Earnings Releases
Brown Group Reports First Quarter Earnings Per Share of $.22vs. $.09 Last Year on a Sales Gain of 2.7%
ST. LOUIS, MISSOURI (WIRE NEWS), May 28, 1998 --
Brown Group, Inc. (NYSE: BG) reported net earnings
of $3,871,000 or 22 cents per diluted share for the first fiscal
quarter ended May 2, 1998 compared to net earnings of $1,542,000
or 9 cents per diluted share in the 1997 first quarter, an increase
of 151.0 percent.
Consolidated net sales for the first
quarter of 1998 were $402,309,000 compared to $391,815,000 in
last year's first quarter, an increase of 2.7 percent. These results
include a reduction in sales at the Pagoda International Division
of $11,849,000. Sales in the balance of the company increased
6.0 percent.
Announcement of the first quarter results
was made at the annual meeting of the Company's shareholders held
in St. Louis, Missouri, by B. A. Bridgewater, Jr., Chairman of
the Board, President and Chief Executive Officer, who said:
"We are very pleased with Brown
Group's sales gain and substantial earnings improvement in the
first quarter of fiscal 1998. These better-than-planned results
were led by Famous Footwear's record first quarter sales and operating
earnings. They also reflect good expense control and leverage,
continuing momentum from the solid performance of Brown Shoe Company
and our Canadian Operations in 1997, progress in the Pagoda International
restructuring, and very good balance sheet management.
"Famous Footwear is off to a very
encouraging start in 1998. First quarter sales of $212.3 million
were up 6.2 percent from last year, and sales from footwear retailing
operations were 8.2 percent higher, reflecting the disposition
of Famous Footwear's fixtures shop. Same-store sales for the first
quarter increased 3.8 percent, and have increased at a 4.1
percent rate to-date in May. Famous Footwear achieved a 54.9 percent
increase in operating earnings to a record $10.4 million
for the quarter.
"These earnings reflect continued
improvements in operating execution, including significantly reduced
inventory shrinkage costs, and very good expense control. Women's
and men's casual footwear sold particularly well during the quarter,
offsetting athletic shoe demand which has declined slightly. The
shift had a positive impact on Famous Footwear's margins for the
quarter. There were 812 stores in operation at quarter-end.
"Brown Shoe Company's wholesale
divisions - Brown Branded Marketing and Pagoda USA - achieved
combined sales of $127.3 million for the quarter, a 5.8 percent
increase from last year. Operating earnings were up 32.2 percent
to $8.3 million. Sales of the brands were led by NaturalSPORT,
which increased 21 percent in the quarter, and the sell-through
of the Brown Branded Marketing brands at retail was strong, reflecting
good consumer acceptance of Naturalizer, NaturalSPORT and Life
Stride product.
"The chronic over-supply of footwear
persists in the marketplace, however, and this continues to impact
the rate and timing of orders from our wholesale customers as
we move into the second quarter. In addition, results at Pagoda
USA's Children's division have been adversely affected by lower-than-planned
orders.
"At Naturalizer Retail, sales were
up 10.4 percent to $34.2 million in the first quarter, with same-store
sales increasing 7.6 percent, including gains in each month of
the quarter. After substantial losses early in the quarter, Naturalizer
Retail achieved significant sales gains and improved operating
earnings in the March/April period. That momentum has continued
to date in May, reflecting strong sales of Naturalizer's and NaturalSPORT's
spring lines. The division reported an operating loss of $1.1 million
for the period, slightly better than last year's loss. There were
337 Naturalizer stores in operation at quarter-end.
"In Canada, the Retail division
achieved an 8.4 percent same-store sales gain in the quarter.
Overall sales for the Canadian Operations were $18.5 million,
about flat with the prior year. Operating earnings were $1.3 million,
about even with last year, but better than planned.
"We are on-track with the restructuring
of the Pagoda International marketing division, which is now expected
to be essentially completed by year-end. In Latin America, along
with the recognition and early resolution of restructuring issues,
the reduction in inventories continues to be well ahead-of-schedule.
In the European operations, the move to a "first cost"
business is on schedule. First quarter results include a loss
of $2.9 million at Pagoda International, in part reflecting early
recognition of certain license-related costs, and we continue
to plan on losses of between $5.0 and $6.0 million for the year.
"Brown Group's cash flow was better
than planned in the quarter and balance sheet management continues
to be very good. Inventories are tightly-controlled, ending the
quarter well below plan and 7.6 percent lower than last year's
level. The company's cash and short-term investments at the quarter's
end exceeded short-term borrowings for the first time in a decade,
and this favorable position is expected to continue for the balance
of the year. Net debt as a percent of total capital was reduced
to 48.5 percent. At its meeting held today, the Board of Directors
declared a regular quarterly dividend of 10 cents per share,
payable July 1, 1998 to shareholders of record on June 8,
1998. This will be the company's 302nd consecutive
quarterly dividend.
"Looking ahead, the momentum at
Famous Footwear is particularly encouraging and sell through of
our brands at retail has been excellent. We are pleased with the
continued improvements in the strength of Brown Group's balance
sheet and the improved earnings achieved through tight management
of our operations. We are enthusiastic about the progress in the
first quarter and we expect continued improvements in Brown Group's
results during 1998 as we emerge from the problems at Pagoda International."
In other business at the annual shareholders'
meeting, three directors were elected to serve three-year terms:
Julie C. Esrey, Richard A. Liddy and John Peters MacCarthy. B. A. Bridgewater,
Jr. was elected to serve a one-year term . Six other directors
continue in office: Joseph L. Bower, Harry E. Rich, Jerry E. Ritter,
John D. Macomber, William E. Maritz and General Edward C. Meyer,
Retired.
Also at the meeting, shareholders ratified
and approved the Brown Group, Inc. 1998 Stock Option and Restricted
Stock Plan and the allocation of 750,000 shares of the company's
Common Stock to the Plan.
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
from time to time contain detailed information relating to such
factors.
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. information also is available on the company's web site at http://www.browngroup.com.
| BROWN GROUP, INC. | ||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||
| (Dollars in millions except per share amounts) | ||||||||
| Thirteen Weeks Ended | ||||||||
 |
||||||||
| May 2, | May 3, | |||||||
| 1998 |
1997 |
|||||||
| Net Sales | $ 402,309 | $ 391,815 |
||||||
| Cost of Goods Sold | $ 246,985  |
$ 245,982 |
||||||
| Gross Profit | 155,324 | 145,833 | ||||||
| Selling and Administrative Expenses | 142,782 | 138,007 | ||||||
| Interest Expense | 5,632 |
5,765 |
||||||
| Other Income | (48) |
(436) |
||||||
| Earnings Before Income Taxes | 6,958 |
2,497 |
||||||
| Income Tax Provision | (3,087) |
(955) |
||||||
| Net Earnings | $3,871 |
$1,542 |
||||||
| Basic Net Earnings per Common Share | $.22 |
$.09 |
||||||
| Diluted Net Earnings per Common Share | $.22 |
$.09 |
||||||
| BROWN GROUP, INC. | ||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
| (Thousands) |
||||
| May 2, | May 3, | |||
| 1998 |
1997 |
|||
ASSETS |
||||
| Cash and Cash Equivalents | $ 36,602 | $ 28,168 | ||
| Receivables, Net | 71,259 | 87,312 | ||
| Inventories (less reserve for valuation to last-in, first-out cost at May 2, 1998 of $ 15,199 and May 3, 1997 of $17,578) | 370,438 | 401,123 | ||
| Other Current Assets | 30,300 |
39,257 |
||
| Total Current Assets | 508,599 | 555,860 | ||
| Property, Plant and Equipment - Net | 80,366 |
84,226 |
||
| Other Assets | 74,574 |
71,784 |
||
| Other Assets | $663,539 |
$711,870 |
||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||
| Notes Payable | $30,000 | $53,000 | ||
| Trade Accounts Payable | 118,155 | 122,431 | ||
| Accrued Expenses | 82,232 | 74,417 | ||
| Income Taxes | 13,603 | 5,891 | ||
| Current Maturities of Long-Term Debt | 15,000 |
2,000 |
||
| Total Current Liabilities | 258,990 |
257,739 |
||
| Long-Term Debt and Capitalized Leases | 182,028 |
197,025 |
||
| Other Liabilities | 20,388 |
24,490 |
||
| Shareholders' Equity | 202,133 |
232,616 |
||
$663,539 |
$711,870 |
|||
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