Famous Footwear 2004 Annual Report Download - page 11

Table of Contents
BROWN SHOE COMPANY, INC. 2003 FORM 10-K
We have sourcing offices in Hong Kong, China, Brazil, Indonesia, Italy, Taiwan and Mexico. Our structure enables us to source footwear at
various price levels from significant shoe manufacturing regions of the world. In 2003, more than 80% of the footwear we sourced was from
manufacturing facilities in China. We believe we have the ability to shift sourcing to alternative countries, over time, based upon trade
conditions, economic advantages, production capabilities and other factors, if conditions warrant. The following table provides an overview of
our foreign sourcing in 2003:
Country Millions of Pairs
China 59.2
Brazil 10.1
Italy 1.2
Indonesia 0.7
All Other 0.4
Total 71.6
We monitor the quality of the components of our footwear products prior to production and inspect prototypes of each footwear product before
production runs are commenced. We also perform random in-line quality control checks during production and before footwear leaves the
manufacturing facility.
We maintain separate design teams for each of our brands. These teams are responsible for the creation and development of new product
styles. Our designers monitor trends in apparel and footwear fashion and work closely with retailers to identify consumer footwear
preferences. From a design center in Florence, Italy, we capture European influences like heel shapes and fabrics. Our Italian design center
works closely with our line builders in the United States, who blend them with the latest U.S. fashion trends. When a new style is created,
our designers work closely with independent footwear manufacturers to translate our designs into new footwear styles.
RISK FACTORS
Certain statements in this Form 10-K, as well as other statements made by us from time to time, contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially. The considerations listed below
represent certain important factors we believe could cause such results to differ. These considerations are not intended to represent a
complete list of the general or specific risks that may affect the Company. It should be recognized that other risks (including those described in
Item 7 — “Management’s Discussion and Analysis”) may be significant, presently or in the future, and the risks set forth below may affect
us to a greater extent than indicated. We disclaim any intent or obligation to update these forward-looking statements.
Competition and Changes in Consumer Preferences
Competition is intense in the footwear industry. Certain of our competitors are larger and have substantially greater resources than we do.
Our success depends upon our ability to remain competitive in the areas of style, price and quality, among others, and in part on our ability to
anticipate and respond to changing merchandise and fashion trends and consumer preferences and demands in a timely manner.
Furthermore, consumer preferences and purchasing patterns may be influenced by consumers’ disposable income. Consequently, the
success of our operations may depend to a significant extent upon a number of factors affecting disposable income, including general
economic conditions and factors such as employment, business conditions, consumer confidence, interest rates and taxation.
Reliance on Foreign Sources of Production
General
We rely entirely on broad-based foreign sourcing for our footwear products. We source footwear products from independent third-party
manufacturing facilities located in China and Brazil and to a lesser extent from Indonesia, Italy and Mexico. Typically, we are a major
customer of these third-party manufacturing facilities. We believe our relationships with such third-party manufacturing facilities provide us
with a competitive advantage; thus, our future results will partly depend on maintaining our close working relationships with our principal
manufacturers.
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