SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 9, 1997
BROWN GROUP, INC.
(Exact name of registrant as specified in its charter)
New York
(State or other jurisdiction of incorporation or organization)
1-2191 43-0197190
(Commission File Number) (IRS Employer Identification Number)
8300 Maryland Avenue
St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)
(314) 854-4000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Page 1 of 7 Pages
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Item 5. Other Events
On October 8, 1997, Brown Group, Inc. announced that it
has decided to reduce substantially its investment in
its Pagoda International division. As a result of this
decision, Brown Group, Inc. will record a non-recurring
after tax charge of $21 million, or $1.18 per share,
against fiscal third quarter 1997 earnings. Attached as
an exhibit to this report is a copy of a press release
issued on October 8, 1997, which press release is
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Information and Exhibits
Exhibit No. Description of Exhibit
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99.1 Press release dated October 8, 1997
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto duly
authorized.
BROWN GROUP, INC.
(Registrant)
By /s/ H. E. Rich
Executive Vice President and
Chief Financial Officer
Date: October 9, 1997
<PAGE>
<page3>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
BROWN GROUP, INC. ANNOUNCES CHARGE TO RESTRUCTURE
PAGODA INTERNATIONAL, THE COMPANY'S INTERNATIONAL SALES DIVISION
ST. LOUIS, MISSOURI, October 8, 1997 . . . Brown Group, Inc.
(NYSE: BG) announced today that excessive inventories and
declining performance at Pagoda International has led to a
decision to reduce substantially investment in that business and
to focus resources on the company's profitable core businesses.
In a related move, the company also announced plans to reduce its
overall debt level. Pagoda International is the company's
international marketing business, with sales operations in Europe
and Latin America. Sales for this division were $85 million in
fiscal year 1996.
The restructuring steps include:
- - Completing the transition of the European business to a
"first cost" basis, in which footwear is sourced only
against confirmed orders, and making several other cost
reduction changes in the company's European operations.
- - Reducing excess inventory in Pagoda International's
Brazilian operations, reducing operating costs and shifting
to more local sourcing to improve the business while
reducing inventory risk associated with long lead times.
. . more
<page 4>
First Add --
- - Repatriating approximately $18.5 million in cash, previously
available offshore to support Pagoda International's
operations, to reduce outstanding corporate debt and
strengthen the balance sheet.
These changes will lead to a non-recurring charge of $21 million,
or $1.18 per share, against the company's third quarter earnings.
The charge includes $8 million to provide for taxes associated
with repatriating the cash; and $13 million related to the costs
of reducing inventories in Europe and Brazil as well as other
costs and asset writeoffs associated with the restructuring.
These moves are expected to reduce the capital invested in Pagoda
International from $52 million at the end of the second quarter
this year, to about $15 million at the end of fiscal year 1998.
These steps were announced by B. A. Bridgewater, Jr., Chairman of
the Board, President and Chief Executive Officer, who said:
"Adverse shifts in shoe business conditions in markets
served by Pagoda International made it essential that we
shift now to a strategy of tight capital management and cost
reduction in that business. Although Pagoda International
had grown rapidly and been profitable prior to last year,
losses have increased substantially in 1997, especially in . . . more
<page 5>
Second Add --
the second half of the year; excess inventory also has
accumulated, and diminished prospects make these steps
necessary.
"The severe developing problems in the Pagoda International
business have more than offset the progress Brown Group has
made this year in its core businesses -- Famous Footwear and
Brown Shoe Company, including the Pagoda U.S.A. division.
Without the projected Pagoda International loss of
approximately $10 million this year, and the related $21
million charge, Brown Group was expecting to earn about $24
million, or $1.35 per share for the year. This strategic
shift is expected to have a positive impact on Brown Group's
results in 1998, allowing the earning power of our core
businesses to be recognized.
"The company will continue to support the le coq sportif
brand of footwear which was acquired by Pagoda International
in 1995. This business is operated primarily through
licensees and distributors in Europe and Latin America.
. . . more
<page 6>
Third Add --
"Confirming the progress we have made in our core
businesses, Brown Group also announced today improved
September retail sales results for both Famous Footwear and
the Naturalizer Retail division. Famous Footwear's retail
sales in September were up 6.7 percent and increased .3
percent on a same-store basis. Naturalizer Retail reported
a 6.8 percent sales increase in September and same-store
sales were up 3.5 percent on top of last year's 8.7 percent
same-store sales increase. Naturalizer's fall product is
selling through well, both in the Naturalizer stores and in
department stores, and forward orders for the Naturalizer
and NaturalSPORT brands are encouraging.
"Brown Shoe Company's Pagoda U.S.A. division announced today
that it has signed two major license agreements with the
Walt Disney Company. Beginning in 1998, Pagoda U.S.A. will
design and market footwear featuring characters from
Disney's summer 1998 release of the animated film, "Mulan,"
and will also design and market footwear under the license
for Disney's "Simba's Pride" direct-to-video release planned
for fall 1998.
. . . more
<page 7>
Fourth Add --
"Despite the strength in our core businesses, the steps
announced today are expected to result in a substantial loss
for the third quarter and fiscal year 1997. However, these
moves protect our balance sheet, free capital to pay down
debt and support our core businesses, and enhance our prospects
for improved performance in the future."
Safe Harbor Statement Under the Private Securities Litigation Act of 1995:
This press release contains certain forward-looking statements that are
subject to various risks and uncertainties that could cause actual results
to differ materially. These include general economic conditions, competition,
consumer apparel and footwear buying trends, and political and economic
conditions in Brazil and China, which are significant footwear sourcing
countries. The Company's reports to the Securities and Exchange Commission
from time to time contain detailed information relating to such factors.
Brown Group, Inc. is a $1.5 billion footwear company with worldwide operations.
The Company operates the Famous Footwear, Naturalizer and F. X. LaSalle chains
of footwear retail stores and markets leading brands including Naturalizer,
Life Stride, NaturalSPORT, the Larry Stuart Collection, le coq sportif athletic
footwear, and licensed brands including Dr. Scholl's, Star Wars and Disney
character footwear.
Brown Group, Inc. press releases are available by fax through PR Newswire's
Company News On-Call fax service at 800-758-5804, extension 109435. Brown
Group, Inc. news also is available on the Company's web site at
http://www.browngroup.com.
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