UPDATE: Morgan Stanley Initiates Coverage On Brown Shoe Company

Jay Sole of Morgan Stanley initiated coverage of Brown Shoe Company (NYSE: BWS) with an Underweight rating and $24.50 price target.

"Brown Shoe Company's wholesale division is weighed down with deteriorating assets and we think sales will fall short of expectations," Sole wrote. The analyst adds that the company's "narrow" margins hinder management's ability to manage an ongoing shift in the footwear retail environment towards athletic footwear.

Sole estimates that only 30 percent of the company's mix comprises of athletic footwear. The company's non-athletic footwear isn't impressing the analyst who notes that companies like Foot Locker and Finish Line offer a more exclusive product offering.

Brown Shoe Company may find it hard to find success within the online channel. The analyst believes that selling lower priced footwear found in the off-price channel is "hard" given an increase in footwear manufacturers selling directly to the consumers. In addition, the analyst thinks that the company's technology usage is "behind that of online leaders" and the company lacks the financial flexibility to reinvest in its business without "seriously damaging" earnings per share growth.