Earnings Releases
Brown Group Reports Third QuarterEarnings Per Share Of $.72 Vs Loss Of $.76 Last Year
ST. LOUIS, Mo. (WIRE NEWS), Novemeber 19, 1998 -- Brown Group, Inc. (NYSE: BG) reported net earnings of $12,898,000 or 72 cents per diluted share in the third fiscal quarter ended October 31, 1998 compared to a net loss of $13,323,000 or 76 cents per diluted share in the 1997 third quarter. The 1997 net loss includes an after tax, non- recurring charge of $21,000,000 or $1.19 per share associated with the restructuring of the company's Pagoda International marketing division.
Consolidated net sales for the third quarter of 1998 were $411,976,000 compared to $433,886,000 in last year's third quarter, a decrease of 5.0 percent. Excluding the reduction in sales at the Pagoda International division, and sales of the Famous Fixtures business that was sold at year-end 1997, sales in the company's core businesses increased 1.8 percent in the quarter.
For the first nine months of fiscal 1998, net earnings were $21,064,000 or 1.18 per diluted share, compared to a net loss of $8,251,000 or 47 cents per diluted share, including the charge described above, for the first nine months of fiscal 1997.
Consolidated net sales for the first nine months of fiscal year 1998 were $1,197,903,000 compared to $1,204,524,000 in the same period last year, a decrease of .5 percent. Adjusting for the decline in sales at the Pagoda International division and the sale of Famous Fixtures, sales in the company's core businesses increased 4.4 percent.
Announcement of these results was made by B. A. Bridgewater, Jr., Chairman of the Board, President and Chief Executive Officer, who said:
"We are pleased to report these strong results at Brown Group during the critical third quarter that includes the important back-to-school season, in which we earn more than half of our annual income. Excluding the operating losses and non-recurring charges related to the phase-out of the Pagoda International marketing division, Brown Group's core operations earned 77 cents per share in the third quarter compared to 71 cents per share in the same period last year, an 8.5 percent increase.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."These results were led by substantial gains in operating earnings at both Famous Footwear and Brown Shoe Company. They confirm the progress we have made in our core businesses and reflect sound management of these businesses in the current highly promotional retail environment.
"Famous Footwear's progress continued in the third quarter, with operating earnings increasing 9.8 percent to $18.6 million. This represents the third consecutive quarter of record operating earnings at Famous Footwear. Sales of $239.7 million in the quarter were down 1.4 percent, reflecting the disposition of Famous Fixtures. Sales from footwear retailing operations were 1.9 percent higher in the quarter. Same-store sales declined 1.4 percent, but sales per square foot improved 1.5 percent.
"These results reflect slightly improved margins, very tight expense control and the success of the Famous Footwear store repositioning program. Famous Footwear's broad merchandise mix helped the company offset weaker athletic footwear sales with higher sales of casual product in the important back-to-school season. During the third quarter, the company opened 16 Famous Footwear stores and closed 13, ending the period with 813 stores in operation.
"Brown Shoe Company's wholesale operations also reported very good results for the third quarter, including a 19.5 percent gain in operating earnings to $11.7 million. Sales were up 3.1 percent to $114.4 million. These results were led by sales gains and higher margins at the Pagoda division and excellent expense control in all operations. The company's Naturalizer brand also continues to perform well in the marketplace. Acceptance of the new Naturalizer product is particularly encouraging, with spring orders 12.0 percent higher.
"At Naturalizer Retail, sales of $33.8 million were 2.1 percent higher in the quarter, with same-store sales increasing .5 percent. Lower margins combined with higher facilities costs resulted in an operating loss of $1.4 million for this division. During the quarter, the company opened 2 Naturalizer stores and closed 2, ending the period with 338 stores in operation.
"The company's Canadian Operations continued to report steady performance in the third quarter, with sales and earnings about even with last year in Canadian dollars. A weakened exchange rate, however, resulted in converted operating earnings of $2.0 million compared to $2.2 million last year and a sales decrease of 6.8 percent to $19.4 million.
"The liquidation of the Pagoda International marketing division continues on-track and is expected to be completed by year-end. Third quarter results include a loss of $.8 million (or $.05 per diluted share) related to Pagoda International.
"Brown Group's cash flow continues to be ahead of plan. The balance sheet has been materially strengthened during fiscal year 1998, with net debt as a percent of total capital reduced to 42.6 percent from 49.0 percent at the end of last year's third quarter. Inventories are tightly controlled, ending the quarter well below plan and below last year in our core operations.
"In summary, restructuring to position the company for the future has now been essentially completed, and Brown Group's core operations continued their progress and confirmed the company's earning power during the important third quarter. This performance is particularly encouraging because it was achieved in a competitive and highly promotional fall retail marketplace. Continued progress in our core operations and the strengthened balance sheet position Brown Group well to achieve continuing improved operating results and increases in shareholder value in the future."
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 | Thirty-Nine Weeks Ended | |||
| October 31, 1998 | November 1, 1997 | October 31, 1998 | November 1, 1997 | |
| Net Sales | $ 411,976 | $ 433,886 | $1,197,903 | $1,204,524 |
| Cost of Goods Sold | 248,222 | 278,056 | 724,823 | 756,625 |
| Gross Profit | 163,754 | 155,830 | 473,080 | 447,899 |
| Selling and Administrative Expenses | 136,887 | 146,871 | 419,785 | 419,624 |
| Interest Expense | 4,464 | 5,145 | 14,954 | 16,274 |
| Other Expense | 774 | 395 | 2,010 | 305 |
| Earnings Before Income Taxes | 21,629 | 3,419 | 36,331 | 11,696 |
| Income Tax Provision | 8,731 | 16,742 | 15,267 | 19,947 |
| Net Earnings (Loss) | $ 12,898 | $ (13,323) | $ 21,064 | $ (8,251) |
| Basic Net Earnings (Loss) per Common Share | $ .73 | $ (.76) | $ 1.19 | $ (.47) |
| Diluted Net Earnings (Loss) per Common Share | $ .72 | $ (.76) | $ 1.18 | $ (.47) |
| Basic Number of Shares | $ 17,717 | $ 17,595 | $ 17,677 | $ 17,584 |
| Diluted Number of Shares | $ 17,908 | $ 17,955 | $ 17,924 | $ 17,837 |
| Note: The consolidated statements of earnings for the thirteen and thirty-nine weeks ended November 1, 1997 include an after tax, non- recurring charge of $21.0 million related to the company's Pagoda International operations, of which $7.9 million is reflected in cost of goods sold, $4.2 million in selling and administrative expenses, $.9 million in other expense and $8.0 million in income taxes. | ||||
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BROWN GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
| (Thousands) | ||||
| October 31, 1998 |
November 1, 1997 | |||
| ASSETS | ||||
| Cash and Cash Investments | $ 37,419 | $ 25,496 | ||
| Receivables, Net | 67,287 | 85,598 | ||
| Inventories (less reserve for valuation to last-in, first-out cost at October 31, 1998 of $14,968 and November 1, 1997 of $16,984) | 369,423 | 393,972 | ||
| Other Current Assets | 25,896 | 35,471 | ||
| Total Current Assets | 500,025 | 540,537 | ||
| Property, Plant and Equipment - Net | 77,866 | 83,561 | ||
| Other Assets | 76,821 | 72,795 | ||
| $ 654,712 | $ 696,893 | |||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Notes Payable | $ -- | $ 32,000 | ||
| Trade Accounts Payable | 121,447 | 124,007 | ||
| Accrued Expenses | 85,182 | 87,647 | ||
| Income Taxes | 15,638 | 16,794 | ||
| Current Maturities of Long-Term Debt | 25,000 | 2,000 | ||
| Total Current Liabilities | 247,267 | 262,448 | ||
| Long-Term Debt and Capitalized Leases | 172,030 | 197,027 | ||
| Other Liabilities | 20,352 | 23,282 | ||
| Shareholders' Equity | 215,063 | 214,136 | ||
| $ 654,712 | $ 696,893 | |||
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