From: Reuters
Published November 28, 2007 11:50 AM

Brown Shoe profit slightly up

By Aarthi Sivaraman

NEW YORK (Reuters) - Brown Shoe Co Inc <BWS.N> reported a slightly higher quarterly profit on Wednesday, but cut its full-year outlook, pointing to an expected decline in same-store sales and wholesale revenue.

Its shares rallied to be up 0.6 percent from an earlier fall of 4.7 percent, which one analyst said could be due to investors' hope despite lower-than-expected results in its fiscal third quarter.

"A lot of investors still look at Brown Shoe as being a long-term opportunity," Susquehanna analyst John Shanley said, adding its stock could further rally if consumers got back into shopping mode again. Shanley has a "buy" rating on Brown Shoe shares.


The owner of the Naturalizer and FX LaSalle brands said net income rose to $27 million, or 61 cents a share, in the third quarter, ended on November 3, from $26.9 million, or 62 cents a share, a year earlier.

Analysts, on average, expected it to earn 62 cents a share, according to Reuters Estimates.

Excluding costs to relocate its offices from Los Angeles to St. Louis, the company earned 67 cents a share.

On a conference call, Chief Executive Ron Fromm said the company faced a "challenging environment for consumer spending," much like the rest of the retail industry.

"Confidence was obviously down, weather was unseasonably warm and dry, and there was quite possibly a style lull," Fromm said.

Tighter cost controls offset a decrease in sales, which fell 4.6 percent to $645.5 million.

At Brown Shoe's Famous Footwear chain, same-store sales fell 6.2 percent and significantly hurt profit companywide, Fromm said in an earlier statement.

Retail sales declined 1.4 percent, while wholesale sales decreased 11.8 percent.

Customer traffic was particularly poor in September and October, said Joseph Wood, Brown Shoe's retail president.


To lure customers back into its stores in the key holiday season, Brown Shoe said it started offering discounts in its stores two weeks earlier than usual.

Sales increases in early November came in as expected, helped by the earlier promotions, the company said.

For the current quarter, the company forecast net earnings of 36 cents to 41 cents per share on sales of $595 million to $605 million.

Quarterly same-store sales at Famous Footwear stores will be flat to down 2 percent from a year earlier, Brown Shoe said, while wholesale revenue to fall 16 percent to 17 percent.

For the full year, Brown Shoe forecast same-store sales to be flat to down 1 percent, and said it expects wholesale revenue to fall by 14 percent to 15 percent.

The company cut its full-year net earnings forecast to a range of $1.40 to $1.45 per share. It had previously expected $1.58 to $1.63.

Brown Shoe also lowered its sales outlook for the year to a range of $2.38 billion to $2.39 billion. It previously forecast $2.44 billion to $2.46 billion.

For the next fiscal year, however, Brown Shoe forecast growth of wholesale revenue in the mid-single-digit percentage range.

Brown Shoe operates some 1,000 stores, and owns or licenses the Via Spiga, Dr. Scholl's, Etienne Aigner and Carlos by Carlos Santana brands.

Its shares were up 9 cents or 0.6 percent at $16.34 after falling as low as $15.50 earlier on the New York Stock Exchange.

(Reporting by Aarthi Sivaraman; Editing by Steve Orlofsky)

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