Famous Footwear 2013 Annual Report Download - page 12

10 2013 BROWN SHOE COMPANY, INC. FORM 10-K
average approximately 2,300 square feet in size. Total square footage at the end of 2013 was 308,000 compared to
332,000 in 2012. In 2013, we closed 25 stores in the United States and Canada, primarily in regional malls, and we
opened nine stores, primarily in outlet malls. We expect to open six stores and close 10 stores in 2014.
Naturalizer footwear is also distributed in China through stores operated by our joint venture partner, C. banner
International Holdings Limited (“CBI”) (formerly Hongguo International Holdings Limited). CBI operated 95 stores at the
end of 2013 and expects to add approximately 10 stores in 2014. During 2013, through our majority-owned subsidiary,
B&H Footwear Company Limited (“B&H Footwear”), we also operated 28 stores in China. As further discussed in Note 16
to the consolidated financial statements, during 2013, B&H Footwear transferred the operation of all retail stores in China
to CBI and currently operates no retail stores. B&H Footwear continues to sell footwear to CBI on a wholesale basis.
Marketing programs for our Naturalizer stores have complemented our Naturalizer brand advertising by building on the
brand’s consumer recognition and value proposition, and reinforcing the brand’s focus on eortless style, comfort, and
quality. Naturalizer utilizes a database-marketing program, which targets frequent consumers through catalogs and
other mailings that display the brand’s product oerings. Consumers can purchase the products in these catalogs from
our stores, online at Naturalizer.com and Naturalizer.ca, or by phone.
E-Commerce/Direct-To-Consumer
We own and operate Shoes.com, Inc., a pure-play internet retailing company. Shoes.com oers a diverse selection of
footwear and accessories for women, men, and children, including footwear purchased from third-party suppliers and
Brown Shoe Company.
In connection with our omni-channel approach to reach consumers, we also operate Famous.com (included in our
Famous Footwear segment), Naturalizer.com, Naturalizer.ca, DrSchollsShoes.com and SamEdelman.com, which oer
substantially the same product selection to consumers as sold in their respective retail stores, except Famous.com
which oers an expanded assortment as a result of the vendor drop ship program. Additional websites such as
Ryka.com, LifeStride.com, ViaSpiga.com, Vince.com, CarlosShoes.com, and FergieShoes.com function as retail outlets
for the online consumer and serve as additional brand-building vehicles for us. In addition, the Company has also
begun operating an e-commerce business in China. Those operations are focused on selling Naturalizer footwear
within China through third-party online sites, with plans to add more Company-branded product in the future.
References to our website addresses do not constitute incorporation by reference of the information contained on the
websites and the information contained on the websites is not part of this report.
Other Store Concepts
At the end of 2013, our Specialty Retail segment also included a total of five retail stores operated under the Dr. Scholl’s
and Sam Edelman names. During 2014, we plan to open several additional Sam Edelman stores as we expand our retail
presence for this brand, and close four Dr. Scholl’s stores.
WHOLESALE OPERATIONS
Our Wholesale Operations segment designs, sources, and markets branded footwear for women and men at a variety of
price points. Certain of our branded footwear products are developed pursuant to licensing agreements. We also receive
royalty revenues for licensing owned brands to third parties. Our footwear is distributed to over 3,000 retailers, including
national chains, department stores, mass merchandisers, independent retailers, online retailers, and catalogs throughout the
United States and Canada as well as approximately 60 other countries (including sales to our retail segments). The most
significant wholesale customers include Famous Footwear and many of the nation’s largest retailers: national chains such as
DSW, TJX Corporation (including TJ Maxx and Marshalls), Ross Stores, Nordstrom Rack, and Kohl’s; department stores such
as Macy’s, Nordstrom, Bon-Ton, Belk, and Dillard’s; mass merchandisers such as Walmart and Target; independent retailers
such as QVC and Home Shopping Network; and online retailers, such as Zappos.com, Amazon.com, and Famous.com. We
also sell product to a variety of international retail customers and distributors. The loss of any one or more of our significant
customers could have a material negative impact on Wholesale Operations and the Company.
The vast majority of our wholesale customers also sell shoes purchased from competing footwear suppliers. Those
competing footwear suppliers own and license brands, many of which are well-known and marketed aggressively. Many
retailers, who are our wholesale customers, are increasing the amount of private brand-name footwear that they source
directly from factories or through agents. The wholesale footwear business has low barriers to entry, which further intensifies
competition. In addition, some competitors have successfully branded their trademarks as lifestyle brands, resulting in a
greater competitive advantage to those companies.
In 2013, our Wholesale Operations segment sold approximately 48 million pairs of shoes. We sell footwear to wholesale
customers on both a landed and first-cost basis. 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.