Caleres Reports Fourth Quarter and Full Year 2023 Results

• Generates fourth quarter earnings per share of $1.57 and adjusted earnings per share of $0.86, up 32% year over year
• Achieves third consecutive year of adjusted earnings per share in excess of $4.00 baseline
• Delivers fourth quarter sales growth and record adjusted operating earnings in Brand Portfolio segment
• Reduces revolver borrowings by $40 million compared to third quarter 2023 and more than $125 million from fiscal 2022
• Expects fiscal 2024 net sales to be flat to up 2 percent compared to fiscal 2023
• Expects fiscal 2024 earnings per share of $4.30 to $4.60

Caleres (NYSE:CAL), a market-leading portfolio of consumer-driven footwear brands, today reported financial results for the fourth quarter and fiscal 2023 and provided guidance for fiscal 2024.

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Caleres Brand Portfolio Lead Brands -- Sam Edelman, Allen Edmonds, Naturalizer, and Vionic.(Graphic: Business Wire)

"The Caleres team delivered another strong operational performance in the fourth quarter, culminating in a third consecutive year of adjusted earnings per share in excess of our $4.00 baseline and underscoring the durability of our earnings power," said Jay Schmidt, president and chief executive officer. "Our fourth quarter results were led by our Brand Portfolio, which achieved a record-setting performance across key financial metrics. Complementing that strong result, Famous Footwear leaned into its competitive advantages to expand market share, particularly in Kids, which has outpaced the total business for 12 straight quarters."

Specifically, during the quarter, the Brand Portfolio capitalized on ongoing strength in its Lead Brands to power a 4.5-percent increase in year-over-year net sales and a 660-basis-point improvement in gross margin. The Brand Portfolio segment also delivered its best-ever annual adjusted operating earnings, which topped $148 million and was accompanied by an 11.7-percent adjusted return on sales. Notably, the segment led the financial performance of the company. At the same time, Famous Footwear navigated a competitive market environment, capitalizing on pockets of holiday demand and delivering positive sales trends in its Kids business. For the full year, Famous gained share in shoe chains in the important Family Channel and achieved record annual sales in the Kids category while generating robust levels of cash flow.

"I am proud of the Caleres team and the tremendous progress we have made across a wide range of strategic objectives," said Schmidt. "The transformation in earnings power that we have achieved in recent years – combined with our value-driving organizational structure, powerful brands, and best-in-class capabilities – positions us exceptionally well for growth in 2024 and beyond. Our Brand Portfolio – powered by our Lead Brands – has tremendous growth potential, and Famous is poised to strengthen its position as the No. 1 footwear destination for the Millennial family. Looking ahead, we are confident in our ability to execute on our growth strategy, deliver on our long-term financial targets, and create sustained value for our shareholders."

Fourth Quarter 2023 Results

(14-weeks ended February 3, 2024, compared to 13-weeks ended January 28, 2023)

• Net sales were $697.1 million, up 0.1 percent from the fourth quarter of 2022;
  • Famous Footwear segment net sales declined 1.5 percent, with comparable sales down 5.9 percent on a 13-week basis
  • Brand Portfolio segment net sales increased 4.5 percent
  • Direct-to-consumer sales represented approximately 74 percent of total net sales
• Gross profit was $305.7 million, while gross margin was 43.9 percent;
  • Famous Footwear segment gross margin of 42.9 percent
  • Brand Portfolio segment gross margin of 42.6 percent
• SG&A as a percentage of net sales was 39.1 percent;
• Net earnings of $55.8 million, or earnings per diluted share of $1.57, compared to net earnings of $40.8 million, or earnings per diluted share of $1.13 in the fourth quarter of fiscal 2022. Earnings per diluted share of $1.57 include:
  • Deferred tax valuation allowance releases of $0.76 per diluted share; and
  • Expense reduction initiatives of ($0.05) per diluted share.
• Adjusted net earnings of $30.8 million, or adjusted earnings per diluted share of $0.86, compared to adjusted net earnings of $23.4 million, or adjusted earnings per diluted share of $0.65 in the fourth quarter of fiscal 2022.

Fiscal Year 2023 Results

(53-weeks ended February 3, 2024, compared to 52-weeks ended January 28, 2023)

• Net sales were $2.82 billion, down 5.1 percent from fiscal 2022;
  • Famous Footwear segment net sales declined 5.6 percent, with comparable sales down 6.3 percent on a 52-week basis
  • Brand Portfolio segment net sales declined 3.9 percent
  • Direct-to-consumer sales represented approximately 72 percent of total net sales
• Gross profit was $1.26 billion, while gross margin was 44.8 percent;
  • Famous Footwear segment gross margin of 44.7 percent
  • Brand Portfolio segment gross margin of 43.0 percent
• SG&A as a percentage of net sales was 37.7 percent;
• Net earnings of $171.4 million, or earnings per diluted share of $4.80, compared to net earnings of $181.7 million, or earnings per diluted share of $4.92 in fiscal 2022. Earnings of $4.80 per diluted share include:
  • Deferred tax valuation allowance releases of $0.75 per diluted share; and
  • Expense reduction initiatives of ($0.13) per diluted share
• Adjusted net earnings of $149.3 million, or adjusted earnings per diluted share of $4.18, compared to adjusted net earnings of $167.1 million, or adjusted earnings per diluted share of $4.52 in fiscal 2022;
• Earnings before interest, taxes, depreciation, and amortization (EBITDA) of $253.5 million and adjusted EBITDA of $259.6 million, or 9.2 percent of sales;
• Inventory was down 6.8 percent compared to fiscal year-end 2022, due to strategic inventory management – primarily in the Brand Portfolio segment; and
• Borrowings under the asset-based revolving credit facility were $182.0 million at the end of the period.

Capital Allocation Update

Caleres continued to reduce the borrowings under its asset-based revolving credit facility, paying down $40.0 million during the fourth quarter. The company also returned $2.5 million to shareholders through its quarterly dividend.

In fiscal 2023, Caleres continued to invest in value-driving growth opportunities while at the same time reduced short-term borrowings by $125.5 million. The company ended fiscal 2023 with $182.0 million of borrowings. This represents its lowest total indebtedness since the fiscal first quarter 2010. In addition, Caleres returned $27.4 million to shareholders through share repurchases and dividend payments. Specifically, the company repurchased 763,000 shares of common stock, or approximately 2 percent of shares outstanding, for $17.4 million and an average price of $22.86 per share. The company returned $10.0 million to shareholders through quarterly dividend payments.

Fiscal 2024 Outlook:

The company is introducing its financial outlook for fiscal 2024 and first quarter of 2024 and notes that its fiscal 2024 is a 52-week year and compares to a 53-week year in fiscal 2023.

Caleres expects consolidated net sales to be flat to up 2 percent, compared to 2023, and earnings per diluted share to be in the range of $4.30 to $4.60. This outlook considers and balances the positive momentum in our Brand Portfolio segment and ongoing companywide cost reduction initiatives against anticipated headwinds that include a forecasted decline in the footwear market, inflationary pressures that could affect consumer demand at Famous Footwear, and higher freight costs.

In addition, for fiscal 2024, the company expects:

• Consolidated operating margin of 7.3 percent to 7.5 percent;
• Effective tax rate of about 24 percent; and
• Capital expenditures of $60 million to $70 million.

For first quarter 2024, the company expects:

• Consolidated net sales to be flat to up 1 percent; and
• Earnings per diluted share in line with fourth quarter 2023 on an adjusted basis.

Investor Conference Call

Caleres will host a conference call at 10:00 a.m. ET today, Tuesday, March 19. 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 13744814.

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 and supply chain disruptions (iii) rapidly changing consumer preferences and purchasing patterns and fashion trends; (iv) supplier concentration, customer concentration and increased consolidation in the retail industry; (v) intense competition within the footwear industry; (vi) foreign currency fluctuations; (vii) 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; (viii) cybersecurity threats or other major disruption to the company's information technology systems; (ix) the ability to accurately forecast sales and manage inventory levels; (x) a disruption in the company's distribution centers; (xi) the ability to recruit and retain senior management and other key associates; (xii) the ability to secure/exit leases on favorable terms; (xiii) the ability to maintain relationships with current suppliers; (xiv) transitional challenges with acquisitions and divestitures; (xv) changes to tax laws, policies and treaties; (xvi) our commitments and shareholder expectations related to environmental, social and governance considerations; (xvii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; and (xviii) 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.

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