Robust results in Brown Shoe Co.’s Famous Footwear division and strength in its wholesale operations helped the retailer beat analysts’ earnings expectations for the third quarter.
“We’ve seen a big difference since [CEO] Diane Sullivan started working with the company, and a lot of this has to do with her ability to sharpen the strategic focus for the company and organize the portfolio,” said Brean Capital analyst Danielle McCoy. “This is the seventh consecutive quarter of year-over-year upside. The company also is continuing to pay down debt and increase capital flexibility.”
Steven Marotta, an analyst at CL King & Associates, said the swift implementation of Sullivan’s overhaul surpassed his expectations. “They have the right products in the stores, and additionally they have the necessary stock,” he said.
Speaking to the quarterly results, Sullivan said, “We’ve been able to make some outstanding progress against our financial targets in the past 18 months. Our strategy is working, and through the third quarter of this year, we have already delivered 27 cents more on earnings versus the first nine months of 2012.”
During a conference call with investors and analysts, Sullivan addressed concerns about industry headwinds and said Brown will remain focused on executing its operational strategy in the fourth quarter.
“We’re going to continue to operate as we have all year, and we’re going to be focused on executing the things we have control over and try to appropriately plan for the external factors that are beyond that scope.”
Sullivan attributed the company’s results in part to the recent repositioning and strategy shift.
“We accelerated our portfolio review and are now in a much better position in terms of store profitability and revenue per square foot,” she said. “We also invested in our assortment efforts. We’re focused on a smaller number of key styles, but providing greater depth within those products.”
Sullivan also noted the continued improvement in Brown’s wholesale sales, which were up 4.5 percent in the quarter, thanks to more trend-right assortments.
The CEO also praised the recent launch of the Sam Edelman e-commerce site, which she said had received “rave reviews,” with the broader Edelman business experiencing double-digit growth in the third quarter.
Overall, Brown delivered quarterly net earnings of $27.3 million, or 63 cents a share, up 12.4 percent from last year. Analysts polled by Yahoo Finance expected 58 cents a share.
Net sales increased 1 percent to $702.8 million, lower than analysts’ predictions of $705.5 million. Famous Footwear posted sales of $439.6 million for the same period, up 0.6 percent year-on-year, with same-store sales up 4.9 percent.
Speaking to the success of the company’s Famous Footwear business, McCoy said, “We always thought Famous was a key back-to-school winner, but the result exceeded our expectations. They are doing an amazing job optimizing the store base and spreading the awareness to the mom consumer.”
The company revealed full-year earnings per share guidance of between $1.36 and $1.40, up from its earlier guidance of between $1.27 and $1.32.