real estate realignment process for its Famous Footwear chain, which will involve 165 store openings and 190 store closings by 2014. That plan is expected to improve business by $20 million.

Investors seemed upbeat on the new target, as Brown’s stock closed 1.4 percent higher at $11.50 a share.

Analysts, too, cheered the firm’s progress.

Scott Krasik, analyst at BB&T Capital Markets, said, “We have a positive thesis on the turnaround and think the targets are achievable. The improvement of Famous Footwear has a lot to do with real estate portfolio management, while in wholesale, having some infrastructure and organization of the brands will help them not make as many mistakes as they have in the past.”

He added, “But it’s a ‘show me’ stock. Investors are going to have to wait and see the improvements.”

As for the firm’s portfolio realignment, Susquehanna Financial analyst Christopher Svezia said, “They need to continue to dispose of their middle-of-the-road, mid-tier-dependent brands and continue to evolve the portfolio into more lifestyle brands with pull, not push — generating higher turns and higher margins.”

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