Caleres Reports Second Quarter 2017 Results

Sales up 8.7%, gross margin up 80 basis points

Company reiterates fiscal 2017 guidance

Tuesday, August 29, 2017 3:15 pm CDT

Dateline:

ST. LOUIS

Public Company Information:

NYSE:
CAL
"In the second quarter, we delivered solid sales improvement across both sides of our business, with Famous Footwear same-store-sales up 2.8% and Brand Portfolio sales up 16.8%"

ST. LOUIS--(BUSINESS WIRE)--Caleres (NYSE: CAL)(caleres.com), a diverse portfolio of global footwear brands which fit people’s lives, today reported second quarter 2017 financial results.

“In the second quarter, we delivered solid sales improvement across both sides of our business, with Famous Footwear same-store-sales up 2.8% and Brand Portfolio sales up 16.8%,” said Diane Sullivan, CEO, president and chairman of Caleres. “At Famous Footwear, sales were ahead of expectations, including a stronger start to the key back-to-school selling season and – as a result – we delivered second quarter earnings ahead of expectations.”

“Additionally, we saw consistent margin expansion, generated steady cash flow, and continued to pay down our revolving credit facility, following the Allen Edmonds acquisition,” continued Sullivan. “We have confidence in the execution of our strategic plan and are maintaining our guidance for fiscal 2017.”

Second Quarter 2017 Results Versus 2016

  • Consolidated sales of $677.0 million were up 8.7%, including Allen Edmonds.
    • Famous Footwear total sales of $404.9 million were up 3.8%, while same-store-sales were up 2.8%.
    • Brand Portfolio sales of $272.0 million were up 16.8% including contribution from Allen Edmonds, which was acquired in December of 2016.
  • Gross profit of $287.5 million – including $1.9 million of expected fair value inventory adjustment amortization related to the Allen Edmonds acquisition – was up 10.8% and gross margin of 42.5% was up 80 basis points.
  • SG&A expense of $253.5 million was up 11.5%, including Allen Edmonds.
  • Operating earnings were $31.1 million and operating margin was 4.6%, while adjusted operating earnings were $35.9 million and adjusted operating margin of 5.3% was up 12 basis points.
  • Net earnings were $17.6 million, while diluted earnings per share were $0.41 and included $0.07 of expected charges related to the acquisition, integration and reorganization of men’s brands.
  • Adjusted net earnings of $20.6 million were up 4.4%, while adjusted diluted earnings per share of $0.48 were up 4.3%.

First Half 2017 Results Versus 2016

  • Consolidated sales of $1,308.5 million were up 8.3%, including Allen Edmonds.
  • Gross profit of $558.4 million – including $4.9 million of expected fair value inventory adjustment amortization related to the Allen Edmonds acquisition – was up 10.1% and gross margin of 42.7% was up 66 basis points.
  • SG&A expense of $497.6 million was up 11.5%, including Allen Edmonds.
  • Operating earnings were $56.8 million and operating margin was 4.3%, while adjusted operating earnings were $65.7 million and adjusted operating margin was 5.0%.
  • Net earnings were $32.5 million, while diluted earnings per share were $0.75 and included $0.13 of expected charges related to the acquisition, integration and reorganization of men’s brands.
  • Adjusted net earnings of $38.1 million were up 1.4%, while adjusted diluted earnings per share of $0.88 were up 2.3%.

Balance Sheet and Cash Flow

  • Cash and equivalents were $52.9 million.
  • Outstanding borrowings under the revolving credit facility of $35 million – associated with the December 2016 acquisition of Allen Edmonds – were down from $110 million at the end of 2016.
  • Inventory of $722.0 million was up 11.3% year-over-year, including Allen Edmonds.
  • Year-to-date cash from operations of $114.3 million was up 5.3% year-over-year.
  • Year-to-date capital expenditures of $27.4 million were down 12.2% year-over-year.

Shareholder Distributions

  • Declared 378th consecutive quarterly dividend, with $0.07 per share payable on October 2, 2017, to shareholders of record as of September 18, 2017.

Outlook for 2017 all including Allen Edmonds

 
Consolidated net sales           $2.7B to $2.8B
Famous Footwear same-store-sales Up low-single digits
Brand Portfolio sales Up high-teens
Gross margin Up 45 to 55 bps
SG&A as a percent of revenue Up 30 to 40 bps
Effective tax rate 31% to 33%
Adjusted earnings per diluted share           $2.10 to $2.20

* Excludes approx. $0.13 of costs related to the acquisition, integration and reorganization of the company’s men's brands

 

Investor Conference Call

Caleres will host an investor conference call at 4:30 p.m. ET today, Tuesday, August 29. The webcast and slides will be available at investor.caleres.com/news/events. A 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 69201252. A replay will be available at investor.caleres.com/news/events/archive for a limited period. Investors may also access the replay by dialing (855) 859-2056 in North America or (404) 537-3406 internationally and using the conference ID 69201252 through Tuesday, September 12.

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; (ii) rapidly changing fashion trends 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) the ability to accurately forecast sales and manage inventory levels; (vi) cybersecurity threats or other major disruption to the Company’s information technology systems; (vii) transitional challenges with acquisitions; (viii) customer concentration and increased consolidation in the retail industry; (ix) a disruption in the Company’s distribution centers; (x) the ability to recruit and retain senior management and other key associates; (xi) foreign currency fluctuations; (xii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; (xiii) the ability to secure/exit leases on favorable terms; (xiv) the ability to maintain relationships with current suppliers; (xv) the ability to attract, retain and maintain good relationships with licensors and protect intellectual property rights; and (xvi) changes to tax laws, policies and treaties. 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, 2017, 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 a diverse portfolio of global footwear brands. Our products are available virtually everywhere - in the over 1,200 retail stores we operate, in hundreds of major department and specialty stores, on our branded e-commerce sites, and on many additional third-party retail websites. Famous Footwear and Famous.com serve as our Family brands. Our Contemporary Fashion brands include Sam Edelman, Allen Edmonds, Franco Sarto, Vince, Via Spiga, George Brown Bilt, Diane von Furstenberg, Fergie Footwear and Carlos Santana. Naturalizer, Dr. Scholl’s Shoes, LifeStride, Bzees and Ryka represent our Healthy Living brands. Combined, these brands help make Caleres a company with both a legacy and a mission. Our legacy is our more than 130-years of craftsmanship, our passion for fit and our business savvy, while our mission is to continue to inspire people to feel good…feet first. Visit caleres.com to learn more about us.

       
 
 
 
 
SCHEDULE 1
         
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
 
(Unaudited)

 

Thirteen Weeks Ended Twenty-six Weeks Ended
(Thousands, except per share data) July 29, 2017 July 30, 2016 July 29, 2017 July 30, 2016
Net sales $ 676,954 $ 622,937 $ 1,308,463 $ 1,207,670
Cost of goods sold 389,493   363,382   750,094   700,322  
Gross profit 287,461     259,555   558,369   507,348  
Selling and administrative expenses 253,500 227,297 497,575 446,347
Restructuring and other special charges, net 2,865     3,973    
Operating earnings 31,096     32,258   56,821   61,001  
Interest expense (4,637 ) (3,479 ) (9,681 ) (7,089 )
Interest income 262   310   497   557  
Earnings before income taxes 26,721     29,089   47,637   54,469  
Income tax provision (9,047 ) (9,410 ) (15,079 ) (16,912 )
Net earnings 17,674   19,679   32,558   37,557  
Net earnings (loss) attributable to noncontrolling interests 79   (89 ) 61   6  
Net earnings attributable to Caleres, Inc. $ 17,595   $ 19,768   $ 32,497   $ 37,551  
 
Basic earnings per common share attributable to Caleres, Inc. shareholders $ 0.41   $ 0.46   $ 0.76   $ 0.87  
 
Diluted earnings per common share attributable to Caleres, Inc. shareholders $ 0.41   $ 0.46   $ 0.75   $ 0.86  
 
 
 
 
 
 
SCHEDULE 2
       
CALERES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
     
(Unaudited)
July 29, 2017 July 30, 2016 January 28, 2017
(Thousands)
ASSETS
Cash and cash equivalents $ 52,942 $ 165,729 $ 55,332
Receivables, net 143,616 144,309 153,121
Inventories, net 722,005 648,881 585,764
Prepaid expenses and other current assets 36,972 30,190 49,528
Total current assets 955,535 989,109 843,745
 
Property and equipment, net 217,838 186,776 219,196
Goodwill and intangible assets, net 341,195 129,060 343,758
Other assets 69,589 115,448 68,574
Total assets $ 1,584,157 $ 1,420,393 $ 1,475,273
 
LIABILITIES AND EQUITY
Borrowings under revolving credit agreement $ 35,000 $ $ 110,000
Trade accounts payable 402,812 358,751 266,370
Other accrued expenses 170,499 142,085 151,225
Total current liabilities 608,311 500,836 527,595
 
Long-term debt 197,233 196,774 197,003
Deferred rent 52,227 47,452 51,124
Other liabilities 85,212 60,566 85,065
Total other liabilities 334,672 304,792 333,192
 
Total Caleres, Inc. shareholders’ equity 639,729 613,787 613,117
Noncontrolling interests 1,445 978 1,369
Total equity 641,174 614,765 614,486
Total liabilities and equity $ 1,584,157 $ 1,420,393 $ 1,475,273
 
 
 
 
 
 
SCHEDULE 3
         
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twenty-six Weeks Ended
(Thousands) July 29, 2017 July 30, 2016
OPERATING ACTIVITIES:    
Net cash provided by operating activities $ 114,280   $ 108,564  
 
INVESTING ACTIVITIES:
Purchases of property and equipment (24,251 ) (27,443 )
Capitalized software (3,152 ) (3,778 )
Net cash used for investing activities (27,403 ) (31,221 )
 
FINANCING ACTIVITIES:
Borrowings under revolving credit agreement 400,000 103,000
Repayments under revolving credit agreement (475,000 ) (103,000 )
Dividends paid (6,030 ) (6,089 )
Acquisition of treasury stock (5,993 ) (23,139 )
Issuance of common stock under share-based plans, net (2,490 ) (4,086 )
Excess tax benefit related to share-based plans   3,248  
Net cash used for financing activities (89,513 ) (30,066 )
Effect of exchange rate changes on cash and cash equivalents 246   301  
(Decrease) increase in cash and cash equivalents (2,390 ) 47,578
Cash and cash equivalents at beginning of period 55,332   118,151  
Cash and cash equivalents at end of period $ 52,942   $ 165,729  
 
 
 
 
 
 
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
July 29, 2017 July 30, 2016
(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 $ 17,595 $ 0.41 $ 19,768 $ 0.46
 

Charges/other items:

Acquisition, integration and reorganization of men's brands $ 4,775     3,041     0.07 $        
Total charges/other items $ 4,775     $ 3,041     $ 0.07 $     $     $
Adjusted earnings $ 20,636     $ 0.48 $ 19,768     $ 0.46
 
 
(Unaudited)
Twenty-six Weeks Ended
July 29, 2017 July 30, 2016
(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 $ 32,497 $ 0.75 $ 37,551 $ 0.86
 

Charges/other items:

Acquisition, integration and reorganization of men's brands $ 8,912     $ 5,569     0.13        
Total charges/other items $ 8,912     $ 5,569     $ 0.13 $     $     $
Adjusted earnings $ 38,066     $ 0.88 $ 37,551     $ 0.86
 
 
 
 
 
 
SCHEDULE 5
                                 
CALERES, INC.
SUMMARY FINANCIAL RESULTS BY SEGMENT
 
SUMMARY FINANCIAL RESULTS                              
 
(Unaudited)
Thirteen Weeks Ended
Famous Footwear     Brand Portfolio     Other     Consolidated
(Thousands)

July 29,

2017

   

July 30,

2016

   

July 29,

2017

   

July 30,

2016

   

July 29,

2017

   

July 30,

2016

   

July 29,

2017

   

July 30,

2016

Net sales $ 404,930 $ 390,123 $ 272,024 $ 232,814 $ $ $ 676,954 $ 622,937
Gross profit $ 183,309 $ 177,437 $ 104,152 $ 82,118 $ $ $ 287,461 $ 259,555
Adjusted gross profit $ 183,309 $ 177,437 $ 106,062 $ 82,118 $ $ $ 289,371 $ 259,555
Gross profit rate 45.3 % 45.5 % 38.3 % 35.3 % % % 42.5 % 41.7 %
Adjusted gross profit rate 45.3 % 45.5 % 39.0 % 35.3 % % % 42.7 % 41.7 %
Operating earnings (loss) $ 25,112 $ 22,604 $ 15,916 $ 17,463 $ (9,932 ) $ (7,809 ) $ 31,096 $ 32,258
Adjusted operating earnings (loss) $ 25,112 $ 22,604 $ 18,462 $ 17,463 $ (7,703 ) $ (7,809 ) $ 35,871 $ 32,258
Operating earnings % 6.2 % 5.8 % 5.9 % 7.5 % % % 4.6 % 5.2 %
Adjusted operating earnings % 6.2 % 5.8 % 6.8 % 7.5 % % % 5.3 % 5.2 %
Same-store sales % (on a 13-week basis) (1) 2.8 % (1.1 )% 15.8 % (8.2 )% % % % %
Number of stores       1,055       1,044       238       167                   1,293       1,211  
 
 
RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP)                              
 
(Unaudited)
Thirteen Weeks Ended
Famous Footwear     Brand Portfolio     Other     Consolidated
(Thousands)

July 29,

2017

   

July 30,

2016

   

July 29,

2017

   

July 30,

2016

   

July 29,

2017

   

July 30,

2016

   

July 29,

2017

   

July 30,

2016

Gross profit $ 183,309 $ 177,437 $ 104,152 $ 82,118 $ $ $ 287,461 $ 259,555

Charges/Other Items:

Acquisition, integration and reorganization of men's brands             1,910                         1,910        
Total charges/other items             1,910                         1,910        
Adjusted gross profit $ 183,309       $ 177,437       $ 106,062       $ 82,118       $       $       $ 289,371       $ 259,555  
Operating earnings (loss) $ 25,112 $ 22,604 $ 15,916 $ 17,463 $ (9,932 ) $ (7,809 ) $ 31,096 $ 32,258

Charges/Other Items:

Acquisition, integration and reorganization of men's brands             2,546             2,229             4,775        
Total charges/other items             2,546             2,229             4,775        
Adjusted operating earnings (loss)       $ 25,112       $ 22,604       $ 18,462       $ 17,463       $ (7,703 )     $ (7,809 )     $ 35,871       $ 32,258  
 

(1) Excludes sales from Allen Edmonds

 
 
 
 
 
 
SCHEDULE 5
                                 
CALERES, INC.
SUMMARY FINANCIAL RESULTS BY SEGMENT
 
SUMMARY FINANCIAL RESULTS                              
 
(Unaudited)
Twenty-six Weeks Ended
Famous Footwear     Brand Portfolio     Other     Consolidated
(Thousands)

July 29,

2017

   

July 30,

2016

   

July 29,

2017

   

July 30,

2016

   

July 29,

2017

   

July 30,

2016

   

July 29,

2017

   

July 30,

2016

Net sales $ 771,424 $ 754,719 $ 537,039 $ 452,951 $ $ $ 1,308,463 $ 1,207,670
Gross profit $ 350,999 $ 346,115 $ 207,370 $ 161,233 $ $ $ 558,369 $ 507,348
Adjusted gross profit $ 350,999 $ 346,115 $ 212,309 $ 161,233 $ $ $ 563,308 $ 507,348
Gross profit rate 45.5 % 45.9 % 38.6 % 35.6 % % % 42.7 % 42.0 %
Adjusted gross profit rate 45.5 % 45.9 % 39.5 % 35.6 % % % 43.1 % 42.0 %
Operating earnings (loss) $ 45,391 $ 48,358 $ 29,230 $ 27,085 $ (17,800 ) $ (14,442 ) $ 56,821 $ 61,001
Adjusted operating earnings (loss) $ 45,391 $ 48,358 $ 35,651 $ 27,085 $ (15,309 ) $ (14,442 ) $ 65,733 $ 61,001
Operating earnings % 5.9 % 6.4 % 5.4 % 6.0 % % % 4.3 % 5.1 %
Adjusted operating earnings % 5.9 % 6.4 % 6.6 % 6.0 % % % 5.0 % 5.1 %
Same-store sales % (on a 26-week basis) (1) 1.1 % (0.1 )% 9.2 % (5.1 )% % % % %
Number of stores       1,055       1,044       238       167                   1,293       1,211  
 
 
RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP)                              
 
(Unaudited)
Twenty-six Weeks Ended
Famous Footwear     Brand Portfolio     Other     Consolidated
(Thousands)

July 29,

2017

   

July 30,

2016

   

July 29,

2017

   

July 30,

2016

   

July 29,

2017

   

July 30,

2016

   

July 29,

2017

   

July 30,

2016

Gross profit $ 350,999 $ 346,115 $ 207,370 $ 161,233 $ $ $ 558,369 $ 507,348

Charges/Other Items:

Acquisition, integration and reorganization of men's brands             4,939                         4,939        
Total charges/other items             4,939                         4,939        
Adjusted gross profit $ 350,999       $ 346,115       $ 212,309       $ 161,233       $       $       $ 563,308       $ 507,348  
Operating earnings (loss) $ 45,391 $ 48,358 $ 29,230 $ 27,085 $ (17,800 ) $ (14,442 ) $ 56,821 $ 61,001

Charges/Other Items:

Acquisition, integration and reorganization of men's brands             6,421             2,491             8,912        
Total charges/other items             6,421             2,491             8,912        
Adjusted operating earnings (loss)       $ 45,391       $ 48,358       $ 35,651       $ 27,085       $ (15,309 )     $ (14,442 )     $ 65,733       $ 61,001  
 

(1) Excludes sales from Allen Edmonds

 
 
 
 
 
 
SCHEDULE 6
                 
CALERES, INC.
BASIC AND DILUTED EARNINGS PER SHARE RECONCILIATION
 
(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended
(Thousands, except per share data) July 29, 2017     July 30, 2016 July 29, 2017     July 30, 2016
 
Net earnings attributable to Caleres, Inc.:
Net earnings $ 17,674 $ 19,679 $ 32,558 $ 37,557
Net (earnings) loss attributable to noncontrolling interests (79 )     89   (61 )     (6 )
Net earnings attributable to Caleres, Inc. 17,595 19,768 32,497 37,551
Net earnings allocated to participating securities (490 )     (523 ) (895 )     (1,014 )
Net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities $ 17,105       $ 19,245   $ 31,602       $ 36,537  
 
Basic and diluted common shares attributable to Caleres, Inc.:
Basic common shares 41,783 42,043 41,807 42,238
Dilutive effect of share-based awards 171       142   172       151  
Diluted common shares attributable to Caleres, Inc. 41,954       42,185   41,979       42,389  
 
Basic earnings per common share attributable to Caleres, Inc. shareholders $ 0.41       $ 0.46   $ 0.76       $ 0.87  
 
Diluted earnings per common share attributable to Caleres, Inc. shareholders $ 0.41       $ 0.46   $ 0.75       $ 0.86  
 
 
 
 
 
 
SCHEDULE 7
                 
CALERES, INC.
BASIC AND DILUTED ADJUSTED EARNINGS PER SHARE RECONCILIATION
 
(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended
(Thousands, except per share data) July 29, 2017     July 30, 2016 July 29, 2017     July 30, 2016
 
Adjusted net earnings attributable to Caleres, Inc.:
Adjusted net earnings $ 20,715 $ 19,679 $ 38,127 $ 37,557
Net (earnings) loss attributable to noncontrolling interests (79 )     89   (61 )     (6 )
Adjusted net earnings attributable to Caleres, Inc. 20,636 19,768 38,066 37,551
Net earnings allocated to participating securities (575 )     (523 ) (1,048 )     (1,014 )
Adjusted net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities $ 20,061       $ 19,245   $ 37,018       $ 36,537  
 
Basic and diluted common shares attributable to Caleres, Inc.:
Basic common shares 41,783 42,043 41,807 42,238
Dilutive effect of share-based awards 171       142   172       151  
Diluted common shares attributable to Caleres, Inc. 41,954       42,185   41,979       42,389  
 
Basic adjusted earnings per common share attributable to Caleres, Inc. shareholders $ 0.48       $ 0.46   $ 0.89       $ 0.87  
 
Diluted adjusted earnings per common share attributable to Caleres, Inc. shareholders $ 0.48       $ 0.46   $ 0.88       $ 0.86  
 
 
 
 

Contact:

Caleres
Investor and Media Contact:
Peggy Reilly Tharp, 314-854-4134
ptharp@caleres.com