Diane Sullivan – President, Chief Executive Officer Russ Hammer – Senior Vice President, Chief Financial Officer Rick Ausick – President, Famous Footwear Peggy Riley Tharp – Vice President, Investor Relations.

Steve Marotta- CL King & Associates Danielle McCoy – Brean Capital Jeff Stein – Northcoast Research Sam Poser – Sterne Agee Jill Nelson - Johnson Rice Chris Svezia – Susquehanna Financial.

Good morning, my name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the Brown Shoe Company First Quarter 2014 Earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the conference over to Ms. Peggy Riley Tharp. Ma’am, you may begin..

Thank you. Good morning and thank you for participating in the Brown Shoe Company First Quarter 2014 Earnings call, which is being made available to the public via webcast. I’m Peggy Riley Tharp, Vice President of Investor Relations for Brown Shoe Company.

Earlier today, we distributed a press release with detailed financial tables which is available on our website at brownshoe.com. In addition, slides are available on our website for you to reference during today’s call. Please be aware that today’s discussion contains forward-looking statements which are subject to a number of risks and uncertainties.

Actual results may differ materially due to various risk factors, including but not limited to the factors disclosed in the company’s Form 10-K and other filings with the U.S. Securities and Exchange Commission.

Please refer to today’s press release and our SEC filings for more information on risk factors and other factors that could impact forward-looking statements. Copies of these reports are available online. The company undertakes no obligation to update any information expressed on this call at any time.

Joining us on the call today are Diane Sullivan, CEO, President and Chairman; Russ Hammer, Chief Financial Officer, and Rick Ausick, President of Famous Footwear. Today we will begin with a strategy review by Diane followed by a financial summary from Russ before turning the call back over for Q&A.

I would now like to turn the call over to Diane Sullivan..

Good morning and thanks for joining us. We’re pleased to report this morning that first quarter earnings came in at $0.35 per share with good contributions from our contemporary fashion platform and thanks also to a strong finish in the month of April at Famous Footwear.

Gross margin for the quarter was 41%, up 20 basis points over last year due to a number of positive factors across the company. For operating margin we saw good progress, coming in at 4.9% for the first quarter with wholesale showing marked improvement.

So all in, we were able to deliver a good quarter under challenging circumstances, and there were a lot of dynamics this spring, particularly at Famous Footwear, so that’s where we’ll begin. With first quarter sales of $354.6 million, Famous Footwear was up 0.7% over last year.

Same store sales for the first quarter came in at 1.3% with strong April same store sales up 5.5%, which drove the quarter. If you recall, last spring handed retailers what we thought was going to be a tough February and March, but clearly we were wrong.

For 2014, we lost approximately 3% of our potential selling days at Famous in the first two months of the quarter; however, the first two weeks of April were particularly good and while we wish we had had that momentum all quarter, it really did propel us into May.

Just as a quick update, on a month-to-date basis right now, our comps are up 1% at Famous. Not surprisingly, boots did well in the quarter but more importantly canvas continued its strong streak. Three of our top selling styles were canvas and we see demand for these styles continuing through the second quarter and well into back-to-school.

We’re already set to drive for back-to-school selling season, and the majority of our inventory increase falls into the canvas category. For the first quarter, sandals were down by about 3% but up approximately 5% in April. These overall trends give us confidence that we’ll be able to maximize spring footwear demand in the second quarter.

During the first quarter, we continued to see sandals and other spring styles perform well in our warm and hot markets, another sign that we have the right products and styles in store this season.

All in all, we ended the quarter at Famous Footwear in a good place as we have continued to build on our successful strategy over the past few years, and this includes omni channel.

We’re going to continue to invest in our omni channel efforts so we can meet or beat consumer expectations, and we’ll talk much more about our omni channel strategy and opportunities during our investor day next week.

Turning to our wholesale operations where first quarter sales of $191.8 million were up 5.6% with our contemporary fashion platform driving the year-over-year increase. Trends were key in contemporary fashion this quarter and we delivered trend-right product across virtually this entire platform.

On the other hand, the weather provided somewhat of an offset at Healthy Living where wholesale sales were up 0.7%. While weather impacted all of our wholesale brands to some extent, the delayed sandal season hit Naturalizer the hardest as this is a key spring category for the brand.

Despite this headwind, Naturalizer wholesale sales were flat for the quarter. At Dr. Scholl’s, we saw very good improvement in operating margin with relatively flat sales. This brand continues to diversify away from the reliance on our mass channel and to gain traction at mid-tier and with other new doors.

Life Stride was also relatively flat for the quarter while Ryka outperformed in the quarter versus both last year and our internal expectations. We saw good performance from our spring Ryka styles and are looking forward to getting fresh product into the stores this fall.

Turning to our contemporary fashion platform where sales were up 12.3%, while there were lots of contributing factors, I’m most pleased with the nice turnaround we saw at Via Spiga in the quarter. This brand showed solid improvement both year-over-year and versus our internal expectations.

The team’s hard work has paid off as consumers were attracted to the great spring product which contributed to strong regular price selling, resulting in fewer close-outs and a reduction in vendor allowances.

More progress will be seen in the coming quarters and in the June and August markets as a sort of phase 2, I’d say, of our refreshed Via Spiga will be presented to the marketplace. At Sam Edelman, sales were up low single digits. This follows a 25.4% increase in sales last year and the comps don’t get any easier for Sam as the year progresses.

We continued to invest in growing this brand and will open our second store this August in Beverly Hills. There’s a lot going on with Sam and we plan to discuss more of our strategy around this brand at our investor day next week as well.

Franco Sarto sales for the quarter were up low single digits despite some weather-related sluggishness at department stores which was balanced by a strong mid-tier business. We saw similar trends for our celebrity brands, Carlos and Fergie, with the mid-tier outperforming department stores.

Carlos sales were down it the first quarter but the brand looks to be back on track for the second, and Fergie sales were up in the first, and for both celebrity brands we’ve seen good response to gladiator styles. Finally at Vince, we saw phenomenal growth.

We delivered great product which was appropriately timed and also spread across key categories, including modern dress shoes, up-front block heel styles, sneakers, sport sandals, and espadrilles. Men’s footwear is going to be available in July and you’ll be seeing it in the same doors where you’d find Vince women’s shoes as the year progresses.

It’s clear in contemporary fashion that as we’ve executed against our strategy, we’ve seen a nice response in terms of sales and profitability. For total wholesale, we reported a 50 basis point increase in gross margin while our operating margin improved to 7.2% in the first quarter.

As you can see, we continue to make progress towards our long-term goals, and I’m really looking forward to sharing more details around our future plans at our investor day next Monday. With that, I’d now like to turn the call over to Russ for a review of our overall financials and more details around our guidance..

Thank you, Diane, and thank you everyone for joining us on both the call and the webcast – we certainly appreciate it. Although Diane briefly reviewed our results, I’d like to add a little more color. For the first quarter, we reported net sales of $591.2 million versus $588.7 million in the prior year.

Net earnings for the first quarter were $15.4 million or $0.35 per diluted share versus a loss of $10.8 million or $0.26 in 2013. On an adjusted basis, earnings in the first quarter were up $0.03 over the $0.32 we reported last year.

At Famous Footwear, we improved our trailing 12-month revenue per square foot to 209 as we closed or relocated 21 stores and opened 11 this quarter. Let’s make a review of our financial metrics now. Overall gross margin in the first quarter was 41%, which was up 20 basis points year-over-year.

SG&A as a share of revenue was 36.1%, down 20 basis points year-over-year. Inventory at quarter-end was $512.8 million, up 5.5% over last year’s first quarter but down 6.3% from our fiscal year-end. Wholesale inventory driven by our growth brands was up 6.2% at quarter-end, excluding discontinued operations.

At Famous Footwear, inventory was up 5.8%, a number we expect will decrease each quarter throughout the remainder of this year.

Our corporate tax rate was 34.1% for the quarter, net interest expense of $5.2 million was down 7.5% in the quarter, cash and equivalents for the quarter were $36.7 million, and we ended the quarter with no borrowings against our revolving credit agreement, down $66 million year-over-year.

We also improved our debt to capital ratio to 28.8% from 39.1% last year. Before we begin Q&A, I’d like to review our fiscal 2014 guidance. To account for a better than anticipated first quarter, we are raising our annual guidance range to $1.47 to $1.57 as we are slightly more positive regarding our potential at wholesale for the year.

We also expect consolidated net sales of $2.58 billion to $2.60 billion, same store sales at Famous Footwear up low single digits, specialty retail sales down mid-single digits due to store closures, net sales at wholesale operations up mid-single digits, gross margin up approximately 10 basis points, SG&A of $920 million to $930 million with continued leverage, net interest expense of $20 million to $21 million, and effective tax rate of 33% to 35%, depreciation and amortization of $51 million to $54 million and capital expenditures of $53 million to $57 million.

We’re pleased with the results we reported in the first quarter and are optimistic about the remainder of the year. We will provide additional insight into our strategies and opportunities at our investor conference next week.

As we move through the year, we will continue to update you with our progress against our expectations, just as we did last year. With that, Operator, we’d be happy to answer all questions..

[Operator instructions] Our first question will come from the line of Steve Marotta with CL King & Associates. Please go ahead with your question..

Good morning everybody and thanks for taking my question. Congratulations on the quarter.

Just talking a little bit about the comp, which is 1% month-to-date, can you talk a little bit about what the gross margin drivers are for Famous Footwear in the near term as well as for the balance of the year?.

Steve, it’s Rick. Gross margin drivers? Well, I believe a couple of things. The shift of the customer from performance to casual athletic – you know, that business, the casual athletic business, however you want to define it, has higher margins than the performance business.

I think we see that as continuing to happen in our assortments where the customer is leaning and buying that at higher levels, so there will be a mix conversation that will help our margins along the way. We have been judicious in our promotional activity where we had actually less days of couponing in the first quarter than we had a year ago.

We’re looking at every single promotion and deciding whether we can either shorten them or change the (indiscernible) off, things like that to make sure that we’re offering value but also managing the profitability side of the business, so I think those are the two things I would point to as being our biggest opportunity..

That’s very helpful, and at the risk of saying the S-word on the call, as it pertains to wholesale and SAP, is that finally ticking in from a margin standpoint or is it simply just the contemporary brands that are primary drivers there?.

Good question, Steve, and thanks for the comments up front. First of all, I really think again, it’s that we’ve been building against the strategy for a couple of years now. Our performance in wholesale has not been good the last number of years.

We’re really showing marked improvement now today, and it really has to do with the fact that we have brands that are hitting on all cylinders, the product is great, and in particular our contemporary fashion side of our business with those kind of growth rates at higher than 10% is really starting to gain traction both at a top line sales and a bottom line perspective.

So it really is a combination of all of those things together working..

Which lends to my last question that pertains to contemporary – are there potential acquisition opportunities that you could and wish to plug in from a contemporary standpoint on the wholesale side?.

Yeah, we are always, first of all, paying attention to the business that we have as we’ve done these last couple years, and always doing that going forward. If the right thing comes along and we identify it, we certainly think that we do have room in our portfolio to add if the right thing came along..

Terrific, thank you..

Thanks, Steve..

Your next question will come from the line of Danielle McCoy with Brean Capital. Please go ahead..

Good morning, and I’ll add my congratulations on a solid quarter..

Thanks, Danielle..

I guess just first at Famous Footwear, we’re seeing a majority of the landscape really competitive, price competitive.

I guess where are the strengths in Famous Footwear that you think that you’re really hitting on all cylinders there?.

Well again, I think the conversation around however you want to differentiate casual athletic, but the canvas piece of the business, some of the things that Sketchers are doing, those things in our assortments are very powerful right now and very impactful, and they’re going to continue to be that way.

Those things are generating large increases for the first quarter and we expect that to continue for the year; and again, those things are obviously also a little bit on the margin-rich side for our total mix, so as that grows, that’s helping our profitability but it’s also really focusing on what the customer is looking for, and I think that’s been part of what we’ve been doing.

We saw this coming about a year or so ago and we’ve been making investments along the way for back-to-school last year, and once that was successful we just started ramping it up so we could capture some first quarter business, and now looking at second and back-to-school ’14, we think it’s even going to be bigger than we might have thought..

Okay, great, and then I guess talking about back-to-school, are there any plans for something to replace last year’s sponsor of the summer concerts?.

Well, what we did this year is actually running this last couple weeks, we ran national TV.

We weren’t able to replicate our value purchase of the Good Morning America show, so that was something we couldn’t repeat, so we have been running national TV advertising the last couple weeks geared to our mobile app, so we are pushing not only the Famous brands, there’s obviously product in the ad as well, but it’s also talking about the convenience and the usability of our mobile app that we have almost 700,000 downloads now and starting to generate some real momentum there.

So I think we looked at that as begin our opportunity to pre-sell into back-to-school, so the customer was aware of that, had the app on their phones, and could start using that. We have an update coming in another couple of weeks to the app for additional features, so back-to-school will actually have additional features than it had a year ago.

And we didn’t have the app a year ago, back-to-school. The app didn’t start until after end of September, so we actually have—that’s all kind of a plus thing for us as we get into back-to-school. So I think that’s our answer to the GMA.

Actually, when we look at the impressions and all that kind of stuff, what we’ve done right now has a greater impression to our core customer than the GMA thing did, believe it or not..

Okay, great.

Then just the store opening and closing cadence at Famous Footwear for the remainder of the year?.

Yes, we’re going to do that. I think we have about 16 or 17 stores due in second quarter, and then I think we only have—at that point, I think we maybe have another 15 in the back half, something like that. So we actually—most of those openings are in July, a lot of July openings as we get ready for back-to-school.

And the closings are kind of spread—the closings really come around to when our lease deals expire, because we do it around lease deals. Most of those will happen closer to the back half of the year, as we get closer to the end of the year, so most of those things will happen probably late third, end of the year..

All right, great. Thank you guys. Good luck..

Thanks, appreciate it..

Your next question will come from the line of Jeff Stein with Northcoast Research. Please go ahead..

Morning guys.

First question for Rick – can you comment on the performance of the warm weather markets for Famous Footwear in the first quarter versus the colder weather markets, so talking about the spread in comps between the two, and with the 1% comp increase you’re seeing in May, has that spread now converged and are you seeing similar trends in both warm and previously cold weather markets?.

It’s gotten closer in May. First quarter, we were about almost mid-single digits in our warmer markets, and therefore we were obviously down low single digits in the cold markets, and that combined to our 1.3%.

So it was probably something like a 6 or 7 point spread, Jeff, between warmer markets and the colder markets, and if you actually got real specific about certain markets, it might even be bigger than that because Chicago got hit particularly hard and some of those markets in the upper midwest where we have a lot of stores have been particularly hard hit for the first three months or so.

It’s getting better now, but it was hard hit early on..

Got it. Diane, can you talk a little bit about Sam Edelman and the slowdown in trend that you did see during the first quarter? Is that anything to be concerned about? Do you think there was some weather impact there, and maybe talk about what kind of lies ahead for Sam Edelman from an anticipated growth perspective..

No, I don’t see anything in the first quarter that concerned me at all. I mean, did weather impact all of the businesses to some degree? Sure, that would be true. Sandal sales for every brand was impacted, but Sam’s sell-throughs have continued to be outstanding. Second quarter is running really nicely.

We’re thrilled with the sell-through of the product. Honestly, Jeff, I can’t think of a thing that I’m not comfortable with with Sam, and next week when we see you on Monday, we’re going to do a little bit of a deep dive on the Sam Edelman strategy for the next couple years so you really get a good insight into what our plans are there..

Terrific, terrific. One question, I guess for either you or Russ – the specialty retail division continues to kind of struggle. I know you’re faced with store closings, but the loss continues to be higher than prior year.

Any thoughts in terms of the longer term view on what your plans are for that business?.

You know, the specialty retail business, as you pointed out, is down this quarter over last quarter from a profitability, and there were less stores, as we indicated, both in Canada and the U.S.

However, you have to remember the total Naturalizer business where we have a profit and a margin on the wholesale side of the sell-in to the stores, when you look at it in total is quite profitable for us. So we are looking at due to the store closures, the down that you see there on just the retail segment, but all-in we’re still quite profitable. .

The other thing on Naturalizer, Jeff, just to add to what Russ was saying, you’re right on the stores as you just look at it on a pure profitability basis.

The (indiscernible) in Naturalizer, about 60% of their business in the spring season is in sandals, so that really hit them particularly hard, and then even more so when you’re a monobrand store like they are too. So we expect that to recover and get better as the year progresses and as sandal sell-through continues to pick up.

We really could see that in our at-once replenishment in the first quarter. So I don’t think there’s any new news there, just again the same impact that everybody has been feeling in the first quarter..

Okay. Do you guys feel pretty good about (indiscernible) in terms of aging of inventory and content heading into second quarter? It looked like inventories were a little bit high there..

Yeah, they are, and we feel really good about it; but I’ll let Rick—.

Yeah, our actual dollars of aged inventory is less than last year, so on a percentage basis it’s much better, and secondly the investment again has been primarily placed in our two key canvas vendors and into the Sketchers business, so when you think about what the customer is buying, I feel really good about where that--.

And Jeff, just to be clear about the comps on the current month, every category – warm, hot and (indiscernible) – everybody is up, everybody is on a positive trend, and the gap has narrowed quite a bit from the first quarter..

Great, thanks a lot..

Your next question will come from the line of Sam Poser with Sterne Agee. Please go ahead..

Thank you for taking my question. Good morning. Just a follow-up on the inventory – given that—I mean, you had a decent comp and you’re coming out of the gate slow, up slightly, but the inventory is still up a little bit more than that.

I mean, are there heavy spaces within sandals and other categories that while you’re not chasing them, you might have to be a little more aggressive than you thought you would have to be previously?.

I think it remains to be seen about what it’s going to take to move through the sandals. We don’t feel our sandal inventory is overly heavy at this point in time.

I think the teams have done a really nice job of managing that early on to either cancel back-ups or whatever we needed to do to read the early selling and not get over-bought in that particular category. But again, we still have some—you know, there’s eight, nine weeks of prime selling coming up.

We’ll see, and always part of this is the competitive environment, although I like to look at how we run about our business, a little bit more about us than it is about everybody else.

But I think the environment, what everybody is talking about, sounds like they think they have to get aggressive to move the goods and we may have to have some of that ourselves, but right now we’re not anticipating the need based on how we’re selling items, what the remainder of the season is and how much time we have to sell it.

We feel like we’ll come out pretty clean, but we’ll see. Other than that, the inventory, again, is made up of those key canvas vendors. The increase in the inventory is really in those key canvas vendors and Sketchers..

Just to beat a dead horse a bit here, you had a very nice increase in your gross margin at Famous, up almost 60 BPs, and given the last Easter and everything, did that move some markdowns? In general, did that move markdowns from Q1 to Q2 as compared to last year with the earlier Easter? And I would expect you’re not expecting to see another big bump in your gross margin the way you did in the first quarter in Q2.

Would that be an appropriate—.

I think we’ve planned it basically flat for the year, Sam, so you’re probably right.

I don’t think we’d probably expect a 60 basis point increase; but again, some of it at least will depend on, and in this mix conversation I had earlier around how much canvas business we actually really do because that has a higher margin than some of the other categories that people were moving from and buying the canvas piece.

So yeah, it could be a little better but I don’t expect it to be 60 basis points better – put it that way. And I don’t know what we actually changed our markdown strategy or markdowns around Easter.

Remember Easter, we still had a couple weeks in April after Easter, so things like some of the dress shoe kind of business that you might want to start thinking about liquidating after Easter, I think most of those fell into first quarter, at least the first mark, and then after we go to the first mark, it’s just a matter of managing it to the sell through, so I don’t know that we missed anything there.

.

Okay. Then just moving over to the wholesale businesses, a little bit—I mean, it was discussed earlier, but a little bit weaker than we expected on a couple of the lines there.

I mean, how aggressive is everything going on there at retail with your customers? I mean, are they asking for a lot now from you, more than in prior years?.

No, I would say, Sam, our performance against our internal expectations is certainly—we’ve really beat our internal expectations on most of our brands. Our sell-throughs at retail are good, and in fact there’s been less vendor allowance and markdowns so far this spring than last year. So all in, we feel like we’re performing solidly.

We feel good about it..

Okay, thank you very much. Good luck..

Your next question will come from the line of Jill Nelson with Johnson Rice. Please go ahead..

Good morning. If you could just talk about the strength you’ve seen in conversion rates, almost up 5% at same, that’s become a strong metric for you. Maybe some of the system initiatives you’re doing to continue to aid that growth..

Well I think again, some of this in my view comes to the issue of what we spend on our omni channel investments.

We believe the customer is coming in more informed about what there is to buy, whether it’s they’ve gone online and shopped the store where they can look and see exactly what inventory and sizes and colors are available if they’re looking for something specifically, and now with the mobile app they can do that if they’re out with their kids at a soccer game and they realize they need something for the next day at school, mom can look at that, she can pull up and find what stores and how far away they are that have what she’s looking for, and come in for a very purposeful shop.

So we think there’s some of that validating our investment in those things along the way to say, that’s how the customer wants to shop.

Other than that, I think we’ve done again a better job of assortment planning, of making sure that we were a little narrower but deeper on the things we believed in, so I think all of that is a combination of that, and our percentage of our business has come through our rewards customer has been increasing over the last two years – we’re up to over 70% now.

So again, those are people who know us, like us, and understand, so again I think it’s just that whole more purposeful shop from the customer in general and driving the rewards customer to another level has been helpful..

All right. And Russ, you had mentioned you’re slightly more optimistic on the wholesale division.

Could you maybe call out, is it on a particular brand? Is it just kind of across the board where that increased optimism is?.

Well it’s definitely, as Diane said on the call, in the contemporary fashion space. We are especially pleased with Via Spiga, and then the rest of the brands are all doing great, so we’re feeling very bullish there..

All right, thank you so much..

Again if you would like to ask a question, please press star, one on your telephone keypad. Our next question will come from the line of Chris Svezia with Susquehanna Financial. Please go ahead..

Good morning everyone. Nice job. You did this well – I’m kind of really curious to see what you guys are going to have to say next week. It should be really interesting..

Thanks, Chris..

Monday at 3:00!.

We’ll be there. So I guess—I got on a little late, so I apologize if this is repetitive, but I guess we’ll start with you, Rick. Maybe walk through at Famous, sandals, boots, athletics, how they performed relative to the comp. I just missed that, if you can add some color around that..

Yeah, good news, bad news – we had a good boot quarter, but we really didn’t want to have that good a boot quarter, but it was good, and it’s on a small base so we don’t really count that as of any great value. Sandals were down about 3% in total.

Our athletic business was up a little bit and driven greatly by our canvas business to a degree, so if we put all the canvas parts together, so whether they’re junior casuals or men’s casuals or the true big canvas guys, that whole canvas business was up double digits for first quarter and we expect that to continue to drive that way.

So in a nutshell, that’s kind of where the business came from, Chris..

Okay, and then when you went into May, the comment about being up about 1%, what happened with that sandals business as you transitioned through the quarter, and how are you looking as you’re going through second quarter?.

It’s gotten a little bit better. I mean, I think we’re still not as—it’s not as robust as we would like.

Again, I think we still seem to have some issues in parts of the country where they haven’t really decided they want to come out and buy sandals, but as we look at our warm markets, again, those businesses are still pretty good and they’re still selling the category pretty well, so we don’t think it’s an assortment issue, we think it’s just a timing issue.

And whether or not we have now—do we have enough time to sell through? We think we do. We don’t think we’re in a lot of jeopardy on the inventory side, but we watch it every week and we make adjustments as we need to..

So I mean, if you feel like maybe others are calling out that you need to probably get aggressive in sandals and kind of a fire sale going on, you don’t feel like you need to or will have to be that aggressive in the (indiscernible) to move it? You feel pretty comfortable where you are?.

We might have to, but we’re not planning on it. I mean, I think the strategy has always been to kind of wait this out a little bit. I think when the customer is ready to buy, we’ll have convenience on our side because we have stores everywhere.

We have sizes, we have integrity on the product, so we’ve proven over and over to ourselves that she will buy it from us when the time is right.

Now, that can’t go on until August, obviously, but we’re talking about over the next couple of weeks, I’m not too worried about that accelerating, and we’re starting to see acceleration on a week-to-week basis that we’re selling more sandals than last week, and then we’re selling more sandals than the week before.

If we can continue to see that, there will be a point in time when it should accelerate relatively rapidly and that’s what we’re waiting to see. And if it doesn’t, then we’ll adjust. I don’t see us being terrible. I don’t see it being, for lack of a better term, a bloodbath. .

Okay, and then the traditional athletic business, the technical piece, this kind of continued transition—you know, you call out Sketchers and you talk about the canvas piece of the business.

I mean, what’s going on in the traditional athletic component, the running, the training business?.

We still have a 1% increase in running in first quarter, and it’s still the biggest part of our athletic business, so don’t misunderstand – we still think it’s important and we still pay attention to it. I think what we’re saying there is we don’t expect it to do much better than that the balance of the year. We’re looking at it to be basically flat.

We have newness coming in. We have a couple of new shoes that are delivering as we speak for back-to-school that we are really—we are high on as far as the opportunity for them to be key drivers for back-to-school.

But I think we’re just trying to be cautious on our assortment and our breadth, and also on how much we’re purchasing, so our inventory level there will start coming down a little bit to support inventory levels getting bigger in other parts of our business. But I don’t see us being, you know, we’re going to go down double digits in running.

I think that business, we think will be stable and hopefully we can make a little more money at it – that will be our next goal..

Okay, and then last question for you, Rick – just on the comp progression second quarter last year, just remind me what it was. You obviously had a good comp second quarter last, just what—.

You want the progression?.

Yeah..

Got it – one second. Second quarter was 872 and 54..

Okay. All right, thank you.

On the wholesale side, just Naturalizer, did you comment how that grew in the quarter?.

Yeah, wholesale business was basically flat in the quarter..

Okay – for Naturalizer. .

Yeah, for Naturalizer, that’s right..

Any thoughts about after what you had seen so far in that business, what maybe happened in the first quarter, or just kind of your thoughts as you go forward in that business for what you see for fall and that type of thing?.

Right, good question. I really haven’t changed my perspective on Naturalizer – we’re going to see growth in the low single digits for the year, that we had a to ugh start to the year because of sandals. Sandals represent about 60% of their business in the spring season – that’s a lot, so obviously first quarter off to a slower start.

I think the team’s been doing terrific work about continuing to move that brand forward and sort of get it to recover with really some terrific new product. So nothing really new there, Chris, we’ll just continue to see good, steady progress. Nothing explosive, just good, steady progress in that brand..

And Via Spiga, I’m just kind of surprised, I guess, some of the changes you’ve made, the response to the fall product.

Is that what really gives you that encouragement about that returning to growth again?.

Yeah, well honestly, even against our own internal expectations, we outperformed on Via Spiga in the first quarter significantly. It looks like our forecast and our plans, our expectations around second quarter look equally good, and that was really just what Jay and team had done through kind of phase 1 of our work on Via Spiga.

Phase 2 really comes in at June and August market with all the new designs from Paul Andrew plus an entirely new kind of positioning.

So we’re feeling, yes, quite good about the turnaround there, and obviously as you know from us, we won’t say that unless we really can see sort of the whites of their eyes, so to speak, and we feel very confident about the year on Via Spiga. They’ve done a great job turning it around. .

Okay, good to hear. That’s alI I have. Talk to you guys soon – see you next week..

See you next week, Chris. Thanks..

Our final question will come from the line of Steve Marotta with CL King & Associates. Please go ahead..

Hello again. Just a quick question as it pertains to fashion, and this is really a little bit more from a 40,000 foot view. Given your perch, given the retail operations as well as wholesale operations, one of the things that I’ve heard is that there isn’t a lot of newness – there is not a lot of fashion drivers, there is not a must-have look.

Do you see anything percolating either at Famous or within the wholesale lines to lead you to believe that there could be a mass unit driver for footwear in the back half of this year?.

Well, I’ll let Rick kind of weigh in on this too, but I guess, Steve, what I’d sort of say from what we see is however you want to define this sport casual category, and it manifests itself in different ways depending on the brands – in our fashion brands, it’s the slip-on canvas and other material side of footwear that Sam is doing well with, Vince is doing extraordinarily well with, and even Naturalizer to a lesser degree, some other sports styling they have.

So any place we have that kind of look, it’s been working really well, so I think that’s been pretty much a big driver.

I think the other thing that we see is foot-fed sandals in the fashion side as being a driver of some business that has been pretty good for business, and then anything that has more, I would say, of a modern kind of edge to it from a dress perspective is kind of what’s working.

But other than the sport kind of category that Rick referred to the canvas is really driving our Famous business, there isn’t really anything really big other than that one that I can see. There’s other pockets of good performance, but that’s the big driver across both fashion and athletic kinds of businesses..

Really helpful.

Oh – go ahead?.

I think Diane has pretty much hit it. I think the sport casual business, when you think about the Sketchers product that’s selling so well and the things that we sell from our canvas partners, it’s really about a casual lifestyle.

It’s really about how I want to—and we frankly believe that that’s coming from a junior casual business or a missy casual business, and by the way it could be creating out some sandal business as well at least early on where the customer had sandals in their closet and actually maybe it wasn’t conducive outside, so they bought a canvas shoe that they thought was—either a new color, a new silhouette, whatever it might be and putting that in their wardrobe.

So there could be some trade-off there, so that seems to be the thing. I know we all talk about, well, that’s not new. Well, it is when they decide they want to wear it. We sell a lot of those shoes every year.

We’re going to sell a lot more shoes this year than we’ve ever sold, so it’s going to be one of those kind of things when it comes into trend that the customer really goes at it, and we try to find—we expand our assortment between colors and patterns and differentiate it, and I think that’s where you kind of start winning a little bit when you start seeing how that sells..

Terrific, thank you..

I will now turn the conference back over to management for any closing remarks..

Thanks everyone for joining us this morning and we look forward to seeing you next Monday at our investor conference. Thanks again..

Ladies and gentlemen, this does conclude today’s conference. Thank you all for joining and you may now disconnect..