Shoe Station Group (SHOE) Q4 2007 earnings summary

Executive summary

• FY2006 net sales rose 4.0% to $681.7 million; net income increased to $23.8 million from $18.8 million, with the fiscal year including an extra 53rd week.

• Gross margin improved to 29.2% from 28.9%; comparable sales rose 1.5% on a comparable 52-week basis.

• Store growth and infrastructure investment advanced, including a new distribution center designed to support approximately 465 stores.

Financial highlights

• Revenue was $681.7 million, up from $655.6 million; $11.5 million of FY2006 sales came in the extra week.

• Operating income was $37.6 million versus $30.8 million; net income was $23.8 million versus $18.8 million.

• Diluted EPS was $1.73, compared with $1.40; reported net income included $1.6 million of stock-based compensation expense.

• Operating cash flow was $29.3 million versus $33.7 million; higher inventory, store openings and Easter receipt timing contributed to the decline.

Outlook and guidance

• FY2007 plans call for 23–25 store openings and three closures, primarily in existing geographic areas.

• FY2007 capital expenditures are projected at $21–22 million, including $4.6 million for distribution equipment and $2 million for headquarters furniture and fixtures.

• Price Optimization software was expected to support improved inventory turnover and gross margin as it became more integrated into merchandise processes.