Famous Footwear 2014 Annual Report Download - page 10

2014 BROWN SHOE COMPANY, INC. FORM 10-K 9
Famous Footwear stores are located in strip shopping centers as well as outlet and regional malls in all 50 states,
Guam and Canada. The breakdown by venue at the end of each of the last three fiscal years is as follows:
2014 2013 2012
Strip centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 696 711 726
Outlet malls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 172 167
Regional malls . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 161 162
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,038 1,044 1,055
Stores open at the end of 2014 averaged approximately 6,700 square feet compared to 6,800 square feet in 2013. Total
square footage at the end of 2014 decreased 1.4% to 7.0 million square feet compared to 7.1 million at the end of 2013. We
expect to open approximately 50 new stores and close approximately 50 stores in 2015. New stores typically experience an
initial start-up period characterized by lower sales and operating earnings than what is generally achieved by more mature
stores or the division as a whole. While the duration of this start-up period may vary by type of store, economic environment
and geographic location, new stores typically reach a normal level of profitability within approximately four years.
Sales per square foot were $215 in 2014, up from $207 in 2013. Same-store sales increased 1.5% during 2014. Same-store
sales changes are calculated by comparing the sales in stores that have been open at least 13 months. Relocated stores
are treated as new stores and closed stores are excluded from the calculation. Sales change from new and closed stores,
net, reflects the change in net sales due to stores that have been opened or closed during the period and are thereby
excluded from the same-store sales calculation. E-commerce sales for those e-commerce websites that function as an
extension of a retail chain are included in the same-store sales calculation.
Famous Footwear relies on merchandise allocation systems and processes that use allocation criteria, consumer
segmentation and inventory data in an eort to ensure stores are adequately stocked with product and to dierentiate
the needs of each store based on location, consumer segmentation and other factors. Famous Footwear’s distribution
systems allow for merchandise to be delivered to each store weekly, or on a more frequent basis, as needed. Famous
Footwear also uses regional third-party pooled distribution sites across the country. Famous Footwear’s in-store point-
of-sale systems provide detailed sales transaction data to our corporate oce for daily update and analysis in the
perpetual inventory and merchandise allocation systems. Certain of these systems also are used for training employees
and communication between the stores and the corporate oce.
Famous Footwear’s marketing programs include national television, digital marketing and social networking, print,
cinema, in-store advertisements and radio, all of which are designed to further develop and reinforce the Famous
Footwear concept and strengthen our connection with consumers. We believe the success of our campaigns is
attributable to highlighting key categories and tailoring the timing of such messaging to adapt to seasonal shopping
patterns. In 2014, we spent approximately $54.5 million to advertise and market Famous Footwear to our target
consumers, a portion of which was recovered from suppliers. Famous Footwear has a robust loyalty program
(“Rewards”), which informs and rewards frequent consumers with product previews, earned incentives based upon
purchase continuity, and other periodic promotional oers. In 2014, approximately 73% of our Famous Footwear net
sales were generated by our Rewards members. During the year, we expanded our eorts to connect with and engage
our consumers to build a strong brand preference for Famous Footwear through our loyalty program. In 2014, we grew
our mobile application and had more than 710,000 members enrolled by the end of the year. In 2015, we will continue
to seek new and expand existing channels for consumers to connect with Famous Footwear to drive our fans from the
digital world into profitable and loyal consumers in our omni-channel selling environments.
As part of our omni-channel approach to reach consumers, we also operate Famous.com. Famous.com oers an expanded
product assortment beyond what is sold in Famous Footwear stores with a variety of delivery options.
Until December 2014, we owned and operated Shoes.com, Inc., a pure-play Internet retailing company. Shoes.com oered a
diverse selection of footwear and accessories for women, men and children, including footwear purchased from third-party
suppliers and Brown Shoe Company. As further discussed in Note 2 to the consolidated financial statements, we sold Shoes.
com in December 2014 and recognized a gain on sale of $4.7 million.
BRAND PORTFOLIO
Our Brand Portfolio segment oers retailers and consumers a portfolio of leading brands from our healthy living and
contemporary fashion platforms by designing, sourcing and marketing branded footwear for women and men at a variety
of price points. Certain of our branded footwear products are sold under brand names that are owned by the Company,
and others are developed pursuant to licensing agreements. Our Brand Portfolio segment sells footwear on a wholesale
basis to retailers. The segment also sells footwear through our branded retail stores and e-commerce businesses.