Caleres Reports Second Quarter 2023 Results and Maintains Full Year 2023 Outlook

• Delivers second quarter adjusted earnings per share ahead of expectations
• Reiterates full year 2023 sales and adjusted earnings per share guidance
• Drives inventory decline of 14.3 percent compared to second quarter 2022
• Reduces revolving credit facility borrowings by $47.5 million from first quarter 2023 and by $104.5 million from second quarter 2022
• Repurchases 763,000 shares for $17.4 million

Caleres (NYSE: CAL), the market-leading portfolio of consumer-driven footwear brands, today reported financial results for the second quarter of 2023, and reiterated its full year 2023 sales and adjusted earnings per share outlook.

“The Caleres team performed at a high level during the second quarter, delivering a strong consolidated operating margin and exceeding adjusted earnings per share expectations despite a choppy macro environment,” said Jay Schmidt, president and chief executive officer. “Once again, we gained market share in our Lead Brands and Famous Footwear.”

“During the quarter, we achieved:

• sequential sales improvement from first quarter in the year-over-year change in the Brand Portfolio and Famous Footwear;
• outperformance in the Brand Portfolio ecommerce business;
• record second quarter gross margin in the Brand Portfolio; and
• year-over-year sales growth in Kids at Famous Footwear and an improved year-over-year inventory position heading into the key back-to-school period.

Just as significantly, we strengthened our financial and long-term competitive position by controlling expenses and by putting free cash to work, reducing revolver borrowings by nearly $50 million. We also invested in high-return growth opportunities, including enhancing the omni-channel experience and marketing technologies and analytics, while at the same time returning approximately $20 million to shareholders through share buybacks and dividends.”

Second Quarter 2023 Results

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

• Net sales were $695.5 million, down 5.8 percent from the second quarter of 2022;
  • Famous Footwear segment net sales declined 5.1 percent, with comparable sales down 4.3 percent
  • Brand Portfolio segment net sales decreased 7.2 percent
  • Direct-to-consumer sales represented approximately 74 percent of total net sales
• Gross profit was $314.2 million, while gross margin was 45.2 percent;
  • Famous Footwear segment gross margin of 46.2 percent
  • Brand Portfolio segment gross margin of 41.3 percent
• SG&A as a percentage of net sales was 37.8 percent;
• Net earnings of $33.9 million, or earnings per diluted share of $0.95, compared to net earnings of $51.2 million, or earnings per diluted share of $1.38 in the second quarter of 2022;
• Adjusted net earnings of $35.2 million, or adjusted earnings per diluted share of $0.98, which excludes $0.03 related to charges associated with expense reduction initiatives during the second quarter;
• Earnings before interest, taxes, depreciation, and amortization (EBITDA) of $63.6 million, or 9.1 percent of net sales;
• Inventory was down 14.3 percent compared to second quarter of 2022, due to disciplined inventory management and improved supply chain flow; and
• Borrowings under the asset-based revolving credit facility were $244.0 million at the end of the period.

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 $47.5 million during the second quarter. With this reduction, the company is now at its leverage ratio target of 1.0x on a debt/EBITDA trailing twelve-month basis. In addition, Caleres opportunistically repurchased 763,000 shares for $17.4 million at an average price of $22.86 per share. As of July 29, 2023, approximately 5.6 million shares remained available under the company’s share repurchase program. Caleres also invested $10.3 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 September 29, 2023, to shareholders of record as of September 8, 2023.

Full Year 2023 Outlook

“Looking ahead, we are confident in our ability to achieve our full year financial outlook and are reaffirming our 2023 sales and earnings guidance,” said Schmidt. “We also remain on course to deliver earnings in excess of the $4.00 per share baseline we established in 2022. This underscores yet again the structural changes to the organization’s normalized earnings profile that the team has executed in recent years. We are making progress on our clearly defined strategic initiatives. We continue to leverage the power of our brands, the strength of our diversified structure, and the rigor of our expense management initiatives to position the company for long-term growth and drive even greater value for our shareholders.”

For full year 2023, the company is reiterating its diluted earnings per share guidance of $4.02 to $4.22, inclusive of the $4 million of restructuring charges associated with expense reduction actions, and adjusted diluted earnings per share of $4.10 to $4.30 and consolidated net sales to be down 3 percent to down 5 percent.

In addition, Caleres still expects:

• Consolidated operating margin of 7.3 percent to 7.5 percent;
• Interest expense of $17 million to $19 million;
• Effective tax rate of about 25 percent; and
• Weighted average shares outstanding of 34.3 million.

The company is revising its forecasted capital expenditures to $50 million to $60 million from $55 million to $65 million. Caleres is fully committed to its strategic initiatives and the change relates to additional visibility on the timing of certain projects.

For third quarter of 2023 the company expects:

• Consolidated net sales to be down low-single digits;
• Diluted earnings per share of $1.25 to $1.30; and
• Adjusted diluted earnings per share of $1.30 to $1.35.

Investor Conference Call

Caleres will host a conference call at 10:00 a.m. ET today, Thursday, August 31. 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 13740501.

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 and future 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 general economic conditions and other factors; (ii) inflationary pressures (iii) supply chain disruptions (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.

n/m – Not meaningful

n/m – Not meaningful