Shoe Station Group (SHOE) Q4 2009 earnings summary

Executive summary

• FY08 challenged by recession-driven traffic weakness, especially in H2; comparable-store sales fell 4.6%, and Q4 comps reached their weakest level of the year.

• Ended FY08 with 304 stores in 29 states, $24.8M cash and cash equivalents, and no interest-bearing debt.

Financial highlights

• FY08 net sales fell 1.7% to $647.6M; comparable-store sales declined 4.6%, partly offset by $17.3M from new and recently opened stores.

• Gross profit declined 6.2% to $174.3M; operating income fell to $8.4M from $19.1M, and net income to $5.3M from $12.8M.

• Diluted EPS was $0.43 versus $0.97 in FY07.

• Net cash provided by operating activities rose to $32.1M from $19.9M, driven chiefly by lower per-store inventory and timing of payables and accrued liabilities, partly offset by lower net income.

Outlook and guidance

• FY09 plans call for ~15 store openings and 10 closures; longer-term annual store growth of 10%–12% depends on economic conditions and suitable real estate.

• FY09 capital expenditures expected at $9M–$12M; plans include up to $3M for distribution-center modifications and ~ $5M for new stores.

• Expectations for FY09 include continued pressure on customer traffic, lower per-store inventories than FY08, tight expense control and continued free cash flow generation.

• FY09 executive incentive plan suspended because realistic performance targets could not be set amid footwear-industry and broader economic conditions.