Famous Footwear 2004 Annual Report Download - page 7

Table of Contents
BROWN SHOE COMPANY, INC. 2003 FORM 10-K
WHOLESALE OPERATIONS
Our Wholesale operations design and market branded, licensed and private-label dress, casual and athletic footwear for women, men and
children at a variety of price points to over 2,000 retailers, including department stores, mass merchandisers, national chains and
independent retailers throughout the United States and Canada. The division is a resource for many of the nation’s largest retailers,
including Wal-Mart, Payless ShoeSource, Target, The May Company, Federated, Dillard’s, Sak’s, Nordstrom, Meijer, Sears and Famous
Footwear, as well as The Bay and Wal-Mart in Canada. We also sell product to a variety of international retail customers and certain
distributors. The vast majority of the division’s customers also sell shoes purchased from competing footwear suppliers.
In fiscal 2003, the division provided its customers with approximately 72 million pairs of shoes. Substantially all of this footwear was
imported through our Sourcing division, except for those pairs produced at the Company-owned manufacturing facility in Canada, which
closed in March 2004.
Our sales force solicits wholesale orders for shoes and is generally responsible for managing our relationships with wholesale customers.
We generally place orders as a result of these sales efforts before the shoes are sourced, with delivery generally within three to four months
thereafter. We sell footwear to wholesale customers on both a first-cost and landed basis. 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. 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. We carry inventories of certain high-volume styles, particularly in the Naturalizer, LifeStride and
Dr. Scholl’s lines, to allow prompt shipment on reorders.
In addition to orders placed through our sales force, the Wholesale division provides its retail customers the ability to check directly inventory
of all wholesale product in our distribution centers, place orders and track expected product arrivals over its business-to-business Internet site,
BrownShoeOnline.com. Approximately 900 retailers utilize this e-commerce tool. In addition, we provide these retailers with our “E-direct”
system that allows them to sell out-of-stock product, which we then ship directly to the consumer’s home.
Our major owned brands include Naturalizer, LifeStride, Buster Brown, Connie, Fanfare and Brown Shoe. Each of our brands is targeted to
a specific customer segment representing different styles and taste levels at different price points.
Introduced in 1927, Naturalizer is one of the nation’s leading women’s footwear brands and is our flagship brand. Naturalizer products
emphasize relevant and up-to-date styling with quality, value, comfort and fit. Naturalizer footwear is sold in department stores, independent
shoe stores and our Famous Footwear and Naturalizer retail stores. The brand has increased its market share from 4.7% in 2002 to 4.9% in
2003, representing the No. 3 market share position within department stores at January 31, 2004 as reported by the NPD Group, Inc.
LifeStride is a leading entry-level price point, women’s brand sold in department stores offering contemporary styling. LifeStride is focused on
providing the consumer with “stylized casual” footwear at price points of $30 to $50 per pair. In 2003, the brand achieved a 2.1% department
store market share, per the NPD Group, Inc., compared to 1.9% in 2002.
The Buster Brown brand of children’s footwear includes Buster Brown “classic” footwear offered to retailers including The May Company and
Famous Footwear. We are capitalizing on the strength and recognition of the Buster Brown brand by marketing licensed and branded
children’s footwear under the Buster Brown & Co. umbrella. We sell these products to mass merchandisers including Wal-Mart, Payless
ShoeSource and Target. Licensed products include, among others, Barbie, Mary-Kate and Ashley, Spider-Man and Bob the Builder. The
Buster Brown & Co. umbrella provides customers with the assurance that these licensed products contain the quality that they are
accustomed to receiving from Buster Brown shoes.
Products sold under license agreements, which are generally for an initial term of two to three years and subject to renewal, were
responsible for approximately 10%, 9% and 8% of consolidated sales in fiscal 2003, 2002 and 2001, respectively.
In addition to the above-mentioned children’s licenses, we have a long-term license agreement, which is renewable through 2014, to market
the Dr. Scholl’s brand of affordable casual, athletic and work shoes for women and men
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