Famous Footwear 2002 Annual Report Download - page 2

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PART I
ITEM 1 - BUSINESS
The Company, founded in 1878 and incorporated in 1913, operates in the footwear industry. In 1999, the Company changed its name
from Brown Group, Inc., to Brown Shoe Company, Inc. Current activities include the operation of retail shoe stores and the sourcing and
marketing of footwear for women, men and children. During 2001, categories of footwear sales were approximately 59% women's, 27%
men's and 14% children's. This composition has remained relatively constant over the past few years. Approximately 71% of 2001 footwear
sales were made at retail compared to 73% in 2000 and 70% in 1999. See Note 6 of Notes to Consolidated Financial Statements on page 35
of the Annual Report to Shareholders for the year ended February 2, 2002, which is incorporated herein by reference, for additional
information regarding the Company's business segments.
In 2001, the Company launched a set of initiatives that are expected to improve the performance of the Company. These initiatives
include the closing of 97 underperforming domestic Naturalizer Retail stores, optimizing the investment in inventory at the Famous
Footwear division, installing a new management team at Famous Footwear, and implementing a Shared Services platform in the
Company's information systems, finance and human resources functions. In the fourth quarter of 2001, a charge was taken to implement
these initiatives along with the costs associated with other nonrecurring events including the costs of calling and restructuring its debt.
The Company's business is seasonal in nature due to consumer spending patterns, with higher back-to-school, Easter and Christmas
holiday season sales. Traditionally, the third fiscal quarter accounts for a substantial portion of the Company's operating earnings for the year.
The Company has approximately 11,500 full and part-time employees. Approximately 100 employees engaged in the warehousing of
footwear in the United States are employed under a union contract, which will expire in September 2002. In Canada, the Company employs
approximately 330 factory and warehouse employees under union contracts, which expire in October 2002 and October 2003.
Retail Operations
The Company's retail operations at February 2, 2002 included 1,376 retail shoe stores in the United States and Canada operating
primarily under the Famous Footwear, Factory Brand Shoes, Warehouse Shoes, Supermarket of Shoes, Naturalizer and F.X. LaSalle
names. A portion of the retail sales includes Company-owned and licensed brand names.
2
ITEM 1 - BUSINESS (Continued)
In retail sales of footwear, the Company competes in a highly fragmented market with many organizations operating retail shoe stores
and departments. Competitors include local, regional and national shoe store chains, department stores, discount stores and numerous
independent retail operators of various sizes. Quality, customer service, store location, merchandise selection, advertising and pricing are
important components of retail competition.
Famous Footwear
Famous Footwear, with 920 stores at the end of fiscal 2001, is America's largest chain selling branded value-priced footwear for the
entire family. Founded over 30 years ago, Famous Footwear was purchased by the Company in 1981 as a 32-store chain, and now also
operates under such names as Factory Brand Shoes, Warehouse Shoes and Supermarket of Shoes.
Famous Footwear stores feature a wide selection of brand-name, value-priced athletic, casual and dress shoes for the entire family.
Brands carried include, among others, Nike, Skechers, New Balance, Reebok, adidas, Rockport, Vans, Connie, K-Swiss, Naturalizer and
Westies.
Famous Footwear stores are located in strip and power 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 2001.
Strip and Power Strip Centers 525
Outlet Malls 211
Regional Malls 184
920
The stores open at the end of fiscal 2001 averaged approximately 6,500 square feet. Those stores open at the end of fiscal 2000 averaged
approximately 5,900 square feet. Total square footage was 5.9 million at the end of fiscal 2001 compared to 5.5 million at the end of fiscal
2000. 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 - 6,000 square foot stores to 8,000-12,000 square foot stores in high traffic, power strip
shopping centers. The Company believes that the larger store format in power strip shopping centers will become highly productive as this
venue provides the best opportunity to showcase and display the wide variety of brands available at Famous Footwear. At the end of fiscal