Release Date: September 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Caleres Inc (CAL, Financial) achieved a strong gross margin rate increase of 30 basis points, driven by the brand portfolio.
- The company saw a 1.5% increase in total sales for Famous Footwear, with a notable 10% year-over-year growth in Famous.com business.
- Caleres Inc (CAL) reported a 140 basis point improvement in segment gross margin for the brand portfolio.
- The company has successfully addressed ERP system issues and is now operational in all areas that caused disruptions.
- Caleres Inc (CAL) announced a restructuring that will save approximately $7.5 million annually and $2 million in the current fiscal year.
Negative Points
- Second quarter sales declined 1.8% year-over-year, leading to earnings per share of $0.85, which was below expectations.
- The ERP upgrade caused significant visibility and execution issues, contributing to the sales decline.
- Seasonal product categories, particularly sandals, underperformed with a high-single-digit decline.
- Famous Footwear's comparable sales declined 2.9%, despite a 1.5% increase in total sales.
- The company experienced late shipments and carrier failures, further impacting sales negatively.
Q & A Highlights
Q: Jay, just hearing all the things that you've done to fix the ERP implementation issues, should we consider it an immaterial impact on the back half of the year?
A: I would say that's accurate, Laura. We have really triaged this during the second quarter and we feel confident that we have all systems go. And where we don't, we have the accurate backups in place until we do that we really feel very confident in. - John Schmidt, President, Chief Executive Officer, Director
Q: On this August rebound -- and I think this would probably be tough to tell, but do you have a sense that that was driven by the macro? Or could it be that your promotions, which were stepping up in that time period are what drove the improved results?
A: It's -- I think it starts with the fact we were looking here this morning, we have -- a lot of our athletic brands are trending extremely well. So we were much better in position with key athletic brands. It's representing well north of 50% of our athletic -- or our total Famous business. So getting those key brands in place and the Kids inventory in place was the first part. Second part was, as you alluded to, this was the first time that we saw such a high demand on the BOGO versus buy more, save more that it became margin-accretive. And that was a different place for us that we haven't seen prior to that. So while not more days in the pure back-to-school business, we do see we got a much higher traffic lift from it. And then, finally, our marketing was really all focused on kids during the back-to-school and the key athletic shoes and others that they really drove through. So you're right, it's hard to get one impact on it, but I think those three things in tandem probably drove it through. That would be where I think we wound up. - John Schmidt, President, Chief Executive Officer, Director
Q: On the ERP situation, Jay, it sounds like you said all systems go. I am curious, though, you mentioned that with brand portfolio that you're seeing growth in your receipt plans. Is there any concern about fallout to those plans, maybe just as some of these issues might have negatively impacted some confidence in your business from your wholesale partners?
A: No. And there was really -- in many cases, Mitch, we did ship second quarter later, but it was within a customer's shipping window. So we haven't seen any lack of confidence from our retail partners. And in some cases, again, very nominal. What we are seeing, though, is some real strength out of fall and it's early days for sure, but we are seeing some really nice reaction to some key trending categories on the brand side. And those include sneakers, as we've mentioned (technical difficulty) continue to grow. We've seen great result in some early flats and mocs coming through. And then, sport-inspired casuals are another great example. Finally, we've seen some interest in high shaft boots, particularly at Naturalizer and Sam Edelman. So it seems like the consumer is interested in new fall and is out shopping and we're in a position to address that. - John Schmidt, President, Chief Executive Officer, Director
Q: And just on the boot piece, can you remind us how big a part of your business that is in the back half of the year and what kind of performance you're lapping there from a year ago?
A: Yeah. We're -- it's a good question. We were -- obviously, we haven't -- we've had boot seasons that were disappointing in the last two. Our best information right now tells us it's about 28% of our brand portfolio sales in the back half. So -- and what we see about that is we -- from what I can see today, tall boots will be up slightly and then short boots will be down, but again, a manageable amount. Over on the Famous side, boots are obviously a much smaller penetration, about 14% of the fall season. So -- and we -- over on there, the only thing to report is that we are seeing some good results in actually some cozy type of products selling early, which is good to see. - John Schmidt, President, Chief Executive Officer, Director
Q: On your third quarter outlook, I think, Jay, you said that Famous Footwear comp up 8% -- I'm sorry, high-single-digits in August. So what kind of comp assumption for the quarter is embedded in your outlook? What kind of Famous comp is in that sales range that you provided?
A: So yes, we expect what I'll describe as a modest positive comp in Q3 for Famous, which obviously drafts off of the strength of August. And -- but I will say, though, that the total reported sales for Famous in the quarter will be down mid-single-digits as a result of this shift in the calendar with the back-to-school weeks and what we're anniversarying last year. So what you'll see is, I think, a modestly positive comp in Q3 for Famous, but total sales, reported sales that are probably down low- to mid-single-digits. - Jack Calandra, Senior Vice President, Chief Financial Officer
Q: And then, how about Famous gross margin for the third quarter? I mean, obviously, it was down pretty substantially in 2Q. Are you also expecting it to be down in 3Q, or do you expect it to be better?
A: No, we're anticipating the gross margin for Famous to be down in the third quarter. And what I would say is when we look at sort of the year, we're still looking for gross margin improvement at the consolidated level, which is really being driven by brand portfolio. - Jack Calandra, Senior Vice President, Chief Financial Officer
Q: Just in terms of the revision to the full year sales guidance, because it sounds like in the quarter, there were three main issues. There was ERP, there was back-to-school, there was seasonal. So for the full year revision, does that basically take into effect kind of the $10 million to $15 million you lost on ERP? But for back-to-school, it's just kind of -- back-to-school is kind of a wash, right? Because what you lost in 2Q, you kind of pick up in 3Q and then it's seasonal. And how much was the impact on seasonal? Can you kind of parse that out?
A: Yes. No, we probably will have to pull it for you, but we did see sandals down on the brand portfolio piece of our business high-single-digits in the second quarter. In Famous, they were actually sandals were flattish. So we can
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
