Caleres (NYSE: CAL) (caleres.com), today announced financial
results for the first quarter ended May 2, 2020. Following a strong
start to the year, first quarter 2020 results were significantly
impacted by the COVID-19 health crisis and subsequent closures of
the company’s retail stores along with the closure of its wholesale
partners’ store operations. Despite this, actions taken by Caleres
to preserve cash, protect liquidity and capitalize on its enhanced
capabilities enabled the company to finish the first quarter with
cash levels consistent with when the stores closed in mid-March and
the financial flexibility necessary to operate in this dynamic
environment.
First Quarter 2020 Highlights
Operating Results: (13-weeks ended May 2, 2020 compared
to 13-weeks ended May 4, 2019)
- Net Sales were $397.2 million compared to $677.8 million in the
first quarter of fiscal 2019;
- Famous Footwear total sales of $191.3 million, down 45.7
percent with same-store-sales up 12.8 percent through mid-March,
and up 12.6 percent for the entire quarter; and
- Brand Portfolio sales of $217.2 million, down 36.3
percent.
- Gross profit was $121.9 million, while gross margin was 30.7
percent and adjusted gross margin was 39.5 percent, excluding
additional markdowns associated with COVID-19;
- SG&A expense of $225.2 million, down $36.9 million compared
to first quarter 2019;
- Net loss of $345.8 million or a loss of $8.95 per diluted share
compared to net income of $9.1 million, or $0.22 per diluted share
in the first quarter of fiscal 2019. The loss of $8.95 per share
includes $7.56 of adjustments related to COVID-19, consisting
primarily of non-cash impairments; and
- Adjusted net loss was $50.4 million; or an adjusted loss of
$1.30 per diluted share compared to adjusted net income of $15.0
million, or adjusted earnings of $0.36 per diluted share in the
first quarter of fiscal 2019.
Liquidity and Capital Allocation:
- Ended the quarter with $187.7 million of cash and $438.5
million of revolving credit facility borrowings;
- Increased the available borrowing capacity of the revolving
credit facility from $500 million to $600 million with no
significant debt maturities until 2023;
- Reduced inventory by 9.7 percent at quarter end from the same
period last year, reflecting actions to cancel seasonal orders and
delay on-order receipts; and
- Returned $15.7 million to shareholders during the quarter
through its long-standing quarterly dividend and share
repurchases.
“This past quarter represented a period of tremendous
uncertainty and challenge for the global community, our consumers
and our company,” said Diane Sullivan, chief executive officer,
president and chairman. “After a strong start – with year-over-year
sales at Famous Footwear up nearly 13 percent through mid-March –
Caleres pivoted sharply to address the rapidly escalating global
health crisis. We temporarily closed our entire network of Famous
Footwear and branded retail stores; instituted work from home
capabilities for the vast majority of our Associates; shifted our
focus to ecommerce; and repurposed our Allen Edmonds factory to
assist in the production of personal protective equipment to
support frontline healthcare workers.”
“The Caleres team has risen to the occasion during the current
crisis – adapting to the quickly moving market environment, serving
our consumers consistently, providing security of supply to our
retail partners and showing compassion to our communities. While we
are taking a realistic view of the broader economic recovery, we
are encouraged by the reception we have seen in the regions where
our stores are now open. Looking ahead, as consumers move to their
next version of normal, we expect they will gravitate to trusted
and well-known brands that stand for value and continuity – and we
have a powerful suite of them. At the same time, we plan to manage
our brand portfolio as intensely as ever and will be adjusting our
offerings to ensure we are anticipating and addressing evolving
consumer preferences and needs,” said Sullivan.
COVID-19 Mitigation Efforts
Caleres took swift and decisive actions to manage through the
economic shutdown. Early in the quarter, the company established a
leadership response team tasked with addressing the challenges of
operating in an environment of significantly reduced economic
activity. By March 19, the company had temporarily shuttered its
entire brick and mortar fleet. Subsequently, the company:
- Aligned its workforce and related expenses to meet the needs of
a lower demand environment;
- Managed inventory levels – continuously balancing supply and
demand;
- Leveraged strong partnerships to reduce product receipts and
extend payment terms;
- Began negotiations to modify leases, including the deferral and
abatement of certain lease payments;
- Eliminated or deferred all non-essential capital projects;
- Expanded ecommerce sales by capitalizing on the significant
enhancements in its omni channel capabilities;
- Utilized expansive network of temporarily closed brick and
mortar stores as distribution centers to support increased
ecommerce business;
- Adapted buy online, pick-up-in-store capability to include a
contactless curbside pickup option; and
- Implemented health and safety measures to ensure a comfortable
work environment and shopping experience for returning Associates
and customers.
Operations Update
On May 11, Caleres initiated a careful and systematic reopening
of its Famous Footwear and branded retail stores. To date, the
company has successfully resumed in-store operations at
approximately 625 locations, including 555 Famous Footwear stores,
or approximately 60 percent of the store fleet. Caleres expects
nearly 90 percent of its Famous Footwear stores to be open by
late-June with the remaining locations – primarily in regions
heavily impacted by the virus and still under state and local
closure restrictions – reopening when it is safe to do so.
In recent weeks, the company has seen continued strength in its
ecommerce-related businesses and sales at the stores that have
reopened are running ahead of expectations with the Famous Footwear
stores running ahead of last year. Importantly, Caleres was
successful in maintaining its skilled Associate base through the
course of the shutdown, and has achieved a nearly 95 percent
retention rate among store managers at stores reopened so far.
Caleres views this continuity as instrumental in maintaining the
high level of service and quality of experience its customers have
come to expect.
“We shifted quickly taking a series of deliberate steps to
reduce costs and preserve cash, while working to maximize ecommerce
sales during the period of stores closures,” said Ken Hannah,
senior vice president and chief financial officer. “We reduced
capital spending – cutting 40 percent from the planned 2020 budget
– exercised the accordion feature of our revolving credit facility
in order to boost liquidity; implemented a disciplined cash
management process; tightly managed our inventory position to
ensure our inventory balance was in line with demand; and leveraged
our prior investments to expand ecommerce-related sales at Famous
Footwear and across our branded portfolio sites.”
2020 Guidance
Given the evolving nature of today’s retail marketplace, we
continue to plan for multiple scenarios while remaining intensely
focused on the disciplined management of inventory and expense.
However, due to the ongoing business disruption and substantial
uncertainty surrounding the impact of COVID-19, the company is not
providing formal financial guidance for fiscal year 2020.
Investor Conference Call
Caleres will host an investor conference call at 4:30 p.m. ET
today, Thursday, June 4. 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
7665925. 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 7665925 through Wednesday, June 17.
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, EBITDA (earnings before interest,
taxes, depreciation, and amortization), 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) the recent coronavirus outbreak
and its adverse impact on our business operations, store traffic
and financial condition (ii) changing consumer demands, which may
be influenced by consumers' disposable income, which in turn can be
influenced by general economic conditions and other factors; (iii)
impairment charges resulting from a long-term decline in our stock
price; (iv) rapidly changing fashion trends and consumer
preferences and purchasing patterns; (v) intense competition within
the footwear industry; (vi) 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; (vii) imposition of tariffs; (viii) the ability to
accurately forecast sales and manage inventory levels; (ix)
cybersecurity threats or other major disruption to the company’s
information technology systems; (x) customer concentration and
increased consolidation in the retail industry; (xi) transitional
challenges with acquisitions; (xii) a disruption in the company’s
distribution centers; (xiii) foreign currency fluctuations; (xiv)
changes to tax laws, policies and treaties; (xv) the ability to
recruit and retain senior management and other key associates;
(xvi) compliance with applicable laws and standards with respect to
labor, trade and product safety issues; (xvii) the ability to
maintain relationships with current suppliers; (xviii) the ability
to attract, retain, and maintain good relationships with licensors
and protect our intellectual property rights; and (xix) the ability
to secure/exit leases on favorable terms. 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 1,
2020, 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. Our
products are available virtually everywhere - in the more than
1,100 retail stores we operate, in hundreds of major department and
specialty stores, on our branded e-commerce sites, and on many
additional third-party retail websites. Famous Footwear offers
great casual and athletic brands for the entire family with
convenient, curated, affordable collections. Sam Edelman keeps
expressive women in step with the latest trends in a playful,
whimsical way. Naturalizer shoes are beautiful from the inside out,
with elegant simplicity and legendary fit re-imagined for today’s
consumer. Allen Edmonds combines old world craft with new world
technology to create luxe footwear for the discerning man who wants
sophisticated, modern classics. Rounding out our family of brands
are Vionic, Vince, Franco Sarto, Dr. Scholl’s Shoes, LifeStride,
Blowfish Malibu, Bzees, Circus by Sam Edelman and Ryka. Combined,
these brands make Caleres a company with both a legacy and a
mission. Our legacy is our more than 140 years of craftsmanship and
our passion for fit, while our mission is to continue to inspire
people to feel great… feet first. Visit caleres.com to learn more
about us.
SCHEDULE 1
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS (LOSS)
(Unaudited)
Thirteen Weeks Ended
(Thousands, except per share data)
May 2, 2020
May 4, 2019
Net sales
$
397,184
$
677,754
Cost of goods sold
275,286
397,918
Gross profit
121,898
279,836
Selling and administrative expenses
225,194
262,111
Impairment of goodwill and intangible
assets
262,719
—
Restructuring and other special charges,
net
60,196
856
Operating (loss) earnings
(426,211
)
16,869
Interest expense, net
(9,478
)
(7,340
)
Other income, net
3,585
2,619
(Loss) earnings before income taxes
(432,104
)
12,148
Income tax benefit (provision)
85,932
(3,063
)
Net (loss) earnings
(346,172
)
9,085
Net (loss) earnings attributable to
noncontrolling interests
(334
)
2
Net (loss) earnings attributable to
Caleres, Inc.
$
(345,838
)
$
9,083
Basic (loss) earnings per common share
attributable to Caleres, Inc. shareholders
$
(8.95
)
$
0.22
Diluted (loss) earnings per common share
attributable to Caleres, Inc. shareholders
$
(8.95
)
$
0.22
SCHEDULE 2
CALERES, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
May 2, 2020
May 4, 2019
February 1, 2020
(Thousands)
ASSETS
Cash and cash equivalents
$
187,717
$
35,778
$
45,218
Receivables, net
145,333
148,487
162,181
Inventories, net
585,307
648,145
618,406
Prepaid expenses and other current
assets
91,433
54,902
56,494
Total current assets
1,009,790
887,312
882,299
Lease right-of-use assets
648,534
735,282
695,594
Property and equipment, net
200,800
236,257
224,846
Goodwill and intangible assets, net
273,648
548,508
539,579
Other assets
90,913
85,711
89,389
Total assets
$
2,223,685
$
2,493,070
$
2,431,707
LIABILITIES AND EQUITY
Borrowings under revolving credit
agreement
$
438,500
$
318,000
$
275,000
Trade accounts payable
297,557
289,071
267,018
Lease obligations
160,138
136,005
127,869
Other accrued expenses
181,344
168,224
181,063
Total current liabilities
1,077,539
911,300
850,950
Noncurrent lease obligations
601,133
662,750
629,032
Long-term debt
198,506
198,046
198,391
Other liabilities
61,384
92,342
104,204
Total other liabilities
861,023
953,138
931,627
Total Caleres, Inc. shareholders’
equity
282,296
627,236
645,950
Noncontrolling interests
2,827
1,396
3,180
Total equity
285,123
628,632
649,130
Total liabilities and equity
$
2,223,685
$
2,493,070
$
2,431,707
SCHEDULE 3
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Thirteen Weeks Ended
(Thousands)
May 2, 2020
May 4, 2019
OPERATING ACTIVITIES:
Net cash provided by operating
activities
$
728
$
49,910
INVESTING ACTIVITIES:
Purchases of property and equipment
(3,523
)
(18,443
)
Capitalized software
(977
)
(2,917
)
Net cash used for investing activities
(4,500
)
(21,360
)
FINANCING ACTIVITIES:
Borrowings under revolving credit
agreement
168,500
84,000
Repayments under revolving credit
agreement
(5,000
)
(101,000
)
Dividends paid
(2,810
)
(2,947
)
Acquisition of treasury stock
(12,932
)
—
Issuance of common stock under share-based
plans, net
(906
)
(2,559
)
Other
(323
)
(394
)
Net cash provided by (used for) financing
activities
146,529
(22,900
)
Effect of exchange rate changes on cash
and cash equivalents
(258
)
(72
)
Increase in cash and cash equivalents
142,499
5,578
Cash and cash equivalents at beginning of
period
45,218
30,200
Cash and cash equivalents at end of
period
$
187,717
$
35,778
SCHEDULE 4
CALERES, INC.
RECONCILIATION OF NET EARNINGS (LOSS)
AND DILUTED EARNINGS (LOSS) PER SHARE (GAAP BASIS) TO ADJUSTED NET
EARNINGS (LOSS) AND ADJUSTED DILUTED EARNINGS (LOSS) PER SHARE
(NON-GAAP BASIS)
(Unaudited)
Thirteen Weeks Ended
May 2, 2020
May 4, 2019
(Thousands, except per share data)
Pre-Tax Impact of Charges/Other
Items
Net (Loss) Earnings Attributable
to Caleres, Inc.
Diluted (Loss) Earnings Per
Share
Pre-Tax Impact of Charges/Other
Items
Net Earnings Attributable to
Caleres, Inc.
Diluted Earnings Per Share
GAAP (loss) earnings
$
(345,838
)
$
(8.95
)
$
9,083
$
0.22
Charges/other
items:
Goodwill and intangible asset impairment
charges
$
262,719
218,506
5.66
$
—
—
—
COVID-19-related expenses (1)
93,612
73,338
1.90
—
—
—
Fair value adjustment to Blowfish purchase
obligation
3,233
2,401
0.06
—
—
—
Brand Portfolio - business exits
1,598
1,187
0.03
1,905
1,415
0.03
Vionic acquisition and integration-related
costs
—
—
—
6,118
4,544
0.11
Total charges/other items
$
361,162
$
295,432
$
7.65
$
8,023
$
5,959
$
0.14
Adjusted (loss) earnings
$
(50,406
)
$
(1.30
)
$
15,042
$
0.36
(1) Represents costs associated with the
economic impact of the COVID-19 pandemic, primarily consisting of
impairment charges associated with property and equipment and lease
right-of-use assets, inventory markdowns, expenses associated with
factory order cancellations and provision for expected credit
losses.
SCHEDULE 5
CALERES, INC.
SUMMARY FINANCIAL RESULTS BY
SEGMENT
SUMMARY FINANCIAL
RESULTS
(Unaudited)
Thirteen Weeks Ended
Famous Footwear
Brand Portfolio
Eliminations and Other
Consolidated
(Thousands)
May 2, 2020
May 4, 2019
May 2, 2020
May 4, 2019
May 2, 2020
May 4, 2019
May 2, 2020
May 4, 2019
Net sales
$
191,252
$
352,165
$
217,238
$
341,050
$
(11,306
)
$
(15,461
)
$
397,184
$
677,754
Gross profit
69,093
152,693
53,393
126,860
(588
)
283
121,898
279,836
Adjusted gross profit
75,051
152,693
82,449
134,027
(588
)
283
156,912
287,003
Gross profit rate
36.1
%
43.4
%
24.6
%
37.2
%
5.2
%
(1.8
)%
30.7
%
41.3
%
Adjusted gross profit rate
39.2
%
43.4
%
38.0
%
39.3
%
5.2
%
(1.8
)%
39.5
%
42.3
%
Operating (loss) earnings
(67,540
)
10,813
(345,748
)
12,929
(12,923
)
(6,873
)
(426,211
)
16,869
Adjusted operating (loss) earnings
(45,578
)
10,813
(10,138
)
20,705
(12,566
)
(6,626
)
(68,282
)
24,892
Operating (loss) earnings %
(35.3
)%
3.1
%
(159.2
)%
3.8
%
114.3
%
44.5
%
(107.3
)%
2.5
%
Adjusted (loss) operating earnings %
(23.8
)%
3.1
%
(4.7
)%
6.1
%
111.1
%
42.9
%
(17.2
)%
3.7
%
Same-store sales % (on a 13-week
basis)
12.6
%
(1.0
)%
(24.8
)%
(8.6
)%
—
%
—
%
—
%
—
%
Number of stores
934
985
203
230
—
—
1,137
1,215
RECONCILIATION OF ADJUSTED
RESULTS (NON-GAAP)
(Unaudited)
Thirteen Weeks Ended
Famous Footwear
Brand Portfolio
Eliminations and Other
Consolidated
(Thousands)
May 2, 2020
May 4, 2019
May 2, 2020
May 4, 2019
May 2, 2020
May 4, 2019
May 2, 2020
May 4, 2019
Gross profit
$
69,093
$
152,693
$
53,393
$
126,860
$
(588
)
$
283
$
121,898
$
279,836
Charges/Other
Items:
COVID-19-related expenses
5,958
—
27,458
—
—
—
33,416
—
Brand Portfolio - business exits
—
—
1,598
1,355
—
—
1,598
1,355
Vionic acquisition and integration-related
costs
—
—
—
5,812
—
—
—
5,812
Total charges/other items
5,958
—
29,056
7,167
—
—
35,014
7,167
Adjusted gross profit
$
75,051
$
152,693
$
82,449
$
134,027
$
(588
)
$
283
$
156,912
$
287,003
Operating (loss) earnings
$
(67,540
)
$
10,813
$
(345,748
)
$
12,929
$
(12,923
)
$
(6,873
)
$
(426,211
)
$
16,869
Charges/Other
Items:
Goodwill and intangible asset impairment
charges
—
—
262,719
—
—
—
262,719
—
COVID-19-related expenses
21,962
—
71,293
—
357
—
93,612
—
Brand Portfolio - business exits
—
—
1,598
1,905
—
—
1,598
1,905
Vionic acquisition and integration-related
costs
—
—
—
5,871
—
247
—
6,118
Total charges/other items
21,962
—
335,610
7,776
357
247
357,929
8,023
Adjusted operating (loss) earnings
$
(45,578
)
$
10,813
$
(10,138
)
$
20,705
$
(12,566
)
$
(6,626
)
$
(68,282
)
$
24,892
SCHEDULE 6
CALERES, INC.
BASIC AND DILUTED EARNINGS (LOSS) PER
SHARE RECONCILIATION
(Unaudited)
Thirteen Weeks Ended
(Thousands, except per share data)
May 2, 2020
May 4, 2019
Net (loss) earnings attributable to
Caleres, Inc.:
Net (loss) earnings
$
(346,172
)
$
9,085
Net loss (earnings) attributable to
noncontrolling interests
334
(2
)
Net (loss) earnings attributable to
Caleres, Inc.
(345,838
)
9,083
Net earnings allocated to participating
securities
—
(283
)
Net (loss) earnings attributable to
Caleres, Inc. after allocation of earnings to participating
securities
$
(345,838
)
$
8,800
Basic and diluted common shares
attributable to Caleres, Inc.:
Basic common shares
38,649
40,741
Dilutive effect of share-based awards
—
60
Diluted common shares attributable to
Caleres, Inc.
38,649
40,801
Basic (loss) earnings per common share
attributable to Caleres, Inc. shareholders
$
(8.95
)
$
0.22
Diluted (loss) earnings per common share
attributable to Caleres, Inc. shareholders
$
(8.95
)
$
0.22
SCHEDULE 7
CALERES, INC.
BASIC AND DILUTED ADJUSTED EARNINGS
(LOSS) PER SHARE RECONCILIATION
(Unaudited)
Thirteen Weeks Ended
(Thousands, except per share data)
May 2, 2020
May 4, 2019
Adjusted net (loss) earnings attributable
to Caleres, Inc.:
Adjusted net (loss) earnings
$
(50,740
)
$
15,044
Net loss (earnings) attributable to
noncontrolling interests
334
(2
)
Adjusted net (loss) earnings attributable
to Caleres, Inc.
(50,406
)
15,042
Net earnings allocated to participating
securities
—
(472
)
Adjusted net (loss) earnings attributable
to Caleres, Inc. after allocation of earnings to participating
securities
$
(50,406
)
$
14,570
Basic and diluted common shares
attributable to Caleres, Inc.:
Basic common shares
38,649
40,741
Dilutive effect of share-based awards
—
60
Diluted common shares attributable to
Caleres, Inc.
38,649
40,801
Basic adjusted (loss) earnings per common
share attributable to Caleres, Inc. shareholders
$
(1.30
)
$
0.36
Diluted adjusted (loss) earnings per
common share attributable to Caleres, Inc. shareholders
$
(1.30
)
$
0.36
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version on businesswire.com: https://www.businesswire.com/news/home/20200604005714/en/
Logan Bonacorsi lbonacorsi@caleres.com
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