Consumer spending environment remains challenging in Q1 - Brown Shoe

28 May '09

5 min read

- Gross margin rate in the first quarter decreased 40 basis points to 38.6 percent of net sales from 39.0 percent of net sales in the first quarter of 2008, driven by the continued promotional environment at retail as well as a greater mix of mid-tier channel sales versus department stores sales;

- Selling and administrative expenses in the first quarter increased by $1.6 million to $212.8 million, or 39.4 percent of net sales, versus $211.2 million, or 38.1 percent of net sales, in the same period last year. The year-over-year change was primarily related to the impact of operating 69 more North American stores as well as the consolidation of Edelman Shoe, Inc., offset partially by expense reductions across the Company;

- Net restructuring and other special charges (recoveries) increased the Company's operating loss by $2.6 million in the first quarter of 2009 and increased operating earnings in the year-earlier period by $8.4 million. Charges in 2009 include costs related to implementing a new information technology platform, while the net benefit in 2008 reflects net insurance recoveries related to environmental remediation, partially offset by costs related to the Company's headquarters consolidation initiatives;

- As a result, the Company generated an operating loss in the quarter of $7.2 million versus operating earnings of $13.6 million in the first quarter of 2008;

- Net interest expense in the quarter increased $1.3 million to $5.1 million versus $3.8 million in the first quarter of 2008 due to increased borrowings on the Company's revolving credit facility;

- The Company recognized a $5.2 million income tax benefit in the quarter due to its loss in the quarter;

- Net loss was $7.6 million, or $0.18 per diluted share, versus net earnings of $7.2 million, or $0.17 per diluted share, in the year-ago quarter. First quarter 2009 net loss included costs, net of a tax benefit, of $1.7 million, or $0.04 per diluted share, related to the Company's information technology initiatives. First quarter 2008 net earnings included costs, net of tax, of $1.1 million, or $0.03 per diluted share related to its headquarters consolidation, offset by net recoveries of $6.2 million, net of tax, or $0.15 per diluted share, for insurance recoveries, net of associated fees and costs, related to environmental remediation;

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Brown Shoe Company Inc

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