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Caleres Reports First Quarter 2023 Results

  • Delivers $0.97 in earnings per share, the upper end of previous guidance
  • Generates record quarterly operating earnings and operating margin in the Brand Portfolio segment
  • Reiterates full year fiscal 2023 adjusted earnings per share guidance
  • Reduces revolving credit facility borrowings by $16 million from fiscal year-end 2022
  • Announces strategic expense reduction initiatives

Caleres (NYSE: CAL), a diverse portfolio of consumer-driven footwear brands, today reported financial results for the first quarter of 2023, and reiterated its full year fiscal 2023 earnings per share outlook.

“The Caleres team delivered a solid financial performance at the upper end of our earnings per share guidance driven by record quarterly profit from the Brand Portfolio and despite a challenging operating environment at Famous Footwear,” said Jay Schmidt, president and chief executive officer. “These first quarter results underscore the value of our diversified structure, the strength of our omnichannel capabilities and the power of our portfolio.”

First Quarter 2023 Results

(13-weeks ended April 29, 2023, compared to 13-weeks ended April 30, 2022)

  • Net sales were $662.7 million, down 9.8 percent from the first quarter of 2022;
    • Famous Footwear segment sales declined 9.2 percent, with comparable sales down 8.5 percent, due to soft consumer demand in shoe chains.
    • Brand Portfolio segment sales decreased 11.0 percent, in-line with expectations and primarily due to the timing of wholesale shipments in the Brand Portfolio in first quarter of 2022 to satisfy customer restocking efforts.
    • Direct-to-consumer sales represented approximately 68 percent of total net sales.
  • Gross profit was $302.7 million, while gross margin was 45.7 percent;
    • Famous Footwear segment gross margin of 45.6 percent
    • Brand Portfolio segment gross margin of 44.2 percent
  • SG&A as a percentage of net sales was 38.2 percent;
  • Net earnings of $34.7 million, or earnings per diluted share of $0.97, compared to net earnings of $50.5 million, or earnings per diluted share of $1.32 in the first quarter of 2022;
  • Earnings before interest, taxes, depreciation, and amortization (EBITDA) of $63.7 million, or 9.6 percent of sales;
  • Inventory was down 13.1 percent compared to first quarter of 2022, reflecting the company’s disciplined approach to inventory management and lower in-transit inventory; and
  • Borrowings under the asset-based revolving credit facility were $291.5 million at the end of the quarter.

Capital Allocation Update

In line with its capital allocation priorities, Caleres continued to reduce the borrowings under its asset-based revolving credit facility, paying down $16 million during the first quarter of 2023. The company also invested $6.5 million in capital expenditures and returned $2.5 million to shareholders through its quarterly dividend. The Caleres board of directors recently approved its next quarterly dividend, which will be paid on June 28, 2023, to shareholders of record as of June 9, 2023.

Fiscal 2023 Outlook:

“Looking ahead, we are encouraged by the increased financial contribution from the Brand Portfolio and the strong momentum in our lead brands – Sam Edelman, Vionic, Naturalizer and Allen Edmonds,” said Schmidt. “While we expect near-term pressure to persist at Famous Footwear, we are highly confident in our ability to remain the leader in footwear for the family, which we believe plays an essential role in the footwear sector overall.”

As a result of the more challenging operating environment, Caleres has taken several steps to reduce expenses across its business. These actions include eliminating open corporate positions, reducing non-merchandise procurement costs, realizing additional Brand Portfolio synergies, and lowering depreciation expense, and are expected to result in $20 million of in-year savings. The company also anticipates better-than-expected freight costs, which is expected to be an additional $10 million in savings. These cost savings are versus prior guidance assumptions, some of which were realized in the first quarter. Caleres anticipates a one-time cash charge of approximately $4 million in the second quarter of 2023 associated with these actions. Additionally, the company anticipates gross margin strength in the Brand Portfolio segment for the balance of the year.

For fiscal 2023, the company is expecting full year diluted earnings per share of $4.02 to $4.22, inclusive of the $4 million one-time charge associated with expense reduction actions in the second quarter. The company is reiterating its full year diluted adjusted earnings per share range of $4.10 to $4.30 and updating its consolidated net sales range to be down 3 percent to down 5 percent. This topline adjustment reflects the company’s revised sales expectations at Famous Footwear.

In addition, Caleres now expects:

  • Consolidated operating margin of 7.3 percent to 7.5 percent, versus previous guidance of 7.1 percent to 7.3 percent;
  • Interest expense of $17 million to $19 million, versus previous guidance of $18 million to $20 million; and
  • Capital expenditures of $55 million to $65 million, versus previous guidance of $60 million to $70 million.

The company still expects an effective tax rate of about 25 percent and weighted average shares outstanding of 34.3 million.

For second quarter of 2023 the company expects:

  • Consolidated net sales down 4 percent to 5 percent;
  • Diluted earnings per share of $0.79 to $0.84; and
  • Adjusted diluted earnings per share of $0.87 to $0.92.

“As we progress through 2023, we are focused on tightly managing our expenses, investing in value-enhancing opportunities, and maximizing our capabilities to position the organization for growth,” said Schmidt. “We believe we have the right foundation and strategic initiatives in place to consistently deliver annual earnings per share of more than $4.00 as we generate strong levels of free cash flow and create value for our shareholders.”

Investor Conference Call

Caleres will host a conference call at 10:00 a.m. ET today, Thursday, June 1. The webcast and associated slides will be available at investor.caleres.com/news/events. A live conference call will be available at (877) 704-4453 for North America participants or (201) 389-0920 for international participants, no passcode necessary. A replay will be also available at investor.caleres.com/news/events/archive for a limited period. Investors may also access the replay by dialing (844) 512-2921 in North America or (412) 317-6671 internationally and using the conference pin 13738707.

Definitions

All references in this press release, outside of the condensed consolidated financial statements that follow, unless otherwise noted, related to net earnings attributable to Caleres, Inc. and diluted earnings per common share attributable to Caleres, Inc. shareholders, are presented as net earnings and earnings per diluted share, respectively.

Non-GAAP Financial Measures

In this press release, the company’s financial results are provided both in accordance with generally accepted accounting principles (GAAP) and using certain non-GAAP financial measures. In particular, the company provides earnings before interest, taxes, depreciation and amortization, and estimated future earnings per diluted share adjusted to exclude certain gains, charges, and recoveries, which are non-GAAP financial measures. These results are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help identify underlying trends in the company’s business and provide useful information to both management and investors by excluding certain items that may not be indicative of the company’s core operating results. These measures should not be considered a substitute for or superior to GAAP results.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This press release contains certain forward-looking statements and expectations regarding the company’s future performance and the performance of its brands. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These risks include (i) inflationary pressures; (ii) supply chain disruptions (iii) changing consumer demands, which may be influenced by general economic conditions and other factors; (iv) rapidly changing consumer preferences and purchasing patterns and fashion trends; (v) customer concentration and increased consolidation in the retail industry; (vi) intense competition within the footwear industry; (vii) foreign currency fluctuations; (viii) political and economic conditions or other threats to the continued and uninterrupted flow of inventory from China and other countries, where the company relies heavily on third-party manufacturing facilities for a significant amount of its inventory; (ix) cybersecurity threats or other major disruption to the company’s information technology systems; (x) the ability to accurately forecast sales and manage inventory levels; (xi) a disruption in the company’s distribution centers; (xii) the ability to recruit and retain senior management and other key associates; (xiii) the ability to secure/exit leases on favorable terms; (xiv) the ability to maintain relationships with current suppliers; (xv) transitional challenges with acquisitions and divestitures; (xvi) changes to tax laws, policies and treaties; (xvii) our commitments and shareholder expectations related to environmental, social and governance considerations; (xviii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; and (xix) the ability to attract, retain, and maintain good relationships with licensors and protect our intellectual property rights. The company's reports to the Securities and Exchange Commission contain detailed information relating to such factors, including, without limitation, the information under the caption Risk Factors in Item 1A of the company’s Annual Report on Form 10-K for the year ended January 28, 2023, which information is incorporated by reference herein and updated by the company’s Quarterly Reports on Form 10-Q. The company does not undertake any obligation or plan to update these forward-looking statements, even though its situation may change.

 

SCHEDULE 1

 

CALERES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Thirteen Weeks Ended

($ thousands, except per share data)

 

April 29, 2023

 

April 30, 2022

Net sales

 

$

662,734

 

 

$

735,116

 

Cost of goods sold

 

 

360,052

 

 

 

408,122

 

Gross profit

 

 

302,682

 

 

 

326,994

 

Selling and administrative expenses

 

 

253,095

 

 

 

260,799

 

Operating earnings

 

 

49,587

 

 

 

66,195

 

Interest expense, net

 

 

(5,623

)

 

 

(2,299

)

Other income, net

 

 

1,492

 

 

 

3,422

 

Earnings before income taxes

 

 

45,456

 

 

 

67,318

 

Income tax provision

 

 

(10,664

)

 

 

(17,333

)

Net earnings

 

 

34,792

 

 

 

49,985

 

Net earnings (loss) attributable to noncontrolling interests

 

 

65

 

 

 

(524

)

Net earnings attributable to Caleres, Inc.

 

$

34,727

 

 

$

50,509

 

 

 

 

 

 

 

 

Basic earnings per common share attributable to Caleres, Inc. shareholders

 

$

0.97

 

 

$

1.34

 

 

 

 

 

 

 

 

Diluted earnings per common share attributable to Caleres, Inc. shareholders

 

$

0.97

 

 

$

1.32

 

SCHEDULE 2

 

CALERES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

(Unaudited)

($ thousands)

 

April 29, 2023

 

April 30, 2022

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,151

 

$

33,717

Receivables, net

 

 

148,068

 

 

181,551

Inventories, net

 

 

559,467

 

 

643,527

Property and equipment, held for sale

 

 

16,777

 

 

16,777

Prepaid expenses and other current assets

 

 

60,417

 

 

58,069

Total current assets

 

 

820,880

 

 

933,641

 

 

 

 

 

 

 

Lease right-of-use assets

 

 

513,817

 

 

503,393

Property and equipment, net

 

 

157,730

 

 

137,600

Goodwill and intangible assets, net

 

 

212,353

 

 

224,475

Other assets

 

 

113,303

 

 

129,189

Total assets

 

$

1,818,083

 

$

1,928,298

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Borrowings under revolving credit agreement

 

$

291,500

 

$

305,000

Trade accounts payable

 

 

261,753

 

 

386,821

Lease obligations

 

 

136,297

 

 

118,692

Other accrued expenses

 

 

189,727

 

 

259,374

Total current liabilities

 

 

879,277

 

 

1,069,887

 

 

 

 

 

 

 

Noncurrent lease obligations

 

 

437,171

 

 

452,742

Other liabilities

 

 

49,754

 

 

47,641

Total other liabilities

 

 

486,925

 

 

500,383

 

 

 

 

 

 

 

Total Caleres, Inc. shareholders’ equity

 

 

446,317

 

 

352,236

Noncontrolling interests

 

 

5,564

 

 

5,792

Total equity

 

 

451,881

 

 

358,028

Total liabilities and equity

 

$

1,818,083

 

$

1,928,298

SCHEDULE 3

 

CALERES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Thirteen Weeks Ended

($ thousands)

 

April 29, 2023

 

April 30, 2022

OPERATING ACTIVITIES:

 

 

 

 

 

 

Net cash provided by operating activities

 

$

37,497

 

 

$

19,686

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(5,750

)

 

 

(9,305

)

Capitalized software

 

 

(798

)

 

 

(2,345

)

Net cash used for investing activities

 

 

(6,548

)

 

 

(11,650

)

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

Borrowings under revolving credit agreement

 

 

126,000

 

 

 

205,000

 

Repayments under revolving credit agreement

 

 

(142,000

)

 

 

(190,000

)

Dividends paid

 

 

(2,482

)

 

 

(2,648

)

Acquisition of treasury stock

 

 

 

 

 

(14,673

)

Issuance of common stock under share-based plans, net

 

 

(10,006

)

 

 

(3,599

)

Contributions by noncontrolling interests

 

 

 

 

 

1,500

 

Net cash used for financing activities

 

 

(28,488

)

 

 

(4,420

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(10

)

 

 

(14

)

Increase in cash and cash equivalents

 

 

2,451

 

 

 

3,602

 

Cash and cash equivalents at beginning of period

 

 

33,700

 

 

 

30,115

 

Cash and cash equivalents at end of period

 

$

36,151

 

 

$

33,717

 

 

SCHEDULE 4

 

 

 

 

 

 

 

 

 

CALERES, INC.

SUMMARY FINANCIAL RESULTS BY SEGMENT

 

 

 

 

 

 

 

 

 

SUMMARY FINANCIAL RESULTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Thirteen Weeks Ended

 

 

Famous Footwear

Brand Portfolio

Eliminations and Other

Consolidated

 

 

April 29,

April 30,

April 29,

April 30,

April 29,

April 30,

April 29,

April 30,

($ thousands)

 

2023

2022

2023

2022

2023

2022

2023

2022

Net sales

 

$

349,158

 

$

384,502

 

$

325,516

 

$

365,740

 

$

(11,940

)

$

(15,126

)

$

662,734

 

$

735,116

 

Gross profit

 

 

159,133

 

 

189,234

 

 

143,858

 

 

139,299

 

 

(309

)

 

(1,539

)

 

302,682

 

 

326,994

 

Gross margin

 

 

45.6

%

 

49.2

%

 

44.2

%

 

38.1

%

 

2.6

%

 

10.2

%

 

45.7

%

 

44.5

%

Operating earnings (loss)

 

 

17,056

 

 

49,688

 

 

42,669

 

 

41,349

 

 

(10,138

)

 

(24,842

)

 

49,587

 

 

66,195

 

Operating margin

 

 

4.9

%

 

12.9

%

 

13.1

%

 

11.3

%

 

n/m

%

 

n/m

%

 

7.5

%

 

9.0

%

Comparable sales % (on a 13-week basis)

 

 

(8.5

)%

 

(4.0

)%

 

9.4

%

 

66.0

%

 

%

 

%

 

%

 

%

Number of stores

 

 

866

 

 

887

 

 

93

 

 

83

 

 

 

 

 

 

959

 

 

970

 

 

n/m – Not meaningful

SCHEDULE 5

 

CALERES, INC.

BASIC AND DILUTED EARNINGS PER SHARE RECONCILIATION

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Thirteen Weeks Ended

 

 

April 29,

 

April 30,

 

 

2023

 

2022

($ thousands, except per share data)

 

 

 

 

 

 

Net earnings attributable to Caleres, Inc.:

 

 

 

 

 

 

Net earnings

 

$

34,792

 

 

$

49,985

 

Net (earnings) loss attributable to noncontrolling interests

 

 

(65

)

 

 

524

 

Net earnings attributable to Caleres, Inc.

 

 

34,727

 

 

 

50,509

 

Net earnings allocated to participating securities

 

 

(1,478

)

 

 

(2,017

)

Net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities

 

$

33,249

 

 

$

48,492

 

 

 

 

 

 

 

 

Basic and diluted common shares attributable to Caleres, Inc.:

 

 

 

 

 

 

Basic common shares

 

 

34,407

 

 

 

36,209

 

Dilutive effect of share-based awards

 

 

 

 

 

467

 

Diluted common shares attributable to Caleres, Inc.

 

 

34,407

 

 

 

36,676

 

 

 

 

 

 

 

 

Basic earnings per common share attributable to Caleres, Inc. shareholders

 

$

0.97

 

 

$

1.34

 

 

 

 

 

 

 

 

Diluted earnings per common share attributable to Caleres, Inc. shareholders

 

$

0.97

 

 

$

1.32

 

SCHEDULE 6

 

CALERES, INC.

CALCULATION OF EBITDA (NON-GAAP METRIC)

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Thirteen Weeks Ended

($ thousands)

 

April 29, 2023

 

April 30, 2022

EBITDA:

 

 

 

 

 

 

 

 

Net earnings attributable to Caleres, Inc.

 

$

34,727

 

 

$

50,509

 

Income tax provision

 

 

10,664

 

 

 

17,333

 

Interest expense, net

 

 

5,623

 

 

 

2,299

 

Depreciation and amortization (1)

 

 

12,714

 

 

 

12,357

 

EBITDA

 

$

63,728

 

 

$

82,498

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

 

9.6

%

 

 

11.2

%

__________________________

 (1)

Includes depreciation and amortization of capitalized software and intangible assets.

SCHEDULE 7

 

CALERES, INC.

RECONCILIATION OF DILUTED EARNINGS PER SHARE (GAAP BASIS) TO ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP BASIS) – SECOND QUARTER AND FISCAL 2023 GUIDANCE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Second Quarter 2023 Guidance

 

Fiscal 2023 Guidance

 

 

Low

 

High

 

Low

 

High

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted earnings per share

 

$

0.79

 

$

0.84

 

$

4.02

 

$

4.22

Charges/other items:

 

 

 

 

 

 

 

 

 

 

 

 

Expense reduction initiatives

 

 

0.08

 

 

0.08

 

 

0.08

 

 

0.08

Adjusted diluted earnings per share

 

$

0.87

 

$

0.92

 

$

4.10

 

$

4.30

 

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