Famous Footwear 2005 Annual Report Download - page 6

LEADING IN SPEED-TO-MARKET: Speed-to-market฀ is฀ an฀ important฀ goal฀ for฀ our฀ business.฀ Our฀ consumer-
driven฀wholesale฀model,฀for฀example,฀calls฀for฀an฀increased฀focus฀on฀faster฀production฀cycles,฀more฀frequent฀
deliveries฀of฀fresh฀styles฀to฀the฀retail฀floor,฀and฀faster฀sell-through฀of฀our฀shoes฀to฀consumers.฀To฀that฀end,฀
we’ve฀added฀talent฀in฀wholesale฀planning฀and฀analysis฀and฀vigorously฀applied฀metrics฀to฀keep฀our฀invento-
ries฀lean.฀ Although฀this฀initiative฀is฀a฀work฀in฀progress,฀early฀results฀tell฀us฀we’re฀on฀track – not฀only฀with฀
more฀timely฀product฀deliveries,฀but฀with฀fewer฀markdowns.฀In฀addition,฀wholesale฀inventory฀turns฀improved฀
significantly฀over฀last฀year.฀฀
In฀total,฀our฀Wholesale฀sales฀were฀up฀40฀percent.฀ Wholesale฀operating฀earnings฀increased฀by฀78.4฀percent,฀
reflecting฀the฀contribution฀from฀the฀Bennett฀business,฀the฀nonrecurrence฀of฀costs฀to฀incorporate฀the฀Bass฀
brand฀in฀2004,฀and฀improved฀sales฀in฀most฀of฀our฀major฀brands.฀
GROWING OUR PORTFOLIO: Bennett฀ Footwear,฀ which฀ we฀ acquired฀ last฀ April,฀ performed฀ in-line฀ with฀
our฀expectations,฀adding฀ 11฀cents*฀ per฀diluted฀share฀to฀our฀ earnings฀in฀ 2005.฀ More฀ importantly,฀ the฀Via฀
Spiga,฀Franco฀Sarto฀and฀Etienne฀Aigner฀brands฀gave฀us฀a฀strong฀presence฀in฀the฀better฀and฀bridge฀footwear฀
segments – where฀in฀the฀past,฀we฀had฀only฀our฀Carlos฀by฀Carlos฀Santana฀brand.
Looking฀Forward
As฀ 2006฀ unfolds,฀ we฀ plan฀ to฀ take฀ these฀ strategies฀ to฀ the฀ next฀ level.฀ We’re฀ undertaking฀ work฀ to฀ further฀
differentiate฀Famous฀Footwear,฀and฀will฀be฀testing฀innovative฀ideas฀for฀improving฀the฀consumer’s฀shopping฀
experience฀there.฀We’ll฀strengthen฀our฀consumer-focused฀wholesale฀model฀by฀fully฀integrating฀our฀work฀on฀
speed-to-market฀into฀the฀operating฀side฀of฀the฀business – so฀we฀can฀better฀satisfy฀the฀consumer’s฀appetite฀for฀
fresh฀fashion.฀ And฀we’ll฀study฀the฀efficiency฀and฀effectiveness฀of฀our฀current฀operations฀with฀an฀eye฀toward฀
instituting฀best฀practices.
Our฀ focus฀ will฀ continue฀ to฀ be฀ on฀ building฀ our฀ brands฀ and฀ strengthening฀ the฀ consumer’s฀ preference฀ for฀
them.฀This฀spring,฀for฀instance,฀we’ll฀roll฀out฀stronger฀product฀assortments฀and฀new฀marketing฀campaigns฀
to฀showcase฀them฀at฀Naturalizer,฀Via฀Spiga฀and฀in฀our฀Famous฀Footwear฀stores.฀We’re฀also฀improving฀our฀
store฀ real฀ estate฀ strategy฀ with฀ the฀ goal฀ of฀ locating฀ new฀ stores฀ just฀ where฀ our฀ target฀ customer฀ wants฀
to฀ shop.฀ This฀ should฀ allow฀ us฀ to฀ optimize฀ our฀ marketing฀ investment฀ and฀ increase฀ profitability฀ on฀ a฀
market-by-market฀ basis.฀ As฀ part฀ of฀ this฀ work,฀ we฀ plan฀ to฀ open฀ about฀ 90฀ new฀ Famous฀ Footwear฀ stores฀
while฀closing฀about฀45,฀ending฀the฀year฀with฀nearly฀1,000฀stores.
Looking฀ ahead,฀ we฀ see฀ exciting฀ growth฀ opportunities:฀ in฀ the฀ brands฀ we’ve฀ acquired฀ through฀ Bennett;฀ in฀
the฀potential฀expansion฀of฀ Famous฀Footwear;฀ in฀the฀stronger฀sales฀and฀higher฀margins฀we฀expect฀to฀win฀
through฀better฀differentiated฀ and฀more฀compelling฀brands,฀increased฀speed-to-market,฀ and฀leveraging฀our฀
consumer฀wholesale฀model;฀ in฀the฀continued฀growth฀of฀Shoes.com;฀and,฀potentially,฀in฀new฀acquisitions.
We’re฀on฀our฀way฀to฀transforming฀Brown฀Shoe.฀We’re฀committed฀to฀driving฀more฀profitable฀business฀for฀
our฀retail฀partners฀and฀suppliers – brand฀by฀brand.฀ And฀we’re฀committed฀to฀creating฀a฀remarkably฀connected฀
portfolio฀of฀retail฀and฀wholesale฀brands฀that฀win฀consumer฀preference.฀฀฀฀
We฀ appreciate฀ the฀ confidence฀ you฀ have฀ shown฀ in฀ us.฀ With฀ your฀ continued฀ support฀ and฀ our฀ continued฀
application฀of฀proven฀strategies,฀we฀look฀forward฀to฀more฀success฀in฀the฀years฀ahead.฀฀฀
Sincerely,
฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀Ronald฀A.฀Fromm,฀Chairman฀and฀Chief฀Executive฀Officer฀฀฀฀฀฀
*This฀was฀17฀cents฀on฀a฀pre-split฀basis.฀All฀per฀share฀data฀
฀฀is฀adjusted฀to฀reflect฀our฀3-for-2฀stock฀split฀on฀April฀3,฀2006.