Investment research report for CAL

Table of Contents

Executive Summary
Valuation Analysis
Industry and Competitors Analysis
Financial Analysis
Earnings Call Multi-Year Analysis
Financial Statements Multi Year
Insider Trading Analysis
Management Compensation Benchmark Analysis
Proxy Statement Analysis
News Analysis
Technical Indicators Analysis
Financial Statements Annual
Financial Statements Quarterly
Earnings Call Analysis

Executive Summary

Company Description

Caleres, Inc. (CAL) is a leading footwear company that operates through two main segments: Famous Footwear (retail) and Brand Portfolio (wholesale). The company owns and operates several well-known footwear brands, including Naturalizer, Sam Edelman, Allen Edmonds, Dr. Scholl’s, LifeStride, Franco Sarto, and Ryka. With a diverse brand portfolio and a significant retail presence of around 980 stores, Caleres has established a strong position in the footwear industry.

Financial Performance

Caleres has maintained relatively stable gross margins around 44-45% and operating margins around 7-9% over the last few years. The company has focused on strengthening its balance sheet by reducing debt levels and improving liquidity. Operating cash flow has improved due to working capital management, providing funds for capital investments and shareholder returns. However, revenue growth has been volatile, with periods of decline as well as double-digit growth in certain quarters, likely impacted by the pandemic and industry trends.

Strategic Initiatives

Caleres’ key strategic initiatives include vertical integration between Famous Footwear and Brand Portfolio to drive synergies, cost reduction initiatives and expense management to offset inflationary pressures, and capital allocation priorities such as debt reduction, share repurchases, and investing in strategic growth areas like e-commerce and international expansion. The company has also pursued acquisitions and brand portfolio expansion as a growth strategy, having acquired brands like Blowfish Malibu, Vince, and Veronica Beard in recent years.

Competitive Landscape

Caleres operates in the highly competitive footwear and accessories industry, facing competition from other major players like Wolverine World Wide (WWW), Steven Madden (SHOO), Rocky Brands (RCKY), Weyco Group (WEYS), and Vera Bradley (VRA). While its diverse brand portfolio, omnichannel presence, and focus on affordable/mid-priced footwear position it reasonably well, its growth prospects may depend on its ability to drive brand strength, retail productivity, and operational efficiencies.

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Valuation Analysis

PE Ratio

The PE ratio for the company CAL is as follows:
– Low: -128.0356454293139
– Base: -20.897157761097045
– High: 86.2413299071198

PB Ratio

The PB ratio for the company CAL is as follows:
– Low: 1.3381605022673293
– Base: 2.031119044718639
– High: 2.7240775871699485

EPS Growth

The EPS growth for the company CAL is as follows:
– Low: 13.90%
– Medium: 19.23%
– High: 23.02%

DPS Growth

The DPS growth for the company CAL is as follows:
– Low: 0.09%
– Medium: 0.16%
– High: 0.22%

Unable to provide price targets since this company’s financials are highly unstable. We recommend not to hold this stock in your portfolio.

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Industry and Competitors Analysis

Caleres, Inc. (CAL) Overview

Based on the information provided, Caleres, Inc. (CAL) operates in the footwear and accessories industry, with a focus on retail and wholesale operations. The company’s main segments are Famous Footwear (retail) and Brand Portfolio (wholesale).

Key Competitive Positioning

  • It owns and operates several well-known footwear brands like Naturalizer, Sam Edelman, Allen Edmonds, Dr. Scholl’s, LifeStride, Franco Sarto, and Ryka, giving it a diverse brand portfolio.
  • It has a significant retail presence with around 980 retail stores under banners like Famous Footwear and Naturalizer.
  • In addition to its retail operations, it has a wholesale business supplying footwear to various retail channels like department stores, online retailers, and specialty stores.
  • Its main competitors appear to be other major footwear companies like Wolverine World Wide (WWW), Steven Madden (SHOO), Rocky Brands (RCKY), Weyco Group (WEYS), and Vera Bradley (VRA) which also operate in the footwear design, manufacturing, and retail space.

Financial Performance

In terms of financial performance, Caleres has maintained relatively stable gross margins around 44-45% and operating margins around 7-9% over the last few years. Its debt levels are moderate, and it has a reasonably healthy balance sheet.

Competitive Landscape and Growth Prospects

While it faces competition from other established players, Caleres’ diverse brand portfolio, omnichannel presence (retail and wholesale), and focus on affordable/mid-priced footwear position it reasonably well in the competitive landscape. However, its growth prospects may depend on its ability to drive brand strength, retail productivity, and operational efficiencies.

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Chart of Competitors

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Financial Analysis

Financial Strength

The company has maintained a current ratio around 1, indicating it has enough current assets to cover current liabilities. However, the debt-to-equity ratio has been relatively high in recent years, suggesting higher financial leverage. Interest coverage ratios have fluctuated significantly, dropping below 1 in some quarters, which could indicate challenges in servicing debt obligations from operations.

Potential for Growth

Revenue growth has been volatile, with periods of decline as well as double-digit growth in certain quarters, likely impacted by the pandemic and industry trends. The company seems to be focused on acquisitions and brand portfolio expansion as a growth strategy, having acquired brands like Blowfish Malibu, Vince, and Veronica Beard in recent years.

Competitive Advantage

Caleres operates a diverse portfolio of footwear brands across multiple segments, which could provide some competitive advantage through brand recognition and market reach. However, the footwear industry is highly competitive, and the company’s ability to maintain and grow market share will depend on factors like product innovation, marketing, and operational efficiency.

Quality of Management

Profitability metrics like return on equity and return on assets have been volatile, which could indicate challenges in consistently generating strong returns from the company’s resources. The company’s strategic decisions, such as acquisitions and brand management, will play a crucial role in determining its long-term success and shareholder value creation.

Shareholder Friendliness

Caleres has maintained a dividend payout, although the yield and payout ratio have fluctuated over time. Share buybacks or other capital return initiatives are not evident from the provided data, which could be a consideration for income-oriented investors.

Valuation

Valuation metrics like price-to-earnings and price-to-book ratios have varied significantly, likely influenced by the company’s volatile profitability and growth trends. Investors would need to assess the company’s future growth prospects, competitive position, and ability to generate consistent profitability to determine an appropriate valuation.

It’s important to note that these insights are based on the limited financial data provided and should be complemented with a more comprehensive analysis of the company’s business model, industry dynamics, and competitive landscape to make informed investment decisions.

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Chart of Key Per Share Metrics

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Earnings Call Multi-Year Analysis

Diversified business model

Caleres has a diversified business model with two main segments – Famous Footwear and Brand Portfolio. This diversification has allowed the company to navigate different operating environments and offset challenges in one segment with strengths in the other.

Brand portfolio strength

The Brand Portfolio segment, which includes brands like Sam Edelman, Allen Edmonds, Naturalizer, and Vionic, has been a key driver of growth and profitability. These brands have strong consumer demand, market share gains, and significant growth potential.

Operational excellence

Caleres has demonstrated operational excellence through disciplined inventory management, strategic pricing, cost control measures, and supply chain agility. These initiatives have helped improve margins and profitability.

Digital and direct-to-consumer focus

The company has a strong focus on expanding its digital and direct-to-consumer channels, which now represent a significant portion of sales. This aligns with evolving consumer preferences and provides a competitive advantage.

Financial discipline

Caleres has prioritized debt reduction, strengthening its balance sheet, and maintaining financial flexibility. This disciplined approach to capital allocation is positive for long-term investors.

While the company has faced challenges like supply chain disruptions, inflationary pressures, and shifts in consumer demand, it has demonstrated the ability to navigate these headwinds through strategic initiatives and operational agility.

Long-term growth potential

Caleres has expressed confidence in its ability to deliver consistent, long-term earnings growth, driven by its diversified model, brand strength, and operational improvements.

Overall, Caleres appears well-positioned for long-term success, with a diversified business model, strong brand portfolio, operational excellence, financial discipline, and a focus on strategic growth initiatives. However, investors should continue to monitor the company’s ability to navigate evolving macroeconomic and industry challenges.

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Financial Statements Multi Year

Revenue declined modestly in recent quarters due to macroeconomic headwinds like inflation and lower consumer spending, impacting both the Famous Footwear and Brand Portfolio segments. However, the company has been able to improve gross margins through higher merchandise margins, growth in e-commerce, and cost management initiatives. Operating earnings and net income have been pressured by the revenue declines and higher costs, but the company has taken steps to reduce expenses through restructuring efforts.

Segment Performance

The Famous Footwear segment has faced sales declines due to lower retail traffic, but has maintained relatively stable margins. The Brand Portfolio segment has seen sales pressure but significant gross margin expansion driven by higher prices, lower discounts, and a shift towards direct-to-consumer.

Financial Position and Cash Flow

The company has focused on strengthening its balance sheet by reducing debt levels and improving liquidity. Operating cash flow has improved due to working capital management, providing funds for capital investments and shareholder returns. The company maintains a strong liquidity position with ample borrowing capacity under its revolving credit facility.

Strategic Initiatives

Vertical integration between Famous Footwear and Brand Portfolio remains a key strategy to drive synergies. Cost reduction initiatives and expense management have been priorities to offset inflationary pressures. Capital allocation priorities include debt reduction, share repurchases, and investing in strategic growth areas like e-commerce and international expansion.

Risks and Challenges

Macroeconomic factors like inflation, interest rates, and consumer spending pose ongoing risks to demand and profitability. Supply chain disruptions and higher costs remain challenges that could impact margins and inventory management. The competitive retail environment and changing consumer preferences require continuous adaptation and innovation.

In summary, while facing near-term headwinds, the company has taken proactive steps to manage costs, strengthen its financial position, and execute on strategic initiatives to drive long-term growth and shareholder value creation.

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Insider Trading Analysis

Long-Term Patterns

The CEO (Diane M. Sullivan) and CFO (Michael R. Edwards) have consistently received large awards of restricted stock units and common stock over the years, indicating they are heavily invested in the company’s long-term success. Several other key executives like John W. Schmidt (COO), Mark A. Schmitt (President), and Daniel R. Freidman (General Counsel) have also received substantial equity awards, aligning their interests with shareholders. There have been periodic sales of shares by executives, likely for personal financial reasons, but the overall trend shows they maintain significant ownership stakes in the company.

Recent Transactions

In 2024, the CEO, CFO, and other top executives received awards of restricted stock units, further increasing their equity stakes. The CEO has been actively selling shares in 2023 and 2024, likely for diversification or personal reasons, but still maintains a very large ownership position of over 200,000 shares. The COO and General Counsel have also made some sales of shares in 2023 and 2024, but continue to hold substantial positions.

Implications

The long-term insider ownership patterns suggest strong alignment between management and shareholders, as the executives have a vested interest in the company’s long-term performance. The recent transactions indicate some diversification by top executives, but they still maintain significant skin in the game, which should provide confidence to long-term investors. Short-term investors may want to monitor the pace of insider sales, as large transactions could signal potential near-term headwinds, but the overall ownership levels remain high.

In summary, the insider trading data for Caleres, Inc. indicates a well-aligned management team that is heavily invested in the company’s long-term success, which should be positive for both long-term and short-term investors.

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Management Compensation Benchmark Analysis

Base Salary Composition

Based on the executive compensation details provided, the key insights for a long-term investor in Caleres, Inc. (CAL) are:

The average percentage of base salary out of total compensation for the executives at CAL is 37.80%. This is higher than the average for Vera Bradley, Inc. (VRA) at 36.27% and Wolverine World Wide, Inc. (WWW) at 39.21%, but lower than the average for Rocky Brands, Inc. (RCKY) at 68.44% and Weyco Group, Inc. (WEYS) at 55.41%. This suggests that the compensation structure at CAL is more balanced between base salary and other incentive-based components compared to some peers.

Executive Compensation Structure

The base salary portion of total compensation for the top executives at CAL, such as the CEO, CFO, and COO, ranges from around 11% to 30%. This is on the lower end compared to some peers, indicating a greater emphasis on performance-based pay.

The use of stock awards and incentive plan compensation makes up a significant portion of the total compensation for CAL’s executives, aligning their interests with long-term shareholder value creation.

Alignment with Shareholder Interests

Overall, the executive compensation structure at CAL appears to be designed to incentivize and reward the leadership team for achieving the company’s long-term strategic goals and driving shareholder value, which should be beneficial for long-term investors.

In summary, the executive compensation practices at Caleres, Inc. seem to strike a reasonable balance between fixed and variable pay components, with a focus on aligning the interests of the leadership team with those of long-term shareholders. This suggests that the compensation structure is likely supportive of the company’s efforts to create sustainable shareholder value over the long term.

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Proxy Statement Analysis

Compensation Structure

Evaluate the balance between base salary, short-term incentives, and long-term incentives. A significant portion should be tied to long-term performance metrics.

Performance Metrics

Examine the specific metrics used for annual and long-term incentive plans to ensure they align with the company’s strategic objectives and long-term value creation (e.g., revenue growth, profitability, return on capital).

Equity-Based Compensation

Assess the use of equity awards (stock options, restricted stock, performance shares) and their vesting schedules/holding requirements to incentivize long-term focus.

Clawback and Recoupment Policies

Look for robust policies to recoup compensation in cases of financial restatements or misconduct, aligning executive interests with long-term shareholder interests.

Stock Ownership Guidelines

Evaluate the company’s stock ownership requirements for executives and the timeframe to meet these guidelines, promoting long-term alignment.

Peer Group and Benchmarking

Understand how the company benchmarks its compensation against a relevant peer group and whether the levels are appropriate.

By analyzing these key areas, a long-term investor can assess the degree to which the executive compensation structure incentivizes and aligns with creating sustainable long-term shareholder value.

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News Analysis

Financial Performance

The company regularly reports quarterly and annual earnings results, providing insights into its sales, profits, and overall financial health over time. Investors should monitor these for sustained growth or any concerning trends.

Strategic Updates

Caleres has provided updates on its strategic growth plans, financial targets, acquisitions (e.g. Allen Edmonds, Vionic), new brand launches, and international expansion efforts. Successful execution of these initiatives could drive long-term value creation.

Leadership Changes

There have been some key executive appointments and planned succession events announced, which could impact the company’s strategic direction and operational execution going forward.

Brand Performance

Updates on specific brands like Famous Footwear, Sam Edelman, Dr. Scholl’s, Naturalizer etc. and their positioning, new product launches and collaborations provide color on growth drivers.

Capital Allocation

The company has periodically authorized share repurchase programs and paid quarterly dividends, signaling capital return to shareholders.

ESG Progress

Caleres has started reporting on its environmental, social and governance goals/targets, which could be relevant for certain investor groups.

Commentary around footwear market conditions, consumer demand shifts, supply chain dynamics etc. offers context on external factors impacting the business.

Guidance

The company provides annual and quarterly guidance which is revised based on performance, giving investors a view into near-term expectations.

In summary, monitoring Caleres’ financial results, execution of growth strategies, brand traction, capital allocation policies and ability to navigate industry forces could help a long-term investor evaluate the company’s prospects. However, I don’t have a strong opinion on whether to invest without deeper analysis.

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Technical Indicators Analysis

Next Week Trading

The recent price action and technical indicators suggest a potential short-term pullback or consolidation in the next week. The 10-day RSI is in the neutral range around 40, indicating the stock may be overbought in the short term. The TEMA is also flattening out, hinting at potential near-term sideways movement. Traders may look for opportunities to take profits or enter short-term positions on any pullbacks.

Resistance and Support Levels

The 20-day SMA and 50-day SMA appear to be providing dynamic resistance and support levels, respectively. The stock has struggled to break above the 20-day SMA in recent sessions, suggesting this could act as a near-term resistance level. The 50-day SMA, on the other hand, seems to be providing support, as the price has bounced off this level multiple times.

Short-Term Investor

The recent decline in the 14-day ADX, along with the flattening TEMA, suggests the stock may be entering a consolidation phase after a period of strong directional momentum. Short-term investors may want to monitor the stock’s ability to hold above the 50-day SMA and look for opportunities to enter or add to positions on any pullbacks towards this support level.

Long-Term Investor

From a long-term perspective, the 200-day SMA is still trending higher, indicating the overall upward trajectory of the stock. The 20-day and 50-day SMAs are also above the 200-day SMA, further reinforcing the bullish long-term outlook. Long-term investors may view any short-term pullbacks as potential buying opportunities to build or add to their positions, as the broader trend appears to remain positive.

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Chart of Valuation History

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Financial Statements Annual

Financial Statements Annual 2024 Q2

Macroeconomic and Industry Risks

Consumer demand for the company’s products may be adversely impacted by economic conditions such as inflation, interest rate hikes, and recession fears, which could lead to reduced consumer spending and lower sales. Inflationary pressures and supply chain disruptions may impact the company’s ability to meet incremental consumer demand, leading to lost sales and higher costs. The company faces intense competition in the highly fragmented footwear industry, which could put pressure on pricing and margins. The company’s quarterly sales and earnings can fluctuate significantly due to seasonality and other factors, which may result in stock price volatility.

Operational Risks

The company relies primarily on international sources of production, which exposes it to risks associated with global trade, including tariffs, political instability, and supply chain disruptions. The company’s information technology systems are critical to its operations, and any major disruption could adversely impact the business. Cybersecurity breaches could lead to the loss of sensitive data, increased costs, and reputational damage. The company’s success depends on its ability to attract and retain key management and other personnel.

Financial and Liquidity Risks

The company’s borrowings under its revolving credit facility have decreased significantly, reflecting strong cash generation and a focus on debt reduction to mitigate the impact of rising interest rates. The company’s working capital and cash flow position have improved, with a higher current ratio and lower debt-to-capital ratio. The company’s capital allocation priorities include further debt reduction and share repurchases, which demonstrate a commitment to enhancing shareholder value.

Accounting and Reporting Considerations

The company’s use of the LIFO inventory method and its approach to determining markdown reserves for the Brand Portfolio segment involve significant estimates and judgments that could impact financial results. The company’s assessment of potential impairment of goodwill, intangible assets, and long-lived assets is an important area of focus, as any impairment charges could adversely affect financial performance. The company’s effective tax rate has benefited from the release of valuation allowances on certain deferred tax assets, but future changes in tax laws and regulations could impact the company’s tax position.

Overall, the financial statements highlight the company’s efforts to navigate a challenging macroeconomic environment, manage operational risks, and maintain a strong financial position. The key areas of focus for long-term investors would be the company’s ability to adapt to changing consumer preferences, effectively manage its global supply chain, and continue to execute on its strategic initiatives to drive sustainable growth and profitability.

Financial Statements Annual 2023 Q2

Strong Brand Portfolio Performance

The Brand Portfolio segment saw a significant increase in net sales of $2.42 billion or 224% in 2022 compared to 2021. This was driven by strong performance across nearly all of Caleres’ brands, particularly those with a high-fashion element like Sam Edelman, Naturalizer, LifeStride, Franco Sarto, and Allen Edmonds. This demonstrates the strength and desirability of Caleres’ brand portfolio.

Improved Supply Chain and Inventory Management

The company was able to better manage its inventory levels in 2022 compared to 2021, when supply chain disruptions had delayed inventory receipts. The decrease in backlog order levels reflects the return to pre-pandemic supply chain efficiency, allowing Caleres to more efficiently fulfill orders.

Margin Expansion in Brand Portfolio

The Brand Portfolio segment’s gross profit margin increased to 37.6% in 2022 from 35.8% in 2021. This was driven by higher average wholesale prices across the brands and growth in the higher-margin direct-to-consumer channel. Effective management of inflationary pressures also contributed to the margin expansion.

Successful Retail Optimization

Caleres continued to optimize its retail footprint, closing 9 stores in the Brand Portfolio segment while opening 13 new stores in China. This demonstrates the company’s ability to adapt its retail strategy to changing consumer preferences and market conditions.

Strong Cash Flow Generation

Caleres generated $125.9 million in operating cash flow in 2022, which allowed the company to continue returning value to shareholders through $63.2 million in share repurchases. The company’s financial position remains strong, with $33.7 million in cash and cash equivalents at the end of 2022.

Inflationary Pressures and Interest Rate Impacts

While Caleres was able to mitigate the majority of inflationary pressures in 2022, these macroeconomic factors continue to pose risks. Rising interest rates will also adversely impact the company’s interest expense going forward. Careful management of these factors will be crucial.

Overall, Caleres’ diversified business model, strong brand portfolio, and operational improvements position the company well for long-term growth and value creation. However, the company will need to remain vigilant in navigating the ongoing macroeconomic challenges.

Financial Statements Annual 2022 Q2

Strong Financial Performance in 2021

Consolidated net sales increased 31.2% to $2.78 billion in 2021 compared to 2020, driven by record-setting sales at the Famous Footwear segment. Consolidated gross profit increased 55.9% to $1.23 billion in 2021 compared to 2020, with the gross profit margin increasing to 44.2% from 37.2%. Consolidated operating earnings increased to $205.8 million in 2021 compared to an operating loss of $485.7 million in 2020. Consolidated net earnings attributable to Caleres Inc. were $137.0 million or $3.56 per diluted share in 2021 compared to a net loss of $439.1 million or $11.80 per diluted share in 2020.

Supply Chain Disruptions and Inflationary Pressures

The company experienced supply chain disruptions and port congestion in 2021, leading to delays in inventory receipt and significantly higher freight costs. The company expects supply chain disruptions to continue into 2022 and anticipates ongoing inflationary pressures for freight and other product costs.

Debt Reduction and Improved Balance Sheet

The company used its strong cash generation to significantly reduce its total debt obligations in 2021, improving its balance sheet. The company redeemed $2 billion of senior notes prior to maturity, shifting this higher interest rate debt to borrowings under its revolving credit facility, which is expected to result in net interest expense savings.

Segment Performance

The Famous Footwear segment experienced record-setting financial results in 2021, with net sales increasing 38.4% and operating earnings of $276.4 million. The Brand Portfolio segment’s net sales increased 19.8% in 2021 compared to 2020, but remained below 2019 levels due in part to brand exits and the closure of Naturalizer retail stores.

Ongoing Strategic Initiatives

The company continues to focus on unlocking growth opportunities, mitigating supply chain and inflationary pressures, and investing in long-term strategic initiatives. The company remains confident in its ability to continue returning capital to shareholders, better align supply with consumer demand, and invest in its long-term strategic priorities.

Overall, Caleres delivered strong financial results in 2021 despite the challenges posed by the pandemic, demonstrating the strength of its portfolio of brands and the success of its strategic transformation.

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Financial Statements Quarterly

Financial Statements Quarterly 2024 Q2

Revenue and Profitability

Net sales declined slightly by 0.5% year-over-year, driven by a 2.6% decline in the Brand Portfolio segment, partially offset by a 0.1% increase in the Famous Footwear segment. Gross profit increased by 2.1% year-over-year, with gross margin improving by 122 basis points to 46.9%, driven by higher merchandise margins, growth in e-commerce sales, and lower sales allowances and discounts. Operating earnings declined by 13.8% year-over-year, with the operating margin decreasing from 7.5% to 6.5%, due to higher selling and administrative expenses. Net earnings attributable to Caleres Inc. declined by 10.9% year-over-year, primarily due to the lower operating earnings.

Segment Performance

Famous Footwear segment:
Comparable sales declined by 2.3%, driven by lower consumer traffic in retail stores, partially offset by growth in e-commerce sales. Gross margin improved by 50 basis points to 46.1%, driven by lower inbound freight costs, lower outbound shipping costs, and lower inventory shrinkage. Operating earnings declined slightly to $169 million, with the operating margin decreasing from 4.9% to 4.8%.

Brand Portfolio segment:
Net sales declined by 2.6%, primarily due to lower wholesale sales, partially offset by growth in e-commerce sales. Gross margin improved by 240 basis points to 46.6%, driven by higher merchandise margins, a higher mix of retail sales, and lower sales allowances and discounts. Operating earnings declined to $414 million, with the operating margin remaining flat at 13.1%.

Liquidity and Capital Structure

Total debt obligations decreased by $105 million from the prior year quarter, and the debt-to-capital ratio improved from 39.2% to 24.9%. Net cash provided by operating activities declined by $14 million, primarily due to a smaller increase in trade accounts payable, a smaller decrease in inventory, and a larger increase in accounts receivable. Capital expenditures increased by $38 million, primarily due to Famous Footwear store remodels and the ongoing ERP implementation. The company repurchased $151 million of its common stock during the quarter, reflecting its commitment to returning capital to shareholders.

Overall, the financial statements indicate that the company is navigating a challenging macroeconomic environment, with declining sales and profitability in the short term. However, the company’s focus on improving gross margins, managing costs, and strengthening its balance sheet suggest a long-term strategy to enhance shareholder value.

Financial Statements Quarterly 2024 Q1

Net sales declined 4.6% in Q3 2023 and 6.7% in the first 9 months of 2023 compared to the prior year periods, driven by lower sales at the Famous Footwear segment. Gross profit margin improved to 44.7% in Q3 2023 from 42.6% in Q3 2022, driven by lower freight costs and higher merchandise margins in the Brand Portfolio segment. Operating earnings increased 19.6% in Q3 2023 but declined 13.2% in the first 9 months of 2023 compared to the prior year periods.

Segment Performance

Famous Footwear segment saw a 6.7% decline in net sales in the first 9 months of 2023 due to lower consumer traffic in retail stores. Brand Portfolio segment net sales declined 6.5% in the first 9 months of 2023, but gross margin improved significantly to 43.1% from 38.1% in the prior year period.

Cash Flow and Liquidity

Operating cash flow increased $1.1 billion in the first 9 months of 2023 compared to the prior year period, driven by improved working capital management. Total debt obligations declined $1.4 billion from the prior year period, and the debt-to-capital ratio improved to 29.9% from 47.3%. The company has ample liquidity with $2.7 billion in additional borrowing availability under its revolving credit facility.

Cost Reduction Initiatives

The company incurred $23 million in Q3 2023 and $39 million in the first 9 months of 2023 in restructuring and other special charges related to expense reduction initiatives, primarily severance costs. These initiatives are expected to result in additional savings for the remainder of 2023 and into 2024.

Macroeconomic Headwinds

The company continues to face challenges from the macroeconomic environment, including inflation, rising interest rates, and cautious consumer spending, which have impacted sales and profitability.

Overall, the financial statements indicate that the company is taking proactive steps to manage costs and maintain a strong liquidity position, but faces ongoing macroeconomic headwinds that have pressured revenue and profitability. The long-term investor should closely monitor the company’s ability to navigate the current environment and execute on its strategic initiatives.

Financial Statements Quarterly 2023 Q4

Total revenue declined 5.8% in Q2 2023 and 7.8% in H1 2023 compared to the prior year periods, driven by decreases in both the Famous Footwear and Brand Portfolio segments. This reflects the challenging macroeconomic environment and cautious consumer spending.

Direct-to-consumer sales grew to 74% of total revenue in Q2 2023 and 71% in H1 2023, up from 72% and 69% respectively in the prior year periods, as the company continues to focus on its vertical integration strategy.

Profitability

Gross margin declined slightly in Q2 2023 but increased in H1 2023, driven by improvements in the Brand Portfolio segment offsetting declines in Famous Footwear.

Operating earnings declined 27.3% in Q2 2023 and 26.3% in H1 2023 due to the lower revenue and gross profit, as well as $17 million in restructuring and other special charges.

The effective tax rate declined in H1 2023 due to discrete tax benefits related to share-based compensation.

Cash Flow and Liquidity

Operating cash flow increased $980 million in H1 2023 compared to the prior year, driven by lower inventory growth and higher accounts payable.

Total debt decreased $1,045 million from the prior year period, and the debt-to-capital ratio improved to 34.1% from 47.5%.

Capital expenditures are expected to be $50-$60 million in 2023, down from $64 million in 2022.

Strategic Initiatives

The company initiated expense reduction initiatives in Q1 2023 that resulted in $17 million in charges in Q2 2023, with additional savings expected in the second half of the year.

The company remains focused on maximizing the vertical opportunity between the Famous Footwear and Brand Portfolio segments, with several of the Brand Portfolio brands represented in Famous Footwear’s top selling products.

Overall, the financial statements reflect the challenges the company is facing in the current macroeconomic environment, but also highlight the company’s efforts to improve profitability and cash flow through cost reduction initiatives and its vertical integration strategy. The company’s strong liquidity position and focus on strategic initiatives provide a solid foundation for long-term investors.

Financial Statements Quarterly 2023 Q3

Macroeconomic Factors Impacting Performance

The company faced headwinds from macroeconomic factors like inflation, rising interest rates, and higher consumer debt levels, which impacted consumer discretionary spending and led to declines in retail store traffic and sales. The company has initiated expense reduction initiatives to mitigate the impact of these macroeconomic pressures.

Segment Performance

The Famous Footwear segment saw a 9.2% decrease in net sales and an 85% decline in comparable sales due to the challenging macroeconomic environment. Gross margin also declined. The Brand Portfolio segment net sales decreased 11.0%, but gross margin improved significantly to 44.2% driven by higher average prices and lower inbound freight costs.

Liquidity and Capital Structure

The company has a $500 million revolving credit facility, with $291.5 million in borrowings and $106 million in letters of credit outstanding as of April 29, 2023. Working capital increased to $584 million, and the current ratio improved to 0.931, indicating a strong liquidity position. The debt-to-capital ratio decreased to 39.2%, providing financial flexibility.

Cash Flow and Capital Allocation

Operating cash flow increased by $178 million year-over-year, driven by lower inventory and accounts receivable. Capital expenditures are expected to be between $55-$65 million in 2023, lower than the $64 million spent in 2022. The company paid $0.07 per share in dividends during the quarter and did not repurchase any shares.

Overall, the financial statements highlight the company’s ability to navigate the challenging macroeconomic environment, maintain a strong liquidity position, and invest in its business while returning capital to shareholders. However, the declines in sales and profitability in the Famous Footwear segment are a concern that the company will need to address.

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Earnings Call Analysis

Earnings Call Analysis 2024 Q2

Caleres’ Strategic Initiatives for Long-Term Growth

Caleres is focused on strategic initiatives to drive long-term growth, including enhancing marketing, expanding international presence, improving the consumer experience at Famous Footwear, and upgrading its technology systems.

Brand Portfolio Segment Performance

The Brand Portfolio segment is performing well, with strong growth in demand for new products, particularly in fashion sneakers, flats, and casuals. The company’s lead brands (Sam Edelman, Allen Edmonds, Naturalizer, Vionic) are driving a significant portion of the segment’s sales and profitability.

Famous Footwear’s Market Share Gains

Famous Footwear continues to gain market share, particularly in the kids category, which has outpaced the rest of the chain for 13 consecutive quarters. The company is investing in enhancing the consumer experience through its FLAIR store format.

The company is navigating challenges in seasonal product categories like sandals and boots, but is pivoting its inventory and marketing to capitalize on the strong demand for casual and athletic footwear.

Analysts’ Focus on Margin Maintenance and Inventory Management

Analysts’ questions suggest a focus on the company’s ability to maintain its margin improvements, particularly in the Brand Portfolio segment, and its plans for managing inventory and product mix to align with evolving consumer preferences.

Overall, the company appears to be taking a disciplined and strategic approach to navigating the current environment and positioning itself for long-term growth, with a focus on its powerful brand portfolio and initiatives to enhance the consumer experience.

Earnings Call Analysis 2024 Q1

Brand Portfolio Strength

The Brand Portfolio segment delivered its best-ever annual adjusted operating earnings, with strong performance across the company’s lead brands like Sam Edelman, Allen Edmonds, Naturalizer, and Vionic. This segment is expected to contribute about 50% of total sales and 60% of operating profit within the next 3 years.

Inventory Management

Caleres has been disciplined in managing inventory, with a nearly 7% reduction in inventory in 2023. This has helped improve margins and profitability.

Focus on Direct-to-Consumer and Digital

Caleres is focused on expanding its direct-to-consumer business, including its own e-commerce platforms and loyalty programs, to engage more directly with consumers.

Operational Efficiency

The company’s SPEED programs have allowed it to better align inventory with consumer demand, driving sales productivity and expanding gross margins.

International Expansion

Caleres sees significant growth opportunities internationally, particularly for brands like Sam Edelman and Naturalizer. The company has hired a dedicated SVP of International to focus on this effort.

Cautious Outlook

While the Brand Portfolio segment is expected to continue performing well, the company is cautious about the overall footwear market, which is expected to decline 1% in 2024 according to industry data. This is reflected in the company’s guidance for flat to 2% sales growth in 2024.

Financial Discipline

Caleres remains focused on reducing debt and maintaining financial flexibility, while also evaluating opportunities for share repurchases as it continues to generate strong cash flow.

Overall, the call suggests Caleres is well-positioned with its diversified brand portfolio and operational initiatives, but the company is also cautious about the broader market environment and is taking a disciplined approach to managing the business for long-term success.

Earnings Call Analysis 2023 Q4

Brand Portfolio Strength

The Brand Portfolio segment is performing well, with record Q3 operating margin of 12.2%. This segment is expected to lead the company’s financial performance going forward.

Leveraging Speed-to-Market

Caleres’ ability to quickly get new products to market (within 3 months) has allowed them to capitalize on key fashion trends and offset weakness in seasonal categories like boots.

Inventory Management

Caleres has been able to strategically manage inventory, leading to lower markdowns and higher margins, especially in the Brand Portfolio.

Famous Footwear Challenges

The Famous Footwear segment has faced softening demand trends, particularly in seasonal categories like boots. However, the kids’ business remains a strength.

Expense Reduction

Caleres is implementing additional cost-saving initiatives, targeting $35-40 million in annualized savings, which should help offset margin pressures.

Cautious Outlook

The company has tightened its full-year earnings guidance range, reflecting continued softness in consumer demand, particularly at Famous Footwear.

Balanced Capital Allocation

Caleres is focused on reducing debt while also evaluating share buybacks, given its improved leverage position.

Overall, the call highlights Caleres’ ability to navigate a challenging environment through its brand portfolio strength, operational agility, and disciplined cost management. However, the Famous Footwear segment remains a concern, and the company is taking a cautious approach to the near-term outlook.

Earnings Call Analysis 2023 Q3

Diversified business model and operational discipline

Caleres was able to deliver strong earnings despite a challenging consumer environment by leveraging its diversified structure, powerful brands, and enhanced omni-capabilities. This demonstrates the company’s ability to drive value in various market conditions.

Inventory management and cost control

Caleres has prioritized profitability over promotions, leading to strong consolidated gross margins. The company has also reduced expenses and managed inventory levels well, ending Q2 about 14% below 2022 levels.

Lead brand performance and growth potential

Caleres’ lead brands like Allen Edmonds, Vionic, Sam Edelman, and Naturalizer are performing well and have significant growth potential. The company is strategically investing in these brands to drive future growth.

Debt reduction and capital allocation

Caleres has reached its target leverage ratio of 1x debt-to-EBITDA and plans to continue using free cash flow to reduce borrowings, which will lower interest expense. The company will also consider share repurchases opportunistically.

Cautious wholesale orders

Caleres noted more conservative ordering patterns by its wholesale partners, which could be a potential headwind. However, the company is leveraging its drop-ship capabilities and speed-to-market initiatives to adapt to this dynamic.

Analyst questions imply

Analysts are focused on the company’s ability to manage inventory and gross margins in the face of uncertain consumer demand, as well as the performance of the different business segments and channels.

Overall, the key insights suggest Caleres is well-positioned with its diversified model, operational discipline, and focus on its lead brands and cost control. The company’s ability to navigate the current environment and reduce debt are positive signs for long-term investors.

Earnings Call Analysis 2023 Q2

Diversified business model

Caleres has a diversified structure with the Famous Footwear and Brand Portfolio segments, which allows it to navigate different operating environments. The Brand Portfolio segment was able to offset the challenges at Famous Footwear in the quarter.

Margin improvement in Brand Portfolio

The Brand Portfolio segment delivered record first quarter operating earnings and a 13% operating margin, driven by higher initial margins and lower freight costs. This demonstrates the company’s ability to improve profitability.

Focus on lead brands

Caleres is strategically investing in and providing more disclosure on the performance of its lead brands – Sam Edelman, Naturalizer, Allen Edmonds, and Vionic. These brands represent over half the Brand Portfolio and 27% of total revenue, and are expected to drive significant growth.

Inventory management

Caleres has managed its inventory levels well, ending the quarter 13% below the prior year. This positions the company to avoid excessive promotions compared to peers.

Cost savings initiatives

The company has implemented $20 million in cost cutting and profit improvement initiatives across the organization, which should help offset the softer performance at Famous Footwear.

Capital allocation priorities

Caleres is prioritizing debt reduction, utilizing free cash flow to pay down its revolving credit facility. This focus on strengthening the balance sheet is prudent given the uncertain macroeconomic environment.

Outlook

While Famous Footwear is facing near-term challenges, the company remains confident in its long-term outlook and ability to deliver over $4 per share in annual earnings on a consistent basis.

Overall, the key insights highlight Caleres’ diversified and profitable business model, focus on strategic brands, disciplined inventory and cost management, and prudent capital allocation – all of which should position the company well for long-term success.

Earnings Call Analysis 2023 Q1

Strong 2022 Performance

Caleres had a strong 2022, delivering record sales, earnings, and market share growth. This underscores the power of their brands and the successful execution of their strategic initiatives.

Brand Portfolio Segment Excels

The Brand Portfolio segment performed exceptionally well, with record quarterly and annual earnings driven by strong consumer demand for fashion footwear. This segment has significant runway for further growth and profitability improvement.

Famous Footwear Solid Performance

Famous Footwear had a solid performance, though not quite reaching the record levels of 2021. The segment is well-positioned to compete due to its leadership position with the millennial family, strong national brand assortment, and enhanced consumer experience.

Strategic Priorities for 2023 and Beyond

Caleres is focused on key strategic priorities for 2023 and beyond, including sharpening the focus on the millennial family at Famous, enhancing the Famous assortment, capitalizing on the strength of lead brands, and maximizing platform capabilities.

Earnings Outlook

The company is confident in its ability to deliver annual earnings in excess of $4 per share on a consistent basis, driven by the structural changes made in recent years.

Debt Reduction and Share Repurchases

Caleres is prioritizing debt reduction in the near-term due to rising interest rates, while also considering opportunistic share repurchases based on market conditions.

Analyst Focus Areas

Analyst questions suggest a focus on the promotional environment, inventory management, and capital allocation tradeoffs between debt reduction and share buybacks – areas that long-term investors should monitor closely.

Overall, the call highlights Caleres’ operational and financial strength, as well as its strategic focus on driving long-term shareholder value. The company appears well-positioned, but investors should watch for potential headwinds from the uncertain macroeconomic environment.

Earnings Call Analysis 2022 Q4

Caleres Delivers Strong Operational and Financial Execution

Caleres has delivered strong operational and financial execution, with record quarterly sales and earnings per share that are well above pre-pandemic levels. This demonstrates the strength of their brands, product creation capabilities, inventory management, and resilient operating model.

Robust Performance in Brand Portfolio Segment

The brand portfolio segment has seen robust performance, with most lead brands delivering positive sales trends. This reflects progress in elevating product design, fit and relevance, sharpening brand positioning, and aligning inventory with demand.

Powerful Double-Digit Operating Margin in Famous Footwear Segment

The Famous Footwear segment has maintained a powerful double-digit operating margin, highlighting the strength of the brand and its leadership position with the family consumer, advantaged assortment of national brands, and enhanced consumer experience.

Successful Price Increases Demonstrate Pricing Power and Brand Equity

Caleres has been able to successfully pass through price increases, with the brand portfolio achieving a 16% average wholesale price increase that has largely stuck. This demonstrates strong pricing power and brand equity.

Focused on Controlling Expenses and Reducing Debt Levels

The company is focused on controlling what it can, managing expenses, and reducing debt levels in the face of a more challenging macroeconomic environment. However, they remain confident in their ability to deliver record earnings per share in 2022.

Transition to New Leadership Well-Positioned for Long-Term Profitability

Caleres is transitioning to new leadership, with J. Schmidt taking over as CEO. The company appears well-positioned for long-term profitability and shareholder value creation under the new leadership team.

Overall, the call suggests Caleres has built a diversified, consumer-focused, and operationally-strong business that is well-positioned to navigate near-term challenges and continue delivering strong financial performance for long-term investors.

Earnings Call Analysis 2022 Q3

Caleres Delivers Strong Q2 2022 Performance

Caleres delivered strong financial performance in Q2 2022, with record consolidated sales, net earnings, EPS, and margins. This demonstrates the structural shift in Caleres’ earnings potential and the competitive advantage of its versatile platform.

Famous Footwear Segment Continues Strong Performance

The Famous Footwear segment continued to perform well, with double-digit operating margins for the 6th consecutive quarter. However, the company is seeing some moderation in consumer demand and traffic starting in July, though it expects a solid back-to-school season.

Brand Portfolio Segment Sees Robust Growth

The Brand Portfolio segment saw a 36% year-over-year sales increase, driven by strong consumer demand across trending categories. Several brands like Sam Edelman, Naturalizer, and LifeStride are gaining market share and resonating well with consumers.

Inventory Management and Strategic Investments

Caleres is managing its inventory carefully, with Brand Portfolio inventory up 64% year-over-year to align with consumer demand, while Famous Footwear inventory is down 15% vs 2019 levels. The company is prioritizing strategic investments, particularly in consumer marketing, to drive deeper connections with consumers. It also continues to return capital to shareholders through share buybacks.

Outlook and Long-Term Positioning

While the company is seeing some moderation in consumer demand, it remains well-positioned to capitalize on opportunities in the marketplace and expects to generate significant cash in the second half of 2022. Overall, the call suggests Caleres has made significant progress in strengthening its business model and brands, positioning it well for long-term growth and profitability, despite near-term macroeconomic uncertainties.

Earnings Call Analysis 2022 Q2

Strong Financial Performance

Caleres has demonstrated strong financial performance, delivering record results across key metrics like sales, gross margin, and operating earnings. This suggests the company has built a solid foundation and improved its earnings power.

Diversified Brand Portfolio and Direct-to-Consumer Capabilities

The company’s diversified brand portfolio and strong direct-to-consumer capabilities appear to be competitive advantages, allowing it to capitalize on evolving consumer demand across different product categories and channels.

Disciplined Inventory Management and Pricing

Management seems focused on disciplined inventory management, strategic pricing, and targeted marketing to drive profitability, even in the face of macroeconomic headwinds like inflation and supply chain disruptions.

Capital Allocation Strategy

The company’s capital allocation strategy, including share buybacks, suggests confidence in the long-term outlook and a commitment to enhancing shareholder value.

Potential Risks

While the near-term outlook remains positive, investors should be cautious about potential risks, such as the ability to sustain current margin levels, the impact of a potential normalization in wholesale demand, and any further supply chain or inflationary pressures.

Analyst Focus

Analyst questions imply a focus on the sustainability of consumer demand, pricing power, and the company’s ability to manage inventory and supply chain challenges. Investors should monitor these areas closely.

Overall, Caleres appears to have made strategic improvements to its business model, positioning it for continued strong performance. However, long-term investors should still evaluate the company’s ability to navigate the evolving macroeconomic environment and maintain its competitive edge.

Earnings Call Analysis 2022 Q1

Strong Financial Results in 2021

Caleres delivered strong financial results in 2021, with record earnings and margins. This suggests the company has improved its operational efficiency and profitability.

Exceptional Performance of Famous Footwear Brand

The Famous Footwear brand performed exceptionally well, with sales exceeding 2019 levels despite lower inventory. This indicates strong consumer demand and effective merchandising and marketing strategies.

Optimizing Brand Portfolio

Caleres is focused on optimizing its brand portfolio, emphasizing key brands like Sam Edelman, Allen Edmonds, and Vionic. These brands are well-positioned to capitalize on trends like the resurgence in dress and event-related footwear.

Disciplined Inventory Management

The company is proactively managing its inventory levels, particularly in the brand portfolio, to better align with consumer demand. This suggests a disciplined approach to inventory management.

Enhancing Consumer Experience

Caleres is investing in enhancing the consumer experience at Famous Footwear, including testing new store prototypes and refreshing existing locations. This indicates a focus on maintaining a competitive edge.

The company is cautious about the ongoing macroeconomic challenges, such as supply chain disruptions and inflationary pressures, but believes it is well-positioned to navigate these uncertainties.

Commitment to Shareholder Returns

Caleres is committed to returning capital to shareholders through dividends and share repurchases, which could be a positive signal for long-term investors.

Overall, the call suggests Caleres has made significant operational improvements, is focused on driving growth in its key brands, and is taking a prudent approach to managing risks and returning capital to shareholders. This could be attractive for long-term investors.

Earnings Call Analysis 2021 Q4

Caleres’ Strong Performance and Strategic Priorities

Caleres is capitalizing on strong consumer demand, achieving record quarterly operating earnings and adjusted EPS. This performance is driven by the Famous Footwear segment, which had its highest ever quarterly sales.

Famous Footwear’s success is attributed to strong back-to-school sales, reduced promotions leading to record margins, and effective inventory management to meet demand. This segment is a key driver of Caleres’ overall performance.

The Brand Portfolio segment is facing supply chain challenges, including factory closures, port delays, and elevated ocean freight costs. However, Caleres is taking actions to mitigate these issues, such as price increases, renegotiating contracts, and diversifying sourcing.

Caleres is making progress on its strategic priorities, including reducing debt levels and improving its financial foundation. The company expects to approach its goal of zero net debt over the next five quarters, which is seen as value-creating for shareholders.

Analyst Insights and Outlook

The analyst questions suggest a focus on the sustainability of Famous Footwear’s gross margins and the outlook for the Brand Portfolio segment’s profitability as supply chain pressures ease. Caleres’ ability to navigate these challenges will be critical for long-term investors.

Overall, Caleres appears to be executing well in the current environment, leveraging its diversified brand portfolio and operational expertise. However, the long-term investor should monitor the company’s ability to maintain its momentum and manage the ongoing supply chain disruptions.

Earnings Call Analysis 2021 Q3

Caleres Delivers Exceptional Results, Leverages Strategic Foundation

Caleres is capitalizing on strong consumer demand and leveraging its strategic foundation to deliver exceptional results. The company achieved record quarterly operating earnings and adjusted EPS in Q2 2021.

Famous Footwear Segment Shines

The Famous Footwear segment had an outstanding quarter, with record sales, margins, and operating earnings. This segment is a key driver of the company’s performance.

Brand Portfolio Segment Shows Progress

The Brand Portfolio segment is also showing progress, with improved gross margins, though sales are still recovering. Brands like Sam Edelman, Vionic, and Allen Edmonds are performing well.

Digital and Direct-to-Consumer Focus

Caleres is focused on growing its digital and direct-to-consumer business, which now represents nearly 80% of total sales. This is a strategic priority and area of investment.

Supply Chain and Inventory Challenges

Supply chain disruptions and inventory constraints are creating challenges, but the company is working to mitigate these issues through measures like diversifying suppliers and optimizing inventory.

Debt Reduction and Balance Sheet Strengthening

Caleres has been proactively reducing debt and strengthening its balance sheet, which is a key priority. This includes calling a portion of long-term debt and renegotiating credit facility terms.

Cautious Optimism for Upcoming Seasons

The company is cautiously optimistic about the back-to-school and holiday seasons, expecting demand to remain strong despite some lingering pandemic-related impacts.

Overall, Caleres appears to be executing well on its strategic initiatives and leveraging its diversified brand portfolio to navigate the current environment. The focus on digital, direct-to-consumer, and balance sheet improvement are positive signs for long-term investors.

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The information provided on this blog is for informational purposes only and should not be considered as financial advice. You should consult with a qualified financial professional before making any investment decisions. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal.