Shoe Station Group (SHOE) Q4 2010 earnings summary

Executive summary

• FY2009 net sales rose 5.4% to $682.4M; net income increased 185% to $15.2M, or $1.20 diluted EPS, from $5.3M and $0.43 in FY2008.

• Momentum strengthened in H2: comparable-store sales increased 9.5% for the half, following a 3.3% decline in H1; full-year comps rose 3.5%.

• Closed FY2009 with $44.2M cash and no interest-bearing debt; generated $27.9M operating cash flow and spent $9.8M on capital expenditures.

Financial highlights

• Revenue was $682.4M versus $647.6M in FY2008; gross profit rose 11.1% to $193.6M.

• Operating income increased to $25.1M from $8.4M; net income was $15.2M versus $5.3M.

• Q4 FY2009 revenue was $170.8M, operating income $4.4M, and net income $2.6M; Q4 FY2008 recorded $156.9M revenue and a $4.8M operating loss.

• Full-year comparable-store sales increased 3.5%; higher average selling prices and sales of boots and athletic footwear supported results.

Outlook and guidance

• FY2010 guidance: open 10–15 stores and close 10–13; per-store inventories expected up mid-single digits in H1 and low-single digits in H2 YoY.

• Capital expenditures expected at $13M–$15M; SG&A expected to rise moderately, mainly from compensation and advertising.

• Management expected positive FY2010 free cash flow, which would mark a seventh consecutive year; store growth to accelerate with sustained improvement in spending and commercial real estate.

• FY2010 remodeling, distribution-center material-handling redesign, and new-store investment underpin the higher capital-spending plan.