Caleres (CAL) 1 Jun 232023 Q1 Earnings call transcript

Good morning, welcome to Caleres First Quarter 2023 Earnings Conference Call. My name is Sherry, and I'll be your conference coordinator. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

turn Investor over Relations. I'll Vice Logan time, of President this the to conference Bonacorsi, At Please ahead. go

Good morning. factors to with not Thank presentation today’s XXXX number as earnings discussion Actual you as Form are for other joining results and materially Exchange the well due uncertainties. statements, Please A limited our available company’s webcast. contains at of press be but quarterly may Commission. including forward-looking release and various in our risks detailed a factors XX-K caleres.com. tables, to filings call financial slide first subject aware U.S. quarter are risk the with disclosed to Securities differ and the which and

SEC factors statements. online. on be filings for financial Please referring our to are these results refer more of to and certain impact we forward-looking factors, operation, our risk which Copies could of discussing the available reports will today’s press In and measures. and other information providing non-GAAP release

can measures, company views update as these release section well non-GAAP no the of discussed The to information find call this undertakes time. on any financial our and Investors obligation other today’s earnings website. in regarding any as additional at You presentation our on information

on Jack call President Calandra, Joining CFO. Schmidt, me and the today Senior CEO; and and Jay are Vice President

prepared thereafter, we’ll and take with be remarks, questions. We our will call this begin to your morning’s happy

over the to call like Jay? now would I Jay. turn to

Thank and you, everyone. Logan, morning, good

more from Footwear. our of Portfolio than guidance operating per at end share we Brand our the Famous During earnings at challenging the contribution the Profit first diversified structure offset leveraged deliver to environment quarter, range. top the

last have last implemented over said in much productive, organization. and several changes we've a we quarter, structural nimble, more As years profitable resulted the the

power successful a enables the believe different value variety to platform, be operating environments. curated our capabilities, our of omnichannel underscores the in and us performance We this Caleres the structure strengths of of the carefully quarter's This portfolio. of

Brand per $X.XX, market X.X% of their to Brand Now by share the Footwear's share record of ending grew well, let's than period a increased chains. XXXX. market our the share key XX% many year quarter turn very with We Caleres and first levels highlights compared We approximately Portfolio year sustained fiscal market. we improving in our in more our footwear of rankings, prior end from earnings to of brands driven X% total in and below share down inventory delivered U.S. some market Portfolio. We We XXXX. profit Famous period, the managed shoe the

to continue are longstanding borrowings utilizing our in our base under from facility asset for drive we our million quarterly free to fiscal end We investment and maintained reduce future prioritized areas debt dividend that credit our by growth. revolving flow We $XX the reduction, strategic cash essential XXXX.

after top we dividend, in communicated, is continued our cash uncertain believe that we've funding As term near priority reduction for this environment. flow macroeconomic debt the

sales Overall, our short initial X.X% falling our to let's Now quarter move of results. expectations. consolidated first operating declined

softer was decline Famous particularly chain this the within Footwear of demand While expected, shoe was hit channel. some by consumer hard the

the performance margin Portfolio. outsized Brand offset Fortunately, Famous performance the by by weaker of was the

strong $XX for the consolidated a million record and and a achieved XX%, quarter we earnings of delivered As first result, in operating nearly represented EBITDA. solid generated margins which period, gross we

areas and namely an preserving growth will SG&A $XX million profit actions across additional consumer first and plus vectors. of priority, better-than-expected of million still $XX analytics these experience, long-term accelerate In the In cost in quarter, these year, measures in the to freight costs. this while that initiated deliver of we expect We we improvement marketing approximately beginning organization. took savings our investments cutting total, strategic addition, initiatives

of retro starting quarter by first number Allen segments, lead capitalize sales XXXX, The sneakers. new consumer was expectations improvements. casual this Edmonds, Portfolio, financial delivered quarterly operating remember, our fashion sandals We and casual modestly dress, all footwear, on motivated gravitated second which toward and in newness $XX our especially white brands, and brands, inspired led programs leaning and react our Sam these sales quarter. in only maximize Win of will selling to initiative. top network Despite with turn ahead performance We of you product let's to our utilized We as Edit our to Edelman our trends the aggressively delivered supply to season compare, into the by the to chased including Brand and wholesale chain included difficult which a inventory million items. restock. and of Now speed

pleased Brand XXX basis point are operating quarter and the nearly by expected first a elevating with delivered margins made, margin. we've messaging, $XX the operating gross of in these driven sharpening decline, a investment. direct improvement are margins sales lower Portfolio million achieved progress due performance freight of initial product our a believe record the to earnings even results that and was We costs. and XX% brand maximizing reflection We This inventory higher design,

Also, owned trends includes and our the from own during increase quarter This XXXX. compared an the our X% ship year-over-year business and in of overall our e-commerce, quarter, to businesses. we notable first drive drop approximately increase to capitalized on capabilities DXC brick-and-mortar strong product improvements

Sam brands represented and in provide revenue Portfolio significant Vionic brands investment we half driving Brand the our These color than what's lead total power our ahead, We Naturalizer the to of of total these to first community quarter. investing Caleres will earnings of Edelman, XX% believe We growth on Edmonds, each the has on Going are brands, want the business. and more four strategically our performance understand Allen of and call. growth. that in each we and forward,

a in Trends own and and we XX% outperformed Allen Naturalizer, websites driven comps traffic. new flat, business channels the We increased on delivered drove all loafers at positive for also as known an both Edelman XX% new our robust Sam yielded and brands Edmonds last up quarter of to was performance to efforts versus fashion and respectively. loafers, its strong delivered own dress program from first where strong improvement and with lead led on results in encouraging consumer by with consumer offerings. loyalty relaunch focus across Collectors. in the the quarter its slip-ons This demand XX% positive sales shoes, year. AE’s sneakers by improvement response

the reintroduction spend than In since total AE non-Collectors. average fact, of grow the higher we've seen and last September, Collectors is our from XX% Collectors the program

our California catalog spurred during and growth. a And solutioning. with our sandals positive casual an new live reaction and the unique finally, launched with on This year-over-year scientific which went website new immediate in brand delivering quarter, the we largest for successfully Northern a on Vionic, aesthetic combining dress direction Vionicshoes.com branding,

encouraged the response by We to early new its offerings. are consumer

consumer In assets we strength are key that in serve Dr. served These lead saw not our Scholl's. by Sarto and important addition, portfolio our brands. growing continued currently including brands, LifeStride, segments Franco

We are leveraging ensure are our our One our to to across Caleres succeed. portfolio all positioned capabilities assets

growth in As term, through of all newness, teams of laser the for and Longer building remain the ambitious upon we've the and seen the progress balance momentum year, momentum year. to the of the rest react brands. we plans recent quarter our maintain are have we the focused will on quickly lead for nimble, amplify

BP diversity the to our and expect agile continue the and of portfolio, operating improved our We model performance flexible given to company's operating that brands, our that contribute the margin performance. the the will strength of substantially

sandal breaking its among in in a its Even difficult spending, competitive to The of macroeconomic this particularly Famous challenging a navigated chains. Famous backdrop After increased March quarters target contribution now decelerating challenging backdrop Footwear's consumer. Footwear. late successive markedly environment, and Turning several of exacerbated and market the declined Famous strength, season. share was in as it month set by outperformed shoe

business, growing the the This for bright key families Famous was a of rest kids footwear. as business spot outpaced a prioritize category purchases Our our kids' and once differentiator important of quarter. in again

In mid-July. due quarter million deliver to earnings drivers, chains, expect with to even operating significantly Famous second Famous including we in in warm school seasonal And generated a weakness weather the total, and beginning as to shoe consumer $XX typical contribution in back stronger activity accelerates in the earnings.

that that for to strengthe back its to have To of leverages we number ensure end, kids delivers taken and steps school. in a Famous

As better our in-stock a best a back despite ever than that XXXX school we key our position. beginning from due delivered year, to reacted remember, less you in the have to This position we've on we ideal well-managed inventory and will to inventory styles brands position. trending

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better technology to there's target conversion We back especially quarter school to and aimed messaging have high a improve all a CDP and our should the lot Famous. excited but sales. impact across consumer Clearly, planned at the and family, during millennial campaign about during be drive at in marketing specifically launching a investments our our touchpoints,

In summary, to confidence and place in stellar have fact for the to delivered Famous. recent same expand. that we years much The strengths in in outlook still continue in results long-term very are great continue

earnings will across effort strategy maximize our marketing in approach, year. potential digital forward, move As assortment, an our taking our product be we we immediate to our our actions team, this

Famous. accelerate in In online with consumer position and family, for off footprint, mostly all our leading parallel, growth the we nationwide brands, of assortment leadership experience retail national our at leverage will mall opportunities and continue to our to consistent stores

relative kids, as to we as the growth to its of look up contribution and to work to forward the advantages have us year, Portfolio ability we year are stronger progresses. the at avenues believe while And much its we balance earnings XXXX overall, its in Famous, and segment improve inherent our strength about the So a Brand set that we optimistic strength beyond. the of in competitive do deliver for and

structure remind the the Before basis, long-term of model. in contribution Caleres on deliver hand free through enable it to made we changes value of cash diversified coupled both our in financial over our I'd of $X strong to years, the for earnings our walk shareholders. while strong financials to and consistent generating structural share more will and than per We segments highlight believe more operating you levels like of recent from with Jack I annual creating to flow detail, us power and a

now I our will to it a Jack Jack? that, hand over view more detailed of for financials. with And

challenging resulted we and margin at market In debt, share good end initiatives. in in growth and in strong maintained flow, environment, reduce while everyone. of which the this healthy company. achieved earnings Jay, critical us and and discipline profitability our across gross better-than-expected Brand the to financial investing enabled guidance upper Thanks, still Portfolio per cash our morning, This

allocation capital on the My priorities, and the expenses for comments in year at I'll and our operating on we taking release full quarter update call, adjusted today's you on of for first basis. outlook provide our on our conditions see details light are press reconciliation difficult will share our In adjusted plan additional actions discuss fiscal performance, more outlook an XXXX. quarter second of a results. today's Please on Famous, and be

Famous were Portfolio year. $XXX a its X.X%, with Starting to with X.X% decrease customer $XXX and sales Comparable line with to sales down moderate were last QX, higher were Brand versus income rates. last continued down expectations. consolidated year, interest X.X%. our in million, grapple inflation XX% sales million, were at and sales more down as

history. Portfolio's restocking consolidated first gross significant second margin compare, last basis the XX.X%, and our XXX this that Portfolio volume was the the Brand was remember into Famous increased highest reflecting gross quarter a margin, margin. wholesale in You'll amount to sales highlighted at in a in with Brand decrease increase this in Despite points gross Portfolio was decline, and factored that difficult sales accounts Even lapping guidance. call quarter's Brand

in $X.X gross Brand to and Portfolio more increase Famous. about million earnings high costs. lower was XXX level Operating quarter SG&A year, were rate operating million a above the below last XX.X%, Diluted the $XX variable higher of a Portfolio decline interest was the X.X% given interest result was XX.X% gross softer freight was sales. borrowing rate. was margin at of demand million higher year margin last Brand earnings last reflects year. margin weighted versus expense last versus initial consumer The position. was Net SG&A at EBITDA and compensation a or year share X.X% average XX.X%, expense for XX.X% year's and last QX and X.X%. X.X% as or million million $X.X was per end of $XXX our sales. year. basis $X.XX, were quarter previous at normalized last air inventory pricing expenses this clearance of given of guidance. lower Operating point XXX was X.X% This expense decline Famous or basis costs. for the was and million due a more year, $X point and $XX clean margins than a versus and margin incentive ocean activity,

first the to sheet million balance reductions versus quarter year, quarter limited $XX $XXX Famous’ good first our of million and In XXXX. and and at quality was last Brand At Notably, the versus level. $XXX year X%, which million year, inventory By XX% inventory and down segment debt. cash last XXXX. the no both of down, inventory inventory and inventory. with feel segments. constraints below about revolver chain in-transit long-term reflecting last Famous first now inventory the end in quarter approximately quantity general, hand in supply flow, XX% XX.X% on we Turning was of in was down up was we Portfolio, borrowings primarily the result ended Inventory XX% QX both of versus on at the or

flow and for our cash and deployed borrowings. quarterly outstanding operations, cash $XX business, million quarter the investments the dividend we strategic in paid Regarding during from reduced generated

million our on expenditures, $X.X dividend and quarterly million on borrowings. $X.X spent reduce $XX million we Specifically, capital to

XX share ongoing on a is best of the EBITDA and to liquidity. a borrowings have increase on of with market we Given basis, to the cash to dividend free a macroeconomic quarter. debt the revolver the X.Xx, our EBITDA to under believe after basis, we million flow below our third Xx uncertainty, below the current reduce to overall maintaining authorization we to that continue and to trailing getting will and conditions. anticipate ratio On debt consider said, month use in quarter shares purchases Xx repurchase X.X ended Board remaining That based we continue

top to we as Famous earnings in savings we turning a continue SG&A. and environment, with cost and more outlook. of to line full Despite expect anticipate our share Now challenging year per macro offsetting $X.XX to $X.XX margin gross softness

We margin Additional up costs procurement of expect eliminating follows: better-than-expected the on overhead the guidance our now to impact to X.X% cost, versus The Brand consolidated full X% operating of versus to actions domestic and X.X%. our year We and flat X.X% non-merchandise XXrd guidance guidance are now metrics being reducing specific sales to as by X.X% ocean X%, week. of improved down expect we original operating X% realizing positions, margin of are including original be to is corporate outlook and taking Portfolio additional transportation open lowering including driven expenses, synergies depreciation expense. consolidated

The we of annualized $XX million and million about $XX million an taking actions on on will $XX to savings are generate costs specific basis. in-year

approximately anticipate actions. in million For the was of the will realized in charge $X and in million $X million $XX remaining QX, $X with the QX, realized half. be in second We savings, these million associated one-time in-year QX cash a

million million savings versus the additional million of We in and QX $X our also was half. the freight we original in expect about remaining $XX realized expect second guidance. $X

We now to of of million $XX interest versus our guidance $XX $XX net $XX million original expect million million. to expense

expect tax to rate of XX%. continue effective about We an

$XX versus of We $XX expect $XX million continue million. to share And our additional offset of shares of no million to capital to compensation dilution guidance expect assumes but million. now stock-based $XX.X million share expenditures we approximately This to of $XX purchases. repurchases any outstanding original

of $X.XX. In to addition, expect the for we are earnings $X.XX share quarter: providing the guidance down second X% to net X% to be following and per We sales

Jay. now Before to turn call will back questions, we the take I over

team. quarter, end the EPS and Thanks, results for These of at upper range for year. the company, the EPS dedication have maintained portfolio, power the our Jack. the our guidance to delivered our demonstrate and are of of closing, we In the first pleased our strength of

We team, are the us our commitment expense management incredibly am capabilities invest as we that growth. to talented our of committed approach, year. help the to drive deliver results of and the disciplined strategic balance I with strong continue will in that confident for coupled nimble

operator Operator? to I'd over questions. And call that, the with the to for turn like

first from Zvejnieks [Operator Our Sandler is Instructions] with Piper question Abbie

I have two.

color first, second the just do the the is I on there face your the you with dynamic? can expectations the and on between mainly for fiscal compares fill-in in a expect guess quarter that Brand Portfolio? you Brand quarter, guidance first year So give was any you and for Famous both that quarter specifically Portfolio, will to continue Footwear tough or second

in that terms time let in by segment. Brand And we on the I'll second half. color Jack we Portfolio, we of get will most just do I the then the lapped think, into have believe by of fill the that

thanks for your Abbie, questions. Yes,

So we segment, a bit guidance let to you specific by me but don't helpful, color. give give of be little

the certainly improve quarter. versus we Famous’ expecting So, to sales are first

our are quarter date. forecast We tracking to to

then improvement half, anywhere back feel what and still are So I we is of about got cases we good BP Again, feel some QX. about bit the to give negative good the And we've improvement in this, will deterioration back sales this the talked on and the in what in wholesale growth an are the of to about restock of guidance lead as on expect a for expecting we as QX some from show we both little initiatives In that anywhere no that. color in Jay brands. in a expect Famous, expecting more BP that we longer year. really we part some our support in would for of our -- well lapping really that half. initiatives assumes for Famous But say

on includes are product in the that and Edmonds, market Vionic. sneaker of talked Abbie, brands. business Sam And Edelman, the We quarter in power model obviously as we right and now second and see our then sourcing the say well opportunities, fashion drive brands company, about our and all lead think help that, modeling we Allen specifically that we're well would through, growing whole of that the further really our exponentially portfolio really I and really be part And really back of get Naturalizer, Yes. able investments category those our maximizing us to this too. late as showing we'll and into that position lead fit will of

that promotional. peers to especially then And strong, your to really continue I inventory be need management space been to just has said compared the in they'll mean, have

the and does of promotional But quantity you peers' inventory. you of feel about your good impact quality So the strategy year? your strategy remainder said the how the through promotional

of kind in-store thing I of Well, continually, control not we that going us it closely brick-and-mortar I Famous, of our need But look competitive think landscape watching and at that key the on manage inventory. we brand it that closely we're managing at think and our forward. really believe that going them helps way be be is the side watching it's our -- opportunities to really very and And it really where the digital quality obviously model and the way we'll And model in business. keep we're that's through. to driving the maximizing inventories, giving really the we they go same all those what as

in mean, Yes, last and our comment, QX Abbie, I add we consolidated inventories Jay's will believe year down continue QX. that versus be to just and to to

tightly own our continue sure any making to to manage have don't inventory. we clear and be actions to will that we So take

question is Laura Loop from Champine with next Capital. Our

Portfolio are Just need there? they are What key color Brand making you the in Are those infrastructure? to more do those investments, investments you're on kind of a what marketing little do brands. that

that of customers, digital vectors then continue points in And we Well own growth of category they continue brands see they're to more continue of feeding while our and drive terms within to different both and we will we to distribution different expansion product, that. as drive. are also develop off marketing those some business and develop

get combination It's thing, of but not things. through. that we do So and us one it just to maximize will continue a feel is there that

with Our Research. from is question next Mitch Kummetz Seaport

planned. in quarter, that Could Famous weather few. maybe a was? a income thought? was it was you worsened bigger there something to that mentioned refunds up tax impact in? the your had softer Was thought starting ended with it was moderate maybe you being other than consumer speak Jay, got worse Or -- just I've going some why planning, than it than reason? you just Or what you had

you little Yes, of all actually a accurate. Mitch, things mentioned, that was the I bit think

we did a First worst in saw the improvement we on of as first that factor. see and our that month a And months, April. all, nice into in coming early weather Famous, was March two

people key weather I that So know to to purchases items do headwinds there and there really it. focusing we some something their had in have out coming believe want. But on that with are actually they general, the are

that done so continue really back control, which need. position And that really Famous all the fuel colors items that's on and want we've our can the in they improved and to what inventory and we things they is mostly come that the is sizes

really that So, would for strength that. our be

bit little what a it's think do we described. you of all But of

what As controlling then can where put efforts. focus really and on we and control usual, our we that's we

Okay.

based And trends guided uptick about again, on your was QX some optimism you've more Or the into the Has than for date? of maybe it kind May? to so, back from April as about is Famous And that to school seeing what quartered you're that thinking of or two? as particularly March. is around piece, XQ, the continued better you're combination

combination of I two. of bit think a it's little

April said, was than I better March for us. As markedly

family, things in put And do continue as the will think we consumer the where believe think little our to kids. really closer back-to-school, in it modeling that to actions better going for place we combination two we prioritize, particularly a through. then So that their we've the into will ourselves that's with a those purchases do to that taken comes

think Famous but was, then down so QX better on for was both. year-over-year, the And profitability, in I was BP better than Okay. and 'XX

for -- I you of -- be and down. levels, land you the margins think margin you mean, expect So as about I expect thinking Is is assume 'XX -- how those going year? to you think? well, BP up year-over-year, could to margin up do EBIT BP you where be be still to it Famous sort over do are then

on favor really BP there. continue those be it's up Well, the that we do. the will working a able margin of do about And lot to that things, initial -- our believe we've in been to based margins

obviously thereto. Our much jump And continued help the all those on freight And things think three we let on us, have is I'll mix piece. the savings Famous then I Jack better. with will side, of some other there. pieces in

operating on Mitch, Famous that down this that Yes. XX.X% last We piece, to year. the in posted come signaled business. we margin had going year was that,

we still I but the we softer sales, feel long term, think year, fuel and provide back these margin on sort that operating that the cost get of likely not of structure for we're margin also target to like given target just hit will XX% business the expectations the that's this that's why of at making sort that changes to XX%. but appropriate other in parts Famous, in

is question with Dana final Our Telsey Telsey Group. Advisory from

range? the As particularly what is How we now, Famous that meaningful store you saw about to the or you sales, traffic? And seen you've did Footwear, uptick the on What improvement? think at were the ticket comp comps? complexions seeing are that

improvement, margin orders and Portfolio AUR? terms of Brand the what wholesale in seeing also you the on are with then And

way us. move actually for my did AUR first was see all, up and usual, last As of with question But Dana, we backwards. start of your I'll -- the part

really we slightly, that up that hold really nicely. came means so it's strategy -- feel really really there we through is through it and worked came do has where So 'XX space as a nice our

be confident in should quarter-to-quarter. dynamic seen going feel wholesale just Obviously, more what bit. it drop it's buying book our through, we and of when there order really our were more terms book been of and more lot quite last year we've coming pivots has else more accomplish our order line guidance up versus wholesale In I our see I as reflect that. there's But everything through reorders would it's with that pretty say than to our people meets where very say, really much model a to a we going or inventory does ship

So pointing then of Footwear on in QX, quarter. the kind overall, to a we Famous see mix did

the actually in was on then pretty where traffic of e-com brick-and-mortar side, conversion was traffic And a dynamic down the little our in conversion actually was that had we but flat. -- different was quarter. Our good, was but a down, bit for roughly QX

So I slower would to season whole a much we're overall say to we obviously just and things it. saw on the working improve start

then be of? the seeing are benefits takes other this other second back it's on gross whether as freight of should raw we for go operating the and mindful the a margin, And that? unpacking we on what puts just margin and you half year, year, is for materials And there any through or any commodity costs

then of the in coming the more XX% versus and And XX% we incremental expecting had this million Jack. half. in $XX freight that half of freight planned talked the for freight actually the benefit half. back we it’s through would in what about benefit, both in about. say, we're the back terms Dana, I is About includes first that Yes, benefit

tailwind a there. the that's So obviously nice gross of margin in terms

the end question-and-answer turn reached have of to like We I back for management remarks. our session. closing the would to conference our

our our as We thank any thanking market for without partners just our I out vendor Well, there. again, thanking at both Famous team retail this them. well. and seeing forward to and to of great of want close at joining everyone, look And also them couldn't Caleres, in many partners you, by of us. you Okay. accomplish many

again. you, thank So,

today's conclude conference. will This

this your at your disconnect lines you participation. You and time, thank may for