Brown Shoe Company

by Zacks Equity Research

November 29, 2012 |

Shares of Brown Shoe Company Inc. (BWS) have been trending higher since May and hit a 52-week high on November 27. This footwear retailer reported a positive earnings surprise of 27.7% for its fiscal third quarter last week, and became a Zacks #1 Rank (Strong Buy) this week. BWS has gained 106% year-to-date.

The company’s consumer-oriented strategies, portfolio realignment initiatives, product innovation and cost containment efforts suggest that there is enough potential for even more improvement moving forward.

Third Quarter Beat

Brown Shoe Company reported fiscal third-quarter earnings of 60 cents per share on November 20, sweeping past the Zacks Consensus Estimate of 47 cents and jumping 17.6% from last year.

Total sales of $732.2 million handily beat the Zacks Consensus Estimate of $703 million and rose 2.6% year over year, driven by sales improvement at the Famous Footwear segment (up 4.6%), offset by declines in the Wholesale Operations (down 0.4%) and Specialty Retail (down 1.8%) segments. Operating income surged 27.1% to $41.1 million, whereas operating margin expanded 110 basis points to 5.6%.

Management now expects fiscal 2012 sales in the range of $2.57 billion to $2.59 billion, and earnings between $1.06 and $1.10 per share.

Earnings Estimate Revisions

The Zacks Consensus Estimate for this fiscal year rose 16.1% to $1.08 per share in the last 30 days, as all 4 estimates were revised higher. This represents year-over-year growth of 54.6%.

The Zacks Consensus Estimate for next fiscal year advanced 6.6% to $1.29 per share in the same time, as 4 of 5 estimates were raised. This guidance reflects a year-over-year increase of 19.4%.

Chart Reflects Strength

Shares of Brown Shoe Company have been on an upsurge since May this year, recording a year-to-date return of 106%. Currently trading close to its 52-week high, shares of Brown Shoe have consistently traded above its 200-day moving average since May 17, 2012. Barring a few occasions, the stock has also remained above the 50-day moving average since the above mentioned period. Moreover, the company has outperformed the S&P 500 Index since May this year. Volume is fairly strong, averaging roughly 483K daily.

Founded in 1878 and headquartered in St. Louis, Missouri, Brown Shoe Company is a wholesaler as well as retailer of footwear with businesses in the United States, Canada and China. It operates approximately 1,300 retail stores under the Famous Footwear and Naturalizer names. Famous Footwear retail stores feature products under brands such as Nike, Skechers, New Balance, Converse, Puma, adidas, DC, Asics, LifeStride, Dr. Scholl’s Shoes, Reebok, Vans, K-Swiss, BOC by Born and Bearpaw. Naturalizer retail stores offer footwear products related to women. The company has a current market cap of $737 million.

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