Brown Shoe Company's Curious Case of Deferred Rent

Brown Shoe Company (BWS) announced that Q4 sales decreased approximately 10% but net earnings increased 2.7% on a diluted per share basis. They are opening new stores in North America and are stepping up their expansion in China. But...

Management has not provided any commentary on the growing Deferred Rent Category. This item has grown 9% from $38 million to $41.4 million over the last year. It is rapidly approaching one year’s worth of net earnings and is growing in significance.

It may seem simple and basic, but this liability will eventually have to be settled. The question is how and when? Management needs to comment on why this shoe still fits.