Famous Footwear 2011 Annual Report Download - page 32

30 2011 BROWN SHOE COMPANY, INC. FORM 10-K
Restructuring and Other Special Charges, Net
We incurred restructuring and other special charges, net of $2.8 million during 2011 as a result of the planned closing of
the Sun Prairie distribution center as part of our portfolio realignment with no corresponding charges in 2010 or 2009.
Operating Earnings
Operating earnings decreased $27.9 million, or 30.9%, to $62.5 million for 2011, compared to $90.4 million last year.
The decrease is the result of lower gross profi t, lower net sales and higher restructuring and other special charges, net,
partially o set by a decrease in selling and administrative expenses, as described above. As a percent of net sales,
operating earnings decreased to 4.3% in 2011 compared to 6.1% last year.
Operating earnings increased $45.8 million, or 102.7%, to $90.4 million for 2010, compared to $44.6 million for 2009.
The execution of our strategic initiatives has led to improved performance metrics, including a higher conversion rate
in our stores, higher average retail prices and increases in consumer tra c levels. These factors resulted in an increase
in net sales and gross margin, partially o set by the increase in selling and administrative expenses, as described above.
As a percent of net sales, operating earnings increased to 6.1% in 2010 compared to 3.3% in 2009.
WHOLESALE OPERATIONS
2011 2010 2009
% of % of % of
($ millions) Net Sales Net Sales Net Sales
Operating Results
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 870.9 100.0% $ 754.4 100.0% $ 631.8 100.0%
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614.6 70.6% 532.4 70.6% 426.0 67.4%
Gross profi t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256.3 29.4% 222.0 29.4% 205.8 32.6%
Selling and administrative expenses . . . . . . . . . . . . . . . . . . 226.6 26.0% 189.1 25.0% 164.4 26.0%
Restructuring and other special charges, net . . . . . . . . . . . . . 13.0 1.5% 0.7 0.1% 0.3 0.1%
Operating earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16.7 1.9% $ 32.2 4.3% $ 41.1 6.5%
Key Metric
Unfi lled order position at year-end . . . . . . . . . . . . . . . . . . . $ 296.8 $ 243.8 $ 246.0
Net Sales
Net sales increased $116.5 million, or 15.4%, to $870.9 million in 2011 compared to $754.4 million last year. The increase was
primarily attributable to the acquisition of ASG during early 2011, which contributed $135.5 million in net sales (excluding
$19.7 million of net sales attributable to TBMC that are refl ected in discontinued operations). We also experienced an
increase in net sales in our Fergie, Franco Sarto, Sam Edelman, LifeStride and Vera Wang divisions. These increases were
o set by a decline in net sales in our Dr. Scholl’s Shoes and Carlos by Carlos Santana divisions. Our unfi lled order position
increased $53.0 million, or 21.7%, to $296.8 million at the end of 2011, as compared to $243.8 million at the end of 2010,
primarily due to the inclusion of ASG.
Net sales increased $122.6 million, or 19.4%, to $754.4 million in 2010 compared to $631.8 million in 2009. Demand for
many of our brands continued to strengthen during 2010, as our brand performance at our retail consumers improved.
We experienced sales growth in nearly all of our brands, primarily led by our Naturalizer, Dr. Scholl’s Shoes, Sam Edelman,
Via Spiga and Vera Wang divisions. The sales growth was driven by sales increases across nearly all of our channels of
distribution, particularly in the mid-tier channel.
Gross Profi t
Gross profi t increased $34.3 million, or 15.5%, to $256.3 million in 2011 compared to $222.0 million last year primarily due to
the acquisition of ASG. Our gross margin was fl at at 29.4% in 2011 as compared to 2010. While the segment did experience
higher margins from its newly acquired ASG business, margins were negatively impacted by higher product costs and
inventory markdowns. During 2011, we experienced operational challenges related to the stabilization of our ERP system,
which we implemented in late 2010. We estimate that the gross profi t impact of these items was a reduction of $11.9 million
(approximately 140 basis points) in 2011, including higher customer allowances, chargebacks and air freight charges. In
addition, we recognized incremental cost of goods sold of $4.2 million (approximately 50 basis points) for the inventory
fair value adjustment related to our acquisition of ASG and $1.6 million (approximately 20 basis points) in costs related to
the exit of certain women’s specialty and private label brands.
Gross profi t increased $16.2 million, or 7.9%, to $222.0 million in 2010 compared to $205.8 million in 2009 due to the
increase in net sales, partially o set by a decline in gross margin. As a percent of net sales, our gross margin decreased to
29.4% in 2010 from 32.6% in 2009. The decrease in gross margin was primarily due to industry-wide sourcing and supply
chain issues that led to increased delivery costs and disruption in the timing of deliveries, leading to higher product costs
and greater markdowns and allowances, and order fulfi llment was further aggravated by the business process changes,
data conversion and learning curves associated with the Company’s systems transition that went live in December 2010.
Additionally, shifts in channel and customer mix negatively impacted the gross margin.