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Caleres Reports Fourth Quarter and Full Year 2015 Results

03/15/2016

Adjusted EPS up 30% in fourth quarter and up 16% for full year

ST. LOUIS--(BUSINESS WIRE)--Caleres (NYSE: CAL) (caleres.com), a diverse portfolio of global footwear brands which fit people’s lives, today reported fourth quarter and full year 2015 financial results.

Consolidated Results

Fourth Quarter

  • Net sales of $608.7 million up 0.4%, excluding sales from Shoes.com, which was sold in December of 2014
  • Gross margin up 55 basis points to 40.8%
  • Adjusted operating margin up 13 basis points to 2.8%
  • Adjusted diluted EPS of $0.26 up 30.0%, on adjusted net earnings of $11.4 million
  • Cash and equivalents of $118.2 million, with inventory up less than 1%

Full Year

  • Net sales of $2,577.4 million up 2.0%, excluding sales from Shoes.com
  • Gross margin up 21 basis points to 40.7%
  • Adjusted operating margin up 21 basis points to 5.2%
  • Adjusted diluted EPS of $2.00 up 16.3%, on adjusted net earnings of $88.0 million
  • ROIC improved to 12.6% from 11.6%

“At Caleres, we actively managed through what was poised to be a difficult quarter. We cut through the noise in the marketplace during the holiday season and delivered improved gross and operating margin, while maintaining our inventory position,” said Diane Sullivan, CEO, president and chairman of Caleres. “For the full year, we saw improvement at both the top and bottom line and delivered double digit earnings per share growth for the fourth year in a row.”

Fourth Quarter Segment Results

Famous Footwear

  • Same-store-sales up 0.8%
  • Gross margin up 58 basis points to 45.5%
  • Inventory up 1.2% on average store basis
  • Opened 12 new stores and closed 10

Brand Portfolio

  • Sales up 0.8%
  • Gross margin up 74 basis points to 33.8%
  • Inventory down 1.8%

Full Year Segment Results

Famous Footwear

  • Same-store-sales up 1.9%
  • Gross margin up 51 basis points to 44.9%
  • Opened 50 new stores and closed 42, with average revenue per square foot improving to $217

Brand Portfolio

  • Sales up 2.3% as segment crossed $1 billion
  • Gross margin down 5 basis points to 33.9%

“Caleres reported annual adjusted EPS growth of 16.3%, as we delivered margin enhancement related to continued improvement in inventory management throughout the year,” said Ken Hannah, chief financial officer of Caleres. “While we’re pleased with our performance in 2015, we realistically expect fourth quarter 2015 industry-related challenges and uncertainty to continue into the first half of 2016.”

     

Outlook for 2016

Consolidated net sales $2.65B to $2.68B
Famous Footwear same-store-sales Up low-single digits
Brand Portfolio sales Up mid-single digits
Gross margin Up 10 to 20 bps
SG&A as a percent of revenue Flat to down 10 bps
Effective tax rate 30% to 32%
Earnings per diluted share $2.00 to $2.10
Capital expenditures ~$70M
 

Investor Conference Call

Caleres will host an investor conference call at 4:30 p.m. ET today, March 15, 2016. 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 50807421. 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 50807421 through Tuesday, March 29, 2016.

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. Reconciliations to the applicable GAAP financial measures have been included in the attached schedules.

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) customer concentration and increased consolidation in the retail industry; (viii) a disruption in the Company’s distribution centers; (ix) the ability to recruit and retain senior management and other key associates; (x) foreign currency fluctuations; (xi) compliance with applicable laws and standards with respect to labor, trade and product safety issues; (xii) the ability to secure/exit leases on favorable terms; (xiii) the ability to attract, retain, and maintain good relationships with licensors and protect intellectual property rights; and (xiv) the ability to maintain relationships with current suppliers. 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 31, 2015, 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, which fit people’s lives: Family, Healthy Living and Contemporary Fashion. 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 ecommerce 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, Franco Sarto, Vince, Via Spiga, Diane von Furstenberg, Fergie Footwear and Carlos Santana. Naturalizer, Dr. Scholl's, 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 better feet first. Visit caleres.com to learn more about us.

 
SCHEDULE 1
 
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
         
(Unaudited)
Thirteen Weeks Ended     Fifty-Two Weeks Ended

(Thousands, except per share data)

January 30,
2016

   

January 31,
2015

   

January 30,
2016

   

January 31,
2015

Net sales $ 608,674     $ 615,393 $ 2,577,430     $ 2,571,709
Cost of goods sold   360,626     368,006     1,529,627     1,531,609  
Gross profit   248,048     247,387     1,047,803     1,040,100  
Selling and administrative expenses 231,233 231,210 912,696 910,682
Restructuring and other special charges, net       3,484         3,484  
Operating earnings   16,815     12,693     135,107     125,934  
Interest expense (3,646 ) (4,808 ) (16,589 ) (20,445 )
Loss on early extinguishment of debt (420 ) (10,651 ) (420 )
Interest income 133 85 899 379
Gain on sale of subsidiary       4,679         4,679  
Earnings before income taxes   13,302     12,229     108,766     110,127  
Income tax (provision) benefit   (1,724 )   3,962     (26,942 )   (27,184 )
Net earnings   11,578     16,191     81,824     82,943  
Net earnings (loss) attributable to noncontrolling interests   168     (53 )   345     93  
Net earnings attributable to Caleres, Inc. $ 11,410   $ 16,244   $ 81,479   $ 82,850  
 

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

$ 0.26   $ 0.37   $ 1.86   $ 1.90  
 
Diluted earnings per common share attributable to Caleres, Inc. shareholders $ 0.26   $ 0.37   $ 1.85   $ 1.89  
 
Basic number of shares 42,372 42,178 42,455 42,071
Diluted number of shares   42,549     42,352     42,656     42,274  
 
 
SCHEDULE 2
 
CALERES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
     
(Unaudited)
January 30, 2016     January 31, 2015
(Thousands)    
ASSETS
Cash and cash equivalents $ 118,151 $ 67,403
Receivables, net 153,664 136,646
Inventories, net 546,745 543,103
Prepaid expenses and other current assets   56,505   42,996
Total current assets   875,065   790,148
 
Property and equipment, net 179,010 149,743
Goodwill and intangible assets, net 130,899 134,587
Other assets   118,349   139,849
Total assets $ 1,303,323 $ 1,214,327
 
LIABILITIES AND EQUITY
Trade accounts payable $ 237,802 $ 215,921
Other accrued expenses   152,497   153,618
Total current liabilities   390,299   369,539
 
Long-term debt 196,544 196,712
Deferred rent 46,506 39,742
Other liabilities   67,502   66,712
Total other liabilities   310,552   303,166
 
Total Caleres, Inc. shareholders’ equity 601,484 540,910
Noncontrolling interests   988   712
Total equity   602,472   541,622
Total liabilities and equity $ 1,303,323 $ 1,214,327
 
 
SCHEDULE 3
 
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
      (Unaudited)
Fifty-Two Weeks Ended
(Thousands) January 30, 2016     January 31, 2015
OPERATING ACTIVITIES:        
Net cash provided by operating activities $ 149,152       $ 118,812  
   
INVESTING ACTIVITIES:
Capital expenditures (81,214 ) (50,038 )
Proceeds from disposal of property and equipment 7,433
Acquisition of trademarks (65,065 )
Investment in nonconsolidated affiliate (7,000 )
Net proceeds from sale of subsidiaries, inclusive of note receivable           10,120  
Net cash used for investing activities   (73,781 )       (111,983 )
 
FINANCING ACTIVITIES:
Borrowings under revolving credit agreement 198,000 867,000
Repayments under revolving credit agreement (198,000 ) (874,000 )
Proceeds from issuance of 2023 senior notes 200,000
Redemption of 2019 senior notes (200,000 )
Dividends paid (12,253 ) (12,237 )
Debt issuance costs (3,650 ) (2,618 )
Acquisition of treasury stock (4,921 )
Issuance of common stock under share-based plans, net (5,297 ) 443
Tax benefit related to share-based plans   2,651         929  
Net cash used for financing activities   (23,470 )       (20,483 )
Effect of exchange rate changes on cash and cash equivalents   (1,153 )       (1,489 )
Increase (decrease) in cash and cash equivalents 50,748 (15,143 )
Cash and cash equivalents at beginning of period   67,403         82,546  
Cash and cash equivalents at end of period $ 118,151       $ 67,403  
 
 
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
January 30, 2016     January 31, 2015
(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
(Loss) Per
Share

               
GAAP earnings $ 11,410 $ 0.26 $ 16,244 $ 0.37
 

Charges/Other Items:

Disposal of Shoes.com (3,134 ) (9,757 ) (0.23 )
Organizational changes 1,939 1,185 0.03
Tax on dividend of international subsidiary 1,040 0.02
Loss on debt extinguishment                 420         257         0.01  
Total Charges/Other items $     $     $ $ (775 )     $ (7,275 )     $ (0.17 )
Adjusted earnings $ 11,410     $ 0.26 $ 8,969       $ 0.20  
 
(Unaudited)
Fifty-Two Weeks Ended
January 30, 2016     January 31, 2015
(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
(Loss) Per
Share

GAAP earnings $ 81,479 $ 1.85 $ 82,850 $ 1.89
 

Charges/Other Items:

Loss on debt extinguishment 10,651 6,473 0.15 420 257 0.01
Disposal of Shoes.com (3,134 ) (9,757 ) (0.23 )
Organizational changes 1,939 1,185 0.03

Tax on dividend of international subsidiary

                        1,040         0.02  
Total Charges/Other items $ 10,651     $ 6,473     $ 0.15 $ (775 )     $ (7,275 )     $ (0.17 )
 
Adjusted earnings $ 87,952     $ 2.00 $ 75,575       $ 1.72  
 
 
SCHEDULE 5
 
CALERES, INC.
SUMMARY FINANCIAL RESULTS BY SEGMENT
(Unaudited)
 
SUMMARY FINANCIAL RESULTS                    
 
      Thirteen Weeks Ended
Famous Footwear     Brand Portfolio     Other     Consolidated
(Thousands)

January 30,
2016

   

January 31,
2015

   

January 30,
2016

   

January 31,
2015

   

January 30,
2016

   

January 31,
2015

   

January 30,
2016

   

January 31,
2015

Net Sales $ 360,596     $ 369,378     $ 248,078 $ 246,015 $ $ $ 608,674 $ 615,393
Gross Profit $ 164,114 $ 165,982 $ 83,934 $ 81,405 $ $ $ 248,048 $ 247,387
Adjusted Gross Profit $ 164,114 $ 165,982 $ 83,934 $ 81,405 $ $ $ 248,048 $ 247,387
Gross Profit Rate 45.5 % 44.9 % 33.8 % 33.1 % % % 40.8 % 40.2 %
Adjusted Gross Profit Rate 45.5 % 44.9 % 33.8 % 33.1 % % % 40.8 % 40.2 %
Operating Earnings (Loss) $ 13,762 $ 14,923 $ 18,471 $ 17,061 $ (15,418 ) $ (19,291 ) $ 16,815 $ 12,693
Adjusted Operating Earnings (Loss) $ 13,762 $ 15,748 $ 18,471 $ 17,344 $ (15,418 ) $ (16,915 ) $ 16,815 $ 16,177
Operating Earnings % 3.8 % 4.0 % 7.4 % 6.9 % % % 2.8 % 2.1 %
Adjusted Operating Earnings % 3.8 % 4.3 % 7.4 % 7.0 % % % 2.8 % 2.6 %
Same-store Sales % (on a 13-week basis) 0.8 % 4.0 % 2.5 % (4.2 )% % % % %
Number of Stores         1,046         1,038         165         171                         1,211         1,209  
 
RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP)
 
Thirteen Weeks Ended
Famous Footwear     Brand Portfolio     Other     Consolidated
(Thousands)

January 30,
2016

   

January 31,
2015

   

January 30,
2016

   

January 31,
2015

   

January 30,
2016

   

January 31,
2015

   

January 30,
2016

   

January 31,
2015

Operating Earnings (Loss) $ 13,762 $ 14,923 $ 18,471 $ 17,061 $ (15,418 ) $ (19,291 ) $ 16,815 $ 12,693

Charges/Other Items:

Restructuring related to disposition 825 283 437 1,545
Organizational changes                                           1,939                 1,939  
Total charges/other items           825                 283                 2,376                 3,484  
Adjusted Operating Earnings (Loss)       $ 13,762       $ 15,748       $ 18,471       $ 17,344       $ (15,418 )     $ (16,915 )     $ 16,815       $ 16,177  
 
 
SCHEDULE 5
 
CALERES, INC.
SUMMARY FINANCIAL RESULTS BY SEGMENT
(Unaudited)
      Fifty-Two Weeks Ended
Famous Footwear     Brand Portfolio     Other     Consolidated
(Thousands)

January 30,
2016

   

January 31,
2015

   

January 30,
2016

   

January 31,
2015

   

January 30,
2016

   

January 31,
2015

   

January 30,
2016

   

January 31,
2015

Net Sales $ 1,572,665     $ 1,589,258     $ 1,004,765     $ 982,451     $     $     $ 2,577,430     $ 2,571,709
Gross Profit $ 706,716 $ 706,101 $ 341,087 $ 333,999 $ $ $ 1,047,803 $ 1,040,100
Adjusted Gross Profit $ 706,716 $ 706,101 $ 341,087 $ 333,999 $ $ $ 1,047,803 $ 1,040,100
Gross Profit Rate 44.9 % 44.4 % 33.9 % 34.0 % % % 40.7 % 40.4 %
Adjusted Gross Profit Rate 44.9 % 44.4 % 33.9 % 34.0 % % % 40.7 % 40.4 %
Operating Earnings (Loss) $ 109,030 $ 104,581 $ 66,578 $ 73,403 $ (40,501 ) $ (52,050 ) $ 135,107 $ 125,934

Adjusted Operating Earnings (Loss)

$ 109,030 $ 105,406 $ 66,578 $ 73,686 $ (40,501 ) $ (49,674 ) $ 135,107 $ 129,418
Operating Earnings % 6.9 % 6.6 % 6.6 % 7.5 % % % 5.2 % 4.9 %

Adjusted Operating Earnings %

6.9 % 6.6 % 6.6 % 7.5 % % % 5.2 % 5.0 %
Same-store Sales % (on a 52-week basis) 1.9 % 1.5 % (0.7 )% (3.6 )%
Number of Stores         1,046         1,038         165         171                         1,211         1,209  
 
RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP)
 
Fifty-Two Weeks Ended
Famous Footwear     Brand Portfolio     Other     Consolidated
(Thousands)

January 30,
2016

   

January 31,
2015

   

January 30,
2016

   

January 31,
2015

   

January 30,
2016

   

January 31,
2015

   

January 30,
2016

   

January 31,
2015

Operating Earnings (Loss) $ 109,030 $ 104,581 $ 66,578 $ 73,403 $ (40,501 ) $ (52,050 ) $ 135,107 $ 125,934

Charges/Other Items:

Restructuring related to disposition 825 283 437 1,545
Organizational changes                                           1,939                 1,939  
Total charges/other items           825                 283                 2,376                 3,484  
Adjusted Operating Earnings (Loss)       $ 109,030       $ 105,406       $ 66,578       $ 73,686       $ (40,501 )     $ (49,674 )     $ 135,107       $ 129,418  
 
 
SCHEDULE 6
                 
CALERES, INC.
BASIC AND DILUTED EARNINGS PER SHARE RECONCILIATION
 
(Unaudited)
Thirteen Weeks Ended     Fifty-Two Weeks Ended
(Thousands, except per share data)

January 30,
2016

January 31,
2015

   

January 30,
2016

January 31,
2015

 
Net earnings attributable to Caleres, Inc.:
Net earnings $ 11,578 $ 16,191 $ 81,824 $ 82,943
Net (earnings) loss attributable to noncontrolling interests (168 ) 53 (345 ) (93 )
Net earnings allocated to participating securities   (339 )   (588 )   (2,587 )   (3,068 )
Net earnings   11,071     15,656     78,892     79,782  

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

$ 11,071   $ 15,656   $ 78,892   $ 79,782  
 
Basic and diluted common shares attributable to Caleres, Inc.:
Basic common shares 42,372 42,178 42,455 42,071
Dilutive effect of share-based awards   177     174     201     203  
Diluted common shares attributable to Caleres, Inc.   42,549     42,352     42,656     42,274  
 
Basic earnings per common share attributable to Caleres, Inc. shareholders $ 0.26   $ 0.37   $ 1.86       $ 1.90  
 

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

$ 0.26   $ 0.37   $ 1.85       $ 1.89  
 
 
SCHEDULE 7
                 
CALERES, INC.
BASIC AND DILUTED ADJUSTED EARNINGS PER SHARE RECONCILIATION
 
(Unaudited)
Thirteen Weeks Ended     Fifty-Two Weeks Ended
(Thousands, except per share data)

January 30,
2016

January 31,
2015

   

January 30,
2016

January 31,
2015

 
Adjusted net earnings attributable to Caleres, Inc.:
Adjusted net earnings $ 11,578 $ 8,916 $ 88,297 $ 75,668
Net (earnings) loss attributable to noncontrolling interests (168 ) 53 (345 ) (93 )
Net earnings allocated to participating securities   (339 )   (325 )   (2,793 )   (2,799 )
Adjusted net earnings   11,071     8,644     85,159     72,776  
Adjusted net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities $ 11,071   $ 8,644   $ 85,159   $ 72,776  
 
Basic and diluted common shares attributable to Caleres, Inc.:
Basic common shares 42,372 42,178 42,455 42,071
Dilutive effect of share-based awards   177     174     201     203  
Diluted common shares attributable to Caleres, Inc.   42,549     42,352     42,656     42,274  
 
Basic adjusted earnings per common share attributable to Caleres, Inc. shareholders $ 0.26   $ 0.20   $ 2.00   $ 1.73  
 
Diluted adjusted earnings per common share attributable to Caleres, Inc. shareholders $ 0.26   $ 0.20   $ 2.00   $ 1.72  
 

Contact:

Caleres
Peggy Reilly Tharp, 314-854-4134
ptharp@caleres.com

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