Brown Shoe Gains Traction

"The Naturalizer turnaround has been a great success story," boasts Ron Fromm, chairman and CEO of Brown Shoe. Fromm says over the last six years, the company has lowered the age of its targeted clientele by 15 to 20 years while doubling Naturalizer's market share in department store. "Now, to take Naturalizer to the next level, we have added talent to our wholesale organization and are refining our store portfolio."

The Naturalizer plan includes: Closing approximately 80 underperforming stores, 60 in the US and 20 in Canada; opening 30 new outlet stores in the US and Canada over the next two to three years; consolidating into its St. Louis headquarters all buying, merchandise planning, and allocation functions for its US and Canadian stores; and strengthening and streamlining its Naturalizer Wholesale operations.

The shuttering of the underperforming stores is expected to be complete by April 2006, and will result in a specialty retail division with approximately 300 stores, 275 of which are Naturalizer stores. The 30 outlet stores will add to that total over the next two to three years. As a result of these initiatives, and by improving the performance of its specialty retail segment, Brown Shoe expects to realize an additional $5 million in pretax operating earnings on an annual basis, or 15 cents per share.

The company also plans to test market response to a new store prototype in 2005. Additional growth and remodeling will depend on the results of the store's assessment.

The company anticipates the cost to implement this plan will be about $14 to $17 million pretax, or 45 cents to 55 cents per diluted share, for lease buyouts, severance, and inventory markdowns.

As a result of these charges and costs, the company's earnings guidance issued on May 25 of $2.30 to $2.45 per diluted share, changes to $1.75 to $2.00 per share for fiscal 2005. For the second quarter, the company now estimates earnings per share guidance in the range of 11 cents to 18 cents, which includes approximately 14 cents to 16 cents in charges related to these actions.