There's no business like the retail and wholesale shoe business for Brown Shoe Company. Brown Shoe operates about 1,055 value-priced family footwear stores under the Famous Footwear banner in the US and Guam, about 190 Naturalizer stores in the US and Canada, and a growing number of shoe stores in China. The company also sells shoes online and licenses Dr. Scholl's and Disney brand footwear. It distributes footwear worldwide through more than 3,000 retailers, including independent, chain (DSW), department stores (Sears), catalogs, and online retailers. Brown Shoe is opening new stores, closing underperforming ones, and updating styles to appeal to younger bipeds. The company has a growing footprint in China.
While Brown Shoe rings up nearly 90% of its sales in the US, its retail reach extends as far as China where its majority-owned subsidiary, B&H Footwear Limited, operates about 25 shoe stores in major cities. China is the source for 97% of Brown Shoe's footwear.
Brown Shoe Co's. wholesale business accounts for about a third of total sales. It supplies many of the major retailers in the US and Canada, as well as some 60 other countries. Important wholesale customers include TJX Corp., Ross Stores, Macy's, Wal-Mart, and Zappos.com. In fiscal 2013 (ends January) the wholesale business sold approximately 56 million pairs of shoes (down from 75 million pairs in 2007).
The company owns and operates Shoes.com, a pure-play Internet company. Its other online businesses, including FamousFootwear.com and Naturalizer.com, are tied to its retail stores. In addition to some 195 Naturalizer stores, Brown Footwear's Specialty Retail segment includes the Dr. Scholl's shoes and Sam Edelman chains. It bought the Sam & Libby brand back from Jones Group in 2012. (In 2012 the company closed the last of its F.X. LaSalle stores in Montreal and Brown Shoe Closet stores.)
Sales and Marketing
Brown Shoe Co. spent approximately $22 million on advertising and marketing support, including public relations, tradeshows consumer media advertising, production, cooperative advertising, and digital advertising, with its wholesale customers in fiscal 2013 (ends January).
Brown Shoe's fiscal 2013 (ends January) sales were essentially flat (up less than 1%) vs. the prior year, while net income increased 12% over the same period. The modest uptick in sales was primarily attributed to a 5% increase in same-store sales (those open more than one year) at its Famous Footwear stores, reflecting higher average retail prices and increased customer traffic. The gain in retail sales was partially offset by declining sales by the wholesale operation and sales at the company's specialty retail chains. The downturn in these two segments was attributed to brands the company is exiting as it realigns its wholesale shoe portfolio, a lower store count at its specialty retail chains, and lower net sales at Shoes.com.
Brown Shoe Company's portfolio realignment began in 2011 and continued throughout 2012. Initiatives included the sale of The Basketball Marketing Company acquired along with athletic footwear manufacturer American Sporting Goods (ASG) in 2011, exiting select women's specialty and private-label brands and the children's wholesale business, the closure of two US distribution centers and facilities in China. The company also terminated its licensing agreement with the Etienne Aigner brand.
Brown Shoe has also been reducing the store counts of both its Famous Footwear and specialty retail chains, while gradually growing its retail footprint in China. Indeed, China is a growth market for Brown Shoe. Its B&H Footwear subsidiary plans to open five stores in China in fiscal 2014 (ends January), bringing its total in China to more than 30 locations. Also, through a joint venture with China's Hongguo International Holdings, Brown Shoe operates some 80 stores there and plans to open more than 20 in the coming year.
Mergers and Acquisitions
To attract younger shoppers, Brown Shoe has invested in its own portfolio of profitable businesses that provide youth-inspired items. In 2010 it acquired the 50% stake in Edelman Shoe it didn't already own for nearly $40 million. The upscale, hip footwear, which includes sandals, sneakers, and high-heel clogs, are sold in Nordstrom and Macy's stores. As part of the agreement, Sam Edelman and Libby Edelman retained their respective roles as president of the Sam Edelman division and head of marketing. Brown Shoe followed the Edelman deal by acquiring athletic footwear manufacturer American Sporting Goods (ASG) for $145 million in cash in 2011. ASG makes shoes under the AND1, Avia, and Ryka brands, adding performance-focused designs to Brown Shoe's portfolio of comfy fitness footwear. (In 2011 Brown Shoe sold its men's basketball and lifestyle shoe brand AND1 to brand-management firm Galaxy International for $55 million.) The ASG deal positioned Brown Shoe to better serve a growing base of shoppers who are in the market for affordably-priced athletic shoes.