Caleres (NYSE: CAL) (caleres.com), a diverse portfolio of global
footwear brands, today reported first quarter 2019 financial
results.
“Despite a soft marketplace, Brand Portfolio performed extremely
well and continued to grow – with sales up more than 20%
year-over-year – and to take share. Once again, we owned six of the
top 25 women's fashion footwear brands and grew sales ahead of
market rate while gaining share,” said Diane Sullivan, CEO,
president and chairman of Caleres. “At Famous Footwear, while the
quarter ended on an encouraging note – with positive
same-store-sales for both March and April – the slow start in
February was tough to overcome. Going forward, we expect to see
softness at Famous Footwear through at least the second quarter, as
we continue to prepare for back-to-school by aggressively clearing
underperforming inventory. While new additions to our elevated and
refreshed product assortment are gaining traction, we expect to see
more evidence of this during back-to-school, as we’ve previously
discussed.
“Rather than maintaining the mid-point of our adjusted EPS
guidance range at a 13% growth rate, we are prudently bringing the
mid-point for earnings growth down to 9%,” continued Sullivan.
“While we still expect to see year-over-year gains, we believe this
new rate more accurately reflects industry challenges to date and
gradual improvement over the balance of the year.”
First Quarter 2019 Results Versus 2018
- Consolidated sales of $677.8 million,
up 7.2%.
- Brand Portfolio sales of $341.1 million
were up 20.3%.
- Famous Footwear total sales were $352.2
million, while same-store-sales were down 1.0%.
- Gross profit was $279.8 million, up
1.8%, while gross margin was 41.3% and adjusted gross margin was
42.3% and excluded $7.2 million related to Vionic inventory
adjustment amortization and for Brand Portfolio business exit
expense.
- SG&A expense of $262.1 million
represented 38.7% of sales, an improvement of more than 90 basis
points.
- Operating earnings of $16.9 million and
adjusted operating earnings of $24.9 million.
- Net earnings were $9.1 million,
resulting in earnings per diluted share of $0.22.
- Adjusted net earnings were $15.0
million, while adjusted earnings per diluted share were $0.36.
Balance Sheet and Cash Flow
- Cash and equivalents of $35.8 million
and cash from operations of $49.9 million.
- There were $318.0 million of
outstanding borrowings under the revolving credit facility,
following the October 18, 2018, acquisition of Vionic.
- Inventory of $648.1 million was up
11.8% year-over-year and included $49.6 million of Vionic and
Blowfish Malibu inventory.
- Capital expenditures of $21.4 million
were up approximately $12 million year-over-year, due to the
investment in automation at the new Brand Portfolio fulfillment
center.
- Returned $2.9 million to
shareholders, via dividends.
Impact of New Lease Accounting Rules
- On February 3, 2019, Caleres adopted
the new accounting standard for leases (ASC 842), which resulted in
a significant increase in reported assets and liabilities
associated with leases. The company does not expect any material
differences in lease expense, lease payments, operating earnings or
cash flows, as compared to the previous accounting rules. However,
due to the incremental asset value required for operating leases
under the new standard, ongoing impairment charges for
underperforming retail stores are expected to be higher. The
adoption of ASC 842 will not impact the company’s credit facility
covenants.
2019 Outlook
Consolidated net sales ~$3.0 billion Brand Portfolio sales
Up low- to mid-teens, including acquisitions Famous Footwear
same-store-sales Flat to up low-single digits Adjusted earnings per
diluted share* $2.35 to $2.45
* Excludes ~$0.14 of expenses
related to brand acquisitions and exits
Investor Conference Call
Caleres will host an investor conference call at 4:30 p.m. ET
today, Monday, June 3. 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
8758845. 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 8758845 through Saturday, June 8.
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, net earnings and earnings per
diluted share adjusted to exclude certain gains, charges and
recoveries, which are non-GAAP financial measures. These results
are included as a complement to results provided in accordance with
GAAP because management believes these non-GAAP financial measures
help identify underlying trends in the company’s business and
provide useful information to both management and investors by
excluding certain items that may not be indicative of the company’s
core operating results. These measures should not be considered a
substitute for or superior to GAAP results.
Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995
This press release contains certain forward-looking statements
and expectations regarding the company’s future performance and the
performance of its brands. Such statements are subject to various
risks and uncertainties that could cause actual results to differ
materially. These risks include (i) changing consumer demands,
which may be influenced by consumers' disposable income, which in
turn can be influenced by general economic conditions and other
factors; (ii) rapidly changing fashion trends and consumer
preferences and purchasing patterns; (iii) intense competition
within the footwear industry; (iv) 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; (v) imposition of tariffs;
(vi) the ability to accurately forecast sales and manage inventory
levels; (vii) cybersecurity threats or other major disruption to
the Company’s information technology systems; (viii) customer
concentration and increased consolidation in the retail industry;
(ix) transitional challenges with acquisitions; (x) a
disruption in the Company’s distribution centers; (xi) foreign
currency fluctuations; (xii) changes to tax laws, policies and
treaties; (xiii) the ability to recruit and retain senior
management and other key associates; (xiv) compliance with
applicable laws and standards with respect to labor, trade and
product safety issues; (xv) the ability to secure/exit leases on
favorable terms; (xvi) the ability to maintain relationships with
current suppliers; 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 2,
2019, 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 over 1,200
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 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, Dr.
Scholl’s Shoes, Vince, Franco Sarto, LifeStride, Via Spiga,
Blowfish Malibu, Bzees, Circus by Sam Edelman, Fergie 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
(Unaudited) Thirteen Weeks Ended (Thousands, except per
share data) May 4, 2019 May 5, 2018 Net sales $ 677,754 $ 632,142
Cost of goods sold 397,918 357,221 Gross profit
279,836 274,921 Selling and administrative expenses
262,111 250,197 Restructuring and other special charges, net 856
1,778 Operating earnings 16,869 22,946
Interest expense, net (7,340 ) (3,683 ) Other income, net 2,619
3,091 Earnings before income taxes 12,148
22,354 Income tax provision (3,063 ) (5,174 ) Net earnings
9,085 17,180 Net earnings (loss) attributable to
noncontrolling interests 2 (32 ) Net earnings attributable
to Caleres, Inc. $ 9,083 $ 17,212 Basic
earnings per common share attributable to Caleres, Inc.
shareholders $ 0.22 $ 0.40 Diluted earnings
per common share attributable to Caleres, Inc. shareholders $ 0.22
$ 0.40
SCHEDULE 2
CALERES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) May 4, 2019 May 5, 2018 February 2, 2019
(Thousands)
ASSETS Cash and cash equivalents $ 35,778 $
96,481 $ 30,200 Receivables, net 148,487 125,559 191,722
Inventories, net 648,145 579,902 683,171 Prepaid expenses and other
current assets 54,902 62,385 71,354 Total current
assets 887,312 864,327 976,447 Lease
right-of-use assets 735,282 — — Property and equipment, net 236,257
208,898 230,784 Goodwill and intangible assets, net 548,508 339,900
549,897 Other assets 85,711 88,941 81,440 Total
assets $ 2,493,070 $ 1,502,066 $ 1,838,568
LIABILITIES AND EQUITY Borrowings under revolving credit
agreement $ 318,000 $ — $ 335,000 Trade accounts payable 289,071
268,917 316,298 Lease obligations 136,005 — — Other accrued
expenses 168,224 168,746 202,038 Total current
liabilities 911,300 437,663 853,336 Noncurrent
lease obligations 662,750 — — Long-term debt 198,046 197,587
197,932 Deferred rent — 53,027 54,850 Other liabilities 92,342
99,651 97,015 Total other liabilities 953,138
350,265 349,797 Total Caleres, Inc. shareholders’
equity 627,236 712,705 634,053 Noncontrolling interests 1,396
1,433 1,382 Total equity 628,632 714,138
635,435 Total liabilities and equity $ 2,493,070 $
1,502,066 $ 1,838,568
SCHEDULE 3
CALERES, INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) Thirteen Weeks Ended
(Thousands) May 4, 2019 May 5, 2018 OPERATING ACTIVITIES:
Net cash provided by operating activities $ 49,910 $
51,347 INVESTING ACTIVITIES: Purchases of property
and equipment (18,443 ) (7,929 ) Capitalized software (2,917 )
(1,434 ) Net cash used for investing activities (21,360 ) (9,363 )
FINANCING ACTIVITIES: Borrowings under revolving credit
agreement 84,000 — Repayments under revolving credit agreement
(101,000 ) — Dividends paid (2,947 ) (3,023 ) Acquisition of
treasury stock — (3,288 ) Issuance of common stock under
share-based plans, net (2,559 ) (3,122 ) Other (394 ) —
Net cash used for financing activities (22,900 )
(9,433 ) Effect of exchange rate changes on cash and cash
equivalents (72 ) (117 ) Increase in cash and cash equivalents
5,578 32,434 Cash and cash equivalents at beginning of period
30,200 64,047 Cash and cash equivalents at end of
period $ 35,778 $ 96,481
SCHEDULE
4
CALERES, INC. RECONCILIATION OF NET EARNINGS AND
DILUTED EARNINGS PER SHARE (GAAP BASIS) TO ADJUSTED NET EARNINGS
AND ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP BASIS)
(Unaudited) Thirteen Weeks Ended May 4, 2019 May 5, 2018
(Thousands, except per share data)
Pre-Tax
Impact of
Charges/Other
Items
Net
Earnings
Attributable
to Caleres, Inc.
Diluted
Earnings
Per Share
Pre-Tax
Impact of
Charges/Other
Items
Net
Earnings
Attributable
to Caleres, Inc.
Diluted
Earnings
Per Share
GAAP earnings $ 9,083 $ 0.22 $ 17,212 $ 0.40
Charges/other
items:
Vionic acquisition and integration-related costs $ 6,118 4,544 0.11
$ — — — Brand Portfolio - business exits 1,905 1,415 0.03 — — —
Integration and reorganization of men's brands —
— — 1,778
1,315 0.03 Total charges/other items $ 8,023
$ 5,959 $ 0.14 $
1,778 $ 1,315 $ 0.03
Adjusted earnings $ 15,042 $ 0.36 $
18,527 $ 0.43
SCHEDULE 5
CALERES, INC. SUMMARY
FINANCIAL RESULTS BY SEGMENT SUMMARY FINANCIAL
RESULTS (Unaudited) Thirteen Weeks Ended Famous Footwear
Brand Portfolio Other
Consolidated (Thousands) May 4, 2019 May 5, 2018
May 4, 2019 May 5, 2018
May 4, 2019 May 5, 2018 May 4, 2019
May 5, 2018 Net sales $ 352,165 $ 363,411 $ 341,050 $
283,497 $ (15,461 ) $ (14,766 ) $ 677,754 $ 632,142 Gross profit $
152,693 $ 165,201 $ 126,860 $ 108,861 $ 283 $ 859 $ 279,836 $
274,921 Adjusted gross profit $ 152,693 $ 165,201 $ 134,027 $
108,861 $ 283 $ 859 $ 287,003 $ 274,921 Gross profit rate 43.4 %
45.5 % 37.2 % 38.4 % (1.8 )% (5.8 )% 41.3 % 43.5 % Adjusted gross
profit rate 43.4 % 45.5 % 39.3 % 38.4 % (1.8 )% (5.8 )% 42.3 % 43.5
% Operating earnings (loss) $ 10,813 $ 21,857 $ 12,929 $ 11,627 $
(6,873 ) $ (10,538 ) $ 16,869 $ 22,946 Adjusted operating earnings
(loss) $ 10,813 $ 21,857 $ 20,705 $ 13,211 $ (6,626 ) $ (10,344 ) $
24,892 $ 24,724 Operating earnings % 3.1 % 6.0 % 3.8 % 4.1 % 44.5 %
71.4 % 2.5 % 3.6 % Adjusted operating earnings % 3.1 % 6.0 % 6.1 %
4.7 % 42.9 % 70.1 % 3.7 % 3.9 % Same-store sales % (on a 13-week
basis) (1) (1.0 )% (0.8 )% (8.6 )% (1.0 )% — % — % — % — % Number
of stores 985 1,013
230 235 —
— 1,215
1,248
RECONCILIATION OF ADJUSTED RESULTS
(NON-GAAP) (Unaudited) Thirteen Weeks Ended Famous
Footwear Brand Portfolio Other
Consolidated (Thousands) May 4, 2019 May 5,
2018 May 4, 2019 May 5, 2018
May 4, 2019 May 5, 2018 May 4,
2019 May 5, 2018 Gross profit $ 152,693 $ 165,201 $
126,860 $ 108,861 $ 283 $ 859 $ 279,836 $ 274,921
Charges/Other
Items:
Vionic acquisition and integration-related costs — — 5,812 — — —
5,812 — Brand Portfolio - business exits — —
1,355 —
— — 1,355
— Total charges/other items —
— 7,167 —
— — 7,167
— Adjusted gross profit $ 152,693
$ 165,201 $ 134,027
$ 108,861 $ 283
$ 859 $ 287,003
$ 274,921 Operating earnings (loss) $ 10,813 $ 21,857
$ 12,929 $ 11,627 $ (6,873 ) $ (10,538 ) $ 16,869 $ 22,946
Charges/Other
Items:
Vionic acquisition and integration-related costs — — 5,871 — 247 —
6,118 — Brand Portfolio - business exits — — 1,905 — — — 1,905 —
Integration and reorganization of men's brands —
— — 1,584
— 194 —
1,778 Total charges/other items —
— 7,776
1,584 247 194
8,023 1,778
Adjusted operating earnings (loss) $ 10,813
$ 21,857 $ 20,705
$ 13,211 $ (6,626 ) $
(10,344 ) $ 24,892 $ 24,724
SCHEDULE 6
CALERES, INC. BASIC AND DILUTED EARNINGS PER SHARE
RECONCILIATION (Unaudited) Thirteen Weeks Ended
(Thousands, except per share data) May 4, 2019 May 5,
2018 Net earnings attributable to Caleres, Inc.: Net
earnings $ 9,085 $ 17,180 Net (earnings) loss attributable to
noncontrolling interests (2 ) 32 Net earnings
attributable to Caleres, Inc. 9,083 17,212 Net earnings allocated
to participating securities (283 ) (479 ) Net
earnings attributable to Caleres, Inc. after allocation of earnings
to participating securities $ 8,800 $ 16,733
Basic and diluted common shares attributable to
Caleres, Inc.: Basic common shares 40,741 41,910 Dilutive effect of
share-based awards 60 124 Diluted
common shares attributable to Caleres, Inc. 40,801
42,034 Basic earnings per common share
attributable to Caleres, Inc. shareholders $ 0.22
$ 0.40 Diluted earnings per common share
attributable to Caleres, Inc. shareholders $ 0.22
$ 0.40
SCHEDULE 7
CALERES, INC. BASIC AND DILUTED EARNINGS PER SHARE
RECONCILIATION (Unaudited) Thirteen Weeks Ended
(Thousands, except per share data) May 4, 2019 May 5,
2018 Adjusted net earnings attributable to Caleres, Inc.:
Adjusted net earnings $ 15,044 $ 18,495 Net (earnings) loss
attributable to noncontrolling interests (2 ) 32
Adjusted net earnings attributable to Caleres, Inc. 15,042
18,527 Net earnings allocated to participating securities (472 )
(516 ) Adjusted net earnings attributable to Caleres,
Inc. after allocation of earnings to participating securities $
14,570 $ 18,011 Basic and
diluted common shares attributable to Caleres, Inc.: Basic common
shares 40,741 41,910 Dilutive effect of share-based awards 60
124 Diluted common shares attributable
to Caleres, Inc. 40,801 42,034
Basic adjusted earnings per common share attributable to Caleres,
Inc. shareholders $ 0.36 $ 0.43
Diluted adjusted earnings per common share attributable to Caleres,
Inc. shareholders $ 0.36 $ 0.43
SCHEDULE 8 CALERES,
INC. RECONCILIATION OF INCOME TAX PROVISION AND EFFECTIVE
TAX RATE (GAAP BASIS) TO ADJUSTED INCOME TAX PROVISION AND ADJUSTED
EFFECTIVE TAX RATE (NON-GAAP BASIS) (Unaudited) Thirteen
Weeks Ended May 4, 2019 May 5, 2018 (Thousands)
Earnings
Before
Income
Taxes
Income
Tax
Provision
Effective
Tax Rate
Earnings
Before
Income
Taxes
Income
Tax
Provision
Effective
Tax Rate
GAAP basis $ 12,148 $ (3,063 ) 25.2 % $ 22,354 $ (5,174 )
23.1 %
Charges/other
items:
Vionic acquisition and integration - related costs 6,118 (1,574 ) —
— Brand Portfolio - business exits 1,905 (490 ) — — Integration and
reorganization of men's brands — — 1,778
(463 ) Adjusted basis $ 20,171 $ (5,127 ) 25.4
% $ 24,132 $ (5,637 ) 23.4 %
SCHEDULE 9
CALERES, INC. CALCULATION OF RETURN ON AVERAGE INVESTED
CAPITAL AND ADJUSTED RETURN ON AVERAGE INVESTED CAPITAL (NON-GAAP
METRICS) (Unaudited) May 4, 2019
May 5, 2018 (in 000's)
Return on Average Invested
Capital Net earnings (trailing twelve months) $ (13,569 ) $
89,510 Average invested capital (1) 453,430 564,459 Return on
average invested capital (3.0 )% 15.9 %
Adjusted Return
on Average Invested Capital Adjusted net earnings (trailing
twelve months) $ 91,569 $ 94,168 Average invested capital (1)
453,430 564,459 Adjusted return on average invested capital 20.2 %
16.7 % (1) Calculated as the 13-month average of each
month-end invested capital balance. Invested capital is defined as
current assets, excluding cash and cash equivalents, plus property
and equipment, net, less current liabilities, excluding borrowings
under revolving credit agreement and current lease obligations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190603005754/en/
Investor and Media ContactPeggy Reilly Tharp,
Caleresptharp@caleres.com
Caleres (NYSE:CAL)
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