Caleres Reports Third Quarter Results and Updates Guidance

Caleres (NYSE:CAL), a market-leading portfolio of consumer-driven footwear brands, today reported financial results for the third quarter 2024.

• Reported sales of $740.9 million, down 2.8% year-on-year;
  • Famous Footwear sales declined 4.8% versus the third quarter of 2023 with comparable store sales up 2.5%;
  • Brand Portfolio sales increased 0.7% versus the third quarter of 2023;
• Third quarter consolidated gross margin rate of 44.1%, down 55 basis points year-on-year;
• Reported earnings per diluted share of $1.19 and adjusted earnings per diluted share of $1.23 for the third quarter, below expectations;
• Generated third quarter EBITDA of $71.4 million;
• Fiscal 2024 outlook of net sales down 2.5% to 3% versus previous guidance of down low-single-digits percent;
• Revises fiscal 2024 outlook for earnings per diluted share to $3.35 to $3.45 versus prior guidance of $3.94 to $4.09, and adjusted earnings per diluted share to $3.45 to $3.55 versus prior guidance of $4.00 to $4.15, which excludes $0.10 per diluted share in restructuring costs.

"The third quarter saw progress toward our strategy highlighted by the Brand Portfolio delivering growth, Famous Footwear delivering positive comparable store sales, and both segments increasing market share. That said, performance was below our expectations reflecting softer seasonal demand in the boot category, late receipts of key athletic product at Famous Footwear, and a discrete customer credit issue that impacted shipments. In addition, our business in China was also weaker than planned," said Jay Schmidt, President and Chief Executive Officer.

"As we begin the fourth quarter, our strategies are working to drive market share and we are aligning our expenses with expected sales, while appropriately investing behind areas of the business that are expected to deliver a strong ROI. However, we have reduced our outlook as we expect our season-to-date sales trend to continue in the final quarter of the year and anticipate pressure on our gross margin as we take action to move through excess inventory and position ourselves well for 2025," said Schmidt. "Longer term, we believe we are well-positioned to execute our strategic plan, invest to fuel our ambition, and drive sustained value for our shareholders."

Third Quarter 2024 Results

(13-weeks ended November 2, 2024, compared to 13-weeks ended October 28, 2023)

• Net sales were $740.9 million, down 2.8% from the third quarter of 2023;
  • Famous Footwear segment net sales decreased 4.8%, with comparable store sales up 2.5%
  • Brand Portfolio segment net sales increased 0.7%
  • Direct-to-consumer sales represented approximately 72% of total net sales
• Gross profit was $327.0 million, while gross margin was 44.1%, down 55 basis points versus last year;
  • Famous Footwear segment gross margin of 42.9%, down 130 basis points versus last year
  • Brand Portfolio segment gross margin of 43.8%, up 15 basis points versus last year
• SG&A as a percentage of net sales was 36.3%, up 30 basis points versus the prior year and reflecting expense deleverage on the decline in sales;
• Net earnings of $41.4 million, or earnings per diluted share of $1.19, compared to net earnings of $46.9 million, or earnings per diluted share of $1.32 in the third quarter 2023;
• Adjusted net earnings of $42.6 million, or adjusted earnings per diluted share of $1.23, which excludes $0.04 related to charges associated with restructuring initiatives completed during the third quarter, compared to adjusted net earnings of $48.6 million, or adjusted earnings per diluted share of $1.37 in the third quarter of 2023;
• Inventory was up 5% to the third quarter 2023 in total, but up 2.7% when accounting for the shift in the retail calendar;
• Borrowings under the asset-based revolving credit facility were $238.5 million at the end of the period, up $16.5 million from the third quarter of 2023.

Capital Allocation Update

During the quarter, Caleres continued to invest in value-driving growth opportunities while at the same time returning cash to shareholders through our dividend. In addition, the company repurchased approximately 1.5 million shares for a total of $50 million during the quarter. In the near term, the company expects to continue to focus on reducing debt and still expects borrowings under its asset-based revolving credit facility will be less than $100 million by the end of 2026. Caleres will continue to consider business performance and market conditions as it evaluates all opportunities for free cash flow for the remainder of the year.

Fiscal 2024 Outlook:

Caleres is revising its fiscal 2024 financial outlook. As previously noted, its fiscal 2024 is a 52-week year and compares to a 53-week year in fiscal 2023. The revised assumptions are summarized in the table below.

*Adjusted EPS guidance excludes estimated restructuring charges incurred in the second half of 2024

Investor Conference Call

Caleres will host a conference call at 10:00 a.m. ET today, Thursday, December 5, 2024. The webcast and associated slides will be available at: https://investor.caleres.com/events-and-presentations/. 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 https://investor.caleres.com/events-and-presentations/ 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 13749800.

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 and Metrics

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 and metrics. In particular, the company provides earnings before interest, taxes, depreciation and amortization (EBITDA) 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, and the debt to EBITDA leverage ratio, which is a non-GAAP financial metric. These results are included as a complement to results provided in accordance with GAAP because management believes this non-GAAP financial measure and metric 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. This measure and metric 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 including those related to our ERP upgrade; (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; (xiv) 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 (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 3, 2024, 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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