Famous Footwear 2012 Annual Report Download - page 12

10 2012 BROWN SHOE COMPANY, INC. FORM 10-K
average approximately 2,400 square feet in size. Total square footage at the end of 2012 was 332,000 compared to
335,000 in 2011. In 2012, we closed 20 stores in the United States and Canada, primarily in regional malls and we opened
13 stores, primarily in outlet malls. We expect to open 10 stores and close 25 stores in 2013.
At the end of 2012, through our majority-owned subsidiary, B&H Footwear Company Limited (“B&H Footwear”), we also
operated 26 stores in several of China’s largest cities. We expect to open five stores in China in 2013. In addition, our joint
venture partner, Hongguo International Holdings Limited (“Hongguo”), operated 79 stores at the end of 2012 and expects
to add approximately 22 stores in 2013. Naturalizer footwear is distributed through these stores operated by B&H Footwear
and Hongguo. See Note 16 to the consolidated financial statements for additional information about B&H Footwear.
Marketing programs for our Naturalizer stores have complemented our Naturalizer brand advertising by building on the
brand’s consumer recognition and value proposition, and reinforcing the brand’s focus on eortless style, comfort and
quality. Naturalizer utilizes a database-marketing program, which targets frequent consumers through catalogs and other
mailings that display the brand’s product oerings. Consumers can purchase the products in these catalogs from our
stores, online at Naturalizer.com and Naturalizer.ca or by phone.
E-Commerce/Direct-To-Consumer
We own and operate Shoes.com, Inc., a pure-play internet retailing company. Shoes.com oers a diverse selection of
footwear and accessories for women, men and children, including footwear purchased from third-party suppliers and
Brown Shoe Company.
In connection with our omni-channel approach to reach consumers, we also operate Famous.com (included in our Famous
Footwear segment), Naturalizer.com, Naturalizer.ca and DrSchollsShoes.com, which oer substantially the same product
selection to consumers as sold in their respective retail stores, except Famous.com which oers an expanded assortment as
a result of the vendor drop ship program. Additional websites such as ViaSpiga.com, LifeStride.com and Ryka.com function
as retail outlets for the online consumer and serve as additional brand-building vehicles for us.
References to our website addresses do not constitute incorporation by reference of the information contained on the
websites and the information contained on the websites is not part of this report.
Other Store Concepts
At the end of 2012, our Specialty Retail segment also included a total of six retail stores operated under the Dr. Scholl’s
Shoes and Sam Edelman names. During 2013, we plan on opening one Sam Edelman store.
WHOLESALE OPERATIONS
Our Wholesale Operations segment designs, sources and markets branded footwear for women and men at a variety of price
points. Certain of our branded footwear products are developed pursuant to licensing agreements. We also receive royalty
revenues for licensing owned brands to third-parties. Our footwear is distributed to over 3,000 retailers, including national
chains, department stores, independent retailers, mass merchandisers, online retailers and catalogs throughout the United
States and Canada as well as approximately 60 other countries (including sales to our retail segments). The most significant
wholesale customers include many of the nation’s largest retailers: national chains such as DSW, TJX Corporation (including
TJ Maxx and Marshalls), Kohl’s and Ross Stores; department stores such as Macy’s, Nordstrom, Bon-Ton, Belk and Dillard’s;
and mass merchandisers such as Wal-Mart and Target; and online retailers, such as Zappos.com, Amazon.com, Piperlime.com
and Famous.com. We also sell product to a variety of international retail customers and distributors. The loss of any one or
more of our significant customers could have a material negative impact on our Wholesale Operations and the Company.
The vast majority of our wholesale customers also sell shoes purchased from competing footwear suppliers. Those
competing footwear suppliers own and license brands, many of which are well-known and marketed aggressively. Many
retailers, who are our wholesale customers, are increasing the amount of private brand-name footwear that they source
directly from factories or through agents. The wholesale footwear business has low barriers to entry, which further intensifies
competition. In addition, some competitors have successfully branded their trademarks as lifestyle brands, resulting in a
greater competitive advantage to those companies.
In 2012, our Wholesale Operations segment sold approximately 56 million pairs of shoes. We sell footwear to wholesale
customers on both a landed and first-cost basis. Landed sales are those in which we obtain title to the footwear from
our overseas suppliers and maintain title until the footwear clears United States customs and is shipped to our wholesale
customers. Landed sales generally carry a higher profit rate than first-cost sales as a result of the brand equity associated
with the product along with the additional customs, warehousing and logistics services provided to customers and the risks
associated with inventory ownership. First-cost sales are those in which we obtain title to footwear from our overseas suppliers
and typically relinquish title to customers at a designated overseas port. Many of these customers then import this product
into the United States. To allow for the prompt shipment on reorders, we carry inventories of certain high-volume styles.