Earnings Releases
Brown Group reports second quarter earnings per share of $.24 versus $.20 last year, led by Fanous Footwear's results
ST. LOUIS, Mo. (WIRE NEWS), August 25, 1998 -- Brown Group, Inc. (NYSE: BG) reported net earnings of $4,295,000 or 24 cents per diluted share in the second fiscal quarter ended August 1, 1998 compared to net earnings of $3,530,000 or 20 cents per diluted share in the 1997 second quarter, an increase of 20.0 percent.
Consolidated net sales for the second quarter of 1998 were $383,618,000 compared to $378,823,000 in last year's second quarter, a 1.3 percent increase. Not including the reduction in sales at the Pagoda International division, sales in the company's core businesses increased 3.1 percent in the quarter.
For the first six months of fiscal 1998, earnings were $8,166,000 or 46 cents per diluted share, compared to earnings of $5,072,000 or 29 cents per diluted share for the first six months of fiscal 1997, an increase of 58.6 percent.
Consolidated net sales for the first half of fiscal year 1998 were $785,927,000 compared to $770,638,000 in last year's first half, a 2.0 percent increase. Adjusting for the decline in sales at the Pagoda International division, sales in the company's core businesses increased 4.6 percent.
Announcement of these results was made by B. A. Bridgewater, Jr., Chairman of the Board, President and Chief Executive Officer, who said:
"The continued strong performance of Famous Footwear led Brown Group's 1998 second quarter and first half sales and earnings gains. We are pleased to report that Famous Footwear achieved its second consecutive quarter of record sales and operating earnings, reflecting the developing momentum in that business. These results and the earnings gain in our Canadian Operations more than offset lower than planned performance at Brown Shoe Company during the quarter.Safe Harbor Statement Under the Private Securities Litigation Act of 1995: This press release contains certain forward-looking statements that are subject to various risks and uncertainties that could cause actual results to differ materially. These include general economic conditions, competition, consumer apparel and footwear buying trends, and political and economic conditions in Brazil and China, which are significant footwear sourcing countries. The Company's reports to the Securities and Exchange Commission contain detailed information relating to such factors."At Famous Footwear, operating earnings increased 67.9 percent to $12.6 million in the second quarter on a sales gain of 2.1 percent to $218.2 million. Sales from footwear retailing operations were up 4.6 percent, reflecting the disposition of Famous Footwear's fixtures business. Same-store sales were up .5 percent for the quarter reflecting the impact of this year's late back-to-school season on July's sales. Sales per square foot increased 3.9 percent, confirming the progress in our store- repositioning program.
"The substantial earnings gain at Famous Footwear is the result of continued improvements in store mix, gross margins and operating execution. Improved margins were the result of a less promotional approach and a shift in merchandising mix. Casual footwear continued to sell well during the quarter, more than offsetting declines in athletic shoe sales. Inventories are clean, well controlled, and slightly lower than last year as we move into the important back-to-school and third quarter periods. There were 810 stores in operation at quarter-end.
"Brown Shoe Company's wholesale divisions - Brown Branded Marketing and Pagoda USA - reported combined sales of $99.4 million, up 5.0 percent from last year's second quarter. Advertising expenses related to development of the NaturalSPORT brand were higher than planned in the quarter, as this program was accelerated to support higher sales of the brand to department store customers.
"These higher advertising costs and markdowns at Brown Branded Marketing, combined with lower than planned shipments at Pagoda USA, led to a decline in operating earnings from $5.9 million to $2.8 million for the quarter. The Naturalizer brand, however, continues to perform well in the market, with sales for this brand 14 percent higher than last year and with this momentum, we anticipate a good fall season at wholesale.
"Naturalizer Retail's sales of $36.6 million in the quarter were up 5.1 percent, with same-store sales up 2.5 percent. However, higher expenses led to an operating loss of $.4 million for the quarter versus operating earnings of $.9 million last year. There were 338 stores in operation at quarter-end.
"The company's Canadian Operations - both retail and wholesale - continued their excellent performance during the second quarter. Sales of $20.2 million were up slightly from last year and operating earnings increased 24.7 percent to $3.0 million in the quarter.
"We remain on-track with the restructuring of the Pagoda International marketing division, which we expect to be essentially completed by year-end. During the quarter, the sale of the company's European Operations was completed and inventory liquidation in Latin America continues to run ahead-of-schedule. Second quarter results include a loss of $2.6 million (or $.14 per share) related to Pagoda International. This loss was somewhat higher than planned, and we now anticipate losses of between $7 and $8 million for the year. We expect, however, that the strong performance of our core operations will more than offset these restructuring costs.
"Brown Group's cash flow is ahead of plan and the balance sheet continues to strengthen. Net debt as a percent of total capital was reduced to 44.8 percent during the quarter. Inventories are tightly controlled, ending the quarter well below plan and 9.7 percent lower than last year's level.
"In summary, Brown Group has shown continued improvement during the first half of fiscal 1998, led by the substantial gains at Famous Footwear. With the late back-to-school season at Famous Footwear off to a solid start and the improving performance of our Naturalizer brand, we are demonstrating continuing progress. As we complete the Pagoda International liquidation, the earning power of our core businesses will stand out, and the value of the company will be confirmed."
Brown Group, Inc. is a $1.6 billion footwear company with worldwide operations. The Company operates the Famous Footwear, Naturalizer and F. X. LaSalle chains of footwear retail stores and markets leading brands including Naturalizer, Life Stride, NaturalSPORT, le coq sportif athletic footwear, and licensed brands including Dr. Scholl's, Star Wars and Disney character footwear.
Brown Group, Inc. press releases are available by fax through PR Newswire's Company News On-Call fax service at 800-758-5804, extension 109435. Brown Group, Inc. news also is available on the Company's web site at http://www.browngroup.com.
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BROWN GROUP, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Thousands, except per share) | ||||
| Thirteen Weeks Ended | Twenty Six Weeks Ended | |||
| Aug 1, 98 | Aug 2, 97 | Aug 1, 98 | Aug 1, 97 | |
| Net Sales | $ 383,618 | $ 378,823 | $ 785,927 | $ 770,638 |
| Cost of Goods Sold | 229,616 | 232,587 | 476,601 | 478,569 |
| Gross Profit | 154,002 | 146,236 | 309,326 | 292,069 |
| Selling and Administrative Expenses | 140,116 | 134,746 | 282,898 | 272,753 |
| Interest Expense | 4,858 | 5,364 | 10,490 | 11,129 |
| Other (Income) Expense | 1,284 | 346 | 1,236 | (90) |
| Earnings Before Income Taxes | 7,744 | 5,780 | 14,702 | 8,277 |
| Income Tax (Provision) | (3,449) | (2,250) | (6,536) | (3,205) |
| Net Earnings | $ 4,295 | $ 3,530 | $ 8,166 | $ 5,072 |
| Basic Net Earnings per Common Share | $ .24 | $ .20 | $ .46 | $ .29 |
| Diluted Net Earnings per Common Share | $ .24 | $ .20 | $ .46 | $ .29 |
| BROWN GROUP, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Thousands) | ||||
| Aug 1, 1998 | Aug 2, 97 | |||
| ASSETS | ||||
| Cash and Cash Investments | $32,180 | $42,320 | ||
| Receivables, Net | 75,109 | $ 32,180 | ||
| Inventories (less reserve for valuation to last-in, first-out cost at August 1, 1998 of $15,265 and August 2, 1997 of $17,203) | 396,657 | 439,208 | ||
| Other Current Assets | 26,014 | 37,634 | ||
| Total Current Assets | 529,960 | 592,646 | ||
| Property, Plant and Equipment - Net | 78,950 | 83,866 | ||
| Other Assets | 75,250 | 72,110 | ||
| $ 684,160 | $ 748,622 | |||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Notes Payable | $ - | $ 47,000 | ||
| Trade Accounts Payable | 161,772 | 160,795 | ||
| Accrued Expenses | 87,549 | 80,154 | ||
| Income Taxes | 14,197 | 5,674 | ||
| Current Maturities of Long-Term Debt | 15,000 | 2,000 | ||
| Total Current Liabilities | 278,518 | 295,623 | ||
| Long-Term Debt and Capitalized Leases | 182,029 | 197,025 | ||
| Other Liabilities | 20,540 | 23,929 | ||
| Shareholders' Equity | 203,073 | 232,045 | ||
| $ 684,160 | $ 748,622 | |||
Brown Group, Inc.
For more information contact:
Mary Sylvia Siverts
8300 Maryland Avenue
Post Office Box 29
St. Louis, Missouri 63166-0029
(314) 854-4000
Vice President - Public Affairs
(314) 854-4093