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business newsBrown Shoe Company Kicks Into High Gear
By
Justin Sharon
Nov 23, 2010 2:15 pm
The specialty retailer is surging more than 16% and is the best performing stock on both the NYSE and Russell 2000 Index so far today.
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On a day only Imelda Marcos could love, with the Dow down triple digits, several footwear firms are bucking the general malaise. Top of the tree for green ink is Brown Shoe (BWS), surging more than 16% and the best performing stock on both the NYSE and Russell 2000 Index as I write. This morning the specialty retailer, which operates more than 1,400 stores in almost 40 countries, reported fiscal third-quarter profit rose to $18.6 million, equivalent to $0.42 on an earnings per share basis. This comfortably exceeded the respective figures of $16.3 million and $0.38 from a year earlier and EPS also beat Street consensus, which was calling for $0.40. Sales gained 15% to a new record of $716.1 million and Brown Shoe also boosted its earnings guidance going forward. It now projects adjusted per share profit in a range of $1.00 to $1.05 for this year and $1.31 to $1.43 in 2011, up from current FactSet forecasts of only $0.90 and $1.03, respectively.CEO Ron Fromm remarked that, “Wholesale grew across all channels, posting the largest quarterly organic sales increase in at least a decade.” Back-to-school was another standout at an outfit founded in 1878 that owns and markets multiple brands including, of course, Buster Brown’s, Dr. Scholl’s, the more well-heeled Via Spiga, and Fergie Footwear (of Black Eyed Peas fame.) Operating margins are expected to rebound to roughly 3% over the next several years.
One caveat: The company’s retail business hasn't performed as well as its wholesale cousin in recent times, and several of its under performing Naturalizer stores are scheduled to be shut down in upcoming months. For now, however, this is a firm that's walking on air.
Please see Biology Professor Embarks on Crusade Against Shoes, In America People Are Getting Married in Department Store Shoe Aisles, and Crazy Business Ideas That Actually Worked: Crocs.
Not such a fine day for fine jewelery firm Zale Corporation (ZLC), sliding more than 7% in an admittedly awful overall session for equities. The 21-year-old outfit, which operates in all 50 states, realistically was never going to be Prince William’s engagement ring of choice even before he opted for Di’s hand-me-down last week. Its offerings tend to be more mass than class, and Zale has often been called the “Walmart (WMT) of jewelery.” It actually competes more with the Arkansas-based category killer than with upscale bling rival Tiffany (TIF), which earlier today touched an all-time peak ahead of its own earnings announcement tomorrow. Still it would have wished for better than this afternoon’s tumble, attributable to a wider-than-anticipated fiscal first-quarter loss amid an impairment charge.
It bled $97.9 million worth of red ink, equal to $3.05 per share. This was far worse than the $59.7 million ($1.87 on an EPS basis) it lost 12 months ago and per share earnings also came in light relative to analysts’ deficit expectations of $1.79. Revenue also fell 1% to $327 million from $329.2 million. Clutching at straws, CEO Theo Killion said, “Since February 2010, when we began implementing our turnaround plan, each fiscal quarter has shown improvement.” But with gold and diamond prices trending ever higher and Zale having been adversely impacted by a recent revolving-door policy involving upper management, it’s a stock that's lost its shine.
Turn to Wedding Bells Wringing Wallets and Most Stolen Products: Brighton Jewelry for related content.
When we introduced “Lloyd’s Wall of Worry” earlier in the month, who knew Mr. Khaner’s indispensable market guide would also do double duty as a singularly apt description for the dire straits Lloyds Banking Group Plc (LYG) currently finds itself in? Today’s anxiety is due to continued fallout from its Irish exposure, and the current sell-off has taken shares down more than 33% in a year. Although analysts at UBS raised the recommendation on Lloyds peer Royal Bank of Scotland (RBS) to Buy from Neutral this morning, both stocks are down as investors view the two as being most exposed to Dublin’s debt debacle.
The London-based company dates to before the Boston Tea Party and is not to be confused with separate but similarly named insurer Lloyd’s of London. (Although both have been beset by an obligatory scandal; for the money center bank it most recently manifested itself as a grotesquely mistimed office party.) Today Adair Turner, head of England’s Financial Services Authority, attempted to downplay the risks to British financial institutions from the crisis across the Irish Sea, and Lloyds’ recent appointment of Antonio Horta-Osorio as its new CEO has been generally well received by the market. However, the troubled firm still requires government assistance some two years after the credit crunch began in earnest and also runs continued risk of charge-offs related to a weak UK real estate market. It’s hard to see this outlook improving meaningfully any time soon.
Lloyds on Hook for External Bank Loans and -- from far happier times of half a decade ago -- Show Some Respect for a Solid British Bank have additional analysis.
Food for thought at Flowers Foods (FLO), currently giving back more than 1% after getting downgraded to Hold from Buy by Deutsche Bank today. (Hey, it could be worse -- 1-800-FLOWERS.com (FLWS) is almost 4% lower to take its 2010 tumble to well over 20%.) The bakery company, founded in Georgia during the Great Depression, is still up by double digits on a percentage basis over the past 12 months, so today’s decline is unlikely to give President Allen Shiver shudders. Its assorted breads, bagels, buns, cakes, pastries, rolls, sandwich rounds, and tortillas have fared well during the Great Recession with the company managing to keep an enviable lid on costs. There are a couple key concerns, however. Beyond a recent uptick in commodity price pressure, Flowers also gets almost 21% of its consolidated sales revenue from Walmart, so concentration risk is real.
Can the Cake Boss Save Hoboken’s Economy? answers an especially tasty baking question.
No positions in stocks mentioned.
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