Famous Footwear 2004 Annual Report Download - page 5

Table of Contents
BROWN SHOE COMPANY, INC. 2003 FORM 10-K
provide our customers with fresh product and, in some cases, product exclusively designed for and available only in our stores.
Famous Footwear stores are located in strip shopping centers as well as outlet malls and regional malls in all 50 states, Puerto Rico and
Guam. The breakdown by venue is as follows at the end of fiscal 2003 and 2002:
January 31, 2004 February 1, 2003
Strip centers 522 535
Outlet malls 191 196
Regional malls 180 187
893 918
The stores open at the end of fiscal 2003 averaged approximately 7,000 square feet compared to an average of 6,700 square feet for stores
open at the end of fiscal 2002. Total square footage at the end of fiscal 2003 increased 0.9% to 6.2 million compared to the end of fiscal 2002.
The increase in total square footage and in the average store size reflects the Company’s initiative to reposition a portion of Famous
Footwear’s real estate portfolio by moving from 5,000- to 6,000-square-foot stores to approximately 8,000-square-foot stores in strip shopping
centers. Plans are to open approximately 70 stores in fiscal 2004, while closing approximately 50 stores.
Sales per square foot were $172 in fiscal 2003, which is down 2.8% from $177 in fiscal 2002. This decrease reflects the same-store sales
decline of 2.4% in fiscal 2003 and lower productivity per square foot in the new stores opened. Same-store sales changes are calculated by
comparing the sales in stores that have been open at least 13 months.
Famous Footwear relies on allocation systems and processes that utilize allocation criteria, customer profiles and inventory data in an effort
to ensure stores are adequately stocked with products and to differentiate the needs of each store based on location, customer profiles or other
factors. Famous Footwear’s in-store point-of-sale systems provide detailed sales transaction data to the main office in Madison, Wisconsin,
for daily analysis and update of the perpetual inventory and product allocation systems. These systems also are used for training employees
and communicating between the stores and the main office.
In fiscal 2001, we embarked upon an initiative named IMPACT (Improved Performance and Competitive Transformation), which focused on
reengineering the Famous Footwear buying, merchandising and allocation functions. We initiated new processes and recruited new talent in
an effort to deliver fresher, more popular brands and styles to customers. This process starts with increased testing to identify emerging
styles. As a result of this testing and knowledge, orders are placed closer to the selling season, and product is flowed through distribution
centers and stores in smaller quantities and in more frequent intervals. The goal of this initiative is to have the right shoes at the right time
for our customers, significantly increase inventory turns and reduce base inventories.
In fiscal 2002 and 2003, we achieved the objectives of this initiative. We significantly improved the aging of the inventory compared to the end
of fiscal 2001 and improved inventory turns, and customers purchased more current season merchandise, which led to higher gross profit
rates. We achieved reductions in the base level of inventories. The processes initiated as part of IMPACT continued to drive down inventory
levels during 2003. At the end of fiscal 2003, inventories per square foot of retail space were 26% lower than they were 36 months earlier.
With two distribution centers, located in Sun Prairie, Wisconsin, and Lebanon, Tennessee, Famous Footwear’s distribution systems allow
for merchandise to be delivered to each store weekly or on a more frequent basis.
Famous Footwear’s marketing program includes newspaper, radio and television advertising, in-store signage and database marketing, all of
which are designed to further develop and reinforce the Famous Footwear concept with the consumer. Marketing and advertising programs
are tailored on a region-by-region basis to reach target customers. Famous Footwear utilizes a database marketing program, which targets
and rewards frequent customers with product discounts and other promotions. In addition, we time certain advertising campaigns to
correspond to regional differences such as the important back-to-school season, which begins at various times throughout the country. In
fiscal 2003, we spent approximately $32 million to communicate Famous Footwear’s philosophy: delivering to the customer the best value
on quality, branded footwear.
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