Shoe Station Group (SHOE) Q4 2013 earnings summary

Executive summary

• FY2012 net sales reached $855.0M, up 12.1% YoY; comparable sales rose 4.5% on a 52-week basis, and diluted EPS set a record at $1.43.

• Operating income as a share of sales improved to 5.7% from 5.5%, despite softer demand late in the year and a sharp increase in new-store openings.

Financial highlights

• Net sales were $855.0M, gross profit $257.5M, operating income $48.5M and net income $29.3M for FY2012.

• Gross profit increased $32.6M; gross margin rose to 30.1% from 29.5%, with merchandise margin up 0.4 percentage points and buying, distribution and occupancy costs down 0.2 points as a share of sales.

• SG&A increased $26.3M to $209.0M, including higher new-store and e-commerce costs, incentive compensation, healthcare costs and pre-opening expense.

• Pre-opening costs were $4.1M, including $2.7M in SG&A; a one-time $1.4M retirement and severance payment for the former CEO was included in incentive compensation.

• Diluted EPS was $1.43 versus $1.31; the 53rd week contributed $10.7M in sales, while comparable sales were measured over 52 weeks.

Outlook and guidance

• FY2013 plans call for 30–35 new stores, five to seven closures and seven relocations; approximately 30 stores are targeted for remodeling, subject to lease negotiations.

• FY2013 capital expenditures are projected at $28M–$29M, including $12.5M for new-store construction, $2.5M for relocations and $8.3M for remodeling; landlord incentives are expected at $8M–$8.5M.

• Expected FY2013 average pre-opening expense is $124,000 per store; projected closure-related expense is $170,000.

• FY2013 plans include testing better-priced women's non-athletic brands in about 20% of stores and launching a new television campaign to build brand awareness, particularly in new markets.

• Existing cash and operating cash flow were expected to fund expansion, capital needs and working capital for at least 12 months.