Brown Shoe's weak outlook sends shares down

Thu Aug 25, 2011 - Brown Shoe Co Inc (BWS.N) forecast a bleak year ahead as it grapples with rising costs, rapidly declining sales of once-popular toning footwear and wavering consumer confidence, sending its shares to their lowest in over two years.

The company, which also posted a smaller-than-expected second-quarter adjusted profit hurt by weak sales of toning shoes, also expressed concerns over whether it will be able to increase prices to counter rising costs.

Retailers have faced high raw material costs over the past year and many have warned shoppers could go into hiding as fears grow of another recession.

Many retailers have increased prices as commodity costs rise, but the raised prices have reached a point where they have become prohibitive for some consumers.

All this is eating into margins at Brown Shoe and the company doesn't expect these pressures to relent this year. Gross profit margin declined 300 basis points in the second quarter.

Footwear retailers and makers are also facing declining demand for toning footwear -- supposed to exercise leg and buttock muscles by making the wearer work harder while walking -- forcing many to clear inventory for these shoes.

The company also said it sold its AND1 brand to New York-based Galaxy International, a brand management company, for $55 million and plans to use the money to pay down debt.

The company, which owns the Famous Footwear and Naturalizer brands, now expects a full-year adjusted profit of 85-97 cents a share, compared with analysts' view of $1.15, according to Thomson Reuters I/B/E/S.

Excluding one-offs, the retailer earned 4 cents a share in the second quarter, missing analysts' expectations by 2 cents.

Revenue rose 7.2 percent to $628.1 million, also missing market estimates of $638.2 million.

Brown Shoe had acquired AND1, a basketball and lifestyle brand, as part of its takeover of the American Sporting Goods in February.

The St. Louis, Missouri-based company's shares 16 percent to a low of $6.57 on Thursday morning, making it the top loser on the New York Stock Exchange.

(Reporting by Meenakshi Iyer in Bangalore; Editing by Viraj Nair)