Shoe Station Group (SHOE) Q4 2005 earnings summary

Executive summary

• FY2004 net sales rose 5.8% to $590.2M; net income was $12.5M vs. $12.0M in FY2003, while comparable-store sales declined 0.8%.

• Operating income increased to $20.9M from $20.0M; diluted EPS was $0.96, compared with $0.92 in FY2003.

Financial highlights

• Gross profit increased 5.7% to $167.2M; gross margin eased to 28.3% from 28.4%.

• SG&A rose to $146.4M from $138.2M and remained 24.8% of sales; operating margin was 3.5% vs. 3.6%.

• Interest expense declined to $658K from $714K; income tax expense was $7.7M, with a 38.0% effective tax rate in both years.

• Net cash from operations was $29.1M vs. $11.1M; cash at year-end was $4.9M.

Outlook and guidance

• FY2005 plan: open 12–14 stores and close four; expected new-store aggregate cost is $4M–$5M.

• FY2005 capital expenditures, including leased assets, are expected at $12M–$14M; remodels and graphics enhancements are planned at $5M.

• Women's merchandise share target is 28%–30% over five years, up from 23% in FY2004; fashion footwear assortment and store displays are being expanded.

• A 400,000-sq.-ft. distribution center is planned, with construction expected to begin spring 2006 and estimated cost of $23M–$25M; financing options are being assessed.