Shoe Pavilion Expands Stores

For the fourth quarter ended Dec. 31, Shoe Pavilion earned net income of $1.3 million, or 17 cents per diluted share, compared with net income of $1 million or 14 cents per share, for the fourth quarter of the previous fiscal year. For all of fiscal 2005, the company earned $2.7 million or 36 cents per diluted share, compared with $2.1 million or 30 cents per diluted share for the same period last year.

Comparable store net sales increased 5.5% for the fourth quarter and rose 6.9% for the year, with total sales for the fourth quarter rising 18.9% to $29.5 million and full-year sales climbing 19.5% to $102.5 million. The company opened 10 new stores and closed six during 2005 as part of its strategic plan to close smaller stores upon lease expiration and open larger stores in power retail centers.

The improved financial results in the fourth quarter and for the full year in 2005 were driven by new store openings as well as comparable store sales increases, Dmitry Beinus, chairman and CEO, commented during the company's conference call with financial analysts. "During the past year we have been focusing on evolving our business model to larger-format stores," Beinus explained. "As our older and smaller stores come up for lease expirations, we are replacing them with larger format stores in retail power centers."

Beinus said that at the end of 2005, Shoe Pavilion's average store measured approximately 10,000 sf. The average size of new stores opened in 2005 was 14,500 sf, and the new locations that open in 2006 will average 18,000 sf to 20,000 sf, he said. Beinus commented that, "We have seen sales increases in the stores that we have relocated to larger sites, confirming our belief that the smaller-sized stores restrict our revenue potential."

Among the advantages of the larger formats are that they allow the company to offer additional categories such as children's shoes and accessories for both men and women, the Shoe Pavilion CEO said. In addition to plans to open up to 20 new stores in 2006, the company is working on a new store pipeline for 2007. Shoe Pavilion operates 93 stores in California, Washington, Oregon, Arizona, Nevada and Texas.