Famous Footwear 2011 Annual Report Download - page 14

12 2011 BROWN SHOE COMPANY, INC. FORM 10-K
Other
We also sell footwear under the Etienne Aigner, Fergie/Fergalicious and Carlos by Carlos Santana brand names. Etienne
Aigner appeals to a target customer who seeks classic footwear styling and is sold at national chains, department
stores and our Famous Footwear stores. We have a license agreement with Etienne Aigner, Inc. to sell Etienne Aigner
footwear that expires 2017, with an extension option through 2022. Fergie/Fergalicious was created in collaboration with
entertainment superstar Fergie (Stacy Ferguson) to capture the multifaceted aspects of Fergie’s life as an award-winning
singer, songwriter and actress and is sold at better department stores, boutiques, independent retailers and online. We
have a license agreement with Krystal Ball Productions to sell Fergie/Fergalicious footwear that expires in 2012 with an
extension option through 2014. Carlos by Carlos Santana footwear is inspired by the passion and energy of Santana’s music
and is sold at major department stores, national chains and our Famous Footwear stores. We have a license from Santana
Tesoro, LLC to sell Carlos by Carlos Santana footwear.
Brown Shoe Company also receives royalty revenues for licensing owned brands, including brands listed above, to third-
parties. Products sold under license agreements accounted for Wholesale Operations’ net sales of approximately 37% in
2011, 44% in 2010 and 48% in 2009.
Portfolio Realignment
We are currently undergoing a portfolio realignment designed to position us to be somewhat smaller but stronger and
more profi table in the future. We made progress in the fi rst phase of our portfolio realignment e orts during 2011 and
will continue these e orts in 2012. The fi rst phase of our portfolio realignment includes selling our AND 1 division (The
Basketball Marketing Company, acquired with ASG); closing two U.S. distribution centers and a factory in China; exiting
certain women’s specialty and private label brands; exiting the children’s wholesale business; closing or relocating
underperforming or poorly aligned retail stores; and other infrastructure changes.
Brown Shoe Company Sourcing and Product Development Operations
Brown Shoe Company sourcing and product development operations source and develop footwear for our Wholesale
Operations and Specialty Retail segments and also a portion of the footwear sold by our Famous Footwear segment.
We have sourcing and product development o ces in China, Hong Kong, Italy, Macau, St. Louis, Los Angeles and New York.
Sourcing Operations
In 2011, the sourcing operations sourced approximately 58 million pairs of shoes through a global network of third-party
independent footwear manufacturers. Also during 2011, we owned and operated factories in central China that produced
approximately six million pairs of athletic footwear for our Avia and RYKÄ brands. This structure enables us to source
footwear at various price levels from key shoe manufacturing regions of the world. The majority of our footwear sourced
is provided by approximately 15 manufacturers operating approximately 75 manufacturing facilities.
In certain countries, we utilize agents to facilitate and manage the development, production and shipment of product.
We attribute our ability to achieve consistent quality, competitive prices and on-time delivery to the breadth of these
established relationships. While we do not have any signifi cant contractual commitments with our suppliers, we do enter
into sourcing agreements with certain independent sourcing agents.
Prior to production, we monitor the quality of all of our footwear components and also inspect the prototypes of each
footwear style. We have leading lab testing facilities in our Dongguan, Putian and JiangXi, China o ces, which provide high
quality footwear for our customers. We also perform random in-line quality control checks during production and before
any footwear leaves the manufacturing facility.
In 2011, approximately 98% of the footwear we sourced was from manufacturing facilities in China. The following table
provides an overview of our foreign sourcing in 2011:
Country Millions of Pairs
China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56.6
All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.8
Product Development Operations
In our Dongguan, Putian and JiangXi, China o ces, we operate a total of fi ve sample-making facilities with unique and
diverse capabilities. By operating these facilities, we have greater control over our product development, in terms of
accuracy, execution and time to market.
We maintain design teams for our brands in St. Louis, Los Angeles, New York and China as well as other select fashion
locations, including Italy. These teams, which include independent designers, 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. Our design teams create collections of footwear and work
closely with our product development and sourcing o ces to convert our designs into new footwear styles.