Famous Footwear 2004 Annual Report Download - page 26

Table of Contents
BROWN SHOE COMPANY, INC. 2003 FORM 10-K
$4.1 million charge taken in 2001 associated with closing 97 underperforming stores and the reversal of $0.8 million of that charge in 2002
that was in excess of the amount necessary to complete the closings.
Selling and Administrative Expenses
Selling and administrative expenses decreased $0.7 million, or 0.8%, to $94.3 million during 2003 compared to $95.0 million in 2002. As a
percent of sales, these costs increased to 49.8% in 2003 compared to 48.6% in 2002. This increase is primarily due to an increase in retail
facilities costs of 1.4% combined with an increase in warehousing and shipping costs of 0.2%, partially offset by a reduction in
merchandising and administrative costs of 0.5%. Selling and administrative expenses for 2003 include a special charge of $0.2 million
related to the closing of our last Canadian manufacturing facility.
Selling and administrative expenses decreased $20.8 million, or 18.0%, to $95.0 million during 2002 compared to $115.8 million in 2001.
As a percent of sales, these costs decreased to 48.6% in 2002 compared to 56.0% in 2001, or a decrease of 7.4%. Special charges of
$12.7 million in 2001 accounted for approximately 6.1% of the 7.4% decrease. These charges were related to the planned closing of
97 underperforming stores: $8.3 million for lease buyouts, $4.1 million for fixed asset writeoffs and $0.3 million for employee severance. In
2002, $0.1 million of these costs were determined to be excess and were reversed to income. The remaining reduction in expenses of
$8.0 million in 2002 compared to 2001 occurred throughout all expense categories reflecting the smaller store base.
Operating Earnings
Naturalizer stores incurred an operating loss of $4.0 million in 2003, compared to operating earnings of $1.4 million in 2002. This operating
loss is primarily attributable to the reduced sales levels, driven principally by the Canadian stores, increased markdowns to transition to
import footwear in Canada and lower than expected productivity in the domestic stores.
Operating earnings were $1.4 million in 2002, which included recovery of store closing charges taken in 2001 of $0.9 million. An operating
loss of $18.8 million was incurred in 2001, which included charges to close 97 underperforming stores of $16.8 million.
WHOLESALE
2003 2002 2001
% of % of % of
($ millions) Net Sales Net Sales Net Sales
Operating Results
Net sales $561.3 100.0% $566.4 100.0% $503.3 100.0%
Cost of goods sold 377.2 67.2% 385.0 68.0% 339.9 67.5%
Gross profit 184.1 32.8% 181.4 32.0% 163.4 32.5%
Selling and administrative 128.5 22.9% 127.0 22.4% 112.2 22.3%
Operating earnings $ 55.6 9.9% $54.4 9.6% $51.2 10.2%
Key Metrics
Unfilled order position at year-end $153.3 $141.3 $121.9
Net Sales
Net sales decreased $5.1 million, or 0.9%, to $561.3 million in fiscal year 2003 and increased $63.1 million, or 12.5%, to $566.4 million in
fiscal year 2002.
The 2003 sales decline was attributable to a decline in sales in the women’s private-label division and the children’s division, partially offset
by gains in both the men’s and athletic division and the LifeStride division. In addition, the West Coast dock strike at the end of 2002 caused
some customers to accelerate their orders of spring product prior to the end of fiscal year 2002. Also, reductions in purchases by a few major
customers, as they worked to reduce their inventories, negatively impacted 2003 sales. Naturalizer sales declined slightly in 2003, reflecting
the difficult retail environment, but the brand increased its department store market share to 4.9% in 2003 from 4.7% in 2002, per
NPD Group, Inc. The LifeStride brand’s sales increased 17.5% in 2003, reflecting strong acceptance of its casual and dress footwear, and
increased its department store market share to 2.1% in 2003 from 1.9% in 2002, per NPD Group, Inc. data.
22