Profile: Brown Shoe Company, Inc. (BWS.BE)

Brown Shoe Company, Inc. (Brown Shoe), incorporated in 1913, operates in the footwear industry. The Company provides a range of licensed, branded and private-label casual, dress and athletic footwear products to women, men and children. The Company’s activities include the operation of retail shoe stores and e-commerce Websites, as well as the sourcing and marketing of footwear for women, men and children. During the fiscal year ended January 31, 2009 (fiscal 2008), categories of the Company’s consolidated footwear sales were approximately 62% women’s, 26% men’s and 12% children’s. In fiscal 2008, approximately 69% of footwear sales represented retail sales, including sales through its e-commerce Websites, with the remaining 31% representing wholesale sales. Through its Wholesale Operations segment, the Company designs, sources and markets footwear to retail stores domestically and internationally, including mass merchandisers, national chains, department stores, independent retailers, catalogs and online retailers.

Retail Operations

The Company’s retail operations at January 31, 2009, included 1,444 retail shoe stores in the United States, Canada, China and Guam. Famous Footwear operated 1,138 stores during fiscal 2008. It is a footwear chain selling branded footwear for the entire family. Its target customers are women who buy brand-name fashionable shoes at value prices for themselves and their families. In addition to its retail footwear stores, the Company operates a FamousFootwear.com site as a Famous Footwear e-tailing store. The Company’s Family footwear stores that feature a selection of brand-name, athletic, casual and dress shoes for the entire family. Brands carried include, among others, Nike, Skechers, New Balance, DC, adidas, Converse, Dr. Scholl’s, Steve Madden, Naturalizer, LifeStride, Mudd, K-Swiss, Puma, Connie, Aerosoles, Vans, Timberland, Buster Brown, Rockport and Reebok. Famous Footwear sells various Company owned and licensed products. Famous Footwear stores are located in strip shopping centers, as well as outlet and regional malls in all 50 states and Guam.

The Company’s Specialty Retail segment consists of 306 stores, includes the retail concepts and Shoes.com and other e-commerce businesses. The Naturalizer retail stores are complementary to and a showcase for its Naturalizer brand of women’s shoes. The Naturalizer stores offer a selection of women’s footwear styles, including casual, dress, sandals and boots, primarily under the Naturalizer brand. During fiscal 2008, the Company operated 134 Naturalizer stores in the United States and 118 stores in Canada. Of the total 252 stores, approximately 66% are located in regional malls, with a few stores having street locations, and average approximately 1,200 square feet in size. The other 34% of stores are located in outlet malls and average approximately 2,500 square feet in size. During fiscal 2008, the Company opened seven stores and closed eight in the United States and Canada, primarily in regional malls.

The Company through its majority owned subsidiary, B&H Footwear Limited (B&H Footwear), operated 19 stores in several of China’s cities during fiscal 2008. The Company’s Specialty Retail segment also includes other store concepts that sell other premium brands. These include retail stores operated under the Brown Shoe Closet, F.X. LaSalle, Franco Sarto and Via Spiga names. During fiscal 2008, the Company operated 17 Brown Shoe Closet retail stores located in United States outlet malls, averaging 2,200 square feet. These multi-branded outlet stores carry Brown Shoe better brands, including Etienne Aigner, Franco Sarto, Carlos by Carlos Santana, Nickels Soft and Natural Sport. During fiscal 2008, it operated 15 F.X. LaSalle retail stores, primarily in the Montreal, Canada market, that sell women’s and men’s branded and private-label footwear. The Company operated two Franco Sarto concept stores, one in San Francisco, California and one near Chicago, Illinois during fiscal 2008. The store sells primarily Franco Sarto product, including various accessories.

The Company owns Shoes.com, Inc., a pure play Internet e-tailing company. Shoes.com offers a selection of footwear and accessories to women, men and children that includes Company-branded and licensed footwear, as well as footwear purchased from outside suppliers and certain merchandise sold in Famous Footwear stores. Brown Shoe also operates FamousFootwear.com and Naturalizer.com, which offer substantially the same product selection to consumers as sold in their respective domestic retail stores. Additional sites, such as ShoeSteal.com, ViaSpiga.com, FrancoSarto.com, DrSchollsShoes.com, LifeStride.com, CarlosShoes.com and SkateStyles.com function as retail outlets for the online consumer and serve as additional brand-building vehicles for the Company.

Wholesale Operations

The Company’s Wholesale Operations segment designs, sources and markets branded and nonbranded casual, dress and athletic footwear for women, men and children at a variety of price points through two operating units, the Authority Alliance and Partnership Alliance. Its Authority Alliance primarily includes sales of the Naturalizer, Franco Sarto, Etienne Aigner, Via Spiga, Nickels Soft and Sam Edelman brands. Its Partnership Alliance primarily includes sales of Dr. Scholl’s, Children’s and Specialty Athletic, private label, LifeStride, Carlos by Carlos Santana and Fergie/Fergalicious by Fergie brands.

The Company’s footwear is distributed to over 2,000 retailers, including mass merchandisers, national chains, department stores, independent retailers, catalogs and online retailers throughout the United States and Canada, as well as approximately 35 other countries. It also sells product to a variety of international retail customers and distributors. During fiscal 2008, Wholesale Operations sold its customers approximately 64 million pairs of shoes. The Company’s Wholesale Operations segment offers retailers a portfolio of brands, each targeted to a specific customer segment within the marketplace. The Company owns approximately half of its major brands and license other brands through short-term and long-term agreements. Products sold under license agreements accounted for Wholesale Operations’ sales of approximately 49% during fiscal 2008.