Brown Shoe: Zacks’ Bull of the Day Play

Brown Shoe Company (BWSSnapshot Report) is cashing in on demand for new shoes as it handily beat the Zacks Consensus in the third quarter. This Zacks Rank #1 (Strong Buy) also raised full year guidance.

Brown Shoe Company is a global footwear company that owns numerous well-known brands including Dr. Scholl’s, LifeStride, Sam Edelman, Franco Sarto, Vince, Via Spiga. It also operates over 1200 Famous Footwear and Naturalizer stores.

Beat By 12% in Q3

On Nov 25, Brown Shoe reported its third quarter results and blew by the Zacks Consensus by 7 cents. Earnings were $0.75 compared to the Zacks Consensus of just $0.57.

It has put together a solid string of beats. Brown Shoe hasn’t missed since early 2012.

The strongest area was wholesale, which was up 18.2% in the quarter, boosted by its Healthy Living and Contemporary Fashion brands which include Dr. Scholl’s and Via Spiga.

Back-to-school was also solid as Famous Footwear posted a same store sales gain of 1.6%. There was strong growth in canvas, sandals and boots.

Full Year Guidance Raised

Unlike most other retailers, the holiday quarter isn’t its largest quarter (that is back-to-school) but it still expects a strong end to fiscal 2014 even with the promotional pressures of the holiday.

It raised full year earnings guidance to the range of $1.65 to $1.69.

In response, the analysts raised full year estimates, pushing up the Zacks Consensus to $1.72 from $1.58 just 30 days before. This is higher than the company’s range and earnings growth of 21.8% compared to 2013.

Analysts also see another 11.8% earnings growth for next year.

Stuart Weitzman Bid?

On Dec 2, both Reuters and the Financial Times were reporting rumors that Brown Shoe was in the mix to bid on Stuart Weitzman Holdings LLC, which is currently owned by Sycamore Partners.

Reports said the deal for Stuart Weitzman could be as big as a $1 billion. Brown Shoe isn’t without its forays into the luxury market with Vince and Via Spiaga, but Stuart Weitzman would be a huge addition to a company with a $1.7 billion market cap.

Shares At New 10-Year Highs

Shares have surged to a new decade-long high after the solid earnings report. They have surpassed even the pre-recession high.

But valuations aren’t really stretched. It is now trading with a forward P/E of 19, only slightly higher than the S&P 500 average of 18.

Shoes are a hot area in retail right now. If you’re looking for a way to play it, Brown Shoe should be on your short list.

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Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.


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