ST. LOUIS, March 5 /PRNewswire/ -- Brown Group, Inc. (NYSE: BG) reported
consolidated net sales for the 52-week fiscal year 1997, which ended January
31, 1998, of $1,567,202,000 compared to $1,525,052,000 in fiscal 1996, an
increase of 2.8 percent.
The company reported a net loss of $20,896,000, or a basic loss per share
of $1.19, for fiscal year 1997 compared to net earnings of $20,315,000, or
basic earnings per share of $1.16, in fiscal year 1996.
The 1997 net loss includes after-tax restructuring charges and operating
losses of $45,617,000 associated with the company's Pagoda International sales
division and an after-tax loss of $1,500,000 related to the sale of Famous
Footwear's fixtures manufacturing facilities.
Excluding these items, the company's core operations earned $26,221,000,
or basic earnings per share of $1.49, in fiscal year 1997 compared to earnings
of $26,015,000, or basic earnings per share of $1.48, in 1996. The 1996
earnings include $4,900,000 or $.28 per share of non-recurring gains related
to LIFO inventory liquidations and income taxes.
Net sales for the fourth quarter of fiscal year 1997, which ended January
31, 1998, were $362,678,000 compared to $358,937,000 in 1996, an increase of
1.0 percent. A net loss of $12,645,000, or a basic loss per share of $.72,
was reported for the quarter compared to net earnings of $1,369,000, or basic
earnings per share of $.08, in the fourth quarter of 1996.
The fourth quarter 1997 net loss includes after-tax charges and operating
losses of $15,502,000 associated with the Pagoda International sales business
and an after-tax loss of $1,500,000 related to the sale of Famous Footwear's
fixtures manufacturing facilities. Excluding these items, the company's core
operations earned $4,357,000, or basic earnings per share of $.25, in the
fourth quarter of 1997 compared to $4,569,000, or basic earnings per share of
$.26, in the fourth quarter of 1996. The 1996 results include a non-recurring
gain of $1,900,000 related to income taxes.
Announcement of these results was made by B. A. Bridgewater, Jr.,
Chairman of the Board, President and Chief Executive Officer, who said:
"Brown Group made excellent progress in its core businesses --
Famous Footwear, Brown Shoe Company and the Canadian Operations --
during fiscal year 1997. Continuing momentum in these businesses
resulted in combined net earnings totaling more than $26 million,
exceeding plan and prior estimates. These earnings are about even
with results last year that included non-recurring gains of $4.9 million.
Unfortunately, this progress was overshadowed by severe losses at the
Pagoda International sales division and charges taken in the second half
of the year to restructure that business. Prospects for further progress
in the core businesses are encouraging.
"At Famous Footwear, strengthened operating execution led to fiscal
1997 sales of $849.9 million that were up 8.8 percent over 1996, with
same-store sales up 1.9 percent for the year. Sales per square foot
increased 5.6 percent, reflecting strong productivity in the newer stores,
and the maturing of stores opened in the 1994 to 1995 period. Operating
earnings of $34.5 million were up 38.3 percent. These operating earnings
exclude a pretax non-recurring loss on the sale of the Famous Fixtures
business, which was completed in early February 1998. The fixture
operation had annual sales in 1997 of $21 million and had incurred net
losses in the $1 to $2.5 million range over the past several years,
depressing Famous Footwear's earnings. Excluding the non-recurring charge
and operating losses at the Fixtures operation, Famous Footwear's
operating earnings in 1997 were $37.8 million.
"Good inventory flow and well-managed distribution costs, particularly at
the company's second distribution center, which opened in the fall of
1995, contributed to Famous Footwear's improved results for the year. The
progress at Famous Footwear is particularly encouraging in light of the
slow-down in the athletic footwear industry. Famous Footwear stores are
uniquely positioned to serve men's, women's and children's changing
fashion needs. The company opened 60 new stores during the year and closed
39, ending the year with 815 stores in operation.
"The company's core wholesale businesses -- Brown Branded Marketing
and Pagoda U.S.A. -- also reported solid progress for the year. Sales of
$432.7 million were slightly below last year's level, but better margins
and tightly controlled expenses led to operating earnings of $31.1 million
compared to $32.0 million in fiscal year 1996, which included $4.0 million
of non-recurring gains from the liquidation of LIFO inventories at Brown
Shoe Company. Sales of the Naturalizer and NaturalSPORT brands increased
slightly in 1997, and the continued emphasis on product development and
investment in aggressive brand marketing, which increased 18 percent in
1997, is contributing to the improved results.
"At Naturalizer Retail, sales of $130.1 million were about even with
fiscal year 1996 sales with same-store sales down .9 percent. An operating
loss of $2.9 million was recorded for the year. However, the real estate
strategy initiated in 1997 is achieving expected results, as average store
volume increased 5 percent in the fall season. The plan to exit under-
performing locations and to operate fewer stores but in better shopping
centers also resulted in comparable store sales increases of 11 percent
for the fall season in our 36 new and remodeled cherry wood stores open at
least twelve months. There were 341 stores in operation at year-end.
"The company's Canadian Operations continued their solid performance
during 1997. Sales of $76.2 million were up 4.1 percent over the prior
year and operating earnings increased 19.1 percent to $7.8 million. These
results were led by improved sales at the Retail division, where
same-store sales were up 5.2 percent for the year on top of a 7.3 percent
same-store sales increase in 1996. There were 107 Naturalizer stores and
16 F. X. LaSalle stores in operation in Canada at fiscal year-end.
"On October 8, 1997, Brown Group announced that excessive inventories and
increasing losses at its Pagoda International sales division had led to a
decision to reduce substantially investment in that business, and to shift
resources to the company's profitable core businesses. As a result of the
completion of the contract for sale of Pagoda International's Brazilian
inventory to Calcados Dilly Ltda. and the impact of the Brazilian
government's financial austerity program, additional losses and provisions
of approximately $9 million were announced on February 5, 1998. As a
result of further review of the division, a year-end charge of $6 million
was also incurred to provide for additional unanticipated high costs.
With these provisions, we have taken actions to deal with these severe
problems and free capital to invest in the ninety-five percent of the
company represented by our core operations.
"Brown Group's management of cash flow for fiscal year 1997 was excellent;
positive cash flow of $21 million was $59 million better than last year,
and resulted in short-term borrowings, net of cash and short-term
investments, of less than $4 million at year-end. At its meeting held
today, the company's Board of Directors declared a regular quarterly
dividend of $.10 per share, payable April 1, 1998. This is the 301st
consecutive quarterly dividend paid by the company.
"In view of the progress with our core operations and balance sheet, the
costs at Pagoda International are particularly disappointing. But
aggressive provisions in 1997 for dealing with that business, although
costly and troublesome, leave us with a higher degree of confidence that
our plans in 1998 will be achieved.
"That confidence is supported by early momentum: Famous Footwear achieved
a 4.4 percent same-store sales gain in February, Naturalizer Retail
returned to a gain, and wholesale forward orders solidly support our
profit plans at Pagoda U.S.A. and Brown Branded Marketing. As Brown Group
emerges from the impact of restructuring Pagoda International, our
developing earning power and strength as a corporation will become clear."
Safe Harbor Statement Under the Private Securities Litigation Act of 1995:
This press release contains certain forward-looking statements that are
subject to various risks and uncertainties that could cause actual results to
differ materially. These include general economic conditions, competition,
consumer apparel and footwear buying trends, and political and economic
conditions in Brazil and China, which are significant footwear sourcing
countries. The Company's reports to the Securities and Exchange Commission
from time to time contain detailed information relating to such factors.
Brown Group, Inc. is a $1.5 billion footwear company with worldwide
operations. The company operates the Famous Footwear, Naturalizer and F. X.
LaSalle chains of footwear retail stores and markets leading brands including
Naturalizer, Life Stride, NaturalSPORT, the Larry Stuart Collection, le coq
sportif athletic footwear, and licensed brands including Dr. Scholl's and
Disney character footwear.
Brown Group, Inc. press releases are available by fax through PR
Newswire's Company News On-Call fax service at 800-758-5804, extension 109435.
Brown Group, Inc. news and other company information also are available on the
company's web site at http://www.browngroup.com .
BROWN GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands, except per share)
Thirteen Weeks Ended Fifty-Two Weeks Ended
Jan. 31 Feb. 1 Jan. 31 Feb. 1
1998 1997 1998 1997
Net Sales $ 362,678 $ 358,937 $1,567,202 $1,525,052
Cost of Goods Sold 231,905 228,758 988,530 958,288
Gross Profit 130,773 130,179 578,672 566,764
Selling and Administrative
Expenses 139,912 126,022 559,536 521,553
Interest Expense 5,482 5,627 21,756 19,327
Other Income (757) (529) (452) (1,341)
Earnings (Loss) Before
Income Taxes (13,864) (941) (2,168) 27,225
Income Tax (Provision)
Benefit 1,219 2,310 (18,728) (6,910)
Net Earnings (Loss) $ (12,645) $ 1,369 $ (20,896) $ 20,315
Basic Net Earnings (Loss)
Per Common Share $ (.72) $ .08 $ (1.19) $ 1.16
Diluted Net Earnings (Loss)
Per Common Share $ (.72) $ .08 $ (1.19) $ 1.15
Note A: The consolidated statement of earnings for the thirteen weeks
ended January 31, 1998 includes an after-tax restructuring charge of
$10.0 million, related to the Pagoda International operations, of which
$6.8 million is reflected in cost of goods sold, $3.1 million in selling and
administrative expenses and $.1 million in other income. Results for the
fifty-two weeks ended January 31, 1998 reflect after-tax restructuring charges
of $31.0 million related to the Pagoda International operations, of which
$14.7 million is reflected in cost of goods sold, $7.3 million in selling and
administrative expenses, $1.0 million in other income and $8.0 million in
income taxes.
Note B: Results for the thirteen weeks ended February 1, 1997 include
$1.9 million of favorable income tax adjustments related to reversal of tax
valuation reserves provided in 1995, and the effect of an adjustment of the
effective tax rate to reflect a higher level of untaxed foreign earnings than
originally anticipated. Results for the fifty-two weeks ended February 1,
1997 reflect an after-tax credit from LIFO inventory liquidations of
$2.6 million and a tax credit of $2.3 million from the recovery of tax
valuation reserves.
BROWN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
January 31 February 1
1998 1997
ASSETS
Cash and Cash Equivalents $ 50,136 $ 38,686
Receivables, Net 77,355 90,246
Inventories (less reserve for
valuation to last-in, first-out
cost at January 31, 1998 of $15,617
and February 1, 1997 of $18,846) 380,177 398,803
Other Current Assets 30,862 37,040
Total Current Assets 538,530 564,775
Property, Plant and Equipment - Net 82,744 85,380
Other Assets 73,714 72,220
$ 694,988 $ 722,375
LIABILITIES AND SHAREHOLDERS EQUITY
Notes Payable $ 54,000 $ 62,000
Trade Accounts Payable 118,907 124,697
Accrued Expenses 93,191 71,053
Income Taxes 11,995 4,005
Current Maturities of Long-Term Debt - 2,000
Total Current Liabilities 278,093 263,755
Long-Term Debt and Capitalized Leases 197,027 197,025
Other Liabilities 20,678 24,558
Shareholders' Equity 199,190 237,037
$ 694,988 $ 722,375
SOURCE The Brown Group, Inc.
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Related links:
http://www.browngroup.com
CONTACT:
Mary Siverts of Brown Group, 314-854-4093
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