Brown Shoes Not Held Back by Restructuring
Erin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
While other shoe manufacturers are dealing with large lawsuits regarding "toning shoes," Brown Shoe Company (NYSE: BWS) has been fighting battles of its own- and winning.
At a time when expectations had been for the company to suffer a loss due to restructuring, major changes, and acquisitions, it instead surprised analysts with a sales increase.
The company has undergone a restructuring in the Famous Footwear retail chain, opened 11 new Famous Footwear stores, closed or relocated 34 stores, and made changes to some women's specialty and children's wholesale products. Additionally, the company closed a factory in China, and is shutting down a Missouri distribution center. The company also acquired another shoe manufacturer, American Sporting Goods Corp, in February for $145 million. As a result, analysts had not expected much sales growth.
But while Brown Shoe Company did report a fiscal first-quarter decline of 54% in net income, they also reported a sales increase. The company overall reported net sales of $626.4 million, up 1.1% over the year previous. The company's retail chain, Famous Footwear, saw sales increase 1.3% to $347.1 million, and revenue increased 2.5%. Same-store sales for the chain went up 2.5% (a marked improvement over the 3.9% loss the year ago period). The Wholesale division 2.8%, while Specialty Retail sales dropped 6.1%.
After the positive announcement last week, shares in the company rose 25% in the next day's trading.
Shoe companies are benefiting from earlier than usual warmer weather. Warmer weather encourages athletes, runners, and everyday people to get out and be active sooner, thereby buying running and other athletic shoes sooner in the year. While Brown Shoe is attributing some of its success to the pleasant weather, it must also be noted that not even a week full of sunny days can produce what good management does for a company. Brown Shoe has successfully brought up sales and revenue at a time when no one, not even the analysts, expected it to. That is a mark of excellent management, wise money handling, and good planning.
A company that can beat expectations, and isn't afraid to make cuts in the right areas, and expand in others, is worth serious consideration. While Brown's numbers were not fantastic, they do prove that the company is resilient and smart. They have not been penalized like competitors have been in the toning shoe lawsuits, and they did make a profit (albeit a small one) at a time when they had not expected to. They managed to do well during a costly restructuring. All things considered, Brown gets a yellowish-green to proceed. Keep an eye on this company for the long run, (and for unlikely, but possible, lawsuits) to continue to surprise and perform. This is a well-managed and reliable company, with a consistent dividend, and solid plan for the future.
Thus far the company has not been included in the large lawsuits and settlements that both Reebok and Skechers have been faced with regarding “toning shoes.” Brown owns the Avia line of shoes, which features several different types of “toning shoes.”
Popular sportswear and shoewear chain Foot Locker (NYSE: FL), which sells such brands as Nike (NYSE: NKE), Reebok, Asics, and Adidas, (and various forms of "toning shoes"), saw fiscal first-quarter earnings jump 36%, beating analysts' expectations. Foot Locker has enjoyed nine straight quarters of sales and earning growth, much of which can be attributed to success with products from Nike and others. For the quarter ended April 28, the company posted a profit of $128 million, compared with a year-earlier profit of $94 million. Sales increased 8.7% to $1.58 billion.
And go out and buy some good walking shoes, and enjoy the pleasant weather. You and your favorite shoe brand will be better for it.
ErinAnnie has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
