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Conclusion: Good number overall, with upside to EPS almost entirely driven by 16% retail comps, while finally growing wholesale sales. GM +278bps, due to better sell-through, better product with higher margins, fewer promotions and lower markdowns. Good read-through for PSS here headed into next week’s print.  

EPS

  Clean/Street/Guidance/LY:: $0.26/$0.14/-$0.14

 

Guidance: Raised 2010 sales growth targets to high-single/low-double from prior guidance of mid-single. Guides Q2 net sales growth to low/mid teens range.

Street $1.06. Net revenue guidance increased to high-single/low-double from prior guidance of mid-single. Lowered SG&A guidance by ~50 bps, lowered interest expense, raised taxes, and raised the lower side of Cap Ex guidance.

 

Sales growth: +10.9%. Sq footage -3.1%, Brown Shoe Comp 15.5%, Specialty Retail Comp 16.2%, Wholesale +3.5%. New store productivity at Famous Footwear 95% -- - improving on the margin. Revs on the higher side of guidance across all segments.

GM %: 41.4%, up 278bps yy. 1 year sequential erosion but 2 year improvement due to a slightly more difficult comp. Comps get harder going forward.  Famous Footwear GMs improved 230 bps from improved sell-through – more trend-right merchandise, and fewer promos (not sure if it’s by accident or solid proactive planning).  Wholesale GMs increased 310 bps due to lower markdowns and improved sell-through and higher margin brand growth.  Specialty Retail increased 150 bps from better product and more full priced selling.

SG&A: +5.5%, 2 year slowdown. SG&A margin -192 bps. Increase due to higher incentive compensation but offset by 62 fewer stores in operation.  

Balance sheet: Inventories up 6% on 11% sales growth. Good spread, though sequential erosion. Capex inflected, now growing as a % of sales, currently at 0.9% of sales ttm. That’s absolutely not sustainable. Average inventory on a per-store basis at Famous Footwear increased 15.9% at quarter-end, reflecting recent sales trend and near-term outlook including its investment in higher-priced categories. Inventory at its Wholesale division decreased 3%.

 

SIGMA: In clean up mode, negative SIGMA move. Sequentially worse sales-inventory growth ratio and margins.

BWS: Quick Take - BWS S 5 26 10