Moody's lifts Brown Shoe outlook to positive

Moody's Investors Service said it changed the outlook of Brown Shoe Co., Inc. to positive from stable and affirmed the corporate family and probability-of-default ratings at Ba3, speculative grade liquidity rating at SGL-2 and $150 million guaranteed senior unsecured notes due 2012 at B1 (LGD5, 72%).

The agency said the change in outlook acknowledges the company's solid operating performance for the fiscal year ended Feb. 3 and the permanent reduction in borrowings under its revolving credit facility, which decreased the debt-to-EBITDA ratio to 4.3x from 5.0x for fiscal 2004. The company reported another solid year of operating performance primarily driven by strong results of its Famous Footwear division and by a significant improvement at the Naturalizer brand, Moody's said, which more than offset performance weakness at the Brown New York Group, acquired in 2005 under the name Bennett, and the negative impact from the door closings from the Federated/May merger.

The agency said the Ba3 corporate family rating is supported by the company's reasonable credit metrics, moderate scale, profitability, pragmatic financial policies, national footprint, credible market position, solid portfolio of brand names and moderate seasonality.

However, the positive impact of these strengths is constrained by the company's high business risk given the fashion component and execution risk of specialty retail, Moody's said.

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