U.S. Markets closed

Caleres Reports Third Quarter 2019 Results

ST. LOUIS--(BUSINESS WIRE)--

Caleres (CAL) (caleres.com), a diverse portfolio of global footwear brands, today reported third quarter 2019 financial results.

  • Record third quarter sales of $792.4 million, up 2.1%
  • Positive same-store-sales growth of 2.5% at Famous Footwear, the eighth consecutive year of positive back-to-school same-store-sales growth
  • Earnings per diluted share of $0.69, up 3.0%, including $0.03 net impact from tariffs
  • Full-year adjusted EPS guidance top-end narrowed by $0.05 to $2.35-$2.40 to reflect tariff impacts

“Our third quarter results demonstrate continued execution against our strategy to broaden the reach of our powerful portfolio and strengthen consumer connections,” said Diane Sullivan, CEO, president and chairman of Caleres. “We delivered our eighth consecutive year of positive back-to-school same-store-sales growth at Famous Footwear and our top brands continued to gain share within the Brand Portfolio. While the demand environment remains dynamic, we are focused on executing on our plan with fresh and compelling inventory and a continued emphasis on cost discipline across the organization.”

Third Quarter 2019 Results Versus Third Quarter 2018

  • Consolidated sales of $792.4 million, up 2.1%.
    • Famous Footwear total sales of $446.6 million, with same-store-sales up 2.5%.
    • Brand Portfolio sales of $359.9 million, up 4.9%.
  • Gross profit of $319.8 million, up 2.9%, representing gross margin of 40.4%.
  • SG&A expense of $275.3 million, up 3.7%, representing 34.7% of sales.
  • Operating earnings of $43.5 million, representing operating margin of 5.5%.
  • Adjusted operating earnings of $44.4 million, down 5.3%, representing adjusted operating margin of 5.6% excluding Vionic integration expense.
  • Net earnings of $28.0 million, resulting in earnings per diluted share of $0.69, up 3.0%, including $0.07 of fair value adjustment associated with the mandatory purchase obligation of Blowfish Malibu and $0.02 of Vionic integration expense.
  • Adjusted net earnings of $31.6 million, resulting in adjusted earnings per diluted share of $0.78, down 3.7%, including a $0.03 net impact from increased tariffs in the quarter.

First Nine Months 2019 Results Versus First Nine Months 2018

  • Consolidated sales of $2,222.6 million, up 5.1%.
    • Famous Footwear total sales of $1,218.6 million, with same-store-sales up 1.1%.
    • Brand Portfolio sales of $1,060.5 million, up 13.8%.
  • Gross profit of $905.6 million, up 3.1%, representing gross margin of 40.7%.
  • Adjusted gross margin of 41.1%, excluding $7.2 million related to Vionic inventory adjustment amortization and Brand Portfolio business exit expense.
  • SG&A expense of $805.0 million, up 3.9%, representing 36.2% of sales.
  • Operating earnings of $98.1 million, up 3.5%, representing operating margin of 4.4%.
  • Adjusted operating earnings of $107.7 million, up 1.2%, representing adjusted operating margin of 4.8%.
  • Net earnings of $62.4 million, resulting in earnings per diluted share of $1.51, down 6.8%.
  • Adjusted net earnings of $72.4 million, resulting in adjusted earnings per diluted share of $1.75, down 4.4%.

Balance Sheet and Cash Flow

  • Cash and equivalents of $52.5 million and cash from operations of $145.7 million year-to-date.
  • Inventory of $644.6 million, down 7.7% year-over-year.
  • Year-to-date capital expenditures of $41.6 million, up 7.4% year-over-year.
  • There were $295.0 million of outstanding borrowings under the revolving credit facility, following the October 18, 2018 acquisition of Vionic.
  • Returned $39.8 million to shareholders in the first nine months of 2019, via share repurchases and dividends.

Investor Conference Call

Caleres will host an investor conference call at 4:30 p.m. ET today, Monday, November 25. The webcast and slides will be available at investor.caleres.com/news/events. The live conference call will be available at (877) 217-9089 for analysts in North America or (706) 679-1723 for international analysts by using the conference ID 5169032. A replay will be available at investor.caleres.com/news/events/archive for a limited period. Investors may also access a replay of the call through December 2 by dialing (855) 859-2056 in North America or (404) 537-3406 internationally and using the conference ID 5169032.

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 historic and estimated future gross profit, operating earnings, net earnings and 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) changing consumer demands, which may be influenced by consumers' disposable income, which in turn can be influenced by general economic conditions and other factors; (ii) rapidly changing fashion trends and consumer preferences and purchasing patterns; (iii) intense competition within the footwear industry; (iv) 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; (v) imposition of tariffs; (vi) the ability to accurately forecast sales and manage inventory levels; (vii) cybersecurity threats or other major disruption to the Company’s information technology systems; (viii) customer concentration and increased consolidation in the retail industry; (ix) transitional challenges with acquisitions; (x) a disruption in the Company’s distribution centers; (xi) foreign currency fluctuations; (xii) changes to tax laws, policies and treaties; (xiii) the ability to recruit and retain senior management and other key associates; (xiv) compliance with applicable laws and standards with respect to labor, trade and product safety issues; (xv) the ability to secure/exit leases on favorable terms; (xvi) the ability to maintain relationships with current suppliers; and (xvii) 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 February 2, 2019, 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.

About Caleres

Caleres is the home of today’s most coveted footwear brands and represents a diverse portfolio spanning all of life’s styles and experiences. Every shoe tells a story and Caleres has the perfect fit for every one of them. Our collections have been developed and acquired to meet the evolving needs of today’s assorted and growing global audiences, with consumer insights driving every aspect of the innovation, design, and craft that go into our distinctly positioned brands, including Famous Footwear, Sam Edelman, Naturalizer, Allen Edmonds, Vionic, Dr. Scholl’s Shoes, Franco Sarto, and more. The Caleres story is most simply defined by the company’s mission: Inspire people to feel great…feet first.

SCHEDULE 1

 

CALERES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

 

 

 

(Unaudited)

 

 

 

Thirteen Weeks Ended

 

 

Thirty-Nine Weeks Ended

 

(Thousands, except per share data)

 

November 2, 2019

 

 

November 3, 2018

 

 

November 2, 2019

 

 

November 3, 2018

 

Net sales

 

$

792,375

 

 

$

775,829

 

 

$

2,222,614

 

 

$

2,114,583

 

Cost of goods sold

 

 

472,605

 

 

 

465,219

 

 

 

1,317,064

 

 

 

1,235,950

 

Gross profit

 

 

319,770

 

 

 

310,610

 

 

 

905,550

 

 

 

878,633

 

Selling and administrative expenses

 

 

275,330

 

 

 

265,522

 

 

 

804,972

 

 

 

774,555

 

Restructuring and other special charges, net

 

 

969

 

 

 

5,340

 

 

 

2,434

 

 

 

9,240

 

Operating earnings

 

 

43,471

 

 

 

39,748

 

 

 

98,144

 

 

 

94,838

 

Interest expense, net

 

 

(10,559

)

 

 

(4,210

)

 

 

(25,288

)

 

 

(11,495

)

Other income, net

 

 

2,633

 

 

 

3,085

 

 

 

7,902

 

 

 

9,254

 

Earnings before income taxes

 

 

35,545

 

 

 

38,623

 

 

 

80,758

 

 

 

92,597

 

Income tax provision

 

 

(7,784

)

 

 

(9,468

)

 

 

(18,685

)

 

 

(22,651

)

Net earnings

 

 

27,761

 

 

 

29,155

 

 

 

62,073

 

 

 

69,946

 

Net (loss) earnings attributable to noncontrolling interests

 

 

(226

)

 

 

2

 

 

 

(338

)

 

 

(65

)

Net earnings attributable to Caleres, Inc.

 

$

27,987

 

 

$

29,153

 

 

$

62,411

 

 

$

70,011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.69

 

 

$

0.68

 

 

$

1.51

 

 

$

1.62

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.69

 

 

$

0.67

 

 

$

1.51

 

 

$

1.62

 

SCHEDULE 2

 

CALERES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

(Unaudited)

 

 

 

 

 

 

 

November 2, 2019

 

 

November 3, 2018

 

 

February 2, 2019

 

(Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

52,502

 

 

$

90,491

 

 

$

30,200

 

Receivables, net

 

 

156,253

 

 

 

192,246

 

 

 

191,722

 

Inventories, net

 

 

644,646

 

 

 

698,265

 

 

 

683,171

 

Prepaid expenses and other current assets

 

 

48,245

 

 

 

63,166

 

 

 

71,354

 

Total current assets

 

 

901,646

 

 

 

1,044,168

 

 

 

976,447

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease right-of-use assets

 

 

704,244

 

 

 

 

 

 

 

Property and equipment, net

 

 

230,261

 

 

 

218,103

 

 

 

230,784

 

Goodwill and intangible assets, net

 

 

542,845

 

 

 

653,852

 

 

 

549,897

 

Other assets

 

 

92,214

 

 

 

92,279

 

 

 

81,440

 

Total assets

 

$

2,471,210

 

 

$

2,008,402

 

 

$

1,838,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings under revolving credit agreement

 

$

295,000

 

 

$

350,000

 

 

$

335,000

 

Trade accounts payable

 

 

275,699

 

 

 

317,499

 

 

 

316,298

 

Lease obligations

 

 

144,501

 

 

 

 

 

 

 

Other accrued expenses

 

 

179,030

 

 

 

209,479

 

 

 

202,038

 

Total current liabilities

 

 

894,230

 

 

 

876,978

 

 

 

853,336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent lease obligations

 

 

629,731

 

 

 

 

 

 

 

Long-term debt

 

 

198,276

 

 

 

197,817

 

 

 

197,932

 

Deferred rent

 

 

 

 

 

51,930

 

 

 

54,850

 

Other liabilities

 

 

95,623

 

 

 

114,592

 

 

 

97,015

 

Total other liabilities

 

 

923,630

 

 

 

364,339

 

 

 

349,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Caleres, Inc. shareholders’ equity

 

 

650,840

 

 

 

765,753

 

 

 

634,053

 

Noncontrolling interests

 

 

2,510

 

 

 

1,332

 

 

 

1,382

 

Total equity

 

 

653,350

 

 

 

767,085

 

 

 

635,435

 

Total liabilities and equity

 

$

2,471,210

 

 

$

2,008,402

 

 

$

1,838,568

 

SCHEDULE 3

 

CALERES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

(Unaudited)

 

 

 

Thirty-Nine Weeks Ended

 

(Thousands)

 

November 2, 2019

 

 

November 3, 2018

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

145,737

 

 

$

94,410

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(37,354

)

 

 

(35,244

)

Disposals of property and equipment

 

 

636

 

 

 

 

Capitalized software

 

 

(4,893

)

 

 

(3,505

)

Acquisition of Blowfish Malibu, net of cash received

 

 

 

 

 

(17,284

)

Acquisition of Vionic, net of cash received

 

 

 

 

 

(344,942

)

Net cash used for investing activities

 

 

(41,611

)

 

 

(400,975

)

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Borrowings under revolving credit agreement

 

 

237,000

 

 

 

360,000

 

Repayments under revolving credit agreement

 

 

(277,000

)

 

 

(10,000

)

Dividends paid

 

 

(8,631

)

 

 

(9,059

)

Acquisition of treasury stock

 

 

(31,168

)

 

 

(3,288

)

Issuance of common stock under share-based plans, net

 

 

(2,605

)

 

 

(4,318

)

Contributions by noncontrolling interests

 

 

1,500

 

 

 

 

Other

 

 

(1,022

)

 

 

(114

)

Net cash (used for) provided by financing activities

 

 

(81,926

)

 

 

333,221

 

Effect of exchange rate changes on cash and cash equivalents

 

 

102

 

 

 

(212

)

Increase in cash and cash equivalents

 

 

22,302

 

 

 

26,444

 

Cash and cash equivalents at beginning of period

 

 

30,200

 

 

 

64,047

 

Cash and cash equivalents at end of period

 

$

52,502

 

 

$

90,491

 

SCHEDULE 4

 

CALERES, INC.

RECONCILIATION OF NET EARNINGS AND DILUTED EARNINGS PER SHARE (GAAP BASIS) TO ADJUSTED NET EARNINGS AND ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP BASIS)

 

 

 

(Unaudited)

 

 

 

Thirteen Weeks Ended

 

 

 

November 2, 2019

 

 

November 3, 2018

 

(Thousands, except per share data)

 

Pre-Tax

Impact of

Charges/Other

Items

 

 

Net

Earnings

Attributable to

Caleres, Inc.

 

 

Diluted

Earnings

Per Share

 

 

Pre-Tax

Impact of

Charges/Other

Items

 

 

Net

Earnings

Attributable to

Caleres, Inc.

 

 

Diluted

Earnings

Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP earnings

 

 

 

 

 

$

27,987

 

 

$

0.69

 

 

 

 

 

 

$

29,153

 

 

$

0.67

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charges/other items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vionic acquisition and integration-related costs

 

$

969

 

 

 

719

 

 

 

0.02

 

 

$

5,022

 

 

 

4,170

 

 

 

0.10

 

Fair value adjustment to Blowfish purchase obligation

 

 

3,883

 

 

 

2,884

 

 

 

0.07

 

 

 

 

 

 

 

 

 

 

Blowfish Malibu acquisition and integration-related costs

 

 

 

 

 

 

 

 

 

 

 

1,000

 

 

 

743

 

 

 

0.02

 

Acquisition, integration and reorganization of men's brands

 

 

 

 

 

 

 

 

 

 

 

1,164

 

 

 

864

 

 

 

0.02

 

Total charges/other items

 

$

4,852

 

 

$

3,603

 

 

$

0.09

 

 

$

7,186

 

 

$

5,777

 

 

$

0.14

 

Adjusted earnings

 

 

 

 

 

$

31,590

 

 

$

0.78

 

 

 

 

 

 

$

34,930

 

 

$

0.81

 

 

 

 

(Unaudited)

 

 

 

Thirty-Nine Weeks Ended

 

 

 

November 2, 2019

 

 

November 3, 2018

 

(Thousands, except per share data)

 

Pre-Tax

Impact of

Charges/Other

Items

 

 

Net

Earnings

Attributable to

Caleres, Inc.

 

 

Diluted

Earnings

Per Share

 

 

Pre-Tax

Impact of

Charges/Other

Items

 

 

Net

Earnings

Attributable to

Caleres, Inc.

 

 

Diluted

Earnings

Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP earnings

 

 

 

 

 

$

62,411

 

 

$

1.51

 

 

 

 

 

 

$

70,011

 

 

$

1.62

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charges/other items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vionic acquisition and integration-related costs

 

$

7,696

 

 

 

5,714

 

 

 

0.14

 

 

$

5,022

 

 

 

4,170

 

 

 

0.10

 

Fair value adjustment to Blowfish purchase obligation

 

 

3,883

 

 

 

2,884

 

 

 

0.07

 

 

 

 

 

 

 

 

 

 

Brand Portfolio - business exits

 

 

1,905

 

 

 

1,415

 

 

 

0.03

 

 

 

 

 

 

 

 

 

 

Blowfish Malibu acquisition-related costs

 

 

 

 

 

 

 

 

 

 

 

1,778

 

 

 

1,319

 

 

 

0.03

 

Acquisition, integration and reorganization of men's brands

 

 

 

 

 

 

 

 

 

 

 

4,826

 

 

 

3,573

 

 

 

0.08

 

Total charges/other items

 

$

13,484

 

 

$

10,013

 

 

$

0.24

 

 

$

11,626

 

 

$

9,062

 

 

$

0.21

 

Adjusted earnings

 

 

 

 

 

$

72,424

 

 

$

1.75

 

 

 

 

 

 

$

79,073

 

 

$

1.83

 

SCHEDULE 5

 

CALERES, INC.

SUMMARY FINANCIAL RESULTS BY SEGMENT

 

SUMMARY FINANCIAL RESULTS

 

 

(Unaudited)

 

 

 

Thirteen Weeks Ended

 

 

 

Famous Footwear

 

 

Brand Portfolio

 

 

Eliminations and Other

 

 

Consolidated

 

(Thousands)

 

November 2, 2019

 

 

November 3, 2018

 

 

November 2, 2019

 

 

November 3, 2018

 

 

November 2, 2019

 

 

November 3, 2018

 

 

November 2, 2019

 

 

November 3, 2018

 

Net sales

 

$

446,583

 

 

$

448,765

 

 

$

359,863

 

 

$

343,032

 

 

$

(14,071

)

 

$

(15,968

)

 

$

792,375

 

 

$

775,829

 

Gross profit

 

 

183,267

 

 

 

182,487

 

 

 

133,761

 

 

 

126,558

 

 

 

2,742

 

 

 

1,565

 

 

 

319,770

 

 

 

310,610

 

Adjusted gross profit

 

 

183,267

 

 

 

182,487

 

 

 

133,761

 

 

 

128,404

 

 

 

2,742

 

 

 

1,565

 

 

 

319,770

 

 

 

312,456

 

Gross profit rate

 

 

41.0

%

 

 

40.7

%

 

 

37.2

%

 

 

36.9

%

 

 

(19.5

)%

 

 

(9.8

)%

 

 

40.4

%

 

 

40.0

%

Adjusted gross profit rate

 

 

41.0

%

 

 

40.7

%

 

 

37.2

%

 

 

37.4

%

 

 

(19.5

)%

 

 

(9.8

)%

 

 

40.4

%

 

 

40.3

%

Operating earnings (loss)

 

 

27,681

 

 

 

24,414

 

 

 

19,398

 

 

 

25,114

 

 

 

(3,608

)

 

 

(9,780

)

 

 

43,471

 

 

 

39,748

 

Adjusted operating earnings (loss)

 

 

27,681

 

 

 

24,414

 

 

 

19,398

 

 

 

28,015

 

 

 

(2,639

)

 

 

(5,495

)

 

 

44,440

 

 

 

46,934

 

Operating earnings %

 

 

6.2

%

 

 

5.4

%

 

 

5.4

%

 

 

7.3

%

 

 

25.6

%

 

 

61.2

%

 

 

5.5

%

 

 

5.1

%

Adjusted operating earnings %

 

 

6.2

%

 

 

5.4

%

 

 

5.4

%

 

 

8.2

%

 

 

18.8

%

 

 

34.4

%

 

 

5.6

%

 

 

6.0

%

Same-store sales % (on a 13-week basis)

 

 

2.5

%

 

 

2.8

%

 

 

(5.1

)%

 

 

1.7

%

 

 

%

 

 

%

 

 

%

 

 

%

Number of stores

 

 

960

 

 

 

1,007

 

 

 

232

 

 

 

232

 

 

 

 

 

 

 

 

 

1,192

 

 

 

1,239

 

...

RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP)

 

 

(Unaudited)

 

 

 

Thirteen Weeks Ended

 

 

 

Famous Footwear

 

 

Brand Portfolio

 

 

Eliminations and Other

 

 

Consolidated

 

(Thousands)

 

November 2, 2019

 

 

November 3, 2018

 

 

November 2, 2019

 

 

November 3, 2018

 

 

November 2, 2019

 

 

November 3, 2018

 

 

November 2, 2019

 

 

November 3, 2018

 

Gross profit

 

$

183,267

 

 

$

182,487

 

 

$

133,761

 

 

$

126,558

 

 

$

2,742

 

 

$

1,565

 

 

$

319,770

 

 

$

310,610

 

Charges/Other Items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blowfish Malibu acquisition-related costs

 

 

 

 

 

 

 

 

 

 

 

932

 

 

 

 

 

 

 

 

 

 

 

 

932