Branded footwear retailer Brown Shoe Company Inc has posted a 2.7% rise in fourth quarter earnings as the company managed to improve gross margins despite lower sales at its Famous Footwear and wholesale units.


Net earnings in the quarter were up to $14.0m, or $0.33 per share, from $13.6m, or $0.31 per share, a year ago. Net sales, however, fell 10.6% to $571.4m from $639.3m.


Gross margins in the quarter slipped 70 basis points to 39.0% of net sales from 39.7% a year ago, driven by increased promotions and aggressive inventory clearance.


Brown Shoe's Retail Division saw quarterly net sales at its Famous Footwear stores fall 3.2% to $310.7m from $320.9m, while same-store sales were down 1.7%.


The Specialty Retail segment, which primarily consists of Naturalizer stores and the e-commerce business, reported quarterly net sales of $70.1m, down 5.1% from last year's $73.9m.


Wholesale net sales declined 22.0% in the quarter to $190.6m, driven by a reduction in private label business, the exit of the Bass license, and poor sales of the Naturalizer, LifeStride, and Carlos by Carlos Santana brands.


For the full year 2007, net earnings fell 8.1% to $60.4m, or $1.37 per share, from $65.7m, or $1.51 per share, in the prior year and include charges related to the company's Earnings Enhancement Plan and the exit of the Bass license.


Net sales fell 4.5% to $2.36bn from $2.47bn.


Gross margins in 2007 increased 70 basis points to 40.0% of net sales, driven by a greater mix of retail sales and improved margins in the Wholesale division.


In its guidance, the company said it expects earnings per share to be in the range of $1.52 to $1.62 for the full-year and $0.07 to $0.11 for the first quarter.     


Total net sales are seen at $2.50bn to $2.55bn for full-year 2008 and $575m to $585m for the first quarter.


Ron Fromm, Brown Shoe's chairman and CEO, said: "Our focus in 2008 will be to manage the business sensibly, while taking disciplined yet aggressive action to grow market share as well as making further investments in our infrastructure."