Shoe Station Group (SHOE) Q4 2006 earnings summary

Executive summary

• FY2005 was a record sales and earnings year, with net sales up 11.1% to $655.6M and comparable store sales up 6.9%.

• Annual net income reached $18.8M; diluted EPS was $1.40. Store count grew to 263 across 23 states.

• Growth plans combine store expansion with investment in distribution, headquarters and technology infrastructure.

Financial highlights

• FY2005 net sales were $655.6M, gross profit $189.7M, operating income $30.8M and net income $18.8M, versus $590.2M, $167.2M, $20.9M and $12.5M in FY2004.

• FY2005 diluted EPS was $1.40 versus $0.96 in FY2004; basic EPS was $1.43 versus $0.98.

• Q4 net sales were $163.6M, operating income $4.9M and net income $3.0M, versus $143.9M, $1.8M and $1.2M in Q4 FY2004.

• Q4 diluted EPS was $0.22 versus $0.09 a year earlier; basic EPS was $0.23 versus $0.09.

• Operating cash flow was $33.7M; year-end cash was $20.3M, with no long-term debt outstanding.

Outlook and guidance

• FY2006 plan: open 13–15 stores and close five; FY2006 is a 53-week year ending February 3, 2007.

• FY2006 capital expenditures are expected at $29M–$31M, including ~$18M for distribution equipment and ~$1M for headquarters furniture and fixtures.

• A 410,000-square-foot distribution center is expected to be operational in January 2007 and designed to support ~465 stores, with expansion capacity for ~650.

• FY2006 focus includes brand recognition, fashion assortment, markdown optimization software and regional pricing; women's sales mix target is 28%–30% over four years, from 25% in FY2005.

• Existing cash, operating cash flow and the revolving credit line were expected to fund planned investment and operations for at least 12 months.